BB&T 2008 Annual Report Download - page 131

Download and view the complete annual report

Please find page 131 of the 2008 BB&T annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 152

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152

BB&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
sales activity. Certain assumptions regarding market liquidity for the valuation of these securities could not be
reliably observed. These assumptions represent a more than nominal component of fair value. There was no gain
or loss recognized in earnings at the time of the transfer of the non-agency mortgage-backed securities to level 3.
The table below summarizes unrealized and realized gains and losses recorded in earnings for Level 3 assets
and liabilities for the year ended December 31, 2008.
Total Gains and Losses
AFS Securities Trading
Mortgage
Servicing
Rights Net Derivatives
Venture
Capital
Investments
(Dollars in millions)
Classification of gains and losses (realized/
unrealized) included in earnings for the period:
Securities gains (losses), net $ (35) $— $ — $— $—
Mortgage banking income — — (314) 35 —
Other noninterest income — (3) — — (8)
Total $ (35) $ (3) $(314) $ 35 $ (8)
Net unrealized gains (losses) included in net income
relating to assets and liabilities still held at
December 31, 2008 $— $— $(220) $ 37 $ (12)
The realized and unrealized losses reported for mortgage servicing rights assets are composed of a negative
valuation adjustment of $220 million plus the realization of expected residential mortgage servicing rights cash
flows of $94 million for the year ended December 31, 2008. BB&T uses various derivative financial instruments to
mitigate the income statement effect of changes in fair value due to its quarterly valuation. During 2008, the
derivative instruments produced gains of $262 million, which offset the negative valuation adjustment recorded.
Also, BB&T may be required, from time to time, to measure certain other financial assets at fair value on a
nonrecurring basis. Assets measured at fair value on a nonrecurring basis for the year ended December 31, 2008
that were still held on the balance sheet at December 31, 2008 totaled $1.3 billion. This amount consists of $740
million for impaired loans and $538 million for foreclosed real estate that were classified as Level 3 assets. During
the year ended December 31, 2008, BB&T recorded $142 million and $22 million, respectively, in losses related to
write-downs of the loans and the foreclosed real estate based on the appraised value of the underlying collateral.
SFAS No. 107, “Disclosures About Fair Value of Financial Instruments” (“SFAS No. 107”), requires the
disclosure of the estimated fair value of financial instruments. A financial instrument is defined as cash, evidence
of an ownership interest in an entity or a contract that creates a contractual obligation or right to deliver or
receive cash or another financial instrument from a second entity. BB&T has recorded certain assets and
liabilities at fair value as required by SFAS No. 157, and those assets for which BB&T elected the Fair Value
Option.
131