BB&T 2007 Annual Report Download - page 43

Average other client deposits, which include money rate savings accounts, investor deposit accounts, savings
accounts, individual retirement accounts and other time deposits represent the largest component of BB&T’s
deposits and composed 41.0% of total average deposits for 2007, compared to 40.7% during 2006. CDs are the
second largest source and composed 31.2% of total average deposits for 2007 compared to 29.2% for 2006. The
remainder of client deposits consists of noninterest-bearing deposits and interest-checking accounts, which
comprised 18.5% of total average deposits in the current year, compared to 19.9%, for last year. BB&T also
gathers other interest-bearing deposits through wholesale funding products, which include negotiable certificates
of deposit and Eurodollar deposits. Average other interest-bearing deposits represented 9.3% of total average
deposits for 2007, as compared to 10.1% for 2006. During 2006, management increased its focus on deposit
gathering efforts and more aggressively pursued retail deposits through the banking network to fund strong loan
growth and fuel organic growth initiatives. This led to the increases in CDs as a percentage of total deposits and
the decrease in reliance on other interest-bearing deposits. Late in 2007, management chose to price CDs less
competitively, which has led to a slowdown in the growth of CDs more recently. The decline in noninterest-
bearing and interest checking deposits as a percentage of total average deposits was largely a result of consumers
migrating to CDs and other higher-yielding deposit products during 2006 and 2007. The slowing economy during
2007 also resulted in a decline in noninterest-bearing and interest checking deposits.
The average rate paid on interest-bearing deposits increased to 3.73% during 2007, from 3.34% in 2006. This
increase resulted primarily as a result of a migration by clients into higher-cost products and intense price
competition in the marketplace. The average rates paid on the various categories of interest-bearing deposits also
increased as follows: CDs increased to 4.61% in the current year from 4.16% in 2006; other client deposits
increased to 2.82% in the current year from 2.43% in 2006; interest checking increased to 2.31% in 2007 from
1.87% in 2006; and other interest-bearing deposits increased to 5.15% in 2007 from 5.04% in 2006. The average
cost for interest-bearing deposits declined in the fourth quarter of 2007, as management was able to lower rates
in response to the Federal Reserve cutting interest rates. Management anticipates that the cost of funding will
continue to decline into 2008, as CDs and other products reprice.
BB&T also uses various types of short-term borrowings in meeting funding needs. While client deposits
remain the primary source for funding loan originations, management uses short-term borrowings as a
supplementary funding source for loan growth and other balance sheet management purposes. Short-term
borrowings comprised 7.4% of total funding needs on average in 2007 as compared to 6.1% in 2006. See Note 9
“Federal Funds Purchased, Securities Sold Under Agreements to Repurchase and Short-Term Borrowed Funds”
in the “Notes to Consolidated Financial Statements” herein for further disclosure. The types of short-term
borrowings utilized by the Corporation include Federal funds purchased, which comprised 11.2% of total short-
term borrowings, and securities sold under repurchase agreements, which comprised 23.8% of short-term
borrowings at year-end 2007. Master notes, U.S. Treasury tax and loan deposit notes, and short-term bank notes
are also utilized to meet short-term funding needs and comprised the remaining 65.0% of these types of funding
sources as of December 31, 2007. Short-term borrowings at the end of 2007 were $10.6 billion, an increase of $2.5
billion, or 31.5% compared to year-end 2006. Average short-term borrowings totaled $9.3 billion during 2007
compared to $7.0 billion last year, an increase of 33.1%. The increase in the year-end balance and average balance
compared to 2006 was primarily due to increases in short-term bank notes, which were generated by a new
funding program offered by BB&T’s Capital Markets Group. The rates paid on average short-term borrowings
increased from 4.30% in 2006 to 4.55% during 2007. The increase in the cost of short-term borrowings primarily
resulted from a higher average Federal funds rate in effect during 2007 compared to 2006. At December 31, 2007,
the targeted Federal funds rate was 4.25% as compared to its lowest level of 1.00% in June 2003. As previously
mentioned, the Federal Reserve lowered rates an additional 125 basis points in early 2008, and the targeted
Federal funds rate is currently 3.00%. The following table summarizes certain pertinent information for the past
three years with respect to BB&T’s short-term borrowings:
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