BB&T 2008 Annual Report Download - page 44

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The available-for-sale securities portfolio is primarily composed of mortgage-backed securities issued by U.S.
government-sponsored entities. Mortgage-backed securities comprised 83.5% of the total available-for-sale
securities portfolio at year-end 2008. The duration of the mortgage-backed securities was 1.60 years at
December 31, 2008 compared to 2.91 years at December 31, 2007. The duration of the entire available-for-sale
portfolio at December 31, 2008 was 2.77 years compared to 2.43 years at December 31, 2007.
The market value of the available-for-sale portfolio at year-end 2008 was $517 million lower than the
amortized cost of these securities. At December 31, 2008, BB&T’s available-for-sale portfolio had net unrealized
losses, net of deferred income taxes, of $324 million, which are reported as a component of shareholders’ equity.
At December 31, 2007, the available-for-sale portfolio had net unrealized losses of $28 million, net of deferred
income taxes. The decline in the fair value of the securities 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 of the economy. Declines in the values of these portfolios were partially offset by increases in the
value of government sponsored entity securities.
During the year ended December 31, 2008, BB&T sold approximately $21.0 billion of available-for-sale
securities and realized net gains totaling $211 million. In addition, 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 recorded during 2007 and 2006.
On December 31, 2008, BB&T also held certain investment securities having continuous unrealized loss
positions for more than 12 months. As of December 31, 2008, the unrealized losses on these securities totaled $412
million. Substantially all of these losses were in non-agency mortgage-backed and municipal securities. At
December 31, 2008, all of the available-for-sale debt securities with the exception of four non-agency mortgage-
backed securities were investment grade. During the fourth quarter of 2008, four non-agency mortgage-backed
securities, with a book value of approximately $293 million, were downgraded below investment grade. BB&T
evaluated all of its non-agency mortgage-backed securities based on the underlying 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 liquidity. Based on the evaluation on December 31, 2008, there were no
credit losses evident from these securities. At December 31, 2008, BB&T had the ability and intent to retain these
securities for a period of time sufficient to recover all unrealized losses.
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