BB&T's CEO Discusses Q1 2012 Results - Earnings Call Transcript

BB&T (BBT)

Q1 2012 Earnings Call

April 19, 2012 8:00 am ET

Executives

Tamera Gjesdal - Senior Vice President of Investor Relations

Kelly S. 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

Clarke R. Starnes - Senior Executive Vice President and Chief Risk Officer

Daryl N. Bible - Chief Financial Officer and Senior Executive Vice President

Analysts

Craig Siegenthaler - Crédit Suisse AG, Research Division

Leanne Erika Penala - BofA Merrill Lynch, Research Division

Catherine Mealor - Keefe, Bruyette, & Woods, Inc., Research Division

John G. Pancari - Evercore Partners Inc., Research Division

Gerard S. Cassidy - RBC Capital Markets, LLC, Research Division

Kenneth M. Usdin - Jefferies & Company, Inc., Research Division

Gregory W. Ketron - UBS Investment Bank, Research Division

Michael Rose - Raymond James & Associates, Inc., Research Division

Brian Foran - Nomura Securities Co. Ltd., Research Division

Jessica Ribner - FBR Capital Markets & Co., Research Division

Jonathan Feldman - Nomura Securities Co. Ltd., Research Division

Christopher W. Marinac - FIG Partners, LLC, Research Division

Matthew H. Burnell - Wells Fargo Securities, LLC, Research Division

Presentation

Operator

Greetings, ladies and gentlemen, and welcome to the BB&T Corporation First Quarter 2012 Earnings Conference Call on April 19, 2012. [Operator Instructions] As a reminder, this conference is being recorded. 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, Jenny, and good morning, everyone, and thanks to all of our listeners for joining us today. 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 the first quarter of 2012, as well as provide their thoughts about next quarter. We will be referencing a slide presentation during our remarks today. A copy of this presentation, as well as our earnings release and supplemental financial information are available on the BB&T website. After Kelly, Daryl and Clarke have made their remarks, we will pause to have Jenny come back on the line and explain how you may participate in the Q&A session.

Before we begin, let me remind you, BB&T does not provide public earnings predictions or forecast. However, there may be statements made during the course of this call that express management's intentions, beliefs or expectation. BB&T's actual results may differ materially from those contemplated by these forward-looking statements. Additional information concerning these factors that could cause actual results to be materially different is contained on Slide 2 of our presentation and in the company's SEC filings.

Our presentation includes certain non-GAAP disclosures. Please refer to Page 2 and the appendix of our presentation for the appropriate reconciliations to GAAP. And I will turn the call over to Kelly.

Kelly S. King

Thank you, Tamera. Good morning, everybody, and thank you for joining us. So overall, we had a very strong first quarter. In fact, it's really the best quarter since before the economic crisis based on stronger revenues, lower expenses and really a positive outlook going forward.

Taking a look at earnings, we had net income totaling $431 million, up 91.6% versus the first quarter of '11. EPS was $0.61, up 91% versus the first quarter, and it was an annualized 44% versus the fourth quarter of '11. Revenues were strong, so our adjusted net revenues totaled $2.4 billion, which was up 19.2% versus the fourth quarter of '11. Now net interest income was down about 4%, but that's due to a difference in day -- less days in this quarter. We had record mortgage banking income. Mortgage volumes are really, really good. In fact, our production was $8.3 billion. I'm very pleased to report that our insurance revenue on a same-store basis was up 6.5%, which is really encouraging because insurance has finally started turning up in these several years of soft market. It's clearly beginning to firm up, so that's very good news for us.

In the lending area, average loan growth was 6.4% on held for investment versus the fourth quarter. But if you exclude ADC covered and other acquired loans, it was up 9.9% versus the fourth quarter. That's really especially good, given that we have some normal seasonality during the first quarter. And I would point out that the loan growth was led by C&I, mortgage, direct retail and Sales Finance. Had another strong deposit quarter, with non-interest-bearing deposits at $957 million or 15.3% versus the fourth, and total deposits increased $2.7 billion or 8.8% versus the fourth. We had some really, I think, positive capital actions, following the very strong results we had in the stress test or the CCAR. And as you recall, as a result of that, we were able to increase our dividend by 25% to $0.20 a quarter. And then we had some very friendly shareholder transactions in the acquisitions of Crump and BankAtlantic.

And on the credit quality front, another really good quarter. NPAs decreased $194 million or 7.9% versus the fourth. Foreclosed real estate decreased and also significant, $158 million or 29.5% and delinquent loans decreased $307 million or 23%. They're really beginning to get to real almost like all-time lows. So Clarke will give you more color on that as we go forward.

If you're following along on the slide deck, please go to Slide #4. We did have a couple of unusual items. In the tax-related area, we had $42 million adjustment in our after-tax write-downs of investments on affordable housing partnerships, and we had $8 million in other tax adjustments. So that was a total of $50 million after-tax, which had a $0.07 diluted impact on EPS. Daryl will give you more color because it also affected our tax rate.

We're glad that we're planning this quarter to sell our last of our leverage leases. So since we knew about what their price was going to be, we went ahead and took a mark on that, which is about $10 million after-tax, that was $0.01. And we didn't have some merger-related charges from BankAtlantic and the restructuring charges from our reconceptualization project, which totaled about $7 million after-tax, and that was about $0.01. And then we had a small amount of security losses, which was about another $0.01 after-tax on an EPS basis. So a few items there.

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