WINSTON-SALEM, N.C. (AP) - BB&T Corp. on Friday posted a 37 percent decline in first-quarter profit, as loans that were overdue or written off as unpaid surged and the regional bank put aside more cash to cover souring credit.
But the results beat Wall Street expectations, and the stock rallied $2.35, or 11.2 percent, to close at $23.42.
For the three months ended March 31, BB&T said net income after paying preferred dividends fell to $271 million, or 48 cents per share, from $428 million, or 78 cents per share, in the 2008 quarter.
Analysts polled by Thomson Reuters, on average, expected profit of 31 cents per share.
Net interest income, or income recorded from interest on assets like loans and mortgages, rose 13 percent to $1.15 billion, from $1.02 billion last year.
Net interest margin edged up 3 basis points to 3.57 percent from 3.54 percent a year ago.
Noninterest income, or money earned from fees and other charges, rose 34 percent to $1.03 billion from $771 million. The jump reflected higher mortgage banking fees as the number of new mortgage loans rose, and greater insurance income.
BB&T more than tripled its provision for credit losses, or money said aside to cover bad loans, to $676 million from $223 million.
Meanwhile, the amount of loans written off as unpaid, called net charge-offs, more than tripled to $388 million from $125 million. And nonperforming assets, or loans that are considered overdue, surged to $2.75 billion, from $989 million a year ago.
BB&T said the increases in net charge-offs, nonperforming assets and the provision for credit losses were driven by continued deterioration in mortgage loans, with the largest concentration of problems occurring in Georgia, Florida and the Washington, D.C., area.
“Our overall earnings were relatively strong given the higher loan losses and additional loan loss reserves, and our capital levels and earnings power remain strong,” said President and Chief Executive Kelly S. King in a statement.
King said the increases in problem loans were “generally within the range we expected,” and the bank foresees further increases as the economy continues to struggle.
BB&T, which received $3.1 billion in government funding as part of the banking bailout, said it incrementally increased loans during the quarter, and has made about $1.9 billion in additional loans since receiving the money. The bank paid a dividend of $40 million to the U.S. Treasury in connection with the investment during the first quarter.
BB&T has more than 1,500 banking offices in 10 states and Washington, D.C. Its shares have ranged from $12.90 to $45.31 over the past year.