BB&T 2013 Annual Report Download - page 140

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140
The following table provides a summary of derivative strategies and the related accounting treatment:
Cash Flow Hedges Fair Value Hedges Derivatives Not Designated as Hedges
Risk exposure Variability in cash flows of
interest payments on
floating rate business loans,
overnight funding, FHLB
advances, medium-term
bank notes and long-term
debt.
Losses in value on fixed
rate long-term debt, CDs,
FHLB advances, loans and
state and political
subdivision securities due to
changes in interest rates.
Risk associated with an asset or
liability, including mortgage
banking operations and MSRs,
or for client needs. Includes
exposure to changes in market
rates and conditions subsequent
to the interest rate lock and
funding date for mortgage loans
originated for sale.
Risk management objective Hedge the variability in the
interest payments and
receipts on future cash
flows for forecasted
transactions related to the
first unhedged payments
and receipts of variable
interest.
Convert the fixed rate paid
or received to a floating
rate, primarily through the
use of swaps.
For interest rate lock
commitment derivatives and
LHFS, use mortgage-based
derivatives such as forward
commitments and options to
mitigate market risk. For MSRs,
mitigate the income statement
effect of changes in the fair
value of the MSRs.
Treatment for portion that is
highly effective
Recognized in OCI until the
related cash flows from the
hedged item are recognized
in earnings.
Recognized in current
period income along with
the corresponding changes
in the fair value of the
designated hedged item
attributable to the risk being
hedged.
Entire change in fair value
recognized in current period
income.
Treatment for portion that is
ineffective
Recognized in current
period income.
Recognized in current
period income.
N
ot applicable
Treatment if hedge ceases to be
highly effective or is terminated
Hedge is dedesignated.
Effective changes in value
that are recorded in OCI
before dedesignation are
amortized to yield over the
period the forecasted
hedged transactions impact
earnings.
If hedged item remains
outstanding, termination
proceeds are included in
cash flows from financing
activities and effective
changes in value are
reflected as part of the
carrying value of the
financial instrument and
amortized to earnings over
its estimated remaining life.
N
ot applicable
Treatment if transaction is no
longer probable of occurring
during forecast period or within
a short period thereafter
Hedge accounting is ceased
and any gain or loss in OCI
is reported in earnings
immediately.
N
ot applicable
N
ot applicable