I'll be sending in my $200 contribution shortly.
Thought 50% mark on the oreo stuff was enough. Obviously not. $500 million loan disposition apparently got marked at 67% - $100 million charge made to the valuation allowance (part of the $142 million foreclosed property expense) and another charge of $74 million run through other income. Those 2 charges amount to a loss in eps of $.20. Also, was not expecting nonaccrual loans to increase by about $300 million. This is second consecutive quarterly increase and reduced the release amount from the Allowance for Loan Loss Reserve.
Oh well. Charity is a good cause.
"Norm: When do you believe that will be?"
Not sure what that refers to. If you talking about ALL release or Bible's $700 million of extraqordinary annual charges for bad loans, I think we'll see the most of the impact in the 2nd half of the year.
Follow the numbers not what King says:
End of period loan balance ex ADC, ex covered, ex HFS
down - 265 / 1.13% ananualized.
End of period loans inc ADC, ex covered and ex HFS.
Q1 - 96,772
Q4 - 97,373
down - 601 / 2.45% annualized
End of period loans inc ADC, inc covered ex HFS.
Q1 - 102,575
Q4 - 103,567
down - 992 / 3.83% annualized
End of period loans inc ADC, inc covered and inc HFS
Q1 - 104,887
Q4 - 107,264
down 2377 / 8.86% annualized.
King uses Average balances vs end of period because in a declining trend the average balance is obviously higher.
Follow the numbers not what King says.
Queen - From Page of their 4/21/11 press release:
"Average total loans and leases held for investment, excluding the impact of ADC and covered and other acquired loan runoff, increased $1.2 billion, or 5.2% on an annualized basis "
Norm, you're like the NASA engineer trying to solve an equation that has nothing to do with the problem. None of what you wrote has anything to do with the stock price. We are at a phase in the market now where the banks will use their reserves to smooth earnings, nothing more. LLRs are a gimmick to manipulate earnings. You need to focus on the following:
Balance Sheet Growth - Down and/or anemic
Loan Growth 0.2% YoY...no growth
Residential Mortgage Growth - represents tail end of Q4 refi boom, this number will go down and coupons have been tredning down as well
C&I Loan growth - very good, but yields are even lower than mortgages, and BB&T has been a land bank, and since they have so much trouble valuing real estate collateral, do yo really think they know how to value commercial collateral? What are they going to do, hire a business appraiser working out of his garage.
use your analytic talents for things that matter. These guys have some serious challenges ahead. When the fed gets rid of the safety net...BB&T is going to have to start paying its depositors some real money and their cash in securities will have to be put to work making loans and yields will compress.
At times, BB&T's Execs can be really boneheaded. Within their vaunted crdit culture is a bias to just say "no" and if that happens a lot, this balance sheet will really start to shrink at an alarming level.
Queen - I disagree.
Their loans for the quarter grew 5% without adc runoff.
For the 2nd consecutive qtr. prime mortgages grew in excess of 22%. C&I was close to double digits. Auto was 4%. Specialized lending was down for the quarter but will increase significantly this qtr. Even retail lending is showing some life and may rebound soon. Alot of opportunities in cre and planned runoff is coming to an end. Adc may run another $500 to $1 billion but its already dropped 70% from its peak. When real estate market comes back and it will bbt has $25 billion of investment securities earning 1.65% which will be put to work financing new loans.
When the Fed increases rates, their net interest income will appreciate significantly. Reference their interest rate sensitivity in the slide deck at yesterday's cc. A 200 bsp increase increases net interest income by about 4% or about $50 million per quarter. Looks like most of their security portfolio is either libor plus 100 bsp or very short term duration. Most of it only yields 1.65% annually and is down sharply from the 4th qtr (1.95%).
Bbt shareholders got hosed yesterday because of the loss severity on the $500 million bad loan disposition. Good grief. A loss severity of 67% after telling us that the 50% mark in 4th qtr cc was good? Also I'm not to happy about the increase in nonaccruals (about $300 million).
Yes, I understand Kelly King is in an extraordinary difficult position and has done an excellent job in preventing really bad shareholder dilution.
But we're simply not getting straightforward explanations. Clark Starnes says that this quarter marks on loan disposition were unusally high because of bulk sale and will revert back to the 50% which is the value place on oreo. Well, what about 2nd qtr? He has already said that dispositions in the 2nd qtr. will exceed $500 million. And then we have Aaron Bible who talked about how the foreclosure cost has reduced eps $.60 to $.65 per qtr and will take 1 to 2 years to runoff. Well that implies that the $100 million plus quarterly valuation adjustment will continue throughout this year and that the 50% mark on balance sheet is insufficient.
What's going on here?
Commercial property values have stabilized or are increasing modestly.
Imo, bottom line is that the 50% mark is insufficient. The loss severity rate on the adc stuff is a disaster. Could not cover it in 2010 because it could have taken share price in deep dive.
Again, I think King has done a nice job but do believe he and his lieutenants should have provided better disclosure.