BB&T 2010 Annual Report Download - page 157

Fair Value Measurements Using Significant Unobservable Inputs
Year Ended December 31, 2008 Trading AFS Securities
Mortgage
Servicing
Rights Net Derivatives
Venture
Capital and
Similar
Investments
(Dollars in millions)
Balance at January 1, 2008 $ 27 $ 9 $ 472 $ 2 $128
Total realized and unrealized gains or losses:
Included in earnings:
Securities gains (losses), net — (35) — — —
Mortgage banking income — — (314) 68 —
Other noninterest income (3) — — — (8)
Included in other comprehensive income (loss) — (3) — — —
Purchases, issuances and settlements (19) 5 212 (33) 62
Transfers in and/or out of Level 3 (1) 1,123 — — —
Balance at December 31, 2008 $ 4 $1,099 $ 370 $ 37 $182
Net unrealized gains (losses) included in net income
relating to assets and liabilities still held at
December 31, 2008 $— $ — $(220) $ 37 $ (12)
BB&T’s policy is to recognize transfers in and transfers out of Levels 1, 2 and 3 as of the end of the reporting
period. During the year ended December 31, 2008, BB&T transferred certain non-agency mortgage-backed
securities from Level 2 to Level 3 as a result of decreased market activity for these securities. These securities
were transferred back to Level 2 during 2009 as the observable market activity increased. Conversely, during
2009, BB&T transferred certain trading and auction rate securities issued by state and political subdivisions into
Level 3 from Level 2 as a result of decreased market activity for these types of securities. Included in transfers
into Level 3 during 2009 are certain covered securities and net derivatives that were acquired in connection with
the Colonial acquisition. There were no gains or losses recognized as a result of the transfers of securities
between Level 2 and Level 3 during the years ended December 31, 2010, 2009 or 2008.
BB&T has investments in venture capital funds and other similar investments that are measured at fair
value based on the investment’s net asset value. The significant investment strategies for these ventures are
primarily equity and subordinated debt in privately-held middle market companies. The majority of these
investments are not redeemable and have varying dates for which the underlying assets are expected to be
liquidated by distribution through 2021. As of December 31, 2010, restrictions on the ability to sell the
investments include, but are not limited to, consent of a majority member or general partner approval for
transfer of ownership. There were no investments probable of sale for less than net asset value at December 31,
2010.
The net realized and unrealized gains (losses) reported for mortgage servicing rights assets includes a
negative valuation adjustment of $138 million and the realization of expected residential mortgage servicing
rights cash flows of $129 million for the year ended December 31, 2010. For the year ended December 31, 2009,
the net realized and unrealized gains reported for mortgage servicing rights assets includes a positive valuation
adjustment of $190 million less the realization of expected residential mortgage servicing rights cash flows of $126
million. For 2008, the net realized and unrealized losses reported for mortgage servicing rights assets are
composed of a negative valuation adjustment of $220 million and the realization of expected residential mortgage
servicing rights cash flows of $94 million. BB&T uses various derivative financial instruments to mitigate the
income statement effect of changes in fair value. During 2010, 2009 and 2008 the derivative instruments produced
gains of $196 million, losses of $98 million and gains of $262 million, respectively, which offset the valuation
adjustments recorded.
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