10-QPeriod: Q2 FY2015

TRUIST FINANCIAL CORP Quarterly Report for Q2 Ended Jun 30, 2015

Filed July 30, 2015For Securities:TFCTFC-POTFC-PRTFC-PI

Summary

TRUIST FINANCIAL CORP (TFC), formerly BB&T Corporation, reported a net income available to common shareholders of $454 million for the second quarter of 2015, an increase from $424 million in the prior year's second quarter. Diluted earnings per share were $0.62, up from $0.58 year-over-year. The company's results were impacted by a $172 million loss on the early extinguishment of higher-cost FHLB advances and a $26 million pre-tax loss on the sale of American Coastal. However, these were partially offset by a $107 million tax benefit related to a favorable appeals court decision on a prior tax dispute, and improved mortgage banking income and FDIC loss share income. Total revenues for the quarter were $2.4 billion, driven by a $61 million increase in noninterest income, largely from mortgage banking and investment banking fees, which more than offset a $30 million decrease in net interest income. Net interest margin compressed to 3.27% from 3.43% in the prior year's quarter due to lower loan yields and interest expense reductions. The company completed the acquisition of The Bank of Kentucky Financial Corporation during the quarter, adding $1.6 billion in deposits and $1.2 billion in loans.

Financial Highlights

36 data points
Beta

Net Income

$501.00M

EPS (Diluted)

$0.62

Total Assets

$191.02B

Cash & Equivalents

$2.62B

Free Cash Flow

$615.00M

Financial Statements
Beta
Interest Expense$177.00M
Net Income$501.00M
EPS (Basic)$0.63
EPS (Diluted)$0.62
Shares Outstanding (Basic)724.88M
Shares Outstanding (Diluted)734.53M

Key Highlights

  • 1Net income available to common shareholders increased by $30 million year-over-year to $454 million, with diluted EPS rising to $0.62 from $0.58.
  • 2A $172 million loss on early extinguishment of FHLB advances and a $26 million pre-tax loss on the sale of American Coastal were incurred.
  • 3A significant $107 million tax benefit was recognized due to a favorable court of appeals decision on a prior tax matter.
  • 4Noninterest income rose by $61 million, primarily driven by stronger performance in mortgage banking, investment banking, and FDIC loss share income.
  • 5Net interest margin decreased to 3.27% from 3.43% year-over-year, influenced by lower loan yields and reduced interest expenses.
  • 6The company completed the acquisition of The Bank of Kentucky, adding $1.6 billion in deposits and $1.2 billion in loans.
  • 7Asset quality continued to improve, with nonperforming assets (NPAs) decreasing to $729 million at June 30, 2015, from $782 million at December 31, 2014.

Frequently Asked Questions

The increase in net income available to common shareholders was primarily driven by a $107 million tax benefit from a favorable court ruling, alongside stronger performance in noninterest income, particularly from mortgage banking and investment banking activities. These positive impacts more than offset a $172 million loss on early extinguishment of debt and a $26 million pre-tax loss on the sale of American Coastal.

The net interest margin compressed to 3.27% for the second quarter of 2015 from 3.43% in the prior year's second quarter. This compression was influenced by lower yields on new loans and the continued runoff of loans acquired from the FDIC, which reduced interest income. Lower interest expenses, resulting from reduced deposit costs and refinancing of long-term debt, partially mitigated this decline.

The sale of American Coastal resulted in a $26 million pre-tax loss, primarily due to the allocation of goodwill. The early extinguishment of higher-cost FHLB advances led to a $172 million pre-tax loss. While these events negatively impacted earnings, the $107 million tax benefit from the favorable court decision provided a significant offset.

Asset quality continued to improve. Nonperforming assets (NPAs) decreased to $729 million at June 30, 2015, from $782 million at December 31, 2014. This improvement was primarily driven by a decline in nonperforming loans. NPAs as a percentage of loans and leases held for investment plus foreclosed property stood at 0.60% at June 30, 2015, down from 0.65% at year-end 2014. Net charge-offs as a percentage of average loans and leases also decreased year-over-year.