Truist Reports Fourth Quarter 2019 Results

Earnings of $702 million, or $0.75 per diluted share

CHARLOTTE, North Carolina, Jan. 30, 2020 /PRNewswire/ -- Truist Financial Corporation (NYSE: TFC) today reported earnings for the fourth quarter of 2019. Reported results for Truist reflect heritage BB&T prior to the completion of the merger and results from both BB&T and SunTrust from the merger closing date forward. The merger of equals resulting in the formation of Truist was completed on December 6, 2019.

Net income available to common shareholders was $702 million, down 6.9 percent, compared with the fourth quarter last year due to costs associated with the merger. Earnings per diluted common share were $0.75 for the fourth quarter of 2019, a decrease of 22.7 percent compared with the same period last year. Results for the fourth quarter produced an annualized return on average assets (ROA) of 0.95 percent, an annualized return on average common shareholders' equity (ROCE) of 7.33 percent, and an annualized return on tangible common shareholders' equity (ROTCE) of 12.91 percent.

Adjusted net income available to common shareholders was $1.0 billion, or $1.12 per diluted share, excluding merger-related and restructuring charges of $223 million ($176 million after-tax), incremental operating expenses related to the merger of $101 million ($79 million after-tax), securities losses of $116 million ($90 million after-tax), partially offset by the after-tax impact from the sale of residential mortgage loans of $1 million. Adjusted diluted earnings per common share increased $0.05 compared to the third quarter of 2019. Adjusted results produced an annualized ROA of 1.40 percent, an annualized ROCE of 10.84 percent and an annualized ROTCE of 18.60 percent.

"The successful completion of our merger was due to the hard work of thousands of Truist teammates and I am truly grateful for their efforts. Our integration and execution efforts are underway and going smoothly. While the fourth quarter of 2019 includes a number of costs necessary to complete the merger, our underlying performance is strong. Taxable-equivalent revenue for the fourth quarter of 2019 totaled $3.7 billion and adjusted net income was $1.0 billion," said Truist Chairman and Chief Executive Officer Kelly S. King.

"This month, we continued to hit key milestones that will bring Truist to life for our clients and teammates. We shared Truist's purpose, mission, and values, which was positively embraced by our teammates. Our purpose to inspire and build better lives and communities is the reason Truist exists and the starting point for every decision we will make," said King. "Our purpose is embedded in our visual brand identity, which was rolled out this month as well. Within our new monogram logo and colors, you can see elements that acknowledge our heritage companies and signal how we'll deliver a distinctive blend of touch and technology to build deeper trust with our clients."

Fourth Quarter 2019 Performance Highlights

• Earnings per diluted common share were $0.75
• Adjusted diluted earnings per share were $1.12
• ROA was 0.95 percent; adjusted ROA was 1.40 percent
• ROCE was 7.33 percent; adjusted ROCE was 10.84 percent
• ROTCE was 12.91 percent; adjusted ROTCE was 18.60 percent
  
  
• Completed merger of equals on December 6, 2019
• Merged loans of $154.0 billion, net of $4.5 billion mark
• Merged deposits of $170.7 billion, including an $83 million mark for time deposits
• Assumed long-term debt of $19.5 billion, including a $309 million mark
• Recorded core deposit and other intangibles of $2.5 billion
  
  
• Restructured balance sheet to enhance credit quality and improve liquidity, interest-sensitivity and return on capital
• Sold $33.2 billion of lower yielding securities to improve yield and lower premium amortization risk
• Transferred $17.9 billion of securities from HTM to AFS in response to changes in regulatory capital rules
• Maintained more than $10 billion in excess reserve balances for stronger liquidity and to meet LCR requirements under the new tailoring rule as a Category III Bank
• Identified $4.2 billion of lending exposures to sell to reduce credit and interest-rate risk
  
  
• Taxable-equivalent revenue was $3.7 billion for the fourth quarter of 2019
• Fee income ratio was 38.6 percent, compared to 42.0 percent for fourth quarter 2018
• Net interest margin was 3.41 percent, up four basis points from the third quarter of 2019
• Core net interest margin was 3.14 percent, down 15 basis points from the third quarter of 2019
  
  
• Noninterest expense was $2.6 billion for the fourth quarter of 2019
• Noninterest expense includes $223 million of merger-related and restructuring charges and $101 million of incremental operating expenses related to the merger
• GAAP efficiency ratio was 71.0 percent, compared to 60.7 percent for fourth quarter 2018
• Adjusted efficiency ratio was 57.5 percent, compared to 56.5 percent for fourth quarter 2018
  
  
• Asset quality remains strong; economic and political uncertainty presents risk
• Nonperforming assets were 0.14 percent of total assets; ratio benefited from pooled basis of accounting for PCI loans
• Loans 90 days or more past due and still accruing were 0.66 percent of loans held for investment, up from 0.27 percent for the prior quarter
• Excluding government guaranteed loans and PCI loans, loans 90 days or more past due and still accruing were 0.03 percent of loans held for investment
• Net charge-offs were 0.40 percent of average loans and leases, down one basis point compared to the prior quarter
• The allowance for loan and lease losses was 0.52 percent of loans and leases held for investment; merged loans were recorded at fair value with no initial allowance
• The allowance for loan loss coverage ratio was 3.41 times nonperforming loans and leases held for investment, versus 3.52 times in the prior quarter
  
  
• Capital levels remained strong compared to regulatory levels for well capitalized banks
• Common equity tier 1 to risk-weighted assets was 9.4 percent
• Tier 1 risk-based capital was 10.8 percent
• Total capital was 12.6 percent

Earnings Presentation and Quarterly Performance Summary

To listen to Truist's live fourth quarter 2019 earnings conference call at 8 a.m. ET today, please call 866-519-2796 and enter the participant code 892418. A presentation will be used during the earnings conference call and is available on our website at https://ir.truist.com/events-and-presentation. Replays of the conference call will be available for 30 days by dialing 888-203-1112 (access code 6759252).

The presentation, including an appendix reconciling non-GAAP disclosures, and Truist's Fourth Quarter 2019 Quarterly Performance Summary, which contains detailed financial schedules, is available at https://ir.truist.com/earnings.

About Truist
Truist Financial Corporation is a purpose-driven financial services company committed to inspire and build better lives and communities. With 275 years of combined BB&T and SunTrust history, Truist serves approximately 10 million households with leading market share in many high-growth markets in the country. The company offers a wide range of services including retail, small business and commercial banking; asset management; capital markets; commercial real estate; corporate and institutional banking; insurance; mortgage; payments; specialized lending and wealth management. Headquartered in Charlotte, North Carolina, Truist is the sixth-largest commercial bank in the U.S. with total assets of $473 billion as of December 31, 2019. Truist Bank, Member FDIC. Learn more at Truist.com.

Capital ratios and return on risk-weighted assets 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"). Truist'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 Corporation believes a meaningful analysis of its financial performance requires an understanding of the factors underlying that performance. Truist'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:

• 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. Truist's management uses this measure in their analysis of the Corporation's performance. Truist'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.
  
  
• Tangible common equity and related measures are non-GAAP measures that exclude the impact of intangible assets, net of deferred taxes, and their related amortization. These measures are useful for evaluating the performance of a business consistently, whether acquired or developed internally. Truist'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.
  
  
• Core net interest margin is a non-GAAP measure that adjusts net interest margin to exclude the impact of purchase accounting. The purchase accounting marks and related amortization for a) securities acquired from the FDIC in the Colonial Bank acquisition and b) loans, deposits and long-term debt from SunTrust, Susquehanna and National Penn are excluded to approximate their yields at the pre-merger and acquisition rates. Interest income for PCI loans adjusts the accretion, net of interest reversals, which approximates the interest received from the client. Truist's management believes the adjustments to the calculation of net interest margin for certain assets and liabilities acquired provide investors with useful information related to the performance of Truist's earning assets.
  
  
• The adjusted diluted earnings per share is non-GAAP in that it excludes merger-related and restructuring charges and other selected items, net of tax. Truist's management uses this measure in their analysis of the Corporation's performance. Truist'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.
  
  
• The adjusted operating leverage ratio is non-GAAP in that it excludes securities gains (losses), amortization of intangible assets, merger-related and restructuring charges and other selected items. Truist's management uses this measure in their analysis of the Corporation's performance. Truist'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.
  
  
• The adjusted performance ratios are non-GAAP in that they exclude merger-related and restructuring charges, selected items and, in the case of return on average tangible common shareholders' equity, amortization of intangible assets. Truist's management uses these measures in their analysis of the Corporation's performance. Truist's management believes these measures provide 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.

A reconciliation of these non-GAAP measures to the most directly comparable GAAP measure is included in the appendix to Truist's Fourth Quarter 2019 Earnings Presentation, which is available at https://ir.truist.com/earnings.

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 Truist. Words such as "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "plans," "projects," "may," "will," "should," "would," "could" and other similar expressions are intended to identify these forward-looking statements.

Forward-looking statements are not based on historical facts but instead represent management's expectations and assumptions regarding Truist's business, the economy and other future conditions. Such statements involve inherent uncertainties, risks and changes in circumstances that are difficult to predict. As such, Truist's actual results may differ materially from those contemplated by forward-looking statements. While there can be no assurance that any list of risks and uncertainties or risk factors is complete, important factors that could cause actual results to differ materially from those contemplated by 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, 2018 and in Truist's subsequent filings with the Securities and Exchange Commission:

• risks and uncertainties relating to the merger of BB&T and SunTrust, including the ability to successfully integrate the companies or to realize the anticipated benefits of the merger; 
   
• expenses relating to the merger and integration of BB&T and SunTrust;
   
• deposit attrition, customer loss or revenue loss following completed mergers or acquisitions may be greater than anticipated;
   
• changes in the interest rate environment, including the replacement of LIBOR as an interest rate benchmark, that could adversely affect Truist's revenue and expenses, the value of assets and obligations, and the availability and cost of capital, cash flows, and liquidity; 
    
• volatility in mortgage production and servicing revenues, and changes in carrying values of Truist's servicing assets and mortgages held for sale due to changes in interest rates; 
   
• management's ability to effectively manage credit risk;
   
• inability to access short-term funding or liquidity; 
   
• loss of customer deposits, which could increase Truist's funding costs;
   
• changes in Truist's credit ratings, which could increase the cost of funding or limit access to capital markets;
   
• additional capital and liquidity requirements that will result from the merger of BB&T and SunTrust;
   
• regulatory matters, litigation or other legal actions, which may result in, among other things, costs, fines, penalties, restrictions on Truist's business activities, reputational harm, or other adverse consequences;
   
• risks related to originating and selling mortgages, including repurchase and indemnity demands from purchasers related to representations and warranties on loans sold, which could result in an increase in the amount of losses for loan repurchases;
   
• failure to execute on strategic or operational plans, including the ability to successfully complete and/or integrate mergers and acquisitions;
   
• risks relating to Truist's role as a servicer of loans, including an increase in the scope or costs of the services Truist is required to perform without any corresponding increase in Truist's servicing fee, or a breach of Truist's obligations as servicer; 
   
• negative public opinion, which could damage Truist's reputation;
   
• increased scrutiny regarding Truist's consumer sales practices, training practices, incentive compensation design and governance; 
    
• competition from new or existing competitors, including increased competition from products and services offered by non-bank financial technology companies, may reduce Truist's customer base, cause Truist to lower prices for its products and services in order to maintain market share or otherwise adversely impact Truist's businesses or results of operations;
   
• Truist's ability to introduce new products and services in response to industry trends or developments in technology that achieve market acceptance and regulatory approval; 
   
• Truist's success depends on the expertise of key personnel, and if these individuals leave or change their roles without effective replacements, which could be exacerbated as Truist continues to integrate the executive management teams of BB&T and SunTrust, or if we are unable to hire and retain qualified personnel, Truist's operations and integration activities could be adversely impacted;
   
• legislative, regulatory or accounting changes may adversely affect the businesses in which Truist is engaged; 
   
• evolving regulatory standards, including with respect to capital and liquidity, and results of regulatory examinations, may adversely affect Truist's financial condition and results of operations;
   
• accounting policies and processes require management to make estimates about matters that are uncertain;
   
• general economic or business conditions, either nationally or regionally, may be less favorable than expected, resulting in, among other things, slower deposit or asset growth, a deterioration in credit quality or a reduced demand for credit, insurance or other services;
   
• risk management measures and management oversight functions may not identify or address risks adequately;
   
• unfavorable resolution of legal proceedings or other claims or regulatory or other governmental investigations or  inquiries could result in negative publicity, protests, fines, penalties, restrictions on Truist's operations or ability to expand its business or other negative consequences, all of which could cause reputational damage and adversely impact Truist's financial condition and results of operations;
   
• competitors of Truist may have greater financial resources or develop products that enable them to compete more successfully than Truist and may be subject to different regulatory standards than Truist;
   
• failure to maintain or enhance Truist's competitive position with respect to technology, whether because it fails to anticipate customer expectations or because its technological developments fail to perform as desired or are not rolled out in a timely manner or for other reasons, may cause Truist to lose market share or incur additional expense;
   
• fraud or misconduct by internal or external parties, which Truist may not be able to prevent, detect or mitigate;
   
• operational or communications systems, including systems used by vendors or other external parties, may fail or may be the subject of a breach or cyber-attack that, if successful, could adversely impact Truist's financial condition and results of operations;
   
• security risks, including denial of service attacks, hacking, social engineering attacks targeting Truist's employees and customers, malware intrusion or data corruption attempts, and identity theft could result in the disclosure of confidential information, adversely affect Truist's business or reputation or create significant legal or financial exposure;
   
• natural or other disasters, including acts of terrorism, could have an adverse effect on Truist, including by materially disrupting Truist's operations or the ability or willingness of customers to access Truist's products and services;  
   
• widespread system outages, caused by the failure of critical internal systems or critical services provided by third parties, could adversely impact Truist's financial condition and results of operations;
   
• accounting policies and processes requiring management to make estimates about matters that are uncertain;  
   
• depressed market values for Truist's stock and adverse economic conditions sustained over a period of time may require us to write down all or some portion of Truist's goodwill; and
   
• new tax guidance or differences in interpretation of tax laws and regulations.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Except to the extent required by applicable law or regulation, Truist undertakes no obligation to revise or update any forward-looking statements.