BB&T 2010 Annual Report Download - page 107

received thereafter are applied as a reduction to the remaining principal balance as long as concern exists as to
the ultimate collection of the principal. Loans and leases are generally removed from nonaccrual status when they
become current as to both principal and interest and concern no longer exists as to the collectability of principal
and interest.
Assets acquired as a result of foreclosure are carried at the lower of cost or net realizable value. Net
realizable value equals fair value less estimated selling costs. Cost is determined based on the sum of unpaid
principal, accrued but unpaid interest if not required to be reversed, and acquisition costs associated with the
loan. Any excess of cost over net realizable value at the time of foreclosure is charged to the allowance for loan
and lease losses. Generally, such properties are valued periodically and if the carrying value is greater than the
net realizable value, a valuation reserve is established. Routine maintenance costs, declines in market value and
net losses on disposal are included in other noninterest expense.
Restructurings
Troubled debt restructurings (“restructurings”) can involve loans remaining on nonaccrual, moving to
nonaccrual, or continuing on accruing status, depending on the individual facts and circumstances of the
borrower. In circumstances where the restructuring involves charging off a portion of the loan balance, BB&T
typically classifies these restructurings as nonaccrual.
In connection with commercial restructurings, the decision to maintain a loan that has been restructured on
accrual status is based on a current, well documented credit evaluation of the borrower’s financial condition and
prospects for repayment under the modified terms. This evaluation includes consideration of the borrower’s
current capacity to pay, which among other things may include a review of the borrower’s current financial
statements, an analysis of global cash flow sufficient to pay all debt obligations, and an evaluation of secondary
sources of payment from the client and any guarantors. This evaluation also includes an evaluation of the
borrower’s current willingness to pay, which may include a review of past payment history, an evaluation of the
borrower’s willingness to provide information on a timely basis, and consideration of offers from the borrower to
provide additional collateral or guarantor support. The credit evaluation also reflects consideration of the
borrower’s future capacity and willingness to pay, which may include evaluation of cash flow projections,
consideration of the adequacy of collateral to cover all principal and interest and trends indicating improving
profitability and collectability of receivables.
The evaluation of mortgage and consumer loans includes an evaluation of the client’s debt to income ratio,
credit report, property value, loan vintage, and certain other client-specific factors that have impacted their
ability to make timely principal and interest payments on the loan.
Restructured nonaccrual loans may be returned to accrual status based on a current, well-documented credit
evaluation of the borrower’s financial condition and prospects for repayment under the modified terms. This
evaluation must include consideration of the borrower’s sustained historical repayment performance for a
reasonable period (generally a minimum of six months) prior to the date on which the loan is returned to accrual
status. Sustained historical repayment performance for a reasonable time prior to the restructuring may be taken
into account. In connection with retail restructurings, a nonperforming loan will be returned to accruing status
when current as to principal and interest and upon a sustained historical repayment performance (generally a
minimum of six months).
Allowance for Loan and Lease Losses and Reserve for Unfunded Lending Commitments
The allowance for loan and lease losses and reserve for unfunded lending commitments are management’s
best estimate of probable credit losses inherent in the loan and lease portfolios and off-balance sheet lending
commitments at the balance sheet date. The Company determines the allowance for loan and lease losses and the
reserve for unfunded lending commitments based on an ongoing evaluation. This evaluation is inherently
subjective because it requires material estimates, including the amounts and timing of cash flows expected to be
received on impaired loans. Those estimates are susceptible to significant change. Changes to the allowance for
loan and lease losses and the reserve for unfunded lending commitments are made by charges to the provision for
credit losses, which is reflected in the Consolidated Statements of Income. Loans or lease balances deemed to be
uncollectible are charged off against the allowance for loan and lease losses. Recoveries of amounts previously
charged-off are credited to the allowance for loan and lease losses. The methodology used to determine the
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