BB&T 2009 Annual Report Download - page 155

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BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
expense is not allocated, but is retained in corporate accounts and reflected as Parent/Reconciling Items in the
accompanying tables. Income taxes are allocated to the various segments based on taxable income and statutory
rates applicable to the segment.
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 $39 million,
$82 million, and $86 million for 2009, 2008, and 2007, respectively. The decline in amortization and depreciation
expense allocated to the Banking Network in 2009 is due to a change in methodology whereby the Banking
Network no longer carries real estate assets. The expenses related to real estate assets including depreciation
and amortization were moved to an allocated expense category contained in noninterest expenses.
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. 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 business units that provide specialty finance
alternatives to consumers and businesses including: dealer-based financing of equipment for both small
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