BB&T 2009 Annual Report Download - page 102

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BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
generally retains the mortgage servicing on loans sold. Since quoted market prices are not typically available,
BB&T estimates the fair value of these retained interests using modeling techniques to determine the net
present value of expected future 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
income in the Consolidated Statements of Income.
BB&T periodically securitizes mortgage loans that it intends to hold for the foreseeable future and transfers
the resulting securities to the securities available for sale portfolio. This is generally accomplished by exchanging
the loans for mortgage-backed securities issued primarily by Freddie Mac. Since the transfers are not considered
a sale, no gain or loss is recorded in conjunction with these transactions.
Mortgage Servicing Rights
BB&T has two classes of mortgage servicing rights for which it separately manages the economic risks:
residential and commercial. 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 each period.
Commercial mortgage servicing rights are recorded as other assets on the Consolidated Balance Sheets at the
lower of cost or market and are amortized in proportion to, and over the estimated period that, net servicing
income is expected to be received based on projections of the amount and timing of estimated future net cash
flows. The amount and timing of estimated future net cash flows are updated based on actual results and updated
projections. BB&T periodically evaluates its commercial mortgage servicing rights for impairment.
Equity-Based Compensation
BB&T maintains various equity-based compensation plans. These plans provide for the granting of stock
options (incentive and nonqualified), stock appreciation rights, restricted stock, restricted stock units,
performance units and performance shares to selected BB&T employees and directors. BB&T values share-based
awards at the grant date fair value and recognizes the expense over the requisite service period taking into
account retirement eligibility.
Changes in Accounting Principles and Effects of New Accounting Pronouncements
BB&T adopted new guidance impacting Business Combinations on January 1, 2009. This guidance requires
the acquiring entity in a business combination to recognize the full fair value of assets acquired and liabilities
assumed in the transaction (whether a full or partial acquisition); establishes the acquisition-date fair value as the
measurement objective for all assets acquired and liabilities assumed; requires expensing of most transaction and
restructuring costs; and requires the acquirer to disclose to investors and other users all of the information
needed to evaluate and understand the nature and financial effect of the business combination. In addition,
guidance related to the initial recognition and measurement, subsequent measurement and accounting, and
disclosure of assets and liabilities arising from contingencies in a business combination was adopted. Disclosures
required for business combinations are included in Note 2 to these consolidated financial statements.
BB&T adopted new guidance impacting Derivatives and Hedging on January 1, 2009. This guidance requires
that an entity provide enhanced disclosures related to derivative and hedging activities. The additional
disclosures required by this guidance are included in Note 19 to these consolidated financial statements.
BB&T adopted new guidance impacting Intangibles—Goodwill and Other on January 1, 2009. This guidance
amends the factors an entity should consider in developing renewal or extension assumptions used in determining
the useful life of recognized intangible assets under GAAP. The adoption of this guidance was not material to the
consolidated financial statements.
In December 2008, the FASB issued new guidance impacting Compensation—Retirement Benefits—Defined
Benefit Plans—General. The objectives of this guidance are to provide users of the financial statements with
102