BB&T 2015 Annual Report Download - page 139

TableofContents
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BB&T utilizes a variety of financial instruments to meet the financing needs of clients and to reduce exposure to fluctuations in interest rates. These financial
instruments include commitments to extend credit, letters of credit and financial guarantees and derivatives. BB&T also has commitments to fund certain
affordable housing investments and contingent liabilities related to certain sold loans.
Commitments to extend, originate or purchase credit are primarily lines of credit to businesses and consumers and have specified rates and maturity dates.
Many of these commitments also have adverse change clauses, which allow BB&T to cancel the commitment due to deterioration in the borrowers’
creditworthiness.
 
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Letters of credit $ 3,033 $ 3,462
Carrying amount of the liability for letters of credit 27 22
Investments in affordable housing and historic building rehabilitation projects:
Carrying amount 1,629 1,436
Amount of future funding commitments included in carrying amount 654 459
Lending exposure 292 169
Tax credits subject to recapture 355 300
Investments in private equity and similar investments 289 329
Future funding commitments to consolidated private equity funds 231 202
Letters of credit and financial guarantees written are unconditional commitments issued by BB&T to guarantee the performance of a customer to a third party.
These guarantees are primarily issued to support borrowing arrangements, including commercial paper issuance, bond financing and similar transactions, the
majority of which are to tax exempt entities. The credit risk involved in the issuance of these guarantees is essentially the same as that involved in extending
loans to clients and as such, the instruments are collateralized when necessary.
BB&T invests in certain affordable housing and historic building rehabilitation projects throughout its market area as a means of supporting local
communities. BB&T receives tax credits related to these investments. BB&T typically acts as a limited partner in these investments and does not exert
control over the operating or financial policies of the partnerships. BB&T typically provides financing during the construction and development of the
properties; however, permanent financing is generally obtained from independent third parties upon completion of a project. Tax credits are subject to
recapture by taxing authorities based on compliance features required to be met at the project level. BB&T’s maximum potential exposure to losses relative
to investments in VIEs is generally limited to the sum of the outstanding balance, future funding commitments and any related loans to the entity. Loans to
these entities are underwritten in substantially the same manner as are other loans and are generally secured.
Effective January 1, 2015, BB&T adopted new guidance related to Investments in Qualified Affordable Housing Projects. The following table summarizes
the estimated impact to the Consolidated Statements of Income.
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Increase in other income $ 141 $ 159
Increase in provision for income taxes (161) (158)
Change in net income and net income available to common shareholders $ (20) $ 1
Decrease in diluted EPS $ (0.03) $ ―
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Decrease to retained earnings $ (49) $ (29)
BB&T has investments in and future funding commitments to certain private equity and similar investments. BB&T’s risk exposure relating to such
commitments is generally limited to the amount of investments and future funding commitments made.
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Source: BB&T CORP, 10-K, February 25, 2016 Powered by Morningstar® Document Research℠
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