BB&T Corporation has reported earnings for the first quarter of 2010. For
the first quarter, net income totaled $194 million, or $.27 per diluted
common share, compared with $318 million, or $.48 per diluted common
share, earned during the first quarter of 2009.
“BB&T enjoyed a solid first quarter of 2010 with continued improvement
in underlying credit trends,” said Chairman and Chief Executive Officer
Kelly S. King. “The build in our allowance for credit losses slowed
substantially compared to recent quarters because of better consumer and
specialized lending credit trends. Growth in nonperforming assets
slowed to 5.6%, excluding covered loans, and early stage credit
indicators continued to improve for many of our portfolios.
“Our acquisition of Colonial is providing tremendous benefits. The net
interest margin and the margin outlook for 2010 increased in the
quarter, primarily due to the accretion benefits from Colonial and lower
deposit costs. The integration of Colonial is progressing smoothly and
we are on target for the systems conversion in the second quarter.
Overall, the acquisition is exceeding our expectations and we remain
very excited about its future strategic benefits,” King said.
Outlook for credit continues to improve
Rate of increase in nonperforming assets slows to 5.6% in the first
quarter, down for the fourth consecutive quarter
Early stage credit indicators for the consumer loan portfolios and
specialized lending portfolios show continued signs of improvement
Net charge-offs totaled 1.84% for the quarter, up 1 basis point compared
to the fourth quarter of 2009
The provision for credit losses totaled $575 million, exceeding net
charge-offs by $100 million, or $.09 per share
The provision for credit losses increased the allowance for loan and
lease losses as a percentage of loans and leases held for investment to
2.65% at March 31 compared to 2.51% at Dec. 31, 2009
The outlook for net charge-offs remains unchanged for 2010 at 1.80%
Net interest income for the first quarter increased 14.7% compared to
the first quarter of 2009
The net interest margin increased to 3.88% for the first quarter, a 31
basis point increase compared to the first quarter of 2009
Net interest margin increased 8 basis points compared to Dec. 31, 2009
The current quarter margin is BB&T’s strongest since 2005
The margin increase was driven primarily by higher yields on acquired
loans and lower deposit costs
2010 margin outlook improves following a reassessment of cash flows from
acquired loans
Approximately 80% of the margin increase from covered loans is offset
through other noninterest income
Average client deposits were up a strong 24.5% in the first quarter
compared to the first quarter of 2009 due largely to the Colonial
acquisition
Net new client transaction accounts increased 38.1% compared with the
first quarter of 2009 including Colonial
Deposit mix continued to improve with 33.5% growth in average
noninterest bearing deposit accounts and 52.2% growth in average
interest checking
Average client certificates of deposit increased 13.6%
Excluding the Colonial acquisition, average client deposits increased 4.8%
Average total loans and leases increased 4.8% for the first quarter of
2010 compared to the same period in 2009
The growth results from loans acquired through the Colonial acquisition,
loans originated by BB&T’s specialized lending group, which increased
15.2% in the first quarter and revolving credit loans, which increased 12.7%
Commercial loans decreased 2.5% reflecting a $2.1 billion decrease in
residential acquisition, development and construction loans compared to
the first quarter last year and slower overall commercial loan demand
Excluding the Colonial acquisition, average total loans decreased 4.3%
BB&T’s capital levels improve
Tier 1 common ratio improved to 8.7% at March 31 from 8.5% at Dec. 31, 2009
Tier 1 risk-based capital ratio increased to 11.7% from 11.5%
Tangible common equity improved to 6.4% from 6.2%
Net revenue growth, excluding securities gains (losses), was 6.8% in the
first quarter compared to the first quarter of 2009
Pre-tax pre-provision earnings totaled $811 million
Excluding securities gains (losses) and mortgage banking revenues, net
revenue increased 12.7%
Impact from reassessment of acquired loans
During the quarter, BB&T completed its first quarterly reassessment of
cash flows on acquired loans. The reassessment resulted in additional
accretion on loans of $22 million, which is reflected in interest
income. This level of accretion reflects one month’s results based on
the timing of the reassessment. The increase results from improving
expectations for cash flows. The reassessment also revealed additional
impairment in certain loans resulting in $19 million in additional
provision for loan and lease losses. Combined with a $2 million
reduction in noninterest income due to the net impact of these changes
on the FDIC receivable, the net benefit to earnings was less than $1
million. Consistent with the provisions of the FDIC loss sharing
agreements, approximately 80% of both the additional accretion and
impairment is offset through the FDIC receivable.
Efforts to work with clients, reclassification of loan modifications
cause increase in restructured loans
BB&T’s performing restructured loans increased to $1.7 billion at March
31, and prior periods were revised to reflect the retrospective
application of more definitive regulatory guidance. BB&T has continued
its efforts in recent quarters to modify certain performing loans to
assist clients that otherwise might become troubled. BB&T has a long
history of working with clients in difficult times and has continued to
do so during the last two years. BB&T fully re-underwrites each borrower
before approving a modification and rarely forgives principal or
interest on any loan.
For commercial loans, performing restructured loans increased to $969
million at March 31. These loans are typically residential acquisition,
development and construction loans where BB&T has extended the maturity
of the loan for less than one year without a sufficient corresponding
increase in the interest rate, or principal payments have been deferred
to assist the borrower. The average rate on modified commercial loans
was 4.09% compared to 4.25% earned on the entire commercial portfolio in
the first quarter. For mortgage loans, BB&T underwrites the modification
to a 31% debt to income ratio. BB&T’s typical mortgage restructuring
includes a rate reduction to the conforming rate plus a premium at the
time of the modification. The average interest rate of modified mortgage
loans for the first quarter was 5.36%, compared to 5.51% for the entire
mortgage portfolio, indicating that BB&T has not substantially reduced
rates in mortgage loan restructurings.
Noninterest revenues decreased 18.1%; excluding securities gains
(losses) and mortgage banking revenues, noninterest revenues increased 9.4%
Noninterest income decreased $187 million, or 18.1%, in the first
quarter of 2010 compared to the same period last year because of $153
million in lower securities gains and a $99 million decrease in mortgage
banking revenues. Excluding the impact of these items, noninterest
income increased 9.4% due to growth in service charges on deposit
accounts, other nondeposit fees and commissions, checkcard fees, and
trust and investment advisory revenues.
BB&T earned $89 million in mortgage-related revenue in the first quarter
of 2010, a decrease of 52.7% compared with the first quarter of 2009.
The significant decline in mortgage banking income is due to a similar
decrease in mortgage loan production as the refinance market has slowed
substantially compared to 2009. BB&T originated $4.8 billion of mortgage
loans during the first quarter of 2010 compared to $7.4 billion in
originations in the first quarter last year.
BB&T earned $253 million in insurance-related revenue in the first
quarter of 2010, relatively flat compared with the first quarter of
2009, reflecting continued softness in the industry’s pricing for
insurance premiums.
Service charges on deposit accounts totaled $164 million in the first
quarter of 2010, an increase of 5.1% compared to the same quarter of
2009. The increase in service charges was primarily due to additional
revenue generated by the acquired Colonial Bank customers. Checkcard
fees and other nondeposit fees and commissions increased 24.5% and
22.6%, respectively, compared to the first quarter of 2009. The
increase in checkcard fees was primarily due to increased usage by new
and existing clients. The growth in nondeposit fees and commissions was
primarily the result of issuing more letters of credit and other
commercial loan servicing fees. Trust and investment advisory revenue
increased 18.8% due to improved market conditions.
Other noninterest income totaled $22 million during the first quarter of
2010, compared with $11 million for the same period of 2009. Other
income increased $13 million as a result of market-related increases in
trading assets for post-employment benefits that are offset by a similar
increase in personnel expense.
Noninterest expenses increase primarily due to higher credit costs
BB&T’s noninterest expenses increased $272 million, or 25.4%, in the
first quarter of 2010 compared with the same period in 2009. The
increase included $116 million of additional net losses on sale and
writedowns in the value of foreclosed properties; $26 million in higher
foreclosed property maintenance expenses; an additional $12 million in
FDIC insurance expense; and $12 million for post-employment benefits
expense that are offset by additional noninterest income. This increase
includes approximately $128 million of growth resulting from purchase
acquisitions. BB&T also announced that projected one-time costs
associated with the acquisition of Colonial would be $140 million, a $45
million reduction from the estimate at Dec. 31, 2009. The company has
already expensed $44 million of the total projected charges.
About BB&T
As of March 31, BB&T is the 10th largest financial services holding
company in the U.S. with $163.7 billion in assets and market
capitalization of $22.4 billion. Based in Winston-Salem, N.C., the
company operates more than 1,800 financial centers in 12 states and
Washington, D.C., and offers a full range of consumer and commercial
banking, securities brokerage, asset management, mortgage and insurance
products and services. A Fortune 500 company, BB&T is consistently
recognized for outstanding client satisfaction by J.D. Power and
Associates, the U.S. Small Business Administration, Greenwich Associates
and others. More information about BB&T and its full line of products
and services is available at www.BBT.com.
Earnings Webcast and Quarterly Performance Summary
To hear a live webcast of BB&T’s first quarter 2010 earnings conference
call at 8 a.m. (ET) today, please visit our Web site at www.BBT.com.
Replays of the conference call will be available on the BB&T Web site
until Thursday, May 6, or by dialing 1-888-203-1112 (access code
4313363) until Tuesday, April 27.
BB&T’s First Quarter 2010 Quarterly Performance Summary, which contains
detailed financial schedules, is available on BB&T’s Web site at
www.bbt.com/bbt/about/financialprofile/statements.html.
Regulatory capital ratios are preliminary.
This news release contains performance measures 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.
BB&T’s management uses these measures to evaluate the underlying
performance and efficiency of its operations. It believes that these
non-GAAP measures provide a greater understanding of ongoing operations
and enhance comparability of results with prior periods as well as
demonstrating the effects of significant gains and charges in the
current period. The company believes that a meaningful analysis of its
financial performance requires an understanding of the factors
underlying that performance. BB&T’s management believes that investors
may use these non-GAAP financial measures to analyze financial
performance without the impact of unusual items that may obscure trends
in the company’s underlying performance. These disclosures should not be
viewed as a substitute for financial measures determined in accordance
with GAAP, nor are they necessarily comparable to non-GAAP performance
measures that may be presented by other companies. Tangible common
equity and Tier 1 common equity ratios are non-GAAP measures. BB&T uses
the Tier 1 common equity definition used in the SCAP assessment to
calculate these ratios. BB&T’s management uses these measures to assess
the quality of capital and believes that investors may find them useful
in their analysis of the corporation. These capital measures are not
necessarily comparable to similar capital measures that may be presented
by other companies.
This news 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 news release.
SOURCE BB&T Corporation
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will change as you go through your life. That’s why we believe in
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