BB&T Quarterly Earnings Soar After Warehouse Lending Acquisition
BB&T Corp. (BBT) reported $210m of net income in Q210, a 74% increase from the year-ago quarter. Mortgages helped drive an overall uptick in lending, with $17.5bn of originations in the quarter, compared with $15.4bn in the previous quarter. BB&T completed the systems conversion of Colonial Bank during the quarter. BB&T in August gained the warehouse lending division of failed Colonial Bank. The company then renewed its commitment to warehouse lending by beefing up the division with a new president. BB&T said it nearly doubled its mortgage originations in 2009. The company said in June it is exiting the wholesale lending business, operated through its Liberty Mortgage Corp. subsidiary as part of a move to expand its warehouse business to correspondent lenders. The acquisition of Colonial helped grow average total loans and leases 4.4% over the same quarter last year. The firm experienced a 9.4% increase in average loans originated by the BB&T specialized lending group, and an 11.1% increase in average revolving credit loans. During the quarter, BB&T also focused on a strategy to accelerate the disposition of nonperforming assets, according to chairman and CEO Kelly King. "Our long-term plan has always been to sell problem assets as pricing improved," King said in the earning statement today. "Early in the second quarter, we reached an inflection point and have seen more bidders and more acceptable valuations for problem assets. As a result, we disposed of $682m of problem assets, lowering our balance sheet risk and making significant progress in meeting the goals of the strategy." BB&T sold $8bn of securities and recorded net gains of $219m in the quarter. Nonperforming assets slipped 3.1% during Q110. It marks the first decrease in nonperforming assets at the bank since Q106. The ratio of loan and lease loss allowance to nonperforming loans held for investment improved to 98% at the end of the quarter, compared with 93% at the end of the previous quarter. The company echoed industry concerns over the "unintended consequences" of financial reform legislation signed yesterday, and warned some changes in the products and services offered are expected as a result. "[O]ur business model is still that of a traditional commercial bank, so many of the provisions will have little or no impact on us," the firm said in its earnings statement. "While we will initially have moderately higher costs and reduced revenues in some areas, we will effectively implement the provisions of the law and we expect little effect on our long-term performance." Write to Diana Golobay. Disclosure: the author holds no relevant investments.