BB&T 2012 Annual Report Download - page 81

59
were transferred from loans held for investment to LHFS in 2011 and 2010, respectively. The disposition of all such
loans was complete as of December 31, 2011.
(4) These asset quality ratios have been adjusted to remove the impact of covered loans and covered foreclosed property.
Appropriate adjustments to the numerator and denominator have been reflected in the calculation of these ratios.
BB&T’ s potential problem loans include loans on nonaccrual status or past due as disclosed in Table 18. In addition, for its
commercial portfolio segment, loans that are rated special mention or substandard performing are closely monitored by
management as potential problem loans. Refer to Note 4 “Allowance for Credit Losses” in the “Notes to Consolidated
Financial Statements” herein for additional disclosures related to these potential problem loans.
TDRs generally occur when a borrower is experiencing, or is expected to experience, financial difficulties in the near-term.
As a result, BB&T will work with the borrower to prevent further difficulties, and ultimately to improve the likelihood of
recovery on the loan. To facilitate this process, a concessionary modification that would not otherwise be considered may be
granted resulting in classification of the loan as a TDR. Refer to Note 1 “Summary of Significant Accounting Policies” in the
“Notes to Consolidated Financial Statements” for additional policy information regarding TDRs.
BB&T’ s performing TDRs, excluding government guaranteed mortgage loans, totaled $1.3 billion at December 31, 2012, an
increase of $218 million, or 19.7%, compared with December 31, 2011. This increase was attributable to guidance issued by
a national bank regulatory agency during 2012 that requires certain loans, which have been discharged in bankruptcy and not
reaffirmed by the borrower, to be accounted for as a TDR and possibly as nonperforming, regardless of their actual payment
history and expected performance. BB&T’ s primary regulators have not formalized how this guidance will be applied to the
entities that it regulates. However, based on a preliminary interpretation of this guidance, BB&T classified $226 million of
performing loans across all loan portfolios as TDRs during the fourth quarter of 2012. Approximately 77% of these loans
have been current for two years or more and approximately 92% are less than 60 days past due. As a result, BB&T
concluded that it has a reasonable expectation of collection of principal and interest and therefore has classified these TDRs
as performing. BB&T’ s exposure to the expected collateral shortfall has been considered in the ALLL recorded at December
31, 2012.
In addition, BB&T classified approximately $44 million of loans already on nonaccrual status as TDRs as a result of
regulatory guidance described above. The classification of these loans as TDRs had an insignificant impact on the allowance
as these loans had been previously charged down to their estimated collateral value less costs to sell.
The following table provides a summary of performing TDR activity during the years ended December 31, 2012 and 2011.
Table 20
Rollforward of Performing TDRs
Years Ended December 31,
2012 2011
(Dollars in millions)
Balance at beginning of year $ 1,109 $ 1,476
Inflows 417 395
Change in regulatory guidance 226 ―
Payments and payoffs (187) (334)
Chargeoffs (36) (43)
Transfers from (to) nonperforming TDRs, net (50) (206)
Removal due to the passage of time (109) (105)
N
on-concessionary re-modifications (43) (74)
Balance at end of year $ 1,327 $ 1,109
Payments and payoffs represent cash received from borrowers in connection with scheduled principal payments, prepayments
and payoffs of amounts outstanding. Transfers to nonperforming TDRs represent loans that no longer meet the requirements
necessary to reflect the loan in accruing status and as a result are subsequently classified as a nonperforming TDR.
TDRs may be removed due to the passage of time if they: (1) did not include a forgiveness of principal or interest, (2) have
performed in accordance with the modified terms (generally a minimum of six months), (3) were reported as a TDR over a
year end reporting period, and (4) reflected an interest rate on the modified loan that was no less than a market rate at the date
of modification. These loans were previously considered TDRs as a result of structural concessions such as extended
interest-only terms or an amortization period that did not otherwise conform to normal underwriting guidelines.