BB&T 2012 Annual Report Download - page 143

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exempt entities. The credit risk involved in the issuance of these guarantees is essentially the same as that involved in
extending loans to clients and as such, the instruments are collateralized when necessary.
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. Tax credits are subject to
recapture by taxing authorities based on compliance features required to be met at the project level. BB&T’ s maximum
potential exposure to losses relative to investments in VIEs is generally limited to the sum of the outstanding balance, future
funding commitments and any related loans to the entity. Loans to these entities are underwritten in substantially the same
manner as are other loans and are generally secured.
BB&T has investments in and future funding commitments to certain private equity and similar investments. BB&T’ s risk
exposure relating to such commitments is generally limited to the amount of investments and future funding commitments
made.
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 “Derivative
Financial Instruments.”
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 GSEs. Refer to Note 7 “Loan Servicing” for additional
disclosures related to these exposures.
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 representations 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.
Legal Proceedings
The nature of the business of BB&T’ s banking and other subsidiaries ordinarily results in a certain amount of claims,
litigation, investigations and legal and administrative cases and proceedings, all of which are considered incidental to the
normal conduct of business. BB&T believes it has meritorious defenses to the claims asserted against it in its currently
outstanding legal proceedings and, with respect to such legal proceedings, intends to continue to defend itself vigorously,
litigating or settling cases according to management’ s judgment as to what is in the best interests of BB&T and its
shareholders.
The Company was a defendant in three separate cases primarily challenging the Company’ s daily ordering of debit
transactions posted to customer checking accounts for the period from 2003 to 2010. The plaintiffs requested class action
treatment; however, no class was certified. The court initially denied motions by the Company to dismiss these cases and
compel them to be submitted to individual arbitration. The Company then filed appeals in all three matters. There were
numerous subsequent procedural developments. These included an appeal to the U.S. Supreme Court in one matter which
resulted in a November 2011 decision that benefited the Company and two decisions in July 2012 in two other matters by the
U.S. Court of Appeals for the Eleventh Circuit ordering arbitration. Those latter two matters are now concluded. The first
remains pending and therefore, the issues raised by the motions and appeal in this one matter have not been finally decided.
If the motions or any appeals are ultimately granted, they would preclude class action treatment. Even if such an appeal is
denied, the Company believes it has meritorious defenses against this matter, including class certification. In addition, no
damages have been specified by the plaintiffs. Because of these circumstances, no specific loss or range of loss can currently
be determined.
On at least a quarterly basis, BB&T assesses its liabilities and contingencies in connection with outstanding legal proceedings
utilizing the latest information available. For those matters where it is probable that BB&T will incur a loss and the amount
of the loss can be reasonably estimated, BB&T records a liability in its consolidated financial statements. These legal
reserves may be increased or decreased to reflect any relevant developments on at least a quarterly basis. For other matters,
where a loss is not probable or the amount of the loss is not estimable, BB&T has not accrued legal reserves. While the
outcome of legal proceedings is inherently uncertain, based on information currently available, advice of counsel and