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46 | Th e M Rep o RT o r i g i nat i o n s e r v i c i n g a na ly t i c s s e c o n da r y M a r k e t ORIGINATION the latest BB&t earnings drop in Q1 Mortgage banking income and actual revenues increase. B B&T Corp.'s profits are down for the first quarter of 2015, drop- ping 1.6 percent since Q1 last year, according to a recently released earnings report. The company posted a net income of $488 million for the quarter, down from $496 million a year ago. Earnings per share came in at 67 cents, compared to 68 cents per share in Q1 of 2014. Despite the no- table drop, according to Kelly S. King, chairman and CEO of BB&T, the dip in profits doesn't send up any red flags for the company. "Given the challenges of the current rate environment, I am pleased with our financial performance and other accomplish- ments during the quarter," King said. "We enjoyed solid loan growth, good expense control in a seasonally chal- lenging quarter and outstanding credit quality. But while earnings dropped, mortgage-banking income and actual revenues for BB&T both increased. Since Q1 last year, mortgage-banking income rose by 48.6 percent, and total revenues for the company jumped by 1.5 percent, or $34 million, coming in at $2.3 billion total. "These results were driven by continued strength in our fee-based businesses, with insur- ance achieving a record quarter," King said. "Excluding residential mortgage loans, average loans grew 5.4 percent compared to last quarter, and our credit metrics improved across the board." Despite improved revenues, BB&T still failed to meet the ex- pectations of analysts. According to the Wall Street Journal, Thomson Reuters said analysts projected the company would reach revenues of $2.4 billion and 70 cents per share for the quarter. In addition to fall- ing profits, income on loan interest also decreased, drop- ping by 2.6 percent in the first quarter. According to the Wall Street Journal, BB&T CFO Daryl Bible expects these numbers to recover over the next year, as the company acquires both Bank of Kentucky Financial Corp. and Susquehanna Bancshares Inc. "Both opportuni- ties are fantastic, and at this point we feel more excited about them than the day we announced," Bible told the Wall Street Journal. BB&T also recently acquired 41 branches in Texas, increased its partnership interest in AmRisc and sold its subsidiary American Coastal Insurance Company. Other notable items in the earnings report included in a significant increase in noninterest expenses (from $28 million to $1.4 billion), a 2.4 percent drop in aver- age deposits and a slight jump in the company's adjusted efficiency ratio from 58.2 to 58.5 percent. lenders Believe industry changes Will Benefit Buyers More than originators More than three quarters say MIp reductions and expanding 97-percent LTV loans will improve the consumer outlook. a new survey by Fannie Mae revealed that most mortgage lenders expect to see benefits from the industry's most recent changes– particularly the Federal Housing Administration's (FHA) move to reduce mortgage insurance premi- ums (MIPs) and the expansion of GSE-eligible 97-percent loan-to- value (LTV) products. The survey, a quarterly Mortgage Lender Sentiment Survey conducted by Fannie Mae's Economic & Strategic Research Group, studied the thoughts of senior mortgage executives throughout the U.S. Specifically, the survey asked about Fannie Mae and Freddie Mac's recent expansion of GSE- eligible 97-percent LTV loan of- ferings and the FHA's .05 percent reduction to annual MIPs, as well as the effect those would have on their business. According to the results of the survey, two out of every three lenders said that both increased 97-percent LTV products and MIP reductions will "somewhat" improve mortgage originations. A third of lenders said they don't expect the changes to impact mortgage originations at all. Though they're on the fence about the benefits for themselves, most lenders surveyed agreed that both changes would be advanta- geous to consumers. In fact, 76 percent believe that expanding 97-percent LTV loan products will be good for homebuyers, and an- other 81 percent believe the MIP reduction will be beneficial, too. The survey also revealed that 81 percent of lenders are planning to offer 97-percent LTV loans in the next calendar year, and though many believe these expanding offerings will improve the overall mortgage market down the line, not as many are confident in their ability to increase loan origina- tions. Of the lenders planning to offer 97-percent LTV loans, only 44 percent expect it to affect their loan origination rate. Another 54 percent expect the origination volume to remain about the same. According to Steve Deggendorf, director of business strategy at the Fannie Mae Economic & Strategic Research Group, both the reduced MIPs and the expansion of 97-per- cent LTV loans were a response to past consumer feedback and research. "Lenders told us the top two causes of mortgage volume de- clines in 2014 were tighter credit underwriting standards and weak consumer demand," Deggendorf said. "In prior research from our National Housing Survey, young renters said that gathering a down payment and affording the monthly mortgage payment [were] two of the top barriers to obtaining a mortgage. The GSE and FHA initiatives seek to ad- dress these lender and consumer concerns by expanding credit access through the GSEs' lower down payment requirements (helping those who can't afford a larger down payment) and from the FHA's lower mortgage insurance premiums (helping those who need more affordable monthly mortgage payments)." "Given the challenges of the current rate environment, I am pleased with our financial performance …" — Kelly S. King, BB&T chairman and CEO