01—Abstract
Summary
Summary of the 10-K filed March 16, 2001. Cited figures are marked; the original filing is the authoritative source.
Important note: this filing is BB&T Corporation's (NYSE: BBT) 2000 Form 10-K, filed March 16, 2001, not Truist Financial (TFC).
BB&T became part of Truist only in 2019 through its merger with SunTrust. BB&T is a Winston-Salem, North Carolina financial holding company with about $59.3 billiona in total assets at December 31, 2000, operating 854 banking offices across the Carolinas, Virginia, Maryland, Georgia, West Virginia, Tennessee, Kentucky and Washington, D.C. Reported 2000 earnings fell to $626.4 million, or $1.55 per diluted share, from $705.6 million, or $1.75, in 1999.
The decline reflects roughly $248.6 millionb in after-tax nonrecurring charges, mainly merger-related costs and a securities portfolio restructuring that produced about $222 million in pretax losses. Excluding these items, management reports net income of $875.1 million, or $2.17 per diluted share. Core operating metrics were solid: net interest income rose to $2.0 billion, the FTE net interest margin was 4.19% (down from 4.27%), net charge-offs improved to 0.25% of average loans, and nonperforming assets were a low 0.33% of total assets.
Noninterest income fell 11.2% to $777.0 millionc, largely because of the securities losses. Capital remained strong, with a Tier 1 risk-based ratio of 9.3%, a total risk-based ratio of 12.0%, and a leverage ratio of 7.1%, all well above regulatory thresholds for well-capitalized status. Shareholders' equity reached $4.8 billion.
The company raised its annual cash dividend 14.7% to $0.86d per share, its 28th consecutive annual increase. BB&T also continued an aggressive acquisition strategy, completing FCNB Corp. in January 2001 and FirstSpartan in March 2001, with pending deals for Century South Banks, Virginia Capital Bancshares and F&M National Corporation.
02—Key points
Key Highlights
- Reported 2000 net income of $626.4 million ($1.55 diluted EPS), down from $705.6 million ($1.75) in 1999, after about $248.6 million in after-tax nonrecurring charges; excluding these items, EPS would have been $2.17.
- A roughly $222 million pretax securities restructuring loss (sale of $5.9 billion of securities) was undertaken to improve portfolio yield by 133 basis points on the restructured portion, with management expecting to recover the loss over three years.
- Total assets grew to $59.3 billion (up 12% year over year), with total deposits of $38.0 billion (up 11.3%) and loans and leases of $39.5 billion (up 11.5%).
- Asset quality remained strong: net charge-offs were 0.25% of average loans, the allowance covered 1.30% of loans and 5.45x net charge-offs, and nonperforming assets were $193.5 million (0.33% of total assets).
- Return on average assets was 1.14% and return on average common equity was 14.55% on a reported basis; excluding nonrecurring items, ROA was 1.59% and ROE was 20.33%.
- Capital ratios were well above well-capitalized thresholds: Tier 1 risk-based 9.3%, total risk-based 12.0%, Tier 1 leverage 7.1%. Dividends rose 14.7% to $0.86 per share.
- Expansion continued through acquisitions, including One Valley Bancorp (about $6.4 billion in assets, July 2000), BankFirst, FCNB Corp. and FirstSpartan, with pending mergers for Century South Banks, Virginia Capital Bancshares and F&M National Corporation.
03—Questions
Frequently Asked Questions
Why did BB&T's reported earnings decline in 2000 even though the core business grew?
Reported net income fell about 11% to $626.4 million, but this was driven by one-time items. BB&T recorded about $248.6 million in after-tax nonrecurring charges, largely from merger-related expenses (Premier, Hardwick, First Banking and One Valley) and a securities portfolio restructuring that generated about $222 million in pretax losses. Excluding these items, net income rose about 14% to $875.1 million, and diluted EPS would have been $2.17 versus $1.91 in 1999 on the same basis.
How healthy is BB&T's loan portfolio and credit quality?
Credit quality was stable to improving. Net charge-offs fell to 0.25% of average loans from 0.27% in 1999. Nonperforming assets rose 26.8% to $193.5 million, but remained only 0.33% of total assets. Nonaccrual and restructured loans were 0.37% of loans, and the allowance for loan and lease losses was $522.0 million, or 1.30% of loans, with a 5.45x coverage ratio of net charge-offs. Loans 90 days or more past due and still accruing rose to $72.3 million, which investors may want to monitor.
Is BB&T's dividend secure, and how well capitalized is the company?
The dividend appears secure. Cash dividends rose 14.7% to $0.86 per share in 2000, the 28th consecutive annual increase, though the payout ratio rose to 54.8% on a reported basis (39.3% excluding nonrecurring items). Capital is strong: the Tier 1 risk-based ratio was 9.3%, the total risk-based ratio 12.0%, and the Tier 1 leverage ratio 7.1%, and BB&T and all its banks were classified as well capitalized. Shareholders' equity grew 17.8% to $4.8 billion, partly through shares issued for acquisitions.
What are the main risks to BB&T's earnings outlook?
Key risks include interest rate sensitivity and margin compression: the net interest margin fell 8 basis points to 4.19% as funding costs rose. Mortgage banking income fell 37% to $103.1 million due to lower origination activity and losses on loan sales. Noninterest expense rose 6.9% to $1.76 billion, and integration costs from the many acquisitions are a continuing factor. Management's simulation shows net interest income could change by as much as 1.5% under the stated rate scenarios, within its policy limits. Future acquisitions could also dilute earnings per share or book value.
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