VEDA ANNUAL MEETING & MEMBERSHIP LUNCHEON Mitchell W. Hassell Senior Vice President Commercial Banking Division November 30, 2011
Mitch Hassell, Senior Vice President 23-year Banking Career with experience in Retail, Commercial/Corporate & Government Banking Richmond-based Commercial Relationship Manager Part of position is traditional “loan officer” where I underwrite, co-approve, close & service loans in my portfolio Clients & Prospects are primarily closely held and established middle market companies Lead a team of Richmond-based professionals that help my clients achieve their business and personal goals 2
BB&T Corporation # of State State Deposits Branches Rank Virginia 389 $ 20.3 bn 4 2 North Carolina 363 $ 22.9 bn 5 Florida 269 $ 12.6 bn 5 Georgia 170 $ 11.3 bn 7 Maryland 128 $ 6.6 bn 3 South Carolina 115 $ 6.7 bn 4 Kentucky 89 $ 3.9 bn $ 4.5 bn 4 Alabama 87 $ 5.1 bn 1 West Virginia 77 $ 2.8 bn 6 Tennessee 56 $ 1.1 bn Texas 23 41 $ 1.3 bn District of Columbia 12 7 NM Indiana 2 NM Total # of Branches 1,780 Number of branches per state as of Sept. 30, 2011 Deposit Market Share data as of June 30, 2011 Source: FactSet, SNL Financial 3
BB&T Corporation Founded in 1872 and headquartered in Winston-Salem, N.C. Among the nation's top financial-holding companies $168 billion in assets & $14.9 billion in market capitalization, as of Sept. 30, 2011 Rated one of the country’s safest and soundest financial institutions 36 banking regions organized as a group of community banks, each with a regional president, which allows decisions to be made locally, close to the client Community banking model allows for client service that is more responsive, reliable and empathetic… “We’re as big as you need us to be and as small as you want us to be” 4
BB&T Corporation One of only three large regional banks in the country to remain profitable during the “Great Recession” Paid a dividend to shareholders every year since 1903 BB&T Insurance Services Inc., is the 6 th largest insurance agency/brokerage in the country, through a network of independent agencies Richmond-based Scott & Stringfellow LLC is a full-service regional brokerage firm with 43 retail brokerage offices throughout the Virginias, Carolinas, Georgia and New Jersey The Wall Street Journal consistently ranks BB&T Capital Markets Equity Research analysts among the nation's "Best on the Street." 5
BB&T’s Mission Helping our CLIENTS achieve economic success and financial security; Creating a place where our EMPLOYEES can learn, grow and be fulfilled in their work; Making the COMMUNITIES in which we work better places to be; and thereby: Optimizing the long-term return to our SHAREHOLDERS , while providing a safe and sound investment. 6
Industry Leading Client Satisfaction OVERALL BANK SATISFACTION* LIKELIHOOD TO RECOMMEND* LIKELIHOOD FOR FUTURE USE* BB&T 60.4% BB&T 62.9% BB&T 61.6% Peer 1 Peer 1 Peer 1 Peer 2 Peer 2 Peer 2 Peer 3 Peer 3 Peer 3 Peer 4 Peer 4 Peer 4 25 35 45 55 65 25 35 45 55 65 25 35 45 55 65 * From Maritz Research 2011 Retail Client Satisfaction and Loyalty Survey, represent percentage of “top box” scores, indicat ing a 9 or 10 rating on a 10-point scale. Peers include BAC, RF, STI and Wachovia Winner of 19 Excellence Awards from Greenwich Associates; 17 National Awards and 2 Regional Awards Received more awards than any other financial “Highest in Customer Satisfaction institution in the nation among Mortgage Servicing Companies, Second consecutive year BB&T has received more Two Years in a Row”** awards than any other financial institution in the nation **Branch Banking and Trust received the highest numerical score among mortgage servicers in the proprietary J.D. Power and Associates 2010-2011 Primary Mortgage Servicer Study SM . 2011 study based on responses from 4,944 consumers measuring 20 companies and measures the satisfaction of consumers with their current mortgage servicer. Proprietary study results are based on experiences and perceptions of consumers surveyed in April-May 2011. Your experiences may vary. Visit jdpower.com 7
Are Banks Lending in Today’s Environment? Yes (although the lending landscape has changed) Continued problem loans create the need for new loans to be less risky on average (banks need batting averages of 999.5 every season) Heightened regulatory environment Banks are hungry for loans today due to decreased demand, especially C&I loans Bank lending is a profitable endeavor and often the key to a bank’s relationship with its client 8
Financing a Business in Today’s Environment Banks focus on a company’s track record and expectations of future results by looking at: Financial Leverage (Total Liabilities/Tangible Net Worth) Profitability Debt Service Coverage Cash Flow (relative to demands and stability) Financial Trends & Outlook (sales, profits & leverage) Management (abilities, experience & back-up) Financial Flexibility (liquidity & asset values relative to debt, i.e. additional borrowing capacity?) Guarantor Support (financial strength and flexibility) 9
Due Diligence Process Understand company’s business and industry (past, present & future) Get to know management team (abilities, experience & back- up) Understand borrowing need, collateral, primary & secondary sources of repayment, and personal guarantors (if offered) Gather project information, business plan, prior year-end financials, most recent interims with prior year information for comparison purposes, budgets/forecasts/proformas Spread and digest data that will lead to questions Loan proposal Typically 2 – 4 week process once all information is in hand 10
Risk of Default vs. Risk of Loss Risk of Default Likelihood that a Borrower will default on a loan during its term- “cash flow” focus Risk of Loss Likelihood of a loss from the resolution of a default- “collateral” focus Banks are interested in understanding and identifying the cash flow that will repay a loan and the collateral that will serve as the secondary source of repayment “Airballs”, or unsecured portions of loans, are much more difficult to get done in today’s environment 11
Commercial Loan Risk Grades Risk Grading System, often 10 grades, used to assign level of risk at loan inception and during life of loan Risk of Default & Risk of Loss factor into Risk Grade The better the grade, the better the interest rate Determines the amount of reserves needed for each loan and ultimately the entire loan portfolio When a loan’s risk grade deteriorates with no change in fees or interest rate, loan profitability suffers due to higher reserve requirement 12
Financial Covenants Borrower and Bank agree to financial covenants that both feel can be maintained during term of loan If maintained (and loan payments, financial information delivery, etc. are handled as agreed), Bank should feel good about company’s performance and return on the loan Typically relate to maintaining a certain level of leverage and profitability or cash flow coverage Banks want the company they lend to today, to look roughly similar during the term of the loan 13
Typical Affirmative Covenants Borrower will: Maintain existence, current legal form of business, records, properties & insurance Conduct business continually Comply with laws Allow inspections Furnish financial and other information when due Provide notice of litigation or defaults Do what other loan documents require 14
Typical Negative Covenants Borrower will not (without bank’s prior written consent): Allow liens on bank’s collateral Create additional debt (or leases) above $TBD Guaranty debt of another entity Exceed capital expenditures of $TBD Change current legal form of business Purchase the equity or assets of another entity Pay dividends or distributions in excess of $TBD Pay salaries/bonuses or make loans to directors/owners/management in excess of $TBD Dispose or transfer ownership of assets other than in the ordinary course of business Violate negative covenants in other loan documents 15
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