BB&T 2010 Annual Report Download - page 104

generally limited to the sum of the outstanding balance, future funding commitments and any related loans to the
entity. Loans to these entities are underwritten in substantially the same manner as are other loans and are
generally secured.
BB&T has investments in certain entities for which BB&T does not have the controlling interest. For these
investments, the Company records its interest using the equity method with its portion of income or loss being
recorded in other noninterest income in the Consolidated Statements of Income. BB&T periodically evaluates
these investments for impairment.
Reclassifications
Investments in Federal Home Loan Bank (“FHLB”) stock have been reclassified from securities available
for sale to other assets in all periods presented. In certain other instances, amounts reported in prior years’
consolidated financial statements have been reclassified to conform to the current presentation. Such
reclassifications had no effect on previously reported cash flows, shareholders’ equity or net income.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial
statements and the reported amounts of revenues and expenses during the reporting periods. Actual results
could differ from those estimates. Material estimates that are particularly susceptible to significant change
include the determination of the allowance for loan and lease losses and the reserve for unfunded lending
commitments, determination of fair value for financial instruments, valuation of goodwill, intangible assets and
other purchase accounting related adjustments, benefit plan obligations and expenses, and tax assets, liabilities
and expense.
Business Combinations
BB&T accounts for all business combinations using the acquisition method of accounting. Under this method
of accounting, the accounts of an acquired entity are included with the acquirer’s accounts as of the date of
acquisition with any excess of purchase price over the fair value of the net assets acquired (including identifiable
intangibles) capitalized as goodwill.
To consummate an acquisition, BB&T typically issues common stock and/or pays cash, depending on the
terms of the acquisition agreement. For acquisitions that occurred prior to January 1, 2009, the value of common
shares issued was determined based on the market price of the securities issued over a reasonable period of time,
not to exceed three days before and three days after the measurement date. For acquisitions occurring after
December 31, 2008, the value of common shares issued is based upon the market price of the stock as of the
closing of the acquisition.
In connection with mergers and acquisitions, BB&T typically issues options to purchase shares of its common
stock in exchange for options outstanding of the acquired entities at the time the merger is completed. To the
extent vested, the options are considered to be part of the purchase price paid. There is no change in the
aggregate intrinsic value of the options issued compared to the intrinsic value of the options held immediately
before the exchange, nor does the ratio of the exercise price per option to the market value per share change.
Cash and Cash Equivalents
Cash and cash equivalents include cash and due from banks, interest-bearing deposits with banks, Federal
funds sold and securities purchased under resale agreements or similar arrangements. Cash and cash equivalents
have maturities of three months or less. Accordingly, the carrying amount of such instruments is considered a
reasonable estimate of fair value.
104