BB&T 2009 Annual Report Download - page 151
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BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The Effect of Derivative Instruments on the Consolidated Statements of Income
for the Year Ended December 31, 2009
(Dollars in millions)
Effective Portion Ineffective Portion
Gain or
(Loss)
Recognized
in OCI
Location of
Amounts Reclassified
from AOCI into
Income
(Gain) or Loss
Reclassified from
AOCI into Income
Location of
Amounts Recognized
in Income
Gain or
(Loss)
Recognized
in Income
Derivatives Designated as
Cash Flow Hedges
Interest rate contracts $146 Total interest income $ (86) Other noninterest income $ 1
Total interest expense 37
$ (49)
Derivatives Designated as Net
Investment Hedges
Foreign exchange contracts $ (11) $— $—
Effective Portion Ineffective Portion
Location of Amounts
Recognized in Income
Gain or
(Loss)
Recognized
in Income Location of Amounts
Recognized in Income
Gain or
(Loss)
Recognized
in Income
Derivatives Designated as Fair Value Hedges
Interest rate contracts Total interest expense $177 Other noninterest income $ 7
Interest rate contracts Total interest income (17) Other noninterest expense —
Total $160 $ 7
Derivatives Not Designated as Hedges
Client-related and other risk management
Interest rate contracts Other noninterest income $ 22
Other derivatives Other noninterest income (20)
Foreign exchange contracts Other nondeposit fees
and commissions (1)
Mortgage Banking
Interest rate contracts Mortgage banking
income 23
Mortgage Servicing Rights
Interest rate contracts Mortgage banking
income (98)
Total $ (74)
Note: All amounts for Other Comprehensive Income (OCI) and Accumulated Other Comprehensive Income
(AOCI) are stated on a pre-tax basis.
The majority of the balance sheet management derivatives are designated as cash flow or fair value hedges.
BB&T’s floating 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 and liabilities is to
hedge the variability in the interest payments. This objective is met by entering into interest rate swaps and
interest rate collars and caps. Interest rate collars and caps fix the interest payments when interest rates on the
hedged item exceed predetermined rates.
Cash Flow Hedges
At December 31, 2009, BB&T had designated notional values of $5.5 billion of derivatives as cash flow
hedges. These cash flow hedges reflected a net unrealized gain of $40 million, with instruments in a gain position
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