BBVA Compass Bancshares, Inc., a Sunbelt-based bank holding company (BBVA Compass), reported today net income of $209 million for the first quarter of 2018 compared to $52 million in the fourth quarter of 2017 ($173 million(1) adjusted for the impact of the Tax Cuts and Jobs Act) and $121 million earned during the first quarter of 2017. Earnings in the quarter represented a 20 percent increase from adjusted earnings(1) in the fourth quarter and a 73 percent increase from year ago levels. Return on average assets and return on tangible equity(2) for the first quarter of 2018 were 0.96 percent and 10.51 percent, respectively.
“Our team at BBVA Compass continued to capitalize on the positive momentum we have developed throughout our organization and allowed us to deliver record performance in multiple areas including net income,” said Onur Genç, president and CEO of BBVA Compass. “Revenue growth was strong, led by a double-digit increase in net interest income, and expenses were well-managed which allowed us to achieve positive operating leverage and record operating income. At the same time, our digital transformation efforts also met with continued success including the broader launch of our fully digital Express Personal Loan, while our award-winning mobile banking app saw a 30 percent year-over-year jump in active users(3). Clearly, our digital transformation strategy is working and seeing our strategy come to life provides us the drive to continue meeting and exceeding our customers expectation for amazing experiences.”
Total revenue for the quarter was $880 million, an increase of 11 percent from the first quarter 2017. Net interest income totaled $623 million, an increase of $71 million or 13 percent from the first quarter of 2017, and an annualized increase of 13 percent from fourth quarter 2017 levels. The percent net interest margin in the first quarter of 2018 was 3.27 percent, an increase of 31 basis points from a year ago and 5 basis points from the fourth quarter of 2017. “The increase in net interest income reflects higher short-term interest rates, the asset sensitivity of our balance sheet and our focus on increasing activity while actively managing loan and deposit spreads,” noted Genç.
Noninterest income for the quarter totaled $258 million, an increase of 5 percent compared to the $245 million recorded in the first quarter of 2017. Growth in several of our fee-based businesses exceeded overall growth, led by card and merchant processing fees which climbed 32 percent year-over-year. Also noteworthy was the growth in corporate and correspondent investment sales (+35 percent), retail investment sales (+10 percent) and asset management fees (+10 percent). Expense growth was also kept in check with noninterest expenses rising just 2 percent year-over-year. Given this positive operating leverage, total operating income2 was a record $318 million, an increase of 29 percent from the first quarter of 2017.
In terms of balance sheet growth, total loans for the first quarter of 2018 were $62.3 billion, an increase of 4 percent from the $59.8 billion at the end of the first quarter of 2017. Commercial loan growth (+7 percent) continued to outpace overall loan growth while consumer loan growth accelerated, driven by increased activity in direct consumer lending (+40 percent) and credit cards (+15 percent). During the quarter, newly funded loans totaled $4.4 billion, up 25 percent compared to the pace in the year ago quarter. Equally important, deposit growth exceeded loan growth in the quarter as total deposits rose 4 percent to $69.9 billion and the loan to deposit ratio ended the quarter at 89.1 percent.
“While we are focused on increasing activity with our customers and adding new products and technology to meet their ever-changing needs, our entire organization is also committed to maintaining sound underwriting standards and a strong risk profile,” Genç noted. Nonperforming loans totaled $694 million at the end of the quarter, down 22 percent from a year ago and 3 percent from year-end 2017. As a percentage of total loans, nonperforming loans were 1.11 percent at quarter end compared to 1.49 percent at the end of the first quarter of 2017. Net charge-offs as a percentage of average loans were 44 basis points in the quarter compared to 57 basis points in the year ago quarter. The allowance for loan losses as a percentage of total loans ended the quarter at 1.34 percent while the coverage ratio of nonperforming loans rose to 120 percent compared to 93 percent in the first quarter of 2017.
“Maintaining a strong capital position is also a top priority as we expand our client base,” Genç said. Total shareholder’s equity at the end of the quarter totaled $13.1 billion, a 2 percent increase from $12.9 billion at the end of the first quarter of 2017. The CET1 ratio rose to 12.08 percent(4) at the end of the first quarter of 2018, up 28 basis points from the end of the fourth quarter of 2017. Importantly, all of BBVA Compass’ regulatory capital ratios significantly exceed the requirements under “well-capitalized” guidelines.
During the first quarter, BBVA Compass announced it now offers near instantaneous decisioning and potential same day funding for both customers and non-customers with the footprint wide(5) opening of the fully digital BBVA Compass Express Personal Loan. The product, which represents months of effort across the entirety of the bank, underscores BBVA Compass' drive to digital transformation and achieving excellence in customer experience.
BBVA Compass also announced the launch of the new BBVA Compass Rewards Card. The new credit card offers rewards to customers for every purchase they make, with no cap on earnings, and boasts an easy to understand rewards structure. When combined with BBVA Wallet, the bank's proprietary wallet app, customers can take advantage of instant reward redemption - even at the point of sale - and manage their card's security, all with the tap of a screen.
1 Adjusted net income excludes the impact of the revaluation of net deferred tax assets mandated by the Tax Cuts and Jobs Act. The calculation of this measure is included on the page titled Non-GAAP Reconciliation.
2 Return on average tangible equity and operating income are non-GAAP financial measures that we believe aid in understanding certain areas of our performance. The calculation of this measure is included on the page titled Non-GAAP Reconciliation.
3 An active user is defined as a customer who signs in to the mobile banking app at least once per month for three consecutive months.
4 Regulatory ratios at March 31, 2018, are estimated.
5 Except California
FTE – fully taxable equivalent