BB&T 2014 Annual Report Download - page 83

Table of Contents
The average annualized cost of interest-bearing deposits was 0.25% during the fourth quarter of 2014, a decline of three basis points compared to the fourth
quarter of 2013. The average annualized rate paid on long-term debt was 2.22% during the fourth quarter of 2014, a decrease of 42 basis points compared to
the same quarter of the prior year. This decrease was the result of lower rates on new issues during the last twelve months and the early extinguishment of
higher cost FHLB advances in the third quarter of 2014.
The $19 million increase in noninterest income, including securities gains (losses), net, was primarily driven by higher insurance and mortgage banking
income, which increased $38 million and $28 million, respectively, partially offset by a $51 million decrease in other income.
The provision for credit losses increased $23 million compared to the earlier quarter primarily due to the reserve release in the earlier quarter partially offset
by the impact of the fourth quarter loan sale. Net charge-offs for the fourth quarter of 2014, excluding loans acquired from the FDIC and the impact of the
loan sale, totaled $106 million, down $35 million compared to the earlier quarter. Excluding the reserve for unfunded lending commitments and the impact
of the loan sale, the reserve release was $67 million for the fourth quarter of 2013 compared to a provision of $5 million in the current quarter.
Noninterest expense was $1.4 billion for the fourth quarter of 2014, a decrease of $45 million compared to the earlier quarter. This decrease reflects the
impact of broad cost control measures, including a 1,280 decrease in FTEs, which was partially offset by higher loan-related expense due to the $27 million
charge related to an ongoing review of mortgage lending processes.
The provision for income taxes was $236 million for the fourth quarter of 2014, compared to $243 million for the earlier quarter. This produced an effective
tax rate for the fourth quarter of 2014 of 27.9%, compared to 29.2% for the earlier quarter.
Reclassifications
In certain circumstances, reclassifications have been made to prior period information to conform to the 2014 presentation. Such reclassifications had no
effect on previously reported shareholders’ equity or net income.
Critical Accounting Policies
The accounting and reporting policies of BB&T are in accordance with GAAP and conform to the accounting and reporting guidelines prescribed by bank
regulatory authorities. The financial position and results of operations are affected by management’s application of accounting policies, including estimates,
assumptions and judgments made to arrive at the carrying value of assets and liabilities and amounts reported for revenues and expenses. Different
assumptions in the application of these policies could result in material changes in the consolidated financial position and/or consolidated results of
operations and related disclosures. Understanding BB&T’s accounting policies is fundamental to understanding the consolidated financial position and
consolidated results of operations. Accordingly, BB&T’s significant accounting policies and changes in accounting principles and effects of new accounting
pronouncements are discussed in detail in Note 1 “Summary of Significant Accounting Policies” in the “Notes to Consolidated Financial Statements.”
The following is a summary of BB&T’s critical accounting policies that are highly dependent on estimates, assumptions and judgments. These critical
accounting policies are reviewed with the Audit Committee of the Board of Directors on a periodic basis.
ACL
BB&T’s policy is to maintain an ALLL and a RUFC that represent management’s best estimate of probable credit losses inherent in the loan and lease
portfolios and off-balance sheet lending commitments at the balance sheet date. Estimates for loan and lease losses are determined by analyzing historical
loan and lease losses, historical loan and lease migration to charge-off experience, current trends in delinquencies and charge-offs, expected cash flows on
purchased loans, current assessment of problem loans and leases, the results of regulatory examinations and changes in the size, composition and risk
assessment of the loan and lease portfolio. As part of this process, BB&T develops a series of loss estimate factors, which are modeled projections of the
frequency, timing and severity of losses. These loss estimate factors are based on historical loss experience, economic and political environmental
considerations and any other data that management believes will provide evidence about the expected collectability of outstanding loan and lease amounts.
The following table summarizes the loss estimate factors used to determine the ALLL.
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Source: BB&T CORP, 10-K, February 25, 2015 Powered by Morningstar® Document Research℠
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