BB&T reports record earnings; EPS totals $0.77, up 6.9%

WINSTON-SALEM, North Carolina, July 18, 2013 /PRNewswire/ -- BB&T Corporation (NYSE: BBT) today reported second quarter 2013 net income available to common shareholders of $547 million, a record for quarterly earnings. EPS totaled $0.77 per diluted share, an increase of 6.9% compared with the second quarter of 2012. Net income available to common shareholders increased 7.3% compared to the same period last year.

Second quarter earnings produced an annualized return on average assets of 1.27% and an annualized return on average common shareholders' equity of 11.39%.

"We are pleased to report the strongest quarterly earnings in our history, supported by continued improvement in diversification strategies," said Chairman and Chief Executive Officer Kelly S. King. "Our earnings were driven by 6% annualized growth in revenues compared with last quarter, including an 18% annualized increase in noninterest income. These results reflect record performances from our insurance, investment banking and brokerage, and trust and investment advisory businesses.

"Improvement in credit quality accelerated this quarter and resulted in our best credit quality levels in five years," said King. "Nonperforming assets declined 10% and loan charge-offs decreased significantly to 0.75% of average loans and leases, down from 0.98% last quarter, excluding covered loans. This improvement led to a decrease in our loan loss provision and other credit-related costs this quarter.

"Average loans grew 3.8% annualized compared with last quarter led by strong performances in sales finance automobile lending, up 35%; other lending subsidiaries, up 17%; and C&I and direct retail lending, which both reflected almost 5% growth."

"Noninterest expense increased compared to last quarter; however much of this was driven by merger-related and restructuring charges following our community bank reorganization and other systems and project-related charges. As these costs fall in coming quarters, we expect noninterest expense to decline as well," said King.

For the first six months of 2013, BB&T reported net income available to common shareholders of $757 million, including the impact of a $281 million adjustment related to a disputed tax liability announced last quarter. Earnings per diluted common share, including the tax adjustment, totaled $1.06 for the first six months of 2013.

Second Quarter 2013 Performance Highlights

• Average total loans and leases held for investment increased 3.8% on an annualized basis compared to the first quarter of 2013
  • Average C&I loans increased 4.7%
  • Average sales finance loans increased 34.9%
  • Average loans in the other lending subsidiaries group increased 16.8%
  • Average direct retail lending increased 4.6%

• Revenues were $2.5 billion for the second quarter, an annualized increase of 6.2% compared with the first quarter of 2013
  • Net interest income was $7 million lower primarily due to covered loan run-off
  • Insurance income increased $61 million, driven by seasonally stronger performance
  • Investment banking and brokerage produced a record performance, up $5 million compared with the first quarter of 2013
  • Mortgage banking income was down $12 million as margins declined to more normal levels, offsetting record originations

• Asset quality improvement accelerated
  • Nonperforming assets decreased $137 million, or 9.7%, excluding covered assets
  • Net charge-offs, excluding covered, totaled 0.75% of average loans for the quarter, down from 0.98% in the first quarter of 2013 and 1.22% in the second quarter of 2012
  • Allowance for loan losses (excluding covered loans) as a percentage of nonperforming loans HFI increased from 1.43% in the first quarter of 2013 to 1.55% in the second quarter of 2013

• Noninterest expense was up $82 million or 23.3% annualized from the first quarter of 2013
  • Noninterest expense included $27 million in restructuring costs
  • Personnel expense was up $27 million primarily due to production-related compensation. Full-time equivalent employees and headcount were down slightly
  • Professional services was up $11 million primarily due to project-related expenses
  • Foreclosed property expense totaled $12 million, down $6 million

• Average noninterest-bearing deposits increased $1.1 billion, or 13.2% on an annualized linked quarter basis
  • Average interest-bearing deposit costs fell to 0.32% this quarter compared to 0.36% in the first quarter

• Capital levels improved across the board
  • Tier 1 common equity to tangible assets was 7.3%
  • Tier 1 common equity to risk-weighted assets was 9.4%
  • Tier 1 risk-based capital was 11.3%
  • Leverage capital remained strong at 8.8%
  • Total capital was 14.1%

Earnings presentation and Quarterly Performance Summary

To listen to BB&T's live second quarter 2013 earnings conference call at 8 a.m. (ET) today, please call 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 888-203-1112 (access code 4313363) until August 18, 2013.

To access the presentation, including an appendix reconciling non-GAAP disclosures, go to www.bbt.com, click on "About" and proceed to "Investor Relations." The presentation can be found under "View Recent Presentations."

BB&T's second 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 June 30, 2013, BB&T is one of the largest financial services holding companies in the U.S. with $182.7 billion in assets and market capitalization of $23.8 billion. Based in Winston-Salem, N.C., the company operates 1,851 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:

• Tier 1 common equity and related ratios are non-GAAP measures. BB&T uses the Tier 1 common equity definition used in the SCAP assessment to calculate these ratios. 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 and diluted EPS have been adjusted to exclude the impact of the $281 million tax adjustment that was recorded in the first 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 Second 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.