Attached files
| file | filename |
|---|---|
| EX-99.2 - QUARTERLY PERFORMANCE SUMMARY - TRUIST FINANCIAL CORP | exhibit992qps3q16.htm |
| EX-99.1 - EARNINGS RELEASE - TRUIST FINANCIAL CORP | exhibit991text3q16.htm |
| 8-K - 8-K - TRUIST FINANCIAL CORP | earningsrelease8-kbodyx3q16.htm |
• general economic or business conditions, either nationally or regionally, may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and/or a reduced demand for credit, insurance or other services;
• disruptions to the national or global financial markets, including the impact of a downgrade of U.S. government obligations by one of the credit ratings agencies and the adverse effects of recessionary conditions or market disruptions in Europe,
China or other global markets;
• changes in the interest rate environment, including interest rate changes made by the Federal Reserve, and cash flow reassessments may reduce NIM and/or the volumes and values of loans made or held as well as the value of other financial
assets held;
• competitive pressures among depository and other financial institutions may increase significantly;
• legislative, regulatory or accounting changes, including changes resulting from the adoption and implementation of the Dodd-Frank Act,may adversely affect the businesses in which BB&T is engaged;
• local, state or federal taxing authorities may take tax positions that are adverse to BB&T;
• a reduction may occur in BB&T's credit ratings;
• adverse changes may occur in the securities markets;
• competitors of BB&T may have greater financial resources or develop products that enable them to compete more successfully than BB&T and may be subject to different regulatory standards than BB&T;
• cyber-security risks, including "denial of service," "hacking" and "identity theft," could adversely affect our business and financial performance or our reputation, and we could be liable for financial losses incurred by third parties due to
breaches of data shared between financial institutions;
• natural or other disasters, including acts of terrorism, could have an adverse effect on BB&T in that such events could materially disrupt BB&T's operations or the ability or willingness of customers to access the services BB&T offers;
• costs related to the integration of the businesses of BB&T and its merger partners may be greater than expected;
• failure to execute on strategic or operational plans, including the ability to successfully complete and/or integrate mergers and acquisitions or fully achieve expected cost savings or revenue growth associated with mergers and acquisitions within
the expected time frames could adversely impact financial condition and results of operations;
• significant litigation could have a material adverse effect on BB&T;
• unfavorable resolution of legal proceedings or other claims and regulatory and other governmental investigations or other inquiries could result in negative publicity, protests, fines, penalties, restrictions on BB&T's operations or ability to
expand its business and other negative consequences, all of which could cause reputational damage and adversely impact BB&T's financial conditions and results of operations;
• deposit attrition, customer loss and/or revenue loss following completed mergers/acquisitions may exceed expectations;
• higher than expected costs related to information technology infrastructure or a failure to successfully implement future system enhancements could adversely impact BB&T's financial condition and results of operations and could result in
significant additional costs to BB&T; and
• widespread system outages, caused by the failure of critical internal systems or critical services provided by third parties, could adversely impact BB&T's financial condition and results of operations.
This presentation contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, regarding the financial condition, results of operations, business plans and the future performance of BB&T. Forward-looking statements
are not based on historical facts but instead represent management’s expectations and assumptions regarding BB&T’s business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties,
risks and changes in circumstances that are difficult to predict. BB&T’s actual results may differ materially from those contemplated by the forward-looking statements. Words such as "anticipates, "believes," "estimates," "expects," "forecasts," "intends," "plans,"
"projects," "may," "will," “should," "could," and other similar expressions are intended to identify these forward-looking statements. Such statements are subject to factors that could cause actual results to differ materially from anticipated results. While there is no
assurance that any list of risks and uncertainties or risk factors is complete, important factors that could cause actual results to differ materially from those in the forward-looking statements include the following, without limitation:
Forward-Looking Information
• Tangible common equity and related ratios are non-GAAP measures that exclude the impact of intangible assets and their related amortization. These measures are useful for evaluating the performance of a business consistently, whether acquired or
developed internally. The return on average risk-weighted assets is a non-GAAP measure. BB&T's management uses these measures to assess the quality of capital and returns relative to balance sheet risk and believes that investors may find them
useful in their analysis of the Corporation.
• The ratio of loans greater than 90 days and still accruing interest as a percentage of loans held for investment has been adjusted to remove the impact of loans that were covered by FDIC loss sharing agreements and purchased credit impaired
("PCI") loans as well as government guaranteed loans. Management believes that their inclusion may result in distortion of these ratios such that they might not be comparable to other periods presented or to other portfolios that were not impacted by
purchase accounting or reflective of asset collectibility.
• The adjusted efficiency ratio is non-GAAP in that it excludes securities gains (losses), amortization of intangible assets, merger-related and restructuring charges and other selected items. BB&T's management uses this measure in their analysis of the
Corporation's performance. BB&T's management believes this measure provides a greater understanding of ongoing operations and enhances comparability of results with prior periods, as well as demonstrating the effects of significant gains and
charges.
• Core net interest margin is a non-GAAP measure that adjusts net interest margin to exclude the impact of interest income and funding costs associated with loans and securities acquired in the Colonial acquisition and PCI loans acquired from
Susquehanna and National Penn. Core net interest margin is also adjusted to remove the purchase accounting marks and related amortization for non-PCI loans, deposits and long-term debt acquired from Susquehanna and National Penn. BB&T's
management believes that the adjustments to the calculation of net interest margin for certain assets and deposits acquired provide investors with useful information related to the performance of BB&T's earning assets.
Non-GAAP Information
A reconciliation of these non-GAAP measures to the most directly comparable GAAP measure is included in BB&T's Third Quarter 2016 Quarterly Performance Summary, which is available on BB&T's website at www.bbt.com.
Capital ratios are preliminary.
This presentation contains financial information and performance measures determined by methods other than in accordance with accounting principles generally accepted in the United States of America ("GAAP"). BB&T's management uses these "non-GAAP"
measures in their analysis of the Corporation's performance and the efficiency of its operations. Management believes that these non-GAAP measures provide a greater understanding of ongoing operations and enhance comparability of results with prior periods
as well as demonstrating the effects of significant gains and charges in the current period. The company believes that a meaningful analysis of its financial performance requires an understanding of the factors underlying that performance. BB&T's management
believes that investors may use these non-GAAP financial measures to analyze financial performance without the impact of unusual items that may obscure trends in the company's underlying performance. These disclosures should not be viewed as a substitute for
financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Below is a listing of the types of non-GAAP measures used in this news release:
3
2016 Third Quarter Performance Highlights1
Net income totaled $599 million2, up 21.7% vs. 3Q15 and 42.7% vs. 2Q16
Diluted EPS totaled $0.73, up 14.1% vs. 3Q15 and up 42.2% vs. 2Q16
Adjusted EPS totaled $0.76 excluding merger-related and restructuring charges
and other items described on slide 4
GAAP ROA, ROE and ROTCE3 were 1.15%, 8.87% and 15.20%, respectively
Record
Earnings
Loans &
Credit Quality
Average loans and leases held for investment totaled $141.3 billion in 3Q16, up slightly
compared with 2Q16
NPAs decreased 4.9% vs. 2Q16
Strategic
Highlights
Settled loss share agreements with the FDIC
Settled FHA-insured loan matter
Made a $50 million charitable contribution
Repurchased $160 million of outstanding shares
Record
Revenues
Taxable-equivalent revenues totaled $2.8 billion, up 13.1% vs. 3Q15 and 3.9% vs. 2Q16
Net interest margin declined 2 bps to 3.39%
Core net interest margin increased to 3.17%
Improved
Efficiency
GAAP efficiency improved to 61.7% vs. 65.4% in 2Q16
Adjusted efficiency improved to 58.7% vs. 59.6% in 2Q16
Noninterest expense was $1.7 billion, a decrease of 19.0% vs. 2Q16
1 Returns and linked quarter growth rates are annualized, except credit metrics
2 Available to common shareholders
3 Refer to the Appendix for appropriate reconciliations of non-GAAP financial measures
4
Pre-Tax After Tax1 Diluted EPS Impact
Merger-related and restructuring charges $ (43) $ (27) $ (0.03)
Charitable contribution (50) (31) (0.04)
Settlement of FHA-insured loans matter, net of
recoveries 73 46 0.05
Termination of FDIC loss share agreements (18) (11) (0.01)
Selected Items Affecting Earnings ($ in millions, except per share impact)
1 Income taxes were estimated using the marginal tax rate
5
Loans Reflect Slower Commercial Growth and Targeted Runoff1
Average loans and leases held for investment increased
0.3% annualized in 3Q16 vs. 2Q16
Excluding residential mortgage and sales finance,
average loans held for investment grew approximately
2.2% annualized vs. 2Q16
Experienced loan growth vs. 2Q16 in other portfolios:
Premium Finance, up 57.1% annualized
Sheffield, up 21.3% annualized
Regional Acceptance, up 15.5% annualized
Revolving credit, up 9.6% annualized
1 Excludes loans held for sale
2 Other lending subsidiaries consist primarily of AFCO/CAFO/Prime Rate, BB&T Equipment Finance, Grandbridge Real Estate Capital, Sheffield Financial and Regional Acceptance
$130.5
$134.8 $134.4
$141.1 $141.3
$100.0
$110.0
$120.0
$130.0
$140.0
$150.0
3Q15 4Q15 1Q16 2Q16 3Q16
Average Loans Held for Investment
($ in billions)
C&I $ 51,508 (1.1)%
CRE – IPP 14,667 (3.2)
CRE – C&D 3,802 14.4
Dealer floor plan 1,268 (11.3)
Direct retail lending 11,994 (1.2)
Sales finance 9,339 (13.6)
Revolving credit 2,537 9.6
Residential mortgage 30,357 (1.5)
Other lending subsidiaries2 14,742 22.3
Acquired from FDIC and PCI 1,052 (27.5)
Total $ 141,266 0.3%
3Q16
Average
Balance
3Q16 v. 2Q16
Annualized
Increase
(Decrease)
Average Loans Held for Investment
($ in millions)
4Q16 management expectations
Average loans are expected to increase 1% – 3%
annualized in the fourth quarter vs. 3Q16
6
Noninterest-Bearing Deposits Reflect Strong Growth
$143.8
$148.5 $149.9
$160.3 $159.5
0.24% 0.24%
0.25%
0.23% 0.23%
0.20%
0.25%
0.30%
0.35%
0.40%
$120.0
$130.0
$140.0
$150.0
$160.0
$170.0
3Q15 4Q15 1Q16 2Q16 3Q16
Total Interest-Bearing Deposit Cost
Total deposits averaged $159.5 billion, a decrease of $835
million vs. 2Q16
Personal, down 5.2%
Business, up 3.7%
Public Funds, up 11.2%
Noninterest-bearing deposits increased $1.8 billion, or
14.3% annualized vs. 2Q16
Average Total Deposits
($ in billions)
$44.2
$45.8 $46.2
$48.8
$50.6
$30.0
$35.0
$40.0
$45.0
$50.0
$55.0
3Q15 4Q15 1Q16 2Q16 3Q16
Average Noninterest-Bearing Deposits
($ in billions)
Noninterest-bearing deposits $ 50,559 14.3%
Interest checking 27,754 (8.7)
Money market & savings 64,335 7.2
Subtotal $ 142,648 6.5%
Time deposits 15,818 (50.2)
Foreign office deposits – Interest-
bearing 1,037 NM
Total deposits $ 159,503 (2.1)%
3Q16
Average
Balance
Average Deposits
($ in millions) 3Q16 v. 2Q16
Annualized
Increase
(Decrease)
7
Credit Quality Reflects Seasonal Increase1
Credit quality results reflect expected seasonal
increase in consumer-related portfolios
Net charge-offs totaled $130 million, up 9 bps vs.
2Q16
Loans 90 days or more past due2 decreased 3.0%
vs. 2Q16
Loans 30-89 days past due2 increased 7.2% vs.
2Q16
NPAs decreased 4.9% vs. 2Q16
Excluding energy-related loans, NPAs were
0.32% of total assets
4Q16 management expectations
Management expects 4Q16 net charge-offs to be in
the range of 35 to 45 bps
NPA levels expected to remain in a similar range in
4Q16
0.36% 0.34%
0.42%
0.32%
0.38%
0.33%
0.40%
0.32%
0.00%
0.20%
0.40%
0.60%
3Q15 4Q15 1Q16 2Q16 3Q16
Total Nonperforming Assets as a Percentage
of Total Assets
Total NPAs Energy-related nonperformers
Annualized Net Charge-offs / Average Loans
1 Includes acquired from FDIC and PCI; excludes loans held for sale
2 Excludes nonperforming loans and leases
0.32%
0.38%
0.46%
0.28%
0.37%
0.00%
0.20%
0.40%
0.60%
3Q15 4Q15 1Q16 2Q16 3Q16
8
Energy Portfolio – Stabilized in 3Q16
Outstanding balances declined 11.2% compared
with last quarter
Total commitments and nonaccruals decreased vs.
2Q16
37% Utilization rate
47% of portfolio is Criticized & Classified
Allocated reserves = 11.5%
All nonperforming borrowers are paying as agreed
Coal portfolio = $201 million outstanding, 51%
utilization with 39% Criticized & Classified
Allocated reserves = 13.7%
Support
Services
$112
8%
Oil and Gas Portfolio
$ in millions
Midstream
$446
34% Upstream
$768
58%
Total $1.3 billion
(Approximately 1% of total loans)
9
Allowance Coverage Ratios Remain Strong
3.44x
2.83x
2.40x
3.88x
2.91x
2.49x 2.53x
1.89x 1.90x
2.00x
1.00
2.00
3.00
4.00
3Q15 4Q15 1Q16 2Q16 3Q16
ALLL to Net Charge-offs ALLL to NPLs HFI
Coverage ratios remain strong at 2.91x and
2.00x for the allowance to net charge-offs and
NPLs, respectively
The ALLL to loans ratio was 1.06%, flat
compared to last quarter
Provision for credit losses was $148 million vs. net
charge-offs of $130 million
Excluding loans acquired in business acquisitions,
the ALLL to loans ratio was 1.15%, compared to
1.16% last quarter
Reflects action taken to comply with guidance
from recent shared national credit review
received in early October
Going forward, we continue to expect the loan
loss provision to match charge-offs in addition
to providing for incremental loan growth
ALLL Coverage Ratios
10
Net Interest Margin Decreases Slightly to 3.39%
3.35% 3.35%
3.43% 3.41% 3.39%
3.15% 3.12% 3.18% 3.16% 3.17%
2.50%
3.00%
3.50%
4.00%
3Q15 4Q15 1Q16 2Q16 3Q16
Reported NIM Core NIM
3Q16 NIM decreased 2 bps due to:
Lower investment portfolio yields, down 15 bps
4Q16 management expectations
GAAP net interest margin expected to decline 3-5 bps
due to a reduction in purchase accounting accretion
Core net interest margin expected to remain
essentially flat as lower interest rates are offset by:
- favorable asset mix changes
- favorable funding cost and mix changes
- one rate increase in December 2016
Average earning assets are expected to decline
approximately $1 billion in 4Q16 vs. 3Q16 due to
lower securities balances
Asset sensitivity increased due to:
Growth in favorable funding sources
Positive growth in shorter asset classes
Net Interest Margin
1
-1.89%
1.96%
3.26%
4.62%
-1.42%
1.44%
2.42%
3.18%
-2.00%
0.00%
2.00%
4.00%
6.00%
Down 25 Up 50 Up 100 Up 200
Sensitivities as of 09/30/16 Sensitivities as of 06/30/16
Rate Sensitivities
1 See non-GAAP reconciliations included in the attached Appendix
11
Fee Income Reflects Stronger Mortgage Banking Income and
Loss Share Settlement Impact
Insurance income decreased $55 million, primarily due to
lower property and casualty commissions as a result of
normal seasonality
Mortgage banking income increased $43 million due to
net mortgage servicing rights valuation adjustments and
higher production volumes
BB&T reached an agreement with the FDIC to terminate
the loss sharing agreements associated with the Colonial
acquisition
As a result, $18 million of expense was recognized in
the third quarter and no FDIC loss share income or
expense will be recognized in future periods
Other income decreased $10 million, primarily due to a
decrease in income related to assets for certain post-
employment benefits, which is offset in personnel
expense
40.3% 40.3% 39.9%
41.2% 41.9%
35.0%
40.0%
45.0%
50.0%
3Q15 4Q15 1Q16 2Q16 3Q16
Fee Income Ratio
3Q16
3Q16 v.
2Q161
Increase
(Decrease)
3Q16 v.
3Q15
Increase
(Decrease)
Insurance income $ 410 (47.1) % 15.8 %
Service charges on deposits 172 14.4 3.0
Mortgage banking income 154 154.1 38.7
Investment banking and brokerage
fees and commissions 101 (3.9) (3.8)
Trust and investment advisory
revenues 68 5.9 7.9
Bankcard fees and merchant
discounts 61 6.6 7.0
Checkcard fees 50 - 11.1
Operating lease income 34 (11.4) 6.3
Income from bank-owned life
insurance 35 51.3 20.7
FDIC loss share income, net (18) NM (69.0)
Securities gains (losses), net - NM (100.0)
Other income 97 (37.2) 14.1
Total noninterest income $ 1,164 12.0 % 17.8 %
Noninterest Income
($ in millions)
1 Linked quarter percentages are annualized
4Q16 management expectations
Total noninterest income expected to be relatively flat
12
Noninterest Expense Reflects Lower Personnel Expense and
Merger-Related Charges
3Q16
3Q16 v.
2Q162
Increase
(Decrease)
3Q16 v.
3Q15
Increase
(Decrease)
Personnel expense $ 1,006 (12.6) % 14.1 %
Occupancy and equipment
expense 203 18.5 10.9
Software expense 63 75.1 26.0
Loan-related expense 33 (33.2) (13.2)
Outside IT services 51 63.3 45.7
Professional services 27 15.3 (35.7)
Amortization of intangibles 38 (37.9) 31.0
Regulatory charges 41 111.9 64.0
Foreclosed property expense 9 49.7 (40.0)
Merger-related and restructuring
charges, net 43 NM (44.2)
Loss (gain) on early
extinguishment of debt - NM NM
Other expense 197 (58.6) (9.6)
Total noninterest expense $ 1,711 (19.0) % 7.3 %
Noninterest Expense
($ in millions)
1 Refer to the Appendix for appropriate reconciliations of non-GAAP financial measures
2 Linked quarter percentages are annualized
65.0%
63.4%
60.7%
65.4%
61.7%
59.8% 59.2% 58.8% 59.6% 58.7%
50.0%
55.0%
60.0%
65.0%
70.0%
3Q15 4Q15 1Q16 2Q16 3Q16
Efficiency Ratio
GAAP Efficiency Adjusted Efficiency
Personnel expense decreased $33 million, driven by
a $14 million decline in certain post-employment
benefits expense and a $10 million decline in
insurance incentives expense
Merger-related and restructuring charges decreased
$49 million due to lower charges from acquisitions
and last quarter’s $19 million of restructuring charges
related to real estate actions
Other expense decreased $34 million primarily due to
a $73 million net benefit related to the settlement of
certain FHA-insured mortgage matters
Partially offset by a $50 million charitable contribution
4Q16 management expectations
Excluding merger-related and restructuring charges and
unusual items, expenses are expected to be down slightly
in the fourth quarter
1
13
Capital and Liquidity Remain Strong
10.1%
10.3%
10.4%
10.0%
10.1%
9.0%
9.5%
10.0%
10.5%
11.0%
3Q15 4Q15 1Q16 2Q16 3Q16
The common equity tier 1 ratio was 9.9% fully
phased-in
BB&T’s 3Q16 LCR was 122%
BB&T’s 3Q16 liquid asset buffer was 13.6%
(high quality liquid assets as a percentage of
total assets)
4Q16 capital actions:
Continue share repurchase program with up to
$160 million in share repurchases in the 4th quarter
1 Current quarter regulatory capital information is preliminary
Common Equity Tier 11
14
($ in millions)
Inc/(Dec)
vs 2Q16
Inc/(Dec)
vs 3Q15
3Q16 Comments5,6
Net Interest Income
Noninterest Income1
Provision for Credit Losses
Noninterest Expense2
Income Tax Expense
Segment Net Income
Highlighted Metrics5,6
$ 972
358
(3)
800
195
$ 338
$ 49
13
(26)
18
27
$ 43
($ in billions)
1 Noninterest Income includes intersegment net referral fees
2 Noninterest Expense includes amortization of intangibles and allocated corporate expense
3 Linked quarter growth rates annualized except for production
4 Commercial production includes C&I, CRE and Dealer Floor Plan
3Q16 Like
Total Commercial Loans
Direct Retail Lending
Money Market & Savings
Noninterest Bearing Deposits
Link3
23.2%
24.6%
26.5%
18.5%
Change
Community Banking Segment
Commercial production4 decreased $167 million, or
4.0%, compared to 3Q15; increased $165 million, or
4.3%, compared with 2Q16
Direct Retail Lending production increased $78
million, or 7.0%, compared to 3Q15; increased $57
million, or 4.9%, compared with 2Q16
Operating results increased vs. 3Q15 primarily due
to the acquisitions of National Penn and
Susquehanna
National Penn systems conversion completed
successfully in mid July
Effective with conversion, 28 branches consolidated
or closed; impacted branches a combination of BB&T
and National Penn
Northern PA region created with a blending of BB&T
and National Penn associates
Retained key National Penn associates for critical
leadership positions at BB&T
Serves individual and business clients by offering a variety of loan and deposit products and other financial services
$49.8
$11.8
$49.8
$44.7
5 National Penn results were included in this segment following the mid-July conversion
6 Balances reported and related growth metrics are based on average YTD loans and deposits
22.9%
35.7%
20.7%
18.1%
$ 200
20
(7)
107
42
$ 78
15
Retains and services mortgage loans originated by the Residential Mortgage Lending Division and through its referral relationship
with the Community Bank and referral partners as well as those purchased from various correspondent originators
($ in millions)
Inc/(Dec)
vs 2Q16
Inc/(Dec)
vs 3Q15
3Q16 Comments
4
Net Interest Income
Noninterest Income1
Provision for Credit Losses
Noninterest Expense2
Income Tax Expense
Segment Net Income
Highlighted Metrics
$ 119
116
9
38
71
$ 117
($ in billions)
1 Noninterest Income includes intersegment net referral fees
2 Noninterest Expense includes amortization of intangibles and allocated corporate expense
3 Credit quality metrics are based on Loans Held for Investment
4 Linked quarter growth rates annualized except for production and sales
Change
Residential Mortgage Banking Segment
$ 9
33
(1)
(74)
44
$ 73
Production mix was 57% purchase / 43%
refinance in 3Q16 and 2Q16
Net interest income increase vs. 2Q16 primarily
due to higher credit spreads on loans held for
investment and growth in loans held for sale
Noninterest income increased vs. 2Q16 due to
higher net mortgage servicing right valuation
adjustments and higher production
Decrease in noninterest expense vs. 2Q16 driven
by settlement of FHA-insured loan matters and
related recovery in 3Q16 and lower loan
processing expense
Credit quality3
30+ days and still accruing delinquency of 3.69%
Nonaccruals of 0.55%
Net charge-offs of 0.16%
$ 3
22
(1)
(69)
36
$ 59
3Q16 Link4 Like
Retail Originations $ 2.4 10.3% 24.8%
Correspondent Purchases $ 3.9 12.6% 24.0%
Total Production $ 6.3 11.7% 24.3%
Loan Sales $ 4.9 33.1% 0.7%
Loans Serviced for others (EOP) $ 90.2 0.8% (0.3%)
16
Primarily originates indirect loans to consumers on a prime and nonprime basis for the purchase of automobiles and other vehicles
through approved dealers both in BB&T’s market and nationally (through Regional Acceptance Corporation)
Comments4,5 ($ in millions)
Inc/(Dec)
vs 2Q16
Inc/(Dec)
vs 3Q15
3Q16
Net Interest Income
Noninterest Income1
Provision for Credit Losses
Noninterest Expense2
Income Tax Expense
Segment Net Income
Highlighted Metrics
3Q16 Like
$ 190
1
76
50
25
$ 40
Retail Loan Production
Loan Yield
Operating Margin3
Net Charge-offs
$ 2.2
6.63%
73.8%
1.95%
88.1%
0.04%
0.1%
0.11%
1 Noninterest Income includes intersegment net referral fees
2 Noninterest Expense includes amortization of intangibles and allocated corporate expense
3 Operating Margin excludes Provision for Credit Losses
($ in billions)
Link4
75.8%
0.08%
(1.0%)
0.45%
Change
Dealer Financial Services Segment
Credit spreads in the prime auto portfolio improved
by 21 basis points over 3Q15
Regional Acceptance generated solid loan growth
15.5% loan growth vs. 2Q16 and 8.5% vs. 3Q15
Origination terms stable, maximum term of 72
months
Program changes over last two years steadily
reduced the maximum permitted origination LTV
Regional Acceptance’s credit results continue to be
within our credit risk appetite
Link quarter provision increase in line with seasonal
expectations
Loss rate flat with 3Q15
Delinquency rate declined from 3Q15
$ 3
1
18
3
(6)
$ (11)
$ 7
1
9
2
(1)
$ (2)
4 Linked quarter growth rates annualized except for production and sales
5 Balances reported and related growth metrics are based on average YTD loans and deposits
17
Provides specialty lending including: commercial finance, mortgage warehouse lending, tax-exempt governmental finance, equipment
leasing, commercial mortgage banking, insurance premium finance, dealer-based equipment financing, and direct consumer finance
Comments4,6 ($ in millions)
Inc/(Dec)
vs 2Q16
Inc/(Dec)
vs 3Q15
3Q16
Net Interest Income
Noninterest Income1
Provision for Credit Losses
Noninterest Expense2
Income Tax Expense
Segment Net Income
Highlighted Metrics
3Q16 Like
$ 122
83
23
97
21
$ 64
$ 5
10
6
5
1
$ 3
$ 11
25
15
17
1
$ 3
($ in billions)
Loan Originations
Loan Yield
Operating Margin3
Net Charge-offs
$ 5.3
4.60%
52.7%
0.43%
16.4%
(0.10%)
0.0%
0.21%
1 Noninterest Income includes intersegment net referral fees
2 Noninterest Expense includes amortization of intangibles and allocated corporate expense
3 Operating Margin excludes Provision for Credit Losses
4 Linked quarter growth rates annualized except for production and sales
(9.3%)
(0.17%)
1.1%
0.19%
Link4
Change5
Specialized Lending Segment
5 During the first quarter of 2016, the Asset-Based Lending Group was moved to Community Banking, and Supply-Chain
Lending was moved to the Financial Services segment. Prior period amounts have been retrospectively adjusted for
these transfers
6 Balances reported and related growth metrics are based on average YTD loans and deposits
Specialized Lending continues to enjoy strong
loan growth and production. Average loans up
29.6% compared to 2Q16 and up 15.0%
compared to 3Q15
Mortgage Warehouse Lending
- 26.4% loan growth vs. 3Q15
- 21.9% production growth vs. 3Q15
Sheffield
- 12.8% loan growth vs. 3Q15
- 4.7% production growth vs. 3Q15
Equipment Finance
- 12.3% loan growth vs. 3Q15
- 18.7% decline in production vs. 3Q15
Grandbridge realized strong mortgage banking
income
3Q16 up 123.7% compared to 2Q16 and 97.3%
compared to 3Q15
18
Comments4 ($ in millions)
Inc/(Dec)
vs 2Q16
Inc/(Dec)
3Q15
3Q16
Net Interest Income
Noninterest Income1
Provision for Credit Losses
Noninterest Expense2
Income Tax Expense
Segment Net Income
Highlighted Metrics
Noninterest Income
Total Agencies3
EBITDA Margin5
3Q16 Like
Provides property and casualty, life, and health insurance to business and individual clients. It also provides workers compensation
and professional liability, as well as surety coverage and title insurance
$ 2
412
-
375
16
$ 23
$ -
(53)
-
(21)
(11)
$(21)
$ (1)
59
-
54
2
$ 2
$ 412
234
13.9%
16.7%
38
-
Change
(45.2%)
(2)
(6.1%)
Link4
($ in millions)
Insurance Holdings Segment
4 Linked quarter growth rates annualized except for production and sales
5 EBITDA is a measurement of operating profitability calculated by dividing pre-tax
net income adjusted to add back interest, depreciation, intangible amortization and merger-related
charges by total revenue
Lower noninterest income vs. 2Q16 primarily
reflects seasonality in commercial property and
casualty insurance
Higher noninterest income and noninterest expense
vs. 3Q15 was primarily due to the addition of Swett
& Crawford
Commission and fee revenue growth vs. 3Q15:
5.5% for Retail
28.5% for Wholesale
16.5% for Total Segment
Organic growth in commission and fee revenue of
0.2% vs 3Q15 and 1.0% as of YTD September
Experienced positive new business growth in 3Q16
1 Noninterest Income includes intersegment net referral fees
2 Noninterest Expense includes amortization of intangibles, allocated corporate expense, and merger related charges
3 U.S. Locations; count includes shared locations
19
Provides trust services, wealth management, investment counseling, asset management, estate planning, employee benefits,
corporate banking, and capital market services to individuals, corporations, governments, and other organizations
Comments4,5 ($ in millions)
Inc/(Dec)
vs 2Q16
Inc/(Dec)
vs 3Q15
3Q16
Net Interest Income
Noninterest Income1
Provision for Credit Losses
Noninterest Expense2
Income Tax Expense
Segment Net Income
Highlighted Metrics
Average Loan Balances
Average Deposits
Total Invested Assets
Invested Assets Noninterest
Income ($ in millions)
Operating Margin3
3Q16 Like
$ 161
233
32
230
49
$ 83
$ 2
18
26
3
(4)
$ (5)
$ 26
3
10
19
(1)
$ 1
$16.1
$32.0
$ 141.4
$ 143.1
41.6%
1 Noninterest Income includes intersegment net referral fees
2 Noninterest Expense includes amortization of intangibles and allocated corporate expense
3 Operating Margin excludes Provision for Credit Losses
($ in billions)
Link4
(2.9%)
15.5%
25.9%
22.1%
2.3%
Change
15.9%
8.1%
15.6%
11.9%
(0.6%)
Financial Services Segment
Modest decline in Corporate Banking’s loans vs.
2Q16
4.2% decline in loans vs. 2Q16
16.6% loan growth vs. 3Q15
BB&T Wealth generated strong loan and deposit
growth
8.6% loan growth and 13.7% transaction deposit
growth vs. 2Q16
11.4% loan growth and 21.4% transaction deposit
growth vs. 3Q15
Increase in noninterest income vs. 2Q16 driven by
client derivative income, trust and investment
advisory fees and higher income from SBIC private
equity investments
The provision increase was driven by risk grade
mix changes, partially offset by lower loan
balances
4 Linked quarter growth rates annualized except for production and sales
5 Balances reported and related growth metrics are based on average YTD loans and deposits
20
21
Capital Measures1
(Dollars in millions, except per share data)
1 Current quarter regulatory capital is preliminary
22
As of / Quarter Ended
Sept. 30 June 30 March 31 Dec. 31 Sept. 30
2016 2016 2016 2015 2015
Selected Capital Information
Risk-based capital:
Common equity tier 1 $ 17,824 $ 17,568 $ 17,320 $ 17,081 $ 16,822
Tier 1 20,876 20,620 20,373 19,682 19,422
Total 24,795 24,525 24,355 23,753 23,612
Risk-weighted assets 177,149 176,021 166,781 166,611 165,990
Average quarterly tangible assets 212,825 214,235 202,200 201,541 195,623
Risk-based capital ratios:
Common equity tier 1 10.1% 10.0% 10.4% 10.3% 10.1%
Tier 1 11.8 11.7 12.2 11.8 11.7
Total 14.0 13.9 14.6 14.3 14.2
Leverage capital ratio 9.8 9.6 10.1 9.8 9.9
Equity as a percentage of total assets 13.5 13.4 13.3 13.0 13.1
Common equity per common share $ 33.27 $ 32.72 $ 32.14 $ 31.66 $ 31.56
Non-GAAP Reconciliations
23
(Dollars in millions, except per share data)
1
Tangible common equity is a non-GAAP measures. BB&T's management uses these measures to assess the quality of capital and believes that investors may find them useful in their analysis of the Corporation.
These capital measures are not necessarily comparable to similar capital measures that may be presented by other companies.
Calculations of tangible common equity and related measures1:
Total shareholders' equity $ 30,091 $ 29,743 $ 28,239 $ 27,340 $ 27,264
Less:
Preferred stock 3,053 3,053 3,054 2,603 2,603
Noncontrolling interests 39 39 39 34 40
Intangible assets 10,519 10,567 9,215 9,234 9,198
Tangible common equity $ 16,480 $ 16,084 $ 15,931 $ 15,469 $ 15,423
Outstanding shares at end of period (in thousands) 811,424 814,500 782,379 780,337 780,150
Tangible common equity per common share $ 20.31 $ 19.75 $ 20.36 $ 19.82 $ 19.77
As of / Quarter Ended
Sept. 30 June 30 March 31 Dec. 31 Sept. 30
2016 2016 2016 2015 2015
Non-GAAP Reconciliations1
24
1 BB&T’s management uses these measures in their analysis of the Corporation’s performance and believes these measures provide a greater understanding of ongoing operations and enhance
comparability of results with prior periods, as well as demonstrating the effects of significant gains and charges.
Quarter Ended
Sept. 30 June 30 March 31 Dec. 31 Sept. 30
Efficiency Ratio (1) 2016 2016 2016 2015 2015
Efficiency Ratio Numerator - Noninterest Expense - GAAP $ 1,711 $ 1,797 $ 1,545 $ 1,597 $ 1,594
Amortization of intangibles (38 ) (42 ) (32 ) (32 ) (29 )
Merger-related and restructuring charges, net (43 ) (92 ) (23 ) (50 ) (77 )
Gain (loss) on early extinguishment of debt - - 1 - -
Charitable contribution (50 ) - - - -
Settlement of FHA-insured loan matters and related recovery 73 - - - -
Efficiency Ratio Numerator - Adjusted $ 1,653 $ 1,663 $ 1,491 $ 1,515 $ 1,488
Efficiency Ratio Denominator - Revenue - GAAP $ 2,774 $ 2,747 $ 2,545 $ 2,519 $ 2,452
Taxable equivalent adjustment 40 40 39 38 37
Securities (gains) losses, net - - (45 ) - 2
Efficiency Ratio Denominator - Adjusted $ 2,814 $ 2,787 $ 2,539 $ 2,557 $ 2,491
Efficiency Ratio - GAAP 61.7 % 65.4 % 60.7 % 63.4 % 65.0 %
Efficiency Ratio - Adjusted 58.7 59.6 58.8 59.2 59.8
25
1 BB&T’s management believes investors use this measure to evaluate the return on average common shareholders’ equity without the impact of intangible assets and their related amortization.
Non-GAAP Reconciliations1
(Dollars in millions)
Quarter Ended
Sept. 30 June 30 March 31 Dec. 31 Sept. 30
Return on Average Tangible Common Shareholders' Equity 2016 2016 2016 2015 2015
Net income available to common shareholders $ 599 $ 541 $ 527 $ 502 $ 492
Plus:
Amortization of intangibles, net of tax 24 26 20 21 18
Tangible net income available to common shareholders $ 623 $ 567 $ 547 $ 523 $ 510
Average common shareholders' equity $ 26,824 $ 26,519 $ 25,076 $ 24,736 $ 23,957
Less:
Average intangible assets 10,545 10,574 9,226 9,224 8,666
Average tangible common shareholders' equity $ 16,279 $ 15,945 $ 15,850 $ 15,512 $ 15,291
Return on Average Tangible Common Shareholders' Equity 15.20% 14.33% 13.87% 13.37% 13.23%
Non-GAAP Reconciliations1
Quarter Ended
Reported net interest margin vs. core net interest margin
Sept. 30
2016
June 30
2016
March 31
2016
Dec. 31
2015
Sept. 30
2015
Reported net interest margin - GAAP 3.39% 3.41% 3.43% 3.35% 3.35%
Adjustments to interest income for assets acquired:
Effect of securities acquired from FDIC (0.03) (0.06) (0.06) (0.03) (0.04)
Effect of loans acquired from FDIC and PCI (0.09) (0.08) (0.11) (0.11) (0.07)
Effect of purchase accounting marks on non-PCI loans acquired from
Susquehanna and National Penn
(0.10) (0.09) (0.06) (0.07) (0.08)
Adjustments to interest expense:
Effect of purchase accounting marks on deposits and long-term debt
assumed from Susquehanna and National Penn
- (0.02) (0.02) (0.02) (0.01)
Core net interest margin 3.17% 3.16% 3.18% 3.12% 3.15%
26
Core net interest margin is a non-GAAP measure that adjusts net interest margin to exclude the impact of interest income and funding costs associated with loans and securities acquired in the Colonial acquisition and
PCI loans acquired from Susquehanna and National Penn. Core net interest margin is also adjusted to remove the purchase accounting marks and related amortization for non-PCI loans, deposits and long-term debt
acquired from Susquehanna and National Penn. BB&T's management believes that the adjustments to the calculation of net interest margin for certain assets and deposits acquired provide investors with useful
information related to the performance of BB&T's earning assets.
1