BB&T 2010 Annual Report Download - page 118

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ŠWhether dividends have been reduced or eliminated, or scheduled interest payments on debt securities
have not been made; and
ŠAny other relevant available information.
For certain U.S. mortgage-backed securities (and in particular for non-agency Alt-A, Prime and other
mortgage-backed securities that have significant unrealized losses as a percentage of amortized cost), credit
impairment is assessed using a cash flow model that estimates the cash flows on the underlying mortgage pools,
using security-specific structure information. The model estimates cash flows from the underlying mortgage loan
pools and distributes those cash flows to the various tranches of securities, considering the transaction structure
and any subordination and credit enhancements that exist in each structure. The cash flow model projects the
remaining cash flows using a number of assumptions, including default rates, prepayment rates and recovery
rates (on foreclosed properties).
Management reviews the results of the cash flow model in conjunction with historical payment experience in
its estimation of possible future credit losses. If management does not expect to recover the entire amortized cost
basis of a mortgage-backed security, the Company records other-than-temporary impairment based on the
amount of expected credit losses in the mortgage-backed security. The remaining amount of unrealized loss is
recognized as a component of other comprehensive income.
Where a mortgage-backed security is not deemed to be credit impaired, management performs additional
analysis to assess whether it intends to sell and it is more likely than not that the Company will be required to sell
these debt securities before anticipated recovery of the amortized cost basis. In making this determination,
BB&T considers its expected liquidity and capital needs, including its asset/liability management needs,
forecasts, strategies and other relevant information.
Summary Analysis Supporting Conclusions
The following table presents a detailed analysis of non-investment grade securities with significant
unrealized losses that are not covered by a loss sharing arrangement. The expected underlying collateral losses
represent losses on the underlying mortgage pools supporting BB&T’s tranche. The benefits from subordination
represent the amount of the expected losses the subordinate security holders are obligated to absorb prior to
BB&T incurring a loss.
Non-investment grade securities with significant unrealized losses
December 31, 2010
(Dollars in millions)
Security Amortized
Cost Fair
Value Unrealized
Loss
Credit Rating Expected Underlying
Collateral Losses(1) Benefit of
Subordination(1)
Moody’s S&P Fitch
Securities with other-than-temporary impairment losses:
RMBS 1 $103 $ 72 $(31) Caa3 CC $16 $15
RMBS 2 47 33 (14) Ca C 7 3
RMBS 3 136 125 (11) Caa3 CC 20 4
RMBS 4 109 74 (35) CCC C 13 13
RMBS 5 52 42 (10) Caa3 CC C 6 3
(1) Estimated underlying collateral losses and benefit of subordination are prior to amounts recorded as other-
than-temporary impairment.
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