BB&T 2007 Annual Report Download - page 80

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BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Securities
At date of purchase, BB&T classifies marketable investment securities as held to maturity, available for sale
or trading. Interest income and dividends on securities are recognized in interest income on an accrual basis.
Premiums and discounts on debt securities are amortized as an adjustment to interest income using the interest
method.
Debt securities acquired with both the intent and ability to hold to maturity are classified as held to maturity
and reported at amortized cost.
Debt securities, which may be sold to meet liquidity needs arising from unanticipated deposit and loan
fluctuations, changes in regulatory capital requirements, or unforeseen changes in market conditions, are
classified as available for sale. Equity securities classified as available for sale are primarily stock issued by the
Federal Home Loan Bank of Atlanta and are carried at cost, which approximates fair value. All other securities
available for sale are reported at estimated fair value, with unrealized gains and losses reported as accumulated
other comprehensive income or loss, net of deferred income taxes, in the shareholders’ equity section of the
Consolidated Balance Sheets. Gains or losses realized from the sale of securities available for sale are determined
by specific identification and are included in noninterest income.
BB&T evaluates each held to maturity and available-for-sale security in a loss position for other-than-
temporary impairment. In its evaluation BB&T considers such factors as the length of time and the extent to
which the market value has been below cost, the financial condition of the issuer, and BB&T’s ability and intent to
hold the security to an expected recovery in market value. Unrealized losses for other-than-temporary
impairment on debt and equity securities are recognized in current period earnings.
Trading account securities, which include both debt and equity securities, are reported at fair value.
Unrealized market value adjustments, fees, and realized gains or losses from trading account activities
(determined by specific identification) are included in noninterest income. Interest income on trading account
securities is included in interest and dividends from securities.
Loans Held for Sale
Loans held for sale, which are primarily mortgage loans, are reported at the lower of cost or market value on
an aggregate loan portfolio basis. Gains or losses realized on the sales of loans are recognized at the time of sale
and are determined by the difference between the net sales proceeds and the carrying value of the loans sold
including any deferred origination fees and costs, adjusted for any servicing asset or liability retained. Gains and
losses on sales of mortgage loans are included in mortgage banking income.
Loans and Leases
Loans and leases that management has the intent and ability to hold for the foreseeable future are reported
at their outstanding principal balances net of any unearned income, charge-offs, unamortized fees and costs on
originated loans and unamortized premiums or discounts on purchased loans. The net amount of nonrefundable
loan origination fees and certain direct costs associated with the lending process are deferred and amortized to
interest income over the contractual lives of the loans using methods which approximate the interest method.
Discounts and premiums are amortized or accreted to interest income over the estimated life of the loans using
methods that approximate the interest method. Commercial loans and substantially all installment loans accrue
interest on the unpaid balance of the loans.
Lease receivables consist primarily of investments in leveraged lease transactions and direct financing leases
on rolling stock, equipment and real property. Direct financing lease receivables are stated at the total amount of
future minimum lease payments receivable plus estimated residual values and initial direct costs, less unearned
income. Leveraged leases are also carried net of non-recourse debt. Income is recognized over the lives of the
lease contracts using the interest method. BB&T also enters into operating leases as lessor. Operating lease
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