UPDATE 3-BB&T profit slumps as credit losses weigh

* EPS $0.23; Street view $0.22

* Nonperforming assets, charge-offs, loan loss provisn up

* Short-term loan delinquencies stable

* Shares down 4.5 percent in afternoon trading (Adds company, analyst comments, background.)

By Joe Rauch

CHARLOTTE, N.C., Oct 19 (Reuters) - BB&T Corp (BBT.N) said on Monday quarterly profit fell 56 percent as credit losses in a few key Southeastern areas weighed on results at the big U.S. regional bank.

Winston-Salem, North Carolina-based BB&T said nonperforming assets, net charge-offs and provisions for loan losses rose sharply, and its shares fell nearly 4.5 percent.

Net income was $157 million, or 23 cents per share, for the third quarter, down from $362 million, or 65 cents, a year earlier.

Analysts on average forecast 22 cents per share, according to Thomson Reuters I/B/E/S.

Despite the rise in credit issues, analysts said the third-quarter results are better than what was expected from BB&T, and while the bank will likely be able to earn its way through the industry's downturn, credit woes would linger in through 2010.

"I think investors are going to take the results with a grain of salt," said Todd Hagerman, an analyst with Collins Stewart LLC, who said he sees higher credit losses heading into next year.

The bank -- one of the 10 largest in the United States -- is seen as one of the early winners in the financial industry turmoil of the last year. It was one of the first banks to repay its U.S. government bailout, returning $3.134 billion of Troubled Asset Relied Program funds in June.

The bank's nonperforming asset ratio -- 2.48 percent -- is still well below many of its peers, and the bank was deemed healthy enough this year to absorb Colonial Bank, the largest U.S. bank to fail in 2009.

BB&T acquired Colonial Bank's deposits, assets and branches when the Montgomery, Alabama-based lender failed on Aug. 14.

BB&T said net interest, or lending, income increased 14.2 percent from a year earlier to $1.2 billion.

Noninterest income climbed 18.7 percent to $940 million, but noninterest expense, such as salaries and equipment, ballooned 31.3 percent to $1.3 billion.

BB&T, with $157 billion in total loans, set aside $709 million for bad loans, nearly double the total of a year earlier, curbing profitability in the quarter.

The bank said that while short-term loan delinquencies were stabilizing, longer-term credit problems were continuing to increase.

Net charge-offs for loans the bank does not expect to be paid back totaled $446 million, increasing to 1.71 percent of total assets from 1 percent a year earlier.

Nonperforming assets surged more than 150 percent to $4.1 billion and now make up 2.48 percent of total assets, compared with 1.2 percent a year earlier.

In the company's earnings call, BB&T Chief Executive Kelly King said the loan problems continued to be concentrated in the company's home construction loan portfolio.

King said such loans in the metro Atlanta, Florida and metro Washington, D.C., were continuing to deteriorate, along with some increase in issues on the North and South Carolina coast.

"This is where most of the stress has been and where it remains," King said.

He said loans in other consumer and mortgage units were beginning to stabilize.

Net interest margin, the difference between what the bank earns on loans and pays on deposits, was little changed at 3.68 percentage points.

Loans increased 10.7 percent to $107 billion, while deposits and total assets spiked, in large part due to the Colonial deal. Deposits rose nearly 30 percent to $114 billion, and assets increased 21 percent to $165 billion.

BB&T shares stood at $26.99 in afternoon trading, down 4.46 percent from a Friday close at $28.25 on the New York Stock Exchange. (Editing by John Wallace and Steve Orlofsky)