BB&T 2010 Annual Report Download - page 91

Specialized Lending
BB&T’s Specialized Lending segment continued to expand during 2010 through strong organic growth and
significantly lower loan and lease losses. Net income from the Specialized Lending segment was $226 million for
2010, up 425.6% compared to 2009. The increase in net income was driven by improved credit performance in the
segment’s consumer lending and equipment finance businesses and strong growth in net interest income. Net
income in 2009 of $43 million was up $23 million, or 115.0%, compared to 2008, primarily due to organic loan
growth and asset portfolio purchases during the year.
Net interest income totaled $712 million in 2010, an increase of 17.7% compared to 2009. Comparing 2009 to
2008, net interest income increased 21.2% to $605 million. The growth in net interest income in 2010 was a result
of strong portfolio growth and expansion in the net interest margin. Net interest income growth in 2009 was
primarily driven by growth in the commercial insurance premium finance and consumer subprime auto loan
portfolios. Average loans for the Specialized Lending segment grew by $637 million, or 8.9%, to $7.8 billion in
2010 compared to 2009. Average loan growth for the segment was $1.6 billion, or 29.6%, in 2009 compared to 2008.
The economic provision for loan and lease losses totaled $155 million in 2010, a decrease of $177 million, or
53.3%, compared to 2009. Comparing 2009 to 2008, the economic provision for loan and lease losses increased $31
million, or 10.3%. The decline in the provision for 2010 was primarily attributable to improved credit performance
in the subprime auto loan and equipment finance portfolios. Due to the overall higher credit risk profiles of some
of the clients of Specialized Lending, loss rates are expected to be higher than conventional bank lending. Loss
rates are also affected by shifts in the portfolio mix of the underlying subsidiaries.
Noninterest income produced by the Specialized Lending segment totaled $143 million in 2010, an increase of
$24 million, or 20.2%, compared to 2009. Comparing 2009 to 2008, noninterest income increased $3 million, or 2.6%.
Noninterest expenses incurred within the Specialized Lending segment in 2010 totaled $293 million, an increase
of $8 million, or 2.8%, compared to 2009. Comparing 2009 to 2008, noninterest expenses totaled $285 million, an
increase of $40 million, or 16.3%. The increases in noninterest expenses incurred within the Specialized Lending
segment were driven by internal growth.
Total identifiable assets for the Specialized Lending segment of $8.6 billion increased $413 million, or 5.1%,
between 2009 and 2010 due primarily to organic growth. Comparing 2009 to 2008, total identifiable assets
increased $1.6 billion, or 24.2%.
Insurance Services
Net income from the Insurance Services segment was $112 million in 2010, a decline of $16 million, or 12.5%,
from 2009. Insurance Services continues to be impacted by both the weak economy and a decline in insurance
premium pricing, which has resulted in lower commission revenues and has increased pressure on brokerage
operating margins. Comparing 2009 to 2008, net income grew $21 million, or 19.6%.
Noninterest income produced by the Insurance Services segment totaled $1.0 billion during 2010 and 2009.
There were no acquisitions completed in 2010. Comparing 2009 to 2008, noninterest income increased $125 million,
or 13.8%.
Noninterest expenses incurred within the Insurance Services segment increased $17 million, or 2.2%, in 2010
to $790 million compared to 2009. This increase was due to higher operating costs, including increased insurance
contract commissions paid to outside agents and brokers and increased legal costs compared to 2009. Comparing
2009 to 2008, noninterest expenses increased $75 million, or 10.7%.
Financial Services
Net income from the Financial Services segment declined by $1 million, or 0.6%, to $159 million in 2010. The
decrease from 2009 is primarily attributable to the $27 million pre-tax gain realized in 2009 on the sale of BB&T’s
payroll processing business. Adjusted for this 2009 one-time gain, the Financial Services segment’s net income
was up $16 million, or 10.9%. In 2010, the Financial Services segment experienced positive results from Corporate
Banking loan and deposit growth and strong growth in assets under management in Sterling Capital and the
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