BB&T 2010 Annual Report Download - page 7

to fail. BB&T has produced quarterly earnings during 2009 and 2010; however, during this time BB&T has
experienced significant challenges, its credit quality has deteriorated and its net income and results of operations
have been adversely impacted. Reflecting concern about the stability of the financial markets generally and the
strength of counterparties, many lenders and institutional investors have reduced, and in some cases, ceased to
provide funding to borrowers including other financial institutions. Although to date BB&T has performed
relatively well during the financial crisis and current economic recovery as compared with the Company’s peers
and several of the largest financial institutions, BB&T is part of the financial system and a systemic lack of
available credit, a lack of confidence in the financial sector, increased volatility in the financial markets and/or
reduced business activity could materially adversely affect BB&T’s business, financial condition and results of
operations.
The capital and credit markets have experienced unprecedented levels of volatility, which could jeopardize
BB&T’s overall liquidity and capitalization.
During the economic downturn, the capital and credit markets experienced extended volatility and
disruption. In some cases, the markets produced downward pressure on stock prices and credit capacity for
certain issuers without regard to those issuers’ underlying financial strength. If these levels of market disruption
and volatility continue, worsen or abate and then arise at a later date, BB&T’s ability to access capital could be
materially impaired. BB&T’s inability to access the capital markets could constrain the Company’s ability to make
new loans, to meet the Company’s existing lending commitments and, ultimately jeopardize the Company’s
overall liquidity and capitalization.
BB&T’s liquidity could be impaired by an inability to access the capital markets, an unforeseen outflow of cash
or a reduction in the credit ratings for BB&T or its subsidiaries.
Liquidity is essential to BB&T’s businesses. Due to circumstances that BB&T may be unable to control, such
as a general market disruption or an operational problem that affects third parties or BB&T, BB&T’s liquidity
could be impaired by an inability to access the capital markets or an unforeseen outflow of cash.
BB&T’s credit ratings are also important to its liquidity. The major credit rating agencies downgraded
BB&T’s credit ratings during 2009 and 2010. These rating agencies regularly evaluate BB&T and its subsidiaries,
and their ratings are based on a number of factors, including the financial strength of BB&T and its subsidiaries,
as well as factors not entirely within BB&T’s control, including conditions affecting the financial services industry
generally. In light of the difficulties in the financial services industry and the housing and financial markets, there
can be no assurance that BB&T will maintain its current ratings. A reduction in BB&T’s credit ratings could
adversely affect BB&T’s liquidity and competitive position, increase its borrowing costs, limit its access to the
capital markets or trigger unfavorable contractual obligations.
The soundness of other financial institutions could adversely affect BB&T.
Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other
relationships. BB&T has exposure to many different industries and counterparties, and BB&T and certain of its
subsidiaries routinely execute transactions with counterparties in the financial services industry, including
brokers and dealers, commercial banks, investment banks, mutual and hedge funds, and other institutional
clients. Many of these transactions expose the Company to credit risk in the event of default of its counterparty
or client. In addition, the Company’s credit risk may be exacerbated when collateral is liquidated at prices not
sufficient to recover the full amount of the loan or derivative exposure due BB&T. These types of losses could
materially and adversely affect BB&T’s results of operations or financial condition.
Changes in interest rates may have an adverse effect on BB&T’s profitability.
BB&T’s earnings and financial condition are dependent to a large degree upon net interest income, which is
the difference between interest earned from loans and investments and interest paid on deposits and borrowings.
The narrowing of interest rate spreads, meaning the difference between interest rates earned on loans and
investments and the interest rates paid on deposits and borrowings, could adversely affect BB&T’s earnings and
financial condition. The Company cannot control or predict with certainty changes in interest rates. Regional and
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