BB&T 2011 Annual Report Download - page 133

extending loans to clients and as such, the instruments are collateralized when necessary. As of December 31, 2011 and
2010, BB&T had issued letters of credit totaling $6.1 billion and $7.3 billion, respectively. The carrying amount of the
liability for such guarantees was $27 million and $41 million at December 31, 2011 and 2010, respectively.
A derivative is a financial instrument that derives its cash flows, and therefore its value, by reference to an underlying
instrument, index or interest rate. For additional disclosures related to BB&T’s derivatives refer to Note 19.
In the ordinary course of business, BB&T indemnifies its officers and directors to the fullest extent permitted by law
against liabilities arising from pending litigation. BB&T also issues standard representation and warranties in
underwriting agreements, merger and acquisition agreements, loan sales, brokerage activities and other similar
arrangements. Counterparties in many of these indemnification arrangements provide similar indemnifications to BB&T.
Although these agreements often do not specify limitations, BB&T does not believe that any payments related to these
guarantees would materially change the financial position or results of operations of BB&T.
Merger and acquisition agreements of businesses other than financial institutions occasionally include additional
incentives to the acquired entities to offset the loss of future cash flows previously received through ownership positions.
Typically, these incentives are based on the acquired entity’s contribution to BB&T’s earnings compared to agreed-upon
amounts. When offered, these incentives are typically issued for terms of three to five years. As certain provisions of these
agreements do not specify dollar limitations, it is not possible to quantify the maximum exposure resulting from these
agreements. However, based on recent payouts and current projections, any payments made in relation to these
agreements are not expected to be material to BB&T’s results of operations, financial position or cash flows.
In connection with the Colonial acquisition, Branch Bank entered into loss sharing agreements with the FDIC related to
certain assets acquired. Pursuant to the terms of these loss sharing agreements, the FDIC’s obligation to reimburse Branch
Bank for losses with respect to certain loans, other real estate owned (“OREO”), certain investment securities and other
assets (collectively, “covered assets”), begins with the first dollar of loss incurred. The terms of the loss sharing agreement
with respect to certain non-agency mortgage-backed securities provides that Branch Bank will be reimbursed by the FDIC
for 95% of any and all losses. All other covered assets are subject to a stated threshold of $5 billion that provides for the
FDIC to reimburse Branch Bank for (1) 80% of losses incurred up to $5 billion and (2) 95% of losses in excess of $5
billion. Gains and recoveries on covered assets will offset losses, or be paid to the FDIC, at the applicable loss share
percentage at the time of recovery. The loss sharing agreement applicable to single family residential mortgage loans
expires in 2019, and provides for FDIC loss sharing and Branch Bank reimbursement to the FDIC. The loss sharing
agreement applicable to commercial loans and other covered assets expires in 2014, however, Branch Bank must
reimburse the FDIC for gains and recoveries through August 2017.
BB&T invests in certain affordable housing and historic building rehabilitation projects throughout its market area as a
means of supporting local communities, and receives tax credits related to these investments. BB&T typically acts as a
limited partner in these investments and does not exert control over the operating or financial policies of the partnerships.
Branch Bank typically provides financing during the construction and development of the properties; however, permanent
financing is generally obtained from independent third parties upon completion of a project. As of December 31, 2011 and
2010, BB&T had investments of $1.2 billion related to these projects, which are included as other assets on the
Consolidated Balance Sheets. BB&T’s outstanding commitments to fund affordable housing investments totaled $394
million and $334 million at December 31, 2011 and 2010, respectively, which are included as other liabilities on the
Consolidated Balance Sheets. As of December 31, 2011 and 2010, BB&T had outstanding loan commitments to these
funds of $178 million and $135 million, respectively. Of these amounts, $76 million and $36 million had been funded at
December 31, 2011 and 2010, respectively, and were included in loans and leases on the Consolidated Balance Sheets.
BB&T’s maximum risk exposure related to these investments totaled $1.4 billion and $1.3 billion at December 31, 2011
and 2010, respectively.
BB&T has sold certain mortgage-related loans that contain recourse provisions. These provisions generally require BB&T
to reimburse the investor for a share of any loss that is incurred after the disposal of the property. BB&T also issues
standard representations and warranties related to mortgage loan sales to government-sponsored entities. Refer to Note 7
for additional disclosures related to these exposures.
BB&T has investments and future funding commitments to certain venture capital funds. As of December 31, 2011 and 2010,
BB&T had investments of $261 million and $266 million related to these ventures, respectively. As of December 31, 2011 and
2010, BB&T had future funding commitments of $129 million and $185 million, respectively. BB&T’s risk exposure relating to
such commitments is generally limited to the amount of investments and future funding commitments made.
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