BB&T 2011 Annual Report Download - page 74

Direct Retail Loan Portfolio
The direct retail loan portfolio primarily consists of a wide variety of loan products offered through BB&T’s branch
network. Various types of secured and unsecured loans are marketed to qualifying existing clients and to other
creditworthy candidates in BB&T’s market area. The vast majority of direct retail loans are secured by first or second
liens on residential real estate, and include both closed-end home equity loans and revolving home equity lines of credit.
Direct retail loans are subject to the same rigorous lending policies and procedures as described above for commercial
loans and are underwritten with note amounts and credit limits that ensure consistency with the Corporation’s risk
philosophy.
Sales Finance Loan Portfolio
The sales finance category primarily includes secured indirect installment loans to consumers for the purchase of new and
used automobiles, boats and recreational vehicles. Such loans are originated through approved franchised and independent
dealers throughout the BB&T market area. These loans are relatively homogenous and no single loan is individually
significant in terms of its size and potential risk of loss. Sales finance loans are subject to the same rigorous lending
policies and procedures as described above for commercial loans and are underwritten with note amounts and credit limits
that ensure consistency with the Corporation’s risk philosophy. In addition to its normal underwriting due diligence,
BB&T uses application systems and “scoring systems” to help underwrite and manage the credit risk in its sales finance
portfolio. Also included in the sales finance category are commercial lines, serviced by the Sales Finance Department, to
finance dealer wholesale inventory (“Floor Plan Lines”) for resale to consumers. Floor Plan Lines are underwritten by
commercial loan officers in compliance with the same rigorous lending policies described above for commercial loans. In
addition, Floor Plan Lines are subject to intensive monitoring and oversight to ensure quality and to mitigate risk from
fraud.
Revolving Credit Loan Portfolio
The revolving credit portfolio comprises the outstanding balances on credit cards and BB&T’s checking account overdraft
protection product, Constant Credit. BB&T markets credit cards to its existing banking client base and does not solicit
cardholders through nationwide programs or other forms of mass marketing. Such balances are generally unsecured and
actively managed by BB&T FSB.
Residential Mortgage Loan Portfolio
Branch Bank offers various types of fixed- and adjustable-rate loans for the purpose of constructing, purchasing or
refinancing residential properties. BB&T primarily originates conforming mortgage loans and higher quality jumbo and
construction-to-permanent loans for owner-occupied properties. Conforming loans are loans that are underwritten in
accordance with the underwriting standards set forth by the Federal National Mortgage Association (“Fannie Mae”) and
the Federal Home Loan Mortgage Corporation (“Freddie Mac”). They are generally collateralized by one-to-four-family
residential real estate, have loan-to-collateral value ratios of 80% or less, and are made to borrowers in good credit
standing.
Risks associated with the mortgage lending function include interest rate risk, which is mitigated through the sale of a
substantial portion of conforming fixed-rate loans in the secondary mortgage market and an effective mortgage servicing
rights hedging process. Borrower risk is lessened through rigorous underwriting procedures and mortgage insurance. The
right to service the loans and receive servicing income is generally retained when conforming loans are sold. Management
believes that the retention of mortgage servicing is a primary relationship driver in retail banking and a vital part of
management’s strategy to establish profitable long-term customer relationships and offer high quality client service.
BB&T also purchases residential mortgage loans from correspondent originators. The loans purchased from third-party
originators are subject to the same underwriting and risk-management criteria as loans originated internally.
Other Lending Subsidiaries Portfolio
BB&T’s other lending subsidiaries portfolio consists of loans originated through six business units that provide specialty
finance alternatives to consumers and businesses including: dealer-based financing of equipment for small businesses and
consumers, commercial equipment leasing and finance, direct and indirect consumer finance, insurance premium finance,
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