Helped by robust loan volume and stable net interest margins, two North Carolina banks that plan to merge reported strong third quarter earnings Monday.

Net income at Wilson-based BB&T Financial Corp. gained 19.2% over the year-ago period, to $32.2 million.

Southern National Corp., Winston-Salem, earned $28 million, up 29%.

BB&T's 88 cents in earnings per-share beat the Wall Street consensus by seven cents. Southern National's 58 cents a share was one cent above consensus.

Stable net interest margins played a major role in the improvement at both banks, as a rise in deposit costs continued to lag behind the increase in loan rates tied to prime.

The margin at both companies was the same, 4.29%, and in each case it gained one basis point from the second quarter.

"The third quarter is going to be a very solid one for the banking industry in general," said Davenport & Co.'s David West. "In most cases, banks have been enjoying the increase in prime. Yet deposit costs are still at rates well below the Treasury yield curve."

Southern National chief financial officer John R. Spruill said deposit costs should begin to catch up in the fourth quarter, when he expects Southern National's margin "to be down slightly."

Loan growth also helped improve third quarter earnings.

Southern National reported a 15% annualized increase led by adjustable rate mortgages and consumer installment loans. BB&T's increase was in the 9%-to-10% range, led by consumer loans and sales finance.

Southern National also benefired from the use of derivatives, which contributed $520,000 to the bottom line in the third quarter.

Returns at BB&T were improved by a reduction in non-interest expense, to $80 million, down $2 million from the second quarter.

BB&T also got a boost from noninterest income, up 9% from the year-ago period to $33.5 million, driven by service charges, bankcard merchant fees, insurance, and broker/dealer activities.

BB&T, which has $10.2 billion of assets, and Southern National, which has $8.5 billion, indicated Monday that the merger of the two companies is likely to close in the first quarter rather than the second, as expected when the deal was announced Aug. 1.

The combined company will have the top market share in North Carolina and the third-largest deposit share in South Carolina.

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