BB&T reports 2006 net income of $1.53 billion; Operating earnings per share total $.82 for the fourth quarter

WINSTON-SALEM, N.C., Jan. 18 /PRNewswire-FirstCall/ -- BB&T Corporation reported today earnings for the fourth quarter and the full year 2006. For the fourth quarter, net income totaled $250.8 million, or $.46 per diluted share, compared with $429.6 million, or $.78 per diluted share, earned during the fourth quarter of 2005.

Fourth quarter net income was negatively affected by a $139.1 million after-tax charge associated with providing additional tax reserves related to leveraged lease transactions, $46.9 million in after-tax losses resulting from a previously-announced restructuring of a portion of the securities portfolio, $5.6 million in net after-tax merger-related charges and $6.5 million in after-tax equity-based compensation.

Excluding the impact of these items, operating earnings for the fourth quarter of 2006 totaled $448.9 million, or $.82 per diluted share, compared with fourth quarter 2005 operating earnings of $425.8 million, or $.78 per diluted share, which exclude $3.8 million in net after-tax merger-related credits. 2006 operating results reflect increases of 5.4% and 5.1%, respectively, compared to the same period last year.

For the full year 2006, BB&T's net income was $1.53 billion compared to $1.65 billion earned in 2005. Diluted earnings per share for 2006 totaled $2.81, a decrease of 6.3% compared to $3.00 earned in 2005. Excluding net after-tax merger-related charges or credits, equity-based compensation and nonrecurring items from 2006 and 2005, operating earnings for 2006 totaled $1.74 billion, an increase of 4.1% compared to operating earnings of $1.67 billion in 2005. Diluted operating earnings per share totaled $3.20 in 2006, an increase of 5.3% compared to $3.04 earned in 2005.

Cash basis operating results exclude the unamortized balances of intangibles from assets and shareholders' equity, and exclude the amortization of intangibles, the net amortization of purchase accounting mark-to-market adjustments, merger-related charges or credits, equity-based compensation and nonrecurring items from earnings. Cash basis operating earnings totaled $467.1 million for the fourth quarter of 2006, an increase of 4.1% compared to the fourth quarter of 2005. Cash basis operating diluted earnings per share totaled $.85 for the fourth quarter of 2006, an increase of 3.7% compared to $.82 earned during the same period in 2005. Cash basis operating earnings for the fourth quarter of 2006 produced annualized returns on average tangible assets and average tangible shareholders' equity of 1.63% and 27.87%, respectively, compared to prior year returns of 1.73% and 27.88%, respectively.

"I am pleased to report strong operating results for the fourth quarter of 2006," said Chairman and Chief Executive Officer John A. Allison. "2006 operating results represent the 25th consecutive year that BB&T has achieved record operating earnings. I am particularly pleased with our core trends in light of the difficult interest rate environment and slowing real estate market. Our performance reflects solid production from our lending and deposit gathering efforts, as well as healthy growth in many of our fee income producing businesses.

"We are disappointed by the unexpected court ruling related to our lawsuit against the Internal Revenue Service that was issued early this month. While we disagree with the judge's decision, we are required to record additional reserves in the fourth quarter. Even so, our core trends are positive and, on an operating basis, the fourth quarter is the most profitable in our history."

Client Deposits Grow 13.5% Compared to Last Year

BB&T's deposit gathering efforts continued to be successful during the fourth quarter, as average client deposits increased 13.5% compared to the fourth quarter last year. Average total client deposits were $72.9 billion for the fourth quarter of 2006 compared to $64.2 billion for the same period of 2005. Total average deposits for the fourth quarter were $79.9 billion, an increase of 9.5% compared to $72.9 billion for the fourth quarter of 2005. During the year, BB&T generated approximately 122,000 net new transaction deposit accounts.

BB&T Continues to Enjoy Strong Loan Growth - Up 11.3% for the Quarter

Average loans and leases totaled $82.7 billion for the fourth quarter of 2006, reflecting an increase of $8.4 billion, or 11.3%, compared to the fourth quarter of 2005. This increase was composed of growth in average commercial loans and leases, which increased $4.5 billion, or 12.5%; average mortgage loans, which increased $1.7 billion, or 11.9%; average consumer loans, which increased $1.3 billion, or 6.2%; and growth in average loans originated by BB&T's specialized lending subsidiaries, which increased $823.4 million, or 30.0%, compared to the fourth quarter last year.

BB&T's Fee Based Businesses Produce Solid Quarterly Growth Rates

Noninterest income, excluding securities gains and losses, increased $56.2 million, or 9.1%, during the fourth quarter of 2006 compared to 2005. These increases include higher revenues from BB&T's insurance operations and other nondeposit fees and commissions, as well as solid performances from BB&T's investment banking and brokerage operations and trust operations while revenues from service charges on deposit accounts and mortgage banking operations decreased slightly during the quarter.

Commissions from BB&T's insurance operations increased 8.7% to a record $214.5 million in the current quarter compared with $197.4 million earned in the fourth quarter of 2005. This increase was the result of growth in commissions from the sale of property and casualty coverage, and improved sales of employee benefits-related insurance products.

Other nondeposit fees and commissions totaled $115.6 million for the fourth quarter of 2006, an increase of 15.4% compared to the fourth quarter of 2005. This increase was generated primarily by growth in debit card related services.

BB&T's investment banking and brokerage operations enjoyed a solid quarter as fees increased 7.6% to $75.0 million compared to $69.7 million earned in the same quarter last year. This increase was primarily driven by growth in revenues at Scott & Stringfellow.

Trust revenues increased 6.8% to $39.5 million in the fourth quarter of 2006 compared with $36.9 million earned in the fourth quarter of 2005. This increase was primarily attributable to improved performance from the wealth management division.

Asset Quality Remains Excellent

BB&T continued to enjoy very healthy asset quality during the fourth quarter. Nonperforming assets, as a percentage of total assets, were .29% at Dec. 31, 2006, compared to .28% at Sept. 30, 2006, and .27% at Dec. 31, 2005. Annualized net charge-offs were .33% of average loans and leases for the fourth quarter of 2006, down from .37% in the fourth quarter of 2005. Excluding losses incurred by BB&T's specialized lending subsidiaries, annualized net charge-offs for the current quarter were .18% of average loans and leases compared to .25% in the same quarter last year.

BB&T Completes Securities Restructuring

During the fourth quarter of 2006, BB&T restructured a portion of its securities portfolio. The restructuring resulted in the sale of approximately $2.5 billion of securities available for sale at an aggregate pre-tax loss of $74.5 million, or $.09 per diluted share on an after-tax basis. BB&T has replaced substantially all of the assets sold with higher-yielding securities and expects to recover the $74.5 million loss through higher earnings by the end of 2007.

Income Taxes

On Jan. 4, the United States District Court for the Middle District of North Carolina issued a summary judgment in favor of the Internal Revenue Service related to BB&T Corporation's treatment of a leveraged lease transaction entered into in 1997. BB&T filed the lawsuit to pursue a refund of $3.3 million in taxes plus interest. BB&T's management disagrees with the decision and intends to appeal the matter to the United States Appeals Court for the Fourth Circuit, based in Richmond, Virginia.

Due to the timing of the District Court's ruling and its potential impact on BB&T's other leveraged lease transactions, BB&T recorded additional tax reserves totaling $139.1 million, after-tax, in the fourth quarter of 2006.

BB&T Expands Presence in Excellent Markets - Acquires Coastal Financial Corporation

On Dec. 21, 2006, BB&T announced plans to acquire Coastal Financial Corporation of Myrtle Beach, S.C. for $394.6 million in stock. The merger would give BB&T the No. 1 deposit market share in the thriving metro Myrtle Beach, S.C. market. With $1.7 billion in assets, Coastal Financial operates 17 banking offices in the greater Myrtle Beach area and seven in greater Wilmington, N.C., where BB&T already has the No. 1 market share. The merger, which is subject to regulatory and shareholder approval, is expected to be completed in the second quarter of 2007.

At Dec. 31, 2006, BB&T had $121.4 billion in assets and operated 1,459 banking offices in the Carolinas, Virginia, West Virginia, Kentucky, Georgia, Maryland, Tennessee, Florida, Alabama, Indiana and Washington, D.C. BB&T's common stock is traded on the New York Stock Exchange under the trading symbol BBT. The closing price of BB&T's common stock on Jan. 17 was $42.74 per share.

For additional information about BB&T's financial performance, company news, products and services, please visit our Web site at http://www.bbt.com/.

Earnings Webcast

To hear a live webcast of BB&T's fourth quarter 2006 earnings conference call at 11:00 a.m. (EST) today, please visit our Web site at http://www.bbt.com/. Replays of the conference call will be available through our Web site until 5 p.m. (EST) on Friday, Feb. 2.

This press release contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America ("GAAP"). BB&T's management uses these "non-GAAP" measures in their analysis of the Corporation's performance. Non-GAAP measures typically adjust GAAP performance measures to exclude the effects of charges, expenses and gains related to the consummation of mergers and acquisitions, and costs related to the integration of merged entities, as well as the amortization of intangibles and purchase accounting mark-to-market adjustments in the case of "cash basis" performance measures. These non-GAAP measures also exclude equity-based compensation in order to make the 2006 results comparable with prior periods presented and may also exclude other significant gains, losses or expenses that are unusual in nature and not expected to recur. Since these items and their impact on BB&T's performance are difficult to predict, management believes presentations of financial measures excluding the impact of these items provide useful supplemental information that is important for a proper understanding of the operating results of BB&T's core businesses. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

This press release contains certain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements may address issues that involve significant risks, uncertainties, estimates and assumptions made by management. Actual results may differ materially from current projections. Please refer to BB&T's filings with the Securities and Exchange Commission for a summary of important factors that may affect BB&T's forward-looking statements. BB&T undertakes no obligation to revise these statements following the date of this press release.

QUARTERLY PERFORMANCE SUMMARY BB&T Corporation (Dollars in thousands, except per share data) Percent For the Three Months Ended Increase 12/31/06 12/31/05 (Decrease) OPERATING EARNINGS STATEMENTS (1) Interest income - taxable equivalent $1,888,151 $1,520,417 24.2 % Interest expense 910,319 599,484 51.9 Net interest income - taxable equivalent 977,832 920,933 6.2 Less: Taxable equivalent adjustment 22,213 21,200 4.8 Net interest income 955,619 899,733 6.2 Provision for credit losses 72,727 69,329 4.9 Net interest income after provision for credit losses 882,892 830,404 6.3 Noninterest income 676,619 618,962 9.3 Noninterest expense 902,163 823,987 9.5 Operating earnings before income taxes 657,348 625,379 5.1 Provision for income taxes 208,428 199,576 4.4 Operating earnings (1) $448,920 $425,803 5.4 % PER SHARE DATA BASED ON OPERATING EARNINGS (1) Basic Earnings $.83 $.78 6.4 % Diluted Earnings .82 .78 5.1 Weighted average shares - Basic 540,807,172 543,879,921 Diluted 546,618,368 548,607,865 Dividends paid per share $.42 $.38 10.5 % PERFORMANCE RATIOS BASED ON OPERATING EARNINGS (1) Return on average assets 1.50 % 1.57 % Return on average equity 14.92 15.18 Net yield on earning assets (taxable equivalent) 3.70 3.82 Efficiency ratio (taxable equivalent) (2) 54.1 53.0 CASH BASIS PERFORMANCE BASED ON OPERATING EARNINGS (1)(3) Cash basis operating earnings $467,106 $448,866 4.1 % Diluted earnings per share .85 .82 3.7 Return on average tangible assets 1.63 % 1.73 % Return on average tangible equity 27.87 27.88 Efficiency ratio (taxable equivalent) (2) 52.4 50.9 QUARTERLY PERFORMANCE SUMMARY BB&T Corporation (Dollars in thousands, except per share data) Percent For the Three Months Ended Increase 12/31/06 12/31/05 (Decrease) INCOME STATEMENTS Interest Income $1,865,926 $1,499,217 24.5 % Interest Expense 910,307 599,484 51.8 Net interest income 955,619 899,733 6.2 Provision for credit losses 72,727 69,329 4.9 Net interest income after provision for credit losses 882,892 830,404 6.3 Noninterest income 602,103 618,962 (2.7) Noninterest expense 921,834 818,031 12.7 Income before income taxes 563,161 631,335 (10.8) Provision for income taxes 312,332 201,761 54.8 Net income $250,829 $429,574 (41.6)% PER SHARE DATA Basic earnings $.46 $.79 (41.8)% Diluted earnings .46 .78 (41.0) Weighted average shares - Basic 540,807,172 543,879,921 Diluted 546,618,368 548,607,865 PERFORMANCE RATIOS BASED ON NET INCOME Return on average assets .84 % 1.58 % Return on average equity 8.33 15.32 Efficiency ratio (taxable equivalent) (2) 55.3 52.6 NOTES: Applicable ratios are annualized. (1) Operating earnings exclude the effect of merger-related charges or credits, equity-based compensation and nonrecurring items. These amounts totaled $198.1 million and $(3.8 million), net of tax, in the fourth quarters of 2006 and 2005, respectively. See Reconciliation Tables included herein. (2) Excludes securities gains (losses), foreclosed property expense, increases or decreases in the valuation of mortgage servicing rights, and gains or losses on mortgage servicing rights-related derivatives. Cash basis and operating ratios also exclude merger- related charges or credits, equity-based compensation and nonrecurring items, where applicable. See Reconciliation Tables included herein. (3) Cash basis performance information excludes the effect on earnings of amortization expense applicable to intangible assets, the unamortized balances of intangibles from assets and equity, and the net amortization of purchase accounting mark-to-market adjustments. See Reconciliation Tables included herein. QUARTERLY PERFORMANCE SUMMARY BB&T Corporation (Dollars in thousands, except per share data) Percent For the Twelve Months Ended Increase 12/31/06 12/31/05 (Decrease) OPERATING EARNINGS STATEMENTS (1) Interest income - taxable equivalent $6,981,269 $5,588,499 24.9 % Interest expense 3,185,386 1,980,969 60.8 Net interest income - taxable equivalent 3,795,883 3,607,530 5.2 Less: Taxable equivalent adjustment 87,655 82,657 6.0 Net interest income 3,708,228 3,524,873 5.2 Provision for credit losses 240,366 217,263 10.6 Net interest income after provision for credit losses 3,467,862 3,307,610 4.8 Noninterest income 2,595,673 2,324,605 11.7 Noninterest expense 3,468,647 3,133,284 10.7 Operating earnings before income taxes 2,594,888 2,498,931 3.8 Provision for income taxes 852,199 825,320 3.3 Operating earnings (1) $1,742,689 $1,673,611 4.1 % PER SHARE DATA BASED ON OPERATING EARNINGS (1) Basic Earnings $3.23 $3.06 5.6 % Diluted Earnings 3.20 3.04 5.3 Weighted average shares - Basic 539,140,045 546,916,414 Diluted 543,890,512 551,379,604 Dividends paid per share $1.60 $1.46 9.6 % PERFORMANCE RATIOS BASED ON OPERATING EARNINGS (1) Return on average assets 1.52 % 1.60 % Return on average equity 15.22 15.12 Net yield on earning assets (taxable equivalent) 3.74 3.89 Noninterest income as a percentage of total income (taxable equivalent) (2) 40.6 39.1 Efficiency ratio (taxable equivalent) (2) 54.0 52.5 CASH BASIS PERFORMANCE BASED ON OPERATING EARNINGS (1)(3) Cash basis operating earnings $1,816,127 $1,763,004 3.0 % Diluted earnings per share 3.34 3.20 4.4 Return on average tangible assets 1.66 % 1.77 % Return on average tangible equity 28.44 27.82 Efficiency ratio (taxable equivalent) (2) 52.3 50.4 QUARTERLY PERFORMANCE SUMMARY BB&T Corporation (Dollars in thousands, except per share data) Percent For the Twelve Months Ended Increase 12/31/06 12/31/05 (Decrease) INCOME STATEMENTS Interest Income $6,893,602 $5,505,842 25.2 % Interest Expense 3,185,374 1,980,969 60.8 Net interest income 3,708,228 3,524,873 5.2 Provision for credit losses 240,366 217,263 10.6 Net interest income after provision for credit losses 3,467,862 3,307,610 4.8 Noninterest income 2,521,157 2,325,622 8.4 Noninterest expense 3,516,102 3,166,501 11.0 Income before income taxes 2,472,917 2,466,731 0.3 Provision for income taxes 944,447 812,962 16.2 Net income $1,528,470 $1,653,769 (7.6)% PER SHARE DATA Basic earnings $2.84 $3.02 (6.0)% Diluted earnings 2.81 3.00 (6.3) Weighted average shares - Basic 539,140,045 546,916,414 Diluted 543,890,512 551,379,604 PERFORMANCE RATIOS BASED ON NET INCOME Return on average assets 1.34 % 1.58 % Return on average equity 13.35 14.95 Efficiency ratio (taxable equivalent) (2) 54.8 53.1 NOTES: Applicable ratios are annualized. (1) Operating earnings exclude the effect of merger-related charges or credits, equity-based compensation and nonrecurring items. These amounts totaled $214.2 million and $19.8 million, net of tax, in 2006 and 2005, respectively. See Reconciliation Tables included herein. (2) Excludes securities gains (losses), foreclosed property expense, increases or decreases in the valuation of mortgage servicing rights, and gains or losses on mortgage servicing rights-related derivatives. Cash basis and operating ratios also exclude merger-related charges or credits, equity-based compensation and nonrecurring items, where applicable. See Reconciliation Tables included herein. (3) Cash basis performance information excludes the effect on earnings of amortization expense applicable to intangible assets, the unamortized balances of intangibles from assets and equity, and the net amortization of purchase accounting mark- to-market adjustments. See Reconciliation Tables included herein. QUARTERLY PERFORMANCE SUMMARY BB&T Corporation (Dollars in thousands) As of / For the Percent Twelve Months Ended Increase 12/31/06 12/31/05 (Decrease) CONSOLIDATED BALANCE SHEETS End of period balances Cash and due from banks $2,067,833 $2,185,571 (5.4)% Interest-bearing deposits with banks 543,509 410,380 32.4 Federal funds sold and other earning assets 282,798 320,439 (11.7) Securities available for sale 20,721,027 19,782,966 4.7 Trading securities 2,146,713 706,518 203.8 Total securities 22,867,740 20,489,484 11.6 Commercial loans and leases 41,300,358 36,615,085 12.8 Direct retail loans 15,312,041 14,452,518 5.9 Sales finance loans 5,682,700 5,264,088 8.0 Revolving credit loans 1,414,010 1,347,309 5.0 Mortgage loans 16,256,766 14,481,561 12.3 Specialized lending 3,625,063 2,862,927 26.6 Total loans and leases 83,590,938 75,023,488 11.4 Allowance for loan and lease losses 888,130 825,300 7.6 Total earning assets 107,676,225 96,777,005 11.3 Premises and equipment, net 1,410,196 1,286,909 9.6 Goodwill 4,827,078 4,255,998 13.4 Core deposit and other intangibles 454,451 487,525 (6.8) Other assets 6,194,652 5,535,265 11.9 Total assets 121,351,065 109,169,759 11.2 Noninterest-bearing deposits 13,393,254 13,476,939 (0.6) Interest checking 1,333,036 1,426,715 (6.6) Other client deposits 34,062,454 30,959,888 10.0 Client certificates of deposit 24,986,519 19,309,667 29.4 Other interest-bearing deposits 7,196,315 9,108,590 (21.0) Total deposits 80,971,578 74,281,799 9.0 Fed funds purchased, repos and other borrowings 8,087,009 6,561,719 23.2 Long-term debt 15,903,756 13,118,559 21.2 Total interest-bearing liabilities 91,569,089 80,485,138 13.8 Other liabilities 4,644,160 4,078,568 13.9 Total liabilities 109,606,503 98,040,645 11.8 Total shareholders' equity $11,744,562 $11,129,114 5.5 % Average balances Securities, at amortized cost $21,348,247 $20,467,160 4.3 % Commercial loans and leases 38,965,374 34,997,432 11.3 Direct retail loans 14,904,385 14,033,773 6.2 Sales finance loans 5,384,615 5,215,444 3.2 Revolving credit loans 1,331,491 1,272,718 4.6 Mortgage loans 15,482,219 13,451,128 15.1 Specialized lending 3,245,212 2,546,813 27.4 Total loans and leases 79,313,296 71,517,308 10.9 Allowance for loan and lease losses 863,097 813,206 6.1 Other earning assets 910,680 718,325 26.8 Total earning assets 101,572,223 92,702,793 9.6 Total assets 114,327,580 104,611,882 9.3 Noninterest-bearing deposits 13,218,167 12,878,120 2.6 Interest checking 2,164,168 1,797,147 20.4 Other client deposits 31,462,213 29,813,549 5.5 Client certificates of deposit 22,563,522 17,969,234 25.6 Other interest-bearing deposits 7,822,120 7,888,309 (0.8) Total deposits 77,230,190 70,346,359 9.8 Fed funds purchased, repos and other borrowings 7,005,798 7,385,826 (5.1) Long-term debt 14,627,849 11,958,681 22.3 Total interest-bearing liabilities 85,645,670 76,812,746 11.5 Total shareholders' equity $11,451,516 $11,065,493 3.5 % NOTES: All items referring to loans and leases include loans held for sale and are net of unearned income. QUARTERLY PERFORMANCE SUMMARY BB&T Corporation (Dollars in thousands, except per share data) For the Three Months Ended 12/31/06 12/31/05 RECONCILIATION TABLE Net income 250,829 429,574 Merger-related items, net of tax 5,588 (3,771) Equity-based compensation, net of tax 6,506 - Other, net of tax (3) 185,997 - Operating earnings 448,920 425,803 Amortization of intangibles, net of tax 17,021 18,305 Amortization of mark-to-market adjustments, net of tax 1,165 4,758 Cash basis operating earnings 467,106 448,866 Return on average assets .84 % 1.58 % Effect of merger-related items, net of tax .02 (.01) Effect of equity-based compensation, net of tax .02 - Effect of other, net of tax (3) .62 - Operating return on average assets 1.50 1.57 Effect of amortization of intangibles, net of tax (1) .13 .14 Effect of amortization of mark- to-market adjustments, net of tax - .02 Cash basis operating return on average tangible assets 1.63 1.73 Return on average equity 8.33 % 15.32 % Effect of merger-related items, net of tax .19 (.14) Effect of equity-based compensation, net of tax .22 - Effect of other, net of tax (3) 6.18 - Operating return on average equity 14.92 15.18 Effect of amortization of intangibles, net of tax (1) 12.88 12.40 Effect of amortization of mark- to-market adjustments, net of tax .07 .30 Cash basis operating return on average tangible equity 27.87 27.88 Efficiency ratio (taxable equivalent) (2) 55.3 % 52.6 % Effect of merger-related items (.6) .4 Effect of equity-based compensation (.6) - Effect of other (3) - - Operating efficiency ratio (2) 54.1 53.0 Effect of amortization of intangibles (1.6) (1.9) Effect of amortization of mark- to-market adjustments (.1) (.2) Cash basis operating efficiency ratio (2) 52.4 50.9 Basic earnings per share $.46 $.79 Effect of merger-related items, net of tax .01 (.01) Effect of equity-based compensation, net of tax .01 - Effect of other, net of tax (3) .35 - Operating basic earnings per share .83 .78 Diluted earnings per share $.46 $.78 Effect of merger-related items, net of tax .01 - Effect of equity-based compensation, net of tax .01 - Effect of other, net of tax (3) .34 - Operating diluted earnings per share .82 .78 Effect of amortization of intangibles, net of tax .03 .03 Effect of amortization of mark- to-market adjustments, net of tax - .01 Cash basis operating diluted earnings per share .85 .82 NOTES: Applicable ratios are annualized. (1) Reflects the effect of excluding average intangible assets from average assets and average equity to calculate cash basis ratios. (2) Excludes securities gains (losses), foreclosed property expense, increases or decreases in the valuation of mortgage servicing rights, and gains or losses on mortgage servicing rights-related derivatives. Operating and cash basis ratios also exclude merger-related charges or credits, equity-based compensation and nonrecurring items, where applicable. (3) Reflects an additional tax provision of $139.1 million related to leveraged leases and a loss on the sale of securities totaling $46.9 million, net of tax, in the fourth quarter of 2006. QUARTERLY PERFORMANCE SUMMARY BB&T Corporation (Dollars in thousands, except per share data) For the Twelve Months Ended 12/31/06 12/31/05 RECONCILIATION TABLE Net income $1,528,470 $1,653,769 Merger-related items, net of tax 10,906 (6,777) Equity-based compensation, net of tax 35,650 - Other, net of tax (3) 167,663 26,619 Operating earnings 1,742,689 1,673,611 Amortization of intangibles, net of tax 65,600 70,754 Amortization of mark-to-market adjustments, net of tax 7,838 18,639 Cash basis operating earnings 1,816,127 1,763,004 Return on average assets 1.34 % 1.58 % Effect of merger-related items, net of tax .01 (.01) Effect of equity-based compensation, net of tax .03 - Effect of other, net of tax (3) .14 .03 Operating return on average assets 1.52 1.60 Effect of amortization of intangibles, net of tax (1) .13 .15 Effect of amortization of mark- to-market adjustments, net of tax .01 .02 Cash basis operating return on average tangible assets 1.66 1.77 Return on average equity 13.35 % 14.95 % Effect of merger-related items, net of tax .10 (.07) Effect of equity-based compensation, net of tax .31 - Effect of other, net of tax (3) 1.46 .24 Operating return on average equity 15.22 15.12 Effect of amortization of intangibles, net of tax (1) 13.09 12.41 Effect of amortization of mark- to-market adjustments, net of tax .13 .29 Cash basis operating return on average tangible equity 28.44 27.82 Efficiency ratio (taxable equivalent) (2) 54.8 % 53.1 % Effect of merger-related items (.3) .2 Effect of equity-based compensation (.9) - Effect of other (3) .4 (.8) Operating efficiency ratio (2) 54.0 52.5 Effect of amortization of intangibles (1.6) (1.9) Effect of amortization of mark- to-market adjustments (.1) (.2) Cash basis operating efficiency ratio (2) 52.3 50.4 Basic earnings per share $2.84 $3.02 Effect of merger-related items, net of tax 0.02 (.01) Effect of equity-based compensation, net of tax .06 - Effect of other, net of tax (3) .31 .05 Operating basic earnings per share 3.23 3.06 Diluted earnings per share $2.81 $3.00 Effect of merger-related items, net of tax .02 (.01) Effect of equity-based compensation, net of tax .06 - Effect of other, net of tax (3) .31 .05 Operating diluted earnings per share 3.20 3.04 Effect of amortization of intangibles, net of tax .12 .12 Effect of amortization of mark- to-market adjustments, net of tax .02 .04 Cash basis operating diluted earnings per share 3.34 3.20 NOTES: Applicable ratios are annualized. (1) Reflects the effect of excluding average intangible assets from average assets and average equity to calculate cash basis ratios. (2) Excludes securities gains (losses), foreclosed property expense, increases or decreases in the valuation of mortgage servicing rights, and gains or losses on mortgage servicing rights-related derivatives. Operating and cash basis ratios also exclude merger- related charges or credits, equity-based compensation and nonrecurring items, where applicable. (3) Reflects an additional tax provision of $139.1 million related to leveraged leases, a loss on the sale of securities totaling $46.9 million, net of tax, and a gain on the sale of duplicate facilities totaling $18.3 million, net of tax, in 2006 and a one- time charge related to the accounting for leases totaling $26.6 million, net of tax, in 2005.