BB&T 2010 Annual Report Download - page 51
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Asset Quality and Credit Risk Management
BB&T has established the following general practices to manage credit risk:
Šlimiting the amount of credit that individual lenders may extend to a borrower;
Šestablishing a process for credit approval accountability;
Šcareful initial underwriting and analysis of borrower, transaction, market and collateral risks;
Šongoing servicing of individual loans and lending relationships;
Šcontinuous monitoring of the portfolio, market dynamics and the economy; and
Šperiodically reevaluating the bank’s strategy and overall exposure as economic, market and other
relevant conditions change.
BB&T’s lending strategy focuses on relationship based lending within its markets. BB&T has continued to
work with its clients that have experienced financial difficulties throughout the economic recession. During the
second quarter of 2010, management implemented a comprehensive nonperforming asset disposition strategy
with a goal of more aggressively reducing BB&T’s exposure to nonperforming loans and foreclosed properties
and to reduce or eliminate any delay in exiting the credit cycle. The strategy was implemented during the second
quarter of 2010 as management believed that pricing for distressed assets had improved. This strategy continued
throughout the third and fourth quarters and into 2011.
The implementation of the nonperforming asset disposition strategy included the identification of problem
assets that were transferred from loans held for investment to loans held for sale. In connection with the
strategy, management transferred loans with a book value of approximately $1.9 billion to loans held for sale
during 2010. This included $1.5 billion of commercial loans, which were primarily in the residential, acquisition
and development and other commercial real estate portfolios, and $388 million of residential mortgage loans. Net
charge-offs of $605 million were recorded upon transfer to loans held for sale. This included $141 million related to
residential mortgage loans and $464 million for commercial loans. BB&T also recognized $90 million of losses and
additional writedowns related to commercial loans held for sale during 2010. As of December 31, 2010, there
remained $521 million of nonaccrual commercial loans held for sale. These loans were carried at average prices
that are consistent with actual sales results. Management expects that these loans will be disposed of in the first
half of 2011.
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