BB&T's third quarter EPS totals $0.71; Generated strong loan and core deposit growth

WINSTON-SALEM, North Carolina, Oct. 16, 2014 /PRNewswire/ -- BB&T Corporation (NYSE: BBT) today reported third quarter 2014 net income available to common shareholders of $520 million, compared to $268 million earned in the third quarter of 2013. Earnings per diluted common share totaled $0.71 compared to $0.37 in the third quarter of last year. The earlier quarter's results were reduced by tax-related reserve adjustments that totaled $235 million, or $0.33 per diluted share.

"Our results for the third quarter were strong, with solid fee income, broad-based loan and core deposit growth, and continued improvement in credit quality," said Chairman and Chief Executive Officer Kelly S. King. "Noninterest income was up slightly, overcoming seasonally lower insurance income, with mortgage banking income trending higher. Average loan growth was strong during the third quarter, with seasonal demand driving the other lending subsidiaries portfolio up 26%, while the CRE – construction and development portfolio increased 16% and the direct retail lending portfolio was up 13%.

"Credit quality continued to improve during the third quarter," said King. "Nonperforming assets, excluding covered assets, declined 4%, and charge-offs remained below our normalized range of 50 to 70 basis points.

"During the third quarter, we sold approximately $550 million of residential mortgage loans that were primarily performing TDRs at an after-tax gain of $26 million. We also extinguished $1.1 billion of our long-term debt to take advantage of the current low interest rate environment, which resulted in an after-tax loss of $76 million. Both of these transactions will benefit our long-term performance. Additionally, we had favorable developments related to a tax position under examination that resulted in a $50 million tax benefit during the third quarter.

"We also reached agreements to expand our geographic footprint through acquisitions in Texas and the northern Kentucky/Cincinnati markets. The acquisition in Texas will add 41 retail branches with approximately $2.3 billion in deposits. Once this deal closes, we will have more than 120 branches in the fast-growing Texas markets. We also announced the signing of a definitive agreement to acquire The Bank of Kentucky, a $1.9 billion bank with 32 branches and a strong market share in the northern Kentucky/Cincinnati market," said King.

Third Quarter 2014 Performance Highlights

• Average loans and leases held for investment increased 4.9% on an annualized basis compared to the second quarter of 2014
  • Average C&I loans increased 5.1%
  • Average sales finance loans increased 11.3%
  • Average CRE – construction and development loans increased 16.1%
  • Average CRE – income producing properties loans increased 8.2%
  • Average loans in the other lending subsidiaries group increased 25.6%
  • Average direct retail loans increased 12.7%

• Taxable equivalent revenues were $2.3 billion for the third quarter, an annualized increase of 1.7% compared to the second quarter
  • Net interest margin was 3.38%, down five basis points compared with the prior quarter due to lower rates on new loans and covered loan runoff
  • Mortgage banking income was $21 million higher than the prior quarter driven by an increase in residential mortgage loan production and sales

• Average deposits increased $1.0 billion, or 3.1% annualized, compared to the prior quarter
  • Average noninterest-bearing deposits increased $1.5 billion, or 15.9%
  • Average interest-bearing deposit costs were 0.26%, consistent with last quarter
  • Deposit mix continued to improve, with average noninterest-bearing deposits representing 29.2% of total deposits, compared to 28.3% in the prior quarter

• Asset quality continued to improve
  • Nonperforming assets, excluding covered assets, decreased $33 million, or 3.6%
  • Delinquent loans decreased $76 million, or 5.9%
  • The allowance for loan loss coverage ratio, excluding covered loans, increased to 1.82 times nonperforming loans held for investment in the third quarter, compared to 1.78 times in the second quarter

• Capital levels remained strong across the board
  • Tier 1 common equity to risk-weighted assets was 10.5%
  • Tier 1 risk-based capital was 12.4%
  • Total capital was 15.1%
  • Basel III common equity tier 1 was 10.3%
  • Leverage capital remained strong at 9.7%
  • Tangible common equity to tangible assets was 7.9%

Earnings presentation and Quarterly Performance Summary

To listen to BB&T's live third quarter 2014 earnings conference call at 8 a.m. (ET) today, please call 1-888-632-5009 and enter the participant code 5184622. A presentation will be used during the earnings conference call and is available on our website at www.bbt.com/earnings. Replays of the conference call will be available by dialing 888-203-1112 (access code 4313363) until November 16, 2014.

The presentation, including an appendix reconciling non-GAAP disclosures, is available at www.bbt.com/earnings.

BB&T's third quarter 2014 Quarterly Performance Summary, which contains detailed financial schedules, is available on BB&T's website at www.bbt.com/earnings.

About BB&T

As of September 30, 2014, BB&T is one of the largest financial services holding companies in the U.S. with $187 billion in assets and market capitalization of $26.8 billion. Based in Winston-Salem, N.C., the company operates 1,842 financial centers in 12 states and Washington, D.C., and offers a full range of consumer and commercial banking, securities brokerage, asset management, mortgage and insurance products and services. A Fortune 500 company, BB&T is consistently recognized for outstanding client satisfaction by the U.S. Small Business Administration, Greenwich Associates and others. More information about BB&T and its full line of products and services is available at www.bbt.com.

Capital ratios are preliminary. Credit quality data excludes covered and government guaranteed GNMA loans where applicable.

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 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:

• Tangible common equity, Tier 1 common equity and related ratios are non-GAAP measures. The return on average risk-weighted assets is a non-GAAP measure. The Basel III common equity Tier I ratio reflects management's interpretation of the regulatory requirements, which is subject to change. 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.
• Asset quality ratios have been adjusted to remove the impact of acquired loans and foreclosed property covered by FDIC loss sharing agreements from the numerator and denominator of these ratios. 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.
• Fee income and efficiency ratios are non-GAAP in that they exclude securities gains (losses), foreclosed property expense, amortization of intangible assets, merger-related and restructuring charges, the impact of FDIC loss share accounting and other selected items. BB&T's management uses these measures in their analysis of the Corporation's performance. BB&T's management 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.
• Return on average tangible common shareholders' equity is a non-GAAP measure that calculates the return on average common shareholders' equity without the impact of intangible assets and their related amortization. This measure is useful for evaluating the performance of a business consistently, whether acquired or developed internally.
• 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. BB&T's management believes that the exclusion of the generally higher yielding assets acquired in the Colonial acquisition from the calculation of net interest margin provides investors with useful information related to the relative performance of the remainder of BB&T's earning assets.
• Diluted EPS and the effective tax rate have been adjusted to exclude the impact of certain adjustments. BB&T's management believes these adjustments increase comparability of period-to-period results and uses these measures to assess performance and believes investors may find them useful in their analysis of the Corporation.

A reconciliation of these non-GAAP measures to the most directly comparable GAAP measure is included in BB&T's Third Quarter 2014 Quarterly Performance Summary, which is available on BB&T's website at www.bbt.com.

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 that are based on the beliefs and assumptions of the management of BB&T and the information available to management at the time that these disclosures were prepared. 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. Such factors include, but are not limited to, the following:

• 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 credit and financial markets, either nationally or globally, 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 in Europe;
• changes in the interest rate environment 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 and develop products that enable them to compete more successfully than BB&T and may be subject to different regulatory standards than BB&T;
• natural or other disasters 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 BB&T's customers to access the financial services BB&T offers;
• costs or difficulties related to the integration of the businesses of BB&T and its merger partners may be greater than expected;
• expected cost savings or revenue growth associated with completed mergers and acquisitions may not be fully realized or realized within the expected time frames;
• significant litigation could have a material adverse effect on BB&T;
• deposit attrition, customer loss and/or revenue loss following completed mergers and acquisitions may be greater than expected;
• cyber-security risks, including "denial of service," "hacking" and "identity theft," could adversely affect our business and financial performance, or our reputation; and
• failure to implement part or all of the Company's new ERP system could result in impairment charges that adversely impact BB&T's financial condition and results of operations and could result in significant additional costs to BB&T.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Actual results may differ materially from those expressed in or implied by any forward-looking statement. Except to the extent required by applicable law or regulation, BB&T undertakes no obligation to revise or update publicly any forward-looking statements for any reason.

Related Links

http://www.bbt.com