ACL

The following discussion focuses on the valuation techniques
and significant inputs used by BB&T in determining the Level 2 and Level 3 fair values of each significant class of assets
and liabilities.BB&T generally utilizes a third-party pricing service
in determining the fair value of its securities portfolio. Fair value measurements are derived from market-based pricing matrices
that were developed using observable inputs that include benchmark yields, benchmark securities, reported trades, offers, bids,
issuer spreads and broker quotes. As described by security type below, additional inputs may be used, or some inputs may not be
applicable. In the event that market observable data was not available, which would generally occur due to the lack of an active
market for a given security, the valuation of the security would be subjective and may involve substantial judgment by management.Specific valuation techniques and inputs used in determining
the fair value of each significant class of assets and liabilities follows:Trading securities: Trading securities are composed
of all types of debt and equity securities, but the majority consists of debt securities issued by the U.S. Treasury, GSEs, or
states and political subdivisions. The valuation techniques used for these investments are more fully discussed below.GSE securities and RMBS issued by GSE: These are debt
securities issued by GSEs. GSE pass-through securities are valued using market-based pricing matrices that are based on observable
inputs including benchmark TBA security pricing and yield curves that were estimated based on U.S. Treasury yields and certain
floating rate indices. The pricing matrices for these securities may also give consideration to pool-specific data supplied directly
by the GSE. GSE CMOs are valued using market-based pricing matrices that are based on observable inputs including offers, bids,
reported trades, dealer quotes and market research reports, the characteristics of a specific tranche, market convention prepayment
speeds and benchmark yield curves as described above.States and political subdivisions: These securities
are valued using market-based pricing matrices that are based on observable inputs including MSRB reported trades, issuer spreads,
material event notices and benchmark yield curves. Field: Page; Sequence: 127; Value: 2 Non-agency RMBS: Pricing matrices for these securities
are based on observable inputs including offers, bids, reported trades, dealer quotes and market research reports, the characteristics
of a specific tranche, market convention prepayment speeds and benchmark yield curves as described above.Other securities: These securities consist primarily
of mutual funds and corporate bonds. These securities are valued based on a review of quoted market prices for assets as well as
through the various other inputs discussed previously.Covered securities: Covered securities are covered
by FDIC loss sharing agreements and consist of re-remic non-agency RMBS, municipal securities and non-agency RMBS. Covered state
and political subdivision securities and certain non-agency RMBS are valued in a manner similar to the approach described above
for these asset classes. The re-remic non-agency RMBS, which are categorized as Level 3, were valued based on broker dealer quotes
that reflected certain unobservable market inputs. Sensitivity to changes in the fair value of covered securities is significantly
offset by changes in BB&T’s indemnification asset from the FDIC. Subject to certain restrictions, the terms of the loss
sharing agreement associated with these re-remic non-agency RMBS provide that Branch Bank will be reimbursed by the FDIC for 95%
of any and all losses.LHFS: BB&T originates certain mortgage loans to
be sold to investors. These loans are carried at fair value based on BB&T’s election of the Fair Value Option. The fair
value is primarily based on quoted market prices for securities backed by similar types of loans. The changes in fair value of
these assets are largely driven by changes in interest rates subsequent to loan funding and changes in the fair value of servicing
associated with the mortgage loan held for sale.Residential MSRs: BB&T estimates the fair value
of residential MSRs using an OAS valuation model to project MSR cash flows over multiple interest rate scenarios, which are then
discounted at risk-adjusted rates. The OAS model considers portfolio characteristics, contractually specified servicing fees, prepayment
assumptions, delinquency rates, late charges, other ancillary revenue, costs to service and other economic factors. Fair value
estimates and assumptions are compared to industry surveys, recent market activity, actual portfolio experience and, when available,
other observable market data.Derivative assets and liabilities: BB&T uses derivatives
to manage various financial risks. The fair values of derivative financial instruments are determined based on quoted market prices,
dealer quotes and internal pricing models that are primarily sensitive to market observable data. The fair values of interest rate
lock commitments, which are related to mortgage loan commitments and are categorized as Level 3, are based on quoted market prices
adjusted for commitments that BB&T does not expect to fund and include the value attributable to the net servicing fees.Private equity and similar investments: BB&T has
private equity and similar investments that are measured at fair value based on the investment’s net asset value. In many
cases there are no observable market values for these investments and therefore management must estimate the fair value based on
a comparison of the operating performance of the company to multiples in the marketplace for similar entities. This analysis requires
significant judgment and actual values in a sale could differ materially from those estimated.Short-term borrowed funds: Short-term borrowed funds
represent debt securities sold short. These are entered into through BB&T’s brokerage subsidiary. These trades are executed
as a hedging strategy for the purposes of supporting institutional and retail client trading activities. Field: Page; Sequence: 128; Value: 2

Fair Value Measurements Using Significant Unobservable Inputs

Private

Equity and

Covered

Residential

Net

Similar

Year Ended December 31, 2012

Trading

Securities

MSRs

Derivatives

Investments

(Dollars in millions)

Balance at January 1, 2012

$
1

$
984

$
563

$
59

$
261

Total realized and unrealized gains (losses):

Included in earnings:

Interest income

 ―

48

 ―

 ―

 ―

Mortgage banking income

 ―

 ―

(32)

458

 ―

Other noninterest income

 ―

 ―

 ―

 ―

21

Included in unrealized net holding gains (losses)

in OCI

 ―

88

 ―

 ―

 ―

Purchases

4

 ―

 ―

 ―

101

Issuances

 ―

 ―

270

308

 ―

Sales

(4)

 ―

 ―

 ―

(59)

Settlements

 ―

(126)

(174)

(771)

(1)

Balance at December 31, 2012

$
1

$
994

$
627

$
54

$
323

Change in unrealized gains (losses) included in earnings for

the period, attributable to assets and liabilities still held

at December 31, 2012

$
 ―

$
48

$
(32)

$
54

$
12

Fair Value Measurements Using Significant Unobservable Inputs

Private

States &

Equity and

Political

Other

Covered

Residential

Net

Similar

Year Ended December 31, 2011

Trading

Subdivisions

Securities

Securities

MSRs

Derivatives

Investments

(Dollars in millions)

Balance at January 1, 2011

$
11

$
119

$
7

$
954

$
830

$
(25)

$
266

Total realized and unrealized gains (losses):

Included in earnings:

Interest income

 ―

 ―

 ―

54

 ―

 ―

 ―

Mortgage banking income

 ―

 ―

 ―

 ―

(341)

151

 ―

Other noninterest income

(3)

 ―

 ―

 ―

 ―

 ―

64

Included in unrealized net holding

gains (losses) in OCI

 ―

(9)

(1)

24

 ―

 ―

 ―

Purchases

7

 ―

 ―

 ―

 ―

 ―

61

Issuances

 ―

 ―

 ―

 ―

225

110

 ―

Sales

(14)

 ―

 ―

 ―

 ―

 ―

(112)

Settlements

 ―

(53)

(1)

(48)

(151)

(177)

(15)

Transfers into Level 3

 ―

 ―

 ―

 ―

 ―

 ―

1

Transfers out of Level 3

 ―

(57)

(5)

 ―

 ―

 ―

(4)

Balance at December 31, 2011

$
1

$
 ―

$
 ―

$
984

$
563

$
59

$
261

Change in unrealized gains (losses)

included in earnings for the period,

attributable to assets and liabilities

still held at December 31, 2011

$
 ―

$
 ―

$
 ―

$
54

$
(341)

$
59

$
39

 Field: Page; Sequence: 129; Value: 2

Fair Value Measurements Using Significant Unobservable Inputs

Private

States &

Equity and

Political

Other

Covered

Residential

Net

Similar

Year Ended December 31, 2010

Trading

Subdivisions

Securities

Securities

MSRs

Derivatives

Investments

(Dollars in millions)

Balance at January 1, 2010

$
93

$
210

$
9

$
668

$
832

$
(20)

$
281

Total realized and unrealized gains (losses):

Included in earnings:

Interest income

 ―

 ―

 ―

61

 ―

 ―

 ―

Mortgage banking income

 ―

 ―

 ―

 ―

(138)

246

 ―

Other noninterest income

(1)

 ―

 ―

 ―

 ―

 ―

35

Included in OCI

 ―

12

(1)

225

 ―

 ―

 ―

Purchases, issuances and settlements

(5)

(87)

(1)

 ―

136

(251)

(50)

Transfers in and/or out of Level 3

(76)

(16)

 ―

 ―

 ―

 ―

 ―

Balance at December 31, 2010

$
11

$
119

$
7

$
954

$
830

$
(25)

$
266

Change in unrealized gains (losses)

included in earnings for the period,

attributable to assets and liabilities

still held at December 31, 2010

$
(2)

$
 ―

$
 ―

$
61

$
(138)

$
(25)

$
9

BB&T’s policy is to recognize transfers in and
transfers out of Levels 1, 2 and 3 as of the end of a reporting period. During the year ended December 31, 2012, BB&T did not
have any material transfer of securities between levels in the fair value hierarchy. During the year ended December 31, 2011, BB&T
transferred certain state and political subdivision securities out of Level 3 as a result of management’s decision to reclassify
them from available for sale to held to maturity classification, which is not recorded at fair value. During the year ended December
31, 2010, transfers from Level 3 to Level 2 were the result of increased observable market activity for these securities. There
were no gains or losses recognized as a result of the transfers of securities during the years ended December 31, 2012, 2011 or
2010. There were no significant transfers of securities between Level 1 and Level 2 for the years ended December 31, 2012, 2011
or 2010.The majority of BB&T’s private equity and similar
investments are in SBIC qualified funds. The significant investment strategies for these funds primarily focus on equity and subordinated
debt investments in privately-held middle market companies. The majority of these investments are not redeemable and distributions
are received as the underlying assets of the funds liquidate. The timing of distributions, which are expected to occur on various
dates through 2025, is uncertain and dependent on various events such as recapitalizations, refinance transactions and ownership
changes among others. Excluding the investment of future funds, BB&T estimates these investments have a weighted average remaining
life of approximately three years; however, the timing and amount of distributions may vary significantly. As of December 31, 2012,
restrictions on the ability to sell the investments include, but are not limited to, consent of a majority member or general partner
approval for transfer of ownership. BB&T’s investments are spread over numerous privately-held middle market companies,
and thus the sensitivity to a change in fair value for any single investment is limited. The significant unobservable inputs for
these investments are EBITDA multiples that ranged from 5x to 11x, with a weighted average of 7x, at December 31, 2012.


ACL

Field: Page; Sequence: 130; Value: 2


ACL

Additionally, accounting standards require the disclosure
of the estimated fair value of financial instruments that are not recorded at fair value. A financial instrument is defined as
cash, evidence of an ownership interest in an entity or a contract that creates a contractual obligation or right to deliver or
receive cash or another financial instrument from a second entity. For the financial instruments that BB&T does not record
at fair value, estimates of fair value are made at a point in time, based on relevant market data and information about the financial
instrument. Fair values are calculated based on the value of one trading unit without regard to any premium or discount that may
result from concentrations of ownership of a financial instrument, possible tax ramifications, estimated transaction costs that
may result from bulk sales or the relationship between various financial instruments. No readily available market exists for a
significant portion of BB&T’s financial instruments. Fair value estimates for these instruments are based on current
economic conditions, currency and interest rate risk characteristics, loss experience and other factors. Many of these estimates
involve uncertainties and matters of significant judgment and cannot be determined with precision. Therefore, the calculated fair
value estimates in many instances cannot be substantiated by comparison to independent markets and, in many cases, may not be realizable
in a current sale of the instrument. In addition, changes in assumptions could significantly affect these fair value estimates.
The following methods and assumptions were used by BB&T in estimating the fair value of these financial instruments.Cash and cash equivalents and segregated cash due from
banks: For these short-term instruments, the carrying amounts are a reasonable estimate of fair values.Securities held to maturity: The fair values of securities
held to maturity are based on a market approach using observable inputs such as benchmark yields and securities, TBA prices, reported
trades, issuer spreads, current bids and offers, monthly payment information and collateral performance.Loans receivable: The fair values for loans are estimated
using discounted cash flow analyses, applying interest rates currently being offered for loans with similar terms and credit quality,
which are deemed to be indicative of orderly transactions in the current market. For commercial loans and leases, discount rates
may be adjusted to address additional credit risk on lower risk grade instruments. For residential mortgage and other consumer
loans, internal prepayment risk models are used to adjust contractual cash flows. Loans are aggregated into pools of similar terms
and credit quality and discounted using a LIBOR based rate. The carrying amounts of accrued interest approximate fair values.FDIC loss share receivable: The fair value of the
FDIC loss share receivable was estimated using discounted cash flow analyses, applying a risk free interest rate that is adjusted
for the uncertainty in the timing and amount of these cash flows. The expected cash flows to/from the FDIC related to loans were
estimated using the same assumptions that were used in determining the accounting values for the related loans. The expected cash
flows to/from the FDIC related to securities are based upon the fair value of the related securities and the payment that would
be required if the securities were sold for that amount. The FDIC loss share agreements are not transferrable and, accordingly,
there is no market for this receivable.Deposit liabilities: The fair values for demand deposits,
interest-checking accounts, savings accounts and certain money market accounts are, by definition, equal to the amount payable
on demand. Fair values for CDs are estimated using a discounted cash flow calculation that applies current interest rates to aggregate
expected maturities. In addition, nonfinancial instruments such as core deposit intangibles are not recorded at fair value. BB&T
has developed long-term relationships with its customers through its deposit base and, in the opinion of management, these items
add significant value to BB&T. Field: Page; Sequence: 131; Value: 2 Federal funds purchased, securities sold under repurchase
agreements and short-term borrowed funds: The carrying amounts of Federal funds purchased, borrowings under repurchase agreements
and short-term borrowed funds approximate their fair values.Long-term debt: The fair values of long-term debt
are estimated based on quoted market prices for the instrument if available, or for similar instruments if not available, or by
using discounted cash flow analyses, based on BB&T’s current incremental borrowing rates for similar types of instruments.Contractual commitments: The fair values of commitments
are estimated using the fees charged to enter into similar agreements, taking into account the remaining terms of the agreements
and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair values also consider the difference
between current levels of interest rates and the committed rates. The fair values of guarantees and letters of credit are estimated
based on the counterparties’ creditworthiness and average default rates for loan products with similar risks. These respective
fair value measurements would be categorized within Level 3 of the fair value hierarchy.

Financial assets and liabilities not recorded at fair value are summarized below:

Carrying

Total

December 31, 2012

Amount

Fair Value

Level 2

Level 3

(Dollars in millions)

Financial assets:

Securities held to maturity (1)

$
13,594

$
13,848

$
13,810

$
38

Loans and leases, net of ALLL excluding covered loans

109,419

109,621

 ―

109,621

Covered loans, net of ALLL

3,166

3,661

 ―

3,661

FDIC loss share receivable

479

149

 ―

149

Financial liabilities:

Deposits

133,075

133,377

133,377

―

Long-term debt

19,114

20,676

20,676

―

Carrying

December 31, 2011

Amount

Fair Value

(Dollars in millions)

Financial assets:

Securities held to maturity (1)

$
14,094

$
14,098

Loans and leases, net of ALLL, excluding covered loans

100,495

100,036

Covered loans, net of ALLL

4,718

5,706

FDIC loss share receivable

1,100

910

Financial liabilities:

Deposits

124,939

125,317

Long-term debt

21,803

23,001

(1)
Excludes amounts deferred in OCI resulting from the transfer of securities available for sale to held to maturity.

The following is a summary of selected information pertaining to off-balance sheet financial instruments:

December 31,

2012

2011

Notional/

Notional/

Contract

Contract

Amount

Fair Value

Amount

Fair Value

(Dollars in millions)

Commitments to extend, originate or purchase credit

$
43,760

$
81

$
41,575

$
73

Residential mortgage loans sold with recourse

1,019

12

1,316

6

Other loans sold with recourse

4,970

13

4,520

15

Letters of credit and financial guarantees written

5,164

30

6,095

27

 Field: Page; Sequence: 132; Value: 2 NOTE 19. Derivative Financial Instruments


ACL

Field: Page; Sequence: 133; Value: 2


ACL

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 four areas of risk management addressed through the use of derivatives: balance sheet management,
mortgage banking operations, MSRs and client-related and other risk management activities. No portion of the change in fair value
of the derivative has been excluded from effectiveness testing. The ineffective portion was immaterial for all periods presented.Cash Flow Hedges BB&T’s floating rate business loans, overnight
funding, FHLB advances, medium-term bank notes and long-term debt expose it to variability in cash flows for interest payments.
The risk management objective for these floating rate assets and liabilities is to hedge the variability in the interest payments
and receipts on future cash flows for forecasted transactions. All of BB&T’s current cash flow hedges are hedging exposure
to variability in future cash flows for forecasted transactions related to the payment of variable interest on then existing financial
instruments.For a qualifying cash flow hedge, the portion of changes
in the fair value of the derivatives that has been highly effective is recognized in OCI until the related cash flows from the
hedged item are recognized in earnings. If a derivative designated as a cash flow hedge is terminated or ceases to be highly effective,
the gain or loss in OCI is amortized to earnings over the period the forecasted hedged transactions impact earnings. If a hedged
forecasted transaction is no longer probable of occurring during the forecast period or within a short period thereafter, hedge
accounting is ceased and any gain or loss included in OCI is reported in earnings immediately. At December 31, 2012, BB&T had
$173 million of unrecognized after-tax losses on derivatives classified as cash flow hedges recorded in OCI, compared to $159 million
of unrecognized after-tax losses at December 31, 2011.The estimated amount to be reclassified from OCI into earnings
during the next 12 months is a loss totaling approximately $59 million. This includes active hedges and gains and losses related
to hedges that were terminated early for which the forecasted transactions are still probable. The proceeds from these terminations
were included in cash flows from financing activities. Field: Page; Sequence: 134; Value: 2 Fair Value Hedges BB&T’s fixed rate long-term debt, CDs, FHLB advances,
loans and state and political subdivision securities produce exposure to losses in value as interest rates change. The risk management
objective for hedging fixed rate assets and liabilities is to convert the fixed rate paid or received to a floating rate. BB&T
accomplishes its risk management objective by hedging exposure to changes in fair value of fixed rate financial instruments primarily
through the use of swaps. For a qualifying fair value hedge, changes in the value of the derivatives that have been highly effective
as hedges are recognized in current period earnings along with the corresponding changes in the fair value of the designated hedged
item attributable to the risk being hedged.During the years ended December 31, 2012 and 2011, BB&T
terminated certain fair value hedges related to its long-term debt and municipal securities and received net proceeds of $85 million
and $185 million, respectively. When a hedge has been terminated but the hedged item remains outstanding, the proceeds from the
termination of these hedges have been reflected as part of the carrying value of the underlying debt/other financial instrument
and are being amortized to earnings over its estimated remaining life. The proceeds from these terminations were included in cash
flows from financing activities. During the years ended December 31, 2012 and 2011, BB&T recognized pre-tax benefits of $256
million and $205 million, respectively, through reductions of interest expense from previously unwound fair value debt hedges.Derivatives Not Designated As Hedges Derivatives not designated as hedges are those that are entered
into as either balance sheet risk management instruments or to facilitate client needs. Balance sheet risk management hedges are
those hedges that do not qualify to be treated as a cash flow hedge, a fair value hedge or a foreign currency hedge for accounting
purposes, but are necessary to economically manage the risk associated with an asset or liability.This category of hedges includes derivatives that hedge mortgage
banking operations and MSRs. For mortgage loans originated for sale, BB&T is exposed to changes in market rates and conditions
subsequent to the interest rate lock and funding date. BB&T’s risk management strategy related to its interest rate lock
commitment derivatives and LHFS includes using mortgage-based derivatives such as forward commitments and options in order to mitigate
market risk. For MSRs, BB&T uses various derivative instruments to mitigate the income statement effect of changes in the fair
value of its MSRs. For the year ended December 31, 2012, BB&T recorded a gain of $128 million related to these derivatives,
which was offset by a negative $32 million valuation adjustment related to the MSR. For the year ended December 31, 2011, BB&T
recorded a gain of $394 million related to these derivatives, which was offset by a negative $341 million valuation adjustment
related to the MSR.BB&T also held, as risk management instruments, other
derivatives not designated as hedges primarily to facilitate transactions on behalf of its clients, as well as activities related
to balance sheet management.Derivatives Credit Risk – Dealer CounterpartiesCredit risk related to derivatives arises when amounts receivable
from a counterparty exceed those payable to the same counterparty. BB&T addresses the risk of loss by subjecting dealer counterparties
to credit reviews and approvals similar to those used in making loans or other extensions of credit and by requiring collateral.
Dealer counterparties operate under agreements to provide cash and/or liquid collateral when unsecured loss positions exceed negotiated
limits.As of December 31, 2012, BB&T had received cash collateral
from dealer counterparties totaling $44 million related to derivatives in a gain position of $40 million and had posted $639 million
in cash collateral to dealer counterparties to secure derivatives in a loss position of $650 million. In the event that BB&T’s
credit ratings had been downgraded below investment grade, the amount of collateral posted to these counterparties would have increased
by $12 million. As of December 31, 2011, BB&T had received cash collateral from dealer counterparties totaling $82 million
related to derivatives in a gain position of $79 million and had posted $639 million in cash collateral to dealer counterparties
to secure derivatives in a loss position of $669 million. In the event that BB&T’s credit ratings had been downgraded
below investment grade, the amount of collateral posted to these counterparties would have increased by $30 million.After collateral postings are considered, BB&T had no
unsecured positions in a gain with dealer counterparties at December 31, 2012, compared to $3 million at December 31, 2011. All
of BB&T’s derivative contracts with dealer counterparties settle on a monthly, quarterly or semiannual basis, with daily
movement of collateral between counterparties required within established netting agreements. BB&T only transacts with dealer
counterparties that are national market makers with strong credit ratings. Field: Page; Sequence: 135; Value: 2 Derivatives Credit Risk – Central Clearing PartiesBB&T also clears certain derivatives through central
clearing parties that require initial margin collateral, as well as additional collateral for trades in a net loss position. Initial
margin collateral requirements are established by central clearing parties on varying bases, with such amounts generally designed
to offset the risk of non-payment. Initial margin is generally calculated by applying the maximum loss experienced in value over
a specified time horizon to the portfolio of existing trades. As of December 31, 2012, BB&T had posted $111 million in cash
collateral, including initial margin, related to the clearing of derivatives in an $11 million net loss position. As of December
31, 2011, BB&T had posted $145 million in cash collateral, including initial margin, related to the clearing of derivatives
in a $60 million net loss position. BB&T had no significant unsecured positions in a gain with central clearing parties at
December 31, 2012.NOTE 20. Computation of EPS

BB&T’s basic and diluted EPS calculations are presented in the following table:

Years Ended December 31,

2012

2011

2010

(Dollars in millions, except per share data,

shares in thousands)

Basic EPS:

Net income available to common shareholders
$
1,916

$
1,289

$
816

Weighted average number of common shares

698,739

696,532

692,489

Basic EPS
$
2.74

$
1.85

$
1.18

Diluted EPS:

Net income available to common shareholders
$
1,916

$
1,289

$
816

Weighted average number of common shares

698,739

696,532

692,489

Add:

Effect of dilutive outstanding equity-based awards

10,138

8,636

8,550

Weighted average number of diluted common shares

708,877

705,168

701,039

Diluted EPS
$
2.70

$
1.83

$
1.16

For the years ended December 31, 2012, 2011 and 2010, the
number of anti-dilutive awards was 36.6 million, 40.9 million and 36.8 million shares, respectively. Field: Page; Sequence: 136; Value: 2 NOTE 21. Operating Segments BB&T's operations are divided into six reportable business
segments: Community Banking, Residential Mortgage Banking, Dealer Financial Services, Specialized Lending, Insurance Services,
and Financial Services. These business segments have been identified based on BB&T’s organizational structure. The segments
require unique technology and marketing strategies and offer different products and services through a number of distinct branded
LOBs. While BB&T is managed as an integrated organization, individual executive managers are held accountable for the operations
of these business segments.BB&T emphasizes revenue growth by focusing on client
service, sales effectiveness and relationship management along with an organizational focus on referring clients between LOBs.
The business objective is to provide BB&T’s entire suite of products to our clients with the end goal of providing our
clients the best financial experience in the marketplace. The segment results contained herein are presented based on internal
management accounting policies that were designed to support these strategic objectives. Unlike financial accounting, there is
no comprehensive authoritative body of guidance for management accounting equivalent to GAAP. The performance of the segments is
not comparable with BB&T’s consolidated results or with similar information presented by any other financial institution.
Additionally, because of the interrelationships of the various segments, the information presented is not indicative of how the
segments would perform if they operated as independent entities.The management accounting process uses various estimates
and allocation methodologies to measure the performance of the operating segments. To determine financial performance for each
segment, BB&T allocates capital, funding charges and credits, an allocated provision for loan and lease losses, certain noninterest
expenses and income tax provisions to each segment, as applicable. To promote revenue growth, certain revenues of Residential Mortgage
Banking, Specialized Lending, Insurance Services, Financial Services and other segments are reflected in noninterest income in
the individual segment results and also allocated to Community Banking and Financial Services. These allocated revenues are reflected
in intersegment net referral fees and eliminated in Other, Treasury & Corporate. Additionally certain client groups of
the Community Bank have also been identified as clients of other LOBs within the business segments. These client groups include
the commercial clients being serviced within the Commercial Finance LOB that is part of the Specialized Lending segment and the
identified wealth and private banking clients of the Wealth Division within the Financial Services segment. The net interest income
and associated net FTP associated with these customers’ loans and deposits is accounted for in the Community Bank in the
respective line categories of net interest income (expense) and net intersegment interest income (expense). For the Commercial
Finance LOB and the Wealth Division, their NIM and net intersegment interest income has been combined in the net intersegment interest
income (expense) line with an appropriate offsetting amount to the Other, Treasury, and Corporate line item to ensure consolidated
totals reflect the Company’s total NIM for loans and deposits. Allocation methodologies are subject to periodic adjustment
as the internal management accounting system is revised and business or product lines within the segments change. Also, because
the development and application of these methodologies is a dynamic process, the financial results presented may be periodically
revised.BB&T utilizes an FTP system to eliminate the effect
of interest rate risk from the segments’ net interest income because such risk is centrally managed within the Treasury function.
The FTP system credits or charges the segments with the economic value or cost of the funds the segments create or use. The FTP
system provides a funds credit for sources of funds and a funds charge for the use of funds by each segment. The net FTP credit
or charge, which includes intercompany interest income and expense, is reflected as net intersegment income (expense) in the accompanying
tables.The allocated provision for loan and lease losses is also
allocated to the relevant segments based on management’s assessment of the segments’ credit risks. During the first
quarter of 2011, management refined the process related to assigning the allocated provision between the Company’s operating
segments. Unlike the provision for loan and lease losses recorded pursuant to GAAP, the allocated provision is designed to achieve
a higher degree of correlation between the loan loss experience and the GAAP basis provision at the segment level, while at the
same time providing management with a measure of operating performance that gives appropriate consideration to the risks inherent
in each of the Company’s operating segments. Any over or under allocated provision for loan and lease losses is reflected
in Other, Treasury & Corporate to arrive at consolidated results.BB&T allocates expenses to the reportable segments based
on various methodologies, including volume and amount of loans and deposits and the number of full-time equivalent employees. Allocation
systems are refined from time to time along with further identification of certain cost pools. These cost pools and refinements
are implemented to provide for improved managerial reporting of cost to the appropriate business segments. A portion of corporate
overhead expense is not allocated, but is retained in corporate accounts and reflected as Other, Treasury & Corporate
in the accompanying tables. The majority of depreciation expense is recorded in support units and allocated to the segments as
part of allocated corporate expense. Income taxes are allocated to the various segments based on taxable income and statutory rates
applicable to the segment. Field: Page; Sequence: 137; Value: 2 Community Banking Community Banking serves individual and business clients
by offering a variety of loan and deposit products and other financial services. Community Banking is primarily responsible for
serving client relationships and, therefore, is credited with certain revenue from the Residential Mortgage Banking, Financial
Services, Insurance Services, Specialized Lending, and other segments, which is reflected in net referral fees.Residential Mortgage Banking Residential Mortgage Banking retains and services mortgage
loans originated by Community Banking as well as those purchased from various correspondent originators. Mortgage loan products
include fixed and adjustable rate government and conventional loans for the purpose of constructing, purchasing or refinancing
residential properties. Substantially all of the properties are owner occupied. BB&T generally retains the servicing rights
to loans sold. Residential Mortgage Banking earns interest on loans held in the warehouse and portfolio, earns fee income from
the origination and servicing of mortgage loans and recognizes gains or losses from the sale of mortgage loans.Dealer Financial Services Dealer Financial Services originates loans to consumers on
a prime and nonprime basis for the purchase of automobiles. Such loans are originated on an indirect basis through approved franchised
and independent automobile dealers throughout the BB&T market area and nationally through Regional Acceptance Corporation.
This segment also originates loans for the purchase of boats and recreational vehicles originated through dealers in BB&T’s
market area. In addition, financing and servicing to dealers for their inventories is provided through a joint relationship between
Dealer Financial Services and Community Banking.Specialized Lending BB&T's Specialized Lending consists of eight LOBs that
provide specialty finance products to consumers and businesses. These LOBs are a combination of LOBs and operating subsidiaries
of either the Company or Branch Bank. The LOBs include Commercial Finance, which contains commercial finance and mortgage warehouse
lending, and Governmental Finance, which is responsible for tax-exempt government finance. Operating subsidiaries include BB&T
Equipment Finance, which provides equipment leasing largely within BB&T’s banking footprint; Sheffield Financial, a division
of BB&T FSB (merged into Branch Bank on January 1, 2013), a dealer-based financer of equipment for both small businesses and
consumers; Lendmark Financial Services, a direct consumer finance lending company; Prime Rate Premium Finance Corporation, which
includes AFCO and CAFO, insurance premium finance LOBs that provide funding to businesses in the United States and Canada and to
consumers in certain markets within BB&T’s banking footprint; and Grandbridge, a full-service commercial mortgage banking
lender providing loans on a national basis. Branch Bank clients as well as nonbank clients within and outside BB&T’s
primary geographic market area are served by these eight LOBs. The Community Banking segment receives credit for referrals to these
LOBs with the corresponding charge retained as part of Other, Treasury & Corporate in the accompanying tables.Insurance Services BB&T's insurance agency / brokerage network is the eighth
largest in the world. Insurance Services provides property and casualty, life and health insurance to businesses and individuals.
It also provides small business and corporate services, such as workers compensation and professional liability, as well as surety
coverage and title insurance. In addition, Insurance Services underwrites a limited amount of property and casualty coverage. Community
Banking and Financial Services receive credit for insurance commissions on referred accounts, with the corresponding charge retained
in the corporate office, which is reflected as part of Other, Treasury & Corporate in the accompanying tables.Financial Services Financial Services provides personal trust administration,
estate planning, investment counseling, wealth management, asset management, employee benefits services, corporate banking and
corporate trust services to individuals, corporations, institutions, foundations and government entities. Financial Services also
offers clients investment alternatives, including discount brokerage services, equities, fixed-rate and variable-rate annuities,
mutual funds and governmental and municipal bonds through BB&T Investment Services, Inc., a subsidiary of Branch Bank.Financial Services includes a full-service brokerage and
investment banking firm that provides services in retail brokerage, equity and debt underwriting, investment advice, corporate
finance and equity research and facilitates the origination, trading and distribution of fixed-income securities and equity products
in both the public and private capital markets. Financial Field: Page; Sequence: 138; Value: 2 Services also has a public finance department that provides
investment banking services, financial advisory services and municipal bond financing to a variety of regional taxable and tax-exempt
issuers.Financial Services includes a group of BB&T-sponsored
private equity and mezzanine investment funds that invests in privately owned middle-market operating companies to facilitate growth
or ownership transition while leveraging the Community Banking network for referrals and other bank services. Financial Services
also includes the Corporate Banking Division that originates and services large corporate relationships, syndicated lending relationships
and client derivatives. Community Banking receives an interoffice credit for referral fees, with the corresponding charge reflected
as part of Other, Treasury & Corporate in the accompanying tables. Also captured within the net intersegment interest
income for Financial Services is the NIM for the loans and deposits assigned to the Wealth Management Division that are housed
in the Community Bank.Other, Treasury & Corporate Other, Treasury & Corporate is the combination of
the Other segment that represents operating entities that do not meet the quantitative or qualitative thresholds for disclosure;
BB&T’s Treasury function, which is responsible for the management of the securities portfolios, overall balance sheet
funding and liquidity, and overall management of interest rate risk; the corporate support functions that have not been allocated
to the business segments; merger-related charges or credits that are incurred as part of acquisition and conversion of acquired
entities; nonrecurring charges that are considered to be unusual in nature or infrequent and not reflective of the normal operations
of the segments; and intercompany eliminations including intersegment net referral fees and net intersegment interest income (expense).The substantial majority of the loan portfolio acquired in
the Colonial acquisition is covered by loss sharing agreements with the FDIC and is managed outside of the Community Banking segment.
The assets and related interest income from this loan portfolio have an expected finite business life and are therefore included
in the Other, Treasury & Corporate segment. Results for BankAtlantic were included in the Other, Treasury & Corporate
segment until the system conversion in October 2012. Historically, performance results of bank acquisitions prior to system conversion
are reported in this segment and on a post-conversion date are reported in the Community Banking segment.The following table discloses selected financial information
with respect to BB&T's reportable business segments for the years indicated: Field: Page; Sequence: 139; Value: 2


ACL

Field: Page; Sequence: 140; Value: 2


EXHIBIT INDEX

Field: Page; Sequence: 143; Value: 2

| Exhibit No. |  | Description |  | Location |
| --- | --- | --- | --- | --- |
| 2.1 |  | Purchase and Assumption Agreement Whole Bank All Deposits, among the Federal Deposit Insurance Corporation, receiver of Colonial Bank, Montgomery, Alabama, the Federal Deposit Insurance Corporation and Branch Banking and Trust Company, dated as of August 14, 2009. |  | Incorporated herein by reference to Exhibit 2.1 of the Current Report on Form 8-K, filed August 17, 2009. |
| 3(i) |  | Articles of Incorporation of the Registrant, as Restated February 25, 2009, and amended May 10, 2010, April 27, 2012, July 24, 2012 and October 26, 2012. |  | Incorporated herein by reference to Exhibit 3 (i) of the Quarterly Report on Form 10-Q, filed November 2, 2012. |
| 3(ii) |  | Bylaws of the Registrant, as amended February 21, 2012. |  | Incorporated herein by reference to Exhibit 3(ii) of the Current Report on Form 8-K, filed February 24, 2012. |
| 4.1 |  | Articles of Incorporation of the Registrant, as Restated February 25, 2009 and amended May 10, 2010, April 27, 2012, July 24, 2012 and October 26, 2012. |  | Incorporated herein by reference to Exhibit 3 (i) of the Quarterly Report on Form 10-Q, filed November 2, 2012. |
| 4.2 |  | Articles of Incorporation of the Registrant, as Restated February 25, 2009 and amended May 10, 2010, April 27, 2012, July 24, 2012 and October 26, 2012. |  | Incorporated herein by reference to Exhibit 3 (i) of the Quarterly Report on Form 10-Q, filed November 2, 2012. |
| 4.3 |  | Indenture Regarding Senior Securities (including form of Senior Debt Security) between Registrant and U.S. Bank National Association (as successor in interest to State Street Bank and Trust Company), as trustee, dated as of May 24, 1996. |  | Incorporated herein by reference to Exhibit 4(c) of Form S-3 Registration Statement No. 333-02899. |
| 4.4 |  | First Supplemental Indenture, dated May 4, 2009, to the Indenture Regarding Senior Securities, dated as of May 24, 1996, between the Registrant and U.S. Bank National Association. |  | Incorporated herein by reference to Exhibit 4.2 of the Current Report on Form 8-K, filed May 4, 2009. |
| 4.5 |  | Indenture Regarding Subordinated Securities (including Form of Subordinated Debt Security) between the Registrant and U.S. Bank National Association (as successor in interest to State Street Bank and Trust Company), as trustee, dated as of May 24, 1996. |  | Incorporated herein by reference to Exhibit 4(d) of Form S-3 Registration Statement No. 333-02899. |
| 4.6 |  | First Supplemental Indenture, dated as of December 23, 2003, to the Indenture Regarding Subordinated Securities, dated as of May 24, 1996, between the Registrant and U.S. Bank National Association. |  | Incorporated herein by reference to Exhibit 4.5 of the Annual Report on Form 10-K, filed February 27, 2009. |
| 4.7 |  | Second Supplemental Indenture, dated as of September 24, 2004, to the Indenture Regarding Subordinated Securities, dated as of May 24, 1996, between the Registrant and U.S. Bank National Association. |  | Incorporated herein by reference to Exhibit 4.7 of the Annual Report on Form 10-K, filed February 26, 2010. |
| 4.8 |  | Third Supplemental Indenture, dated May 4, 2009, to the Indenture Regarding Subordinated Securities, dated as of May 24, 1996, between the Registrant and U.S. Bank National Association. |  | Incorporated herein by reference to Exhibit 4.6 of the Current Report on Form 8-K, filed May 4, 2009. |
| 10.1\* |  | BB&T Corporation Amended and Restated Non-Employee Directors’ Deferred Compensation and Stock Option Plan (amended and restated January 1, 2005). |  | Incorporated herein by reference to Exhibit 10.1 of the Annual Report on Form 10-K, filed February 28, 2008. |


EXHIBIT INDEX

Field: Page; Sequence: 144; Value: 2

| 10.2\*† |  | Form of Non-Employee Director Nonqualified Stock Option Agreement for the BB&T Corporation Amended and Restated Non-Employee Directors’ Deferred Compensation and Stock Option Plan. |  | Incorporated herein by reference to Exhibit 10.2 of the Annual Report on Form 10-K, filed February 25, 2011. |
| --- | --- | --- | --- | --- |
| 10.3\* |  | BB&T Corporation 1995 Omnibus Stock Incentive Plan (as amended and restated through February 25, 2003). |  | Incorporated herein by reference to Exhibit 99 of Form S-8 Registration Statement No. 333-116502. |
| 10.4\* |  | 2008 Declaration of Amendment to BB&T Corporation 1995 Omnibus Stock Incentive Plan. |  | Incorporated herein by reference to Exhibit 10.2.a of the Annual Report on Form 10-K, filed February 27, 2009. |
| 10.5\* |  | 409A Declaration of Amendment to BB&T Corporation 1995 Omnibus Stock Incentive Plan. |  | Incorporated herein by reference to Exhibit 10.2.b of the Annual Report on Form 10-K, filed February 27, 2009. |
| 10.6\* |  | Form of Employee Nonqualified Stock Option Agreement for the BB&T Corporation 1995 Omnibus Stock Incentive Plan, as amended and restated. |  | Incorporated herein by reference to Exhibit 10.5 of the Annual Report on Form 10-K, filed February 25, 2011. |
| 10.7\* |  | BB&T Corporation Amended and Restated 2004 Stock Incentive Plan, as amended (as amended through February 24, 2009). |  | Incorporated herein by reference to the Appendix to the Proxy Statement for the 2009 Annual Meeting of Shareholders on Schedule 14A, filed March 13, 2009. |
| 10.8\* |  | Form of Restricted Stock Unit Agreement (Performance-Based Vesting Component) for Executive Officers under the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (June 2010 Performance Award). |  | Incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K, filed June 25, 2010. |
| 10.9\* |  | Form of Performance Unit Award Agreement for the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (3-Year Vesting). |  | Incorporated herein by reference to Exhibit 10.6 of the Quarterly Report on Form 10-Q, filed May 7, 2010. |
| 10.10\* |  | Form of Non-Employee Director Restricted Stock Unit Agreement for the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (5-Year Vesting). |  | Incorporated herein by reference to Exhibit 10.6 of the Annual Report on Form 10-K, filed February 28, 2008. |
| 10.11\* |  | Form of Non-Employee Director Restricted Stock Unit Agreement for the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (4-Year Vesting). |  | Incorporated herein by reference to Exhibit 10.2 of the Quarterly Report on Form 10-Q, filed May 7, 2010. |
| 10.12\* |  | Form of Non-Employee Director Nonqualified Stock Option Agreement for the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (5-Year Vesting). |  | Incorporated herein by reference to Exhibit 10.7 of the Annual Report on Form 10-K, filed February 28, 2008. |
| 10.13\* |  | Form of Non-Employee Director Nonqualified Stock Option Agreement for the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (4-Year Vesting). |  | Incorporated herein by reference to Exhibit 10.3 of the Quarterly Report on Form 10-Q, filed May 7, 2010. |
|  |


EXHIBIT INDEX

Field: Page; Sequence: 145; Value: 2

| 10.14\* |  | Form of Employee Nonqualified Stock Option Agreement for the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (5-Year Vesting). |  | Incorporated herein by reference to Exhibit 10.8 of the Annual Report on Form 10-K, filed February 28, 2008. |
| --- | --- | --- | --- | --- |
| 10.15\* |  | Form of Employee Nonqualified Stock Option Agreement for the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (4-Year Vesting). |  | Incorporated herein by reference to Exhibit 10.5 of the Quarterly Report on Form 10-Q, filed May 7, 2010. |
| 10.16\* |  | Form of Restricted Stock Unit Agreement for the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (5-Year Vesting). |  | Incorporated herein by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q, filed May 8, 2009. |
| 10.17\* |  | Form of Restricted Stock Unit Agreement for the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (4-Year Vesting). |  | Incorporated herein by reference to Exhibit 10.4 of the Quarterly Report on Form 10-Q, filed May 7, 2010. |
| 10.18\* |  | BB&T Corporation Amended and Restated Short-term Incentive Plan. |  | Incorporated herein by reference to Exhibit 10.11 of the Annual Report on Form 10-K, filed February 27, 2009. |
| 10.19\* |  | First Amendment to BB&T Corporation Short-term Incentive Plan (January 1, 2009 Restatement). |  | Incorporated herein by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q, filed May 7, 2010. |
| 10.20\* |  | Southern National Deferred Compensation Plan for Key Executives including amendments. |  | Incorporated herein by reference to Exhibit 10.21 of the Annual Report on Form 10-K, filed February 25, 2011. |
| 10.21\* |  | BB&T Corporation Target Pension Plan. |  | Incorporated herein by reference to Exhibit 10.13 of the Annual Report on Form 10-K, filed February 27, 2009. |
| 10.22\* |  | First Amendment to the BB&T Corporation Target Pension Plan. |  | Incorporated herein by reference to Exhibit 10.23 of the Annual Report on Form 10-K, filed February 25, 2011. |
| 10.23\*† |  | Second Amendment to the BB&T Corporation Target Pension Plan. |  | Incorporated herein by reference to Exhibit 10.24 of the Annual Report on Form 10-K, filed February 25, 2011. |
| 10.24\*† |  | Third Amendment to the BB&T Corporation Target Pension Plan. |  | Incorporated herein by reference to Exhibit 10.25 of the Annual Report on Form 10-K, filed February 25, 2011. |
| 10.25\* |  | BB&T Corporation Non-Qualified Defined Benefit Plan. |  | Incorporated herein by reference to Exhibit 10.14 of the Annual Report on Form 10-K, filed February 27, 2009. |
| 10.26\* |  | First Amendment to the BB&T Corporation Non-Qualified Defined Benefit Plan. |  | Incorporated herein by reference to Exhibit 10.25 of the Annual Report on Form 10-K, filed February 25, 2011. |
|  |


EXHIBIT INDEX

Field: Page; Sequence: 146; Value: 2

| 10.27\*† |  | Second Amendment to the BB&T Corporation Non-Qualified Defined Benefit Plan. |  | Incorporated herein by reference to Exhibit 10.28 of the Annual Report on Form 10-K, filed February 25, 2011. |
| --- | --- | --- | --- | --- |
| 10.28\*† |  | Third Amendment to the BB&T Corporation Non-Qualified Defined Benefit Plan. |  | Incorporated herein by reference to Exhibit 10.29 of the Annual Report on Form 10-K, filed February 25, 2011. |
| 10.29\* |  | BB&T Corporation Non-Qualified Defined Contribution Plan. |  | Incorporated herein by reference to Exhibit 10.15 of the Annual Report on Form 10-K, filed February 27, 2009. |
| 10.30\* |  | BB&T Corporation Non-Qualified Deferred Compensation Trust Amended and Restated effective November 1, 2001 (including amendments). |  | Incorporated herein by reference to Exhibit 10.16 of the Annual Report on Form 10-K, filed February 27, 2009. |
| 10.31\* |  | BB&T Corporation Non-Qualified Deferred Compensation Trust Amended and Restated effective November 1, 2001 (including amendments). |  | Incorporated herein by reference to Exhibit 10.17 of the Annual Report on Form 10-K, filed February 28, 2008. |
| 10.32\* |  | Form of Employee Nonqualified Stock Option Agreement for the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (4-Year Vesting with Clawback Provision). |  | Incorporated herein by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q, filed May 4, 2012. |
| 10.33\* |  | Form of Employee Restricted Stock Unit Agreement for the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (4-Year Vesting with Clawback Provision). |  | Incorporated herein by reference to Exhibit 10.2 of the Quarterly Report on Form 10-Q, filed May 4, 2012. |
| 10.34\* |  | Form of Performance Unit Award Agreement for the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (3-Year Vesting 2012 - 2014). |  | Incorporated herein by reference to Exhibit 10.3 of the Quarterly Report on Form 10-Q, filed May 4, 2012. |
| 10.35\* |  | Form of Employee Nonqualified Stock Option Agreement for the BB&T Corporation 2012 Incentive Plan. |  | Incorporated herein by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q, filed August 7, 2012. |
| 10.36\* |  | Form of Employee Restricted Stock Unit Agreement for the BB&T Corporation 2012 Incentive Plan. |  | Incorporated herein by reference to Exhibit 10.2 of the Quarterly Report on Form 10-Q, filed August 7, 2012. |
| 10.37\* |  | Amended and Restated Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Co. and Kelly S. King dated as of December 19, 2012. |  | Incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K, filed December 19, 2012. |
| 10.38\* |  | 2008 Amended and Restated Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Co. and Christopher L. Henson. |  | Incorporated herein by reference to Exhibit 10.21 of the Annual Report on Form 10-K, filed February 27, 2009. |
| 10.39\* |  | 2008 Amended and Restated Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Co. and Daryl N. Bible. |  | Incorporated herein by reference to Exhibit 10.22 of the Annual Report on Form 10-K, filed February 27, 2009. |
|  |


EXHIBIT INDEX

Field: Page; Sequence: 147; Value: 2

| 10.40\* |  | 2008 Amended and Restated Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Co. and Ricky K. Brown. |  | Incorporated herein by reference to Exhibit 10.23 of the Annual Report on Form 10-K, filed February 27, 2009. |
| --- | --- | --- | --- | --- |
| 10.41\* |  | 2008 Amended and Restated Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Co. and Barbara F. Duck. |  | Incorporated herein by reference to Exhibit 10.24 of the Annual Report on Form 10-K, filed February 27, 2009. |
| 10.42\* |  | 2008 Amended and Restated Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Co. and Donna C. Goodrich. |  | Incorporated herein by reference to Exhibit 10.25 of the Annual Report on Form 10-K, filed February 27, 2009. |
| 10.43\* |  | 2008 Amended and Restated Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Co. and Robert E. Greene. |  | Incorporated herein by reference to Exhibit 10.26 of the Annual Report on Form 10-K, filed February 27, 2009. |
| 10.44\* |  | 2008 Amended and Restated Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Co. and Clarke R. Starnes, III. |  | Incorporated herein by reference to Exhibit 10.27 of the Annual Report on Form 10-K, filed February 27, 2009. |
| 10.45\* |  | 2008 Amended and Restated Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Co. and Steven B. Wiggs. |  | Incorporated herein by reference to Exhibit 10.28 of the Annual Report on Form 10-K, filed February 27, 2009. |
| 10.46\* |  | 2008 Amended and Restated Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Co. and C. Leon Wilson, III. |  | Incorporated herein by reference to Exhibit 10.29 of the Annual Report on Form 10-K, filed February 27, 2009. |
| 10.47\* |  | 2012 Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Co. and Cynthia A. Williams |  | Incorporated herein by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q, filed November 2, 2012. |
| 10.48\* |  | 2012 Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Co. and William R. Yates |  | Incorporated herein by reference to Exhibit 10.2 of the Quarterly Report on Form 10-Q, filed November 2, 2012. |
| 11 |  | Statement re computation of earnings per share |  | Filed herewith as Note 20 to the consolidated financial statements. |
| 12† |  | Statement re computation of ratios |  | Filed herewith. |
| 21† |  | Subsidiaries of the Registrant |  | Filed herewith. |
| 22 |  | Proxy Statement for the Annual Meeting of Shareholders |  | Future filing incorporated herein by reference pursuant to General Instruction G(3). |
| 23† |  | Consent of Independent Registered Public Accounting Firm |  | Filed herewith. |
| 31.1 |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15(d)-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |  | Filed herewith. |
|  |


Net Interest Income and NIM

(1)Yields are stated on a TE basis utilizing the marginal income tax rates for the periods presented. The change in interest not solely due to changes in yield/rate or volume has been allocated on a pro-rata basis based on the absolute dollar amount of each. (2)Total securities include AFS and HTM securities. (3)Includes Federal funds sold, securities purchased under resale agreements or similar arrangements, interest-bearing deposits with banks, trading securities, FHLB stock and other earning assets. (4)Loan fees, which are not material for any of the periods shown, are included for rate calculation purposes. (5)NPLs are included in the average balances. (6)Excludes basis adjustments for fair value hedges.


Noninterest Income

Noninterest income was a record $4.5 billion for 2016, an increase of $453 million compared to 2015. This increase was across all categories and primarily reflects the impact from acquisitions.Income from BB&T’s insurance agency/brokerage operations was the largest source of noninterest income in 2016. Insurance income totaled $1.7 billion for 2016, an increase of $117 million compared to 2015. The increase was largely the result of the acquisition of Swett and Crawford on April 1, 2016, which was partially offset by the impact from selling American Coastal in 2015.FDIC loss share income improved by $111 million, primarily due to the termination of the loss sharing agreements during the third quarter of 2016. Other income totaled $362 million for 2016, an increase of $36 million from 2015. This increase is primarily due to the $26 million loss on sale of American Coastal during the second quarter of 2015, $19 million for client derivatives revenues and $10 million of trading gains. These increases were partially offset by lower partnerships and other investment income, which was the result of an opportunistic sale that resulted in a $28 million gain during the third quarter of 2015.Noninterest income was $4.0 billion for 2015, an increase of $163 million compared to 2014. This increase was driven by improved FDIC loss share income, higher mortgage banking income and higher operating lease income, partially offset by lower insurance income and lower other income.FDIC loss share income improved by $90 million, primarily due to a $58 million reduction in negative accretion related to credit losses on covered loans and a $20 million change in the offset to the provision for covered loans. Mortgage banking income increased $60 million, primarily due to higher volume and $17 million of higher MSR valuation adjustments.Operating lease income increased $29 million, primarily due to a larger leasing portfolio size as this business has continued to demonstrate steady growth.Income from BB&T’s insurance agency/brokerage operations was the largest source of noninterest income in 2015. Insurance income totaled $1.6 billion for 2015, a decline of $47 million compared to 2014. The second quarter sale of American Coastal resulted in a $79 million decline in insurance income, which was partially offset by higher volume in the property and casualty business.Other income totaled $326 million for 2015, a decline of $23 million from 2014. This decline is primarily due to the $26 million loss on sale of American Coastal during the second quarter of 2015 and $18 million of lower income related to assets for certain post-employment benefits (which is offset in personnel expense). These declines were partially offset by higher partnerships and other investment income, which was the result of an opportunistic sale that resulted in a $28 million gain during the third quarter of 2015.


Noninterest Expense

Noninterest expense totaled $6.7 billion for 2016, an increase of $455 million from 2015. This increase was primarily driven by higher personnel expense. Personnel expense is the largest component of noninterest expense and includes salaries, wages and incentives, as well as pension and other employee benefit costs. Personnel expense totaled $4.0 billion, a $495 million increase compared to 2015. This increase was driven by a $284 million increase in salaries, which was primarily due to additional headcount from acquisitions. Incentives expense was higher $110 million due to performance against targets and acquisitions. Personnel expense also increased due to a $48 million increase in pension expense that reflects higher amortization, service and interest costs. Additionally, personnel expense reflects a $26 million increase in payroll taxes as a result of higher salaries and incentives.Loss on early extinguishment of debt was down $173 million for 2016, as the prior year included a loss of $172 million, compared to a small gain for 2016.Occupancy and equipment expense totaled $786 million for 2016, compared to $708 million for 2015. The increase reflects the acquisition activity. Software expense was higher $32 million compared to 2015, primarily reflecting higher depreciation on recent investments.Outside IT services expense totaled $186 million for 2016, compared to $135 million in the prior year. This increase was due to higher costs related to projects.Loan-related expense totaled $95 million for 2016, a decrease of $55 million compared to the prior year. This decrease is largely the result of a release of $31 million in reserves during the fourth quarter of 2016, which was primarily driven by lower anticipated loan repurchase requests.Regulatory charges totaled $145 million for 2016, an increase of $44 million compared to the prior year. This increase reflects the impact from acquisitions and the surcharge assessed to large banks, which was implemented in the third quarter of 2016.Other expense decreased $40 million primarily due to a net benefit of $73 million in the third quarter related to the settlement of certain legacy mortgage matters involving the origination of mortgage loans insured by the FHA. In addition, business referral expense decreased $16 million primarily due to the sale of American Coastal in the prior year. Partially offsetting these decreases was a $50 million charitable contribution that was also made in the third quarter.Noninterest expense totaled $6.3 billion for 2015, an increase of $414 million from 2014. This increase was driven by higher personnel expense, merger-related and restructuring charges and loss on early extinguishment of debt, partially offset by lower loan-related expense.Personnel expense totaled $3.5 billion, a $289 million increase compared to 2014. This increase was driven by a $114 million increase in salaries, which was primarily due to additional headcount from acquisitions. Personnel expense also increased due to a $74 million increase in pension expense that reflects higher amortization, service and interest costs, partially offset by the estimated return on higher plan assets. Additionally, personnel expense reflects a $50 million increase in employee medical and insurance benefits and a $32 million increase in incentives.Merger-related and restructuring charges totaled $165 million, an increase of $119 million compared to 2014. This increase was primarily related to the Susquehanna acquisition, with additional amounts related to The Bank of Kentucky and the planned acquisition of National Penn.Loss on early extinguishment of debt was $172 million for 2015, compared to $122 million for 2014. The combined debt extinguishments for the two years totaled $2.0 billion of FHLB advances with a weighted average interest rate of 4.5%.Occupancy and equipment expense totaled $708 million for 2015, compared to $682 million for 2014. The increase reflects the acquisition activity occurring during the year.Loan-related expense totaled $150 million for 2015, a decrease of $117 million compared to the prior year. This decrease is largely the result of lower claims and charge-offs in the current year, as well as charges recorded in the prior year of $33 million related to the FHA-insured loan origination process and $27 million related to a review of mortgage lending processes.


Merger-Related and Restructuring Charges

The 2016 costs primarily reflect the acquisitions of National Penn and Swett & Crawford, while the 2015 activities were largely related to Susquehanna.


Investment Activities

The securities portfolio totaled $43.6 billion at December 31, 2016, compared to $43.8 billion at December 31, 2015. The overall portfolio was relatively flat compared to the prior year, with a slight change in the mix between AFS and HTM as new purchases and reinvestments were directed to the AFS portfolio.As of December 31, 2016, approximately 7.5% of the securities portfolio was variable rate, compared to 12.4% as of December 31, 2015. The effective duration of the securities portfolio was 4.8 years at December 31, 2016, compared to 4.0 years at the end of 2015. The duration of the securities portfolio excludes equity securities and certain non-agency MBS acquired from the FDIC.Agency MBS represented 79.1% of the total securities portfolio at year-end 2016, compared to 73.7% as of prior year end. BB&T transferred $517 million of HTM securities to AFS during the third quarter of 2015. These securities, which were sold by the end of the third quarter, represented investments in student loans for which there was a significant increase in risk weighting as a result of the implementation of Basel III.


Investment Activities

(1)Yields represent interest computed using the effective interest method on a TE basis using marginal income tax rates and the amortized cost of the securities.(2)For purposes of the maturity table, MBS, which are not due at a single maturity date, have been included in maturity groupings based on the contractual maturity. The expected life of MBS will differ from contractual maturities because borrowers may have the right to call or prepay the underlying mortgage loans.(3)Weighted-average yield excludes the effect of pay-fixed swaps hedging municipal securities.


Lending Activities

Average loans held for investment for the fourth quarter of 2016 were $142.3 billion, up $1.1 billion compared to the third quarter of 2016. The increase was driven by sales finance loans. There was also modest growth in other lending subsidiaries loans, which was offset by a continued decline in residential mortgage loans.Average sales finance loans increased $1.3 billion, primarily due to a $1.0 billion portfolio acquisition late in the third quarter of 2016 and a $1.9 billion portfolio acquisition in the fourth quarter. These increases were partially offset by the continued effects of dealer pricing structure changes implemented during 2015 and also reflect the continued runoff of the auto lease portfolio obtained in connection with the Susquehanna acquisition.The following table excludes sales finance and retail other lending subsidiaries loans as the substantial majority of those loans have fixed interest rates:


Lending Activities

(1)The weighted average remaining term for dealer floor plan is excluded as the balance primarily represents loans that are callable on demand.(2)Margin loans totaling $90 million have been excluded because they do not have a contractual end date and are callable on demand.As of December 31, 2016, approximately $258 million of variable rate residential mortgage loans are currently in an interest-only phase. Approximately 94.8% of these balances will begin amortizing within the next three years. Variable rate residential mortgage loans typically reset every 12 months beginning after a 3 to 10 year fixed period, with an annual cap on rate changes ranging from 2.0% to 6.0%.As of December 31, 2016, the direct retail lending portfolio includes $8.7 billion of variable rate home equity lines, $946 million of variable rate other lines of credit and $326 million of variable rate loans. Approximately $6.4 billion of the variable rate home equity lines is currently in the interest-only phase and approximately 8.5% of these balances will begin amortizing within the next three years. Approximately $788 million of the outstanding balance of variable rate other lines of credit is in the interest-only phase and 23.2% of these balances will begin amortizing within the next three years. Variable rate home equity lines and other lines of credit typically reset on a monthly basis. BB&T monitors the performance of its home equity loans and lines secured by second liens similarly to other consumer loans and utilizes assumptions specific to these loans in determining the necessary ALLL. BB&T also receives notification when the first lien holder, whether BB&T or another financial institution, has initiated foreclosure proceedings against the borrower. When notified that the first lien is in the process of foreclosure, BB&T obtains valuations to determine if any additional charge-offs or reserves are warranted. These valuations are updated at least annually thereafter.BB&T has limited ability to monitor the delinquency status of the first lien, unless the first lien is held or serviced by BB&T. As a result, using migration assumptions that are based on historical experience and adjusted for current trends, BB&T estimates the volume of second lien positions where the first lien is delinquent and adjusts the ALLL to reflect the increased risk of loss on these credits. Finally, BB&T also provides additional reserves to second lien positions when the estimated combined current loan to value ratio for the credit exceeds 100%. As of December 31, 2016, BB&T held or serviced the first lien on 31.5% of its second lien positions.Scheduled repayments are reported in the maturity category in which the payment is due. Determinations of maturities are based on contract terms. BB&T’s credit policy typically does not permit automatic renewal of loans. At the scheduled maturity date (including balloon payment date), the customer generally must request a new loan to replace the matured loan and execute either a new note or note modification with rate, terms and conditions negotiated at that time.BB&T lends to a diverse customer base that is substantially located within the Company’s primary market area. At the same time, the loan portfolio is geographically dispersed throughout BB&T’s branch network to mitigate concentration risk arising from local and regional economic downturns. Refer to the "Risk Management" section for a discussion of each of the loan portfolios and the credit risk management policies used to manage the portfolios.The following table presents the loan portfolio based upon BB&T’s BUs:


Lending Activities

(1) During the first quarter of 2014, $8.3 billion of loans were transferred from direct retail lending to residential mortgage.Loans and leases HFI were $143.3 billion at December 31, 2016, an increase of $7.4 billion compared to the prior year. This increase reflects the impact of the April 1, 2016 acquisition of National Penn, which contributed $6.0 billion in loans. Commercial and industrial loans were up $3.3 billion, other lending subsidiaries loans were up $1.5 billion, CRE-income producing properties loans were up $1.1 billion and direct retail lending loans were up $952 million, all of which were primarily due to the acquisition of National Penn. Sales finance loans were up $940 million over the prior year, primarily due to a $1.0 billion portfolio acquisition late in the third quarter of 2016 and a $1.9 billion portfolio acquisition during the fourth quarter. These increases were partially offset by the continued effects of dealer pricing structure changes implemented during 2015 and also reflect the continued runoff of the auto lease portfolio obtained in connection with the Susquehanna acquisition.The $612 million decline in residential mortgage balances reflects the continuing strategy to sell conforming residential mortgage loan production.The PCI loan portfolio, which totaled $910 million at December 31, 2016, continued to runoff during the year, partially offset by the addition of $124 million of PCI loans in connection with the National Penn acquisition.The majority of loans are with clients in domestic market areas, which are primarily concentrated in the southeastern United States. International loans were immaterial as of December 31, 2016 and 2015.


Asset Quality

(1)Includes charge-offs and losses recorded upon sale of $210 million and $170 million for the year ended December 31, 2016 and 2015, respectively.(2)Includes charge-offs and losses recorded upon sale of $30 million and $17 million for the year ended December 31, 2016 and 2015, respectively.NPAs, which include foreclosed real estate, repossessions and NPLs, totaled $813 million at December 31, 2016 compared to $712 million (or $686 million excluding foreclosed real estate acquired from the FDIC) at December 31, 2015. This increase consisted of a $160 million increase in NPLs partially offset by a $59 million decrease in foreclosed real estate and other property.The increase in NPLs is primarily due to commercial and industrial NPLs that were downgraded as a result of a review of shared national credits in the energy lending portfolio during the first quarter, partially offset by the sale of several energy-related credits during the year. NPAs as a percentage of loans and leases plus foreclosed property were 0.57% at December 31, 2016 compared with 0.52% at December 31, 2015.The following tables summarize asset quality information for the past five years.


Asset Quality

(1)During 2016, approximately $191 million of nonaccrual energy-related loans were sold.(2)During 2014, approximately $121 million of nonaccrual residential mortgage loans were sold.(3)During 2014, approximately $94 million of performing TDRs were transferred from direct retail lending to residential mortgage.(4)During 2014, approximately $540 million of performing residential mortgage TDRs were sold.BB&T’s performing TDRs totaled $1.2 billion at December 31, 2016, an increase of $188 million compared to the prior year. This increase includes a $148 million increase for residential mortgage loans, which was primarily the result of the permanent restructuring of certain mortgage loan modifications that successfully completed their trial periods and of implementing a change in the strategy of repurchasing loans from GNMA pools that BB&T has the right but not the obligation to repurchase.Loans 90 days or more past due and still accruing interest totaled $636 million at December 31, 2016, compared with $677 million at prior year-end, a decline of $41 million. This decline includes a $43 million reduction for past due government guaranteed residential mortgage loans, which reflects general improvements in credit quality within that portfolio.Loans 30-89 days past due totaled $1.1 billion at December 31, 2016, an increase of $46 million compared to the prior year, primarily due to higher loan balances.


Asset Quality

(1)These asset quality ratios have been adjusted to remove the impact of government guaranteed and PCI assets. Appropriate adjustments to the numerator and denominator have been reflected in the calculation of these ratios.The following table provides a summary of performing TDR activity:


Asset Quality

Payments and payoffs include scheduled principal payments, prepayments and payoffs of amounts outstanding. Transfers to nonperforming TDRs represent loans that no longer meet the requirements necessary to reflect the loan in accruing status.TDRs may be removed due to the passage of time if they: (1) did not include a forgiveness of principal or interest, (2) have performed in accordance with the modified terms (generally a minimum of six months), (3) were reported as a TDR over a year end reporting period, and (4) reflected an interest rate on the modified loan that was no less than a market rate at the date of modification. These loans were previously considered TDRs as a result of structural concessions such as extended interest-only terms or an amortization period that did not otherwise conform to normal underwriting guidelines.In addition, certain loans may be removed from classification as a TDR as a result of a subsequent non-concessionary re-modification. Non-concessionary re-modifications represent TDRs that did not contain concessionary terms at the date of a subsequent renewal/modification and there was a reasonable expectation that the borrower would continue to comply with the terms of the loan subsequent to the date of the re-modification. A re-modification may be considered for such a re-classification if the loan has not had a forgiveness of principal or interest and the modified terms qualify as more than minor such that the re-modified loan is considered a new loan. Alternatively, such loans may be considered for reclassification in years subsequent to the date of the re-modification based on the passage of time as described in the preceding paragraph.In connection with consumer loan TDRs, a NPL will be returned to accruing status when current as to principal and interest and upon a sustained historical repayment performance (generally a minimum of six months).


Asset Quality

(1)Past due performing TDRs are included in past due disclosures.(2)Nonperforming TDRs are included in NPL disclosures.


ACL

(1)During the first quarter of 2014, $8.3 billion of loans were transferred from direct retail lending to residential mortgage. Charge-offs and recoveries have been reflected in these line items based upon the date the loans were transferred.The ACL consists of the ALLL, which is presented separately on the Consolidated Balance Sheets, and the RUFC, which is included in other liabilities on the Consolidated Balance Sheets. The ACL totaled $1.6 billion at December 31, 2016, an increase of $49 million compared to the prior year.The ALLL amounted to 1.04% of loans and leases held for investment at December 31, 2016, compared to 1.07% at December 31, 2015. This decline is primarily due to the acquisitions of National Penn during 2016 and Susquehanna during 2015, which provided a total of $18.9 billion in loans and no related allowance as of the acquisition dates. The ratio of the ALLL to NPLs held for investment was 2.03x at December 31, 2016 compared to 2.53x at December 31, 2015.The energy portfolio totals approximately $1.2 billion and has allocated reserves of 11.7%. This portfolio does not include any offshore, second lien or mezzanine loans. The allowance includes the impact of the shared national credit review related to the energy lending portfolio.Net charge-offs totaled $532 million for 2016, compared to $436 million in 2015. Net charge-offs as a percentage of average loans and leases were 0.38% for 2016, compared to 0.35% in 2015. Net charge-offs increased by $59 million in the other lending subsidiaries portfolio, driven by an increase in loss severity associated with used car values and loan growth. Commercial and industrial net charge-offs increased $44 million, primarily due to the energy portfolio.


ACL

(1) During the first quarter of 2014, $8.3 billion in loans were transferred from direct retail lending to residential mortgage.


Deposits

Average deposits for the fourth quarter of 2016 were $160.1 billion, up $615 million compared to the prior quarter.Average noninterest-bearing deposits increased $862 million, primarily due to increases in commercial balances with smaller increases in public funds and personal balances.Interest checking increased $880 million, primarily due to increases in personal and commercial balances.Money market and savings decreased $451 million primarily due to commercial balances partially offset by increased personal balances.Average time deposits decreased $125 million as decreases in IRAs and personal balances were partially offset by higher commercial balances.Average foreign office deposits decreased $551 million due to lower overall funding needs.Noninterest-bearing deposits represented 32.1% of total average deposits for the fourth quarter, compared to 31.7% for the prior quarter and 30.9% a year ago. The cost of interest-bearing deposits was 0.22% for the fourth quarter, down one basis point compared to the prior quarter.


Risk Management

The CRO leads the RMO, which designs, organizes and manages BB&T’s risk management framework. The RMO is responsible for ensuring effective risk management oversight, measurement, monitoring, reporting and consistency. The CRO has direct access to the Board of Directors and Executive Management. The CRO is responsible for identifying and communicating in a timely manner to the CEO and the Board of Directors meaningful risks and significant instances when the RMO’s assessment of risk differs from that of a BU, significant instances when a BU is not adhering to the risk governance framework, and BB&T’s risk profile in relation to its risk appetite on at least a quarterly basis. In the event that the CRO and CEO’s assessment of risk were to differ or if the CEO were to not adhere to the risk management framework, the CRO would have the responsibility to report such matters to the Board of Directors.The Executive Management-led enterprise risk committees provide oversight of the first and second lines of defense and communicate risk appetite and values to the RMO. The CRO and the enterprise risk committees approve policies, set risk limits and tolerances and monitor results.The RMC, CRMC, ORMC, CROC and the MRLCC are the enterprise risk committees and provide oversight of the risks as described in the common risk language. Executive Management members participate in all five committees.The risk management framework is composed of specialized risk functions focused on specific types of risk. The MRLCC, CRMC, CROC and ORMC provide oversight of market, liquidity, capital, credit, compliance, and operational risk while RMC provides a fully integrated view of all material risks across the company. The RMC provides oversight of all risks and its purpose is to review BB&T’s aggregate risk exposure, evaluate risk appetite, and evaluate risks not reviewed by other risk committees.The RMC is responsible for taking a broad view of risk, incorporating information from all risk functions. This combination of broad and specific focus provides the most effective framework for the management of risk. The RMC is chaired by the CRO and its membership includes all members of Executive Management, the General Auditor (ex officio) and senior leaders from Financial Management, the RMO and other areas.The principal types of inherent risk include compliance, credit, liquidity, market, operational, reputation and strategic risks.

|  | | | | |
| --- | --- | --- | --- | --- |
|  |  |  |  |  |
| Risk Committees | Board of Directors | | | Executive Management |
|  |  |  |
| 1st Line of Defense | 2nd Line of Defense | 3rd Line of Defense |
| Business Units | Risk Functions | Audit Services |
|  |  |  |
| Chief Risk Officer | | |


Branch Bank

BB&T and Branch Bank have Contingency Funding Plans designed to ensure that liquidity sources are sufficient to meet their ongoing obligations and commitments, particularly in the event of a liquidity contraction. These plans are designed to examine and quantify the organization’s liquidity under various "stress" scenarios. Additionally, the plans provide a framework for management and other critical personnel to follow in the event of a liquidity contraction or in anticipation of such an event. The plans address authority for activation and decision making, liquidity options and the responsibilities of key departments in the event of a liquidity contraction. The liquidity options available to management could include seeking secured funding, asset sales, and under the most extreme scenarios, curtailing new loan originations.Management believes current sources of liquidity are adequate to meet BB&T’s current requirements and plans for continued growth. See the "Premises and Equipment," "Long-Term Debt" and "Commitments and Contingencies" notes in the "Notes to Consolidated Financial Statements" for additional information regarding outstanding balances of sources of liquidity and contractual commitments and obligations.

|  | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |
| Table 28 | | | | | | | |
| Credit Ratings of BB&T Corporation and Branch Bank | | | | | | | |
| December 31, 2016 | | | | | | | |
|  |  |  |  |  |  |  |  |
|  | S&P |  | Moody's |  | Fitch |  | DBRS |
| BB&T Corporation: |  |  |  |  |  |  |  |
| Commercial Paper | A-2 |  | N/A |  | F1 |  | R-1(low) |
| Issuer | A- |  | A2 |  | A+ |  | A(high) |
| LT/Senior debt | A- |  | A2 |  | A+ |  | A(high) |
| Subordinated debt | BBB+ |  | A2 |  | A |  | A |
|  |  |  |  |  |  |  |  |
| Branch Bank: |  |  |  |  |  |  |  |
| Bank financial strength | N/A |  | N/A |  | a+ |  | N/A |
| Long term deposits | N/A |  | Aa1 |  | AA- |  | AA(low) |
| LT/Senior unsecured bank notes | A |  | A1 |  | A+ |  | AA(low) |
| Long term issuer | A |  | A1 |  | A+ |  | AA(low) |
| Other long term senior obligations | A |  | N/A |  | A+ |  | AA(low) |
| Other short term senior obligations | A-1 |  | N/A |  | F1 |  | R-1(middle) |
| Short term bank notes | A-1 |  | P-1 |  | F1 |  | R-1(middle) |
| Short term deposits | N/A |  | P-1 |  | F1+ |  | R-1(middle) |
| Subordinated bank notes | A- |  | A2 |  | A |  | A(high) |
|  |  |  |  |  |  |  |  |
| Ratings Outlook: |  |  |  |  |  |  |  |
| Credit Trend | Stable |  | Stable |  | Stable |  | Stable |


Contractual Obligations, Commitments, Contingent Liabilities, Off-Balance Sheet Arrangements and Related Party Transactions

(1)Based on estimated payment dates.(2)Includes accrued interest, future contractual interest obligations and the impact of hedges in a loss position. Other derivatives are excluded. Variable rate payments are based upon the rate in effect at December 31, 2016.(3)Represents obligations to purchase goods or services that are enforceable and legally binding. Many of the purchase obligations have terms that are not fixed and determinable and are included in the table above based upon the estimated timing and amount of payment. In addition, certain of the purchase agreements contain clauses that would allow BB&T to cancel the agreement with specified notice; however, that impact is not included in the table above.(4)Although technically unfunded plans, Rabbi Trusts and insurance policies on the lives of certain of the covered employees are available to finance future benefit plan payments.BB&T’s commitments include investments in affordable housing and historic building rehabilitation projects throughout its market area and private equity funds. Refer to the "Summary of Significant Accounting Policies" note and the "Commitments and Contingencies" note in the "Notes to Consolidated Financial Statements" for further discussion of these commitments.In addition, BB&T enters into derivative contracts to manage various financial risks. 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. Derivative contracts are carried at fair value on the Consolidated Balance Sheets with the fair value representing the net present value of expected future cash receipts or payments based on market interest rates as of the balance sheet date. Derivative contracts are written in amounts referred to as notional amounts, which only provide the basis for calculating payments between counterparties and are not a measure of financial risk. Therefore, the derivative liabilities recorded on the balance sheet as of December 31, 2016 do not represent the amounts that may ultimately be paid under these contracts. Further discussion of derivative instruments is included in the "Summary of Significant Accounting Policies" note and the "Derivative Financial Instruments" note in the "Notes to Consolidated Financial Statements."In the ordinary course of business, BB&T indemnifies its officers and directors to the fullest extent permitted by law against liabilities arising from litigation. BB&T also issues standard representation and warranties in underwriting agreements, merger and acquisition agreements, loan sales, brokerage activities and other similar arrangements. Counterparties in many of these indemnifications 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 holds public funds in certain states that do not require 100% collateralization on public fund bank deposits. In these states, should the failure of another public fund depository institution result in a loss for the public entity, the resulting shortfall would have to be absorbed on a pro-rata basis by the remaining financial institutions holding public funds in that state.As a member of the FHLB, BB&T is required to maintain a minimum investment in capital stock. The board of directors of the FHLB can increase the minimum investment requirements in the event it has concluded that additional capital is required to allow it to meet its own regulatory capital requirements. Any increase in the minimum investment requirements outside of specified ranges requires the approval of the Federal Housing Finance Agency. Because the extent of any obligation to increase BB&T’s investment in the FHLB depends entirely upon the occurrence of a future event, potential future payments to the FHLB are not determinable.In the normal course of business, BB&T is also a party to financial instruments to meet the financing needs of clients and to mitigate exposure to interest rate risk. Such financial instruments include commitments to extend credit and certain contractual agreements, including standby letters of credit and financial guarantee arrangements. Further discussion of BB&T’s commitments is included in the "Commitments and Contingencies" note and the "Fair Value Disclosures" note in the "Notes to Consolidated Financial Statements."


(1)Excludes the FHA-insured mortgage loan reserve of $85 million established during 2014 and settled in 2016.


Capital

(1) BB&T's goal is to maintain capital levels above the 2019 requirements. Payments of cash dividends and repurchases of common shares are the methods used to manage any excess capital generated. In addition, management closely monitors the Parent Company’s double leverage ratio (investments in subsidiaries as a percentage of shareholders’ equity). The active management of the subsidiaries’ equity capital, as described above, is the process used to manage this important driver of Parent Company liquidity and is a key element in the management of BB&T’s capital position.Management intends to maintain capital at Branch Bank at levels that will result in classification as "well-capitalized" for regulatory purposes. Secondarily, it is management’s intent to maintain Branch Bank’s capital at levels that result in regulatory risk-based capital ratios that are generally comparable with peers of similar size, complexity and risk profile. If the capital levels of Branch Bank increase above these guidelines, excess capital may be transferred to the Parent Company in the form of special dividend payments, subject to regulatory and other operating considerations.While nonrecurring events or management decisions may result in the Company temporarily falling below its operating minimum guidelines for one or more of these ratios, it is management’s intent through capital planning to return to these targeted operating minimums within a reasonable period of time. Such temporary decreases below the operating minimums shown above are not considered an infringement of BB&T’s overall capital policy, provided a return above the minimums is forecast to occur within a reasonable time period.BB&T regularly performs stress testing on its capital levels and is required to periodically submit the company’s capital plans to the banking regulators. The FRB did not object to the Company’s 2016 capital plan, and the 2017 capital plan is expected to be submitted during April 2017. Management’s capital deployment plan in order of preference is to focus on 1) organic growth, 2) dividends and 3) acquisitions and/or share repurchases depending on opportunities in the marketplace and our interest and ability to proceed with acquisitions.Risk-based capital ratios, which include Tier 1 Capital, Total Capital and Tier 1 Common Equity, are calculated based on regulatory guidance related to the measurement of capital and risk-weighted assets. Branch Bank's capital ratios are presented in the following table:


Capital

BB&T's capital ratios are presented in the following table:


Capital

(1)Tangible common equity and related ratios are non-GAAP measures. Management uses these measures to assess the quality of capital and believes that investors may find them useful in their analysis of the Company. These capital measures are not necessarily comparable to similar capital measures that may be presented by other companies.The Company’s estimated CET1 ratio using the Basel III standardized approach on a fully phased-in basis was 10.0% at December 31, 2016 and 2015. During April 2016, BB&T's Board of Directors approved a $0.01 increase in the quarterly dividend. During July 2016, BB&T's Board of Directors approved an additional $0.02 increase in the quarterly dividend, which increased the amount of the quarterly dividend to $0.30. The Board of Directors also authorized cumulative share buybacks of up to $640 million beginning during the third quarter of 2016. Pursuant to this authorization, the Company completed $160 million of share repurchases during the third quarter of 2016 and $160 million of share repurchases during the fourth quarter of 2016. The Board of Directors also approved an additional $200 million of share repurchases through an accelerated share repurchase program that began in December and resulted in the retirement of 3.4 million shares. The program concluded in January 2017 with approximately 910,000 additional shares being retired. The conclusion of the program in January does not impact capital as the full cost was charged to equity in the fourth quarter. The total payout ratio was 64.0% for the year ended December 31, 2016.


Capital

(1)Loans and leases are net of unearned income and include LHFS.


ACL

For collectively evaluated loans, the ALLL is determined by multiplying the loan exposure estimated at the time of default by the loss frequency and loss severity factors. For individually evaluated loans, the ALLL is determined through review of data specific to the borrower. For TDRs, default expectations and estimated slower prepayment speeds that are specific to each of the restructured loan populations are incorporated in the determination of the ALLL. Also included in management’s estimates for loan and lease losses are considerations with respect to the impact of current economic events, the outcomes of which are uncertain. These events may include, but are not limited to, fluctuations in overall interest rates, political conditions, legislation that may directly or indirectly affect the banking industry and economic conditions affecting specific geographical areas and industries in which BB&T conducts business.The methodology used to determine an estimate for the RUFC is inherently similar to the methodology used in calculating the ALLL adjusted for factors specific to binding commitments, including the probability of funding and exposure at the time of funding. A detailed discussion of the methodology used in determining the ALLL and the RUFC is included in the "Summary of Significant Accounting Policies" note in the "Notes to Consolidated Financial Statements."

|  | | |
| --- | --- | --- |
|  |  |  |
| Loss Estimate Factor |  | Description |
| Loss Frequency |  | Indicates the likelihood of a borrower defaulting on a loan |
| Loss Severity |  | Indicates the amount of estimated loss at the time of default |