BB&T 2009 Annual Report Download - page 66

The 2008 increase of 5.1% resulted primarily from additional salaries and wages as a result of acquisitions
and the implementation of the fair value option for loans held for sale, which changed the accounting for loan
origination costs. Total salaries and wages expense increased $148 million, or 8.6%, in 2008 compared to 2007,
primarily due to annual salary increases and higher overall headcount. The increase also includes approximately
$55 million related to the change in accounting for loans held for sale as discussed previously and a decrease in
annual incentive compensation. The 10.8% decrease in pension and other employee benefit costs was driven by a
decrease in nonqualified defined contribution plan expense of $52 million, which is based on the value of assets in
the participant’s accounts. In addition, defined benefit plan expenses were down $23 million in 2008 compared to
2007 due to contributions made to the qualified pension plan in 2007 and 2008 that increased the estimated return
on plan assets that is recorded as a component of defined benefit plan expense. These decreases were partially
offset by an increase in health care and other welfare expenses of $20 million in 2008 compared to 2007. Additional
disclosures relating to BB&T’s benefit plans can be found in Note 14 “Benefit Plans” in the “Notes to
Consolidated Financial Statements.”
Net occupancy and equipment expense increased $70 million, or 13.8%, in 2009. The increase in 2009 was
primarily due to increased rent expense related to the Colonial acquisition. During 2008, net occupancy and
equipment expense increased by $32 million, or 6.7%. The increase in 2008 was largely a result of increased lease
expenses due to BB&T’s de novo branching strategy.
Foreclosed property expense increased $277 million in 2009. The increase in 2009 was primarily due to rising
maintenance costs, valuation adjustments and sales of foreclosed property. Maintenance cost on foreclosed
properties increased by $67 million in 2009 compared to 2008, while valuation adjustments and losses from sales of
properties increased by $206 million compared to the same period in 2008. BB&T’s inventory of foreclosed
property increased by $913 million compared to year-end 2008 as a result of the economic recession and
challenges in the residential real estate market. Foreclosed property expense increased by $48 million in 2008.
Regulatory charges increased $200 million in 2009. The increase in 2009 was a result of higher FDIC
insurance expense which increased $201 million. The higher FDIC insurance expense reflects increased
premiums charged by the FDIC as one step the FDIC has taken to insure adequate funding to resolve failed
institutions. In addition to the higher premiums, the FDIC also levied a special assessment of $68 million in the
second quarter of 2009. The FDIC also required that insured depository institutions prepay three years of
assessments on December 31, 2009. BB&T’s prepayment was $608 million and will be expensed as incurred over
the three-year period based on the actual FDIC assessment calculation. During 2008, regulatory charges
increased by $16 million.
Other noninterest expenses increased $157 million, or 14.4%, compared to 2008, which reflected an increase of
$84 million, or 8.3%, compared to 2007. The 2009 increase was primarily the result of increases in professional
services and operational losses of $58 million and $43 million, respectively. Merger-related and restructuring
charges and software expense also increased $23 million and $20 million, respectively, from the prior year. The
2008 increase primarily reflected higher professional services expense and software expense. The increases for
2009 and 2008 were impacted by acquisitions completed during the past two years. Please refer to Table 20 for
additional detail on fluctuations in other categories of noninterest expense.
Merger-Related and Restructuring Charges
BB&T recorded certain merger-related and restructuring charges during the years 2009, 2008 and 2007.
These charges are reflected in BB&T’s Consolidated Statements of Income as a category of noninterest expense.
Please Refer to Note 2 “Business Combinations” in the “Notes to Consolidated Financial Statements” for a
summary of mergers and acquisitions consummated during the three years ended December 31, 2009.
During 2009, BB&T recorded $38 million of merger-related and restructuring charges. These amounts were
primarily associated with the acquisition of Colonial, which was completed during the year. BB&T currently
estimates that total merger-related and restructuring charges for the Colonial acquisition will be approximately
$185 million, of which $27 million has been expensed through December 31, 2009. The majority of the estimated
charges will be incurred during the second quarter of 2010 in connection with the completion of the remaining
systems conversions. The 2008 net merger-related and restructuring charges of $15 million were primarily
associated with the acquisitions of insurance agencies and other merger-related and restructuring activities.
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