BB&T Corporation, (

BBT

)

Q3 2010 Earnings Call

October 21, 2010 08:00 a.m. ET

Executives

Clarke Starnes - Chief Risk Officer and Senior Executive Vice President

Daryl Bible - Chief Financial Officer and Senior Executive Vice President

Compare to:
Previous Statements by BBT
» BB & T Q2 2010 Earnings Call Transcript
» BB&T Corporation Q1 2010 Earnings Call Transcript
» BB&T Corporation Q4 2009 Earnings Call Transcript
» BB&T Corporation Q3 2009 Earnings Call Transcript

Kelly King - Chairman, Chief Executive Officer, President, Member of Executive & Risk Management Committee, Chairman of Branch Banking & Trust Company and Chief Executive Officer of Branch Banking & Trust Company

Tamera Gjesdal - Senior Vice President of Investor Relations

Analysts

Betsy Grasek – Morgan Stanley

Jefferson Harralson - Keefe, Bruyette, & Woods, Inc.

Robert Patten - Morgan Keegan & Company, Inc.

Craig Siegenthaler - Crédit Suisse AG

Gerard Cassidy – RBC

Vivek Juneja – JPMorgan

Christopher Marinac – FIG Partners

Kevin Fitzsimmons - Sandler O'Neill + Partners, L.P.

Peter Denushu – Carlton Capital

Presentation

Operator

Greeting, ladies and gentleman, and welcome to the BB&T Corporation Q3 Earnings 2010 Conference call, on Thursday, October 21, 2010. [Operator Instructions] It is now my pleasure to introduce your host, Ms. Tamera Gjesdal, Senior Vice President of Investor Relations for BB&T Corporation. Thank you. You may begin, Tamera.

Tamera Gjesdal

Thank you, Andrea, and good morning everyone. Thanks to all of our listeners for joining us today. Of course, this call is being broadcast on the internet from our website at BBT.com. We have with us today Kelly King, our Chairman and Chief Executive Officer, Daryl Bible, our Chief Financial Officer, and Clarke Starnes, our Chief Risk Officer, who will review the results for Q3 2010, as well as provide a look ahead. We will be referencing a slide presentation in our remarks today. A copy of the presentation as well as our earnings release and performance summary is available on the BB&T website. After Kelly, Daryl, and Clarke have made their remarks, we will pause to have Andrea come back on the line and explain how those who have dialed in to the call may participate in the Q & A session.

Before we begin, let me make a few preliminary comments. BB&T does not make predictions or forecasts. However, there may be statements made during the course of this call that express management's intentions, beliefs or expectations. BB&T's actual results may differ materially from those contemplated by these forward-looking statements. Additional information concerning factors that could cause actual results to be materially different is contained on Slide 1 of our presentation and in the company's SEC filings. Our presentation includes certain non-GAAP disclosures please refer you to page 2 in the appendix of our presentation for the appropriate reconciliation to GAAP.

And now it is my pleasure to introduce our Chairman and Chief Executive Officer, Kelly King.

Kelly King

Thank you, Tamara, and good morning, everybody. Thanks for joining our call. Let me just start by saying I would kind of describe our quarter improving performance in credit quality, and very strong performance in most other areas, which we’ll describe. So a few quarterly highlights – strong improvement in earnings compared to ’09, Q3 net income available to shareholders is $210 million, up 38.2%, and our EPS is $0.30, up 30.4%. I feel good about our revenue, net revenue is up 4.2%, up 1.1% annualized linked with securities gains. And importantly, our pre-tax, pre-provision earnings was up 61% excluding security gains.

You’ll recall a couple of years ago we told you that we were pursuing a five year strategy of overall balance sheet improvement, as we looked to diversify our asset and our liability side. We’ll explain to you the progress in regard to that. For the loan area, we grew annualized linked quarter in all non-real estate loan areas, in fact, growth accelerated in most of the portfolios in the quarter, we’ll show you some detail on that. We had 6.1% growth in mortgage loans, annualized quarter and very strong mortgage revenue growth. In fact, our origination for $6.7 billion in Q3 compared to $5 billion in Q2.

Very pleased about average non-interest bearing deposits increasing 15.4% on an annualized linked-quarter basis. A very strong balance sheet and capital levels, which continue to improve, Tier 1 common is 9%. We had 130% allowance for the coverage of NPLs helpful investment, if you exclude covered loans. Importantly, we want to discuss with you the substantial progress in the closing of problem assets. We told you last quarter we were embarking on a more aggressive disposition strategy, which we started in the second and substantially progressed on in the third, and we mentioned intra-quarter that we’d be transferring over $1 billion to help us, so we did that. We transferred $1.3 billion in non-performing loans to help the sell and we’ve written those down consistent with actual sales experience, in terms of the mark.

Very good sales activity, we sold $207 million of NPLs in the quarter, we also sold $244 million of other real estate loans, and we currently have more than $350 million of NPA under contract to sell, so a lot of really good activity, and all that activity is consistent with the market level that we expected. Importantly, our TDRs, our NPAs, our NPA inflow and foreclosed property expenses all declined during this quarter. If you follow along on the deck, you go to slide four, security exchange unusual item for the quarter. We did take $239 million of security gains in the quarter, which is an usual income item, obviously, in conjunction with some other unusual items that we had. There was a $0.21 positive impact. We did have a $321 million, or $0.28 negative impact related to the transfer of NPLs, and then we had a small remaining Colonial merger charge of $10 million, or $0.01. So the way I think about this, I always try to get back to what I feel like our normalized earning rate is, so if you take the $0.21 in security exchange away, and then if you add back the $0.28 in unusual earnings impact because of the NPL transfer, and the penny of merger related charges, you start out with 30, add back 8, so I think of a normalized run rate of about $0.38. Obviously we can debate that, but that’s the way I think about it.

If you look at our underlying community bank performance, we’re making really good continued progress. We continue to have the best value proposition in the market, where our community banking models deliver the best service in reliable and competitive responsive competent service. We know that because we continue to evaluate that in terms of the outside market research that we have provided for us by (Merrill Corp), and I’m pleased to share that we have a substantial improvement in our very high level, and also a substantial improvement in terms of the gap over our major in market peers. So remember, our value proposition is the best in the market place, because value functions have quality relative to (inaudible 0:14:46).

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