BB&T Corporation (TFC 0.41%) reported earnings for its third quarter this morning, and a slight miss on EPS expectations prompted a small sell-off early this morning. With analysts expecting $0.71 in earnings per share, the bank checked in at $0.66, in part because of merger-related charges associated with its acquisition of BankAtlantic. Nevertheless, net income is up 57% year to date compared to the first nine months of last year, and the bank looks poised for strong performance in the quarters to follow.
What I was watching
In addition to the standard metrics referenced above, I was also watching for continued improvement in the bank's tier 1 capital ratio and the percentage of nonperforming loans. Last quarter, these numbers were 10.2% and 1.5%, respectively, and they have some room for improvement. With a reported tier 1 capital ratio of 10.9%, loan quality has improved significantly at the bank. This is further evidenced by the 1.35% of total assets that are currently deemed nonperforming loans. With improving numbers like this, it is easy to see how BB&T managed to pass the Fed stress test in March, something Bank of America (BAC -0.10%) and Citigroup (C -0.55%) failed to do.
What to expect going forward
With BB&T among regional banks stepping up mortgage lending nationwide, the future is bright for this stellar regional bank. Total loans were up again this quarter, with a increasing by 12.6% on an annualized basis as compared to the second quarter. If anything, the bank is still cheap according to its Graham number valuation, so it could be an attractive option if you are looking for a smaller bank in which to invest.
