Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the quarterly period ended: March 31, 2011

Commission file number: 1-10853

 

 

BB&T CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

North Carolina   56-0939887
(State of Incorporation)  

(I.R.S. Employer

Identification No.)

200 West Second Street   27101

Winston-Salem, North Carolina

(Address of Principal Executive Offices)

  (Zip Code)

(336) 733-2000

(Registrant’s Telephone Number, Including Area Code)

 

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ¨    NO  x

At April 30, 2011, 696,467,219 shares of the Registrant’s common stock, $5 par value, were outstanding.

 

 

 


Table of Contents

BB&T CORPORATION

FORM 10-Q

March 31, 2011

INDEX

 

     Page No.  

Part I. FINANCIAL INFORMATION

  

Item 1.

  Financial Statements (Unaudited)      2   
  Notes to Consolidated Financial Statements (Unaudited)      6   

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations      52   
  Executive Summary      57   
  Analysis of Financial Condition      58   
  Analysis of Results of Operations      75   
  Market Risk Management      81   
  Capital Adequacy and Resources      84   
  Liquidity      87   
  Segment Results      88   

Item 3.

  Quantitative and Qualitative Disclosures About Market Risk      90   

Item 4.

  Controls and Procedures      90   

Part II. OTHER INFORMATION

  

Item 1.

  Legal Proceedings      91   

Item 1A.

  Risk Factors      91   

Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds      91   

Item 6.

  Exhibits      92   

SIGNATURES

     93   

 

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Table of Contents

BB&T CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in millions, except per share data, shares in thousands)

 

     March 31,
2011
    December 31,
2010
 

Assets

    

Cash and due from banks

   $ 1,030      $ 1,127   

Interest-bearing deposits with banks

     865        931   

Federal funds sold and securities purchased under resale agreements or similar arrangements

     305        327   

Segregated cash due from banks

     153        309   

Trading securities at fair value

     730        633   

Securities available for sale at fair value ($1,654 and $1,539 covered by FDIC loss share at March 31, 2011 and December 31, 2010, respectively)

     17,887        23,169   

Securities held to maturity ($8,365 fair value at March 31, 2011)

     8,333        —     

Loans held for sale ($2,109 and $3,176 at fair value at March 31, 2011 and December 31, 2010, respectively)

     2,312        3,697   

Loans and leases ($5,803 and $6,194 covered by FDIC loss share at March 31, 2011 and December 31, 2010, respectively)

     102,575        103,567   

Allowance for loan and lease losses

     (2,641     (2,708
                

Loans and leases, net of allowance for loan and lease losses

     99,934        100,859   
                

FDIC loss share receivable

     1,580        1,922   

Premises and equipment

     1,830        1,840   

Goodwill

     6,014        6,008   

Core deposit and other intangible assets

     483        508   

Residential mortgage servicing rights at fair value

     928        830   

Other assets ($401 and $360 of foreclosed property and other assets covered by FDIC loss share at March 31, 2011 and December 31, 2010, respectively)

     14,655        14,921   
                

Total assets

   $ 157,039      $ 157,081   
                

Liabilities and Shareholders’ Equity

    

Deposits:

    

Noninterest-bearing deposits

   $ 21,864      $ 20,637   

Interest-bearing deposits

     85,049        86,576   
                

Total deposits

     106,913        107,213   
                

Federal funds purchased, securities sold under repurchase agreements and short-term borrowed funds

     5,186        5,673   

Long-term debt

     22,591        21,730   

Accounts payable and other liabilities

     5,679        5,967   
                

Total liabilities

     140,369        140,583   
                

Commitments and contingencies (Note 13)

    

Shareholders’ equity:

    

Common stock, $5 par

     3,481        3,472   

Additional paid-in capital

     5,794        5,776   

Retained earnings

     8,042        7,935   

Accumulated other comprehensive loss, net of deferred income taxes of $(429) at March 31, 2011 and $(452) at December 31, 2010

     (706     (747

Noncontrolling interest

     59        62   
                

Total shareholders’ equity

     16,670        16,498   
                

Total liabilities and shareholders’ equity

   $ 157,039      $ 157,081   
                

Common shares outstanding

     696,285        694,381   

Common shares authorized

     2,000,000        2,000,000   

Preferred shares authorized

     5,000        5,000   

The accompanying notes are an integral part of these consolidated financial statements.

 

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BB&T CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Dollars in millions, except per share data, shares in thousands)

 

    Three Months Ended
March 31,
 
    2011     2010  

Interest Income

   

Interest and fees on loans and leases

  $ 1,520      $ 1,440   

Interest and dividends on securities

    150        336   

Interest on other earning assets

    6        3   
               

Total interest income

    1,676        1,779   
               

Interest Expense

   

Interest on deposits

    171        259   

Interest on federal funds purchased, securities sold under repurchase agreements and short-term borrowed funds

    4        5   

Interest on long-term debt

    216        201   
               

Total interest expense

    391        465   
               

Net Interest Income

    1,285        1,314   

Provision for credit losses

    340        575   
               

Net Interest Income After Provision for Credit Losses

    945        739   
               

Noninterest Income

   

Insurance income

    250        253   

Service charges on deposits

    135        164   

Mortgage banking income

    95        89   

Investment banking and brokerage fees and commissions

    87        79   

Checkcard fees

    72        61   

Other nondeposit fees and commissions

    67        65   

Bankcard fees and merchant discounts

    46        40   

Trust and investment advisory revenues

    43        38   

Income from bank-owned life insurance

    30        31   

FDIC loss share income, net

    (58     5   

Other income (loss), net

    (53     22   

Securities gains (losses), net

   

Realized gains, net

    21        3   

Other-than-temporary impairments

    (1     (12

Non-credit portion recognized in other comprehensive income

    (20     6   
               

Total securities gains (losses), net

    —          (3
               

Total noninterest income

    714        844   
               

Noninterest Expense

   

Personnel expense

    694        646   

Foreclosed property expense

    143        178   

Occupancy and equipment expense

    154        138   

Professional services

    71        72   

Regulatory charges

    61        45   

Loan processing expenses

    53        35   

Amortization of intangibles

    26        32   

Software expense

    26        29   

Merger-related and restructuring charges, net

    (2     17   

Other expenses

    146        149   
               

Total noninterest expense

    1,372        1,341   
               

Earnings

   

Income before income taxes

    287        242   

Provision for income taxes

    53        48   
               

Net income

    234        194   
               

Noncontrolling interest

    9        6   
               

Net income available to common shareholders

  $ 225      $ 188   
               

Earnings Per Common Share

   

Basic

  $ 0.32      $ 0.27   
               

Diluted

  $ 0.32      $ 0.27   
               

Cash dividends declared

  $ 0.17      $ 0.15   
               

Weighted Average Shares Outstanding

   

Basic

    695,309        690,792   
               

Diluted

    704,101        698,675   
               

The accompanying notes are an integral part of these consolidated financial statements.

 

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BB&T CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

Three Months Ended March 31, 2011 and 2010

(Dollars in millions, except per share data, shares in thousands)

 

    Shares of
Common
Stock
    Common
Stock
    Additional
Paid-In
Capital
    Retained
Earnings
    Accumulated
Other
Comprehensive
Income (Loss)
    Noncontrolling
Interest
    Total
Shareholders’
Equity
 

Balance, January 1, 2010

    689,750      $ 3,449      $ 5,620      $ 7,539      $ (417   $ 50      $ 16,241   

Add (Deduct):

             

Comprehensive income (loss):

             

Net income

    —          —          —          188        —          6        194   

Net change in other comprehensive income (loss)

    —          —          —          —          125        —          125   
                                                       

Total comprehensive income (loss) (Note 10)

    —          —          —          188        125        6        319   
                                                       

Stock transactions:

             

In connection with equity awards, net of repurchases

    1,349        7        23        —          —          —          30   

In connection with dividend reinvestment plan

    299        1        7        —          —          —          8   

In connection with 401(k) plan

    471        2        11        —          —          —          13   

Cash dividends declared on common stock, $0.15 per share

    —          —          —          (103     —          —          (103

Equity-based compensation expense

    —          —          16        —          —          —          16   

Other, net

    —          —          —          —          —          4        4   
                                                       

Balance, March 31, 2010

    691,869      $ 3,459      $ 5,677      $ 7,624      $ (292   $ 60      $ 16,528   
                                                       

Balance, January 1, 2011

    694,381      $ 3,472      $ 5,776      $ 7,935      $ (747   $ 62      $ 16,498   

Add (Deduct):

             

Comprehensive income (loss):

             

Net income

    —          —          —          225        —          9        234   

Net change in other comprehensive income (loss)

    —          —          —          —          41        —          41   
                                                       

Total comprehensive income (loss) (Note 10)

    —          —          —          225        41        9        275   
                                                       

Stock transactions:

             

In connection with equity awards

    1,763        9        (8     —          —          —          1   

Shares repurchased in connection with equity awards

    (595     (3     (14     —          —          —          (17

In connection with dividend reinvestment plan

    274        1        6        —          —          —          7   

In connection with 401(k) plan

    462        2        11        —          —          —          13   

Cash dividends declared on common stock, $0.17 per share

    —          —          —          (118     —          —          (118

Equity-based compensation expense

    —          —          24        —          —          —          24   

Other, net

    —          —          (1     —          —          (12     (13
                                                       

Balance, March 31, 2011

    696,285      $ 3,481      $ 5,794      $ 8,042      $ (706   $ 59      $ 16,670   
                                                       

The accompanying notes are an integral part of these consolidated financial statements.

 

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BB&T CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in millions)

 

     Three Months Ended
March 31,
 
     2011     2010  

Cash Flows From Operating Activities:

    

Net income

   $ 234      $ 194   

Adjustments to reconcile net income to net cash from operating activities:

    

Provision for credit losses

     340        575   

Depreciation

     65        65   

Amortization of intangibles

     26        32   

Equity-based compensation

     24        16   

(Gain) loss on sales of securities, net

     —          3   

Net write-downs on foreclosed property

     103        133   

Net change in operating assets and liabilities:

    

Segregated cash due from banks

     156        1   

Trading securities

     (158     (15

Loans held for sale

     1,089        475   

FDIC loss share receivable

     263        398   

Other assets

     126        (1,155

Accounts payable and other liabilities

     (273     (66

Other, net

     36        (19
                

Net cash from operating activities

     2,031        637   
                

Cash Flows From Investing Activities:

    

Proceeds from sales of securities available for sale

     115        787   

Proceeds from maturities, calls and paydowns of securities available for sale

     1,105        1,694   

Purchases of securities available for sale

     (4,165     (1,563

Originations and purchases of loans and leases, net of principal collected

     509        456   

Net cash paid for divestitures

     —          (832

Net cash paid in business combinations

     (6     (5

Purchases of premises and equipment

     (48     (263

Proceeds from sales of foreclosed property or other real estate held for sale

     192        166   

Other, net

     23        13   
                

Net cash from investing activities

     (2,275     453   
                

Cash Flows From Financing Activities:

    

Net change in deposits

     (229     (365

Net change in federal funds purchased, securities sold under repurchase agreements and short-term borrowed funds

     (487     (1,087

Proceeds from issuance of long-term debt

     999        —     

Repayment of long-term debt

     (127     (1

Net proceeds from common stock transactions

     4        51   

Cash dividends paid on common stock

     (104     (103

Other, net

     3        4   
                

Net cash from financing activities

     59        (1,501
                

Net Change in Cash and Cash Equivalents

     (185     (411

Cash and Cash Equivalents at Beginning of Period

     2,385        2,649   
                

Cash and Cash Equivalents at End of Period

   $ 2,200      $ 2,238   
                

Supplemental Disclosure of Cash Flow Information:

    

Cash paid during the period for:

    

Interest

   $ 370      $ 430   

Income taxes

     5        636   

Noncash investing and financing activities:

    

Transfers of securities available for sale to securities held to maturity

     8,341        —     

Transfers of loans to foreclosed property

     304        388   

The accompanying notes are an integral part of these consolidated financial statements.

 

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BB&T Corporation and Subsidiaries

  

Notes to Consolidated Financial Statements (Unaudited)

     First Quarter 2011   

NOTE 1.    Basis of Presentation

General

In the opinion of management, the accompanying unaudited Consolidated Balance Sheets, Consolidated Statements of Income, Consolidated Statements of Changes in Shareholders’ Equity, and Consolidated Statements of Cash Flows of BB&T Corporation and subsidiaries ( “BB&T”, the “Corporation” or the “Company”), are fair statements of BB&T’s financial position at March 31, 2011 and December 31, 2010, and BB&T’s results of operations, changes in shareholders’ equity and cash flows for the three month periods ended March 31, 2011 and 2010. In the opinion of management, all normal recurring adjustments necessary for a fair statement of the consolidated financial position and consolidated results of operations have been made.

These consolidated financial statements and notes are presented in accordance with the instructions for Form 10-Q. The information contained in the financial statements and footnotes included in BB&T’s Annual Report on Form 10-K for the year ended December 31, 2010 should be referred to in connection with these unaudited interim consolidated financial statements.

The accounting and reporting policies of BB&T and its subsidiaries are in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Additionally, where applicable, the policies conform to the accounting and reporting guidelines prescribed by bank regulatory authorities.

Nature of Operations

BB&T is a financial holding company organized under the laws of North Carolina. BB&T conducts operations through its principal bank subsidiary, Branch Banking and Trust Company (“Branch Bank”), BB&T Financial, FSB (“BB&T FSB”) a federally chartered thrift institution, and its nonbank subsidiaries. Branch Bank has offices in North Carolina, South Carolina, Virginia, Maryland, Georgia, West Virginia, Tennessee, Kentucky, Florida, Alabama, Indiana, Texas and Washington, D.C. Branch Bank provides a wide range of banking services to individuals and businesses, and offers a variety of loans to businesses and consumers. Such loans are made primarily to individuals residing in the market areas described above or to businesses located within BB&T’s geographic footprint. Branch Bank also markets a wide range of deposit services to individuals and businesses. Branch Bank offers, either directly, or through its subsidiaries, lease financing to businesses and municipal governments; factoring; discount brokerage services, annuities and mutual funds; life insurance, property and casualty insurance, health insurance and commercial general liability insurance on an agency basis and through a wholesale insurance brokerage operation; insurance premium financing; permanent financing arrangements for commercial real estate; loan servicing for third-party investors; direct consumer finance loans to individuals; trust and comprehensive wealth advisory services and association services. BB&T FSB and the direct nonbank subsidiaries of BB&T provide a variety of financial services including credit card lending, automobile lending, equipment financing, full-service securities brokerage, asset management and capital markets services.

Principles of Consolidation

The consolidated financial statements of BB&T include the accounts of BB&T Corporation and those subsidiaries that are majority owned by BB&T and over which BB&T exercises control. In consolidation, all significant intercompany accounts and transactions are eliminated. The results of operations of companies or assets acquired are included only from the dates of acquisition. All material wholly-owned and majority-owned subsidiaries are consolidated unless GAAP requires otherwise.

BB&T holds investments in certain legal entities that are considered variable interest entities (“VIE’s”). VIE’s are legal entities in which equity investors do not have sufficient equity at risk for the entity to

 

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BB&T Corporation and Subsidiaries

  

Notes to Consolidated Financial Statements (Unaudited)

     First Quarter 2011   

 

independently finance its activities, or as a group, the holders of the equity investment at risk lack the power through voting or similar rights to direct the activities of the entity that most significantly impact its economic performance, or do not have the obligation to absorb the expected losses of the entity or the right to receive expected residual returns of the entity. Consolidation of a VIE is considered appropriate if a reporting entity holds a controlling financial interest in the VIE.

BB&T evaluates its investments in VIE’s to determine if a controlling financial interest is held. This evaluation gives appropriate consideration to the design of the entity and the variability that the entity was designed to pass along, the relative power of each of the parties to the VIE, and to BB&T’s relative obligation to absorb losses or receive residual returns of the entity, in relation to such obligations and rights held by other parties to the VIE. BB&T has variable interests in certain entities that were not required to be consolidated, including affordable housing partnership interests, historic tax credit partnerships, other partnership interests and trusts that have issued capital securities. Refer to Note 13 for additional disclosures regarding BB&T’s significant variable interest entities.

BB&T accounts for unconsolidated partnership and similar investments using the equity method of accounting. In addition to affordable housing partnerships, which represent the majority of unconsolidated investments in variable interest entities, BB&T also has investments and future funding commitments to venture capital and other entities. The maximum potential exposure to losses relative to investments in variable interest entities is generally limited to the sum of the outstanding balance, future funding commitments and any related loans to the entity. Loans to these entities are underwritten in substantially the same manner as are other loans and are generally secured.

BB&T has investments in certain other entities for which BB&T does not have the controlling interest. For these investments, the Company records its interest using the equity method with its portion of income or loss being recorded in other noninterest income in the Consolidated Statements of Income. BB&T periodically evaluates these investments for impairment.

Reclassifications

In certain instances, amounts reported in prior years’ consolidated financial statements have been reclassified to conform to the current presentation. Such reclassifications had no effect on previously reported cash flows, shareholders’ equity or net income.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change include the determination of the allowance for loan and lease losses and the reserve for unfunded lending commitments, determination of fair value for financial instruments, valuation of goodwill, intangible assets and other purchase accounting related adjustments, benefit plan obligations and expenses, and tax assets, liabilities and expense.

Changes in Accounting Principles and Effects of New Accounting Pronouncements

In February 2010, the FASB issued new guidance impacting Fair Value Measurements and Disclosures. The new guidance requires a gross presentation of purchases and sales of Level 3 activities and adds a new requirement to disclose transfers in and out of Level 1 and Level 2 measurements. The guidance related to the

 

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BB&T Corporation and Subsidiaries

  

Notes to Consolidated Financial Statements (Unaudited)

     First Quarter 2011   

 

transfers between Level 1 and Level 2 measurements was effective for BB&T on January 1, 2010. The guidance that requires increased disaggregation of the Level 3 activities was effective for BB&T on January 1, 2011. The new disclosures required by this guidance are included in Note 14 to these consolidated financial statements.

In July 2010, the FASB issued new guidance impacting Receivables. The new guidance requires additional disclosures that will allow users to understand the nature of credit risk inherent in a company’s loan portfolios, how that risk is analyzed and assessed in arriving at the allowance for loan and lease losses, and changes and reasons for those changes in the allowance for loan and lease losses. The new disclosures that relate to information as of the end of the reporting period are required as of December 31, 2010. The disclosures related to activity that occurs during a reporting period are effective for reporting periods beginning on or after December 15, 2010, except for the disclosure requirements relating to troubled debt restructurings, which are effective for reporting periods beginning on or after June 15, 2011.

In April 2011, the FASB issued new guidance impacting Receivables. The new guidance amended existing guidance for assisting a creditor in determining whether a restructuring is a troubled debt restructuring. The amendments clarify the guidance for a creditor’s evaluation of whether it has granted a concession and whether a debtor is experiencing financial difficulties. This guidance is effective for interim and annual reporting periods beginning after June 15, 2011, and should be applied retrospectively to the beginning of the annual period of adoption. BB&T is currently evaluating the impact the standard will have on the consolidated financial statements.

NOTE 2.    Securities

The amortized cost, gross unrealized gains and losses and approximate fair values of securities available for sale and held to maturity were as follows:

 

     March 31, 2011  
     Amortized
Cost
     Gross Unrealized      Fair
Value
 
        Gains      Losses     
     (Dollars in millions)  

Securities available for sale:

           

U.S. government-sponsored entities (GSE)

   $ 123       $ 2       $ —         $ 125   

Mortgage-backed securities issued by GSE

     13,915         27         293         13,649   

States and political subdivisions

     1,950         21         155         1,816   

Non-agency mortgage-backed securities

     564         —           100         464   

Equity and other securities

     167         12         —           179   

Covered securities

     1,251         407         4         1,654   
                                   

Total securities available for sale

   $ 17,970       $ 469       $ 552       $ 17,887   
                                   
     Amortized
Cost
     Gross Unrealized      Fair
Value
 
        Gains      Losses     
     (Dollars in millions)  

Securities held to maturity:

           

Mortgage-backed securities issued by GSE

   $ 7,692       $ 23       $ —         $ 7,715   

States and political subdivisions

     63         —           —           63   

Equity and other securities

     578         9         —           587   
                                   

Total securities held to maturity

   $ 8,333       $ 32       $ —         $ 8,365   
                                   

 

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Table of Contents

BB&T Corporation and Subsidiaries

  

Notes to Consolidated Financial Statements (Unaudited)

     First Quarter 2011   

 

     December 31, 2010  
     Amortized
Cost
     Gross Unrealized      Fair
Value
 
        Gains      Losses     
     (Dollars in millions)  

Securities available for sale:

           

U.S. government-sponsored entities (GSE)

   $ 102       $ 1       $ —         $ 103   

Mortgage-backed securities issued by GSE

     18,663         42         361         18,344   

States and political subdivisions

     2,051         19         161         1,909   

Non-agency mortgage-backed securities

     635         —           120         515   

Equity and other securities

     734         27         2         759   

Covered securities

     1,234         307         2         1,539   
                                   

Total securities available for sale

   $ 23,419       $ 396       $ 646       $ 23,169   
                                   

During the first quarter of 2011, BB&T reclassified approximately $8.3 billion of securities available for sale to securities held to maturity. Management determined that it has both the positive intent and ability to hold these securities to maturity. The reclassification of these securities was accounted for at fair value. On the date of transfer, the difference between the par value and the fair value of these securities resulted in a premium or discount that, under amortized cost accounting, will be amortized as a yield adjustment to interest income using the interest method. The unrealized holding gains or losses at the date of transfer will continue to be reported as a separate component of shareholders’ equity in accumulated other comprehensive income, and will also be amortized over the remaining life of the securities as a yield adjustment to interest income using the interest method. Refer to Note 10 for additional disclosures related to this amount. There were no gains or losses recognized as a result of this transfer.

As of March 31, 2011, the fair value of covered securities included $1.4 billion of non-agency mortgage-backed securities and $303 million of municipal securities. As of December 31, 2010, the fair value of covered securities included $1.2 billion of non-agency mortgage-backed securities and $304 million of municipal securities. All covered securities were acquired from Colonial Bank (“Colonial”) and are covered by one of the Federal Deposit Insurance Corporation (“FDIC”) loss sharing agreements. BB&T is restricted from selling these securities without prior approval from the FDIC. Refer to BB&T’s Annual Report on Form 10-K for the year ended December 31, 2010 for additional information.

At March 31, 2011 and December 31, 2010, securities with carrying values of approximately $21.6 billion and $19.3 billion, respectively, were pledged to secure municipal deposits, securities sold under agreements to repurchase, other borrowings, and for other purposes as required or permitted by law.

BB&T had certain investments in marketable debt securities and mortgage-backed securities issued by the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) that exceeded ten percent of shareholders’ equity at March 31, 2011. The Fannie Mae investments had total amortized cost and fair values of $8.7 billion and $8.6 billion, respectively, at March 31, 2011, while Freddie Mac investments had total amortized cost and fair values of $10.5 billion and $10.4 billion, respectively.

At March 31, 2011 and December 31, 2010, non-agency mortgage-backed securities primarily consisted of residential mortgage-backed securities.

 

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BB&T Corporation and Subsidiaries

  

Notes to Consolidated Financial Statements (Unaudited)

     First Quarter 2011   

 

The gross realized gains and losses and other than temporary impairments recognized in net income during the three months ended March 31, 2011 and 2010 are reflected in the following table:

 

     Three Months Ended March 31,  
     2011     2010  
     (Dollars in millions)  

Gross gains

   $ 21      $ 5   

Gross losses

     —          (2
                

Net realized gains/(losses)

     21        3   
                

Other than temporary impairment (OTTI) recognized on non-agency mortgage-backed securities:

    

Total OTTI on non-agency mortgage-backed securities

     (1     (12

Non-credit portion recognized in other comprehensive income (1)

     (20     6   
                

Total OTTI on non-agency mortgage-backed securities recognized in net income

     (21     (6
                

Net securities gains/(losses)

   $ —        $ (3
                

 

(1) A negative balance is due to additional credit losses recognized in earnings that were previously recognized in other comprehensive income in a prior period when the security was originally other-than-temporarily impaired.

The following table reflects activity during the three months ended March 31, 2011 and 2010 related to credit losses on other-than-temporarily impaired non-agency mortgage-backed securities where a portion of the unrealized loss was recognized in other comprehensive income:

 

     Three Months Ended March 31,  
             2011                      2010          
     (Dollars in millions)  

Balance at beginning of period

   $ 30       $ 2   

Credit losses on securities not previously considered other-than-temporarily impaired

     —           1   

Credit losses on securities for which OTTI was previously recognized

     21         6   
                 

Balance at end of period

   $ 51       $ 9   
                 

 

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Table of Contents

BB&T Corporation and Subsidiaries

  

Notes to Consolidated Financial Statements (Unaudited)

     First Quarter 2011   

 

The amortized cost and estimated fair value of the debt securities portfolio at March 31, 2011, by contractual maturity, are shown in the accompanying table. The expected life of mortgage-backed securities will differ from contractual maturities because borrowers may have the right to call or prepay the underlying mortgage loans with or without call or prepayment penalties. For purposes of the maturity table, mortgage-backed securities, which are not due at a single maturity date, have been included in maturity groupings based on the contractual maturity.

 

     March 31, 2011  
     Available for Sale      Held to Maturity  
     Amortized
Cost
     Fair
Value
     Amortized
Cost
     Fair
Value
 
    

(Dollars in millions)

 

Debt Securities:

           

Due in one year or less

   $ 135       $ 135       $ 13       $ 13   

Due after one year through five years

     56         59         —           —     

Due after five years through ten years

     646         654         —           —     

Due after ten years

     16,969         16,863         8,314         8,346   
                                   

Total debt securities

     17,806         17,711         8,327         8,359   

Total securities with no stated maturity

     164         176         6         6   
                                   

Total securities

   $ 17,970       $ 17,887       $ 8,333       $ 8,365   
                                   

The following tables reflect the gross unrealized losses and fair values of BB&T’s investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at the dates presented:

 

    March 31, 2011  
    Less than 12 months     12 months or more     Total  
    Fair
Value
    Unrealized
Losses
    Fair
Value
    Unrealized
Losses
    Fair
Value
    Unrealized
Losses
 
    (Dollars in millions)  

Securities available for sale:

           

U.S. government-sponsored entities (GSE)

  $ 40      $ —        $ —        $ —        $ 40      $ —     

Mortgage-backed securities issued by GSE

    11,699        293        —          —          11,699        293   

States and political subdivisions

    600        21        632        134        1,232        155   

Non-agency mortgage-backed securities

    12        —          451        100        463        100   

Equity and other securities

    33        —          —          —          33        —     

Covered securities

    89        4        —          —          89        4   
                                               

Total

  $ 12,473      $ 318      $ 1,083      $ 234      $ 13,556      $ 552   
                                               
    Less than 12 months     12 months or more     Total  
    Fair
Value
    Unrealized
Losses
    Fair
Value
    Unrealized
Losses
    Fair
Value
    Unrealized
Losses
 
    (Dollars in millions)  

Securities held to maturity:

           

Mortgage-backed securities issued by GSE

  $ 394      $ —        $ —        $ —        $ 394      $ —     

States and political subdivisions

    36        —          —          —          36        —     
                                               

Total

  $ 430      $ —        $ —        $ —        $ 430      $ —     
                                               

 

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Table of Contents

BB&T Corporation and Subsidiaries

  

Notes to Consolidated Financial Statements (Unaudited)

     First Quarter 2011   

 

     December 31, 2010  
     Less than 12 months      12 months or more      Total  
     Fair
Value
     Unrealized
Losses
     Fair
Value
     Unrealized
Losses
     Fair
Value
     Unrealized
Losses
 
     (Dollars in millions)  

Securities available for sale:

                 

U.S. government-sponsored entities (GSE)

   $ 50       $ —         $ —         $ —         $ 50       $ —     

Mortgage-backed securities issued by GSE

     15,438         361         —           —           15,438         361   

States and political subdivisions

     694         21         735         140         1,429         161   

Non-agency mortgage-backed securities

     —           —           506         120         506         120   

Equity and other securities

     535         2         2         —           537         2   

Covered securities

     79         2         —           —           79         2   
                                                     

Total

   $ 16,796       $ 386       $ 1,243       $ 260       $ 18,039       $ 646   
                                                     

BB&T conducts periodic reviews to identify and evaluate each investment that has an unrealized loss for other-than-temporary impairment. An unrealized loss exists when the current fair value of an individual security is less than its amortized cost basis. Unrealized losses that are determined to be temporary in nature are recorded, net of tax, in accumulated other comprehensive income for available-for-sale securities.

Factors considered in determining whether a loss is temporary include:

 

   

The financial condition and near–term prospects of the issuer, including any specific events that may influence the operations of the issuer;

 

   

BB&T’s intent to sell and whether it is more likely than not that the Company will be required to sell these debt securities before the anticipated recovery of the amortized cost basis;

 

   

The length of the time and the extent to which the market value has been less than cost;

 

   

Whether the decline in fair value is attributable to specific conditions, such as conditions in an industry or in a geographic area;

 

   

Whether a debt security has been downgraded by a rating agency;

 

   

Whether the financial condition of the issuer has deteriorated;

 

   

The seniority of the security;

 

   

Whether dividends have been reduced or eliminated, or scheduled interest payments on debt securities have not been made; and

 

   

Any other relevant available information.

For certain U.S. mortgage-backed securities (and in particular for non-agency Alt-A, Prime and other mortgage-backed securities that exhibit credit risk to investors), credit impairment is assessed using cash flow models that provide estimates of the expected cash flows on the underlying mortgage pools, using security-specific structure information over the expected life of the security. The models estimate cash flows from the underlying mortgage loan pools and distribute those cash flows to the various tranches within the securitization considering the transaction structure which includes subordination features and credit enhancements. These cash flow models depend on a number of assumptions, with the emphasis in one model being predicated on long-term macroeconomic factor assumptions applied to current security default rates, prepayment rates and recovery rates while another model produces results more heavily influenced by current security level performance with only a nominal impact from macroeconomic assumptions.

 

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BB&T Corporation and Subsidiaries

  

Notes to Consolidated Financial Statements (Unaudited)

     First Quarter 2011   

 

Management reviews the results of these cash flow models in conjunction with current economic conditions and historical payment experience in its estimation of possible future credit losses. If management does not expect to recover the entire amortized cost basis of a mortgage-backed security, the Company records other-than-temporary impairment based on the present value of the weighted outcome obtained from assigning probabilities to each of the model results. The remaining amount of unrealized loss is recognized as a component of other comprehensive income.

When an investment security is rated lower than investment grade, the security is evaluated for potential credit impairment. On March 31, 2011, BB&T held certain investment securities having continuous unrealized loss positions for more than 12 months. All of these losses were in non-agency mortgage-backed and municipal securities. At March 31, 2011, all of the available-for-sale debt securities in an unrealized loss position, excluding those covered by FDIC loss sharing agreements, were investment grade with the exception of two municipal bonds with an amortized cost of $8 million and nine non-agency mortgage-backed securities with an amortized cost of $537 million. At March 31, 2011, the total unrealized loss on these non-investment grade securities was $99 million. All of the non-investment grade securities referenced above were initially investment grade and have been downgraded since purchase. Based on its evaluation at March 31, 2011, BB&T determined that certain of the non-investment grade non-agency mortgage-backed securities had credit losses evident and recognized other-than-temporary impairments related to these securities. BB&T’s evaluation of the other debt securities with continuous unrealized losses indicated that there were no credit losses evident. Furthermore, as of the date of the evaluation, BB&T did not intend to sell, and it was more likely than not that the Company would not be required to sell these debt securities before the anticipated recovery of the amortized cost basis. In making this determination, BB&T considers its expected liquidity and capital needs, including its asset/liability management needs, forecasts, strategies and other relevant information.

The following table presents non-investment grade securities with significant unrealized losses that are not covered by a loss sharing arrangement and the OTTI recognized to date:

 

     March 31, 2011  

Security

   Amortized
Cost
     Fair
Value
     Unrealized
Loss
    Credit Loss
Recognized
 
     (Dollars in millions)  

RMBS 1

   $ 94       $ 71       $ (23   $ (8

RMBS 2

     42         31         (11     (7

RMBS 3

     128         97         (31     (20

RMBS 4

     105         94         (11     (3

 

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BB&T Corporation and Subsidiaries

  

Notes to Consolidated Financial Statements (Unaudited)

     First Quarter 2011   

 

NOTE 3.    Loans and Leases

The following table provides a breakdown of BB&T’s loan portfolio as of March 31, 2011 and December 31, 2010:

 

     March 31,
2011
     December 31,
2010
 
     (Dollars in millions)  

Loans and leases, net of unearned income:

     

Commercial loans and leases:

     

Commercial and industrial

   $ 33,587       $ 34,050   

Commercial real estate—other

     11,277         11,439   

Commercial real estate—residential ADC (1)

     3,061         3,397   

Direct retail lending

     13,612         13,749   

Sales finance

     7,121         7,050   

Revolving credit

     2,063         2,127   

Residential mortgage

     18,228         17,550   

Specialized lending

     7,767         7,953   

Other acquired

     56         58   
                 

Total loans and leases held for investment (excluding covered loans)

     96,772         97,373   

Covered

     5,803         6,194   
                 

Total loans and leases held for investment

     102,575         103,567   

Loans held for sale

     2,312         3,697   
                 

Total loans and leases

   $ 104,887       $ 107,264   
                 

 

(1) Commercial real estate—residential ADC represents residential acquisition, development and construction loans.

Covered loans represent loans acquired from the FDIC subject to one of the loss sharing agreements. Other acquired loans represent consumer loans acquired from the FDIC that are not subject to one of the loss sharing agreements.

The following table reflects the carrying value of all purchased impaired and nonimpaired loans as of March 31, 2011 and December 31, 2010:

 

     March 31, 2011     December 31, 2010  
     Purchased
Impaired
Loans
    Purchased
Nonimpaired
Loans
    Total     Purchased
Impaired
Loans
    Purchased
Nonimpaired
Loans
    Total  
     (Dollars in millions)  

Residential mortgage

   $ 716      $ 691      $ 1,407      $ 733      $ 713      $ 1,446   

Commercial real estate

     1,892        1,921        3,813        2,031        1,982        4,013   

Commercial

     83        500        583        91        644        735   
                                                

Total covered

     2,691        3,112        5,803        2,855        3,339        6,194   

Other acquired

     3        53        56        3        55        58   
                                                

Total

     2,694        3,165        5,859        2,858        3,394        6,252   
                                                

Allowance for loans losses

     (105     (39     (144     (90     (54     (144
                                                

Net

   $ 2,589      $ 3,126      $ 5,715      $ 2,768      $ 3,340      $ 6,108   
                                                

 

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BB&T Corporation and Subsidiaries

  

Notes to Consolidated Financial Statements (Unaudited)

     First Quarter 2011   

 

Changes in the carrying amount and accretable yield for purchased impaired and nonimpaired loans, excluding loans held for sale, were as follows for the three months ended March 31, 2011 and 2010:

 

    March 31, 2011     March 31, 2010  
    Purchased Impaired     Purchased Nonimpaired     Purchased Impaired     Purchased Nonimpaired  
    Accretable
Yield
    Carrying
Amount
of Loans
    Accretable
Yield
    Carrying
Amount
of Loans
    Accretable
Yield
    Carrying
Amount
of Loans
    Accretable
Yield
    Carrying
Amount
of Loans
 
    (Dollars in millions)  

Balance at beginning of period

  $ 835      $ 2,858      $ 1,611      $ 3,394      $ 889      $ 3,666      $ 1,301      $ 4,476   

Additions

    —          —          —          —          —          —          —          —     

Accretion

    (92     92        (174     174        (83     83        (82     82   

Reclassifications from nonaccretable balance, net

    35        —          82        —          370        —          93        —     

Payments received, net

    —          (256     —          (403     —          (263     —          (487
                                                               

Balance at end of period

  $ 778      $ 2,694      $ 1,519      $ 3,165      $ 1,176      $ 3,486      $ 1,312      $ 4,071   
                                                               

The outstanding unpaid principal balance for all purchased impaired loans as of March 31, 2011 and December 31, 2010 was $3.5 billion and $3.8 billion, respectively. The outstanding unpaid principal balance for all purchased nonimpaired loans as of March 31, 2011 and December 31, 2010 was $4.6 billion and $5.0 billion, respectively.

At March 31, 2011 and December 31, 2010 none of the purchased loans were classified as nonperforming assets. Therefore, interest income, through accretion of the difference between the carrying amount of the loans and the expected cash flows, is being recognized on all purchased loans. The allowance for loan losses related to the purchased loans results from decreased expectations of future cash flows due to increased credit losses for certain acquired loan pools.

The following table provides a summary of BB&T’s nonperforming and past due loans as of March 31, 2011 and December 31, 2010:

 

     March 31,
2011
     December 31,
2010
 
     (Dollars in millions)  

Nonaccrual loans and leases (1)(2)

     

Held for investment

   $ 2,427       $ 2,149   

Held for sale

     189         521   
                 

Total nonaccrual loans and leases

     2,616         2,670   
                 

Foreclosed real estate

     1,211         1,259   

Other foreclosed property

     36         42   
                 

Total foreclosed property (3)

     1,247         1,301   
                 

Total nonperforming assets (excluding covered assets)

   $ 3,863       $ 3,971   
                 

Loans 90 days or more past due and still accruing (excluding covered loans) (4) (5) (6)

   $ 263       $ 295   

 

(1) Covered and other acquired loans are considered to be performing due to the application of the accretion method. Covered loans that are contractually past due are noted in footnote (5) below.

 

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Notes to Consolidated Financial Statements (Unaudited)

     First Quarter 2011   

 

(2) Includes nonperforming restructurings totaling $479 million at March 31, 2011 and December 31, 2010.
(3) Excludes foreclosed real estate totaling $362 million and $313 million as of March 31, 2011 and December 31, 2010, respectively, that are covered by FDIC loss sharing agreements.
(4) Excludes mortgage loans guaranteed by GNMA that BB&T does not have the obligation to repurchase.
(5) Excludes loans past due 90 days or more that are covered by FDIC loss sharing agreements totaling $1.2 billion and $1.1 billion as of March 31, 2011 and December 31, 2010, respectively.
(6) Excludes mortgage loans past due 90 days or more that are government guaranteed totaling $187 million and $153 million as of March 31, 2011 and December 31, 2010, respectively.

The following table provides a summary of loans that continue to accrue interest under the terms of the restructuring (“performing restructurings”) and restructured loans that have been placed in nonaccrual status (“nonperforming restructurings”) as of March 31, 2011 and December 31, 2010:

 

     March 31,
2011
     December 31,
2010
 
     (Dollars in millions)  

Performing restructurings:

     

Commercial loans and leases:

     

Commercial and industrial

   $ 125       $ 205   

Commercial real estate—other

     233         280   

Commercial real estate—residential ADC

     120         172   

Direct retail lending

     146         141   

Sales finance

     5         5   

Revolving credit

     62         62   

Residential mortgage (1)

     587         585   

Specialized lending

     31         26   
                 

Total performing restructurings

     1,309         1,476   

Nonperforming restructurings (2)(3)(4)

     479         479   
                 

Total restructurings (5)

   $ 1,788       $ 1,955   
                 

 

(1) Excludes restructured mortgage loans that are government guaranteed totaling $134 million and $115 million at March 31, 2011 and December 31, 2010, respectively.
(2) Nonperforming restructurings are included in nonaccrual loan disclosures.
(3) Excludes restructured mortgage loans that are government guaranteed totaling $14 million included in loans held for sale at March 31, 2011 and December 31, 2010.
(4) Includes approximately $39 million and $110 million of nonperforming restructurings included in loans held for sale at March 31, 2011 and December 31, 2010, respectively.
(5) All restructurings are considered impaired. The allowance for loan and lease losses attributable to these restructured loans totaled $314 million and $324 million at March 31, 2011 and December 31, 2010, respectively.

BB&T had commitments totaling $56 million and $64 million at March 31, 2011 and December 31, 2010, respectively, to lend additional funds to clients with loans whose terms have been modified in restructurings.

 

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BB&T Corporation and Subsidiaries

  

Notes to Consolidated Financial Statements (Unaudited)

     First Quarter 2011   

 

NOTE 4.    Allowance for Loan and Lease Losses and Reserve for Unfunded Lending Commitments

An analysis of the allowance for credit losses for the three months ended March 31, 2011 is presented in the following table:

 

     Three Months Ended March 31, 2011  
     Beginning
Balance
     Charge-
Offs
    Recoveries      Provision     Ending
Balance
 
     (Dollars in millions)  

Commercial:

            

Commercial and industrial

   $ 621       $ (78   $ 4       $ (12   $ 535   

Commercial real estate—other

     446         (68     3         116        497   

Commercial real estate—residential ADC

     469         (71     4         19        421   

Specialized lending

     21         (2     1         (2     18   

Retail:

            

Direct retail lending

     246         (78     9         68        245   

Revolving credit

     109         (27     5         18        105   

Residential mortgage

     298         (54     1         83        328   

Sales finance

     47         (10     2         4        43   

Specialized lending

     177         (50     5         43        175   

Covered and other acquired

     144         —          —           —          144   

Unallocated

     130         —          —           —          130   
                                          

Allowance for loan and lease losses

     2,708         (438     34         337        2,641   

Reserve for unfunded lending commitments

     47         —          —           3        50   
                                          

Allowance for credit losses

   $ 2,755       $ (438   $ 34       $ 340      $ 2,691   
                                          

An analysis of the allowance for credit losses for the three months ended March 31, 2010 is presented in the following table:

 

     Three Months Ended
March 31, 2010
 
     (Dollars in millions)  

Beginning balance

   $ 2,672   

Provision for credit losses

     575   

Loans and leases charged-off

     (509

Recoveries of previous charge-offs

     34   
        

Net loans and leases charged-off

     (475
        

Other changes, net

     (13
        

Ending balance

   $ 2,759   
        

Allowance for loan and lease losses

   $ 2,714   

Reserve for unfunded lending commitments

     45   
        

Allowance for credit losses

   $ 2,759   
        

 

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Table of Contents

BB&T Corporation and Subsidiaries

  

Notes to Consolidated Financial Statements (Unaudited)

     First Quarter 2011   

 

The following tables provide a breakdown of the allowance for loan and lease losses and the recorded investment in loans based on the method for determining the allowance as of March 31, 2011 and December 31, 2010:

 

     March 31, 2011  
     Allowance for Loan and Lease Losses  
     Individually
Evaluated for
Impairment
     Collectively
Evaluated for
Impairment
     Loans
Acquired
With
Deteriorated
Credit
Quality
     Total  
     (Dollars in millions)  

Commercial:

           

Commercial and industrial

   $ 86       $ 449       $ —         $ 535   

Commercial real estate—other

     99         398         —           497   

Commercial real estate—residential ADC

     77         344         —           421   

Specialized lending

     —           18         —           18   

Retail:

           

Direct retail lending

     33         212         —           245   

Revolving credit

     26         79         —           105   

Residential mortgage

     161         167         —           328   

Sales finance

     1         42         —           43   

Specialized lending

     14         161         —           175   

Covered and other acquired

     —           39         105         144   

Unallocated

     —           130         —           130   
                                   

Total

   $ 497       $ 2,039       $ 105       $ 2,641   
                                   

 

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Table of Contents

BB&T Corporation and Subsidiaries

  

Notes to Consolidated Financial Statements (Unaudited)

     First Quarter 2011   

 

 

     March 31, 2011  
     Loans and Leases  
     Individually
Evaluated for
Impairment
     Collectively
Evaluated for
Impairment
     Loans
Acquired
With
Deteriorated
Credit
Quality
     Total  
     (Dollars in millions)  

Commercial:

           

Commercial and industrial

   $ 719       $ 32,868       $ —         $ 33,587   

Commercial real estate—other

     741         10,536         —           11,277   

Commercial real estate—residential ADC

     687         2,374         —           3,061   

Specialized lending

     4         3,199         —           3,203   

Retail:

           

Direct retail lending

     178         13,434         —           13,612   

Revolving credit

     62         2,001         —           2,063   

Residential mortgage

     832         17,396         —           18,228   

Sales finance

     7         7,114         —           7,121   

Specialized lending

     31         4,533         —           4,564   

Covered and other acquired

     —           3,165         2,694         5,859   
                                   

Total

   $ 3,261       $ 96,620       $ 2,694       $ 102,575   
                                   

 

     December 31, 2010  
     Allowance for Loan and Lease Losses  
     Individually
Evaluated for
Impairment
     Collectively
Evaluated for
Impairment
     Loans
Acquired
With
Deteriorated
Credit
Quality
     Total  
     (Dollars in millions)  

Commercial:

           

Commercial and industrial

   $ 96       $ 525       $ —         $ 621   

Commercial real estate—other

     63         383         —           446   

Commercial real estate—residential ADC

     75         394         —           469   

Specialized lending

     1         20         —           21   

Retail:

           

Direct retail lending

     26         220         —           246   

Revolving credit

     25         84         —           109   

Residential mortgage

     167         131         —           298   

Sales finance

     1         46         —           47   

Specialized lending

     2         175         —           177   

Covered and other acquired

     —           54         90         144   

Unallocated

     —           130         —           130   
                                   

Total

   $ 456       $ 2,162       $ 90       $ 2,708   
                                   

 

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Table of Contents

BB&T Corporation and Subsidiaries

  

Notes to Consolidated Financial Statements (Unaudited)

     First Quarter 2011   

 

     December 31, 2010  
     Loans and Leases  
     Individually
Evaluated for
Impairment
     Collectively
Evaluated for
Impairment
     Loans
Acquired
With
Deteriorated
Credit
Quality
     Total  
     (Dollars in millions)  

Commercial:

           

Commercial and industrial

   $ 708       $ 33,342       $ —         $ 34,050   

Commercial real estate—other

     691         10,748         —           11,439   

Commercial real estate—residential ADC

     684         2,713         —           3,397   

Specialized lending

     4         3,399         —           3,403   

Retail:

           

Direct retail lending

     177         13,572         —           13,749   

Revolving credit

     62         2,065         —           2,127   

Residential mortgage

     803         16,747         —           17,550   

Sales finance

     5         7,045         —           7,050   

Specialized lending

     24         4,526         —           4,550   

Covered and other acquired

     —           3,394         2,858         6,252   
                                   

Total

   $ 3,158       $ 97,551       $ 2,858       $ 103,567   
                                   

BB&T monitors the credit quality of its commercial portfolio segment using internal risk ratings. These ratings have been correlated with bond ratings for similar instruments based on management’s judgment. BB&T assigns an internal risk rating at loan origination and reviews the relationship again on an annual basis or at any point management becomes aware of information affecting the borrowers’ ability to fulfill their obligations.

BB&T monitors the credit quality of its retail portfolio segment based primarily on delinquency status, which is the primary factor considered in determining whether a retail loan should be classified as nonaccrual.

For the commercial portfolio segment, BB&T’s internal risk ratings were correlated with Moody’s bond ratings by mapping the historical default rates by internal risk grade to those implied in the bond ratings. Investment grade includes all loans mapped to a “Baa” or higher rating. Near investment grade includes all loans mapped to a “Ba” rating. Noninvestment grade includes all loans mapped to a “B” or lower rating. For the retail portfolio segment, nonperforming loans reflect loans in nonaccrual status.

 

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BB&T Corporation and Subsidiaries

  

Notes to Consolidated Financial Statements (Unaudited)

     First Quarter 2011   

 

The following tables illustrate the credit quality indicators associated with BB&T’s loans and leases held for investment as of March 31, 2011 and December 31, 2010. Covered and other acquired loans are excluded from this analysis because their related allowance is determined by loan pool performance due to the application of the accretion method.

 

            March 31, 2011  
            Commercial  
            Commercial
& Industrial
     Commercial
Real Estate -
Other
     Commercial
Real Estate -
Residential
ADC
     Specialized
Lending
 
            (Dollars in millions)  

Investment grade

      $ 8,152       $ 726       $ 35       $ 1,869   

Near investment grade

        16,344         4,547         436         816   

Noninvestment grade—performing

  

     8,497         5,496         2,022         507   

Noninvestment grade—nonperforming (1)

  

     594         508         568         11   
                                      

Total

      $ 33,587       $ 11,277       $ 3,061       $ 3,203   
                                      
     March 31, 2011  
     Retail  
     Direct Retail
Lending
     Revolving
Credit
     Residential
Mortgage
     Sales
Finance
     Specialized
Lending
 
     (Dollars in millions)  

Performing

   $ 13,430       $ 2,063       $ 17,717       $ 7,112       $ 4,520   

Nonperforming

     182         —           511         9         44   
                                            
   $ 13,612       $ 2,063       $ 18,228       $ 7,121       $ 4,564   
                                            
            December 31, 2010  
            Commercial  
            Commercial
& Industrial
     Commercial
Real Estate -
Other
     Commercial
Real Estate -
Residential
ADC
     Specialized
Lending
 
            (Dollars in millions)  

Investment grade

      $ 8,358       $ 687       $ 35       $ 2,070   

Near investment grade

        16,637         4,618         512         756   

Noninvestment grade—performing

  

     8,547         5,729         2,337         566   

Noninvestment grade—nonperforming (1)

  

     508         405         513         11   
                                      

Total

      $ 34,050       $ 11,439       $ 3,397       $ 3,403   
                                      
     December 31, 2010  
     Retail  
     Direct Retail
Lending
     Revolving
Credit
     Residential
Mortgage
     Sales
Finance
     Specialized
Lending
 
     (Dollars in millions)  

Performing

   $ 13,558       $ 2,127       $ 17,084       $ 7,044       $ 4,501   

Nonperforming

     191         —           466         6         49   
                                            
   $ 13,749       $ 2,127       $ 17,550       $ 7,050       $ 4,550   
                                            

 

  (1) Excludes nonperforming commercial loans held for sale of $189 million and $521 million as of March 31, 2011 and December 31, 2010, respectively.

 

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BB&T Corporation and Subsidiaries

  

Notes to Consolidated Financial Statements (Unaudited)

     First Quarter 2011   

 

The following tables represent an aging analysis of BB&T’s past due loans and leases as of March 31, 2011 and December 31, 2010:

 

     March 31, 2011  
     Loans and Leases Excluding Covered (1)  
     Accruing Loans and Leases         
     Current      30-89 Days
Past Due
     90 Days Or
More Past
Due
     Nonaccrual
Loans And
Leases (2)
     Total Loans And
Leases, Excluding
Covered Loans
 
     (Dollars in millions)  

Commercial:

              

Commercial and industrial

   $ 32,850       $ 137       $ 6       $ 594       $ 33,587   

Commercial real estate—other

     10,695         54         20         508         11,277   

Commercial real estate—residential ADC

     2,448         40         5         568         3,061   

Specialized lending

     3,161         25         6         11         3,203   

Retail:

              

Direct retail lending

     13,205         166         59         182         13,612   

Revolving credit

     2,021         24         18         —           2,063   

Residential mortgage (3)

     16,891         515         311         511         18,228   

Sales finance

     7,022         67         23         9         7,121   

Specialized lending

     4,379         141         —           44         4,564   

Other acquired

     53         1         2         —           56   
                                            

Total

   $ 92,725       $ 1,170       $ 450       $ 2,427       $ 96,772   
                                            

 

     December 31, 2010  
     Loans and Leases Excluding Covered (1)  
     Accruing Loans and Leases         
     Current      30-89 Days
Past Due
     90 Days Or
More Past
Due
     Nonaccrual
Loans And
Leases (2)
     Total Loans And
Leases, Excluding
Covered Loans
 
     (Dollars in millions)  

Commercial:

              

Commercial and industrial

   $ 33,371       $ 163       $ 8       $ 508       $ 34,050   

Commercial real estate—other

     10,962         68         4         405         11,439   

Commercial real estate—residential ADC

     2,792         84         8         513         3,397   

Specialized lending

     3,358         29         5         11         3,403   

Retail:

              

Direct retail lending

     13,293         189         76         191         13,749   

Revolving credit

     2,079         28         20         —           2,127   

Residential mortgage (3)

     16,173         615         296         466         17,550   

Sales finance

     6,922         95         27         6         7,050   

Specialized lending

     4,281         219         1         49         4,550   

Other acquired

     54         1         3         —           58   
                                            

Total

   $ 93,285       $ 1,491       $ 448       $ 2,149       $ 97,373   
                                            

 

(1) Covered loans have been excluded from this aging analysis because they are covered by FDIC loss sharing agreements, and their related allowance is determined by loan pool performance due to the application of the accretion method.
(2) Excludes nonperforming commercial loans held for sale of $189 million and $521 million as of March 31, 2011 and December 31, 2010, respectively.
(3) Residential mortgage loans include $71 million and $83 million in government guaranteed loans past due 30-89 days, and $187 million and $153 million in government guaranteed loans past due greater than 90 days as of March 31, 2011 and December 31, 2010, respectively.

 

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BB&T Corporation and Subsidiaries

  

Notes to Consolidated Financial Statements (Unaudited)

     First Quarter 2011   

 

The following tables set forth certain information regarding BB&T’s impaired loans, excluding acquired impaired loans and loans held for sale, that were evaluated for specific reserves as of March 31, 2011 and December 31, 2010. The average balance of impaired loans and the interest income recognized while on impaired status are reported for the three months ended March 31, 2011.

 

     March 31, 2011  
     Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
     Average
Recorded
Investment
     Interest
Income
Recognized
 
     (Dollars in millions)  

With No Related Allowance Recorded:

              

Commercial:

              

Commercial and industrial

   $ 182       $ 281       $ —         $ 252       $ —     

Commercial real estate—other

     161         248         —           252         —     

Commercial real estate—residential ADC

     229         357         —           258         —     

Specialized lending

     —           —           —           —           —     

Retail:

              

Direct retail lending

     23         75         —           25         —     

Residential mortgage (1)

     39         74         —           30         —     

Sales finance

     1         1         —           3         —     

Specialized lending

     1         2         —           10         —     

With An Allowance Recorded:

              

Commercial:

              

Commercial and industrial

     537         559         86         510         1   

Commercial real estate—other

     580         629         99         552         2   

Commercial real estate—residential ADC

     458         527         77         484         1   

Specialized lending

     4         4         —           4         —     

Retail:

              

Direct retail lending

     155         163         33         152         2   

Revolving credit

     62         62         26         61         1   

Residential mortgage (1)

     659         676         148         663         7   

Sales finance

     6         7         1         2         —     

Specialized lending

     30         30         14         14         —     
                                            

Total

   $ 3,127       $ 3,695       $ 484       $ 3,272       $ 14   
                                            

 

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BB&T Corporation and Subsidiaries

  

Notes to Consolidated Financial Statements (Unaudited)

     First Quarter 2011   

 

     December 31, 2010  
     Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
 
     (Dollars in millions)  

With No Related Allowance Recorded:

        

Commercial:

        

Commercial and industrial

   $ 196       $ 267       $ —     

Commercial real estate—other

     175         246         —     

Commercial real estate—residential ADC

     200         300         —     

Retail:

        

Direct retail lending

     22         69         —     

Residential mortgage (1)

     25         50         —     

With An Allowance Recorded:

        

Commercial:

        

Commercial and industrial

     512         534         96   

Commercial real estate—other

     516         565         63   

Commercial real estate—residential ADC

     484         556         75   

Specialized lending

     4         4         1   

Retail:

        

Direct retail lending

     155         161         26   

Revolving credit

     62         61         25   

Residential mortgage (1)

     663         690         153   

Sales finance

     5         5         1   

Specialized lending

     24         24         2   
                          

Total

   $ 3,043       $ 3,532       $ 442   
                          

 

(1) Residential mortgage loans exclude $134 million and $115 million in government guaranteed loans and related allowance of $13 million and $14 million as of March 31, 2011 and December 31, 2010, respectively.

NOTE 5.    Goodwill and Other Intangible Assets

The changes in the carrying amounts of goodwill attributable to each of BB&T’s operating segments for the three months ended March 31, 2011 are reflected in the table below. To date, there have been no goodwill impairments recorded by BB&T.

 

    Community
Banking
    Residential
Mortgage
Banking
    Sales
Finance
    Specialized
Lending
    Insurance
Services
    Financial
Services
    All
Other
    Total  
    (Dollars in millions)  

Balance January 1, 2011

  $ 4,519      $ 7      $ 93      $ 104      $ 1,067      $ 192      $ 26      $ 6,008   

Contingent consideration

    —          —          —          —          6        —          —          6   
                                                               

Balance, March 31, 2011

  $ 4,519      $ 7      $ 93      $ 104      $ 1,073      $ 192      $ 26      $ 6,014   
                                                               

 

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Table of Contents

BB&T Corporation and Subsidiaries

  

Notes to Consolidated Financial Statements (Unaudited)

     First Quarter 2011   

 

The following table presents the gross carrying amounts and accumulated amortization for BB&T’s identifiable intangible assets subject to amortization at the dates presented:

 

     March 31, 2011      December 31, 2010  
     Gross
Carrying
Amount
     Accumulated
Amortization
    Net
Carrying
Amount
     Gross
Carrying
Amount
     Accumulated
Amortization
    Net
Carrying
Amount
 
     (Dollars in millions)  

Identifiable intangible assets:

               

Core deposit intangibles

   $ 626       $ (450   $ 176       $ 626       $ (438   $ 188   

Other (1)

     753         (446     307         752         (432     320   
                                                   

Totals

   $ 1,379       $ (896   $ 483       $ 1,378       $ (870   $ 508   
                                                   

 

(1) Other identifiable intangibles are primarily customer relationship intangibles.

NOTE 6.    Loan Servicing

Residential Mortgage Banking Activities

The following table includes a summary of residential mortgage loans managed or securitized and related delinquencies and net charge-offs:

 

     March 31, 2011      December 31, 2010  
     (Dollars in millions)  

Mortgage loans managed or securitized (1)

   $ 23,116       $ 23,692   

Less: Loans securitized and transferred to securities available for sale

     4         4   

Loans held for sale

     1,943         3,068   

Covered mortgage loans

     1,407         1,446   

Mortgage loans sold with recourse

     1,534         1,624   
                 

Mortgage loans held for investment

   $ 18,228       $ 17,550   
                 

Mortgage loans on nonaccrual status (2)

   $ 511       $ 466   

Mortgage loans 90 days past due and still accruing interest (2)

     124         143   

Mortgage loans net charge-offs (3)

     53         390   

 

(1) Balances exclude loans serviced for others, with no other continuing involvement.
(2) Includes amounts related to residential mortgage loans held for sale and excludes amounts related to government guaranteed loans.
(3) Net charge-offs for March 31, 2011 reflect three months.

The unpaid principal balances of BB&T’s total residential mortgage servicing portfolio were $86.6 billion and $83.6 billion at March 31, 2011 and December 31, 2010, respectively. The unpaid principal balances of residential mortgage loans serviced for others consist primarily of agency conforming fixed-rate mortgage loans and totaled $64.9 billion and $61.8 billion at March 31, 2011 and December 31, 2010, respectively. Mortgage loans serviced for others are not included in loans on the accompanying Consolidated Balance Sheets.

During the three months ended March 31, 2011 and 2010, BB&T sold residential mortgage loans from the held for sale portfolio with unpaid principal balances of $5.5 billion and $4.5 billion, respectively, and recognized pre-tax gains of $35 million and $38 million, respectively, including the impact of interest rate lock commitments. These gains are recorded in noninterest income as a component of mortgage banking income. BB&T retained the related mortgage servicing rights and receives servicing fees.

 

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BB&T Corporation and Subsidiaries

  

Notes to Consolidated Financial Statements (Unaudited)

     First Quarter 2011   

 

At March 31, 2011 and 2010, the approximate weighted average servicing fee was 0.35% and 0.36%, respectively, of the outstanding balance of the residential mortgage loans serviced for others. The weighted average coupon interest rate on the portfolio of mortgage loans serviced for others was 5.17% and 5.49% at March 31, 2011 and 2010, respectively. BB&T recognized servicing fees of $58 million and $57 million during the first three months of 2011 and 2010, respectively, as a component of mortgage banking income.

At March 31, 2011 and December 31, 2010, BB&T had $1.5 billion and $1.6 billion, respectively, of residential mortgage loans sold with recourse liability. In the event of nonperformance by the borrower, BB&T has maximum recourse exposure of approximately $578 million and $597 million as of March 31, 2011 and December 31, 2010, respectively. At March 31, 2011 and December 31, 2010, BB&T has recorded $6 million of reserves related to these recourse exposures. Payments made to date have been immaterial.

Residential mortgage servicing rights are recorded on the Consolidated Balance Sheets at fair value with changes in fair value recorded as a component of mortgage banking income in the Consolidated Statements of Income for each period. BB&T uses various derivative instruments to mitigate the income statement effect of changes in fair value, due to changes in valuation inputs and assumptions, of its residential mortgage servicing rights. The following is an analysis of the activity in BB&T’s residential mortgage servicing rights for the three months ended March 31, 2011 and 2010:

 

    Residential Mortgage Servicing Rights
Three Months Ended March 31,
 
            2011                     2010          
    (Dollars in millions)  

Carrying value, January 1,

  $ 830      $ 832   

Additions

    86        69   

Increase (decrease) in fair value:

   

Due to changes in valuation inputs or assumptions

    40        5   

Other changes (1)

    (28     (31
               

Carrying value, March 31,

  $ 928      $ 875   
               

 

(1) Represents the realization of expected net servicing cash flows, expected borrower payments and the passage of time.

BB&T uses assumptions and estimates in determining the fair value of mortgage servicing rights. These assumptions include prepayment speeds, servicing costs and Option Adjusted Spread commensurate with the risks involved and comparable to assumptions used by market participants to value and bid servicing rights available for sale in the market. At March 31, 2011, the sensitivity of the current fair value of the residential mortgage servicing rights to immediate 10% and 20% adverse changes in key economic assumptions are included in the accompanying table:

 

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Notes to Consolidated Financial Statements (Unaudited)

     First Quarter 2011   

 

     Residential
Mortgage Servicing Rights
March 31, 2011
 
     (Dollars in millions)  

Fair value of residential mortgage servicing rights

   $ 928   

Composition of residential loans serviced for others:

  

Fixed-rate mortgage loans

     99

Adjustable-rate mortgage loans

     1   
        

Total

     100
        

Weighted average life

     6.4 yrs 

Prepayment Speed

     10.5

Effect on fair value of a 10% increase

   $ (40

Effect on fair value of a 20% increase

     (76

Weighted average discount rate

     10.6

Effect on fair value of a 10% increase

   $ (41

Effect on fair value of a 20% increase

     (79

The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of an adverse variation in a particular assumption on the fair value of the mortgage servicing rights is calculated without changing any other assumption; while in reality, changes in one factor may result in changes in another (for example, increases in market interest rates may result in lower prepayments), which may magnify or counteract the effect of the change.

Commercial Mortgage Banking Activities

BB&T also arranges and services commercial real estate mortgages through Grandbridge Real Estate Capital, LLC (“Grandbridge”) the commercial mortgage banking subsidiary of Branch Bank. During the three months ended March 31, 2011 and 2010, Grandbridge originated $930 million and $268 million, respectively, of commercial real estate mortgages, the majority of which were arranged for third party investors. As of March 31, 2011 and December 31, 2010, Grandbridge’s portfolio of commercial real estate mortgages serviced for others totaled $24.4 billion and $24.1 billion, respectively. Commercial real estate mortgage loans serviced for others are not included in loans on the accompanying Consolidated Balance Sheets. Grandbridge had $4.4 billion in loans serviced for others that were covered by recourse provisions at March 31, 2011 and December 31, 2010. At March 31, 2011 and December 31, 2010, Grandbridge’s maximum exposure to loss for these loans was approximately $1.2 billion. BB&T has recorded $21 million and $19 million of reserves related to these recourse exposures at March 31, 2011 and December 31, 2010, respectively.

Commercial mortgage servicing rights are recorded as other assets on the Consolidated Balance Sheets at lower of cost or market and amortized in proportion to and over the estimated period that net servicing income is expected to be received based on projections of the amount and timing of estimated future net cash flows. The following is an analysis of the activity in BB&T’s commercial mortgage servicing rights for the three months ended March 31, 2011 and 2010:

 

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Notes to Consolidated Financial Statements (Unaudited)

     First Quarter 2011   

 

     Commercial Mortgage Servicing Rights
Three Months Ended March 31,
 
     2011     2010  
     (Dollars in millions)  

Carrying value, January 1,

   $ 103      $ 101   

Additions

     6        2   

Amortization expense

     (5     (4
                

Carrying value, March 31,

   $ 104      $ 99   
                

At March 31, 2011, the sensitivity of the current fair value of the capitalized commercial mortgage servicing rights to adverse changes in key economic assumptions are included in the accompanying table:

 

     Commercial
Mortgage Servicing  Rights
March 31, 2011
 
     (Dollars in millions)  

Fair value of commercial mortgage servicing rights

   $ 120   

Weighted average life

     7.1 yrs 

Prepayment speed

     0.0

Weighted average discount rate

     12.2

Effect on fair value of a 25% increase

   $ (9

Effect on fair value of a 50% increase

     (17

The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of an adverse variation in a particular assumption on the fair value of the mortgage servicing rights is calculated without changing any other assumption; while in reality, changes in one factor may result in changes in another (for example, increases in market interest rates may result in increased value of escrow deposits), which may magnify or counteract the effect of the change.

NOTE 7.    Deposits

A summary of BB&T’s deposits is presented in the accompanying table:

 

     March 31,
2011
     December 31,
2010
 
     (Dollars in millions)  

Noninterest-bearing deposits

   $ 21,864       $ 20,637   

Interest checking

     3,711         4,050   

Other client deposits

     57,432         54,040   

Client certificates of deposit

     20,580         21,317   

Other interest-bearing deposits

     3,326         7,169   
                 

Total deposits

   $ 106,913       $ 107,213   
                 

Time deposits that are $100,000 and greater totaled $10.8 billion and $10.6 billion at March 31, 2011 and December 31, 2010, respectively.

 

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Notes to Consolidated Financial Statements (Unaudited)

     First Quarter 2011   

 

NOTE 8.    Long-Term Debt

Long-term debt comprised the following:

 

     March 31,
2011
     December 31,
2010
 
     (Dollars in millions)  

BB&T Corporation

     

3.10% Senior Notes Due 2011

   $ 250       $ 250   

3.85% Senior Notes Due 2012

     1,000         1,000   

3.38% Senior Notes Due 2013

     500         500   

5.70% Senior Notes Due 2014

     510         510   

3.95% Senior Notes Due 2016

     499         499   

3.20% Senior Notes Due 2016 (5)

     999         —     

6.85% Senior Notes Due 2019 (5)

     538         538   

6.50% Subordinated Notes Due 2011 (1)

     611         610   

4.75% Subordinated Notes Due 2012 (1)

     490         490   

5.20% Subordinated Notes Due 2015 (1)

     932         932   

4.90% Subordinated Notes Due 2017 (1)(5)

     340         339   

5.25% Subordinated Notes Due 2019 (1)(5)

     586         586   

Branch Bank

     

Floating Rate Subordinated Notes Due 2016 (1)(2)

     350         350   

Floating Rate Subordinated Notes Due 2017 (1)(2)

     261         261   

4.875% Subordinated Notes Due 2013 (1)

     222         222   

5.625% Subordinated Notes Due 2016 (1)(5)

     386         386   

Federal Home Loan Bank Advances to Branch Bank (3) 

     

Varying maturities to 2034

     10,147         10,243   

Junior Subordinated Debt to Unconsolidated Trusts (4) 

     3,269         3,269   

Other Long-Term Debt

     99         123   

Fair value hedge-related basis adjustments

     602         622   
                 

Total Long-Term Debt

   $ 22,591       $ 21,730   
                 

 

(1) Subordinated notes that qualify under the risk-based capital guidelines as Tier 2 supplementary capital, subject to certain limitations.
(2) These floating-rate securities are based on LIBOR and had an effective rate of 0.62% as of March 31, 2011.
(3) $800 million of these advances were swapped to a floating rate based on LIBOR. At March 31, 2011, the weighted average cost of these advances was 3.17% including the effect of fair value hedges, and the weighted average maturity was 6.0 years.
(4) Securities that qualify under the risk-based capital guidelines as Tier 1 capital, subject to certain limitations. Refer to BB&T’s Annual Report on Form 10-K for the year ended December 31, 2010 for additional information.
(5) These fixed rate notes were swapped to floating rates based on LIBOR. At March 31, 2011, the effective rates paid on these borrowings ranged from 1.25% to 3.89%.

In March 2011, BB&T made the decision to retire all of its junior subordinated debt to unconsolidated trusts through the exercise of certain early redemption provisions. BB&T determined that it was appropriate to amortize the debt issuance costs and related discounts or premiums, including fair value hedge adjustments, over the period from March 2011 to the expected redemption date for each of the impacted debt securities.

 

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Notes to Consolidated Financial Statements (Unaudited)

     First Quarter 2011   

 

NOTE 9.    Shareholders’ Equity

Common Stock

The authorized common stock of BB&T consists of two billion shares with a $5 par value. There were 696 million and 694 million common shares issued and outstanding at March 31, 2011 and December 31, 2010, respectively.

Preferred Stock

The authorized preferred stock of BB&T consists of five million shares. At March 31, 2011 and December 31, 2010, there were no preferred shares outstanding.

Equity-Based Plans

At March 31, 2011, BB&T had options, restricted shares and restricted share units outstanding from the following equity-based compensation plans: the 2004 Stock Incentive Plan (“2004 Plan”), the 1995 Omnibus Stock Incentive Plan (“Omnibus Plan”), the Non-Employee Directors’ Stock Option Plan (“Directors’ Plan”), and a plan assumed from an acquired entity. BB&T’s shareholders have approved all equity-based compensation plans with the exception of plans assumed from acquired companies. As of March 31, 2011, the 2004 Plan is the only plan that has shares available for future grants. The 2004 Plan allows for accelerated vesting of awards for holders who retire and have met all retirement eligibility requirements and in connection with certain other events. Refer to BB&T’s Annual Report on Form 10-K for the year ended December 31, 2010 for further disclosures related to equity-based awards issued by BB&T.

BB&T measures the fair value of each option award on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants awarded during the first three months of 2011 and 2010, respectively. Substantially all of BB&T’s option awards are granted in February of each year. Therefore, the assumptions noted below are weighted accordingly:

 

     March 31,  
     2011     2010  

Assumptions:

    

Risk-free interest rate

     1.7     2.0

Dividend yield

     3.5        5.4   

Volatility factor

     37.2        36.0   

Expected life

     7.4 yrs      7.2 yrs 

Fair value of options per share

   $ 7.45      $ 5.60   

BB&T measures the fair value of restricted shares based on the price of BB&T’s common stock on the grant date and the fair value of restricted share units based on the price of BB&T’s common stock on the grant date less the present value of expected dividends that are foregone during the vesting period.

 

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Notes to Consolidated Financial Statements (Unaudited)

     First Quarter 2011   

 

The following table details the activity during the first three months of 2011 related to stock options awarded by BB&T:

 

     Three Months Ended
March 31, 2011
 
     Options     Wtd. Avg.
Exercise
Price
 

Outstanding at beginning of period

     44,690,131      $ 35.06   

Granted

     3,790,012        27.73   

Exercised

     (24,567     18.24   

Forfeited or expired

     (2,466,224     36.41   
          

Outstanding at end of period

     45,989,352        34.39   
          

Exercisable at end of period

     34,377,969      $ 36.38   
          

The following table details the activity during the first three months of 2011 related to restricted shares and restricted share units awarded by BB&T:

 

     Three Months Ended
March 31, 2011
 
     Shares/Units     Wtd. Avg.
Grant Date
Fair Value
 

Nonvested at beginning of period

     13,283,786      $ 20.06   

Granted

     2,520,382        24.17   

Vested

     (1,736,841     30.08   

Forfeited

     (227,975     22.15   
          

Nonvested at end of period

     13,839,352      $ 19.52   
          

 

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Notes to Consolidated Financial Statements (Unaudited)

     First Quarter 2011   

 

NOTE 10.    Accumulated Other Comprehensive Income (Loss)

The balances in accumulated other comprehensive income (loss) at March 31, 2011 and December 31, 2010 are shown in the following table:

 

     March 31, 2011     December 31, 2010  
     Pre-Tax
Amount
    Deferred
Tax Expense
(Benefit)
    After-Tax
Amount
    Pre-Tax
Amount
    Deferred
Tax Expense
(Benefit)
    After-Tax
Amount
 
     (Dollars in millions)  

Unrecognized net pension and postretirement costs

   $ (579   $ (216