10-QPeriod: Q2 FY2016

TRUIST FINANCIAL CORP Quarterly Report for Q2 Ended Jun 30, 2016

Filed July 27, 2016For Securities:TFCTFC-POTFC-PRTFC-PI

Summary

Truist Financial Corporation (TFC) reported a solid second quarter for 2016, demonstrating an increase in net income to $541 million, a rise of $87 million compared to the prior year's second quarter. This translated to diluted earnings per common share of $0.66, up $0.04 year-over-year. The company's operational performance was significantly boosted by strategic acquisitions, notably the integration of National Penn and the acquisition of insurance broker Swett & Crawford. Total revenues saw a substantial increase to $2.8 billion, largely driven by these acquisitions. Net interest margin improved to 3.41%, reflecting growth in average earning assets and an increase in the yield on the loan portfolio. While noninterest income also grew, primarily due to insurance and other income streams, noninterest expenses rose due to integration costs, personnel, and restructuring activities. The company maintained a strong capital position, with the Federal Reserve accepting its capital plan and a significant dividend increase and share buyback authorization approved.

Financial Highlights

37 data points
Beta

Net Income

$587.00M

EPS (Diluted)

$0.66

Total Assets

$221.86B

Cash & Equivalents

$2.61B

Free Cash Flow

$991.00M

Financial Statements
Beta
Interest Expense$188.00M
Net Income$587.00M
EPS (Basic)$0.67
EPS (Diluted)$0.66
Shares Outstanding (Basic)814.26M
Shares Outstanding (Diluted)823.68M

Key Highlights

  • 1Net income available to common shareholders increased to $541 million, a 19.2% increase year-over-year.
  • 2Diluted earnings per common share rose to $0.66, an improvement from $0.62 in the prior year's second quarter.
  • 3The company completed two significant acquisitions: National Penn for $1.6 billion and Swett & Crawford for $465 million, positively impacting total revenues.
  • 4Net interest margin improved to 3.41% from 3.27% year-over-year, driven by an increase in average earning assets and loan yields.
  • 5Noninterest income increased by $111 million, primarily due to contributions from the Swett & Crawford acquisition and increased trust and investment advisory revenues.
  • 6Noninterest expenses rose by $144 million, largely attributable to acquisition-related costs and restructuring activities.
  • 7Truist Financial Corporation's Board of Directors approved a significant increase in the quarterly dividend to $0.30 per share and authorized up to $640 million in share buybacks.

Frequently Asked Questions

Revenue growth was primarily driven by the successful completion of two significant acquisitions: National Penn, a bank with $10.1 billion in assets, and Swett & Crawford, an insurance broker. These acquisitions contributed to a substantial increase in total revenues, particularly in net interest income and insurance income.

The acquisitions, along with ongoing restructuring activities, led to an increase in noninterest expenses. This included higher personnel costs due to increased headcount from acquisitions, as well as merger-related and restructuring charges associated with integrating the new businesses.

The company demonstrated a strong commitment to returning capital to shareholders. On July 26, 2016, the Board of Directors approved a substantial increase in the quarterly dividend from $0.02 to $0.30 per share. Additionally, a new share repurchase program authorizing up to $640 million was approved, commencing in the third quarter of 2016.

The net interest margin (NIM) improved to 3.41% in the second quarter of 2016, up from 3.27% in the prior year's second quarter. This improvement was primarily driven by a significant increase in average earning assets, largely due to acquisitions, and a higher annualized yield on the total loan portfolio, also influenced by purchase accounting adjustments from the acquisitions.