BB&T 2012 Annual Report Download - page 41

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ITEM 1A. RISK FACTORS
The following discussion sets forth some of the more important risk factors that could materially affect BB&T’ s financial
condition and operations. Other factors that could affect the Company’ s financial condition and operations are discussed in
the “Forward-Looking Statements” section above. However, there may be additional risks that are not presently material or
known, and factors besides those discussed below, or elsewhere in this or other reports that BB&T filed or furnished with the
SEC, that also could adversely affect the Company.
Changes in national, regional and local economic conditions and deterioration in the geographic and financial markets in
which BB&T operates could lead to higher loan charge-offs and reduce BB&T’s net income and growth.
BB&T’ s business is subject to periodic fluctuations based on national, regional and local economic conditions. These
fluctuations are not predictable, cannot be controlled, and may have a material adverse impact on BB&T’ s operations and
financial condition even if other favorable events occur. BB&T’ s banking operations are locally oriented and community-
based. Accordingly, BB&T expects to continue to be dependent upon local business conditions as well as conditions in the
local residential and commercial real estate markets it serves. For example, an increase in unemployment, a decrease in real
estate values or increases in interest rates, as well as other factors, could weaken the economies of the communities BB&T
serves. Weakness in BB&T’ s market area could depress its earnings and consequently its financial condition because:
 customers may not want or need BB&T’ s products or services;
 borrowers may not be able or willing to repay their loans;
 the value of the collateral securing loans to borrowers may decline; and
 the quality of BB&T’ s loan portfolio may decline.
Any of the latter three scenarios could require BB&T to charge off a higher percentage of loans and/or increase provisions for
credit losses, which would reduce BB&T’ s net income. For example, while the credit deterioration that BB&T experienced
from 2007 through 2010 has improved considerably in the last two years, the challenges in the residential real estate markets
still present credit deterioration risks for BB&T in light of the slow pace of general economic recovery. Any further credit
deterioration, combined with flat to declining real estate values, would result in increased loan charge-offs and higher
provisions for credit losses, which may negatively impact BB&T’ s net income.
Although the United States economy has shown modest improvement recently, economic conditions continue to pose a risk
to financial services firms such as BB&T. The economic recovery, although continuing, proceeded at a slower pace in 2012
than previously anticipated. Job growth has not yet been sufficient to significantly reduce high unemployment in the United
States. There continues to be concern regarding the possibility of a return to recessionary conditions, as well as increased
turmoil or volatility in the financial system. BB&T is part of the financial system and a systemic lack of available credit, a
lack of confidence in the financial sector, continued volatility in the financial markets and/or reduced business activity could
materially adversely affect BB&T’ s business, financial condition and results of operations.
Further downgrades of U.S. government securities by one or more of the credit ratings agencies could have a material
adverse effect on BB&T’s operations, earnings and financial condition.
In August 2011, the S&P credit rating agency lowered its long term sovereign credit rating on the U.S. from AAA to AA+,
while maintaining a negative outlook. The downgrade reflected S&P’ s view that an August 2011 agreement of U.S.
lawmakers regarding the debt ceiling fell short of what would be necessary to stabilize the U.S. government’ s medium term
debt dynamics. The three other major credit rating agencies did not downgrade their previously issued U.S. sovereign credit
ratings. The current uncertainty over U.S. fiscal policy, and the resulting tax increases and potential spending cuts in the U.S.
in 2013 could lead to future or further downgrades of the U.S. sovereign credit rating by one or more of the major credit
rating agencies. A possible future downgrade of the federal government’ s credit rating by one or more of the other major
ratings agencies could create uncertainty in the U.S. and global financial markets and cause other events which, directly or
indirectly, may adversely affect BB&T’ s operations, earnings and financial condition. For example, BB&T’ s securities
portfolio consists largely of RMBS issued by GSEs, such as FHLMC and FNMA. Among other things, a further downgrade
in the U.S. government’ s credit rating could adversely impact the value of these securities and may trigger requirements that
the Company post additional collateral for trades relative to these securities.