2018 Annual Report
To our shareholders: In 2018, BB&T achieved strong results, including the best stock performance in our peer group, by adhering to our long-held values, while simultaneously making fundamental changes in the way we deliver products and services.
2 // OUR CULTURE
Our Vision Our Vision is part of the 2 // OUR CULTURE section
To create the best financial institution possible – “The Best of the Best.”
3 // MERGER OF EQUALS
The Premier Financial Institution The Premier Financial Institution is part of the 3 // MERGER OF EQUALS section
Our merger of equals with SunTrust will create the nation’s premier financial institution.
4 // CLIENT SUCCESS
Focused on Clients Focused on Clients is part of the 4 // CLIENT SUCCESS section
We work every day to help clients attain financial security and build successful businesses.
5 // ENGAGED ASSOCIATES
Character at Work Character at Work is part of the 5 // ENGAGED ASSOCIATES section
Our associates are learning and growing as they serve clients and the community.
virtual banking specialist
As a virtual banking specialist, Silva helps clients achieve their goals, whether that’s obtaining a mortgage or saving for retirement. He’s known for his ability to listen, empathize and problem-solve with clients. What does he love most about the job? “The opportunity to grow,” he said.
vice president of Student Leadership Programs at The BB&T Leadership Institute
Brown helps high school and college students find self awareness as part of their leadership journey. “Our programs are built on that personal experience of discovering your strengths and challenges,” she said. BB&T’s culture and mission were what drew Brown, exemplified by the Lighthouse Project volunteer initiative.
Green-Holloway works with marketing collateral and signage used in bank branches across the country. He’s always thinking about customers. “BB&T’s focus is client satisfaction and happiness. The decisions we make revolve around delivering the perfect customer experience,” he said. Outside of work, he mentors high school students and volunteers in the community.
mortgage loan officer
A BB&T associate for 21 years, Dockery is known for helping clients – as well as other associates – get mortgages tailored to their needs. “We’re about giving our clients the attention they deserve by listening and uncovering opportunities to help them achieve financial success,” she said. “There is nothing more rewarding than watching someone achieve homeownership.”
6 // GROWING COMMUNITIES
Helping Neighbors in Need Helping Neighbors in Need is part of the 6 // GROWING COMMUNITIES section
BB&T associates are committed to helping communities overcome adversity and thrive.
BB&T is merely a reflection of our communities. When communities succeed, we succeed.
— Kelly S. King, Chairman and CEO
The Healing Power of Play
Urban MinistriesAssociates in Durham, North Carolina, partnered with Urban Ministries to prepare and serve food to more than 350 people.
Alta Vista Children’s ShelterA Clarksburg, West Virginia, Community Banking team updated a 2,500-square-foot playroom in the Alta Vista Children’s Shelter, which teaches children as young as 6 life skills and behavior management.
HopeWorksA Commercial Credit team in Columbia, Maryland, updated an emergency shelter, HopeWorks, which offers a haven to victims of domestic and sexual violence, including human trafficking.
Hurricane Michael reliefAssociates headed to Panama City, Florida, to provide bottled water to residents after Hurricane Michael caused a county water system to fail.
7 // Empowering Leaders
Inside the BB&T Leadership Institute Inside the BB&T Leadership Institute is part of the 7 // Empowering Leaders section
Providing business, educational and student leaders with the skills they need to succeed.
There is no facet of society that cannot be improved through better leadership.
— Kelly S. King, Chairman and CEO
8 // By the numbers
2018 Performance 2018 Performance is part of the 8 // By the numbers section
BB&T reported record annual earnings in 2018, with strong momentum and balanced growth that position us for another very good year in 2019. Our results were driven by record insurance and investment banking income, diversified loan growth, stellar credit quality and strong expense management. These results reflect our laser focus on producing excellent returns for our shareholders while at the same time investing in digital and other initiatives that are crucial to excel in a new banking world.
Taxable equivalent revenue increased 1.6 percent during 2018 to $11.7 billion. Net income available to common shareholders was a record $3.1 billion, or $3.91 per diluted share, up 38 percent from $2.2 billion, or $2.74 per diluted share, in 2017.
BB&T vs Peers
Note: Market data through 2/6/19. Peer median includes: BAC, CFG, COF, FITB, HBAN, KEY, MTB, PNC, RF, STI, USB, WFC. Source: S&P Global
Strong Loan Growth
Average loans held for investment increased a strong 3.6 percent annualized in the fourth quarter.
Commercial and industrial (C&I) loans drove our growth, with strong performance in corporate banking, dealer floor plans, equipment and indirect lending led by auto and recreational lending. The growth in C&I loans reflects our long-term strategy of reducing the proportion of more volatile commercial real estate loans. For 2019, we expect loan growth in the 2 percent to 4 percent range, based on our belief that the economy will continue to expand despite economic uncertainty.
BB&T’s community bank, which contributes more than half of BB&T’s revenue, reported gains in retail and commercial loans even as we closed 170 branches, or 8.3 percent of our 15-state branching network. We retained virtually all of the clients of closed branches, in part by introducing them to our digital banking services. More than 3 million clients now use BB&T’s U digital platform.
Our community bank benefited from Main Street companies returning to traditional banking markets from highly leveraged capital markets. We stepped up our calls on smaller businesses, with 10,000 more calls per week, while identifying 14 target industries, starting with veterinary, dental and medical practices and adding three more industries each quarter during the year.
Record Insurance Income
Income from BB&T’s national insurance brokerage business, buoyed by new business in an expanding economy and more favorable industry conditions, increased by 16.5 percent over the fourth quarter of 2017. Insurance, our largest nonbanking business, accounting for 17 percent of BB&T’s revenue, provides important diversification and stability because it is not subject to fluctuating interest rates or the dynamics of the credit markets. Our investment banking and brokerage operations, also national in scope, reported a 25.2 percent gain in noninterest income compared to the fourth quarter of 2017. Scott & Stringfellow, BB&T’s full-service brokerage, has expanded into all of our primary operating states to support our growing wealth business. We also benefited from strong performances by BB&T’s diversified specialty lending businesses, including Grandbridge Real Estate Capital, our national commercial real estate and multifamily business, and Sheffield Financial, which provides consumer financing for outdoor power and power sports equipment.
The combination with SunTrust will fuel further growth for BB&T’s insurance and specialized lending businesses and our combined investment banking capability as we offer those services to an expanded client base.
Noninterest-bearing deposits dipped by 3.2 percent on an annualized basis in the fourth quarter as companies invested more in their operations. But we continue to benefit from our long-term strategy of improving the mix of our deposits and from the loyalty of our clients. We have become one of the leaders among our peers in noninterest-bearing deposits as a percentage of total deposits. On average, BB&T’s clients have had their retail accounts with us for 10 years and their commercial accounts for eight years.
Stellar Credit Quality
Nonperforming assets are at historically low levels, at 0.26 percent of total assets at the end of 2018.
Net charge-offs as a percentage of average loans and leases compare favorably with our peers, at 0.38 percent for the fourth quarter of 2018. We remain intensely focused on diversification and our conservative lending limits. We do not take big project risks or large exposures. The average loan size in our C&I portfolio is less than $1 million. In a rapidly changing industry, we constantly enhance our risk controls. Most importantly, BB&T’s best risk control is our strong culture and our associates’ commitment to ethics and honesty.
BB&T’s allowance for loan loss coverage ratios also remain strong at 2.99 times for nonperforming loans and 2.76 times for net charge-offs. A higher ratio means a bank can withstand any future losses better.
The balance between BB&T’s net interest income and our noninterest income provides further diversification. Our fee income ratio of 42.2 percent for the year compares favorably to the 34.7 percent average of our peers. A higher value indicates a bank is producing more of its revenue from noninterest income.
Our net interest margin, a key measure of profitability, improved throughout 2018 – at 3.49 percent in the fourth quarter compared to 3.43 percent in the fourth quarter of 2017 – and was superior to the 3.24 percent median of our peers. The margin is the difference between interest received on loans and investments and interest paid on deposits and other funding, expressed as a percentage of earning assets.
(1Q09 – 4Q18)
…with Less Volatility
10-year standard deviation
(1Q09 – 4Q18)
National peer group: BAC, CFG, COF, FITB, HBAN, KEY, MTB, PNC, RF, STI, USB and WFC. Largest 4 BHCs: BAC, C, JPM, WFC
Excellent Cost Control
We recognize reducing costs and increasing efficiency are more vital than ever, as we invest more in technology and automation. Our adjusted noninterest expense, which excludes merger-related and restructuring charges, was down 3.7 percent annualized in the fourth quarter of 2018, compared to the third quarter of 2018. Our adjusted efficiency ratio was 56.5 percent for the fourth quarter of 2018, the lowest level since 2014. The ratio measures expenses as a percentage of revenue, so lower percentages signal better performance.
Other key ratios underscore BB&T’s commitment to deliver top-tier profitability, with prudent capital management and leading returns to shareholders. Both our adjusted return on average assets and adjusted return on average tangible common shareholders’ equity compared favorably with our peers.
As we leverage the estimated $1.6 billion of pretax cost savings net of investments and other benefits of the SunTrust merger of equals, we believe our efficiency and return on average common equity ratios will lead all of our peers.
Our capital and liquidity levels remain strong and our 41.1 percent dividend payout ratio in the fourth quarter of 2018 was superior among our peers. BB&T’s priorities for using our capital are clear: organic growth is first, a strong dividend payout is second, followed by share buybacks and strategic opportunities.
BB&T has a long history of consistent and superior performance. We grow the company within our conservative risk parameters, driven by strong, diversified market share across lines of business and markets, to produce shareholder returns in all economic cycles. With enhanced scale, revenue opportunities and investments in technology made possible by the SunTrust merger of equals, we will create a sustainable competitive advantage in an increasingly digital world.
Record Taxable Equivalent Revenues
Record Net Income Available to Common Shareholders ($3.1 billion)
Record Diluted Earnings Per Share
9 // The Details
General Information General Information is part of the 9 // The Details section
10 // New Beginning