BB&T 2012 Annual Report Download - page 68

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46
Residential Mortgage Banking
BB&T’ s mortgage originations totaled $33.1 billion in 2012, up $9.4 billion, or 39.9%, compared to 2011. BB&T’ s
residential mortgage servicing portfolio, which includes both retained loans and loans serviced for third parties, totaled
$101.3 billion at the end of 2012, an increase of 10.5%, compared to $91.6 billion at December 31, 2011. Residential
Mortgage Banking net income was $366 million in 2012, compared to a net loss of $15 million in 2011.
Segment net interest income in Residential Mortgage Banking increased $81 million, or 27.8%, to $372 million in 2012. The
increase in segment net interest income was primarily due to growth in LHFS, growth in loans held for investment and higher
spreads to funding costs on loans held for investment. These increases in segment net interest income were partially offset by
lower spreads to funding costs on LHFS.
The allocated provision for loan and lease losses was $95 million for 2012, down $225 million, or 70.3%, compared to $320
million in 2011. The decrease in provision expense reflects improved credit quality in the loan portfolio, as well as the sale
of NPLs in the second quarter of 2011, which resulted in higher charge-offs. Net charge-offs of $133 million were recorded
in 2012 compared to $264 million in 2011.
Noninterest income in Residential Mortgage Banking increased from $349 million in 2011 to $753 million in 2012. This
increase was primarily due to higher mortgage loan production and sales and higher margins than in the prior year.
Noninterest expense increased $92 million, or 31.1%, to $388 million in 2012, reflecting higher loan-related and personnel
expenses. The increase in loan-related expense was driven by an increase in the loan repurchase reserve. The increase in
personnel expense was driven by a higher number of employees and incentives related to the increased production.
Dealer Financial Services
Dealer Financial Services net income was $208 million in 2012, a decrease of $1 million, or 0.5%, compared to 2011.
Segment net interest income in Dealer Financial Services increased $47 million, or 8.1%, to $629 million in 2012. The
increase in segment net interest income was primarily due to loan growth and an improved NIM in Regional Acceptance
Corporation’ s point-of-sale loan portfolio.
The allocated provision for loan and lease losses increased $39 million, or 31.2%, in 2012, primarily due to increases in
Regional Acceptance Corporation’ s allowance for loan losses related to nonprime auto loans as delinquent accounts and
NPAs move from historical lows to more normalized levels.
Specialized Lending
Specialized Lending net income was $235 million in 2012, flat compared to 2011.
Specialized Lending net interest income increased $82 million, or 17.6%, to $547 million in 2012. This increase was
primarily due to strong loan growth by Sheffield Financial as the result of dealer volume growth and expanded dealer
relationships. Additionally, Mortgage Warehouse Lending benefited from increased market penetration, higher commitment
levels and higher line usage, while Lendmark and Equipment Finance realized higher NIM. Average loans for Specialized
Lending grew by $2.0 billion, or 15.6%, to $14.8 billion in 2012.
The allocated provision for loan and lease losses increased $65 million, or 90.3%, in 2012. The increase in provision expense
was primarily due to reserve rate adjustments, as well as adjustments to loss factors resulting from an acceleration of certain
consumer loan charge-offs in the third quarter of 2012. Due to the overall higher credit risk profiles of Specialized Lending’ s
clients, 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 increased $17 million, or 8.1%, to $228 million in 2012. The increase in noninterest income was driven
by higher operating lease income and gains on sale of finance lease equipment by Equipment Finance, as well as higher
commercial finance and commercial mortgage banking fees.
Noninterest expense increased $23 million, or 9.9%, to $256 million. The increase in noninterest expense was driven by
higher depreciation on property leased to customers by Equipment Finance, higher loan referral fees paid by Sheffield
Financial and higher personnel expense.