BBVA Compass Bancshares, Inc., a Sunbelt-based bank holding company (BBVA Compass), reported today net income of $89 million for the fourth quarter of 2016 compared to $92 million earned during the fourth quarter of 2015. Included in fourth quarter 2016 and 2015 results were goodwill impairment charges of $60 million and $17 million, respectively. Net income adjusted to exclude goodwill impairment was $149 million for the fourth quarter of 2016 and $109 million for the fourth quarter of 2015. Return on average assets and return on average tangible equity(2) for the fourth quarter of 2016 were 0.40 percent and 4.51 percent, respectively.
Net income for the twelve months of 2016 was $372 million compared to $507 million earned during the twelve months of 2015. Return on average assets and return on average tangible equity(2) for the twelve months of 2016 were 0.41 percent and 4.82 percent, respectively.
“Despite the challenging economic environment in 2016, we are encouraged by the momentum of our results during the second half of the year, particularly with respect to revenue growth in the fourth quarter,” said Onur Genç, president and CEO of BBVA Compass. “As we navigate the evolving landscape in 2017, our focus is on targeted balance sheet growth, managing the spread on our earning assets and ensuring we are optimizing our capital base to enable us to enhance profitability. Digital transformation will be at the forefront of our efforts designed to increase digital sales while at the same time improving the client experience.”
"Despite the challenging economic environment in 2016, we are encouraged by the momentum of our results during the second half of the year, particularly with respect to revenue growth in the fourth quarter.
Total revenue increased 5 percent from the prior year as both net interest income and noninterest income posted solid gains. Net interest income totaled $532 million in the quarter, an increase of 5 percent from prior year levels. The percent net interest margin in the fourth quarter of 2016 was 2.78 percent, up 22 basis points from a year ago and 5 basis points from third quarter 2016 levels. This improvement reflected the company’s focus on targeted loan growth and disciplined spread management, as well as the positive impact from the increase in interest rates. The company continues to maintain a balance sheet that is asset sensitive, and thus is well-positioned for further interest rate increases should they materialize.
Noninterest income for the quarter totaled $261 million, an increase of 5 percent compared to $249 million recorded in the fourth quarter of 2015. Growth in mortgage banking income, money transfer income, and card and merchant processing more than offset softness in some of our market sensitive businesses. Expense growth was also well-contained in the quarter with noninterest expense totaling $554 million, down 1 percent compared to the year ago quarter. For the full-year, total expenses increased 2 percent, reflecting the company’s focus on expense management.
“Average total loans for the year were $61.5 billion, an increase of 2 percent,” Genç noted. “While year-over-year growth was muffled by strategic loan sales, in 2016 we funded more than $14.5 billion in customer loans. At the same time, deposit generation remained strong and continued to fully fund our earning asset growth. Average deposits totaled $67.9 billion, an increase of $4.4 billion or 7 percent. Growth in this portfolio was led by an 8 percent increase in average noninterest bearing deposits which now represent 30.2 percent of total deposits.”
"BBVA Compass is committed to maintaining sound underwriting standards, a strong risk profile and reserve levels that adequately reflect the make-up of our loan portfolio and economic conditions,” Genç said. Provision expense for the year totaled $303 million and exceeded net charge-offs by $76 million. Net charge-offs as a percentage of average total loans were 40 basis points in the fourth quarter and 37 basis points for the full-year of 2016. The allowance for loan losses as a percentage of total loans ended the year at 1.40 percent, up from 1.24 at the end of 2015. Nonperforming loans as a percentage of total loans declined from 1.91 percent at the end of the third quarter to 1.63 percent, primarily reflecting activity within our energy portfolio.
Energy loans totaled $3.2 billion at the end of the quarter, down $76 million compared to third quarter 2016 levels and $905 million compared to first quarter 2016 levels when the portfolio reached its peak. The energy portfolio now represents 5.4 percent of total loans compared to 5.5 percent at the end of the third quarter of 2016 and 6.7 percent at the end of the first quarter of 2016. During the fourth quarter, nonaccrual loans in the energy portfolio declined by 34 percent from third quarter 2016 levels. This improvement reflects the company’s ongoing actions to actively manage this portfolio, as well as an improvement in economic conditions in this sector.
Energy loans totaled $3.2 billion at the end of the quarter, down $76 million compared to third quarter 2016 levels and $905 million compared to first quarter 2016 levels when the portfolio reached its peak.
Total shareholder’s equity ended the fourth quarter of 2016 at $12.8 billion, a 1 percent increase from $12.6 billion at the end of the fourth quarter of 2015. “Maintaining a strong capital position while optimizing the use of our capital base is an essential part of our strategic plan,” said Genç. “Each of the company’s regulatory capital ratios remain significantly above ‘well-capitalized’ guidelines and our total capital ratio ended the quarter at 14.31 percent(1) while the CET1 ratio rose to 11.49 percent(1) from 10.70 percent(1) at the end of 2015.”
(1) Regulatory capital ratios at December 31, 2016, are estimated
(2) Average tangible equity is a non-GAAP financial measure that we believe aids in understanding certain areas of our performance.