BB&T announces agreement to repurchase TARP warrant
WINSTON-SALEM, N.C., July 17 /PRNewswire-FirstCall/ -- BB&T
Corporation (NYSE:BBT) reported today net income for the second
quarter of 2009 totaling $208 million and net income available to
common shareholders totaling $121 million, or $.20 per diluted
common share, compared with $428 million, or $.78 per diluted
common share, earned during the second quarter of 2008. Results for
the second quarter of 2009 produced annualized returns on average
assets and average common shareholders' equity of .56% and 3.43%,
respectively. Results for the quarter were reduced by a special
assessment from the FDIC totaling $.07 per diluted share and
accelerated amortization on the preferred stock repaid to the
United States Department of the Treasury (the "Treasury") in
connection with the Troubled Asset Relief Program (TARP) totaling
$.08 per diluted share. These costs were partially offset by gains
on sales of securities and extinguishment of debt, which increased
earnings per diluted share by $.06. BB&T also recorded a $701
million provision for credit losses in the second quarter. The
provision for credit losses exceeded net charge-offs by $250
million and resulted in an increase in the allowance for loan and
lease losses as a percentage of loans and leases held for
investment to 2.19% at June 30, compared to 1.94% at March 31 and
1.62% at Dec. 31, 2008. "I am pleased with our overall second
quarter results considering the difficult economic conditions and
the aggressive measures we have taken relating to the challenging
credit environment," said President and Chief Executive Officer
Kelly S. King. "We absorbed a $701 million loan loss provision
during the quarter and a number of special items that negatively
affected earnings. However, our underlying revenue growth was
strong at 13% for the quarter compared to the second quarter last
year. Also, we enjoyed another outstanding quarter in mortgage
banking production, with a record $8.5 billion in originations, and
a record quarter from our insurance revenues, up 19%. Average
client deposits have continued an impressive growth trend, up 12%
this quarter." Cash basis performance measures exclude the
unamortized balances of intangibles from assets and shareholders'
equity, and exclude the amortization of intangibles and the net
amortization of purchase accounting mark-to-market adjustments from
earnings. Cash basis diluted earnings per common share were $.21
for the second quarter compared to $.81 earned in the second
quarter last year. Cash basis results for the second quarter of
2009 produced annualized returns on average tangible assets and
average tangible common shareholders' equity of .61% and 6.41%,
respectively. BB&T Exceeds Stress Test Capital Levels; Exits
TARP BB&T was one of nine large financial institutions
sufficiently capitalized under a "more adverse" macroeconomic
scenario, as determined by banking regulators. The government's
"stress test" projected a prolonged and deepening recession using
assumptions that were more severe than BB&T's internal
estimates with respect to earnings and expected loan losses. The
stress test results determined that BB&T had more than enough
capital even in a more adverse downturn in the economy. BB&T
was one of two super-regional commercial banks in the country and
the only large commercial bank in the mid-Atlantic and Southeast to
achieve a favorable outcome from the stress test. On June 17,
BB&T exited TARP by repurchasing the preferred stock sold to
the Treasury under the Capital Purchase Program. BB&T paid
approximately $3.134 billion to the Treasury to repurchase the
preferred stock plus $14 million for the final dividend payment. In
connection with the repurchase of the preferred stock, BB&T
recognized $47 million in the second quarter of 2009 to account for
the difference between the amortized cost of the preferred stock
and the repurchase price. BB&T also today announced an
agreement with the Treasury for the repurchase of the warrant
issued in connection with the government's TARP investment. The
warrant will be repurchased for $67 million in cash. The exchange
price for the warrant will be recorded as a charge to shareholders'
equity in the third quarter. "Our capital levels have remained
strong throughout this economic downturn, allowing us to pay back
TARP in a very short amount of time," said King. "Our successful
results in the government's stress test and our ability to repay
the government's TARP investment are significant achievements for
BB&T. Removing this distraction frees our company to focus on
serving our clients and strengthening our franchise for the
opportunities that will be available as the economy improves. We
are also very pleased to have reached a settlement with the
Treasury on the warrant. BB&T was an excellent investment for
the American taxpayer, as their annualized return on the preferred
stock and warrant was 8.4% after-tax." BB&T Completes $1.7
Billion Common Stock Offering; Improves Common Capital Levels On
May 13, BB&T successfully issued 86.25 million shares of common
stock at $20 per share for net proceeds of $1.7 billion. The
offering strengthened BB&T's already healthy regulatory and
tangible common equity ratios. The tangible common equity ratio
improved to 6.5% at June 30, compared to 5.6% at March 31. The Tier
1 common ratio improved to 8.4% at June 30 compared to 7.0% at
March 31. In addition, the Tier 1 risk-based capital and total
risk-based capital ratios were 10.6% and 15.2%, respectively,
compared to 12.1% and 17.1%, respectively, at March 31. The decline
in the regulatory capital levels reflects the repayment of TARP
preferred stock in the second quarter. BB&T's risk-based and
tangible capital ratios remain well above regulatory standards for
well-capitalized banks. Nonperforming Assets and Credit Losses
Increase Nonperforming assets, as a percentage of total assets,
increased to 2.19% at June 30, compared to 1.92% at March 31.
Annualized net charge-offs were 1.81% of average loans and leases
for the second quarter of 2009, up from 1.58% in the first quarter
and .72% during the second quarter last year. The increase in net
charge-offs largely resulted from further deterioration in
housing-related portfolios, including mortgage, home equity and
consumer real estate. In particular, BB&T's consumer real
estate portfolio, which is composed of loans made to individuals to
purchase developed lots, experienced significant deterioration in
the quarter. BB&T is aggressively moving its problem loans to
nonaccrual status and recognizing losses. Early indicators of
credit problems improved for the second consecutive quarter as
loans past due 30-89 days improved in nearly all portfolios and
loans past due more than 90 days improved in all portfolios. The
provision for credit losses totaled $701 million in the second
quarter of 2009, an increase of $371 million compared to the same
quarter last year, and exceeded net charge-offs by $250 million.
The higher provision increased the allowance for loan and lease
losses as a percentage of loans held for investment to 2.19% at
June 30, compared to 1.94% at March 31, and 1.33% at June 30, 2008.
The increases in net charge-offs, nonperforming assets and the
provision for credit losses were driven by continued deterioration
in housing-related credits and deterioration in consumer real
estate. The largest concentration of housing-related credit issues
continues to be in Georgia, Florida and metro Washington, D.C.
Balance Sheet Growth Remains Healthy; Client Deposit Growth Very
Strong Average loans and leases held for investment totaled $96.2
billion for the second quarter of 2009, reflecting an increase of
$3.0 billion, or 3.2%, compared to the second quarter of 2008. This
increase was led by growth in average commercial loans and leases,
which increased $3.2 billion, or 6.9%; average sales finance loans,
which increased $114 million, or 1.8%; average revolving credit
loans, which increased $174 million, or 10.7%; and growth in
average loans originated by BB&T's specialized lending
subsidiaries, which increased $1.6 billion, or 29.6% including
acquisitions, compared to the second quarter last year. Average
mortgage loans declined $1.4 billion, or 7.9%, as the vast majority
of new mortgage loan production is conforming loans that are sold
in the secondary market. The growth rate in average client deposits
was very strong at 11.5% compared to the second quarter of 2008.
Average deposits totaled $94.4 billion for the second quarter of
2009, an increase of $7.7 billion, or 8.9%, compared to the second
quarter last year. The increase in client deposits included growth
in average noninterest-bearing deposits, which increased $2.4
billion, or 18.0% compared to the second quarter of 2008 and 46.8%,
on an annualized basis, compared to the first quarter of 2009.
Total Revenues Increase 12.7% Led by Mortgage Banking BB&T's
fully taxable equivalent net interest income totaled $1.17 billion
for the second quarter, an increase of 7.1% compared to the same
quarter of 2008. The net interest margin was 3.56% for the current
quarter, down nine basis points from 3.65% in the second quarter of
2008 and down 1 basis point from the first quarter of 2009. The
reduction in the margin reflects lower yields on the investment
portfolio due to a management decision to shorten duration in the
portfolio and lower yields resulting from increases in nonaccrual
loans. Noninterest income increased $166 million, or 20.1%, during
the second quarter of 2009 compared to 2008. These increases
reflect another very strong performance from BB&T's mortgage
banking operations during the quarter, as well as record revenues
from BB&T's insurance operations. Mortgage-related revenues
totaled $184 million for the second quarter of 2009, an increase of
222.8% compared to the second quarter of 2008. This increase
includes the net change in the mortgage servicing rights valuation,
which resulted in an increase of $29 million compared to the second
quarter of 2008, as a result of the increase in the valuation of
mortgage servicing rights exceeding the losses on the hedging
instruments. Excluding the impact of this item, mortgage banking
income increased $98 million, or 155.6%, compared to the same
period last year. The growth in mortgage banking income is
primarily attributable to continued strong production revenues from
residential mortgage banking operations, including $8.5 billion in
mortgage loan originations during the second quarter of 2009 and
$16 billion for the six months ended June 30, equal to mortgage
originations for all of 2008. The increase in mortgage originations
reflects continued benefits from the consumers' "flight to quality"
to BB&T and the favorable interest rate environment. BB&T's
insurance operations produced record revenues of $281 million
during the current quarter, up $44 million, or 18.6%, compared to
the second quarter of 2008. The increase in insurance income was
primarily the result of growth in property and casualty, credit and
employee benefit insurance commissions, including growth from
acquisitions. Expenses Increase Due to FDIC Insurance Premiums,
Acquisitions and Credit Costs BB&T's noninterest expenses
increased $222 million, or 23.1%, in the second quarter of 2009
compared to the same period in 2008. The increase included $103
million of additional FDIC insurance expense, of which $71 million
was the special assessment, approximately $46 million of growth
resulting from purchase acquisitions and $16 million for pension
costs. The increase also included higher foreclosed
property-related expenses, legal fees and settlements totaling $56
million associated with the current credit environment. Excluding
these items, noninterest expenses were basically flat compared to
the second quarter last year. At June 30, BB&T had $152.4
billion in assets and operated 1,505 banking offices in the
Carolinas, Virginia, West Virginia, Kentucky, Georgia, Maryland,
Tennessee, Florida, Alabama, Indiana and Washington, D.C.
BB&T's common stock is traded on the New York Stock Exchange
under the trading symbol BBT. For additional information about
BB&T's financial performance, company news, products and
services, please visit our Web site at http://www.bbt.com/.
Earnings Webcast To hear a live webcast of BB&T's second
quarter 2009 earnings conference call at 11:00 a.m. (EDT) today,
please visit our Web site at http://www.bbt.com/. Replays of the
conference call will be available through our Web site until
Wednesday, July 22, or by dialing 1-888-203-1112 plus access code
6794434 until Friday, July 24. Risk-based capital ratios are
preliminary. This press release contains financial information
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. BB&T's
management believes that these non-GAAP financial 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 operating
results determined in accordance with GAAP, nor are they
necessarily comparable to non-GAAP performance measures that may be
presented by other companies. BB&T's non-GAAP disclosures
include cash basis results, which adjust GAAP performance to
exclude the amortization of intangibles and purchase accounting
mark-to-market adjustments. BB&T's management uses these
measures to evaluate the underlying performance and efficiency of
its operations. BB&T's management believes these measures
reflect core trends of the business, excluding purchase accounting
amortization that will cease in the future, while the acquired
business will remain. Tangible common equity and Tier 1 common
equity ratios are Non-GAAP measures. BB&T uses the Tier 1
common equity definition used in the SCAP assessment to calculate
these ratios. 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. These capital measures
are not necessarily comparable to similar capital measures that may
be presented by other companies. This press 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 press release.
BB&T Corporation Financial Highlights (Dollars in millions,
except per share data, shares in thousands) Quarter Ended June 30 %
2009 2008 Change Summary Income Statement Interest income $1,670
$1,817 (8.1)% Interest expense 503 727 (30.8) Net interest income -
taxable equivalent 1,167 1,090 7.1 Less: Taxable-equivalent
adjustment 29 22 31.8 Net interest income 1,138 1,068 6.6 Provision
for credit losses 701 330 112.4 Net interest income after provision
for credit losses 437 738 (40.8) Noninterest income 993 827 20.1
Noninterest expense 1,181 959 23.1 Income before income taxes 249
606 (58.9) Provision for income taxes 41 175 (76.6) Net income 208
431 (51.7) Noncontrolling interest 4 3 33.3 Dividends and accretion
on preferred stock 83 - 100.0 Net income available to common
shareholders 121 428 (71.7) Per Common Share Data Earnings Basic
$.20 $.78 (74.4)% Diluted .20 .78 (74.4) Cash dividends paid .47
.46 2.2 Book value 22.76 23.40 (2.7) Tangible book value (1) 14.74
13.50 9.2 End of period shares outstanding (in thousands) 648,068
546,928 18.5 Weighted average shares (in thousands) Basic 602,726
546,628 10.3 Diluted 608,797 549,758 10.7 Performance Ratios Return
on average assets .56% 1.28% Return on average common shareholders'
equity 3.43 13.27 Net interest margin - taxable equivalent 3.56
3.65 Fee income ratio (2) 44.9 43.0 Efficiency ratio (2) 53.0 49.2
Cash Basis Performance Ratios - Non-GAAP (3) Diluted earnings per
common share $.21 $.81 (74.1)% Return on average tangible assets
61% 1.38% Return on average tangible common shareholders' equity
6.41 24.22 Efficiency ratio (2) 52.1 47.9 Credit Quality
Nonperforming assets $3,340 $1,301 Nonperforming assets as a
percentage of: Total assets 2.19% .95% Loans and leases plus
foreclosed property 3.29 1.36 Net charge-offs as a percentage of
average loans and leases 1.81 .72 Allowance for loan and lease
losses as a percentage of loans and leases held for investment 2.19
1.33 Ratio of allowance for loan and lease losses to nonperforming
loans and leases 1.01 X 1.24 X Average Balances Total assets
$148,496 $135,557 9.5% Investment securities 30,468 23,898 27.5
Loans and leases 99,577 94,866 5.0 Deposits 94,385 86,685 8.9
Client deposits 85,927 77,044 11.5 Shareholders' equity 16,683
13,017 28.2 Period-End Balances Total assets $152,398 $136,465
11.7% Investment securities 31,555 23,171 36.2 Loans and leases
100,334 95,715 4.8 Deposits 102,164 88,214 15.8 Client deposits
88,339 79,781 10.7 Shareholders' equity 14,792 12,838 15.2 Capital
Ratios (4) Risk-based Tier 1 10.6% 8.9% Total 15.2 14.0 Leverage
8.5 7.2 Tangible common equity (1) 6.5 5.6 Tier 1 common equity to
risk-weighted assets (1) 8.4 7.1 Note: Applicable ratios are
annualized. (1) Tangible common equity and Tier 1 common equity
ratios are Non-GAAP measures. BB&T uses the Tier 1 common
equity definition used in the SCAP assessment to calculate these
ratios. See Non-GAAP reconciliations for the calculations of these
measures. (2) Excludes securities gains (losses), foreclosed
property expense, increases or decreases in the valuation of
mortgage servicing rights, and gains or losses on mortgage
servicing rights-related derivatives. See Non-GAAP reconciliations.
(3) Cash basis performance information excludes the amortization of
intangible assets and purchase accounting mark-to-market
adjustments. In addition, cash basis performance excludes the
unamortized balances of intangibles from assets and equity, net of
deferred taxes. See Non-GAAP reconciliations. (4) Current quarter
regulatory capital information is preliminary. Year-to-Date June 30
% 2009 2008 Change Summary Income Statement Interest income $3,379
$3,735 (9.5)% Interest expense 1,038 1,611 (35.6) Net interest
income - taxable equivalent 2,341 2,124 10.2 Less:
Taxable-equivalent adjustment 57 39 46.2 Net interest income 2,284
2,085 9.5 Provision for credit losses 1,377 553 149.0 Net interest
income after provision for credit losses 907 1,532 (40.8)
Noninterest income 2,024 1,598 26.7 Noninterest expense 2,250 1,894
18.8 Income before income taxes 681 1,236 (44.9) Provision for
income taxes 155 376 (58.8) Net income 526 860 (38.8)
Noncontrolling interest 10 4 150.0 Dividends and accretion on
preferred stock 124 - 100.0 Net income available to common
shareholders 392 856 (54.2) Per Common Share Data Earnings Basic
$.67 $1.57 (57.3)% Diluted .67 1.56 (57.1) Cash dividends paid .94
.92 2.2 Weighted average shares (in thousands) Basic 581,382
546,421 6.4 Diluted 586,256 549,344 6.7 Performance Ratios Return
on average assets .71% 1.29% Return on average common shareholders'
equity 5.78 13.29 Net interest margin - taxable equivalent 3.57
3.59 Fee income ratio (1) 43.5 42.2 Efficiency ratio (1) 52.0 50.7
Cash Basis Performance Ratios - Non-GAAP (2) Diluted earnings per
common share $.70 $1.62 (56.8)% Return on average tangible assets
.77% 1.39% Return on average tangible common shareholders' equity
10.68 24.24 Efficiency ratio (1) 51.0 49.3 Average Balances Total
assets $149,182 $134,491 10.9% Investment securities 30,945 23,656
30.8 Loans and leases 99,650 93,792 6.2 Deposits 94,161 86,634 8.7
Client deposits 85,035 76,967 10.5 Shareholders' equity 16,546
12,988 27.4 Note: Applicable ratios are annualized. (1) Excludes
securities gains (losses), foreclosed property expense, increases
or decreases in the valuation of mortgage servicing rights, and
gains or losses on mortgage servicing rights-related derivatives.
See Non-GAAP reconciliations. (2) Cash basis performance
information excludes the amortization of intangible assets and
purchase accounting mark-to-market adjustments. In addition, cash
basis performance excludes the unamortized balances of intangibles
from assets and equity, net of deferred taxes. See Non-GAAP
reconciliations. BB&T Corporation NON-GAAP Reconciliation Table
(Dollars in millions, except per share data) Quarter Ended June 30
June 30 NON-GAAP Reconciliation Table 2009 2008 Diluted earnings
per common share $.20 $.78 Effect of amortization of intangibles,
net of tax .02 .03 Effect of amortization of mark-to-market
adjustments, net of tax (.01) - Cash basis diluted earnings per
common share .21 .81 Return on average assets .56% 1.28% Effect of
amortization of intangibles, net of tax .07 .10 Effect of
amortization of mark-to-market adjustments, net of tax (.02) - Cash
basis return on average tangible assets .61 1.38 Return on average
common shareholders' equity 3.43% 13.27% Effect of amortization of
intangibles, net of tax 3.18 10.94 Effect of amortization of
mark-to-market adjustments, net of tax (.20) .01 Cash basis return
on average tangible common shareholders' equity 6.41 24.22
Efficiency ratio - GAAP 54.7% 50.0% Effect of securities gains
(losses), net .5 .3 Effect of net MSR valuation (2.8) (.9) Effect
of foreclosed property expense .6 (.2) Efficiency ratio - reported
53.0 49.2 Effect of amortization of intangibles (1.1) (1.3) Effect
of amortization of mark- to-market adjustments .2 - Cash basis
efficiency ratio 52.1 47.9 Fee income ratio - GAAP 46.0% 43.1%
Effect of securities gains (losses), net (.5) (.3) Effect of net
MSR valuation (.6) .2 Fee income ratio - reported 44.9 43.0
Year-to-Date June 30, NON-GAAP Reconciliation Table 2009 2008
Diluted earnings per common share $.67 $1.56 Effect of amortization
of intangibles, net of tax .05 .06 Effect of amortization of
mark-to-market adjustments, net of tax (.02) - Cash basis diluted
earnings per common share .70 1.62 Return on average assets .71%
1.29% Effect of amortization of intangibles, net of tax .07 .10
Effect of amortization of mark-to-market adjustments, net of tax
(.01) - Cash basis return on average tangible assets .77 1.39
Return on average common shareholders' equity 5.78% 13.29% Effect
of amortization of intangibles, net of tax 5.12 10.94 Effect of
amortization of mark-to-market adjustments, net of tax (.22) .01
Cash basis return on average tangible common shareholders' equity
10.68 24.24 Efficiency ratio - GAAP 51.6% 50.9% Effect of
securities gains (losses), net 2.0 .7 Effect of net MSR valuation
(2.3) (.8) Effect of foreclosed property expense .7 (.1) Efficiency
ratio - reported 52.0 50.7 Effect of amortization of intangibles
(1.2) (1.4) Effect of amortization of mark-to-market adjustments .2
- Cash basis efficiency ratio 51.0 49.3 Fee income ratio - GAAP
46.4% 42.9% Effect of securities gains (losses), net (2.2) (.8)
Effect of net MSR valuation (.7) .1 Fee income ratio - reported
43.5 42.2 As of June 30, Calculations of Tier 1 common equity and
tangible assets and related measures (1) (2) 2009 2008 Tier 1
equity $12,132 $9,317 Less: Qualifying restricted core capital
elements 2,578 1,932 Tier 1 common equity 9,554 7,385 Total assets
$152,398 $136,465 Less: Intangible assets, net of deferred taxes
(4) 5,851 5,811 Plus: Pre-tax regulatory adjustments for
accumulated OCI 1,315 520 Tangible assets 147,862 131,174 Total
risk-weighted assets (3) 114,260 104,455 Tangible common equity as
a percentage of tangible assets 6.5% 5.6% Tier 1 common equity as a
percentage of risk-weighted assets 8.4 7.1 Tier 1 common equity
$9,554 $7,385 Outstanding shares at end of period 648,068 546,928
Tangible book value per common share $14.74 $13.50 (1) Current
quarter regulatory capital information is preliminary. (2) Tangible
common equity and Tier 1 common equity ratios are Non-GAAP
measures. BB&T uses the Tier 1 common equity definition used in
the SCAP assessment to calculate these ratios. 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. These capital measures are not necessarily
comparable to similar capital measures that may be presented by
other companies. (3) Risk-weighted assets are determined based on
regulatory capital requirements. Under the regulatory framework for
determining risk-weighted assets each asset class is assigned a
risk-weighting of 0%, 20%, 50% or 100% based on the underlying risk
of the specific asset class. In addition, off balance sheet
exposures are first converted to a balance sheet equivalent amount
and subsequently assigned to one of the four risk-weightings. (4)
Prior to December 2008, BB&T had a net deferred tax liability.
DATASOURCE: BB&T Corporation CONTACT: ANALYSTS, Tamera Gjesdal,
Senior Vice President, Investor Relations, +1-336-733-3058, or
Daryl Bible, Sr. Exec. Vice President, Chief Financial Officer,
+1-336-733-3031; or MEDIA, Bob Denham, Senior Vice President,
Corporate Communications, +1-336-733-1475 Web Site:
http://www.bbt.com/
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