BB&T 2008 Annual Report Download - page 70

funding commitments of $222 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 offset the loss of future cash flows previously received through
ownership positions. Typically, these incentives are based on the acquired entity’s contribution to BB&T’s
earnings compared to agreed-upon amounts. When offered, these incentives are typically issued for terms of
three to five years. As certain provisions of these agreements do not specify dollar limitations, it is not possible to
quantify the maximum exposure resulting from these agreements.
In the normal course of business, BB&T is also a party to financial instruments to meet the financing needs of
clients and to mitigate exposure to interest rate risk. Such financial instruments include commitments to extend
credit and certain contractual agreements, including standby letters of credit and financial guarantee
arrangements. Further discussion of these commitments is included in Note 15 “Commitments and
Contingencies” in the “Notes to Consolidated Financial Statements.”
BB&T previously contracted with an independent third party for the disbursement of official checks. BB&T
terminated its arrangement with the third party during 2008. Under the terms of the agreement, BB&T acted as
an agent for the third party in the issuance of official checks. Funds received from the buyers of official checks
were transferred to the third party issuer to cover the checks when they are ultimately presented for payment.
At December 31, 2008, the third party issuer had outstanding official checks that had been sold by BB&T totaling
$97 million. The official check program is contractually arranged to substantially limit BB&T’s exposure to loss,
since the third party is required to invest the funds received and maintain an equal relationship between
outstanding checks and the balances available to cover the checks. BB&T monitors this relationship through a
reconciliation process. However, in the event that the third party failed to honor official checks BB&T had sold as
its agent, it is likely that BB&T would choose to reimburse the purchasers, though not contractually or legally
obligated to do so.
BB&T’s significant commitments and obligations are summarized in the accompanying table. Not all of the
commitments presented in the table will be used thus the actual cash requirements are likely to be significantly
less than the amounts reported.
Table 25
Summary of Significant Commitments
December 31, 2008
(Dollars in millions)
Lines of credit $15,270
Commercial letters of credit 34
Standby letters of credit and financial guarantees written 5,861
Other commitments (1) 19,874
Total significant commitments $41,039
(1) Other commitments include unfunded business loan commitments, unfunded overdraft protection on demand
deposit accounts and other unfunded commitments to lend.
Related Party Transactions
The Corporation may extend credit to certain officers and directors in the ordinary course of business. These
loans are made under substantially the same terms as comparable third-party lending arrangements and are in
compliance with applicable banking regulations.
Capital
The maintenance of appropriate levels of capital is a management priority and is monitored on a regular
basis. BB&T’s principal goals related to the maintenance of capital are to provide adequate capital to support
BB&T’s comprehensive risk profile, to preserve a sufficient capital base from which to support future growth, to
provide a competitive return to shareholders, to comply with regulatory standards and to achieve optimal credit
ratings for BB&T Corporation and its subsidiaries.
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