BB&T 2010 Annual Report Download - page 154

Fair Value Measurements for Assets and Liabilities
Measured on a Recurring Basis
12/31/2009 Level 1 Level 2 Level 3
(Dollars in millions)
Assets:
Trading securities $ 636 $ 255 $ 288 $ 93
Securities available for sale:
U.S. government-sponsored entities (GSE) 2,035 — 2,035 —
Mortgage-backed securities issued by GSE 26,670 — 26,670 —
States and political subdivisions 2,107 — 1,897 210
Non-agency mortgage-backed securities 1,022 — 1,022 —
Equity and other securities 218 166 43 9
Covered securities 1,201 — 533 668
Loans held for sale 2,551 — 2,551 —
Residential mortgage servicing rights 832 — — 832
Derivative assets (2) 983 1 975 7
Venture capital and similar investments (2)(3) 281 — — 281
Total assets $38,536 $422 $36,014 $2,100
Liabilities:
Derivative liabilities (2) $ 700 $ 5 $ 668 $ 27
Short-term borrowed funds (4) 295 — 295 —
Total liabilities $ 995 $ 5 $ 963 $ 27
(1) Excludes loans held for sale carried at the lower of cost or market.
(2) These amounts are reflected in other assets and other liabilities on the Consolidated Balance Sheets.
(3) Based on an analysis of the nature and risks of these investments, BB&T has determined that presenting
these investments as a single class is appropriate.
(4) Short-term borrowed funds reflect securities sold short positions.
The following discussion focuses on the valuation techniques and significant inputs used by BB&T in
determining the Level 2 and Level 3 fair values of each significant class of assets and liabilities.
The fair values for available-for-sale and trading securities are generally based upon quoted market prices or
observable market prices for similar instruments. BB&T generally utilizes a third-party pricing service in
determining the fair value of its securities portfolio. The pricing service uses observable inputs when available
including benchmark yields, reported trades, broker-dealer quotes, issuer spreads, benchmark securities, bids
and offers. For certain security types, additional inputs may be used, or some inputs may not be applicable.
BB&T performs a review of pricing on actual trades executed in order to validate the fair values provided by this
pricing service. BB&T also analyzes available third-party market data for a sample of securities to further
validate these fair values. When market observable data is not available, which generally occurs due to the lack of
liquidity for certain securities, the valuation of the security is subjective and may involve substantial judgment
by management.
Specific valuation techniques and inputs used in determining the fair value of each significant class of assets
and liabilities follows:
Trading securities: Trading securities are composed of all types of debt and equity securities, but the
majority consists of debt securities issued by the U.S. Treasury, U.S. government-sponsored entities, or states
and political subdivisions. The valuation techniques used for these investments are more fully discussed below.
U.S. government-sponsored entities (GSE) and Mortgage-backed securities issued by GSE: These are debt
securities issued by government sponsored entities. BB&T’s valuations are based on a market approach using
observable inputs such as benchmark yields and securities, TBA prices, reported trades, issuer spreads, monthly
payment information and collateral performance.
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