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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 one 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. |
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| | | 2018 | | | | | | | | | | 2017 | | | | | | | | |
| December 31,(Dollars in millions) | | Range | | | | | | Weighted Average | | | | Range | | | | | | Weighted Average | | |
| | Min | | | Max | | | | Min | | | Max | | |
| Prepayment speed | | 9.1 | % | | 10.5 | % | | 9.9 | | % | | 7.1 | % | | 10.1 | % | | 9.1 | | % |
| Effect on fair value of a 10% increase | | | | | | | | $ | (34 | ) | | | | | | | | $ | (31 | ) |
| Effect on fair value of a 20% increase | | | | | | | | (66 | | ) | | | | | | | | (60 | | ) |
| OAS | | 6.6 | % | | 8.3 | % | | 7.0 | | % | | 8.4 | % | | 8.9 | % | | 8.5 | | % |
| Effect on fair value of a 10% increase | | | | | | | | $ | (24 | ) | | | | | | | | $ | (28 | ) |
| Effect on fair value of a 20% increase | | | | | | | | (47 | | ) | | | | | | | | (54 | | ) |
| Composition of loans serviced for others: | | | | | | | | | | | | | | | | | | | | |
| Fixed-rate residential mortgage loans | | | | | | | | 99.2 | | % | | | | | | | | 99.1 | | % |
| Adjustable-rate residential mortgage loans | | | | | | | | 0.8 | | | | | | | | | | 0.9 | | |
| Total | | | | | | | | 100.0 | | % | | | | | | | | 100.0 | | % |
| Weighted average life | | | | | | | | 6.1 years | | | | | | | | | | 6.4 years | | |
| TFC/10-K/0000092230-19-000017 |
NOTE 8. Long-Term Debt | (1)FHLB advances had a weighted average maturity of 4.0 years at December 31, 2018.The effective rates above reflect the impact of fair value hedges and debt 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.During 2017, Branch Bank 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. |
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| | | 2018 | | | | | | | | | | | | | | | | | 2017 | | |
| December 31,(Dollars in millions) | | | | | | Stated Rate | | | | | | Effective Rate | | | Carrying Amount | | | | Carrying Amount | | |
| | Maturity | | | | Min | | | Max | | | | |
| BB&T Corporation: | | | | | | | | | | | | | | | | | | | | | |
| Fixed rate senior notes | | 2019 | to | 2025 | | 2.05 | % | | 6.85 | % | | 3.50 | % | | $ | 10,408 | | | $ | 8,562 | |
| Floating rate senior notes | | 2019 | | 2022 | | 2.76 | | | 3.36 | | | 3.23 | | | 2,398 | | | | 2,547 | | |
| Fixed rate subordinated notes | | 2019 | | 2022 | | 3.95 | | | 5.25 | | | 2.47 | | | 903 | | | | 933 | | |
| Branch Bank: | | | | | | | | | | | | | | | | | | | | | |
| Fixed rate senior notes | | 2019 | | 2022 | | 1.45 | | | 2.85 | | | 3.14 | | | 4,895 | | | | 5,653 | | |
| Floating rate senior notes | | 2019 | | 2020 | | 2.89 | | | 3.07 | | | 3.01 | | | 1,149 | | | | 1,149 | | |
| Fixed rate subordinated notes | | 2025 | | 2026 | | 3.63 | | | 3.80 | | | 3.90 | | | 2,075 | | | | 2,119 | | |
| FHLB advances (1) | | 2019 | | 2034 | | — | | | 5.50 | | | 2.79 | | | 1,749 | | | | 2,480 | | |
| Other long-term debt | | | | | | | | | | | | | | | 132 | | | | 205 | | |
| Total long-term debt | | | | | | | | | | | | | | | $ | 23,709 | | | $ | 23,648 | |
| TFC/10-K/0000092230-19-000017 |
Preferred Stock | BB&T Corporation 92Dividends 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. |
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| Preferred Stock Issue(Dollars in millions) | | Issuance Date | | Earliest Redemption Date | | Liquidation Amount | | | | Carrying Amount | | | | Dividend Rate | |
| 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 | |
| Total | | | | | | $ | 3,140 | | | $ | 3,053 | | | | |
| TFC/10-K/0000092230-19-000017 |
Equity-Based Compensation Plans | The fair value of RSUs and PSUs 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. Substantially all awards are granted in February of each year. Grants to non-executive employees primarily consist of RSUs. |
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| December 31, 2018 | | | |
| Shares available for future grants (in thousands) | | 16,366 | |
| Vesting period, minimum | | 1.0 year | |
| Vesting period, maximum | | 5.0 years | |
| TFC/10-K/0000092230-19-000017 |
Equity-Based Compensation Plans | The following table presents the activity related to awards of RSUs, PSUs and restricted shares: |
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| As of / For the Year Ended December 31,(Dollars in millions) | | 2018 | | | | 2017 | | | | 2016 | | |
| Equity-based compensation expense | | $ | 141 | | | $ | 132 | | | $ | 115 | |
| Income tax benefit from equity-based compensation expense | | 34 | | | | 34 | | | | 43 | | |
| Intrinsic value of options exercised, and RSUs and PSUs that vested during the year | | 260 | | | | 261 | | | | 159 | | |
| Grant date fair value of equity-based awards that vested during the year | | 139 | | | | 116 | | | | 98 | | |
| Unrecognized compensation cost related to equity-based awards | | 135 | | | | 132 | | | | 109 | | |
| Weighted-average life over which compensation cost is expected to be recognized | | 2.4 years | | | | 2.4 years | | | | 2.3 years | | |
| TFC/10-K/0000092230-19-000017 |
NOTE 10. AOCI | BB&T Corporation 94 |
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| (Dollars in millions) | Pension and OPEB Costs | | | | Cash Flow Hedges | | | | AFS Securities | | | | Other, net | | | | Total | | |
| AOCI balance, January 1, 2016 | $ | (723 | ) | | $ | (83 | ) | | $ | (34 | ) | | $ | (188 | ) | | $ | (1,028 | ) |
| OCI before reclassifications, net of tax | (91 | | ) | | (16 | | ) | | (201 | | ) | | 149 | | | | (159 | | ) |
| Amounts reclassified from AOCI: | | | | | | | | | | | | | | | | | | | |
| Before tax | 80 | | | | 11 | | | | (39 | | ) | | 34 | | | | 86 | | |
| Tax effect | 30 | | | | 4 | | | | (15 | | ) | | 12 | | | | 31 | | |
| Amounts reclassified, net of tax | 50 | | | | 7 | | | | (24 | | ) | | 22 | | | | 55 | | |
| Total OCI, net of tax | (41 | | ) | | (9 | | ) | | (225 | | ) | | 171 | | | | (104 | | ) |
| AOCI balance, December 31, 2016 | (764 | | ) | | (92 | | ) | | (259 | | ) | | (17 | | ) | | (1,132 | | ) |
| OCI before reclassifications, net of tax | (129 | | ) | | 7 | | | | (23 | | ) | | 5 | | | | (140 | | ) |
| Amounts reclassified from AOCI: | | | | | | | | | | | | | | | | | | | |
| Before tax | 72 | | | | 15 | | | | (7 | | ) | | — | | | | 80 | | |
| Tax effect | 27 | | | | 4 | | | | (3 | | ) | | — | | | | 28 | | |
| Amounts reclassified, net of tax | 45 | | | | 11 | | | | (4 | | ) | | — | | | | 52 | | |
| Total OCI, net of tax | (84 | | ) | | 18 | | | | (27 | | ) | | 5 | | | | (88 | | ) |
| Reclassification of certain tax effects | (156 | | ) | | (18 | | ) | | (70 | | ) | | (3 | | ) | | (247 | | ) |
| AOCI balance, December 31, 2017 | (1,004 | | ) | | (92 | | ) | | (356 | | ) | | (15 | | ) | | (1,467 | | ) |
| OCI before reclassifications, net of tax | (217 | | ) | | 52 | | | | (159 | | ) | | (6 | | ) | | (330 | | ) |
| Amounts reclassified from AOCI: | | | | | | | | | | | | | | | | | | | |
| Before tax | 75 | | | | 12 | | | | 20 | | | | 1 | | | | 108 | | |
| Tax effect | 18 | | | | 3 | | | | 5 | | | | — | | | | 26 | | |
| Amounts reclassified, net of tax | 57 | | | | 9 | | | | 15 | | | | 1 | | | | 82 | | |
| Total OCI, net of tax | (160 | | ) | | 61 | | | | (144 | | ) | | (5 | | ) | | (248 | | ) |
| AOCI balance, December 31, 2018 | $ | (1,164 | ) | | $ | (31 | ) | | $ | (500 | ) | | $ | (20 | ) | | $ | (1,715 | ) |
| Primary income statement location of amounts reclassified from AOCI | Other expense | | | | Net interest income | | | | Net interest income | | | | Net interest income | | | | | | |
| TFC/10-K/0000092230-19-000017 |
NOTE 11. 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,(Dollars in millions) | | 2018 | | | | 2017 | | | | 2016 | | |
| Current expense: | | | | | | | | | | | | |
| Federal | | $ | 629 | | | $ | 539 | | | $ | 959 | |
| State | | 151 | | | | 80 | | | | 97 | | |
| Total current expense | | 780 | | | | 619 | | | | 1,056 | | |
| Deferred expense: | | | | | | | | | | | | |
| Federal | | 26 | | | | 253 | | | | (14 | | ) |
| State | | (3 | | ) | | 39 | | | | 16 | | |
| Total deferred expense | | 23 | | | | 292 | | | | 2 | | |
| Provision for income taxes | | $ | 803 | | | $ | 911 | | | $ | 1,058 | |
| TFC/10-K/0000092230-19-000017 |
NOTE 11. Income Taxes | The Tax Cuts and Jobs Act was signed into law on December 22, 2017. Amounts reflected in the above table as Federal tax reform impact for 2018 relate to the revaluation of deferred taxes on positions taken in the 2017 tax return filing, while amounts for 2017 relate to the net tax benefit recognized as a result of the revaluation of deferred taxes and investments in affordable housing projects. |
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| Year Ended December 31,(Dollars in millions) | | 2018 | | | | 2017 | | | | 2016 | | |
| Federal income taxes at statutory rate | | $ | 853 | | | $ | 1,164 | | | $ | 1,225 | |
| Increase (decrease) in provision for income taxes as a result of: | | | | | | | | | | | | |
| State income taxes, net of federal tax benefit | | 117 | | | | 77 | | | | 73 | | |
| Affordable housing projects proportional amortization | | 260 | | | | 236 | | | | 205 | | |
| Affordable housing projects tax credits and other tax benefits | | (317 | | ) | | (319 | | ) | | (279 | | ) |
| Tax-exempt income | | (90 | | ) | | (139 | | ) | | (151 | | ) |
| Federal tax reform impact | | (27 | | ) | | (43 | | ) | | — | | |
| Excess tax benefits for equity-based compensation | | (17 | | ) | | (52 | | ) | | — | | |
| Other, net | | 24 | | | | (13 | | ) | | (15 | | ) |
| Provision for income taxes | | $ | 803 | | | $ | 911 | | | $ | 1,058 | |
| Effective income tax rate | | 19.8 | | % | | 27.4 | | % | | 30.2 | | % |
| Statutory federal tax rate | | 21.0 | | % | | 35.0 | | % | | 35.0 | | % |
| TFC/10-K/0000092230-19-000017 |
NOTE 11. 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 amounts of unrecognized tax benefits and accrued tax-related interest penalties were immaterial at December 31, 2018, 2017 and 2016. Further, the amount of net interest and penalties related to unrecognized tax benefits was immaterial for all periods presented. The Company's federal income tax returns are no longer subject to examination by the IRS for taxable years prior to 2015. With limited exceptions, the Company is no longer subject to examination by state and local taxing authorities for taxable years prior to 2014. |
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| December 31,(Dollars in millions) | | 2018 | | | | 2017 | | |
| Deferred tax assets: | | | | | | | | |
| ALLL | | $ | 374 | | | $ | 359 | |
| Postretirement plans | | 360 | | | | 311 | | |
| Net unrealized loss on AFS securities | | 156 | | | | 112 | | |
| Equity-based compensation | | 82 | | | | 66 | | |
| Reserves and expense accruals | | 203 | | | | 114 | | |
| Partnerships | | 77 | | | | 70 | | |
| Other | | 158 | | | | 160 | | |
| Total deferred tax assets | | 1,410 | | | | 1,192 | | |
| Deferred tax liabilities: | | | | | | | | |
| Prepaid pension plan expense | | 453 | | | | 436 | | |
| MSRs | | 248 | | | | 234 | | |
| Lease financing | | 376 | | | | 366 | | |
| Loan fees and expenses | | 169 | | | | 114 | | |
| Identifiable intangible assets | | 183 | | | | 163 | | |
| Other | | 82 | | | | 31 | | |
| Total deferred tax liabilities | | 1,511 | | | | 1,344 | | |
| Net deferred tax asset (liability) | | $ | (101 | ) | | $ | (152 | ) |
| TFC/10-K/0000092230-19-000017 |
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 2019, the expected rate of return on plan assets is 7.0%. |
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| Year Ended December 31,(Dollars in millions) | Location | | 2018 | | | | 2017 | | | | 2016 | | |
| Net periodic pension cost: | | | | | | | | | | | | | |
| Service cost | Personnel expense | | $ | 238 | | | $ | 200 | | | $ | 186 | |
| Interest cost | Other expense | | 201 | | | | 192 | | | | 181 | | |
| Estimated return on plan assets | Other expense | | (448 | | ) | | (372 | | ) | | (326 | | ) |
| Net amortization and other | Other expense | | 81 | | | | 75 | | | | 80 | | |
| Net periodic benefit cost | | | 72 | | | | 95 | | | | 121 | | |
| Pre-tax amounts recognized in OCI: | | | | | | | | | | | | | |
| Prior service credit (cost) | | | — | | | | 30 | | | | — | | |
| Net actuarial loss (gain) | | | 289 | | | | 137 | | | | 138 | | |
| Net amortization | | | (81 | | ) | | (75 | | ) | | (80 | | ) |
| Net amount recognized in OCI | | | 208 | | | | 92 | | | | 58 | | |
| Total net periodic pension costs (income) recognized in total comprehensive income, pre-tax | | | $ | 280 | | | $ | 187 | | | $ | 179 | |
| Weighted average assumptions used to determine net periodic pension cost: | | | | | | | | | | | | | |
| Discount rate | | | 3.79 | | % | | 4.43 | | % | | 4.68 | | % |
| Expected long-term rate of return on plan assets | | | 7.00 | | % | | 7.00 | | % | | 7.00 | | % |
| Assumed long-term rate of annual compensation increases | | | 4.50 | | % | | 4.50 | | % | | 4.50 | | % |
| TFC/10-K/0000092230-19-000017 |
Defined Benefit Retirement Plans | Effective December 31, 2017, the qualified defined benefit plan was amended and a portion of the accrued benefits of participants in the nonqualified plan were shifted to the qualified plan. Affected associates continue to participate in the nonqualified plan for benefits earned in 2017 and later. In conjunction with this shift, a minimum benefit was established under the qualified plan. Activity in plan assets is presented in the following table: |
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| Year Ended December 31,(Dollars in millions) | Qualified Plan | | | | | | | | Nonqualified Plans | | | | | | |
| 2018 | | | | 2017 | | | | 2018 | | | | 2017 | | |
| Projected benefit obligation, January 1 | $ | 4,939 | | | $ | 3,939 | | | $ | 387 | | | $ | 426 | |
| Service cost | 222 | | | | 188 | | | | 16 | | | | 12 | | |
| Interest cost | 186 | | | | 173 | | | | 15 | | | | 19 | | |
| Actuarial (gain) loss | (537 | | ) | | 576 | | | | (19 | | ) | | 77 | | |
| Benefits paid | (113 | | ) | | (102 | | ) | | (13 | | ) | | (12 | | ) |
| Plan amendments | — | | | | 165 | | | | — | | | | (135 | | ) |
| Projected benefit obligation, December 31 | $ | 4,697 | | | $ | 4,939 | | | $ | 386 | | | $ | 387 | |
| Accumulated benefit obligation, December 31 | $ | 4,035 | | | $ | 4,198 | | | $ | 293 | | | $ | 288 | |
| Weighted average assumptions used to determine projected benefit obligations: | | | | | | | | | | | | | | | |
| Weighted average assumed discount rate | 4.43 | | % | | 3.79 | | % | | 4.43 | | % | | 3.79 | | % |
| Assumed rate of annual compensation increases | 4.50 | | % | | 4.50 | | % | | 4.50 | | % | | 4.50 | | % |
| TFC/10-K/0000092230-19-000017 |
Defined Benefit Retirement Plans | The following are the pre-tax amounts recognized in AOCI: |
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| Year Ended December 31,(Dollars in millions) | | Qualified Plan | | | | | | | | Nonqualified Plans | | | | | | |
| | 2018 | | | | 2017 | | | | 2018 | | | | 2017 | | |
| Fair value of plan assets, January 1 | | $ | 6,309 | | | $ | 5,044 | | | $ | — | | | $ | — | |
| Actual return on plan assets | | (397 | | ) | | 888 | | | | — | | | | — | | |
| Employer contributions | | 169 | | | | 479 | | | | 13 | | | | 13 | | |
| Benefits paid | | (113 | | ) | | (102 | | ) | | (13 | | ) | | (13 | | ) |
| Fair value of plan assets, December 31 | | $ | 5,968 | | | $ | 6,309 | | | $ | — | | | $ | — | |
| Funded status, December 31 | | $ | 1,271 | | | $ | 1,370 | | | $ | (386 | ) | | $ | (387 | ) |
| TFC/10-K/0000092230-19-000017 |
Defined Benefit Retirement Plans | The following table presents the amount expected to be amortized from AOCI into net periodic pension cost during 2019 |
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| Year Ended December 31,(Dollars in millions) | | Qualified Plan | | | | | | | | Nonqualified Plans | | | | | | |
| | 2018 | | | | 2017 | | | | 2018 | | | | 2017 | | |
| Prior service credit (cost) | | $ | (140 | ) | | $ | (165 | ) | | $ | 115 | | | $ | 134 | |
| Net actuarial loss | | (1,349 | | ) | | (1,092 | | ) | | (156 | | ) | | (198 | | ) |
| Net amount recognized | | $ | (1,489 | ) | | $ | (1,257 | ) | | $ | (41 | ) | | $ | (64 | ) |
| TFC/10-K/0000092230-19-000017 |
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 $549 million during the first quarter of 2019. Management may make additional contributions in 2019. 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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| (Dollars in millions) | | Qualified Plan | | | | Nonqualified Plans | | |
| Net actuarial loss | | $ | (79 | ) | | $ | (17 | ) |
| Prior service credit (cost) | | (25 | | ) | | $ | 19 | |
| Net amount expected to be amortized | | $ | (104 | ) | | $ | 2 | |
| TFC/10-K/0000092230-19-000017 |
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 Corporation 98 |
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| (Dollars in millions) | | Qualified Plan | | | | Nonqualified Plans | | |
| 2019 | | $ | 126 | | | $ | 16 | |
| 2020 | | 138 | | | | 16 | | |
| 2021 | | 151 | | | | 17 | | |
| 2022 | | 165 | | | | 18 | | |
| 2023 | | 179 | | | | 19 | | |
| 2024-2028 | | 1,126 | | | | 113 | | |
| TFC/10-K/0000092230-19-000017 |
Defined Benefit Retirement Plans | (1)The plan may hold up to 10% of its assets in BB&T common stock.International equity securities include a common/commingled fund that consists of assets from several accounts, pooled together, to reduce management and administration costs. 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 plan held alternative investments valued using net asset values totaling $274 million and $105 million at December 31, 2018 and 2017, respectively. |
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| December 31,(Dollars in millions) | Target Allocation | | | | | | 2018 | | | | | | | | | | | | 2017 | | | | | | | | | | |
| Min | | | Max | | | Total | | | | Level 1 | | | | Level 2 | | | | Total | | | | Level 1 | | | | Level 2 | | |
| Cash and cash-equivalents | | | | | | | $ | 21 | | | $ | 21 | | | $ | — | | | $ | 67 | | | $ | 67 | | | $ | — | |
| U.S. equity securities (1) | 30 | % | | 50 | % | | 2,323 | | | | 1,204 | | | | 1,119 | | | | 2,503 | | | | 1,333 | | | | 1,170 | | |
| International equity securities | 11 | | | 18 | | | 797 | | | | 161 | | | | 636 | | | | 1,130 | | | | 195 | | | | 935 | | |
| Fixed income securities | 35 | | | 53 | | | 2,528 | | | | 11 | | | | 2,517 | | | | 2,452 | | | | 10 | | | | 2,442 | | |
| Total | | | | | | | $ | 5,669 | | | $ | 1,397 | | | $ | 4,272 | | | $ | 6,152 | | | $ | 1,605 | | | $ | 4,547 | |
| TFC/10-K/0000092230-19-000017 |
NOTE 13. Commitments and Contingencies | BB&T invests in certain affordable housing 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 private equity and certain other equity method 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.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. Refer to "Note 16. Fair Value Disclosures" for additional disclosures related to off-balance sheet financial instruments.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 "Note 6. Loan Servicing" 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,(Dollars in millions) | | 2018 | | | | 2017 | | |
| Investments in affordable housing projects: | | | | | | | | |
| Carrying amount | | $ | 2,088 | | | $ | 1,948 | |
| Amount of future funding commitments included in carrying amount | | 919 | | | | 928 | | |
| Lending exposure | | 460 | | | | 561 | | |
| Tax credits subject to recapture | | 523 | | | | 471 | | |
| Private equity investments: | | | | | | | | |
| Carrying amount | | 458 | | | | 471 | | |
| Amount of future funding commitments not included in carrying amount | | 331 | | | | 143 | | |
| TFC/10-K/0000092230-19-000017 |
Pledged Assets | BB&T Corporation 100 |
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| December 31,(Dollars in millions) | | 2018 | | | | 2017 | | |
| Pledged securities | | $ | 13,237 | | | $ | 14,636 | |
| Pledged loans | | 77,847 | | | | 74,718 | | |
| TFC/10-K/0000092230-19-000017 |
NOTE 14. 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, 2018 and 2017, Branch Bank's capital was above all required levels. |
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| | | 2018 | | | | | | | | | | | | | | | 2017 | | | | | | | | | | | | | |
| | | Actual Capital | | | | | | | Capital Requirements | | | | | | | | Actual Capital | | | | | | | Capital Requirements | | | | | | |
| December 31,(Dollars in millions) | | Ratio | | | Amount | | | | Minimum | | | | Well-Capitalized | | | | Ratio | | | Amount | | | | Minimum | | | | Well-Capitalized | | |
| CET1 capital: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| BB&T Corporation | | 10.2 | % | | $ | 18,405 | | | $ | 8,157 | | | $ | 11,782 | | | 10.2 | % | | $ | 18,051 | | | $ | 7,975 | | | $ | 11,519 | |
| Branch Bank | | 11.2 | | | 19,571 | | | | 7,875 | | | | 11,375 | | | | 11.3 | | | 19,480 | | | | 7,752 | | | | 11,197 | | |
| Tier 1 capital: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| BB&T Corporation | | 11.8 | | | 21,456 | | | | 10,876 | | | | 14,501 | | | | 11.9 | | | 21,102 | | | | 10,633 | | | | 14,177 | | |
| Branch Bank | | 11.2 | | | 19,571 | | | | 10,500 | | | | 14,000 | | | | 11.3 | | | 19,480 | | | | 10,336 | | | | 13,781 | | |
| Total capital: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| BB&T Corporation | | 13.8 | | | 24,963 | | | | 14,501 | | | | 18,126 | | | | 13.9 | | | 24,653 | | | | 14,177 | | | | 17,722 | | |
| Branch Bank | | 13.2 | | | 23,049 | | | | 14,000 | | | | 17,500 | | | | 13.3 | | | 22,915 | | | | 13,781 | | | | 17,226 | | |
| Leverage capital: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| BB&T Corporation | | 9.9 | | | 21,456 | | | | 8,635 | | | | 10,794 | | | | 9.9 | | | 21,102 | | | | 8,567 | | | | 10,708 | | |
| Branch Bank | | 9.3 | | | 19,571 | | | | 8,378 | | | | 10,473 | | | | 9.4 | | | 19,480 | | | | 8,315 | | | | 10,394 | | |
| TFC/10-K/0000092230-19-000017 |
NOTE 15. Parent Company Financial Information | BB&T Corporation 102 |
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| Parent Company - Condensed Income and Comprehensive Income Statements(Dollars in millions) | | Year Ended December 31, | | | | | | | | | | |
| | 2018 | | | | 2017 | | | | 2016 | | |
| Income: | | | | | | | | | | | | |
| Dividends from subsidiaries: | | | | | | | | | | | | |
| Banking | | $ | 2,825 | | | $ | 1,950 | | | $ | 1,350 | |
| Nonbank | | 147 | | | | 40 | | | | 6 | | |
| Total dividends from subsidiaries | | 2,972 | | | | 1,990 | | | | 1,356 | | |
| Interest and other income from subsidiaries | | 164 | | | | 112 | | | | 73 | | |
| Other income | | 7 | | | | 2 | | | | 3 | | |
| Total income | | 3,143 | | | | 2,104 | | | | 1,432 | | |
| Expenses: | | | | | | | | | | | | |
| Interest expense | | 364 | | | | 227 | | | | 160 | | |
| Other expenses | | 82 | | | | 83 | | | | 56 | | |
| Total expenses | | 446 | | | | 310 | | | | 216 | | |
| Income before income taxes and equity in undistributed earnings of subsidiaries | | 2,697 | | | | 1,794 | | | | 1,216 | | |
| Income tax benefit | | 52 | | | | 63 | | | | 38 | | |
| Income before equity in undistributed earnings of subsidiaries | | 2,749 | | | | 1,857 | | | | 1,254 | | |
| Equity in undistributed earnings of subsidiaries in excess of dividends from subsidiaries | | 508 | | | | 558 | | | | 1,188 | | |
| Net income | | 3,257 | | | | 2,415 | | | | 2,442 | | |
| Total OCI | | (248 | | ) | | (88 | | ) | | (104 | | ) |
| Total comprehensive income | | $ | 3,009 | | | $ | 2,327 | | | $ | 2,338 | |
| TFC/10-K/0000092230-19-000017 |
NOTE 15. Parent Company Financial Information | 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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| Parent Company - Statements of Cash Flows(Dollars in millions) | | Year Ended December 31, | | | | | | | | | | |
| | 2018 | | | | 2017 | | | | 2016 | | |
| Cash Flows From Operating Activities: | | | | | | | | | | | | |
| Net income | | $ | 3,257 | | | $ | 2,415 | | | $ | 2,442 | |
| Adjustments to reconcile net income to net cash from operating activities: | | | | | | | | | | | | |
| Equity in earnings of subsidiaries in excess of dividends from subsidiaries | | (508 | | ) | | (558 | | ) | | (1,188 | | ) |
| Other, net | | (28 | | ) | | — | | | | (14 | | ) |
| Net cash from operating activities | | 2,721 | | | | 1,857 | | | | 1,240 | | |
| Cash Flows From Investing Activities: | | | | | | | | | | | | |
| Proceeds from maturities, calls, paydowns and sales of AFS securities | | 33 | | | | 29 | | | | 27 | | |
| Purchases of AFS securities | | (28 | | ) | | (29 | | ) | | (31 | | ) |
| Proceeds from maturities, calls and paydowns of HTM securities | | — | | | | — | | | | 2 | | |
| Investment in subsidiaries | | — | | | | 1,100 | | | | (85 | | ) |
| Advances to subsidiaries | | (4,639 | | ) | | (6,958 | | ) | | (7,719 | | ) |
| Proceeds from repayment of advances to subsidiaries | | 3,665 | | | | 4,671 | | | | 6,975 | | |
| Net cash from acquisitions and divestitures | | — | | | | — | | | | (254 | | ) |
| Other, net | | (4 | | ) | | 1 | | | | — | | |
| Net cash from investing activities | | (973 | | ) | | (1,186 | | ) | | (1,085 | | ) |
| Cash Flows From Financing Activities: | | | | | | | | | | | | |
| Net change in short-term borrowings | | (5 | | ) | | (39 | | ) | | (60 | | ) |
| Net change in long-term debt | | 1,746 | | | | 1,319 | | | | 465 | | |
| Repurchase of common stock | | (1,205 | | ) | | (1,613 | | ) | | (520 | | ) |
| Net proceeds from preferred stock issued | | — | | | | — | | | | 450 | | |
| Cash dividends paid on common and preferred stock | | (1,378 | | ) | | (1,179 | | ) | | (1,092 | | ) |
| Other, net | | (52 | | ) | | 104 | | | | 225 | | |
| Net cash from financing activities | | (894 | | ) | | (1,408 | | ) | | (532 | | ) |
| Net Change in Cash, Cash Equivalents and Restricted Cash | | 854 | | | | (737 | | ) | | (377 | | ) |
| Cash, Cash Equivalents and Restricted Cash at Beginning of Period | | 6,378 | | | | 7,115 | | | | 7,492 | | |
| Cash, Cash Equivalents and Restricted Cash at End of Period | | $ | 7,232 | | | $ | 6,378 | | | $ | 7,115 | |
| TFC/10-K/0000092230-19-000017 |
NOTE 16. Fair Value Disclosures | Accounting standards define fair value as the exchange price that would be received on the measurement date to sell an asset or the price paid to transfer a liability in the principal or most advantageous market available to the entity in an orderly transaction between market participants, with a three level valuation input hierarchy. The following discussion focuses on the valuation techniques and significant inputs for Level 2 and Level 3 assets and liabilities.BB&T Corporation 104A 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.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 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 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. Trading and equity securities: Trading and equity securities primarily consist of exchange traded equity securities, and debt securities issued by the U.S. Treasury, GSEs, or states and political subdivisions. The valuation techniques for debt securities are more fully discussed above.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: 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.Activity for Level 3 assets and liabilities is summarized below: |
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| December 31, 2018(Dollars in millions) | | Total | | | | Level 1 | | | | Level 2 | | | | Level 3 | | |
| Assets: | | | | | | | | | | | | | | | | |
| AFS securities: | | | | | | | | | | | | | | | | |
| U.S. Treasury | | $ | 3,441 | | | $ | — | | | $ | 3,441 | | | $ | — | |
| GSE | | 200 | | | | — | | | | 200 | | | | — | | |
| Agency MBS | | 20,155 | | | | — | | | | 20,155 | | | | — | | |
| States and political subdivisions | | 701 | | | | — | | | | 701 | | | | — | | |
| Non-agency MBS | | 505 | | | | — | | | | 114 | | | | 391 | | |
| Other | | 36 | | | | — | | | | 36 | | | | — | | |
| Total AFS securities | | 25,038 | | | | — | | | | 24,647 | | | | 391 | | |
| LHFS | | 988 | | | | — | | | | 988 | | | | — | | |
| MSRs | | 1,108 | | | | — | | | | — | | | | 1,108 | | |
| Other assets: | | | | | | | | | | | | | | | | |
| Trading and equity securities | | 767 | | | | 374 | | | | 390 | | | | 3 | | |
| Derivative assets | | 246 | | | | — | | | | 234 | | | | 12 | | |
| Private equity investments | | 393 | | | | — | | | | — | | | | 393 | | |
| Total assets | | $ | 28,540 | | | $ | 374 | | | $ | 26,259 | | | $ | 1,907 | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Derivative liabilities | | $ | 247 | | | $ | 1 | | | $ | 246 | | | $ | — | |
| Securities sold short | | 145 | | | | — | | | | 145 | | | | — | | |
| Total liabilities | | $ | 392 | | | $ | 1 | | | $ | 391 | | | $ | — | |
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| December 31, 2017(Dollars in millions) | | Total | | | | Level 1 | | | | Level 2 | | | | Level 3 | | |
| Assets: | | | | | | | | | | | | | | | | |
| AFS securities: | | | | | | | | | | | | | | | | |
| U.S. Treasury | | $ | 2,291 | | | $ | — | | | $ | 2,291 | | | $ | — | |
| GSE | | 179 | | | | — | | | | 179 | | | | — | | |
| Agency MBS | | 20,101 | | | | — | | | | 20,101 | | | | — | | |
| States and political subdivisions | | 1,392 | | | | — | | | | 1,392 | | | | — | | |
| Non-agency MBS | | 576 | | | | — | | | | 144 | | | | 432 | | |
| Other | | 8 | | | | 6 | | | | 2 | | | | — | | |
| Total AFS securities | | 24,547 | | | | 6 | | | | 24,109 | | | | 432 | | |
| LHFS | | 1,099 | | | | — | | | | 1,099 | | | | — | | |
| MSRs | | 1,056 | | | | — | | | | — | | | | 1,056 | | |
| Other assets: | | | | | | | | | | | | | | | | |
| Trading and equity securities | | 633 | | | | 363 | | | | 270 | | | | — | | |
| Derivative assets | | 443 | | | | — | | | | 437 | | | | 6 | | |
| Private equity investments | | 404 | | | | — | | | | — | | | | 404 | | |
| Total assets | | $ | 28,182 | | | $ | 369 | | | $ | 25,915 | | | $ | 1,898 | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Derivative liabilities | | $ | 714 | | | $ | — | | | $ | 711 | | | $ | 3 | |
| Securities sold short | | 120 | | | | — | | | | 120 | | | | — | | |
| Total liabilities | | $ | 834 | | | $ | — | | | $ | 831 | | | $ | 3 | |
| TFC/10-K/0000092230-19-000017 |
NOTE 16. Fair Value Disclosures | The non-agency MBS categorized as Level 3 represent ownership interests 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, 2018, the fair value of Re-REMIC non-agency MBS represented a discount of 18.6% 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 on an approximately ratable basis through 2028, is uncertain and dependent on various events such as recapitalizations, refinance transactions and ownership changes among others. As of December 31, 2018, 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. These 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 6x to 14x, with a weighted average of 9x, at December 31, 2018.The following table details the fair value and UPB of LHFS that were elected to be carried at fair value: |
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| (Dollars in millions) | | Non-agency MBS | | | | MSRs | | | | Net Derivatives | | | | Private Equity Investments | | |
| Balance at January 1, 2016 | | $ | 626 | | | $ | 880 | | | $ | 4 | | | $ | 289 | |
| Total realized and unrealized gains (losses): | | | | | | | | | | | | | | | | |
| Included in earnings | | 25 | | | | 63 | | | | 97 | | | | 20 | | |
| Included in unrealized net holding gains (losses) in OCI | | (45 | | ) | | — | | | | — | | | | — | | |
| Purchases | | — | | | | — | | | | — | | | | 106 | | |
| Issuances | | — | | | | 146 | | | | 82 | | | | — | | |
| Sales | | — | | | | — | | | | — | | | | (4 | | ) |
| Settlements | | (99 | | ) | | (160 | | ) | | (196 | | ) | | (49 | | ) |
| Adoption of fair value option for commercial MSRs | | — | | | | 123 | | | | — | | | | — | | |
| Balance at December 31, 2016 | | 507 | | | | 1,052 | | | | (13 | | ) | | 362 | | |
| Total realized and unrealized gains (losses): | | | | | | | | | | | | | | | | |
| Included in earnings | | 36 | | | | 48 | | | | 38 | | | | 58 | | |
| Included in unrealized net holding gains (losses) in OCI | | (40 | | ) | | — | | | | — | | | | — | | |
| Purchases | | — | | | | — | | | | — | | | | 142 | | |
| Issuances | | — | | | | 124 | | | | 43 | | | | — | | |
| Sales | | — | | | | — | | | | — | | | | (119 | | ) |
| Settlements | | (71 | | ) | | (168 | | ) | | (65 | | ) | | (26 | | ) |
| Transfers out of Level 3 | | — | | | | — | | | | — | | | | (13 | | ) |
| Balance at December 31, 2017 | | 432 | | | | 1,056 | | | | 3 | | | | 404 | | |
| Total realized and unrealized gains (losses): | | | | | | | | | | | | | | | | |
| Included in earnings | | 9 | | | | 71 | | | | 11 | | | | 66 | | |
| Purchases | | — | | | | — | | | | — | | | | 91 | | |
| Issuances | | — | | | | 152 | | | | 24 | | | | — | | |
| Sales | | — | | | | — | | | | — | | | | (112 | | ) |
| Settlements | | (50 | | ) | | (171 | | ) | | (26 | | ) | | (56 | | ) |
| Balance at December 31, 2018 | | $ | 391 | | | $ | 1,108 | | | $ | 12 | | | $ | 393 | |
| Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at December 31, 2018 | | $ | 9 | | | $ | 71 | | | $ | 12 | | | $ | 11 | |
| Primary income statement location of realized gains (losses) included in earnings | | Interest income | | | | Mortgage banking income | | | | Mortgage banking income | | | | Other income | | |
| TFC/10-K/0000092230-19-000017 |
NOTE 16. Fair Value Disclosures | BB&T Corporation 106Excluding government guaranteed, LHFS that were nonperforming or 90 days or more past due and still accruing interest were not material at December 31, 2018.The following table provides information about certain 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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| December 31,(Dollars in millions) | | 2018 | | | | | | | | | | | | 2017 | | | | | | | | | | |
| | Fair Value | | | | UPB | | | | Difference | | | | Fair Value | | | | UPB | | | | Difference | | |
| LHFS at fair value | | $ | 988 | | | $ | 975 | | | $ | 13 | | | $ | 1,099 | | | $ | 1,084 | | | $ | 15 | |
| TFC/10-K/0000092230-19-000017 |
NOTE 16. Fair Value Disclosures | 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.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 and revolving credit commitments have an immaterial fair value as BB&T typically has the ability to cancel such commitments.Financial assets and liabilities not recorded at fair value are summarized below: |
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | |
| | | 2018 | | | | | | | | 2017 | | | | | | |
| As of / For The Year Ended December 31,(Dollars in millions) | | Carrying Value | | | | Valuation Adjustments | | | | Carrying Value | | | | Valuation Adjustments | | |
| Impaired loans | | $ | 167 | | | $ | (35 | ) | | $ | 163 | | | $ | (22 | ) |
| Foreclosed real estate | | 35 | | | | (240 | | ) | | 32 | | | | (255 | | ) |
| TFC/10-K/0000092230-19-000017 |
NOTE 16. Fair Value Disclosures | The following is a summary of selected information pertaining to off-balance sheet financial instruments: |
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | |
| December 31,(Dollars in millions) | | 2018 | | | | | | | | 2017 | | | | | | |
| Fair Value Hierarchy | Carrying Amount | | | | Fair Value | | | | Carrying Amount | | | | Fair Value | | |
| Financial assets: | | | | | | | | | | | | | | | | |
| HTM securities | Level 2 | $ | 20,552 | | | $ | 20,047 | | | $ | 23,027 | | | $ | 22,837 | |
| Loans and leases HFI, net of ALLL | Level 3 | 147,455 | | | | 145,591 | | | | 142,211 | | | | 141,664 | | |
| Financial liabilities: | | | | | | | | | | | | | | | | |
| Time deposits | Level 2 | 16,577 | | | | 16,617 | | | | 13,170 | | | | 13,266 | | |
| Long-term debt | Level 2 | 23,709 | | | | 23,723 | | | | 23,648 | | | | 23,885 | | |
| TFC/10-K/0000092230-19-000017 |
NOTE 16. Fair Value Disclosures | BB&T Corporation 108 |
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
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| | 2018 | | | | | | | | 2017 | | | | | | |
| December 31,(Dollars in millions) | Notional/Contract Amount | | | | Fair Value | | | | Notional/Contract Amount | | | | Fair Value | | |
| Commitments to extend, originate or purchase credit | $ | 72,435 | | | $ | 140 | | | $ | 67,860 | | | $ | 259 | |
| Residential mortgage loans sold with recourse | 419 | | | | 3 | | | | 490 | | | | 5 | | |
| CRE mortgages serviced for others covered by recourse provisions | 4,699 | | | | 6 | | | | 4,153 | | | | 5 | | |
| Letters of credit | 2,389 | | | | 18 | | | | 2,466 | | | | 21 | | |
| TFC/10-K/0000092230-19-000017 |
Impact of Derivatives on the Consolidated Balance Sheets | The following table presents additional information for fair value hedging relationships: |
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
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| | | | | 2018 | | | | | | | | | | | | 2017 | | | | | | | | | | |
| December 31,(Dollars in millions) | | Hedged Item or Transaction | | Notional Amount | | | | Fair Value | | | | | | | | Notional Amount | | | | Fair Value | | | | | | |
| | | | Gain | | | | Loss | | | | | Gain | | | | Loss | | |
| Cash flow hedges: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest rate contracts: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Pay fixed swaps | | 3 mo. LIBOR funding | | $ | 6,500 | | | $ | — | | | $ | — | | | $ | 6,500 | | | $ | — | | | $ | (126 | ) |
| Fair value hedges: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest rate contracts: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Receive fixed swaps | | Long-term debt | | 12,908 | | | | 5 | | | | (74 | | ) | | 15,538 | | | | 118 | | | | (166 | | ) |
| Options | | Long-term debt | | 4,785 | | | | — | | | | (2 | | ) | | 6,087 | | | | — | | | | (1 | | ) |
| Pay fixed swaps | | Commercial loans | | 505 | | | | 2 | | | | — | | | | 416 | | | | 5 | | | | (1 | | ) |
| Pay fixed swaps | | Municipal securities | | 259 | | | | — | | | | — | | | | 231 | | | | — | | | | (76 | | ) |
| Total | | | | 18,457 | | | | 7 | | | | (76 | | ) | | 22,272 | | | | 123 | | | | (244 | | ) |
| Not designated as hedges: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Client-related and other risk management: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest rate contracts: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Receive fixed swaps | | | | 11,577 | | | | 128 | | | | (98 | | ) | | 10,880 | | | | 141 | | | | (61 | | ) |
| Pay fixed swaps | | | | 11,523 | | | | 19 | | | | (32 | | ) | | 10,962 | | | | 59 | | | | (155 | | ) |
| Other | | | | 1,143 | | | | 2 | | | | (3 | | ) | | 1,658 | | | | 4 | | | | (4 | | ) |
| Forward commitments | | | | 2,883 | | | | 11 | | | | (13 | | ) | | 3,549 | | | | 3 | | | | (2 | | ) |
| Foreign exchange contracts | | | | 529 | | | | 5 | | | | (2 | | ) | | 470 | | | | 3 | | | | (6 | | ) |
| Total | | | | 27,655 | | | | 165 | | | | (148 | | ) | | 27,519 | | | | 210 | | | | (228 | | ) |
| Mortgage banking: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest rate contracts: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest rate lock commitments | | | | 702 | | | | 12 | | | | — | | | | 1,308 | | | | 7 | | | | (3 | | ) |
| When issued securities, forward rate agreements and forward commitments | | | | 1,753 | | | | 2 | | | | (20 | | ) | | 3,124 | | | | 4 | | | | (3 | | ) |
| Other | | | | 271 | | | | 2 | | | | (1 | | ) | | 182 | | | | 1 | | | | — | | |
| Total | | | | 2,726 | | | | 16 | | | | (21 | | ) | | 4,614 | | | | 12 | | | | (6 | | ) |
| MSRs: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest rate contracts: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Receive fixed swaps | | | | 4,328 | | | | — | | | | — | | | | 4,498 | | | | 15 | | | | (86 | | ) |
| Pay fixed swaps | | | | 3,224 | | | | — | | | | — | | | | 3,418 | | | | 32 | | | | (13 | | ) |
| Options | | | | 3,155 | | | | 48 | | | | (2 | | ) | | 4,535 | | | | 50 | | | | (11 | | ) |
| When issued securities, forward rate agreements and forward commitments | | | | 1,590 | | | | 10 | | | | — | | | | 1,813 | | | | 1 | | | | — | | |
| Other | | | | 103 | | | | — | | | | — | | | | 3 | | | | — | | | | — | | |
| Total | | | | 12,400 | | | | 58 | | | | (2 | | ) | | 14,267 | | | | 98 | | | | (110 | | ) |
| Total derivatives not designated as hedges | | | | 42,781 | | | | 239 | | | | (171 | | ) | | 46,400 | | | | 320 | | | | (344 | | ) |
| Total derivatives | | | | $ | 67,738 | | | 246 | | | | (247 | | ) | | $ | 75,172 | | | 443 | | | | (714 | | ) |
| Gross amounts not offset in the Consolidated Balance Sheets: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Amounts subject to master netting arrangements not offset due to policy election | | | | | | | | (47 | | ) | | 47 | | | | | | | | (297 | | ) | | 297 | | |
| Cash collateral (received) posted | | | | | | | | (53 | | ) | | 82 | | | | | | | | (20 | | ) | | 344 | | |
| Net amount | | | | | | | | $ | 146 | | | $ | (118 | ) | | | | | | $ | 126 | | | $ | (73 | ) |
| TFC/10-K/0000092230-19-000017 |
Impact of Derivatives on the Consolidated Balance Sheets | BB&T Corporation 110 |
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| | | 2018 | | | | | | | | | | | | 2017 | | | | | | | | | | |
| | | | | | | Hedge Basis Adjustment | | | | | | | | | | | | Hedge Basis Adjustment | | | | | | |
| December 31,(Dollars in millions) | | Hedged Asset / Liability Basis | | | | Items Currently Designated | | | | Items No Longer Designated | | | | Hedged Asset / Liability Basis | | | | Items Currently Designated | | | | Items No Longer Designated | | |
| AFS securities | | $ | 493 | | | $ | 5 | | | $ | 54 | | | $ | 533 | | | $ | 64 | | | $ | 10 | |
| Loans and leases | | 562 | | | | — | | | | (3 | | ) | | 511 | | | | (5 | | ) | | — | | |
| Long-term debt | | 15,397 | | | | (98 | | ) | | 12 | | | | 16,917 | | | | (49 | | ) | | 140 | | |
| TFC/10-K/0000092230-19-000017 |
Impact of Derivatives on the Consolidated Statements of Income and Comprehensive Income | The following table summarizes the impact on net interest income related to fair value hedges, which consist of interest rate contracts. Prior period amounts and presentation were not conformed to new hedge accounting guidance that was adopted in 2018. |
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| Year Ended December 31,(Dollars in millions) | 2018 | | | | 2017 | | | | 2016 | | |
| Pre-tax gain (loss) recognized in OCI: | | | | | | | | | | | |
| Deposits | $ | 15 | | | | | | | | | |
| Short-term borrowings | (3 | | ) | | | | | | | | |
| Long-term debt | 57 | | | | | | | | | | |
| Total | 69 | | | | $ | 10 | | | $ | (24 | ) |
| Pre-tax gain (loss) reclassified from AOCI into interest expense: | | | | | | | | | | | |
| Deposits | (1 | | ) | | | | | | | | |
| Short-term borrowings | 1 | | | | | | | | | | |
| Long-term debt | (12 | | ) | | | | | | | | |
| Total | $ | (12 | ) | | $ | (15 | ) | | $ | (11 | ) |
| TFC/10-K/0000092230-19-000017 |
Impact of Derivatives on the Consolidated Statements of Income and Comprehensive Income | The following table presents pre-tax gain (loss) recognized in income for derivative instruments not designated as hedges: |
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| Year Ended December 31,(Dollars in millions) | 2018 | | | | 2017 | | | | 2016 | | |
| AFS securities: | | | | | | | | | | | |
| Amounts related to interest settlements | $ | (5 | ) | | | | | | | | |
| Recognized on derivatives | 12 | | | | | | | | | | |
| Recognized on hedged items | (15 | | ) | | | | | | | | |
| Net income (expense) recognized | (8 | | ) | | $ | (16 | ) | | $ | (16 | ) |
| Loans and leases: | | | | | | | | | | | |
| Amounts related to interest settlements | (2 | | ) | | | | | | | | |
| Recognized on derivatives | (1 | | ) | | | | | | | | |
| Recognized on hedged items | 2 | | | | | | | | | | |
| Net income (expense) recognized | (1 | | ) | | (3 | | ) | | (2 | | ) |
| Long-term debt: | | | | | | | | | | | |
| Amounts related to interest settlements | (30 | | ) | | | | | | | | |
| Recognized on derivatives | (122 | | ) | | | | | | | | |
| Recognized on hedged items | 165 | | | | | | | | | | |
| Net income (expense) recognized | 13 | | | | 148 | | | | 226 | | |
| Net income (expense) recognized, total | $ | 4 | | | $ | 129 | | | $ | 208 | |
| TFC/10-K/0000092230-19-000017 |
Impact of Derivatives on the Consolidated Statements of Income and Comprehensive Income | The following table presents information about BB&T's cash flow and fair value hedges: |
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| Year Ended December 31,(Dollars in millions) | Location | 2018 | | | | 2017 | | | | 2016 | | |
| Client-related and other risk management: | | | | | | | | | | | | |
| Interest rate contracts | Other noninterest income | $ | 40 | | | $ | 50 | | | $ | 52 | |
| Foreign exchange contracts | Other noninterest income | 21 | | | | 1 | | | | 11 | | |
| Mortgage banking: | | | | | | | | | | | | |
| Interest rate contracts | Mortgage banking income | (5 | | ) | | (12 | | ) | | 8 | | |
| MSRs: | | | | | | | | | | | | |
| Interest rate contracts | Mortgage banking income | (65 | | ) | | — | | | | 31 | | |
| Total | | $ | (9 | ) | | $ | 39 | | | $ | 102 | |
| TFC/10-K/0000092230-19-000017 |
Derivatives Credit Risk – Central Clearing Parties | BB&T Corporation 112 |
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| --- | --- | --- | --- | --- | --- | --- | --- |
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| December 31,(Dollars in millions) | 2018 | | | | 2017 | | |
| Dealer counterparties: | | | | | | | |
| Cash collateral received from dealer counterparties | $ | 56 | | | $ | 21 | |
| Derivatives in a net gain position secured by collateral received | 55 | | | | 22 | | |
| Unsecured positions in a net gain with dealer counterparties after collateral postings | 2 | | | | 2 | | |
| Cash collateral posted to dealer counterparties | 75 | | | | 172 | | |
| Derivatives in a net loss position secured by collateral received | 76 | | | | 171 | | |
| Additional collateral that would have been posted had BB&T's credit ratings dropped below investment grade | 1 | | | | — | | |
| Central clearing parties: | | | | | | | |
| Cash collateral, including initial margin, posted to central clearing parties | 17 | | | | 177 | | |
| Derivatives in a net loss position | 8 | | | | 176 | | |
| Securities pledged to central clearing parties | 124 | | | | 91 | | |
| TFC/10-K/0000092230-19-000017 |
Other, Treasury & Corporate | (1)Includes financial data from business units below the quantitative and qualitative thresholds requiring disclosure. |
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| Year Ended December 31,(Dollars in millions) | CB-Retail | | | | | | | | | | | CB-Commercial | | | | | | | | | | | | FS&CF | | | | | | | | | | | |
| 2018 | | | | 2017 | | | | 2016 | | | | 2018 | | | | 2017 | | | | 2016 | | | | 2018 | | | | 2017 | | | | 2016 | | |
| Net interest income (expense) | $ | 3,451 | | | $ | 3,415 | | | $ | 3,290 | | | $ | 2,000 | | | $ | 1,741 | | | $ | 1,604 | | | $ | 689 | | | $ | 583 | | | $ | 511 | |
| Net intersegment interest income (expense) | 280 | | | | 146 | | | | 113 | | | | 241 | | | | 379 | | | | 404 | | | | 84 | | | | 127 | | | | 142 | | |
| Segment net interest income | 3,731 | | | | 3,561 | | | | 3,403 | | | | 2,241 | | | | 2,120 | | | | 2,008 | | | | 773 | | | | 710 | | | | 653 | | |
| Allocated provision for credit losses | 504 | | | | 502 | | | | 475 | | | | 112 | | | | 68 | | | | (41 | | ) | | 1 | | | | (15 | | ) | | 128 | | |
| Segment net interest income after provision | 3,227 | | | | 3,059 | | | | 2,928 | | | | 2,129 | | | | 2,052 | | | | 2,049 | | | | 772 | | | | 725 | | | | 525 | | |
| Noninterest income | 1,394 | | | | 1,408 | | | | 1,358 | | | | 437 | | | | 427 | | | | 397 | | | | 1,235 | | | | 1,181 | | | | 1,148 | | |
| Noninterest expense | 2,654 | | | | 2,724 | | | | 2,480 | | | | 1,036 | | | | 1,206 | | | | 1,330 | | | | 1,259 | | | | 1,190 | | | | 1,141 | | |
| Income (loss) before income taxes | 1,967 | | | | 1,743 | | | | 1,806 | | | | 1,530 | | | | 1,273 | | | | 1,116 | | | | 748 | | | | 716 | | | | 532 | | |
| Provision (benefit) for income taxes | 483 | | | | 650 | | | | 684 | | | | 342 | | | | 441 | | | | 394 | | | | 155 | | | | 225 | | | | 156 | | |
| Segment net income (loss) | $ | 1,484 | | | $ | 1,093 | | | $ | 1,122 | | | $ | 1,188 | | | $ | 832 | | | $ | 722 | | | $ | 593 | | | $ | 491 | | | $ | 376 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Identifiable assets (period end) | $ | 73,793 | | | $ | 71,263 | | | $ | 74,747 | | | $ | 57,044 | | | $ | 56,566 | | | $ | 55,038 | | | $ | 31,740 | | | $ | 29,144 | | | $ | 26,795 | |
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| | IH | | | | | | | | | | | OT&C (1) | | | | | | | | | | | | Total | | | | | | | | | | | |
| | 2018 | | | | 2017 | | | | 2016 | | | | 2018 | | | | 2017 | | | | 2016 | | | | 2018 | | | | 2017 | | | | 2016 | | |
| Net interest income (expense) | $ | 119 | | | $ | 98 | | | $ | 86 | | | $ | 423 | | | $ | 698 | | | $ | 830 | | | $ | 6,682 | | | $ | 6,535 | | | $ | 6,321 | |
| Net intersegment interest income (expense) | (32 | | ) | | (21 | | ) | | (19 | | ) | | (573 | | ) | | (631 | | ) | | (640 | | ) | | — | | | | — | | | | — | | |
| Segment net interest income | 87 | | | | 77 | | | | 67 | | | | (150 | | ) | | 67 | | | | 190 | | | | 6,682 | | | | 6,535 | | | | 6,321 | | |
| Allocated provision for credit losses | 2 | | | | 4 | | | | 3 | | | | (53 | | ) | | (12 | | ) | | 7 | | | | 566 | | | | 547 | | | | 572 | | |
| Segment net interest income after provision | 85 | | | | 73 | | | | 64 | | | | (97 | | ) | | 79 | | | | 183 | | | | 6,116 | | | | 5,988 | | | | 5,749 | | |
| Noninterest income | 1,871 | | | | 1,777 | | | | 1,731 | | | | (61 | | ) | | (11 | | ) | | (162 | | ) | | 4,876 | | | | 4,782 | | | | 4,472 | | |
| Noninterest expense | 1,614 | | | | 1,590 | | | | 1,524 | | | | 369 | | | | 734 | | | | 246 | | | | 6,932 | | | | 7,444 | | | | 6,721 | | |
| Income (loss) before income taxes | 342 | | | | 260 | | | | 271 | | | | (527 | | ) | | (666 | | ) | | (225 | | ) | | 4,060 | | | | 3,326 | | | | 3,500 | | |
| Provision (benefit) for income taxes | 87 | | | | 99 | | | | 105 | | | | (264 | | ) | | (504 | | ) | | (281 | | ) | | 803 | | | | 911 | | | | 1,058 | | |
| Segment net income (loss) | $ | 255 | | | $ | 161 | | | $ | 166 | | | $ | (263 | ) | | $ | (162 | ) | | $ | 56 | | | $ | 3,257 | | | $ | 2,415 | | | $ | 2,442 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Identifiable assets (period end) | $ | 6,622 | | | $ | 6,024 | | | $ | 5,943 | | | $ | 56,498 | | | $ | 58,645 | | | $ | 56,753 | | | $ | 225,697 | | | $ | 221,642 | | | $ | 219,276 | |
| TFC/10-K/0000092230-19-000017 |
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES | BB&T Corporation 118 |
| | | | | |
| --- | --- | --- | --- | --- |
| | | | | |
| Exhibit No. | | Description | | Location |
| 10.3\* | | BB&T Corporation 2012 Incentive Plan, as amended | | [Incorporated herein by reference to Exhibit 10.1 of the Registration Statement on Form S-8, filed May 25, 2017.](http://www.sec.gov/Archives/edgar/data/92230/000009223017000046/ex101-incentiveplan_517.htm) |
| 10.4\* | | Form of Restricted Stock Unit Agreement (Non-Employee Directors) for the BB&T 2012 Incentive Plan. | | [Incorporated herein by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q, filed April 27, 2015.](http://www.sec.gov/Archives/edgar/data/92230/000009223015000035/exhibit101.htm) |
| 10.5\* | | Form of Non-Employee Director Nonqualified Stock Option Agreement for the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (5-Year Vesting). | | [Incorporated herein by reference to Exhibit 10.7 of the Annual Report on Form 10-K, filed February 28, 2008.](http://www.sec.gov/Archives/edgar/data/92230/000119312508041900/dex107.htm) |
| 10.6\* | | Form of Non-Employee Director Nonqualified Stock Option Agreement for the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (4-Year Vesting). | | [Incorporated herein by reference to Exhibit 10.3 of the Quarterly Report on Form 10-Q, filed May 7, 2010.](http://www.sec.gov/Archives/edgar/data/92230/000119312510112881/dex103.htm) |
| 10.7\* | | Form of Employee Nonqualified Stock Option Agreement for the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (5-Year Vesting). | | [Incorporated herein by reference to Exhibit 10.8 of the Annual Report on Form 10-K, filed February 28, 2008.](http://www.sec.gov/Archives/edgar/data/92230/000119312508041900/dex108.htm) |
| 10.8\* | | Form of Employee Nonqualified Stock Option Agreement for the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (4-Year Vesting). | | [Incorporated herein by reference to Exhibit 10.5 of the Quarterly Report on Form 10-Q, filed May 7, 2010.](http://www.sec.gov/Archives/edgar/data/92230/000119312510112881/dex105.htm) |
| 10.9\* | | Southern National Deferred Compensation Plan for Key Executives including amendments. | | [Incorporated herein by reference to Exhibit 10.21 of the Annual Report on Form 10-K, filed February 25, 2011.](http://www.sec.gov/Archives/edgar/data/92230/000119312511047405/dex1021.htm) |
| 10.10\* | | BB&T Non-Qualified Defined Benefit Plan (January 1, 2012 Restatement). | | [Incorporated herein by reference to Exhibit 10.11 of the Annual Report on Form 10-K, filed February 25, 2016.](http://www.sec.gov/Archives/edgar/data/92230/000009223016000125/exhibit1011.htm) |
| 10.11\* | | First Amendment to the BB&T Non-Qualified Defined Benefit Plan (January 1, 2012 Restatement). | | [Incorporated herein by reference to Exhibit 10.12 of the Annual Report on Form 10-K, filed February 25, 2016.](http://www.sec.gov/Archives/edgar/data/92230/000009223016000125/exhibit1012.htm) |
| 10.12\* | | Second Amendment to the BB&T Non-Qualified Defined Benefit Plan (January 1, 2012 Restatement). | | [Incorporated herein by reference to Exhibit 10.13 of the Annual Report on Form 10-K, filed February 25, 2016.](http://www.sec.gov/Archives/edgar/data/92230/000009223016000125/exhibit1013.htm) |
| 10.13\* | | BB&T Non-Qualified Defined Contribution Plan (January 1, 2012 Restatement). | | [Incorporated herein by reference to Exhibit 10.14 of the Annual Report on Form 10-K, filed February 25, 2016.](http://www.sec.gov/Archives/edgar/data/92230/000009223016000125/exhibit1014.htm) |
| 10.14\* | | BB&T Corporation Non-Qualified Deferred Compensation Trust (Amended and Restated Effective January 1, 2012). | | [Incorporated herein by reference to Exhibit 10.15 of the Annual Report on Form 10-K, filed February 25, 2016.](http://www.sec.gov/Archives/edgar/data/92230/000009223016000125/exhibit1015.htm) |
| 10.15\* | | Form of Employee Nonqualified Stock Option Agreement for the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (4-Year Vesting with Clawback Provision). | | [Incorporated herein by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q, filed May 4, 2012.](http://www.sec.gov/Archives/edgar/data/92230/000119312512212084/d343887dex101.htm) |
| 10.16\* | | Form of Employee Nonqualified Stock Option Agreement for the BB&T Corporation 2012 Incentive Plan. | | [Incorporated herein by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q, filed May 2, 2013.](http://www.sec.gov/Archives/edgar/data/92230/000009223013000043/exhibit101.htm) |
| 10.17\* | | Form of Nonqualified Option Agreement (Senior Executive) for the BB&T Corporation 2012 Incentive Plan. | | [Incorporated herein by reference to Exhibit 10.4 of the Quarterly Report on Form 10-Q, filed April 30, 2014.](http://www.sec.gov/Archives/edgar/data/92230/000009223014000026/exhibit104.htm) |
| 10.18\* | | Form of Director Restricted Stock Unit Agreement for the BB&T Corporation 2012 Incentive Plan. | | [Incorporated herein by reference to Exhibit 10.2 of the Quarterly Report on Form 10-Q, filed May 2, 2013.](http://www.sec.gov/Archives/edgar/data/92230/000009223013000043/exhibit102.htm) |
| TFC/10-K/0000092230-19-000017 |
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES | BB&T Corporation 120 |
| | | | | |
| --- | --- | --- | --- | --- |
| | | | | |
| Exhibit No. | | Description | | Location |
| 10.35\* | | 2016 Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Company and Brant J. Standridge. | | [Incorporated herein by reference to Exhibit 10.2 of the Quarterly Report on Form 10-Q, filed October 24, 2016.](http://www.sec.gov/Archives/edgar/data/92230/000009223016000202/exh102standridgeagreement.htm) |
| 10.36\* | | 2016 Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Company and Dontá L. Wilson. | | [Incorporated herein by reference to Exhibit 10.3 of the Quarterly Report on Form 10-Q, filed October 24, 2016.](http://www.sec.gov/Archives/edgar/data/92230/000009223016000202/exh103wilsonagreement.htm) |
| 10.37\* | | Amended and Restated Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Co. and Kelly S. King dated as of February 7, 2019. | | [Incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K, filed February 13, 2019.](http://www.sec.gov/Archives/edgar/data/92230/000119312519036824/d704920dex101.htm) |
| 11 | | Statement re computation of earnings per share. | | [Filed herewith as Computation of EPS note to the consolidated financial statements.](#s10FFD23AB2D053F7A3C6D1335044C90B) |
| 21† | | Subsidiaries of the Registrant. | | [Filed herewith.](ex21-subsidiaries_4q18.htm) |
| 23† | | Consent of Independent Registered Public Accounting Firm. | | [Filed herewith.](ex23-consent_4q18.htm) |
| 31.1 | | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | [Filed herewith.](ex311-certification_4q18.htm) |
| 31.2 | | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | [Filed herewith.](ex312-certification_4q18.htm) |
| 32 | | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | | [Filed herewith.](ex32-certification_4q18.htm) |
| 101.INS | | XBRL Instance Document. | | Filed herewith. |
| 101.SCH | | XBRL Taxonomy Extension Schema. | | Filed herewith. |
| 101.CAL | | XBRL Taxonomy Extension Calculation Linkbase. | | Filed herewith. |
| 101.LAB | | XBRL Taxonomy Extension Label Linkbase. | | Filed herewith. |
| 101.PRE | | XBRL Taxonomy Extension Presentation Linkbase. | | Filed herewith. |
| 101.DEF | | XBRL Taxonomy Definition Linkbase. | | Filed herewith. |
| † Exhibit filed with the SEC and available upon request. | | | | |
| \* Management compensatory plan or arrangement. | | | | |
| \*\* Pursuant to Item 601(b)(2) of Regulation S-K, certain schedules and similar attachments have been omitted. The registrant hereby agrees to furnish a copy of any omitted schedule or similar attachment to the SEC upon request. | | | | |
| TFC/10-K/0000092230-19-000017 |
Net Interest Income and NIM | (1)Yields are stated on a TE basis utilizing the marginal income tax rates for the periods presented. The change in interest not solely due to changes in yield/rate or volume has been allocated on a pro-rata basis based on the absolute dollar amount of each. (2)Total securities include AFS and HTM securities. (3)Includes 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. |
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| Table 5 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| TE Net Interest Income and Rate / Volume Analysis (1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2017, 2016 and 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2017 vs. 2016 | | | | | | | | | | | | 2016 vs. 2015 | | | | | | | | | | |
| | | Average Balances (6) | | | | | | | | | | | | Yield/Rate | | | | | | | | | Income/Expense | | | | | | | | | | | | Incr. | | | | Change due to | | | | | | | | Incr. | | | | Change due to | | | | | | |
| (Dollars in millions) | | 2017 | | | | 2016 | | | | 2015 | | | | 2017 | | | 2016 | | | 2015 | | | 2017 | | | | 2016 | | | | 2015 | | | | (Decr.) | | | | Rate | | | | Vol. | | | | (Decr.) | | | | Rate | | | | Vol. | | |
| Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total securities, at amortized cost: (2) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| U.S. Treasury | | $ | 4,179 | | | $ | 3,061 | | | $ | 2,650 | | | 1.71 | % | | 1.67 | % | | 1.58 | % | | $ | 72 | | | $ | 51 | | | $ | 42 | | | $ | 21 | | | $ | 1 | | | $ | 20 | | | $ | 9 | | | $ | 2 | | | $ | 7 | |
| GSE | | 2,385 | | | | 3,601 | | | | 5,338 | | | | 2.22 | | | 2.13 | | | 2.13 | | | 53 | | | | 77 | | | | 113 | | | | (24 | | ) | | 3 | | | | (27 | | ) | | (36 | | ) | | — | | | | (36 | | ) |
| Agency MBS | | 37,250 | | | | 36,658 | | | | 30,683 | | | | 2.26 | | | 2.05 | | | 1.98 | | | 841 | | | | 750 | | | | 605 | | | | 91 | | | | 79 | | | | 12 | | | | 145 | | | | 22 | | | | 123 | | |
| States and political subdivisions | | 1,748 | | | | 2,361 | | | | 2,204 | | | | 4.77 | | | 5.20 | | | 5.65 | | | 83 | | | | 123 | | | | 125 | | | | (40 | | ) | | (10 | | ) | | (30 | | ) | | (2 | | ) | | (11 | | ) | | 9 | | |
| Non-agency MBS | | 411 | | | | 534 | | | | 751 | | | | 18.80 | | | 14.56 | | | 13.51 | | | 77 | | | | 78 | | | | 102 | | | | (1 | | ) | | 19 | | | | (20 | | ) | | (24 | | ) | | 7 | | | | (31 | | ) |
| Other | | 56 | | | | 64 | | | | 477 | | | | 2.17 | | | 1.87 | | | 1.31 | | | 1 | | | | — | | | | 7 | | | | 1 | | | | 1 | | | | — | | | | (7 | | ) | | 1 | | | | (8 | | ) |
| Total securities | | 46,029 | | | | 46,279 | | | | 42,103 | | | | 2.45 | | | 2.33 | | | 2.36 | | | 1,127 | | | | 1,079 | | | | 994 | | | | 48 | | | | 93 | | | | (45 | | ) | | 85 | | | | 21 | | | | 64 | | |
| Other earning assets (3) | | 3,484 | | | | 3,202 | | | | 2,768 | | | | 1.53 | | | 1.64 | | | 1.39 | | | 53 | | | | 53 | | | | 38 | | | | — | | | | (4 | | ) | | 4 | | | | 15 | | | | 8 | | | | 7 | | |
| Loans and leases, net of unearned income: (4)(5) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | 57,994 | | | | 56,227 | | | | 49,518 | | | | 3.59 | | | 3.40 | | | 3.25 | | | 2,080 | | | | 1,914 | | | | 1,612 | | | | 166 | | | | 106 | | | | 60 | | | | 302 | | | | 77 | | | | 225 | | |
| CRE | | 20,497 | | | | 19,407 | | | | 15,840 | | | | 4.08 | | | 3.75 | | | 3.67 | | | 837 | | | | 727 | | | | 581 | | | | 110 | | | | 67 | | | | 43 | | | | 146 | | | | 13 | | | | 133 | | |
| Lease financing | | 1,726 | | | | 1,524 | | | | 1,183 | | | | 2.82 | | | 3.01 | | | 2.82 | | | 49 | | | | 45 | | | | 33 | | | | 4 | | | | (3 | | ) | | 7 | | | | 12 | | | | 2 | | | | 10 | | |
| Retail: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Residential mortgage | | 29,140 | | | | 30,184 | | | | 30,252 | | | | 4.02 | | | 4.05 | | | 4.15 | | | 1,170 | | | | 1,224 | | | | 1,255 | | | | (54 | | ) | | (10 | | ) | | (44 | | ) | | (31 | | ) | | (28 | | ) | | (3 | | ) |
| Direct | | 11,968 | | | | 11,796 | | | | 9,375 | | | | 4.60 | | | 4.27 | | | 4.07 | | | 550 | | | | 503 | | | | 381 | | | | 47 | | | | 40 | | | | 7 | | | | 122 | | | | 20 | | | | 102 | | |
| Indirect | | 17,840 | | | | 17,072 | | | | 16,443 | | | | 6.89 | | | 6.94 | | | 6.86 | | | 1,230 | | | | 1,186 | | | | 1,127 | | | | 44 | | | | (9 | | ) | | 53 | | | | 59 | | | | 13 | | | | 46 | | |
| Revolving credit | | 2,662 | | | | 2,521 | | | | 2,406 | | | | 8.88 | | | 8.77 | | | 8.76 | | | 236 | | | | 221 | | | | 211 | | | | 15 | | | | 3 | | | | 12 | | | | 10 | | | | — | | | | 10 | | |
| PCI | | 784 | | | | 1,063 | | | | 1,083 | | | | 18.86 | | | 19.55 | | | 16.57 | | | 148 | | | | 208 | | | | 179 | | | | (60 | | ) | | (7 | | ) | | (53 | | ) | | 29 | | | | 32 | | | | (3 | | ) |
| Total loans and leases HFI | | 142,611 | | | | 139,794 | | | | 126,100 | | | | 4.42 | | | 4.31 | | | 4.27 | | | 6,300 | | | | 6,028 | | | | 5,379 | | | | 272 | | | | 187 | | | | 85 | | | | 649 | | | | 129 | | | | 520 | | |
| LHFS | | 1,464 | | | | 1,965 | | | | 1,702 | | | | 3.62 | | | 3.34 | | | 3.63 | | | 53 | | | | 66 | | | | 62 | | | | (13 | | ) | | 5 | | | | (18 | | ) | | 4 | | | | (5 | | ) | | 9 | | |
| Total loans and leases | | 144,075 | | | | 141,759 | | | | 127,802 | | | | 4.41 | | | 4.30 | | | 4.26 | | | 6,353 | | | | 6,094 | | | | 5,441 | | | | 259 | | | | 192 | | | | 67 | | | | 653 | | | | 124 | | | | 529 | | |
| Total earning assets | | 193,588 | | | | 191,240 | | | | 172,673 | | | | 3.89 | | | 3.78 | | | 3.75 | | | 7,533 | | | | 7,226 | | | | 6,473 | | | | 307 | | | | 281 | | | | 26 | | | | 753 | | | | 153 | | | | 600 | | |
| Nonearning assets | | 27,477 | | | | 27,705 | | | | 24,674 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total assets | | $ | 221,065 | | | $ | 218,945 | | | $ | 197,347 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Liabilities and Shareholders’ Equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest-bearing deposits: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest checking | | $ | 28,033 | | | $ | 27,595 | | | $ | 22,092 | | | 0.25 | | | 0.14 | | | 0.08 | | | $ | 70 | | | $ | 39 | | | $ | 18 | | | $ | 31 | | | $ | 30 | | | $ | 1 | | | $ | 21 | | | $ | 16 | | | $ | 5 | |
| Money market and savings | | 63,061 | | | | 62,966 | | | | 56,592 | | | | 0.30 | | | 0.20 | | | 0.19 | | | 190 | | | | 123 | | | | 107 | | | | 67 | | | | 67 | | | | — | | | | 16 | | | | 5 | | | | 11 | | |
| Time deposits | | 14,133 | | | | 16,619 | | | | 16,405 | | | | 0.51 | | | 0.51 | | | 0.66 | | | 72 | | | | 85 | | | | 107 | | | | (13 | | ) | | — | | | | (13 | | ) | | (22 | | ) | | (23 | | ) | | 1 | | |
| Foreign office deposits - interest-bearing | | 1,142 | | | | 1,034 | | | | 593 | | | | 1.05 | | | 0.38 | | | 0.12 | | | 12 | | | | 4 | | | | 1 | | | | 8 | | | | 8 | | | | — | | | | 3 | | | | 2 | | | | 1 | | |
| Total interest-bearing deposits | | 106,369 | | | | 108,214 | | | | 95,682 | | | | 0.32 | | | 0.23 | | | 0.24 | | | 344 | | | | 251 | | | | 233 | | | | 93 | | | | 105 | | | | (12 | | ) | | 18 | | | | — | | | | 18 | | |
| Short-term borrowings | | 4,311 | | | | 2,554 | | | | 3,221 | | | | 0.94 | | | 0.35 | | | 0.15 | | | 41 | | | | 9 | | | | 4 | | | | 32 | | | | 23 | | | | 9 | | | | 5 | | | | 6 | | | | (1 | | ) |
| Long-term debt | | 21,660 | | | | 22,791 | | | | 23,343 | | | | 2.10 | | | 2.13 | | | 2.13 | | | 454 | | | | 485 | | | | 498 | | | | (31 | | ) | | (7 | | ) | | (24 | | ) | | (13 | | ) | | — | | | | (13 | | ) |
| Total interest-bearing liabilities | | 132,340 | | | | 133,559 | | | | 122,246 | | | | 0.63 | | | 0.56 | | | 0.60 | | | 839 | | | | 745 | | | | 735 | | | | 94 | | | | 121 | | | | (27 | | ) | | 10 | | | | 6 | | | | 4 | | |
| Noninterest-bearing deposits | | 52,872 | | | | 49,255 | | | | 42,816 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Other liabilities | | 5,852 | | | | 6,776 | | | | 6,414 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Shareholders’ equity | | 30,001 | | | | 29,355 | | | | 25,871 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total liabilities and shareholders’ equity | | $ | 221,065 | | | $ | 218,945 | | | $ | 197,347 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Average interest rate spread | | | | | | | | | | | | | | 3.26 | % | | 3.22 | % | | 3.15 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| NIM / net interest income | | | | | | | | | | | | | | 3.46 | % | | 3.39 | % | | 3.32 | % | | $ | 6,694 | | | $ | 6,481 | | | $ | 5,738 | | | $ | 213 | | | $ | 160 | | | $ | 53 | | | $ | 743 | | | $ | 147 | | | $ | 596 | |
| TE adjustment | | | | | | | | | | | | | | | | | | | | | | | $ | 159 | | | $ | 160 | | | $ | 146 | | | | | | | | | | | | | | | | | | | | | | | | | |
| TFC/10-K/0000092230-18-000021 |
Noninterest Income | Noninterest income was a record $4.8 billion for 2017, an increase of $310 million compared to 2016. The increase was broad based across almost all major categories of noninterest income. Income from BB&T’s insurance agency/brokerage operations was the largest source of noninterest income in 2017. 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.FDIC loss share income improved by $142 million due to the termination of the loss sharing agreements during the third quarter of 2016. Other income totaled $467 million for 2017, an increase of $105 million from 2016, primarily due to a $34 million increase in income from SBIC investments and a $50 million increase driven by income related to assets for certain post-employment benefits. Noninterest income was $4.5 billion for 2016, an increase of $453 million compared to 2015. This increase was across all categories and primarily reflects the impact from acquisitions.Income from BB&T’s insurance agency/brokerage operations was the largest source of noninterest income in 2016. Insurance income totaled $1.7 billion for 2016, an increase of $117 million compared to 2015. The increase was largely the result of the acquisition of Swett and Crawford, which was partially offset by the impact from selling American Coastal in 2015.FDIC loss share income improved by $111 million, primarily due to the termination of the loss sharing agreements during the third quarter of 2016. Other income totaled $362 million for 2016, an increase of $36 million from 2015. This increase is primarily due to the $26 million loss on sale of American Coastal during the second quarter of 2015, $19 million for client derivatives revenues and $10 million of trading gains. These increases were partially offset by lower partnerships and other investment income, which was the result of an opportunistic sale that resulted in a $28 million gain during the third quarter of 2015. |
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| Table 6 | | | | | | | | | | | | | | | | | | |
| Noninterest Income | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | | | | | | | | | | | | % Change | | | | |
| | | | 2017 vs. 2016 | | | 2016 vs. 2015 | |
| (Dollars in millions) | | 2017 | | | | 2016 | | | | 2015 | | | | |
| Insurance income | | $ | 1,754 | | | $ | 1,713 | | | $ | 1,596 | | | 2.4 | % | | 7.3 | % |
| Service charges on deposits | | 706 | | | | 664 | | | | 631 | | | | 6.3 | | | 5.2 | |
| Mortgage banking income | | 415 | | | | 463 | | | | 455 | | | | (10.4 | ) | | 1.8 | |
| Investment banking and brokerage fees and commissions | | 410 | | | | 408 | | | | 398 | | | | 0.5 | | | 2.5 | |
| Trust and investment advisory revenues | | 278 | | | | 266 | | | | 240 | | | | 4.5 | | | 10.8 | |
| Bankcard fees and merchant discounts | | 271 | | | | 237 | | | | 218 | | | | 14.3 | | | 8.7 | |
| Checkcard fees | | 214 | | | | 195 | | | | 174 | | | | 9.7 | | | 12.1 | |
| Operating lease income | | 146 | | | | 137 | | | | 124 | | | | 6.6 | | | 10.5 | |
| Income from bank-owned life insurance | | 122 | | | | 123 | | | | 113 | | | | (0.8 | ) | | 8.8 | |
| FDIC loss share income, net | | — | | | | (142 | | ) | | (253 | | ) | | (100.0 | ) | | (43.9 | ) |
| Securities gains (losses), net | | (1 | | ) | | 46 | | | | (3 | | ) | | (102.2 | ) | | NM | |
| Other income | | 467 | | | | 362 | | | | 326 | | | | 29.0 | | | 11.0 | |
| Total noninterest income | | $ | 4,782 | | | $ | 4,472 | | | $ | 4,019 | | | 6.9 | | | 11.3 | |
| TFC/10-K/0000092230-18-000021 |
Noninterest Expense | 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 and other employee benefit costs. Personnel expense totaled $4.1 billion, a $157 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 $23 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. This was partially offset by a decline of $26 million for pension expense. 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 $183 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.Noninterest expense totaled $6.7 billion for 2016, an increase of $455 million from 2015. This increase was primarily driven by higher personnel expense. Personnel expense is the largest component of noninterest expense and includes salaries, wages and incentives, as well as pension and other employee benefit costs. Personnel expense totaled $4.0 billion, a $495 million increase compared to 2015. This increase was driven by a $284 million increase in salaries, which was primarily due to additional headcount from acquisitions. Incentives expense was higher $110 million due to performance against targets and acquisitions. Personnel expense also increased due to a $48 million increase in pension expense that reflects higher amortization, service and interest costs. Additionally, personnel expense reflects a $26 million increase in payroll taxes as a result of higher salaries and incentives.Loss on early extinguishment of debt was down $173 million for 2016, as the prior year included a loss of $172 million, compared to a small gain for 2016.Occupancy and equipment expense totaled $786 million for 2016, compared to $708 million for 2015. The increase reflects the acquisition activity. Software expense was higher $32 million compared to 2015, primarily reflecting higher depreciation on recent investments.Outside IT services expense totaled $186 million for 2016, compared to $135 million in the prior year. This increase was due to higher costs related to projects.Loan-related expense totaled $95 million for 2016, a decrease of $55 million compared to the prior year. This decrease is largely the result of a release of $31 million in reserves during the fourth quarter of 2016, which was primarily driven by lower anticipated loan repurchase requests.Regulatory charges totaled $145 million for 2016, an increase of $44 million compared to the prior year. This increase reflects the impact from acquisitions and the surcharge assessed to large banks, which was implemented in the third quarter of 2016.Other expense decreased $40 million primarily due to a net benefit of $73 million in the third quarter related to the settlement of certain legacy mortgage matters involving the origination of mortgage loans insured by the FHA. In addition, business referral expense decreased $16 million primarily due to the sale of American Coastal in the prior year. Partially offsetting these decreases was a $50 million charitable contribution that was also made in the third quarter. |
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| Table 7 | | | | | | | | | | | | | | | | | | |
| Noninterest Expense | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | | | | | | | | | | | | % Change | | | | |
| | | | 2017 vs. 2016 | | | 2016 vs. 2015 | |
| (Dollars in millions) | | 2017 | | | | 2016 | | | | 2015 | | | | |
| Personnel expense | | $ | 4,121 | | | $ | 3,964 | | | $ | 3,469 | | | 4.0 | % | | 14.3 | % |
| Occupancy and equipment expense | | 784 | | | | 786 | | | | 708 | | | | (0.3 | ) | | 11.0 | |
| Software expense | | 242 | | | | 224 | | | | 192 | | | | 8.0 | | | 16.7 | |
| Outside IT services | | 160 | | | | 186 | | | | 135 | | | | (14.0 | ) | | 37.8 | |
| Regulatory charges | | 153 | | | | 145 | | | | 101 | | | | 5.5 | | | 43.6 | |
| Amortization of intangibles | | 142 | | | | 150 | | | | 105 | | | | (5.3 | ) | | 42.9 | |
| Loan-related expense | | 130 | | | | 95 | | | | 150 | | | | 36.8 | | | (36.7 | ) |
| Professional services | | 123 | | | | 102 | | | | 130 | | | | 20.6 | | | (21.5 | ) |
| Merger-related and restructuring charges, net | | 115 | | | | 171 | | | | 165 | | | | (32.7 | ) | | 3.6 | |
| Loss (gain) on early extinguishment of debt | | 392 | | | | (1 | | ) | | 172 | | | | NM | | | (100.6 | ) |
| Other expense | | 1,082 | | | | 899 | | | | 939 | | | | 20.4 | | | (4.3 | ) |
| Total noninterest expense | | $ | 7,444 | | | $ | 6,721 | | | $ | 6,266 | | | 10.8 | | | 7.3 | |
| TFC/10-K/0000092230-18-000021 |
Merger-Related and Restructuring Charges | (1) Includes asset impairment charges.The 2017 costs primarily reflect branch closures and other restructuring initiatives, while the 2016 costs primarily reflect the acquisitions of National Penn and Swett & Crawford. |
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| Table 8 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Merger-related and Restructuring Accrual Activity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | Year Ended December 31, 2017 | | | | | | | | | | | | | | | | Year Ended December 31, 2016 | | | | | | | | | | | | | | |
| (Dollars in millions) | | Beginning Balance | | | | Expense | | | | Utilized | | | | Ending Balance | | | | Beginning Balance | | | | Expense | | | | Utilized | | | | Ending Balance | | |
| Severance and personnel-related | | $ | 25 | | | $ | 40 | | | $ | (51 | ) | | $ | 14 | | | $ | 26 | | | $ | 51 | | | $ | (52 | ) | | $ | 25 | |
| Occupancy and equipment (1) | | 21 | | | | 43 | | | | (44 | | ) | | 20 | | | | 11 | | | | 49 | | | | (39 | | ) | | 21 | | |
| Professional services | | 1 | | | | 2 | | | | (3 | | ) | | — | | | | 13 | | | | 14 | | | | (26 | | ) | | 1 | | |
| Systems conversion and related costs (1) | | 1 | | | | 26 | | | | (27 | | ) | | — | | | | — | | | | 27 | | | | (26 | | ) | | 1 | | |
| Other adjustments | | 1 | | | | 4 | | | | (5 | | ) | | — | | | | 2 | | | | 30 | | | | (31 | | ) | | 1 | | |
| Total | | $ | 49 | | | $ | 115 | | | $ | (130 | ) | | $ | 34 | | | $ | 52 | | | $ | 171 | | | $ | (174 | ) | | $ | 49 | |
| TFC/10-K/0000092230-18-000021 |
Investment Activities | The securities portfolio totaled $47.6 billion at December 31, 2017, compared to $43.6 billion at December 31, 2016. The increase in the overall portfolio was due to new purchases and reinvestments in the HTM portfolio. A change in the mix between AFS and HTM also contributed to the increase in HTM securities. As of December 31, 2017, approximately 5.8% of the securities portfolio was variable rate, compared to 7.5% as of December 31, 2016. The effective duration of the securities portfolio was 4.7 years at December 31, 2017, compared to 4.8 years at the end of 2016. The duration of the securities portfolio excludes equity securities and certain non-agency MBS acquired from the FDIC.Agency MBS represented 83.6% of the total securities portfolio at year-end 2017, compared to 79.1% as of prior year end. Refer to "Note 2. Securities" for additional disclosures related to the evaluation of securities for OTTI.The following table presents the securities portfolio at December 31, 2017, 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) | | 2017 | | | | 2016 | | | | 2015 | | |
| AFS securities (at fair value): | | | | | | | | | | | | |
| U.S. Treasury | | $ | 2,291 | | | $ | 2,587 | | | $ | 1,832 | |
| GSE | | 179 | | | | 180 | | | | 51 | | |
| Agency MBS | | 20,101 | | | | 21,264 | | | | 20,046 | | |
| States and political subdivisions | | 1,392 | | | | 2,205 | | | | 2,375 | | |
| Non-agency MBS | | 576 | | | | 679 | | | | 989 | | |
| Other | | 8 | | | | 11 | | | | 4 | | |
| Total AFS securities | | 24,547 | | | | 26,926 | | | | 25,297 | | |
| HTM securities (at amortized cost): | | | | | | | | | | | | |
| U.S. Treasury | | 1,098 | | | | 1,098 | | | | 1,097 | | |
| GSE | | 2,198 | | | | 2,197 | | | | 5,045 | | |
| Agency MBS | | 19,660 | | | | 13,225 | | | | 12,267 | | |
| States and political subdivisions | | 28 | | | | 110 | | | | 63 | | |
| Other | | 43 | | | | 50 | | | | 58 | | |
| Total HTM securities | | 23,027 | | | | 16,680 | | | | 18,530 | | |
| Total securities | | $ | 47,574 | | | $ | 43,606 | | | $ | 43,827 | |
| TFC/10-K/0000092230-18-000021 |
Investment Activities | (1)Yields represent interest computed using the effective interest method on a TE basis using marginal income tax rates and the amortized cost of the securities.(2)For purposes of the maturity table, MBS, which are not due at a single maturity date, have been included in maturity groupings based on the contractual maturity. The expected life of MBS will differ from contractual maturities because borrowers may have the right to call or prepay the underlying mortgage loans.(3)Weighted-average yield excludes the effect of pay-fixed swaps hedging municipal securities. |
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| Table 10 | | | | | | | | | | | | | | |
| Securities Yields By Major Category and Maturity | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | December 31, 2017 | | | | | | | | | | | | |
| | | AFS | | | | | | | HTM | | | | | |
| (Dollars in millions) | | Fair Value | | | | Effective Yield (1) | | | Amortized Cost | | | | Effective Yield (1) | |
| U.S. Treasury: | | | | | | | | | | | | | | |
| Within one year | | $ | 307 | | | 1.21 | % | | $ | — | | | — | % |
| One to five years | | 246 | | | | 1.53 | | | 1,098 | | | | 2.30 | |
| Five to ten years | | 1,738 | | | | 1.52 | | | — | | | | — | |
| Total | | 2,291 | | | | 1.48 | | | 1,098 | | | | 2.30 | |
| GSE: | | | | | | | | | | | | | | |
| One to five years | | 26 | | | | 1.45 | | | 1,136 | | | | 2.35 | |
| Five to ten years | | 141 | | | | 1.55 | | | 1,062 | | | | 2.21 | |
| After ten years | | 12 | | | | 2.69 | | | — | | | | — | |
| Total | | 179 | | | | 1.61 | | | 2,198 | | | | 2.29 | |
| Agency MBS: (2) | | | | | | | | | | | | | | |
| One to five years | | 1 | | | | 2.09 | | | — | | | | — | |
| Five to ten years | | 16 | | | | 2.64 | | | 31 | | | | 2.09 | |
| After ten years | | 20,084 | | | | 2.23 | | | 19,629 | | | | 2.56 | |
| Total | | 20,101 | | | | 2.23 | | | 19,660 | | | | 2.56 | |
| States and political subdivisions: (3) | | | | | | | | | | | | | | |
| Within one year | | 20 | | | | 4.96 | | | — | | | | — | |
| One to five years | | 223 | | | | 5.05 | | | 2 | | | | 1.72 | |
| Five to ten years | | 446 | | | | 4.45 | | | 18 | | | | 1.28 | |
| After ten years | | 703 | | | | 6.03 | | | 8 | | | | 1.59 | |
| Total | | 1,392 | | | | 5.35 | | | 28 | | | | 1.40 | |
| Non-agency MBS: (2) | | | | | | | | | | | | | | |
| After ten years | | 576 | | | | 18.96 | | | — | | | | — | |
| Total | | 576 | | | | 18.96 | | | — | | | | — | |
| Other: | | | | | | | | | | | | | | |
| Within one year | | 8 | | | | 1.09 | | | — | | | | — | |
| One to five years | | — | | | | — | | | 1 | | | | 2.03 | |
| After ten years | | — | | | | — | | | 42 | | | | 2.79 | |
| Total | | 8 | | | | 1.09 | | | 43 | | | | 2.78 | |
| Total securities | | $ | 24,547 | | | 2.73 | | | $ | 23,027 | | | 2.52 | |
| TFC/10-K/0000092230-18-000021 |
Lending Activities | Average loans held for investment for the fourth quarter of 2017 were $142.7 billion, down $30 million, or 0.1 percent annualized compared to the third quarter of 2017.Average commercial and industrial loans increased $267 million, while average CRE increased $222 million. Average lease financing increased $119 million due to strong production from our leasing businesses. Average revolving credit increased $91 million, primarily due to seasonal spending.Average residential mortgage loans decreased $365 million as the majority of conforming loans continue to be sold in the secondary market. In addition, average indirect loans decreased $252 million, primarily due to strategic optimization and directing investments toward higher-yielding assets. The following table presents loans with variable interest rates: |
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| Table 11 | | | | | | | | | | | | | | | | | | | | |
| Quarterly Average Balances of Loans and Leases | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | For the Three Months Ended | | | | | | | | | | | | | | | | | | |
| (Dollars in millions) | | 12/31/2017 | | | | 9/30/2017 | | | | 6/30/2017 | | | | 3/31/2017 | | | | 12/31/2016 | | |
| Commercial: | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 58,478 | | | $ | 58,211 | | | $ | 58,150 | | | $ | 57,125 | | | $ | 57,226 | |
| CRE | | 20,998 | | | | 20,776 | | | | 20,304 | | | | 19,892 | | | | 19,830 | | |
| Lease financing | | 1,851 | | | | 1,732 | | | | 1,664 | | | | 1,653 | | | | 1,570 | | |
| Retail: | | | | | | | | | | | | | | | | | | | | |
| Residential mortgage | | 28,559 | | | | 28,924 | | | | 29,392 | | | | 29,701 | | | | 30,044 | | |
| Direct | | 11,901 | | | | 11,960 | | | | 12,000 | | | | 12,014 | | | | 12,046 | | |
| Indirect | | 17,426 | | | | 17,678 | | | | 18,127 | | | | 18,137 | | | | 18,041 | | |
| Revolving credit | | 2,759 | | | | 2,668 | | | | 2,612 | | | | 2,607 | | | | 2,608 | | |
| PCI | | 689 | | | | 742 | | | | 825 | | | | 883 | | | | 974 | | |
| Total loans and leases HFI | | 142,661 | | | | 142,691 | | | | 143,074 | | | | 142,012 | | | | 142,339 | | |
| LHFS | | 1,428 | | | | 1,490 | | | | 1,253 | | | | 1,686 | | | | 2,230 | | |
| Total loans and leases | | $ | 144,089 | | | $ | 144,181 | | | $ | 144,327 | | | $ | 143,698 | | | $ | 144,569 | |
| TFC/10-K/0000092230-18-000021 |
Lending Activities | (1)Commercial and industrial loans and direct loans totaling $1.7 billion and $100 million, respectively, have been excluded from the weighted average remaining term because they are callable on demand. As of December 31, 2017, approximately $126 million of variable rate residential mortgage loans are currently in an interest-only phase. Approximately 95.0% of these balances will begin amortizing within the next three years. Variable rate residential mortgage loans typically reset every 12 months beginning after a 3 to 10 year fixed period, with an annual cap on rate changes ranging from 2.0% to 6.0%.As of December 31, 2017, the direct lending portfolio includes $8.5 billion of variable rate home equity lines, $1.0 billion of variable rate other lines of credit and $255 million of variable rate loans. Approximately $6.5 billion of the variable rate home equity lines is currently in the interest-only phase and approximately 9.4% of these balances will begin amortizing within the next three years. Approximately $911 million of the outstanding balance of variable rate other lines of credit is in the interest-only phase and 17.0% of these balances will begin amortizing within the next three years. Variable rate home equity lines and other lines of credit typically reset on a monthly basis. BB&T monitors the performance of its home equity loans and lines secured by second liens similarly to other consumer loans and utilizes assumptions specific to these loans in determining the necessary ALLL. BB&T also receives notification when the first lien holder, whether BB&T or another financial institution, has initiated foreclosure proceedings against the borrower. When notified that the first lien is in the process of foreclosure, BB&T obtains valuations to determine if any additional charge-offs or reserves are warranted. These valuations are updated at least annually thereafter.BB&T has limited ability to monitor the delinquency status of the first lien, unless the first lien is held or serviced by BB&T. As a result, using migration assumptions that are based on historical experience and adjusted for current trends, BB&T estimates the volume of second lien positions where the first lien is delinquent and adjusts the ALLL to reflect the increased risk of loss on these credits. Finally, BB&T also provides additional reserves to second lien positions when the estimated combined current loan to value ratio for the credit exceeds 100%. As of December 31, 2017, BB&T held or serviced the first lien on 30.4% of its second lien positions.BB&T lends to a diverse customer base that is substantially located within the Company’s primary market area. At the same time, the loan portfolio is geographically dispersed throughout BB&T’s branch network to mitigate concentration risk arising from local and regional economic downturns. Refer to the "Risk Management" section for a discussion of each of the loan portfolios and the credit risk management policies used to manage the portfolios.The following table summarizes the loan portfolio: |
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| Table 12 | | | | | | | | | | | |
| Variable Rate Loans (Excluding PCI and LHFS) | | | | | | | | | | | |
| | | | | | | | | | | | |
| December 31, 2017 | | Outstanding Balance | | | | Wtd. Avg. Contractual Rate | | | Wtd. Avg. Remaining Term (1) | | |
| (Dollars in millions) | | | |
| Commercial: | | | | | | | | | | | |
| Commercial and industrial | | $ | 38,562 | | | 3.13 | % | | 4.1 | | yrs |
| CRE | | 16,046 | | | | 3.94 | | | 4.0 | | |
| Lease financing | | 133 | | | | 3.22 | | | 5.6 | | |
| Retail: | | | | | | | | | | | |
| Residential mortgage | | 5,148 | | | | 3.62 | | | 24.4 | | |
| Direct | | 9,777 | | | | 4.43 | | | 8.0 | | |
| Indirect | | 20 | | | | 4.06 | | | NM | | |
| Revolving credit | | 2,552 | | | | 10.86 | | | NM | | |
| TFC/10-K/0000092230-18-000021 |
Lending Activities | (1) During the first quarter of 2014, $8.3 billion of loans were transferred from direct lending to residential mortgage.Loans and leases HFI were $143.7 billion at December 31, 2017, an increase of $379 million compared to the prior year.Commercial and industrial loans were up $1.4 billion and CRE loans were up $1.5 billion. Residential mortgage loans declined $1.2 billion as the majority of conforming loan production continues to be sold in the secondary market. Indirect loans were down $1.3 billion, primarily due to strategic optimization and directing investments into higher yielding assets. The PCI loan portfolio, which totaled $651 million at December 31, 2017, continued to run off during the year.The majority of loans are with clients in domestic market areas, which are primarily concentrated in the Southeastern United States. International loans were immaterial as of December 31, 2017 and 2016.Scheduled repayments are reported in the maturity category in which the payment is due. Determinations of maturities are based on contract terms. BB&T’s credit policy typically does not permit automatic renewal of loans. At the scheduled maturity date (including balloon payment date), the customer generally must request a new loan to replace the matured loan and execute either a new note or note modification with rate, terms and conditions negotiated at that time. |
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| Table 13 | | | | | | | | | | | | | | | | | | | | |
| Composition of Loan and Lease Portfolio | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | December 31, | | | | | | | | | | | | | | | | | | |
| (Dollars in millions) | | 2017 | | | | 2016 | | | | 2015 | | | | 2014 | | | | 2013 | | |
| Commercial: | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 59,153 | | | $ | 57,739 | | | $ | 53,746 | | | $ | 46,110 | | | $ | 42,954 | |
| CRE | | 21,263 | | | | 19,764 | | | | 18,312 | | | | 14,128 | | | | 13,042 | | |
| Lease financing | | 1,911 | | | | 1,677 | | | | 1,535 | | | | 1,119 | | | | 1,125 | | |
| Retail: | | | | | | | | | | | | | | | | | | | | |
| Residential mortgage (1) | | 28,725 | | | | 29,921 | | | | 30,533 | | | | 31,090 | | | | 24,648 | | |
| Direct (1) | | 11,891 | | | | 12,092 | | | | 11,140 | | | | 8,146 | | | | 15,869 | | |
| Indirect | | 17,235 | | | | 18,564 | | | | 17,053 | | | | 15,616 | | | | 13,841 | | |
| Revolving credit | | 2,872 | | | | 2,655 | | | | 2,510 | | | | 2,460 | | | | 2,403 | | |
| PCI | | 651 | | | | 910 | | | | 1,122 | | | | 1,215 | | | | 2,035 | | |
| Total loans and leases HFI | | 143,701 | | | | 143,322 | | | | 135,951 | | | | 119,884 | | | | 115,917 | | |
| LHFS | | 1,099 | | | | 1,716 | | | | 1,035 | | | | 1,423 | | | | 1,222 | | |
| Total loans and leases | | $ | 144,800 | | | $ | 145,038 | | | $ | 136,986 | | | $ | 121,307 | | | $ | 117,139 | |
| TFC/10-K/0000092230-18-000021 |
Asset Quality | (1)Includes charge-offs and losses recorded upon sale of $236 million and $210 million for the year ended December 31, 2017 and 2016, respectively.(2)Includes charge-offs and losses recorded upon sale of $33 million and $30 million for the year ended December 31, 2017 and 2016, respectively.NPAs, which include foreclosed real estate, repossessions and NPLs, totaled $627 million at December 31, 2017 compared to $813 million at December 31, 2016. This decrease consisted of a $166 million decrease in NPLs and a $20 million decrease in foreclosed real estate and other property.The decrease in NPLs is primarily due to a $110 million decline in commercial and industrial NPLs primarily resulting from payoffs, sales and writedowns. In addition, residential mortgage NPLs were down $43 million largely due to sales.NPAs as a percentage of loans and leases plus foreclosed property were 0.44% at December 31, 2017 compared with 0.57% at December 31, 2016.The following tables summarize asset quality information for the past five years: |
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| | | | | | | | | |
| Table 15 | | | | | | | | |
| Rollforward of NPAs | | | | | | | | |
| | | | | | | | | |
| | | Year Ended December 31, | | | | | | |
| (Dollars in millions) | | 2017 | | | | 2016 | | |
| Balance at beginning of year | | $ | 813 | | | $ | 686 | |
| New NPAs | | 1,297 | | | | 1,716 | | |
| Advances and principal increases | | 328 | | | | 253 | | |
| Disposals of foreclosed assets (1) | | (520 | | ) | | (516 | | ) |
| Disposals of NPLs (2) | | (212 | | ) | | (302 | | ) |
| Charge-offs and losses | | (251 | | ) | | (279 | | ) |
| Payments | | (660 | | ) | | (586 | | ) |
| Transfers to performing status | | (164 | | ) | | (179 | | ) |
| Foreclosed real estate, included as a result of loss share termination | | — | | | | 17 | | |
| Other, net | | (4 | | ) | | 3 | | |
| Balance at end of year | | $ | 627 | | | $ | 813 | |
| TFC/10-K/0000092230-18-000021 |
Asset Quality | (1)During 2016, approximately $191 million of nonaccrual energy-related loans were sold.(2)During 2017 and 2014, approximately $61 million and $121 million, respectively, of nonaccrual residential mortgage loans were sold.(3)During 2017 and 2014, approximately $331 million and $540 million, respectively, of performing residential mortgage TDRs were sold.(4)During 2014, approximately $94 million of performing TDRs were transferred from direct lending to residential mortgage.Asset quality continued to improve in 2017 with declines across almost all loan categories. NPAs declined $186 million driven by commercial and industrial loans and its reduction in the energy-related portfolio. Performing TDRs declined $144 million driven by the sale of $199 million of performing residential mortgage TDRs. Delinquent loans still accruing interest declined $113 million driven by residential mortgage loans, which reflects general improvements in credit quality within that portfolio. |
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| Table 16 | | | | | | | | | | | | | | | | | | | | |
| Asset Quality | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | December 31, | | | | | | | | | | | | | | | | | | |
| (Dollars in millions) | | 2017 | | | | 2016 | | | | 2015 | | | | 2014 | | | | 2013 | | |
| Nonaccrual loans and leases: | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial (1) | | $ | 259 | | | $ | 369 | | | $ | 242 | | | $ | 243 | | | $ | 364 | |
| CRE | | 45 | | | | 57 | | | | 51 | | | | 100 | | | | 164 | | |
| Lease financing | | 1 | | | | 4 | | | | 1 | | | | — | | | | — | | |
| Residential mortgage (2) | | 129 | | | | 172 | | | | 173 | | | | 166 | | | | 243 | | |
| Direct | | 64 | | | | 63 | | | | 43 | | | | 48 | | | | 109 | | |
| Indirect | | 72 | | | | 71 | | | | 66 | | | | 59 | | | | 55 | | |
| Total nonaccrual loans and leases (1)(2) | | 570 | | | | 736 | | | | 576 | | | | 616 | | | | 935 | | |
| Foreclosed real estate | | 32 | | | | 50 | | | | 108 | | | | 143 | | | | 192 | | |
| Other foreclosed property | | 25 | | | | 27 | | | | 28 | | | | 23 | | | | 47 | | |
| Total NPAs (1)(2) | | $ | 627 | | | $ | 813 | | | $ | 712 | | | $ | 782 | | | $ | 1,174 | |
| | | | | | | | | | | | | | | | | | | | | |
| Performing TDRs: | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 50 | | | $ | 57 | | | $ | 50 | | | $ | 65 | | | $ | 78 | |
| CRE | | 16 | | | | 25 | | | | 29 | | | | 57 | | | | 89 | | |
| Residential mortgage (3)(4) | | 605 | | | | 769 | | | | 604 | | | | 621 | | | | 1,161 | | |
| Direct (4) | | 62 | | | | 67 | | | | 72 | | | | 84 | | | | 187 | | |
| Indirect | | 281 | | | | 240 | | | | 194 | | | | 182 | | | | 142 | | |
| Revolving credit | | 29 | | | | 29 | | | | 33 | | | | 41 | | | | 48 | | |
| Total performing TDRs (3)(4) | | $ | 1,043 | | | $ | 1,187 | | | $ | 982 | | | $ | 1,050 | | | $ | 1,705 | |
| | | | | | | | | | | | | | | | | | | | | |
| Loans 90 days or more past due and still accruing: | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 1 | | | $ | — | | | $ | — | | | $ | — | | | $ | 5 | |
| CRE | | 1 | | | | — | | | | — | | | | — | | | | — | | |
| Residential mortgage | | 465 | | | | 522 | | | | 541 | | | | 731 | | | | 876 | | |
| Direct | | 6 | | | | 6 | | | | 7 | | | | 12 | | | | 33 | | |
| Indirect | | 6 | | | | 6 | | | | 5 | | | | 5 | | | | 5 | | |
| Revolving credit | | 12 | | | | 12 | | | | 10 | | | | 9 | | | | 10 | | |
| PCI | | 57 | | | | 90 | | | | 114 | | | | 188 | | | | 304 | | |
| Total loans 90 days or more past due and still accruing | | $ | 548 | | | $ | 636 | | | $ | 677 | | | $ | 945 | | | $ | 1,233 | |
| | | | | | | | | | | | | | | | | | | | | |
| Loans 30-89 days past due and still accruing: | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 41 | | | $ | 44 | | | $ | 53 | | | $ | 37 | | | $ | 50 | |
| CRE | | 8 | | | | 8 | | | | 22 | | | | 5 | | | | 10 | | |
| Lease financing | | 4 | | | | 4 | | | | 1 | | | | — | | | | — | | |
| Residential mortgage | | 472 | | | | 525 | | | | 475 | | | | 474 | | | | 546 | | |
| Direct | | 65 | | | | 60 | | | | 58 | | | | 41 | | | | 132 | | |
| Indirect | | 412 | | | | 377 | | | | 358 | | | | 285 | | | | 262 | | |
| Revolving credit | | 23 | | | | 23 | | | | 22 | | | | 23 | | | | 23 | | |
| PCI | | 27 | | | | 36 | | | | 42 | | | | 33 | | | | 88 | | |
| Total loans 30-89 days past due and still accruing | | $ | 1,052 | | | $ | 1,077 | | | $ | 1,031 | | | $ | 898 | | | $ | 1,111 | |
| TFC/10-K/0000092230-18-000021 |
Asset Quality | (1)These asset quality ratios have been adjusted to remove the impact of government guaranteed and PCI assets. Appropriate adjustments to the numerator and denominator have been reflected in the calculation of these ratios.The following table provides a summary of performing TDR activity: |
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| Table 17 | | | | | | | | | | | | | | |
| Asset Quality Ratios | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | As Of / For The Year Ended December 31, | | | | | | | | | | | | | |
| | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| Asset Quality Ratios: | | | | | | | | | | | | | | |
| Loans 30-89 days past due and still accruing as a percentage of loans and leases HFI | 0.73 | % | | 0.75 | % | | 0.76 | % | | 0.75 | % | | 0.96 | % |
| Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI | 0.38 | | | 0.44 | | | 0.50 | | | 0.79 | | | 1.06 | |
| NPLs as a percentage of loans and leases HFI | 0.40 | | | 0.51 | | | 0.42 | | | 0.51 | | | 0.81 | |
| NPAs as a percentage of: | | | | | | | | | | | | | | |
| Total assets | 0.28 | | | 0.37 | | | 0.34 | | | 0.42 | | | 0.64 | |
| Loans and leases HFI plus foreclosed property | 0.44 | | | 0.57 | | | 0.52 | | | 0.65 | | | 1.01 | |
| Net charge-offs as a percentage of average loans and leases HFI | 0.38 | | | 0.38 | | | 0.35 | | | 0.46 | | | 0.69 | |
| ALLL as a percentage of loans and leases HFI | 1.04 | | | 1.04 | | | 1.07 | | | 1.23 | | | 1.49 | |
| Ratio of ALLL to: | | | | | | | | | | | | | | |
| Net charge-offs | 2.78 | x | | 2.80 | x | | 3.36 | x | | 2.74 | x | | 2.19 | x |
| NPLs | 2.62 | | | 2.03 | | | 2.53 | | | 2.39 | | | 1.85 | |
| | | | | | | | | | | | | | | |
| Asset Quality Ratios (Excluding Government Guaranteed and PCI): (1) | | | | | | | | | | | | | | |
| Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI | 0.05 | % | | 0.07 | % | | 0.06 | % | | 0.09 | % | | 0.11 | % |
| TFC/10-K/0000092230-18-000021 |
Asset Quality | Payments and payoffs include scheduled principal payments, prepayments and payoffs of amounts outstanding. Transfers to nonperforming TDRs represent loans that no longer meet the requirements necessary to reflect the loan in accruing status.TDRs may be removed due to the passage of time if they: (1) did not include a forgiveness of principal or interest, (2) have performed in accordance with the modified terms (generally a minimum of six months), (3) were reported as a TDR over a year end reporting period, and (4) reflected an interest rate on the modified loan that was no less than a market rate at the date of modification. These loans were previously considered TDRs as a result of structural concessions such as extended interest-only terms or an amortization period that did not otherwise conform to normal underwriting guidelines.In addition, certain loans may be removed from classification as a TDR as a result of a subsequent non-concessionary re-modification. Non-concessionary re-modifications represent TDRs that did not contain concessionary terms at the date of a subsequent renewal/modification and there was a reasonable expectation that the borrower would continue to comply with the terms of the loan subsequent to the date of the re-modification. A re-modification may be considered for such a re-classification if the loan has not had a forgiveness of principal or interest and the modified terms qualify as more than minor such that the re-modified loan is considered a new loan. Alternatively, such loans may be considered for reclassification in years subsequent to the date of the re-modification based on the passage of time as described in the preceding paragraph.In connection with consumer loan TDRs, a NPL will be returned to accruing status when current as to principal and interest and upon a sustained historical repayment performance (generally a minimum of six months). |
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| Table 18 | | | | | | | | |
| Rollforward of Performing TDRs | | | | | | | | |
| | | | | | | | | |
| | | Year Ended December 31, | | | | | | |
| (Dollars in millions) | | 2017 | | | | 2016 | | |
| Balance at beginning of year | | $ | 1,187 | | | $ | 982 | |
| Inflows | | 635 | | | | 699 | | |
| Payments and payoffs | | (253 | | ) | | (217 | | ) |
| Charge-offs | | (55 | | ) | | (41 | | ) |
| Transfers to nonperforming TDRs, net | | (78 | | ) | | (68 | | ) |
| Removal due to the passage of time | | (46 | | ) | | (54 | | ) |
| Non-concessionary re-modifications | | (3 | | ) | | — | | |
| Sold and transferred to LHFS | | (344 | | ) | | (114 | | ) |
| Balance at end of year | | $ | 1,043 | | | $ | 1,187 | |
| TFC/10-K/0000092230-18-000021 |
Asset Quality | (1)Past due performing TDRs are included in past due disclosures.(2)Nonperforming TDRs are included in NPL disclosures. |
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| Table 19 | | | | | | | | | | | | | | | | | | | | | | | | | |
| Payment Status of TDRs | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2017 | | | | | | | | | | | | | | | | | | | | | | | |
| (Dollars in millions) | | Current | | | | | | | Past Due 30-89 Days | | | | | | | Past Due 90 Days Or More | | | | | | | Total | | |
| Performing TDRs (1): | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 50 | | | 100.0 | % | | $ | — | | | — | % | | $ | — | | | — | % | | $ | 50 | |
| CRE | | 16 | | | | 100.0 | | | — | | | | — | | | — | | | | — | | | 16 | | |
| Retail: | | | | | | | | | | | | | | | | | | | | | | | — | | |
| Residential mortgage | | 315 | | | | 52.1 | | | 111 | | | | 18.3 | | | 179 | | | | 29.6 | | | 605 | | |
| Direct | | 58 | | | | 93.5 | | | 4 | | | | 6.5 | | | — | | | | — | | | 62 | | |
| Indirect | | 229 | | | | 81.5 | | | 52 | | | | 18.5 | | | — | | | | — | | | 281 | | |
| Revolving credit | | 24 | | | | 82.8 | | | 4 | | | | 13.8 | | | 1 | | | | 3.4 | | | 29 | | |
| Total performing TDRs | | 692 | | | | 66.3 | | | 171 | | | | 16.4 | | | 180 | | | | 17.3 | | | 1,043 | | |
| Nonperforming TDRs (2) | | 88 | | | | 46.6 | | | 29 | | | | 15.3 | | | 72 | | | | 38.1 | | | 189 | | |
| Total TDRs | | $ | 780 | | | 63.3 | | | $ | 200 | | | 16.2 | | | $ | 252 | | | 20.5 | | | $ | 1,232 | |
| TFC/10-K/0000092230-18-000021 |
ACL | (1)During the first quarter of 2014, $8.3 billion of loans were transferred from direct lending to residential mortgage. Charge-offs and recoveries have been reflected in these line items based upon the date the loans were transferred.The ACL consists of the ALLL, which is presented separately on the Consolidated Balance Sheets, and the RUFC, which is included in other liabilities on the Consolidated Balance Sheets. The ACL totaled $1.6 billion at December 31, 2017, an increase of $10 million compared to the prior year.The ALLL amounted to 1.04% of loans and leases held for investment at December 31, 2017 and 2016. The ratio of the ALLL to NPLs held for investment was 2.62x at December 31, 2017 compared to 2.03x at December 31, 2016.Net charge-offs totaled $537 million for 2017, compared to $532 million in 2016. Net charge-offs as a percentage of average loans and leases HFI were 0.38% for 2017, flat compared to 2016. Refer to "Note 3. Loans and ACL" for additional disclosures.The following table presents an allocation of the ALLL at the end of each of the last five years. 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. During 2013, the balance in the unallocated ALLL was incorporated into the loan portfolio segments. |
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| Table 20 | | | | | | | | | | | | | | | | | | | | |
| Analysis of ACL | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | | | | | | | | | | | | | | | | | | |
| (Dollars in millions) | | 2017 | | | | 2016 | | | | 2015 | | | | 2014 | | | | 2013 | | |
| Beginning balance | | $ | 1,599 | | | $ | 1,550 | | | $ | 1,534 | | | $ | 1,821 | | | $ | 2,048 | |
| Provision for credit losses (excluding PCI) | | 562 | | | | 574 | | | | 430 | | | | 280 | | | | 587 | | |
| Provision for PCI loans | | (15 | | ) | | (2 | | ) | | (2 | | ) | | (29 | | ) | | 5 | | |
| Charge-offs: | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | (95 | | ) | | (143 | | ) | | (90 | | ) | | (143 | | ) | | (257 | | ) |
| CRE | | (10 | | ) | | (9 | | ) | | (24 | | ) | | (42 | | ) | | (132 | | ) |
| Lease financing | | (5 | | ) | | (6 | | ) | | — | | | | — | | | | — | | |
| Residential mortgage (1) | | (47 | | ) | | (40 | | ) | | (46 | | ) | | (84 | | ) | | (81 | | ) |
| Direct (1) | | (61 | | ) | | (53 | | ) | | (54 | | ) | | (69 | | ) | | (148 | | ) |
| Indirect | | (402 | | ) | | (366 | | ) | | (303 | | ) | | (280 | | ) | | (269 | | ) |
| Revolving credit | | (76 | | ) | | (69 | | ) | | (70 | | ) | | (71 | | ) | | (85 | | ) |
| PCI | | (1 | | ) | | (15 | | ) | | (1 | | ) | | (21 | | ) | | (19 | | ) |
| Total charge-offs | | (697 | | ) | | (701 | | ) | | (588 | | ) | | (710 | | ) | | (991 | | ) |
| Recoveries: | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | 36 | | | | 44 | | | | 38 | | | | 45 | | | | 49 | | |
| CRE | | 16 | | | | 19 | | | | 18 | | | | 33 | | | | 51 | | |
| Lease financing | | 2 | | | | 2 | | | | — | | | | — | | | | 1 | | |
| Residential mortgage (1) | | 2 | | | | 3 | | | | 3 | | | | 7 | | | | 3 | | |
| Direct (1) | | 25 | | | | 26 | | | | 29 | | | | 29 | | | | 38 | | |
| Indirect | | 60 | | | | 55 | | | | 44 | | | | 39 | | | | 40 | | |
| Revolving credit | | 19 | | | | 20 | | | | 20 | | | | 19 | | | | 17 | | |
| Total recoveries | | 160 | | | | 169 | | | | 152 | | | | 172 | | | | 199 | | |
| Net charge-offs | | (537 | | ) | | (532 | | ) | | (436 | | ) | | (538 | | ) | | (792 | | ) |
| Other changes, net | | — | | | | 9 | | | | 24 | | | | — | | | | (27 | | ) |
| Ending balance | | $ | 1,609 | | | $ | 1,599 | | | $ | 1,550 | | | $ | 1,534 | | | $ | 1,821 | |
| | | | | | | | | | | | | | | | | | | | | |
| ALLL (excluding PCI loans) | | $ | 1,462 | | | $ | 1,445 | | | $ | 1,399 | | | $ | 1,410 | | | $ | 1,618 | |
| Allowance for PCI loans | | 28 | | | | 44 | | | | 61 | | | | 64 | | | | 114 | | |
| RUFC | | 119 | | | | 110 | | | | 90 | | | | 60 | | | | 89 | | |
| Total ACL | | $ | 1,609 | | | $ | 1,599 | | | $ | 1,550 | | | $ | 1,534 | | | $ | 1,821 | |
| TFC/10-K/0000092230-18-000021 |
ACL | (1) During the first quarter of 2014, $8.3 billion in loans were transferred from direct to residential mortgage. |
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| Table 21 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Allocation of ALLL by Category | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2017 | | | | | | | 2016 | | | | | | | 2015 | | | | | | | 2014 | | | | | | | 2013 | | | | | |
| (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 | |
| Balances at end of period applicable to: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 522 | | | 41.1 | % | | $ | 530 | | | 40.3 | % | | $ | 488 | | | 39.6 | % | | $ | 445 | | | 38.5 | % | | $ | 475 | | | 37.0 | % |
| CRE | | 160 | | | | 14.8 | | | 145 | | | | 13.8 | | | 175 | | | | 13.5 | | | 212 | | | | 11.8 | | | 227 | | | | 11.3 | |
| Lease financing | | 9 | | | | 1.3 | | | 7 | | | | 1.2 | | | 5 | | | | 1.1 | | | 4 | | | | 0.9 | | | 7 | | | | 1.0 | |
| Residential mortgage (1) | | 209 | | | | 20.0 | | | 227 | | | | 20.8 | | | 217 | | | | 22.4 | | | 253 | | | | 25.9 | | | 331 | | | | 21.3 | |
| Direct (1) | | 106 | | | | 8.3 | | | 103 | | | | 8.4 | | | 105 | | | | 8.2 | | | 110 | | | | 6.8 | | | 209 | | | | 13.7 | |
| Indirect | | 348 | | | | 12.0 | | | 327 | | | | 13.0 | | | 305 | | | | 12.6 | | | 276 | | | | 13.0 | | | 254 | | | | 11.9 | |
| Revolving credit | | 108 | | | | 2.0 | | | 106 | | | | 1.9 | | | 104 | | | | 1.8 | | | 110 | | | | 2.1 | | | 115 | | | | 2.1 | |
| PCI | | 28 | | | | 0.5 | | | 44 | | | | 0.6 | | | 61 | | | | 0.8 | | | 64 | | | | 1.0 | | | 114 | | | | 1.7 | |
| Total ALLL | | 1,490 | | | | 100.0 | % | | 1,489 | | | | 100.0 | % | | 1,460 | | | | 100.0 | % | | 1,474 | | | | 100.0 | % | | 1,732 | | | | 100.0 | % |
| RUFC | | 119 | | | | | | | 110 | | | | | | | 90 | | | | | | | 60 | | | | | | | 89 | | | | | |
| Total ACL | | $ | 1,609 | | | | | | $ | 1,599 | | | | | | $ | 1,550 | | | | | | $ | 1,534 | | | | | | $ | 1,821 | | | | |
| TFC/10-K/0000092230-18-000021 |
Deposits | Average deposits for the fourth quarter of 2017 were $158.0 billion, up $545 million compared to the prior quarter.Average noninterest-bearing deposits increased $799 million, primarily due to increases in commercial, public funds and personal balances.Interest checking decreased $254 million, primarily due to decreases in public funds, personal and commercial balances.Money market and savings increased $243 million primarily due to commercial balances partially offset by decreased personal and public funds balances.Average time deposits decreased $50 million as decreases in personal balances and IRAs were partially offset by higher commercial balances.Average foreign office deposits decreased $193 million due to lower overall funding needs.Noninterest-bearing deposits represented 34.4% of total average deposits for the fourth quarter, compared to 34.0% for the prior quarter and 32.1% a year ago. The cost of interest-bearing deposits was 0.40% for the fourth quarter, up five basis points compared to the prior quarter. |
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| Table 22 | | | | | | | | | | | | | | | | | | | | |
| Quarterly Composition of Average Deposits | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | For the Three Months Ended | | | | | | | | | | | | | | | | | | |
| (Dollars in millions) | | 12/31/2017 | | | | 9/30/2017 | | | | 6/30/2017 | | | | 3/31/2017 | | | | 12/31/2016 | | |
| Noninterest-bearing deposits | | $ | 54,288 | | | $ | 53,489 | | | $ | 52,573 | | | $ | 51,095 | | | $ | 51,421 | |
| Interest checking | | 26,746 | | | | 27,000 | | | | 28,849 | | | | 29,578 | | | | 28,634 | | |
| Money market and savings | | 61,693 | | | | 61,450 | | | | 64,294 | | | | 64,857 | | | | 63,884 | | |
| Time deposits | | 13,744 | | | | 13,794 | | | | 14,088 | | | | 14,924 | | | | 15,693 | | |
| Foreign office deposits - interest-bearing | | 1,488 | | | | 1,681 | | | | 459 | | | | 929 | | | | 486 | | |
| Total average deposits | | $ | 157,959 | | | $ | 157,414 | | | $ | 160,263 | | | $ | 161,383 | | | $ | 160,118 | |
| TFC/10-K/0000092230-18-000021 |
Risk Management | The CRO leads the RMO, which designs, organizes and manages BB&T’s risk management framework. The RMO is responsible for ensuring effective risk management oversight, measurement, monitoring, reporting and consistency. The CRO has direct access to the Board of Directors and Executive Management. The CRO is responsible for identifying and communicating in a timely manner to the CEO and the Board of Directors meaningful risks and significant instances when the RMO’s assessment of risk differs from that of a BU, significant instances when a BU is not adhering to the risk governance framework, and BB&T’s risk profile in relation to its risk appetite on at least a quarterly basis. In the event that the CRO and CEO’s assessment of risk were to differ or if the CEO were to not adhere to the risk management framework, the CRO would have the responsibility to report such matters to the Board of Directors.The Executive Management-led enterprise risk committees provide oversight of the first and second lines of defense and communicate risk appetite and values to the RMO. The CRO and the enterprise risk committees approve policies, set risk limits and tolerances and monitor results.The RMC, CRMC, ORMC, CROC and the MRLCC are the enterprise risk committees and provide oversight of the risks as described in the common risk language. There is Executive Management representation in all five committees. The risk management framework is composed of specialized risk functions focused on specific types of risk. The MRLCC, CRMC, CROC and ORMC provide oversight of market, liquidity, capital, credit, compliance, and operational risk while RMC provides a fully integrated view of all material risks across the company. The RMC provides oversight of all risks and its purpose is to review BB&T’s aggregate risk exposure, evaluate risk appetite, and evaluate risks not reviewed by other risk committees.The RMC is responsible for taking a broad view of risk, incorporating information from all risk functions. This combination of broad and specific focus provides the most effective framework for the management of risk. The RMC is chaired by the CRO and its membership includes all members of Executive Management, the General Auditor (ex officio) and senior leaders from Financial Management, the RMO and other areas.The principal types of inherent risk include compliance, credit, liquidity, market, operational, reputation and strategic risks. |
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| | | | | |
| Risk Committees | Board of Directors | | | Executive Management |
| | | |
| 1st Line of Defense | 2nd Line of Defense | 3rd Line of Defense |
| Business Units | Risk Functions | Audit Services |
| | | |
| Chief Risk Officer | | |
| TFC/10-K/0000092230-18-000021 |
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. Management currently only models up to a negative 100 basis point decline, 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 4% or the proportional limit. 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. As the Federal Reserve has started to raise rates, competitive pressure on deposit rates has not materialized. As a result, asset repricing in excess of liability repricing is causing the measured exposure to declining rates to increase. Management evaluates its interest rate risk position each month.Management must also consider 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 50% 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. Due to current market conditions the actual deposit beta on non-maturity interest bearing deposits has been less than 15%; however, BB&T expects the beta to increase as rates continue to rise. 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 effect that the loss of demand deposits and an associated increase in managed rate deposits would have on BB&T’s interest-rate sensitivity position. 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 | | | | |
| | | Prime Rate | | | | | |
| Linear Change in Prime Rate | | December 31, | | | | | | December 31, | | | | |
| | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| Up 200 bps | | 6.50 | % | | 5.75 | % | | 3.09 | % | | 3.13 | % |
| Up 100 | | 5.50 | | | 4.75 | | | 2.07 | | | 2.14 | |
| No Change | | 4.50 | | | 3.75 | | | — | | | — | |
| Down 25 | | 4.25 | | | 3.50 | | | (1.06 | ) | | (0.93 | ) |
| Down 100 | | 3.50 | | | 2.75 | | | (6.62 | ) | | NA | |
| TFC/10-K/0000092230-18-000021 |
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, 2017 as presented in the preceding table.If rates increased 200 basis points, BB&T could absorb the loss of $14.8 billion, or 27.5%, of noninterest-bearing demand 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 | | | | | | | | | |
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| Increase in Rates | | Base Scenario at December 31, 2017 (1) | | | Results Assuming a Decrease in Noninterest-Bearing Demand Deposits | | | | |
| | | $1 Billion | | | $5 Billion | |
| Up 200 bps | | 3.09 | % | | 2.88 | % | | 2.04 | % |
| Up 100 | | 2.07 | | | 1.94 | | | 1.42 | |
| TFC/10-K/0000092230-18-000021 |
Branch Bank | BB&T and Branch Bank have Contingency Funding Plans designed to ensure that liquidity sources are sufficient to meet their ongoing obligations and commitments, particularly in the event of a liquidity contraction. These plans are designed to examine and quantify the organization’s liquidity under various "stress" scenarios. Additionally, the plans provide a framework for management and other critical personnel to follow in the event of a liquidity contraction or in anticipation of such an event. The plans address authority for activation and decision making, liquidity options and the responsibilities of key departments in the event of a liquidity contraction. The liquidity options available to management could include seeking secured funding, asset sales, and under the most extreme scenarios, curtailing new loan originations.Management believes current sources of liquidity are adequate to meet BB&T’s current requirements and plans for continued growth. See "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 | | | | | | | |
| December 31, 2017 | | | | | | | |
| | | | | | | | |
| | S&P | | Moody's | | Fitch | | DBRS |
| BB&T Corporation: | | | | | | | |
| Commercial Paper | A-2 | | N/A | | F1 | | R-1(low) |
| Issuer | A- | | A2 | | A+ | | A(high) |
| LT/Senior debt | A- | | A2 | | A+ | | A(high) |
| Subordinated debt | BBB+ | | A2 | | A | | A |
| 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) |
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| Ratings Outlook: | | | | | | | |
| Credit Trend | Stable | | Stable | | Stable | | Stable |
| TFC/10-K/0000092230-18-000021 |
Contractual Obligations, Commitments, Contingent Liabilities, Off-Balance Sheet Arrangements and Related Party Transactions | (1)Based on estimated payment dates.(2)Includes accrued interest, future contractual interest obligations and the impact of hedges in a loss position. Other derivatives are excluded. Variable rate payments are based upon the rate in effect at December 31, 2017.(3)Represents obligations to purchase goods or services that are enforceable and legally binding. Many of the purchase obligations have terms that are not fixed and determinable and are included in the table above based upon the estimated timing and amount of payment. In addition, certain of the purchase agreements contain clauses that would allow BB&T to cancel the agreement with specified notice; however, that impact is not included in the table above.(4)Although technically unfunded plans, Rabbi Trusts and insurance policies on the lives of certain of the covered employees are available to finance future benefit plan payments.BB&T’s commitments include investments in affordable housing projects throughout its market area and private equity funds. Refer to "Note 1. Summary of Significant Accounting Policies" 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, 2017 do not represent the amounts that may ultimately be paid under these contracts. Further discussion of derivative instruments is included in "Note 1. Summary of Significant Accounting Policies" 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, 2017 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| (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 | | $ | 23,559 | | | $ | 2,446 | | | $ | 10,845 | | | $ | 6,107 | | | $ | 4,161 | |
| Operating leases | | 1,511 | | | | 255 | | | | 427 | | | | 320 | | | | 509 | | |
| Commitments to fund affordable housing investments | | 928 | | | | 536 | | | | 349 | | | | 20 | | | | 23 | | |
| Private equity and other investments commitments (1) | | 143 | | | | 39 | | | | 69 | | | | 28 | | | | 7 | | |
| Time deposits | | 13,170 | | | | 8,379 | | | | 3,804 | | | | 970 | | | | 17 | | |
| Contractual interest payments (2) | | 3,004 | | | | 751 | | | | 1,113 | | | | 560 | | | | 580 | | |
| Purchase obligations (3) | | 1,335 | | | | 608 | | | | 544 | | | | 160 | | | | 23 | | |
| Nonqualified benefit plan obligations (4) | | 1,020 | | | | 15 | | | | 31 | | | | 33 | | | | 941 | | |
| Total contractual cash obligations | | $ | 44,670 | | | $ | 13,029 | | | $ | 17,182 | | | $ | 8,198 | | | $ | 6,261 | |
| TFC/10-K/0000092230-18-000021 |
Contractual Obligations, Commitments, Contingent Liabilities, Off-Balance Sheet Arrangements and Related Party Transactions | (1)Excludes the FHA-insured mortgage loan reserve of $85 million established during 2014 and settled in 2016. |
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| Table 30 | | | | | | | | | | | | |
| Mortgage Indemnification, Recourse and Repurchase Reserves Activity (1) | | | | | | | | | | | | |
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| | | Year Ended December 31, | | | | | | | | | | |
| (Dollars in millions) | | 2017 | | | | 2016 | | | | 2015 | | |
| Balance, at beginning of period | | $ | 40 | | | $ | 79 | | | $ | 94 | |
| Payments | | — | | | | (2 | | ) | | (5 | | ) |
| Expense | | (3 | | ) | | (37 | | ) | | (15 | | ) |
| Acquisitions | | — | | | | — | | | | 5 | | |
| Balance, at end of period | | $ | 37 | | | $ | 40 | | | $ | 79 | |
| TFC/10-K/0000092230-18-000021 |
Capital | (1) BB&T's goal is to maintain capital levels above the 2019 requirements.Payments of cash dividends and repurchases of common shares are the methods used to manage any excess capital generated. In addition, management closely monitors the Parent Company’s double leverage ratio (investments in subsidiaries as a percentage of shareholders’ equity). The active management of the subsidiaries’ equity capital, as described above, is the process used to manage this important driver of Parent Company liquidity and is a key element in the management of BB&T’s capital position.Management intends to maintain capital at Branch Bank at levels that will result in classification as "well-capitalized" for regulatory purposes. Secondarily, it is management’s intent to maintain Branch Bank’s capital at levels that result in regulatory risk-based capital ratios that are generally comparable with peers of similar size, complexity and risk profile. If the capital levels of Branch Bank increase above these guidelines, excess capital may be transferred to the Parent Company in the form of special dividend payments, subject to regulatory and other operating considerations.While nonrecurring events or management decisions may result in the Company temporarily falling below its operating minimum guidelines for one or more of these ratios, it is management’s intent through capital planning to return to these targeted operating minimums within a reasonable period of time. Such temporary decreases below the operating minimums shown above are not considered an infringement of BB&T’s overall capital policy, provided a return above the minimums is forecast to occur within a reasonable time period.BB&T regularly performs stress testing on its capital levels and is required to periodically submit the company’s capital plans to the banking regulators. The FRB did not object to the Company’s 2017 capital plan, and the 2018 capital plan is expected to be submitted during April 2018. Management’s capital deployment plan in order of preference is to focus on 1) organic growth, 2) dividends and 3) acquisitions and/or share repurchases depending on opportunities in the marketplace and our interest and ability to proceed with acquisitions.Risk-based capital ratios, which include Tier 1 Capital, Total Capital and Tier 1 Common Equity, are calculated based on regulatory guidance related to the measurement of capital and risk-weighted assets. Branch Bank's capital ratios are presented in the following table: |
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| Table 32 | | | | | | | | | | | | | | | | | | |
| Capital Requirements Under Basel III | | | | | | | | | | | | | | | | | | |
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| | | Minimum Capital | | | Well-Capitalized | | | Minimum Capital Plus Capital Conservation Buffer | | | | | | | | | BB&T Target | |
| | | | | 2017 | | | 2018 | | | 2019 (1) | | |
| CET1 to risk-weighted assets | | 4.5 | % | | 6.5 | % | | 5.750 | % | | 6.375 | % | | 7.000 | % | | 8.5 | % |
| Tier 1 capital to risk-weighted assets | | 6.0 | | | 8.0 | | | 7.250 | | | 7.875 | | | 8.500 | | | 10.0 | |
| Total capital to risk-weighted assets | | 8.0 | | | 10.0 | | | 9.250 | | | 9.875 | | | 10.500 | | | 12.0 | |
| Leverage ratio | | 4.0 | | | 5.0 | | | N/A | | | N/A | | | N/A | | | 8.0 | |
| TFC/10-K/0000092230-18-000021 |
Capital | BB&T's capital ratios are presented in the following table: |
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| Table 33 | | | | | | |
| Capital Ratios - Branch Bank | | | | | | |
| | | | | | | |
| | | December 31, | | | | |
| | | 2017 | | | 2016 | |
| CET1 to risk-weighted assets | | 11.3 | % | | 11.5 | % |
| Tier 1 capital to risk-weighted assets | | 11.3 | | | 11.5 | |
| Total capital to risk-weighted assets | | 13.3 | | | 13.6 | |
| Leverage ratio | | 9.4 | | | 9.6 | |
| TFC/10-K/0000092230-18-000021 |
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.During 2017, BB&T completed $1.6 billion of stock repurchases and paid $1.0 billion in common stock dividends, which resulted in a total payout ratio of 117.9% for the year. Effective December 31, 2017, BB&T adopted new accounting guidance related to tax reform legislation passed in 2017, and reclassified deferred income taxes from AOCI and increased retained earnings $247 million, which also increased regulatory capital and the related ratios.During July 2017, BB&T's Board of Directors approved a $0.03 increase in the quarterly dividend, which increased the amount of the quarterly dividend to $0.33 per share. As of December 31, 2017, the remaining stock repurchases authorized by the Board of Directors totaled $640 million. During the first quarter of 2018, the Company repurchased approximately 5.9 million shares of common stock totaling $320 million. |
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| Table 34 | | | | | | | | |
| Capital Ratios - BB&T Corporation | | | | | | | | |
| | | | | | | | | |
| | | December 31, | | | | | | |
| (Dollars in millions, except per share data, shares in thousands) | | 2017 | | | | 2016 | | |
| Risk-based: | | | | | | | | |
| CET1 | | 10.2 | | % | | 10.2 | | % |
| Tier 1 | | 11.9 | | | | 12.0 | | |
| Total | | 13.9 | | | | 14.1 | | |
| Leverage capital | | 9.9 | | | | 10.0 | | |
| | | | | | | | | |
| Non-GAAP capital measures (1): | | | | | | | | |
| Tangible common equity per common share | | $ | 20.80 | | | $ | 20.18 | |
| | | | | | | | | |
| Calculations of tangible common equity (1): | | | | | | | | |
| Total shareholders' equity | | $ | 29,695 | | | $ | 29,926 | |
| Less: | | | | | | | | |
| Preferred stock | | 3,053 | | | | 3,053 | | |
| Noncontrolling interests | | 47 | | | | 45 | | |
| Intangible assets | | 10,329 | | | | 10,492 | | |
| Tangible common equity | | $ | 16,266 | | | $ | 16,336 | |
| | | | | | | | | |
| Risk-weighted assets | | $ | 177,217 | | | $ | 176,138 | |
| Common shares outstanding at end of period | | 782,006 | | | | 809,475 | | |
| TFC/10-K/0000092230-18-000021 |
Capital | (1)Loans and leases are net of unearned income and include LHFS. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Table 35 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Quarterly Financial Summary – Unaudited | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2017 | | | | | | | | | | | | | | | | 2016 | | | | | | | | | | | | | | |
| (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 | | $ | 1,898 | | | $ | 1,877 | | | $ | 1,824 | | | $ | 1,775 | | | $ | 1,745 | | | $ | 1,795 | | | $ | 1,805 | | | $ | 1,721 | |
| Interest expense | | 254 | | | | 230 | | | | 189 | | | | 166 | | | | 180 | | | | 185 | | | | 188 | | | | 192 | | |
| Provision for credit losses | | 138 | | | | 126 | | | | 135 | | | | 148 | | | | 129 | | | | 148 | | | | 111 | | | | 184 | | |
| Noninterest income | | 1,225 | | | | 1,166 | | | | 1,220 | | | | 1,171 | | | | 1,162 | | | | 1,164 | | | | 1,130 | | | | 1,016 | | |
| Noninterest expense | | 1,855 | | | | 1,745 | | | | 1,742 | | | | 2,102 | | | | 1,668 | | | | 1,711 | | | | 1,797 | | | | 1,545 | | |
| Provision for income taxes | | 209 | | | | 294 | | | | 304 | | | | 104 | | | | 287 | | | | 273 | | | | 252 | | | | 246 | | |
| Net income | | 667 | | | | 648 | | | | 674 | | | | 426 | | | | 643 | | | | 642 | | | | 587 | | | | 570 | | |
| Noncontrolling interest | | 9 | | | | 8 | | | | (1 | | ) | | 5 | | | | 7 | | | | — | | | | 3 | | | | 6 | | |
| Preferred stock dividends | | 44 | | | | 43 | | | | 44 | | | | 43 | | | | 44 | | | | 43 | | | | 43 | | | | 37 | | |
| Net income available to common shareholders | | $ | 614 | | | $ | 597 | | | $ | 631 | | | $ | 378 | | | $ | 592 | | | $ | 599 | | | $ | 541 | | | $ | 527 | |
| Basic EPS | | $ | 0.78 | | | $ | 0.75 | | | $ | 0.78 | | | $ | 0.47 | | | $ | 0.73 | | | $ | 0.74 | | | $ | 0.67 | | | $ | 0.67 | |
| Diluted EPS | | $ | 0.77 | | | $ | 0.74 | | | $ | 0.77 | | | $ | 0.46 | | | $ | 0.72 | | | $ | 0.73 | | | $ | 0.66 | | | $ | 0.67 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Selected Average Balances: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Assets | | $ | 222,525 | | | $ | 220,732 | | | $ | 221,018 | | | $ | 219,961 | | | $ | 220,165 | | | $ | 222,065 | | | $ | 223,399 | | | $ | 210,102 | |
| Securities, at amortized cost | | 48,093 | | | | 45,968 | | | | 45,410 | | | | 44,607 | | | | 44,881 | | | | 47,152 | | | | 48,510 | | | | 44,580 | | |
| Loans and leases (1) | | 144,089 | | | | 144,181 | | | | 144,327 | | | | 143,698 | | | | 144,569 | | | | 143,689 | | | | 143,097 | | | | 135,628 | | |
| Total earning assets | | 195,305 | | | | 193,073 | | | | 193,386 | | | | 192,564 | | | | 192,574 | | | | 193,909 | | | | 194,822 | | | | 183,612 | | |
| Deposits | | 157,959 | | | | 157,414 | | | | 160,263 | | | | 161,383 | | | | 160,118 | | | | 159,503 | | | | 160,338 | | | | 149,867 | | |
| Short-term borrowings | | 6,342 | | | | 5,983 | | | | 2,748 | | | | 2,105 | | | | 2,373 | | | | 2,128 | | | | 2,951 | | | | 2,771 | | |
| Long-term debt | | 22,639 | | | | 21,459 | | | | 21,767 | | | | 20,757 | | | | 21,563 | | | | 23,428 | | | | 23,272 | | | | 22,907 | | |
| Total interest-bearing liabilities | | 132,652 | | | | 131,367 | | | | 132,205 | | | | 133,150 | | | | 132,633 | | | | 134,500 | | | | 137,760 | | | | 129,342 | | |
| Shareholders' equity | | 29,853 | | | | 29,948 | | | | 30,302 | | | | 29,903 | | | | 30,054 | | | | 29,916 | | | | 29,610 | | | | 27,826 | | |
| TFC/10-K/0000092230-18-000021 |
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 "Note 1. Summary of Significant Accounting Policies." |
| | | |
| --- | --- | --- |
| | | |
| 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/0000092230-18-000021 |
Reclassifications | Certain other amounts reported in prior periods’ consolidated financial statements have been reclassified to conform to the current presentation. |
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | |
| (dollars in millions) | | 2016 | | | | 2015 | | |
| Net cash from operating activities | | $ | 443 | | | $ | 216 | |
| Net cash from investing activities | | (326 | | ) | | (211 | | ) |
| Net cash from financing activities | | (117 | | ) | | (5 | | ) |
| Net change in cash and cash equivalents | | $ | — | | | $ | — | |
| TFC/10-K/0000092230-18-000021 |
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 nonaccrual 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 nonaccrual 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 nonaccrual 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. |
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | |
| (number of days) | | Placed on Nonaccrual (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/0000092230-18-000021 |
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, BB&T's policy is to review all commercial lending relationships with an outstanding nonaccrual balance of $3 million or more. While this review is largely focused on the borrower’s ability to repay the loan, BB&T also considers the capacity and willingness of a loan’s guarantors to support the debt service on the loan as a secondary source of repayment. When a guarantor exhibits the documented capacity and willingness to support the loan, BB&T may consider extending the loan maturity and/or temporarily deferring principal payments if the ultimate collection of both principal and interest is not in question. In these cases, BB&T may deem the loan to not be impaired due to the documented capacity and willingness of the guarantor to repay the loan. Loans are considered impaired when the borrower (or guarantor in certain circumstances) does not have the cash flow capacity or willingness to service the debt according to contractual terms, or it does not appear reasonable to assume that the borrower will continue to pay according to the contractual agreement. BB&T establishes a specific reserve for each loan that has been deemed impaired based on the criteria outlined above. 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 collateral-dependent commercial loan balances between $1 million and $3 million 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 TDRs and other commercial impaired 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 TDRs 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. |
| | | |
| --- | --- | --- |
| | | |
| 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/0000092230-18-000021 |
NOTE 2. Securities | Certain investments in marketable debt securities and MBS issued by FNMA and FHLMC exceeded 10% of shareholders’ equity at December 31, 2017. The FNMA investments had total amortized cost and fair value of $14.7 billion and $14.4 billion, respectively. The FHLMC investments had total amortized cost and fair value of $10.2 billion and $10.0 billion, respectively.The change in credit losses on securities with OTTI where a portion of the unrealized loss was recognized in OCI was immaterial for all periods presented.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. |
| | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | |
| December 31, 2016 | | Amortized Cost | | | | Gross Unrealized | | | | | | | | Fair Value | | |
| (Dollars in millions) | | | Gains | | | | Losses | | | |
| AFS securities: | | | | | | | | | | | | | | | | |
| U.S. Treasury | | $ | 2,669 | | | $ | 2 | | | $ | 84 | | | $ | 2,587 | |
| GSE | | 190 | | | | — | | | | 10 | | | | 180 | | |
| Agency MBS | | 21,819 | | | | 13 | | | | 568 | | | | 21,264 | | |
| States and political subdivisions | | 2,198 | | | | 56 | | | | 49 | | | | 2,205 | | |
| Non-agency MBS | | 446 | | | | 233 | | | | — | | | | 679 | | |
| Other | | 11 | | | | — | | | | — | | | | 11 | | |
| Total AFS securities | | $ | 27,333 | | | $ | 304 | | | $ | 711 | | | $ | 26,926 | |
| | | | | | | | | | | | | | | | | |
| HTM securities: | | | | | | | | | | | | | | | | |
| U.S. Treasury | | $ | 1,098 | | | $ | 20 | | | $ | — | | | $ | 1,118 | |
| GSE | | 2,197 | | | | 14 | | | | 30 | | | | 2,181 | | |
| Agency MBS | | 13,225 | | | | 40 | | | | 180 | | | | 13,085 | | |
| States and political subdivisions | | 110 | | | | — | | | | — | | | | 110 | | |
| Other | | 50 | | | | 2 | | | | — | | | | 52 | | |
| Total HTM securities | | $ | 16,680 | | | $ | 76 | | | $ | 210 | | | $ | 16,546 | |
| TFC/10-K/0000092230-18-000021 |
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, 2017 | | Amortized Cost | | | | Fair Value | | | | Amortized Cost | | | | Fair Value | | |
| (Dollars in millions) | | | | |
| Due in one year or less | | $ | 336 | | | $ | 335 | | | $ | — | | | $ | — | |
| Due after one year through five years | | 498 | | | | 496 | | | | 2,237 | | | | 2,242 | | |
| Due after five years through ten years | | 2,419 | | | | 2,341 | | | | 1,111 | | | | 1,103 | | |
| Due after ten years | | 21,756 | | | | 21,375 | | | | 19,679 | | | | 19,492 | | |
| Total debt securities | | $ | 25,009 | | | $ | 24,547 | | | $ | 23,027 | | | $ | 22,837 | |
| TFC/10-K/0000092230-18-000021 |
NOTE 2. 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 U.S. Treasury securities, 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, 2017, there were no non-agency MBS with other than temporary credit impairment.At December 31, 2017, 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, 2017, the evaluation of municipal securities did not indicate any municipal securities with other than temporary credit impairment. |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Less than 12 months | | | | | | | | 12 months or more | | | | | | | | Total | | | | | | |
| December 31, 2016 | | Fair Value | | | | Unrealized Losses | | | | Fair Value | | | | Unrealized Losses | | | | Fair Value | | | | Unrealized Losses | | |
| (Dollars in millions) | | | | | | |
| AFS securities: | | | | | | | | | | | | | | | | | | | | | | | | |
| U.S. Treasury | | $ | 2,014 | | | $ | 84 | | | $ | — | | | $ | — | | | $ | 2,014 | | | $ | 84 | |
| GSE | | 180 | | | | 10 | | | | — | | | | — | | | | 180 | | | | 10 | | |
| Agency MBS | | 14,842 | | | | 342 | | | | 5,138 | | | | 226 | | | | 19,980 | | | | 568 | | |
| States and political subdivisions | | 365 | | | | 7 | | | | 314 | | | | 42 | | | | 679 | | | | 49 | | |
| Total | | $ | 17,401 | | | $ | 443 | | | $ | 5,452 | | | $ | 268 | | | $ | 22,853 | | | $ | 711 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| HTM securities: | | | | | | | | | | | | | | | | | | | | | | | | |
| GSE | | $ | 1,762 | | | $ | 30 | | | $ | — | | | $ | — | | | $ | 1,762 | | | $ | 30 | |
| Agency MBS | | 7,717 | | | | 178 | | | | 305 | | | | 2 | | | | 8,022 | | | | 180 | | |
| Total | | $ | 9,479 | | | $ | 208 | | | $ | 305 | | | $ | 2 | | | $ | 9,784 | | | $ | 210 | |
| TFC/10-K/0000092230-18-000021 |
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 and not reclassified to nonperforming. |
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | |
| | | Accruing | | | | | | | | | | | | | | | | | | |
| December 31, 2016 | | Current | | | | 30-89 Days Past Due | | | | 90 Days Or More Past Due | | | | Nonaccrual | | | | Total | | |
| (Dollars in millions) | | | | | |
| Commercial: | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 57,326 | | | $ | 44 | | | $ | — | | | $ | 369 | | | $ | 57,739 | |
| CRE | | 19,699 | | | | 8 | | | | — | | | | 57 | | | | 19,764 | | |
| Lease financing | | 1,669 | | | | 4 | | | | — | | | | 4 | | | | 1,677 | | |
| Retail: | | | | | | | | | | | | | | | | | | | | |
| Residential mortgage | | 28,702 | | | | 525 | | | | 522 | | | | 172 | | | | 29,921 | | |
| Direct | | 11,963 | | | | 60 | | | | 6 | | | | 63 | | | | 12,092 | | |
| Indirect | | 18,110 | | | | 377 | | | | 6 | | | | 71 | | | | 18,564 | | |
| Revolving credit | | 2,620 | | | | 23 | | | | 12 | | | | — | | | | 2,655 | | |
| PCI | | 784 | | | | 36 | | | | 90 | | | | — | | | | 910 | | |
| Total | | $ | 140,873 | | | $ | 1,077 | | | $ | 636 | | | $ | 736 | | | $ | 143,322 | |
| TFC/10-K/0000092230-18-000021 |
NOTE 3. Loans and ACL | The following tables present a summary of activity in the ACL: |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2017 | | | | | | | | | | | | December 31, 2016 | | | | | | | | | | |
| | | Commercial & Industrial | | | | CRE | | | | Lease financing | | | | Commercial & Industrial | | | | CRE | | | | Lease financing | | |
| (Dollars in millions) | | | | | | |
| Commercial: | | | | | | | | | | | | | | | | | | | | | | | | |
| Pass | | $ | 57,700 | | | $ | 20,862 | | | $ | 1,881 | | | $ | 55,881 | | | $ | 19,186 | | | $ | 1,641 | |
| Special mention | | 268 | | | | 48 | | | | 6 | | | | 343 | | | | 162 | | | | 4 | | |
| Substandard-performing | | 926 | | | | 308 | | | | 23 | | | | 1,146 | | | | 359 | | | | 28 | | |
| Nonperforming | | 259 | | | | 45 | | | | 1 | | | | 369 | | | | 57 | | | | 4 | | |
| Total | | $ | 59,153 | | | $ | 21,263 | | | $ | 1,911 | | | $ | 57,739 | | | $ | 19,764 | | | $ | 1,677 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Residential Mortgage | | | | Direct | | | | Indirect | | | | Residential Mortgage | | | | Direct | | | | Indirect | | |
| Retail: | | | | | | | | | | | | | | | | | | | | | | | | |
| Performing | | $ | 28,596 | | | $ | 11,827 | | | $ | 17,163 | | | $ | 29,749 | | | $ | 12,029 | | | $ | 18,493 | |
| Nonperforming | | 129 | | | | 64 | | | | 72 | | | | 172 | | | | 63 | | | | 71 | | |
| Total | | $ | 28,725 | | | $ | 11,891 | | | $ | 17,235 | | | $ | 29,921 | | | $ | 12,092 | | | $ | 18,564 | |
| TFC/10-K/0000092230-18-000021 |
NOTE 3. Loans and ACL | The following table provides a summary of loans that are collectively evaluated for impairment: |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2015 | | Beginning Balance | | | | Charge-Offs | | | | Recoveries | | | | Provision (Benefit) | | | | Other | | | | Ending Balance | | |
| (Dollars in millions) | | | | | | |
| Commercial: | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 446 | | | $ | (90 | ) | | $ | 40 | | | $ | 92 | | | $ | — | | | $ | 488 | |
| CRE | | 212 | | | | (24 | | ) | | 18 | | | | (31 | | ) | | — | | | | 175 | | |
| Lease financing | | 4 | | | | — | | | | — | | | | 1 | | | | — | | | | 5 | | |
| Retail: | | | | | | | | | | | | | | | | | | | | | | | | |
| Residential mortgage | | 253 | | | | (46 | | ) | | 3 | | | | 7 | | | | — | | | | 217 | | |
| Direct | | 110 | | | | (54 | | ) | | 29 | | | | 20 | | | | — | | | | 105 | | |
| Indirect | | 275 | | | | (303 | | ) | | 42 | | | | 291 | | | | — | | | | 305 | | |
| Revolving credit | | 110 | | | | (70 | | ) | | 20 | | | | 44 | | | | — | | | | 104 | | |
| PCI | | 64 | | | | (1 | | ) | | — | | | | (2 | | ) | | — | | | | 61 | | |
| ALLL | | 1,474 | | | | (588 | | ) | | 152 | | | | 422 | | | | — | | | | 1,460 | | |
| RUFC | | 60 | | | | — | | | | — | | | | 6 | | | | 24 | | | | 90 | | |
| ACL | | $ | 1,534 | | | $ | (588 | ) | | $ | 152 | | | $ | 428 | | | $ | 24 | | | $ | 1,550 | |
| TFC/10-K/0000092230-18-000021 |
NOTE 3. 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, 2017 | | | | | | | | December 31, 2016 | | | | | | |
| (Dollars in millions) | | Recorded Investment | | | | Related ALLL | | | | Recorded Investment | | | | Related ALLL | | |
| Commercial: | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 58,804 | | | $ | 494 | | | $ | 57,265 | | | $ | 492 | |
| CRE | | 21,173 | | | | 154 | | | | 19,649 | | | | 136 | | |
| Lease financing | | 1,910 | | | | 9 | | | | 1,672 | | | | 7 | | |
| Retail: | | | | | | | | | | | | | | | | |
| Residential mortgage | | 27,914 | | | | 143 | | | | 28,954 | | | | 144 | | |
| Direct | | 11,815 | | | | 98 | | | | 12,011 | | | | 93 | | |
| Indirect | | 16,935 | | | | 296 | | | | 18,308 | | | | 286 | | |
| Revolving credit | | 2,842 | | | | 97 | | | | 2,626 | | | | 95 | | |
| PCI | | 651 | | | | 28 | | | | 910 | | | | 44 | | |
| Total | | $ | 142,044 | | | $ | 1,319 | | | $ | 141,395 | | | $ | 1,297 | |
| TFC/10-K/0000092230-18-000021 |
NOTE 3. Loans and ACL | The following table provides a summary of TDRs, all of which are considered impaired: |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| As Of / For The Year Ended December 31, 2016 | | UPB | | | | Recorded Investment | | | | | | | | Related ALLL | | | | Average Recorded Investment | | | | Interest Income Recognized | | |
| (Dollars in millions) | | | Without an ALLL | | | | With an ALLL | | | | | |
| Commercial: | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 505 | | | $ | 204 | | | $ | 271 | | | $ | 38 | | | $ | 483 | | | $ | 6 | |
| CRE | | 121 | | | | 35 | | | | 80 | | | | 9 | | | | 114 | | | | 3 | | |
| Lease financing | | 4 | | | | 1 | | | | 3 | | | | — | | | | 4 | | | | — | | |
| Retail: | | | | | | | | | | | | | | | | | | | | | | | | |
| Residential mortgage | | 1,026 | | | | 97 | | | | 870 | | | | 83 | | | | 843 | | | | 34 | | |
| Direct | | 107 | | | | 13 | | | | 68 | | | | 10 | | | | 83 | | | | 5 | | |
| Indirect | | 265 | | | | 5 | | | | 251 | | | | 41 | | | | 227 | | | | 33 | | |
| Revolving credit | | 29 | | | | — | | | | 29 | | | | 11 | | | | 31 | | | | 1 | | |
| Total | | $ | 2,057 | | | $ | 355 | | | $ | 1,572 | | | $ | 192 | | | $ | 1,785 | | | $ | 82 | |
| TFC/10-K/0000092230-18-000021 |
NOTE 3. 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, | | | | | | |
| (Dollars in millions) | | 2017 | | | | 2016 | | |
| Performing TDRs: | | | | | | | | |
| Commercial: | | | | | | | | |
| Commercial and industrial | | $ | 50 | | | $ | 57 | |
| CRE | | 16 | | | | 25 | | |
| Lease financing | | — | | | | — | | |
| Retail: | | | | | | | | |
| Residential mortgage | | 605 | | | | 769 | | |
| Direct | | 62 | | | | 67 | | |
| Indirect | | 281 | | | | 240 | | |
| Revolving credit | | 29 | | | | 29 | | |
| Total performing TDRs | | 1,043 | | | | 1,187 | | |
| Nonperforming TDRs (also included in NPL disclosures) | | 189 | | | | 184 | | |
| Total TDRs | | $ | 1,232 | | | $ | 1,371 | |
| ALLL attributable to TDRs | | $ | 142 | | | $ | 146 | |
| TFC/10-K/0000092230-18-000021 |
NOTE 3. 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 $104 million, $73 million and $81 million for the twelve months ended December 31, 2017, 2016 and 2015, respectively. Payment default is defined as movement of the TDR to nonaccrual status, foreclosure or charge-off, whichever occurs first.The following table presents additional information about BB&T’s loans and leases: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2017 | | | | | | | | | | | | 2016 | | | | | | | | | | | | 2015 | | | | | | | | | | |
| | | Type of Modification | | | | | | | | ALLL Impact | | | | Type of Modification | | | | | | | | ALLL Impact | | | | Type of Modification | | | | | | | | ALLL Impact | | |
| (Dollars in millions) | | Rate | | | | Structure | | | | | Rate | | | | Structure | | | | | Rate | | | | Structure | | | |
| Newly Designated TDRs: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 79 | | | $ | 101 | | | $ | 3 | | | $ | 105 | | | $ | 96 | | | $ | 3 | | | $ | 68 | | | $ | 31 | | | $ | 2 | |
| CRE | | 14 | | | | 10 | | | | 1 | | | | 12 | | | | 16 | | | | — | | | | 11 | | | | 26 | | | | 1 | | |
| Retail: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Residential mortgage | | 357 | | | | 46 | | | | 25 | | | | 431 | | | | 53 | | | | 28 | | | | 230 | | | | 34 | | | | 16 | | |
| Direct | | 10 | | | | 3 | | | | — | | | | 14 | | | | 1 | | | | — | | | | 12 | | | | 2 | | | | 4 | | |
| Indirect | | 192 | | | | 6 | | | | 21 | | | | 169 | | | | 7 | | | | 21 | | | | 129 | | | | 9 | | | | 18 | | |
| Revolving credit | | 19 | | | | — | | | | 4 | | | | 17 | | | | — | | | | 4 | | | | 16 | | | | — | | | | 4 | | |
| Re-Modification of Previously Designated TDRs | | 176 | | | | 44 | | | | — | | | | 79 | | | | 46 | | | | — | | | | 88 | | | | 34 | | | | — | | |
| TFC/10-K/0000092230-18-000021 |
NOTE 4. Premises and Equipment | The following table excludes assets related to the lease financing business: |
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | |
| | Estimated Useful Life | | | | December 31, | | | | | | |
| (Dollars in millions) | | 2017 | | | | 2016 | | |
| Land and land improvements | | | | | $ | 583 | | | $ | 611 | |
| Buildings and building improvements | 40 years | | | | 1,660 | | | | 1,628 | | |
| Furniture and equipment | 3 | - | 15 | | 1,146 | | | | 1,121 | | |
| Leasehold improvements | | | | | 733 | | | | 791 | | |
| Construction in progress | | | | | 52 | | | | 62 | | |
| Capitalized leases on premises and equipment | | | | | 58 | | | | 66 | | |
| Total | | | | | 4,232 | | | | 4,279 | | |
| Accumulated depreciation and amortization | | | | | (2,177 | | ) | | (2,172 | | ) |
| Net premises and equipment | | | | | $ | 2,055 | | | $ | 2,107 | |
| TFC/10-K/0000092230-18-000021 |
NOTE 5. Goodwill and Other Intangible Assets | During 2016, the purchase price allocation for Susquehanna was finalized. During 2017, the purchase price allocations for National Penn and Swett & Crawford were finalized. The related effects of these finalizations are included in other adjustments in the above table. The following table, which excludes fully amortized intangibles, presents information for identifiable intangible assets: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Dollars in millions) | | Community Banking | | | | Residential Mortgage Banking | | | | Dealer Financial Services | | | | Specialized Lending | | | | Insurance Holdings | | | | Financial Services | | | | Total | | |
| Goodwill, January 1, 2015 | | $ | 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 | | |
| Other adjustments | | (12 | | ) | | 6 | | | | — | | | | (9 | | ) | | (5 | | ) | | — | | | | (20 | | ) |
| Goodwill, prior to reorganization | | $ | 7,020 | | | $ | 422 | | | $ | 111 | | | $ | 104 | | | $ | 1,747 | | | $ | 214 | | | $ | 9,618 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Goodwill, after reorganization | | | | | | | | | | CB-Retail | | | | CB-Commercial | | | | FS&CF | | | | IH&PF | | | | Total | | |
| Goodwill, December 31, 2017 | | | | | | | | | | $ | 3,724 | | | $ | 3,862 | | | $ | 259 | | | $ | 1,773 | | | $ | 9,618 | |
| TFC/10-K/0000092230-18-000021 |
NOTE 5. Goodwill and Other Intangible Assets | The estimated amortization expense for the next five years is presented as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | December 31, 2017 | | | | | | | | | | | | December 31, 2016 | | | | | | | | | | |
| (Dollars in millions) | | Wtd. Avg. Remaining Life | | Gross Carrying Amount | | | | Accumulated Amortization | | | | Net Carrying Amount | | | | Gross Carrying Amount | | | | Accumulated Amortization | | | | Net Carrying Amount | | |
| CDI | | 7.0 years | | $ | 605 | | | $ | (409 | ) | | $ | 196 | | | $ | 825 | | | $ | (565 | ) | | $ | 260 | |
| Other, primarily customer relationship intangibles | | 12.0 | | 1,211 | | | | (696 | | ) | | 515 | | | | 1,249 | | | | (655 | | ) | | 594 | | |
| Total | | | | $ | 1,816 | | | $ | (1,105 | ) | | $ | 711 | | | $ | 2,074 | | | $ | (1,220 | ) | | $ | 854 | |
| TFC/10-K/0000092230-18-000021 |
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.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, | | | | | | | | | | |
| (Dollars in millions) | | 2017 | | | | 2016 | | | | 2015 | | |
| UPB of residential mortgage and home equity loan servicing portfolio | | $ | 118,424 | | | $ | 121,639 | | | $ | 122,169 | |
| UPB of residential mortgage loans serviced for others, primarily agency conforming fixed rate | | 89,124 | | | | 90,325 | | | | 91,132 | | |
| Mortgage loans sold with recourse | | 490 | | | | 578 | | | | 702 | | |
| Maximum recourse exposure from mortgage loans sold with recourse liability | | 251 | | | | 282 | | | | 326 | | |
| Indemnification, recourse and repurchase reserves | | 37 | | | | 40 | | | | 79 | | |
| UPB of residential mortgage loans sold | | 12,423 | | | | 15,675 | | | | 14,764 | | |
| Pre-tax gains recognized on mortgage loans sold and held for sale | | 153 | | | | 139 | | | | 148 | | |
| Servicing fees recognized from mortgage loans serviced for others | | 261 | | | | 268 | | | | 273 | | |
| Approximate weighted average servicing fee on the outstanding balance of residential mortgage loans serviced for others | | 0.28 | | % | | 0.28 | | % | | 0.29 | | % |
| Weighted average interest rate on mortgage loans serviced for others | | 4.00 | | | | 4.03 | | | | 4.12 | | |
| TFC/10-K/0000092230-18-000021 |
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, | | | | | | | | | | |
| (Dollars in millions) | | 2017 | | | | 2016 | | | | 2015 | | |
| Carrying value, beginning of year | | $ | 915 | | | $ | 880 | | | $ | 844 | |
| Additions | | 123 | | | | 146 | | | | 156 | | |
| Change in fair value due to changes in valuation inputs or assumptions: | | | | | | | | | | | | |
| Prepayment speeds | | (42 | | ) | | 13 | | | | 91 | | |
| Weighted average OAS | | 46 | | | | 10 | | | | (52 | | ) |
| Servicing costs | | 9 | | | | 2 | | | | (25 | | ) |
| Realization of expected net servicing cash flows, passage of time and other | | (137 | | ) | | (136 | | ) | | (134 | | ) |
| Carrying value, end of year | | $ | 914 | | | $ | 915 | | | $ | 880 | |
| | | | | | | | | | | | | |
| Gains (losses) on derivative financial instruments used to mitigate the income statement effect of changes in fair value | | $ | — | | | $ | 32 | | | $ | 32 | |
| TFC/10-K/0000092230-18-000021 |
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, 2017 | | | | | | | | | | December 31, 2016 | | | | | | | | |
| | | Range | | | | | | Weighted Average | | | | Range | | | | | | Weighted Average | | |
| (Dollars in millions) | | Min | | | Max | | | | Min | | | Max | | |
| Prepayment speed | | 7.1 | % | | 10.1 | % | | 9.1 | | % | | 7.5 | % | | 8.4 | % | | 8.1 | | % |
| Effect on fair value of a 10% increase | | | | | | | | $ | (31 | ) | | | | | | | | $ | (28 | ) |
| Effect on fair value of a 20% increase | | | | | | | | (60 | | ) | | | | | | | | (54 | | ) |
| | | | | | | | | | | | | | | | | | | | | |
| OAS | | 8.4 | % | | 8.9 | % | | 8.5 | | % | | 9.8 | % | | 10.2 | % | | 10.0 | | % |
| Effect on fair value of a 10% increase | | | | | | | | $ | (28 | ) | | | | | | | | $ | (33 | ) |
| Effect on fair value of a 20% increase | | | | | | | | (54 | | ) | | | | | | | | (64 | | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Composition of loans serviced for others: | | | | | | | | | | | | | | | | | | | | |
| Fixed-rate residential mortgage loans | | | | | | | | 99.1 | | % | | | | | | | | 99.1 | | % |
| Adjustable-rate residential mortgage loans | | | | | | | | 0.9 | | | | | | | | | | 0.9 | | |
| Total | | | | | | | | 100.0 | | % | | | | | | | | 100.0 | | % |
| | | | | | | | | | | | | | | | | | | | | |
| Weighted average life | | | | | | | | 6.4 years | | | | | | | | | | 7.0 years | | |
| TFC/10-K/0000092230-18-000021 |
NOTE 8. Long-Term Debt | (1)FHLB advances had a weighted average maturity of 3.8 years at December 31, 2017.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.During 2017, 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.The following table presents future debt maturities: |
| | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2017 | | | | | | | | | | | | | | | | | December 31, 2016 | | |
| | | | | | | Stated Rate | | | | | | Effective Rate | | | Carrying | | | | Carrying | | |
| (Dollars in millions) | | Maturity | | | | Min | | | Max | | | | Amount | | | | Amount | | |
| BB&T Corporation: | | | | | | | | | | | | | | | | | | | | | |
| Fixed rate senior notes | | 2018 | to | 2024 | | 2.05 | % | | 6.85 | % | | 2.89 | % | | $ | 8,562 | | | $ | 7,600 | |
| Floating rate senior notes | | 2018 | | 2022 | | 1.60 | | | 2.45 | | | 2.13 | | | 2,547 | | | | 1,898 | | |
| Fixed rate subordinated notes | | 2019 | | 2022 | | 3.95 | | | 5.25 | | | 1.98 | | | 933 | | | | 1,338 | | |
| Branch Bank: | | | | | | | | | | | | | | | | | | | | | |
| Fixed rate senior notes | | 2018 | | 2022 | | 1.45 | | | 2.85 | | | 2.56 | | | 5,653 | | | | 4,209 | | |
| Floating rate senior notes | | 2019 | | 2020 | | 1.74 | | | 1.91 | | | 2.10 | | | 1,149 | | | | 250 | | |
| Fixed rate subordinated notes | | 2025 | | 2026 | | 3.63 | | | 3.80 | | | 3.58 | | | 2,119 | | | | 2,138 | | |
| Floating rate subordinated notes | | | | | | | | | | | | | | | — | | | | 262 | | |
| FHLB advances (1) | | 2018 | | 2034 | | — | | | 5.50 | | | 1.49 | | | 2,480 | | | | 4,118 | | |
| Other long-term debt | | | | | | | | | | | | | | | 205 | | | | 152 | | |
| Total long-term debt | | | | | | | | | | | | | | | $ | 23,648 | | | $ | 21,965 | |
| TFC/10-K/0000092230-18-000021 |
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 | |
| Total | | | | | | $ | 3,140 | | | $ | 3,053 | | | | |
| TFC/10-K/0000092230-18-000021 |
Equity-Based Compensation Plans | The fair value of RSUs and PSUs 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. 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, 2017 | | |
| Shares available for future grants (in thousands) | | 19,408 | | |
| Vesting period, minimum | | 1.0 | | years |
| Vesting period, maximum | | 5.0 | | |
| Option term | | 10.0 | | |
| TFC/10-K/0000092230-18-000021 |
Equity-Based Compensation Plans | The following table presents the activity during 2017 related to awards of RSUs, PSUs and restricted shares: |
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | |
| | | As of / For the Year Ended December 31, | | | | | | | | | | |
| (Dollars in millions) | | 2017 | | | | 2016 | | | | 2015 | | |
| Equity-based compensation expense | | $ | 132 | | | $ | 115 | | | $ | 106 | |
| Income tax benefit from equity-based compensation expense | | 34 | | | | 43 | | | | 40 | | |
| Intrinsic value of options exercised, and RSUs and PSUs that vested during the year | | 261 | | | | 159 | | | | 170 | | |
| Grant date fair value of equity-based awards that vested during the year | | 116 | | | | 98 | | | | 115 | | |
| Unrecognized compensation cost related to equity-based awards | | 132 | | | | 109 | | | | 103 | | |
| Weighted-average life over which compensation cost is expected to be recognized (years) | | 2.4 | | | | 2.3 | | | | 2.2 | | |
| TFC/10-K/0000092230-18-000021 |
NOTE 10. AOCI | (1)Amounts related to unrecognized net pension and postretirement costs are included in personnel expense, amounts related to unrealized net gains (losses) on cash flow hedges are included in net interest income, amounts related to unrealized net gains (losses) on AFS securities are included in net interest income or securities gains/losses when realized, amounts related to FDIC's share of unrealized gains (losses) on AFS securities are included in FDIC loss share income, net and amounts related to other, net are primarily included in net interest income in the Consolidated Statements of Income. |
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| | | | | | | | | | | | | | | | | | | | | | | | | |
| (Dollars in millions) | | Unrecognized Net Pension and Postretirement Costs | | | | Unrealized Net Gains (Losses) on Cash Flow Hedges | | | | Unrealized Net Gains (Losses) on AFS Securities | | | | FDIC's Share of Unrealized (Gains) Losses on AFS Securities | | | | Other, net | | | | Total | | |
| AOCI balance, January 1, 2015 | | $ | (626 | ) | | $ | (54 | ) | | $ | 152 | | | $ | (207 | ) | | $ | (16 | ) | | $ | (751 | ) |
| OCI before reclassifications, net of tax | | (139 | | ) | | (81 | | ) | | (206 | | ) | | 19 | | | | (9 | | ) | | (416 | | ) |
| Amounts reclassified from AOCI: | | | | | | | | | | | | | | | | | | | | | | | | |
| Before tax (1) | | 67 | | | | 83 | | | | 32 | | | | 31 | | | | 9 | | | | 222 | | |
| Tax effect | | 25 | | | | 31 | | | | 12 | | | | 12 | | | | 3 | | | | 83 | | |
| Amounts reclassified, net of tax | | 42 | | | | 52 | | | | 20 | | | | 19 | | | | 6 | | | | 139 | | |
| Total OCI, net of tax | | (97 | | ) | | (29 | | ) | | (186 | | ) | | 38 | | | | (3 | | ) | | (277 | | ) |
| AOCI balance, December 31, 2015 | | (723 | | ) | | (83 | | ) | | (34 | | ) | | (169 | | ) | | (19 | | ) | | (1,028 | | ) |
| OCI before reclassifications, net of tax | | (91 | | ) | | (16 | | ) | | (201 | | ) | | 148 | | | | 1 | | | | (159 | | ) |
| Amounts reclassified from AOCI: | | | | | | | | | | | | | | | | | | | | | | | | |
| Before tax (1) | | 80 | | | | 11 | | | | (39 | | ) | | 33 | | | | 1 | | | | 86 | | |
| Tax effect | | 30 | | | | 4 | | | | (15 | | ) | | 12 | | | | — | | | | 31 | | |
| Amounts reclassified, net of tax | | 50 | | | | 7 | | | | (24 | | ) | | 21 | | | | 1 | | | | 55 | | |
| Total OCI, net of tax | | (41 | | ) | | (9 | | ) | | (225 | | ) | | 169 | | | | 2 | | | | (104 | | ) |
| AOCI balance, December 31, 2016 | | (764 | | ) | | (92 | | ) | | (259 | | ) | | — | | | | (17 | | ) | | (1,132 | | ) |
| OCI before reclassifications, net of tax | | (129 | | ) | | 7 | | | | (23 | | ) | | — | | | | 5 | | | | (140 | | ) |
| Amounts reclassified from AOCI: | | | | | | | | | | | | | | | | | | | | | | | | |
| Before tax (1) | | 72 | | | | 15 | | | | (7 | | ) | | — | | | | — | | | | 80 | | |
| Tax effect | | 27 | | | | 4 | | | | (3 | | ) | | — | | | | — | | | | 28 | | |
| Amounts reclassified, net of tax | | 45 | | | | 11 | | | | (4 | | ) | | — | | | | — | | | | 52 | | |
| Total OCI, net of tax | | (84 | | ) | | 18 | | | | (27 | | ) | | — | | | | 5 | | | | (88 | | ) |
| Reclassification of certain tax effects | | (156 | | ) | | (18 | | ) | | (70 | | ) | | — | | | | (3 | | ) | | (247 | | ) |
| AOCI balance, December 31, 2017 | | $ | (1,004 | ) | | $ | (92 | ) | | $ | (356 | ) | | $ | — | | | $ | (15 | ) | | $ | (1,467 | ) |
| TFC/10-K/0000092230-18-000021 |
NOTE 11. 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, | | | | | | | | | | |
| (Dollars in millions) | | 2017 | | | | 2016 | | | | 2015 | | |
| Current expense: | | | | | | | | | | | | |
| Federal | | $ | 539 | | | $ | 959 | | | $ | 585 | |
| State | | 80 | | | | 97 | | | | 99 | | |
| Total current expense | | 619 | | | | 1,056 | | | | 684 | | |
| Deferred expense: | | | | | | | | | | | | |
| Federal | | 253 | | | | (14 | | ) | | 99 | | |
| State | | 39 | | | | 16 | | | | 11 | | |
| Total deferred expense | | 292 | | | | 2 | | | | 110 | | |
| Provision for income taxes | | $ | 911 | | | $ | 1,058 | | | $ | 794 | |
| TFC/10-K/0000092230-18-000021 |
NOTE 11. Income Taxes | The Tax Cuts and Jobs Act was signed into law December 22, 2017. The net tax benefit recognized as a result of the revaluation of deferred taxes and investment in affordable housing projects is presented as Federal tax reform impact in the above table. 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, | | | | | | | | | | |
| (Dollars in millions) | | 2017 | | | | 2016 | | | | 2015 | | |
| Federal income taxes at statutory rate of 35% | | $ | 1,164 | | | $ | 1,225 | | | $ | 1,021 | |
| Increase (decrease) in provision for income taxes as a result of: | | | | | | | | | | | | |
| State income taxes, net of federal tax benefit | | 77 | | | | 73 | | | | 72 | | |
| Affordable housing projects proportional amortization | | 236 | | | | 205 | | | | 181 | | |
| Affordable housing projects tax credits and other tax benefits | | (319 | | ) | | (279 | | ) | | (249 | | ) |
| Tax exempt income | | (139 | | ) | | (151 | | ) | | (129 | | ) |
| Federal tax reform impact | | (43 | | ) | | — | | | | — | | |
| Excess tax benefits for equity-based compensation | | (52 | | ) | | — | | | | — | | |
| Adjustments for uncertain tax positions | | — | | | | (6 | | ) | | (107 | | ) |
| Other, net | | (13 | | ) | | (9 | | ) | | 5 | | |
| Provision for income taxes | | $ | 911 | | | $ | 1,058 | | | $ | 794 | |
| Effective income tax rate | | 27.4 | | % | | 30.2 | | % | | 27.2 | | % |
| TFC/10-K/0000092230-18-000021 |
NOTE 11. 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, | | | | | | |
| (Dollars in millions) | | 2017 | | | | 2016 | | |
| Deferred tax assets: | | | | | | | | |
| ALLL | | $ | 359 | | | $ | 564 | |
| Postretirement plans | | 311 | | | | 451 | | |
| Net unrealized loss on AFS securities | | 112 | | | | 155 | | |
| Equity-based compensation | | 66 | | | | 124 | | |
| Reserves and expense accruals | | 114 | | | | 238 | | |
| Partnerships | | 70 | | | | 116 | | |
| Other | | 160 | | | | 317 | | |
| Total deferred tax assets | | 1,192 | | | | 1,965 | | |
| Deferred tax liabilities: | | | | | | | | |
| Prepaid pension plan expense | | 436 | | | | 558 | | |
| MSRs | | 234 | | | | 358 | | |
| Lease financing | | 366 | | | | 587 | | |
| Loan fees and expenses | | 114 | | | | 103 | | |
| Identifiable intangible assets | | 163 | | | | 224 | | |
| Other | | 31 | | | | 45 | | |
| Total deferred tax liabilities | | 1,344 | | | | 1,875 | | |
| Net deferred tax asset (liability) | | $ | (152 | ) | | $ | 90 | |
| TFC/10-K/0000092230-18-000021 |
NOTE 11. Income Taxes | During 2015, the U.S. Court of Appeals for the Federal Circuit overturned a portion of an earlier ruling pertaining to the disallowance of foreign tax credits and other deductions claimed by a subsidiary in connection with a financing transaction, which resulted in the recognition of a $107 million income tax benefit. During 2016, the U.S. Supreme Court declined to hear the case, which preserved the earlier ruling and effectively concluded this matter.The Company had immaterial amounts accrued for tax-related interest and penalties at December 31, 2017 and 2016. The amount of net interest and penalties related to unrecognized tax benefits recognized in the Consolidated Statements of Income was immaterial for all periods presented. 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, | | | | | | | | | | |
| (Dollars in millions) | | 2017 | | | | 2016 | | | | 2015 | | |
| Beginning balance of unrecognized tax benefits | | $ | 1 | | | $ | 426 | | | $ | 503 | |
| Additions based on tax positions related to current year | | — | | | | — | | | | — | | |
| Additions (reductions) for tax positions of prior years | | — | | | | (5 | | ) | | (76 | | ) |
| Settlements | | — | | | | (420 | | ) | | (1 | | ) |
| Lapse of statute of limitations | | — | | | | — | | | | (1 | | ) |
| Unrecognized deferred tax benefits from acquisitions | | — | | | | — | | | | 1 | | |
| Ending balance of unrecognized tax benefits | | $ | 1 | | | $ | 1 | | | $ | 426 | |
| | | | | | | | | | | | | |
| Unrecognized tax benefits that would have impacted effective rate if recognized | | | | | | | | | | | | |
| Federal | | $ | — | | | $ | — | | | $ | 422 | |
| State | | 1 | | | | 1 | | | | 3 | | |
| TFC/10-K/0000092230-18-000021 |
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 2018, 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, | | | | | | | |
| | | 2017 | | | 2016 | | | 2015 | |
| Weighted average assumed discount rate | | 4.43 | % | | 4.68 | % | | 4.27 | % |
| Weighted average expected long-term rate of return on plan assets | | 7.00 | | | 7.00 | | | 7.50 | |
| Assumed long-term rate of annual compensation increases | | 4.50 | | | 4.50 | | | 4.50 | |
| TFC/10-K/0000092230-18-000021 |
Defined Benefit Retirement Plans | The following actuarial assumptions were used to determine benefit obligations: |
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
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| | | Year Ended December 31, | | | | | | | | | | |
| (Dollars in millions) | | 2017 | | | | 2016 | | | | 2015 | | |
| Net Periodic Pension Cost: | | | | | | | | | | | | |
| Service cost | | $ | 200 | | | $ | 186 | | | $ | 176 | |
| Interest cost | | 192 | | | | 181 | | | | 157 | | |
| Estimated return on plan assets | | (372 | | ) | | (326 | | ) | | (327 | | ) |
| Net amortization and other | | 75 | | | | 80 | | | | 67 | | |
| Net periodic benefit cost | | 95 | | | | 121 | | | | 73 | | |
| Pre-Tax Amounts Recognized in OCI: | | | | | | | | | | | | |
| Prior service credit (cost) | | 30 | | | | — | | | | — | | |
| Net actuarial loss (gain) | | 137 | | | | 138 | | | | 230 | | |
| Net amortization | | (75 | | ) | | (80 | | ) | | (67 | | ) |
| Net amount recognized in OCI | | 92 | | | | 58 | | | | 163 | | |
| Total net periodic pension costs (income) recognized in total comprehensive income, pre-tax | | $ | 187 | | | $ | 179 | | | $ | 236 | |
| TFC/10-K/0000092230-18-000021 |
Defined Benefit Retirement Plans | Activity in the projected benefit obligation is presented in the following table: |
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| --- | --- | --- | --- | --- | --- | --- |
| | | | | | | |
| | | December 31, | | | | |
| | | 2017 | | | 2016 | |
| Weighted average assumed discount rate | | 3.79 | % | | 4.43 | % |
| Assumed rate of annual compensation increases | | 4.50 | | | 4.50 | |
| TFC/10-K/0000092230-18-000021 |
Defined Benefit Retirement Plans | Effective December 31, 2017, the qualified defined benefit plan was amended and a portion of the accrued benefits of participants in the nonqualified plan were shifted to the qualified plan. Affected associates continue to participate in the nonqualified plan for benefits earned in 2017 and later. In conjunction with this shift, a minimum benefit was established under the qualified plan. Activity in plan assets is presented in the following table: |
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| | | Qualified Plan | | | | | | | | Nonqualified Plans | | | | | | |
| | | Year Ended December 31, | | | | | | | | Year Ended December 31, | | | | | | |
| (Dollars in millions) | | 2017 | | | | 2016 | | | | 2017 | | | | 2016 | | |
| Projected benefit obligation, beginning of year | | $ | 3,939 | | | $ | 3,473 | | | $ | 426 | | | $ | 392 | |
| Service cost | | 188 | | | | 174 | | | | 12 | | | | 12 | | |
| Interest cost | | 173 | | | | 163 | | | | 19 | | | | 18 | | |
| Actuarial (gain) loss | | 576 | | | | 152 | | | | 77 | | | | 15 | | |
| Benefits paid | | (102 | | ) | | (94 | | ) | | (12 | | ) | | (11 | | ) |
| Plan amendments | | 165 | | | | — | | | | (135 | | ) | | — | | |
| Acquisitions | | — | | | | 71 | | | | — | | | | — | | |
| Projected benefit obligation, end of year | | $ | 4,939 | | | $ | 3,939 | | | $ | 387 | | | $ | 426 | |
| Accumulated benefit obligation, end of year | | $ | 4,198 | | | $ | 3,403 | | | $ | 288 | | | $ | 363 | |
| TFC/10-K/0000092230-18-000021 |
Defined Benefit Retirement Plans | The following are the pre-tax amounts recognized in AOCI: |
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | | | |
| | | Qualified Plan | | | | | | | | Nonqualified Plans | | | | | | |
| | | Year Ended December 31, | | | | | | | | Year Ended December 31, | | | | | | |
| (Dollars in millions) | | 2017 | | | | 2016 | | | | 2017 | | | | 2016 | | |
| Fair value of plan assets, beginning of year | | $ | 5,044 | | | $ | 4,369 | | | $ | — | | | $ | — | |
| Actual return on plan assets | | 888 | | | | 356 | | | | — | | | | — | | |
| Employer contributions | | 479 | | | | 360 | | | | 13 | | | | 11 | | |
| Benefits paid | | (102 | | ) | | (94 | | ) | | (13 | | ) | | (11 | | ) |
| Acquisitions | | — | | | | 53 | | | | — | | | | — | | |
| Fair value of plan assets, end of year | | $ | 6,309 | | | $ | 5,044 | | | $ | — | | | $ | — | |
| Funded status at end of year | | $ | 1,370 | | | $ | 1,105 | | | $ | (387 | ) | | $ | (426 | ) |
| TFC/10-K/0000092230-18-000021 |
Defined Benefit Retirement Plans | The following table presents the amount expected to be amortized from AOCI into net periodic pension cost during 2018: |
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
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| | | Qualified Plan | | | | | | | | Nonqualified Plans | | | | | | |
| | | Year Ended December 31, | | | | | | | | Year Ended December 31, | | | | | | |
| (Dollars in millions) | | 2017 | | | | 2016 | | | | 2017 | | | | 2016 | | |
| Prior service credit (cost) | | $ | (165 | ) | | $ | — | | | $ | 134 | | | $ | (1 | ) |
| Net actuarial loss | | (1,092 | | ) | | (1,095 | | ) | | (198 | | ) | | (135 | | ) |
| Net amount recognized | | $ | (1,257 | ) | | $ | (1,095 | ) | | $ | (64 | ) | | $ | (136 | ) |
| TFC/10-K/0000092230-18-000021 |
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 $144 million during the first quarter of 2018. Management may make additional contributions in 2018. 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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| (Dollars in millions) | | Qualified Plan | | | | Nonqualified Plans | | |
| Net actuarial loss | | $ | (49 | ) | | $ | (22 | ) |
| Prior service credit (cost) | | (25 | | ) | | $ | 19 | |
| Net amount expected to be amortized in 2018 | | $ | (74 | ) | | $ | (3 | ) |
| TFC/10-K/0000092230-18-000021 |
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, 2017, 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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| (Dollars in millions) | | Qualified Plan | | | | Nonqualified Plans | | |
| 2018 | | $ | 114 | | | $ | 15 | |
| 2019 | | 125 | | | | 15 | | |
| 2020 | | 137 | | | | 16 | | |
| 2021 | | 150 | | | | 16 | | |
| 2022 | | 164 | | | | 17 | | |
| 2023-2027 | | 1,042 | | | | 101 | | |
| TFC/10-K/0000092230-18-000021 |