BB&T (BBT) in Winston-Salem, N.C., reported a decline in quarterly earnings because of lower mortgage activity and a narrower net interest margin.

The $188 billion-asset company said in a press release Monday that its second-quarter earnings fell 22% from a year earlier, to $425 million, or 58 cents a share. Revenue fell 7%, to $2.3 billion.

BB&T's noninterest income fell 11%, to $933 million. The decline was largely due to an 82% decrease in mortgage banking income and a 7% drop in investment banking and brokerage fees and commissions.

The company's net interest income fell 5%, to $1.38 billion. Total loans rose 2%, to $121.2 billion, with loans rising in most major categories, but the net interest margin compressed 27 basis points, to 3.43%. Total deposits were relatively flat from a year earlier, at $131.6 billion.

The loan-loss provision fell 56%, to $74 million. Net chargeoffs declined 44%, to $121 million, while nonperforming assets decreased 28%, to $916 million.

BB&T also said it will establish a reserve after being notified that the Department of Housing and Urban Affairs will conduct an audit survey of the company's origination process for loans insured by the Federal Housing Administration. "In light of an announcements made by other financial institutions related to the outcomes of similar audits and related matters, and after further review of our exposure, we believe it is prudent" to create the reserve, Kelly King, BB&T's chairman and chief executive, said in the release.

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