BB&T 2010 Annual Report Download - page 67
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estimates. On a quarterly basis, management estimates the total expected cash flows from the loans acquired.
Based on these assessments during 2010, the total expected cash flows increased, which resulted in additional
accretion that is reflected in interest income. The additional accretion recognized from the assessments is
significantly offset by lower noninterest income due to the provisions of the FDIC loss sharing agreements. Net
interest income for 2010 also benefitted from lower funding costs, as management grew noninterest bearing
deposits and was able to reduce higher costs certificates and other interest-bearing liabilities. Net interest
income increased 14.9% in 2009 compared to 2008 due primarily to earning asset growth, which helped offset
declines in yields due to a lower rate environment, lower funding costs and higher yields on the covered loan and
securities portfolios.
The FTE-adjusted net interest margin is the primary measure used in evaluating the gross profit margin
from the portfolios of earning assets. The FTE-adjusted net interest margin was 4.03% in 2010, 3.66% in 2009 and
3.58% in 2008. During 2010, the average yield on interest earning assets increased 19 basis points compared to the
average yield during 2009, while the average cost of funds over the same time period decreased 21 basis points.
The improvement in the net interest margin during 2010 was primarily due to the higher yield assets acquired in
the Colonial acquisition and lower funding costs. The improvement in the net interest margin during 2009 was
primarily due to successfully managing liability costs and wider spreads on assets.
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