Truist Financial Corporation · NYSE:TFC
Truist Financial — BB&T — Investor Presentation (February 2006)
64 slides from Truist Financial's investor presentation, Feb 15, 2006
Slide 1: Loan Portfolio Performance and Strategies
BB&T CORPORATION oT ; Loan Portfolio Performance and Strategies Ken Chalk Chief Credit Officer February 2006
Slide 2: Lines of Business & Portfolio Performance
Slide 3: Portfolio Summary
Portfolio Summary As of December 31, 2005 -BB&T $ % Business Lending 36,699 48.9 Direct Retail 14,451 19.3 Bankcard 1,352 1.8 Mortgage 14,486 ag:3: Sales Finance 5,269 7.0 Specialized Lending 2,766 auf TOTAL $75,023 100.0% $ In Millions
Slide 4: Loan Portfolio Management: Balanced Performance
Slide 5: Business Lending: Small Business Banking
BUSINESS LENDING >Small Business Banking > $8.2 billion loan portfolio > Small businesses with sales up to $5 million > Total credit exposure $1 million or less > Long term core strength of BB&T » Consistently ranked by SBA as #1 or #2 Small Business Friendly Bank
Slide 6: Business Lending: Commercial Banking
BUSINESS LENDING >Commercial Banking > $21.2 billion loan portfolio > Predominantly closely held companies with sales up to $50 million > Total credit exposure > $1 million > Includes most of the bank’s CRE portfolio > Community banking structure serves as strategic advantage
Slide 7: Business Lending: Corporate Banking
BUSINESS LENDING -BBS&T >Corporate Banking > $4.1 billion loan portfolio > Companies with sales > $50 million > In-market relationship driven strategy » Includes core corporate and all multi-bank borrowers > Opportunity to integrate lending and other services with BB&T Capital Markets
Slide 8: Business Lending
BUSINESS LENDING VAS Past Dues Loan Losses pe Yield Js Growth =— % Increase $in Millions 2004 1.04% 19% Prime + -95% 5.29% $32,325 $35,010 8.31%
Slide 9: Direct Retail Lending
DIRECT RETAIL LENDING > Consumer purpose term loans and Financial Center Ma s & Private Bankers > Noninterest income from Pa Protection sales and loan fees > 93% of all Direct Retail Lending loans are secured by Real Estate
Slide 10: Direct Retail Lending: Relationship Driven HELOC Strategy
DIRECT RETAIL LENDING *Relationship Driven HELOC Strategy* CBA 2005 Home Equity Study 100% 100% 80% 80% 60%] 60% 40% 40% ———S J —$— 20% BB&T PEERS” BB&T PEERS* 20% ‘f of Home Equity clients with ‘ of Home Equity clients with Deposit Relationship Another Consumer Credit Relationship + Banks with > $2
Slide 11: Direct Retail Lending
DIRECT RETAIL LENDING pe Past Dues Loan Losses 7. Yield Ke . Growth JE % increase in Millions 2004 1.38% 21% 6.30% $12,817 2005 1.17% 20% 6.82% $14,021 9.39%
Slide 12: Bankcard and Merchant Services
BANKCARD and MERCHANT SERVICES “BB&T >Relationship Based Credit Cards > > i > > Retail, Business, Corporate, Fleet & Purchase Cards 90% of Cardholders have other relationships w/ BB&T Delivered through branch network, direct mail, telemarketing and other direct cross sell programs Retail Card ranked
Slide 13: Bankcard and Merchant Services
2004 2005 4. Past Dues 2.03% 1.77% Loan Losses 3.54% 3.42% \. Yield P+469% P+4.77% A Growth $1,200.9 $1,272.7 \ % Increase 5.97% ‘$in Millions
Slide 14: Bankcard and Merchant Services Noninterest Income
BANKCARD and MERCHANT SERVICES NonInterest Income 2004 2005 Bankcard $ 51.6 $ 58.6 Constant Credit $ 68 $ 8.8 Merchant Services $ 50.9 $ 54.0 Total $109.3 $121.4 $in Millions
Slide 15: Mortgage Lending
MORTGAGE LENDING > Mortgage Loan Officers strategically placed throughout branches > Achieved 53% average cross sell of 5+ services on mortgages closed in 2005 in core markets > Home purchase production increased by approximately 20% in 2005 : 2004 — 2005 Originations $9,961 $10,529 ‘$in Milfions:
Slide 16: Mortgage Lending: Servicing
MORTGAGE LENDING > Servicing retained as a client service, relationship building strategy > Very efficient, cost advantaged servicer with annual direct servicing cost per loan of approximately $40 and loans serviced per employee at 2,088 Total Servicing -- $41.1 Billion-- 328,000 Loans
Slide 17: Mortgage Lending
MORTGAGE LENDING pe _ Past Dues Loan Losses 7. Yield Ke . Growth JE % increase in Millions 2004 2.70% 04% 5.60% $12,517 5.51% $13,451 7.46%
Slide 18: Mortgage Income
MORTGAGE INCOME Residential Mortgage* BBS&T 2004 2005 Originations $ 9,961,000 $10,529,000 Servicing (EOP) 37,530,000 41,106,000 Mortgage Banking Revenue": Mortgage Production Revenue 84,708 86,237 Servicing Revenue 94,114 98,535 Gross Revenue $ 178,822 $ 184,772 Mortgage Servicing Asset: Provision:
Slide 19: Sales Finance
SALES FINANCE Prime automobile financing provided through retail auto dealerships High quality new loan contracts purchased from over 5,000 active dealers by Sales Finance Specialists in 21 centers In partnership with Banking Network, Relationship Managers pursue broader banking relationships with d
Slide 20: Sales Finance
SALES FINANCE /®> Past Dues “~~ Loan Losses 7. Yield i, \ Growth J©& —_% Increase $in Millions 2004 1.57% A1% 5.40% $5,200
Slide 21: Specialized Lending
SPECIALIZED LENDING BB&T > Includes nine ui — six subsidiaries/affiliates and three bank departments — oversight provided by advisory boards of directors from the bank and subsidiary management team. > Provides specialty finance alternatives to consumers and businesses that are complementary to the
Slide 22: Specialized Lending
SPECIALIZED LENDING Lendmark Financial -- Direct Consumer Finance Operates 88 offices in 9 states. Non-conforming mortgage lending. Alternative channel for bank referrals Prime Rate Premium Finance — Insurance Premium Finance 8t Jargest U.S. Insurance Premium Finance Company Regional Acceptance Corp
Slide 23: Specialized Lending
SPECIALIZED LENDING BB&T 2004 2005 fe \. Loan Losses 3.73% 3.14% TN Yield 15.11% 14.63% VEX Growth $2,047 $2,547 ‘— ‘fo |Increase 24.42% $in Millions “Includes: Prime Rate, Lendmark, Leasing, Laureate, Sheffield, and Regional Acceptance Corp.
Slide 24: Specialized Lending
SPECIALIZED LENDING 2004 2005 i_Net Income* $101.0 $120.2 3 Cash ROA 2.70% 2.60% Cash ROE 20.30% 19.20% Efficiency Ratio 39.20% 39.10% Total Capital & 18.80% 18.40% Loan Loss Reserves Includes: Prime Rate, Lendmark, Leasing, Laureate, Sheffield, and Regional Acceptance Corp. $in Millions *Before Tax
Slide 25: Total Loan Portfolio: Loan Losses and NPAs
TOTAL LOAN PORTFOLIO J 2004 2005 Loan Losses 36% -30% Loan Losses 24% 19% (excluding Specialized Lending) NPA’s 52% A0% NPA’s A8% 34% (excluding Specialized Lending) [Nonperforming Assets / (Loans+OREO)]
Slide 26: Total Loan Portfolio: Yield
TOTAL LOAN PORTFOLIO BB&T 2004 2005 Yield 5.87% 6.59% Yield 5.55% 6.29% (excluding Specialized Lending) Risk Adj. Yield 5.51% 6.29% Risk Adj. Yield 5.31% 6.10% {excluding Specialized Lending)
Slide 27: Total Loan Portfolio: Growth
TOTAL LOAN PORTFOLIO Average Growth % Increase EOP Growth % Increase $in Millions 2004 $66,107 $68,163 2005 $71,517 8.2% $75,023 10.1%
Slide 28: Peer Performance Comparison
PEER PERFORMANCE COMPARISON
Slide 29: Nonperforming Assets / Total Loans
NONPERFORMING ASSETS/ TOTAL LOANS BB&T versus Peers: (Year ended December 31) Nonperforming Assets / (Loans+OREO) .60 1) .40 % 30 .20 10 .00 2005 @ BB&T &@ National Peers * US Bank Holding Companies (14) in BB&T’s National Peer Group.
Slide 30: Nonperforming Assets / Total Loans
NONPERFORMING ASSETS/ TOTAL LOANS BB&T versus Peers (Year ended December 31) Nonperforming Assets / (LoanstOREO) 4.20 414% 1.10 : 4.00 20 80 -70 4 -60 + 50 44 40 48% — 45, 48% : — -30 —— — 40% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 % 66% _ BB&T -# National Peers * US Bank Holding Companie
Slide 31: Net Charge-offs / Average Loans
NET CHARGE-OFFS/AVERAGE LOANS ‘ BB&T BB&T versus Peers: (Year ended December 31) @ BB&T Corp. @ National Peers * US Bank Holding Companies (14) in BB&T’s National Peer Group.
Slide 32: Net Charge-offs / Average Loans
NET CHARGE-OFFS/AVERAGE LOANS TT BT BB&T versus Peers: ; (Year ended December 31) 80 a 3 69% .70 61% 60 AT% Ws -50 A2% AB, AB%) = 39% 48% - 37% ‘% .40 = — = A% 30 |. __38% ‘A0% Mm 30% : 32% E me re kd 20 -28% .27% — 28% 10 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 __BB&T -a National Peers *
Slide 33: Total Loan Yield
TOTAL LOAN YIELD BB&T versus Peers: (Year ended December 31) 7.00 6.59% 2005 @ BB&T Z National Peers * US Bank Holding Companies (14) in BB&T’s National Peer Group.
Slide 34: Total Loan Yield
TOTAL LOAN YIELD BB&T versus Peers (Year ended December 31) 11.00 ; 9.34% 10.00 +o 72% 220% 9.02% 8.85% O40 a= a, 8.37%, s.08 53% 8.30% 8.63% %7 00 7.73% 00 6.51% 5.58% 6.02%| ue) 5.30% 4.00 Variance 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 toBB&T -44 -56 -49 -55 -71 -64 -42 -59 -57 -.57 —_
Slide 35: Risk-Adjusted Yield
RISK-ADJUSTED YIELD (Total loan yield less loan losses) BB&T versus Peers: (Year ended December 31) 6.29% 2005 Variance to BB&T =55 @ BB&T & National Peers * US Bank Holding Companies (14) in BB&T’s National Peer Group.
Slide 36: Risk-Adjusted Yield
RISK-ADJUSTED YIELD (Total loan yield less loan losses) BB&T versus Peers: (Year ended December 31) 10.00 5 8.80% 8.81% 8.74% asym 9.00 : B5E% = a 787% 8.00 + 7.00 6.00 5.00 4.00 Variance 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 to BB&T -59 -59 -61 -71 -90 -93 -45 -77 58 _ BB&T_ -# National
Slide 37: Total Loan Growth
TOTAL LOAN GROWTH (Average loan balances) BB&T versus Peers: (Year ended December 31) 2005 @ BB&T @ National Peers * US Bank Holding Companies (14) in BB&T’s National Peer Group.
Slide 38: Total Loan Growth
TOTAL LOAN GROWTH (Average loan balances) BB&T versus Peers: (Year ended December 31) 20.00 15.00 — 10.6% 10.9% 11.1% Ps ee ll 10.00 +7-3%- 5.00 +63% -00 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 _ BB&T -® National Peers “US Bank Holding Companies in BB&T's National Peer group for each repor
Slide 39: Risk Management Strategies
RISK MANAGEMENT STRATEGIES
Slide 40: Risk Management Strategies
RISK MANAGEMENT STRATEGIE *Instill the BB&T Values Driven Credit Culture* *Focus on knowledge of local markets and individual clients* *Practice sound and fundamental underwriting and portfolio management techniques* *Diversify to mitigate concentration risks*
Slide 41: BB&T Values Driven Credit Culture
BB&T Values Driven Credit Culture BB&T > Virtues of BB&T Credit Culture clearly defined and communicated regularly > Provide fundamental insight to help clients »Responsive, flexible and reliable >Manage risks within agreed upon limits >Ensure economic return with “premium” for service delivery > Co
Slide 42: BB&T Values Driven Credit Culture
BB&T Values Driven Credit Culture > Loan quality is a core long-term : quality is a long-term > Emphasis is on balanced performance > Quality -- Profitability -- Growth > Long-term focus > Avoids short-term excesses that result from fads or “herd” mentality > Training is organizational imperative ~
Slide 43: BB&T Values Driven Credit Culture
BB&T Values Driven Credit Culture “BB&T Sales Force and Loan Administration Share Common Objectives Integration of Credit and Sales Cultures
Slide 44: Local Market and Client Knowledge
Local Market and Client Knowledge BB&T > Community banking strategy promotes in-market lending > Lenders discouraged from going out-of-market > Loans outside footprint must be relationship-based > Total Relationship approach vs. Transaction approach > Promotes better understanding of total risks > R
Slide 45: Local Market and Client Knowledge
Local Market and Client Knowledge > Maintain local servicing > Produces better client service and lowers performance risk > Line of Business segmentation strategy improves risk Management > Credit skills and underwriting more clearly defined > Product definitions help control risks >» Experienced le
Slide 46: Sound and Fundamental Underwriting and Portfolio Management
Sound and Fundamental eee > Centralized risk management support for higher risk portfolio > Asset based lending > Commercial real estate > Specialists assist with underwriting > Construction managers inspect progress/monitor disbursements > Certified appraisers order and review appraisals > Retail a
Slide 47: Sound and Fundamental Underwriting and Portfolio Management Techniques
Sound and Fundamental Underwriting and Portfolio Management Techniques BB&T > Comprehensive problem asset management systems > Centralized collections and recoveries groups for retail portfolios > Staff of problem asset managers for business portfolio > Risk management in place in specialized lendin
Slide 48: Diversify Risks
Diversify Risks > Community banking strategy promotes diversity > By geography, » By client selection > Goal: 50/50 mix cae are ee a
Slide 49: Diversify Risks
Diversify Risks SSiiet Gecipline.on: ; xe us » Tier down by risk grade > 41 = 100% of limit > 2= 75% of limit ee 3 = 50% of limit oe 4 = 30% of limit > 5 = 15% of limit > Increase -- Maintain — Decrease > nae yndica 2 LO teat
Slide 50: Diversification by Lines of Business
Diversification by Lines of Business Risk Management BB&T ‘Small Business Direct Retail exe (HES Sales Finance Corporate 7.0% Lending Total 55% aS Bankcard Total ines " 18% Consumer SS 51.1% 48.9% a Mortgage Commercial y 193% | Lending \ Specialized 32.5% Lending 37% Total $75.0 Billion
Slide 51: Diversification by Size of Relationship
Risk Management Diversification by Size of Relationship ‘BB&T Commercial and Small Business Relationships Relationship Hof Outstandings % of Total: ‘Commitment Relationships $ in Thousands Loans > $20MM 342 $ 5,892,021 79% $10MM - $20MM 4,314,068 5.8% $5MM - $10MM 4,658,989 6.2% $2MM - $5MM 6,466,17
Slide 52: Limited Exposure to Shared National Credits
Risk Management Diversification by Size of Relationship BB&T Limited exposure to Shared National Credits > Total outstandings = $1,045 million on 12-31-05 [1.5% of Total Loans ] > Participation in syndicated credits limited to Relationship-based clients
Slide 53: Diversification by Industry
Risk Management Diversification by Industry mer Other —_Agricutture/ Services 1% Forestry ot Construction Finance/ 45% Insurance: 2% 8% Real Estate Wholesale Trade 3% "— _ Related 38% Transportation’ Utilities Manufacturing 5% 5% Industry Outstandings as % of Total Portfolio
Slide 54: Commercial Real Estate
Risk Management Commercial Real Estate -BB&T Largest concentration is Commercial Real Estate (Definition: the primary source of funds for repayment is the sale or rental of the property) Total CRE portfolio = $15.3 billion 20.9% of Total Loans Highly diversified by Property Type
Slide 55: Diversification by Property Type
Risk Management Diversification by Property Type BB&T Golf Courses Dand= oe a ie Residential Commercial: Condos/ 408 8% Townhouses, @ ome, S.F. Residential- 1% Development Warehouses/ 12% Lt.nd/Dist. 8% ~ > S.F. Residential- Hotels/Motels we ee Bidr.Const. 8% i S.F.Residential- 16% Centers Multi-Fam
Slide 56: Diversification by Market
Risk Management Diversification by Market Corp CRE Loans by Market as % of Total CRE Loans
Slide 57: Commercial Real Estate
Risk Management Commercial Real Estate VV Vv VV Vv Vv In-market relationship lending focus Underwrite client as well as the transaction Professional CRE Underwriters assist with >$5MM loans Professional Construction Managers inspect >$1MM loans CRE limits by Risk Grade = 1/2 of non-CRE limits Additi
Slide 58: Consumer Portfolios
Risk Management Consumer Portfolios Mortgage: (19.3% of Total Loans) > Lowrisk single family permanent mortgages Direct Retail: (19.3% of Total Loans) > 93% of portfolio is real estate secured Sales Finance: (7.0% of Total Loans) > No retail leasing Bankcard: (1.8% of Total Loans) > Issue cards in-m
Slide 59: 2006 Outlook
2006 OUTLOOK
Slide 60: 2006 Portfolio Goals
Total Portfolio 2006 Portfolio Goals Plan 2005 2006 J Loanlosses 30% ~=—.28 -.32% J Yield 6.59% 7 -8% VS Growth ‘~~ _“% Increase 8.20% 8-9% $in Millions
Slide 61: Strategic Goals
Strategie Goal Goa * rough commun banking sategy >Implement enhanced segmentation strategy for business loan growth > Micro — Small Business — Commercial >Continue Integrated Relationship Management (IRM) initiatives for cross-sell opportunities > Builder > Mortgage » Mortgage > Home Equity > Small
Slide 62: BB&T Lending Strategic Goals
BB&T Lending Strategic Goals BB&T > Place additional focus on specific opportunities for growth > Corporate Market > Commercial Finance > Metro Market Sales Finance > Specialized Lending >Expand on alternative channels for loan production > Internet applications > Home Mortgage Direct (Call Center f
Slide 63: BB&T Lending Strategic Goals
BB&T Lending Strategic Goals BB&T > Continue to develop additional risk management capabilities Expanded credit risk analytics and portfolio monitoring More robust decision engine platforms Fraud monitoring programs Enhanced risk based pricing models Improved CRE market analysis
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