BB&T 2007 Annual Report Download - page 36

Short-term borrowings include Federal funds purchased, securities sold under repurchase agreements,
master notes, short-term bank notes, treasury tax and loan deposit notes payable and other short-term
borrowings. Average short-term borrowings totaled $9.3 billion for the year ended December 31, 2007, an
increase of $2.3 billion, or 33.1%, from the 2006 average. BB&T has also utilized long-term debt for a significant
portion of its funding needs. Long-term debt includes Federal Home Loan Bank (“FHLB”) advances, other
secured borrowings by Branch Bank, capital securities issued by unconsolidated trusts and senior and
subordinated debt issued by the Corporation and Branch Bank. Average long-term debt totaled $18.0 billion for
the year ended December 31, 2007, up $3.4 billion, or 23.4%, compared to 2006.
The compound annual rate of growth in average total assets for the five-year period ended December 31, 2007,
was 10.8%. Over the same five-year period, average loans and leases increased at a compound annual rate of 11.6%,
average securities increased at a compound annual rate of 6.6%, and average deposits grew at a compound annual
rate of 11.2%. These balance sheet growth rates include the effect of acquisitions, as well as internal growth.
For more detailed discussions concerning the causes of these fluctuations, please refer to the sections that
follow.
Securities
The securities portfolio provides earnings and liquidity, and is managed as part of the overall asset and
liability management process to optimize net interest income and reduce exposure to interest rate risk.
Management has historically emphasized investments with duration of five years or less to provide flexibility in
managing the balance sheet in changing interest rate environments. Total securities increased 2.4% in 2007, to a
total of $23.4 billion at the end of the year. As of December 31, 2007, the total securities portfolio included $1.0
billion in trading securities and $22.4 billion of available-for-sale securities. The available-for-sale portfolio
comprised 95.7% of total securities at December 31, 2007. Management believes that the high concentration of
securities in the available-for-sale portfolio allows flexibility in the day-to-day management of the overall
investment portfolio, consistent with the objectives of optimizing profitability and mitigating interest rate risk.
The available-for-sale securities portfolio is primarily composed of U.S. government-sponsored entity
obligations and mortgage-backed securities issued by U.S. government-sponsored entities. U.S. government-
sponsored entity securities comprised 43.4% of the available-for-sale securities portfolio at December 31, 2007.
The duration of the U.S. government-sponsored entity portfolio was 1.83 years and 2.84 years at December 31,
2007 and 2006, respectively. Mortgage-backed securities comprised 36.7% of the total available-for-sale securities
portfolio at year-end 2007. The duration of the mortgage-backed securities was 2.91 years at December 31, 2007
compared to 3.26 years at December 31, 2006. The duration of the entire available-for-sale portfolio at
December 31, 2007 was 2.43 years compared to 3.04 years at December 31, 2006.
The following table provides information regarding the composition of BB&T’s securities portfolio for the
years presented:
Table 9
Composition of Securities Portfolio
December 31,
2007 2006 2005
(Dollars in millions)
Trading securities (at estimated fair value): $ 1,009 $ 2,147 $ 707
Securities available for sale (at estimated fair value):
U.S. Treasury securities 73 83 112
U.S. government-sponsored entity securities 9,734 9,036 11,154
States and political subdivisions 1,392 571 675
Mortgage-backed securities 8,221 8,297 6,611
Equity and other securities 2,999 2,734 1,231
Total securities available for sale 22,419 20,721 19,783
Total securities $23,428 $22,868 $20,490
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