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BB&T Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 7, 2012 04:33PM
BB&T Corp. (BBT) filed Quarterly Report for the period ended 2012-06-30.
Highlight of Business Operations:Consolidated net income available to common shareholders for the second quarter of 2012 of $510 million was up 66.1% compared to $307 million earned during the same period in 2011. On a diluted per common share basis, earnings for the second quarter of 2012 were $0.72, up 63.6% compared to $0.44 for the same period in 2011. BB&Ts results of operations for the second quarter of 2012 produced an annualized return on average assets of 1.22% and an annualized return on average common shareholders equity of 11.21% compared to prior year ratios of 0.83% and 7.25%, respectively.
Total shareholders equity increased $1.4 billion, or 8.3%, compared to December 31, 2011. The increase was driven by earnings and net proceeds of $559 million from the issuance of Tier 1 qualifying non-cumulative perpetual preferred stock in the second quarter. The Tier 1 common ratio was 9.7% and 10.0% at June 30, 2012 and March 31, 2012, respectively. In addition, the Tier 1 risk-based capital and total risk-based capital ratios were 10.2% and 13.5% at June 30, 2012, respectively, compared to 12.8% and 16.2%, respectively, at March 31, 2012. The decline in the regulatory risk-based capital ratios was primarily due to the announced redemption of BB&Ts trust preferred securities following the release of the proposed Basel III capital standards. Under the proposed standards, these types of securities will no longer receive Tier 1 capital treatment. BB&Ts risk-based capital ratios remain well above regulatory standards for well-capitalized banks. As of June 30, 2012, measures of tangible capital were not required by the regulators and, therefore, were considered non-GAAP measures. Refer to the section titled Capital Adequacy and Resources herein for a discussion of how BB&T calculates and uses these measures in the evaluation of the Company.
Net interest income on a fully taxable-equivalent (FTE) basis was $1.5 billion for the second quarter of 2012, an increase of 7.9% compared to the same period in 2011. The higher net interest income was driven by an increase in earning assets and lower funding costs. The decline in funding costs included a $29 million benefit from the accelerated amortization of deferred hedge gains and issuance costs due to a change in the expected life, resulting from the announced redemption of the Companys trust preferred securities. For the quarter ended June 30, 2012, average earning assets increased $18.2 billion, or 13.5%, compared to the same period of 2011, while average interest-bearing liabilities increased $10.7 billion, or 9.5%. The net interest margin was 3.95% for the second quarter of 2012 compared to 4.15% for the same period of 2011. The 20 basis point decline in the net interest margin was due to runoff of covered assets, lower yields on new loans and growth in the securities portfolio, which has been partially offset by lower funding costs.
Net interest income on a fully taxable-equivalent (FTE) basis was $3.0 billion for the six months ended June 30, 2012, an increase of 9.7% compared to the same period in 2011. The higher net interest income was driven by an increase in earning assets and lower funding costs. For the six months ended June 30, 2012, average earning assets increased $17.7 billion, or 13.2%, compared to the same period of 2011, while average interest-bearing liabilities increased $10.3 billion, or 9.1%. The net interest margin was 3.94% for the six months ended June 30, 2012 compared to 4.08% for the same period of 2011. The 14 basis point decline in the net interest margin was due to runoff of covered assets, lower yields on new loans and growth in the securities portfolio, which has been partially offset by lower funding costs.
Mortgage banking income totaled $182 million in the second quarter of 2012, an increase of $99 million compared to $83 million earned in the second quarter of 2011. This increase is primarily due to $82 million in higher gains on residential mortgage loan production due to wider margins and increased sales volumes. Included in mortgage banking income during the second quarter of 2012 was a gain of $20 million from the net valuation of residential mortgage servicing rights. This compares to a net loss of $2 million in the second quarter of 2011. Included in the second quarter 2012 net valuation adjustment is a $132 million decrease in the fair value of mortgage servicing rights, primarily due to a decrease in interest rates for new mortgages, which was more than offset by $152 million of gains from derivative financial instruments used to manage the economic risk of the mortgage servicing rights. Mortgage banking income for the third quarter of 2012 is expected to be at a similar level to the second quarter of 2012.
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