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  • spin.vestor spin.vestor Oct 19, 2012 6:24 PM Flag

    Norm - What do you think?

    King's FDIC answer was gobble-de#$%$ at BBTs finest. Just like BBT's accounting on NPAs that frustrates you so much. There is more to come. The NPAs and TDRs are still mismarked.

    Each time a NPL washes through to REO and then finally sale, foreclosure expenses are required to correct the mismakrs that are still present on the balancesheet. Its part of Kings shell game to make the provision look light just like the shell game where King introduced core vs Non-core charge-offs and this quarters shell game of introducing Core vs Non-core NIM. King focuses on what analysts wan't and ensures the accounting chosen maxamises that metric. King can't change the economics of BBTs prior bad underwriting - just delay and spread-out the hit.

    You still got Q4 regulatory clean-up on BBTs NPA assets to look forward to. Funny how every other major bank was able to get it done and take the hit in Q3. Not BBT though. It will be a nice big chargoff that you will be asked to ignore as a one time or 'Non-Core' charge as King likes to put it.


    • You may be right Spin but I think it's worth pointing out that Kelly King and Clark Starnes in previous conference calls have consistently pointed out that the final marks on liquidated oreos have been several points worse than the cumulative mark on the charge-off. Several points are significant but it does not equate to the billion plus charge run through the valuation allowance in other income and expense. I have been told that bbt investor relations in 2010 and 2011 that the bulk of the valuation allowance has been due to a worsening in market prices but now the market appears to be on the upswing.

      I looked at their FRY9C at 6/30/12. It shows the cost to maintain and sell oreos at $52 million. It does not show the valuation allowance. But the bbt financial statements show foreclosed property expense through June at $164 million. The difference, I believe, is the valuation allowance charge-off of $112 million through 6 months.

      I don't believe several points of additional marks equates to anything close to $112 million. I think the vast majority of the $112 million is additional marks because of allegedly worse market prices. I've lost track of the cumulative mark on their oreos but believe the cumulative mark it's around 85% And based on their latest comments of additional foreclosed property expense at the 10/18/12 conference call, I'm speculating than they might write-down some of their property to zilch.

      Of course, bbt management could end this speculation on my part by providing full disclosure showing the cumulative principal balance of the bad loans and their carrying value and corresponding mark.

      Their is no reason for bbt to treat this area with a cloak of secrecy. Shareholders have the right to fair financial reporting. Anything less violates basic core values. This is certainly a determinant in my investment criteria. At one time JC Browns and I owned around 30,000 common shares of bbt.
      We have reduce our position by about 2/3. I have my balance largely hedged through covered calls. Our number 1 concern regards management credibility and our opinions might change for the positive with proper financial disclosure.

      Thanks for your comments.


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