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Financial reports 27 Jul 2017

BBVA Compass reports record quarterly earnings

BBVA Compass Bancshares, Inc., a Sunbelt-based bank holding company (BBVA Compass), reported today record net income of $157 million for the second quarter of 2017, a 29 percent increase from the $123 million earned during the second quarter of 2016 and a 30 percent increase from the $121 million earned during the first quarter of 2017. Return on average assets and return on average tangible equity(1) for the second quarter of 2017 were 0.72 percent and 7.93 percent, respectively.

BBVA Compass Houston Tower

Net income for the first six months of 2017 totaled $278 million, an increase of 72 percent from the $162 million earned during the first six months of 2016. Return on average assets and return on average tangible equity(1) for the first six months of 2017 were 0.64 percent and 7.12 percent, respectively.

"Our strong second quarter results attest to the collective strength of our teammates, and also reflect our unparalleled passion for the best customer service," said Onur Genç, president and CEO of BBVA Compass. "As we move forward, we'll continue to build on the key components of our financial success, some of which include targeted balance sheet growth that optimizes capital, effective spread management, deposit cost control and continued improvement in credit quality metrics."

Total revenue for the quarter was $832 million, an increase of 9 percent from second quarter 2016 levels that was driven by an increase in net interest income. Net interest income totaled $585 million, an increase of $82 million or 16 percent from the second quarter of 2016 and an increase of $34 million or 25 percent (annualized) on a linked-quarter basis with first quarter 2017. The percent net interest margin in the second quarter was 3.11 percent, up 56 basis points from the quarter a year ago and 15 basis points on a linked-quarter basis.

"The increase in net interest income certainly reflects the benefit of higher short-term interest rates and the interest rate sensitivity position of our balance sheet, which positively impacted earning asset yields, particularly loan yields," Genç noted. "At the same time, it also reflects our continued efforts focused on prudently managing spreads and maintaining a disciplined deposit pricing strategy."

Noninterest income for the quarter totaled $246 million, a decrease of 4 percent compared to the $257 million recorded for the second quarter of 2016 as positive gains in each of our major fee-based businesses were offset by a decline in investment banking and advisory fees and other income associated with this area. On a linked quarter basis, noninterest income increased 3 percent annualized as the increase in fee-based businesses, particularly card and merchant processing, money transfer income and corporate and correspondent investment sales, more than offset the decline in investment banking and advisory fees. Noninterest expense totaled $572 million, an increase of 6 percent compared to the year ago quarter. On a year-to-date basis, total noninterest expense declined 1 percent compared to the same period a year ago.

With respect to the balance sheet, average total loans for the second quarter of 2017 were $59.9 billion, a decrease of 4 percent from $62.4 billion for the second quarter of 2016. This decrease further reflects the company's focus on targeted loan growth aimed at enhancing long-term profitability while also efficiently optimizing capital consumption. During the first half of 2017, approximately $7.5 billion of customer loans were funded, including $4.0 billion during the second quarter. Average total deposits for the quarter decreased 4 percent to $65.7 billion, primarily as a result of a decrease in higher rate deposits. Conversely, average noninterest bearing demand deposits increased 3 percent and now represents 32 percent of total deposits.

Credit quality metrics showed continued improvement, following the trend of the past several quarters. Nonperforming loans totaled $821 million at the end of the quarter, a decrease of $72 million compared to first quarter 2017 and $162 million since the end of the fourth quarter of 2016. Nonperforming loans as a percentage of total loans were 1.37 percent, down from 1.49 percent at the end of the first quarter of 2017 and 1.63 percent at year-end 2016. The decrease continues to reflect improvement in the company's primarily reserved-based energy portfolio that represents 4.9 percent of total loans compared to 6 percent a year ago. Net charge-offs as a percentage of average loans totaled 42 basis points in the quarter, down from 57 basis points in the first quarter of 2017 and 43 basis points in the second quarter of 2016. The allowance for loan losses as a percentage of total loans ended the quarter at 1.36 percent while the coverage ratio of nonperforming loans stood at 100 percent.

Total shareholder's equity at the end of the second quarter totaled $13.0 billion, a 2 percent increase from $12.7 billion at the end of the second quarter of 2016. The CET1 ratio rose to 11.89 percent(2) at the end of the second quarter of 2017, up 40 basis points from the end of the fourth quarter of 2016 and 110 basis points from the end of the second quarter of 2016. Each of the company's other regulatory capital ratios remain significantly above "well-capitalized" guidelines at the end of the quarter.

"BBVA Compass has been part of the Comprehensive Capital Analysis and Review for four years, and in each, our capital plan has received no-objection from the Federal Reserve," Genç said. "Our strong capital position will support us as we continue to transform digitally to get ready for the challenges and opportunities of 21st century banking."

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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 ratios at June 30, 2017, are estimated.