BB&T 2009 Annual Report Download - page 106

BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following is a description of the methods used to determine the fair values of significant assets and
liabilities presented above.
Cash, due from banks and federal funds sold, interest-bearing deposits in banks and the Federal Reserve
The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of
these assets.
Investment Securities
Fair values for securities are based on quoted market prices, where available. If quoted market prices are
not available, fair value estimates are based on observable inputs including quoted market prices for similar
instruments, quoted market prices that are not in an active market or other inputs that are observable in the
market. In the absence of observable inputs, fair value is estimated based on pricing models and/or discounted
cash flow methodologies.
Loans
Fair values for loans were based on a discounted cash flow methodology that considered factors including the
type of loan and related collateral, classification status, fixed or variable interest rate, term of loan and whether or
not the loan was amortizing, and current discount rates. Loans were grouped together according to similar
characteristics and were treated in the aggregate when applying various valuation techniques. The discount rates
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 represents the value of the relationships that Colonial had with its deposit customers.
The fair value of this intangible asset was estimated based on a discounted cash flow methodology that gave
appropriate consideration to expected customer attrition rates, cost of the deposit base, reserve requirements
and the net maintenance cost attributable to customer deposits.
Other real estate owned (“OREO”)
OREO is presented at the estimated present value that management expects to receive when the property is
sold, net of related costs of disposal.
FDIC loss share receivable
This loss sharing asset is measured separately from the related covered asset as it is not contractually
embedded in the assets and is not transferable with the assets should Branch Bank choose to dispose of them.
Fair value was estimated using projected cash flows related to the loss sharing agreements based on the expected
reimbursements for losses and the applicable loss sharing percentages. These expected reimbursements do not
include reimbursable amounts related to future covered expenditures. These cash flows were discounted to
reflect the uncertainty of the timing and receipt of the loss sharing reimbursement from the FDIC.
Deferred taxes
Deferred taxes totaling approximately $306 million, which are reflected in the other assets line in the table
above, relate to differences between the financial statement and tax basis of certain acquired assets and liabilities
including the acquired loans, loss share receivable and certain acquired long-term debt. Deferred taxes are
calculated based on the estimated federal and state income tax rates currently in effect for BB&T.
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