BB&T 2007 Annual Report Download - page 69

interest income from investments, while the additional FTP charge resulted from higher credits paid on deposits
and other funding sources. For 2005 net interest income for the Treasury segment consisted of $30 million of net
interest income and $512 million of expense from the FTP charge. The decrease in the FTP charge from 2005 to
2006 was primarily a result of changes to the rates used for crediting funding sources, while the decline in net
interest income from external sources was principally due to the increase in short-term interest rates, which
increased the cost of funding.
Noninterest income in the Treasury segment is primarily related to income from bank-owned life insurance.
During 2007, noninterest income earned by the Treasury segment totaled $111 million, a decrease of 5.1%,
compared to $117 million earned during 2006. The decline during 2007 reflected an $8 million increase from bank-
owned life insurance, which was more than offset by $17 million in losses from the sale of securities. For 2005,
noninterest income within the Treasury segment totaled $108 million.
The provision for income taxes allocated to the Treasury segment during 2007, 2006 and 2005 was a benefit of
$117 million, $94 million and $194 million, respectively. The changes in the tax benefits allocated to the Treasury
segment are a combination of changes in the level of pretax income and tax exempt income. In addition, the
change in the provision for income taxes for 2006 compared to 2005 reflects a change in the methodology used to
allocate taxes. Total identifiable assets for the Treasury segment in 2007 decreased slightly compared to 2006,
following an increase of $2.2 billion, or 10.2%, in 2006 compared to 2005. As of December 31, 2007, total identifiable
assets in the Treasury segment were $24.1 billion.
Fourth Quarter Results
Net income for the fourth quarter of 2007 was $411 million, compared to $251 million for the comparable
period of 2006. On a per share basis, diluted net income for the fourth quarter of 2007 was $.75 compared to $.46
for the same period a year ago. Annualized returns on average assets and average shareholders’ equity were
1.24% and 12.89%, respectively, for the fourth quarter of 2007, compared to .84% and 8.33%, respectively, for the
fourth quarter of 2006.
BB&T’s fourth quarter 2006 results were negatively affected by an additional tax provision of $139 million
after-tax, and securities losses resulting from a previously-announced portfolio restructuring of $47 million after-
tax. BB&T recorded the additional tax reserves as a result of a summary judgment issued by the United States
District Court for the Middle District of North Carolina on January 4, 2007 in favor of the IRS related to the
treatment of a leveraged lease transaction. The amount of the additional tax reserves relates to the potential
impact of the District Court’s ruling on BB&T’s entire leveraged lease portfolio.
Net interest income amounted to $991 million for the fourth quarter of 2007, an increase of 3.7% compared to
$956 million for the same period of 2006. Noninterest income totaled $718 million for the fourth quarter of 2007,
up 19.3% from $602 million earned during the fourth quarter of 2006. The growth in noninterest income in the
fourth quarter of 2007 compared to the same period of 2006 includes the impact of the securities losses that were
recorded in the prior year’s fourth quarter. BB&T’s noninterest expense for the fourth quarter of 2007 totaled
$942 million, up 2.2% from the $922 million recorded in the fourth quarter of 2006.
The fourth quarter 2007 provision for credit losses increased 152.1% to $184 million, compared to $73 million
for the fourth quarter of 2006. The increase in the provision for credit losses reflects the deteriorating credit
quality of the loan portfolio that has resulted from challenges in the residential real estate markets and a weaker
overall economy. The increase in the provision for credit losses also reflects higher net charge-offs in the fourth
quarter of 2007, compared to the fourth quarter of 2006.
The fourth quarter 2007 provision for income taxes totaled $172 million, a decrease of $140 million compared
to $312 million for the same period of 2006. The decrease in the provision for income taxes was primarily the
result of additional tax reserves for leveraged lease transactions in 2006 as previously mentioned.
The accompanying table, “Quarterly Financial Summary—Unaudited,” presents condensed information
relating to quarterly periods in the years ended December 31, 2007 and 2006.
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