BB&T 2007 Annual Report Download - page 44

Table 14
Federal Funds Purchased, Securities Sold Under
Agreements to Repurchase and Short-Term Borrowed Funds
As of /For the Year Ended
Ended December 31,
2007 2006 2005
(Dollars in millions)
Securities Sold Under Agreements to Repurchase
Maximum outstanding at any month-end during the year $2,776 $3,080 $4,269
Balance outstanding at end of year 2,530 2,090 2,699
Average outstanding during the year 2,160 2,608 3,505
Average interest rate during the year 4.39% 4.35% 3.04%
Average interest rate at end of year 3.18 4.24 3.73
Federal Funds Purchased and Short-term Borrowed Funds
Maximum outstanding at any month-end during the year $9,148 $6,036 $5,447
Balance outstanding at end of year 8,104 5,997 3,863
Average outstanding during the year 7,165 4,398 3,881
Average interest rate during the year 4.39% 4.27% 3.04%
Average interest rate at end of year 3.79 4.83 3.93
BB&T also utilizes long-term debt to provide both funding and, to a lesser extent, regulatory capital. Long-term
debt comprised 14.3% of total funding needs on average during 2007 and 12.8% in 2006. See Note 10 “Long-Term Debt”
in the “Notes to Consolidated Financial Statements” herein for further disclosure. Long-term debt at December 31,
2007, totaled $18.7 billion, an increase of $2.8 billion, or 17.5%, from year-end 2006. For the year ended December 31,
2007, average long-term debt increased $3.4 billion, or 23.4%, compared to the average for 2006. BB&T’s long-term
debt consists primarily of FHLB advances, which composed 38.6% of total outstanding long-term debt at December 31,
2007, subordinated notes of BB&T Corporation, which composed 16.6% of the year-end balance and a $4.0 billion
private financing arrangement by Branch Bank, which composed 21.4% of total outstanding long-term debt at
December 31, 2007. FHLB advances are cost-effective long-term funding sources that provide BB&T with the
flexibility to structure the debt in a manner that aids in the management of interest rate risk and liquidity. The
remaining long-term debt primarily consists of both unsecured senior and subordinated borrowings by Branch Bank
and junior subordinated debt to unconsolidated trusts issued by the Corporation. The average rate paid on long-term
debt increased from 5.10% during 2006 to 5.46% during 2007 primarily because BB&T has issued floating rate
instruments or elected to swap a portion of its fixed-rate long-term debt to floating rates. In addition, new long-term
debt issuances in 2007 were at higher rates than issuances that were replaced during the year.
The increase in long-term debt during 2007 primarily resulted from a $4.0 billion fixed-rate private financing
by Branch Bank that matures in 2010, which was partially offset by the repayment of $1.5 billion in private
financing. The fixed interest rate on the new $4.0 billion borrowing was swapped to a floating rate during the first
quarter of 2007. In addition, BB&T and Branch Bank issued new long-term debt during the second quarter of
2007 that provides additional regulatory capital. In June 2007, BB&T issued $600 million of capital securities
through a statutory business trust created under the laws of the State of Delaware, which was formed by BB&T
for the sole purpose of issuing the capital securities and investing the proceeds thereof in junior subordinated
debentures issued by BB&T. BB&T has made guarantees which, taken collectively, fully, irrevocably, and
unconditionally guarantee, on a subordinated basis, all of the obligations under the trust, including the capital
securities. The capital securities qualify for Tier 1 regulatory capital treatment and have a scheduled maturity on
June 12, 2057 and a final repayment date of June 12, 2077. BB&T is required to use all commercially reasonable
efforts, subject to certain market disruption events, to sell adequate qualifying capital securities to permit
repayment of the securities in full on the scheduled maturity date. In May 2007, Branch Bank issued $300 million
of floating-rate subordinated notes due in 2017 that qualify for Tier II capital treatment.
Liquidity needs are a primary consideration in evaluating funding sources. BB&T’s strategy is to maintain
funding flexibility in order that the Corporation may react rapidly to opportunities that may become available in
the marketplace. BB&T will continue to focus on traditional core funding strategies, supplemented as needed by
the types of borrowings discussed above. See “Liquidity” herein for additional discussion.
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