BB&T 2008 Annual Report Download - page 54
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reprice in a short period of time after a change in rates, there is typically a delay of between three and eighteen
months before BB&T’s assets will be repriced. The improvement in the net interest margin during 2008 was
caused by a combination of factors. BB&T entered 2008 in a liability sensitive position, which means that interest-
bearing liabilities generally reprice more frequently than interest-earning assets. This resulted in lower funding
costs throughout 2008, as interest-rates declined. Additionally, BB&T experienced some improvement in loan
pricing in 2008. The net interest margin was negatively impacted five basis points by an adjustment of $67
million, as a result of a change in the income recognition on leveraged lease transactions in connection with
BB&T’s settlement with the Internal Revenue Service (“IRS”). In addition, the net interest margin has been
negatively affected by the higher level of non-performing assets in 2008. The net interest margin contracted in
2007 for four primary reasons. First, the mix 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 costs, specifically a shift to higher-cost deposits from lower-cost transaction accounts and additional
funding costs associated with a payment to the IRS that was made in January 2007 as described in the “Provision
for Income Taxes” section below, contributed to the margin compression.
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