BBVA Compass Bancshares, Inc., a Sunbelt-based bank holding company (BBVA Compass), reported today net income of $121 million for the first quarter of 2017 compared to $89 million earned during the fourth quarter of 2016 and $39 million earned during the first quarter of 2016. Earnings in the quarter represented a 35 percent increase from the prior quarter and a 208 percent increase from year ago levels. Return on average assets and return on average tangible equity (1) for the first quarter of 2017 were 0.56 percent and 6.28 percent, respectively.
“Our results for the first quarter of 2017 reflect our ability to build upon the momentum we experienced in the second half of last year, particularly with respect to revenue growth,” said Onur Genç, president and CEO of BBVA Compass. “While our balance sheet was certainly well-positioned to benefit from an increase in interest rates, our results also demonstrate our efforts to manage loan and deposit spreads, effectively control expense growth and prudently manage our energy portfolio. These factors, along with continuing on our path towards digital transformation and improving the client experience, remain our primary focus as we aim to enhance profitability.”
Our results for the first quarter of 2017 reflect our ability to build upon the momentum we experienced in the second half of last year, particularly with respect to revenue growth
Total revenue for the quarter was $796 million, an increase of 5 percent from first quarter 2016 levels. Net interest income totaled $551 million, an increase of $35 million or 7 percent from the first quarter of 2016, and an annualized increase of 15 percent from fourth quarter 2016 levels. The percent net interest margin in the first quarter of 2017 was 2.96 percent, up 35 basis points from a year ago and 18 basis points from the fourth quarter of 2016. This improvement reflects the positive impact from the increase in interest rates, as well as the company’s continued focus on targeted loan and deposit growth and disciplined spread management. The company continues to maintain an asset-sensitive balance sheet and thus is positively positioned for future interest rate increases should they materialize.
“While noninterest income at $245 million was relatively unchanged from a year ago, the first quarter of 2016 included a gain on sale of mortgage loans in other noninterest income,” Genç noted. “Conversely, all of our fee-based businesses generated positive growth, particularly our market sensitive businesses which each grew at double digit rates. At the same time, our focus on strong expense management met with continued success as total noninterest expense declined both from prior quarter and year ago levels.”
In terms of balance sheet growth, average total loans for the first quarter of 2017 were $60.3 billion, a decrease of 3 percent from $62.2 billion for the first quarter 2016, further reflecting the company’s strategic focus on targeted loan growth. While total loans declined, approximately $3.5 billion of customer loans were funded during the quarter. Average total deposits for the quarter were $67.2 billion, relatively unchanged from year ago levels. Average noninterest bearing deposits totaled $20.6 billion, representing a 3 percent increase from the prior year. Noninterest bearing deposits now represent nearly 32 percent of total deposits.
“Credit quality metrics continue to reflect our strong risk profile and commitment to maintaining reserve levels that adequately reflect our loan portfolio as well as current and expected economic conditions,” Genç said.
Nonperforming loans as a percentage of total loans declined to 1.49 percent compared to 1.63 percent at the end of the fourth quarter of 2016, reflecting continued improvement in the energy portfolio. Net charge-offs as a percentage of average total loans were 57 basis points in the quarter compared to 35 basis points a year ago, as the increase was specifically attributable to a single, commercial credit. The allowance for loan losses as a percentage of total loans remained unchanged from fourth quarter 2016 levels at 1.40 percent while the allowance for loan losses as a percentage of nonperforming loans stood at 93 percent.
“While the stress caused by the prolonged period of low energy prices impacted provisioning levels in the year ago quarter, we have been steadfast in our active management of this conservatively underwritten, reserve-based and highly-collateralized energy portfolio,” said Genç. “As a result, metrics continue to show improvement and losses have been well within expectations.”
While the stress caused by the prolonged period of low energy prices impacted provisioning levels in the year ago quarter, we have been steadfast in our active management of this conservatively underwritten, reserve-based and highly-collateralized energy portfolio
Energy loans totaled $2.9 billion at the end of the quarter, down $372 million compared to fourth quarter levels and down $1.3 billion compared to first quarter 2016 levels when the portfolio reached its peak. The energy portfolio now represents 4.8 percent of total loans compared to 5.4 percent at the end of the fourth quarter of 2016 and 6.7 percent at the end of the first quarter of 2016. During the first quarter of 2017, nonaccrual loans in the energy portfolio declined by 29 percent which was preceded by a 34 percent decline in nonperforming loans in the fourth quarter of 2016.
Total shareholder’s equity ended the first quarter of 2017 at $12.9 billion, a 1 percent increase from $12.7 billion at the end of the first quarter of 2016. The CET1 ratio rose to 11.75 percent(2) at the end of the first quarter of 2017, up 26 basis points from the end of the fourth quarter of 2016 and 111 basis points from the end of the first quarter of 2016. Each of the company’s other regulatory capital ratios remain significantly above “well-capitalized” guidelines at the end of the quarter.
1 Average tangible equity is a non-GAAP financial measure that we believe aids in understanding certain areas of our performance. The calculation of this measure is included on the page titled Non-GAAP Reconciliation.
2 Regulatory capital ratios at March 31, 2017, are estimated
FTE – Fully taxable equivalent