BB&T 2011 Annual Report Download - page 146

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The Effect of Derivative Instruments on the Consolidated Statements of Income
Years Ended December 31, 2011, 2010 and 2009
Effective Portion
Gain or (Loss)
Recognized in OCI
Location of
Amounts Reclassified
(Gain) or Loss Reclassified
from AOCI into Income
2011 2010 2009 from AOCI into Income 2011 2010 2009
(Dollars in millions)
Cash Flow Hedges:
Interest rate contracts $ (211) $ (224) $ 146 Total interest income $ (26) $ (44) $ (86)
Total interest expense 58 20 37
$ 32 $ (24) $ (49)
Net Investment Hedges:
Foreign exchange
contracts $ 1 $ (4) $ (11) $ — $ — $ —
Gain or (Loss)
Location of Amounts Recognized in Income
Recognized in Income 2011 2010 2009
(Dollars in millions)
Fair Value Hedges:
Interest rate contracts Total interest expense $ 300 $ 170 $ 177
Total interest income (21) (19) (17)
$ 279 $ 151 $ 160
Not Designated as Hedges:
Client-related and other risk management:
Interest rate contracts Other income $ 10 $ 5 $ 22
Other derivatives Other income — — (20)
Foreign exchange contracts Other income 6 6 (1)
Mortgage Banking:
Interest rate contracts Mortgage banking income (70) 33 23
Mortgage Servicing Rights:
Interest rate contracts Mortgage banking income 394 196 (98)
$ 340 $ 240 $ (74)
Note: All amounts for Other Comprehensive Income (“OCI”) and Accumulated Other Comprehensive Income (“AOCI”)
are stated on a pre-tax basis.
BB&T uses a variety of derivative instruments to manage interest rate and foreign exchange risks. These instruments
consist of interest-rate swaps, swaptions, caps, floors, collars, financial forward and futures contracts, when-issued
securities, foreign exchange contracts and options written and purchased. A derivative is a financial instrument that
derives its cash flows, and therefore its value, by reference to an underlying instrument, index or referenced interest rate.
There are five areas of risk management: balance sheet management, mortgage banking operations, mortgage servicing
rights, net investment in a foreign subsidiary and client-related and other risk management activities. No portion of the
change in fair value of the derivative has been excluded from effectiveness testing. The ineffective portion was immaterial
for all years presented.
Cash Flow Hedges
BB&T’s floating rate business loans, overnight funding, FHLB advances, medium-term bank notes and long-term debt
expose it to variability in cash flows for interest payments. The risk management objective for these floating rate assets
and liabilities is to hedge the variability in the interest payments and receipts on future cash flows for forecasted
transactions. These forecasted transactions include interest receipts on commercial loans and interest payments on 3
month LIBOR funding. All of BB&T’s current cash flow hedges are hedging exposure to variability in future cash flows
for forecasted transactions related to the payment of variable interest on then existing financial instruments.
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