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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended:
December 31, 2008
Commission File Number: 1-10853
BB&T CORPORATION
(Exact name of Registrant as specified in its Charter)
North Carolina 56-0939887
(State of Incorporation) (I.R.S. Employer Identification No.)
200 West Second Street
Winston-Salem, North Carolina 27101
(Address of principal executive offices) (Zip Code)
(336) 733-2000
(Registrant’s telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each class Name of each exchange
on which registered
Common Stock, $5 par value New York Stock Exchange
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act. YES ÍNO
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act YES NO Í
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. YES ÍNO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or
information statements incorporated by references in Part III of this Form 10-K or any amendment to this
Form 10-K.
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ÍAccelerated filer
Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the
Act). YES NO Í
At January 31, 2009, the Corporation had 559,298,182 shares of its Common Stock, $5 par value, outstanding.
The aggregate market value of voting stock held by nonaffiliates of the Corporation is approximately $12.7 billion
(based on the closing price of such stock as of June 30, 2008).

Table of contents

  • Page 1
    ... 31, 2008 Commission File Number: 1-10853 (Exact name of Registrant as specified in its Charter) North Carolina (State of Incorporation) BB&T CORPORATION 56-0939887 (I.R.S. Employer Identification No.) 200 West Second Street Winston-Salem, North Carolina (Address of principal executive offices...

  • Page 2
    ...Item 4 Business ...Risk Factors ...Unresolved Staff Comments None. Properties ...Legal Proceedings ...Submission of Matters to a Vote of Security Holders None. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ...Selected Financial Data...

  • Page 3
    ... to the information that appears under the headings "Security Ownership", "Compensation of Executive Officers" and "Equity Compensation Plan Information" in the Registrant's Proxy Statement for the 2009 Annual Meeting of Shareholders. The information required by Item 13 is incorporated herein by...

  • Page 4
    ...a financial holding company headquartered in Winston-Salem, North Carolina. BB&T conducts its business operations primarily through its commercial bank subsidiary, Branch Banking and Trust Company ("Branch Bank"), which has offices in North Carolina, South Carolina, Virginia, Maryland, Georgia, West...

  • Page 5
    ... credit markets have been affecting the mortgage industry generally. BB&T's financial results have been adversely affected by changes in real estate values, primarily in Georgia, Florida and metro Washington, D.C. Decreases in real estate values have adversely affected the value of property used...

  • Page 6
    ... routinely execute transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, mutual and hedge funds, and other institutional clients. Many of these transactions expose the Company to credit risk in the event of default of...

  • Page 7
    ...was enacted on October 3, 2008. As part of the TARP, the Treasury Department created the Capital Purchase Program ("CPP"), under which the Treasury Department will invest up to $250 billion in senior preferred stock of U.S. banks and savings associations or their holding companies for the purpose of...

  • Page 8
    ... the Company's market area. Some of these institutions conduct business primarily over the Internet and may thus be able to realize certain cost savings and offer products and services at more favorable rates and with greater convenience to the customer who can pay bills and transfer funds directly...

  • Page 9
    ...') business continuity and data security systems prove to be inadequate. The Treasury Department's investment in BB&T imposes restrictions and obligations limiting BB&T's ability to increase dividends, repurchase common stock or preferred stock and access the equity capital markets. In November 2008...

  • Page 10
    ... financial results, or a cumulative charge to retained earnings. BB&T may not be able to successfully integrate bank or nonbank mergers and acquisitions. Difficulties may arise in the integration of the business and operations of bank holding companies, banks and other nonbank entities BB&T acquires...

  • Page 11
    ... stock price to decrease regardless of the Company's operating results. Operating Subsidiaries At December 31, 2008, the principal operating subsidiaries of BB&T included the following: Å Å Å Branch Banking and Trust Company, Winston-Salem, North Carolina BB&T Financial, FSB, Columbus, Georgia...

  • Page 12
    ... insurance premium financing to clients in the United States and Canada; Grandbridge Real Estate Capital, LLC, based in Charlotte, North Carolina, which specializes in arranging and servicing commercial mortgage loans; Lendmark Financial Services, Inc., located in Covington, Georgia, which offers...

  • Page 13
    ... middle market lending real estate lending retail lending home equity lending sales finance home mortgage lending commercial mortgage lending equipment finance asset management retail and wholesale agency insurance institutional trust services wealth management / private banking investment brokerage...

  • Page 14
    ...Deposit Market Share and Branch Locations by State December 31, 2008 % of BB&T's Deposits (2) Deposit Market Share Rank (2) Number of Branches Virginia (1) North Carolina (1) Georgia Maryland South Carolina Florida Kentucky West Virginia Tennessee Washington, D.C. (1) Excludes home office deposits...

  • Page 15
    ... community bank approach to providing client service is a competitive advantage that strengthens the Corporation's ability to effectively provide financial products and services to businesses and individuals in its markets. General Business Development BB&T is a regional financial holding company...

  • Page 16
    ... to meet the credit needs of businesses and consumers in its markets while pursuing a balanced strategy of loan profitability, loan growth and loan quality. BB&T conducts the majority of its lending activities within the framework of the Corporation's community bank operating model, with lending...

  • Page 17
    ...-commercial, sales finance, revolving credit, direct retail, mortgage and specialized lending. BB&T lends to a diverse customer base that is substantially located within the Corporation's primary market area. At the same time, the loan portfolio is geographically dispersed throughout BB&T's branch...

  • Page 18
    ...residential real estate, and include both closed-end home equity loans and revolving home equity lines of credit. Direct retail loans are subject to the same rigorous lending policies and procedures as described above for commercial loans and are underwritten with note amounts and credit limits that...

  • Page 19
    ...financing of equipment for small businesses and consumers, commercial equipment leasing and finance, direct and indirect consumer finance, insurance premium finance, indirect subprime automobile finance, and full-service commercial mortgage banking. BB&T offers these services to bank clients as well...

  • Page 20
    ... and leases, net of unearned income: Commercial loans Leveraged leases Total commercial loans and leases Sales finance Revolving credit Direct retail Residential mortgage loans Specialized lending Total loans held for investment Total loans held for sale Total loans and leases $49,727 753 50,480...

  • Page 21
    ... used in calculating the allowance for commercial loans, adjusted for factors specific to binding commitments, including the probability of funding and exposure at funding. The reserve for unfunded lending commitments is included in accounts payable and other liabilities on the Consolidated...

  • Page 22
    ... loan review system to identify and proactively manage accounts with a higher risk of loss. The "score" produced by this automated system is updated monthly. All of the loan portfolios grouped in the retail lending and specialized lending categories typically employ scoring models to segment credits...

  • Page 23
    ...residential mortgage and consumer home equity portfolios as of December 31, 2008. Table 6 Real Estate Lending Portfolio Credit Quality and Geographic Distribution Commercial Real Estate Loan Portfolio (1) Residential Acquisition, Development, and Construction Loans (ADC) As of / For the Period Ended...

  • Page 24
    ... Loans by State As of / For the Period Ended December 31, 2008 Nonaccrual as Gross Charge-Offs Total Mortgages Percentage a Percentage as a Percentage Outstanding (1) of Total of Outstandings of Outstandings (Dollars in millions) North Carolina Virginia Florida Maryland Georgia South Carolina West...

  • Page 25
    ...and Lines by State As of / For the Period Ended December 31, 2008 Total Home Equity Loans and Nonaccrual as Gross Charge-Offs Lines Percentage a Percentage as a Percentage Outstanding of Total of Outstandings of Outstandings (Dollars in millions) North Carolina Virginia South Carolina Georgia West...

  • Page 26
    ... checking accounts, savings accounts, money rate savings accounts, investor deposit accounts, certificates of deposit and individual retirement accounts. Deposit account terms vary with respect to the minimum balance required, the time period the funds must remain on deposit and service charge...

  • Page 27
    ... office space used as the Corporation's headquarters in Winston-Salem, North Carolina. At December 31, 2008, Branch Bank operated 1,511 branch offices in North Carolina, South Carolina, Virginia, Maryland, Georgia, West Virginia, Tennessee, Kentucky, Alabama, Florida, Indiana and Washington...

  • Page 28
    ...Vice President and Deposit Services Manager Robert E. Greene Senior Executive Vice President and Risk Management and Administrative Group Manager Clarke R. Starnes III Senior Executive Vice President and Chief Credit Officer Steven B. Wiggs Senior Executive Vice President and Chief Marketing Officer...

  • Page 29
    ..., Regions Financial Corporation, SunTrust Banks, Inc., U.S. Bancorp and Zions Bancorporation. The Peer Group consists of bank holding companies with assets between approximately $38.9 billion and $291.1 billion. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* AMONG BB&T CORPORATION, THE S&P 500 INDEX...

  • Page 30
    ... to become a financial holding company, which allows the holding company to offer customers virtually any type of service that is financial in nature or incidental thereto, including banking and activities closely related thereto, securities underwriting, insurance (both underwriting and agency) and...

  • Page 31
    ...period of time, not to exceed five years; and subject to certain deposit market-share limitations. After a bank has established branches in a state through an interstate merger transaction, the bank may establish and acquire additional branches at any location in the state where a bank headquartered...

  • Page 32
    ... to fully fund the dividends and (2) the prospective rate of earnings retention appears consistent with the organization's capital needs, asset quality and overall financial condition. North Carolina law states that, subject to certain capital requirements, the board of directors of a bank chartered...

  • Page 33
    ... not meeting these criteria, as well as institutions with supervisory, financial or operational weaknesses, are expected to maintain a minimum Tier 1 capital to total adjusted average assets ratio at least 100 basis points above that stated minimum. Holding companies experiencing internal growth...

  • Page 34
    ... of 2009. Currently, banks pay between 5 and 43 basis points of their domestic deposits for FDIC insurance. Under the final rule, risk-based rates would range between 12 and 50 basis points (annualized) for the first quarter 2009 assessment, depending on the insured institution's risk category as...

  • Page 35
    ... acquire the assets or assume the liabilities of an insured depository institution, or to open or relocate a branch office. The CRA record of each subsidiary bank of a financial holding company, such as BB&T, also is assessed by the Federal Reserve Board in connection with any acquisition or merger...

  • Page 36
    ... right to elect two directors if dividends have not been paid for six periods. As part of its purchase of the Series C Preferred Stock, the Treasury Department received a warrant (the "Warrant") to purchase 13.9 million shares of BB&T's common stock at an initial per share exercise price of $33.81...

  • Page 37
    ... accounts, including NOW accounts with interest rates of 0.5 percent or less and IOLTAs (lawyer trust accounts). The TLGP also guarantees all senior unsecured debt of insured depository institutions or their qualified holding companies issued between October 14, 2008 and June 30, 2009 with a stated...

  • Page 38
    ... and Procedures for Accounting and Legal Complaints BB&T intends to disclose any substantive amendments or waivers to the Code of Ethics for Directors or Senior Financial Officers on our web site at www.BBT.com/Investor. NYSE Certification The annual certification of BB&T's Chief Executive Officer...

  • Page 39
    ...Trust Bank ("Haven Trust") of Duluth, Georgia through an agreement with the FDIC. Haven Trust operated four branches with approximately $506 million in deposits. In addition to the acquisition noted above, BB&T acquired eleven insurance agencies and one nonbank financial services company during 2008...

  • Page 40
    ... and related mortgage servicing rights ("MSRs"). BB&T has two classes of MSRs for which it separately manages the economic risk: residential and commercial. Residential MSRs are carried at fair value with changes in fair value recorded as a component of mortgage banking income each period. BB&T uses...

  • Page 41
    ... based on quoted market prices for securities backed by similar types of loans. Changes in the fair value are recorded as a component of mortgage banking income while mortgage loan origination costs for loans held for sale for which the Corporation elected the Fair Value Option are recognized in...

  • Page 42
    ... values of plan assets and liabilities are subject to management judgment and may differ significantly if different assumptions are used. The discount rate assumption used to measure the postretirement benefit obligations is set by reference to published high-quality bond indices, as well as certain...

  • Page 43
    ...-year period, average loans and leases increased at a compound annual rate of 10.5%, average securities increased at a compound annual rate of 7.5%, and average deposits grew at a compound annual rate of 9.3%. These balance sheet growth rates include the effect of acquisitions, as well as internal...

  • Page 44
    ... available-for-sale portfolio during 2008 was largely a result of declines in the value of non-agency mortgage-backed securities and municipal securities, as demand for securities in these asset classes has waned due to investor concerns about real estate related assets and the overall state...

  • Page 45
    ... weighted average contractual maturities of underlying collateral. (3) Trading securities and securities with no stated maturity include equity investments that totaled $682 million and trading securities that totaled $376 million. (4) Includes securities available-for-sale and trading securities of...

  • Page 46
    ... BB&T to attract new clients. The pace of growth in the direct retail loan portfolio slowed further in 2008, due to a difficult residential real estate market, which decreased demand for home equity loan products. Sales finance loans and revolving credit reflected solid growth rates of 5.3% and 14...

  • Page 47
    ... consumer loans, declined 400 basis points during 2008 to 3.25% at year-end as the Federal Reserve Board lowered rates seven times during 2008 in response to the economic recession, challenges in the residential real estate markets, and disruptions in other financial markets. The average prime rate...

  • Page 48
    ...year-end 2008. Net charge-offs for 2008 were .89% of average loans and leases and reflected an increase of 51 basis points from the .38% level recorded during 2007. The increases in nonperforming assets and net charge-offs were driven by continued deterioration in residential real estate markets and...

  • Page 49
    ... estate Other foreclosed property Total nonperforming assets Nonaccrual loans and leases as a percentage of total loans and leases Commercial loans and leases Direct retail Sales finance Mortgage Specialized lending Total nonaccrual loans and leases as a percentage of loans and leases Loans 90 days...

  • Page 50
    ... significant increases occurring in the single family residential real estate acquisition, development and construction loan portfolio. Please refer to Note 5 "Allowance for Loan and Lease Losses and Reserve for Unfunded Lending Commitments" in the "Notes to Consolidated Financial Statements" for...

  • Page 51
    include money rate savings accounts, investor deposit accounts, savings accounts, individual retirement accounts and other time deposits. Interest checking accounts also increased by $1.4 billion from the prior year and client certificates of deposit ("CDs") increased by $965 million. For the year ...

  • Page 52
    ... increases in FHLB advances, which were used due to the more competitive rates obtained compared to other financing options. In addition, BB&T and Branch Bank issued new long-term debt during the third quarter of 2008 that provides additional regulatory capital. In September 2008, BB&T Capital Trust...

  • Page 53
    ... of capital invested by the U.S. Treasury in the fourth quarter of 2008. In addition, during 2008, BB&T issued 13.3 million common shares of stock in connection with business combinations, equity-based incentive plans, the Company's dividend reinvestment plan and a private placement of shares sold...

  • Page 54
    ... of asset growth shifted from higher-yielding commercial real estate and direct retail loans to lower-yielding mortgage loans and commercial and industrial loans. Second, higher levels of nonaccruals have negatively affected net interest income and the net interest margin. Third, increased liability...

  • Page 55
    ... (1)(3)(4) Commercial loans and leases Direct retail loans Sales finance loans Revolving credit loans Mortgage loans Specialized lending Total loans and leases Total earning assets 2007 2006 Yield / Rate 2008 2007 2006 Income / Expense 2008 2007 2006 Increase (Decrease) Change due to Rate Volume...

  • Page 56
    ... estate markets and the overall economy with the largest concentration of credit issues occurring in Georgia, Florida, and metro Washington D.C. Additional disclosures related to BB&T's real estate lending by product type and geographic distribution can be found in Table 6 herein. The 86.7% increase...

  • Page 57
    ...existing book of business. The increase in commission income during 2007 was primarily related to the sale of property and casualty, and employee benefit insurance, which increased $17 million and $9 million, respectively, compared to 2006. Service charges on deposit accounts represent BB&T's second...

  • Page 58
    ... as a result of strong sales of merchant services. Trust and investment advisory revenues are based on the types of services provided as well as the overall value of the assets managed, which is affected by stock market conditions. During 2008, trust and investment advisory revenues decreased by $15...

  • Page 59
    ... its existing mortgage banking operations and renamed the subsidiary Grandbridge Real Estate Capital LLC ("Grandbridge"). The acquisition of Collateral significantly expanded the size and product offerings of BB&T's commercial mortgage banking activities. Mortgage banking income increased $7 million...

  • Page 60
    ... to focus on asset management, mortgage banking, trust, insurance, investment banking and brokerage services, as well as other fee-producing products and services. BB&T plans to continue to pursue acquisitions of additional financial services companies, including insurance agencies and other fee...

  • Page 61
    ..., as well as pension and other employee benefit costs. The 2008 increase of 5.1% resulted primarily from additional salaries and wages as a result of acquisitions and the implementation of the fair value option for loans held for sale, which changed the accounting for loan origination costs. Total...

  • Page 62
    ... properties or equipment are sold for more than originally estimated. Other merger-related and restructuring charges or credits include expenses necessary to convert and combine the acquired branches and operations of merged companies, direct media advertising related to the acquisitions, asset...

  • Page 63
    ...over time based on the sale, closing or disposal of duplicate facilities or equipment or the expiration of lease contracts. Merger accruals are re-evaluated periodically and adjusted as necessary. The remaining accruals at December 31, 2008 are expected to be utilized during 2009, unless they relate...

  • Page 64
    ... to manage risk related to securities, business loans, Federal funds purchased, long-term debt, mortgage servicing rights, mortgage banking operations and certificates of deposit. BB&T also uses derivatives to facilitate transactions on behalf of its clients. BB&T's derivatives produced a benefit to...

  • Page 65
    ... to changes in interest rates. The Simulation model projects net interest income and interest rate risk for a rolling two-year period of time. Simulation takes into account the current contractual agreements that BB&T has made with its customers on deposits, borrowings, loans, investments and...

  • Page 66
    ... prepayment speeds of mortgage-related assets, cash flows and maturities of derivative financial instruments, loan volumes and pricing, deposit sensitivity, customer preferences and capital plans. The resulting change in interest sensitive income reflects the level of sensitivity that interest...

  • Page 67
    ...716 million in 2008. Funds raised through master note agreements with commercial clients are placed in a note receivable at Branch Bank primarily for its use in meeting short-term funding needs and, to a lesser extent, to support the short-term temporary cash needs of the Parent Company. At December...

  • Page 68
    ... of deposit, access to the FHLB system, dealer repurchase agreements and repurchase agreements with commercial clients, participation in the Treasury, Tax and Loan and Special Direct Investment programs with the Federal Reserve Bank, access to the overnight and term Federal funds markets, use of...

  • Page 69
    ...-rata basis by the remaining financial institutions holding public funds in that state. BB&T has investments and future funding commitments to certain venture capital funds. As of December 31, 2008, BB&T had investments of $168 million, net of minority interest, related to these ventures and future...

  • Page 70
    ... 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...

  • Page 71
    ... ratios, it is management's intent through capital planning to return to these targeted minimums within a reasonable period of time. Such temporary decreases below these minimums are not considered an infringement of BB&T's overall capital policy provided the Corporation and Branch Bank remain "well...

  • Page 72
    ... of Branch Bank to pay dividends to the Parent Company. The payment of cash dividends is an integral part of providing a competitive return on shareholders' investments. The Corporation's policy is to accomplish this while retaining sufficient capital to support future growth and to meet regulatory...

  • Page 73
    ...with employee benefit plans based on normal past practices, for three years or until the preferred stock has been repaid. Table 28 Share Repurchase Activity 2008 Average Price Paid Per Share (2) Total Shares Purchased Pursuant to Publicly-Announced Plan (Shares in Thousands) Maximum Remaining Number...

  • Page 74
    ... Mortgage Banking, Sales Finance, Specialized Lending, Insurance Services, Financial Services, and Treasury. These operating segments have been identified based primarily on BB&T's organizational structure. See Note 21 "Operating Segments", in the "Notes to Consolidated Financial Statements...

  • Page 75
    ... in residential real estate markets, especially in Florida, Georgia and metro Washington D.C. Noninterest income in the Residential Mortgage Banking segment increased $104 million in 2008. This increase includes the impact of the implementation of the Fair Value Option for loans held for sale, which...

  • Page 76
    ... of net interest income from clients less an FTP charge of $223 million. The growth in net interest income in 2007 was a result of growth in the lending portfolio, offset by higher funding costs. Average loans for the Specialized Lending segment increased 8.6% during 2008 compared to 2007. The...

  • Page 77
    ...revenues from investment banking and brokerage operations, as well as increased revenues from the sale of client derivatives. These increases were partially offset by lower revenues from trust and investment advisory services. Noninterest expenses incurred by Financial Services in 2008 increased $47...

  • Page 78
    ...of 2007. The growth in noninterest income in the fourth quarter of 2008 compared to the same period of 2007 was driven by increases in mortgage banking income, investment banking and brokerage operations, net securities gains and insurance income. BB&T's noninterest expense for the fourth quarter of...

  • Page 79
    ... 86,939 84,894 Total earning assets 125,144 121,001 119,799 117,414 116,029 114,441 111,030 107,606 Deposits 91,986 90,021 86,685 86,583 85,260 84,223 81,959 82,523 Federal funds purchased, securities sold under repurchase agreements and short-term debt 12,296 8,915 10,350...

  • Page 80
    ...' equity Total liabilities and shareholders' equity Period-End Balances Total assets Loans and leases (1) Deposits Long-term debt Shareholders' equity Selected Ratios Rate of return on: Average total assets Average common equity Average total equity Dividend payout Average equity to average assets...

  • Page 81
    ... reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Corporation's assets that could have a material impact on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or...

  • Page 82
    ... reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or...

  • Page 83
    ... share data, shares in thousands) 2008 2007 Assets Cash and due from banks Interest-bearing deposits with banks Federal funds sold and securities purchased under resale agreements or similar arrangements Segregated cash due from banks Trading securities at fair value Securities available for sale...

  • Page 84
    ... for Credit Losses Noninterest Income Insurance income Service charges on deposits Investment banking and brokerage fees and commissions Mortgage banking income Checkcard fees Other nondeposit fees and commissions Bankcard fees and merchant discounts Trust and investment advisory revenues Securities...

  • Page 85
    ... Common Preferred Common Paid-In Retained Comprehensive Shareholders' Stock Stock Stock Capital Earnings Income (Loss) Equity Balance, January 1, 2006 Add (Deduct): Comprehensive income: Net income Unrealized holding gains (losses) arising during the period on securities available for sale, net...

  • Page 86
    ...with dividend reinvestment plan 1,415 In connection with private placement to BB&T pension plan 2,458 In connection with Capital Purchase Program Warrants issued in connection with Capital Purchase Program Cash dividends declared on common stock, $1.87 per share - Cash dividends accrued on preferred...

  • Page 87
    ... and equipment Proceeds from sales of foreclosed property or other real estate held for sale Other, net Net cash used in investing activities Cash Flows From Financing Activities: Net increase in deposits Net increase in federal funds purchased, securities sold under repurchase agreements and...

  • Page 88
    ... is a financial holding company headquartered in Winston-Salem, North Carolina. BB&T conducts its operations primarily through Branch Bank, which has branches in North Carolina, South Carolina, Virginia, Maryland, Georgia, West Virginia, Tennessee, Kentucky, Florida, Alabama, Indiana and Washington...

  • Page 89
    ...determined based on the market price of the securities issued over a reasonable period of time, not to exceed three days before and three days after the measurement date. In connection with mergers and acquisitions, BB&T typically issues options to purchase shares of its common stock in exchange for...

  • Page 90
    ... and dividends from securities. Loans Held for Sale Effective January 1, 2008, BB&T elected to account for new originations of prime residential mortgage and commercial mortgage loans held for sale at fair value in accordance with Financial Standards Accounting Board ("FASB") Statement of Financial...

  • Page 91
    ...first. Sales finance loans, revolving credit loans, direct retail loans and mortgage loans are placed on nonaccrual status at varying intervals, based on the type of product, when principal and interest becomes between 90 days and 180 days past due. Specialized lending loans are placed on nonaccrual...

  • Page 92
    ... the probability of funding and exposure at default. While management uses the best information available to establish the allowance for loan and lease losses and the reserve for unfunded lending commitments, future adjustments may be necessary if economic conditions differ substantially from the...

  • Page 93
    ... and purchased. BB&T uses derivatives primarily to manage economic risk related to securities, business loans, mortgage servicing rights and mortgage banking operations, Federal funds purchased, other time deposits, long-term debt and institutional certificates of deposit. BB&T also uses derivatives...

  • Page 94
    ... periods of time. To the extent that BB&T's interest rate lock commitments relate to loans that will be held for sale upon funding, they are also accounted for as derivatives, with gains or losses included in mortgage banking income. Gains and losses on other derivatives used to manage economic risk...

  • Page 95
    .... Such models incorporate management's best estimates of key variables, such as prepayment speeds and discount rates that would be used by market participants and are appropriate for the risks involved. Gains and losses incurred on loans sold to third party investors are included in mortgage banking...

  • Page 96
    ... value option for certain loans held for sale originated on or after January 1, 2008. The adoption of SFAS No. 159 was not material to the consolidated financial statements. In November 2007, the SEC Staff issued Staff Accounting Bulletin No. 109 ("SAB No. 109") "Written Loan Commitments Recorded at...

  • Page 97
    ... Deposit Insurance Corporation ("FDIC"). Haven Trust Bank operated four branches with approximately $506 million in deposits. On May 1, 2007, BB&T completed the acquisition of Coastal Financial Corporation ("Coastal"), a $1.7 billion bank holding company headquartered in Myrtle Beach, South Carolina...

  • Page 98
    ... and the sale of duplicate facilities and equipment, and other merger-related and restructuring charges or credits, which include expenses necessary to convert and combine the acquired branches and operations of merged companies, direct media advertising related to the acquisitions, asset and supply...

  • Page 99
    ... agreements to repurchase, other borrowings, and for other purposes as required or permitted by law. BB&T had certain investments in marketable debt securities and mortgage-backed securities issued by Fannie Mae and Freddie Mac that exceeded ten percent of shareholders' equity at December 31, 2008...

  • Page 100
    ... 51 28 19 $188 BB&T periodically evaluates available-for-sale securities for other-than-temporary impairment. Based on its evaluations during 2008, BB&T recorded $104 million of other-than-temporary impairments related to certain debt and equity securities. No other-than-temporary impairments were...

  • Page 101
    ... collateral as well as capital structure. BB&T holds the senior position on all of the non-agency mortgage-backed securities. The unrealized losses for all of the securities having continuous unrealized loss positions for more than 12 months are the result of changes in market interest rates and...

  • Page 102
    ...&T CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The following table sets forth certain information regarding BB&T's impaired loans: December 31, 2008 2007 (Dollars in millions) Total recorded investment-impaired loans Total recorded investment with no related...

  • Page 103
    ... by Operating Segment Residential Banking Mortgage Sales Specialized Insurance Financial All Network Banking Finance Lending Services Services Other (Dollars in millions) Total Balance January 1, 2007 Acquired goodwill, net Contingent consideration Divestiture Other adjustments Balance December 31...

  • Page 104
    ...and timing of estimated future net cash flows. Residential mortgage servicing rights are recorded on the Consolidated Balance Sheets at fair value with changes in fair value recorded as a component of mortgage banking income in the Consolidated Statements of Income for each period. BB&T uses various...

  • Page 105
    ... value of capitalized mortgage servicing rights. These assumptions include prepayment speeds and discount rates commensurate with the risks involved and comparable to assumptions used by market participants to value and bid servicing rights available for sale in the market. At December 31, 2008, the...

  • Page 106
    ... 10 BB&T also arranges and services commercial real estate mortgages through Grandbridge Real Estate Capital, LLC ("Grandbridge") the commercial mortgage banking subsidiary of Branch Bank. During the years ended December 31, 2008, 2007 and 2006, Grandbridge originated $3.7 billion, $3.0 billion and...

  • Page 107
    ..., U.S. Treasury tax and loan deposit notes payable to the U.S. Treasury upon demand or for periods of less than one month, and borrowings under the treasury auction facility. A summary of selected data related to Federal funds purchased, securities sold under agreements to repurchase and short-term...

  • Page 108
    ...to certain limitations. (2) Securities that qualify under the risk-based capital guidelines as Tier 1 capital, subject to certain limitations. (3) These fixed rate notes were swapped to floating rates based on LIBOR. At December 31, 2008, the effective rates paid on these borrowings ranged from 2.02...

  • Page 109
    ...NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Junior Subordinated Debt to Unconsolidated Trusts In August 2005, BB&T Capital Trust I ("BBTCT") issued $500 million of 5.85% Capital Securities. BBTCT, a statutory business trust created under the laws of the State of Delaware, was formed by BB...

  • Page 110
    BB&T CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) In July 1997, Mason-Dixon Capital Trust ("MDCT") issued $20 million of 10.07% Preferred Securities. MDCT, a statutory business trust created under the laws of the State of Delaware, was formed by Mason-Dixon ...

  • Page 111
    ...CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) In May 2003, Main Street Banks Statutory Trust II ("MSBT II") issued $45 million of floating rate Capital Securities. MSBT II, a statutory business trust created under the laws of the State of Connecticut, was formed...

  • Page 112
    ... issued 3,133.64 shares of preferred stock, with a $1,000,000 per share liquidation preference, to the United States Department of the Treasury ("Treasury Department") in connection with the Troubled Asset Relief Program's Capital Purchase Program. The preferred stock pays a dividend of 5% per year...

  • Page 113
    ... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) BB&T also has equity-based plans outstanding as the result of assuming the plans of acquired companies. At December 31, 2008, there were 192 thousand stock options outstanding in connection with these plans, with option prices ranging from $22...

  • Page 114
    ... TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The following tables summarize information about BB&T's stock option awards as of December 31, 2008: Options Outstanding WeightedAverage WeightedNumber Remaining Average Outstanding Contractual Exercise 12/31/08 Life (yrs) Price Options Exercisable...

  • Page 115
    ... tables: As of December 31, 2008 Deferred Pre-Tax Tax Expense After-Tax Amount (Benefit) Amount (Dollars in millions) Unrealized net losses on securities available for sale Unrealized net gains on cash flow hedges Foreign currency translation adjustment Unrecognized net pension and postretirement...

  • Page 116
    ... tax rate for 2008. As a result of changes in the timing of tax payments, FSP FAS 13-2 required a recalculation of each transaction that resulted in a $67 million charge to interest income and a corresponding $24 million tax benefit. The tax effects of temporary differences that gave rise to...

  • Page 117
    ... Unrealized loss on securities available for sale Postretirement plans Equity-based compensation Other Total deferred tax assets Deferred tax liabilities: Lease financing Prepaid pension plan expense Loan fees & expenses Depreciation Identifiable intangible assets Loan servicing rights Unamortized...

  • Page 118
    ... insurance policies on the lives of the certain covered employees are available to finance future benefits. The following are the significant actuarial assumptions that were used to determine net periodic pension costs: December 31, 2008 2007 Actuarial Assumptions Weighted average assumed discount...

  • Page 119
    ..., the Company develops forward-looking return expectations for each asset category and a weighted average expected long-term rate of return for the plan based on target asset allocations contained in BB&T's Investment Policy Statement. Financial data relative to the defined benefit pension plans is...

  • Page 120
    ... Ended Years Ended December 31, December 31, 2008 2007 2008 2007 (Dollars in millions) Change in Plan Assets Fair value of plan assets, January 1, Actual return on plan assets Employer contributions Benefits paid Fair value of plan assets, December 31, Funded status at end of year $1,736 $1,448...

  • Page 121
    ... for fixed income securities, and 10% to 30% for alternative investments, which include real estate, hedge funds, private equities and commodities, with any remainder to be held in cash equivalents. The allocation of plan assets for the defined benefit pension plans, by asset category as of December...

  • Page 122
    ...of service of the employee at the time of retirement. The effect of the change in subsidy has been accounted for as a plan amendment and reduced the projected benefit obligation by $96 million, which is being amortized as a reduction of benefit costs over approximately 17 years. At December 31, 2008...

  • Page 123
    ... as a means of supporting local communities, and receives tax credits related to these investments. BB&T typically acts as a limited partner in these investments and does not exert control over the operating or financial policies of the partnerships. Branch Bank typically provides financing during...

  • Page 124
    ... expect that any of these laws, regulations or policies will materially affect the ability of Branch Bank to pay dividends. In connection with the sale of preferred stock to the Treasury Department under the CPP, BB&T is restricted from increasing its cash dividend to common shareholders above $.47...

  • Page 125
    ...various agencies, including the United States Department of Housing and Urban Development, Government National Mortgage Association, Federal Home Loan Mortgage Corporation and Federal National Mortgage Association. At December 31, 2008 and 2007, Branch Bank's equity was above all required levels. At...

  • Page 126
    ... FINANCIAL STATEMENTS-(Continued) NOTE 17. Parent Company Financial Statements Parent Company Condensed Balance Sheets December 31, 2008 and 2007 2008 2007 (Dollars in millions) Assets Cash and due from banks Securities available for sale at fair value Investment in banking subsidiaries Investment...

  • Page 127
    BB&T CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Parent Company Condensed Income Statements For the Years Ended December 31, 2008, 2007 and 2006 2008 2007 2006 (Dollars in millions) Income Dividends from banking subsidiaries Dividends from other subsidiaries ...

  • Page 128
    ...cash acquired (paid) in business combinations Net cash used in investing activities Cash Flows From Financing Activities: Net increase in long-term debt Net (decrease) increase in short-term borrowed funds Net proceeds from common stock issued Redemption of common stock Proceeds from preferred stock...

  • Page 129
    ... the Corporation's trading and available-for-sale portfolios, loans held for sale, certain derivative contracts and short-term borrowings. Level 3 Level 3 assets and liabilities are financial instruments whose value is calculated by the use of pricing models and/or discounted cash flow methodologies...

  • Page 130
    ... and commercial mortgage loans that were originated subsequent to December 31, 2007 for which BB&T elected the fair value option under SFAS No. 159. Loans originated prior to January 1, 2008 and certain other loans held for sale are still accounted for at the lower of cost or market. There...

  • Page 131
    ...&T CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) BB&T transferred approximately $1.1 billion in available for sale securities to level 3 during 2008. These transfers were almost entirely non-agency mortgage-backed securities for which there has been very limited...

  • Page 132
    ... cash due from banks Loans and leases, net of unearned income: Loans (1) Leases Allowance for loan and lease losses Net loans and leases Financial liabilities: Deposits Federal funds purchased, securities sold under repurchase agreements and short-term borrowed funds Long-term debt Capitalized...

  • Page 133
    ... of loans held for sale for which BB&T did not elect the Fair Value Option are based on quoted market prices and the projected value of the net servicing fees. Deposit liabilities: The fair values for demand deposits, interest-checking accounts, savings accounts and certain money market accounts are...

  • Page 134
    .... BB&T's floating rate business loans, Federal funds purchased, institutional certificates of deposit, other time deposits, medium term bank notes and long term debt expose it to variability in cash flows for interest payments. The risk management objective for these assets and liabilities is...

  • Page 135
    ... for mortgage servicing rights and mortgage banking operations at December 31, 2008 and 2007, respectively. For mortgage loans originated for sale, BB&T is exposed to changes in market rates and conditions subsequent to the interest rate lock and funding date. BB&T's economic hedge strategy related...

  • Page 136
    ...Residential Mortgage Banking, Sales Finance, Specialized Lending, Insurance Services, Financial Services, and Treasury. These operating segments have been identified based on BB&T's organizational structure. The segments require unique technology and marketing strategies and offer different products...

  • Page 137
    ... of loan and deposit products and other financial services. The Banking Network is primarily responsible for serving client relationships, and, therefore, is credited with revenue from the Residential Mortgage Banking, Financial Services, Insurance Services, Specialized Lending, Sales Finance and...

  • Page 138
    .... Financial Services BB&T's Financial Services segment provides personal trust administration, estate planning, investment counseling, wealth management, asset management, employee benefits services, corporate banking and corporate trust services to individuals, corporations, institutions...

  • Page 139
    ...Virginia. Scott & Stringfellow provides services in retail brokerage, equity and debt underwriting, investment advice, corporate finance and equity research and facilitates the origination, trading and distribution of fixed-income securities and equity products in both the public and private capital...

  • Page 140
    ... FINANCIAL STATEMENTS-(Continued) BB&T Corporation Reportable Segments For the Years Ended December 31, 2008, 2007 and 2006 Banking Network 2008 2007 2006 Residential Mortgage Banking 2008 2007 2006 Sales Finance 2008 2007 2006 (Dollars in millions) Specialized Lending 2008 2007 2006 Insurance...

  • Page 141
    ... SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) BB&T Corporation Reportable Segments-Prior Methodology For the Year Ended December 31, 2008 Banking Network Residential Mortgage Banking Sales Finance Specialized Insurance Financial Lending Services Services (Dollars in millions...

  • Page 142
    ... Chief Executive Officer (Principal Executive Officer) / S/ DARYL N. BIBLE Daryl N. Bible Senior Executive Vice President and Chief Financial Officer (Principal Financial Officer) / S/ EDWARD D. VEST Edward D. Vest Executive Vice President and Corporate Controller (Principal Accounting Officer...

  • Page 143
    ...S/ KELLY S. KING Kelly S. King Director, President and Chief Executive Officer / S/ JENNIFER S. BANNER Jennifer S. Banner Director / S/ ANNA R. CABLIK Anna R. Cablik Director / S/ NELLE R. CHILTON Nelle R. Chilton Director / S/ RONALD E. DEAL Ronald E. Deal Director / S/ TOM D. EFIRD Tom...

  • Page 144
    ... as Restated February 25, 2009, related to Series C Preferred Stock. Subordinated Indenture (including Form of Subordinated Debt Security) between the Registrant and U.S. Bank National Association (as successor in interest to State Street Bank and Trust Company), as trustee, dated as of May 24, 1996...

  • Page 145
    Exhibit No. Description Location 10.3* Form of Employee Nonqualified Stock Option Agreement for the BB&T Corporation 1995 Omnibus Stock Incentive Plan, as amended and restated. BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (amended and restated effective January 1, 2005). ...

  • Page 146
    ... 2006 Amended and Restated Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Co. and W. Kendall Chalk. Death Benefit Only Plan, dated April 23, 1990, by and between Branch Banking and Trust Company (as successor to Southern National Bank of North Carolina) and L. Glenn Orr...

  • Page 147
    Exhibit No. Description Location 10.33* Employment Agreement, dated January 20, 2003, by and between Branch Banking and Trust Co. of Virginia and Barry J. Fitzpatrick. Special Pay Agreement, dated January 20, 2003, by and between First Virginia Banks, Inc. and Barry J. Fitzpatrick. Incorporated...

  • Page 148
    ...for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in...

  • Page 149
    ...; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 27, 2009 /s/ DARYL N. BIBLE Daryl N. Bible Senior Executive Vice President and Chief Financial Officer

  • Page 150
    ..., state and attest that: (1) I am the President and Chief Executive Officer of BB&T Corporation (the "Issuer"). (2) Accompanying this certification is the Issuer's Annual Report on Form 10-K for the year ended December 31, 2008, (the "Periodic Report") as filed by the Issuer with the Securities and...

  • Page 151
    ... N. Bible, state and attest that: (1) I am the Senior Executive Vice President and Chief Financial Officer of BB&T Corporation (the "Issuer"). (2) Accompanying this certification is the Issuer's Annual Report on Form 10-K for the year ended December 31, 2008, (the "Periodic Report") as filed by the...

  • Page 152
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