BB&T reports 3rd quarter EPS totaling $0.37; Adjusted EPS of $0.70 excluding tax adjustment

WINSTON-SALEM, North Carolina, Oct. 17, 2013 /PRNewswire/ -- BB&T Corporation (NYSE: BBT) today reported third quarter 2013 net income available to common shareholders of $268 million, or $0.37 per diluted share. Net income available to common shareholders and earnings per share include the impact of a previously announced $235 million tax adjustment. Excluding this adjustment, BB&T's third quarter earnings totaled $503 million, or $0.70 per diluted share.

Excluding the tax adjustment, net income available to common shareholders increased 7.2% and earnings per diluted share increased 6.1% compared with the third quarter of 2012.

Third quarter earnings exclusive of the tax adjustment produced an annualized return on average assets of 1.20% and an annualized return on average common shareholders' equity of 10.22%.

"BB&T posted solid results in a challenging environment this quarter," said Chairman and Chief Executive Officer Kelly S. King. "Our 7% growth in adjusted earnings was driven by a substantial improvement in credit quality to the best levels in almost six years. In addition, we maintained a stable net interest margin and reduced expenses compared with last quarter. We are also pleased to achieve 3% loan growth in a sluggish economic environment.

"Credit quality improvement accelerated the last two quarters and credit metrics are very strong," said King. "Nonperforming assets declined 9% to their lowest levels as a percent of total assets since 2007. In addition, net loan charge-offs decreased 34% to 0.49% of average loans and leases, down from 0.75% last quarter, excluding covered loans. Net charge-offs have declined by half since the first quarter this year, driving a decrease in our loan loss provision and other credit-related costs.

"Average loans grew 3% on an annualized basis compared with last quarter, led by strong performances in other lending subsidiaries, up 23%; sales finance automobile lending, up 22%; and direct retail lending, up 4%. We are pleased with this performance given the slower economic growth this quarter. Early in the fourth quarter, we sold a consumer lending subsidiary, which will allow us to optimize our loan mix in the short-term and redeploy the capital over the long-term.

"While average total deposits were lower this quarter, noninterest-bearing deposits grew 8% annualized consistent with our mix improvement goals," King said. "We are also pleased with the results of the FDIC deposit market share report, where we maintained or grew market share rank in nine states in our footprint.

"We are working to reduce noninterest expenses and improve efficiency. Third quarter expenses declined 7% on an annualized basis compared to last quarter, led by lower personnel and restructuring costs. Professional services expenses related to systems and project-related costs remained elevated this quarter, but we are confident these costs and total expenses will decline in coming quarters," said King.

For the first nine months of 2013, BB&T reported net income available to common shareholders of $1.0 billion, which includes the impact of $516 million in adjustments related primarily to tax-related litigation. Earnings per diluted common share, including the tax adjustments, totaled $1.44 for the first nine months of 2013.

Third Quarter 2013 Performance Highlights

• Average total loans and leases held for investment increased 3.0% on an annualized basis compared to the second quarter of 2013
  • Average C&I loans increased 0.9%; 2.1% excluding mortgage warehouse lending
  • Average sales finance loans increased 22.0%
  • Average loans in the other lending subsidiaries group increased 23.3%
  • Average direct retail lending increased 4.4%
  • Average revolving credit increased 7.0%
  • Early in 4Q13, BB&T sold a consumer lending subsidiary with approximately $500 million in loans
    
    
• Taxable equivalent revenues were $2.4 billion for the third quarter
  • Net interest margin was 3.68%, down two basis points compared with last quarter
  • Insurance income decreased $71 million, driven by seasonal factors
  • Mortgage banking income was down $51 million as margins and production declined due to reduced demand
    
    
• Asset quality results improved significantly
  • Nonperforming assets decreased $114 million, or 8.9%, excluding covered assets
  • Net charge-offs, excluding covered, were 0.49% of average loans for the quarter, down from 0.75% in the second quarter of 2013 and 1.08% in the third quarter of 2012
  • Net charge-offs, excluding covered, decreased 34.0% compared with the second quarter
  • Allowance for loan losses (excluding covered loans) as a percentage of nonperforming loans HFI increased from 1.55% in the second quarter of 2013 to 1.66% in the third quarter of 2013
    
    
• Noninterest expense decreased an annualized 6.6% compared with the second quarter of 2013
  • Personnel expense declined $39 million primarily due to lower production-related compensation and other post-employment benefits expenses
  • Professional services increased $13 million primarily due to legal and systems and project-related expenses
  • Merger-related and restructuring expenses declined $23 million
    
    
• Average noninterest-bearing deposits increased $658 million, or 7.8% on an annualized linked quarter basis
  • Average interest-bearing deposit costs fell one basis point to 0.31% this quarter
    
    
• Capital levels improved across the board
  • Tangible common equity to tangible assets was 6.9%
  • Tier 1 common equity to risk-weighted assets was 9.4%
  • Tier 1 risk-based capital was 11.3%
  • Leverage capital remained strong at 9.0%
  • Total capital was 13.9%
    

Earnings presentation and Quarterly Performance Summary

To listen to BB&T's live third quarter 2013 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. Replays of the conference call will be available by dialing +1-888-203-1112 (access code 4313363) until November 17, 2013.

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

BB&T's third quarter 2013 Quarterly Performance Summary, which contains detailed financial schedules, is available on BB&T's website at www.bbt.com/financials.html.

About BB&T

As of September 30, 2013, BB&T is one of the largest financial services holding companies in the U.S. with $181.1 billion in assets and market capitalization of $23.8 billion. Based in Winston-Salem, N.C., the company operates 1,824 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 J.D. Power and Associates, 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 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 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 believe 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.
• Net income available to common shareholders, diluted EPS, return on average assets, return on average risk-weighted assets, return on average common shareholders' equity and return on average tangible common shareholders' equity have been adjusted to exclude the impact of the $235 million tax adjustment that was recorded in the third quarter of 2013. BB&T 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 on the Investor Relations section of BB&T's website and in BB&T's Third Quarter 2013 Quarterly Performance Summary, which is available on BB&T's website at www.bbt.com/financials.html.

This news release contains certain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements may address issues that involve significant risks, uncertainties, estimates and assumptions made by management. Actual results may differ materially from current projections. Please refer to BB&T's filings with the Securities and Exchange Commission for a summary of important factors that may affect BB&T's forward-looking statements. BB&T undertakes no obligation to revise these statements following the date of this news release.