BB&T Corporation — 2009 Form 10-K Summary
Entity note: The supplied filing is for BB&T Corporation, not an issuer named Truist Financial Corp. It covers the fiscal year ended December 31, 2009, with separate fourth-quarter results. BB&T was a regional financial holding company operating primarily through its bank subsidiary.
Financial performance and condition
| Metric | 2009 | 2008 |
|---|---|---|
| Total assets, year-end | $165.8 billion | $152.0 billion |
| Net interest income (GAAP) | $4.844 billion | $4.238 billion |
| Net interest income (FTE) | $4.963 billion | $4.321 billion |
| Net interest margin (FTE) | 3.66% | 3.58% |
| Noninterest income | $3.934 billion | $3.197 billion |
| Noninterest expense | $4.931 billion | $3.911 billion |
| Provision for credit losses | $2.811 billion | $1.445 billion |
| Net income | $877 million | $1.529 billion |
| Net income available to common shareholders | $729 million | $1.498 billion |
| Diluted earnings per share | $1.15 | $2.71 |
| Return on average assets / common equity | 0.56% / 4.93% | 1.12% / 11.44% |
- Management reported total revenue growth of 18.3%, including 14.9% growth in FTE net interest income and 23.1% growth in noninterest income. Mortgage banking income rose to $658 million; insurance income exceeded $1 billion.
- Credit deterioration sharply reduced earnings: net charge-offs were $1.773 billion versus $851 million in 2008. The loan-loss allowance was $2.600 billion; total allowance for credit losses, including unfunded commitments, was $2.672 billion.
- At year-end, total loans and leases were $106.2 billion, including $8.0 billion of Colonial covered loans. Nonperforming assets excluding covered assets were $4.227 billion, up from $2.030 billion; the nonperforming-loan ratio excluding covered loans was 2.77%.
- Total deposits were $115.0 billion, up 16.6%, primarily reflecting Colonial. Long-term debt was $21.4 billion, up from $18.0 billion. Shareholders’ equity was $16.2 billion.
- Capital ratios remained above regulatory well-capitalized thresholds: Tier 1 risk-based 11.5%, total risk-based 15.8%, and leverage 8.5%. Tier 1 common was 8.5%.
- Cash flows were negative $493 million from operating activities, positive $7.233 billion from investing activities, and negative $6.831 billion from financing activities. Cash and cash equivalents ended the year at $2.649 billion.
Material changes and notable events
- BB&T acquired certain Colonial Bank assets and assumed substantially all deposits and certain liabilities from the FDIC in August 2009. The acquisition added a large loan portfolio and expanded BB&T’s presence in Alabama, Florida, Georgia, Texas, and Nevada.
- The FDIC loss-sharing arrangements covered specified acquired loans, securities, and other assets. BB&T recorded a $3.1 billion FDIC loss-share receivable; the arrangements do not cover all acquired assets or all potential losses and have limited terms.
- BB&T raised $2.6 billion through two common-stock offerings, repaid the approximately $3.1 billion Treasury preferred investment under TARP, and repurchased the related warrant. The common dividend was reduced from $0.47 to $0.15 quarterly beginning in the third quarter; 2009 dividends declared totaled $0.92 per share.
- Fourth-quarter 2009 net income was $194 million, or $0.27 diluted per share, compared with $307 million, or $0.51, a year earlier. The quarter included a $27 million payroll-processing business sale gain, Colonial loan revaluation adjustments, tax adjustments, and $9 million of merger-related charges.
Outlook, risks, and unusual items
- Management identified the recession, housing and commercial real-estate weakness, rising credit costs, financial-market disruption, competition, and heightened regulation as key near-term challenges. Credit problems were concentrated in Georgia, Florida, and metropolitan Washington, D.C., with deterioration also in parts of the Carolinas.
- Management expected further loan restructurings in 2010. It estimated Colonial-related merger and restructuring charges of approximately $185 million in total, with most remaining costs expected in the second quarter of 2010 for systems conversions.
- Management’s stated longer-term goal was for noninterest income to exceed 45% of total revenue. The filing provides no specific earnings or revenue forecast.
- In February 2010, the IRS asserted approximately $890 million of taxes, penalties, and interest for 2002–2007 related to foreign tax credits and other deductions. BB&T planned to pay the disputed amount and sue for a refund; management said it believed its tax treatment was compliant and reserves adequate, but the outcome was uncertain.
- The FDIC required a three-year premium prepayment of $608 million at year-end 2009, to be expensed over the applicable period. Higher insurance assessments contributed to increased regulatory expense.
- Management said current liquidity was adequate and reported approximately $39 billion of secured borrowing capacity. It also cited risks from further credit deterioration, interest-rate changes, integration of Colonial, deposit retention, regulatory changes, litigation, and valuation estimates.
- The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting. Management also concluded disclosure controls and internal controls were effective at year-end.
Important facts for investors to verify
- Confirm the issuer identity: this source is BB&T Corporation’s 2009 Form 10-K, not a Truist-named filing.
- Review subsequent credit performance, allowance adequacy, real-estate concentrations, and the distinction between covered and noncovered Colonial assets.
- Track actual FDIC reimbursements, loss-sharing terms and expirations, and any losses BB&T bears outside those agreements.
- Check the status and eventual resolution of the $890 million IRS dispute and related refund litigation.
- Assess Colonial integration costs, Nevada branch and deposit divestitures, and whether projected synergies and customer retention were achieved.
- Evaluate the effects of the dividend reduction, common-stock issuance and dilution, capital ratios, and the sustainability of earnings after credit provisions and unusual gains.