BB&T 2012 Annual Report Download - page 152

130
Fair Value Measurements Using Significant Unobservable Inputs
Private
States & Equity and
Political Other Covered Residential Net Similar
Year Ended December 31, 2010 Trading Subdivisions Securities Securities MSRs Derivatives Investments
(Dollars in millions)
Balance at January 1, 2010 $ 93 $ 210 $ 9 $ 668 $ 832 $ (20) $ 281
Total realized and unrealized gains (losses):
Included in earnings:
Interest income ― ― ― 61 ― ― ―
Mortgage banking income ― ― ― ― (138) 246 ―
Other noninterest income (1) ― ― ― ― ― 35
Included in OCI ― 12 (1) 225 ― ― ―
Purchases, issuances and settlements (5) (87) (1) ― 136 (251) (50)
Transfers in and/or out of Level 3 (76) (16) ― ― ― ― ―
Balance at December 31, 2010 $ 11 $ 119 $ 7 $ 954 $ 830 $ (25) $ 266
Change in unrealized gains (losses)
included in earnings for the period,
attributable to assets and liabilities
still held at December 31, 2010 $ (2) $ ―$ ―$ 61 $ (138) $ (25) $ 9
BB&T’ s policy is to recognize transfers in and transfers out of Levels 1, 2 and 3 as of the end of a reporting period. During
the year ended December 31, 2012, BB&T did not have any material transfer of securities between levels in the fair value
hierarchy. During the year ended December 31, 2011, BB&T transferred certain state and political subdivision securities out
of Level 3 as a result of management’ s decision to reclassify them from available for sale to held to maturity classification,
which is not recorded at fair value. During the year ended December 31, 2010, transfers from Level 3 to Level 2 were the
result of increased observable market activity for these securities. There were no gains or losses recognized as a result of the
transfers of securities during the years ended December 31, 2012, 2011 or 2010. There were no significant transfers of
securities between Level 1 and Level 2 for the years ended December 31, 2012, 2011 or 2010.
The majority of BB&T’ s private equity and similar investments are in SBIC qualified funds. The significant investment
strategies for these funds primarily focus on equity and subordinated debt investments in privately-held middle market
companies. The majority of these investments are not redeemable and distributions are received as the underlying assets of
the funds liquidate. The timing of distributions, which are expected to occur on various dates through 2025, is uncertain and
dependent on various events such as recapitalizations, refinance transactions and ownership changes among others.
Excluding the investment of future funds, BB&T estimates these investments have a weighted average remaining life of
approximately three years; however, the timing and amount of distributions may vary significantly. As of December 31,
2012, restrictions on the ability to sell the investments include, but are not limited to, consent of a majority member or
general partner approval for transfer of ownership. BB&T’ s investments are spread over numerous privately-held middle
market companies, and thus the sensitivity to a change in fair value for any single investment is limited. The significant
unobservable inputs for these investments are EBITDA multiples that ranged from 5x to 11x, with a weighted average of 7x,
at December 31, 2012.
The following table details the fair value and unpaid principal balance of LHFS that were elected to be carried at fair value:
December 31,
2012 2011
Aggregate Aggregate
Unpaid Unpaid
Fair Principal Fair Principal
Value Balance Difference Value Balance Difference
(Dollars in millions)
LHFS reported at fair value (1) $ 3,761 $ 3,652 $ 109 $ 3,736 $ 3,652 $ 84
(1) The change in fair value is reflected in mortgage banking income. Excluding government guaranteed loans, there were
no nonaccrual loans or loans 90 days or more past due and still accruing interest.