BB&T reports second quarter results; Adjusted diluted EPS totals $0.69 per share

WINSTON-SALEM, N.C., July 16, 2015 /CNW/ -- BB&T Corporation (NYSE: BBT) today reported quarterly earnings for the second quarter of 2015. Net income available to common shareholders was $454 million, compared to $424 million earned in the second quarter of 2014, an increase of 7.1%. Earnings per diluted common share totaled $0.62 for the quarter, compared to $0.58 for the second quarter of last year, an increase of 6.9%. Net income available to common shareholders was affected by $25 million in pre-tax merger-related charges ($16 million after-tax), or $0.02 per diluted share, and a $34 million after-tax loss on the sale of American Coastal, or $0.05 per diluted share.

"We are pleased to report solid results for the quarter, led by improved loan growth and strong credit quality," said Chairman and Chief Executive Officer Kelly S. King. "We completed several strategic transactions during the second quarter and reached an important milestone with the recent approval of the Susquehanna merger.

"Revenues were $2.4 billion, up $31 million, or 1.3% compared with the second quarter of 2014. These results were driven by continued strength in our fee-based businesses.

"We successfully completed our acquisition of The Bank of Kentucky," said King. "This strategic transaction added $1.6 billion in deposits and boosted us to the No. 2 marketplace ranking in Kentucky, and we look forward to expanding on this solid base with our diverse product offerings and strong customer focus.

"We were very pleased to receive regulatory approval to acquire Susquehanna Bancshares, which we expect to close on August 1. This transaction is very important strategically and will drive improved growth and efficiency in coming quarters.

"We reported an income tax benefit of $107 million as a result of a decision by the U.S. Court of Appeals related to previously disallowed deductions in connection with a financing transaction. We also extinguished nearly $1 billion of higher cost FHLB borrowings resulting in a $172 million pre-tax loss, or $107 million after-tax. The debt extinguishment will modestly benefit our net interest margin going forward.

"We also completed the sale of American Coastal and the related purchase of additional ownership in AmRisc," said King. "The sale resulted in an after-tax loss of $34 million due to the allocation of goodwill upon disposal. These transactions eliminate our exposure to future underwriting losses and significantly increase our share of a historically strong fee-based business."

Second Quarter 2015 Performance Highlights

• Taxable equivalent revenues were $2.4 billion for the second quarter, up $23 million from the first quarter of 2015
  • Net interest margin was 3.27%, down six basis points due to lower rates on new loans and runoff of loans acquired from the FDIC
  • Mortgage banking income was up $20 million, an annualized increase of 72.9% that reflects higher mortgage servicing income and higher commercial mortgage fee income due to increased volume
  • Fee income ratio was 46.3%, compared to 45.8% in the prior quarter, reflecting continued revenue diversification
    
    
• Noninterest expense was $1.7 billion, up compared to the prior quarter primarily due to a $172 million loss on early extinguishment of debt
  • Personnel expense was up $34 million due to increased production-related incentives due to volume, seasonal increases in fringe benefits and approximately 500 additional full-time equivalent employees, which was primarily due to acquisitions
  • Merger-related and restructuring charges were $12 million higher as a result of increased activity related to The Bank of Kentucky, Susquehanna and AmRisc/American Coastal transactions
  • The adjusted efficiency ratio was 59.2%
    
    
• Average loans and leases held for investment increased 3.9% on an annualized basis compared to the first quarter of 2015; up 7.8% excluding residential mortgage
  • Average C&I loans increased 10.6%
  • Average direct retail loans increased 12.6%
  • Average other lending subsidiaries loans increased 13.6%
  • Average residential mortgage loans decreased 7.4%, reflecting the strategic decision to continue to sell conforming mortgage loan production
    
    
• Average deposits increased $2.3 billion, or 7.2% annualized, compared to the prior quarter
  • The Texas branch acquisition, completed in late March, contributed approximately $1.7 billion of the average deposit growth
  • The Bank of Kentucky acquisition added approximately $190 million in average deposits as a result of closing on June 19
  • Excluding the impact of these acquisitions, average noninterest-bearing deposits increased $1.4 billion
  • Average interest-bearing deposit costs were 0.24%, down one basis point compared to the prior quarter
  • Deposit mix improved, with average noninterest-bearing deposits representing 31.5% of total deposits, compared to 30.6% in the prior quarter
    
    
• Asset quality remained strong
  • Nonperforming assets decreased $36 million, or 4.7%, from March 31, 2015
  • Delinquent loans increased $43 million, primarily due to seasonality
  • The allowance for loan loss coverage ratio was 2.55 times nonperforming loans held for investment at June 30, 2015, versus 2.45 times at March 31, 2015
    
    
• Capital levels remained strong across the board
  • Common equity tier 1 to risk-weighted assets was 10.4%, or 10.2% on a fully phased-in basis
  • Tier 1 risk-based capital was 12.1%
  • Total capital was 14.3%
  • Leverage capital was 10.2%
  • Tangible common equity to tangible assets was 8.1%

Earnings presentation and Quarterly Performance Summary

To listen to BB&T's live second quarter 2015 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 for 30 days by dialing 888-203-1112 (access code 4313363).

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

BB&T's second quarter 2015 Quarterly Performance Summary, which contains detailed financial schedules, is available on BB&T's website at www.bbt.com.

About BB&T

As of June 30, 2015, BB&T is one of the largest financial services holding companies in the U.S. with $191 billion in assets and market capitalization of $29.6 billion. Based in Winston-Salem, N.C., the company operates 1,903 financial centers in 13 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 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 and related ratios are non-GAAP measures. The return on average risk-weighted assets is a non-GAAP measure. 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.
• The ratio of loans greater than 90 days and still accruing interest as a percentage of loans held for investment has been adjusted to remove the impact of loans that are or were covered by FDIC loss sharing agreements. 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.

A reconciliation of these non-GAAP measures to the most directly comparable GAAP measure is included in BB&T's Second Quarter 2015 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 BB&T's business, financial performance, or reputation;
• 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; and
• failure to execute on the Company's strategic or operational plans, including the ability to successfully complete and/or integrate mergers and acquisitions, could adversely impact BB&T's financial condition and results of operations.

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.

SOURCE BB&T Corporation

ANALYSTS: Alan Greer, Executive Vice President, Investor Relations, [phone]; Tamera Gjesdal, Senior Vice President, Investor Relations, [phone]; MEDIA: Cynthia A. Williams, Senior Executive Vice President, Corporate Communications, [phone], http://www.bbt.com