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BB&T 10-Q 2009
q110q.htm - BB&T
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)
 of the Securities Exchange Act of 1934

For the quarterly period ended:

March 31, 2009

Commission file number: 1-10853

BB&T CORPORATION
(Exact name of registrant as specified in its charter)

North Carolina  56-0939887 
(State of Incorporation)  (I.R.S. Employer Identification No.) 
 
200 West Second Street   
Winston-Salem, North Carolina  27101 
(Address of Principal Executive Offices)  (Zip Code) 

(336) 733-2000
(Registrant's Telephone Number, Including Area Code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ NO ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). YES þ NO ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  þ Accelerated filer  ¨
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)   Smaller reporting company  ¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO þ

At April 30, 2009, 560,640,875 shares of the Registrant's common stock, $5 par value, were outstanding.

 


  BB&T CORPORATION   
  FORM 10-Q   
  March 31, 2009   
  INDEX   
    Page No. 
Part I. FINANCIAL INFORMATION   
            Item 1.  Financial Statements (Unaudited)  2 
  Notes to Consolidated Financial Statements (Unaudited)  6 
            Item 2.  Management’s Discussion and Analysis of  
  Financial Condition and Results of Operations 35 
  Executive Summary  40 
  Analysis of Financial Condition 42 
  Analysis of Results of Operations 53 
  Market Risk Management 60 
  Capital Adequacy and Resources 64 
  Segment Results 67 
 
            Item 3. Quantitative and Qualitative Disclosures About  
  Market Risk 68 
           Item 4.  Controls and Procedures 68 
Part II. OTHER INFORMATION   
            Item 1.  Legal Proceedings 68 
            Item 1A. Risk Factors 69 
            Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds 70 
            Item 6. Exhibits  70 
SIGNATURES  71 
EXHIBIT INDEX 72 
CERTIFICATIONS  73 

1


Item 1. Financial Statements

BB&T CORPORATION AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in millions, except per share data, shares in thousands)

    March 31,     December 31,  
    2009     2008  
 
Assets             
     Cash and due from banks  $ 1,188   $ 1,639  
     Interest-bearing deposits with banks    511     751  
     Federal funds sold and securities purchased under resale agreements             
           or similar arrangements    301     350  
     Segregated cash due from banks    283     379  
     Trading securities at fair value    481     376  
     Securities available for sale at fair value    19,008     32,843  
     Loans held for sale ($3,783 and $1,396 at fair value at March 31, 2009 and    3,798     1,424  
           December 31, 2008, respectively)             
     Loans and leases    96,441     97,245  
     Allowance for loan and lease losses    (1,869 )    (1,574 ) 
           Loans and leases, net of allowance for loan and lease losses    94,572     95,671  
 
     Premises and equipment    1,583     1,580  
     Goodwill    5,492     5,483  
     Core deposit and other intangible assets    521     542  
     Residential mortgage servicing rights at fair value    365     370  
     Other assets    15,322     10,607  
                           Total assets  $ 143,425   $ 152,015  
 
Liabilities and Shareholders' Equity             
     Deposits:             
           Noninterest-bearing deposits  $ 14,766   $ 13,649  
           Interest checking    2,401     2,576  
           Other client deposits    40,604     39,413  
           Client certificates of deposit    26,521     27,937  
           Other interest-bearing deposits    6,325     15,038  
                           Total deposits    90,617     98,613  
     Federal funds purchased, securities sold under repurchase agreements             
                   and short-term borrowed funds    13,721     10,788  
     Long-term debt    17,955     18,032  
     Accounts payable and other liabilities    4,950     8,501  
                           Total liabilities    127,243     135,934  
     Commitments and contingencies (Note 6)             
     Shareholders' equity:             
           Preferred stock, liquidation preference of $1,000,000 per share    3,085     3,082  
           Common stock, $5 par    2,803     2,796  
           Additional paid-in capital    3,547     3,510  
           Retained earnings    7,385     7,381  
           Accumulated other comprehensive loss, net of deferred income             
                   taxes of $(409) at March 31, 2009 and $(438) at December 31, 2008    (683 )    (732 ) 
           Noncontrolling interest    45     44  
                           Total shareholders' equity    16,182     16,081  
                           Total liabilities and shareholders' equity  $ 143,425   $ 152,015  
 
     Common shares outstanding    560,563     559,248  
     Common shares authorized    1,000,000     1,000,000  
     Preferred shares outstanding    3     3  
     Preferred shares authorized    5,000     5,000  

The accompanying notes are an integral part of these consolidated financial statements.

2


BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in millions, except per share data, shares in thousands)

    For the Three Months Ended 
    March 31,
    2009    2008 
Interest Income         
         Interest and fees on loans and leases  $ 1,322  $  1,595 
         Interest and dividends on securities    355    289 
         Interest on short-term investments    2    11 
               Total interest income    1,679    1,895 
 
Interest Expense         
         Interest on deposits    346    564 
         Interest on federal funds purchased, securities sold under         
               repurchase agreements and short-term borrowed funds    23    88 
         Interest on long-term debt    164    226 
               Total interest expense    533    878 
 
Net Interest Income    1,146    1,017 
         Provision for credit losses    676    223 
 
Net Interest Income After Provision for Credit Losses    470    794 
Noninterest Income         
         Insurance income    252    212 
         Service charges on deposits    156    154 
         Investment banking and brokerage fees and commissions    82    86 
         Mortgage banking income    188    59 
         Checkcard fees    49    46 
         Other nondeposit fees and commissions    53    46 
         Trust and investment advisory revenues    32    40 
         Bankcard fees and merchant discounts    35    36 
         Income from bank-owned life insurance    23    13 
         Securities gains, net    150    43 
         Other income    11    36 
               Total noninterest income    1,031    771 
Noninterest Expense         
         Personnel expense    600    547 
         Occupancy and equipment expense    129    123 
         Professional services    53    37 
         Foreclosed property expense    36    13 
         Regulatory charges    33    5 
         Loan processing expenses    29    31 
         Amortization of intangibles    25    27 
         Merger-related and restructuring charges, net    12    5 
         Other expenses    152    147 
               Total noninterest expense    1,069    935 
Earnings         
         Income before income taxes    432    630 
         Provision for income taxes    114    201 
               Net income    318    429 
         Noncontrolling interest    6    1 
         Dividends and accretion on preferred stock    41    - 
               Net income available to common shareholders  $ 271  $  428 
 
Earnings Per Common Share         
               Basic  $ .48  $  .78 
               Diluted  $ .48  $  .78 
         Cash dividends paid  $ .47  $  .46 
 
Weighted Average Shares Outstanding         
               Basic    559,801    546,214 
               Diluted    563,566    548,946 

The accompanying notes are an integral part of these consolidated financial statements.

3


BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Three Months Ended March 31, 2009 and 2008
(Unaudited)
(Dollars in millions, except per share data, shares in thousands)

                              Accumulated                
  Shares of           Additional       Other           Total
  Common Preferred  Common Paid-In Retained Comprehensive Noncontrolling   Shareholders'
  Stock Stock Stock Capital Earnings Income (Loss) Interest   Equity
Balance, January 1, 2008    545,955    $   -  $ 2,730  $   3,087  $ 6,919   $   (104 )  $   32   $   12,664  
Add (Deduct):                                                     
   Comprehensive income (loss):                                                     
       Net income  -      -  -    -    428       -       1       429  
           Unrealized holding gains (losses) arising during the period                                                   
               on securities available for sale, net of tax of $22  -      -  -    -  -       37     -       37  
           Reclassification adjustment for losses (gains)                                                   
               on securities available for sale included in net                                                   
               income, net of tax of $(16)     -         -    -      -    -       (27 )      -       (27 ) 
       Change in unrealized gains (losses) on securities, net of tax  -      -  -    -  -       10     -       10  
       Change in unrecognized gains (losses) on cash flow hedges,                                                   
           net of tax of $(4)  -      -  -    -  -       (7 )    -       (7 ) 
       Change in pension and postretirement liability, net of tax.  -      -  -    -  -       (1 )    -       (1 ) 
       Foreign currency translation adjustment     -         -     -      -    -       (1 )      -       (1 ) 
   Total comprehensive income (loss)     -         -    -      -    428       1       1       430  
 
   Common stock issued:                                                     
       In connection with stock option exercises                                                     
           and other employee benefits, net of cancellations    844      -    4      21  -     -     -       25  
   Cash dividends declared on common stock, $.46 per share  -      -  -    -    (252 )    -     -       (252 ) 
   Cumulative effect of adoption of EITF 06-4 and EITF 06-10  -      -  -    -    (8 )    -     -       (8 ) 
   Equity-based compensation expense     -         -    -      16    -       -       -       16  
Balance, March 31, 2008    546,799    $    -  $ 2,734  $   3,124  $ 7,087   $   (103 )  $   33   $   12,875  
 
 
Balance, January 1, 2009    559,248  $   3,082  $ 2,796  $   3,510  $ 7,381   $   (732 )  $   44   $   16,081  
Add (Deduct):                                                     
   Comprehensive income (loss):                                                     
       Net income  -      -  -    -    312     -       6       318  
           Unrealized holding gains (losses) arising during the period                                                   
               on securities available for sale, net of tax of $(39)  -      -  -    -  -       (58 )    -       (58 ) 
           Reclassification adjustment for losses (gains)                                                   
               on securities available for sale included in net                                                   
               income, net of tax of $57      -         -    -      -    -       93       -       93  
 
       Change in unrealized gains (losses) on securities, net of tax  -        -  -    -  -       35       -       35  
 
       Change in unrecognized gains (losses) on cash flow hedges,                                                     
           net of tax of $6  -        -  -    -  -       8     -       8  
 
       Change in pension and postretirement liability, net of tax of $5  -      -  -      -  -       8     -       8  
 
       Foreign currency translation adjustment     -        -    -      -    -       (2 )      -       (2 ) 
 
   Total comprehensive income (loss)     -        -    -      -    312       49       6       367  
 
   Common stock issued:                                                     
       In purchase acquisitions    96      -    1      1  -     -     -       2  
       In connection with stock option exercises                                                   
           and other employee benefits, net of cancellations    44      -  -      -  -     -     -     -  
       In connection with dividend reinvestment plan    1,175      -    6      16  -     -     -       22  
   Cash dividends declared on common stock, $.47 per share  -      -  -      -    (266 )    -     -       (266 ) 
   Cash dividends accrued on preferred stock  -      -  -    -    (39 )    -     -       (39 ) 
   Equity-based compensation expense  -      -  -      19  -     -     -       19  
   Other, net    -        3    -      1    (3 )      -       (5 )      (4 ) 
Balance, March 31, 2009    560,563  $ 3,085  $ 2,803  $    3,547  $ 7,385   $   (683 )  $   45   $   16,182  

The accompanying notes are an integral part of these consolidated financial statements.

4


BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
(Dollars in millions)

    For the Three Months Ended  
             March 31,  
    2009   2008
Cash Flows From Operating Activities:             
     Net income  $ 318   $ 429  
     Adjustments to reconcile net income to net cash used in             
           operating activities:             
                 Provision for credit losses    676     223  
                 Depreciation    54     46  
                 Amortization of intangibles    25     27  
                 Equity-based compensation    19     16  
                 Discount accretion and premium amortization on long-term debt, net    16     27  
                 Gain on sales of securities, net    (150 )    (43 ) 
                 Net (increase) decrease in trading securities    (105 )    400  
                 Net increase in loans held for sale    (2,355 )    (1,027 ) 
                 Net increase in other assets    (4,376 )    (1,118 ) 
                 Net (decrease) increase in accounts payable and other liabilities    (3,562 )    973  
                 Decrease (increase) in segregated cash due from banks    96     (117 ) 
                 Other, net    73     18  
                           Net cash used in operating activities    (9,271 )    (146 ) 
 
Cash Flows From Investing Activities:             
     Proceeds from sales of securities available for sale    12,034     4,238  
     Proceeds from maturities, calls and paydowns of securities available for sale    2,091     1,984  
     Purchases of securities available for sale    (151 )    (7,208 ) 
     Originations and purchases of loans and leases, net of principal collected    633     (1,449 ) 
     Net cash paid in business combinations    (717 )    (39 ) 
     Proceeds from disposals of premises and equipment    2     2  
     Purchases of premises and equipment    (43 )    (55 ) 
     Proceeds from sales of foreclosed property or other real estate held for sale    45     23  
     Other, net     -     33  
                 Net cash provided by (used in) investing activities    13,894     (2,471 ) 
 
Cash Flows From Financing Activities:             
     Net (decrease) increase in deposits    (7,993 )    715  
     Net increase (decrease) in federal funds purchased, securities sold under repurchase agreements             
             and short-term borrowed funds    2,933     (1,024 ) 
     Proceeds from issuance of long-term debt    1     2,646  
     Repayment of long-term debt    (24 )    (29 ) 
     Net proceeds from common stock issued    22     25  
     Cash dividends paid on common stock    (263 )    (251 ) 
     Cash dividends paid on preferred stock    (40 )     -  
     Other, net    1     (1 ) 
                 Net cash (used in) provided by financing activities    (5,363 )    2,081  
 
Net Decrease in Cash and Cash Equivalents    (740 )    (536 ) 
Cash and Cash Equivalents at Beginning of Period    2,740     3,117  
Cash and Cash Equivalents at End of Period  $ 2,000   $ 2,581  
 
 
Supplemental Disclosure of Cash Flow Information:             
 
     Cash paid during the period for:             
           Interest  $ 484   $ 866  
           Income taxes    138     63  
     Noncash investing and financing activities:             
           Transfers of loans to foreclosed property    465     65  

Back to Index

The accompanying notes are an integral part of these consolidated financial statements.

5


BB&T Corporation and Subsidiaries   
Notes to Consolidated Financial Statements (Unaudited)  First Quarter 2009 

NOTE 1. Basis of Presentation

     General

          In the opinion of management, the accompanying unaudited Consolidated Balance Sheets, Consolidated Statements of Income, Consolidated Statements of Changes in Shareholders’ Equity, and Consolidated Statements of Cash Flows of BB&T Corporation and subsidiaries (referred to herein as “BB&T”, “the Corporation” or “the Company”), are a fair statement of BB&T’s financial position at March 31, 2009 and December 31, 2008, and BB&T’s results of operations, changes in shareholders’ equity and cash flows for the three month periods ended March 31, 2009 and 2008. In the opinion of management, all normal recurring adjustments necessary for a fair statement of the consolidated financial position and consolidated results of operations have been made.

          These consolidated financial statements and notes are presented in accordance with the instructions for Form 10-Q. The information contained in the financial statements and footnotes included in BB&T’s Annual Report on Form 10-K for the year ended December 31, 2008 should be referred to in connection with these unaudited interim consolidated financial statements.

     Nature of Operations

          BB&T is a financial holding company headquartered in Winston-Salem, North Carolina. BB&T conducts operations through its principal bank subsidiary, Branch Banking and Trust Company (“Branch Bank”), a federally chartered thrift institution, BB&T Financial, FSB (“BB&T FSB”) and its nonbank subsidiaries. Branch Bank has offices in North Carolina, South Carolina, Virginia, Maryland, Georgia, West Virginia, Tennessee, Kentucky, Florida, Alabama, Indiana and Washington, D.C. Branch Bank provides a wide range of banking services to individuals and businesses, and offers a variety of loans to businesses and consumers. Such loans are made primarily to individuals residing in the market areas described above or to businesses located within BB&T’s geographic footprint. Branch Bank also markets a wide range of deposit services to individuals and businesses. Branch Bank offers, either directly, or through its subsidiaries, lease financing to businesses and municipal governments; factoring; discount brokerage services, annuities and mutual funds; life insurance, property and casualty insurance, health insurance and commercial general liability insurance on an agency basis and through a wholesale insurance brokerage operation; insurance premium financing; permanent financing arrangements for commercial real estate; loan servicing for third-party investors; direct consumer finance loans to individuals; and trust and comprehensive wealth advisory services. BB&T FSB and the direct nonbank subsidiaries of BB&T provide a variety of financial services including credit card lending, automobile lending, equipment financing, full-service securities brokerage, payroll processing, asset management and capital markets services.

     Principles of Consolidation

          The consolidated financial statements of BB&T include the accounts of BB&T Corporation and those subsidiaries that are majority owned by BB&T and over which BB&T exercises control. In consolidation, all significant intercompany accounts and transactions are

6


BB&T Corporation and Subsidiaries   
Notes to Consolidated Financial Statements (Unaudited)  First Quarter 2009 

eliminated. The results of operations of companies acquired are included only from the dates of acquisition. All material wholly owned and majority owned subsidiaries are consolidated unless accounting principles generally accepted in the United States of America require otherwise.

          BB&T evaluates variable interests in entities for which voting interests are not an effective means of identifying controlling financial interests. Variable interests are those in which the value of the interest changes with the fair value of the net assets of the entity exclusive of variable interests. If the results of the evaluation indicate the existence of a primary beneficiary and the entity does not effectively disperse risks among the parties involved, that primary beneficiary is required to consolidate the entity. Likewise, if the evaluation indicates that the requirements for consolidation are not met and the entity has previously been consolidated, then the entity would be deconsolidated.

          BB&T has variable interests in certain entities that were not required to be consolidated, including affordable housing partnership interests, historic tax credit partnerships, other partnership interests and trusts that have issued capital securities. Please refer to Note 6 for additional disclosures regarding BB&T’s significant variable interest entities.

          BB&T accounts for unconsolidated partnership investments using the equity method of accounting. In addition to affordable housing partnerships, which represent the majority of unconsolidated investments in variable interest entities, BB&T also has investments and future funding commitments to venture capital and other entities. The maximum potential exposure to losses relative to investments in variable interest entities is generally limited to the sum of the outstanding balance 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.

        BB&T has investments in certain entities for which BB&T does not have controlling interest. For these investments, the Company records its interest using the equity method with its portion of income or loss being recorded in other noninterest income in the Consolidated Statements of Income. BB&T periodically evaluates these investments for impairment.

     Reclassifications

          In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51,” (“SFAS No. 160”). SFAS No. 160 requires that a noncontrolling interest in a subsidiary be accounted for as equity in the consolidated balance sheet and that net income include the amounts for both the parent and the noncontrolling interest, with a separate amount presented in the income statement for the noncontrolling interest share of net income. SFAS No. 160 also expands the disclosure requirements and provides guidance on how to account for changes in the ownership interest of a subsidiary. BB&T adopted the provisions of SFAS No. 160 on January 1, 2009. In accordance with SFAS No. 160, the presentation and disclosure provisions were applied retrospectively for all periods presented. The amounts reclassified in connection with the adoption of SFAS No. 160 were not material to the consolidated financial statements.

7


BB&T Corporation and Subsidiaries   
Notes to Consolidated Financial Statements (Unaudited)  First Quarter 2009 

          In certain other instances, amounts reported in prior periods’ consolidated financial statements have been reclassified to conform to the current presentation. Such reclassifications had no effect on previously reported cash flows, shareholders’ equity or net income.

     Use of Estimates in the Preparation of Financial Statements

          The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change include the determination of the allowance for loan and lease losses and the reserve for unfunded lending commitments, determination of fair value for financial instruments, valuation of goodwill, intangible assets and other purchase accounting related adjustments, benefit plan obligations and expenses, and tax assets, liabilities and expense.

     Changes in Accounting Principles and Effects of New Accounting Pronouncements

          In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations,” (“SFAS No. 141(R)”). SFAS No. 141(R) requires the acquiring entity in a business combination to recognize the full fair value of assets acquired and liabilities assumed in the transaction (whether a full or partial acquisition); establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; requires expensing of most transaction and restructuring costs; and requires the acquirer to disclose to investors and other users all of the information needed to evaluate and understand the nature and financial effect of the business combination. SFAS No. 141(R) was effective for BB&T for business combinations entered into on or after January 1, 2009. BB&T has not entered into any material business combinations since adopting SFAS No. 141(R).

          In April 2009, the FASB issued FASB Staff Position (“FSP”) FAS 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies,” (“FSP FAS 141(R)-1”). FSP FAS 141(R)-1 amends and clarifies SFAS No. 141(R) to address application issues raised by preparers, auditors, and members of the legal profession on initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. FSP FAS 141(R)-1 was effective for BB&T for business combinations entered into on or after January 1, 2009. BB&T has not entered into any material business combinations since adopting FSP FAS 141(R)-1.

          In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities—an amendment of SFAS No. 133,” (“SFAS No. 161”). SFAS No. 161 requires that an entity provide enhanced disclosures related to derivative and hedging activities. BB&T adopted SFAS No. 161 on January 1, 2009. The additional disclosures required by SFAS No. 161 are included in Note 12 to these consolidated financial statements.

8


BB&T Corporation and Subsidiaries   
Notes to Consolidated Financial Statements (Unaudited)  First Quarter 2009 

          In April 2008, the FASB issued FSP FAS 142-3, “Determination of the Useful Life of Intangible Assets,” (“FSP FAS 142-3”). FSP FAS 142-3 amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under SFAS No. 142, “Goodwill and Other Intangible Assets,” (“SFAS No. 142”). The intent of FSP FAS 142-3 is to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141(R). BB&T adopted FSP FAS 142-3 on January 1, 2009. The adoption of FSP FAS 142-3 was not material to the consolidated financial statements.

          In December 2008, the FASB issued FSP FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets,” (“FSP FAS 132(R)-1”). The objectives of FSP FAS 132(R)-1 are to provide users of the financial statements with more detailed information related to the major categories of plan assets, the inputs and valuation techniques used to measure the fair value of plan assets and the effect of fair value measurements using significant unobservable inputs (Level 3) on changes in plan assets for the period, as well as how investment allocation decisions are made, including the factors that are pertinent to an understanding of investment policies and strategies. The disclosures about plan assets required by FSP FAS 132(R)-1 are effective for BB&T on December 31, 2009.

          In April 2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,” (“FSP FAS 157-4”). FSP FAS 157-4 provides additional guidance for estimating fair value in accordance with SFAS No. 157, “Fair Value Measurements,” when the volume and level of activity for the asset or liability have significantly decreased. FSP FAS 157-4 also includes guidance on identifying circumstances that indicate a transaction is not orderly. In addition, FSP FAS 157-4 amends SFAS No. 157 to require additional disclosures of valuation inputs and techniques in interim periods and defines the major security types that are required to be disclosed. FSP FAS 157-4 will be effective for BB&T on June 30, 2009. BB&T is currently evaluating the provisions of FSP FAS 157-4.

          In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments,” (“FSP FAS 115-2 and FAS 124-2”). FSP FAS 115-2 and FAS 124-2 amends the other-than-temporary impairment guidance for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. FSP FAS 115-2 and FAS 124-2 will be effective for BB&T on June 30, 2009. BB&T is currently evaluating the provisions of FSP FAS 115-2 and FAS 124-2.

          In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments,” (“FSP FAS 107-1 and APB 28-1”). FSP FAS 107-1 and APB 28-1 amends SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” to require disclosures about fair value of financial instruments in interim periods, as well as in annual periods. The disclosures required by FSP FAS 107-1 and APB 28-1 will be effective for BB&T on June 30, 2009.

9


BB&T Corporation and Subsidiaries   
Notes to Consolidated Financial Statements (Unaudited)  First Quarter 2009 

NOTE 2. Business Combinations and Intangible Assets

     Acquisitions

          During the first three months of 2009, BB&T acquired certain assets of one insurance premium financing business. Approximately $8 million of goodwill and $6 million of identifiable intangibles were recorded in connection with this transaction.

     Goodwill and Other Intangible Assets

          The changes in the carrying amount of goodwill attributable to each of BB&T’s operating segments for the three months ended March 31, 2009, are as follows:

    Goodwill Activity by Operating Segment
      Residential                           
    Banking  Mortgage    Sales  Specialized  Insurance     Financial    All     
    Network   Banking   Finance   Lending  Services     Services    Other    Total 
    (Dollars in millions)
 
Balance,                                   
January 1, 2009  $ 4,038   $  7  $ 93  $ 98  $ 1,029   $ 192  $ 26  $ 5,483 
 
     Acquisitions    -    -    -    8    -     -    -    8 
     Other                                   
     adjustments    -    -    -    2    (1 )    -    -    1 
Balance,                                   
March 31, 2009  $ 4,038   $  7  $ 93  $ 108  $ 1,028   $ 192  $ 26  $ 5,492 

          The following table presents the gross carrying amounts and accumulated amortization for BB&T’s identifiable intangible assets subject to amortization at the dates presented:

    Identifiable Intangible Assets
      As of March 31, 2009        As of December 31, 2008   
       Gross          Net       Gross          Net 
    Carrying  Accumulated   Carrying    Carrying  Accumulated   Carrying 
    Amount  Amortization   Amount    Amount  Amortization   Amount 
    (Dollars in millions)
  Identifiable intangible assets                             
     Core deposit intangibles  $ 457  $ (334 )   $ 123  $ 457   $ (325 )   $ 132 
     Other (1)    723    (325 )    398    719    (309 )    410 
           Totals  $ 1,180  $ (659 )  $ 521  $ 1,176  $ (634 )   $ 542 
  
     (1) Other identifiable intangibles are primarily customer relationship intangibles.           

10


BB&T Corporation and Subsidiaries   
Notes to Consolidated Financial Statements (Unaudited)  First Quarter 2009 

NOTE 3. Securities

          The amortized cost and approximate fair values of securities available for sale were as follows:

        March 31, 2009    
    Amortized    Gross Unrealized      Fair 
    Cost    Gains  Losses     Value 
        (Dollars in millions)    
Securities available for sale:                 
     U.S. government-sponsored entities (GSE)  $  960  $ 11  $  -  $ 971 
     Mortgage-backed securities issued by GSE    13,668    298    18    13,948 
     States and political subdivisions    2,416    15    258    2,173 
     Non-agency mortgage-backed securities    1,525    -    492    1,033 
     Equity and other securities    903    2    22    883 
         Total securities available for sale  $  19,472  $ 326  $  790  $ 19,008 
 
        December 31, 2008    
    Amortized    Gross Unrealized      Fair 
    Cost    Gains  Losses     Value 
        (Dollars in millions)    
Securities available for sale:                 
     U.S. government-sponsored entities (GSE)  $  1,320  $ 13  $  -  $ 1,333 
     Mortgage-backed securities issued by GSE    27,117    338    25    27,430 
     States and political subdivisions    2,413    8    344    2,077 
     Non-agency mortgage-backed securities    1,573    -    475    1,098 
     Equity and other securities    937    2    34    905 
         Total securities available for sale  $  33,360  $ 361  $  878  $ 32,843 

          The following tables reflect the gross unrealized losses and fair values of BB&T’s investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at the dates presented.

            March 31, 2009        
     Less than 12 months    12 months or more   Total
 
    Fair  Unrealized    Fair  Unrealized     Fair    Unrealized
    Value     Losses    Value     Losses    Value    Losses
            (Dollars in millions)         
Securities:                         
     U.S. government-sponsored entities (GSE)  $ 8   $  -  $  -   $  -  $ 8           $  - 
     Mortgage-backed securities issued by GSE    1,175    3    768    15    1,943    18 
     States and political subdivisions    816    86    476    172    1,292    258 
     Non-agency mortgage-backed securities    206    100    827    392    1,033    492 
     Equity and other securities    165    18    52    4    217    22 
             Total temporarily impaired securities  $ 2,370  $  207  $  2,123   $  583  $ 4,493  $  790 

11


BB&T Corporation and Subsidiaries   
Notes to Consolidated Financial Statements (Unaudited)  First Quarter 2009 

            December 31, 2008        
    Less than 12 months   12 months or more   Total
 
    Fair  Unrealized     Fair  Unrealized     Fair  Unrealized 
    Value     Losses    Value  Losses    Value  Losses
            (Dollars in millions)         
Securities:                         
     Mortgage-backed securities issued by GSE  $ 4,388   $  24  $ 191   $  1  $ 4,579  $  25 
     States and political subdivisions    1,174    174    328    170    1,502    344 
     Non-agency mortgage-backed securities    629    235    469    240    1,098    475 
     Equity and other securities    159    33    20    1    179    34 
          Total temporarily impaired securities  $ 6,350  $  466  $ 1,008  $  412  $ 7,358    $  878 

          BB&T periodically evaluates available-for-sale securities for other-than-temporary impairment. Based on its evaluations during 2009, BB&T recorded $36 million of other-than-temporary impairments related to certain debt and equity securities.

          On March 31, 2009, BB&T also held certain investment securities having continuous unrealized loss positions for more than 12 months. As of March 31, 2009, the unrealized losses on these securities totaled $583 million. Substantially all of these losses were in non-agency mortgage-backed and municipal securities. At March 31, 2009, all of the available-for-sale debt securities were investment grade with the exception of two municipal bonds with the same issuer with a book value of $10 million and eight non-agency mortgage-backed securities, with a book value of $723 million. All of the non-investment grade securities referenced above were initially investment grade and have been downgraded since purchase. The unrealized losses on securities in a continuous unrealized loss position for more than 12 months are the result of changes in market interest rates and liquidity. BB&T has evaluated all of its debt securities for credit impairment. At March 31, 2009, there were no credit losses evident from these securities. Furthermore, BB&T had the ability and intent to retain these securities for a period of time sufficient to recover all unrealized losses.

          BB&T conducts periodic reviews to identify and evaluate each investment that has an unrealized loss for other-than-temporary impairment. An unrealized loss exists when the current fair value of an individual security is less than its amortized cost basis. Unrealized losses that are determined to be temporary in nature are recorded, net of tax, in accumulated other comprehensive income for available-for-sale securities.

               Factors considered in determining whether a loss is temporary include:

  The financial condition and near–term prospects of the issuer, including any specific events which may influence the operations of the issuer;
   
  BB&T’s intent and ability to retain the investment in the issuer for a period of time sufficient to allow for any anticipated recovery in market value; 
   
  The length of the time and the extent to which the market value has been less than cost;
   
  Whether the decline in fair value is attributable to specific conditions, such as conditions in an industry or in a geographic area; 
   
  Whether a debt security has been downgraded by a rating agency; 

12


BB&T Corporation and Subsidiaries   
Notes to Consolidated Financial Statements (Unaudited)  First Quarter 2009 

  Whether the financial condition of the issuer has deteriorated; 
 
  The seniority of the security; 
 
  Whether dividends have been reduced or eliminated, or scheduled interest payments on debt securities have not been made; and 
   
  Any other relevant available information. 

          For certain U.S. mortgage-backed securities (and in particular for non-agency Alt-A, Prime and other mortgage-backed securities that have significant unrealized losses as a percentage of amortized cost), credit impairment is assessed using a cash flow model that estimates the cash flows on the underlying mortgage pools, using security-specific structure information. The model estimates cash flows from the underlying mortgage loan pools and distributes those cash flows to the various tranches of securities, considering the transaction structure and any subordination and credit enhancements that exist in each structure. The cash flow model projects the remaining cash flows using a number of assumptions, including default rates, prepayment rates and recovery rates (on foreclosed properties).

          Management reviews the result of the cash flow model, the internal credit analysis and other market observable information in its estimation of possible future credit losses. If management believes that it is not probable that a mortgage-backed security will recover all principal and interest due, the Company records other-than-temporary impairment equal to the entire decline in fair value of the mortgage-backed security.

          Where a mortgage-backed security is not deemed to be credit impaired, management performs additional analysis to assess whether it has the intent and ability to hold each security for a period of time sufficient for a forecasted recovery of fair value. In making this determination, BB&T considers its expected liquidity and capital needs, including its asset/liability management needs, forecasts, strategies and other relevant information.

13


BB&T Corporation and Subsidiaries   
Notes to Consolidated Financial Statements (Unaudited)  First Quarter 2009 

NOTE 4. Loans and Leases

          The following table provides a breakdown of BB&T’s loan portfolio as of March 31, 2009 and December 31, 2008.

    March 31,  December 31, 
    2009  2008
    (Dollars in millions) 
Loans and leases, net of unearned income:         
     Commercial loans and leases  $  50,392  $  50,480 
     Sales finance    6,275    6,354 
     Revolving credit    1,760    1,777 
     Direct retail    15,000    15,454 
     Residential mortgage loans    16,336    17,091 
     Specialized lending    6,678    6,089 
             Total loans and leases held for investment    96,441    97,245 
     Loans held for sale    3,798    1,424 
           Total loans and leases   $  100,239  $  98,669 

          An analysis of the allowance for credit losses for the three months ended March 31, 2009 and 2008 is presented in the following table:

    For the Three Months Ended
    March 31,
    2009   2008   
    (Dollars in millions)  
 
Beginning Balance  $  1,607   $  1,015  
     Provision for credit losses    676     223  
     Loans and leases charged-off    (405 )    (141 ) 
     Recoveries of previous charge-offs    17     16  
            Net loans and leases charged-off    (388 )    (125 ) 
Ending Balance  $  1,895   $  1,113  
 
Allowance for loan and lease losses  $  1,869   $  1,097  
Reserve for unfunded lending commitments    26     16  
Allowance for credit losses  $  1,895   $  1,113  

14


BB&T Corporation and Subsidiaries   
Notes to Consolidated Financial Statements (Unaudited)  First Quarter 2009 

          The following table provides a summary of BB&T’s nonperforming and past due loans as of March 31, 2009 and December 31, 2008.

    March 31,  December 31, 
    2009  2008
       (Dollars in millions)
 
Nonaccrual loans and leases  $ 1,727   $ 1,413 
 
Foreclosed real estate    958    538 
Other foreclosed property    65    79 
     Total foreclosed property    1,023    617 
Total nonperforming assets  $ 2,750   $ 2,030 
 
Loans 90 days or more past due and still accruing (1)  $ 381   $ 431 

(1) Excludes mortgage loans guaranteed by GNMA that BB&T does not have the obligation to repurchase.

          At March 31, 2009, BB&T had $103 million in loans under the terms of troubled debt restructurings. This amount consists of $42 million in revolving credit loans, $36 million in residential mortgage loans, and $25 million in commercial loans. Loan restructurings generally occur when a borrower is experiencing, or is expected to experience, financial difficulties in the near-term. Consequently, a modification that would otherwise not be considered is granted to the borrower. These loans continue to accrue interest as long as the borrower complies with the revised terms and conditions and has demonstrated repayment performance with the modified terms.

15


BB&T Corporation and Subsidiaries   
Notes to Consolidated Financial Statements (Unaudited)  First Quarter 2009 

NOTE 5. Long-Term Debt

          Long-term debt is summarized as follows:

  March 31, December 31, 
  2009 2008
    (Dollars in millions) 
Parent Company         
       6.50% Subordinated Notes Due 2011 (1,3)  $ 648  $ 648 
       4.75% Subordinated Notes Due 2012 (1,3)    497    497 
       5.20% Subordinated Notes Due 2015 (1,3)    993    997 
       4.90% Subordinated Notes Due 2017 (1,3)    368    368 
       5.25% Subordinated Notes Due 2019 (1,3)    600    600 
 
Branch Bank         
       Floating Rate Senior Notes Due 2009 (8)    516    516 
       Floating Rate Subordinated Notes Due 2016 (1,8)    350    350 
       Floating Rate Subordinated Notes Due 2017 (1,8)    296    300 
       4.875% Subordinated Notes Due 2013 (1,3)    237    250 
       5.625% Subordinated Notes Due 2016 (1,3)    394    399 
 
Federal Home Loan Bank Advances to Branch Bank (4)         
       Varying maturities to 2028    9,851    9,838 
 
Junior Subordinated Debt to Unconsolidated Trusts (2)         
       5.85% BB&T Capital Trust I Securities Due 2035    514    514 
       6.75% BB&T Capital Trust II Securities Due 2036    598    598 
       6.82% BB&T Capital Trust IV Securities Due 2077 (5)    600    600 
       8.95% BB&T Capital Trust V Securities Due 2068 (6)    450    450 
       Other Securities (7)    182    182 
 
Other Long-Term Debt    69    66 
 
Fair value hedge-related basis adjustments    792    859 
 
                 Total Long-Term Debt  $ 17,955  $ 18,032 

(1) Subordinated notes that qualify under the risk-based capital guidelines as Tier 2 supplementary capital, subject to certain limitations.
(2) Securities that qualify under the risk-based capital guidelines as Tier 1 capital, subject to certain limitations.
(3) These fixed rate notes were swapped to floating rates based on LIBOR. At March 31, 2009, the effective rates paid on these borrowings ranged from 1.44% to 1.97%.
(4) At March 31, 2009, the weighted average cost of these advances was 3.78% and the weighted average maturity was 6.8 years.
(5) These securities are fixed rate through June 12, 2037 and then switch to a floating rate based on LIBOR.
(6) $360 million of this issuance was swapped to a floating rate based on LIBOR. At March 31, 2009 the effective rate on the swapped portion was 4.69%.
(7) These securities were issued by companies acquired by BB&T. At March 31, 2009, the effective rate paid on these borrowings ranged from 3.70% to 10.07%. These securities have varying maturities through 2035.
(8) These floating-rate securities are based on LIBOR and had an effective rate of 1.48% as of March 31, 2009.

16


BB&T Corporation and Subsidiaries   
Notes to Consolidated Financial Statements (Unaudited)  First Quarter 2009 

NOTE 6. Contractual Obligations, Commitments, Contingent Liabilities, and Off-Balance Sheet Arrangements

          BB&T utilizes a variety of financial instruments to meet the financing needs of clients and reduce exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit, standby letters of credit and financial guarantees, and derivatives. BB&T also has commitments to fund certain affordable housing investments and contingent liabilities of certain sold loans.

          Standby 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 public and private borrowing arrangements, including commercial paper issuance, bond financing and similar transactions. 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. As of March 31, 2009 and December 31, 2008, BB&T had issued standby letters of credit totaling $7.0 billion and $5.9 billion, respectively. The carrying amount of the liability for such guarantees was $22 million and $20 million at March 31, 2009 and December 31, 2008, respectively.

          A derivative is a financial instrument that derives its cash flows, and therefore its value, by reference to an underlying instrument, index or referenced interest rate. These instruments include interest-rate swaps, swaptions, caps, floors, collars, financial forward and futures contracts, when-issued securities, foreign exchange contracts and options written and purchased. BB&T uses derivatives primarily to manage risk related to securities, business loans, Federal Funds purchased, other overnight funding, long-term debt, mortgage servicing rights, mortgage banking operations and certificates of deposit. BB&T also uses derivatives to facilitate transactions on behalf of its clients. BB&T held a variety of derivative financial instruments with notional values of $75.6 billion and $74.2 billion at March 31, 2009 and December 31, 2008, respectively. These instruments were in a net gain position of $486 million and $626 million at March 31, 2009 and December 31, 2008, respectively.

          BB&T invests in certain affordable housing and historic building rehabilitation projects throughout its market area as a means of supporting local communities and 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. Branch Bank 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. As of March 31, 2009 and December 31, 2008, BB&T had investments of $907 million and $891 million, respectively, related to these projects, which are included in other assets on the Consolidated Balance Sheets. BB&T’s outstanding commitments to fund affordable housing investments totaled $393 million and $412 million at March 31, 2009 and December 31, 2008, respectively, which are included in other liabilities on the Consolidated Balance Sheets. As of March 31, 2009 and December 31, 2008, BB&T had outstanding loan commitments to these funds of $164 million and $161 million, respectively. Of this amount, $86 million and $81 million had been funded at March 31, 2009 and December 31, 2008, respectively, and were included in loans and leases on the Consolidated Balance Sheets. BB&T’s maximum risk

17


BB&T Corporation and Subsidiaries   
Notes to Consolidated Financial Statements (Unaudited)  First Quarter 2009 

exposure related to these investments totaled $1.1 billion at March 31, 2009 and December 31, 2008, respectively.

          In the ordinary course of business, BB&T indemnifies its officers and directors to the fullest extent permitted by law against liabilities arising from pending litigation. BB&T also issues standard representations and warranties in underwriting agreements, merger and acquisition agreements, loan sales, brokerage activities and other similar arrangements. Counterparties in many of these indemnification arrangements provide similar indemnifications to BB&T. Although these agreements often do not specify limitations, BB&T does not believe that any payments related to these guarantees would materially change the financial condition or results of operations of BB&T.

          BB&T has sold certain mortgage-related loans that contain recourse provisions. These provisions generally require BB&T to reimburse the investor for a share of any loss that is incurred after the disposal of the property. At March 31, 2009 and December 31, 2008, BB&T had $782 million and $822 million, respectively, of residential mortgage loans sold with recourse. In the event of nonperformance by the borrower, BB&T has maximum recourse exposure of approximately $704 million and $741 million as of March 31, 2009 and December 31, 2008, respectively. In addition, BB&T has $3.6 billion and $3.3 billion in loans serviced for others that were covered by loss sharing agreements at March 31, 2009 and December 31, 2008, respectively. As of March 31, 2009 and December 31, 2008, BB&T’s maximum exposure to loss for these loans is approximately $920 million and $818 million, respectively.

          BB&T has investments and future funding commitments to certain venture capital funds. As of March 31, 2009 and December 31, 2008, respectively, BB&T had investments of $176 million and $168 million, net of noncontrolling interest, related to these ventures and future funding commitments of $213 million and $222 million. BB&T’s risk exposure relating to such commitments is generally limited to the amount of investments and future funding commitments made.

          BB&T has made loan commitments to qualified special purpose entities as a nontransferor lender. As of March 31, 2009 and December 31, 2008, BB&T had loan commitments to these entities totaling $400 million and $405 million, respectively. Of this amount, $282 million and $290 million had been funded at March 31, 2009 and December 31, 2008, respectively, and were included in loans and leases on the Consolidated Balance Sheets.

18


BB&T Corporation and Subsidiaries   
Notes to Consolidated Financial Statements (Unaudited)  First Quarter 2009 

NOTE 7. Benefit Plans

          BB&T provides various benefit plans to substantially all employees, including employees of acquired entities. Employees of acquired entities generally participate in existing BB&T plans after consummation of the business combinations. The plans of acquired institutions are typically merged into the BB&T plans after consummation of the mergers, and, under these circumstances, credit is usually given to these employees for years of service at the acquired institution for vesting and eligibility purposes. Please refer to BB&T’s Annual Report on Form 10-K for the year ended December 31, 2008 for descriptions and disclosures about the various benefit plans offered by BB&T.

          The following table summarizes the components of net periodic benefit cost recognized for BB&T’s pension plans for the three month periods ended March 31, 2009 and 2008, respectively:

    Pension Plans
    Qualified   Nonqualified
    For the    For the
    Three Months Ended Three Months Ended 
    March 31,    March 31,
    2009 2008      2009     2008
          (Dollars in millions)     
 
Service cost  $  19   $  17   $  1  $  1 
Interest cost    19     18     2    2 
Estimated return on plan assets    (36 )    (34 )    -    - 
Amortization and other    14     (1 )    1    1 
Net periodic benefit cost  $  16   $  -   $  4  $  4 

          BB&T makes contributions to the qualified pension plan in amounts between the minimum required for funding standard accounts and the maximum amount deductible for federal income tax purposes. A discretionary contribution of $422 million was made to the qualified pension plan in the first quarter of 2009. Management currently has no plans to make any additional contributions to the qualified pension plan in 2009; however, management may elect to make additional contributions during 2009 if deemed appropriate.

19


BB&T Corporation and Subsidiaries   
Notes to Consolidated Financial Statements (Unaudited)  First Quarter 2009 

NOTE 8. Computation of Earnings Per Common Share

          BB&T’s basic and diluted earnings per common share amounts for the three month periods ended March 31, 2009 and 2008, respectively, were calculated as follows:

                 For the Three Months Ended 
    March 31,
    2009    2008 
  (Dollars in millions, except per share data, 
  shares in thousands) 
Basic Earnings Per Common Share:         
             Net income available to common shareholders  $  271  $  428 
     Weighted average number of common shares    559,801    546,214 
     Basic earnings per common share  $  .48  $  .78 
Diluted Earnings Per Common Share:         
             Net income available to common shareholders  $  271  $  428 
     Weighted average number of common shares    559,801    546,214 
             Effect of dilutive outstanding equity-based awards    3,765    2,732 
     Weighted average number of diluted common shares    563,566    548,946 
     Diluted earnings per common share  $  .48  $  .78 

           For the three months ended March 31, 2009 and 2008, the number of anti-dilutive awards was 43.4 million and 32.5 million shares, respectively. In addition, BB&T had a warrant outstanding for 13.9 million shares as of March 31, 2009 that was anti-dilutive.

20


BB&T Corporation and Subsidiaries   
Notes to Consolidated Financial Statements (Unaudited)  First Quarter 2009 

NOTE 9. Comprehensive Income (Loss)

          The balances in accumulated other comprehensive loss for the periods indicated are shown in the following tables:

 
    As of March 31, 2009  
        Deferred          
  Pre-Tax   Tax Expense     After-Tax
    Amount   (Benefit)     Amount
    (Dollars in millions)  
 
Unrealized net losses on securities available for sale  $ (464 )  $  (175 )   $    (289 ) 
Unrealized net gains on cash flow hedges    90     34       56  
Foreign currency translation adjustment    (11 )    -       (11 ) 
Unrecognized net pension and postretirement costs    (707 )    (268 )      (439 ) 
Total  $ (1,092 )  $  (409 )   $    (683 ) 

    As of December 31, 2008  
        Deferred          
  Pre-Tax   Tax Expense     After-Tax
    Amount   (Benefit)     Amount
    (Dollars in millions)  
 
Unrealized net losses on securities available for sale  $ (517 )  $  (193 )   $    (324 ) 
Unrealized net gains on cash flow hedges    76     28       48  
Foreign currency translation adjustment    (9 )    -       (9 ) 
Unrecognized net pension and postretirement costs    (720 )    (273 )      (447 ) 
Total  $ (1,170 )  $  (438 )   $    (732 ) 

21


BB&T Corporation and Subsidiaries   
Notes to Consolidated Financial Statements (Unaudited)  First Quarter 2009 

NOTE 10. Equity-Based Compensation Plans

          BB&T has options, restricted shares of common stock and restricted share units outstanding from the following equity-based compensation plans: the 2004 Stock Incentive Plan (“2004 Plan”), the 1995 Omnibus Stock Incentive Plan, the Non-Employee Directors’ Stock Option Plan, and plans assumed from acquired entities. All plans generally allow for accelerated vesting of awards for holders who retire and have met all retirement eligibility requirements and in connection with certain other events. BB&T’s shareholders have approved all equity-based compensation plans with the exception of plans assumed from acquired companies. As of March 31, 2009, the 2004 Plan is the only plan that has awards available for future grants. Please refer to BB&T’s Annual Report on Form 10-K for the year ended December 31, 2008 for further disclosures related to equity-based awards issued by BB&T.

          BB&T measures the fair value of each option award on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants awarded during the first three months of 2009 and 2008.

  2009     2008  
Assumptions:       
             Risk-free interest rate    3.1  %  3.6  %
             Dividend yield    6.0    4.5
             Volatility factor    29.1    15.5
             Expected life    7.1  yrs  6.9  yrs
Fair value of options per share  $  2.59    $ 3.45

          BB&T measures the fair value of restricted shares based on the price of BB&T’s common stock on the grant date and the fair value of restricted share units based on the price of BB&T’s common stock on the grant date less the present value of expected dividends that are foregone during the vesting period.

          The following table details the activity during the first three months of 2009 related to stock options awarded by BB&T:

  For the Three Months Ended 
  March 31, 2009
      Wtd. Avg. 
       Exercise 
  Options   Price
 
Outstanding at beginning of period  41,837,504    $ 36.55 
Granted  2,827,578     16.88 
Exercised  (5,523 )    23.57 
Forfeited or expired  (1,085,570 )    36.88 
Outstanding at end of period  43,573,989     35.27 
 
Exercisable at end of period  30,531,153    $ 36.09 

22


BB&T Corporation and Subsidiaries   
Notes to Consolidated Financial Statements (Unaudited)  First Quarter 2009 

          The following table details the activity during the first three months of 2009 related to restricted shares and restricted share units awarded by BB&T:

  For the Three Months Ended 
  March 31, 2009
      Wtd. Avg. 
      Grant Date 
  Shares/Units   Fair Value 
Nonvested at beginning of period  6,259,349   $  29.15 
Granted  4,969,610     7.43 
Vested  (39,020 )    29.39 
Forfeited  (37,137 )    26.45 
Nonvested at end of period  11,152,802     19.48 

NOTE 11. Fair Value Disclosures

          BB&T carries various assets and liabilities at fair value based on applicable accounting standards. In addition, BB&T has elected to account for prime residential mortgage and commercial mortgage loans held for sale at fair value in accordance with SFAS No. 159, “The Fair Value Option for Financial Assets and Liabilities-including an amendment of FASB Statement No. 115,” (the “Fair Value Option”). SFAS No. 157 established a framework for measuring fair value and defines fair value as the exchange price that would be received on the measurement date to sell an asset or the price paid to transfer a liability in the principal or most advantageous market available to the entity in an orderly transaction between market participants. SFAS No. 157 also established a three level fair value hierarchy that describes the inputs that are used to measure assets and liabilities.

Level 1

Level 1 asset and liability fair values are based on quoted prices in active markets for identical assets and liabilities. Level 1 assets and liabilities include certain equity securities and derivative contracts that are traded in an active market.

Level 2

Level 2 asset and liability fair values are based on observable inputs that include: quoted market prices for similar assets or liabilities; quoted market prices that are not in an active market; or other inputs that are observable in the market and can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include fixed income securities and mortgage-backed securities that are held in the Corporation’s trading and available-for-sale portfolios, loans held for sale, certain derivative contracts and short-term borrowings.

Level 3

Level 3 assets and liabilities are financial instruments whose value is calculated by the use of pricing models and/or discounted cash flow methodologies, as well as financial instruments for which the determination of fair value requires significant management

23


BB&T Corporation and Subsidiaries   
Notes to Consolidated Financial Statements (Unaudited)  First Quarter 2009 

judgment or estimation. These methodologies may result in a significant portion of the fair value being derived from unobservable data. Level 3 assets and liabilities include certain trading securities, non-agency mortgage-backed securities, mortgage servicing rights, venture capital investments and certain derivative contracts.

          Assets and liabilities measured at fair value on a recurring basis, including financial instruments for which BB&T has elected the Fair Value Option are summarized below:

        Fair Value Measurements for Assets and Liabilities 
        Measured on a Recurring Basis
        Quoted Prices in      Significant 
        Active Markets for  Significant Other  Unobservable 
        Identical Assets  Observable Inputs  Inputs 
    3/31/2009    (Level 1)  (Level 2) (Level 3)
        (Dollars in Millions)
Assets:                 
 Trading securities   $  481  $  190  $  287  $  4 
 Securities available for sale    19,008    154    17,819    1,035 
 Loans held for sale (1)    3,783    -    3,783    - 
 Residential mortgage servicing rights    365    -    -    365 
 Derivative assets (2)    1,468    3    1,409    56 
 Venture capital investments (2)    191    -    1    190 
   Total assets   $  25,296  $  347  $  23,299  $  1,650 
 
Liabilities:                 
 Derivative liabilities (2)   $  982  $  3  $  978  $  1 
 Short-term borrowed funds (3)    191    -    191    - 
   Total liabilities   $  1,173  $  3  $  1,169  $  1 
 
        Fair Value Measurements for Assets and Liabilities
        Measured on a Recurring Basis
        Quoted Prices in      Significant 
        Active Markets for  Significant Other  Unobservable 
        Identical Assets  Observable Inputs  Inputs 
    12/31/2008    (Level 1)  (Level 2) (Level 3) 
        (Dollars in Millions)
Assets:                 
 Trading securities     $  376  $  204  $  168  $  4 
 Securities available for sale    32,843    170    31,574    1,099 
 Loans held for sale (1)    1,396    -    1,396    - 
 Residential mortgage servicing rights    370    -    -    370 
 Derivative assets (2)    1,723    4    1,681    38 
 Venture capital investments (2)    183    -    1    182 
     Total assets   $  36,891  $  378  $  34,820  $  1,693 
 
Liabilities:                 
 Derivative liabilities (2)   $  1,097  $  11  $  1,085  $  1 
 Short-term borrowed funds (3)    149    -    149    - 
     Total liabilities   $  1,246  $  11  $  1,234  $  1 

(1) Loans held for sale are residential and commercial mortgage loans that were originated subsequent to December 31, 2007 for which the Company elected the fair value option under SFAS No. 159. Loans originated prior to January 1, 2008 and certain other loans held for sale are still accounted for at the lower of cost or market. There were $15 million and $28 million in loans held for sale that are not accounted for at fair value at March 31, 2009 and December 31, 2008, respectively.
(2) These amounts are reflected in other assets and other liabilities on the Consolidated Balance Sheets.
(3) Short-term borrowed funds reflect securities sold short positions.

24


BB&T Corporation and Subsidiaries   
Notes to Consolidated Financial Statements (Unaudited)  First Quarter 2009 

          The tables below present a reconciliation for the three month periods ended March 31, 2009 and 2008, respectively, for all Level 3 assets and liabilities that are measured at fair value on a recurring basis.

 
    Fair Value Measurements Using Significant Unobservable Inputs  
 
              Mortgage         Venture  
              Servicing   Net   Capital  
    AFS Securities    Trading    Rights   Derivatives   Investments  
    (Dollars in Millions)  
Balance at January 1, 2009       $  1,099    $  4   $  370   $  37   $  182  
 Total realized and unrealized gains or losses:                               
     Included in earnings    -     -     (78 )    41     (1 ) 
     Included in other comprehensive income (loss)    (64 )    -     -     -     -  
 Purchases, issuances and settlements    -     11     73     (23 )    9  
 Transfers in and/or out of Level 3    -     (11 )    -     -     -  
Balance at March 31, 2009  $  1,035   $  4   $  365   $  55   $  190  
 
 
    Fair Value Measurements Using Significant Unobservable Inputs  
 
              Mortgage         Venture  
              Servicing   Net   Capital  
    AFS Securities    Trading    Rights   Derivatives   Investments  
    (Dollars in Millions)  
Balance at January 1, 2008  $  9   $  27   $  472    $  2   $  128  
 Total realized and unrealized gains or losses:                               
       Included in earnings    -     (2 )    (107 )    22     (1 ) 
 Purchases, issuances and settlements    5     (14 )    41     (5 )    14  
 Transfers in and/or out of Level 3    -     3     -     -     -  
Balance at March 31, 2008  $  14   $  14   $  406   $  19   $  141  

          The tables below summarize unrealized and realized gains and losses recorded in earnings for Level 3 assets and liabilities for the three month periods ended March 31, 2009 and 2008, respectively.

  Total Gains and Losses
  AFS Securities     Trading Mortgage Net Derivatives    Venture Capital  
          Servicing Rights       Investments  
  (Dollars in Millions)
Classification of gains and losses                         
(realized/unrealized) included in earnings                       
for the period:                         
     Mortgage banking income  $  -  $  -     $  (78 )  $  41   $  -  
     Other noninterest income     -    -    -     -    (1 ) 
           Total  $  -  $  -     $  (78 )  $  41   $  (1 ) 
 
Net unrealized gains (losses) included                         
 in net income relating to assets and liabilities                       
 still held at March 31, 2009  $  -  $  -   $  (46 )  $  56     $  (1 ) 

25


BB&T Corporation and Subsidiaries   
Notes to Consolidated Financial Statements (Unaudited)  First Quarter 2009 

  Total Gains and Losses
            Mortgage         Venture Capital  
  AFS Securities  Trading     Servicing Rights   Net Derivatives    Investments  
  (Dollars in Millions)
Classification of gains and losses                         
(realized/unrealized) included in                         
earnings for the period:                         
       Mortgage banking income  $    $ -      $  (107 )     $  22   $  -  
       Other noninterest income        (2 )    -     -    (1 ) 
             Total  $     $ (2 )     $  (107 )   $  22  $  (1 ) 
 
Net unrealized gains (losses) included                         
 in net income relating to assets and liabilities                       
 still held at March 31, 2008  $     $ -    $  (84 )  $  19  $  (1 ) 

           The realized and unrealized losses reported for mortgage servicing rights assets are composed of a negative valuation adjustment of $46 million and $84 million plus the realization of expected residential mortgage servicing rights cash flows of $32 million and $23 million for the quarters ended March 31, 2009 and 2008, respectively. BB&T uses various derivative financial instruments to mitigate the income statement effect of changes in fair value due to its quarterly valuation. During the three months ended March 31, 2009 and 2008, respectively, the derivative instruments produced gains of $74 million and $82 million, which offset the negative valuation adjustment recorded.

          The following table details the fair value and unpaid principal balance of loans held for sale at March 31, 2009 and December 31, 2008, that were elected to be carried at fair value.

          Fair Value less           Fair Value less 
        Aggregate  Aggregate         Aggregate  Aggregate 
        Unpaid  Unpaid         Unpaid  Unpaid 
       Fair    Principal  Principal      Fair    Principal  Principal 
      Value    Balance  Balance     Value    Balance  Balance 
    March 31, 2009     December 31, 2008
    (Dollars in millions)
Loans held for sale reported at fair value                           
 Total (1)  $ 3,783  $ 3,716  $  67   $ 1,396     $  1,367     $  29 
 Nonaccrual loans    2    3    (1 )    1    1    - 
 Loans 90 days or more past due                           
 and still accruing interest    4    5    (1 )    3    3    - 

(1) The change in fair value is reflected in mortgage banking income.

          Also, BB&T may be required, from time to time, to measure certain other financial assets at fair value on a nonrecurring basis. Assets measured at fair value on a nonrecurring basis for the quarter ended March 31, 2009 that were still held on the balance sheet at March 31, 2009 totaled $1.7 billion. This amount consists of $758 million for impaired loans and $958 million for foreclosed real estate that were classified as Level 3 assets. During the first quarter of 2009, BB&T recorded $86 million and $17 million, respectively, in losses related to write-downs of the loans and foreclosed real estate based on the appraised value of the underlying collateral.

26


BB&T Corporation and Subsidiaries   
Notes to Consolidated Financial Statements (Unaudited)  First Quarter 2009 

NOTE 12. Derivative Financial Instruments

          BB&T uses a variety of derivative instruments to manage interest rate and foreign exchange risks. These instruments consist of interest-rate swaps, swaptions, caps, floors, collars, financial forward and futures contracts, when-issued securities, foreign exchange contracts and options written and purchased. A derivative is a financial instrument that derives its cash flows, and therefore its value, by reference to an underlying instrument, index or referenced interest rate. There are five areas of risk management: balance sheet management, mortgage banking operations, mortgage servicing rights, net investment in a foreign subsidiary and client-related and other risk management activities.

          The following tables set forth certain information concerning BB&T’s derivative financial instruments and related hedged items at March 31, 2009:

Derivative Classifications and Hedging Relationships
        March 31, 2009           
  Hedged Item or  Notional      Fair Value   
  Transaction  Amount       Gain (1)          Loss (1)    
      (Dollars in millions)
 
 
Derivatives Designated as Cash Flow Hedges                       
 Interest rate contracts                       
   Receive fixed swaps  First forecasted interest receipts on  $  5,000   $    55   $    -  
   commercial loans                     
   Pay fixed swaps  First forecasted interest payments on    3,350      2       (36 ) 
   overnight funding                     
   Pay fixed swaps  First forecasted interest payments on    3,100      4       (47 ) 
   3 month LIBOR funding                     
   Caps  First forecasted interest payments on    904      -       -  
   3 month LIBOR funding                        
   Total    $  12,354   $      61   $    (83 ) 
 
Derivatives Designated as Net Investment Hedges                     
 Foreign exchange contracts    $  73   $    2   $    -  
 
Derivatives Designated as Fair Value Hedges                       
 Interest rate contracts:                       
   Receive fixed swaps  Individual fixed rate long-term debt  $  4,137   $    522   $    -  
   Receive fixed swaps  Long-term CDs    328      13       -  
   Pay fixed swaps  Individual fixed rate securities    354      -       (123 ) 
   available for sale                        
   Total    $  4,819   $      535    $     (123 ) 
 
Derivatives Not Designated as Hedges                       
Client-related and other risk management                       
 Interest rate contracts                       
     Receive fixed swaps    $  10,134   $    674   $    (1 ) 
     Pay fixed swaps      11,141      2       (608 ) 
     Other swaps      7,639      13       (27 ) 
     Option trades      141      -       -  
     Swaptions      580      36       (36 ) 
     Futures contracts      1,407      -       -  
     Collars      162      7       (7 ) 
 Other derivatives                       
     Swaps      51      16       -  
 Foreign exchange contracts      618      7       (9 ) 
Mortgage Banking                       
 Interest rate contracts                       
   Receive fixed swaps      88      2       -  
   Forward commitments      7,656      4       (73 ) 
   Purchased and sold put options      6,307      56       -  
   Swaptions      75      1       -  

27


BB&T Corporation and Subsidiaries   
Notes to Consolidated Financial Statements (Unaudited)  First Quarter 2009 

   TBA/When issued securities    645    1    -  
Mortgage Servicing Rights               
 Interest rate contracts               
   Receive fixed swaps    724    22    (8 ) 
   Pay fixed swaps    109    -    (2 ) 
   Swaptions    910