BB&T 2008 Annual Report Download - page 46

changes in the overall composition of the securities portfolio with a larger concentration of higher-yielding
mortgage-backed and municipal securities. The yield on mortgage-backed securities issued by government-
sponsored entities decreased from 5.15% to 4.94% and the FTE yield on state and municipal securities decreased
from 6.65% last year to 6.33% in the current year, while the yield on U.S. government-sponsored entity securities
increased from 4.53% in 2007 to 4.86% in 2008. The yield on non-agency mortgage-backed securities increased
from 5.78% during 2007 to 5.81% in 2008.
Loans and Leases
BB&T emphasizes commercial lending to small and medium-sized businesses, consumer lending, mortgage
lending and specialized lending with an overall goal of maximizing the profitability of the loan portfolio while
maintaining strong asset quality. The various categories of loan products offered by BB&T are discussed under
“Lending Activities” in the “Overview and Description of Business” section herein. BB&T is a full-service lender
with approximately one-half of its loan portfolio to businesses and one-half to individual consumers. Average
commercial loans, including lease receivables, comprised 50.0% of the loan portfolio during 2008, compared to
48.3% in 2007. Average direct retail loans comprised 16.4% of average loans in 2008, compared to 17.6% in 2007.
Average sales finance loans comprised 6.5% of average loans in 2008, compared to 6.7% in 2007. Average
revolving credit loans comprised 1.7% of average loans in 2008 and 2007. Average mortgage loans comprised
19.5% of average total loans for 2008, compared to 19.9% a year ago. Average loans originated by BB&T’s
specialized lending subsidiaries represented 5.9% of average total loans in 2008 compared to 5.8% in the prior
year.
BB&T’s loan portfolio, excluding loans held for sale, increased $6.3 billion, or 7.0%, compared to year-end
2007. Average total loans and leases for 2008 increased $7.2 billion, or 8.2%, compared to 2007. The growth in the
loan portfolio was primarily a result of strong internal growth in the commercial and industrial lending portfolio,
as well as growth in the mortgage and specialized lending portfolios. The growth in average loans during 2008,
includes the impact of the acquisition of Coastal Financial Corporation (“Coastal”), which was acquired during
2007.
Average commercial loans and leases increased $5.1 billion, or 12.0%, in 2008 as compared to 2007. Overall,
the commercial loan and lease portfolio showed strong growth during 2008. The mix of the commercial loan
portfolio has shifted somewhat, as commercial real estate lending has slowed due to a slower real estate market
and management’s efforts to reduce exposure to the real estate market. This has been offset by an increased focus
on commercial and industrial loans. BB&T experienced stronger trends in the fourth quarter of 2008 both in
commercial and industrial lending and income producing commercial real estate lending primarily due to
challenges facing many in-market competitors that has allowed BB&T to attract new clients.
The pace of growth in the direct retail loan portfolio slowed further in 2008, due to a difficult residential real
estate market, which decreased demand for home equity loan products. Sales finance loans and revolving credit
reflected solid growth rates of 5.3% and 14.0%, respectively, during 2008. BB&T concentrates its efforts on the
highest quality borrowers in both of these product markets. Sales finance loans were negatively affected by weak
auto sales; however BB&T has been gaining market share in this portfolio as many competitors have withdrawn
from indirect automobile lending in our footprint.
Average mortgage loans increased $1.1 billion, or 6.2%, compared to 2007. Management views mortgage
loans as an integral part of BB&T’s relationship-based credit culture. BB&T is a large originator of residential
mortgage loans, with 2008 originations of $16.4 billion. The vast majority of mortgage loans originated during
2008 were conforming mortgage loans that were either sold in the secondary market or held in the loans held for
sale portfolio at year-end. Loans held for sale, which is almost entirely comprised of government-conforming
mortgage loans increased 82.8% compared to year-end 2007 as refinance activity significantly increased late in the
fourth quarter due to the historically low loan rates for mortgages. At December 31, 2008, BB&T was servicing
$40.7 billion in residential mortgages owned by third parties and $19.0 billion of mortgage loans owned by BB&T,
including $18.4 billion classified as mortgage loans and $573 million classified as securities available for sale.
Average loans originated by BB&T’s specialized lending subsidiaries increased $445 million, or 8.6%,
compared to 2007. The growth in the specialized lending portfolio was driven by strong internal loan growth in
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