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Capital | BB&T's capital ratios are presented in the following table: |
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| --- | --- | --- | --- | --- | --- | --- |
| | | | | | | |
| Table 33 | | | | | | |
| Capital Ratios - Branch Bank | | | | | | |
| | | | | | | |
| | | December 31, | | | | |
| | | 2016 | | | 2015 | |
| CET1 to risk-weighted assets | | 11.5 | % | | 11.3 | % |
| Tier 1 capital to risk-weighted assets | | 11.5 | | | 11.3 | |
| Total capital to risk-weighted assets | | 13.6 | | | 13.4 | |
| Leverage ratio | | 9.6 | | | 9.3 | |
| TFC/10-K/0000092230-17-000021 |
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. |
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| Table 34 | | | | | | | | |
| Capital Ratios - BB&T Corporation | | | | | | | | |
| | | | | | | | | |
| | | December 31, | | | | | | |
| | | 2016 | | | | 2015 | | |
| | | (Dollars in millions, except per share data, shares in thousands) | | | | | | |
| Risk-based: | | | | | | | | |
| CET1 | | 10.2 | | % | | 10.3 | | % |
| Tier 1 | | 12.0 | | | | 11.8 | | |
| Total | | 14.1 | | | | 14.3 | | |
| Leverage capital | | 10.0 | | | | 9.8 | | |
| | | | | | | | | |
| Non-GAAP capital measures (1): | | | | | | | | |
| Tangible common equity per common share | | $ | 20.18 | | | $ | 19.82 | |
| | | | | | | | | |
| Calculations of tangible common equity (1): | | | | | | | | |
| Total shareholders' equity | | $ | 29,926 | | | $ | 27,340 | |
| Less: | | | | | | | | |
| Preferred stock | | 3,053 | | | | 2,603 | | |
| Noncontrolling interests | | 45 | | | | 34 | | |
| Intangible assets | | 10,492 | | | | 9,234 | | |
| Tangible common equity | | $ | 16,336 | | | $ | 15,469 | |
| | | | | | | | | |
| Risk-weighted assets | | $ | 176,138 | | | $ | 166,611 | |
| Common shares outstanding at end of period | | 809,475 | | | | 780,337 | | |
| TFC/10-K/0000092230-17-000021 |
Capital | (1)Loans and leases are net of unearned income and include LHFS. |
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| Table 35 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Quarterly Financial Summary – Unaudited | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2016 | | | | | | | | | | | | | | | | 2015 | | | | | | | | | | | | | | |
| | | Fourth Quarter | | | | Third Quarter | | | | Second Quarter | | | | First Quarter | | | | Fourth Quarter | | | | Third Quarter | | | | Second Quarter | | | | First Quarter | | |
| | | (Dollars in millions, except per share data) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Consolidated Summary of Operations: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest income | | $ | 1,745 | | | $ | 1,795 | | | $ | 1,805 | | | $ | 1,721 | | | $ | 1,695 | | | $ | 1,650 | | | $ | 1,489 | | | $ | 1,493 | |
| Interest expense | | 180 | | | | 185 | | | | 188 | | | | 192 | | | | 191 | | | | 186 | | | | 177 | | | | 181 | | |
| Provision for credit losses | | 129 | | | | 148 | | | | 111 | | | | 184 | | | | 129 | | | | 103 | | | | 97 | | | | 99 | | |
| Noninterest income | | 1,162 | | | | 1,164 | | | | 1,130 | | | | 1,016 | | | | 1,015 | | | | 988 | | | | 1,019 | | | | 997 | | |
| Noninterest expense | | 1,668 | | | | 1,711 | | | | 1,797 | | | | 1,545 | | | | 1,597 | | | | 1,594 | | | | 1,653 | | | | 1,422 | | |
| Provision for income taxes | | 287 | | | | 273 | | | | 252 | | | | 246 | | | | 251 | | | | 222 | | | | 80 | | | | 241 | | |
| Net income | | 643 | | | | 642 | | | | 587 | | | | 570 | | | | 542 | | | | 533 | | | | 501 | | | | 547 | | |
| Noncontrolling interest | | 7 | | | | — | | | | 3 | | | | 6 | | | | 3 | | | | 4 | | | | 10 | | | | 22 | | |
| Preferred stock dividends | | 44 | | | | 43 | | | | 43 | | | | 37 | | | | 37 | | | | 37 | | | | 37 | | | | 37 | | |
| Net income available to common shareholders | | $ | 592 | | | $ | 599 | | | $ | 541 | | | $ | 527 | | | $ | 502 | | | $ | 492 | | | $ | 454 | | | $ | 488 | |
| Basic EPS | | $ | 0.73 | | | $ | 0.74 | | | $ | 0.67 | | | $ | 0.67 | | | $ | 0.64 | | | $ | 0.64 | | | $ | 0.63 | | | $ | 0.68 | |
| Diluted EPS | | $ | 0.72 | | | $ | 0.73 | | | $ | 0.66 | | | $ | 0.67 | | | $ | 0.64 | | | $ | 0.64 | | | $ | 0.62 | | | $ | 0.67 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Selected Average Balances: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Assets | | $ | 220,165 | | | $ | 222,065 | | | $ | 223,399 | | | $ | 210,102 | | | $ | 209,217 | | | $ | 203,531 | | | $ | 189,033 | | | $ | 187,297 | |
| Securities, at amortized cost | | 44,881 | | | | 47,152 | | | | 48,510 | | | | 44,580 | | | | 43,468 | | | | 43,048 | | | | 40,727 | | | | 41,133 | | |
| Loans and leases (1) | | 144,569 | | | | 143,689 | | | | 143,097 | | | | 135,628 | | | | 136,190 | | | | 132,499 | | | | 122,056 | | | | 120,235 | | |
| Total earning assets | | 192,574 | | | | 193,909 | | | | 194,822 | | | | 183,612 | | | | 183,151 | | | | 178,464 | | | | 165,428 | | | | 163,367 | | |
| Deposits | | 160,118 | | | | 159,503 | | | | 160,338 | | | | 149,867 | | | | 148,491 | | | | 143,837 | | | | 131,868 | | | | 129,531 | | |
| Short-term borrowings | | 2,373 | | | | 2,128 | | | | 2,951 | | | | 2,771 | | | | 2,698 | | | | 3,572 | | | | 3,080 | | | | 3,539 | | |
| Long-term debt | | 21,563 | | | | 23,428 | | | | 23,272 | | | | 22,907 | | | | 24,306 | | | | 23,394 | | | | 22,616 | | | | 23,043 | | |
| Total interest-bearing liabilities | | 132,633 | | | | 134,500 | | | | 137,760 | | | | 129,342 | | | | 129,671 | | | | 126,650 | | | | 116,062 | | | | 116,412 | | |
| Shareholders' equity | | 30,054 | | | | 29,916 | | | | 29,610 | | | | 27,826 | | | | 27,378 | | | | 26,612 | | | | 24,888 | | | | 24,566 | | |
| TFC/10-K/0000092230-17-000021 |
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." |
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| | | |
| 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 |
| TFC/10-K/0000092230-17-000021 |
NOTE 2. Acquisitions and Divestitures | The purchase price allocation for this acquisition has not been finalized. The following is a description of the methods used to determine the fair values of significant assets and liabilities.Cash, due from banks and federal funds sold: The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets.Securities: Fair values for securities are based on quoted market prices, where available. If quoted market prices are not available, fair value estimates are based on observable inputs including quoted market prices for similar instruments, quoted market prices that are not in an active market or other inputs that are observable in the market. In the absence of observable inputs, fair value is estimated based on pricing models and/or discounted cash flow methodologies.Loans and leases: Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan, amortization status and current discount rates. Loans were grouped together according to similar characteristics and were treated in the aggregate when applying various valuation techniques. The discount rates used for loans are based on current market rates for new originations of comparable loans and include adjustments for liquidity concerns. The discount rate does not include a factor for credit losses as that has been included as a reduction to the estimated cash flows.CDI: This intangible asset represents the value of the relationships with deposit customers. The fair value was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the deposit base, reserve requirements and the net maintenance cost attributable to customer deposits. The CDI is being amortized over 10 years based upon the estimated economic benefits received.Deposits: The fair values used for the demand and savings deposits by definition equal the amount payable on demand at the acquisition date. The fair values for time deposits are estimated using a discounted cash flow calculation that applies interest rates currently being offered to the contractual interest rates on such time deposits.Debt: The fair values of long-term debt instruments 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 current incremental borrowing rates for similar types of instruments. |
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| | | | | | | | | |
| | | National Penn | | | | | | |
| | | UPB | | | | Fair Value | | |
| | | (Dollars in millions) | | | | | | |
| Assets acquired: | | | | | | | | |
| Cash, due from banks and federal funds sold | | | | | | $ | 216 | |
| Securities | | | | | | 2,499 | | |
| Loans and leases: | | | | | | | | |
| Commercial and industrial | | $ | 2,817 | | | 2,596 | | |
| CRE-income producing properties | | 1,450 | | | | 1,202 | | |
| CRE-construction and development | | 165 | | | | 127 | | |
| Direct retail lending | | 801 | | | | 767 | | |
| Revolving credit | | 7 | | | | 7 | | |
| Residential mortgage | | 1,217 | | | | 1,004 | | |
| Sales finance | | 166 | | | | 162 | | |
| PCI | | 181 | | | | 124 | | |
| Total loans and leases | | $ | 6,804 | | | 5,989 | | |
| Goodwill | | | | | | 795 | | |
| CDI | | | | | | 67 | | |
| Other assets | | | | | | 503 | | |
| Total assets acquired | | | | | | 10,069 | | |
| Liabilities assumed: | | | | | | | | |
| Deposits: | | | | | | | | |
| Noninterest-bearing deposits | | | | | | 1,209 | | |
| Interest-bearing deposits | | | | | | 5,420 | | |
| Total deposits | | | | | | 6,629 | | |
| Debt | | | | | | 1,756 | | |
| Other liabilities | | | | | | 66 | | |
| Total liabilities assumed | | | | | | 8,451 | | |
| Consideration paid | | | | | | $ | 1,618 | |
| | | | | | | | | |
| Cash paid | | | | | | $ | 555 | |
| Fair value of common stock issued, including replacement equity awards | | | | | | 1,063 | | |
| TFC/10-K/0000092230-17-000021 |
NOTE 3. Securities | During the third quarter of 2016, Branch Bank entered into an early termination agreement with the FDIC that terminated the loss share agreements. As a result of the settlement, no future loss sharing or gain sharing will occur related to the Colonial acquisition. The accounting for the affected securities has not changed; however, these securities have been classified into their respective categories and prior periods have been revised to conform to the current presentation.During 2015, BB&T transferred $517 million of HTM securities to AFS. These securities, which were sold in 2015, represented securities collateralized by student loans for which there was a significant increase in risk weighting as a result of the implementation of Basel III.Certain investments in marketable debt securities and MBS issued by FNMA and FHLMC exceeded 10% of shareholders’ equity at December 31, 2016. The FNMA investments had total amortized cost and fair value of $13.9 billion and $13.6 billion, respectively. The FHLMC investments had total amortized cost and fair value of $7.8 billion and $7.6 billion, respectively.The following table reflects changes in credit losses on securities with OTTI where a portion of the unrealized loss was recognized in OCI. Assets acquired from the FDIC were excluded from this table prior to the termination of the loss share agreements. |
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| | | Amortized Cost | | | | Gross Unrealized | | | | | | | | Fair Value | | |
| December 31, 2015 | | | Gains | | | | Losses | | | |
| | | (Dollars in millions) | | | | | | | | | | | | | | |
| AFS securities: | | | | | | | | | | | | | | | | |
| U.S. Treasury | | $ | 1,836 | | | $ | 2 | | | $ | 6 | | | $ | 1,832 | |
| GSE | | 51 | | | | — | | | | — | | | | 51 | | |
| Agency MBS | | 20,463 | | | | 22 | | | | 439 | | | | 20,046 | | |
| States and political subdivisions | | 2,312 | | | | 103 | | | | 40 | | | | 2,375 | | |
| Non-agency MBS | | 683 | | | | 306 | | | | — | | | | 989 | | |
| Other | | 4 | | | | — | | | | — | | | | 4 | | |
| Total AFS securities | | $ | 25,349 | | | $ | 433 | | | $ | 485 | | | $ | 25,297 | |
| | | | | | | | | | | | | | | | | |
| HTM securities: | | | | | | | | | | | | | | | | |
| U.S. Treasury | | $ | 1,097 | | | $ | 22 | | | $ | — | | | $ | 1,119 | |
| GSE | | 5,045 | | | | 16 | | | | 98 | | | | 4,963 | | |
| Agency MBS | | 12,267 | | | | 70 | | | | 22 | | | | 12,315 | | |
| States and political subdivisions | | 63 | | | | — | | | | — | | | | 63 | | |
| Other | | 58 | | | | 2 | | | | 1 | | | | 59 | | |
| Total HTM securities | | $ | 18,530 | | | $ | 110 | | | $ | 121 | | | $ | 18,519 | |
| TFC/10-K/0000092230-17-000021 |
NOTE 3. Securities | The amortized cost and estimated fair value of the securities portfolio by contractual maturity are shown in the following table. The expected life of MBS may differ from contractual maturities because borrowers have the right to prepay the underlying mortgage loans with or without prepayment penalties. |
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| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | | | | | | | | |
| | | 2016 | | | | 2015 | | | | 2014 | | |
| | | (Dollars in millions) | | | | | | | | | | |
| Balance at beginning of period | | $ | 42 | | | $ | 64 | | | $ | 78 | |
| Credit losses on securities without previous OTTI | | — | | | | — | | | | 6 | | |
| Credit losses on securities for which OTTI was previously recognized | | — | | | | 4 | | | | — | | |
| Reductions for securities sold/settled during the period | | (21 | | ) | | (22 | | ) | | (17 | | ) |
| Credit recoveries through yield | | (1 | | ) | | (4 | | ) | | (3 | | ) |
| Included as a result of loss share termination | | 1 | | | | — | | | | — | | |
| Balance at end of period | | $ | 21 | | | $ | 42 | | | $ | 64 | |
| TFC/10-K/0000092230-17-000021 |
NOTE 3. Securities | The following tables present the fair values and gross unrealized losses of investments based on the length of time that individual securities have been in a continuous unrealized loss position: |
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| | | AFS | | | | | | | | HTM | | | | | | |
| December 31, 2016 | | Amortized Cost | | | | Fair Value | | | | Amortized Cost | | | | Fair Value | | |
| | | (Dollars in millions) | | | | | | | | | | | | | | |
| Due in one year or less | | $ | 275 | | | $ | 275 | | | $ | — | | | $ | — | |
| Due after one year through five years | | 1,013 | | | | 1,018 | | | | 1,683 | | | | 1,703 | | |
| Due after five years through ten years | | 2,670 | | | | 2,580 | | | | 1,688 | | | | 1,672 | | |
| Due after ten years | | 23,375 | | | | 23,053 | | | | 13,309 | | | | 13,171 | | |
| Total debt securities | | $ | 27,333 | | | $ | 26,926 | | | $ | 16,680 | | | $ | 16,546 | |
| TFC/10-K/0000092230-17-000021 |
NOTE 3. Securities | Periodic reviews are conducted to identify and evaluate each investment with an unrealized loss for OTTI. An unrealized loss exists when the current fair value of an individual security is less than its amortized cost basis. Unrealized losses that are determined to be temporary in nature are recorded, net of tax, in AOCI for AFS securities. The unrealized losses on GSE securities and agency MBS were the result of increases in market interest rates compared to the date the securities were acquired rather than the credit quality of the issuers.Cash flow modeling is used to evaluate non-agency MBS in an unrealized loss position for potential credit impairment. These models give consideration to long-term macroeconomic factors applied to current security default rates, prepayment rates and recovery rates and security-level performance. At December 31, 2016, there were no non-agency MBS with other than temporary credit impairment.At December 31, 2016, the majority of the unrealized loss on municipal securities was the result of fair value hedge basis adjustments that are a component of amortized cost. Municipal securities in an unrealized loss position are evaluated for credit impairment through a qualitative analysis of issuer performance and the primary source of repayment. At December 31, 2016, the evaluation of municipal securities did not indicate any municipal securities with other than temporary credit impairment. |
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| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Less than 12 months | | | | | | | | 12 months or more | | | | | | | | Total | | | | | | |
| December 31, 2015 | | Fair Value | | | | Unrealized Losses | | | | Fair Value | | | | Unrealized Losses | | | | Fair Value | | | | Unrealized Losses | | |
| | | (Dollars in millions) | | | | | | | | | | | | | | | | | | | | | | |
| AFS securities: | | | | | | | | | | | | | | | | | | | | | | | | |
| U.S. Treasury | | $ | 1,211 | | | $ | 6 | | | $ | — | | | $ | — | | | $ | 1,211 | | | $ | 6 | |
| Agency MBS | | 12,052 | | | | 199 | | | | 5,576 | | | | 240 | | | | 17,628 | | | | 439 | | |
| States and political subdivisions | | 64 | | | | 1 | | | | 329 | | | | 39 | | | | 393 | | | | 40 | | |
| Total | | $ | 13,327 | | | $ | 206 | | | $ | 5,905 | | | $ | 279 | | | $ | 19,232 | | | $ | 485 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| HTM securities: | | | | | | | | | | | | | | | | | | | | | | | | |
| GSE | | $ | 2,307 | | | $ | 41 | | | $ | 1,743 | | | $ | 57 | | | $ | 4,050 | | | $ | 98 | |
| Agency MBS | | 3,992 | | | | 21 | | | | 124 | | | | 1 | | | | 4,116 | | | | 22 | | |
| Other | | 56 | | | | 1 | | | | — | | | | — | | | | 56 | | | | 1 | | |
| Total | | $ | 6,355 | | | $ | 63 | | | $ | 1,867 | | | $ | 58 | | | $ | 8,222 | | | $ | 121 | |
| TFC/10-K/0000092230-17-000021 |
NOTE 4. Loans and ACL | The following tables present the carrying amount of loans by risk rating. PCI loans are excluded because their related ALLL is determined by loan pool performance. |
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| | | Accruing | | | | | | | | | | | | | | | | | | |
| December 31, 2015 | | Current | | | | 30-89 Days Past Due | | | | 90 Days Or More Past Due | | | | Nonaccrual | | | | Total | | |
| | | (Dollars in millions) | | | | | | | | | | | | | | | | | | |
| Commercial: | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 48,157 | | | $ | 36 | | | $ | — | | | $ | 237 | | | $ | 48,430 | |
| CRE-income producing properties | | 13,370 | | | | 13 | | | | — | | | | 38 | | | | 13,421 | | |
| CRE-construction and development | | 3,710 | | | | 9 | | | | — | | | | 13 | | | | 3,732 | | |
| Dealer floor plan | | 1,215 | | | | — | | | | — | | | | — | | | | 1,215 | | |
| Other lending subsidiaries | | 6,771 | | | | 18 | | | | — | | | | 6 | | | | 6,795 | | |
| Retail: | | | | | | | | | | | | | | | | | | | | |
| Direct retail lending | | 11,032 | | | | 58 | | | | 7 | | | | 43 | | | | 11,140 | | |
| Revolving credit | | 2,478 | | | | 22 | | | | 10 | | | | — | | | | 2,510 | | |
| Residential mortgage-nonguaranteed | | 29,038 | | | | 397 | | | | 55 | | | | 173 | | | | 29,663 | | |
| Residential mortgage-government guaranteed | | 306 | | | | 78 | | | | 486 | | | | — | | | | 870 | | |
| Sales finance | | 10,243 | | | | 72 | | | | 5 | | | | 7 | | | | 10,327 | | |
| Other lending subsidiaries | | 6,381 | | | | 286 | | | | — | | | | 59 | | | | 6,726 | | |
| PCI | | 966 | | | | 42 | | | | 114 | | | | — | | | | 1,122 | | |
| Total | | $ | 133,667 | | | $ | 1,031 | | | $ | 677 | | | $ | 576 | | | $ | 135,951 | |
| TFC/10-K/0000092230-17-000021 |
NOTE 4. Loans and ACL | The following tables present a summary of activity in the ACL: |
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | |
| December 31, 2015 | | Direct Retail Lending | | | | Revolving Credit | | | | Residential Mortgage | | | | Sales Finance | | | | Other Lending Subsidiaries | | |
| | | (Dollars in millions) | | | | | | | | | | | | | | | | | | |
| Retail: | | | | | | | | | | | | | | | | | | | | |
| Performing | | $ | 11,097 | | | $ | 2,510 | | | $ | 30,360 | | | $ | 10,320 | | | $ | 6,667 | |
| Nonperforming | | 43 | | | | — | | | | 173 | | | | 7 | | | | 59 | | |
| Total | | $ | 11,140 | | | $ | 2,510 | | | $ | 30,533 | | | $ | 10,327 | | | $ | 6,726 | |
| TFC/10-K/0000092230-17-000021 |
NOTE 4. Loans and ACL | The following table provides a summary of loans that are collectively evaluated for impairment. |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2014 | | Beginning Balance | | | | Charge-Offs | | | | Recoveries | | | | Provision (Benefit) | | | | Other | | | | Ending Balance | | |
| | | (Dollars in millions) | | | | | | | | | | | | | | | | | | | | | | |
| Commercial: | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 454 | | | $ | (131 | ) | | $ | 42 | | | $ | 56 | | | $ | — | | | $ | 421 | |
| CRE-income producing properties | | 149 | | | | (31 | | ) | | 14 | | | | 30 | | | | — | | | | 162 | | |
| CRE-construction and development | | 76 | | | | (11 | | ) | | 19 | | | | (36 | | ) | | — | | | | 48 | | |
| Dealer floor plan | | 8 | | | | — | | | | — | | | | 2 | | | | — | | | | 10 | | |
| Other lending subsidiaries | | 15 | | | | (8 | | ) | | 3 | | | | 11 | | | | — | | | | 21 | | |
| Retail: | | | | | | | | | | | | | | | | | | | | | | | | |
| Direct retail lending | | 209 | | | | (69 | | ) | | 29 | | | | 26 | | | | (85 | | ) | | 110 | | |
| Revolving credit | | 115 | | | | (71 | | ) | | 19 | | | | 47 | | | | — | | | | 110 | | |
| Residential mortgage-nonguaranteed | | 269 | | | | (82 | | ) | | 7 | | | | (62 | | ) | | 85 | | | | 217 | | |
| Residential mortgage-government guaranteed | | 62 | | | | (2 | | ) | | — | | | | (24 | | ) | | — | | | | 36 | | |
| Sales finance | | 37 | | | | (23 | | ) | | 9 | | | | 17 | | | | — | | | | 40 | | |
| Other lending subsidiaries | | 224 | | | | (261 | | ) | | 30 | | | | 242 | | | | — | | | | 235 | | |
| PCI | | 114 | | | | (21 | | ) | | — | | | | (29 | | ) | | — | | | | 64 | | |
| ALLL | | 1,732 | | | | (710 | | ) | | 172 | | | | 280 | | | | — | | | | 1,474 | | |
| RUFC | | 89 | | | | — | | | | — | | | | (29 | | ) | | — | | | | 60 | | |
| ACL | | $ | 1,821 | | | $ | (710 | ) | | $ | 172 | | | $ | 251 | | | $ | — | | | $ | 1,534 | |
| TFC/10-K/0000092230-17-000021 |
NOTE 4. Loans and ACL | The following tables set forth certain information regarding impaired loans, excluding PCI and LHFS, that were individually evaluated for reserves. |
| | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | |
| | | December 31, 2016 | | | | | | | | December 31, 2015 | | | | | | |
| | | Recorded Investment | | | | Related ALLL | | | | Recorded Investment | | | | Related ALLL | | |
| | | (Dollars in millions) | | | | | | | | | | | | | | |
| Commercial: | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 51,253 | | | $ | 463 | | | $ | 48,110 | | | $ | 439 | |
| CRE-income producing properties | | 14,455 | | | | 112 | | | | 13,339 | | | | 127 | | |
| CRE-construction and development | | 3,787 | | | | 21 | | | | 3,697 | | | | 32 | | |
| Dealer floor plan | | 1,413 | | | | 11 | | | | 1,215 | | | | 8 | | |
| Other lending subsidiaries | | 7,678 | | | | 28 | | | | 6,789 | | | | 21 | | |
| Retail: | | | | | | | | | | | | | | | | |
| Direct retail lending | | 12,011 | | | | 93 | | | | 11,055 | | | | 93 | | |
| Revolving credit | | 2,626 | | | | 95 | | | | 2,477 | | | | 91 | | |
| Residential mortgage-nonguaranteed | | 28,488 | | | | 136 | | | | 29,199 | | | | 153 | | |
| Residential mortgage-government guaranteed | | 466 | | | | 8 | | | | 553 | | | | 1 | | |
| Sales finance | | 11,251 | | | | 37 | | | | 10,308 | | | | 39 | | |
| Other lending subsidiaries | | 7,057 | | | | 249 | | | | 6,534 | | | | 235 | | |
| PCI | | 910 | | | | 44 | | | | 1,122 | | | | 61 | | |
| Total | | $ | 141,395 | | | $ | 1,297 | | | $ | 134,398 | | | $ | 1,300 | |
| TFC/10-K/0000092230-17-000021 |
NOTE 4. Loans and ACL | Trial modifications are excluded from the following disclosures because the specific types and amounts of concessions offered to borrowers frequently change between the trial modification and the permanent modification. The following table provides a summary of TDRs, all of which are considered impaired. |
| | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | |
| December 31, 2015 | | Recorded Investment | | | | UPB | | | | Related ALLL | | | | Average Recorded Investment | | | | Interest Income Recognized | | |
| | | (Dollars in millions) | | | | | | | | | | | | | | | | | | |
| With no related ALLL recorded: | | | | | | | | | | | | | | | | | | | | |
| Commercial: | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 129 | | | $ | 164 | | | $ | — | | | $ | 95 | | | $ | 1 | |
| CRE-income producing properties | | 8 | | | | 13 | | | | — | | | | 17 | | | | — | | |
| CRE-construction and development | | 8 | | | | 11 | | | | — | | | | 10 | | | | — | | |
| Dealer floor plan | | — | | | | — | | | | — | | | | 2 | | | | — | | |
| Other lending subsidiaries | | 2 | | | | 3 | | | | — | | | | — | | | | — | | |
| Retail: | | | | | | | | | | | | | | | | | | | | |
| Direct retail lending | | 11 | | | | 40 | | | | — | | | | 12 | | | | 1 | | |
| Residential mortgage-nonguaranteed | | 103 | | | | 153 | | | | — | | | | 99 | | | | 4 | | |
| Residential mortgage-government guaranteed | | 5 | | | | 5 | | | | — | | | | 3 | | | | — | | |
| Sales finance | | 1 | | | | 2 | | | | — | | | | 1 | | | | — | | |
| Other lending subsidiaries | | 4 | | | | 8 | | | | — | | | | 3 | | | | — | | |
| With an ALLL recorded: | | | | | | | | | | | | | | | | | | | | |
| Commercial: | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | 191 | | | | 194 | | | | 27 | | | | 223 | | | | 5 | | |
| CRE-income producing properties | | 74 | | | | 77 | | | | 8 | | | | 96 | | | | 3 | | |
| CRE-construction and development | | 27 | | | | 27 | | | | 5 | | | | 36 | | | | 1 | | |
| Dealer floor plan | | — | | | | — | | | | — | | | | 1 | | | | — | | |
| Other lending subsidiaries | | 4 | | | | 5 | | | | 1 | | | | 6 | | | | — | | |
| Retail: | | | | | | | | | | | | | | | | | | | | |
| Direct retail lending | | 74 | | | | 75 | | | | 12 | | | | 79 | | | | 4 | | |
| Revolving credit | | 33 | | | | 33 | | | | 13 | | | | 36 | | | | 1 | | |
| Residential mortgage-nonguaranteed | | 361 | | | | 368 | | | | 41 | | | | 354 | | | | 15 | | |
| Residential mortgage-government guaranteed | | 312 | | | | 312 | | | | 22 | | | | 323 | | | | 13 | | |
| Sales finance | | 18 | | | | 18 | | | | 1 | | | | 19 | | | | 1 | | |
| Other lending subsidiaries | | 188 | | | | 190 | | | | 30 | | | | 179 | | | | 28 | | |
| Total | | $ | 1,553 | | | $ | 1,698 | | | $ | 160 | | | $ | 1,594 | | | $ | 77 | |
| TFC/10-K/0000092230-17-000021 |
NOTE 4. Loans and ACL | The following table summarizes the primary reason loan modifications were classified as TDRs and includes newly designated TDRs as well as modifications made to existing TDRs. Balances represent the recorded investment at the end of the quarter in which the modification was made. Rate modifications in this table include TDRs made with below market interest rates that also include modifications of loan structures. |
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | |
| | | December 31, | | | | | | |
| | | 2016 | | | | 2015 | | |
| | | (Dollars in millions) | | | | | | |
| Performing TDRs: | | | | | | | | |
| Commercial: | | | | | | | | |
| Commercial and industrial | | $ | 55 | | | $ | 49 | |
| CRE-income producing properties | | 16 | | | | 13 | | |
| CRE-construction and development | | 9 | | | | 16 | | |
| Direct retail lending | | 67 | | | | 72 | | |
| Revolving credit | | 29 | | | | 33 | | |
| Residential mortgage-nonguaranteed | | 332 | | | | 288 | | |
| Residential mortgage-government guaranteed | | 420 | | | | 316 | | |
| Sales finance | | 16 | | | | 17 | | |
| Other lending subsidiaries | | 226 | | | | 178 | | |
| Total performing TDRs | | 1,170 | | | | 982 | | |
| Nonperforming TDRs (also included in NPL disclosures) | | 183 | | | | 146 | | |
| Total TDRs | | $ | 1,353 | | | $ | 1,128 | |
| ALLL attributable to TDRs | | $ | 146 | | | $ | 126 | |
| TFC/10-K/0000092230-17-000021 |
NOTE 4. Loans and ACL | The pre-default balance for modifications that experienced a payment default that had been classified as TDRs during the previous 12 months was $73 million, $81 million and $78 million for the twelve months ended December 31, 2016, 2015 and 2014, respectively. Payment default is defined as movement of the TDR to nonaccrual status, foreclosure or charge-off, whichever occurs first.Changes in the carrying value and accretable yield of PCI loans are presented in the following table: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2016 | | | | | | | | | | | | 2015 | | | | | | | | | | | | 2014 | | | | | | | | | | |
| | | Type of Modification | | | | | | | | | | | | Type of Modification | | | | | | | | | | | | Type of Modification | | | | | | | | | | |
| | | Rate | | | | Structure | | | | ALLL Impact | | | | Rate | | | | Structure | | | | ALLL Impact | | | | Rate | | | | Structure | | | | ALLL Impact | | |
| | | (Dollars in millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 112 | | | $ | 128 | | | $ | 3 | | | $ | 99 | | | $ | 45 | | | $ | 2 | | | $ | 112 | | | $ | 48 | | | $ | 4 | |
| CRE-income producing properties | | 21 | | | | 17 | | | | — | | | | 9 | | | | 15 | | | | — | | | | 18 | | | | 18 | | | | — | | |
| CRE-construction and development | | 7 | | | | 11 | | | | — | | | | 8 | | | | 25 | | | | 1 | | | | 25 | | | | 22 | | | | — | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Retail: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Direct retail lending | | 19 | | | | 1 | | | | — | | | | 16 | | | | 4 | | | | 4 | | | | 32 | | | | 4 | | | | 6 | | |
| Revolving credit | | 17 | | | | — | | | | 4 | | | | 16 | | | | — | | | | 4 | | | | 24 | | | | — | | | | 4 | | |
| Residential mortgage-nonguaranteed | | 129 | | | | 54 | | | | 10 | | | | 88 | | | | 37 | | | | 9 | | | | 127 | | | | 36 | | | | 16 | | |
| Residential mortgage-government guaranteed | | 335 | | | | — | | | | 18 | | | | 189 | | | | — | | | | 7 | | | | 282 | | | | — | | | | 12 | | |
| Sales finance | | — | | | | 7 | | | | — | | | | — | | | | 10 | | | | 1 | | | | 1 | | | | 14 | | | | 3 | | |
| Other lending subsidiaries | | 169 | | | | — | | | | 21 | | | | 129 | | | | — | | | | 17 | | | | 130 | | | | — | | | | 17 | | |
| TFC/10-K/0000092230-17-000021 |
NOTE 4. Loans and ACL | The following table presents additional information about BB&T’s loans and leases: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2016 | | | | | | | | | | | | | | | | December 31, 2015 | | | | | | | | | | | | | | |
| | | Purchased Impaired | | | | | | | | Purchased Nonimpaired | | | | | | | | Purchased Impaired | | | | | | | | Purchased Nonimpaired | | | | | | |
| | | Accretable Yield | | | | Carrying Value | | | | Accretable Yield | | | | Carrying Value | | | | Accretable Yield | | | | Carrying Value | | | | Accretable Yield | | | | Carrying Value | | |
| | | (Dollars in millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at beginning of period | | $ | 189 | | | $ | 700 | | | $ | 176 | | | $ | 422 | | | $ | 134 | | | $ | 579 | | | $ | 244 | | | $ | 636 | |
| Additions | | 36 | | | | 124 | | | | — | | | | — | | | | 98 | | | | 402 | | | | — | | | | — | | |
| Accretion | | (134 | | ) | | 134 | | | | (73 | | ) | | 73 | | | | (89 | | ) | | 89 | | | | (89 | | ) | | 89 | | |
| Payments received, net | | — | | | | (344 | | ) | | — | | | | (199 | | ) | | — | | | | (370 | | ) | | — | | | | (303 | | ) |
| Other, net | | 162 | | | | — | | | | 52 | | | | — | | | | 46 | | | | — | | | | 21 | | | | — | | |
| Balance at end of period | | $ | 253 | | | $ | 614 | | | $ | 155 | | | $ | 296 | | | $ | 189 | | | $ | 700 | | | $ | 176 | | | $ | 422 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Outstanding UPB at end of period | | | | | | $ | 910 | | | | | | | $ | 423 | | | | | | | $ | 1,063 | | | | | | | $ | 587 | |
| TFC/10-K/0000092230-17-000021 |
NOTE 5. Premises and Equipment | The following table excludes assets related to the lease financing business. |
| | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | |
| | | Estimated Useful Life | | December 31, | | | | | | |
| | | | 2016 | | | | 2015 | | |
| | | (Years) | | (Dollars in millions) | | | | | | |
| Land and land improvements | | | | $ | 611 | | | $ | 596 | |
| Buildings and building improvements | | 40 | | 1,628 | | | | 1,503 | | |
| Furniture and equipment | | 3 - 15 | | 1,121 | | | | 1,030 | | |
| Leasehold improvements | | | | 791 | | | | 721 | | |
| Construction in progress | | | | 62 | | | | 122 | | |
| Capitalized leases on premises and equipment | | | | 66 | | | | 67 | | |
| Total | | | | 4,279 | | | | 4,039 | | |
| Accumulated depreciation and amortization | | | | (2,172 | | ) | | (2,032 | | ) |
| Net premises and equipment | | | | $ | 2,107 | | | $ | 2,007 | |
| TFC/10-K/0000092230-17-000021 |
NOTE 5. Premises and Equipment | Year Ended December 31, 2017 2018 2019 2020 2021 Thereafter (Dollars in millions)Future minimum lease payments for operating leases $263 $239 $210 $179 $154 $574 |
| | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | | | | | | | | |
| | | 2016 | | | | 2015 | | | | 2014 | | |
| | | (Dollars in millions) | | | | | | | | | | |
| Rent expense applicable to operating leases | | $ | 278 | | | $ | 245 | | | $ | 227 | |
| Rental income from owned properties and subleases | | 8 | | | | 7 | | | | 7 | | |
| TFC/10-K/0000092230-17-000021 |
NOTE 6. Goodwill and Other Intangible Assets | During 2014, the transfer of closed-end, first and second lien position residential mortgage loans from Community Banking to Residential Mortgage Banking resulted in a reallocation of the related goodwill, which is included in other adjustments in the above table. During 2015, BB&T sold American Coastal, which resulted in the allocation and write-off of goodwill from the Insurance Holdings segment. During 2016, the valuations and purchase price allocation for Susquehanna were finalized and are included in other adjustments in the above table. The acquisition of Swett & Crawford provided goodwill of $269 million and identifiable intangible assets of $224 million. The identifiable intangible assets are being amortized over a weighted average term of 13 years based upon the estimated economic benefits received. Approximately $135 million of the goodwill and identifiable intangible assets is deductible for tax purposes.The following table presents information for identifiable intangible assets subject to amortization: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Community Banking | | | | Residential Mortgage Banking | | | | Dealer Financial Services | | | | Specialized Lending | | | | Insurance Holdings | | | | Financial Services | | | | Total | | |
| | | (Dollars in millions) | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Goodwill, January 1, 2014 | | $ | 4,924 | | | $ | 7 | | | $ | 111 | | | $ | 88 | | | $ | 1,492 | | | $ | 192 | | | $ | 6,814 | |
| Acquired goodwill, net | | 29 | | | | — | | | | — | | | | — | | | | 12 | | | | — | | | | 41 | | |
| Contingent consideration | | — | | | | — | | | | — | | | | — | | | | 14 | | | | — | | | | 14 | | |
| Other adjustments | | (319 | | ) | | 319 | | | | — | | | | — | | | | — | | | | — | | | | — | | |
| Goodwill, December 31, 2014 | | 4,634 | | | | 326 | | | | 111 | | | | 88 | | | | 1,518 | | | | 192 | | | | 6,869 | | |
| Acquired goodwill, net | | 1,501 | | | | 43 | | | | — | | | | 155 | | | | 16 | | | | 11 | | | | 1,726 | | |
| American Coastal sale | | — | | | | — | | | | — | | | | — | | | | (49 | | ) | | — | | | | (49 | | ) |
| Other adjustments | | 5 | | | | — | | | | — | | | | — | | | | (3 | | ) | | — | | | | 2 | | |
| Goodwill, December 31, 2015 | | 6,140 | | | | 369 | | | | 111 | | | | 243 | | | | 1,482 | | | | 203 | | | | 8,548 | | |
| Acquired goodwill, net | | 753 | | | | 39 | | | | — | | | | 2 | | | | 270 | | | | 9 | | | | 1,073 | | |
| Other adjustments | | 139 | | | | 8 | | | | — | | | | (132 | | ) | | — | | | | 2 | | | | 17 | | |
| Goodwill, December 31, 2016 | | $ | 7,032 | | | $ | 416 | | | $ | 111 | | | $ | 113 | | | $ | 1,752 | | | $ | 214 | | | $ | 9,638 | |
| TFC/10-K/0000092230-17-000021 |
NOTE 6. Goodwill and Other Intangible Assets | Year Ended December 31, 2017 2018 2019 2020 2021 (Dollars in millions)Estimated amortization expense of identifiable intangibles $141 $123 $104 $87 $74 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | December 31, 2016 | | | | | | | | | | | | December 31, 2015 | | | | | | | | | | |
| | | Wtd. Avg. Remaining Life | | Gross Carrying Amount | | | | Accumulated Amortization | | | | Net Carrying Amount | | | | Gross Carrying Amount | | | | Accumulated Amortization | | | | Net Carrying Amount | | |
| | | (Years) | | (Dollars in millions) | | | | | | | | | | | | | | | | | | | | | | |
| CDI | | 7.9 | | $ | 970 | | | $ | (710 | ) | | $ | 260 | | | $ | 903 | | | $ | (634 | ) | | $ | 269 | |
| Other, primarily customer relationship intangibles | | 13.0 | | 1,415 | | | | (821 | | ) | | 594 | | | | 1,164 | | | | (747 | | ) | | 417 | | |
| Total | | | | $ | 2,385 | | | $ | (1,531 | ) | | $ | 854 | | | $ | 2,067 | | | $ | (1,381 | ) | | $ | 686 | |
| TFC/10-K/0000092230-17-000021 |
Residential Mortgage Banking Activities | During 2014, HUD-OIG notified BB&T that it had been selected for an audit/survey to assess compliance with FHA loan origination and quality control requirements. BB&T subsequently received subpoenas from the HUD-OIG and the Department of Justice seeking additional information regarding its lending practices in connection with loans insured by the FHA. During 2014, BB&T recognized an $85 million charge that was included in other expense on the Consolidated Statements of Income. During the third quarter of 2016, BB&T paid $83 million to settle these matters pursuant to an agreement with the Department of Justice. In addition, the Company separately received recoveries of $71 million, resulting in a net benefit of $73 million, which was included in other expense on the Consolidated Statements of Income. During 2014, BB&T recognized a $33 million adjustment related to the indemnification reserves for mortgage loans sold, which represents an increase in estimated losses that may be incurred on FHA-insured mortgage loans that have not yet defaulted. During 2016, BB&T released $31 million of mortgage repurchase reserves, which was primarily driven by lower anticipated loan repurchase requests. These adjustments were included in loan-related expense on the Consolidated Statements of Income.Payments made to date for recourse exposure on residential mortgage loans sold with recourse liability have been immaterial. |
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | |
| | | December 31, | | | | | | |
| | | 2016 | | | | 2015 | | |
| | | (Dollars in millions) | | | | | | |
| UPB of residential mortgage and home equity loan servicing portfolio | | $ | 121,639 | | | $ | 122,169 | |
| UPB of residential mortgage loans serviced for others (primarily agency conforming fixed rate) | | 90,325 | | | | 91,132 | | |
| Mortgage loans sold with recourse | | 578 | | | | 702 | | |
| Maximum recourse exposure from mortgage loans sold with recourse liability | | 282 | | | | 326 | | |
| Indemnification, recourse and repurchase reserves | | 40 | | | | 79 | | |
| FHA-insured mortgage loan reserve | | — | | | | 85 | | |
| TFC/10-K/0000092230-17-000021 |
Residential Mortgage Banking Activities | The following table presents a roll forward of the carrying value of residential MSRs recorded at fair value: |
| | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | |
| | | As Of / For The Year Ended December 31, | | | | | | | | | | |
| | | 2016 | | | | 2015 | | | | 2014 | | |
| | | (Dollars in millions) | | | | | | | | | | |
| UPB of residential mortgage loans sold from the LHFS portfolio | | $ | 15,675 | | | $ | 14,764 | | | $ | 13,400 | |
| Pre-tax gains recognized on mortgage loans sold and held for sale | | 139 | | | | 148 | | | | 110 | | |
| Servicing fees recognized from mortgage loans serviced for others | | 268 | | | | 273 | | | | 275 | | |
| Approximate weighted average servicing fee on the outstanding balance of residential mortgage loans serviced for others | | 0.28 | | % | | 0.29 | | % | | 0.29 | | % |
| Weighted average interest rate on mortgage loans serviced for others | | 4.03 | | | | 4.12 | | | | 4.20 | | |
| TFC/10-K/0000092230-17-000021 |
Residential Mortgage Banking Activities | The sensitivity of the fair value of the residential MSRs to changes in key assumptions is included in the accompanying table: |
| | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | | | | | | | | |
| | | 2016 | | | | 2015 | | | | 2014 | | |
| | | (Dollars in millions) | | | | | | | | | | |
| Carrying value, beginning of year | | $ | 880 | | | $ | 844 | | | $ | 1,047 | |
| Additions | | 146 | | | | 156 | | | | 141 | | |
| Change in fair value due to changes in valuation inputs or assumptions: | | | | | | | | | | | | |
| Prepayment speeds | | 13 | | | | 91 | | | | (219 | | ) |
| Weighted average OAS | | 10 | | | | (52 | | ) | | — | | |
| Servicing costs | | 2 | | | | (25 | | ) | | (2 | | ) |
| Realization of expected net servicing cash flows, passage of time and other | | (136 | | ) | | (134 | | ) | | (123 | | ) |
| Carrying value, end of year | | $ | 915 | | | $ | 880 | | | $ | 844 | |
| | | | | | | | | | | | | |
| Gains (losses) on derivative financial instruments used to mitigate the income statement effect of changes in fair value | | $ | 32 | | | $ | 32 | | | $ | 251 | |
| TFC/10-K/0000092230-17-000021 |
Residential Mortgage Banking Activities | The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in the above table, the effect of an adverse variation in a particular assumption on the fair value of the MSRs is calculated without changing any other assumption; while in reality, changes in one factor may result in changes in another, which may magnify or counteract the effect of the change. |
| | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2016 | | | | | | | | | | December 31, 2015 | | | | | | | | |
| | | Range | | | | | | Weighted Average | | | | Range | | | | | | Weighted Average | | |
| | | Min | | | Max | | | | Min | | | Max | | |
| | | (Dollars in millions) | | | | | | | | | | | | | | | | | | |
| Prepayment speed | | 7.5 | % | | 8.4 | % | | 8.1 | | % | | 8.1 | % | | 9.0 | % | | 8.7 | | % |
| Effect on fair value of a 10% increase | | | | | | | | $ | (28 | ) | | | | | | | | $ | (29 | ) |
| Effect on fair value of a 20% increase | | | | | | | | (54 | | ) | | | | | | | | (56 | | ) |
| | | | | | | | | | | | | | | | | | | | | |
| OAS | | 9.8 | % | | 10.2 | % | | 10.0 | | % | | 10.3 | % | | 10.6 | % | | 10.4 | | % |
| Effect on fair value of a 10% increase | | | | | | | | $ | (33 | ) | | | | | | | | $ | (33 | ) |
| Effect on fair value of a 20% increase | | | | | | | | (64 | | ) | | | | | | | | (63 | | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Composition of loans serviced for others: | | | | | | | | | | | | | | | | | | | | |
| Fixed-rate residential mortgage loans | | | | | | | | 99.1 | | % | | | | | | | | 99.2 | | % |
| Adjustable-rate residential mortgage loans | | | | | | | | 0.9 | | | | | | | | | | 0.8 | | |
| Total | | | | | | | | 100.0 | | % | | | | | | | | 100.0 | | % |
| | | | | | | | | | | | | | | | | | | | | |
| Weighted average life (in years) | | | | | | | | 7.0 | | | | | | | | | | 6.8 | | |
| TFC/10-K/0000092230-17-000021 |
Commercial Mortgage Banking Activities | Effective January 1, 2016, the Company adopted the fair value option for commercial MSRs, which are included in MSRs at fair value on the Consolidated Balance Sheets, to facilitate hedging against changes in the fair value of the MSR asset. Prior to adoption, commercials MSRs were included in other assets. The impact of the adoption was immaterial. |
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | |
| | | December 31, | | | | | | |
| | | 2016 | | | | 2015 | | |
| | | (Dollars in millions) | | | | | | |
| UPB of CRE mortgages serviced for others | | $ | 29,333 | | | $ | 28,163 | |
| CRE mortgages serviced for others covered by recourse provisions | | 4,240 | | | | 4,198 | | |
| Maximum recourse exposure from CRE mortgages sold with recourse liability | | 1,272 | | | | 1,259 | | |
| Recorded reserves related to recourse exposure | | 7 | | | | 7 | | |
| Originated CRE mortgages during the year | | 7,145 | | | | 7,012 | | |
| Commercial MSRs at fair value | | 137 | | | | — | | |
| TFC/10-K/0000092230-17-000021 |
NOTE 9. Long-Term Debt | The effective rates above reflect the impact of hedges and issuance costs. Subordinated notes with a remaining maturity of one year or greater qualify under the risk-based capital guidelines as Tier 2 supplementary capital, subject to certain limitations.Subsequent to year end, BB&T terminated FHLB advances totaling $2.9 billion of par value, which resulted in a pre-tax loss on early extinguishment of debt totaling $392 million. During 2015, BB&T terminated FHLB advances totaling $931 million, which resulted in a pre-tax loss on early extinguishment of debt totaling $172 million. During 2014, BB&T terminated FHLB advances totaling $1.1 billion, resulting in a pre-tax loss on early extinguishment of debt totaling $122 million. Year Ended December 31, Thereafter 2017 2018 2019 2020 2021 (Dollars in millions)Future debt maturities $3,696 $2,223 $3,985 $3,357 $3,881 $4,586 |
| | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Stated Rate | | | | | | Effective Rate | | | December 31, | | | | | | |
| | | Maturity | | | | Min | | | Max | | | | 2016 | | | | 2015 | | |
| | | | | | | | | | | | | | | | (Dollars in millions) | | | | | | |
| BB&T Corporation | | | | | | | | | | | | | | | | | | | | | |
| Fixed rate senior notes | | 2017 | to | 2024 | | 1.45 | % | | 6.85 | % | | 2.33 | % | | $ | 7,600 | | | $ | 7,831 | |
| Floating rate senior notes | | 2018 | | 2020 | | 1.55 | | | 1.82 | | | 1.67 | | | 1,898 | | | | 1,050 | | |
| Fixed rate subordinated notes | | 2017 | | 2022 | | 3.95 | | | 5.25 | | | 1.53 | | | 1,338 | | | | 1,382 | | |
| Branch Bank | | | | | | | | | | | | | | | | | | | | | |
| Fixed rate senior notes | | 2017 | | 2021 | | 1.00 | | | 2.85 | | | 1.80 | | | 4,209 | | | | 4,071 | | |
| Floating rate senior notes | | 2019 | | | | 1.42 | | | 1.42 | | | 1.48 | | | 250 | | | | 375 | | |
| Fixed rate subordinated notes | | 2025 | | 2026 | | 3.63 | | | 3.80 | | | 3.48 | | | 2,138 | | | | 2,562 | | |
| Floating rate subordinated notes | | 2017 | | | | 1.22 | | | 1.22 | | | 3.73 | | | 262 | | | | 612 | | |
| FHLB advances (5.5 years weighted average maturity at December 31, 2016) | | 2017 | | 2034 | | — | | | 6.38 | | | 4.20 | | | 4,118 | | | | 5,732 | | |
| Other long-term debt | | | | | | | | | | | | | | | 152 | | | | 154 | | |
| Total long-term debt | | | | | | | | | | | | | | | $ | 21,965 | | | $ | 23,769 | |
| TFC/10-K/0000092230-17-000021 |
Preferred Stock | Dividends on the preferred stock, if declared, accrue and are payable quarterly, in arrears. For each issuance, BB&T issued depositary shares, each of which represents a fractional ownership interest in a share of the Company’s preferred stock. The preferred stock has no stated maturity and redemption is solely at the option of the Company in whole, but not in part, upon the occurrence of a regulatory capital treatment event, as defined. In addition, the preferred stock may be redeemed in whole or in part, on any dividend payment date after five years from the date of issuance. Under current rules, any redemption of the preferred stock is subject to prior approval of the FRB. The preferred stock is not subject to any sinking fund or other obligations of the Company. |
| | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | |
| Preferred Stock Issue | | Issuance Date | | Earliest Redemption Date | | Liquidation Amount | | | | Carrying Amount | | | | Dividend Rate | |
| | | | | | | (Dollars in millions) | | | | | | | | | |
| Series D | | 5/1/2012 | | 5/1/2017 | | $ | 575 | | | $ | 559 | | | 5.850 | % |
| Series E | | 7/31/2012 | | 8/1/2017 | | 1,150 | | | | 1,120 | | | | 5.625 | |
| Series F | | 10/31/2012 | | 11/1/2017 | | 450 | | | | 437 | | | | 5.200 | |
| Series G | | 5/1/2013 | | 6/1/2018 | | 500 | | | | 487 | | | | 5.200 | |
| Series H | | 3/9/2016 | | 6/1/2021 | | 465 | | | | 450 | | | | 5.625 | |
| | | | | | | $ | 3,140 | | | $ | 3,053 | | | | |
| TFC/10-K/0000092230-17-000021 |
Equity-Based Compensation Plans | The fair value of RSUs is based on the common stock price on the grant date less the present value of expected dividends that will be foregone during the vesting period. The fair value of options is measured on the grant date using the Black-Scholes option-pricing model. Substantially all awards are granted in February of each year. Grants to non-executive employees primarily consist of RSUs.A summary of selected data related to equity-based compensation costs follows: |
| | | | | |
| --- | --- | --- | --- | --- |
| | | | | |
| | | December 31, 2016 | | |
| Shares available for future grants (in thousands) | | 16,627 | | |
| | | | | |
| Vesting period, awards granted prior to 2010 | | 5.0 | | yrs |
| Vesting period, awards granted after 2009 (minimum years) | | 1.0 | | |
| Vesting period, awards granted after 2009 (maximum years) | | 5.0 | | |
| Option term | | 10.0 | | |
| TFC/10-K/0000092230-17-000021 |
Equity-Based Compensation Plans | The following tables present the activity during 2016 related to equity-based compensation awards: |
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | | | | | | | | |
| | | 2016 | | | | 2015 | | | | 2014 | | |
| | | (Dollars in millions) | | | | | | | | | | |
| Equity-based compensation expense | | $ | 115 | | | $ | 106 | | | $ | 102 | |
| Income tax benefit from equity-based compensation expense | | 43 | | | | 40 | | | | 39 | | |
| Intrinsic value of options exercised and RSUs that vested during the year | | 159 | | | | 170 | | | | 280 | | |
| Grant date fair value of equity-based awards that vested during the year | | 98 | | | | 115 | | | | 113 | | |
| | | | | | | | | | | | | |
| | | | | | | December 31, | | | | | | |
| | | | | | | 2016 | | | | 2015 | | |
| | | | | | | (Dollars in millions) | | | | | | |
| Unrecognized compensation cost related to equity-based awards | | | | | | $ | 109 | | | $ | 103 | |
| Weighted-average life over which compensation cost is expected to be recognized (years) | | | | | | 2.3 | | | | 2.2 | | |
| TFC/10-K/0000092230-17-000021 |
NOTE 12. Income Taxes | The reasons for the difference between the provision for income taxes and the amount computed by applying the statutory Federal income tax rate to income before income taxes were as follows: |
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | | | | | | | | |
| | | 2016 | | | | 2015 | | | | 2014 | | |
| | | (Dollars in millions) | | | | | | | | | | |
| Current expense: | | | | | | | | | | | | |
| Federal | | $ | 959 | | | $ | 585 | | | $ | 706 | |
| State | | 97 | | | | 99 | | | | 81 | | |
| Total current expense | | 1,056 | | | | 684 | | | | 787 | | |
| Deferred expense: | | | | | | | | | | | | |
| Federal | | (14 | | ) | | 99 | | | | 122 | | |
| State | | 16 | | | | 11 | | | | 12 | | |
| Total deferred expense | | 2 | | | | 110 | | | | 134 | | |
| Provision for income taxes | | $ | 1,058 | | | $ | 794 | | | $ | 921 | |
| TFC/10-K/0000092230-17-000021 |
NOTE 12. Income Taxes | The tax effects of temporary differences that gave rise to deferred tax assets and liabilities are reflected in the table below: |
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | | | | | | | | |
| | | 2016 | | | | 2015 | | | | 2014 | | |
| | | (Dollars in millions) | | | | | | | | | | |
| Federal income taxes at statutory rate of 35% | | $ | 1,225 | | | $ | 1,021 | | | $ | 1,094 | |
| Increase (decrease) in provision for income taxes as a result of: | | | | | | | | | | | | |
| State income taxes, net of federal tax benefit | | 73 | | | | 72 | | | | 61 | | |
| Affordable housing projects proportional amortization | | 205 | | | | 181 | | | | 159 | | |
| Affordable housing projects tax credits and other tax benefits | | (279 | | ) | | (249 | | ) | | (221 | | ) |
| Tax exempt income | | (151 | | ) | | (129 | | ) | | (125 | | ) |
| Adjustments for uncertain tax positions | | (6 | | ) | | (107 | | ) | | (39 | | ) |
| Other, net | | (9 | | ) | | 5 | | | | (8 | | ) |
| Provision for income taxes | | $ | 1,058 | | | $ | 794 | | | $ | 921 | |
| Effective income tax rate | | 30.2 | | % | | 27.2 | | % | | 29.5 | | % |
| TFC/10-K/0000092230-17-000021 |
NOTE 12. Income Taxes | On a periodic basis, BB&T evaluates its income tax positions based on tax laws and regulations and financial reporting considerations, and records adjustments as appropriate. This evaluation takes into consideration the status of current taxing authorities’ examinations of BB&T’s tax returns, recent positions taken by the taxing authorities on similar transactions and the overall tax environment in relation to tax-advantaged transactions. The following table presents changes in unrecognized tax benefits: |
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| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | |
| | | December 31, | | | | | | |
| | | 2016 | | | | 2015 | | |
| | | (Dollars in millions) | | | | | | |
| Deferred tax assets: | | | | | | | | |
| ALLL | | $ | 564 | | | $ | 553 | |
| Postretirement plans | | 451 | | | | 431 | | |
| Net unrealized loss on AFS securities | | 155 | | | | 124 | | |
| Equity-based compensation | | 124 | | | | 129 | | |
| Reserves and expense accruals | | 238 | | | | 255 | | |
| Investments in qualified affordable housing projects | | 116 | | | | 110 | | |
| Other | | 317 | | | | 292 | | |
| Total deferred tax assets | | 1,965 | | | | 1,894 | | |
| | | | | | | | | |
| Deferred tax liabilities: | | | | | | | | |
| Prepaid pension plan expense | | 558 | | | | 509 | | |
| MSRs | | 358 | | | | 331 | | |
| Lease financing | | 587 | | | | 663 | | |
| Loan fees and expenses | | 103 | | | | 70 | | |
| Identifiable intangible assets | | 224 | | | | 207 | | |
| Other | | 45 | | | | 169 | | |
| Total deferred tax liabilities | | 1,875 | | | | 1,949 | | |
| Net deferred tax asset (liability) | | $ | 90 | | | $ | (55 | ) |
| TFC/10-K/0000092230-17-000021 |
NOTE 12. Income Taxes | During 2010, BB&T received an IRS statutory notice of deficiency for tax years 2002-2007 related to the disallowance of foreign tax credits and other deductions claimed by a subsidiary in connection with a financing transaction. BB&T paid the disputed tax, penalties and interest during 2010 and filed a lawsuit seeking a refund in the U.S. Court of Federal Claims, which denied the claim. BB&T appealed the decision to the U.S. Court of Appeals for the Federal Circuit. During 2015, the appeals court overturned a portion of the earlier ruling, resulting in the recognition of a $107 million income tax benefit during 2015. The remainder of the decision was affirmed. BB&T filed a petition requesting the case be heard by the U.S. Supreme Court. During 2016, the U.S. Supreme Court declined to hear the case, which preserves the earlier ruling and effectively concluded this matter.The Company had immaterial amounts accrued for tax-related interest and penalties at December 31, 2016 and $181 million at December 31, 2015. The amount of net interest and penalties related to unrecognized tax benefits recognized in the Consolidated Statements of Income was a benefit of $29 million for 2015.The IRS has completed its Federal income tax examinations of BB&T through 2013. Various years remain subject to examination by state taxing authorities. |
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | |
| | | As of/ For the Year Ended December 31, | | | | | | | | | | |
| | | 2016 | | | | 2015 | | | | 2014 | | |
| | | (Dollars in millions) | | | | | | | | | | |
| Beginning balance of unrecognized tax benefits | | $ | 426 | | | $ | 503 | | | $ | 644 | |
| Additions based on tax positions related to current year | | — | | | | — | | | | 1 | | |
| Additions (reductions) for tax positions of prior years | | (5 | | ) | | (76 | | ) | | (34 | | ) |
| Settlements | | (420 | | ) | | (1 | | ) | | (17 | | ) |
| Lapse of statute of limitations | | — | | | | (1 | | ) | | — | | |
| Unrecognized deferred tax benefits from acquisitions | | — | | | | 1 | | | | (91 | | ) |
| Ending balance of unrecognized tax benefits | | $ | 1 | | | $ | 426 | | | $ | 503 | |
| | | | | | | | | | | | | |
| Unrecognized tax benefits that would have impacted effective rate if recognized | | | | | | | | | | | | |
| Federal | | $ | — | | | $ | 422 | | | $ | 497 | |
| State | | 1 | | | | 3 | | | | 4 | | |
| TFC/10-K/0000092230-17-000021 |
Defined Benefit Retirement Plans | The weighted average expected long-term rate of return on plan assets represents the average rate of return expected to be earned on plan assets over the period the benefits included in the benefit obligation are to be paid. In developing the expected rate of return, BB&T considers long-term compound annualized returns of historical market data for each asset category, as well as historical actual returns on the plan assets. Using this reference information, the Company develops forward-looking return expectations for each asset category and a weighted average expected long-term rate of return for the plan based on target asset allocations contained in BB&T's Investment Policy Statement. For 2017, the expected rate of return on plan assets is 7.0%.Financial data relative to qualified and nonqualified defined benefit pension plans is summarized in the following tables for the years indicated. On the Consolidated Balance Sheets, the qualified pension plan prepaid asset is recorded as a component of other assets and the nonqualified pension plans accrued liability is recorded as a component of other liabilities. The data is calculated using an actuarial measurement date of December 31. |
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | |
| | | December 31, | | | | | | | |
| | | 2016 | | | 2015 | | | 2014 | |
| Weighted average assumed discount rate | | 4.68 | % | | 4.27 | % | | 5.10 | % |
| Weighted average expected long-term rate of return on plan assets | | 7.00 | | | 7.50 | | | 7.75 | |
| Assumed long-term rate of annual compensation increases | | 4.50 | | | 4.50 | | | 5.00 | |
| TFC/10-K/0000092230-17-000021 |
Defined Benefit Retirement Plans | The following actuarial assumptions were used to determine benefit obligations: |
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | |
| | | Year Ended December 31, | | | | | | | | | | |
| | | 2016 | | | | 2015 | | | | 2014 | | |
| | | (Dollars in millions) | | | | | | | | | | |
| Net Periodic Pension Cost: | | | | | | | | | | | | |
| Service cost | | $ | 186 | | | $ | 176 | | | $ | 138 | |
| Interest cost | | 181 | | | | 157 | | | | 140 | | |
| Estimated return on plan assets | | (326 | | ) | | (327 | | ) | | (296 | | ) |
| Net amortization and other | | 80 | | | | 67 | | | | 17 | | |
| Net periodic benefit cost | | 121 | | | | 73 | | | | (1 | | ) |
| | | | | | | | | | | | | |
| Pre-Tax Amounts Recognized in OCI: | | | | | | | | | | | | |
| Net actuarial loss (gain) | | 138 | | | | 230 | | | | 532 | | |
| Net amortization | | (80 | | ) | | (67 | | ) | | (17 | | ) |
| Net amount recognized in OCI | | 58 | | | | 163 | | | | 515 | | |
| Total net periodic pension costs (income) recognized in total comprehensive income, pre-tax | | $ | 179 | | | $ | 236 | | | $ | 514 | |
| TFC/10-K/0000092230-17-000021 |
Defined Benefit Retirement Plans | The following are the pre-tax amounts recognized in AOCI: |
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | |
| | | Qualified Plans | | | | | | | | Nonqualified Plans | | | | | | |
| | | Year Ended December 31, | | | | | | | | Year Ended December 31, | | | | | | |
| | | 2016 | | | | 2015 | | | | 2016 | | | | 2015 | | |
| | | (Dollars in millions) | | | | | | | | | | | | | | |
| Fair value of plan assets, beginning of year | | $ | 4,369 | | | $ | 4,223 | | | $ | — | | | $ | — | |
| Actual return on plan assets | | 356 | | | | (70 | | ) | | — | | | | — | | |
| Employer contributions | | 360 | | | | 126 | | | | 11 | | | | 15 | | |
| Benefits paid | | (94 | | ) | | (80 | | ) | | (11 | | ) | | (15 | | ) |
| Acquisitions | | 53 | | | | 170 | | | | — | | | | — | | |
| Fair value of plan assets, end of year | | $ | 5,044 | | | $ | 4,369 | | | $ | — | | | $ | — | |
| Funded status at end of year | | $ | 1,105 | | | $ | 896 | | | $ | (426 | ) | | $ | (392 | ) |
| TFC/10-K/0000092230-17-000021 |
Defined Benefit Retirement Plans | The following table presents the amount expected to be amortized from AOCI into net periodic pension cost during 2017: |
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | |
| | | Qualified Plans | | | | | | | | Nonqualified Plans | | | | | | |
| | | Year Ended December 31, | | | | | | | | Year Ended December 31, | | | | | | |
| | | 2016 | | | | 2015 | | | | 2016 | | | | 2015 | | |
| | | (Dollars in millions) | | | | | | | | | | | | | | |
| Prior service credit (cost) | | $ | — | | | $ | — | | | $ | (1 | ) | | $ | (2 | ) |
| Net actuarial loss | | (1,095 | | ) | | (1,040 | | ) | | (135 | | ) | | (131 | | ) |
| Net amount recognized | | $ | (1,095 | ) | | $ | (1,040 | ) | | $ | (136 | ) | | $ | (133 | ) |
| TFC/10-K/0000092230-17-000021 |
Defined Benefit Retirement Plans | BB&T makes contributions to the qualified pension plan in amounts between the minimum required for funding and the maximum amount deductible for federal income tax purposes. BB&T made discretionary contributions of $260 million during the first quarter of 2017. Management may make additional contributions in 2017. For the nonqualified plans, the employer contributions are based on benefit payments.The following table reflects the estimated benefit payments for the periods presented: |
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| | | | | | | | | |
| | | Qualified Plans | | | | Nonqualified Plans | | |
| | | (Dollars in millions) | | | | | | |
| Net actuarial loss | | $ | (66 | ) | | $ | (12 | ) |
| Net amount expected to be amortized in 2017 | | $ | (66 | ) | | $ | (12 | ) |
| TFC/10-K/0000092230-17-000021 |
Defined Benefit Retirement Plans | BB&T's primary total return objective is to achieve returns that, over the long term, will fund retirement liabilities and provide for the desired plan benefits in a manner that satisfies the fiduciary requirements of the Employee Retirement Income Security Act of 1974. The plan assets have a long-term time horizon that runs concurrent with the average life expectancy of the participants. As such, the Plan can assume a time horizon that extends well beyond a full market cycle, and can assume an above-average level of risk, as measured by the standard deviation of annual return. It is expected, however, that both professional investment management and sufficient portfolio diversification will smooth volatility and help to generate a reasonable consistency of return. The investments are broadly diversified among economic sector, industry, quality and size in order to reduce risk and to produce incremental return. Within approved guidelines and restrictions, investment managers have wide discretion over the timing and selection of individual investments.BB&T periodically reviews its asset allocation and investment policy and makes changes to its target asset allocation. BB&T has established guidelines within each asset category to ensure the appropriate balance of risk and reward. For the year ended December 31, 2016, the target asset allocations for the plan assets included a range of 30% to 50% for U.S. equity securities, 11% to 18% for international equity securities, 35% to 53% for fixed income securities, and 0% to 14% for alternative investments, which include real estate, hedge funds and private equities. The plan may hold up to 10% of its assets in BB&T common stock.The fair values of certain pension plan assets by asset category are reflected in the following table. |
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| | | Qualified Plans | | | | Nonqualified Plans | | |
| | | (Dollars in millions) | | | | | | |
| 2017 | | $ | 104 | | | $ | 15 | |
| 2018 | | 115 | | | | 16 | | |
| 2019 | | 125 | | | | 17 | | |
| 2020 | | 137 | | | | 18 | | |
| 2021 | | 149 | | | | 20 | | |
| 2022-2026 | | 949 | | | | 119 | | |
| TFC/10-K/0000092230-17-000021 |
Defined Benefit Retirement Plans | Investments measured at fair value using the net asset value per share or equivalent as a practical expedient are not required to be classified in the fair value hierarchy. The pension plan held alternative investments valued using net asset values totaling $199 million and $115 million at December 31, 2016 and 2015, respectively.U.S. equity securities included 3.0 million shares of BB&T common stock valued at $113 million at December 31, 2015. International equity securities include a common/commingled fund that consists of assets from several accounts, pooled together, to reduce management and administration costs. Total plan assets exclude accrued income of $21 million and $18 million at December 31, 2016 and 2015, respectively. |
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| | | December 31, 2016 | | | | | | | | | | | | December 31, 2015 | | | | | | | | | | |
| | | Total | | | | Level 1 | | | | Level 2 | | | | Total | | | | Level 1 | | | | Level 2 | | |
| | | (Dollars in millions) | | | | | | | | | | | | | | | | | | | | | | |
| Cash and cash-equivalents | | $ | 179 | | | $ | 179 | | | $ | — | | | $ | 266 | | | $ | 266 | | | $ | — | |
| U.S. equity securities | | 1,892 | | | | 1,018 | | | | 874 | | | | 1,627 | | | | 1,627 | | | | — | | |
| International equity securities | | 839 | | | | 165 | | | | 674 | | | | 712 | | | | 614 | | | | 98 | | |
| Fixed income securities | | 1,914 | | | | 10 | | | | 1,904 | | | | 1,631 | | | | 10 | | | | 1,621 | | |
| Total | | $ | 4,824 | | | $ | 1,372 | | | $ | 3,452 | | | $ | 4,236 | | | $ | 2,517 | | | $ | 1,719 | |
| TFC/10-K/0000092230-17-000021 |
NOTE 14. Commitments and Contingencies | Letters of credit and financial guarantees written are unconditional commitments issued by BB&T to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support borrowing arrangements, including commercial paper issuance, bond financing and similar transactions, the majority of which are to tax exempt entities. The credit risk involved in the issuance of these guarantees is essentially the same as that involved in extending loans to clients and as such, the instruments are collateralized when necessary.BB&T invests in certain affordable housing and historic building rehabilitation projects throughout its market area as a means of supporting local communities. BB&T receives tax credits related to these investments. BB&T typically acts as a limited partner in these investments and does not exert control over the operating or financial policies of the partnerships. BB&T typically provides financing during the construction and development of the properties; however, permanent financing is generally obtained from independent third parties upon completion of a project. Tax credits are subject to recapture by taxing authorities based on compliance features required to be met at the project level. BB&T’s maximum potential exposure to losses relative to investments in VIEs is generally limited to the sum of the outstanding balance, future funding commitments and any related loans to the entity. Loans to these entities are underwritten in substantially the same manner as are other loans and are generally secured.BB&T has investments in and future funding commitments to certain private equity investments. The majority of these investments are private equity funds that are consolidated into BB&T's financial statements. The risk exposure relating to such commitments is generally limited to the amount of investments and future funding commitments made.BB&T has sold certain mortgage-related loans that contain recourse provisions. These provisions generally require BB&T to reimburse the investor for a share of any loss that is incurred after the disposal of the property. BB&T also issues standard representations and warranties related to mortgage loan sales to GSEs. Refer to the "Loan Servicing" note in the "Notes to Consolidated Financial Statements" for additional disclosures related to these exposures.In the ordinary course of business, BB&T indemnifies its officers and directors to the fullest extent permitted by law against liabilities arising from pending litigation. BB&T also issues standard representations and warranties in underwriting agreements, merger and acquisition agreements, loan sales, brokerage activities and other similar arrangements. Counterparties in many of these indemnification arrangements provide similar indemnifications to BB&T. Although these agreements often do not specify limitations, BB&T does not believe that any payments related to these guarantees would materially change the financial position or results of operations of BB&T. |
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| | | December 31, | | | | | | |
| | | 2016 | | | | 2015 | | |
| | | (Dollars in millions) | | | | | | |
| Letters of credit | | $ | 2,786 | | | $ | 3,033 | |
| Carrying amount of the liability for letters of credit | | 27 | | | | 27 | | |
| | | | | | | | | |
| Investments in affordable housing and historic building rehabilitation projects: | | | | | | | | |
| Carrying amount | | 1,719 | | | | 1,629 | | |
| Amount of future funding commitments included in carrying amount | | 738 | | | | 654 | | |
| Lending exposure | | 495 | | | | 292 | | |
| Tax credits subject to recapture | | 413 | | | | 355 | | |
| | | | | | | | | |
| Private equity investments | | 362 | | | | 289 | | |
| Future funding commitments to private equity investments | | 197 | | | | 231 | | |
| TFC/10-K/0000092230-17-000021 |
NOTE 15. Regulatory Requirements and Other Restrictions | As an approved seller/servicer, Branch Bank is required to maintain minimum levels of capital, as specified by various agencies, including the U.S. Department of Housing and Urban Development, GNMA, FHLMC and FNMA. At December 31, 2016 and 2015, Branch Bank’s capital was above all required levels. |
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| | | December 31, 2016 | | | | | | | | | | | | | | | December 31, 2015 | | | | | | | | | | | | | |
| | | Actual Capital | | | | | | | Capital Requirements | | | | | | | | Actual Capital | | | | | | | Capital Requirements | | | | | | |
| | | Ratio | | | Amount | | | | Minimum | | | | Well-Capitalized | | | | Ratio | | | Amount | | | | Minimum | | | | Well-Capitalized | | |
| | | (Dollars in millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| CET1 Capital: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| BB&T | | 10.2 | % | | $ | 18,050 | | | $ | 7,926 | | | $ | 11,449 | | | 10.3 | % | | $ | 17,081 | | | $ | 7,497 | | | $ | 10,830 | |
| Branch Bank | | 11.5 | | | 19,839 | | | | 7,730 | | | | 11,166 | | | | 11.3 | | | 18,382 | | | | 7,319 | | | | 10,572 | | |
| Tier 1 Capital: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| BB&T | | 12.0 | | | 21,102 | | | | 10,568 | | | | 14,091 | | | | 11.8 | | | 19,682 | | | | 9,997 | | | | 13,329 | | |
| Branch Bank | | 11.5 | | | 19,839 | | | | 10,307 | | | | 13,743 | | | | 11.3 | | | 18,382 | | | | 9,759 | | | | 13,012 | | |
| Total Capital: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| BB&T | | 14.1 | | | 24,872 | | | | 14,091 | | | | 17,614 | | | | 14.3 | | | 23,753 | | | | 13,329 | | | | 16,661 | | |
| Branch Bank | | 13.6 | | | 23,289 | | | | 13,743 | | | | 17,179 | | | | 13.4 | | | 21,859 | | | | 13,012 | | | | 16,265 | | |
| Leverage Capital: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| BB&T | | 10.0 | | | 21,102 | | | | 8,460 | | | | 10,576 | | | | 9.8 | | | 19,682 | | | | 8,062 | | | | 10,077 | | |
| Branch Bank | | 9.6 | | | 19,839 | | | | 8,249 | | | | 10,311 | | | | 9.3 | | | 18,382 | | | | 7,866 | | | | 9,833 | | |
| TFC/10-K/0000092230-17-000021 |
NOTE 16. Parent Company Financial Statements | The transfer of funds in the form of dividends, loans or advances from bank subsidiaries to the Parent Company is restricted. Federal law requires loans to the Parent Company or its affiliates to be secured and at market terms and generally limits loans to the Parent Company or an individual affiliate to 10% of Branch Bank’s unimpaired capital and surplus. In the aggregate, loans to the Parent Company and all affiliates cannot exceed 20% of the bank’s unimpaired capital and surplus.Dividend payments to the Parent Company by Branch Bank are subject to regulatory review and statutory limitations and, in some instances, regulatory approval. In general, dividends from Branch Bank to the Parent Company are limited by rules which compare dividends to net income for regulatory-defined periods. Furthermore, dividends are restricted by regulatory minimum capital constraints. |
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| | | Year Ended December 31, | | | | | | | | | | |
| Parent Company - Statements of Cash Flows | | 2016 | | | | 2015 | | | | 2014 | | |
| | | (Dollars in millions) | | | | | | | | | | |
| Cash Flows From Operating Activities: | | | | | | | | | | | | |
| Net income | | $ | 2,442 | | | $ | 2,123 | | | $ | 2,206 | |
| Adjustments to reconcile net income to net cash from operating activities: | | | | | | | | | | | | |
| Equity in earnings of subsidiaries in excess of dividends from subsidiaries | | (1,188 | | ) | | (273 | | ) | | (585 | | ) |
| Net change in operating assets and liabilities: | | | | | | | | | | | | |
| Other assets | | 41 | | | | 88 | | | | 27 | | |
| Accounts payable and other liabilities | | (42 | | ) | | (14 | | ) | | 40 | | |
| Other, net | | (88 | | ) | | 32 | | | | (86 | | ) |
| Net cash from operating activities | | 1,165 | | | | 1,956 | | | | 1,602 | | |
| | | | | | | | | | | | | |
| Cash Flows From Investing Activities: | | | | | | | | | | | | |
| Proceeds from sales, calls and maturities of AFS securities | | 27 | | | | 49 | | | | 25 | | |
| Purchases of AFS securities | | (31 | | ) | | (21 | | ) | | (124 | | ) |
| Proceeds from maturities, calls and paydowns of HTM securities | | 2 | | | | 27 | | | | 16 | | |
| Investment in subsidiaries | | (85 | | ) | | — | | | | (1 | | ) |
| Advances to subsidiaries | | (7,719 | | ) | | (7,461 | | ) | | (7,145 | | ) |
| Proceeds from repayment of advances to subsidiaries | | 6,975 | | | | 6,848 | | | | 7,060 | | |
| Net cash from acquisitions and divestitures | | (254 | | ) | | (595 | | ) | | — | | |
| Net cash from investing activities | | (1,085 | | ) | | (1,153 | | ) | | (169 | | ) |
| | | | | | | | | | | | | |
| Cash Flows From Financing Activities: | | | | | | | | | | | | |
| Net change in short-term borrowings | | — | | | | (40 | | ) | | (34 | | ) |
| Net change in long-term debt | | 476 | | | | (92 | | ) | | 1,085 | | |
| Net cash from common stock transactions | | (293 | | ) | | 73 | | | | 298 | | |
| Net proceeds from preferred stock issued | | 450 | | | | — | | | | — | | |
| Cash dividends paid on common and preferred stock | | (1,092 | | ) | | (937 | | ) | | (814 | | ) |
| Other, net | | 2 | | | | (6 | | ) | | (4 | | ) |
| Net cash from financing activities | | (457 | | ) | | (1,002 | | ) | | 531 | | |
| Net Change in Cash and Cash Equivalents | | (377 | | ) | | (199 | | ) | | 1,964 | | |
| Cash and Cash Equivalents at Beginning of Period | | 7,492 | | | | 7,691 | | | | 5,727 | | |
| Cash and Cash Equivalents at End of Period | | $ | 7,115 | | | $ | 7,492 | | | $ | 7,691 | |
| TFC/10-K/0000092230-17-000021 |
NOTE 17. Fair Value Disclosures | The following discussion focuses on the valuation techniques and significant inputs for Level 2 and Level 3 assets and liabilities.A third-party pricing service is generally utilized in determining the fair value of the securities portfolio. Management independently evaluates the fair values provided by the pricing service through comparisons to other external pricing sources, review of additional information provided by the pricing service and other third party sources for selected securities and back-testing to compare the price realized on any security sales to the daily pricing information received from the pricing service. 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.Trading securities: Trading securities include various types of debt and equity securities, primarily consisting 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.U.S. Treasury securities: Treasury securities are valued using quoted prices in active over the counter markets.GSE securities and agency MBS: GSE pass-through securities are valued using market-based pricing matrices that reference 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 reference observable inputs including MSRB reported trades, issuer spreads, material event notices and benchmark yield curves.Non-agency MBS: 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. Non-agency MBS also include investments in Re-REMIC trusts that primarily hold non-agency MBS, which are valued based on broker pricing models that use baseline securities yields and tranche-level yield adjustments to discount cash flows modeled using market convention prepayment speed and default assumptions.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.LHFS: Certain mortgage loans are originated to be sold to investors, which are carried at fair value. 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 LHFS.MSRs: Residential MSRs are valued using an OAS valuation model to project cash flows over multiple interest rate scenarios, which are then discounted at risk-adjusted rates. The 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. Commercial MSRs are valued using a cash flow valuation model that calculates the present value of estimated future net servicing cash flows. BB&T considers actual and expected loan prepayment rates, discount rates, servicing costs and other economic factors that are determined based on current market conditions. Derivative assets and liabilities: The fair values of derivatives are determined based on quoted market prices and internal pricing models that use 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 are not expected to fund and include the value attributable to the net servicing fees.Private equity investments: Private equity investments 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.Securities sold short: Securities sold short represent debt securities sold short that are entered into as a hedging strategy for the purposes of supporting institutional and retail client trading activities.The following tables summarize activity for Level 3 assets and liabilities: |
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| December 31, 2015 | | Total | | | | Level 1 | | | | Level 2 | | | | Level 3 | | |
| | | (Dollars in millions) | | | | | | | | | | | | | | |
| Assets: | | | | | | | | | | | | | | | | |
| Trading securities | | $ | 1,180 | | | $ | 311 | | | $ | 869 | | | $ | — | |
| AFS securities: | | | | | | | | | | | | | | | | |
| U.S. Treasury | | 1,832 | | | | — | | | | 1,832 | | | | — | | |
| GSE | | 51 | | | | — | | | | 51 | | | | — | | |
| Agency MBS | | 20,046 | | | | — | | | | 20,046 | | | | — | | |
| States and political subdivisions | | 2,375 | | | | — | | | | 2,375 | | | | — | | |
| Non-agency MBS | | 989 | | | | — | | | | 363 | | | | 626 | | |
| Other | | 4 | | | | 4 | | | | — | | | | — | | |
| LHFS | | 1,035 | | | | — | | | | 1,035 | | | | — | | |
| MSRs | | 880 | | | | — | | | | — | | | | 880 | | |
| Derivative assets: | | | | | | | | | | | | | | | | |
| Interest rate contracts | | 964 | | | | — | | | | 956 | | | | 8 | | |
| Foreign exchange contracts | | 6 | | | | — | | | | 6 | | | | — | | |
| Private equity investments | | 289 | | | | — | | | | — | | | | 289 | | |
| Total assets | | $ | 29,651 | | | $ | 315 | | | $ | 27,533 | | | $ | 1,803 | |
| | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Derivative liabilities: | | | | | | | | | | | | | | | | |
| Interest rate contracts | | $ | 788 | | | $ | — | | | $ | 784 | | | $ | 4 | |
| Foreign exchange contracts | | 4 | | | | — | | | | 4 | | | | — | | |
| Securities sold short | | 147 | | | | — | | | | 147 | | | | — | | |
| Total liabilities | | $ | 939 | | | $ | — | | | $ | 935 | | | $ | 4 | |
| TFC/10-K/0000092230-17-000021 |
NOTE 17. Fair Value Disclosures | BB&T’s policy is to recognize transfers between levels as of the end of a reporting period. Transfers in and out of Level 3 are shown in the preceding tables. There were no transfers between Level 1 and Level 2 during 2016, 2015 or 2014.The non-agency MBS categorized as Level 3 represent ownership interest in various tranches of Re-REMIC trusts. These securities are valued at a discount, which is unobservable in the market, to the fair value of the underlying securities owned by the trusts. The Re-REMIC tranches do not have an active market and therefore are categorized as Level 3. At December 31, 2016, the fair value of the Re-REMIC non-agency MBS represented a discount of 14.1% to the fair value of the underlying securities owned by the Re-REMIC trusts. The majority of private equity investments are in SBIC qualified funds, which primarily focus on equity and subordinated debt investments in privately-held middle market companies. The majority of these VIE 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 2026, 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 two years; however, the timing and amount of distributions may vary significantly. As of December 31, 2016, 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 13x, with a weighted average of 8x, at December 31, 2016.The following table details the fair value and UPB of LHFS that were elected to be carried at fair value: December 31, 2016 December 31, 2015 Fair Value Aggregate UPB Difference Fair Value Aggregate UPB Difference (Dollars in millions)LHFS reported at fair value $1,716 $1,736 $(20) $1,035 $1,023 $12Excluding government guaranteed, LHFS that were in nonaccrual status or 90 days or more past due and still accruing interest were not material at December 31, 2016.The following table provides information about certain financial assets measured at fair value on a nonrecurring basis, which are primarily collateral dependent and may be subject to liquidity adjustments. The carrying values represent end of period values, which approximate the fair value measurements that occurred on the various measurement dates throughout the period. The valuation adjustments represent the amounts recorded during the period regardless of whether the asset is still held at period end. These assets are considered to be Level 3 assets (excludes PCI). |
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| Year Ended December 31, 2014 | | Non-agency MBS | | | | MSRs | | | | Net Derivatives | | | | Private Equity Investments | | |
| | | (Dollars in millions) | | | | | | | | | | | | | | |
| Balance at January 1, 2014 | | $ | 861 | | | $ | 1,047 | | | $ | (11 | ) | | $ | 291 | |
| Total realized and unrealized gains (losses): | | | | | | | | | | | | | | | | |
| Included in earnings: | | | | | | | | | | | | | | | | |
| Interest income | | 33 | | | | — | | | | — | | | | — | | |
| Mortgage banking income | | — | | | | (221 | | ) | | 94 | | | | — | | |
| Other noninterest income | | — | | | | — | | | | (2 | | ) | | 27 | | |
| Included in unrealized holding gains (losses) in OCI | | (38 | | ) | | — | | | | — | | | | — | | |
| Purchases | | — | | | | — | | | | — | | | | 67 | | |
| Issuances | | — | | | | 141 | | | | 75 | | | | — | | |
| Sales | | — | | | | — | | | | — | | | | (50 | | ) |
| Settlements | | (111 | | ) | | (123 | | ) | | (139 | | ) | | (7 | | ) |
| Transfers into Level 3 | | — | | | | — | | | | — | | | | 1 | | |
| Balance at December 31, 2014 | | $ | 745 | | | $ | 844 | | | $ | 17 | | | $ | 329 | |
| | | | | | | | | | | | | | | | | |
| Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at December 31, 2014 | | $ | 33 | | | $ | (221 | ) | | $ | 17 | | | $ | 15 | |
| TFC/10-K/0000092230-17-000021 |
NOTE 17. Fair Value Disclosures | Refer to the "Acquisitions and Divestitures" note for fair value measurements related to acquisitions.For financial instruments not recorded at fair value, estimates of fair value are based on relevant market data and information about the instrument. Values obtained relate to one trading unit without regard to any premium or discount that may result from concentrations of ownership, possible tax ramifications, estimated transaction costs that may result from bulk sales or the relationship between various instruments.An active market does not exist for certain 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 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 assumptions were used to estimate the fair value of these financial instruments.Cash and cash equivalents and restricted cash: For these short-term instruments, the carrying amounts are a reasonable estimate of fair values.HTM securities: The fair values of HTM securities 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 and payable: The fair values of the receivable and payable were estimated using discounted cash flow analyses, applying a risk free interest rate that was adjusted for the uncertainty in the timing and amount of the 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 were 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 loss share agreements were not transferable and, accordingly, there was no market for the receivable or payable.Deposit liabilities: The fair values for demand deposits are 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. BB&T has developed long-term relationships with its deposit customers, commonly referred to as CDIs, that have not been considered in the determination of the deposit liabilities’ fair value.Short-term borrowings: The carrying amounts of short-term borrowings, excluding securities sold short, approximate their fair values.Long-term debt: The fair values of long-term debt instruments 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 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. 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 are categorized within Level 3 of the fair value hierarchy. Retail lending commitments are assigned no fair value as BB&T typically has the ability to cancel such commitments by providing notice to the borrower.Financial assets and liabilities not recorded at fair value are summarized below: |
| | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | |
| | | As Of / For the Year Ended | | | | | | | | | | | | | | |
| | | December 31, 2016 | | | | | | | | December 31, 2015 | | | | | | |
| | | Carrying Value | | | | Valuation Adjustments | | | | Carrying Value | | | | Valuation Adjustments | | |
| | | (Dollars in millions) | | | | | | | | | | | | | | |
| Impaired loans | | $ | 278 | | | $ | (89 | ) | | $ | 149 | | | $ | (30 | ) |
| Foreclosed real estate | | 50 | | | | (221 | | ) | | 82 | | | | (190 | | ) |
| TFC/10-K/0000092230-17-000021 |
NOTE 17. Fair Value Disclosures | The following is a summary of selected information pertaining to off-balance sheet financial instruments: |
| | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | |
| December 31, 2015 | | Carrying Amount | | | | Total Fair Value | | | | Level 2 | | | | Level 3 | | |
| | | (Dollars in millions) | | | | | | | | | | | | | | |
| Financial assets: | | | | | | | | | | | | | | | | |
| HTM securities | | $ | 18,530 | | | $ | 18,519 | | | $ | 18,519 | | | $ | — | |
| Loans and leases HFI, net of ALLL | | 134,491 | | | | 134,728 | | | | — | | | | 134,728 | | |
| FDIC loss share receivable | | 285 | | | | 11 | | | | — | | | | 11 | | |
| | | | | | | | | | | | | | | | | |
| Financial liabilities: | | | | | | | | | | | | | | | | |
| Deposits | | 149,124 | | | | 149,300 | | | | 149,300 | | | | — | | |
| FDIC loss share payable | | 685 | | | | 676 | | | | — | | | | 676 | | |
| Long-term debt | | 23,769 | | | | 24,206 | | | | 24,206 | | | | — | | |
| TFC/10-K/0000092230-17-000021 |
NOTE 18. Derivative Financial Instruments | The fair values of derivatives in a gain or loss position are presented on a gross basis in other assets or other liabilities, respectively, in the Consolidated Balance Sheets. Cash collateral posted for derivatives in a loss position is reported as restricted cash. Derivatives with dealer counterparties at both the bank and the parent company are governed by the terms of ISDA Master netting agreements and Credit Support Annexes. The ISDA Master agreements allow counterparties to offset trades in a gain against trades in a loss to determine net exposure and allows for the right of setoff in the event of either a default or an additional termination event. Credit Support Annexes govern the terms of daily collateral posting practices. Collateral practices mitigate the potential loss impact to affected parties by requiring liquid collateral to be posted on a scheduled basis to secure the aggregate net unsecured exposure. In addition to collateral, the right of setoff allows counterparties to offset net derivative values with a defaulting party against certain other contractual receivables from or obligations due to the defaulting party in determining the net termination amount. No portion of the change in fair value of derivatives designated as hedges has been excluded from effectiveness testing. The ineffective portion was immaterial for all periods presented. The following table presents the effect of hedging derivative instruments on the consolidated statements of income: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | December 31, 2016 | | | | | | | | | | | | December 31, 2015 | | | | | | | | | | |
| | | | | Notional Amount | | | | Fair Value | | | | | | | | Notional Amount | | | | Fair Value | | | | | | |
| | | Hedged Item or Transaction | | | Gain | | | | Loss | | | | | Gain | | | | Loss | | |
| | | | | (Dollars in millions) | | | | | | | | | | | | | | | | | | | | | | |
| Cash flow hedges: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest rate contracts: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Pay fixed swaps | | 3 mo. LIBOR funding | | $ | 7,050 | | | $ | — | | | $ | (187 | ) | | $ | 9,300 | | | $ | — | | | $ | (214 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fair value hedges: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest rate contracts: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Receive fixed swaps | | Long-term debt | | 12,099 | | | | 202 | | | | (100 | | ) | | 13,092 | | | | 329 | | | | (1 | | ) |
| Options | | Long-term debt | | 2,790 | | | | — | | | | (1 | | ) | | — | | | | — | | | | — | | |
| Pay fixed swaps | | Commercial loans | | 346 | | | | 4 | | | | (2 | | ) | | 207 | | | | — | | | | (2 | | ) |
| Pay fixed swaps | | Municipal securities | | 231 | | | | — | | | | (83 | | ) | | 244 | | | | — | | | | (94 | | ) |
| Total | | | | 15,466 | | | | 206 | | | | (186 | | ) | | 13,543 | | | | 329 | | | | (97 | | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Not designated as hedges: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Client-related and other risk management: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest rate contracts: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Receive fixed swaps | | | | 9,989 | | | | 235 | | | | (44 | | ) | | 8,827 | | | | 337 | | | | (1 | | ) |
| Pay fixed swaps | | | | 10,263 | | | | 43 | | | | (252 | | ) | | 8,984 | | | | 1 | | | | (363 | | ) |
| Other swaps | | | | 1,086 | | | | 2 | | | | (5 | | ) | | 1,005 | | | | 3 | | | | (6 | | ) |
| Other | | | | 709 | | | | 2 | | | | (2 | | ) | | 601 | | | | 1 | | | | (2 | | ) |
| Forward commitments | | | | 5,972 | | | | 29 | | | | (28 | | ) | | 4,403 | | | | 5 | | | | (4 | | ) |
| Foreign exchange contracts | | | | 669 | | | | 8 | | | | (5 | | ) | | 513 | | | | 6 | | | | (4 | | ) |
| Total | | | | 28,688 | | | | 319 | | | | (336 | | ) | | 24,333 | | | | 353 | | | | (380 | | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Mortgage banking: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest rate contracts: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest rate lock commitments | | | | 2,219 | | | | 7 | | | | (20 | | ) | | 1,828 | | | | 8 | | | | (4 | | ) |
| When issued securities, forward rate agreements and forward commitments | | | | 3,657 | | | | 51 | | | | (14 | | ) | | 2,725 | | | | 9 | | | | (5 | | ) |
| Other | | | | 449 | | | | 2 | | | | (1 | | ) | | 677 | | | | 4 | | | | — | | |
| Total | | | | 6,325 | | | | 60 | | | | (35 | | ) | | 5,230 | | | | 21 | | | | (9 | | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| MSRs: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest rate contracts: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Receive fixed swaps | | | | 5,034 | | | | 18 | | | | (236 | | ) | | 2,343 | | | | 79 | | | | (7 | | ) |
| Pay fixed swaps | | | | 3,768 | | | | 56 | | | | (7 | | ) | | 2,329 | | | | 4 | | | | (56 | | ) |
| Options | | | | 5,710 | | | | 160 | | | | (8 | | ) | | 7,765 | | | | 184 | | | | (24 | | ) |
| When issued securities, forward rate agreements and forward commitments | | | | 3,210 | | | | 3 | | | | (8 | | ) | | 2,682 | | | | — | | | | (5 | | ) |
| Total | | | | 17,722 | | | | 237 | | | | (259 | | ) | | 15,119 | | | | 267 | | | | (92 | | ) |
| Total derivatives not designated as hedges | | | | 52,735 | | | | 616 | | | | (630 | | ) | | 44,682 | | | | 641 | | | | (481 | | ) |
| Total derivatives | | | | $ | 75,251 | | | 822 | | | | (1,003 | | ) | | $ | 67,525 | | | 970 | | | | (792 | | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Gross amounts not offset in the Consolidated Balance Sheets: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Amounts subject to master netting arrangements not offset due to policy election | | | | | | | | (443 | | ) | | 443 | | | | | | | | (391 | | ) | | 391 | | |
| Cash collateral (received) posted | | | | | | | | (119 | | ) | | 450 | | | | | | | | (283 | | ) | | 368 | | |
| Net amount | | | | | | | | $ | 260 | | | $ | (110 | ) | | | | | | $ | 296 | | | $ | (33 | ) |
| TFC/10-K/0000092230-17-000021 |
NOTE 18. Derivative Financial Instruments | The following table provides a summary of derivative strategies and the related accounting treatment: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Effective Portion | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Pre-tax Gain (Loss) Recognized in OCI | | | | | | | | | | | | Location of Amounts Reclassified from AOCI into Income | | Pre-tax Gain (Loss) Reclassified from AOCI into Income | | | | | | | | | | |
| Year Ended December 31 | | 2016 | | | | 2015 | | | | 2014 | | | | | 2016 | | | | 2015 | | | | 2014 | | |
| | | (Dollars in millions) | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash Flow Hedges: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest rate contracts | | $ | (24 | ) | | $ | (130 | ) | | $ | (172 | ) | | Total interest expense | | $ | (11 | ) | | $ | (83 | ) | | $ | (82 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Location of Amounts Recognized in Income | | Pre-tax Gain (Loss) Recognized in Income | | | | | | | | | | |
| | | | | | | | | | | | | | | | 2016 | | | | 2015 | | | | 2014 | | |
| | | | | | | | | | | | | | | | | (Dollars in millions) | | | | | | | | | | |
| Fair Value Hedges: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest rate contracts | | | | | | | | | | | | | | Total interest income | | $ | (18 | ) | | $ | (20 | ) | | $ | (22 | ) |
| Interest rate contracts | | | | | | | | | | | | | | Total interest expense | | 226 | | | | 279 | | | | 233 | | |
| Total | | | | | | | | | | | | | | | | $ | 208 | | | $ | 259 | | | $ | 211 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Not Designated as Hedges: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Client-related and other risk management: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest rate contracts | | | | | | | | | | | | | | Other income | | $ | 52 | | | $ | 27 | | | $ | 18 | |
| Foreign exchange contracts | | | | | | | | | | | | | | Other income | | 11 | | | | 21 | | | | 16 | | |
| Mortgage Banking: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest rate contracts | | | | | | | | | | | | | | Mortgage banking income | | 8 | | | | 7 | | | | (16 | | ) |
| MSRs: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest rate contracts | | | | | | | | | | | | | | Mortgage banking income | | 31 | | | | 32 | | | | 251 | | |
| Total | | | | | | | | | | | | | | | | $ | 102 | | | $ | 87 | | | $ | 269 | |
| TFC/10-K/0000092230-17-000021 |
NOTE 18. Derivative Financial Instruments | The following table presents information about BB&T's cash flow and fair value hedges: |
| | | | | | | |
| --- | --- | --- | --- | --- | --- | --- |
| | | | | | | |
| | | Cash Flow Hedges | | Fair Value Hedges | | Derivatives Not Designated as Hedges |
| | | | | | | |
| Risk exposure | | Variability in cash flows of interest payments on floating rate business loans, overnight funding and various LIBOR funding instruments. | | Losses in value on fixed rate long-term debt, CDs, FHLB advances, loans and state and political subdivision securities due to changes in interest rates. | | Risk associated with an asset or liability, including mortgage banking operations and MSRs, or for client needs. Includes exposure to changes in market rates and conditions subsequent to the interest rate lock and funding date for mortgage loans originated for sale. |
| | | | | | | |
| Risk management objective | | Hedge the variability in the interest payments and receipts on future cash flows for forecasted transactions related to the first unhedged payments and receipts of variable interest. | | Convert the fixed rate paid or received to a floating rate, primarily through the use of swaps. | | For interest rate lock commitment derivatives and LHFS, use mortgage-based derivatives such as forward commitments and options to mitigate market risk. For MSRs, mitigate the income statement effect of changes in the fair value of the MSRs. |
| | | | | | | |
| Treatment for portion that is highly effective | | Recognized in AOCI until the related cash flows from the hedged item are recognized in earnings. | | Recognized in current period income along with the corresponding changes in the fair value of the designated hedged item attributable to the risk being hedged. | | Entire change in fair value recognized in current period income. |
| | | | | | | |
| Treatment for portion that is ineffective | | Recognized in current period income. | | Recognized in current period income. | | Not applicable |
| | | | | | | |
| Treatment if hedge ceases to be highly effective or is terminated | | Hedge is dedesignated. Effective changes in value that are recorded in AOCI before dedesignation are amortized to yield over the period the forecasted hedged transactions impact earnings. | | If hedged item remains outstanding, termination proceeds are included in cash flows from financing activities and effective changes in value are reflected as part of the carrying value of the financial instrument and amortized to earnings over its estimated remaining life. | | Not applicable |
| | | | | | | |
| Treatment if transaction is no longer probable of occurring during forecast period or within a short period thereafter | | Hedge accounting is ceased and any gain or loss in AOCI is reported in earnings immediately. | | Not applicable | | Not applicable |
| TFC/10-K/0000092230-17-000021 |
Segment Realignment | (1) Includes financial data from subsidiaries below the quantitative and qualitative thresholds requiring disclosure. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Community Banking | | | | | | | | | | | | Residential Mortgage Banking | | | | | | | | | | | | Dealer Financial Services | | | | | | | | | | | | Specialized Lending | | | | | | | | | | |
| Year Ended December 31, | | 2016 | | | | 2015 | | | | 2014 | | | | 2016 | | | | 2015 | | | | 2014 | | | | 2016 | | | | 2015 | | | | 2014 | | | | 2016 | | | | 2015 | | | | 2014 | | |
| | | (Dollars in millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net interest income (expense) | | $ | 2,208 | | | $ | 1,798 | | | $ | 1,726 | | | $ | 1,341 | | | $ | 1,357 | | | $ | 1,482 | | | $ | 930 | | | $ | 881 | | | $ | 835 | | | $ | 752 | | | $ | 648 | | | $ | 575 | |
| Net intersegment interest income (expense) | | 1,589 | | | | 1,271 | | | | 1,188 | | | | (898 | | ) | | (905 | | ) | | (984 | | ) | | (161 | | ) | | (153 | | ) | | (160 | | ) | | (283 | | ) | | (235 | | ) | | (206 | | ) |
| Segment net interest income | | 3,797 | | | | 3,069 | | | | 2,914 | | | | 443 | | | | 452 | | | | 498 | | | | 769 | | | | 728 | | | | 675 | | | | 469 | | | | 413 | | | | 369 | | |
| Allocated provision for credit losses | | 36 | | | | 67 | | | | 123 | | | | 45 | | | | 9 | | | | (107 | | ) | | 296 | | | | 253 | | | | 237 | | | | 70 | | | | 43 | | | | 36 | | |
| Noninterest income | | 1,227 | | | | 1,166 | | | | 1,184 | | | | 344 | | | | 355 | | | | 310 | | | | 2 | | | | — | | | | 2 | | | | 297 | | | | 260 | | | | 222 | | |
| Intersegment net referral fees (expense) | | 153 | | | | 135 | | | | 120 | | | | 1 | | | | 2 | | | | 2 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | |
| Noninterest expense | | 1,742 | | | | 1,516 | | | | 1,428 | | | | 211 | | | | 321 | | | | 498 | | | | 149 | | | | 151 | | | | 114 | | | | 300 | | | | 254 | | | | 210 | | |
| Amortization of intangibles | | 74 | | | | 39 | | | | 29 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 5 | | | | 4 | | | | 5 | | |
| Allocated corporate expenses | | 1,337 | | | | 1,225 | | | | 1,204 | | | | 107 | | | | 93 | | | | 91 | | | | 45 | | | | 38 | | | | 31 | | | | 81 | | | | 63 | | | | 62 | | |
| Income (loss) before income taxes | | 1,988 | | | | 1,523 | | | | 1,434 | | | | 425 | | | | 386 | | | | 328 | | | | 281 | | | | 286 | | | | 295 | | | | 310 | | | | 309 | | | | 278 | | |
| Provision (benefit) for income taxes | | 724 | | | | 563 | | | | 524 | | | | 161 | | | | 146 | | | | 124 | | | | 107 | | | | 109 | | | | 112 | | | | 74 | | | | 74 | | | | 63 | | |
| Segment net income (loss) | | $ | 1,264 | | | $ | 960 | | | $ | 910 | | | $ | 264 | | | $ | 240 | | | $ | 204 | | | $ | 174 | | | $ | 177 | | | $ | 183 | | | $ | 236 | | | $ | 235 | | | $ | 215 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Identifiable assets (period end) | | $ | 73,640 | | | $ | 68,250 | | | $ | 55,495 | | | $ | 33,473 | | | $ | 33,407 | | | $ | 34,463 | | | $ | 16,556 | | | $ | 15,130 | | | $ | 12,821 | | | $ | 19,976 | | | $ | 18,243 | | | $ | 15,671 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Insurance Holdings | | | | | | | | | | | | Financial Services | | | | | | | | | | | | Other, Treasury and Corporate (1) | | | | | | | | | | | | Total BB&T Corporation | | | | | | | | | | |
| | | 2016 | | | | 2015 | | | | 2014 | | | | 2016 | | | | 2015 | | | | 2014 | | | | 2016 | | | | 2015 | | | | 2014 | | | | 2016 | | | | 2015 | | | | 2014 | | |
| | | (Dollars in millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net interest income (expense) | | $ | 3 | | | $ | 2 | | | $ | 2 | | | $ | 260 | | | $ | 219 | | | $ | 187 | | | $ | 827 | | | $ | 687 | | | $ | 567 | | | $ | 6,321 | | | $ | 5,592 | | | $ | 5,374 | |
| Net intersegment interest income (expense) | | 4 | | | | 6 | | | | 6 | | | | 372 | | | | 314 | | | | 263 | | | | (623 | | ) | | (298 | | ) | | (107 | | ) | | — | | | | — | | | | — | | |
| Segment net interest income | | 7 | | | | 8 | | | | 8 | | | | 632 | | | | 533 | | | | 450 | | | | 204 | | | | 389 | | | | 460 | | | | 6,321 | | | | 5,592 | | | | 5,374 | | |
| Allocated provision for credit losses | | — | | | | — | | | | — | | | | 126 | | | | 66 | | | | 26 | | | | (1 | | ) | | (10 | | ) | | (64 | | ) | | 572 | | | | 428 | | | | 251 | | |
| Noninterest income | | 1,726 | | | | 1,608 | | | | 1,663 | | | | 888 | | | | 850 | | | | 780 | | | | (12 | | ) | | (220 | | ) | | (305 | | ) | | 4,472 | | | | 4,019 | | | | 3,856 | | |
| Intersegment net referral fees (expense) | | — | | | | — | | | | — | | | | 23 | | | | 22 | | | | 15 | | | | (177 | | ) | | (159 | | ) | | (137 | | ) | | — | | | | — | | | | — | | |
| Noninterest expense | | 1,312 | | | | 1,190 | | | | 1,189 | | | | 753 | | | | 683 | | | | 637 | | | | 2,104 | | | | 2,046 | | | | 1,685 | | | | 6,571 | | | | 6,161 | | | | 5,761 | | |
| Amortization of intangibles | | 60 | | | | 47 | | | | 53 | | | | 5 | | | | 3 | | | | 2 | | | | 6 | | | | 12 | | | | 2 | | | | 150 | | | | 105 | | | | 91 | | |
| Allocated corporate expenses | | 111 | | | | 99 | | | | 86 | | | | 151 | | | | 136 | | | | 128 | | | | (1,832 | | ) | | (1,654 | | ) | | (1,602 | | ) | | — | | | | — | | | | — | | |
| Income (loss) before income taxes | | 250 | | | | 280 | | | | 343 | | | | 508 | | | | 517 | | | | 452 | | | | (262 | | ) | | (384 | | ) | | (3 | | ) | | 3,500 | | | | 2,917 | | | | 3,127 | | |
| Provision (benefit) for income taxes | | 96 | | | | 98 | | | | 110 | | | | 190 | | | | 195 | | | | 170 | | | | (294 | | ) | | (391 | | ) | | (182 | | ) | | 1,058 | | | | 794 | | | | 921 | | |
| Segment net income (loss) | | $ | 154 | | | $ | 182 | | | $ | 233 | | | $ | 318 | | | $ | 322 | | | $ | 282 | | | $ | 32 | | | $ | 7 | | | $ | 179 | | | $ | 2,442 | | | $ | 2,123 | | | $ | 2,206 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Identifiable assets (period end) | | $ | 3,463 | | | $ | 2,804 | | | $ | 2,965 | | | $ | 17,451 | | | $ | 16,650 | | | $ | 12,887 | | | $ | 54,717 | | | $ | 55,463 | | | $ | 52,532 | | | $ | 219,276 | | | $ | 209,947 | | | $ | 186,834 | |
| TFC/10-K/0000092230-17-000021 |
Net Interest Income and NIM | (1)Yields are stated on a TE basis utilizing the marginal income tax rates. The change in interest not solely due to changes in 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 cash equivalents, 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.(7)Total deposit costs were 0.41%, 0.22% and 0.16% for the years ended December 31, 2018, 2017 and 2016, respectively. |
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| Table 4: TE Net Interest Income and Rate / Volume Analysis (1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2018 vs. 2017 | | | | | | | | | | | | 2017 vs. 2016 | | | | | | | | | | |
| Year Ended December 31,(Dollars in millions) | Average Balances (6) | | | | | | | | | | | | Yield/Rate | | | | | | | | | Income/Expense | | | | | | | | | | | | Incr.(Decr.) | | | | Change due to | | | | | | | | Incr.(Decr.) | | | | Change due to | | | | | | |
| 2018 | | | | 2017 | | | | 2016 | | | | 2018 | | | 2017 | | | 2016 | | | 2018 | | | | 2017 | | | | 2016 | | | | | Rate | | | | Volume | | | | | Rate | | | | Volume | | |
| Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total securities, at amortized cost: (2) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| U.S. Treasury | $ | 3,800 | | | $ | 4,179 | | | $ | 3,061 | | | 1.89 | % | | 1.71 | % | | 1.67 | % | | $ | 72 | | | $ | 72 | | | $ | 51 | | | $ | — | | | $ | 7 | | | $ | (7 | ) | | $ | 21 | | | $ | 1 | | | $ | 20 | |
| GSE | 2,394 | | | | 2,385 | | | | 3,601 | | | | 2.23 | | | 2.22 | | | 2.13 | | | 54 | | | | 53 | | | | 77 | | | | 1 | | | | 1 | | | | — | | | | (24 | | ) | | 3 | | | | (27 | | ) |
| Agency MBS | 39,559 | | | | 37,250 | | | | 36,658 | | | | 2.45 | | | 2.26 | | | 2.05 | | | 969 | | | | 841 | | | | 750 | | | | 128 | | | | 74 | | | | 54 | | | | 91 | | | | 79 | | | | 12 | | |
| States and political subdivisions | 958 | | | | 1,748 | | | | 2,361 | | | | 3.68 | | | 4.77 | | | 5.20 | | | 35 | | | | 83 | | | | 123 | | | | (48 | | ) | | (16 | | ) | | (32 | | ) | | (40 | | ) | | (10 | | ) | | (30 | | ) |
| Non-agency MBS | 349 | | | | 411 | | | | 534 | | | | 11.93 | | | 18.80 | | | 14.56 | | | 42 | | | | 77 | | | | 78 | | | | (35 | | ) | | (25 | | ) | | (10 | | ) | | (1 | | ) | | 19 | | | | (20 | | ) |
| Other | 40 | | | | 56 | | | | 64 | | | | 3.34 | | | 2.17 | | | 1.87 | | | 1 | | | | 1 | | | | — | | | | — | | | | — | | | | — | | | | 1 | | | | 1 | | | | — | | |
| Total securities | 47,100 | | | | 46,029 | | | | 46,279 | | | | 2.49 | | | 2.45 | | | 2.33 | | | 1,173 | | | | 1,127 | | | | 1,079 | | | | 46 | | | | 41 | | | | 5 | | | | 48 | | | | 93 | | | | (45 | | ) |
| Other earning assets (3) | 2,251 | | | | 3,484 | | | | 3,202 | | | | 2.96 | | | 1.53 | | | 1.64 | | | 67 | | | | 53 | | | | 53 | | | | 14 | | | | 38 | | | | (24 | | ) | | — | | | | (4 | | ) | | 4 | | |
| Loans and leases, net of unearned income: (4)(5) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | 59,663 | | | | 57,994 | | | | 56,227 | | | | 3.98 | | | 3.59 | | | 3.40 | | | 2,374 | | | | 2,080 | | | | 1,914 | | | | 294 | | | | 233 | | | | 61 | | | | 166 | | | | 106 | | | | 60 | | |
| CRE | 21,435 | | | | 20,497 | | | | 19,407 | | | | 4.70 | | | 4.08 | | | 3.75 | | | 1,007 | | | | 837 | | | | 727 | | | | 170 | | | | 130 | | | | 40 | | | | 110 | | | | 67 | | | | 43 | | |
| Lease financing | 1,917 | | | | 1,726 | | | | 1,524 | | | | 3.19 | | | 2.82 | | | 3.01 | | | 61 | | | | 49 | | | | 45 | | | | 12 | | | | 6 | | | | 6 | | | | 4 | | | | (3 | | ) | | 7 | | |
| Residential mortgage | 29,932 | | | | 29,140 | | | | 30,184 | | | | 4.05 | | | 4.02 | | | 4.05 | | | 1,212 | | | | 1,170 | | | | 1,224 | | | | 42 | | | | 9 | | | | 33 | | | | (54 | | ) | | (10 | | ) | | (44 | | ) |
| Direct | 11,670 | | | | 11,968 | | | | 11,796 | | | | 5.22 | | | 4.60 | | | 4.27 | | | 610 | | | | 550 | | | | 503 | | | | 60 | | | | 74 | | | | (14 | | ) | | 47 | | | | 40 | | | | 7 | | |
| Indirect | 17,111 | | | | 17,840 | | | | 17,072 | | | | 7.51 | | | 6.89 | | | 6.94 | | | 1,285 | | | | 1,230 | | | | 1,186 | | | | 55 | | | | 107 | | | | (52 | | ) | | 44 | | | | (9 | | ) | | 53 | | |
| Revolving credit | 2,913 | | | | 2,662 | | | | 2,521 | | | | 9.25 | | | 8.88 | | | 8.77 | | | 269 | | | | 236 | | | | 221 | | | | 33 | | | | 10 | | | | 23 | | | | 15 | | | | 3 | | | | 12 | | |
| PCI | 548 | | | | 784 | | | | 1,063 | | | | 19.64 | | | 18.86 | | | 19.55 | | | 108 | | | | 148 | | | | 208 | | | | (40 | | ) | | 6 | | | | (46 | | ) | | (60 | | ) | | (7 | | ) | | (53 | | ) |
| Total loans and leases HFI | 145,189 | | | | 142,611 | | | | 139,794 | | | | 4.77 | | | 4.42 | | | 4.31 | | | 6,926 | | | | 6,300 | | | | 6,028 | | | | 626 | | | | 575 | | | | 51 | | | | 272 | | | | 187 | | | | 85 | | |
| LHFS | 1,228 | | | | 1,464 | | | | 1,965 | | | | 4.13 | | | 3.62 | | | 3.34 | | | 50 | | | | 53 | | | | 66 | | | | (3 | | ) | | 7 | | | | (10 | | ) | | (13 | | ) | | 5 | | | | (18 | | ) |
| Total loans and leases | 146,417 | | | | 144,075 | | | | 141,759 | | | | 4.77 | | | 4.41 | | | 4.30 | | | 6,976 | | | | 6,353 | | | | 6,094 | | | | 623 | | | | 582 | | | | 41 | | | | 259 | | | | 192 | | | | 67 | | |
| Total earning assets | 195,768 | | | | 193,588 | | | | 191,240 | | | | 4.20 | | | 3.89 | | | 3.78 | | | 8,216 | | | | 7,533 | | | | 7,226 | | | | 683 | | | | 661 | | | | 22 | | | | 307 | | | | 281 | | | | 26 | | |
| Nonearning assets | 26,505 | | | | 27,477 | | | | 27,705 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total assets | $ | 222,273 | | | $ | 221,065 | | | $ | 218,945 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Liabilities and Shareholders' Equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest-bearing deposits: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest-checking | $ | 26,951 | | | $ | 28,033 | | | $ | 27,595 | | | 0.43 | | | 0.25 | | | 0.14 | | | 116 | | | | 70 | | | | 39 | | | | 46 | | | | 49 | | | | (3 | | ) | | 31 | | | | 30 | | | | 1 | | |
| Money market and savings | 62,257 | | | | 63,061 | | | | 62,966 | | | | 0.62 | | | 0.30 | | | 0.20 | | | 387 | | | | 190 | | | | 123 | | | | 197 | | | | 199 | | | | (2 | | ) | | 67 | | | | 67 | | | | — | | |
| Time deposits | 13,963 | | | | 14,133 | | | | 16,619 | | | | 0.94 | | | 0.51 | | | 0.51 | | | 132 | | | | 72 | | | | 85 | | | | 60 | | | | 61 | | | | (1 | | ) | | (13 | | ) | | — | | | | (13 | | ) |
| Foreign deposits - interest-bearing | 494 | | | | 1,142 | | | | 1,034 | | | | 1.67 | | | 1.05 | | | 0.38 | | | 9 | | | | 12 | | | | 4 | | | | (3 | | ) | | 5 | | | | (8 | | ) | | 8 | | | | 8 | | | | — | | |
| Total interest-bearing deposits (7) | 103,665 | | | | 106,369 | | | | 108,214 | | | | 0.62 | | | 0.32 | | | 0.23 | | | 644 | | | | 344 | | | | 251 | | | | 300 | | | | 314 | | | | (14 | | ) | | 93 | | | | 105 | | | | (12 | | ) |
| Short-term borrowings | 5,955 | | | | 4,311 | | | | 2,554 | | | | 1.86 | | | 0.94 | | | 0.35 | | | 111 | | | | 41 | | | | 9 | | | | 70 | | | | 50 | | | | 20 | | | | 32 | | | | 23 | | | | 9 | | |
| Long-term debt | 23,755 | | | | 21,660 | | | | 22,791 | | | | 2.88 | | | 2.10 | | | 2.13 | | | 683 | | | | 454 | | | | 485 | | | | 229 | | | | 182 | | | | 47 | | | | (31 | | ) | | (7 | | ) | | (24 | | ) |
| Total interest-bearing liabilities | 133,375 | | | | 132,340 | | | | 133,559 | | | | 1.08 | | | 0.63 | | | 0.56 | | | 1,438 | | | | 839 | | | | 745 | | | | 599 | | | | 546 | | | | 53 | | | | 94 | | | | 121 | | | | (27 | | ) |
| Noninterest-bearing deposits (7) | 53,818 | | | | 52,872 | | | | 49,255 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Other liabilities | 5,337 | | | | 5,852 | | | | 6,776 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Shareholders' equity | 29,743 | | | | 30,001 | | | | 29,355 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total liabilities and shareholders' equity | $ | 222,273 | | | $ | 221,065 | | | $ | 218,945 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Average interest-rate spread | | | | | | | | | | | | | 3.12 | % | | 3.26 | % | | 3.22 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| NIM/net interest income | | | | | | | | | | | | | 3.46 | % | | 3.46 | % | | 3.39 | % | | $ | 6,778 | | | $ | 6,694 | | | $ | 6,481 | | | $ | 84 | | | $ | 115 | | | $ | (31 | ) | | $ | 213 | | | $ | 160 | | | $ | 53 | |
| Taxable-equivalent adjustment | | | | | | | | | | | | | | | | | | | | | | $ | 96 | | | $ | 159 | | | $ | 160 | | | | | | | | | | | | | | | | | | | | | | | | | |
| TFC/10-K/0000092230-19-000017 |
Noninterest Income | Noninterest income for the year ended December 31, 2018 was a record $4.9 billion, up $94 million compared to 2017.Income from BB&T's insurance agency/brokerage operations was the largest source of noninterest income in 2018. Insurance income was $1.9 billion, up $98 million compared to 2017, primarily due to the acquisition of Regions Insurance, which contributed $67 million, and higher production. Service charges on deposits were up slightly, but were negatively impacted due to fee waivers associated with the February system outage. Mortgage banking income was $358 million, down $57 million, primarily resulting from a decline in residential mortgage production revenue. Investment banking and brokerage fees and commissions were $477 million, up $67 million due to higher managed account fees and higher investment banking income. BB&T Corporation 34Other income was $420 million, down $47 million, primarily due to $56 million in lower income related to assets for certain post-employment benefits, which is primarily offset in other income/expense categories. Noninterest income was a record $4.8 billion for 2017, an increase of $310 million compared to 2016. Insurance income totaled $1.8 billion for 2017, an increase of $41 million compared to 2016. The increase was largely due to the acquisition of Swett and Crawford on April 1, 2016. In addition, organic commissions and fees were higher, which was offset by lower performance based commissions.Service charges on deposits were $706 million for 2017, an increase of $42 million compared to 2016. The increase was due to changes in client behavior, pricing increases and the acquisition of National Penn on April 1, 2016.Mortgage banking income declined $48 million primarily due to a decline of $39 million in the net mortgage servicing rights valuation.Bankcard fees and merchant discounts increased $34 million due to higher volumes and a reduction in the accrual for rewards.Other income totaled $467 million for 2017, an increase of $247 million from 2016, primarily due to the termination of the loss sharing agreements during the third quarter of 2016, which resulted in a $142 million improvement compared to 2016. In addition, other income increased $34 million from SBIC investments and $50 million from income related to assets for certain post-employment benefits. |
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| Table 5: Noninterest Income | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | % Change | | | | |
| Year Ended December 31,(Dollars in millions) | 2018 | | | | 2017 | | | | 2016 | | | | 2018 vs. 2017 | | | 2017 vs. 2016 | |
| Insurance income | $ | 1,852 | | | $ | 1,754 | | | $ | 1,713 | | | 5.6 | % | | 2.4 | % |
| Service charges on deposits | 712 | | | | 706 | | | | 664 | | | | 0.8 | | | 6.3 | |
| Investment banking and brokerage fees and commissions | 477 | | | | 410 | | | | 408 | | | | 16.3 | | | 0.5 | |
| Mortgage banking income | 358 | | | | 415 | | | | 463 | | | | (13.7 | ) | | (10.4 | ) |
| Trust and investment advisory revenues | 285 | | | | 278 | | | | 266 | | | | 2.5 | | | 4.5 | |
| Bankcard fees and merchant discounts | 287 | | | | 271 | | | | 237 | | | | 5.9 | | | 14.3 | |
| Checkcard fees | 221 | | | | 214 | | | | 195 | | | | 3.3 | | | 9.7 | |
| Operating lease income | 145 | | | | 146 | | | | 137 | | | | (0.7 | ) | | 6.6 | |
| Income from bank-owned life insurance | 116 | | | | 122 | | | | 123 | | | | (4.9 | ) | | (0.8 | ) |
| Securities gains (losses), net | 3 | | | | (1 | | ) | | 46 | | | | NM | | | (102.2 | ) |
| Other income | 420 | | | | 467 | | | | 220 | | | | (10.1 | ) | | 112.3 | |
| Total noninterest income | $ | 4,876 | | | $ | 4,782 | | | $ | 4,472 | | | 2.0 | | | 6.9 | |
| TFC/10-K/0000092230-19-000017 |
Noninterest Expense | Noninterest expense totaled $6.9 billion for the year ended December 31, 2018, a decrease of $512 million, or 6.9%, from the prior year. This decrease was driven by the $392 million loss on early extinguishment of debt in 2017 and lower other expense. Personnel expense is the largest component of noninterest expense and includes salaries and incentives, as well as pension service costs and other employee benefit costs. Personnel expense was $4.3 billion for the year ended December 31, 2018, an increase of $87 million compared to the year ended December 31, 2017. This increase was driven by $43 million of personnel expense resulting from the Regions Insurance acquisition and $38 million in higher defined benefit pension plan service cost. In addition, capitalized employee costs were $31 million lower due to efficiencies in the loan closing process, and incentive expense, excluding Regions Insurance, was $12 million higher primarily due to higher performance-based incentive expense, partially offset by the 2017 one-time bonus of $36 million paid to associates who do not generally receive incentives or commissions. These increases were partially offset by a $47 million decrease for certain post-employment benefits, which is offset by lower noninterest income.Occupancy and equipment expense decreased $26 million primarily related to cost savings from facilities.Software expense increased $30 million, primarily reflecting higher depreciation on recent investments and maintenance costs. Outside IT services decreased $28 million due to lower use of outside IT services in the current year compared to the prior year.Merger-related and restructuring expense was $146 million, an increase of $31 million. This includes higher charges as a result of restructuring initiatives in 2018, including $61 million of personnel costs for severance and other benefits and $63 million related to costs to exit facilities. These restructuring activities will enable continued investment in the company's digital strategy, while maintaining disciplined cost control.Other expense decreased $177 million primarily due to the prior year including a $100 million contribution to BB&T's philanthropic fund and a $61 million benefit primarily from higher income on pension plan assets. Noninterest expense totaled $7.4 billion for 2017, an increase of $723 million from 2016. The increase includes actions taken in the fourth quarter of 2017 in connection with the passage of tax reform legislation. This included a contribution of $100 million to BB&T's philanthropic fund and $36 million for a one-time bonus paid to associates who do not generally receive incentives or commissions. The increase also includes a $392 million charge in 2017 for the early extinguishment of $2.9 billion of higher cost FHLB advances.Personnel expense is the largest component of noninterest expense and includes salaries and incentives, as well as pension service costs and other employee benefit costs. Personnel expense totaled $4.2 billion, a $197 million increase compared to 2016. Salaries and incentives increased $120 million compared to the prior year, primarily due to higher incentives as a result of improved performance and the one-time bonus previously mentioned. Equity based compensation increased $14 million and benefit costs increased $63 million. The increase in benefit costs was primarily the result of an increase of $43 million for post-employment benefits that is primarily offset in other income. Software expense was higher $18 million compared to 2016, primarily reflecting higher depreciation on recent investments.Outside IT services expense decreased $26 million compared to the prior year, while professional services expense increased $21 million. These fluctuations are due to the volume of project related work in the current year compared to the prior year. Loan-related expense totaled $130 million for 2017, an increase of $35 million compared to the prior year. This increase 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.Merger-related and restructuring expense decreased $56 million compared to 2016. This includes a decrease in merger-related charges, partially offset by branch closures and other restructuring initiatives.Other expense increased $143 million primarily due to higher operating charge-offs and charitable contributions. Operating charge-offs increased $108 million due to a net benefit of $73 million recorded in 2016 related to the settlement of matters involving the origination of certain legacy mortgage loans insured by the FHA. Charitable contributions increased $44 million as the company made a $100 million contribution to its philanthropic fund in 2017 as noted above, compared to $50 million made in the third quarter of 2016. |
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| Table 6: Noninterest Expense | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | % Change | | | | |
| Year Ended December 31,(Dollars in millions) | 2018 | | | | 2017 | | | | 2016 | | | | 2018 vs. 2017 | | | 2017 vs. 2016 | |
| Personnel expense | $ | 4,313 | | | $ | 4,226 | | | $ | 4,029 | | | 2.1 | % | | 4.9 | % |
| Occupancy and equipment expense | 758 | | | | 784 | | | | 786 | | | | (3.3 | ) | | (0.3 | ) |
| Software expense | 272 | | | | 242 | | | | 224 | | | | 12.4 | | | 8.0 | |
| Outside IT services | 132 | | | | 160 | | | | 186 | | | | (17.5 | ) | | (14.0 | ) |
| Regulatory charges | 134 | | | | 153 | | | | 145 | | | | (12.4 | ) | | 5.5 | |
| Amortization of intangibles | 131 | | | | 142 | | | | 150 | | | | (7.7 | ) | | (5.3 | ) |
| Loan-related expense | 108 | | | | 130 | | | | 95 | | | | (16.9 | ) | | 36.8 | |
| Professional services | 138 | | | | 123 | | | | 102 | | | | 12.2 | | | 20.6 | |
| Merger-related and restructuring charges, net | 146 | | | | 115 | | | | 171 | | | | 27.0 | | | (32.7 | ) |
| Loss (gain) on early extinguishment of debt | — | | | | 392 | | | | (1 | | ) | | (100.0 | ) | | NM | |
| Other expense | 800 | | | | 977 | | | | 834 | | | | (18.1 | ) | | 17.1 | |
| Total noninterest expense | $ | 6,932 | | | $ | 7,444 | | | $ | 6,721 | | | (6.9 | ) | | 10.8 | |
| TFC/10-K/0000092230-19-000017 |
Merger-Related and Restructuring Charges | The 2018 costs primarily reflect higher charges as a result of restructuring initiatives, including costs for severance and other benefits and costs related to exiting facilities, while the 2017 costs primarily reflect branch closures and other restructuring initiatives. |
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| Table 7: Merger-Related and Restructuring Accrual Activity | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Dollars in millions) | Accrual at Jan 1, 2017 | | | | Expense | | | | Utilized | | | | Accrual at Dec 31, 2017 | | | | Expense | | | | Utilized | | | | Accrual at Dec 31, 2018 | | |
| Severance and personnel-related | $ | 25 | | | $ | 40 | | | $ | (51 | ) | | $ | 14 | | | $ | 61 | | | $ | (32 | ) | | $ | 43 | |
| Occupancy and equipment | 21 | | | | 43 | | | | (44 | | ) | | 20 | | | | 63 | | | | (60 | | ) | | 23 | | |
| Professional services | 1 | | | | 2 | | | | (3 | | ) | | — | | | | 4 | | | | (3 | | ) | | 1 | | |
| Systems conversion and related costs | 1 | | | | 26 | | | | (27 | | ) | | — | | | | 5 | | | | (5 | | ) | | — | | |
| Other adjustments | 1 | | | | 4 | | | | (5 | | ) | | — | | | | 13 | | | | (13 | | ) | | — | | |
| Total | $ | 49 | | | $ | 115 | | | $ | (130 | ) | | $ | 34 | | | $ | 146 | | | $ | (113 | ) | | $ | 67 | |
| TFC/10-K/0000092230-19-000017 |
Investment Activities | The securities portfolio totaled $45.6 billion at December 31, 2018, compared to $47.6 billion at December 31, 2017, primarily driven by a $2.4 billion decrease in agency MBS and a $714 million decrease in securities issued by state and political subdivisions, partially offset by a $1.2 billion increase in U.S. Treasury securities.As of December 31, 2018, approximately 6.5% of the securities portfolio was variable rate, compared to 5.8% as of December 31, 2017. The effective duration of the securities portfolio was 4.8 years at December 31, 2018, compared to 4.7 years at December 31, 2017. The duration of the securities portfolio excludes certain non-agency MBS. U.S. Treasury, GSE and Agency MBS represented 97.3% of the total securities portfolio as of December 31, 2018, compared to 95.7% as of prior year end. The following table presents the securities portfolio at December 31, 2018, segregated by major category with ranges of maturities and average yields disclosed: |
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| Table 9: Composition of Securities Portfolio | | | | | | | | | | | |
| December 31,(Dollars in millions) | 2018 | | | | 2017 | | | | 2016 | | |
| AFS securities (at fair value): | | | | | | | | | | | |
| U.S. Treasury | $ | 3,441 | | | $ | 2,291 | | | $ | 2,587 | |
| GSE | 200 | | | | 179 | | | | 180 | | |
| Agency MBS | 20,155 | | | | 20,101 | | | | 21,264 | | |
| States and political subdivisions | 701 | | | | 1,392 | | | | 2,205 | | |
| Non-agency MBS | 505 | | | | 576 | | | | 679 | | |
| Other | 36 | | | | 8 | | | | 11 | | |
| Total AFS securities | 25,038 | | | | 24,547 | | | | 26,926 | | |
| HTM securities (at amortized cost): | | | | | | | | | | | |
| U.S. Treasury | 1,099 | | | | 1,098 | | | | 1,098 | | |
| GSE | 2,199 | | | | 2,198 | | | | 2,197 | | |
| Agency MBS | 17,248 | | | | 19,660 | | | | 13,225 | | |
| States and political subdivisions | 5 | | | | 28 | | | | 110 | | |
| Other | 1 | | | | 43 | | | | 50 | | |
| Total HTM securities | 20,552 | | | | 23,027 | | | | 16,680 | | |
| Total securities | $ | 45,590 | | | $ | 47,574 | | | $ | 43,606 | |
| TFC/10-K/0000092230-19-000017 |
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. |
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| Table 10: Securities Yields By Major Category and Maturity | | | | | | | | | | | | | | |
| December 31, 2018(Dollars in millions) | | AFS | | | | | | | HTM | | | | | |
| | Fair Value | | | | Effective Yield (1) | | | Amortized Cost | | | | Effective Yield (1) | |
| U.S. Treasury: | | | | | | | | | | | | | | |
| Within one year | | $ | 408 | | | 1.95 | % | | $ | — | | | — | % |
| One to five years | | 2,329 | | | | 1.98 | | | 1,099 | | | | 2.30 | |
| Five to ten years | | 704 | | | | 2.95 | | | — | | | | — | |
| Total | | 3,441 | | | | 2.18 | | | 1,099 | | | | 2.30 | |
| GSE: | | | | | | | | | | | | | | |
| One to five years | | 115 | | | | 1.50 | | | 2,189 | | | | 2.29 | |
| Five to ten years | | 50 | | | | 1.68 | | | 10 | | | | 2.47 | |
| After ten years | | 35 | | | | 3.11 | | | — | | | | — | |
| Total | | 200 | | | | 1.82 | | | 2,199 | | | | 2.29 | |
| Agency MBS: (2) | | | | | | | | | | | | | | |
| One to five years | | 4 | | | | 2.96 | | | — | | | | — | |
| Five to ten years | | 20 | | | | 2.89 | | | 615 | | | | 2.43 | |
| After ten years | | 20,131 | | | | 2.41 | | | 16,633 | | | | 3.00 | |
| Total | | 20,155 | | | | 2.41 | | | 17,248 | | | | 2.83 | |
| States and political subdivisions: | | | | | | | | | | | | | | |
| Within one year | | 16 | | | | 4.81 | | | — | | | | — | |
| One to five years | | 139 | | | | 3.34 | | | 2 | | | | 1.67 | |
| Five to ten years | | 269 | | | | 3.74 | | | 2 | | | | 3.59 | |
| After ten years | | 277 | | | | 4.55 | | | 1 | | | | 1.26 | |
| Total | | 701 | | | | 4.01 | | | 5 | | | | 2.60 | |
| Non-agency MBS: (2) | | | | | | | | | | | | | | |
| After ten years | | 505 | | | | 12.82 | | | — | | | | — | |
| Other: | | | | | | | | | | | | | | |
| Within one year | | — | | | | — | | | 1 | | | | 2.03 | |
| After ten years | | 36 | | | | 4.25 | | | — | | | | — | |
| Total | | 36 | | | | 4.25 | | | 1 | | | | 2.03 | |
| Total securities | | $ | 25,038 | | | 2.63 | | | $ | 20,552 | | | 2.75 | |
| TFC/10-K/0000092230-19-000017 |
Lending Activities | Loans and leases HFI were $149.0 billion at December 31, 2018, an increase of $5.3 billion compared to the prior year.Commercial and industrial loans were up $2.8 billion due to strong growth in corporate banking loans, while CRE loans were down $203 million. Residential mortgage loans increased $2.7 billion, primarily due to the retention of a portion of the conforming mortgage production.Indirect loans were up $190 million, primarily due to growth in power sports and other recreational lending. The PCI loan portfolio, which totaled $466 million at December 31, 2018, continued to run off during the year.Scheduled repayments are reported in the maturity category in which the payment is due. Determinations of maturities are based on contractual 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. |
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| Table 11: Composition of Loans and Leases as of Period End | | | | | | | | | | | | | | | | | | | | |
| December 31,(Dollars in millions) | | 2018 | | | | 2017 | | | | 2016 | | | | 2015 | | | | 2014 | | |
| Commercial: | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 61,935 | | | $ | 59,153 | | | $ | 57,739 | | | $ | 53,746 | | | $ | 46,110 | |
| CRE | | 21,060 | | | | 21,263 | | | | 19,764 | | | | 18,312 | | | | 14,128 | | |
| Lease financing | | 2,018 | | | | 1,911 | | | | 1,677 | | | | 1,535 | | | | 1,119 | | |
| Retail: | | | | | | | | | | | | | | | | | | | | |
| Residential mortgage | | 31,393 | | | | 28,725 | | | | 29,921 | | | | 30,533 | | | | 31,090 | | |
| Direct | | 11,584 | | | | 11,891 | | | | 12,092 | | | | 11,140 | | | | 8,146 | | |
| Indirect | | 17,425 | | | | 17,235 | | | | 18,564 | | | | 17,053 | | | | 15,616 | | |
| Revolving credit | | 3,132 | | | | 2,872 | | | | 2,655 | | | | 2,510 | | | | 2,460 | | |
| PCI | | 466 | | | | 651 | | | | 910 | | | | 1,122 | | | | 1,215 | | |
| Total loans and leases HFI | | 149,013 | | | | 143,701 | | | | 143,322 | | | | 135,951 | | | | 119,884 | | |
| LHFS | | 988 | | | | 1,099 | | | | 1,716 | | | | 1,035 | | | | 1,423 | | |
| Total loans and leases | | $ | 150,001 | | | $ | 144,800 | | | $ | 145,038 | | | $ | 136,986 | | | $ | 121,307 | |
| TFC/10-K/0000092230-19-000017 |
Lending Activities | The following table presents loans with variable interest rates: |
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| Table 12: Commercial Loan Maturities and Interest Sensitivity | | | | | | | | | | | | | | | | |
| December 31, 2018(Dollars in millions) | | 1 Year or Less | | | | Over 1 to 5 Years | | | | After 5 Years | | | | Total | | |
| Fixed rate: | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 3,344 | | | $ | 7,551 | | | $ | 9,454 | | | $ | 20,349 | |
| CRE | | 405 | | | | 2,552 | | | | 2,257 | | | | 5,214 | | |
| Lease financing | | 92 | | | | 1,239 | | | | 582 | | | | 1,913 | | |
| Total fixed rate | | 3,841 | | | | 11,342 | | | | 12,293 | | | | 27,476 | | |
| Variable rate: | | | | | | | | | | | | | | | | |
| Commercial and industrial | | 9,571 | | | | 21,424 | | | | 10,591 | | | | 41,586 | | |
| CRE | | 2,231 | | | | 9,203 | | | | 4,412 | | | | 15,846 | | |
| Lease financing | | 1 | | | | 59 | | | | 45 | | | | 105 | | |
| Total variable rate | | 11,803 | | | | 30,686 | | | | 15,048 | | | | 57,537 | | |
| Total commercial loans and leases | | $ | 15,644 | | | $ | 42,028 | | | $ | 27,341 | | | $ | 85,013 | |
| TFC/10-K/0000092230-19-000017 |
Lending Activities | (1)Commercial and industrial loans and direct loans totaling $2.3 billion and $127 million, respectively, have been excluded from the weighted average remaining term because they are callable on demand. Certain residential mortgage loans have an initial period where the borrower is only required to pay the periodic interest. After the interest-only period, the loan will require the payment of both interest and principal over the remaining term. The outstanding balances of residential mortgage loans in the interest-only phase were approximately $64 million and $126 million at December 31, 2018 and December 31, 2017, respectively. At December 31, 2018, approximately 95.9% of the interest-only balances will begin amortizing within the next three years compared to 95.0% at December 31, 2017.Home equity lines, which are a component of the direct retail portfolio, generally require interest-only payments during the first 15 years after origination. After this initial period, the outstanding balance begins amortizing and requires the payment of both interest and principal. At December 31, 2018, the direct retail lending portfolio includes $7.2 billion of variable rate home equity lines and $1.1 billion of variable rate other lines of credit. Approximately $5.7 billion of the variable rate home equity lines is currently in the interest-only phase and approximately 10.3% of these balances will begin amortizing within the next three years. Approximately $949 million of the outstanding balance of variable rate other lines of credit is in the interest-only phase and 15.9% 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. The following table presents the most recent composition of average loans and leases: |
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| Table 13: Variable Rate Loans (Excluding PCI and LHFS) | | | | | | | | | | | |
| December 31, 2018(Dollars in millions) | | Outstanding Balance | | | | Wtd. Avg. Contractual Rate | | | Wtd. Avg. Remaining Term (1) | | |
| Commercial: | | | | | | | | | | | |
| Commercial and industrial | | $ | 41,586 | | | 4.02 | % | | 4.2 | | yrs |
| CRE | | 15,846 | | | | 4.85 | | | 3.9 | | |
| Lease financing | | 105 | | | | 3.98 | | | 5.5 | | |
| Retail: | | | | | | | | | | | |
| Residential mortgage | | 4,451 | | | | 3.90 | | | 24.0 | | |
| Direct | | 8,464 | | | | 5.41 | | | 7.7 | | |
| Indirect | | 12 | | | | 5.04 | | | NM | | |
| Revolving credit | | 2,870 | | | | 11.79 | | | NM | | |
| TFC/10-K/0000092230-19-000017 |
Lending Activities | Average loans held for investment for the fourth quarter of 2018 were $147.5 billion, up $1.3 billion, or 3.6% annualized compared to the third quarter of 2018. Average commercial and industrial loans increased $653 million driven by strong growth in corporate banking and dealer floor plan, partially offset by a decline in mortgage warehouse lending. Average residential mortgage loans increased $603 million primarily due to the retention of a portion of the conforming mortgage production.Average indirect retail loans increased $154 million. This increase was primarily due to strong growth in automobile lending.Average revolving credit increased $123 million due to a new product launched early in the third quarter. BB&T made changes to its credit card products to offer more attractive features to existing clients and attract new clients. BB&T Corporation 44 |
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| Table 14: Composition of Average Loans and Leases | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended(Dollars in millions) | | Dec 31, 2018 | | | | Sep 30, 2018 | | | | Jun 30, 2018 | | | | Mar 31, 2018 | | | | Dec 31, 2017 | | |
| Commercial: | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 60,553 | | | $ | 59,900 | | | $ | 59,548 | | | $ | 58,627 | | | $ | 58,478 | |
| CRE | | 21,301 | | | | 21,496 | | | | 21,546 | | | | 21,398 | | | | 20,998 | | |
| Lease financing | | 1,990 | | | | 1,941 | | | | 1,862 | | | | 1,872 | | | | 1,851 | | |
| Retail: | | | | | | | | | | | | | | | | | | | | |
| Residential mortgage | | 31,103 | | | | 30,500 | | | | 29,272 | | | | 28,824 | | | | 28,559 | | |
| Direct | | 11,600 | | | | 11,613 | | | | 11,680 | | | | 11,791 | | | | 11,901 | | |
| Indirect | | 17,436 | | | | 17,282 | | | | 16,804 | | | | 16,914 | | | | 17,426 | | |
| Revolving credit | | 3,070 | | | | 2,947 | | | | 2,831 | | | | 2,798 | | | | 2,759 | | |
| PCI | | 486 | | | | 518 | | | | 559 | | | | 631 | | | | 689 | | |
| Total average loans and leases HFI | | $ | 147,539 | | | $ | 146,197 | | | $ | 144,102 | | | $ | 142,855 | | | $ | 142,661 | |
| TFC/10-K/0000092230-19-000017 |
Asset Quality | Excludes loans held for sale. (1)During 2016, approximately $191 million of nonaccrual energy-related loans were sold.(2)During 2017, approximately $61 million of nonaccrual residential mortgage loans were sold.(3)During 2017, approximately $331 million of performing residential mortgage TDRs were sold.Asset quality continued to improve in 2018. Nonperforming assets totaled $585 million at December 31, 2018, down $42 million compared to December 31, 2017. Nonperforming loans and leases represented 0.35% of loans and leases held for investment, a five basis point decrease compared to December 31, 2017. Performing TDRs were up $76 million during 2018 primarily in residential mortgage and indirect lending.Loans 90 days or more past due and still accruing totaled $462 million at December 31, 2018, down $86 million compared to the prior year. The ratio of loans 90 days or more past due and still accruing as a percentage of loans and leases was 0.31% at December 31, 2018, compared to 0.38% for the prior year. Excluding government guaranteed and PCI loans, the ratio of loans 90 days or more past due and still accruing as a percentage of loans and leases was 0.04% at December 31, 2018, down one basis point compared to December 31, 2017.Loans 30-89 days past due and still accruing totaled $1.0 billion at December 31, 2018, down slightly compared to the prior year. Problem loans include NPLs and loans that are 90 days or more past due and still accruing as disclosed in Table 15. In addition, for the commercial portfolio segment, loans that are rated special mention or substandard performing are closely monitored by management as potential problem loans. Refer to "Note 3. Loans and ACL" herein for additional disclosures related to these potential problem loans. |
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| Table 15: Asset Quality | | | | | | | | | | | | | | | | | | | | |
| December 31,(Dollars in millions) | | 2018 | | | | 2017 | | | | 2016 | | | | 2015 | | | | 2014 | | |
| NPAs: | | | | | | | | | | | | | | | | | | | | |
| NPLs: | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 200 | | | $ | 259 | | | $ | 369 | | | $ | 242 | | | $ | 243 | |
| CRE | | 65 | | | | 45 | | | | 57 | | | | 51 | | | | 100 | | |
| Lease financing | | 3 | | | | 1 | | | | 4 | | | | 1 | | | | — | | |
| Residential mortgage | | 119 | | | | 129 | | | | 172 | | | | 173 | | | | 166 | | |
| Direct | | 53 | | | | 64 | | | | 63 | | | | 43 | | | | 48 | | |
| Indirect | | 82 | | | | 72 | | | | 71 | | | | 66 | | | | 59 | | |
| Total NPLs HFI | | 522 | | | | 570 | | | | 736 | | | | 576 | | | | 616 | | |
| Foreclosed real estate | | 35 | | | | 32 | | | | 50 | | | | 108 | | | | 143 | | |
| Other foreclosed property | | 28 | | | | 25 | | | | 27 | | | | 28 | | | | 23 | | |
| Total nonperforming assets (1)(2) | | $ | 585 | | | $ | 627 | | | $ | 813 | | | $ | 712 | | | $ | 782 | |
| Performing TDRs: | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 65 | | | $ | 50 | | | $ | 57 | | | $ | 50 | | | $ | 65 | |
| CRE | | 10 | | | | 16 | | | | 25 | | | | 29 | | | | 57 | | |
| Residential mortgage | | 656 | | | | 605 | | | | 769 | | | | 604 | | | | 621 | | |
| Direct | | 55 | | | | 62 | | | | 67 | | | | 72 | | | | 84 | | |
| Indirect | | 305 | | | | 281 | | | | 240 | | | | 194 | | | | 182 | | |
| Revolving credit | | 28 | | | | 29 | | | | 29 | | | | 33 | | | | 41 | | |
| Total performing TDRs (3) | | $ | 1,119 | | | $ | 1,043 | | | $ | 1,187 | | | $ | 982 | | | $ | 1,050 | |
| Loans 90 days or more past due and still accruing: | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | — | | | $ | 1 | | | $ | — | | | $ | — | | | $ | — | |
| CRE | | — | | | | 1 | | | | — | | | | — | | | | — | | |
| Residential mortgage | | 405 | | | | 465 | | | | 522 | | | | 541 | | | | 731 | | |
| Direct | | 7 | | | | 6 | | | | 6 | | | | 7 | | | | 12 | | |
| Indirect | | 6 | | | | 6 | | | | 6 | | | | 5 | | | | 5 | | |
| Revolving credit | | 14 | | | | 12 | | | | 12 | | | | 10 | | | | 9 | | |
| PCI | | 30 | | | | 57 | | | | 90 | | | | 114 | | | | 188 | | |
| Total loans 90 days or more past due and still accruing | | $ | 462 | | | $ | 548 | | | $ | 636 | | | $ | 677 | | | $ | 945 | |
| Loans 30-89 days past due: | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 34 | | | $ | 41 | | | $ | 44 | | | $ | 53 | | | $ | 37 | |
| CRE | | 5 | | | | 8 | | | | 8 | | | | 22 | | | | 5 | | |
| Lease financing | | 1 | | | | 4 | | | | 4 | | | | 1 | | | | — | | |
| Residential mortgage | | 456 | | | | 472 | | | | 525 | | | | 475 | | | | 474 | | |
| Direct | | 61 | | | | 65 | | | | 60 | | | | 58 | | | | 41 | | |
| Indirect | | 436 | | | | 412 | | | | 377 | | | | 358 | | | | 285 | | |
| Revolving credit | | 28 | | | | 23 | | | | 23 | | | | 22 | | | | 23 | | |
| PCI | | 23 | | | | 27 | | | | 36 | | | | 42 | | | | 33 | | |
| Total loans 30-89 days past due | | $ | 1,044 | | | $ | 1,052 | | | $ | 1,077 | | | $ | 1,031 | | | $ | 898 | |
| TFC/10-K/0000092230-19-000017 |
Asset Quality | Applicable ratios are annualized. |
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| Table 16: Asset Quality Ratios | | | | | | | | | | | | | | |
| As Of / For The Year Ended December 31, | 2018 | | | 2017 | | | 2016 | | | 2015 | | | 2014 | |
| Loans 30-89 days past due and still accruing as a percentage of loans and leases HFI | 0.70 | % | | 0.73 | % | | 0.75 | % | | 0.76 | % | | 0.75 | % |
| Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI | 0.31 | | | 0.38 | | | 0.44 | | | 0.50 | | | 0.79 | |
| NPLs as a percentage of loans and leases HFI | 0.35 | | | 0.40 | | | 0.51 | | | 0.42 | | | 0.51 | |
| NPAs as a percentage of: | | | | | | | | | | | | | | |
| Total assets | 0.26 | | | 0.28 | | | 0.37 | | | 0.34 | | | 0.42 | |
| Loans and leases HFI plus foreclosed property | 0.39 | | | 0.44 | | | 0.57 | | | 0.52 | | | 0.65 | |
| Net charge-offs as a percentage of average loans and leases HFI | 0.36 | | | 0.38 | | | 0.38 | | | 0.35 | | | 0.46 | |
| ALLL as a percentage of loans and leases HFI | 1.05 | | | 1.04 | | | 1.04 | | | 1.07 | | | 1.23 | |
| Ratio of ALLL to: | | | | | | | | | | | | | | |
| Net charge-offs | 2.98x | | | 2.78x | | | 2.80x | | | 3.36x | | | 2.74x | |
| NPLs | 2.99x | | | 2.62x | | | 2.03x | | | 2.53x | | | 2.39x | |
| Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI (1) | 0.04 | % | | 0.05 | % | | 0.07 | % | | 0.06 | % | | 0.09 | % |
| TFC/10-K/0000092230-19-000017 |
Asset Quality | (1) Includes charge-offs and losses recorded upon sale of $216 million and $236 million for the year ended December 31, 2018 and 2017, respectively.(2) Includes charge-offs and losses recorded upon sale of $31 million and $33 million for the year ended December 31, 2018 and 2017, respectively.TDRs occur when a borrower is experiencing, or is expected to experience, financial difficulties in the near-term and a concession has been granted to the borrower. As a result, BB&T will work with the borrower to prevent further difficulties and ultimately improve the likelihood of recovery on the loan. To facilitate this process, a concessionary modification that would not otherwise be considered may be granted, resulting in classification of the loan as a TDR.BB&T Corporation 46The following table provides a summary of performing TDR activity: |
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| Table 17: Rollforward of NPAs | | | | | | | | |
| Year Ended December 31,(Dollars in millions) | | 2018 | | | | 2017 | | |
| Balance, January 1 | | $ | 627 | | | $ | 813 | |
| New NPAs | | 1,184 | | | | 1,297 | | |
| Advances and principal increases | | 400 | | | | 328 | | |
| Disposals of foreclosed assets (1) | | (459 | | ) | | (520 | | ) |
| Disposals of NPLs (2) | | (95 | | ) | | (212 | | ) |
| Charge-offs and losses | | (243 | | ) | | (251 | | ) |
| Payments | | (673 | | ) | | (660 | | ) |
| Transfers to performing status | | (155 | | ) | | (164 | | ) |
| Other, net | | (1 | | ) | | (4 | | ) |
| Ending balance, December 31 | | $ | 585 | | | $ | 627 | |
| TFC/10-K/0000092230-19-000017 |
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 under certain conditions due to the passage of time. See additional disclosures included in "Note 1. Basis of Presentation". 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).The following table provides further details regarding the payment status of TDRs outstanding at December 31, 2018: |
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| Table 18: Rollforward of Performing TDRs | | | | | | | | |
| (Dollars in millions) | | 2018 | | | | 2017 | | |
| Balance, January 1 | | $ | 1,043 | | | $ | 1,187 | |
| Inflows | | 510 | | | | 635 | | |
| Payments and payoffs | | (169 | | ) | | (253 | | ) |
| Charge-offs | | (63 | | ) | | (55 | | ) |
| Transfers to nonperforming TDRs, net | | (69 | | ) | | (78 | | ) |
| Removal due to the passage of time | | (32 | | ) | | (46 | | ) |
| Non-concessionary re-modifications | | (6 | | ) | | (3 | | ) |
| Transferred to LHFS and/or sold | | (95 | | ) | | (344 | | ) |
| Balance, December 31 | | $ | 1,119 | | | $ | 1,043 | |
| TFC/10-K/0000092230-19-000017 |
Asset Quality | (1)Past due performing TDRs are included in past due disclosures and nonperforming TDRs are included in NPL disclosures. |
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| Table 19: Payment Status of TDRs (1) | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2018(Dollars in millions) | | Current | | | | | | | Past Due 30-89 Days | | | | | | | Past Due 90 Days Or More | | | | | | | Total | | |
| Performing TDRs: | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 64 | | | 98.5 | % | | $ | 1 | | | 1.5 | % | | $ | — | | | — | % | | $ | 65 | |
| CRE | | 10 | | | | 100.0 | | | — | | | | — | | | — | | | | — | | | 10 | | |
| Retail: | | | | | | | | | | | | | | | | | | | | | | | | | |
| Residential mortgage | | 379 | | | | 57.8 | | | 116 | | | | 17.7 | | | 161 | | | | 24.5 | | | 656 | | |
| Direct | | 53 | | | | 96.4 | | | 2 | | | | 3.6 | | | — | | | | — | | | 55 | | |
| Indirect | | 245 | | | | 80.3 | | | 60 | | | | 19.7 | | | — | | | | — | | | 305 | | |
| Revolving credit | | 24 | | | | 85.7 | | | 3 | | | | 10.7 | | | 1 | | | | 3.6 | | | 28 | | |
| Total performing TDRs | | 775 | | | | 69.2 | | | 182 | | | | 16.3 | | | 162 | | | | 14.5 | | | 1,119 | | |
| Nonperforming TDRs | | 81 | | | | 46.1 | | | 8 | | | | 4.5 | | | 87 | | | | 49.4 | | | 176 | | |
| Total TDRs | | $ | 856 | | | 66.1 | | | $ | 190 | | | 14.7 | | | $ | 249 | | | 19.2 | | | $ | 1,295 | |
| TFC/10-K/0000092230-19-000017 |
ACL | 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 $1.7 billion at December 31, 2018, up $42 million compared to December 31, 2017.The ALLL, excluding PCI, was $1.5 billion, up $87 million compared to December 31, 2017. The allowance for PCI loans was $9 million, down $19 million compared to December 31, 2017. As of December 31, 2018, the total allowance for loan and lease losses was 1.05% of loans and leases held for investment, compared to 1.04% at December 31, 2017. These amounts include acquired loans, which were marked to fair value and did not receive an ALLL at the acquisition date.The ALLL was 2.99 times NPLs held for investment, compared to 2.62 times at December 31, 2017. At December 31, 2018, the ALLL was 2.98 times annual net charge-offs, compared to 2.78 times at December 31, 2017.Net charge-offs during 2018 totaled $524 million, or 0.36% of average loans and leases, down two basis points compared to 2017.BB&T Corporation 48The following table presents an allocation of the ALLL at the periods shown. This allocation of the ALLL is calculated on an approximate basis and is not necessarily indicative of future losses or allocations. The entire amount of the allowance is available to absorb losses occurring in any category of loans and leases. |
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| Table 20: Activity in ACL | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31,(Dollars in millions) | 2018 | | | | 2017 | | | | 2016 | | | | 2015 | | | | 2014 | | |
| Balance, beginning of period | $ | 1,609 | | | $ | 1,599 | | | $ | 1,550 | | | $ | 1,534 | | | $ | 1,821 | |
| Provision for credit losses (excluding PCI loans) | 583 | | | | 562 | | | | 574 | | | | 430 | | | | 280 | | |
| Provision (benefit) for PCI loans | (17 | | ) | | (15 | | ) | | (2 | | ) | | (2 | | ) | | (29 | | ) |
| Charge-offs: | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | (92 | | ) | | (95 | | ) | | (143 | | ) | | (90 | | ) | | (143 | | ) |
| CRE | (13 | | ) | | (10 | | ) | | (9 | | ) | | (24 | | ) | | (42 | | ) |
| Lease financing | (4 | | ) | | (5 | | ) | | (6 | | ) | | — | | | | — | | |
| Residential mortgage | (21 | | ) | | (47 | | ) | | (40 | | ) | | (46 | | ) | | (84 | | ) |
| Direct | (71 | | ) | | (61 | | ) | | (53 | | ) | | (54 | | ) | | (69 | | ) |
| Indirect | (391 | | ) | | (402 | | ) | | (366 | | ) | | (303 | | ) | | (280 | | ) |
| Revolving credit | (84 | | ) | | (76 | | ) | | (69 | | ) | | (70 | | ) | | (71 | | ) |
| PCI | (2 | | ) | | (1 | | ) | | (15 | | ) | | (1 | | ) | | (21 | | ) |
| Total charge-offs | (678 | | ) | | (697 | | ) | | (701 | | ) | | (588 | | ) | | (710 | | ) |
| Recoveries: | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | 39 | | | | 36 | | | | 44 | | | | 38 | | | | 45 | | |
| CRE | 8 | | | | 16 | | | | 19 | | | | 18 | | | | 33 | | |
| Lease financing | 1 | | | | 2 | | | | 2 | | | | — | | | | — | | |
| Residential mortgage | 2 | | | | 2 | | | | 3 | | | | 3 | | | | 7 | | |
| Direct | 23 | | | | 25 | | | | 26 | | | | 29 | | | | 29 | | |
| Indirect | 62 | | | | 60 | | | | 55 | | | | 44 | | | | 39 | | |
| Revolving credit | 19 | | | | 19 | | | | 20 | | | | 20 | | | | 19 | | |
| Total recoveries | 154 | | | | 160 | | | | 169 | | | | 152 | | | | 172 | | |
| Net charge-offs | (524 | | ) | | (537 | | ) | | (532 | | ) | | (436 | | ) | | (538 | | ) |
| Other | — | | | | — | | | | 9 | | | | 24 | | | | — | | |
| Balance, end of period | $ | 1,651 | | | $ | 1,609 | | | $ | 1,599 | | | $ | 1,550 | | | $ | 1,534 | |
| ALLL (excluding PCI loans) | $ | 1,549 | | | $ | 1,462 | | | $ | 1,445 | | | $ | 1,399 | | | $ | 1,410 | |
| ALLL for PCI loans | 9 | | | | 28 | | | | 44 | | | | 61 | | | | 64 | | |
| RUFC | 93 | | | | 119 | | | | 110 | | | | 90 | | | | 60 | | |
| Total ACL | $ | 1,651 | | | $ | 1,609 | | | $ | 1,599 | | | $ | 1,550 | | | $ | 1,534 | |
| TFC/10-K/0000092230-19-000017 |
ACL | 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 for second lien positions when the estimated combined current loan to value ratio for the credit exceeds 100%. As of December 31, 2018, BB&T held or serviced the first lien on 29.8% of its second lien positions. |
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| Table 21: Allocation of ALLL by Category | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2018 | | | | | | | 2017 | | | | | | | 2016 | | | | | | | 2015 | | | | | | | 2014 | | | | | |
| December 31,(Dollars in millions) | | Amount | | | | % Loans in each category | | | Amount | | | | % Loans in each category | | | Amount | | | | % Loans in each category | | | Amount | | | | % Loans in each category | | | Amount | | | | % Loans in each category | |
| Commercial and industrial | | $ | 546 | | | 41.5 | % | | $ | 522 | | | 41.1 | % | | $ | 530 | | | 40.3 | % | | $ | 488 | | | 39.6 | % | | $ | 445 | | | 38.5 | % |
| CRE | | 190 | | | | 14.1 | | | 160 | | | | 14.8 | | | 145 | | | | 13.8 | | | 175 | | | | 13.5 | | | 212 | | | | 11.8 | |
| Lease financing | | 11 | | | | 1.4 | | | 9 | | | | 1.3 | | | 7 | | | | 1.2 | | | 5 | | | | 1.1 | | | 4 | | | | 0.9 | |
| Residential mortgage | | 232 | | | | 21.1 | | | 209 | | | | 20.0 | | | 227 | | | | 20.8 | | | 217 | | | | 22.4 | | | 253 | | | | 25.9 | |
| Direct | | 97 | | | | 7.8 | | | 106 | | | | 8.3 | | | 103 | | | | 8.4 | | | 105 | | | | 8.2 | | | 110 | | | | 6.8 | |
| Indirect | | 356 | | | | 11.7 | | | 348 | | | | 12.0 | | | 327 | | | | 13.0 | | | 305 | | | | 12.6 | | | 276 | | | | 13.0 | |
| Revolving credit | | 117 | | | | 2.1 | | | 108 | | | | 2.0 | | | 106 | | | | 1.9 | | | 104 | | | | 1.8 | | | 110 | | | | 2.1 | |
| PCI | | 9 | | | | 0.3 | | | 28 | | | | 0.5 | | | 44 | | | | 0.6 | | | 61 | | | | 0.8 | | | 64 | | | | 1.0 | |
| Total ALLL | | 1,558 | | | | 100.0 | % | | 1,490 | | | | 100.0 | % | | 1,489 | | | | 100.0 | % | | 1,460 | | | | 100.0 | % | | 1,474 | | | | 100.0 | % |
| RUFC | | 93 | | | | | | | 119 | | | | | | | 110 | | | | | | | 90 | | | | | | | 60 | | | | | |
| Total ACL | | $ | 1,651 | | | | | | $ | 1,609 | | | | | | $ | 1,599 | | | | | | $ | 1,550 | | | | | | $ | 1,534 | | | | |
| TFC/10-K/0000092230-19-000017 |
Deposits | Average deposits for the fourth quarter were $157.8 billion, up $571 million compared to the third quarter of 2018. Average noninterest-bearing deposits decreased $442 million, driven by decreases in commercial balances.Average interest checking increased $266 million primarily due to increases in commercial and public fund balances, partially offset by a decrease in personal balances. Average money market and savings deposits decreased $696 million primarily due to a decrease in commercial balances. Average time deposits increased $1.3 billion primarily due to increases in commercial balances. Average foreign office deposits increased $114 million due to changes in the overall funding mix.Noninterest-bearing deposits represented 34.0% of total average deposits for the fourth quarter, compared to 34.4% for the prior quarter and 34.4% a year ago. The cost of total deposits was 0.52% for the fourth quarter, up nine basis points compared to the prior quarter. The cost of interest-bearing deposits was 0.78% for the fourth quarter, up 12 basis points compared to the prior quarter. |
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| Table 22: Composition of Average Deposits | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended(Dollars in millions) | | Dec 31, 2018 | | | | Sep 30, 2018 | | | | Jun 30, 2018 | | | | Mar 31, 2018 | | | | Dec 31, 2017 | | |
| Noninterest-bearing deposits | | $ | 53,732 | | | $ | 54,174 | | | $ | 53,963 | | | $ | 53,396 | | | $ | 54,288 | |
| Interest checking | | 26,921 | | | | 26,655 | | | | 26,969 | | | | 27,270 | | | | 26,746 | | |
| Money market and savings | | 62,261 | | | | 62,957 | | | | 62,105 | | | | 61,690 | | | | 61,693 | | |
| Time deposits | | 14,682 | | | | 13,353 | | | | 13,966 | | | | 13,847 | | | | 13,744 | | |
| Foreign office deposits - interest-bearing | | 246 | | | | 132 | | | | 673 | | | | 935 | | | | 1,488 | | |
| Total average deposits | | $ | 157,842 | | | $ | 157,271 | | | $ | 157,676 | | | $ | 157,138 | | | $ | 157,959 | |
| TFC/10-K/0000092230-19-000017 |
Borrowings | At December 31, 2018, short-term borrowings totaled $5.2 billion, an increase of $240 million compared to December 31, 2017. Short-term borrowings fluctuate based on the Company's funding needs. Average short-term borrowings were $6.0 billion or 2.7% of total funding on average in 2018 as compared to $4.3 billion or 2.0% in 2017. BB&T Corporation 50Long-term debt provides funding and, to a lesser extent, regulatory capital, and primarily consists of senior and subordinated notes issued by BB&T and Branch Bank. Long-term debt totaled $23.7 billion at December 31, 2018, an increase of $61 million compared to December 31, 2017. The average cost of long-term debt was 2.88% in 2018, up 78 basis points compared to 2017. FHLB advances represented 7.4% of total outstanding long-term debt at December 31, 2018, compared to 10.5% at December 31, 2017. See "Note 8. Long-Term Debt" for additional disclosures. |
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| Table 24: Short-Term Borrowing | | | | | | | | | | | | |
| As Of / For The Year Ended December 31,(Dollars in millions) | | 2018 | | | | 2017 | | | | 2016 | | |
| Securities sold under agreements to repurchase: | | | | | | | | | | | | |
| Maximum outstanding at any month-end during the year | | $ | 836 | | | $ | 1,923 | | | $ | 2,265 | |
| Balance outstanding at end of year | | 251 | | | | 483 | | | | 970 | | |
| Average outstanding during the year | | 446 | | | | 1,449 | | | | 1,600 | | |
| Average interest rate during the year | | 1.35 | | % | | 0.70 | | % | | 0.37 | | % |
| Average interest rate at end of year | | 1.59 | | | | 0.43 | | | | 0.52 | | |
| Federal funds purchased and short-term borrowed funds: | | | | | | | | | | | | |
| Maximum outstanding at any month-end during the year | | $ | 9,063 | | | $ | 6,859 | | | $ | 3,003 | |
| Balance outstanding at end of year | | 4,927 | | | | 4,455 | | | | 436 | | |
| Average outstanding during the year | | 5,509 | | | | 2,862 | | | | 954 | | |
| Average interest rate during the year | | 1.92 | | % | | 1.06 | | % | | 0.30 | | % |
| Average interest rate at end of year | | 2.49 | | | | 1.34 | | | | 0.71 | | |
| TFC/10-K/0000092230-19-000017 |
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, MRLCC and CCRC are the enterprise risk committees and provide oversight of the risks as described in the common risk language. There is Executive Management representation in all six committees. The risk management framework is composed of specialized risk functions focused on specific types of risk. The MRLCC, CRMC, CROC, ORMC and CCRC 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. |
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| Risk Committees | Board of Directors | | | Executive Management |
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| 1st Line of Defense | 2nd Line of Defense | 3rd Line of Defense |
| Business Units | Risk Functions | Audit Services |
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| Chief Risk Officer | | |
| TFC/10-K/0000092230-19-000017 |
Interest Rate Market Risk (Other than Trading) | The MRLCC has established parameters related to interest sensitivity that prescribe a maximum negative impact on net interest income under different interest rate scenarios. In the event the results of the Simulation model fall outside the established parameters, management will make recommendations to the MRLCC on the most appropriate response given the current economic forecast. The following parameters and interest rate scenarios are considered BB&T's primary measures of interest rate risk:•Maximum negative impact on net interest income of 2% for the next 12 months assuming a 25 basis point change in interest rates each month for four months followed by a flat interest rate scenario for the remaining eight month period.•Maximum negative impact on net interest income of 4% for the next 12 months assuming a 25 basis point change in interest rates each month for eight months followed by a flat interest rate scenario for the remaining four month period.If a parallel rate change of 200 basis points cannot be modeled due to a low level of rates, a proportional limit applies, and the maximum negative impact on net interest income is adjusted on a proportional basis. Regardless of the proportional limit, the negative risk exposure limit will be the greater of the 4% or the proportional limit.Management has also established a maximum negative impact on net interest income of 4% for an immediate 100 basis points parallel change in rates and 8% for an immediate 200 basis points parallel change in rates. These "interest rate shock" limits are designed to create an outer band of acceptable risk based upon a significant and immediate change in rates.Management has temporarily suspended its interest rate exposure limits to declining interest rates. Although, the Federal Reserve has raised rates nine times beginning in December 2015, competitive pressure on deposit rates was slow to materialize. As a result, asset repricing in excess of liability repricing has caused the measured exposure to declining rates to increase. Management closely monitors its interest rate risk position.Management considers how the balance sheet and interest rate risk position could be impacted by changes in balance sheet mix. Liquidity in the banking industry has been very strong during the current economic cycle. Much of this liquidity increase has been due to a significant increase in noninterest-bearing demand deposits. Consistent with the industry, Branch Bank has seen a significant increase in this funding source. The behavior of these deposits is one of the most important assumptions used in determining the interest rate risk position of BB&T. A loss of these deposits in the future would reduce the asset sensitivity of BB&T's balance sheet as the Company increases interest-bearing funds to offset the loss of this advantageous funding source.Beta represents the correlation between overall market interest rates and the rates paid by BB&T on interest-bearing deposits. BB&T applies an average beta of approximately 55% to its non-maturity interest-bearing deposit accounts for determining its interest rate sensitivity. Non-maturity interest-bearing deposit accounts include interest checking accounts, savings accounts and money market accounts that do not have a contractual maturity. The actual deposit beta on non-maturity interest-bearing deposits has been less than 27% since rates began to rise in December 2015. However, BB&T expects the beta to increase as rates continue to rise as evidenced by the 39% beta on interest bearing-deposits related to the September 2018 federal funds rate increase. BB&T regularly conducts sensitivity on other key variables to determine the impact they could have on the interest rate risk position. This allows BB&T to evaluate the likely impact on its balance sheet management strategies due to a more extreme variation in a key assumption than expected.The following table shows the results of BB&T's interest-rate sensitivity position assuming the loss of demand deposits and an associated increase in managed rate deposits under various scenarios. For purposes of this analysis, BB&T modeled the incremental beta for the replacement of the lost demand deposits at 100%. |
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| Table 25: Interest Sensitivity Simulation Analysis | | | | | | | | | | | | |
| Interest Rate Scenario | | | | | | | | Annualized Hypothetical Percentage Change in Net Interest Income | | | | |
| Linear Change in Prime Rate | | Prime Rate | | | | | |
| | Dec 31, 2018 | | | Dec 31, 2017 | | | Dec 31, 2018 | | | Dec 31, 2017 | |
| Up 200 bps | | 7.50 | % | | 6.50 | % | | 1.80 | % | | 3.09 | % |
| Up 100 | | 6.50 | | | 5.50 | | | 1.22 | | | 2.07 | |
| No Change | | 5.50 | | | 4.50 | | | — | | | — | |
| Down 100 | | 4.50 | | | 3.50 | | | (3.17 | ) | | (6.62 | ) |
| Down 200 | | 4.00 | | | N/A | | | (7.04 | ) | | N/A | |
| TFC/10-K/0000092230-19-000017 |
Interest Rate Market Risk (Other than Trading) | (1) The base scenario is equal to the annualized hypothetical percentage change in net interest income at December 31, 2018 as presented in the preceding table.If rates increased 200 basis points, BB&T could absorb the loss of $8.9 billion, or 16.7%, of noninterest-bearing deposits and replace them with managed rate deposits with a beta of 100% before becoming neutral to interest rate changes.The following table shows the effect that the indicated changes in interest rates would have on EVE. Key assumptions in the preparation of the table include prepayment speeds of mortgage-related and other assets, cash flows and maturities of derivative financial instruments, loan volumes and pricing and deposit sensitivity. |
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| Table 26: Deposit Mix Sensitivity Analysis | | | | | | | | | |
| Linear Change in Rates | | Base Scenario at December 31, 2018 (1) | | | Results Assuming a Decrease in Noninterest-Bearing Demand Deposits | | | | |
| | |
| | | $1 Billion | | | $5 Billion | |
| Up 200 bps | | 1.80 | % | | 1.60 | % | | 0.79 | % |
| Up 100 | | 1.22 | | | 1.09 | | | 0.59 | |
| TFC/10-K/0000092230-19-000017 |
Branch Bank | 1)In connection with the pending SunTrust merger, Moody's placed BB&T's credit ratings under review for possible downgrade. 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 "Note 4. Premises and Equipment," "Note 8. Long-Term Debt" and "Note 13. Commitments and Contingencies" for additional information regarding outstanding balances of sources of liquidity and contractual commitments and obligations. |
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| Table 28: Credit Ratings of BB&T Corporation and Branch Bank | | | | | | | |
| | S&P | | Moody's (1) | | 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 |
| Preferred stock | BBB- | | Baa1(hyb) | | BBB- | | BBB(high) |
| Branch Bank: | | | | | | | |
| Long term deposits | N/A | | Aa1 | | AA- | | AA(low) |
| LT/Senior unsecured bank notes | 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 | | Rating under review | | Stable | | Positive |
| TFC/10-K/0000092230-19-000017 |
Contractual Obligations, Commitments, Contingent Liabilities and Off-Balance Sheet Arrangements | (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, 2018.(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 Corporation 60BB&T's commitments include investments in affordable housing projects throughout its market area and private equity funds. Refer to "Note 1. Basis of Presentation" and "Note 13. Commitments and Contingencies" 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, 2018 do not represent the amounts that may ultimately be paid under these contracts. Further discussion of derivative instruments is included in "Note 1. Basis of Presentation" and "Note 17. Derivative Financial Instruments."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 uncollateralized deposit shortfall would have to be absorbed on a pro-rata basis (based upon the public deposits held by each bank within the respective state) by the remaining financial institutions holding public funds in that state. BB&T monitors deposits levels relative to the total public deposits held by all depository institutions within these states. 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 certain risks. 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 "Note 13. Commitments and Contingencies" and "Note 16. Fair Value Disclosures." |
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| Table 29: Contractual Obligations and Other Commitments | | | | | | | | | | | | | | | | | | | | |
| December 31, 2018(Dollars in millions) | | Total | | | | Less than 1 Year | | | | 1 to 3 Years | | | | 3 to 5 Years | | | | After 5 Years | | |
| Long-term debt and capital leases | | $ | 23,802 | | | $ | 4,837 | | | $ | 10,015 | | | $ | 3,828 | | | $ | 5,122 | |
| Operating leases | | 1,217 | | | | 217 | | | | 361 | | | | 260 | | | | 379 | | |
| Commitments to fund affordable housing investments | | 919 | | | | 586 | | | | 277 | | | | 26 | | | | 30 | | |
| Private equity and other investments commitments (1) | | 331 | | | | 74 | | | | 121 | | | | 93 | | | | 43 | | |
| Time deposits | | 16,577 | | | | 12,308 | | | | 3,629 | | | | 636 | | | | 4 | | |
| Contractual interest payments (2) | | 2,766 | | | | 849 | | | | 999 | | | | 520 | | | | 398 | | |
| Purchase obligations (3) | | 1,238 | | | | 565 | | | | 578 | | | | 75 | | | | 20 | | |
| Nonqualified benefit plan obligations (4) | | 1,153 | | | | 16 | | | | 33 | | | | 37 | | | | 1,067 | | |
| Total contractual cash obligations | | $ | 48,003 | | | $ | 19,452 | | | $ | 16,013 | | | $ | 5,475 | | | $ | 7,063 | |
| TFC/10-K/0000092230-19-000017 |
Capital | (1)BB&T's goal is to maintain capital levels above all regulatory minimums.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 to return to these targeted operating minimums within a reasonable period of time through capital planning. 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 forecasted to occur within a reasonable time period.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.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 2018 capital plan. On February 5, 2019, the FRB notified banks with less than $250 billion in assets that they will not need to participate in the 2019 supervisory stress test. However, BB&T may need to provide additional information as a result of the pending merger with SunTrust. Following the completion of the merger of equals with SunTrust, management's capital deployment plan in order of preference is to focus on 1) organic growth, 2) dividends and 3) strategic opportunities and/or share repurchases depending on opportunities in the marketplace and BB&T's interest and ability to proceed with acquisitions. BB&T has suspended share repurchases as a result of the pending merger of equals with SunTrust.Branch Bank's capital ratios are presented in the following table: |
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| Table 30: Capital Requirements Under Basel III | | | | | | | | | | | | | | | | | |
| | Minimum Capital | | | Well-Capitalized | | | Minimum Capital Plus Capital Conservation Buffer | | | | | | BB&T Targets | | | | |
| | | | 2018 | | | 2019 | | | Operating (1) | | | Stressed | |
| CET1 capital to risk-weighted assets | 4.5 | % | | 6.5 | % | | 6.375 | % | | 7.000 | % | | 8.5 | % | | 6.0 | % |
| Tier 1 capital to risk-weighted assets | 6.0 | | | 8.0 | | | 7.875 | | | 8.500 | | | 10.0 | | | 7.5 | |
| Total capital to risk-weighted assets | 8.0 | | | 10.0 | | | 9.875 | | | 10.500 | | | 12.0 | | | 9.5 | |
| Leverage ratio | 4.0 | | | 5.0 | | | N/A | | | N/A | | | 8.0 | | | 5.5 | |
| TFC/10-K/0000092230-19-000017 |
Capital | BB&T's capital ratios are presented in the following table: |
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| Table 31: Capital Ratios - Branch Bank | | | | | | |
| December 31, | | 2018 | | | 2017 | |
| CET1 to risk-weighted assets | | 11.2 | % | | 11.3 | % |
| Tier 1 capital to risk-weighted assets | | 11.2 | | | 11.3 | |
| Total capital to risk-weighted assets | | 13.2 | | | 13.3 | |
| Leverage ratio | | 9.3 | | | 9.4 | |
| TFC/10-K/0000092230-19-000017 |
Capital | (1)Tangible common equity and related measures are non-GAAP measures that exclude the impact of intangible assets and their related amortization. These measures are useful for evaluating the performance of a business consistently, whether acquired or developed internally. BB&T's management uses these measures to assess the quality of capital and returns relative to balance sheet risk and believes investors may find them useful in their analysis of the Corporation. These capital measures are not necessarily comparable to similar capital measures that may be presented by other companies.BB&T Corporation 62During 2018, BB&T completed $1.2 billion of stock repurchases and paid $1.2 billion in common stock dividends, which resulted in a total payout ratio of 78.7%for the year. BB&T's Board of Directors increased the dividend $0.075 during 2018, which increased the amount of the quarterly dividend to $0.405 per share. As of December 31, 2018, the remaining stock repurchases authorized by the Board of Directors totaled $1.1 billion. BB&T has suspended share repurchases as a result of the pending merger of equals with SunTrust. |
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| Table 32: Capital Ratios - BB&T Corporation | | | | | | | | |
| December 31,(Dollars in millions, except per share data, shares in thousands) | | 2018 | | | | 2017 | | |
| Risk-based: | | | | | | | | |
| CET1 capital to risk-weighted assets | | 10.2 | | % | | 10.2 | | % |
| Tier 1 capital to risk-weighted assets | | 11.8 | | | | 11.9 | | |
| Total capital to risk-weighted assets | | 13.8 | | | | 13.9 | | |
| Leverage ratio | | 9.9 | | | | 9.9 | | |
| Non-GAAP capital measure (1): | | | | | | | | |
| Tangible common equity per common share | | $ | 21.89 | | | $ | 21.07 | |
| Calculation of tangible common equity (1): | | | | | | | | |
| Total shareholders' equity | | $ | 30,178 | | | $ | 29,695 | |
| Less: | | | | | | | | |
| Preferred stock | | 3,053 | | | | 3,053 | | |
| Noncontrolling interests | | 56 | | | | 47 | | |
| Intangible assets, net of deferred taxes | | 10,360 | | | | 10,117 | | |
| Tangible common equity | | $ | 16,709 | | | $ | 16,478 | |
| Risk-weighted assets | | $ | 181,260 | | | $ | 177,217 | |
| Common shares outstanding at end of period | | 763,326 | | | | 782,006 | | |
| TFC/10-K/0000092230-19-000017 |
Capital | (1)Loans and leases are net of unearned income and include LHFS. |
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| Table 33: Quarterly Financial Summary – Unaudited | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2018 | | | | | | | | | | | | | | | | 2017 | | | | | | | | | | | | | | |
| (Dollars in millions, except per share data) | Fourth Quarter | | | | Third Quarter | | | | Second Quarter | | | | First Quarter | | | | Fourth Quarter | | | | Third Quarter | | | | Second Quarter | | | | First Quarter | | |
| Consolidated summary of operations: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest income | $ | 2,136 | | | $ | 2,069 | | | $ | 1,994 | | | $ | 1,921 | | | $ | 1,898 | | | $ | 1,877 | | | $ | 1,824 | | | $ | 1,775 | |
| Interest expense | 431 | | | | 382 | | | | 337 | | | | 288 | | | | 254 | | | | 230 | | | | 189 | | | | 166 | | |
| Provision for credit losses | 146 | | | | 135 | | | | 135 | | | | 150 | | | | 138 | | | | 126 | | | | 135 | | | | 148 | | |
| Noninterest income | 1,235 | | | | 1,239 | | | | 1,222 | | | | 1,180 | | | | 1,225 | | | | 1,166 | | | | 1,220 | | | | 1,171 | | |
| Noninterest expense | 1,784 | | | | 1,742 | | | | 1,720 | | | | 1,686 | | | | 1,855 | | | | 1,745 | | | | 1,742 | | | | 2,102 | | |
| Provision for income taxes | 205 | | | | 210 | | | | 202 | | | | 186 | | | | 209 | | | | 294 | | | | 304 | | | | 104 | | |
| Net income | 805 | | | | 839 | | | | 822 | | | | 791 | | | | 667 | | | | 648 | | | | 674 | | | | 426 | | |
| Noncontrolling interest | 7 | | | | 7 | | | | 3 | | | | 3 | | | | 9 | | | | 8 | | | | (1 | | ) | | 5 | | |
| Preferred stock dividends | 44 | | | | 43 | | | | 44 | | | | 43 | | | | 44 | | | | 43 | | | | 44 | | | | 43 | | |
| Net income available to common shareholders | $ | 754 | | | $ | 789 | | | $ | 775 | | | $ | 745 | | | $ | 614 | | | $ | 597 | | | $ | 631 | | | $ | 378 | |
| Basic EPS | $ | 0.99 | | | $ | 1.02 | | | $ | 1.00 | | | $ | 0.96 | | | $ | 0.78 | | | $ | 0.75 | | | $ | 0.78 | | | $ | 0.47 | |
| Diluted EPS | $ | 0.97 | | | $ | 1.01 | | | $ | 0.99 | | | $ | 0.94 | | | $ | 0.77 | | | $ | 0.74 | | | $ | 0.77 | | | $ | 0.46 | |
| Selected average balances: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Assets | $ | 223,625 | | | $ | 222,674 | | | $ | 221,344 | | | $ | 221,419 | | | $ | 222,525 | | | $ | 220,732 | | | $ | 221,018 | | | $ | 219,961 | |
| Securities, at amortized cost | 46,610 | | | | 46,299 | | | | 47,145 | | | | 48,374 | | | | 48,093 | | | | 45,968 | | | | 45,410 | | | | 44,607 | | |
| Loans and leases (1) | 148,457 | | | | 147,489 | | | | 145,752 | | | | 143,906 | | | | 144,089 | | | | 144,181 | | | | 144,327 | | | | 143,698 | | |
| Total earning assets | 197,213 | | | | 196,200 | | | | 195,094 | | | | 194,530 | | | | 195,305 | | | | 193,073 | | | | 193,386 | | | | 192,564 | | |
| Deposits | 157,842 | | | | 157,271 | | | | 157,676 | | | | 157,138 | | | | 157,959 | | | | 157,414 | | | | 160,263 | | | | 161,383 | | |
| Short-term borrowings | 6,979 | | | | 6,023 | | | | 5,323 | | | | 5,477 | | | | 6,342 | | | | 5,983 | | | | 2,748 | | | | 2,105 | | |
| Long-term debt | 23,488 | | | | 24,211 | | | | 23,639 | | | | 23,677 | | | | 22,639 | | | | 21,459 | | | | 21,767 | | | | 20,757 | | |
| Total interest-bearing liabilities | 134,577 | | | | 133,331 | | | | 132,675 | | | | 132,896 | | | | 132,652 | | | | 131,367 | | | | 132,205 | | | | 133,150 | | |
| Shareholders' equity | 29,965 | | | | 29,887 | | | | 29,585 | | | | 29,528 | | | | 29,853 | | | | 29,948 | | | | 30,302 | | | | 29,903 | | |
| TFC/10-K/0000092230-19-000017 |
ACL | BB&T Corporation 64For 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 "Note 1. Basis of Presentation." |
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| 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 |
| TFC/10-K/0000092230-19-000017 |
NPAs | (1)Loans may be returned to accrual status when they become current as to both principal and interest and concern no longer exists as to the collectability of principal and interest, generally indicated by 180 days of sustained performance.(2)Or when it is probable that principal or interest is not fully collectible, whichever occurs first.(3)Depends on product type, loss mitigation status and status of the government guaranty.When commercial loans are placed on nonperforming status, a charge-off is recorded, as applicable, to decrease the carrying value of such loans to the estimated recoverable amount. Retail loans are subject to mandatory charge-off at a specified delinquency date consistent with regulatory guidelines. As such, retail loans are subject to collateral valuation and charge-off, as applicable, when they are moved to nonperforming status.Certain past due loans may remain on accrual status if management determines that it does not have concern over the collectability of principal and interest. Generally, when loans are placed on nonperforming status, accrued interest receivable is reversed against interest income in the current period and amortization of deferred loan fees and expenses is suspended. Payments received for interest and lending fees thereafter are applied as a reduction to the remaining principal balance as long as concern exists as to the ultimate collection of the principal.Assets acquired as a result of foreclosure are subsequently carried at the lower of cost or net realizable value. Net realizable value equals fair value less estimated selling costs. Any excess of cost over net realizable value at the time of foreclosure is charged to the ALLL. NPAs are subject to periodic revaluations of the collateral underlying impaired loans and foreclosed real estate. The periodic revaluations are generally based on the appraised value of the property and may include additional liquidity adjustments based upon the expected retention period. BB&T's policies require that valuations be updated at least annually and that upon foreclosure, the valuation must not be more than six months old, otherwise an update is required. |
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| (number of days) | | Placed on Nonperforming (1) | | | | Charge-off | | |
| Commercial: | | | | | | | | |
| Commercial and industrial | | 90 | (2) | | | 90 | | |
| CRE | | 90 | (2) | | | 90 | | |
| Lease financing | | 90 | (2) | | | 90 | | |
| Retail: | | | | | | | | |
| Residential mortgage (3) | | 90 | to | 180 | | 90 | to | 210 |
| Direct (3) | | 90 | to | 120 | | 90 | to | 120 |
| Indirect (3) | | 90 | to | 120 | | 90 | to | 120 |
| Revolving credit (3) | | NA | | | | 90 | to | 180 |
| TFC/10-K/0000092230-19-000017 |
Commercial | For commercial clients with total credit exposure of $2 million or less, BB&T has developed an automated loan review system to identify and proactively manage accounts with a higher risk of loss. The "score" produced by this automated system is updated quarterly.To establish a reserve for loans individually evaluated for impairment, BB&T's policy is to review all commercial lending relationships with an outstanding nonperforming balance of $3 million or more. The amount of the reserve is based on the present value of expected cash flows discounted at the loan's effective interest rate and/or the value of collateral, net of costs to sell. In addition, BB&T reviews other commercial relationships with collateral-dependent TDRs and nonperforming loans with balances of $1 million or more to establish a specific reserve based on the underlying collateral value, net of costs to sell.BB&T also has a review process related to all other TDRs and commercial nonperforming loans. In connection with this process, BB&T establishes reserves related to these loans that are calculated using an expected cash flow approach. These discounted cash flow analyses incorporate adjustments to future cash flows that reflect management's best estimate of the default risk related to these loans based on a combination of historical experience and management judgment.BB&T also maintains reserves for collective impairment that reflect an estimate of losses related to non-impaired commercial loans as of the balance sheet date. Embedded loss estimates for BB&T's commercial loan portfolio are based on estimated migration rates, which are based on historical experience, and current risk mix as indicated by the risk grading or scoring process described above. Embedded loss estimates may be adjusted to reflect current economic conditions and current portfolio trends including credit quality, concentrations, aging of the portfolio, and significant policy and underwriting changes.BB&T Corporation 78 |
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| --- | --- |
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| Risk Rating | Description |
| Pass | Loans not considered to be problem credits |
| Special Mention | Loans that have a potential weakness deserving management's close attention |
| Substandard | Loans for which a well-defined weakness has been identified that may put full collection of contractual cash flows at risk |
| TFC/10-K/0000092230-19-000017 |
Changes in Accounting Principles and Effects of New Accounting Pronouncements | BB&T Corporation 82 |
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| | | |
| Standard/Adoption Date | Description | Effects on the Financial Statements |
| Standards Adopted During the Current Year | | |
| Revenue from Contracts with CustomersJan 1, 2018 | Requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. | BB&T adopted this guidance using the modified retrospective approach for in-scope contracts at the date of adoption. The impact was not material. |
| Net Periodic Pension Cost and Net Periodic Postretirement Benefit CostJan 1, 2018 | Requires that the service cost component of net benefit costs of pension and postretirement benefit plans be reported in the same line item as other compensation costs in the Consolidated Statements of Income. The other components of net benefit cost are required to be presented in a separate line item. | The service cost component is included in personnel expense and the other components of net benefit costs are included in other expense in the Consolidated Statements of Income. The prior periods were reclassified to conform to the current presentation. See Note 12. Benefit Plans. |
| Derivatives and HedgingJan 1, 2018 | Expands the risk management activities that qualify for hedge accounting, and simplifies certain hedge documentation and assessment requirements. Eliminates the concept of separately recording hedge ineffectiveness, and expands disclosure requirements. | BB&T early adopted this guidance using the modified retrospective approach. The impact was not material. New required disclosures have been included in Note 17. Derivative Financial Instruments. |
| Standards Not Yet Adopted | | |
| LeasesJan 1, 2019 | Requires lessees to recognize assets and liabilities related to certain operating leases on the balance sheet, requires additional disclosures by lessees, and contains targeted changes to accounting by lessors. | BB&T expects to establish ROU assets of approximately $850 million and lease liabilities of approximately $1.0 billion. The net impact to equity is expected to be a reduction of approximately $40 million, with no material impact to its Consolidated Statements of Income. BB&T will adopt on a prospective basis. |
| Credit LossesJan 1, 2020 | Replaces the incurred loss impairment methodology with an expected credit loss methodology and requires consideration of a broader range of information to determine credit loss estimates. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses. Purchased credit deteriorated loans will receive an allowance for expected credit losses. Any credit impairment on AFS debt securities for which the fair value is less than cost will be recorded through an allowance for expected credit losses. The standard also requires expanded disclosures related to credit losses and asset quality. | BB&T expects that the ACL could be materially higher; however, the magnitude of the increase, which is highly dependent on existing and forecasted economic conditions at the time of adoption, has not yet been quantified. Model development and fit-for-purpose testing is substantially complete for most portfolios, and significant progress has been made on testing designed to evaluate the sensitivity of the models to economic forecasts, length of the reasonable and supportable period and reversion to historical loss information. A phased approach to parallel testing is expected, with limited parallel testing in the first and second quarters of 2019, with plans for a more comprehensive parallel testing program in the second half of the year that will include consideration of new or modified internal controls. |
| TFC/10-K/0000092230-19-000017 |
NOTE 2. Securities | Certain securities issued by FNMA and FHLMC exceeded 10% of shareholders' equity at December 31, 2018. The FNMA investments had total amortized cost and fair value of $13.3 billion and $12.8 billion, respectively. The FHLMC investments had total amortized cost and fair value of $9.6 billion and $9.3 billion, respectively.The amortized cost and estimated fair value of the securities portfolio by contractual maturity are shown in the following table. The expected life of MBS may differ from contractual maturities because borrowers have the right to prepay the underlying mortgage loans. |
| | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | |
| December 31, 2018(Dollars in millions) | | Amortized Cost | | | | Gross Unrealized | | | | | | | | Fair Value | | |
| | | Gains | | | | Losses | | | |
| AFS securities: | | | | | | | | | | | | | | | | |
| U.S. Treasury | | $ | 3,503 | | | $ | 22 | | | $ | 84 | | | $ | 3,441 | |
| GSE | | 209 | | | | — | | | | 9 | | | | 200 | | |
| Agency MBS | | 20,927 | | | | 15 | | | | 787 | | | | 20,155 | | |
| States and political subdivisions | | 694 | | | | 25 | | | | 18 | | | | 701 | | |
| Non-agency MBS | | 321 | | | | 184 | | | | — | | | | 505 | | |
| Other | | 35 | | | | 1 | | | | — | | | | 36 | | |
| Total AFS securities | | $ | 25,689 | | | $ | 247 | | | $ | 898 | | | $ | 25,038 | |
| HTM securities: | | | | | | | | | | | | | | | | |
| U.S. Treasury | | $ | 1,099 | | | $ | — | | | $ | 6 | | | $ | 1,093 | |
| GSE | | 2,199 | | | | 4 | | | | 43 | | | | 2,160 | | |
| Agency MBS | | 17,248 | | | | 27 | | | | 487 | | | | 16,788 | | |
| States and political subdivisions | | 5 | | | | — | | | | — | | | | 5 | | |
| Other | | 1 | | | | — | | | | — | | | | 1 | | |
| Total HTM securities | | $ | 20,552 | | | $ | 31 | | | $ | 536 | | | $ | 20,047 | |
| | | | | | | | | | | | | | | | | |
| December 31, 2017(Dollars in millions) | | Amortized Cost | | | | Gross Unrealized | | | | | | | | Fair Value | | |
| | | Gains | | | | Losses | | | |
| AFS securities: | | | | | | | | | | | | | | | | |
| U.S. Treasury | | $ | 2,368 | | | $ | — | | | $ | 77 | | | $ | 2,291 | |
| GSE | | 187 | | | | — | | | | 8 | | | | 179 | | |
| Agency MBS | | 20,683 | | | | 8 | | | | 590 | | | | 20,101 | | |
| States and political subdivisions | | 1,379 | | | | 37 | | | | 24 | | | | 1,392 | | |
| Non-agency MBS | | 384 | | | | 192 | | | | — | | | | 576 | | |
| Other | | 8 | | | | — | | | | — | | | | 8 | | |
| Total AFS securities | | $ | 25,009 | | | $ | 237 | | | $ | 699 | | | $ | 24,547 | |
| HTM securities: | | | | | | | | | | | | | | | | |
| U.S. Treasury | | $ | 1,098 | | | $ | 8 | | | $ | — | | | $ | 1,106 | |
| GSE | | 2,198 | | | | 11 | | | | 22 | | | | 2,187 | | |
| Agency MBS | | 19,660 | | | | 33 | | | | 222 | | | | 19,471 | | |
| States and political subdivisions | | 28 | | | | — | | | | — | | | | 28 | | |
| Other | | 43 | | | | 2 | | | | — | | | | 45 | | |
| Total HTM securities | | $ | 23,027 | | | $ | 54 | | | $ | 244 | | | $ | 22,837 | |
| TFC/10-K/0000092230-19-000017 |
NOTE 2. Securities | The following tables present the fair values and gross unrealized losses of investments based on the length of time that individual securities have been in a continuous unrealized loss position: |
| | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | |
| | | AFS | | | | | | | | HTM | | | | | | |
| December 31, 2018(Dollars in millions) | | Amortized Cost | | | | Fair Value | | | | Amortized Cost | | | | Fair Value | | |
| Due in one year or less | | $ | 425 | | | $ | 424 | | | $ | 1 | | | $ | 1 | |
| Due after one year through five years | | 2,660 | | | | 2,587 | | | | 3,290 | | | | 3,244 | | |
| Due after five years through ten years | | 1,038 | | | | 1,043 | | | | 627 | | | | 611 | | |
| Due after ten years | | 21,566 | | | | 20,984 | | | | 16,634 | | | | 16,191 | | |
| Total debt securities | | $ | 25,689 | | | $ | 25,038 | | | $ | 20,552 | | | $ | 20,047 | |
| TFC/10-K/0000092230-19-000017 |
NOTE 2. Securities | Substantially all of the unrealized losses on the securities portfolio were the result of changes in market interest rates compared to the date the securities were acquired rather than the credit quality of the issuers or underlying loans.BB&T Corporation 84 |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Less than 12 months | | | | | | | | 12 months or more | | | | | | | | Total | | | | | | |
| December 31, 2018(Dollars in millions) | | Fair Value | | | | Unrealized Losses | | | | Fair Value | | | | Unrealized Losses | | | | Fair Value | | | | Unrealized Losses | | |
| AFS securities: | | | | | | | | | | | | | | | | | | | | | | | | |
| U.S. Treasury | | $ | 111 | | | $ | — | | | $ | 2,121 | | | $ | 84 | | | $ | 2,232 | | | $ | 84 | |
| GSE | | 3 | | | | — | | | | 176 | | | | 9 | | | | 179 | | | | 9 | | |
| Agency MBS | | 322 | | | | 2 | | | | 18,478 | | | | 785 | | | | 18,800 | | | | 787 | | |
| States and political subdivisions | | 100 | | | | 1 | | | | 288 | | | | 17 | | | | 388 | | | | 18 | | |
| Total | | $ | 536 | | | $ | 3 | | | $ | 21,063 | | | $ | 895 | | | $ | 21,599 | | | $ | 898 | |
| HTM securities: | | | | | | | | | | | | | | | | | | | | | | | | |
| U.S. Treasury | | $ | 698 | | | $ | 3 | | | $ | 395 | | | $ | 3 | | | $ | 1,093 | | | $ | 6 | |
| GSE | | — | | | | — | | | | 1,749 | | | | 43 | | | | 1,749 | | | | 43 | | |
| Agency MBS | | 264 | | | | 3 | | | | 14,976 | | | | 484 | | | | 15,240 | | | | 487 | | |
| Total | | $ | 962 | | | $ | 6 | | | $ | 17,120 | | | $ | 530 | | | $ | 18,082 | | | $ | 536 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Less than 12 months | | | | | | | | 12 months or more | | | | | | | | Total | | | | | | |
| December 31, 2017(Dollars in millions) | | Fair Value | | | | Unrealized Losses | | | | Fair Value | | | | Unrealized Losses | | | | Fair Value | | | | Unrealized Losses | | |
| AFS securities: | | | | | | | | | | | | | | | | | | | | | | | | |
| U.S. Treasury | | $ | 634 | | | $ | 4 | | | $ | 1,655 | | | $ | 73 | | | $ | 2,289 | | | $ | 77 | |
| GSE | | 9 | | | | — | | | | 170 | | | | 8 | | | | 179 | | | | 8 | | |
| Agency MBS | | 5,077 | | | | 64 | | | | 13,920 | | | | 526 | | | | 18,997 | | | | 590 | | |
| States and political subdivisions | | 201 | | | | 1 | | | | 355 | | | | 23 | | | | 556 | | | | 24 | | |
| Total | | $ | 5,921 | | | $ | 69 | | | $ | 16,100 | | | $ | 630 | | | $ | 22,021 | | | $ | 699 | |
| HTM securities: | | | | | | | | | | | | | | | | | | | | | | | | |
| GSE | | $ | 1,470 | | | $ | 12 | | | $ | 290 | | | $ | 10 | | | $ | 1,760 | | | $ | 22 | |
| Agency MBS | | 10,880 | | | | 77 | | | | 4,631 | | | | 145 | | | | 15,511 | | | | 222 | | |
| Total | | $ | 12,350 | | | $ | 89 | | | $ | 4,921 | | | $ | 155 | | | $ | 17,271 | | | $ | 244 | |
| TFC/10-K/0000092230-19-000017 |
NOTE 3. Loans and ACL | The following table presents the carrying amount of loans by risk rating. PCI loans are excluded because their related ALLL is determined by loan pool performance and revolving credit loans are excluded as the loans are charged-off rather than reclassifying to nonperforming: |
| | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | |
| | | Accruing | | | | | | | | | | | | | | | | | | |
| December 31, 2018(Dollars in millions) | | Current | | | | 30-89 Days Past Due | | | | 90 Days Or More Past Due | | | | Nonperforming | | | | Total | | |
| Commercial: | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 61,701 | | | $ | 34 | | | $ | — | | | $ | 200 | | | $ | 61,935 | |
| CRE | | 20,990 | | | | 5 | | | | — | | | | 65 | | | | 21,060 | | |
| Lease financing | | 2,014 | | | | 1 | | | | — | | | | 3 | | | | 2,018 | | |
| Retail: | | | | | | | | | | | | | | | | | | | | |
| Residential mortgage | | 30,413 | | | | 456 | | | | 405 | | | | 119 | | | | 31,393 | | |
| Direct | | 11,463 | | | | 61 | | | | 7 | | | | 53 | | | | 11,584 | | |
| Indirect | | 16,901 | | | | 436 | | | | 6 | | | | 82 | | | | 17,425 | | |
| Revolving credit | | 3,090 | | | | 28 | | | | 14 | | | | — | | | | 3,132 | | |
| PCI | | 413 | | | | 23 | | | | 30 | | | | — | | | | 466 | | |
| Total | | $ | 146,985 | | | $ | 1,044 | | | $ | 462 | | | $ | 522 | | | $ | 149,013 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | Accruing | | | | | | | | | | | | | | | | | | |
| December 31, 2017(Dollars in millions) | | Current | | | | 30-89 Days Past Due | | | | 90 Days Or More Past Due | | | | Nonperforming | | | | Total | | |
| Commercial: | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 58,852 | | | $ | 41 | | | $ | 1 | | | $ | 259 | | | $ | 59,153 | |
| CRE | | 21,209 | | | | 8 | | | | 1 | | | | 45 | | | | 21,263 | | |
| Lease financing | | 1,906 | | | | 4 | | | | — | | | | 1 | | | | 1,911 | | |
| Retail: | | | | | | | | | | | | | | | | | | | | |
| Residential mortgage | | 27,659 | | | | 472 | | | | 465 | | | | 129 | | | | 28,725 | | |
| Direct | | 11,756 | | | | 65 | | | | 6 | | | | 64 | | | | 11,891 | | |
| Indirect | | 16,745 | | | | 412 | | | | 6 | | | | 72 | | | | 17,235 | | |
| Revolving credit | | 2,837 | | | | 23 | | | | 12 | | | | — | | | | 2,872 | | |
| PCI | | 567 | | | | 27 | | | | 57 | | | | — | | | | 651 | | |
| Total | | $ | 141,531 | | | $ | 1,052 | | | $ | 548 | | | $ | 570 | | | $ | 143,701 | |
| TFC/10-K/0000092230-19-000017 |
NOTE 3. Loans and ACL | The following tables present activity in the ACL: |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2018 | | | | | | | | | | | | 2017 | | | | | | | | | | |
| December 31,(Dollars in millions) | | Commercial & Industrial | | | | CRE | | | | Lease Financing | | | | Commercial & Industrial | | | | CRE | | | | Lease Financing | | |
| Commercial: | | | | | | | | | | | | | | | | | | | | | | | | |
| Pass | | $ | 60,655 | | | $ | 20,712 | | | $ | 2,012 | | | $ | 57,700 | | | $ | 20,862 | | | $ | 1,881 | |
| Special mention | | 216 | | | | 61 | | | | — | | | | 268 | | | | 48 | | | | 6 | | |
| Substandard-performing | | 864 | | | | 222 | | | | 3 | | | | 926 | | | | 308 | | | | 23 | | |
| Nonperforming | | 200 | | | | 65 | | | | 3 | | | | 259 | | | | 45 | | | | 1 | | |
| Total | | $ | 61,935 | | | $ | 21,060 | | | $ | 2,018 | | | $ | 59,153 | | | $ | 21,263 | | | $ | 1,911 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Residential Mortgage | | | | Direct | | | | Indirect | | | | Residential Mortgage | | | | Direct | | | | Indirect | | |
| Retail: | | | | | | | | | | | | | | | | | | | | | | | | |
| Performing | | $ | 31,274 | | | $ | 11,531 | | | $ | 17,343 | | | $ | 28,596 | | | $ | 11,827 | | | $ | 17,163 | |
| Nonperforming | | 119 | | | | 53 | | | | 82 | | | | 129 | | | | 64 | | | | 72 | | |
| Total | | $ | 31,393 | | | $ | 11,584 | | | $ | 17,425 | | | $ | 28,725 | | | $ | 11,891 | | | $ | 17,235 | |
| TFC/10-K/0000092230-19-000017 |
NOTE 3. Loans and ACL | BB&T Corporation 86 |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| (Dollars in millions) | | Balance at Jan 1, 2016 | | | | Charge-Offs | | | | Recoveries | | | | Provision (Benefit) | | | | Other | | | | Balance at Dec 31, 2016 | | |
| Commercial: | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 488 | | | $ | (143 | ) | | $ | 44 | | | $ | 141 | | | $ | — | | | $ | 530 | |
| CRE | | 175 | | | | (9 | | ) | | 19 | | | | (40 | | ) | | — | | | | 145 | | |
| Lease financing | | 5 | | | | (6 | | ) | | 2 | | | | 6 | | | | — | | | | 7 | | |
| Retail: | | | | | | | | | | | | | | | | | | | | | | | | |
| Residential mortgage | | 217 | | | | (40 | | ) | | 3 | | | | 47 | | | | — | | | | 227 | | |
| Direct | | 105 | | | | (53 | | ) | | 26 | | | | 25 | | | | — | | | | 103 | | |
| Indirect | | 305 | | | | (366 | | ) | | 55 | | | | 333 | | | | — | | | | 327 | | |
| Revolving credit | | 104 | | | | (69 | | ) | | 20 | | | | 51 | | | | — | | | | 106 | | |
| PCI | | 61 | | | | (15 | | ) | | — | | | | (2 | | ) | | — | | | | 44 | | |
| ALLL | | 1,460 | | | | (701 | | ) | | 169 | | | | 561 | | | | — | | | | 1,489 | | |
| RUFC | | 90 | | | | — | | | | — | | | | 11 | | | | 9 | | | | 110 | | |
| ACL | | $ | 1,550 | | | $ | (701 | ) | | $ | 169 | | | $ | 572 | | | $ | 9 | | | $ | 1,599 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| (Dollars in millions) | | Balance at Jan 1, 2017 | | | | Charge-Offs | | | | Recoveries | | | | Provision (Benefit) | | | | Other | | | | Balance at Dec 31, 2017 | | |
| Commercial: | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 530 | | | $ | (95 | ) | | $ | 36 | | | $ | 51 | | | $ | — | | | $ | 522 | |
| CRE | | 145 | | | | (10 | | ) | | 16 | | | | 9 | | | | — | | | | 160 | | |
| Lease financing | | 7 | | | | (5 | | ) | | 2 | | | | 5 | | | | — | | | | 9 | | |
| Retail: | | | | | | | | | | | | | | | | | | | | | | | | |
| Residential mortgage | | 227 | | | | (47 | | ) | | 2 | | | | 27 | | | | — | | | | 209 | | |
| Direct | | 103 | | | | (61 | | ) | | 25 | | | | 39 | | | | — | | | | 106 | | |
| Indirect | | 327 | | | | (402 | | ) | | 60 | | | | 363 | | | | — | | | | 348 | | |
| Revolving credit | | 106 | | | | (76 | | ) | | 19 | | | | 59 | | | | — | | | | 108 | | |
| PCI | | 44 | | | | (1 | | ) | | — | | | | (15 | | ) | | — | | | | 28 | | |
| ALLL | | 1,489 | | | | (697 | | ) | | 160 | | | | 538 | | | | — | | | | 1,490 | | |
| RUFC | | 110 | | | | — | | | | — | | | | 9 | | | | — | | | | 119 | | |
| ACL | | $ | 1,599 | | | $ | (697 | ) | | $ | 160 | | | $ | 547 | | | $ | — | | | $ | 1,609 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| (Dollars in millions) | | Balance at Jan 1, 2018 | | | | Charge-Offs | | | | Recoveries | | | | Provision (Benefit) | | | | Other | | | | Balance at Dec 31, 2018 | | |
| Commercial: | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 522 | | | $ | (92 | ) | | $ | 39 | | | $ | 77 | | | $ | — | | | $ | 546 | |
| CRE | | 160 | | | | (13 | | ) | | 8 | | | | 35 | | | | — | | | | 190 | | |
| Lease financing | | 9 | | | | (4 | | ) | | 1 | | | | 5 | | | | — | | | | 11 | | |
| Retail: | | | | | | | | | | | | | | | | | | | | | | | | |
| Residential mortgage | | 209 | | | | (21 | | ) | | 2 | | | | 42 | | | | — | | | | 232 | | |
| Direct | | 106 | | | | (71 | | ) | | 23 | | | | 39 | | | | — | | | | 97 | | |
| Indirect | | 348 | | | | (391 | | ) | | 62 | | | | 337 | | | | — | | | | 356 | | |
| Revolving credit | | 108 | | | | (84 | | ) | | 19 | | | | 74 | | | | — | | | | 117 | | |
| PCI | | 28 | | | | (2 | | ) | | — | | | | (17 | | ) | | — | | | | 9 | | |
| ALLL | | 1,490 | | | | (678 | | ) | | 154 | | | | 592 | | | | — | | | | 1,558 | | |
| RUFC | | 119 | | | | — | | | | — | | | | (26 | | ) | | — | | | | 93 | | |
| ACL | | $ | 1,609 | | | $ | (678 | ) | | $ | 154 | | | $ | 566 | | | $ | — | | | $ | 1,651 | |
| TFC/10-K/0000092230-19-000017 |
NOTE 3. Loans and ACL | The following tables set forth certain information regarding impaired loans, excluding PCI and LHFS, that were individually evaluated for impairment: |
| | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | |
| | | 2018 | | | | | | | | 2017 | | | | | | |
| December 31,(Dollars in millions) | | Recorded Investment | | | | Related ALLL | | | | Recorded Investment | | | | Related ALLL | | |
| Commercial: | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 61,629 | | | $ | 521 | | | $ | 58,804 | | | $ | 494 | |
| CRE | | 20,960 | | | | 181 | | | | 21,173 | | | | 154 | | |
| Lease financing | | 2,015 | | | | 11 | | | | 1,910 | | | | 9 | | |
| Retail: | | | | | | | | | | | | | | | | |
| Residential mortgage | | 30,539 | | | | 164 | | | | 27,914 | | | | 143 | | |
| Direct | | 11,517 | | | | 92 | | | | 11,815 | | | | 98 | | |
| Indirect | | 17,099 | | | | 299 | | | | 16,935 | | | | 296 | | |
| Revolving credit | | 3,104 | | | | 106 | | | | 2,842 | | | | 97 | | |
| PCI | | 466 | | | | 9 | | | | 651 | | | | 28 | | |
| Total | | $ | 147,329 | | | $ | 1,383 | | | $ | 142,044 | | | $ | 1,319 | |
| TFC/10-K/0000092230-19-000017 |
NOTE 3. Loans and ACL | The following table presents a summary of TDRs, all of which are considered impaired: |
| | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | UPB | | | | Recorded Investment | | | | | | | | Related ALLL | | | | Average Recorded Investment | | | | Interest Income Recognized | | |
| As of / For The Year Ended December 31, 2018(Dollars in millions) | | Without an ALLL | | | | With an ALLL | | | | | |
| Commercial: | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | $ | 318 | | | $ | 95 | | | $ | 211 | | | $ | 25 | | | $ | 343 | | | $ | 6 | |
| CRE | 102 | | | | 29 | | | | 71 | | | | 9 | | | | 97 | | | | 2 | | |
| Lease financing | 3 | | | | — | | | | 3 | | | | — | | | | 6 | | | | — | | |
| Retail: | | | | | | | | | | | | | | | | | | | | | | | |
| Residential mortgage | 904 | | | | 122 | | | | 732 | | | | 68 | | | | 841 | | | | 34 | | |
| Direct | 86 | | | | 26 | | | | 41 | | | | 5 | | | | 72 | | | | 4 | | |
| Indirect | 335 | | | | 6 | | | | 320 | | | | 57 | | | | 306 | | | | 46 | | |
| Revolving credit | 28 | | | | — | | | | 28 | | | | 11 | | | | 29 | | | | 1 | | |
| Total | $ | 1,776 | | | $ | 278 | | | $ | 1,406 | | | $ | 175 | | | $ | 1,694 | | | $ | 93 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | UPB | | | | Recorded Investment | | | | | | | | Related ALLL | | | | Average Recorded Investment | | | | Interest Income Recognized | | |
| As of / For The Year Ended December 31, 2017(Dollars in millions) | | Without an ALLL | | | | With an ALLL | | | | | |
| Commercial: | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | $ | 381 | | | $ | 136 | | | $ | 213 | | | $ | 28 | | | $ | 424 | | | $ | 6 | |
| CRE | 91 | | | | 26 | | | | 64 | | | | 6 | | | | 109 | | | | 3 | | |
| Lease financing | 1 | | | | — | | | | 1 | | | | — | | | | 3 | | | | — | | |
| Retail: | | | | | | | | | | | | | | | | | | | | | | | |
| Residential mortgage | 860 | | | | 132 | | | | 679 | | | | 67 | | | | 895 | | | | 37 | | |
| Direct | 99 | | | | 22 | | | | 54 | | | | 8 | | | | 78 | | | | 4 | | |
| Indirect | 308 | | | | 6 | | | | 294 | | | | 52 | | | | 269 | | | | 41 | | |
| Revolving credit | 30 | | | | — | | | | 30 | | | | 10 | | | | 29 | | | | 1 | | |
| Total | $ | 1,770 | | | $ | 322 | | | $ | 1,335 | | | $ | 171 | | | $ | 1,807 | | | $ | 92 | |
| TFC/10-K/0000092230-19-000017 |
NOTE 3. Loans and ACL | The primary reason loan modifications were classified as TDRs is summarized below. Balances represent the recorded investment at the end of the quarter in which the modification was made. Rate modifications consist of TDRs made with below market interest rates, including those that also have modifications of loan structures. |
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| --- | --- | --- | --- | --- | --- | --- | --- | --- |
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| December 31,(Dollars in millions) | | 2018 | | | | 2017 | | |
| Performing TDRs: | | | | | | | | |
| Commercial: | | | | | | | | |
| Commercial and industrial | | $ | 65 | | | $ | 50 | |
| CRE | | 10 | | | | 16 | | |
| Retail: | | | | | | | | |
| Residential mortgage | | 656 | | | | 605 | | |
| Direct | | 55 | | | | 62 | | |
| Indirect | | 305 | | | | 281 | | |
| Revolving credit | | 28 | | | | 29 | | |
| Total performing TDRs | | 1,119 | | | | 1,043 | | |
| Nonperforming TDRs (also included in NPL disclosures) | | 176 | | | | 189 | | |
| Total TDRs | | $ | 1,295 | | | $ | 1,232 | |
| ALLL attributable to TDRs | | $ | 146 | | | $ | 142 | |
| TFC/10-K/0000092230-19-000017 |
NOTE 3. Loans and ACL | Charge-offs and forgiveness of principal and interest for TDRs were immaterial for all periods presented.The pre-default balance for modifications that had been classified as TDRs during the previous 12 months that experienced a payment default was $76 million, $104 million and $73 million for the years ended December 31, 2018, 2017 and 2016, respectively. Payment default is defined as movement of the TDR to nonperforming status, foreclosure or charge-off, whichever occurs first. Unearned income, discounts and net deferred loan fees and costs were immaterial for all periods presented. Residential mortgage loans in the process of foreclosure were $253 million at December 31, 2018 and $288 million at December 31, 2017.BB&T Corporation 88 |
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| | 2018 | | | | | | | | | | | | 2017 | | | | | | | | | | | | 2016 | | | | | | | | | | |
| Year Ended December 31,(Dollars in millions) | Type of Modification | | | | | | | | ALLL Impact | | | | Type of Modification | | | | | | | | ALLL Impact | | | | Type of Modification | | | | | | | | ALLL Impact | | |
| Rate | | | | Structure | | | | | Rate | | | | Structure | | | | | Rate | | | | Structure | | | |
| Newly designated TDRs: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | $ | 74 | | | $ | 62 | | | $ | — | | | $ | 79 | | | $ | 101 | | | $ | 3 | | | $ | 105 | | | $ | 96 | | | $ | 3 | |
| CRE | 32 | | | | 3 | | | | — | | | | 14 | | | | 10 | | | | 1 | | | | 12 | | | | 16 | | | | — | | |
| Retail: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Residential mortgage | 250 | | | | 30 | | | | 16 | | | | 357 | | | | 46 | | | | 25 | | | | 431 | | | | 53 | | | | 28 | | |
| Direct | 8 | | | | 2 | | | | — | | | | 10 | | | | 3 | | | | — | | | | 14 | | | | 1 | | | | — | | |
| Indirect | 195 | | | | 4 | | | | 22 | | | | 192 | | | | 6 | | | | 21 | | | | 169 | | | | 7 | | | | 21 | | |
| Revolving credit | 18 | | | | — | | | | 4 | | | | 19 | | | | — | | | | 4 | | | | 17 | | | | — | | | | 4 | | |
| Re-modification of previously designated TDRs | 120 | | | | 15 | | | | — | | | | 176 | | | | 44 | | | | — | | | | 79 | | | | 46 | | | | — | | |
| TFC/10-K/0000092230-19-000017 |
NOTE 4. Premises and Equipment | The following table excludes assets related to the lease financing business: |
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
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| December 31,(Dollars in millions) | Estimated Useful Life | | | | | | | | | | |
| | 2018 | | | | 2017 | | |
| Land and land improvements | | | | | $ | 567 | | | $ | 583 | |
| Buildings and building improvements | 40 years | | | | 1,804 | | | | 1,660 | | |
| Furniture and equipment | 3 | - | 15 | | 1,136 | | | | 1,146 | | |
| Leasehold improvements | | | | | 719 | | | | 733 | | |
| Construction in progress | | | | | 21 | | | | 52 | | |
| Capitalized leases on premises and equipment | | | | | 54 | | | | 58 | | |
| Total | | | | | 4,301 | | | | 4,232 | | |
| Accumulated depreciation and amortization | | | | | (2,183 | | ) | | (2,177 | | ) |
| Net premises and equipment | | | | | $ | 2,118 | | | $ | 2,055 | |
| TFC/10-K/0000092230-19-000017 |
NOTE 4. Premises and Equipment | The following table excludes executory costs: |
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| Year Ended December 31,(Dollars in millions) | | | | | | | | | | | | |
| | 2018 | | | | 2017 | | | | 2016 | | |
| Rent expense applicable to operating leases | | $ | 235 | | | $ | 249 | | | $ | 250 | |
| Rental income from owned properties and subleases | | 20 | | | | 12 | | | | 8 | | |
| TFC/10-K/0000092230-19-000017 |
NOTE 5. Goodwill and Other Intangible Assets | The following table, which excludes fully amortized intangibles, presents information for identifiable intangible assets: |
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| Year Ended December 31,(Dollars in millions) | 2018 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| CB-Retail | | | | CB-Commercial | | | | FS&CF | | | | IH | | | | Total | | | | 2017 | | | | 2016 | | |
| Goodwill, beginning balance | $ | 3,724 | | | $ | 3,862 | | | $ | 259 | | | $ | 1,773 | | | $ | 9,618 | | | $ | 9,638 | | | $ | 8,548 | |
| Acquisitions | — | | | | — | | | | — | | | | 201 | | | | 201 | | | | — | | | | 1,073 | | |
| Adjustments | — | | | | — | | | | (1 | | ) | | — | | | | (1 | | ) | | (20 | | ) | | 17 | | |
| Goodwill, ending balance | $ | 3,724 | | | $ | 3,862 | | | $ | 258 | | | $ | 1,974 | | | $ | 9,818 | | | $ | 9,618 | | | $ | 9,638 | |
| TFC/10-K/0000092230-19-000017 |
NOTE 5. Goodwill and Other Intangible Assets | The estimated amortization expense for the next five years is presented as follows: |
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| | | | 2018 | | | | | | | | | | | | 2017 | | | | | | | | | | |
| December 31,(Dollars in millions) | Wtd. Avg. Remaining Life | | Gross Carrying Amount | | | | Accumulated Amortization | | | | Net Carrying Amount | | | | Gross Carrying Amount | | | | Accumulated Amortization | | | | Net Carrying Amount | | |
| CDI | 6.2 years | | $ | 605 | | | $ | (460 | ) | | $ | 145 | | | $ | 605 | | | $ | (409 | ) | | $ | 196 | |
| Other, primarily customer relationship intangibles | 11.8 | | 1,329 | | | | (716 | | ) | | 613 | | | | 1,211 | | | | (696 | | ) | | 515 | | |
| Total | | | $ | 1,934 | | | $ | (1,176 | ) | | $ | 758 | | | $ | 1,816 | | | $ | (1,105 | ) | | $ | 711 | |
| TFC/10-K/0000092230-19-000017 |
Residential Mortgage Banking Activities | During 2016, BB&T paid $83 million to settle certain FHA loan origination and quality control matters pursuant to an agreement with the Department of Justice. In addition, the Company separately received recoveries of $71 million, resulting in a net benefit of $73 million, which was included in other expense on the Consolidated Statements of Income. During 2016, BB&T released $31 million of mortgage repurchase reserves, which was primarily driven by lower anticipated loan repurchase requests. These adjustments were included in loan-related expense on the Consolidated Statements of Income. Payments made to date for recourse exposure on residential mortgage loans sold with recourse liability have been immaterial. |
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| December 31,(Dollars in millions) | | 2018 | | | | 2017 | | | | 2016 | | |
| UPB of residential mortgage loan servicing portfolio | | $ | 118,605 | | | $ | 118,424 | | | $ | 121,639 | |
| UPB of residential mortgage loans serviced for others, primarily agency conforming fixed rate | | 87,270 | | | | 89,124 | | | | 90,325 | | |
| Mortgage loans sold with recourse | | 419 | | | | 490 | | | | 578 | | |
| Maximum recourse exposure from mortgage loans sold with recourse liability | | 223 | | | | 251 | | | | 282 | | |
| Indemnification, recourse and repurchase reserves | | 24 | | | | 37 | | | | 40 | | |
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| As of / For the Year Ended December 31, (Dollars in millions) | | 2018 | | | | 2017 | | | | 2016 | | |
| UPB of residential mortgage loans sold from LHFS | | $ | 10,094 | | | $ | 12,423 | | | $ | 15,675 | |
| Pre-tax gains recognized on mortgage loans sold and held for sale | | 116 | | | | 153 | | | | 139 | | |
| Servicing fees recognized from mortgage loans serviced for others | | 256 | | | | 261 | | | | 268 | | |
| Approximate weighted average servicing fee on the outstanding balance of residential mortgage loans serviced for others | | 0.28 | | % | | 0.28 | | % | | 0.28 | | % |
| Weighted average interest rate on mortgage loans serviced for others | | 4.04 | | | | 4.00 | | | | 4.03 | | |
| TFC/10-K/0000092230-19-000017 |
Residential Mortgage Banking Activities | BB&T Corporation 90 |
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| Year Ended December 31,(Dollars in millions) | | 2018 | | | | 2017 | | | | 2016 | | |
| Residential MSRs, carrying value, January 1 | | $ | 914 | | | $ | 915 | | | 880 | | |
| Additions | | 116 | | | | 123 | | | | 146 | | |
| Change in fair value due to changes in valuation inputs or assumptions: | | | | | | | | | | | | |
| Prepayment speeds | | (12 | | ) | | (42 | | ) | | 13 | | |
| OAS | | 57 | | | | 46 | | | | 10 | | |
| Servicing costs | | 22 | | | | 9 | | | | 2 | | |
| Realization of expected net servicing cash flows, passage of time and other | | (140 | | ) | | (137 | | ) | | (136 | | ) |
| Residential MSRs, carrying value, December 31 | | $ | 957 | | | $ | 914 | | | $ | 915 | |
| Gains (losses) on derivative financial instruments used to mitigate the income statement effect of changes in residential MSR fair value | | $ | (63 | ) | | $ | — | | | 32 | | |
| TFC/10-K/0000092230-19-000017 |