BB&T Corp., North Carolina's second-largest bank, said the Department of Housing and Urban Development plans to audit the lender over sales of government-backed loans.

BB&T was notified of the audit last quarter and set aside reserves of $53 million, or 7 cents a share, based on the outcomes of similar queries, the Winston-Salem-based lender said today in a statement.

"While there are no findings from HUD at this time, in light of 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 establish reserves," the firm said in the statement.

It "could be a year and a half or so before we find out what the final determination is," Chief Executive Officer Kelly King, 65, said on a conference call to discuss second-quarter results.

Net income fell 22% in the quarter to $425 million, or 58 cents a share, from $547 million, or 77 cents, a year earlier, the bank said in the statement. Earnings excluding some expenses were 70 cents, missing the 75-cent average estimate of 31 analysts surveyed by Bloomberg.

Expenses increased 3.7% to $1.55 billion from a year earlier and the bank’s efficiency ratio, a measure of management’s ability to control costs, rose to 59.8% from 57.6%, the firm said.

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