10-QPeriod: Q1 FY2017

TRUIST FINANCIAL CORP Quarterly Report for Q1 Ended Mar 31, 2017

Filed April 24, 2017For Securities:TFCTFC-POTFC-PRTFC-PI

Summary

Truist Financial Corp (TFC), formerly BB&T Corporation, reported a decrease in net income available to common shareholders to $378 million for the first quarter of 2017, down from $527 million in the prior year's comparable period. This decline was significantly impacted by a $392 million pre-tax loss on the early extinguishment of higher-cost FHLB advances. Despite this, total revenues on a taxable-equivalent basis increased by $236 million to $2.8 billion, largely driven by acquisition activity, with both net interest income and noninterest income showing growth. The net interest margin slightly improved to 3.46% from 3.43% year-over-year, benefiting from higher average earning assets and a reduction in long-term debt costs. The company's strategic focus on integration and managing operational expenses continues as it navigates a dynamic regulatory and economic environment.

Financial Highlights

36 data points
Beta

Net Income

$426.00M

EPS (Diluted)

$0.46

Total Assets

$220.50B

Cash & Equivalents

$4.48B

Free Cash Flow

$158.00M

Financial Statements
Beta
Interest Expense$166.00M
Net Income$426.00M
EPS (Basic)$0.47
EPS (Diluted)$0.46
Shares Outstanding (Basic)809.90M
Shares Outstanding (Diluted)822.72M

Key Highlights

  • 1Net income available to common shareholders decreased by $149 million to $378 million in Q1 2017 compared to Q1 2016, largely due to a significant loss on early debt extinguishment.
  • 2Total revenues increased by $236 million to $2.8 billion, driven by acquisition activity and growth in both net interest income and noninterest income.
  • 3Net interest margin (NIM) saw a slight improvement, reaching 3.46% compared to 3.43% in the prior year's quarter.
  • 4Noninterest expense increased substantially by $557 million to $2.1 billion, primarily due to the loss on debt extinguishment, higher personnel expenses, and integration costs from recent acquisitions.
  • 5The provision for credit losses decreased to $148 million from $184 million, and net charge-offs also saw a slight reduction.
  • 6Total assets grew to $220.5 billion as of March 31, 2017, from $219.3 billion at year-end 2016, with a notable increase in noninterest-bearing deposits.
  • 7The company maintained strong capital levels, with its CET1 ratio at 10.3% as of March 31, 2017.

Frequently Asked Questions

The primary driver of the decrease in net income available to common shareholders was a significant pre-tax loss of $392 million ($246 million after tax) resulting from the early extinguishment of higher-cost FHLB advances. This charge substantially impacted the quarter's profitability.

Acquisitions, notably National Penn and Swett & Crawford, contributed to an increase in total revenues. Noninterest income, specifically insurance income, and noninterest expenses, such as personnel costs, were directly impacted by these integrations. The company's overall asset and deposit base also grew as a result of these transactions.

Asset quality metrics remained relatively stable. Nonperforming assets (NPAs) totaled $801 million, a slight decrease from the prior quarter, and represented 0.51% of loans and leases held for investment. Net charge-offs decreased to $148 million in Q1 2017 from $154 million in Q1 2016. The Allowance for Credit Losses (ALLL) as a percentage of loans and leases held for investment was 1.04%, consistent with the prior quarter.

Net interest income increased by $81 million year-over-year, and the net interest margin (NIM) improved slightly to 3.46% from 3.43%. This was partly due to a lower average rate paid on long-term debt, benefiting from the debt extinguishment, which offset increases in interest expense related to acquisitions. The company actively manages its balance sheet to navigate interest rate fluctuations.