BB&T 2012 Annual Report Download - page 88

66
 Value of any underlying collateral—loans are generally secured by the asset being financed. Because an analysis of the
primary and secondary sources of repayment is the most important factor, collateral, unless it is liquid, does not justify
loans that cannot be serviced by the borrower’ s normal cash flows.
 Overall creditworthiness of the customer, taking into account the customer’s relationships, both past and current, with
BB&T and other lenders—BB&T’ s success depends on building lasting and mutually beneficial relationships with
clients, which involves assessing their financial position and background.
 Level of equity invested in the transaction—in general, borrowers are required to contribute or invest a portion of their
own funds prior to any loan advances.
Commercial Loan and Lease Portfolio
The commercial loan and lease portfolio represents the largest category of the Company’ s total loan portfolio. BB&T’ s
commercial lending program is generally targeted to serve small-to-middle market businesses with sales of $250 million or
less. In addition, BB&T’ s Corporate Banking Group provides lending solutions to large corporate clients. Traditionally,
lending to small and mid-sized businesses has been among BB&T’ s strongest market segments.
Commercial and small business loans are primarily originated through BB&T’ s Community Bank. In accordance with the
Company’ s lending policy, each loan undergoes a detailed underwriting process, which incorporates BB&T’ s underwriting
approach, procedures and evaluations described above. Commercial loans are typically priced with an interest rate tied to
market indices, such as the prime rate or LIBOR. Commercial loans are individually monitored and reviewed for any
possible deterioration in the ability of the client to repay the loan. Approximately 90% of BB&T’ s commercial loans are
secured by real estate, business equipment, inventories and other types of collateral.
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 Company’ 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 Company’ 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 Dealer 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, including 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.
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 FNMA and FHLMC. They are generally collateralized by one-to-