| |
ITEM 2. | ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Forward-Looking Statements
This Quarterly Report on Form 10-Q 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:
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| |
l
| general economic or business conditions, either nationally or regionally, may be less favorable than expected, resulting in, among other things, slower deposit and/or asset growth, and a deterioration in credit quality and/or a reduced demand for credit, insurance or other services; |
l
| disruptions to the national or global financial markets, including the impact of a downgrade of U.S. government obligations by one of the credit ratings agencies, the economic instability and recessionary conditions in Europe, the eventual exit of the United Kingdom from the European Union; |
l
| changes in the interest rate environment, including interest rate changes made by the Federal Reserve, as well as cash flow reassessments may reduce net interest margin and/or the volumes and values of loans and deposits as well as the value of other financial assets and liabilities; |
l
| competitive pressures among depository and other financial institutions may increase significantly; |
l
| 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; |
l
| local, state or federal taxing authorities may take tax positions that are adverse to BB&T; |
l
| a reduction may occur in BB&T's credit ratings; |
l
| adverse changes may occur in the securities markets; |
l
| competitors of BB&T may have greater financial resources or develop products that enable them to compete more successfully than BB&T and may be subject to different regulatory standards than BB&T; |
l
| cybersecurity risks could adversely affect BB&T's business and financial performance or reputation, and BB&T could be liable for financial losses incurred by third parties due to breaches of data shared between financial institutions; |
l
| higher-than-expected costs related to information technology infrastructure or a failure to successfully implement future system enhancements could adversely impact BB&T's financial condition and results of operations and could result in significant additional costs to BB&T; |
l
| natural or other disasters, including acts of terrorism, could have an adverse effect on BB&T, materially disrupting BB&T's operations or the ability or willingness of customers to access BB&T's products and services; |
l
| costs related to the integration of the businesses of BB&T and its merger partners may be greater than expected; |
l
| failure to execute on strategic or operational plans, including the ability to successfully complete and/or integrate mergers and acquisitions or fully achieve expected cost savings or revenue growth associated with mergers and acquisitions within the expected time frames could adversely impact financial condition and results of operations; |
l
| significant litigation and regulatory proceedings could have a material adverse effect on BB&T; |
l
| unfavorable resolution of legal proceedings or other claims and regulatory and other governmental investigations or other inquiries could result in negative publicity, protests, fines, penalties, restrictions on BB&T's operations or ability to expand its business and other negative consequences, all of which could cause reputational damage and adversely impact BB&T's financial conditions and results of operations; |
l
| risks resulting from the extensive use of models; |
l
| risk management measures may not be fully effective; |
l
| deposit attrition, customer loss and/or revenue loss following completed mergers/acquisitions may exceed expectations; and |
l
| widespread system outages, caused by the failure of critical internal systems or critical services provided by third parties, could adversely impact BB&T's financial condition and results of operations. |
These and other risk factors are more fully described in this report and in BB&T's Annual Report on Form 10-K for the year ended December 31, 2017 under the sections entitled "Item 1A. Risk Factors" and from time to time, in other filings with the SEC. 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 statements. 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. Readers should, however, consult any further disclosures of a forward-looking nature BB&T may make in any subsequent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q or Current Reports on Form 8-K.
BB&T is a financial holding company organized under the laws of North Carolina. BB&T conducts operations through its principal bank subsidiary, Branch Bank, and its nonbank subsidiaries.
Regulatory Considerations
The extensive regulatory framework applicable to financial institutions is intended primarily for the protection of depositors, the DIF and the stability of the financial system, rather than for the protection of shareholders and creditors. In addition to banking laws, regulations and regulatory agencies, BB&T is subject to various other laws, regulations, supervision and examination by other regulatory agencies, all of which affect the operations and management of BB&T and its ability to make distributions to shareholders. Refer to BB&T's Annual Report on Form 10-K for the year ended December 31, 20172018 for additional disclosures with respect to significant laws and regulations affecting BB&T.
OnIn April 10, 2018,2019, the banking regulators issued a proposal to simplify capital rules for large banks. The proposal introduces a “stress capital buffer," which would in part integrate the forward-looking stress test results with the non-stress capital requirements. The result would produce capital requirements for large banking organizations that are firm-specificFRB terminated its cease and risk-sensitive and reduce the overall number of capital ratios that must be met. The stress capital buffer would equal the decrease in a firm’s CET1 capital ratio in CCAR plus four quarters of planned common stock dividends. A bank's stress capital buffer requirement would be subject to a floor of 2.5% of risk-weighted assets.
On May 14, 2018, the banking regulators issued a proposal that would revise the agencies' regulatory capital rules. The proposal identifies which allowances under the new current expected credit losses accounting standard would be eligible for inclusion in regulatory capital, provides banking organizations the option to phase in the day-one effects on regulatory capital that may result from the adoption of the new accounting standard, and amends certain regulatory disclosure requirements consistent with the new accounting standard. In addition, the agencies are proposing to make amendments to their stress testing regulations so that covered banking organizations that have adopted the new accounting standard would not include the effect of it on their provisioning for purposes of stress testing until the 2020 stress test cycle.
The Economic Growth, Regulatory Relief, and Consumer Protection Act was enacted on May 24, 2018. Effective upon enactment, the banking agencies require depository institutions to assign a heightened risk weight of 150% to high volatility CRE exposures, as defined in the new law. In addition, the bill amends the Federal Deposit Insurance Act to exclude a capped amount of reciprocal deposits from treatment as brokered deposits for qualifying institutions, effective upon enactment. BB&T began to report both items under the new rules of the bill for the second quarter of 2018.
During June 2018, the FDIC and the NCCOB terminated their consentdesist order with Branch Bank related to internal control within the BSA/AML Compliance Program.BB&T's anti-money laundering program. No money laundering activity was identified and no financial penalty was levied. BB&T continueslevied in relation to work closely withthis order.
In July 2019, the FRB to resolve its continuing order. Since early 2016, BB&T has made substantial enhancements to its AML compliance program, including significantfederal bank regulatory agencies issued a final rule that reduces regulatory burden by simplifying the capital treatment for mortgage servicing rights, certain deferred tax assets, investments in system upgrades, process improvementsthe capital instruments of unconsolidated financial institutions and the hiringminority interest. The final rule applies to non-advanced approaches banking organizations and placement of a highly experienced AML team to oversee these efforts.is effective April 1, 2020.
Executive SummaryOverview
Overview of Significant Events and Financial Results
On February 7, 2019, BB&T entered into an agreement and plan of merger, by and between BB&T and SunTrust, pursuant to which SunTrust will merge with and into BB&T, with BB&T as the surviving entity in the merger. Immediately following the merger, SunTrust's wholly owned subsidiary, SunTrust Bank, will merge with and into Branch Bank, with Branch Bank as the surviving entity. Under the terms of the merger agreement, shareholders of SunTrust will receive 1.295 shares of BB&T common stock for each share of SunTrust common stock. The merger agreement was unanimously approved by both companies' Boards of Directors. The merger is expected to close late in the third or fourth quarter of 2019, subject to satisfaction of closing conditions, including receipt of remaining regulatory approvals. The merger is subject to a mutual break-up fee of approximately $1.1 billion, payable in customary circumstances. Merger-of-equals updates include:
On July 10, 2019, BB&T received regulatory approval from the NCCOB for the pending merger-of-equals with SunTrust. Management is continuing to work with regulators on the remaining approvals.
On July 16, 2019, BB&T and SunTrust announced the Truist Bank Community Benefits Plan under which the combined company will lend or invest $60 billion to low and moderate-income borrowers and communities over a three-year period from 2020 to 2022.
Management agreed on a one-time bonus to be paid to certain associates of Truist following the closing of the merger. The estimated bonus payments total approximately $70 million.
On July 24, 2019, BB&T and SunTrust Executives attended a U.S. House Committee on Financial Services hearing.
On July 30, 2019, BB&T and SunTrust shareholders approved the merger. In addition, BB&T's shareholders approved Truist Financial Corporation to be the name of the combined company.
Consolidated net income available to common shareholders for the second quarter of 20182019 was $775$842 million. On a diluted per common share basis, earnings for the second quarter of 20182019 were $0.99,$1.09, an increase of $0.22$0.10 compared to the second quarter of 2017.2018.
BB&T's results of operations for the second quarter of 20182019 produced an annualized return on average assets of 1.49%1.55% and an annualized return on average common shareholders' equity of 11.74%11.98%, compared to ratios for the same quarter of the prior year of 1.22%1.49% and 9.30%11.74%, respectively.
Total revenues on a TE basis were $2.9$3.1 billion for the second quarter of 2018,2019, an increase of $6$165 million compared to the same period in 2017 as taxable-equivalent2018, which reflects an increase of $35 million in TE net interest income and an increase of $130 million in noninterest income were essentially flat.income.
The provision for credit losses was $135$172 million flat compared to the earlier quarter. Net charge-offs$135 million for the second quarter of 2018 totaled $1092018. Net charge-offs were 0.38% of average loans and leases on an annualized basis for the second quarter of 2019, up eight basis point compared to the second quarter of 2018.
Noninterest income for the second quarter of 2019 was up $130 million compared to $132 million for the earlier quarter.quarter primarily due to increases in insurance income, mortgage banking income, and investment banking and brokerages fees and commissions.
Noninterest income was $1.2 billion, flat from the earlier quarter. Noninterest expense for the second quarter of 20182019 was $1.7 billion, down $22up $31 million compared to the earlier quarter. Excluding merger-related and restructuring charges and incremental operating expenses related to the merger, noninterest expense was down $36 million due to continued focus on expense control.up $23 million.
The provision for income taxes was $202$234 million for the second quarter of 2018,2019, compared to $304$202 million for the earlier quarter. This produced an effective tax rate for the second quarter of 20182019 of 19.7%20.9%, compared to 31.1%19.7% for the earlier quarter.
BB&T declared common dividends of $0.405 per share during the second quarter of 2019, which resulted in a dividend payout ratio of 36.8%. The provision for income taxes for the current quarter reflects the new lower federal tax rate.
The Company previously announced that the FRB accepted its capital plan and did not object to its proposed capital actions. The capital actions, which have been approved by BB&T's Board of Directors includeapproved a $0.03proposal to increase in the quarterly dividend 11.1% to $0.405 and$0.45 per share buybacks of up to $1.7 billion for the one-year period ending June 30, 2019.at their July meeting. As previously communicated, BB&T may not utilizehas suspended its share repurchase program due to the full share repurchases in order to maintain desired capital levels. On July 2, 2018, the acquisition of Regions Insurance was completed.merger-of-equals.
Analysis of Results of Operations
Net Interest Income and NIM
Second Quarter 20182019 compared to Second Quarter 20172018
Net interest income on a TE basis was $1.7 billion for the second quarter of 2018, flat2019, an increase of $35 million compared to the same period in 2017.2018. Interest income increased $152$214 million, which primarily reflects higher rates.rates and loan growth. Interest expense increased $148$179 million primarily due to higher funding costs reflecting the impact of rate increases.
Net interest margin was 3.45%3.42%, down three basis points compared to 3.47% for the second quarter of 2017.earlier quarter. Average earning assets increased $1.7$5.7 billion. The increase in average earningsearning assets reflects a $1.7 billion increase in average securities, a $1.4$5.8 billion increase in average total loans inclusive of a $1.3 billion decrease in indirect lending and a $1.5 billion decrease in average other earning assets.leases. Average interest-bearing liabilities increased $470 million compared to the earlier quarter, as the growth in earning assets was primarily funded by noninterest-bearing deposits, which increased $1.4$6.1 billion compared to the earlier quarter. Average interest-bearing deposits decreased $4.0increased $3.5 billion due to the decision to shift away from higher-cost rate sensitive deposits, which was offset by increases of $1.9and average short-term borrowings increased $3.0 billion, inwhile average long-term debt and $2.6 billion in average short-term borrowings.decreased $406 million. The annualized yield on the total loan portfolio for the second quarter of 20182019 was 4.70%5.05%, up 3435 basis points compared to the earlier quarter, reflecting the impact of rate increases. The annualized taxable-equivalent yield on the average securities portfolio was 2.53%2.62%, up fournine basis points compared to the earlier period.
The average annualized cost of total deposits was 0.68%, up 31 basis points compared to the earlier quarter. The average annualized cost of interest-bearing deposits was 0.57%1.02%, up 2745 basis points compared to the earlier quarter. The average annualized rate on long-term debt was 2.81%3.33%, up 9052 basis points compared to the earlier quarter. The average annualized rate on short-term borrowings was 1.77%2.40%, up 10763 basis points compared to the earlier quarter. The higher rates on interest-bearing liabilities reflect the impact of rate increases.
Six Months of 20182019 compared to Six Months of 20172018
Net interest income on a TE basis was $3.3$3.4 billion for the six months ended June 30, 2018,2019, an increase of $11$99 million compared to the same period in 2017. This increase2018. Interest income increased $467 million, which reflects a $281higher rates and loan growth. Interest expense increased $368 million increase in TE interest income, partially offset by a $270 million increase in funding costs. The increase in interest income was driven byprimarily due to higher overall yields. The increase in funding costs reflecting the impact of rate increases.
Net interest margin was driven by increases in interest rates.
The NIM was 3.45%3.47% for the six months ended June 30, 2018,2019, up two basis points compared to 3.47% for the same period of 2017.2018. The annualized TE yield for the total loan portfolio for the six months ended June 30, 2019 was 5.05%, up 42 basis points compared to the corresponding period of 2018. The increase was primarily due to rate increases. The annualized TE yield on the average securities portfolio for the six months ended June 30, 20182019 was 2.48%2.61%, up three13 basis points compared to the annualized yield earned during the same period of 2017. 2018.
The average annualized TE yield for thecost of total loan portfoliodeposits for the six months ended June 30, 20182019 was 4.63%0.66%, up 3032 basis points compared to the corresponding period of 2017.
prior year. The average annualized cost of interest-bearing deposits for the six months ended June 30, 20182019 was 0.52%0.99%, up 2447 basis points compared to the same period in the prior year. The average annualized rate on short-term borrowings was 1.60%2.37% for the six months ended June 30, 2018,2019, up 10277 basis points compared to the same period in 2017.2018. The average annualized rate on long-term debt for the six months ended June 30, 20182019 was 2.67%3.31%, up 8064 basis points compared to the same period in 2017.2018. The higher rates on interest-bearing liabilities reflect the impact of rate increases.
The major components of net interest income and the related annualized yields and rates as well as the variances between the periods caused by changes in interest rates versus changes in volumes are summarized below.
| | | Table 1-1 | |
| TE Net Interest Income and Rate / Volume Analysis (1) | |
| | | | | | | | | | | | |
| Three Months Ended June 30, | | Average Balances (6) | | Annualized Yield/Rate | | Income/Expense | | Increase | | Change due to | |
| (Dollars in millions) | | 2018 | | 2017 | | 2018 | | 2017 | | 2018 | | 2017 | | (Decrease) | | Rate | | Volume | |
| Table 1-1: TE Net Interest Income and Rate / Volume Analysis (1) | | Table 1-1: TE Net Interest Income and Rate / Volume Analysis (1) |
Three Months Ended June 30,
(Dollars in millions) | | Average Balances (6) | | Annualized Yield/Rate | | Income/Expense | | Incr. (Decr.) | | Change due to |
| 2019 | | 2018 | | 2019 | | 2018 | | 2019 | | 2018 | | Rate | | Volume |
| Assets | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Total securities, at amortized cost: (2) | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| U.S. Treasury | | $ | 3,537 |
| | $ | 4,761 |
| | 1.80 | % | | 1.73 | % | | $ | 17 |
| | $ | 21 |
| | $ | (4 | ) | | $ | 1 |
| | $ | (5 | ) | $ | 2,662 |
| | $ | 3,537 |
| | 2.04 | % | | 1.80 | % | | $ | 14 |
| | $ | 17 |
| | $ | (3 | ) | | $ | 2 |
| | $ | (5 | ) |
| GSE | | 2,384 |
| | 2,386 |
| | 2.23 |
| | 2.22 |
| | 14 |
| | 14 |
| | — |
| | — |
| | — |
| 2,440 |
| | 2,384 |
| | 2.25 |
| | 2.23 |
| | 13 |
| | 14 |
| | (1 | ) | | — |
| | (1 | ) |
| Agency MBS | | 39,777 |
| | 35,911 |
| | 2.44 |
| | 2.21 |
| | 241 |
| | 198 |
| | 43 |
| | 22 |
| | 21 |
| 40,112 |
| | 39,777 |
| | 2.57 |
| | 2.44 |
| | 258 |
| | 241 |
| | 17 |
| | 15 |
| | 2 |
|
| States and political subdivisions | | 1,051 |
| | 1,879 |
| | 3.79 |
| | 5.29 |
| | 8 |
| | 25 |
| | (17 | ) | | (7 | ) | | (10 | ) | 566 |
| | 1,051 |
| | 4.37 |
| | 3.79 |
| | 6 |
| | 8 |
| | (2 | ) | | 1 |
| | (3 | ) |
| Non-agency MBS | | 354 |
| | 416 |
| | 17.35 |
| | 24.16 |
| | 17 |
| | 25 |
| | (8 | ) | | (5 | ) | | (3 | ) | 302 |
| | 354 |
| | 13.28 |
| | 17.35 |
| | 10 |
| | 17 |
| | (7 | ) | | (4 | ) | | (3 | ) |
| Other | | 42 |
| | 57 |
| | 3.26 |
| | 2.22 |
| | — |
| | — |
| | — |
| | — |
| | — |
| 33 |
| | 42 |
| | 3.85 |
| | 3.26 |
| | 1 |
| | — |
| | 1 |
| | — |
| | 1 |
|
| Total securities | | 47,145 |
| | 45,410 |
| | 2.53 |
| | 2.49 |
| | 297 |
| | 283 |
| | 14 |
| | 11 |
| | 3 |
| 46,115 |
| | 47,145 |
| | 2.62 |
| | 2.53 |
| | 302 |
| | 297 |
| | 5 |
| | 14 |
| | (9 | ) |
| Other earning assets (3) | | 2,197 |
| | 3,649 |
| | 2.24 |
| | 1.36 |
| | 13 |
| | 11 |
| | 2 |
| | 7 |
| | (5 | ) | 3,167 |
| | 2,197 |
| | 2.59 |
| | 2.24 |
| | 20 |
| | 13 |
| | 7 |
| | 2 |
| | 5 |
|
| Loans and leases, net of unearned income: (4)(5) | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| Commercial and industrial | | 59,548 |
| | 58,150 |
| | 3.92 |
| | 3.57 |
| | 580 |
| | 518 |
| | 62 |
| | 50 |
| | 12 |
| 62,563 |
| | 59,548 |
| | 4.35 |
| | 3.92 |
| | 679 |
| | 580 |
| | 99 |
| | 68 |
| | 31 |
|
| CRE | | 21,546 |
| | 20,304 |
| | 4.64 |
| | 3.87 |
| | 246 |
| | 196 |
| | 50 |
| | 38 |
| | 12 |
| 20,748 |
| | 21,546 |
| | 5.03 |
| | 4.64 |
| | 260 |
| | 252 |
| | 8 |
| | 18 |
| | (10 | ) |
| Lease financing | | 1,862 |
| | 1,664 |
| | 3.05 |
| | 2.91 |
| | 12 |
| | 12 |
| | — |
| | — |
| | — |
| 2,122 |
| | 1,862 |
| | 3.29 |
| | 3.05 |
| | 17 |
| | 12 |
| | 5 |
| | 2 |
| | 3 |
|
| Residential mortgage | | 29,272 |
| | 29,392 |
| | 4.01 |
| | 4.01 |
| | 291 |
| | 295 |
| | (4 | ) | | — |
| | (4 | ) | 32,066 |
| | 29,272 |
| | 4.00 |
| | 4.01 |
| | 321 |
| | 291 |
| | 30 |
| | (1 | ) | | 31 |
|
| Direct | | 11,680 |
| | 12,000 |
| | 5.10 |
| | 4.55 |
| | 150 |
| | 135 |
| | 15 |
| | 18 |
| | (3 | ) | 11,506 |
| | 11,680 |
| | 5.80 |
| | 5.10 |
| | 166 |
| | 150 |
| | 16 |
| | 18 |
| | (2 | ) |
| Indirect | | 16,804 |
| | 18,127 |
| | 7.46 |
| | 6.83 |
| | 311 |
| | 309 |
| | 2 |
| | 26 |
| | (24 | ) | 17,879 |
| | 16,804 |
| | 7.99 |
| | 7.46 |
| | 356 |
| | 311 |
| | 45 |
| | 24 |
| | 21 |
|
| Revolving credit | | 2,831 |
| | 2,612 |
| | 9.16 |
| | 8.78 |
| | 73 |
| | 57 |
| | 16 |
| | 6 |
| | 10 |
| 3,151 |
| | 2,831 |
| | 9.39 |
| | 9.16 |
| | 74 |
| | 67 |
| | 7 |
| | 2 |
| | 5 |
|
| PCI | | 559 |
| | 825 |
| | 18.92 |
| | 17.94 |
| | 26 |
| | 37 |
| | (11 | ) | | 2 |
| | (13 | ) | 432 |
| | 559 |
| | 21.63 |
| | 18.92 |
| | 24 |
| | 26 |
| | (2 | ) | | 4 |
| | (6 | ) |
| Total loans and leases HFI | | 144,102 |
| | 143,074 |
| | 4.70 |
| | 4.37 |
| | 1,689 |
| | 1,559 |
| | 130 |
| | 140 |
| | (10 | ) | 150,467 |
| | 144,102 |
| | 5.05 |
| | 4.70 |
| | 1,897 |
| | 1,689 |
| | 208 |
| | 135 |
| | 73 |
|
| LHFS | | 1,650 |
| | 1,253 |
| | 4.02 |
| | 3.65 |
| | 17 |
| | 11 |
| | 6 |
| | 1 |
| | 5 |
| 1,090 |
| | 1,650 |
| | 4.17 |
| | 4.02 |
| | 11 |
| | 17 |
| | (6 | ) | | 1 |
| | (7 | ) |
| Total loans and leases | | 145,752 |
| | 144,327 |
| | 4.70 |
| | 4.36 |
| | 1,706 |
| | 1,570 |
| | 136 |
| | 141 |
| | (5 | ) | 151,557 |
| | 145,752 |
| | 5.05 |
| | 4.70 |
| | 1,908 |
| | 1,706 |
| | 202 |
| | 136 |
| | 66 |
|
| Total earning assets | | 195,094 |
| | 193,386 |
| | 4.14 |
| | 3.87 |
| | 2,016 |
| | 1,864 |
| | 152 |
| | 159 |
| | (7 | ) | 200,839 |
| | 195,094 |
| | 4.45 |
| | 4.14 |
| | 2,230 |
| | 2,016 |
| | 214 |
| | 152 |
| | 62 |
|
| Nonearning assets | | 26,250 |
| | 27,632 |
| | |
| | |
| | |
| | |
| | |
| | |
| | | 28,410 |
| | 26,250 |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| Total assets | | $ | 221,344 |
| | $ | 221,018 |
| | |
| | |
| | |
| | |
| | |
| | |
| | | $ | 229,249 |
| | $ | 221,344 |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| Liabilities and Shareholders' Equity | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| Interest-bearing deposits: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| Interest-checking | | $ | 26,969 |
| | $ | 28,849 |
| | 0.42 |
| | 0.22 |
| | 29 |
| | 15 |
| | 14 |
| | 15 |
| | (1 | ) | $ | 27,708 |
| | $ | 26,969 |
| | 0.65 |
| | 0.42 |
| | 45 |
| | 29 |
| | 16 |
| | 15 |
| | 1 |
|
| Money market and savings | | 62,105 |
| | 64,294 |
| | 0.56 |
| | 0.29 |
| | 86 |
| | 47 |
| | 39 |
| | 41 |
| | (2 | ) | 63,394 |
| | 62,105 |
| | 1.03 |
| | 0.56 |
| | 163 |
| | 86 |
| | 77 |
| | 75 |
| | 2 |
|
| Time deposits | | 13,966 |
| | 14,088 |
| | 0.86 |
| | 0.48 |
| | 30 |
| | 17 |
| | 13 |
| | 13 |
| | — |
| 15,730 |
| | 13,966 |
| | 1.58 |
| | 0.86 |
| | 63 |
| | 30 |
| | 33 |
| | 29 |
| | 4 |
|
| Foreign deposits - interest-bearing | | 673 |
| | 459 |
| | 1.77 |
| | 1.03 |
| | 3 |
| | 1 |
| | 2 |
| | 1 |
| | 1 |
| 379 |
| | 673 |
| | 2.43 |
| | 1.77 |
| | 2 |
| | 3 |
| | (1 | ) | | 1 |
| | (2 | ) |
| Total interest-bearing deposits | | 103,713 |
| | 107,690 |
| | 0.57 |
| | 0.30 |
| | 148 |
| | 80 |
| | 68 |
| | 70 |
| | (2 | ) | |
| Total interest-bearing deposits (7) | | 107,211 |
| | 103,713 |
| | 1.02 |
| | 0.57 |
| | 273 |
| | 148 |
| | 125 |
| | 120 |
| | 5 |
|
| Short-term borrowings | | 5,323 |
| | 2,748 |
| | 1.77 |
| | 0.70 |
| | 23 |
| | 5 |
| | 18 |
| | 11 |
| | 7 |
| 8,367 |
| | 5,323 |
| | 2.40 |
| | 1.77 |
| | 50 |
| | 23 |
| | 27 |
| | 10 |
| | 17 |
|
| Long-term debt | | 23,639 |
| | 21,767 |
| | 2.81 |
| | 1.91 |
| | 166 |
| | 104 |
| | 62 |
| | 52 |
| | 10 |
| 23,233 |
| | 23,639 |
| | 3.33 |
| | 2.81 |
| | 193 |
| | 166 |
| | 27 |
| | 30 |
| | (3 | ) |
| Total interest-bearing liabilities | | 132,675 |
| | 132,205 |
| | 1.02 |
| | 0.57 |
| | 337 |
| | 189 |
| | 148 |
| | 133 |
| | 15 |
| 138,811 |
| | 132,675 |
| | 1.49 |
| | 1.02 |
| | 516 |
| | 337 |
| | 179 |
| | 160 |
| | 19 |
|
| Noninterest-bearing deposits | | 53,963 |
| | 52,573 |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Noninterest-bearing deposits (7) | | 52,680 |
| | 53,963 |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Other liabilities | | 5,121 |
| | 5,938 |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| 6,457 |
| | 5,121 |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Shareholders' equity | | 29,585 |
| | 30,302 |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| 31,301 |
| | 29,585 |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Total liabilities and shareholders' equity | | $ | 221,344 |
| | $ | 221,018 |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| $ | 229,249 |
| | $ | 221,344 |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Average interest-rate spread | | |
| | | | 3.12 | % | | 3.30 | % | | |
| | |
| | |
| | |
| | |
| |
| | | | 2.96 | % | | 3.12 | % | | |
| | |
| | |
| | |
| | |
|
| NIM/net interest income | | |
| | | | 3.45 | % | | 3.47 | % | | $ | 1,679 |
| | $ | 1,675 |
| | $ | 4 |
| | $ | 26 |
| | $ | (22 | ) | |
| | | | 3.42 | % | | 3.45 | % | | $ | 1,714 |
| | $ | 1,679 |
| | $ | 35 |
| | $ | (8 | ) | | $ | 43 |
|
| Taxable-equivalent adjustment | | |
| | | | | | |
| | $ | 22 |
| | $ | 40 |
| | |
| | |
| | |
| |
| | | | | | |
| | $ | 24 |
| | $ | 22 |
| | |
| | |
| | |
|
| |
| (1) | Yields are stated on a TE basis utilizing the marginal income tax rates. The change in interest not solely due to changes in rate or volume has been allocated on a pro-rata basis based on the absolute dollar amount of each. |
| |
| (2) | Total securities include AFS and HTM securities. |
| |
| (3) | Includes cash equivalents, interest-bearing deposits with banks, trading securities, FHLB stock and other earning assets. |
| |
| (4) | Loan fees, which are not material for any of the periods shown, are included for rate calculation purposes. |
| |
| (5) | NPLs are included in the average balances. |
| |
| (6) | Excludes basis adjustments for fair value hedges. |
| |
| (7) | Total deposit costs were 0.68% and 0.37% for the three months ended June 30, 2019 and 2018, respectively. |
| | | Table 1-2 | |
| TE Net Interest Income and Rate / Volume Analysis (1) | |
| | | | | | | | | | | | |
| Six Months Ended June 30, | | Average Balances (6) | | Annualized Yield/Rate | | Income/Expense | | Increase | | Change due to | |
| (Dollars in millions) | | 2018 | | 2017 | | 2018 | | 2017 | | 2018 | | 2017 | | (Decrease) | | Rate | | Volume | |
| Table 1-2: TE Net Interest Income and Rate / Volume Analysis (1) | | Table 1-2: TE Net Interest Income and Rate / Volume Analysis (1) |
Six Months Ended June 30,
(Dollars in millions) | | Average Balances (6) | | Annualized Yield/Rate | | Income/Expense | | Incr.
(Decr.) | | Change due to |
| 2019 | | 2018 | | 2019 | | 2018 | | 2019 | | 2018 | | Rate | | Volume |
| Assets | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Total securities, at amortized cost: (2) | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| U.S. Treasury | | $ | 3,538 |
| | $ | 4,746 |
| | 1.79 | % | | 1.72 | % | | $ | 32 |
| | $ | 41 |
| | $ | (9 | ) | | $ | 2 |
| | $ | (11 | ) | $ | 2,980 |
| | $ | 3,538 |
| | 2.02 | % | | 1.79 | % | | $ | 30 |
| | $ | 32 |
| | $ | (2 | ) | | $ | 4 |
| | $ | (6 | ) |
| GSE | | 2,384 |
| | 2,385 |
| | 2.23 |
| | 2.22 |
| | 27 |
| | 27 |
| | — |
| | — |
| | — |
| 2,429 |
| | 2,384 |
| | 2.24 |
| | 2.23 |
| | 27 |
| | 27 |
| | — |
| | — |
| | — |
|
| Agency MBS | | 40,292 |
| | 35,412 |
| | 2.43 |
| | 2.19 |
| | 489 |
| | 387 |
| | 102 |
| | 45 |
| | 57 |
| 40,078 |
| | 40,292 |
| | 2.58 |
| | 2.43 |
| | 516 |
| | 489 |
| | 27 |
| | 30 |
| | (3 | ) |
| States and political subdivisions | | 1,133 |
| | 1,985 |
| | 3.78 |
| | 5.20 |
| | 19 |
| | 52 |
| | (33 | ) | | (13 | ) | | (20 | ) | 593 |
| | 1,133 |
| | 4.04 |
| | 3.78 |
| | 12 |
| | 19 |
| | (7 | ) | | 1 |
| | (8 | ) |
| Non-agency MBS | | 364 |
| | 424 |
| | 12.41 |
| | 21.45 |
| | 24 |
| | 45 |
| | (21 | ) | | (16 | ) | | (5 | ) | 308 |
| | 364 |
| | 12.89 |
| | 12.41 |
| | 20 |
| | 24 |
| | (4 | ) | | 1 |
| | (5 | ) |
| Other | | 45 |
| | 58 |
| | 2.73 |
| | 2.05 |
| | — |
| | — |
| | — |
| | — |
| | — |
| 35 |
| | 45 |
| | 3.90 |
| | 2.73 |
| | 1 |
| | — |
| | 1 |
| | 1 |
| | — |
|
| Total securities | | 47,756 |
| | 45,010 |
| | 2.48 |
| | 2.45 |
| | 591 |
| | 552 |
| | 39 |
| | 18 |
| | 21 |
| 46,423 |
| | 47,756 |
| | 2.61 |
| | 2.48 |
| | 606 |
| | 591 |
| | 15 |
| | 37 |
| | (22 | ) |
| Other earning assets (3) | | 2,223 |
| | 3,953 |
| | 3.40 |
| | 1.43 |
| | 38 |
| | 27 |
| | 11 |
| | 27 |
| | (16 | ) | 2,684 |
| | 2,223 |
| | 3.98 |
| | 3.40 |
| | 53 |
| | 38 |
| | 15 |
| | 7 |
| | 8 |
|
| Loans and leases, net of unearned income: (4)(5) | | | | | | | | | | | | | | |
| | |
| | |
| | | | | | | | | | | | | |
| | |
| | |
|
| Commercial and industrial | | 59,090 |
| | 57,639 |
| | 3.82 |
| | 3.53 |
| | 1,117 |
| | 1,010 |
| | 107 |
| | 82 |
| | 25 |
| 61,970 |
| | 59,090 |
| | 4.34 |
| | 3.82 |
| | 1,335 |
| | 1,117 |
| | 218 |
| | 160 |
| | 58 |
|
| CRE | | 21,472 |
| | 20,100 |
| | 4.56 |
| | 3.81 |
| | 480 |
| | 379 |
| | 101 |
| | 75 |
| | 26 |
| 20,826 |
| | 21,472 |
| | 5.05 |
| | 4.56 |
| | 521 |
| | 486 |
| | 35 |
| | 50 |
| | (15 | ) |
| Lease financing | | 1,867 |
| | 1,658 |
| | 3.03 |
| | 2.88 |
| | 26 |
| | 24 |
| | 2 |
| | — |
| | 2 |
| 2,071 |
| | 1,867 |
| | 3.31 |
| | 3.03 |
| | 34 |
| | 26 |
| | 8 |
| | 4 |
| | 4 |
|
| Residential mortgage | | 29,049 |
| | 29,546 |
| | 4.01 |
| | 4.01 |
| | 580 |
| | 592 |
| | (12 | ) | | — |
| | (12 | ) | 31,720 |
| | 29,049 |
| | 4.07 |
| | 4.01 |
| | 645 |
| | 580 |
| | 65 |
| | 9 |
| | 56 |
|
| Direct | | 11,735 |
| | 12,007 |
| | 5.00 |
| | 4.44 |
| | 291 |
| | 264 |
| | 27 |
| | 33 |
| | (6 | ) | 11,500 |
| | 11,735 |
| | 5.77 |
| | 5.00 |
| | 329 |
| | 291 |
| | 38 |
| | 44 |
| | (6 | ) |
| Indirect | | 16,859 |
| | 18,132 |
| | 7.39 |
| | 6.79 |
| | 615 |
| | 611 |
| | 4 |
| | 50 |
| | (46 | ) | 17,609 |
| | 16,859 |
| | 7.95 |
| | 7.39 |
| | 694 |
| | 615 |
| | 79 |
| | 50 |
| | 29 |
|
| Revolving credit | | 2,815 |
| | 2,610 |
| | 9.05 |
| | 8.79 |
| | 140 |
| | 114 |
| | 26 |
| | 7 |
| | 19 |
| 3,131 |
| | 2,815 |
| | 9.44 |
| | 9.05 |
| | 147 |
| | 134 |
| | 13 |
| | 4 |
| | 9 |
|
| PCI | | 595 |
| | 854 |
| | 19.07 |
| | 18.86 |
| | 56 |
| | 80 |
| | (24 | ) | | 1 |
| | (25 | ) | 444 |
| | 595 |
| | 19.77 |
| | 19.07 |
| | 44 |
| | 56 |
| | (12 | ) | | 2 |
| | (14 | ) |
| Total loans and leases HFI | | 143,482 |
| | 142,546 |
| | 4.64 |
| | 4.34 |
| | 3,305 |
| | 3,074 |
| | 231 |
| | 248 |
| | (17 | ) | 149,271 |
| | 143,482 |
| | 5.06 |
| | 4.64 |
| | 3,749 |
| | 3,305 |
| | 444 |
| | 323 |
| | 121 |
|
| LHFS | | 1,352 |
| | 1,468 |
| | 3.87 |
| | 3.56 |
| | 26 |
| | 26 |
| | — |
| | 2 |
| | (2 | ) | 910 |
| | 1,352 |
| | 4.25 |
| | 3.87 |
| | 19 |
| | 26 |
| | (7 | ) | | 2 |
| | (9 | ) |
| Total loans and leases | | 144,834 |
| | 144,014 |
| | 4.63 |
| | 4.33 |
| | 3,331 |
| | 3,100 |
| | 231 |
| | 250 |
| | (19 | ) | 150,181 |
| | 144,834 |
| | 5.05 |
| | 4.63 |
| | 3,768 |
| | 3,331 |
| | 437 |
| | 325 |
| | 112 |
|
| Total earning assets | | 194,813 |
| | 192,977 |
| | 4.09 |
| | 3.84 |
| | 3,960 |
| | 3,679 |
| | 281 |
| | 295 |
| | (14 | ) | 199,288 |
| | 194,813 |
| | 4.47 |
| | 4.09 |
| | 4,427 |
| | 3,960 |
| | 467 |
| | 369 |
| | 98 |
|
| Nonearning assets | | 26,568 |
| | 27,516 |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| 28,133 |
| | 26,568 |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Total assets | | $ | 221,381 |
| | $ | 220,493 |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| $ | 227,421 |
| | $ | 221,381 |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Liabilities and Shareholders' Equity | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Interest-bearing deposits: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Interest-checking | | $ | 27,119 |
| | $ | 29,211 |
| | 0.39 |
| | 0.20 |
| | 54 |
| | 28 |
| | 26 |
| | 28 |
| | (2 | ) | $ | 27,665 |
| | $ | 27,119 |
| | 0.62 |
| | 0.39 |
| | 85 |
| | 54 |
| | 31 |
| | 30 |
| | 1 |
|
| Money market and savings | | 61,899 |
| | 64,574 |
| | 0.50 |
| | 0.26 |
| | 153 |
| | 84 |
| | 69 |
| | 73 |
| | (4 | ) | 63,360 |
| | 61,899 |
| | 0.99 |
| | 0.50 |
| | 313 |
| | 153 |
| | 160 |
| | 156 |
| | 4 |
|
| Time deposits | | 13,907 |
| | 14,504 |
| | 0.77 |
| | 0.48 |
| | 53 |
| | 34 |
| | 19 |
| | 20 |
| | (1 | ) | 16,059 |
| | 13,907 |
| | 1.54 |
| | 0.77 |
| | 123 |
| | 53 |
| | 70 |
| | 61 |
| | 9 |
|
| Foreign deposits - interest-bearing | | 803 |
| | 693 |
| | 1.57 |
| | 0.79 |
| | 6 |
| | 3 |
| | 3 |
| | 3 |
| | — |
| 400 |
| | 803 |
| | 2.43 |
| | 1.57 |
| | 5 |
| | 6 |
| | (1 | ) | | 3 |
| | (4 | ) |
| Total interest-bearing deposits | | 103,728 |
| | 108,982 |
| | 0.52 |
| | 0.28 |
| | 266 |
| | 149 |
| | 117 |
| | 124 |
| | (7 | ) | |
| Total interest-bearing deposits (7) | | 107,484 |
| | 103,728 |
| | 0.99 |
| | 0.52 |
| | 526 |
| | 266 |
| | 260 |
| | 250 |
| | 10 |
|
| Short-term borrowings | | 5,399 |
| | 2,428 |
| | 1.60 |
| | 0.58 |
| | 43 |
| | 7 |
| | 36 |
| | 21 |
| | 15 |
| 7,003 |
| | 5,399 |
| | 2.37 |
| | 1.60 |
| | 82 |
| | 43 |
| | 39 |
| | 24 |
| | 15 |
|
| Long-term debt | | 23,658 |
| | 21,264 |
| | 2.67 |
| | 1.87 |
| | 316 |
| | 199 |
| | 117 |
| | 93 |
| | 24 |
| 23,240 |
| | 23,658 |
| | 3.31 |
| | 2.67 |
| | 385 |
| | 316 |
| | 69 |
| | 75 |
| | (6 | ) |
| Total interest-bearing liabilities | | 132,785 |
| | 132,674 |
| | 0.94 |
| | 0.54 |
| | 625 |
| | 355 |
| | 270 |
| | 238 |
| | 32 |
| 137,727 |
| | 132,785 |
| | 1.45 |
| | 0.94 |
| | 993 |
| | 625 |
| | 368 |
| | 349 |
| | 19 |
|
| Noninterest-bearing deposits | | 53,681 |
| | 51,838 |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Noninterest-bearing deposits (7) | | 52,484 |
| | 53,681 |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Other liabilities | | 5,359 |
| | 5,877 |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| 6,287 |
| | 5,359 |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Shareholders' equity | | 29,556 |
| | 30,104 |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| 30,923 |
| | 29,556 |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Total liabilities and shareholders' equity | | $ | 221,381 |
| | $ | 220,493 |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| $ | 227,421 |
| | $ | 221,381 |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Average interest-rate spread | | |
| | | | 3.15 | % | | 3.30 | % | | |
| | |
| | |
| | |
| | |
| |
| | | | 3.02 | % | | 3.15 | % | | |
| | |
| | |
| | |
| | |
|
| NIM/net interest income | | |
| | | | 3.45 | % | | 3.47 | % | | $ | 3,335 |
| | $ | 3,324 |
| | $ | 11 |
| | $ | 57 |
| | $ | (46 | ) | |
| | | | 3.47 | % | | 3.45 | % | | $ | 3,434 |
| | $ | 3,335 |
| | $ | 99 |
| | $ | 20 |
| | $ | 79 |
|
| Taxable-equivalent adjustment | | |
| | | | | | |
| | $ | 45 |
| | $ | 80 |
| | |
| | |
| | |
| |
| | | | | | |
| | $ | 48 |
| | $ | 45 |
| | |
| | |
| | |
|
| |
| (1) | Yields are stated on a TE basis utilizing the marginal income tax rates. The change in interest not solely due to changes in rate or volume has been allocated on a pro-rata basis based on the absolute dollar amount of each. |
| |
| (2) | Total securities include AFS and HTM securities. |
| |
| (3) | Includes cash equivalents, interest-bearing deposits with banks, trading securities, FHLB stock and other earning assets. |
| |
| (4) | Loan fees, which are not material for any of the periods shown, are included for rate calculation purposes. |
| |
| (5) | NPLs are included in the average balances. |
| |
| (6) | Excludes basis adjustments for fair value hedges. |
| |
| (7) | Total deposit costs were 0.66% and 0.34% for the six months ended June 30, 2019 and 2018, respectively. |
Provision for Credit Losses
Second Quarter 20182019 compared to Second Quarter 20172018
The provision for credit losses totaled $135was $172 million, for the second quarter of 2018, compared to $135 million for the same period of the prior year.
earlier quarter. Net charge-offs were $109 million for the second quarter of 2018 and $1322019 totaled $142 million forcompared to $109 million in the second quarter of 2017. Net charge-offs in residential mortgage decreased $15 million, primarily due to net charge-offs associated with the 2017 sale of $300 million of residential mortgage loans, which included $40 million of nonaccrual loans and $199 million of performing TDRs.earlier period.
Net charge-offs were 0.30%0.38% of average loans and leases on an annualized basis for the second quarter of 2018,2019, up eight basis points compared to 0.37%the second quarter of average loans2018. The increase in net charge-offs was primarily related to CRE and leases for the same period in 2017.indirect loans.
Six Months of 20182019 compared to Six Months of 20172018
The provision for credit losses totaled $285$327 million for the six months ended June 30, 2018,2019, compared to $283$285 million for 2018. The ratio of the same period of 2017.ALLL to net charge-offs was 2.74X for 2019, compared to 2.99X for 2018.
Net charge-offs for the six months ended June 30, 20182019 were $254$289 million, compared to $280$254 million for the six months ended June 30, 2017. Net charge-offs in residential mortgage decreased $23 million, primarily due to net charge-offs associated with the previously mentioned sale of residential mortgage loans.
2018. Net charge-offs were 0.36%0.39% of average loans and leases on an annualized basis for the six months ended June 30, 2018,2019, compared to 0.40%0.36% of average loans and leases for the same period2018. The increase in 2017.net charge-offs was primarily related to CRE, indirect and revolving credit loans.
Noninterest Income
Noninterest income is a significant contributor to BB&T's financial results. Management focuses on diversifying its sources of revenue to further reduce BB&T's reliance on traditional spread-based interest income, as certain fee-based activities are a relatively stable revenue source during periods of changing interest rates.
|
| | | | | | | | | | | | | | | | | | | | | |
| Table 2: Noninterest Income |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| (Dollars in millions) | 2019 | | 2018 | | % Change | | 2019 | | 2018 | | % Change |
| Insurance income | $ | 566 |
| | $ | 481 |
| | 17.7 | % | | $ | 1,076 |
| | $ | 917 |
| | 17.3 | % |
| Service charges on deposits | 181 |
| | 179 |
| | 1.1 |
| | 352 |
| | 344 |
| | 2.3 |
|
| Investment banking and brokerage fees and commissions | 131 |
| | 109 |
| | 20.2 |
| | 242 |
| | 222 |
| | 9.0 |
|
| Mortgage banking income | 113 |
| | 94 |
| | 20.2 |
| | 176 |
| | 193 |
| | (8.8 | ) |
| Trust and investment advisory revenues | 70 |
| | 72 |
| | (2.8 | ) | | 138 |
| | 144 |
| | (4.2 | ) |
| Bankcard fees and merchant discounts | 77 |
| | 72 |
| | 6.9 |
| | 147 |
| | 141 |
| | 4.3 |
|
| Checkcard fees | 59 |
| | 57 |
| | 3.5 |
| | 114 |
| | 109 |
| | 4.6 |
|
| Operating lease income | 35 |
| | 36 |
| | (2.8 | ) | | 70 |
| | 73 |
| | (4.1 | ) |
| Income from bank-owned life insurance | 34 |
| | 30 |
| | 13.3 |
| | 62 |
| | 61 |
| | 1.6 |
|
| Securities gains (losses), net | — |
| | 1 |
| | NM |
| | — |
| | 1 |
| | NM |
|
| Other income | 86 |
| | 91 |
| | (5.5 | ) | | 177 |
| | 197 |
| | (10.2 | ) |
| Total noninterest income | $ | 1,352 |
| | $ | 1,222 |
| | 10.6 |
| | $ | 2,554 |
| | $ | 2,402 |
| | 6.3 |
|
Second Quarter 20182019 compared to Second Quarter 20172018
Noninterest income for the second quarter of 20182019 was essentially flatup $130 million compared to the earlier quarter. Insurance income increased $85 million to record levels due to higher production and the acquisition of Regions Insurance. Mortgage banking income increased $19 million primarily due to an increase of $28 million for net mortgage servicing rights valuation adjustments, which was partially offset by lower residential and commercial mortgage banking revenues. Investment banking and brokerage fees and commissions increased $22 million primarily due to higher revenue from investment banking transactions and higher managed account fees.
Six Months of 20182019 compared to Six Months of 20172018
Noninterest income for the six months ended June 30, 2018 totaled $2.42019 was $2.6 billion, up $11$152 million compared to 2018. Insurance income was $1.1 billion, up $159 million compared to 2018, due to higher production levels and the same period in 2017.
acquisition of Regions Insurance. Investment banking and brokerage fees and commissions were $222$242 million, up $26$20 million compared to 2018, due to higher managed account fees and higher investment banking income. InsuranceMortgage banking income was $917$176 million, down $22$17 million compared to the corresponding period of 2017. This decrease was primarily2018, due to lower performance-based commissions. Service charges on deposits was essentially flat, but was negatively impacted due to fee waivers associated with the February system outage. Other income was essentially flat, as increases from various sundry items wereresidential mortgage sales, partially offset by a $27an increase of $28 million decrease in income related to assets for certain post-employment benefits, which is primarily offset in other income/expense categories.net mortgage service rights valuation adjustments.
Noninterest Expense
The following table provides a breakdown of BB&T's noninterest expense:
|
| | | | | | | | | | | | | | | | | | | | | |
| Table 3: Noninterest Expense |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| (Dollars in millions) | 2019 | | 2018 | | % Change | | 2019 | | 2018 | | % Change |
| Personnel expense | $ | 1,120 |
| | $ | 1,074 |
| | 4.3 | % | | $ | 2,207 |
| | $ | 2,113 |
| | 4.4 | % |
| Occupancy and equipment expense | 184 |
| | 187 |
| | (1.6 | ) | | 371 |
| | 381 |
| | (2.6 | ) |
| Software expense | 71 |
| | 67 |
| | 6.0 |
| | 143 |
| | 132 |
| | 8.3 |
|
| Outside IT services | 29 |
| | 32 |
| | (9.4 | ) | | 59 |
| | 64 |
| | (7.8 | ) |
| Regulatory charges | 19 |
| | 39 |
| | (51.3 | ) | | 37 |
| | 79 |
| | (53.2 | ) |
| Amortization of intangibles | 32 |
| | 31 |
| | 3.2 |
| | 64 |
| | 64 |
| | — |
|
| Loan-related expense | 30 |
| | 26 |
| | 15.4 |
| | 55 |
| | 55 |
| | — |
|
| Professional services | 31 |
| | 32 |
| | (3.1 | ) | | 62 |
| | 62 |
| | — |
|
| Merger-related and restructuring charges, net | 23 |
| | 24 |
| | (4.2 | ) | | 103 |
| | 52 |
| | 98.1 |
|
| Other expense | 212 |
| | 208 |
| | 1.9 |
| | 418 |
| | 404 |
| | 3.5 |
|
| Total noninterest expense | $ | 1,751 |
|
| $ | 1,720 |
| | 1.8 |
| | $ | 3,519 |
| | $ | 3,406 |
| | 3.3 |
|
Second Quarter 20182019 compared to Second Quarter 20172018
Noninterest expense for the second quarter of 20182019 was down $22up $31 million compared to the earlier quarter. Excluding merger-relatedMerger-related and restructuring charges was essentially flat, as the current quarter included charges in connection with the announced merger-of-equals with SunTrust, whereas the earlier quarter included charges associated with facilities optimization. The current quarter also included $9 million of incremental operating expenses related to the merger. Excluding these charges, noninterest expense was down $36up $23 million, due to continued focus on expense control. This includes the benefits of prior optimization efforts including lower occupancy and equipment expense and fewer FTEs, as well as lower project-related costs.
Personnel expense was essentially flator 1.4% compared to the earlier quarter as lower salariesquarter.
Personnel expense driven by approximately 1,600 fewer FTEs was largely offset by higher performance-based incentive expense and annual merit increases.
Other expense decreased $16increased $46 million compared to the earlier quarter, primarily due to an increasehigher incentives, partially due to the Regions Insurance acquisition, and lower capitalized employee costs. The lower capitalized employee costs reflect efficiencies in the expected return on pension plan assets due to higher plan assets.loan closing process. Regulatory charges decreased $20 million as a result of the deposit insurance fund reaching the targeted level.
Six Months of 20182019 compared to Six Months of 20172018
Noninterest expense totaled $3.4$3.5 billion for the six months ended June 30, 2018, a decrease2019, an increase of $438$113 million, or 11.4%3.3%, overfrom the same period ofin the prior year. This decreaseMerger-related and restructuring expense was driven by$103 million, an increase of $51 million, primarily due to the loss on early extinguishmentannounced merger-of-equals with SunTrust. Additionally, the six months ended June 30, 2019 included $11 million of debt in 2017, lower outside IT services and lower other expense.incremental operating expenses related to the merger. Excluding these charges, noninterest expense was up $51 million or 1.5% compared to the earlier period.
Personnel expense was $2.1$2.2 billion for the six months ended June 30, 2018,2019, an increase of $10$94 million compared to the six months ended June 30, 2017. The increase was driven by $15 million in higher defined benefit pension plan service cost and $12 million of higher performance-based incentive expense. Salaries decreased by $15 million2018, primarily due to approximately 1,600 fewer FTEs, which washigher incentives, partially offset by annual merit increasesdue to the Regions Insurance acquisition, and promotions.lower capitalized employee costs. The lower capitalized employee costs reflect efficiencies in the loan closing process.
Outside IT servicesRegulatory charges decreased $24$42 million primarily as a result of decreased expenses associated with the implementationDIF reaching the targeted level.
Merger-Related and Restructuring Charges
The following table presents a summary of merger-related and restructuring charges and the related accruals:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Table 4: Merger-Related and Restructuring Accrual Activity |
| (Dollars in millions) | Accrual at Apr 1, 2019 | | Expense | | Utilized | | Accrual at Jun 30, 2019 | | Accrual at Jan 1, 2019 | | Expense | | Utilized | | Accrual at Jun 30, 2019 |
| Severance and personnel-related | $ | 10 |
| | $ | 5 |
| | $ | (7 | ) | | $ | 8 |
| | $ | 43 |
| | $ | 21 |
| | $ | (56 | ) | | $ | 8 |
|
| Occupancy and equipment (1) | — |
| | 3 |
| | (3 | ) | | — |
| | — |
| | 12 |
| | (12 | ) | | — |
|
| Professional services | 44 |
| | 9 |
| | — |
| | 53 |
| | 1 |
| | 60 |
| | (8 | ) | | 53 |
|
| Other adjustments | 2 |
| | 6 |
| | (7 | ) | | 1 |
| | — |
| | 10 |
| | (9 | ) | | 1 |
|
| Total | $ | 56 |
| | $ | 23 |
| | $ | (17 | ) | | $ | 62 |
| | $ | 44 |
| | $ | 103 |
| | $ | (85 | ) | | $ | 62 |
|
(1) Certain lease reserves are no longer required as a result of new commercial lendinglease accounting guidance adopted in the first quarter of 2019. See additional information and accounting system in 2017 and systems enhancements relatedNote 1. Basis of Presentation.
Provision for Income Taxes
Second Quarter 2019 compared to BSA/AML.Second Quarter 2018
Other expense decreased $30The provision for income taxes was $234 million primarily duefor the second quarter of 2019, compared to the estimated return on defined benefit pension plan assets, which was $39$202 million better thanfor the earlier period.quarter. This produced an effective tax rate for the second quarter of 2019 of 20.9%, compared to 19.7% for the earlier quarter.
Six Months of 2019 compared to Six Months of 2018
The provision for income taxes was $411 million for the six months ended June 30, 2019, compared to $388 million for 2018. This produced an effective tax rate for the six months ended June 30, 2019 of 19.6%, compared to 19.4% for 2018.
Segment Results
See Note 16.18. Operating Segments herein and Note 19. Operating Segments in BB&T's Annual Report on Form 10-K for the year ended December 31, 2017,2018, for additional disclosures related to BB&T's reportable business segments. Fluctuations in noninterest income and noninterest expense incurred directly by the segments are more fully discussed in the "Noninterest Income"Noninterest Income and "Noninterest Expense"Noninterest Expense sections above.
| | | Table 2 | |
| Net Income by Reportable Segment | |
| | | | | | |
| Table 5: Net Income by Reportable Segment | | Table 5: Net Income by Reportable Segment |
| | | Three Months Ended June 30, | | Six Months Ended June 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
| (Dollars in millions) | | 2018 | | 2017 | | 2018 | | 2017 | 2019 | | 2018 | | % Change | | 2019 | | 2018 | | % Change |
| Community Banking Retail and Consumer Finance | | $ | 377 |
| | $ | 279 |
| | $ | 701 |
| | $ | 533 |
| $ | 445 |
| | $ | 383 |
| | 16.2 | % | | $ | 824 |
| | $ | 717 |
| | 14.9 | % |
| Community Banking Commercial | | 277 |
| | 177 |
| | 547 |
| | 372 |
| 319 |
| | 278 |
| | 14.7 |
| | 647 |
| | 549 |
| | 17.9 |
|
| Financial Services and Commercial Finance | | 145 |
| | 134 |
| | 289 |
| | 243 |
| 169 |
| | 145 |
| | 16.6 |
| | 325 |
| | 289 |
| | 12.5 |
|
| Insurance Holdings and Premium Finance | | 73 |
| | 60 |
| | 135 |
| | 110 |
| |
| Insurance Holdings | | 111 |
| | 73 |
| | 52.1 |
| | 199 |
| | 135 |
| | 47.4 |
|
| Other, Treasury & Corporate | | (50 | ) | | 24 |
| | (59 | ) | | (158 | ) | (159 | ) | | (57 | ) | | 178.9 |
| | (312 | ) | | (77 | ) | | NM |
|
| BB&T Corporation | | $ | 822 |
| | $ | 674 |
| | $ | 1,613 |
| | $ | 1,100 |
| $ | 885 |
| | $ | 822 |
| | 7.7 |
| | $ | 1,683 |
| | $ | 1,613 |
| | 4.3 |
|
Second Quarter 20182019 compared to Second Quarter 20172018
Community Banking Retail and Consumer Finance
CB-Retail serves retail clients by offering a variety of loan and deposit products, payment services, bankcard products and other financial services by connecting clients to a wide range of financial products and services. CB-Retail includes Dealer Retail Services, which originates loans on an indirect basis to consumers for the purchase of automobiles, boats and recreational vehicles. Additionally, CB-Retail includes specialty finance lending, small equipment leasing and other products for consumers. CB-Retail also includes Residential Mortgage Banking, which originates and purchases mortgage loans to either hold for investment or sell to third parties. BB&T generally retains the servicing rights to loans sold. Mortgage products include fixed and adjustable-rate government guaranteed and conventional loans used for the purpose of constructing, purchasing or refinancing residential properties. Substantially all of the properties are owner-occupied. Residential Mortgage Banking also includes Mortgage Warehouse Lending, which provides short-term lending solutions to finance first-lien residential mortgages held-for-sale by independent mortgage companies.
CB-Retail net income was $377$445 million for the second quarter of 2018,2019, an increase of $98$62 million compared to the earlier quarter. Segment net interest income increased $31$54 million primarily due to average loan growth and higher funding spreads on deposits, partially offset by lower credit spreads on loans. Noninterest income increased $32 million primarily due to an increase in mortgage banking income resulting from net residential mortgage servicing rights valuation adjustments. The allocated provision for credit losses decreased slightlyincreased $13 million primarily due to a decline inhigher net charge-offs primarily driven by the sale of mortgage TDRs in the earlier period,current quarter due to portfolio growth, partially offset by accelerating loan growth in the current quarter.reserve rate changes at Regional Acceptance Corporation. Noninterest expense decreased primarily due to declines inlower personnel expense, loan-related expense, and occupancy and equipment expense. The provision for income taxes decreased $43 million due to the lower federal tax rate compared to the earlier quarter.
CB-Retail average loans and leases held for investment decreased $1.4increased $4.4 billion, or 2.2%7.0%, compared to the earlier quarter,quarter. The increase was primarily driven by a declineincreases in sales financeaverage residential mortgage loans due to the strategic decision to optimize the size of the portfolio$2.8 billion, or 9.6%, and direct investments towards higher-yielding assets.increases in average indirect lending of $1.1 billion.
CB-Retail average total deposits decreased $96increased $117 million, or 0.1%, compared to the earlier quarter. Average noninterest-bearing deposits increased $1.3 billion whileThe increase was primarily driven by growth in average time deposits, interest checking, and money market and savings fell $636of $926 million, $478or 2.6%, and average noninterest-bearing deposits of $390 million, and $290 million, respectively.or 2.3%, partially offset by a decline in interest checking of $1.3 billion, or 8.2%.
Community Banking Commercial
CB-Commercial serves large, medium and small business clients by offering a variety of loan and deposit products and by connecting clients to the combined organization’sorganization's broad array of financial services. CB-Commercial includes CRE lending, commercial and industrial lending, corporate banking, asset-based lending, dealer inventory financing, tax exempttax-exempt financing, cash management and treasury services, and commercial deposit products.
CB-Commercial net income was $277$319 million for the second quarter of 2018,2019, an increase of $100$41 million compared to the earlier quarter. Segment net interest income increased $20$43 million primarily driven by higher funding spreads, and average loan growth, partially offset by lower credit spreads on loans. Noninterest expense decreased $66 million driven primarily by a decline in personnel expense due to a change in approach for allocating capitalized loan origination costs that was implemented in the third quarter of 2017, as well as lower allocated corporate expenses. The provision for income taxes decreasedincreased compared to the earlier quarter primarily due to higher referral fees in the current quarter. The allocated provision for credit losses decreased primarily due to the lower federal tax rate.impact of average loan growth in the earlier quarter and reserve rate changes primarily due to overall credit improvement in the past year, partially offset by higher net charge-offs. Noninterest expense was essentially flat compared to the earlier quarter.
CB-Commercial average loans and leases held for investment increased $994decreased $222 million, or 1.9%0.4%, compared to the earlier quarter, driven primarilyquarter. Average commercial real estate loans declined $741 million, or 3.8%, partially offset by an increaseincreases in average commercial real estate loans.
CB-Commercial averageand industrial loans of $572 million, or 1.8%. Average total deposits decreased $307increased $324 million, or 0.5%, compared to the earlier quarter. Noninterest-bearing deposits increased $480quarter driven by an increase in average money market and savings of $837 million, while averageor 5.5%, and interest checking and timeof $797 million, or 9.3%, partially offset by a decline in noninterest-bearing deposits declined $725 million and $153 million, respectively.of $1.4 billion, or 4.2%.
Financial Services and Commercial Finance
FS&CF provides personal trust administration, estate planning, investment counseling, wealth management, asset management, corporate retirement services, capital markets and corporate banking services, specialty finance and corporate trust services to individuals, corporations, institutions, foundations and government entities. In addition, the segment includes BB&T Securities, a full-service brokerage and investment banking firm, which offers clients a variety of investment services, including discount brokerage services, equities, annuities, mutual funds and government bonds. The Corporate Banking Division originates and services large corporate relationships, syndicated lending relationships and client derivatives while the specialty finance products offered by FS&CF include equipment finance, tax-exempt financing for local governments and special-purpose entities, and full-service commercial mortgage banking lending.
FS&CF net income was $145$169 million for the second quarter of 2018,2019, an increase of $11$24 million compared to the earlier quarter. Segment net interest income increased $22 million primarily driven by average loan growth and higher funding spreads, partially offset by lower credit spreads on loans. Noninterest income increased slightly$26 million primarily due to higher commercial mortgagean increase in investment banking income.and brokerage fees and commissions related to several large deals in the current quarter as well as market driven asset growth. The allocated provision for credit losses increased due to higher incurred loss estimates and an increase in net charge-offs. Noninterest expense increased$18 million primarily due to higher personnel expense. The provision for income taxes decreased $25 million duethe release of specific reserves in the earlier quarter. Noninterest expense was essentially flat compared to the lower federal tax rate.earlier quarter.
FS&CF average loans and leases held for investment increased $1.9$2.4 billion, or 7.5%8.9%, compared to the earlier quarter. The increase was primarily driven by growth in Corporate Banking's averageBanking loans of $2.0 billion, or 13.3%, and leases held for investment increased $698Equipment Finance of $532 million, or 4.7%19.0%, partially offset by a decline for Governmental Finance of $384 million, or 7.4%.
FS&CF average total deposits increased $106 million, or 0.4%, compared to the earlier quarter while BB&T Wealth's average loans and leases held for investment increased $240 million, or 14.5%. Average loans and leases held for investment at Governmental Finance increased $417 million, or 8.8%, compared to the earlier quarter and increased 12.5% and 15.0%, respectively, for Equipment Finance and Grandbridge.
FS&CFprimarily driven by growth in average total deposits decreased $3.1 billion, or 10.0%, compared to the earlier quarter. Average money marketfor Wealth and savings accounts fell $2.2 billion, or 10.4%, and average interest checking declined $745Retirement Services of $268 million, or 12.3%1.6%.
Insurance Holdings and Premium Finance
BB&T's insurance agency / brokerage network is the fifthsixth largest in the world. IH&PF provides property and casualty, employee benefits and life insurance to businesses and individuals. It also provides small business and corporate services, such as workers compensation and professional liability, as well as surety coverage and title insurance. In addition, IH&PF includes commercial and retail insurance premium finance.
IH&PF net income was $73$111 million for the second quarter of 2018,2019, an increase of $13$38 million compared to the earlier quarter. Noninterest income increased $86 million, primarily due to higher production and noninterestthe acquisition of Regions Insurance, which contributed $32 million. Noninterest expense were essentially flat compared to the earlier quarter. The provision for income taxes decreased compared to the earlier quarterincreased $36 million primarily due to the lower federal tax rate.acquisition of Regions Insurance and commissions on higher production.
Other, Treasury & Corporate
Net income in OT&C can vary due to the changing needs of the Corporation, including the size of the investment portfolio, the need for wholesale funding and income received from derivatives used to hedge the balance sheet.
OT&C generated a net loss of $50$159 million in the second quarter of 2018,2019, compared to a net incomeloss of $24$57 million in the earlier quarter. Segment net interest income decreased $36$89 million primarily due to an increase in the ratenet credit for funds provided to other operating segments, and average balances foran increase in the rates on long-term debt. Noninterest expense increased $47income decreased $18 million primarily due to an increaselower hedge and client derivative income and income related to assets for certain post-employment benefits. The benefit for income taxes increased $13 million primarily due to a higher pre-tax loss, partially offset by a higher tax benefit from discrete items in personnel expense resulting from a third quarter of 2017 change in approach for allocating capitalized loan origination costs.the earlier quarter.
Six Months of 20182019 compared to Six Months of 20172018
Community Banking Retail and Consumer Finance
CB-Retail net income was $701$824 million for the six months ended June 30, 2018,2019, an increase of $168$107 million, or 14.9%, compared to the same period of the prior year. Segment net interest income increased $41$121 million primarily due to higher funding spreads on deposits, partially offset by lower credit spreads on loans. Noninterest income increased slightly primarily due to higher bankcard fees and merchant discounts. The allocated provision for credit losses decreased primarily due to a decline in net charge-offs and a decrease in incurred loss estimates, partially offset by accelerating loan growth in the current period. Noninterest expense decreased primarily due to declines in personnel expense, loan-related expense, and occupancy and equipment expense, partially offset by an increase in allocated corporate expenses. The provision for income taxes decreased $88 million due to the lower federal tax rate compared to the earlier period.
CB-Retail average loans and leases held for investment decreased $1.8 billion, or 2.8%, compared to the earlier period, primarily driven by a decline in sales finance loans due to the strategic decision to optimize the size of the portfolio and direct investments towards higher-yielding assets.
CB-Retail average total deposits decreased $243 million, or 0.3%, compared to the earlier period. Average noninterest-bearing deposits increased $1.4 billion while average time deposits and interest checking fell $1.0 billion and $472 million, respectively.
Community Banking Commercial
CB-Commercial net income was $547 million for the six months ended June 30, 2018, an increase of $175 million compared to the same period of the prior year. Segment net interest income increased $47 million driven primarily by higher funding spreads and average loan growth, partially offset by lower credit spreads on loans. The allocated provision for credit losses increased $29 million primarily due to an increase in incurred loss estimates. Noninterest expense decreased $119 million driven primarily by a decline in personnel expense due to a third quarter of 2017 change in approach for allocating capitalized loan origination costs, as well as lower allocated corporate expenses. The provision for income taxes decreased $36 million compared to the earlier period due to the lower tax rate.
CB-Commercial average loans and leases held for investment increased $1.1 billion, or 2.1%, compared to the earlier period, driven primarily by an increase in average commercial real estate loans.
CB-Commercial average total deposits decreased $238 million, or 0.4%, compared to the earlier period. Noninterest-bearing deposits increased $744 million while average interest checking and time deposits declined $758 million and $158 million, respectively.
Financial Services and Commercial Finance
FS&CF net income was $289 million for the six months ended June 30, 2018, an increase of $46 million compared to the same period of the prior year. Segment net interest income increased due to higher funding spreads and average loan growth, partially offset by lower credit spreads on loans and a decline in average total deposits.loans. Noninterest income increased $27primarily due to an increase in checkcard fees, bankcard fees and merchant discounts, and service charges on deposits. The allocated provision for credit losses increased $21 million primarily due to higher investment banking and brokerage fees and commissions, primarily driven by higher managed account fees.net charge-offs. Noninterest expense increased $26decreased $20 million primarily due to higher performance-based incentivedeclines in personnel expense and net occupancy expense. The provision for income taxes decreased $35 million due to the lower tax rate.
FS&CFCB-Retail average loans and leases held for investmentHFI increased $2.1$3.7 billion, or 8.5%5.9%, compared to the earlier period. Corporate Banking'sAverage residential mortgage loans increased $2.7 billion, or 9.2%, and average indirect retail loans and leases held for investment increased $793$758 million, or 5.4%4.5%, compared to the earlier period, while BB&T Wealth'sand average loans and leases held for investmentrevolving credit increased $255$317 million, or 15.8%11.3%. Average loans and leases held for investment at Governmental Finance increased $507 million, or 10.8%, compared to the earlier period and increased 13.5% and 14.5%, respectively, for Equipment Finance and Grandbridge.
FS&CFCB-Retail average total deposits decreased $3.4 billion,increased $142 million, or 10.7%0.2%, compared to the earlier period. Average money market and savings accounts fell $2.4 billion,increased $817 million, or 11.3%2.3%, and average noninterest-bearing deposits increased $425 million, or 2.6%, while average interest checking declined $845 million,decreased $1.2 billion, or 13.9%7.4%.
Community Banking Commercial
Insurance Holdings and Premium Finance
IH&PFCB-Commercial net income was $135$647 million for the six months ended June 30, 2018,2019, an increase of $25$98 million, or 17.9%, compared to the same period of the prior year. Segment net interest income increased $89 million driven primarily by higher funding spreads. The allocated provision for credit losses decreased $22 million primarily due to a decrease in incurred loss estimates and loan growth, partially offset by an increase in net charge-offs.
CB-Commercial average loans and leases HFI were essentially flat compared with the earlier period. Average commercial and industrial loans increased $777 million, or 2.4%, while average commercial real estate loans decreased $666 million, or 3.4%.
CB-Commercial average total deposits decreased $165 million, or 0.3%, compared to the earlier period. Average noninterest-bearing deposits declined $1.4 billion, or 4.0%, while average money market and savings increased $658 million, or 4.4%, and average interest checking increased $405 million, or 4.6%.
Financial Services and Commercial Finance
FS&CF net income was $325 million for the six months ended June 30, 2019, an increase of $36 million, or 12.5%, compared to the same period of the prior year. Segment net interest income increased $55 million due to higher average loan growth and funding spreads. Noninterest income increased primarily due to higher revenue from managed account fees, investment commissions, and investment banking transactions, and client derivatives due to higher sales volumes, partially offset by declines in commercial mortgage banking income primarily due to lower sales volume. The allocated provision for credit losses increased $24 million primarily due the release of specific reserves and reserve rate changes driven by overall credit improvement in the earlier period. Noninterest expense decreased primarily due to lower allocated corporate expenses, partially offset by higher personnel expense.
FS&CF average loans and leases HFI increased $2.3 billion, or 8.3%, compared to the earlier period. Average loans and leases HFI for Corporate Banking and Equipment Finance increased $1.9 billion, or 12.5%, and $407 million, or 14.6%, respectively. FS&CF average total deposits increased $389 million, or 1.4%, compared to the earlier period primarily driven by growth in average total deposits for Wealth and Retirement Services of $363 million, or 2.2%.
Client invested assets totaled $170.4 billion as of June 30, 2019, an increase of $6.3 billion, or 3.9%, compared to the earlier period.
Insurance Holdings
IH net income was $199 million for the six months ended June 30, 2019, an increase of $64 million, or 47.4%, compared to the same period of the prior year. Noninterest income decreased $25increased $162 million due to the acquisition of Regions Insurance, which contributed $78 million, and organic growth. Noninterest expense increased $78 million primarily due to lower performance-based commissions. Noninterest expense decreased $25 million primarily due to declines in business referral expensethe acquisition of Regions Insurance and allocated corporate expenses. The provision for income taxes decreased $20 million compared to the earlier period due to the lower federal tax rate.commissions on higher production.
Other, Treasury & Corporate
OT&C generated a net loss of $59$312 million for the six months ended June 30, 2018,2019, compared to a net loss of $158$77 million for the same period of the prior year.earlier period. Segment net interest income decreased $57$175 million primarily due to an increase in the rate and average balancesnet credit for funds provided to other operating segments, an increased net cost for long-term debt.debt and short-term borrowings, and a decline in volume for securities and short-term borrowings. Noninterest income decreased $40 million primarily due lower hedge and client derivative income and income related to assets for certain post-employment benefits. The allocated provision for credit losses decreasedincreased $15 million primarily due to a declinean increase in the provision for unfunded lending commitments. Noninterest expense decreased $305increased $61 million due to a $392 million loss on the early extinguishment of debtmerger-related charges in the earlier period. This decrease wascurrent period, as well as higher personnel expense resulting from capitalized employee costs allocated to the segments in the current quarter, which were partially offset by an increase in personnel expense due to a third quarter of 2017 change in approach for allocating capitalized loan origination costs, as well as a decline in corporate expenses allocated to other operating segments.lower regulatory charges. The benefit for income taxes decreased $159increased $56 million primarily due to a declinean increase in pre-tax loss, andpartially offset by a lower excess tax benefitsbenefit from equity-based compensation.discrete items compared to the earlier period.
Analysis of Financial Condition
Investment Activities
The total securities portfolio was $45.7totaled $45.3 billion at June 30, 2018,2019, compared to $47.6$45.6 billion at December 31, 2017. 2018.
As of June 30, 2018,2019, approximately 6.4% of the securities portfolio included $23.9 billionwas variable rate, compared to 6.5% as of AFS securities (at fair value) and $21.7 billion of HTM securities (at amortized cost).
December 31, 2018. The effective duration of the securities portfolio was 5.23.3 years at June 30, 2018,2019, compared to 4.74.8 years at December 31, 2017.2018. The duration of the securities portfolio excludes certain non-agency MBS.
U.S. Treasury, GSE and Agency MBS represented 97.8% of the total securities portfolio as of June 30, 2019, compared to 97.3% as of prior year end.
Lending Activities
Loans HFI totaled $146.2$152.6 billion at June 30, 2018,2019, compared to $143.7$149.0 billion at December 31, 2017. This increase was primarily related to commercial and industrial loans and residential mortgage loans.2018. Management continuously evaluates the composition of the loan portfolio taking into consideration the current and expected market conditions, interest rate environment and risk profiles to optimize profitability. Based upon this evaluation, management may decide to focus efforts on growing or decreasing exposures in certain portfolios through both organic changes and portfolio acquisitions or sales.
The following table presents During the composition of average loans and leases:
|
| | | | | | | | | | | | | | | | | | | | |
| Table 3 |
| Quarterly Average Balances of Loans and Leases |
| | | |
| For the Three Months Ended | | |
| (Dollars in millions) | | 6/30/2018 | | 3/31/2018 | | 12/31/2017 | | 9/30/2017 | | 6/30/2017 |
| Commercial: | | | | | | | | | | |
| Commercial and industrial | | $ | 59,548 |
| | $ | 58,627 |
| | $ | 58,478 |
| | $ | 58,211 |
| | $ | 58,150 |
|
| CRE | | 21,546 |
| | 21,398 |
| | 20,998 |
| | 20,776 |
| | 20,304 |
|
| Lease financing | | 1,862 |
| | 1,872 |
| | 1,851 |
| | 1,732 |
| | 1,664 |
|
| Retail: | | | | | | | | | | |
| Residential mortgage | | 29,272 |
| | 28,824 |
| | 28,559 |
| | 28,924 |
| | 29,392 |
|
| Direct | | 11,680 |
| | 11,791 |
| | 11,901 |
| | 11,960 |
| | 12,000 |
|
| Indirect | | 16,804 |
| | 16,914 |
| | 17,426 |
| | 17,678 |
| | 18,127 |
|
| Revolving credit | | 2,831 |
| | 2,798 |
| | 2,759 |
| | 2,668 |
| | 2,612 |
|
| PCI | | 559 |
| | 631 |
| | 689 |
| | 742 |
| | 825 |
|
| Total average loans and leases HFI | | $ | 144,102 |
| | $ | 142,855 |
| | $ | 142,661 |
| | $ | 142,691 |
| | $ | 143,074 |
|
Average loans held for investment for the secondthird quarter of 2018 were $144.1 billion, up $1.2 billion, or 3.5% annualized compared to the first quarter of 2018.
Average commercial and industrial loans increased $921 million driven by strong growth in mortgage warehouse lending of $389 million following2019, a seasonal decline in the first quarter. Community Banking Commercial segment average loans increased $260 million across most of the footprint. Also contributing to the growth in commercial and industrial loans was higher dealer floor plan and premium finance of $64 million and $60 million, respectively. Average CRE loans increased $148 million primarily due to an increase in construction lending and Grandbridge. Average residential mortgage loans increased $448 million primarily dueloan portfolio totaling approximately $4 billion is expected to the retention of a portion of the conforming mortgage production.be sold.
Average direct retail loans decreased $111 million, however, direct retail loans as of June 30, 2018, were relatively flat compared to the balance at the end of the first quarter as loan demand in this category improved late in the second quarter.
Average indirect retail loans decreased $110 million. While overall this category decreased, there was strong seasonal growth in power sports and recreational lending, which was more than offset by declines in automobile loans. Indirect loans as of June 30, 2018, were $17.1 billion, up 11.1% annualized compared to the end of the first quarter, reflecting strong growth late in the second quarter.
Asset Quality
The following tables summarize asset quality information for the past five quarters:
|
| | | | | | | | | | | | | | | | | | | | |
| Table 4 |
| Asset Quality |
| | | |
| (Dollars in millions) | 6/30/2018 | | 3/31/2018 | | 12/31/2017 | | 9/30/2017 | | 6/30/2017 |
| NPAs (1) | | | | | | | | | |
| NPLs: | | | | | | | | | |
| Commercial and industrial | $ | 243 |
| | $ | 257 |
| | $ | 259 |
| | $ | 288 |
| | $ | 300 |
|
| CRE | 61 |
| | 67 |
| | 45 |
| | 41 |
| | 50 |
|
| Lease financing | 9 |
| | 13 |
| | 1 |
| | 2 |
| | 3 |
|
| Residential mortgage | 119 |
| | 127 |
| | 129 |
| | 141 |
| | 131 |
|
| Direct | 58 |
| | 64 |
| | 64 |
| | 64 |
| | 65 |
|
| Indirect | 68 |
| | 74 |
| | 72 |
| | 70 |
| | 63 |
|
| Total NPLs HFI (1)(2) | 558 |
| | 602 |
| | 570 |
| | 606 |
| | 612 |
|
| Foreclosed real estate | 43 |
| | 40 |
| | 32 |
| | 46 |
| | 48 |
|
| Other foreclosed property | 23 |
| | 27 |
| | 25 |
| | 28 |
| | 30 |
|
| Total nonperforming assets (1)(2) | $ | 624 |
| | $ | 669 |
| | $ | 627 |
| | $ | 680 |
| | $ | 690 |
|
| | | | | | | | | | | |
| Performing TDRs (3): | | | | | | | | | |
| Commercial and industrial | $ | 44 |
| | $ | 38 |
| | $ | 50 |
| | $ | 62 |
| | $ | 50 |
|
| CRE | 11 |
| | 12 |
| | 16 |
| | 22 |
| | 24 |
|
| Residential mortgage | 647 |
| | 627 |
| | 605 |
| | 609 |
| | 603 |
|
| Direct | 58 |
| | 59 |
| | 62 |
| | 63 |
| | 63 |
|
| Indirect | 284 |
| | 277 |
| | 281 |
| | 267 |
| | 244 |
|
| Revolving credit | 29 |
| | 29 |
| | 29 |
| | 29 |
| | 29 |
|
| Total performing TDRs (3)(4) | $ | 1,073 |
| | $ | 1,042 |
| | $ | 1,043 |
| | $ | 1,052 |
| | $ | 1,013 |
|
| | | | | | | | | | | |
| Loans 90 days or more past due and still accruing: | | | | | | | | | |
| Commercial and industrial | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
|
| CRE | — |
| | — |
| | 1 |
| | — |
| | — |
|
| Residential mortgage (5) | 374 |
| | 420 |
| | 465 |
| | 409 |
| | 401 |
|
| Direct | 4 |
| | 6 |
| | 6 |
| | 9 |
| | 7 |
|
| Indirect | 4 |
| | 5 |
| | 6 |
| | 6 |
| | 4 |
|
| Revolving credit | 10 |
| | 11 |
| | 12 |
| | 11 |
| | 10 |
|
| PCI | 43 |
| | 48 |
| | 57 |
| | 70 |
| | 71 |
|
| Total loans 90 days or more past due and still accruing (5) | $ | 435 |
| | $ | 490 |
| | $ | 548 |
| | $ | 505 |
| | $ | 493 |
|
| | | | | | | | | | | |
| Loans 30-89 days past due: | | | | | | | | | |
| Commercial and industrial | $ | 26 |
| | $ | 31 |
| | $ | 41 |
| | $ | 47 |
| | $ | 32 |
|
| CRE | 4 |
| | 10 |
| | 8 |
| | 8 |
| | 3 |
|
| Lease financing | 2 |
| | 1 |
| | 4 |
| | 1 |
| | 2 |
|
| Residential mortgage (6) | 441 |
| | 400 |
| | 472 |
| | 455 |
| | 393 |
|
| Direct | 52 |
| | 55 |
| | 65 |
| | 55 |
| | 54 |
|
| Indirect | 337 |
| | 272 |
| | 412 |
| | 358 |
| | 341 |
|
| Revolving credit | 21 |
| | 21 |
| | 23 |
| | 22 |
| | 20 |
|
| PCI | 22 |
| | 24 |
| | 27 |
| | 41 |
| | 29 |
|
| Total loans 30-89 days past due (6) | $ | 905 |
| | $ | 814 |
| | $ | 1,052 |
| | $ | 987 |
| | $ | 874 |
|
Excludes loans held for sale.
| |
(1) | PCI loans are accounted for using the accretion method.
|
| |
(2) | Sales of nonperforming loans totaled $12 million, $33 million, $44 million, $19 million and $75 million for the quarter ended June 30, 2018, March 31, 2018, December 31, 2017, September 30, 2017 and June 30, 2017, respectively.
|
| |
(3) | Excludes TDRs that are nonperforming totaling $191 million, $196 million, $189 million, $203 million and $214 million at June 30, 2018, March 31, 2018, December 31, 2017, September 30, 2017 and June 30, 2017, respectively. These amounts are included in total nonperforming assets.
|
| |
(4) | Sales of performing TDRs, which were primarily residential mortgage loans, totaled $17 million, $29 million, $44 million, $49 million and $203 million for the quarter ended June 30, 2018, March 31, 2018, December 31, 2017, September 30, 2017 and June 30, 2017, respectively.
|
| |
(5) | Includes government guaranteed GNMA mortgage loans that BB&T has the right but not the obligation to repurchase that are past due 90 days or more totaling $27 million, $23 million, $66 million, $45 million and $32 million at June 30, 2018, March 31, 2018, December 31, 2017, September 30, 2017 and June 30, 2017, respectively.
|
| |
(6) | Includes government guaranteed GNMA mortgage loans that BB&T has the right but not the obligation to repurchase that are past due 30-89 days totaling $1 million, $1 million, $2 million, $2 million and $2 million at June 30, 2018, March 31, 2018, December 31, 2017, September 30, 2017 and June 30, 2017, respectively.
|
|
| | | | | | | | | | | | | | | |
| Table 5 |
| Asset Quality Ratios |
| | | |
| As of / For the Three Months Ended | | 6/30/2018 | | 3/31/2018 | | 12/31/2017 | | 9/30/2017 | | 6/30/2017 |
| Asset Quality Ratios: | | | | | | | | | | |
| NPLs as a percentage of loans and leases HFI | | 0.38 | % | | 0.42 | % | | 0.40 | % | | 0.42 | % | | 0.43 | % |
| NPAs as a percentage of: | | | | | | | | | | |
| Total assets | | 0.28 |
| | 0.30 |
| | 0.28 |
| | 0.31 |
| | 0.31 |
|
| Loans and leases HFI plus foreclosed property | | 0.43 |
| | 0.47 |
| | 0.44 |
| | 0.48 |
| | 0.48 |
|
| Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI | | 0.30 |
| | 0.34 |
| | 0.38 |
| | 0.35 |
| | 0.34 |
|
| Loans 30-89 days past due and still accruing as a percentage of loans and leases HFI | | 0.62 |
| | 0.57 |
| | 0.73 |
| | 0.69 |
| | 0.61 |
|
| Net charge-offs as a percentage of average loans and leases HFI | | 0.30 |
| | 0.41 |
| | 0.36 |
| | 0.35 |
| | 0.37 |
|
| ALLL as a percentage of loans and leases HFI | | 1.05 |
| | 1.05 |
| | 1.04 |
| | 1.04 |
| | 1.03 |
|
| Ratio of ALLL to: | | | | | | | | | | |
| Net charge-offs | | 3.49x |
| | 2.55x |
| | 2.89x |
| | 2.93x |
| | 2.80x |
|
| NPLs | | 2.74x |
| | 2.49x |
| | 2.62x |
| | 2.44x |
| | 2.43x |
|
| | | | | | | | | | | |
| Asset Quality Ratios (Excluding Government Guaranteed and PCI): (1) |
| Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI | | 0.04 | % | | 0.04 | % | | 0.05 | % | | 0.05 | % | | 0.05 | % |
Applicable ratios are annualized. | |
(1) | This asset quality ratio has been adjusted to remove the impact of government guaranteed mortgage loans and PCI. Appropriate adjustments to the numerator and denominator have been reflected in the calculation of these ratios. Management believes the inclusion of such assets in this asset quality ratio results in distortion of this ratio such that it might not be reflective of asset collectibility or might not be comparable to other periods presented or to other portfolios that do not have government guarantees or were not impacted by purchase accounting. |
Nonperforming assets totaled $624 million at June 30, 2018, down $45 million compared to March 31, 2018. Nonperforming loans and leases represented 0.38% of loans and leases held for investment, a four basis point decrease compared to March 31, 2018. The decrease in nonperforming assets was across all major loan categories.
The following table presents activity related to NPAs:
|
| | | | | | | | |
| Table 6 |
| Rollforward of NPAs |
| | | |
| Six Months Ended June 30, | | |
| (Dollars in millions) | | 2018 | | 2017 |
| Balance, January 1 | | $ | 627 |
| | $ | 813 |
|
| New NPAs | | 616 |
| | 657 |
|
| Advances and principal increases | | 226 |
| | 141 |
|
| Disposals of foreclosed assets (1) | | (222 | ) | | (258 | ) |
| Disposals of NPLs (2) | | (45 | ) | | (149 | ) |
| Charge-offs and losses | | (124 | ) | | (131 | ) |
| Payments | | (366 | ) | | (289 | ) |
| Transfers to performing status | | (87 | ) | | (91 | ) |
| Other, net | | (1 | ) | | (3 | ) |
| Ending balance, June 30 | | $ | 624 |
| | $ | 690 |
|
| |
(1) | Includes charge-offs and losses recorded upon sale of $105 million and $115 million for the six months ended June 30, 2018 and 2017, respectively. |
| |
(2) | Includes charge-offs and losses recorded upon sale of $11 million and $17 million for the six months ended June 30, 2018 and 2017, respectively. |
Loans 30-89 days past due and still accruing totaled $905 million at June 30, 2018, up $91 million compared to the prior quarter. The increase was primarily due to residential mortgage and expected seasonality in indirect lending.
Loans 90 days or more past due and still accruing totaled $435 million at June 30, 2018, down $55 million compared to the prior quarter, primarily due to a decrease in residential mortgage loans. The ratio of loans 90 days or more past due and still accruing as a percentage of loans and leases was 0.30% at June 30, 2018, compared to 0.34% for the prior quarter. Excluding government guaranteed and PCI loans, the ratio of loans 90 days or more past due and still accruing as a percentage of loans and leases was 0.04% at June 30, 2018, unchanged from the prior quarter.
Problem loans include NPLs and loans that are 90 days or more past due and still accruing as disclosed in Table 4. In addition, for the commercial portfolio segment, loans that are rated special mention or substandard performing are closely monitored by management as potential problem loans. Refer to Note 3. Loans and ACL herein for additional disclosures related to these potential problem loans.
Certain residential mortgage loans have an initial period where the borrower is only required to pay the periodic interest. After the interest-only period, the loan will require the payment of both interest and principal over the remaining term. The outstanding balances of variable rate residential mortgage loans in the interest-only phase were approximately $57 million and $64 million at June 30, 2019 and December 31, 2018, respectively. At June 30, 2018,2019, approximately $614 million of the outstanding balances of residential mortgage loans were in the interest-only phase. Approximately 96.2%100.0% of the interest-only balances will begin amortizing within the next three years.years compared to 95.9% at December 31, 2018.
The direct retail portfolio includes variable rate home equity lines and other lines of credit whose rate typically reset on a monthly basis. Home equity lines which are a component of the direct retail portfolio, generally require interest-only payments during the first 15 years after origination. After this initial period, the outstanding balance begins amortizing and requires the payment of both interest and principal. AtThe following table presents additional information over variable rate lines of credit:
|
| | | | | | | | | | | | | | | |
| Table 6: Variable Rate Lines of Credit | | | | | | | |
| | Home Equity Lines | | Other Lines of Credit |
| (Dollars in millions) | Jun 30, 2019 | | Dec 31, 2018 | | Jun 30, 2019 | | Dec 31, 2018 |
| Total variable rate lines | $ | 6,831 |
| | $ | 7,201 |
| | $ | 1,092 |
| | $ | 1,067 |
|
| Amount in interest-only phase | 5,487 |
| | 5,730 |
| | 985 |
| | 949 |
|
| Percent in interest-only phase that will begin amortizing within 3 years | 10.7 | % | | 10.3 | % | | 13.0 | % | | 15.9 | % |
The following table presents the most recent composition of average loans and leases:
|
| | | | | | | | | | | | | | | | | | | | |
| Table 7: Composition of Average Loans and Leases |
For the Three Months Ended (Dollars in millions) | | Jun 30, 2019 | | Mar 31, 2019 | | Dec 31, 2018 | | Sep 30, 2018 | | Jun 30, 2018 |
| Commercial: | | | | | | | | | | |
| Commercial and industrial | | $ | 62,563 |
| | $ | 61,370 |
| | $ | 60,553 |
| | $ | 59,900 |
| | $ | 59,548 |
|
| CRE | | 20,748 |
| | 20,905 |
| | 21,301 |
| | 21,496 |
| | 21,546 |
|
| Lease financing | | 2,122 |
| | 2,021 |
| | 1,990 |
| | 1,941 |
| | 1,862 |
|
| Retail: | | | | | | | | | | |
| Residential mortgage | | 32,066 |
| | 31,370 |
| | 31,103 |
| | 30,500 |
| | 29,272 |
|
| Direct | | 11,506 |
| | 11,493 |
| | 11,600 |
| | 11,613 |
| | 11,680 |
|
| Indirect | | 17,879 |
| | 17,337 |
| | 17,436 |
| | 17,282 |
| | 16,804 |
|
| Revolving credit | | 3,151 |
| | 3,110 |
| | 3,070 |
| | 2,947 |
| | 2,831 |
|
| PCI | | 432 |
| | 455 |
| | 486 |
| | 518 |
| | 559 |
|
| Total average loans and leases HFI | | $ | 150,467 |
| | $ | 148,061 |
| | $ | 147,539 |
| | $ | 146,197 |
| | $ | 144,102 |
|
Average loans held for investment for the second quarter of 2019 were $150.5 billion, up $2.4 billion or 6.5% annualized, compared to the first quarter of 2019.
Average commercial and industrial loans increased $1.2 billion driven by strong growth in mortgage warehouse lending, corporate banking, equipment finance and dealer floor plan. Average CRE loans decreased $157 million, primarily due to a decrease in construction loans.
Average residential mortgage loans increased $696 million primarily due to the retention of a portion of the conforming mortgage production.
Average indirect retail loans increased $542 million. The increase was across all categories of indirect lending. Growth was led by prime automobile lending and complemented with seasonally strong growth in power sports and recreational lending.
Asset Quality
The following tables summarize asset quality information for the past five quarters:
|
| | | | | | | | | | | | | | | | | | | | |
| Table 8: Asset Quality |
| (Dollars in millions) | Jun 30, 2019 | | Mar 31, 2019 | | Dec 31, 2018 | | Sep 30, 2018 | | Jun 30, 2018 |
| NPAs: | | | | | | | | | |
| NPLs: | | | | | | | | | |
| Commercial and industrial | $ | 193 |
| | $ | 196 |
| | $ | 200 |
| | $ | 238 |
| | $ | 243 |
|
| CRE | 33 |
| | 75 |
| | 65 |
| | 46 |
| | 61 |
|
| Lease financing | 2 |
| | 1 |
| | 3 |
| | 6 |
| | 9 |
|
| Residential mortgage | 104 |
| | 121 |
| | 119 |
| | 120 |
| | 119 |
|
| Direct | 54 |
| | 53 |
| | 53 |
| | 55 |
| | 58 |
|
| Indirect | 75 |
| | 80 |
| | 82 |
| | 72 |
| | 68 |
|
| Total NPLs HFI | 461 |
| | 526 |
| | 522 |
| | 537 |
| | 558 |
|
| Foreclosed real estate | 36 |
| | 33 |
| | 35 |
| | 39 |
| | 43 |
|
| Other foreclosed property | 26 |
| | 25 |
| | 28 |
| | 25 |
| | 23 |
|
| Total nonperforming assets (1) | $ | 523 |
| | $ | 584 |
| | $ | 585 |
| | $ | 601 |
| | $ | 624 |
|
| Performing TDRs: | | | | | | | | | |
| Commercial and industrial | $ | 84 |
| | $ | 63 |
| | $ | 65 |
| | $ | 56 |
| | $ | 44 |
|
| CRE | 8 |
| | 9 |
| | 10 |
| | 12 |
| | 11 |
|
| Residential mortgage | 581 |
| | 669 |
| | 656 |
| | 643 |
| | 647 |
|
| Direct | 53 |
| | 54 |
| | 55 |
| | 56 |
| | 58 |
|
| Indirect | 315 |
| | 306 |
| | 305 |
| | 295 |
| | 284 |
|
| Revolving credit | 29 |
| | 29 |
| | 28 |
| | 28 |
| | 29 |
|
| Total performing TDRs (2)(3) | $ | 1,070 |
| | $ | 1,130 |
| | $ | 1,119 |
| | $ | 1,090 |
| | $ | 1,073 |
|
| Loans 90 days or more past due and still accruing: | | | | | | | | | |
| Residential mortgage | $ | 350 |
| | $ | 377 |
| | $ | 405 |
| | $ | 367 |
| | $ | 374 |
|
| Direct | 10 |
| | 7 |
| | 7 |
| | 6 |
| | 4 |
|
| Indirect | 7 |
| | 5 |
| | 6 |
| | 6 |
| | 4 |
|
| Revolving credit | 14 |
| | 14 |
| | 14 |
| | 12 |
| | 10 |
|
| PCI | 26 |
| | 28 |
| | 30 |
| | 40 |
| | 43 |
|
| Total loans 90 days or more past due and still accruing | $ | 407 |
| | $ | 431 |
| | $ | 462 |
| | $ | 431 |
| | $ | 435 |
|
| Loans 30-89 days past due: | | | | | | | | | |
| Commercial and industrial | $ | 32 |
| | $ | 36 |
| | $ | 34 |
| | $ | 35 |
| | $ | 26 |
|
| CRE | 3 |
| | 3 |
| | 5 |
| | 4 |
| | 4 |
|
| Lease financing | 5 |
| | 3 |
| | 1 |
| | 1 |
| | 2 |
|
| Residential mortgage | 480 |
| | 478 |
| | 456 |
| | 510 |
| | 441 |
|
| Direct | 58 |
| | 67 |
| | 61 |
| | 59 |
| | 52 |
|
| Indirect | 393 |
| | 316 |
| | 436 |
| | 418 |
| | 337 |
|
| Revolving credit | 28 |
| | 27 |
| | 28 |
| | 27 |
| | 21 |
|
| PCI | 17 |
| | 18 |
| | 23 |
| | 21 |
| | 22 |
|
| Total loans 30-89 days past due | $ | 1,016 |
| | $ | 948 |
| | $ | 1,044 |
| | $ | 1,075 |
| | $ | 905 |
|
Excludes loans held for sale.
| |
| (1) | Sales of nonperforming loans totaled $48 million, $30 million, $30 million, $20 million and $12 million for the quarter ended June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018 and June 30, 2018, respectively. |
| |
| (2) | Excludes TDRs that are nonperforming totaling $135 million, $178 million, $176 million, $176 million and $191 million at June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018 and June 30, 2018, respectively. These amounts are included in total nonperforming assets. |
| |
| (3) | Sales of performing TDRs, which were primarily residential mortgage loans, totaled $120 million, $33 million, $15 million, $34 million and $17 million for the quarter ended June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018 and June 30, 2018, respectively. |
Nonperforming assets totaled $523 million at June 30, 2018,2019, down $61 million compared to March 31, 2019. Nonperforming loans and leases represented 0.30% of loans and leases held for investment, down five basis points compared to March 31, 2019.
Performing TDRs were down $60 million during the direct retail lendingsecond quarter primarily in residential mortgage loans, which was partially offset by an increase in commercial and industrial loans.
Loans 90 days or more past due and still accruing totaled $407 million at June 30, 2019, down $24 million compared to the prior quarter. The ratio of loans 90 days or more past due and still accruing as a percentage of loans and leases was 0.27% at June 30, 2019, compared to 0.29% for the prior quarter. Excluding government guaranteed and PCI loans, the ratio of loans 90 days or more past due and still accruing as a percentage of loans and leases was 0.04% at June 30, 2019, unchanged from the prior quarter.
Loans 30-89 days past due and still accruing totaled $1.0 billion at June 30, 2019, up $68 million compared to the prior quarter, primarily due to an expected seasonal increase in indirect automobile lending.
Problem loans include NPLs and loans that are 90 days or more past due and still accruing as disclosed in Table 8. In addition, for the commercial portfolio includes $8.2 billion of variable rate home equity linessegment, loans that are rated special mention or substandard performing are closely monitored by management as potential problem loans. Refer to Note 4. Loans and $1.1 billion of variable rate other lines of credit. Approximately $6.4 billion of the variable rate home equity lines is currently in the interest-only phase and approximately 7.4% ofACL herein for additional disclosures related to these balances will begin amortizing within the next three years. Approximately $942 million of the outstanding balance of variable rate other lines of credit is in the interest-only phase and 13.6% of these balances will begin amortizing within the next three years. Variable rate home equity lines and other lines of credit typically reset on a monthly basis.potential problem loans.
|
| | | | | | | | | | | | | | |
| Table 9: Asset Quality Ratios |
| As of / For the Three Months Ended | Jun 30, 2019 | | Mar 31, 2019 | | Dec 31, 2018 | | Sep 30, 2018 | | Jun 30, 2018 |
| Loans 30-89 days past due and still accruing as a percentage of loans and leases HFI | 0.67 | % | | 0.64 | % | | 0.70 | % | | 0.73 | % | | 0.62 | % |
| Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI | 0.27 |
| | 0.29 |
| | 0.31 |
| | 0.29 |
| | 0.30 |
|
| NPLs as a percentage of loans and leases HFI | 0.30 |
| | 0.35 |
| | 0.35 |
| | 0.37 |
| | 0.38 |
|
| NPAs as a percentage of: | | | | | | | | | |
| Total assets | 0.23 |
| | 0.26 |
| | 0.26 |
| | 0.27 |
| | 0.28 |
|
| Loans and leases HFI plus foreclosed property | 0.34 |
| | 0.39 |
| | 0.39 |
| | 0.41 |
| | 0.43 |
|
| Net charge-offs as a percentage of average loans and leases HFI | 0.38 |
| | 0.40 |
| | 0.38 |
| | 0.35 |
| | 0.30 |
|
| ALLL as a percentage of loans and leases HFI | 1.05 |
| | 1.05 |
| | 1.05 |
| | 1.05 |
| | 1.05 |
|
| Ratio of ALLL to: | | | | | | | | | |
| Net charge-offs | 2.80x |
| | 2.62x |
| | 2.76x |
| | 3.05x |
| | 3.49x |
|
| NPLs | 3.46x |
| | 2.97x |
| | 2.99x |
| | 2.86x |
| | 2.74x |
|
| Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI (1) | 0.04 | % | | 0.04 | % | | 0.04 | % | | 0.04 | % | | 0.04 | % |
| |
| (1) | This asset quality ratio has been adjusted to remove the impact of government guaranteed mortgage loans and PCI. Management believes the inclusion of such assets in this asset quality ratio results in distortion of this ratio such that it might not be reflective of asset collectability or might not be comparable to other periods presented or to other portfolios that do not have government guarantees or were not impacted by PCI accounting requirements. |
The following table presents activity related to NPAs:
|
| | | | | | | | |
| Table 10: Rollforward of NPAs |
| (Dollars in millions) | | 2019 | | 2018 |
| Balance, January 1 | | $ | 585 |
| | $ | 627 |
|
| New NPAs | | 600 |
| | 616 |
|
| Advances and principal increases | | 107 |
| | 226 |
|
| Disposals of foreclosed assets (1) | | (235 | ) | | (222 | ) |
| Disposals of NPLs (2) | | (78 | ) | | (45 | ) |
| Charge-offs and losses | | (141 | ) | | (124 | ) |
| Payments | | (237 | ) | | (366 | ) |
| Transfers to performing status | | (78 | ) | | (87 | ) |
| Other, net | | — |
| | (1 | ) |
| Ending balance, June 30 | | $ | 523 |
| | $ | 624 |
|
| |
| (1) | Includes charge-offs and losses recorded upon sale of $106 million and $105 million for the six months ended June 30, 2019 and 2018, respectively. |
| |
| (2) | Includes charge-offs and losses recorded upon sale of $17 million and $11 million for the six months ended June 30, 2019 and 2018, respectively. |
TDRs occur when a borrower is experiencing, or is expected to experience, financial difficulties in the near-term and a concession has been granted to the borrower. As a result, BB&T will work with the borrower to prevent further difficulties and ultimately improve the likelihood of recovery on the loan. To facilitate this process, a concessionary modification that would not otherwise be considered may be granted, resulting in classification of the loan as a TDR. Refer to Note 1. Summary of Significant Accounting Policies in the Annual Report on Form 10-K for the year ended December 31, 2017 for additional policy information regarding TDRs.
Performing TDRs were up $31 million during the second quarter primarily in residential mortgage with small increases in indirect lending and commercial and industrial.
The following table provides a summary of performing TDR activity:
| | | Table 7 | |
| Rollforward of Performing TDRs | |
| | | | |
| Table 11: Rollforward of Performing TDRs | | Table 11: Rollforward of Performing TDRs |
| (Dollars in millions) | | 2018 | | 2017 | | 2019 | | 2018 |
| Balance, January 1 | | $ | 1,043 |
| | $ | 1,187 |
| | $ | 1,119 |
| | $ | 1,043 |
|
| Inflows | | 256 |
| | 324 |
| | 283 |
| | 256 |
|
| Payments and payoffs | | (83 | ) | | (138 | ) | | (90 | ) | | (83 | ) |
| Charge-offs | | (31 | ) | | (26 | ) | | (31 | ) | | (31 | ) |
| Transfers to nonperforming TDRs, net | | (36 | ) | | (40 | ) | | (36 | ) | | (36 | ) |
| Removal due to the passage of time | | (25 | ) | | (41 | ) | | (15 | ) | | (25 | ) |
| Non-concessionary re-modifications | | (5 | ) | | (2 | ) | | (7 | ) | | (5 | ) |
| Sold and transferred to LHFS | | (46 | ) | | (251 | ) | |
| Transferred to LHFS and/or sold | | | (153 | ) | | (46 | ) |
| Balance, June 30 | | $ | 1,073 |
| | $ | 1,013 |
| | $ | 1,070 |
| | $ | 1,073 |
|
The following table provides further details regarding the payment status of TDRs outstanding at June 30, 2018:2019: