10-QPeriod: Q1 FY2014

TRUIST FINANCIAL CORP Quarterly Report for Q1 Ended Mar 31, 2014

Filed April 30, 2014For Securities:TFCTFC-POTFC-PRTFC-PI

Summary

BB&T Corporation (BB&T) reported a significant increase in net income available to common shareholders for the first quarter of 2014, reaching $501 million, up 138.6% from $210 million in the prior year's quarter. This strong performance was largely driven by a substantial decrease in the provision for income taxes compared to Q1 2013, which was impacted by a significant tax adjustment. Diluted earnings per share increased to $0.69 from $0.29 year-over-year. While net interest income saw a slight decrease due to lower yields on new loans and securities and the runoff of higher-yielding covered loans, this was partially offset by a decrease in funding costs. Noninterest income experienced a decline primarily due to lower mortgage banking income and net securities gains, but was bolstered by a significant increase in insurance income. The company demonstrated improved asset quality, with nonperforming assets (excluding covered assets) reaching their lowest level since 2007. Capital ratios remained robust and well above regulatory requirements.

Financial Highlights

37 data points
Beta

Net Income

$573.00M

EPS (Diluted)

$0.68

Total Assets

$184.65B

Cash & Equivalents

$2.22B

Free Cash Flow

$632.00M

Financial Statements
Beta
Interest Expense$199.00M
Net Income$573.00M
EPS (Basic)$0.70
EPS (Diluted)$0.68
Shares Outstanding (Basic)712.84M
Shares Outstanding (Diluted)724.28M

Key Highlights

  • 1Net income available to common shareholders increased significantly by 138.6% year-over-year to $501 million.
  • 2Diluted EPS rose to $0.69 in Q1 2014 from $0.29 in Q1 2013, largely due to a lower income tax provision.
  • 3Net interest income decreased by 5.2% to $1.4 billion, with Net Interest Margin (NIM) contracting to 3.52% from 3.76% year-over-year.
  • 4Noninterest income decreased by 9.0% to $911 million, driven by lower mortgage banking income and securities gains, partially offset by higher insurance income.
  • 5The provision for credit losses (excluding covered loans) decreased significantly by 72.9% to $67 million, reflecting improved credit quality.
  • 6Nonperforming assets (excluding covered assets) continued to decline, reaching the lowest level since 2007, with NPAs as a percentage of total assets at 0.54% on a non-covered basis.
  • 7Capital ratios, including Tier 1 common equity ratio of 10.2%, remain well above regulatory well-capitalized standards.

Frequently Asked Questions

The primary driver was a substantial reduction in the provision for income taxes. In the first quarter of 2013, BB&T recorded a significant tax adjustment of $281 million related to a U.S. Tax Court ruling, which negatively impacted prior year net income. In the current quarter, this adjustment was absent, leading to a significant year-over-year increase in reported net income.

The Net Interest Margin (NIM) for the first quarter of 2014 was 3.52%, a decrease of 24 basis points compared to 3.76% in the first quarter of 2013. This contraction was primarily due to lower yields on new loans and securities, and the continued runoff of higher-yielding covered loans, partially offset by lower funding costs.

Asset quality continued to improve during the first quarter of 2014. Nonperforming assets (NPAs), excluding covered assets, decreased and reached their lowest level since December 31, 2007. Management expects NPAs to continue to improve at a modest pace in the second quarter of 2014.

BB&T maintains a strong capital position, with its Tier 1 common equity ratio at 10.2% and total capital ratio at 14.6% as of March 31, 2014, both well above regulatory 'well-capitalized' requirements. The company actively manages its capital to support its risk profile, future growth, and regulatory compliance, including adherence to Basel III guidelines.