BB&T 2009 Annual Report Download - page 37

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The following discussion and analysis of the consolidated financial condition and consolidated results of
operations of BB&T Corporation and its subsidiaries for each of the three years in the period ended December 31,
2009, and related financial information, are presented in conjunction with the consolidated financial statements
and related notes to assist in the evaluation of BB&T’s 2009 performance.
Reclassifications
In certain circumstances, reclassifications have been made to prior period information to conform to the 2009
presentation. Such reclassifications had no effect on previously reported shareholders’ equity or net income.
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 and Nevada with approximately $19 billion in deposits at the date of
acquisition. In addition to the acquisition noted above, BB&T acquired one insurance agency and three nonbank
financial services companies during 2009. All of the nonbank acquisitions during 2009 were immaterial in relation
to the consolidated results of BB&T. See Note 2 “Business Combinations” in the “Notes to Consolidated Financial
Statements” for further information regarding mergers and acquisitions.
Critical Accounting Policies
The accounting and reporting policies of BB&T Corporation and its subsidiaries are in accordance with
accounting principles generally accepted in the United States of America and conform to the accounting and
reporting guidelines prescribed by bank regulatory authorities. BB&T’s financial position and results of
operations are affected by management’s application of accounting policies, including estimates, assumptions and
judgments made to arrive at the carrying value of assets and liabilities and amounts reported for revenues and
expenses. Different assumptions in the application of these policies could result in material changes in BB&T’s
consolidated financial position and/or consolidated results of operations and related disclosures. The more critical
accounting and reporting policies include BB&T’s accounting for the allowance for loan and lease losses and
reserve for unfunded lending commitments, determining fair value of financial instruments, intangible assets and
other purchase accounting related adjustments associated with mergers and acquisitions, costs and benefit
obligations associated with BB&T’s pension and postretirement benefit plans, and income taxes. Understanding
BB&T’s accounting policies is fundamental to understanding BB&T’s consolidated financial position and
consolidated results of operations. Accordingly, BB&T’s significant accounting policies and changes in accounting
principles and effects of new accounting pronouncements are discussed in detail in Note 1 in the “Notes to
Consolidated Financial Statements.”
The following is a summary of BB&T’s critical accounting policies that are highly dependent on estimates,
assumptions and judgments. These critical accounting policies are reviewed with the Audit Committee of BB&T’s
Board of Directors on a periodic basis.
Allowance for Loan and Lease Losses and Reserve for Unfunded Lending Commitments
It is the policy of BB&T to maintain an allowance for loan and lease losses and a reserve for unfunded lending
commitments that represent management’s best estimate of probable credit losses that are inherent in the
portfolio at the balance sheet date. Estimates for loan and lease losses are determined by analyzing historical loan
and lease losses, historical loan and lease migration to charge-off experience, current trends in delinquencies and
charge-offs, expected cash flows on purchased loans, current assessment of problem loan and lease
administration, the results of regulatory examinations, and changes in the size, composition and risk assessment
of the loan and lease portfolio. Also included in management’s estimates for loan and lease losses are
considerations with respect to the impact of current economic events, the outcomes of which are uncertain. These
events may include, but are not limited to, fluctuations in overall interest rates, political conditions, legislation
that may directly or indirectly affect the banking industry and economic conditions affecting specific geographical
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