Attached files
| file | filename |
|---|---|
| 8-K - 8-K - TRUIST FINANCIAL CORP | form8k-earnings_1q17.htm |
| EX-99.2 - EXHIBIT 99.2 - TRUIST FINANCIAL CORP | ex992-earningstables_1q17.htm |
| EX-99.1 - EXHIBIT 99.1 - TRUIST FINANCIAL CORP | ex991-earningstext_1q17.htm |
Kelly S. King
Chairman and Chief Executive Officer
First Quarter 2017
Earnings
Conference Call
April 20, 2017
Daryl N. Bible
Chief Financial Officer
• 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, including, but not limited to, the potential exit of the United Kingdom from the European Union;
• changes in the interest rate environment, including interest rate changes made by the Federal Reserve or the possibility of a negative interest rate scenario, as well as cash flow reassessments may reduce net interest margin 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;
• cybersecurity risks, including "denial of service," "hacking" and "identity theft," could adversely affect BB&T's business and financial performance or reputation, and BB&T 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, materially disrupting BB&T's operations or the ability or willingness of customers to access BB&T's products and services;
• 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 and regulatory proceedings 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;
• risks resulting from the extensive use of models;
• risk management measures may not be fully effective;
• 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 news release 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 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 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, as well as the risks and uncertainties more fully discussed
under Item 1A-Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2016 and in any of BB&T’s subsequent filings with the Securities and Exchange Commission:
Forward-Looking Information
• Tangible common equity and related measures 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. BB&T's management uses these measures to assess the quality of capital and returns relative to balance sheet risk and believes investors may find them useful in their analysis of the Corporation.
• 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 demonstrates 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 estimated 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 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 First Quarter 2017 Quarterly Performance Summary, which is available at BBT.com.
Capital ratios are preliminary.
This news release 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 these non-GAAP measures provide a greater understanding of ongoing operations, enhance comparability of results with prior periods and
demonstrate the effects of significant items in the current period. The company believes a meaningful analysis of its financial performance requires an understanding of the factors underlying that performance. BB&T's management believes investors may find these
non-GAAP financial measures useful. 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
2017 first quarter performance highlights1
Net income available to common shareholders totaled $378 million, down 28.3% vs. 1Q16
Adjusted net income was $611 million, up 15.1% vs. 1Q16
Diluted EPS totaled $0.46
Adjusted EPS totaled $0.74, up 10.4% vs. 1Q16
ROA, ROCE and ROTCE were 0.79%, 5.72% and 9.98%, respectively
Adjusted ROA, ROCE and ROTCE were 1.21%, 9.18% and 15.56%, respectively
Earnings
Credit Quality
Credit quality remains excellent and improved across the board
NPAs, performing TDRs, delinquencies and net charge-offs all declined vs. last quarter
Revenues
Record taxable-equivalent revenues totaled $2.8 billion, up 9.1% vs. 1Q16 and
up 7.6% annualized vs. 4Q16
Net interest margin increased 14 bps to 3.46% vs. 4Q16
Core net interest margin increased 10 bps to 3.28% vs. 4Q16
Fee income ratio declined slightly to 42.1% from 42.6% in 4Q16
Efficiency
GAAP efficiency ratio was 75.6%
Adjusted efficiency ratio improved to 58.0% vs. 59.5% in 4Q16
1 Includes non-GAAP measures; refer to non-GAAP reconciliation in the attached Appendix
4
Selected items affecting earnings ($ in millions, except per share impact)
Pre - Tax After Tax
Diluted EPS
Impact
Loss on early extinguishment of debt $ (392) $ (246) $ ( 0.30)
Merger - related and restructuring charges ( 36) ( 22) (0.02)
Excess tax benefit on equity-based awards N/A 35 0.04
5
First quarter 2017 guidance update
Category 1Q17 outlook Results Actuals
($ in millions)
Loans
Average loans are expected to be
flat to up slightly vs. 4Q16 due
largely to seasonality
(-) (0.9)%
Credit quality
1Q17 net charge-offs to be in the
range of 35 to 45 bps
NPA levels expected to remain in a
similar range in 1Q17
42 bps
0.36%
Net interest margin
GAAP net interest margin
expected to increase 10 – 12 bps
Core net interest margin expected
to increase 8 – 10 bps
+
+14 bps
+10 bps
Noninterest income
Total noninterest income expected
to be relatively flat vs. 4Q16
+$9
Expenses
Excluding merger-related and
restructuring charges and the
FHLB restructuring charge,
expenses should be slightly below
$1.7 billion
+ $1,674
Operating leverage
Achieve positive adjusted
operating leverage + 10.5%1
(-) = missed guidance = achieved guidance + = exceeded guidance
1 Refer to non-GAAP reconciliation in the attached Appendix
Category al
($ in il ions)
6
Average loans and leases held for investment decreased
0.9% annualized in 1Q17 vs. 4Q16
Experienced loan growth vs. 4Q16 in several portfolios:
Equipment Finance, up 21.8% annualized
Grandbridge, up 16.4% annualized
Commercial Equipment Capital, up 10.0% annualized
Sales finance loans increased $297 million, or 11.4%
annualized, primarily due to a portfolio purchase in
4Q16; no additional portfolio purchases planned for 2017
C&I growth, excluding Mortgage Warehouse Lending,
was 4.5%
Community Bank production substantially improved in
1Q17 compared to 1Q16
1 Other lending subsidiaries consist primarily of AFCO/CAFO/Prime Rate, BB&T Equipment Finance, Grandbridge Real Estate Capital, Sheffield Financial and Regional Acceptance
$134.4
$141.1 $141.3 $142.3 $142.0
$100.0
$120.0
$140.0
$160.0
1Q16 2Q16 3Q16 4Q16 1Q17
C&I $ 51,119 (1.5)%
CRE – IPP 14,602 1.0
CRE – C&D 3,844 (3.1)
Dealer floor plan 1,427 17.8
Direct retail lending 12,014 (1.1)
Sales finance 10,896 11.4
Revolving credit 2,607 (0.2)
Other lending subsidiaries1 14,919 (1.0)
Subtotal $ 111,428 0.4%
Residential mortgage 29,701 (4.6)
PCI 883 (37.9)
Total $ 142,012 (0.9)%
1Q17
Average
Balance
1Q17 v. 4Q16
Annualized
Increase
(Decrease)
Loans reflect seasonality and targeted runoff
Average Loans Held for Investment
$ in billions
Average Loans Held for Investment
($ in millions)
2Q17 management expectations
Average loans are expected to increase 1 – 3%
annualized vs. 1Q17
7
1Q17 impact of seasonal / optimizing portfolios
Loan growth strategies
Growing more profitable loans with better
risk profile
Reducing exposure to prime auto loans
given low profitability and uncertain market
outlook
Continuing strategy to reduce exposure to
residential mortgage due to low profitability
2Q17 management expectations
Loans expected to grow 5% – 7%
annualized in 2Q17 vs. 1Q17 excluding
optimizing portfolios
Core
C&I, excluding mortgage warehouse lending $ 49,885
CRE-IPP 14,602
CRE-C&D 3,844
Dealer floor plan 1,427
Direct retail lending 12,014
Revolving credit 2,607
Other lending subsidiaries 8,500
Subtotal $ 92,879 3.1%
Seasonal
Mortgage warehouse lending 1,234
Other lending subsidiaries 6,419
Subtotal $ 7,653 (42.7)%
Optimizing
Sales finance $10,896
Residential mortgage 29,701
PCI 883
Subtotal $ 41,480 (1.3)%
Total $142,012 (0.9)%
1Q17 v. 4Q16
Annualized
Increase
(Decrease)
1Q17
Average
Balance
Average Loans Held for Investment
($ in millions)
8
Deposit growth remains solid
$149.9
$160.3 $159.5 $160.1 $161.4
0.25%
0.23% 0.23%
0.22%
0.26%
0.20%
0.25%
0.30%
0.35%
0.40%
$120.0
$140.0
$160.0
$180.0
1Q16 2Q16 3Q16 4Q16 1Q17
Total Interest-Bearing Deposit Cost
Total deposits averaged $161.4 billion, an increase of
$1.3 billion vs. 4Q16
Personal, up 5.4% annualized
Business, down 4.8% annualized
Public Funds, up 24.2% annualized
Average noninterest-bearing deposits decreased $326
million vs. 4Q16 due to seasonal factors
The percentage of noninterest-bearing deposits to total
deposits was 31.7% compared with 32.1% in 4Q16
Average Total Deposits
($ in billions)
$46.2
$48.8
$50.6 $51.4 $51.1
$30.0
$40.0
$50.0
$60.0
1Q16 2Q16 3Q16 4Q16 1Q17
Noninterest-bearing deposits $ 51,095 (2.6)%
Interest checking 29,578 13.4
Money market & savings 64,857 6.2
Subtotal $ 145,530 4.5%
Time deposits 14,924 (19.9)
Foreign office deposits – Interest-
bearing
929 NM
Total deposits $ 161,383 3.2%
1Q17
Average
Balance
Average Deposits
($ in millions)
1Q17 v. 4Q16
Annualized
Increase
(Decrease)
Average Noninterest-Bearing Deposits
($ in billions)
9
Credit quality results reflect expected
seasonal decrease in consumer-related
portfolios
Net charge-offs totaled $148 million, down
slightly vs. 4Q16
Loans 90 days or more past due and still
accruing decreased 14.8% vs. 4Q16
Loans 30-89 days past due decreased 25.3%
vs. 4Q16
NPAs decreased 1.5% vs. 4Q16
2Q17 management expectations
NCOs expected to be 35 – 45 bps
NPAs expected to be in a similar range to
1Q17
0.42%
0.40%
0.38% 0.37% 0.36%
0.00%
0.20%
0.40%
0.60%
1Q16 2Q16 3Q16 4Q16 1Q17
0.46%
0.28%
0.37%
0.42% 0.42%
0.00%
0.20%
0.40%
0.60%
1Q16 2Q16 3Q16 4Q16 1Q17
Credit quality improves across the board
Annualized Net Charge-offs / Average Loans
Total Nonperforming Assets / Total Assets
10
Allowance coverage ratios remain strong
2.40x
3.88x
2.91x
2.47x 2.49x
1.89x 1.90x
2.00x 2.03x 2.05x
1.50
2.50
3.50
4.50
1Q16 2Q16 3Q16 4Q16 1Q17
ALLL to Annualized NCOs ALLL to NPLs HFI
Coverage ratios remain strong at 2.49x and 2.05x for
the allowance to net charge-offs and NPLs,
respectively
The ALLL to loans ratio was 1.04%, unchanged vs.
4Q16
Excluding loans acquired in business acquisitions, the
ALLL to loans ratio was 1.13%, unchanged compared
with last quarter
The provision for credit losses matched net
charge-offs of $148 million for 1Q17
Going forward, we continue to expect the loan
loss provision to approximate charge-offs in
addition to providing for incurred losses on
incremental loan growth
ALLL Coverage Ratios
11
Net interest margin improves 14 bps
3.43% 3.41% 3.39%
3.32%
3.46%
3.19% 3.17% 3.18% 3.18%
3.28%
2.50%
3.00%
3.50%
4.00%
1Q16 2Q16 3Q16 4Q16 1Q17
Reported NIM Core NIM
1Q17 NIM increased 14 bps vs. 4Q16 due to:
Increased earning asset yields (7 bps)
4Q16 securities duration adjustment (5 bps)
Impact of FHLB termination (5 bps)
Offset by higher deposit costs (-3 bps)
Restructured $2.9 billion of FHLB advances in 1Q17
Recorded a pretax loss of $392 million
The debt’s average cost was 4.58%2
The weighted average duration was 59 months
Asset sensitivity improved driven mostly due to:
Shrinking fixed-rate loans
Growing core deposits
2Q17 management expectations
GAAP margin flat vs. 1Q17
Core margin up 2 – 4 bps vs. 1Q17
1
-1.26%
1.47%
2.61%
3.85%
-0.93%
1.13%
2.14%
3.13%
-2.00%
0.00%
2.00%
4.00%
6.00%
Down 25 Up 50 Up 100 Up 200
Sensitivities as of 03/31/17 Sensitivities as of 12/31/16
1 See non-GAAP reconciliations included in the attached Appendix
2 Includes impact of hedges
Net Interest Margin
Rate Sensitivities
12
Insurance income increased $39 million vs.
4Q16, primarily due to seasonality in employee
benefits commissions
Investment banking and brokerage fees and
commissions decreased $17 million as a result
of several large deals closed in the prior quarter
2Q17 management expectations
Total noninterest income expected to increase
6% – 8% vs. 2Q16
39.9%
41.2%
41.9%
42.6% 42.1%
35.0%
40.0%
45.0%
50.0%
1Q16 2Q16 3Q16 4Q16 1Q17
1Q17
1Q17 v.
4Q161
Increase
(Decrease)
1Q17 v.
1Q16
Increase
(Decrease)
Insurance income $ 458 37.7 % 9.3 %
Service charges on deposits 168 (9.4) 9.1
Mortgage banking income 103 (15.2) 13.2
Investment banking and
brokerage fees and commissions
91 (63.8) (6.2)
Trust and investment advisory
revenues
68 (5.9) 9.7
Bankcard fees and merchant
discounts
59 (6.8) 5.4
Checkcard fees 51 8.1 13.3
Operating lease income 36 23.9 5.9
Income from bank-owned life
insurance
29 46.8 (6.5)
FDIC loss share income, net - - (100.0)
Securities gains (losses), net - NM (100.0)
Other income 108 (28.0) 157.1
Total noninterest income $ 1,171 3.1 % 15.3 %
Noninterest Income
($ in millions)
1 Linked quarter percentages are annualized
Fee income growth reflects insurance seasonality
Fee Income Ratio
13
1Q17
1Q17 v.
4Q162
Increase
(Decrease)
1Q17 v.
1Q16
Increase
(Decrease)
Personnel expense $ 1,011 2.8 % 10.5 %
Occupancy and equipment
expense
193 (10.2) 1.0
Software expense 58 7.1 13.7
Outside IT services 49 (8.1) 19.5
Amortization of intangibles 38 - 18.8
Regulatory charges 39 (29.0) 30.0
Professional services 22 (75.1) -
Loan-related expense 30 NM (6.3)
Merger-related and restructuring
charges, net
36 NM 56.5
Loss (gain) on early
extinguishment of debt
392 NM NM
Other expense 234 (18.2) 12.0
Total noninterest expense $ 2,102 105.5 % 36.1 %
Adjusted noninterest expense3 $ 1,674 (2.9) % 9.9 %
Noninterest Expense
($ in millions)
1 Refer to the Appendix for appropriate reconciliations of non-GAAP financial measures
2 Linked quarter percentages are annualized
3 Excludes merger-related and restructuring charges, mortgage reserve adjustments and losses or gains on early extinguishment of debt
60.7%
65.4%
61.7% 61.1%
75.6%
58.8% 59.6% 58.7% 59.5% 58.0%
50.0%
60.0%
70.0%
80.0%
1Q16 2Q16 3Q16 4Q16 1Q17
GAAP Efficiency Adjusted Efficiency
Personnel expense increased $7 million vs. 4Q16
primarily driven by:
$34 million increase in payroll taxes, equity-based
compensation and other employee benefits expenses
- Includes approximately $25 million in largely seasonal
FICA and 401(k) match costs
Offset by:
97 fewer FTEs
$28 million decrease in salaries and incentives expense
Loan-related expense increased $36 million compared
to the prior quarter largely due to a prior quarter
release of $31 million of mortgage repurchase
reserves, which was primarily driven by lower
anticipated loan repurchase requests
1
Efficiency Ratio
Noninterest expense increases largely due to FHLB charge
2Q17 management expectations
Excluding merger-related and restructuring charges,
expenses expected to increase 0% – 2% vs. 2Q16
14
Capital and liquidity remain strong
10.4%
10.0%
10.1%
10.2%
10.3%
9.0%
9.5%
10.0%
10.5%
11.0%
1Q16 2Q16 3Q16 4Q16 1Q17
The common equity tier 1 ratio was 10.1% fully
phased-in
LCR was 124%
Liquid asset buffer was 12.7%
1Q17 dividend payout ratio was 64.0%
1Q17 total payout ratio was 106.3%
CCAR 2017
Management is currently targeting a total payout to
shareholders in excess of 100%
Current quarter regulatory capital information is preliminary
Common Equity Tier 1
15
($ in millions)
Inc/(Dec)
vs 4Q16
Inc/(Dec)
vs 1Q16
1Q17
Comments5
Net Interest Income
Noninterest Income1
Provision for Credit Losses
Noninterest Expense2
Income Tax Expense
Segment Net Income
Highlighted Metrics5,6
$ 991
351
25
797
186
$ 334
$ 7
(9)
(1)
2
(4)
$ 1
($ 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
1Q17 Like
Total Commercial Loans
Direct Retail Lending
Money Market & Savings
Noninterest Bearing Deposits
Link3
2.0%
(2.9%)
2.4%
0.8%
Change
Community Banking
Commercial production4 in 1Q17 was the best first
quarter production in our history
Increased $737 million, or 22.6%, compared to 1Q16
Decreased $509 million, or 11.3%, compared to 4Q16
Direct Retail Lending production in 1Q17 was
stronger than prior year’s 1Q production
Increased $228 million, or 25.3%, compared to 1Q16
Decreased $80 million, or 6.6%, compared with 4Q16
Operating results increased vs. 1Q16 due to the
inclusion of National Penn results as well as
improved deposit margin by the Community Bank
overall
Community Bank continues to focus on improving
efficiency
Operating margin7 improved 8.1% to 40.6% in 1Q17
vs. 1Q16
Serves individual and business clients by offering a variety of loan and deposit products and other financial services
$ 50.7
$ 11.9
$ 50.4
$ 46.5
5 National Penn results were included in this segment following the mid-July, 2016 conversion
6 Balances reported and related growth metrics are based on average loans and deposits
7 Operating margin is calculated as net income before taxes and provision for credit losses divided by total revenues
7.3%
8.0%
8.6%
11.0%
$ 73
31
35
24
13
$ 32
16
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. Also includes Mortgage Warehouse
Lending which provides short-term lending solutions to finance first-lien residential mortgages held-for-sale by independent mortgage companies.
($ in millions)
Inc/(Dec)
vs 1Q16
1Q17
Inc/(Dec)
vs 4Q16
Comments
Net Interest Income
Noninterest Income1
Provision for Credit Losses
Noninterest Expense2
Income Tax Expense
Segment Net Income
Highlighted Metrics
$ 111
76
5
105
29
$ 48
($ 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
$ (12)
-
(9)
36
(15)
$ (24)
Net interest income decreased vs. 4Q16 primarily
due to lower average balances
Provision for credit losses decreased vs. 4Q16
primarily due to the impact of improved loss
severity trends
Noninterest expense increased vs. 4Q16 primarily
driven by 4Q16 decrease in repurchase reserves
that reflects lower anticipated repurchase requests
Total production and loan sales decreased vs.
4Q16 due to seasonality
Production mix was 52% purchase / 48%
refinance in 1Q17 vs. 47% purchase / 53%
refinance in 4Q16
Credit quality3
30+ days and still accruing delinquency of 2.83%
Nonaccruals of 0.58%
Net charge-offs of 0.15%, annualized
$ (3)
5
(5)
1
2
$ 4
1Q17 Link4 Like
Retail Originations $ 1.6 (25.6%) 19.4%
Correspondent Purchases $ 2.4 (21.4%) 5.6%
Total Production $ 4.0 (23.2%) 10.9%
Loan Sales $ 3.6 (22.0%) 43.4%
Loans Serviced for others (EOP) $ 90.9 2.4% 0.3%
17
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)
Comments
($ in millions)
Inc/(Dec)
vs 1Q16
1Q17
Inc/(Dec)
vs 4Q16
Net Interest Income
Noninterest Income1
Provision for Credit Losses
Noninterest Expense2
Income Tax Expense
Segment Net Income
Highlighted Metrics
1Q17 Like
$ 196
-
95
55
17
$ 29
Retail Loan Production5
Loan Yield
Operating Margin3
Net Charge-offs
$ 1.2
6.34%
71.9%
2.09%
36.9%
(0.14)%
(3.9)%
0.15%
1 Noninterest Income includes intersegment net referral fees
2 Noninterest Expense includes amortization of intangibles and allocated corporate expense
3 Operating margin is calculated as net income before taxes and provision for credit losses divided by total revenues
($ in billions)
Link4
(56.3)%
(0.15)%
(2.9)%
0.08%
Change
Dealer Financial Services
Production and growth reflect continued portfolio mix
shift to lower risk receivables
Prime recreational lending production increased $61
million or 90% over 1Q16 and $49 million or 61% over
4Q16
Prime auto growth of 21.8% vs. 4Q16 driven by prime
portfolio acquisitions in 4Q16
Regional Acceptance (RAC) growth of 2.6% vs. 4Q16
driven by portfolio acquisition of lower risk near-prime
portfolio in 1Q17
Segment risk adjusted yield6 totaled 4.25% in 1Q17,
which included RAC risk adjusted yields of 8.7%
There are no plans for additional portfolio purchases
in 2017
Asset quality continues to remain within management
expectations
Prime auto 1Q17 charge-offs of 0.16%, flat with 1Q16
RAC 1Q17 charge-offs of 8.6% compared to 8.0% in 1Q16
RAC delinquencies and non-performing asset rates
declined in 1Q17 compared to 1Q16
$ (7)
-
9
4
(8)
$ (12)
$ 7
(1)
19
9
(9)
$ (13)
4 Linked quarter growth rates annualized except for production, sales and credit metrics
5 Retail loan production includes portfolio acquisitions
6 Risk adjusted yield is calculated as loan yield less charge-off rate
18
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
($ in millions)
Inc/(Dec)
vs 1Q165
1Q17
Inc/(Dec)
vs 4Q165
Net Interest Income
Noninterest Income1
Provision for Credit Losses
Noninterest Expense2
Income Tax Expense
Segment Net Income
Highlighted Metrics
1Q17 Like
$ 101
70
16
92
13
$ 50
$ (4)
(3)
3
(17)
3
$ 4
$ 1
8
(3)
12
-
$ -
($ in billions)
Loan Originations
Loan Yield
Operating Margin3
Net Charge-offs
$ 4.2
4.76%
46.2%
0.29%
21.4%
(0.30%)
(4.4%)
(0.12%)
1 Noninterest Income includes intersegment net referral fees
2 Noninterest Expense includes amortization of intangibles and allocated corporate expense
3 Operating margin is calculated as net income before taxes and provision for credit losses divided by total revenues
4 Linked quarter growth rates annualized except for production, sales and credit metrics
(12.1%)
0.02%
7.4%
(0.08%)
Link4
Change5
Specialized Lending
5 During the first quarter of 2017, the Mortgage Warehouse Lending Group was moved to the Mortgage Lending
segment. Prior period amounts have been retrospectively adjusted for this transfer.
Specialized Lending continues to experience solid
seasonal year over year production and loan growth
Average loans up 10.9% compared to 1Q16
Premium Finance
- 16.6% loan growth vs. 1Q16
- 21.0% production growth vs. 1Q16
Sheffield
- 9.9% loan growth vs. 1Q16
- 19.3% production decline vs. 1Q16
Equipment Finance
- 11.9% loan growth vs. 1Q16
- 122.3% production growth vs. 1Q16
Governmental Finance
- 7.9% loan growth vs. 1Q16
- 32.4% production growth vs. 1Q16
Grandbridge realized strong mortgage banking
production and income
1Q17 Mortgage Banking income increased 28.9%
compared to 1Q16
1Q17 production increased 47.2% vs. 1Q16
19
Comments
($ in millions)
Inc/(Dec)
1Q16
1Q17
Inc/(Dec)
vs 4Q16
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
1Q17 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
462
-
389
28
$ 47
$ -
34
-
15
6
$13
$ 1
41
-
51
(3)
$ (6)
$ 462
216
20.6%
9.7%
17
(3.7%)
Change
32.2%
(8)
2.9%
Link4
($ in millions)
Insurance Holdings
4 Linked quarter growth rates annualized except for production and sales
5 EBITDA margin 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
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
Commission and fee revenue growth of 9.4% vs.
1Q16:
4.3% for Retail Segment
14.7% for Wholesale Segment
Higher noninterest income and noninterest expense
vs. 1Q16 was primarily due to the acquisition of Swett
& Crawford
Higher noninterest income vs. 4Q16 primarily reflects
seasonality in employee benefits commission
Organic commission and fee revenue declined 1.3%
vs. 1Q16, primarily driven by timing of wholesale
commission payments
Continue to expand our Life Insurance and Employee
Benefits platforms with strong quarter over quarter
growth
Completed the systems conversion of Swett &
Crawford in 1Q17
20
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
($ in millions)
Inc/(Dec)
vs 1Q165
1Q17
Inc/(Dec)
vs 4Q165
Net Interest Income
Noninterest Income1
Provision for Credit Losses
Noninterest Expense2
Income Tax Expense
Segment Net Income
Highlighted Metrics
Average Loan Balances5
Average Deposits5
Total Invested Assets
Invested Assets Noninterest
Income ($ in millions)
Operating Margin3
1Q17 Like
$ 154
221
1
230
53
$ 91
$ 2
(45)
3
(2)
(18)
(26)
$ 12
19
(89)
10
40
$ 70
$16.1
$31.1
$ 147.8
$ 144.7
38.7%
1 Noninterest Income includes intersegment net referral fees
2 Noninterest Expense includes amortization of intangibles and allocated corporate expense
3 Operating margin is calculated as net income before taxes and provision for credit losses divided by total revenues
4 Linked quarter growth rates annualized except for production and sales
5 Effective January 2017 certain client relationships with $218 million of loans and $2 billion of deposits were no longer included in Financial Services and are only reported in Community Banking as the result of client segmentation
($ in billions)
Link4
7.7%
16.9%
11.6%
2.8%
(5.8%)
Change5
6.2%
14.4%
12.0%
10.5%
2.6%
Financial Services
Strong growth in Corporate Banking’s loans
7.6% loan growth vs. 4Q16
5.7% loan growth vs. 1Q16
BB&T Wealth generated strong loan and deposit
growth5
10.5% loan growth and 35.5% transaction deposit
growth vs. 4Q16
11.7% loan growth and 29.5% transaction deposit
growth vs. 1Q16
Decrease in noninterest income vs. 4Q16 driven by
lower investment banking, client derivative and
SBIC private equity investments income
Allocated provision decrease vs. 1Q16 driven by
higher net charge-offs and increased reserves in
the earlier quarter primarily related to the energy
portfolio
Segment comparisons are affected by the exit from
Capital Markets equity research, sales and trading
in 3Q16
21
2Q17 Outlook
1 Excludes merger-related and restructuring charges
Category Guidance
Loans Up 1% – 3% annualized vs. 1Q17
Credit quality
NCOs expected to be 35 – 45 bps
vs. 1Q17
NPAs expected to be in a similar
range vs. 1Q17
Net interest margin
GAAP margin flat vs. 1Q17
Core margin up 2 – 4 bps vs. 1Q17
Net interest income Up 2% – 4% annualized vs. 1Q17
Noninterest income Up 6% – 8% vs. 2Q16
Expenses Up 0% – 2%1 vs. 2Q16
Category 2Q17 Outlook
22
23
1 Accretable yield represents the difference between total expected cash flows and the carrying value of the related loan pools. It is recognized using level-yield method over the remaining expected life of the
pools (subject to future cash-flow reassessments).
2 Purchase accounting loan marks on Susquehanna and National Penn non-PCI loans represents the total mark, including credit and interest, and are recognized using level-yield method over the remaining
life of the individual loans or recognized in full in the event of prepayment. Not subject to future cash flow reassessments.
3 Purchase accounting marks on liabilities represents interest rate marks on Susquehanna and National Penn time deposits and long-term debt and are recognized using level-yield method over the term of the
liability.
4 Purchase accounting securities marks represents securities acquired in the Colonial acquisition and are recognized using level-yield method over the expected maturity of the underlying securities. Subject to
reassessment of prepayments, as applicable. The mark is also used for payment shortfalls and credit losses.
Purchase accounting summary
(Dollars in millions)
24
Purchase accounting summary
Acc. Yield1 PCI
Loans
PA Mark2 Non-
PCI Loans
PA Mark3
Liabilities
PA Mark4
Securities
Balance, December 31, 2016 $ (408) $ (285) $ (48) $ (418)
Interest income:
Normal accretion 30 14 5 9
Cash recoveries / early pay-offs 12 11 - 1
Total interest income 42 25 5 10
Other 16 - - -
Balance, March 31, 2017 $ (350) $ (260) $ (43) $ (408)
NBV/amortized cost of related
assets/liabilities at March 31, 2017 $ 860 $ 12,891 $ 2,753 $ 476
March 31 Dec. 31 Sept. 30 June 30 March 31
2017 2016 2016 2016 2016
Net interest income - GAAP $ 1,609 $ 1,565 $ 1,610 $ 1,617 $ 1,529
Taxable-equivalent adjustment 40
41
40
40
39
Net interest income - taxable-equivalent $ 1,649 $ 1,606 $ 1,650 $ 1,657 $ 1,568
Interest income - PCI loans (42) (49) (52) (48) (59)
Accretion of mark on Susquehanna and National Penn non-PCI loans (25) (33) (40) (42) (28)
Accretion of mark on Susquehanna and National Penn liabilities (5) (6) (7) (9) (8)
Accretion of mark on securities acquired from FDIC (10) 14 (8) (21) (18)
Net interest income - Core $ 1,567 $ 1,532 $ 1,543 $ 1,537 $ 1,455
Earning assets - GAAP 192,564 192,574 193,909 194,822 183,612
Average balance - PCI loans (883) (974) (1,052) (1,130) (1,098)
Average balance of mark on Susquehanna and National Penn non-PCI
loans 272 300 335 345 274
Average balance of mark on securities acquired from FDIC 414 402 408 424 441
Earning assets - Core $ 192,367 $ 192,302 $ 193,600 $ 194,461 $183,229
Annualized net interest margin
Reported 3.46 % 3.32 % 3.39 % 3.41 % 3.43 %
Core 3.28 3.18 3.18 3.17 3.19
Non-GAAP reconciliations1,2
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.
Amounts may not sum due to rounding
1
Quarter Ended
25
(Dollars in millions)
2
Non-GAAP reconciliations
26
(Dollars in millions, except per share data)
1
Tangible common equity and related measures are 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 $ 30,025 $ 29,926 $ 30,091 $ 29,743 $ 28,239
Less:
Preferred stock 3,053 3,053 3,053 3,053 3,054
Noncontrolling interests 44 45 39 39 39
Intangible assets 10,436 10,492 10,519 10,567 9,215
Tangible common equity 16,492 $ 16,336 $ 16,480 $ 16,084 $ 15,931
Outstanding shares at end of period (in
thousands) 811,370 809,475 811,424 814,500 782,379
Tangible common equity per common share $ 20.33 $ 20.18 $ 20.31 $ 19.75 $ 20.36
As of / Quarter Ended
March 31 Dec. 31 Sept. 30 June 30 March 31
2017 2016 2016 2016 2016
27
1 BB&T’s management uses this measure to evaluate the return on average common shareholders’ equity without the impact of intangible assets and their related amortization and believes that investors
may find the information useful in their analysis of the company.
Non-GAAP reconciliations1
(Dollars in millions)
Quarter Ended
March 31 Dec. 31 Sept. 30 June 30 March 31
Return on Average Tangible Common Shareholders' Equity 2017 2016 2016 2016 2016
Net income available to common shareholders $ 378 $ 592 $ 599 $ 541 $ 527
Plus:
Amortization of intangibles, net of tax 24 24 24 26 20
Tangible net income available to common shareholders $ 402 $ 616 $ 623 $ 567 $ 547
Average common shareholders' equity $ 26,807 $ 26,962 $ 26,824 $ 26,519 $ 25,076
Less:
Average intangible assets 10,464 10,508 10,545 10,574 9,226
Average tangible common shareholders' equity $ 16,343 $ 16,454 $ 16,279 $ 15,945 $ 15,850
Return on Average Tangible Common Shareholders' Equity 9.98 % 14.91 % 15.20 % 14.33 % 13.87 %
Non-GAAP reconciliations1
28
(Dollars in millions)
Quarter Ended
March 31, 2017
Return on average assets
Net income $ 426
Loss on debt extinguishment, net of tax 246
Excess tax benefit of equity-based compensation (35)
Merger-related and restructuring charges, net 22
Adjusted net income $ 659
Reported denominator $ 219,961
Estimated impact of adjustments on average assets 232
Adjusted denominator $ 220,193
Return on average assets 0.79 %
Adjusted return on average assets 1.21
Quarter Ended
March 31, 2017
Return on average common equity
Net income available to common shareholders $ 378
Loss on debt extinguishment, net of tax 246
Excess tax benefit of equity-based compensation (35)
Merger-related and restructuring charges, net 22
Adjusted net income $ 611
Reported denominator $ 26,807
Estimated impact of adjustments on average common equity 224
Adjusted denominator $ 27,031
Return on average common equity 5.72 %
Adjusted return on average common equity 9.18
Quarter Ended
March 31, 2017
Return on average tangible common equity
Tangible net income available to common shareholders $ 402
Loss on debt extinguishment, net of tax 246
Excess tax benefit of equity-based compensation (35)
Merger-related and restructuring charges, net 22
Adjusted net income $ 635
Reported denominator $ 16,343
Estimated impact of adjustments on average tangible common equity 224
Adjusted denominator $ 16,567
Return on average tangible common equity 9.98 %
Adjusted return on tangible common equity 15.56
1 BB&T's management uses these measures to evaluate the returns without the impact of significant gains or charges and believes that investors may find the information useful in their analysis of the company.
29
Non-GAAP reconciliations
Operating leverage1 1Q17 4Q16
Annualized
Growth
Reported revenue $ 2,780 $ 2,727 7.9 %
Taxable equivalent adjustment 40 41
Adjusted revenue $ 2,820 $ 2,768 7.6 %
Reported noninterest expense $ 2,102 $ 1,668 105.5 %
Merger related and restructuring charges, net (36) (13)
Loss (gain) on early extinguishment of debt (392) -
Mortgage reserve adjustments - 31
Adjusted noninterest expense $ 1,674 $ 1,686 (2.9) %
Operating leverage - GAAP (97.6) %
Operating leverage - adjusted 10.5
(Dollars in millions)
1 Operating leverage is defined as annualized revenue growth less annualized noninterest expense growth. BB&T's management uses this measure in the analysis of the Corporation’s performance and
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.
Non-GAAP reconciliations1
30
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.
2 Revenue is defined as net interest income plus noninterest income
Efficiency Ratio Numerator - Noninterest Expense - GAAP $ 2,102 $ 1,668 $ 1,711 $ 1,797 1,545
Amortization of intangibles (38) (38) (38) (42) (32)
Merger-related and restructuring charges, net (36) (13) (43) (92) (23)
Gain (loss) on early extinguishment of debt (392) - - - 1
Mortgage reserve adjustments - 31 - - -
Charitable contribution - - (50) - -
Settlement of FHA-insured loan matters and related recovery - - 73 - -
Efficiency Ratio Numerator - Adjusted $ 1,636 $ 1,648 $ 1,653 1,663 1,491
Efficiency Ratio Denominator – Revenue2 – GAAP $ 2,780 $ 2,727 $ 2,774 2,747 2,545
Taxable equivalent adjustment 40 41 40 40 39
Securities (gains) losses, net -
(1) - - (45)
Efficiency Ratio Denominator - Adjusted $ 2,820 $ 2,767 $ 2,814 2,787 2,539
Efficiency Ratio - GAAP 75.6 % 61.1 % 61.7 % 65.4 % 60.7 %
Efficiency Ratio - Adjusted 58.0 59.5 58.7 59.6 58.8
(Dollars in millions)
As of / Quarter Ended
March 31 Dec. 31 Sept. 30 June 30 March 31
2017 2016 2016 2016 2016