BB&T 2008 Annual Report Download - page 33

Download and view the complete annual report

Please find page 33 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

The Federal Reserve Board requires bank holding companies that engage in trading activities to adjust their
risk-based capital ratios to take into consideration market risks that may result from movements in market prices
of covered trading positions in trading accounts, or from foreign exchange or commodity positions, whether or not
in trading accounts, including changes in interest rates, equity prices, foreign exchange rates or commodity
prices. Any capital required to be maintained under these provisions may consist of a new “Tier 3 capital”
consisting of forms of short-term subordinated debt.
Each of the federal bank regulatory agencies, including the Federal Reserve Board, the FDIC and the OTS,
also has established minimum leverage capital requirements for banking organizations. These requirements
provide that banking organizations that meet certain criteria, including excellent asset quality, high liquidity, low
interest rate exposure and good earnings, and that have received the highest regulatory rating must maintain a
ratio of Tier 1 capital to total adjusted average assets of at least 3%. Institutions 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 or making acquisitions are expected to maintain strong capital positions
substantially above the minimum supervisory levels without significant reliance on intangible assets. The Federal
Reserve Board also continues to consider a “tangible Tier 1 capital leverage ratio” (deducting all intangibles) and
other indicators of capital strength in evaluating proposals for expansion or new activity.
In addition, the Federal Reserve Board, the FDIC and the OTS all have adopted risk-based capital standards
that explicitly identify concentrations of credit risk and the risk arising from non-traditional activities, as well as
an institution’s ability to manage these risks, as important factors to be taken into account by each agency in
assessing an institution’s overall capital adequacy. The capital guidelines also provide that an institution’s
exposure to a decline in the economic value of its capital due to changes in interest rates be considered by the
agency as a factor in evaluating a banking organization’s capital adequacy. The agencies also require banks and
bank holding companies to adjust their regulatory capital to take into consideration the risk associated with
certain recourse obligations, direct credit subsidies, residual interest and other positions in securitized
transactions that expose banking organizations to credit risk.
The ratios of Tier 1 capital, total capital to risk-adjusted assets, and leverage capital of BB&T, Branch Bank
and BB&T FSB as of December 31, 2008, are shown in the following table.
Table 8
Capital Adequacy Ratios of BB&T Corporation and Banks
December 31, 2008
Regulatory
Minimums
Regulatory
Minimums
to be Well-
Capitalized BB&T Branch
Bank BB&T
FSB
Risk-based capital ratios:
Tier 1 capital 4.0% 6.0% 12.3% 10.8% 14.4%
Total risk-based capital 8.0 10.0 17.4 13.6 15.7
Tier 1 leverage ratio 3.0 5.0 9.9 8.7 13.8
The federal banking agencies, including the Federal Reserve Board, the FDIC and the OTS, are required to
take “prompt corrective action” in respect of depository institutions and their bank holding companies that do not
meet minimum capital requirements. The law establishes five capital categories for insured depository
institutions for this purpose: “well-capitalized,” “adequately capitalized,” “undercapitalized,” “significantly
undercapitalized” and “critically undercapitalized.” To be considered “well-capitalized” under these standards, an
institution must maintain a total risk-based capital ratio of 10% or greater; a Tier 1 risk-based capital ratio of 6%
or greater; a leverage capital ratio of 5% or greater; and must not be subject to any order or written directive to
meet and maintain a specific capital level for any capital measure. BB&T, Branch Bank and BB&T FSB are all
classified as “well-capitalized.” Federal law also requires the bank regulatory agencies to implement systems for
“prompt corrective action” for institutions that fail to meet minimum capital requirements within the five capital
categories, with progressively more severe restrictions on operations, management and capital distributions
33