BB&T 2011 Annual Report Download - page 75

indirect subprime automobile finance, and full-service commercial mortgage banking. BB&T offers these services to bank
clients as well as nonbank clients within and outside BB&T’s primary geographic market area.
BB&T’s other lending subsidiaries adhere to the same overall underwriting approach as the commercial and consumer
lending portfolio and also utilize automated credit scoring to assist with underwriting the credit risk. The majority of these
loans are relatively homogenous and no single loan is individually significant in terms of its size and potential risk of loss.
The majority of the loans are secured by real estate, automobiles, equipment or unearned insurance premiums. As of
December 31, 2011, included in the other lending subsidiaries portfolio are loans to subprime borrowers of approximately
$3.3 billion, or 3.0% of the total BB&T loan and lease portfolio. Of these, approximately $297 million are residential real
estate loans and are included in the disclosures in Table 25 herein.
Covered Loan Portfolio
In connection with the FDIC-assisted acquisition of Colonial, BB&T acquired approximately $14.1 billion of loans that
are covered by loss sharing agreements. BB&T recorded these loans at $9.6 billion, which represented their fair value on
the acquisition date. The loans covered by loss sharing agreements are primarily commercial real estate loans and
residential mortgage loans. Refer to Note 3 “Loans and Leases” in the “Notes to Consolidated Financial Statements” in
this report for additional disclosures related to BB&T’s covered loans.
Liquidity risk
Liquidity risk is the risk to ongoing operations arising from the inability to accommodate liability maturities, deposit
withdrawals, fund asset growth, or meet contractual obligations when they come due. For additional information
concerning BB&T’s management of liquidity risk, see the “Liquidity” section of “Management’s Discussion and
Analysis” herein.
Market risk
Market risk is the risk to earnings or capital arising from changes in the market value of portfolios, securities, or other
financial instruments due to changes in the level, volatility, or correlations among financial market rates or prices,
including interest rates, foreign exchange rates, equity prices, or other relevant rates or prices. For additional information
concerning BB&T’s management of market risk, see the “Market Risk Management” section of “Management’s
Discussion and Analysis” herein.
Operational risk
Operational risk is the risk to earnings or capital arising from inadequate or failed internal processes, people and systems
or from external events. This definition includes legal risk, which is the risk of loss arising from defective transactions,
litigation or claims made, or the failure to adequately protect company-owned assets.
Reputation risk
Reputation risk is the risk to earnings, capital, enterprise value, the BB&T brand, and public confidence arising from
negative publicity or public opinion, whether real or perceived, regarding BB&T’s business practices, products and
services, transactions, or other activities undertaken by BB&T, its representatives, or its partners. Reputation risk may
impact BB&T’s clients, employees, communities or shareholders, and is often a residual risk that arises when other risks
are not managed properly.
Strategic risk
Strategic risk is the risk to earnings, capital, enterprise value, and to the achievement of BB&T’s Vision, Mission,
Purpose, and business objectives that arises from BB&T’s business strategy, adverse business decisions, improper or
ineffective implementation of decisions, or lack of responsiveness to changes in business environment. Strategic risk is a
function of the compatibility of BB&T’s strategic goals, the business strategies developed to achieve those goals, the
resources deployed against these goals, and the quality of implementation.
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