BB&T 2015 Annual Report Download - page 71

TableofContents
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.
Revolving Credit Loan Portfolio
The revolving credit portfolio consists of 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-four-family residential real estate, typically have loan-to-collateral value ratios of 80% or less at origination, 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 MSR 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 relationship driver in retail banking and a 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 BUs 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, insurance premium finance,
indirect nonprime automobile finance, and full-service commercial mortgage banking. BB&T offers these services to bank clients as well as nonbank clients
within and outside BB&T’s primary geographic market area.
BB&T’s other lending subsidiaries adhere to the same overall underwriting approach as the commercial and consumer lending portfolio and also utilize
automated credit scoring to assist with underwriting credit risk. The majority of these loans are relatively homogenous and no single loan is individually
significant in terms of its size and potential risk of loss. The majority of the loans are secured by real estate, automobiles, equipment or unearned insurance
premiums. As of December 31, 2015, the other lending subsidiaries portfolio includes loans to nonprime borrowers of approximately $3.2 billion.
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Source: BB&T CORP, 10-K, February 25, 2016 Powered by Morningstar® Document Research℠
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