BB&T 2007 Annual Report Download - page 61

BB&T has investments and future funding commitments to certain venture capital funds. As of December 31,
2007, BB&T had investments of $99 million, net of minority interest, related to these ventures and future funding
commitments of $213 million. BB&T’s risk exposure relating to such commitments is generally limited to the
amount of investments and future funding commitments made.
Merger and acquisition agreements of businesses other than financial institutions occasionally include
additional incentives to the acquired entities to offset the loss of future cash flows previously received through
ownership positions. Typically, these incentives are based on the acquired entity’s contribution to BB&T’s
earnings compared to agreed-upon amounts. When offered, these incentives are typically issued for terms of
three to five years. As certain provisions of these agreements do not specify dollar limitations, it is not possible to
quantify the maximum exposure resulting from these agreements.
In the normal course of business, BB&T is also a party to financial instruments to meet the financing needs of
clients and to mitigate exposure to interest rate risk. Such financial instruments include commitments to extend
credit and certain contractual agreements, including standby letters of credit and financial guarantee
arrangements. Further discussion of these commitments is included in Note 15 “Commitments and
Contingencies” in the “Notes to Consolidated Financial Statements.”
BB&T contracts with an independent third party for the disbursement of official checks. Under the terms of
the agreement, BB&T acts as an agent for the third party in the issuance of official checks. Funds received from
the buyers of official checks are transferred to the third party issuer to cover the checks when they are ultimately
presented for payment. But for this arrangement with the third party, these funds would have remained at
BB&T in the form of noninterest-bearing deposits. The official check program is contractually arranged to
substantially limit BB&T’s exposure to loss, since the third party is required to invest the funds received and
maintain an equal relationship between outstanding checks and the balances available to cover the checks. BB&T
monitors this relationship through a reconciliation process. The third party has provided a letter of credit from
another bank in favor of BB&T and has access to a revolving line of credit to further mitigate any risk that there
would be inadequate funds to cover the outstanding balance of official checks sold. However, in the event that the
third party failed to honor official checks BB&T had sold as its agent, it is likely that BB&T would choose to
reimburse the purchasers, though not contractually or legally obligated to do so. At December 31, 2007, the third
party issuer had outstanding official checks that had been sold by BB&T totaling $418 million.
BB&T’s significant commitments and obligations are summarized in the accompanying table. Not all of the
commitments presented in the table will be utilized thus the actual cash requirements are likely to be
significantly less than the amounts reported.
Table 23
Summary of Significant Commitments
December 31, 2007
(Dollars in millions)
Lines of credit $ 13,904
Commercial letters of credit 41
Standby letters of credit and financial guarantees written 3,367
Other commitments (1) 20,391
Total significant commitments $ 37,703
(1) Other commitments include unfunded business loan commitments, unfunded overdraft protection on demand
deposit accounts and other unfunded commitments to lend.
Related Party Transactions
The Corporation may extend credit to certain officers and directors in the ordinary course of business. These
loans are made under substantially the same terms as comparable third-party lending arrangements and are in
compliance with applicable banking regulations.
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