BB&T 2011 Annual Report Download - page 94

BB&T evaluates each held to maturity and available for sale security in a loss position for other-than-temporary
impairment (“OTTI”). BB&T considers such factors as the length of time and the extent to which the market value has
been below amortized cost, long term expectations and recent experience regarding principal and interest payments,
BB&T’s intent to sell and whether it is more likely than not that the Company would be required to sell those securities
before the anticipated recovery of the amortized cost basis. The credit component of an OTTI loss is recognized in
earnings and the non-credit component is recognized in accumulated other comprehensive income in situations where
BB&T does not intend to sell the security and it is more-likely-than-not that BB&T will not be required to sell the security
prior to recovery.
Trading account securities, which include both debt and equity securities, are reported at fair value. Unrealized market
value adjustments, fees, and realized gains or losses from trading account activities (determined by specific identification)
are included in noninterest income. Interest income on trading account securities is included in interest and dividends
from other earning assets.
Loans Held for Sale
BB&T accounts for new originations of prime residential mortgage and commercial mortgage loans held for sale at fair
value. BB&T accounts for the derivatives used to economically hedge the loans held for sale at fair value. Held for
investment loans that have been transferred to loans held for sale are carried at the lower of cost or market because these
loans are not exchanged in an active market and BB&T does not hedge these assets.
The value for loans held for sale carried at fair value is primarily based on quoted market prices for securities backed by
similar types of loans. Direct loan origination fees and costs related to loans held for sale and accounted for at fair value
are not capitalized, but rather are recorded as mortgage banking income in the case of the direct loan origination fees and
primarily personnel expense in the case of the direct loan origination costs. Gains and losses on sales of mortgage loans
are included in mortgage banking income. Gains and losses on sales of commercial loans held for sale are included in
other noninterest income.
Loans and Leases
The Company’s accounting methods for loans differ depending on whether the loans are originated or acquired, and if
acquired, whether or not the acquired loans reflect credit deterioration since the date of origination such that it is probable
at the date of acquisition that BB&T will be unable to collect all contractually required payments.
Originated Loans and Leases
Loans and leases that management has the intent and ability to hold for the foreseeable future are reported at their outstanding
principal balances net of any unearned income, charge-offs, and unamortized fees and costs on originated loans. The net amount
of nonrefundable loan origination fees and certain direct costs associated with the lending process are deferred and amortized to
interest income over the contractual lives of the loans using methods that approximate the interest method.
BB&T classifies all loans and leases past due when the payment of principal and interest based upon contractual terms is
greater than 30 days delinquent. When commercial loans are placed on nonaccrual status as described below, a charge-off
is recorded, as applicable, to decrease the carrying value of such loans to the estimated fair value of the collateral securing
the loan. Consumer loans are subject to mandatory charge-off at a specified delinquency date consistent with regulatory
guidelines. As such, consumer loans are subject to collateral valuation and charge-off, as applicable, when they are moved
to nonaccrual status as described below.
Purchased Loans
Purchased loans are recorded at their fair value at the acquisition date. Credit discounts are included in the determination
of fair value; therefore, an allowance for loan losses is not recorded at the acquisition date.
Acquired loans are evaluated upon acquisition and classified as either purchased impaired or purchased non-impaired.
Purchased impaired loans reflect credit deterioration since origination such that it is probable at acquisition that BB&T will
be unable to collect all contractually required payments. For purchased impaired loans, expected cash flows at the acquisition
date in excess of the fair value of loans are recorded as interest income over the life of the loans using a level yield method if
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