BB&T's 4th quarter EPS totals $0.75, up 6%; 2013 reflects record adjusted earnings

WINSTON-SALEM, North Carolina, Jan. 16, 2014 /PRNewswire/ -- BB&T Corporation (NYSE: BBT) today reported fourth quarter 2013 net income available to common shareholders of $537 million, an increase of 6.1% compared to $506 million earned in the fourth quarter of 2012. Earnings per diluted common share totaled $0.75, an increase of 5.6% compared with the fourth quarter last year. Quarterly results include an after-tax gain of $19 million from the sale of a consumer lending subsidiary.

For the full year 2013, net income available to common shareholders totaled $1.6 billion, resulting in earnings per diluted share of $2.19. These results include $516 million in previously announced tax adjustments. Excluding these adjustments, BB&T's 2013 earnings represent a record $2.1 billion, up 8.5% from 2012.

Fourth quarter earnings produced an annualized return on average assets of 1.31% and an annualized return on average common shareholders' equity of 10.85%. The return on average tangible common equity for the fourth quarter was 17.91%.

"BB&T produced record operating results for the year and accomplished most of our strategic objectives," said Chairman and Chief Executive Officer Kelly S. King. "Our 6% growth in earnings this quarter was driven by a continuing improvement in credit quality and record performances from our trust and investment advisory businesses as well as our investment banking and brokerage businesses.

"Credit quality improved dramatically in 2013 and fourth quarter credit metrics continue to be very strong," said King. "Nonperforming assets, excluding covered assets, declined 9% to their lowest levels as a percent of total assets since 2007. In addition, net loan charge-offs remained low at 0.49% of average loans and leases, excluding covered loans. Net charge-offs have declined by 52% since the first quarter of this year, driving a decrease in our loan loss provision and other credit-related costs.

"While average loans grew modestly excluding the sale of a consumer lending subsidiary early this quarter, demand picked up in the second half of the quarter. Our strongest loan categories for the quarter were sales finance, up an annualized 12%; revolving credit, up 8% and CRE-other, up 5%. Residential mortgage loans were up 10% with 6% coming from organic growth and 4% due to loans transferred from other lending subsidiaries. Excluding the subsidiary sale and a decline in mortgage warehouse lending, average loans increased 1.5% on an annualized basis.

"We saw a 4% annualized decline in noninterest expense this quarter, which coupled with increased revenue, drove positive operating leverage and a decline in the efficiency ratio. Expense control remains our focus heading into 2014 and we expect expenses to trend lower and efficiency to improve throughout the year," said King.

"Looking ahead to 2014, we are optimistic about a number of initiatives that will help drive performance," said King. "We recently announced an agreement to acquire 21 retail branches in Texas that will accelerate the growth of our franchise in these fast growing markets. We also continue to expand our wealth, corporate banking, insurance and specialized lending businesses. We will continue to focus on providing the best value proposition in our markets through our community banking model."

Fourth Quarter 2013 Performance Highlights

• Average total loans and leases held for investment decreased 1.2% on an annualized basis compared to the third quarter of 2013; excluding the subsidiary sale, average loans increased 0.3%
  • Average sales finance loans increased 11.9%
  • Average revolving credit loans increased 8.4%
  • Average CRE-other loans increased 5.2%
  • Average loans in the other lending subsidiaries group decreased 20.5%; excluding the subsidiary sale and the transfer of loans to residential mortgage, average loans in other lending increased 3.5%
  • Average C&I loans decreased 3.6%; flat excluding mortgage warehouse lending
  • Average direct retail lending decreased 2.8%
  • End of period loans increased 1.0% on an annualized basis

• Taxable equivalent revenues were $2.4 billion for the fourth quarter, up 3.9% annualized compared with the third quarter
  • Net interest margin was 3.56%, down 12 basis points compared with last quarter due to the subsidiary sale and runoff of covered assets
  • Insurance income increased $16 million, driven by seasonal factors
  • Mortgage banking income was down $17 million driven by lower originations, tighter pricing and the retention of certain mortgages
  • Investment banking and brokerage increased $12 million to a record $101 million

• Asset quality improved significantly
  • Nonperforming assets decreased $109 million, or 9.4%, excluding covered assets
  • Net charge-offs, excluding covered, were 0.49% of average loans for the quarter, flat with the third quarter of 2013 and down from 1.04% in the fourth quarter of 2012
  • Allowance for loan losses (excluding covered loans) as a percentage of nonperforming loans held for investment increased from 1.66% in the third quarter to 1.73% in the fourth quarter of 2013

• Noninterest expense decreased an annualized 4.0% compared with the third quarter of 2013
  • Professional services decreased $14 million primarily due to declining legal and project-related expenses
  • Other expenses declined $14 million
  • Merger-related and restructuring expenses increased $6 million

• Average noninterest-bearing deposits increased $1.1 billion, or 12.8% on an annualized linked quarter basis
  • Average interest-bearing deposit costs fell three basis points to 0.28% this quarter

• Capital levels improved across the board
  • Tangible common equity to tangible assets was 7.3%
  • Tier 1 common equity to risk-weighted assets was 9.9%
  • Tier 1 risk-based capital was 11.8%
  • Leverage capital remained strong at 9.3%
  • Total capital was 14.3%

Earnings presentation and Quarterly Performance Summary

To listen to BB&T's live fourth 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 February 16, 2014.

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

BB&T's fourth 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 December 31, 2013, BB&T is one of the largest financial services holding companies in the U.S. with $182.3 billion in assets and market capitalization of $26.4 billion. Based in Winston-Salem, N.C., the company operates 1,825 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 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 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 Fourth 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.