BB&T 2012 Annual Report Download - page 62

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40
Provision for Credit Losses
2012 compared to 2011
The provision for credit losses recorded by BB&T in 2012 was $1.1 billion, a decrease of $133 million, or 11.2%, compared
to the prior year. Included in the provision for credit losses during 2012 was $13 million related to covered loans. The
decrease in the provision for credit losses during 2012 compared to 2011 was primarily due to improving credit trends and
outlook, as net charge-offs in 2012 decreased 22.0% compared to the prior year. Improving credit conditions also resulted in
an increase in the ratio of the ALLL to net charge-offs, which increased to 1.56 for 2012, compared to 1.36 for 2011.
Net charge-offs were 1.14% of average loans and leases (or 1.15% excluding covered loans) for 2012 compared to 1.57% of
average loans and leases (or 1.59% excluding covered loans) during 2011. Net charge-offs for 2011 included $87 million
related to the transfer and sale of residential mortgage loans in the second quarter. Excluding the charge-off related to this
transfer, net charge-offs were 1.50% of average loans and leases for 2011. The largest decreases in the provision for credit
losses for 2012 were in the residential mortgage and CRE - ADC portfolios.
2011 compared to 2010
The provision for credit losses recorded by BB&T in 2011 was $1.2 billion compared with $2.6 billion in 2010, which
represents a decrease of 54.9% during 2011. Included in the provision for credit losses during 2011 was $71 million related
to covered loans. The provision for credit losses recorded for covered loans reflects lower expected cash flows on certain
loan pools compared to the original estimates. Approximately 80% of this provision for credit losses is offset through a
credit to noninterest income based on the provisions of the FDIC loss sharing agreements. The decrease in the provision for
credit losses during 2011 compared to 2010 was primarily due to improving credit trends and outlook, as net charge-offs in
2011 decreased 34.3% compared to 2010.
Net charge-offs were 1.57% of average loans and leases (or 1.59% excluding covered loans) for 2011 compared to 2.41% of
average loans and leases (or 2.59% excluding covered loans) during 2010. Net charge-offs for 2011 included $87 million
related to the transfer and sale of residential mortgage loans in the second quarter. This compares to $605 million of net
charge-offs recorded in 2010 related to commercial and residential mortgage loans that were transferred to the held for sale
portfolio. Excluding these items, net charge-offs were 1.50% and 1.97% of average loans and leases for 2011 and 2010,
respectively. The largest decreases in the provision for credit losses for 2011 were in the commercial and residential
mortgage portfolios.
Noninterest Income
Noninterest income is a significant contributor to BB&T’ s financial results. Noninterest income includes insurance income,
service charges on deposit accounts, mortgage banking income, investment banking and brokerage fees and commissions,
trust and investment advisory revenues, gains and losses on securities transactions, and commissions and fees derived from
other activities. Management continues to focus on diversifying its sources of revenue to further reduce BB&T’ s reliance on
traditional spread-based interest income, as fee-based activities are a relatively stable revenue source during periods of
changing interest rates.