BB&T 2009 Annual Report Download

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended:
December 31, 2009
Commission File Number: 1-10853
BB&T CORPORATION
(Exact name of Registrant as specified in its Charter)
North Carolina 56-0939887
(State of Incorporation) (I.R.S. Employer Identification No.)
200 West Second Street
Winston-Salem, North Carolina 27101
(Address of principal executive offices) (Zip Code)
(336) 733-2000
(Registrant’s telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each class Name of each exchange
on which registered
Common Stock, $5 par value New York Stock Exchange
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act. YES ÍNO
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act YES NO Í
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. YES ÍNO
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web
site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was
required to submit and post such files). Yes ÍNo
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or
information statements incorporated by references in Part III of this Form 10-K or any amendment to this
Form 10-K. Í
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ÍAccelerated filer
Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the
Act). YES NO Í
At January 31, 2010, the Corporation had 690,679,160 shares of its Common Stock, $5 par value, outstanding.
The aggregate market value of voting stock held by nonaffiliates of the Corporation is approximately $15.1 billion
(based on the closing price of such stock as of June 30, 2009).

Table of contents

  • Page 1
    ... 31, 2009 Commission File Number: 1-10853 (Exact name of Registrant as specified in its Charter) North Carolina (State of Incorporation) BB&T CORPORATION 56-0939887 (I.R.S. Employer Identification No.) 200 West Second Street Winston-Salem, North Carolina (Address of principal executive offices...

  • Page 2
    ......Market Risk Management ...Financial Statements and Supplementary Data Consolidated Balance Sheets at December 31, 2009 and 2008 ...Consolidated Statements of Income for each of the years in the three-year period ended December 31, 2009 ...Consolidated Statements of Changes in Shareholders' Equity...

  • Page 3
    ...", and "Compensation of Directors" in the Registrant's Proxy Statement for the 2010 Annual Meeting of Shareholders. For information regarding the registrant's securities authorized for issuance under equity compensation plans, refer to "Equity Compensation Plan Information" in Part II hereof. The...

  • Page 4
    ...holding company headquartered in Winston-Salem, North Carolina. BB&T conducts its business operations primarily through its commercial bank subsidiary, Branch Banking and Trust Company ("Branch Bank"), which has offices in North Carolina, Virginia, Florida, Georgia, Maryland, South Carolina, Alabama...

  • Page 5
    ... credit losses, which negatively impacted BB&T's net income. In connection with the agreement between the Federal Deposit Insurance Corporation ("FDIC") and the Company to acquire certain assets and assume substantially all of the deposits and certain liabilities of Colonial Bank, an Alabama state...

  • Page 6
    ... credit risk than residential mortgage loans. With the acquisition of the Colonial loan portfolio, the commercial real estate loan and construction loan portfolios have become a larger portion of Branch Bank's total loan portfolio than it was prior to the Colonial acquisition. This type of lending...

  • Page 7
    ... ongoing policies and procedures designed to manage the risks associated with changes in market interest rates. However, changes in interest rates still may have an adverse effect on BB&T's profitability. For example, high interest rates could adversely affect the Company's mortgage banking business...

  • Page 8
    ..., and the Company may be unable to timely develop competitive new products and services in response to these changes. Maintaining or increasing BB&T's market share may depend on lowering prices and market acceptance of new products and services. BB&T's success depends, in part, on its ability...

  • Page 9
    ... position, increase its borrowing costs, limit its access to the capital markets or trigger unfavorable contractual obligations. BB&T's reported financial results depend on management's selection of accounting methods and certain assumptions and estimates. BB&T's accounting policies and methods...

  • Page 10
    ... may require significant resources and management attention. Prior to the acquisition, Colonial was the subject of a federal criminal investigation relating to the bank's mortgage warehouse lending division and related accounting irregularities. Colonial also received subpoenas from the Special...

  • Page 11
    ... and FDIC loss share agreements. As with any acquisition involving a financial institution, particularly one like Colonial with a large number of bank branches, there may be business and service changes and disruptions that result in the loss of customers or cause customers to close their accounts...

  • Page 12
    ..., North Carolina, which provides loan and lease financing to commercial and small businesses; BB&T Investment Services, Inc., a registered broker-dealer located in Charlotte, North Carolina, which offers clients non-deposit investment alternatives, including discount brokerage services, equities...

  • Page 13
    ... Real Estate Capital, LLC, based in Charlotte, North Carolina, which specializes in arranging and servicing commercial mortgage loans; Lendmark Financial Services, Inc., located in Covington, Georgia, which offers alternative consumer loans to clients unable to meet Branch Bank's normal credit...

  • Page 14
    ... is to offer clients a full array of products to meet all their financial needs. Retail: Commercial: Bankcard lending Consumer finance Home equity lending Home mortgage lending Insurance Investment brokerage services Payment solutions Sales finance Small business lending Wealth management / private...

  • Page 15
    ... disruption and significantly increased risk in financial markets Effectively managing through the credit cycle Residential real estate risk / risk of downturn spreading to other asset classes Intense competition for best credits within the financial services industry Cost and risk associated with...

  • Page 16
    ... the Federal Deposit Insurance Corporation ("FDIC"), as receiver for Colonial. Colonial operated 357 banking offices in Alabama, Florida, Georgia, Texas and Nevada. The acquisition significantly strengthened BB&T's banking franchise, moving BB&T to fifth in deposit market share in Florida and fourth...

  • Page 17
    ... see "Market Area", "General Business Development" and "Regulatory Considerations" below. Market Area BB&T's primary market area for its banking operations consists of North and South Carolina, Virginia, Maryland, Georgia, eastern Tennessee, West Virginia, Kentucky, Florida, Alabama and Washington...

  • Page 18
    ... to meet the credit needs of businesses and consumers in its markets while pursuing a balanced strategy of loan profitability, loan growth and loan quality. BB&T conducts the majority of its lending activities within the framework of the Corporation's community bank operating model, with lending...

  • Page 19
    ...six major categories-commercial, sales finance, revolving credit, direct retail, mortgage and specialized lending. In addition, BB&T has a portfolio of loans that were acquired in the Colonial acquisition that are covered by FDIC loss sharing agreements. BB&T lends to a diverse customer base that is...

  • Page 20
    ...residential real estate, and include both closed-end home equity loans and revolving home equity lines of credit. Direct retail loans are subject to the same rigorous lending policies and procedures as described above for commercial loans and are underwritten with note amounts and credit limits that...

  • Page 21
    ... their fair value on the acquisition date. The loans covered by loss sharing agreements are primarily commercial real estate loans and residential mortgage loans. See Note 2 "Business Combinations" and Note 4 "Loans and Leases" in the "Notes to Consolidated Financial Statements" in this report for...

  • Page 22
    ... the amounts and timing of cash flows expected to be received on impaired loans. Those estimates may be susceptible to significant change. Increases to the allowance are made by charges to the provision for credit losses, which is reflected in the Consolidated Statements of Income. Loans or leases...

  • Page 23
    ... models are validated on a periodic basis in order to ensure reliable default rate information. This information is employed to evaluate the levels of risk associated with new production as well as to assess any risk migration in the existing portfolio. For loans acquired in a business combination...

  • Page 24
    ... category Amount category Amount category Amount category (Dollars in millions) Balances at end of period applicable to: Commercial loans and leases $1,574 Sales finance 77 Revolving credit 127 Direct retail 297 Residential mortgage loans 131 Specialized lending 264 Unallocated 130 Total $2,600 52...

  • Page 25
    ... checking accounts, savings accounts, money market deposit accounts, certificates of deposit and individual retirement accounts. Deposit account terms vary with respect to the minimum balance required, the time period the funds must remain on deposit and service charge schedules. Interest rates paid...

  • Page 26
    ...leases significant office space used as the Corporation's headquarters in Winston-Salem, North Carolina. At December 31, 2009, Branch Bank operated 1,857 branch offices in North Carolina, South Carolina, Virginia, Maryland, Georgia, West Virginia, Tennessee, Kentucky, Alabama, Florida, Texas, Nevada...

  • Page 27
    ... 2006. Deposit Services Manager since April 2004. 22 43 24 47 Administrative Group Manager since August 2001. Risk Management Group Manager between July 2006 and June 2009. Chief Risk Officer since July 2009. Chief Credit Officer between September 2008 and June 2009. Specialized Lending Manager...

  • Page 28
    ... merger of First Virginia. No future options will be issued under the First Virginia plans. (2) All awards remaining available for future issuance will be issued under the terms of the BB&T Corporation 2004 Stock Incentive Plan, as amended by the Corporation's shareholders at the 2009 Annual Meeting...

  • Page 29
    ...of dividends) of BB&T Common Stock, the S&P 500 Index, and an Industry Peer Group Index. The graph assumes $100 invested on December 31, 2004 in BB&T Common Stock and in each of the indices. In 2009, the financial holding companies in the Industry Peer Group Index (the "Peer Group") were Capital One...

  • Page 30
    ... company, which allows the holding company to offer customers virtually any type of service that is financial in nature or incidental thereto, including banking and activities closely related thereto, securities underwriting, insurance (both underwriting and agency) and merchant banking. In order...

  • Page 31
    ...period of time, not to exceed five years; and subject to certain deposit market-share limitations. After a bank has established branches in a state through an interstate merger transaction, the bank may establish and acquire additional branches at any location in the state where a bank headquartered...

  • Page 32
    ... to fully fund the dividends and (2) the prospective rate of earnings retention appears consistent with the organization's capital needs, asset quality and overall financial condition. North Carolina law states that, subject to certain capital requirements, the board of directors of a bank chartered...

  • Page 33
    ...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...

  • Page 34
    ... limited circumstances, to obtain or attempt to obtain customer information of a financial nature by fraudulent or deceptive means. The CRA requires the Banks' primary federal bank regulatory agency, the FDIC for Branch Bank and the OTS for BB&T FSB, to assess the bank's record in meeting the credit...

  • Page 35
    ... bank mergers and bank holding company acquisitions. The Treasury Department has issued a number of regulations implementing the Patriot Act, which impose obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering...

  • Page 36
    ... BB&T's Policy and Procedures for Accounting and Legal Complaints BB&T intends to disclose any substantive amendments or waivers to the Codes of Ethics for Directors or Senior Financial Officers on BB&T's web site at www.BBT.com/Investor. NYSE Certification The annual certification of BB&T's Chief...

  • Page 37
    .... Mergers and Acquisitions Completed During 2009 On August 14, 2009, BB&T acquired certain assets and assumed all of the deposits and certain other liabilities of Colonial, headquartered in Montgomery, Ala., from the FDIC. Colonial operated 357 banking offices in Alabama, Florida, Georgia, Texas...

  • Page 38
    ... and trading securities, which is less than 1% of total assets, valued using unobservable inputs. This total includes $668 million of non-agency mortgage backed securities that are covered by a loss sharing agreement with the FDIC and $219 million of auction-rate securities. BB&T conducts periodic...

  • Page 39
    ... the income statement effect of changes in fair value of the underlying loans. Derivatives BB&T uses derivatives to manage various financial risks. The fair values of derivative financial instruments are determined based on quoted market prices, dealer quotes and internal pricing models that are...

  • Page 40
    ... to Consolidated Financial Statements" for disclosures related to BB&T's benefit plans. Income Taxes The calculation of BB&T's income tax provision is complex and requires the use of estimates and judgments. As part of the Company's analysis and implementation of business strategies, consideration...

  • Page 41
    ...used long-term debt for a significant portion of its funding needs. Long-term debt includes Federal Home Loan Bank ("FHLB") advances, other secured borrowings by Branch Bank, capital securities issued by unconsolidated trusts and senior and subordinated debt issued by the Corporation and Branch Bank...

  • Page 42
    ... taxes. The increase in the fair value of the securities available-for-sale portfolio during 2009 was largely a result of recoveries in the value of non-agency mortgage-backed securities and municipal securities, as investor concerns about real estate related assets and the overall state of the...

  • Page 43
    ...-equivalent basis using the statutory federal income tax rate of 35%. Yields for available-for-sale securities are calculated based on the amortized cost of the securities. (2) For purposes of the maturity table, mortgage-backed securities, which are not due at a single maturity date, have been...

  • Page 44
    ... 2009 2008 Balance % of total Balance % of total (Dollars in millions) Commercial loans and leases Direct retail loans Sales finance loans Revolving credit loans Mortgage loans Specialized lending loans Other acquired loans Total average loans and leases held for investment (excluding covered loans...

  • Page 45
    ... willingness to extend credit. Average direct retail loans declined 5.5% in 2009 due to continuing difficulties in the residential real estate market, which decreased demand for home equity loan products. Average sales finance loans and average revolving credit reflected growth rates of 2.8% and 11...

  • Page 46
    ... real estate totaling $160 million as of December 31, 2009 that is covered by FDIC loss sharing agreements. (3) Excludes mortgage loans guaranteed by GNMA that BB&T does not have the obligation to repurchase. (4) Excludes loans totaling $1.4 billion past due 90 days or more at December 31, 2009...

  • Page 47
    ... the FDIC in connection with the loss share agreements and is recorded as a separate asset from the covered loans and reflected on the Consolidated Balance Sheets. As a result, all of the loans acquired in the Colonial acquisition were considered to be accruing loans as of the acquisition date. In...

  • Page 48
    ... the level at year-end 2008. Loans 90 days or more past due and still accruing interest, excluding Colonial loans covered by FDIC loss share agreements, totaled $319 million at December 31, 2009, compared with $431 million at year-end 2008. Loans 30-89 days past due, excluding Colonial loans covered...

  • Page 49
    ... due loans by loan type for the past three years. Table 12 Summary of Nonperforming Assets and Past Due Loans December 31, 2009 2008 2007 (Dollars in millions) Nonaccrual loans and leases (1) Commercial loans and leases Direct retail Sales finance Mortgage Specialized lending Total nonaccrual loans...

  • Page 50
    ... the loans. Table 13-2 is presented based upon the lines of business, as discussed herein. Table 13-1 Analysis of Allowance for Credit Losses December 31, 2009 2008 2007 2006 (Dollars in millions) 2005 Balance, beginning of period Charge-offs: Commercial, financial and agricultural Real estate...

  • Page 51
    ... 2009 December 31, 2008 2007 2006 (Dollars in millions) 2005 Allowance For Credit Losses Beginning balance Other changes Provision for credit losses Charge-offs Commercial loans and leases Direct retail loans Sales finance loans Revolving credit loans Mortgage loans Specialized lending Total charge...

  • Page 52
    ... mortgage and consumer home equity portfolios as of December 31, 2009. Table 14-1 Real Estate Lending Portfolio Credit Quality and Geographic Distribution Commercial Real Estate Loan Portfolio (1) Residential Acquisition, Development, and Construction Loans (ADC) As of / For the Period Ended...

  • Page 53
    ... commercial real estate portfolio, which is largely office buildings, hotels, warehouses, apartments, rental houses, and shopping centers, totaled $12.5 billion at December 31, 2009. While this portfolio has experienced some deterioration, BB&T has not seen a dramatic increase in problem credits...

  • Page 54
    ... of Mortgages Percentage Percentage of Outstandings Outstandings Outstanding of Total Outstandings - YTD - QTD (Dollars in millions) North Carolina Virginia Florida Maryland Georgia South Carolina Kentucky West Virginia Tennessee Washington, D.C. Alabama Other Total Applicable ratios are annualized...

  • Page 55
    Table 14-3 Real Estate Lending Portfolio Credit Quality and Geographic Distribution Direct Retail 1-4 Family and Lot/Land Real Estate Portfolio (1) As of / For the Period Ended December 31, 2009 Residential Lot/Land Home Equity Home Equity Loans Loans Lines Total (Dollars in millions, except average...

  • Page 56
    ...funds used to support asset growth. Total deposits at December 31, 2009, were $115.0 billion, an increase of $16.4 billion, or 16.6%, compared to year-end 2008. The increase in deposits during 2009 was driven by a $12.7 billion, or 32.2%, increase in other client deposits, which include money market...

  • Page 57
    ...&T also uses various types of short-term borrowings in meeting funding needs. While client deposits remain the primary source for funding loan originations, management uses short-term borrowings as a supplementary funding source for loan growth and other balance sheet management purposes. Short-term...

  • Page 58
    ... in the fair values of available-for-sale securities and pension assets. BB&T's tangible shareholders' equity available to common shareholders was $10.0 billion at December 31, 2009, an increase of $2.2 billion, or 28.4%, compared to December 31, 2008. BB&T's tangible book value per common share at...

  • Page 59
    ... per common share were $2.71 and $3.14 for 2008 and 2007, respectively. Two important and commonly used measures of bank profitability are return on average assets (net income as a percentage of average total assets) and return on average common shareholders' equity (net income available to common...

  • Page 60
    ... Commercial loans and leases Direct retail loans Sales finance loans Revolving credit loans Mortgage loans Specialized lending Other acquired loans Total loans and leases held for investment (excluding covered loans) Covered loans Total loans and leases held for investment Loans held for sale...

  • Page 61
    ... contributor to BB&T's financial success. Noninterest income includes insurance income, service charges on deposit accounts, mortgage banking income, investment banking and brokerage fees and commissions, trust and investment advisory revenues, gains and losses on securities transactions, and...

  • Page 62
    ... paper checks. Bankcard fees also grew $5 million in 2009 compared to 2008 and $12 million in 2008 compared to 2007, as a result of strong sales of merchant services. Trust and investment advisory revenues are based on the types of services provided as well as the overall value of the assets managed...

  • Page 63
    ...2007 (Dollars in millions) % Change 2009 2008 v. v. 2008 2007 Mortgage Banking Income Residential Mortgage Banking: Residential mortgage production income Residential Mortgage Servicing: Residential mortgage servicing fees Residential mortgage servicing rights increase (decrease) in fair value due...

  • Page 64
    ... focus on asset management, mortgage banking, trust, insurance, investment banking and brokerage services, as well as other fee-producing products and services. BB&T plans to continue to pursue acquisitions of additional financial services companies, including insurance agencies and other fee income...

  • Page 65
    ... largely the result of a reduction in the discount rate and a decline the value of plan assets, whereas the increase in other post employment benefits expense was due to increases in the value of participant's accounts and was offset by a similar increase in noninterest income. In addition, health...

  • Page 66
    ... be found in Note 14 "Benefit Plans" in the "Notes to Consolidated Financial Statements." Net occupancy and equipment expense increased $70 million, or 13.8%, in 2009. The increase in 2009 was primarily due to increased rent expense related to the Colonial acquisition. During 2008, net occupancy and...

  • Page 67
    ... are sold for more than originally estimated. Other merger-related and restructuring charges or credits include expenses necessary to convert and combine the acquired branches and operations of merged companies, direct media advertising related to the acquisitions, asset and supply inventory write...

  • Page 68
    ... to the statutory tax rate is included in Note 13 "Income Taxes" in the "Notes to Consolidated Financial Statements" herein. BB&T has extended credit to, and invested in, the obligations of states and municipalities and their agencies, and has made other investments and loans that produce tax-exempt...

  • Page 69
    ...index or referenced interest rate. BB&T uses derivatives primarily to manage risk related to securities, business loans, Federal funds purchased, other overnight funding, long-term debt, mortgage servicing rights, mortgage banking operations and certificates of deposit. BB&T also uses derivatives to...

  • Page 70
    ... to changes in interest rates. The Simulation model projects net interest income and interest rate risk for a rolling two-year period of time. Simulation takes into account the current contractual agreements that BB&T has made with its customers on deposits, borrowings, loans, investments and...

  • Page 71
    ...assets, cash flows and maturities of derivative financial instruments, loan volumes and pricing, deposit sensitivity, customer preferences and capital plans. The resulting change in interest sensitive income reflects the level of sensitivity that interest sensitive income has in relation to changing...

  • Page 72
    ... of deposit, access to the FHLB system, dealer repurchase agreements and repurchase agreements with commercial clients, participation in the Treasury, Tax and Loan and Special Direct Investment programs with the Federal Reserve Bank, access to the overnight and term Federal funds markets, use of...

  • Page 73
    ...below. Table 25 Credit Ratings of BB&T Corporation and Branch Bank December 31, 2009 S&P Moody's Fitch DBRS BB&T Corp. Commercial Paper Issuer LT/Senior debt Subordinated debt Trust Preferred Securities Branch Bank Bank financial strength Long term deposits LT/Senior unsecured bank notes Other long...

  • Page 74
    ...73 million had been funded. BB&T's risk exposure relating to such commitments is generally limited to the amount of investments and loan commitments made. Please refer to Note 1 "Summary of Significant Accounting Policies" in the "Notes to Consolidated Financial Statements" for further discussion of...

  • Page 75
    ... 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...

  • Page 76
    ... cash dividends to BB&T's shareholders, which have generally been in the range of 40.0% to 60.0% of earnings, and repurchases of common shares are the methods used to manage any excess capital generated. In addition, management closely monitors the Parent Company's double leverage ratio (investments...

  • Page 77
    ... preferred stock and a limited amount of the allowance for credit losses. Tier 1 capital and Tier 2 capital combined are referred to as total regulatory capital. Tier 1 capital is required to be at least 4% of risk-weighted assets, and total capital must be at least 8% of risk-weighted assets...

  • Page 78
    ... of Branch Bank to pay dividends to the Parent Company. The payment of cash dividends is an integral part of providing a competitive return on shareholders' investments. The Corporation's policy is to accomplish this while retaining sufficient capital to support future growth and to meet regulatory...

  • Page 79
    ... high and low trading prices and closing sales prices for BB&T's common stock and the dividends paid per share of common stock for each of the last eight quarters. Table 29 Quarterly Summary of Market Prices and Cash Dividends Declared on Common Stock 2009 High Sales Prices Low Last Cash Dividends...

  • Page 80
    ... by the loss sharing agreement under the terms of the Colonial acquisition and managed outside of the Banking Network. The assets and related interest income from this portfolio are included in the Parent/ Reconciling Items segment. New loans originated by the acquired Colonial branches after August...

  • Page 81
    ... identifiable assets in 2009 included the assets from the Colonial acquisition except for assets covered by FDIC loss share agreements and other acquired loans, while the 2008 balance included the assets from the acquisition of Haven Trust. Residential Mortgage Banking BB&T's mortgage originations...

  • Page 82
    ...primarily attributable to stabilization in the sub-prime auto loan portfolio. Due to the overall higher credit risk profiles of some of the clients of Specialized Lending, loss rates are expected to be higher than conventional bank lending. Loss rates are also affected by shifts in the portfolio mix...

  • Page 83
    ... strong revenues from investment banking and brokerage operations, as well as increased revenues from the sale of client derivatives partially offset by lower revenues from trust and investment advisory services related to the market value declines seen in the financial markets. Noninterest expenses...

  • Page 84
    ... by increases in mortgage banking income, service charges on deposits, checkcard fees and other nondeposit fees and commissions. Noninterest income also benefitted from a $38 million increase in the value of various financial assets isolated for the purpose of providing post-employment benefits and...

  • Page 85
    ... Provision for credit losses Securities (losses) gains, net Other noninterest income Noninterest expense Provision for income taxes (1) Net income Noncontrolling interest Dividends and accretion on preferred stock Net income available to common shareholders $ Basic earnings per common share Diluted...

  • Page 86
    ...on preferred stock Net income available to common shareholders $ Per Common Share Average shares outstanding: Basic Diluted Earnings: Basic Diluted Cash dividends declared Book value Average Balances Securities, at amortized cost Loans and leases (1) Other assets Total assets Deposits Long-term debt...

  • Page 87
    ... management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Corporation's assets that could have a material impact on the financial statements. Because of its inherent limitations, internal control...

  • Page 88
    ... Accounting Firm To the Board of Directors and Shareholders of BB&T Corporation: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, changes in shareholders' equity and cash flows present fairly, in all material respects, the financial...

  • Page 89
    ... deposits with banks Federal funds sold and securities purchased under resale agreements or similar arrangements Segregated cash due from banks Trading securities at fair value Securities available for sale at fair value ($1,201 covered by FDIC loss share at December 31, 2009) Loans held for sale...

  • Page 90
    ... agreements and short-term borrowed funds Interest on long-term debt Total interest expense Net Interest Income Provision for credit losses Net Interest Income After Provision for Credit Losses Noninterest Income Insurance income Service charges on deposits Mortgage banking income Investment banking...

  • Page 91
    ... (loss) (Note 12) Stock issued: In purchase acquisitions (1) In connection with stock option exercises and other employee benefits, net of cancellations Redemption of common stock Cash dividends declared on common stock, $1.80 per share Cumulative effect of adoption of accounting principles Equity...

  • Page 92
    ... - Cash dividends accrued on preferred stock - Equity-based compensation expense - Other, net - Balance, December 31, 2009 689,750 (1) Additional paid in capital includes the value of replacement stock options. The accompanying notes are an integral part of these consolidated financial statements...

  • Page 93
    ...property or other real estate held for sale Other, net Net cash provided by (used in) investing activities Cash Flows From Financing Activities: Net (decrease) increase in deposits Net (decrease) increase in federal funds purchased, securities sold under repurchase agreements and short-term borrowed...

  • Page 94
    ... of financial services including credit card lending, automobile lending, equipment financing, full-service securities brokerage, asset management and capital markets services. Principles of Consolidation The consolidated financial statements of BB&T include the accounts of BB&T Corporation and...

  • Page 95
    ... common stock and/or pays cash, depending on the terms of the acquisition agreement. For acquisitions that occurred prior to January 1, 2009, the value of common shares issued was determined based on the market price of the securities issued over a reasonable period of time, not to exceed three days...

  • Page 96
    ... mergers and acquisitions, BB&T typically issues options to purchase shares of its common stock in exchange for options outstanding of the acquired entities at the time the merger is completed. To the extent vested, the options are considered to be part of the purchase price paid. There is no change...

  • Page 97
    ... in mortgage banking income. Loans and Leases The Company's accounting methods for loans differ depending on whether the loans are originated or purchased, and for purchased loans, whether the loans were acquired as a result of a business acquisition or purchased at a discount as a result of credit...

  • Page 98
    ... assets. The acquisition date fair value of the reimbursement the Company expected to receive from the FDIC under those agreements was recorded in the FDIC loss share receivable on the Consolidated Balance Sheet. The fair value of the FDIC loss share receivable is estimated using a discounted cash...

  • Page 99
    ... estimates are susceptible to significant change. Changes to the allowance for loan and lease losses and the reserve for unfunded lending commitments are made by charges to the provision for credit losses, which is reflected in the Consolidated Statements of Income. Loans or lease balances deemed...

  • Page 100
    ... purchased. BB&T uses derivatives primarily to manage economic risk related to securities, business loans, mortgage servicing rights and mortgage banking operations, Federal funds purchased, other time deposits, long-term debt and institutional certificates of deposit. BB&T also uses derivatives to...

  • Page 101
    ... periods of time. To the extent that BB&T's interest rate lock commitments relate to loans that will be held for sale upon funding, they are also accounted for as derivatives, with gains or losses included in mortgage banking income. Gains and losses on other derivatives used to manage economic risk...

  • Page 102
    ... cash flows. Such models incorporate management's best estimates of key variables, such as prepayment speeds and discount rates that would be used by market participants based on the risks involved. Gains and losses incurred on loans sold to third party investors are included in mortgage banking...

  • Page 103
    ... BB&T on January 1, 2011. NOTE 2. Business Combinations Financial Institution Acquisitions Colonial Bank On August 14, 2009, Branch Bank entered into a purchase and assumption agreement with the Federal Deposit Insurance Corporation ("FDIC") to acquire certain assets and assume substantially all of...

  • Page 104
    ... estate, banking facilities, furniture or equipment of Colonial as part of the purchase and assumption agreement. However, under the terms of the agreement, Branch Bank had the option through February 1, 2010 to acquire these assets from the FDIC at their fair market value as of the acquisition date...

  • Page 105
    ... Fair Value As Recorded by Colonial Adjustments by BB&T Bank (Dollars in millions) Assets: Cash, due from banks and federal funds sold Interest-bearing deposits in banks and the Federal Reserve Investment securities (including $1,142 of covered securities) Covered loans held for sale Covered loans...

  • Page 106
    ...used for loans are based on current market rates for new originations of comparable loans and include adjustments for liquidity concerns. The discount rate does not include a factor for credit losses as that has been included in the estimated cash flows. Core deposit intangible This intangible asset...

  • Page 107
    ... values of Federal Home Loan Bank (FHLB) advances were based on pricing supplied by the FHLB. Other Financial Institution Acquisitions On December 12, 2008, BB&T acquired all the deposits and $61 million in assets of Haven Trust Bank of Duluth, Georgia through an agreement with the FDIC. Haven Trust...

  • Page 108
    ...non-agency mortgage-backed securities and $305 million of municipal securities acquired as part of the Colonial transaction. All covered securities are covered by one of the FDIC loss share agreements as further discussed in Note 2 to these consolidated financial statements. At December 31, 2009 and...

  • Page 109
    ... TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Fannie Mae investments had total amortized cost and fair values of $18.1 billion at December 31, 2009, while Freddie Mac investments had total amortized cost and fair values of $7.4 billion. At December 31, 2009, non-agency mortgage-backed securities...

  • Page 110
    ...-agency mortgage-backed and municipal securities. At December 31, 2009, all of the available-for-sale debt securities in an unrealized loss position, excluding those covered by FDIC loss sharing agreements, were investment grade with the exception of (a) one auction rate security with a book value...

  • Page 111
    ... the result of the cash flow model, internal credit analysis and other market observable information in its estimation of possible future credit losses. If management does not expect to recover the entire amortized cost basis of a mortgage-backed security, the Company records other-than-temporary...

  • Page 112
    ... Total commercial loans and leases Sales finance loans Revolving credit loans Direct retail loans Residential mortgage loans Specialized lending Loans Leases Total specialized lending Other acquired loans Total loans and leases held for investment (excluding covered loans) Covered loans Total loans...

  • Page 113
    ... of August 14, 2009, the preliminary estimate of the contractually required payments receivable for all purchased impaired loans acquired in the Colonial transaction, including those covered and not covered under loss sharing agreements with the FDIC, were $8.3 billion, the cash flows expected to be...

  • Page 114
    ... 31, 2009 2008 (Dollars in millions) Total recorded investment-impaired loans Total recorded investment with no related valuation allowance Total recorded investment with related valuation allowance Allowance for loan and lease losses assigned to impaired loans Net carrying value-impaired loans...

  • Page 115
    ... real estate totaling $160 million as of December 31, 2009 that is covered by FDIC loss sharing agreements. (3) Excludes mortgage loans guaranteed by GNMA that BB&T does not have the obligation to repurchase. (4) Excludes loans totaling $1.4 billion past due 90 days or more at December 31, 2009...

  • Page 116
    ...31, 2009 and 2008 are reflected in the table below. To date, there have been no goodwill impairments recorded by BB&T. Goodwill Activity by Operating Segment Banking Network Residential Mortgage Banking Sales Finance Specialized Insurance Lending Services (Dollars in millions) Financial Services All...

  • Page 117
    .... NOTE 8. Loan Servicing Residential Mortgage Banking Activities The following table includes a summary of residential mortgage loans managed or securitized and related delinquencies and net charge-offs: Years Ended December 31, 2009 2008 (Dollars in millions) Mortgage Loans Managed or Securitized...

  • Page 118
    ... rates, prepayment speeds or credit losses. Residential mortgage servicing rights are recorded on the Consolidated Balance Sheets at fair value with changes in fair value recorded as a component of mortgage banking income in the Consolidated Statements of Income for each period. BB&T uses various...

  • Page 119
    ..., respectively. Commercial real estate mortgage loans serviced for others are not included in loans on the accompanying Consolidated Balance Sheets. At December 31, 2009, Grandbridge had $4.0 billion in loans serviced for others that were covered by loss sharing agreements. Grandbridge's maximum...

  • Page 120
    BB&T CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Commercial mortgage servicing rights are recorded as other assets on the Consolidated Balance Sheets at lower of cost or market and amortized in proportion to and over the estimated period that net servicing ...

  • Page 121
    ...(variable rate commercial paper) that mature in less than one year. Other short-term borrowed funds include unsecured bank notes that mature in less than one year, bank obligations with a maturity of seven days that are collateralized by municipal securities, U.S. Treasury tax and loan deposit notes...

  • Page 122
    ... IV's obligations under the Trust and Capital Securities. BBTCT IV's sole asset is the Junior Subordinated Debentures issued by BB&T which have a scheduled maturity on June 12, 2057 and a final repayment date on June 12, 2077. BB&T is required to use all commercially reasonable efforts, subject to...

  • Page 123
    BB&T CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) whole or in part at any time at the option of BB&T pursuant to the optional redemption provisions of such security, or (ii) in whole, but not in part, under certain prescribed limited circumstances. The Capital ...

  • Page 124
    ... TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) In November 1997, MainStreet Capital Trust I ("MSCT I") issued $50 million of 8.90% Trust Securities. MSCT I, a statutory business trust created under the laws of the State of Delaware, was formed by MainStreet Financial Corporation, ("MainStreet...

  • Page 125
    ... SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) In July 2003, Coastal Financial Capital Trust I ("Coastal I") issued $15 million of floating rate Capital Securities. Coastal I, a statutory business trust created under the laws of the State of Delaware, was formed by Coastal for...

  • Page 126
    ... plans of acquired companies. At December 31, 2009, there were 148 thousand stock options outstanding in connection with these plans, with option prices ranging from $24.04 to $29.54. BB&T measures the fair value of each option award on the date of grant using the Black-Scholes optionpricing model...

  • Page 127
    ... share units based on the price of BB&T's common stock on the grant date less the present value of expected dividends that are foregone during the vesting period. BB&T recorded $62 million, $75 million and $70 million in equity-based compensation in 2009, 2008 and 2007, respectively. In connection...

  • Page 128
    ...of securities available for sale are covered by loss sharing agreements with the FDIC as discussed in Note 2 to these consolidated financial statements. The securities covered by the loss share agreements reflected a net unrealized pretax gain of $35 million as of December 31, 2009. The FDIC's share...

  • Page 129
    ... net holding gains (losses) arising during the period on securities available for sale Reclassification adjustment for losses (gains) on securities available for sale included in net income Net change in amounts attributable to the FDIC under the loss share agreements Net change in unrecognized...

  • Page 130
    ... TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) NOTE 13. Income Taxes The provision for income taxes comprised the following: Years Ended December 31, 2009 2008 2007 (Dollars in millions) Current expense: Federal State Foreign Total current expense Deferred expense (benefit): Federal State Total...

  • Page 131
    ... tax assets are included in other assets on the "Consolidated Balance Sheets". December 31, 2009 2008 (Dollars in millions) Deferred tax assets: Allowance for loan and lease losses Unrealized loss on securities available for sale Postretirement benefit plans Equity-based compensation Loan basis...

  • Page 132
    ... key officers under supplemental defined benefit executive retirement plans, which are not qualified under the Internal Revenue Code. Although technically unfunded plans, a Rabbi Trust and insurance policies on the lives of the certain covered employees are available to finance future benefits. 132

  • Page 133
    ... the period the benefits included in the benefit obligation are to be paid. In developing the expected rate of return, BB&T considers long-term compound annualized returns of historical market data for each asset category, as well as historical actual returns on the Company's plan assets. Using this...

  • Page 134
    ... Ended Years Ended December 31, December 31, 2009 2008 2009 2008 (Dollars in millions) Change in Plan Assets Fair value of plan assets, January 1, Actual return on plan assets Employer contributions Benefits paid Fair value of plan assets, December 31, Funded status at end of year $1,371 $1,736...

  • Page 135
    ... real estate, hedge funds, private equities and commodities, with any remainder to be held in cash equivalents. In January 2009, the Compensation Committee amended the Statement of Investment Policies to revise the asset allocation strategy for the Plan and the Trust to have no additional investment...

  • Page 136
    ... for Level 3 plan assets at December 31, 2009. Fair Value Measurements Using Significant Unobservable Inputs U.S. Equity Alternative Securities (1) Investments Balance at January 1, 2009 Actual return on plan assets: Relating to assets still held at the reporting date Purchases, sales and...

  • Page 137
    ... primarily to manage risk related to securities, business loans, Federal Funds purchased, other overnight funding, long-term debt, mortgage servicing rights, mortgage banking operations and certificates of deposit. BB&T also uses derivatives to facilitate transactions on behalf of its clients. BB...

  • Page 138
    ... a means of supporting local communities, and receives tax credits related to these investments. BB&T typically acts as a limited partner in these investments and does not exert control over the operating or financial policies of the partnerships. Branch Bank typically provides financing during the...

  • Page 139
    ... seller/servicer, Branch Bank is required to maintain minimum levels of shareholders' equity, as specified by various agencies, including the United States Department of Housing and Urban Development, Government National Mortgage Association, Federal Home Loan Mortgage Corporation and Federal...

  • Page 140
    ... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) NOTE 17. Parent Company Financial Statements Parent Company Condensed Balance Sheets December 31, 2009 and 2008 2009 2008 (Dollars in millions) Assets Cash and due from banks Securities available for sale at fair value Investment in banking...

  • Page 141
    ...Income tax benefit Income before equity in undistributed earnings of subsidiaries Equity in undistributed earnings of subsidiaries in excess of dividends from subsidiaries Net income Noncontrolling interests Dividends and accretion on preferred stock Net income available to common shareholders $459...

  • Page 142
    ... Net cash acquired in business combinations Net cash used in investing activities Cash Flows From Financing Activities: Net increase in long-term debt Net (decrease) increase in short-term borrowed funds Net proceeds from common stock issued Redemption of common stock Retirement of preferred stock...

  • Page 143
    ... the Corporation's trading and available-for-sale portfolios, loans held for sale, certain derivative contracts and short-term borrowings. Level 3 Level 3 assets and liabilities are financial instruments whose value is calculated by the use of pricing models and/or discounted cash flow methodologies...

  • Page 144
    ... 2 Level 3 (Dollars in Millions) Assets: Trading securities Securities available for sale Loans held for sale (1) Residential mortgage servicing rights Derivative assets (2) Venture capital and similar investments (2) Total assets Liabilities: Derivative liabilities (2) Short-term borrowed funds...

  • Page 145
    ... Inputs Non-agency Venture States & mortgage- Equity & Mortgage Capital and Political backed Other Covered Servicing Net Similar Trading Subdivisions securities Securities Securities Rights Derivatives Investments (Dollars in Millions) For the Year Ended December 31, 2009 Balance at January...

  • Page 146
    ... TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) There were no gains or losses recognized as a result of the transfers of securities between level 2 and level 3 in either 2009 or 2008. BB&T has investments in venture capital funds and other similar investments that are measured at fair value based...

  • Page 147
    ... BB&T has not recorded at fair value: December 31, 2009 Carrying Amount 2008 Carrying Fair Fair Value Amount Value (Dollars in millions) Financial assets: Loans and leases, net of allowance for loan and lease losses (1) Financial liabilities: Deposits Long-term debt $101,056 114,965 21,376 $100...

  • Page 148
    ... rates being offered by BB&T for new loans with similar terms and credit quality are reflective of credit risk and liquidity spreads inherent in an orderly transaction in the current market. For commercial loans and leases, internal credit risk models are used to adjust discount rates for risk...

  • Page 149
    ... of credit are estimated based on the counterparties' creditworthiness and average default rates for loan products with similar risks. The fair values of commitments to fund affordable housing investments are estimated using the net present value of future commitments. NOTE 19. Derivative Financial...

  • Page 150
    ... Not Designated as Hedges: Client-related and other risk management Interest rate contracts Receive fixed swaps Pay fixed swaps Other swaps Option trades Swaptions Futures contracts Collars Foreign exchange contracts Mortgage Banking Interest rate contracts Interest rate lock commitments Forward...

  • Page 151
    ... rate business loans, Federal funds purchased, other overnight funding, institutional and brokered certificates of deposit, other time deposits, medium-term bank notes and long-term debt expose it to variability in cash flows for interest payments. The risk management objective for these assets...

  • Page 152
    ... 31, 2009. For mortgage loans originated for sale, BB&T is exposed to changes in market rates and conditions subsequent to the interest rate lock and funding date. BB&T's risk management strategy related to its interest rate lock commitment derivatives and loans held for sale includes using mortgage...

  • Page 153
    ... of its clients, as well as activities related to balance sheet management. At December 31, 2009, BB&T had designated notional values of $73 million of derivatives as net investment hedges used to hedge the variability in a foreign currency exchange rate. Credit risk related to derivatives arises...

  • Page 154
    ...consolidated results. Allocation methodologies are subject to periodic adjustment as the internal management accounting system is revised and business or product lines within the segments change. Also, because the development and application of these methodologies is a dynamic process, the financial...

  • Page 155
    ... or charge, which includes intercompany interest income and expense, is reflected as net funds transfer pricing in the accompanying tables. Banking Network BB&T's Banking Network serves individual and business clients by offering a variety of loan and deposit products and other financial services...

  • Page 156
    ...asset management, employee benefits services, corporate banking and corporate trust services to individuals, corporations, institutions, foundations and government entities. BB&T's Financial Services segment also offers clients investment alternatives, including discount brokerage services, equities...

  • Page 157
    ...TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Parent/Reconciling Items Parent/Reconciling Items reflect corporate support functions that have not been allocated to the business segments, merger-related charges or credits that are incurred as part of acquisition and conversion of acquired entities...

  • Page 158
    ... indicated: BB&T Corporation Reportable Segments For the Years Ended December 31, 2009, 2008 and 2007 Banking Network Sales Finance 2009 (Dollars in millions) 2008 2007 2009 2009 2008 2007 2009 2008 2007 Residential Mortgage Banking Specialized Lending 2008 2007 Insurance Services 2009 2008 2007...

  • Page 159
    ... duly authorized, as of February 26, 2010: BB&T Corporation (Registrant) By: / S/ KELLY S. KING Kelly S. King Chairman and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the...

  • Page 160
    ... Kelly S. King Chairman and Chief Executive Officer / S/ JOHN A. ALLISON IV John A. Allison IV Director / S/ JENNIFER S. BANNER Jennifer S. Banner Director / S/ K. DAVID BOYER JR. K. David Boyer Jr. Director / S/ ANNA R. CABLIK Anna R. Cablik Director / S/ RONALD E. DEAL Ronald E. Deal...

  • Page 161
    / S/ NIDO R. QUBEIN Nido R. Qubein Director / S/ THOMAS E. SKAINS Thomas E. Skains Director / S/ THOMAS N. THOMPSON Thomas N. Thompson Director / S/ STEPHEN T. WILLIAMS Stephen T. Williams Director 161

  • Page 162
    ... February 25, 2009, related to Series C Preferred Stock. 4.2 4.3 Indenture Regarding Senior Securities (including form of Senior Debt Security) between Registrant and U.S. Bank National Association (as successor in interest to State Street Bank and Trust Company), as trustee, dated as of May...

  • Page 163
    ... Supplemental Indenture, dated May 4, 2009, to the Indenture Regarding Subordinated Securities, dated as of May 24, 1996, between the Registrant and U.S. Bank National Association. BB&T Corporation Amended and Restated Non-Employee Directors' Deferred Compensation and Stock Option Plan (amended and...

  • Page 164
    ... Defined Contribution Plan for Highly Compensated Employees. 10.20* BB&T Corporation Non-Qualified Deferred Compensation Trust Amended and Restated effective November 1, 2001 (including amendments). 2006 Amended and Restated Employment Agreement by and among BB&T Corporation, Branch Banking...

  • Page 165
    ... and Restated Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Co. and C. Leon Wilson, III. Not used. Death Benefit Only Plan, dated April 23, 1990, by and between Branch Banking and Trust Company (as successor to Southern National Bank of North Carolina) and L. Glenn...

  • Page 166
    ...Statement for the 2009 Annual Meeting of Shareholders. Filed herewith. Future filing incorporated herein by reference pursuant to General Instruction G(3). Filed herewith. Filed herewith. 23†31.1 Consent of Independent Registered Public Accounting Firm. Certification of Chief Executive Officer...

  • Page 167
    ... affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 26, 2010...

  • Page 168
    ... affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 26, 2010...

  • Page 169
    ... I am the Chairman and Chief Executive Officer of BB&T Corporation (the "Issuer"). (2) Accompanying this certification is the Issuer's Annual Report on Form 10-K for the year ended December 31, 2009, (the "Periodic Report") as filed by the Issuer with the Securities and Exchange Commission pursuant...

  • Page 170
    ... Executive Vice President and Chief Financial Officer of BB&T Corporation (the "Issuer"). (2) Accompanying this certification is the Issuer's Annual Report on Form 10-K for the year ended December 31, 2009, (the "Periodic Report") as filed by the Issuer with the Securities and Exchange Commission...