BBVA Compass Bancshares, Inc., (BBVA Compass), reported today net income of $52 million for the fourth quarter of 2017, a 42 percent decrease from the $89 million earned during the fourth quarter of 2016. Included in fourth quarter 2017 results is income tax expense of approximately $121 million related to the revaluation of net deferred tax assets at the lower statutory tax rate mandated by the Tax Cuts and Jobs Act (non-cash charge). Excluding the impact of this item, adjusted net income(1) for the quarter was $173 million, a 33 percent increase from third quarter 2017 and a 94 percent increase from the fourth quarter 2016.
Net income for full-year 2017 totaled $461 million, an increase of 24 percent from the $372 million earned during the full-year of 2016. Excluding the impact of the non-cash charge, adjusted net income for the full-year 2017 was $582 million, up 57 percent.
Genç: The positive momentum we have built in our organization allowed us to report solid results for the year, and we finished the year on a strong note by delivering record operating income in the fourth quarter
“The positive momentum we have built in our organization allowed us to report solid results for the year, and we finished the year on a strong note by delivering record operating income in the fourth quarter,” said Onur Genç, president and CEO of BBVA Compass. “While the change in tax law required a revaluation of our net deferred tax assets, underlying trends in all of our businesses were very positive in the quarter. Revenue growth was robust and well-balanced as both net interest income and noninterest income posted double-digit gains over the year ago quarter. At the same time, balance sheet growth accelerated during the quarter both in terms of loans and deposits, while credit quality metrics improved throughout the year. As we enter 2018, our plan is to continue building on this momentum while also increasing our digital transformation efforts designed to increase our digital sales capabilities and improve the customer experience.”
Total revenue for the quarter was $901 million, an increase of 14 percent from fourth quarter 2016 levels. For the full-year 2017, total revenue was $3.4 billion, an increase of 9 percent from $3.1 billion in 2016. Net interest income totaled $604 million, up 14 percent from the fourth quarter of 2016 and 10 percent (annualized) on a linked quarter basis. The percent net interest margin in the fourth quarter was 3.22 percent, up 44 basis points from the fourth quarter of 2016 and 9 basis points from the third quarter of 2017. On a year-to-date basis, the percent net interest margin was 3.10 percent, an increase of 46 basis points compared to the same timeframe a year ago.
Noninterest income for the quarter totaled $297 million, an increase of 14 percent compared to the $261 million recorded in the fourth quarter of 2016. Positive performances were broad-based led by increases in corporate and correspondent investment sales, investment banking and advisory fees, retail investment sales and other income, which includes a sundry of miscellaneous items. While noninterest expense growth in the quarter was 11 percent, overall expense growth for the year was well-contained at 3 percent. As a result of this positive operating leverage, total operating income(1) was a record $285 million in the quarter, an increase of 20 percent compared to the fourth quarter of 2016. For the full-year 2017, operating income(1) totaled $1.1 billion, an increase of 21 percent compared to the full-year of 2016.
Genç: Loan growth accelerated during the second half of the year, particularly during the fourth quarter
“While overall balance sheet growth was muted during the first half of the year, loan growth accelerated during the second half of the year, particularly during the fourth quarter,” Genç noted. “During the year, we funded a record $18.4 billion of customer loans, an increase of 27 percent compared to the prior year, including $5.9 billion in the fourth quarter. Particularly noteworthy during the year was our 6th place ranking nationally in terms of the number of SBA 7(a) loans originated. While our commercial loan pipeline remains strong, continuing to build out our capabilities, particularly with respect to our consumer offerings in the digital space, remains a priority and we have been encouraged by the recent success of our Express Personal Loan product.”
Total loans at the end of the fourth quarter of 2017 were $61.7 billion, a 9 percent (annualized) increase on a linked quarter basis and a 2 percent increase from the end of the fourth quarter of 2016. Total deposits at the end of the fourth quarter of 2017 were $69.3 billion, a 12 percent (annualized) increase on a linked quarter basis and a 3 percent increase at the end of the fourth quarter of 2016. Total noninterest bearing deposits increased 6 percent compared to a year ago and 10 percent on a linked quarter basis. Interest bearing deposits increased 1 percent compared to a year ago and 13 percent (annualized) on a linked quarter basis led by a 14 percent (annualized) increase in interest bearing transaction accounts.
“Maintaining strong credit quality standards is a top priority and during the year many of our key metrics showed improvement, a trend that continued in the fourth quarter,” Genç noted. Nonperforming loans totaled $718 million at the end of the quarter, a decrease of $265 million since the end of the fourth quarter of 2016. Nonperforming loans in the primarily reserved-based energy portfolio declined $31 million during the quarter, bringing the year-over-year decrease to $236 million. Nonperforming loans as a percentage of total loans were 1.16 percent, down from 1.63 percent at year-end 2016. Net charge-offs as a percentage of average loans totaled 42 basis points in the quarter and 47 basis points for the full-year of 2017. The allowance for loan losses as a percentage of total loans ended the year at 1.37 percent while the coverage ratio of nonperforming loans rose to 117 percent compared to 85 percent at the end of 2016.
Total shareholder’s equity at the end of the fourth quarter totaled $13.0 billion, a 2 percent increase from $12.8 billion at the end of the fourth quarter of 2016. The CET1 ratio rose to 11.80 percent(2) at the end of the fourth quarter of 2017, up 31 basis points from the end of the fourth quarter of 2016. All of BBVA Compass’ regulatory capital ratios significantly exceed the requirements under “well-capitalized” guidelines.
1 Adjusted net income excludes the impact of the revaluation of net deferred tax assets mandated by the Tax Cuts and Jobs Act. This measure, along with operating income, are non-GAAP financial measures we believe aid in understanding certain areas of our performance. The calculation of these measures is included on the page titled Non-GAAP Reconciliation.
2 Regulatory ratios at December 31, 2017, are estimated.