BB&T 2015 Annual Report Download - page 64

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     
 
Loans and leases $ 273 $ 539 $ 812 $ 561 $ 654 $ 1,215
AFS securities 1,064 ― 1,064 1,243 ― 1,243
Other assets 32 27 59 58 38 96
Total assets acquired from the FDIC $ 1,369 $ 566 $ 1,935 $ 1,862 $ 692 $ 2,554
UPB of loans and leases $ 462 $ 725 $ 1,187 $ 836 $ 888 $ 1,724
As of October 1, 2014, the loss sharing provisions of the commercial loss sharing agreement expired; however, gains on the disposition of assets subject to
this agreement will be shared with the FDIC through September 30, 2017. Any gains realized after September 30, 2017 would not be shared with the FDIC.
Assets subject to the single family loss sharing agreement are indemnified through August 31, 2019.
The gain/loss sharing coverage related to the acquired AFS securities is based on a contractually-specified value of the securities as of the date of the loss
sharing agreement, adjusted to reflect subsequent pay-downs, redemptions or maturities on the underlying securities. The contractually-specified value of
these securities totaled approximately $492 million at December 31, 2015. During the period of gain sharing (October 1, 2014 through September 30, 2017),
any decline in the fair value of the acquired AFS securities down to the contractually-specified value would reduce BB&T’s liability to the FDIC at the
applicable loss sharing percentage. BB&T is not indemnified for declines in the fair value of the acquired securities below the contractually-specified
amount.
The terms of the loss sharing agreement with respect to certain non-agency MBS provided that Branch Bank would be reimbursed by the FDIC for 95% of
any and all losses incurred through the third quarter of 2014. For other assets acquired from the FDIC, the FDIC reimbursement was as follows:
·80% of net losses incurred up to $5 billion
·95% of net losses in excess of $5 billion.
BB&T does not expect cumulative net losses to exceed $5 billion on the respective assets acquired from FDIC. Gains and recoveries on assets acquired from
FDIC, net of related expenses, will offset losses or be paid to the FDIC at the applicable loss share percentage at the time of recovery.
Following the conclusion of the 10 year loss share period in 2019, should actual aggregate losses, excluding securities, be less than an amount determined in
accordance with these agreements, BB&T will pay the FDIC a portion of the difference. As of December 31, 2015, BB&T projects that in 2019 Branch Bank
would owe the FDIC approximately $170 million under the aggregate loss calculation. As described below, this liability is expensed over time and BB&T
has recognized total expense of approximately $149 million through December 31, 2015.
The fair value of the net reimbursement the Company expected to receive from the FDIC under these agreements was recorded as the FDIC loss share
receivable at the date of acquisition. The fair value of the FDIC loss share receivable/payable was estimated using a discounted cash flow methodology.
Acquired loans were aggregated into separate pools based upon common risk characteristics. Each pool is considered a unit of account and the cash flows
expected to be collected, credit losses and other relevant information are developed for each pool. A summary of the accounting treatment related to changes
in credit losses on each loan pool and the related FDIC loss share asset follows.
·If the estimated credit loss on a loan pool is increased:
oThe reduction in the net present value of the loan pool is recognized immediately as provision expense and an increase to the ALLL.
oThe FDIC loss share asset is increased by 80% of the adjustment to the ALLL through income, if applicable.
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Source: BB&T CORP, 10-K, February 25, 2016 Powered by Morningstar® Document Research℠
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