BB&T 2007 Annual Report Download - page 124

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BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
BB&T utilizes a funds transfer pricing (“FTP”) system to eliminate the effect of interest rate risk from the
segments’ net interest income because such risk is centrally managed within the Treasury segment. The FTP
system credits or charges the segments with the economic value or cost of the funds the segments create or use.
The FTP system provides a funds credit for sources of funds and a funds charge for the use of funds by each
segment. The net FTP credit or charge, which includes intercompany interest income and expense, is reflected as
net funds transfer pricing in the accompanying tables.
Banking Network
BB&T’s Banking Network serves individual and business clients by offering a variety of loan and deposit
products and other financial services. The Banking Network is primarily responsible for serving client
relationships, and, therefore, is credited with revenue from the Residential Mortgage Banking, Financial
Services, Insurance Services, Specialized Lending, Sales Finance and other segments, which is reflected in net
referral fees. Amortization and depreciation expense that has been allocated to the segment totaled $86 million,
$88 million and $83 million for 2007, 2006 and 2005, respectively.
Residential Mortgage Banking
The Residential Mortgage Banking segment retains and services mortgage loans originated by the Banking
Network as well as those purchased from various correspondent originators. Mortgage loan products include
fixed- and adjustable-rate government and conventional loans for the purpose of constructing, purchasing or
refinancing residential properties. Substantially all of the properties are owner occupied. BB&T generally retains
the servicing rights to all loans sold. The Residential Mortgage Banking segment earns interest on loans held in
the warehouse and portfolio, fee income from the origination and servicing of mortgage loans and recognizes gains
or losses from the sale of mortgage loans. The Banking Network receives an intersegment referral fee for the
origination of loans and servicing rights, with a portion of the corresponding charge incurred by the Residential
Mortgage Banking segment and the remaining charge incurred in the corporate office, which is reflected as part
of Parent/Reconciling Items in the accompanying tables. Amortization and depreciation expense that has been
allocated to the segment was not material for any of the years presented.
Sales Finance
BB&T’s Sales Finance segment primarily originates loans to consumers for the purchase of automobiles.
Such loans are originated on an indirect basis through approved franchised and independent automobile dealers
throughout the BB&T market area and, to a lesser extent, states outside of BB&T’s traditional banking footprint.
Sales Finance also originates loans for the purchase of boats and recreational vehicles originated through dealers
in BB&T’s market area. In addition, Sales Finance also provides financing to dealers for their inventories. The
Banking Network receives an intersegment referral fee for servicing the loans originated by the Sales Finance
segment with the corresponding charge remaining in the Sales Finance segment. Amortization and depreciation
expense that has been allocated to the segment was not material for any of the years presented.
Specialized Lending
BB&T’s Specialized Lending segment consists of six wholly owned subsidiaries that provide specialty finance
alternatives to consumers and businesses including: dealer-based financing of equipment for both small
businesses and consumers, equipment leasing, direct consumer finance, insurance premium finance, indirect
sub-prime automobile finance, and full-service commercial mortgage banking. Bank clients as well as nonbank
clients within and outside BB&T’s primary geographic market area are served by these companies. The Banking
Network receives credit for referrals to these companies with the corresponding charge retained in the corporate
office, which is reflected as part of Parent/Reconciling Items in the accompanying tables. Amortization and
depreciation expense that has been allocated to the segment totaled $23 million, $17 million and $14 million for
2007, 2006 and 2005, respectively.
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