BB&T 2009 Annual Report Download - page 119

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BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
BB&T uses assumptions and estimates in determining the fair value of capitalized mortgage servicing rights.
These assumptions include prepayment speeds and discount rates commensurate with the risks involved and
comparable to assumptions used by market participants to value and bid servicing rights available for sale in the
market. At December 31, 2009, the sensitivity of the current fair value of the residential mortgage servicing
rights to immediate 10% and 20% adverse changes in key economic assumptions are included in the accompanying
table.
Residential
Mortgage Servicing Rights
December 31, 2009
(Dollars in millions)
Fair Value of Residential Mortgage Servicing Rights $ 832
Composition of Residential Loans Serviced for Others:
Fixed-rate mortgage loans 99%
Adjustable-rate mortgage loans 1
Total 100
Weighted Average Life 5.2 yrs
Prepayment Speed 14.7%
Effect on fair value of a 10% increase $ (42)
Effect on fair value of a 20% increase (80)
Weighted Average Discount Rate 9.8%
Effect on fair value of a 10% increase $ (36)
Effect on fair value of a 20% increase (69)
The sensitivity calculations above are hypothetical and should not be considered to be predictive of future
performance. As indicated, changes in fair value based on adverse changes in assumptions generally cannot be
extrapolated because the relationship of the change in assumption to the change in fair value may not be linear.
Also, in this table, the effect of an adverse variation in a particular assumption on the fair value of the mortgage
servicing rights is calculated without changing any other assumption; while in reality, changes in one factor may
result in changes in another (for example, increases in market interest rates may result in lower prepayments),
which may magnify or counteract the effect of the change.
Commercial Mortgage Banking Activities
BB&T also arranges and services commercial real estate mortgages through Grandbridge Real Estate
Capital, LLC (“Grandbridge”) the commercial mortgage banking subsidiary of Branch Bank. During the years
ended December 31, 2009, 2008 and 2007, Grandbridge originated $2.3 billion, $3.7 billion and $3.0 billion,
respectively, of commercial real estate mortgages, the majority of which were arranged for third party investors.
As of December 31, 2009, 2008 and 2007, Grandbridge’s portfolio of commercial real estate mortgages serviced for
others totaled $24.3 billion, $23.9 billion and $20.8 billion, 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 recourse exposure associated with these loans is approximately $1.1 billion. BB&T has
recorded $12 million of reserves related to these recourse exposures at December 31, 2009.
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