BB&T 2007 Annual Report Download - page 28

controlled insured depository institutions or for any assistance provided by the FDIC to commonly controlled
insured depository institutions in danger of failure. The FDIC may decline to enforce the cross-guarantee
provision if it determines that a waiver is in the best interests of the DIF. The FDIC’s claim for reimbursement
under the cross guarantee provisions is superior to claims of shareholders of the insured depository institution or
its holding company but is subordinate to claims of depositors, secured creditors and nonaffiliated holders of
subordinated debt of the commonly controlled insured depository institution.
State banking regulators also have broad enforcement powers over the Banks, including the power to impose
fines and other civil and criminal penalties, and to appoint a conservator (with the approval of the Governor in the
case of a North Carolina state bank) in order to conserve the assets of any such institution for the benefit of
depositors and other creditors. The North Carolina Commissioner of Banks also has the authority to take
possession of a North Carolina state bank in certain circumstances, including, among other things, when it
appears that such bank has violated its charter or any applicable laws, is conducting its business in an
unauthorized or unsafe manner, is in an unsafe or unsound condition to transact its business or has an impairment
of its capital stock.
Payment of Dividends
BB&T is a legal entity separate and distinct from its subsidiaries. The majority of BB&T’s revenue is from
dividends paid to BB&T by Branch Bank. Branch Bank is subject to laws and regulations that limit the amount of
dividends it can pay. In addition, both BB&T and Branch Bank are subject to various regulatory restrictions
relating to the payment of dividends, including requirements to maintain capital at or above regulatory
minimums, and to remain “well-capitalized” under the prompt corrective action regulations summarized
elsewhere in this section. Federal banking regulators have indicated that banking organizations should generally
pay dividends only if (1) the organization’s net income available to common shareholders over the past year has
been sufficient to fully fund the dividends and (2) the prospective rate of earnings retention appears consistent
with the organization’s capital needs, asset quality and overall financial condition. North Carolina law states that,
subject to certain capital requirements, the board of directors of a bank chartered under the laws of North
Carolina may declare a dividend of as much of that bank’s undivided profits as the directors deem expedient.
BB&T does not expect that these laws, regulations or policies will materially affect the ability of Branch Bank to
pay dividends. At December 31, 2007, subject to restrictions imposed by state law, the Board of Directors of
Branch Bank could have declared dividends of up to $3.4 billion; however, to remain well-capitalized under federal
guidelines, Branch Bank would have limited total additional dividends to $1.0 billion.
Capital
Each of the federal banking agencies, including the Federal Reserve Board and the FDIC, have issued
substantially similar risk-based and leverage capital guidelines applicable to banking organizations they
supervise, including bank holding companies and banks. Under the risk-based capital requirements, BB&T and
the Banks are each generally required to maintain a minimum ratio of total capital to risk-weighted assets
(including certain off-balance sheet activities, such as standby letters of credit) of 8%. At least half of the total
capital must be composed of common shareholders’ equity excluding the over- or underfunded status of
postretirement benefit obligations, unrealized gains or losses on debt securities available for sale, unrealized
gains on equity securities available for sale and unrealized gains or losses on cash flow hedges, net of deferred
income taxes; plus certain mandatorily redeemable capital securities; less nonqualifying intangible assets net of
applicable deferred income taxes and certain nonfinancial equity investments. This is called “Tier 1 capital.” The
remainder may consist of qualifying subordinated debt, certain hybrid capital instruments, qualifying preferred
stock and a limited amount of the allowance for credit losses. This is called “Tier 2 capital.” Tier 1 capital and Tier
2 capital combined are referred to as total regulatory capital.
The Federal Reserve Board requires bank holding companies that engage in trading activities to adjust their
risk-based capital ratios to take into consideration market risks that may result from movements in market prices
of covered trading positions in trading accounts, or from foreign exchange or commodity positions, whether or not
in trading accounts, including changes in interest rates, equity prices, foreign exchange rates or commodity
prices. Any capital required to be maintained under these provisions may consist of a new “Tier 3 capital”
consisting of forms of short-term subordinated debt.
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