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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the quarterly period ended: March 31, 2012

Commission file number: 1-10853

 

 

BB&T CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

North Carolina		56-0939887
(State of Incorporation)		(I.R.S. Employer Identification No.)

 

200 West Second Street Winston-Salem, North Carolina		27101
(Address of Principal Executive Offices)		(Zip Code)

(336) 733-2000

(Registrant’s Telephone Number, Including Area Code)

 

 

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

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

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

 

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

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

At April 30, 2012, 698,639,304 shares of the Registrant’s common stock, $5 par value, were outstanding.

 

 

 

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BB&T CORPORATION

FORM 10-Q

March 31, 2012

INDEX

 

		PART I		Page No.
Item 1.		Financial Statements
		Consolidated Balance Sheets (Unaudited)			3
		Consolidated Statements of Income (Unaudited)			4
		Consolidated Statements of Comprehensive Income (Unaudited)			5
		Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)			6
		Consolidated Statements of Cash Flows (Unaudited)			7
		Notes to Consolidated Financial Statements (Unaudited)			8
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			51
Item 3.		Quantitative and Qualitative Disclosures About Market Risk (see Market Risk Management)			80
Item 4.		Controls and Procedures			80
		PART II
Item 1.		Legal Proceedings			80
Item 1A.		Risk Factors			80
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			80
Item 3.		Defaults Upon Senior Securities - (not applicable.)
Item 4.		Mine Safety Disclosures - (not applicable.)
Item 5.		Other Information - (none to be reported.)
Item 6.		Exhibits			81

 

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BB&T CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in millions, except per share data, shares in thousands)

 

		March  31, 2012				December  31, 2011
Assets
Cash and due from banks		$	1,336			$	1,562
Interest-bearing deposits with banks			2,464				2,646
Federal funds sold and securities purchased under resale agreements or similar arrangements			252				136
Segregated cash due from banks			20				20
Trading securities at fair value			589				534
Securities available for sale at fair value ($1,621 and $1,577 covered by FDIC loss share at March 31, 2012 and December 31, 2011, respectively)			24,380				22,313
Securities held to maturity (fair value of $13,507 and $14,098 at March 31, 2012 and December 31, 2011, respectively)			13,485				14,094
Loans held for sale			2,525				3,736
Loans and leases ($4,532 and $4,867 covered by FDIC loss share at March 31, 2012 and December 31, 2011, respectively)			108,161				107,469
Allowance for loan and lease losses			(2,181	)			(2,256	)
Loans and leases, net of allowance for loan and lease losses			105,980				105,213
FDIC loss share receivable			949				1,100
Premises and equipment			1,822				1,855
Goodwill			6,077				6,078
Core deposit and other intangible assets			422				444
Residential mortgage servicing rights at fair value			696				563
Other assets ($403 and $415 of foreclosed property and other assets covered by FDIC loss share at March 31, 2012 and December 31, 2011, respectively)			13,755				14,285
Total assets		$	174,752			$	174,579
Liabilities and Shareholders’ Equity
Deposits:
Noninterest-bearing deposits		$	27,410			$	25,684
Interest-bearing deposits			96,747				99,255
Total deposits			124,157				124,939
Federal funds purchased, securities sold under repurchase agreements and short-term borrowed funds			3,436				3,566
Long-term debt			22,768				21,803
Accounts payable and other liabilities			6,509				6,791
Total liabilities			156,870				157,099
Commitments and contingencies (Note 13)
Shareholders’ equity:
Common stock, $5 par			3,492				3,486
Additional paid-in capital			5,880				5,873
Retained earnings			9,064				8,772
Accumulated other comprehensive loss, net of deferred income taxes			(616	)			(713	)
Noncontrolling interests			62				62
Total shareholders’ equity			17,882				17,480
Total liabilities and shareholders’ equity		$	174,752			$	174,579
Common shares outstanding			698,454				697,143
Common shares authorized			2,000,000				2,000,000
Preferred shares authorized			5,000				5,000

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

 

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BB&T CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Dollars in millions, except per share data, shares in thousands)

 

		Three Months Ended March 31,
		2012				2011
Interest Income
Interest and fees on loans and leases		$	1,502			$	1,520
Interest and dividends on securities			234				150
Interest on other earning assets			7				6
Total interest income			1,743				1,676
Interest Expense
Interest on deposits			121				171
Interest on federal funds purchased, securities sold under repurchase agreements and short-term borrowed funds			1				4
Interest on long-term debt			185				216
Total interest expense			307				391
Net Interest Income			1,436				1,285
Provision for credit losses			288				340
Net Interest Income After Provision for Credit Losses			1,148				945
Noninterest Income
Insurance income			271				250
Service charges on deposits			137				135
Mortgage banking income			216				95
Investment banking and brokerage fees and commissions			89				87
Checkcard fees			43				72
Bankcard fees and merchant discounts			54				46
Trust and investment advisory revenues			45				43
Income from bank-owned life insurance			30				30
FDIC loss share income, net			(57	)			(58	)
Other income			52				14
Securities gains (losses), net
Realized gains (losses), net			(4	)			21
Other-than-temporary impairments			(3	)			(1	)
Non-credit portion recognized in other comprehensive income			(2	)			(20	)
Total securities gains (losses), net			(9	)			—
Total noninterest income			871				714
Noninterest Expense
Personnel expense			730				694
Foreclosed property expense			92				143
Occupancy and equipment expense			153				154
Loan processing expenses			63				56
Regulatory charges			41				61
Professional services			35				31
Software expense			32				26
Amortization of intangibles			22				26
Merger-related and restructuring charges, net			12				(2	)
Other expenses			205				183
Total noninterest expense			1,385				1,372
Earnings
Income before income taxes			634				287
Provision for income taxes			189				53
Net income			445				234
Noncontrolling interests			14				9
Net income available to common shareholders		$	431			$	225
Earnings Per Common Share
Basic		$	0.62			$	0.32
Diluted		$	0.61			$	0.32
Cash dividends declared		$	0.20			$	0.17
Weighted Average Shares Outstanding
Basic			697,685				695,309
Diluted			707,369				704,101

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

 

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BB&T CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in millions)

 

		Three Months Ended March 31,
		2012				2011
Net income		$	445			$	234
Other comprehensive income, net of tax:
Unrealized net holding gains (losses) arising during the period on securities available for sale, net of taxes of $74 and $49 for 2012 and 2011, respectively			119				83
Reclassification adjustment for (gains) losses on securities available for sale included in net income, net of taxes of $3 and $0 for 2012 and 2011, respectively			6				—
Change in amounts attributable to the FDIC under the loss share agreements, net of taxes of $(26) and $(34) for 2012 and 2011, respectively			(42	)			(57	)
Change in unrecognized gains (losses) on cash flow hedges, net of taxes of $0 and $6 for 2012 and 2011, respectively			1				9
Change in pension and postretirement liability, net of taxes of $7 and $3 for 2012 and 2011, respectively			11				5
Other, net of taxes of $0 and $(1) for 2012 and 2011, respectively			2				1
Total other comprehensive income			97				41
Total comprehensive income		$	542			$	275

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

 

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BB&T CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

Three Months Ended March 31, 2012 and 2011

(Dollars in millions, except per share data, shares in thousands)

 

		Shares of Common Stock				Common Stock				Additional Paid-In Capital				Retained Earnings				Accumulated Other Comprehensive Income (Loss)				Noncontrolling Interests				Total Shareholders’ Equity
Balance, January 1, 2011			694,381			$	3,472			$	5,776			$	7,935			$	(747	)		$	62			$	16,498
Add (Deduct):
Net income			—				—				—				225				—				9				234
Net change in other comprehensive income (loss)			—				—				—				—				41				—				41
Stock transactions:
In connection with equity awards			1,763				9				(8	)			—				—				—				1
Shares repurchased in connection with equity awards			(595	)			(3	)			(14	)			—				—				—				(17	)
In connection with dividend reinvestment plan			274				1				6				—				—				—				7
In connection with 401(k) plan			462				2				11				—				—				—				13
Cash dividends declared on common stock			—				—				—				(118	)			—				—				(118	)
Equity-based compensation expense			—				—				24				—				—				—				24
Other, net			—				—				(1	)			—				—				(12	)			(13	)
Balance, March 31, 2011			696,285			$	3,481			$	5,794			$	8,042			$	(706	)		$	59			$	16,670
Balance, January 1, 2012			697,143			$	3,486			$	5,873			$	8,772			$	(713	)		$	62			$	17,480
Add (Deduct):
Net income			—				—				—				431				—				14				445
Net change in other comprehensive income (loss)			—				—				—				—				97				—				97
Stock transactions:
In connection with equity awards			1,794				9				(3	)			—				—				—				6
Shares repurchased in connection with equity awards			(497	)			(3	)			(12	)			—				—				—				(15	)
In connection with dividend reinvestment plan			14				—				—				—				—				—				—
Cash dividends declared on common stock			—				—				—				(140	)			—				—				(140	)
Equity-based compensation expense			—				—				25				—				—				—				25
Other, net			—				—				(3	)			1				—				(14	)			(16	)
Balance, March 31, 2012			698,454			$	3,492			$	5,880			$	9,064			$	(616	)		$	62			$	17,882

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

 

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BB&T CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in millions)

 

		Three Months Ended March 31,
		2012				2011
Cash Flows From Operating Activities:
Net income		$	445			$	234
Adjustments to reconcile net income to net cash from operating activities:
Provision for credit losses			288				340
Depreciation			64				65
Amortization of intangibles			22				26
Equity-based compensation			25				24
(Gain) loss on securities, net			9				—
Net write-downs/losses on foreclosed property			59				103
Net change in operating assets and liabilities:
Segregated cash due from banks			—				156
Trading securities			(55	)			(158	)
Loans held for sale			1,214				1,089
FDIC loss share receivable			105				263
Other assets			52				126
Accounts payable and other liabilities			(288	)			(273	)
Other, net			(67	)			36
Net cash from operating activities			1,873				2,031
Cash Flows From Investing Activities:
Proceeds from sales of securities available for sale			109				115
Proceeds from maturities, calls and paydowns of securities available for sale			851				1,105
Purchases of securities available for sale			(2,859	)			(4,165	)
Proceeds from maturities, calls and paydowns of securities held to maturity			1,021				—
Purchases of securities held to maturity			(412	)			—
Originations and purchases of loans and leases, net of principal collected			(1,196	)			509
Purchases of premises and equipment			(21	)			(48	)
Proceeds from sales of foreclosed property or other real estate held for sale			238				192
Other, net			14				17
Net cash from investing activities			(2,255	)			(2,275	)
Cash Flows From Financing Activities:
Net change in deposits			(782	)			(229	)
Net change in federal funds purchased, securities sold under repurchase agreements and short-term borrowed funds			(130	)			(487	)
Proceeds from issuance of long-term debt			1,058				999
Repayment of long-term debt			(9	)			(127	)
Net cash from common stock transactions			(9	)			4
Cash dividends paid on common stock			(112	)			(104	)
Other, net			74				3
Net cash from financing activities			90				59
Net Change in Cash and Cash Equivalents			(292	)			(185	)
Cash and Cash Equivalents at Beginning of Period			4,344				2,385
Cash and Cash Equivalents at End of Period		$	4,052			$	2,200
Supplemental Disclosure of Cash Flow Information:
Cash paid (received) during the period for:
Interest		$	310			$	370
Income taxes			60				5
Noncash investing and financing activities:
Transfer of securities available for sale to securities held to maturity			1				8,341
Transfers of loans to foreclosed property			149				304

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

 

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BB&T Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited)		First Quarter 2012

NOTE 1. Basis of Presentation

General

In the opinion of management, the accompanying unaudited Consolidated Balance Sheets, Consolidated Statements of Income, Consolidated Statements of Comprehensive Income, Consolidated Statements of Changes in Shareholders’ Equity, and Consolidated Statements of Cash Flows of BB&T Corporation and subsidiaries (“BB&T,” the “Corporation” or the “Company”), are fair statements of BB&T’s financial position at March 31, 2012 and December 31, 2011, BB&T’s results of operations for the three months ended March 31, 2012 and 2011, and BB&T’s changes in shareholders’ equity and cash flows for the three months ended March 31, 2012 and 2011. In the opinion of management, all normal recurring adjustments necessary for a fair statement of the consolidated financial position and consolidated results of operations have been made.

These consolidated financial statements and notes are presented in accordance with the instructions for Form 10-Q. The information contained in the financial statements and footnotes included in BB&T’s Annual Report on Form 10-K for the year ended December 31, 2011 should be referred to in connection with these unaudited interim consolidated financial statements.

The accounting and reporting policies of BB&T and its subsidiaries are in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Additionally, where applicable, the policies conform to the accounting and reporting guidelines prescribed by bank regulatory authorities.

Nature of Operations

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

Principles of Consolidation

The consolidated financial statements of BB&T include the accounts of BB&T Corporation and those subsidiaries that are majority owned by BB&T and over which BB&T exercises control. In consolidation, all significant intercompany accounts and transactions are eliminated. The results of operations of companies or assets acquired are included only from the dates of acquisition. All material wholly-owned and majority-owned subsidiaries are consolidated unless GAAP requires otherwise.

BB&T holds investments in certain legal entities that are considered variable interest entities (“VIE’s”). VIE’s are legal entities in which equity investors do not have sufficient equity at risk for the entity to independently

 

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finance its activities, or as a group, the holders of the equity investment at risk lack the power through voting or similar rights to direct the activities of the entity that most significantly impact its economic performance, or do not have the obligation to absorb the expected losses of the entity or the right to receive expected residual returns of the entity. Consolidation of a VIE is considered appropriate if a reporting entity holds a controlling financial interest in the VIE.

BB&T evaluates its investments in VIE’s to determine if a controlling financial interest is held. This evaluation gives appropriate consideration to the design of the entity and the variability that the entity was designed to pass along, the relative power of each of the parties to the VIE, and to BB&T’s relative obligation to absorb losses or receive residual returns of the entity, in relation to such obligations and rights held by other parties to the VIE. BB&T has variable interests in certain entities that were not required to be consolidated, including affordable housing partnership interests, historic tax credit partnerships, and other partnership interests. Refer to Note 13 for additional disclosures regarding BB&T’s significant variable interest entities.

BB&T accounts for unconsolidated partnership and similar investments using the equity method of accounting. In addition to affordable housing partnerships, which represent the majority of unconsolidated investments in variable interest entities, BB&T also has investments and future funding commitments to venture capital and other entities. The maximum potential exposure to losses relative to investments in variable interest entities is generally limited to the sum of the outstanding balance, 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 certain entities for which BB&T does not have the controlling interest. For these investments, the Company records its interest using the equity method with its portion of income or loss being recorded in other noninterest income in the Consolidated Statements of Income. BB&T periodically evaluates these investments for impairment.

Reclassifications

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

Use of Estimates in the Preparation of Financial Statements

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

Changes in Accounting Principles and Effects of New Accounting Pronouncements

In May 2011, the FASB issued new guidance impacting Fair Value Measurements and Disclosures. The new guidance creates a uniform framework for applying fair value measurement principles for companies around the world. It eliminates differences between GAAP and International Financial Reporting Standards issued by the International Accounting Standards Board. New disclosures required by the guidance include: quantitative information about the significant unobservable inputs used for Level 3 measurements; a qualitative discussion about the sensitivity of recurring Level 3 measurements to changes in the unobservable inputs disclosed, including the interrelationship between inputs; and a description of the company’s valuation processes. The adoption of this guidance, which occurred effective January 1, 2012, had no impact on BB&T’s consolidated financial position, results of operations or cash flows. The new disclosures required by this guidance are included in Note 14 to these consolidated financial statements.

 

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In June 2011, the FASB issued new guidance impacting Comprehensive Income. The new guidance amends disclosure requirements for the presentation of comprehensive income. The amended guidance eliminates the option to present components of other comprehensive income (“OCI”) as part of the statement of changes in shareholders’ equity. All changes in OCI must be presented either in a single continuous statement of comprehensive income or in two separate but consecutive financial statements. The guidance does not change the items that must be reported in OCI. BB&T adopted this guidance effective January 1, 2012, and has elected to present two separate but consecutive financial statements.

In December 2011, the FASB issued new guidance impacting the presentation of certain items on the Balance Sheet. The new guidance requires an entity to disclose both gross and net information about both instruments and transactions that are eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. This guidance is effective for annual periods beginning on or after January 1, 2013 and interim periods within those annual periods. The adoption of this guidance will not impact BB&T’s consolidated financial position, results of operations or cash flows, but may result in certain additional disclosures.

NOTE 2. Securities

The amortized cost, gross unrealized gains and losses and approximate fair values of securities available for sale and held to maturity were as follows:

 

		Amortized Cost				Gross Unrealized								Fair     Value
March 31, 2012						Gains				Losses
		(Dollars in millions)
Securities available for sale:
U.S. government-sponsored entities (“GSE”)		$	341			$	—			$	—			$	341
Mortgage-backed securities issued by GSE			19,903				262				7				20,158
States and political subdivisions			1,951				102				104				1,949
Non-agency mortgage-backed securities			346				—				41				305
Other securities			6				—				—				6
Covered securities			1,210				411				—				1,621
Total securities available for sale		$	23,757			$	775			$	152			$	24,380
Securities held to maturity:
GSE securities		$	500			$	—			$	2			$	498
Mortgage-backed securities issued by GSE			12,429				45				16				12,458
States and political subdivisions			35				—				—				35
Other securities			521				1				6				516
Total securities held to maturity		$	13,485			$	46			$	24			$	13,507

 

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		Amortized Cost				Gross Unrealized								Fair Value
December 31, 2011						Gains				Losses
		(Dollars in millions)
Securities available for sale:
GSE securities		$	305			$	1			$	—			$	306
Mortgage-backed securities issued by GSE			17,940				199				7				18,132
States and political subdivisions			1,977				91				145				1,923
Non-agency mortgage-backed securities			423				—				55				368
Other securities			7				—				—				7
Covered securities			1,240				343				6				1,577
Total securities available for sale		$	21,892			$	634			$	213			$	22,313
Securities held to maturity:
GSE securities		$	500			$	—			$	—			$	500
Mortgage-backed securities issued by GSE			13,028				32				23				13,037
States and political subdivisions			35				—				2				33
Other securities			531				1				4				528
Total securities held to maturity		$	14,094			$	33			$	29			$	14,098

As of March 31, 2012, the fair value of covered securities included $1.3 billion of non-agency mortgage-backed securities and $324 million of municipal securities. As of December 31, 2011, the fair value of covered securities included $1.3 billion of non-agency mortgage-backed securities and $326 million of municipal securities. All covered securities are subject to loss sharing agreements with the FDIC and cannot be sold without their prior approval.

At March 31, 2012 and December 31, 2011, securities with carrying values of approximately $14.5 billion and $15.5 billion, respectively, were pledged to secure municipal deposits, securities sold under agreements to repurchase, other borrowings, and for other purposes as required or permitted by law.

Investments in marketable debt securities and mortgage-backed securities issued by Fannie Mae had total amortized cost and fair value of $11.3 billion and $11.4 billion, respectively, at March 31, 2012. Investments in securities issued by Freddie Mac had total amortized cost and fair value of $9.4 billion and $9.5 billion, respectively.

At March 31, 2012 and December 31, 2011, non-agency mortgage-backed securities consisted of residential mortgage-backed securities.

The gross realized gains and losses are reflected in the following table:

 

		Three Months Ended March 31,
		2012				2011
		(Dollars in millions)
Gross gains		$	—			$	21
Gross losses			(4	)			—
Net realized gains (losses)			(4	)			21

For the three months ended March 31, 2011, all other-than-temporary impairment (“OTTI”) recognized into net income was from non-agency mortgage-backed securities. For the three months ended March 31, 2012, $4 million of the OTTI was related to covered securities.

 

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The following table reflects activity during the three months ended March 31, 2012 and 2011 related to credit losses on other-than-temporarily impaired non-agency mortgage-backed securities where a portion of the unrealized loss was recognized in other comprehensive income:

 

		Three Months Ended March 31,
		2012				2011
		(Dollars in millions)
Balance at beginning of period		$	129			$	30
Credit losses on securities for which OTTI was previously recognized			1				21
Reductions for securities sold/settled during the period			(16	)			—
Balance at end of period		$	114			$	51

The amortized cost and estimated fair value of the debt securities portfolio at March 31, 2012, by contractual maturity, are shown in the accompanying table. The expected life of mortgage-backed securities will differ from contractual maturities because borrowers may have the right to call or prepay the underlying mortgage loans with or without call or prepayment penalties. For purposes of the maturity table, mortgage-backed securities, which are not due at a single maturity date, have been included in maturity groupings based on the contractual maturity.

 

		Available for Sale								Held to Maturity
March 31, 2012		Amortized Cost				Fair Value				Amortized Cost				Fair Value
		(Dollars in millions)
Due in one year or less		$	179			$	179			$	1			$	1
Due after one year through five years			186				188				—				—
Due after five years through ten years			652				685				501				499
Due after ten years			22,734				23,322				12,983				13,007
Total debt securities			23,751				24,374				13,485				13,507
Total securities with no stated maturity			6				6				—				—
Total securities		$	23,757			$	24,380			$	13,485			$	13,507

 

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

 

		Less than 12 months								12 months or more								Total
March 31, 2012		Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
		(Dollars in millions)
Securities available for sale:
GSE securities		$	230			$	—			$	—			$	—			$	230			$	—
Mortgage-backed securities issued by GSE			1,680				7				1				—				1,681				7
States and political subdivisions			70				5				551				99				621				104
Non-agency mortgage-backed securities			—				—				305				41				305				41
Total		$	1,980			$	12			$	857			$	140			$	2,837			$	152
Securities held to maturity:
GSE securities		$	498			$	2			$	—			$	—			$	498			$	2
Mortgage-backed securities issued by GSE			4,678				16				—				—				4,678				16
States and political subdivisions			1				—				7				—				8				—
Other securities			512				6				—				—				512				6
Total		$	5,689			$	24			$	7			$	—			$	5,696			$	24
		Less than 12 months								12 months or more								Total
December 31, 2011		Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
		(Dollars in millions)
Securities available for sale:
GSE securities		$	24			$	—			$	—			$	—			$	24			$	—
Mortgage-backed securities issued by GSE			3,098				7				—				—				3,098				7
States and political subdivisions			453				68				265				77				718				145
Non-agency mortgage-backed securities			—				—				368				55				368				55
Covered securities			29				6				—				—				29				6
Total		$	3,604			$	81			$	633			$	132			$	4,237			$	213
Securities held to maturity:
GSE securities		$	250			$	—			$	—			$	—			$	250			$	—
Mortgage-backed securities issued by GSE			7,770				23				—				—				7,770				23
States and political subdivisions			33				2				—				—				33				2
Other securities			207				4				—				—				207				4
Total		$	8,260			$	29			$	—			$	—			$	8,260			$	29

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

Factors considered in determining whether a loss is temporary include:

 

l

The financial condition and near-term prospects of the issuer, including any specific events that may influence the operations of the issuer;

 

l

BB&T’s intent to sell and whether it is more likely than not that the Company will be required to sell these debt securities before the anticipated recovery of the amortized cost basis;

 

l

The length of time and the extent to which the market value has been less than cost;

 

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l

Whether the decline in fair value is attributable to specific conditions, such as conditions in an industry or in a geographic area;

 

l

Whether a debt security has been downgraded by a rating agency;

 

l

Whether the financial condition of the issuer has deteriorated;

 

l

The seniority of the security;

 

l

Whether dividends have been reduced or eliminated, or scheduled interest payments on debt securities have not been made; and

 

l

Any other relevant available information.

If an unrealized loss is considered other-than-temporary, the credit component of the unrealized loss is recognized in earnings and the non-credit component is recognized in accumulated other comprehensive income, to the extent that BB&T does not intend to sell the security and it is more likely than not that BB&T will not be required to sell the security prior to recovery.

BB&T evaluates credit impairment related to non-agency mortgage-backed securities through the use of cash flow modeling. These models give consideration to long-term macroeconomic factors applied to current security default rates, prepayment rates and recovery rates and security-level performance.

During 2012, BB&T realized principal losses on certain other-than-temporarily impaired securities. These realized losses were a factor in evaluating the level of OTTI necessary to address future projected losses.

At March 31, 2012, BB&T held certain investment securities having continuous unrealized loss positions for more than 12 months. The vast majority of these losses were in non-agency mortgage-backed and municipal securities. At March 31, 2012, all of the available-for-sale debt securities in an unrealized loss position for more than 12 months, excluding those covered by FDIC loss sharing agreements, were investment grade with the exception of one municipal bond with an amortized cost of $3 million and seven non-agency mortgage-backed securities with an adjusted amortized cost of $346 million. All of these non-investment grade securities were initially investment grade and have been downgraded since purchase. Based on its evaluation at March 31, 2012, BB&T determined that certain of the non-investment grade non-agency mortgage-backed securities had credit losses evident and recognized OTTI related to these securities. At March 31, 2012, the total unrealized loss on these non-investment grade securities was $41 million.

The following table presents non-investment grade securities with significant unrealized losses that are not covered by a loss sharing arrangement and the credit loss component of OTTI recognized to date:

 

March 31, 2012		Amortized Cost				Cumulative Credit Loss Recognized				Adjusted Amortized Cost				Fair Value				Unrealized Loss
		(Dollars in millions)
Security:
RMBS 1		$	129			$	(34	)		$	95			$	80			$	(15	)
RMBS 2			100				(17	)			83				73				(10	)

BB&T’s evaluation of the other debt securities with continuous unrealized losses indicated that there were no credit losses evident. Furthermore, as of the date of the evaluation, BB&T did not intend to sell, and it was more likely than not that the Company would not be required to sell, these debt securities before the anticipated recovery of the amortized cost basis. In making this determination, BB&T considers its expected liquidity and capital needs, including its asset/liability management needs, forecasts, strategies and other relevant information.

 

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NOTE 3. Loans and Leases

The following table provides a breakdown of BB&T’s loan portfolio:

 

		March 31, 2012				December 31, 2011
		(Dollars in millions)
Loans and leases, net of unearned income:
Commercial:
Commercial and industrial		$	36,156			$	36,415
Commercial real estate - other			10,543				10,689
Commercial real estate - residential ADC (1)			1,823				2,061
Direct retail lending			14,862				14,467
Sales finance			7,587				7,401
Revolving credit			2,159				2,212
Residential mortgage			21,513				20,581
Other lending subsidiaries			8,951				8,737
Other acquired			35				39
Total loans and leases held for investment (excluding covered loans)			103,629				102,602
Covered			4,532				4,867
Total loans and leases held for investment			108,161				107,469
Loans held for sale			2,525				3,736
Total loans and leases		$	110,686			$	111,205

 

(1)	Commercial real estate - residential ADC represents residential acquisition, development and construction loans.

Covered loans represent loans acquired from the FDIC subject to one of the loss sharing agreements. Other acquired loans represent consumer loans acquired from the FDIC that are not subject to one of the loss sharing agreements.

The following table reflects the carrying amount of all purchased impaired and nonimpaired loans and the related allowance:

 

		March 31, 2012												December 31, 2011
		Purchased Impaired Loans				Purchased Nonimpaired Loans				Total				Purchased Impaired Loans				Purchased Nonimpaired Loans				Total
		(Dollars in millions)
Residential mortgage		$	630			$	582			$	1,212			$	647			$	617			$	1,264
Commercial real estate			1,280				1,495				2,775				1,407				1,597				3,004
Commercial			58				487				545				68				531				599
Total covered			1,968				2,564				4,532				2,122				2,745				4,867
Other acquired			2				33				35				2				37				39
Total			1,970				2,597				4,567				2,124				2,782				4,906
Allowance for loan losses			(101	)			(36	)			(137	)			(113	)			(36	)			(149	)
Net		$	1,869			$	2,561			$	4,430			$	2,011			$	2,746			$	4,757

 

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Changes in the carrying amount and accretable yield for purchased impaired and nonimpaired loans were as follows:

 

		Three Months Ended March 31, 2012																Year Ended December 31, 2011
		Purchased Impaired								Purchased Nonimpaired								Purchased Impaired								Purchased Nonimpaired
		Accretable Yield				Carrying Amount of Loans				Accretable Yield				Carrying Amount of Loans				Accretable Yield				Carrying Amount of Loans				Accretable Yield				Carrying Amount of Loans
		(Dollars in millions)
Balance at beginning of period		$	521			$	2,124			$	1,239			$	2,782			$	835			$	2,858			$	1,611			$	3,394
Accretion			(72	)			72				(155	)			155				(359	)			359				(706	)			706
Payments received, net			—				(226	)			—				(340	)			—				(1,093	)			—				(1,318	)
Other, net			(69	)			—				(62	)			—				45				—				334				—
Balance at end of period		$	380			$	1,970			$	1,022			$	2,597			$	521			$	2,124			$	1,239			$	2,782

The outstanding unpaid principal balance for all purchased impaired loans as of March 31, 2012 and December 31, 2011 was $3.0 billion and $3.3 billion, respectively. The outstanding unpaid principal balance for all purchased nonimpaired loans as of March 31, 2012 and December 31, 2011 was $3.6 billion and $3.9 billion, respectively.

At March 31, 2012 and December 31, 2011, none of the purchased loans were classified as nonperforming assets. Therefore, interest income, through accretion of the difference between the carrying amount of the loans and the expected cash flows, is being recognized on all purchased loans. The allowance for loan losses related to the purchased loans results from decreased expectations of future cash flows due to increased credit losses for certain acquired loan pools.

The following table provides a summary of BB&T’s nonperforming assets and loans 90 days or more past due and still accruing:

 

		March 31, 2012				December 31, 2011
		(Dollars in millions)
Nonaccrual loans and leases held for investment		$	1,843			$	1,872
Foreclosed real estate (1)			378				536
Other foreclosed property			35				42
Total nonperforming assets (excluding covered assets) (1)		$	2,256			$	2,450
Loans 90 days or more past due and still accruing (excluding covered loans) (2)(3)(4)		$	157			$	202

 

(1)	Excludes foreclosed real estate totaling $364 million and $378 million as of March 31, 2012 and December 31, 2011, respectively, that is covered by FDIC loss sharing agreements.

(2)	Excludes mortgage loans guaranteed by GNMA that BB&T does not have the obligation to repurchase totaling $439 million and $426 million as of March 31, 2012 and December 31, 2011, respectively.

(3)	Excludes loans 90 days or more past due that are covered by FDIC loss sharing agreements totaling $677 million and $736 million as of March 31, 2012 and December 31, 2011, respectively.

(4)	Excludes mortgage loans 90 days or more past due that are government guaranteed totaling $218 million and $206 million as of March 31, 2012 and December 31, 2011, respectively.

 

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The following table provides a summary of loans that continue to accrue interest under restructured terms (“performing restructurings”) and restructured loans that have been placed in nonaccrual status (“nonperforming restructurings”):

 

		March 31, 2012				December 31, 2011
		(Dollars in millions)
Performing restructurings:
Commercial:
Commercial and industrial		$	76			$	74
Commercial real estate - other			82				117
Commercial real estate - residential ADC			30				44
Direct retail lending			117				146
Sales finance			7				8
Revolving credit			61				62
Residential mortgage (1)(2)			589				608
Other lending subsidiaries			53				50
Total performing restructurings (1)(2)			1,015				1,109
Nonperforming restructurings (3)			263				280
Total restructurings (1)(2)(3)(4)		$	1,278			$	1,389

 

(1)	Excludes restructured mortgage loans held for investment that are government guaranteed totaling $237 million and $232 million at March 31, 2012 and December 31, 2011, respectively.

(2)	Excludes restructured mortgage loans held for sale that are government guaranteed totaling $5 million and $4 million at March 31, 2012 and December 31, 2011, respectively.

(3)	Nonperforming restructurings are included in nonaccrual loan disclosures.

(4)	All restructurings are considered impaired. The allowance for loan and lease losses attributable to these restructured loans totaled $216 million and $266 million at March 31, 2012 and December 31, 2011, respectively.

BB&T had commitments totaling $37 million and $32 million at March 31, 2012 and December 31, 2011, respectively, to lend additional funds to clients with loans whose terms have been modified in restructurings.

 

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NOTE 4. Allowance for Credit Losses

An analysis of the allowance for credit losses is presented in the following tables:

 

Three Months Ended March 31, 2012		Beginning Balance				Charge- Offs				Recoveries				Provision				Ending Balance
		(Dollars in millions)
Commercial:
Commercial and industrial		$	433			$	(63	)		$	4			$	152			$	526
Commercial real estate - other			334				(73	)			3				30				294
Commercial real estate - residential ADC			286				(54	)			8				(34	)			206
Other lending subsidiaries			11				(3	)			1				4				13
Retail:
Direct retail lending			232				(57	)			10				116				301
Revolving credit			112				(22	)			5				(1	)			94
Residential mortgage			365				(42	)			1				(23	)			301
Sales finance			38				(7	)			3				(2	)			32
Other lending subsidiaries			186				(57	)			6				47				182
Covered and other acquired			149				(15	)			—				3				137
Unallocated			110				—				—				(15	)			95
Allowance for loan and lease losses			2,256				(393	)			41				277				2,181
Reserve for unfunded lending commitments			29				—				—				11				40
Allowance for credit losses		$	2,285			$	(393	)		$	41			$	288			$	2,221

 

Three Months Ended March 31, 2011		Beginning Balance				Charge- Offs				Recoveries				Provision				Ending Balance
		(Dollars in millions)
Commercial:
Commercial and industrial		$	621			$	(78	)		$	4			$	(12	)		$	535
Commercial real estate - other			446				(68	)			3				116				497
Commercial real estate - residential ADC			469				(71	)			4				19				421
Other lending subsidiaries			21				(2	)			1				(2	)			18
Retail:
Direct retail lending			246				(78	)			9				68				245
Revolving credit			109				(27	)			5				18				105
Residential mortgage			298				(54	)			1				83				328
Sales finance			47				(10	)			2				4				43
Other lending subsidiaries			177				(50	)			5				43				175
Covered and other acquired			144				—				—				—				144
Unallocated			130				—				—				—				130
Allowance for loan and lease losses			2,708				(438	)			34				337				2,641
Reserve for unfunded lending commitments			47				—				—				3				50
Allowance for credit losses		$	2,755			$	(438	)		$	34			$	340			$	2,691

 

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The following tables provide a breakdown of the allowance for loan and lease losses and the recorded investment in loans based on the method for determining the allowance:

 

		Allowance for Loan and Lease Losses
March 31, 2012		Individually Evaluated for Impairment				Collectively Evaluated for Impairment				Loans Acquired With Deteriorated Credit Quality				Total
		(Dollars in millions)
Commercial:
Commercial and industrial		$	91			$	435			$	—			$	526
Commercial real estate - other			54				240				—				294
Commercial real estate - residential ADC			42				164				—				206
Other lending subsidiaries			3				10				—				13
Retail:
Direct retail lending			31				270				—				301
Revolving credit			26				68				—				94
Residential mortgage			102				199				—				301
Sales finance			1				31				—				32
Other lending subsidiaries			22				160				—				182
Covered and other acquired			—				36				101				137
Unallocated			—				95				—				95
Total		$	372			$	1,708			$	101			$	2,181

 

		Loans and Leases
March 31, 2012		Individually Evaluated for Impairment				Collectively Evaluated for Impairment				Loans Acquired With Deteriorated Credit Quality				Total
		(Dollars in millions)
Commercial:
Commercial and industrial		$	769			$	35,387			$	—			$	36,156
Commercial real estate - other			418				10,125				—				10,543
Commercial real estate - residential ADC			345				1,478				—				1,823
Other lending subsidiaries			11				3,705				—				3,716
Retail:
Direct retail lending			160				14,702				—				14,862
Revolving credit			61				2,098				—				2,159
Residential mortgage			958				20,555				—				21,513
Sales finance			18				7,569				—				7,587
Other lending subsidiaries			55				5,180				—				5,235
Covered and other acquired			—				2,597				1,970				4,567
Total		$	2,795			$	103,396			$	1,970			$	108,161

 

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		Allowance for Loan and Lease Losses
December 31, 2011		Individually Evaluated for Impairment				Collectively Evaluated for Impairment				Loans Acquired With Deteriorated Credit Quality				Total
		(Dollars in millions)
Commercial:
Commercial and industrial		$	77			$	356			$	—			$	433
Commercial real estate - other			69				265				—				334
Commercial real estate - residential ADC			50				236				—				286
Other lending subsidiaries			1				10				—				11
Retail:
Direct retail lending			35				197				—				232
Revolving credit			27				85				—				112
Residential mortgage			152				213				—				365
Sales finance			1				37				—				38
Other lending subsidiaries			20				166				—				186
Covered and other acquired			—				36				113				149
Unallocated			—				110				—				110
Total		$	432			$	1,711			$	113			$	2,256

 

		Loans and Leases
December 31, 2011		Individually Evaluated for Impairment				Collectively Evaluated for Impairment				Loans Acquired With Deteriorated Credit Quality				Total
		(Dollars in millions)
Commercial:
Commercial and industrial		$	656			$	35,759			$	—			$	36,415
Commercial real estate - other			511				10,178				—				10,689
Commercial real estate - residential ADC			420				1,641				—				2,061
Other lending subsidiaries			5				3,621				—				3,626
Retail:
Direct retail lending			165				14,302				—				14,467
Revolving credit			62				2,150				—				2,212
Residential mortgage			931				19,650				—				20,581
Sales finance			10				7,391				—				7,401
Other lending subsidiaries			49				5,062				—				5,111
Covered and other acquired			—				2,782				2,124				4,906
Total		$	2,809			$	102,536			$	2,124			$	107,469

BB&T monitors the credit quality of its commercial portfolio segment using internal risk ratings. These risk ratings are based on established regulatory guidance. Loans with a Pass rating represent those not considered as a problem credit. Special mention loans are those that have a potential weakness deserving management’s close attention. Substandard loans are those where a well-defined weakness has been identified that may put full collection of contractual cash flows at risk. Substandard loans are placed in nonaccrual status when BB&T believes it is no longer probable it will collect all contractual cash flows.

 

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BB&T assigns an internal risk rating at loan origination and reviews the relationship again on an annual basis or at any point management becomes aware of information affecting the borrower’s ability to fulfill their obligations.

BB&T monitors the credit quality of its retail portfolio segment based primarily on delinquency status, which is the primary factor considered in determining whether a retail loan should be classified as nonaccrual.

The following tables illustrate the credit quality indicators associated with loans and leases held for investment. Covered and other acquired loans are excluded from this analysis because their related allowance is determined by loan pool performance due to the application of the accretion method.

 

March 31, 2012		Commercial & Industrial				Commercial Real Estate- Other				Commercial Real Estate- Residential ADC				Other Lending Subsidiaries
		(Dollars in millions)
Commercial:
Pass		$	33,196			$	8,669			$	992			$	3,664
Special mention			361				129				40				4
Substandard - performing			1,914				1,433				479				32
Nonperforming			685				312				312				16
Total		$	36,156			$	10,543			$	1,823			$	3,716

 

		Direct Retail Lending				Revolving Credit				Residential Mortgage				Sales Finance				Other Lending Subsidiaries
		(Dollars in millions)
Retail:
Performing		$	14,723			$	2,159			$	21,193			$	7,572			$	5,191
Nonperforming			139				—				320				15				44
Total		$	14,862			$	2,159			$	21,513			$	7,587			$	5,235

 

December 31, 2011		Commercial & Industrial				Commercial Real Estate- Other				Commercial Real Estate- Residential ADC				Other Lending Subsidiaries
		(Dollars in millions)
Commercial:
Pass		$	33,497			$	8,568			$	1,085			$	3,578
Special mention			488				234				60				5
Substandard - performing			1,848				1,493				540				35
Nonperforming			582				394				376				8
Total		$	36,415			$	10,689			$	2,061			$	3,626

 

		Direct Retail Lending				Revolving Credit				Residential Mortgage				Sales Finance				Other Lending Subsidiaries
		(Dollars in millions)
Retail:
Performing		$	14,325			$	2,212			$	20,273			$	7,394			$	5,056
Nonperforming			142				—				308				7				55
Total		$	14,467			$	2,212			$	20,581			$	7,401			$	5,111

 

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The following tables represent aging analyses of BB&T’s past due loans and leases held for investment. Covered loans have been excluded from this aging analysis because they are covered by FDIC loss sharing agreements, and their related allowance is determined by loan pool performance due to the application of the accretion method.

 

		Accruing Loans and Leases
March 31, 2012		Current				30-89 Days Past Due				90 Days Or More Past Due				Nonaccrual Loans And Leases				Total Loans And Leases, Excluding Covered Loans
		(Dollars in millions)
Commercial:
Commercial and industrial		$	35,407			$	62			$	2			$	685			$	36,156
Commercial real estate - other			10,204				26				1				312				10,543
Commercial real estate - residential ADC			1,503				8				—				312				1,823
Other lending subsidiaries			3,681				14				5				16				3,716
Retail:
Direct retail lending			14,540				135				48				139				14,862
Revolving credit			2,125				20				14				—				2,159
Residential mortgage (1)			20,424				479				290				320				21,513
Sales finance			7,509				50				13				15				7,587
Other lending subsidiaries			5,032				158				1				44				5,235
Other acquired			34				—				1				—				35
Total (1)		$	100,459			$	952			$	375			$	1,843			$	103,629

 

		Accruing Loans and Leases
December 31, 2011		Current				30-89 Days Past Due				90 Days Or More Past Due				Nonaccrual Loans And Leases				Total Loans And Leases, Excluding Covered Loans
		(Dollars in millions)
Commercial:
Commercial and industrial		$	35,746			$	85			$	2			$	582			$	36,415
Commercial real estate - other			10,273				22				—				394				10,689
Commercial real estate - residential ADC			1,671				14				—				376				2,061
Other lending subsidiaries			3,589				25				4				8				3,626
Retail:
Direct retail lending			14,109				161				55				142				14,467
Revolving credit			2,173				22				17				—				2,212
Residential mortgage (1)			19,393				570				310				308				20,581
Sales finance			7,301				75				18				7				7,401
Other lending subsidiaries			4,807				248				1				55				5,111
Other acquired			37				1				1				—				39
Total (1)		$	99,099			$	1,223			$	408			$	1,872			$	102,602

 

(1)	Residential mortgage loans include $82 million and $91 million in government guaranteed loans 30-89 days past due, and $218 million and $206 million in government guaranteed loans 90 days or more past due as of March 31, 2012 and December 31, 2011, respectively.

 

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The following tables set forth certain information regarding BB&T’s impaired loans, excluding acquired impaired loans and loans held for sale, that were evaluated for specific reserves.

 

As Of / For The Three Months Ended March 31, 2012		Recorded Investment				Unpaid Principal Balance				Related Allowance				Average Recorded Investment				Interest Income Recognized
		(Dollars in millions)
With No Related Allowance Recorded:
Commercial:
Commercial and industrial		$	128			$	223			$	—			$	126			$	—
Commercial real estate - other			104				159				—				101				—
Commercial real estate - residential ADC			108				213				—				110				—
Retail:
Direct retail lending			21				78				—				22				—
Residential mortgage (1)			84				141				—				82				—
Sales finance			1				2				—				1				—
Other lending subsidiaries			2				5				—				4				—
With An Allowance Recorded:
Commercial:
Commercial and industrial			641				650				91				470				1
Commercial real estate - other			314				329				54				272				1
Commercial real estate - residential ADC			237				247				42				198				—
Other lending subsidiaries			11				13				3				13				—
Retail:
Direct retail lending			139				146				31				137				2
Revolving credit			61				60				26				61				1
Residential mortgage (1)			637				652				91				596				7
Sales finance			17				17				1				9				—
Other lending subsidiaries			53				55				22				48				—
Total (1)		$	2,558			$	2,990			$	361			$	2,250			$	12

 

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As Of / For The Year Ended December 31, 2011		Recorded Investment				Unpaid Principal Balance				Related Allowance				Average Recorded Investment				Interest Income Recognized
		(Dollars in millions)
With No Related Allowance Recorded:
Commercial:
Commercial and industrial		$	114			$	196			$	—			$	102			$	—
Commercial real estate - other			102				163				—				94				1
Commercial real estate - residential ADC			153				289				—				145				—
Retail:
Direct retail lending			19				74				—				23				1
Residential mortgage (1)			46				85				—				55				2
Sales finance			1				1				—				1				—
Other lending subsidiaries			2				4				—				3				—
With An Allowance Recorded:
Commercial:
Commercial and industrial			542				552				77				300				1
Commercial real estate - other			409				433				69				278				5
Commercial real estate - residential ADC			267				298				50				164				1
Other lending subsidiaries			5				5				1				5				—
Retail:
Direct retail lending			146				153				35				128				8
Revolving credit			62				61				27				61				3
Residential mortgage (1)			653				674				125				562				26
Sales finance			9				10				1				6				—
Other lending subsidiaries			47				50				20				31				2
Total (1)		$	2,577			$	3,048			$	405			$	1,958			$	50

 

(1)	Residential mortgage loans exclude $237 million and $232 million in government guaranteed loans and related allowance of $11 million and $27 million as of March 31, 2012 and December 31, 2011, respectively.

 

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The following table provides a summary of the primary reason loan modifications were classified as restructurings and their estimated impact on the allowance for loan and lease losses:

 

		Three Months Ended March 31,
		2012												2011
		Types of Modifications (1)								Increase  To Allowance				Types of Modifications (1)								Increase  To Allowance
		Rate (2)				Structure								Rate (2)				Structure
		(Dollars in millions)
Commercial:
Commercial and industrial		$	5			$	28			$	—			$	12			$	13			$	1
Commercial real estate - other			4				9				1				19				13				1
Commercial real estate - residential ADC			—				13				—				12				9				3
Retail:
Direct retail lending			6				2				1				16				1				3
Revolving credit			8				—				2				11				—				2
Residential mortgage			55				9				3				32				5				5
Sales finance			2				—				—				1				2				—
Other lending subsidiaries			8				2				4				12				1				4

(1)	Includes modifications made to existing restructurings, as well as new modifications that are considered restructurings. Balances represent the recorded investment as of the end of the period in which the modification was made.

(2)	Includes restructurings made with a below market interest rate that also includes a modification of loan structure.

Charge-offs recorded at the modification date were $4 million and $5 million for the three months ended March 31, 2012 and March 31, 2011, respectively. Modifications made to existing restructurings in the commercial portfolio segment approximated 11% and 29% of total commercial restructurings for the three months ended March 31, 2012 and March 31, 2011, respectively. The forgiveness of principal or interest for restructurings recorded during the three months ended March 31, 2012 and March 31, 2011 was immaterial.

The following table summarizes the pre-default balance for modifications that experienced a payment default that had been classified as restructurings during the previous 12 months. BB&T defines payment default as movement of the restructuring to nonaccrual status, foreclosure or charge-off, whichever occurs first.

 

		Three Months Ended March 31,
		2012				2011
		(Dollars in millions)
Commercial:
Commercial and industrial		$	2			$	13
Commercial real estate - other			1				30
Commercial real estate - residential ADC			8				41
Retail:
Direct retail lending			2				9
Revolving credit			3				5
Residential mortgage			17				13
Sales finance			—				1
Other lending subsidiaries			2				1

If a restructuring subsequently defaults, BB&T evaluates the restructuring for possible impairment. As a result, the related allowance may be increased or charge-offs may be taken to reduce the carrying value of the loan.

 

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NOTE 5. Goodwill and Other Intangible Assets

The changes in the carrying amounts of goodwill attributable to each of BB&T’s operating segments is reflected in the table below. To date, there have been no goodwill impairments recorded by BB&T.

 

		Community Banking				Residential Mortgage Banking				Dealer Financial Services				Specialized Lending				Insurance Services				Financial Services				Total
		(Dollars in millions)
Balance, January 1, 2012		$	4,542			$	7			$	111			$	94			$	1,132			$	192			$	6,078
Other adjustments			—				—				—				—				(1	)			—				(1	)
Balance, March 31, 2012		$	4,542			$	7			$	111			$	94			$	1,131			$	192			$	6,077

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

 

		March 31, 2012												December 31, 2011
		Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount				Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount
		(Dollars in millions)
Identifiable intangible assets:
Core deposit intangibles		$	626			$	(493	)		$	133			$	626			$	(484	)		$	142
Other (1)			787				(498	)			289				787				(485	)			302
Totals		$	1,413			$	(991	)		$	422			$	1,413			$	(969	)		$	444

 

(1)	Other identifiable intangibles are primarily customer relationship intangibles.

NOTE 6. Loan Servicing

Residential Mortgage Banking Activities

The following table includes a summary of residential mortgage loans managed or securitized and related delinquencies and net charge-offs:

 

		March 31, 2012				December 31, 2011
		(Dollars in millions)
Mortgage loans managed or securitized (1)		$	26,166			$	26,559
Less: Loans securitized and transferred to securities available for sale			4				4
Loans held for sale			2,209				3,394
Covered mortgage loans			1,212				1,264
Mortgage loans sold with recourse			1,228				1,316
Mortgage loans held for investment		$	21,513			$	20,581
Mortgage loans on nonaccrual status		$	320			$	308
Mortgage loans 90 days or more past due and still accruing interest (2)			72				104
Mortgage loans net charge-offs (3)			41				264

 

(1)	Balances exclude loans serviced for others with no other continuing involvement.

(2)	Includes amounts related to residential mortgage loans held for sale and excludes amounts related to government guaranteed loans and covered mortgage loans. Refer to Loans and Leases Note for additional disclosures related to past due government guaranteed loans.

(3)	Net charge-offs for March 31, 2012 reflect three months.

 

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The unpaid principal balances of BB&T’s total residential mortgage servicing portfolio were $94.6 billion and $91.6 billion at March 31, 2012 and December 31, 2011, respectively. The unpaid principal balances of residential mortgage loans serviced for others consist primarily of agency conforming fixed-rate mortgage loans and totaled $70.3 billion and $67.1 billion at March 31, 2012 and December 31, 2011, respectively. Mortgage loans serviced for others are not included in loans and leases on the accompanying Consolidated Balance Sheets.

During the three months ended March 31, 2012 and 2011, BB&T sold residential mortgage loans from the held for sale portfolio with unpaid principal balances of $7.6 billion and $5.5 billion, respectively, and recognized pre-tax gains of $127 million and $35 million, respectively, including the impact of interest rate lock commitments. These gains are recorded in noninterest income as a component of mortgage banking income. BB&T retained the related mortgage servicing rights and receives servicing fees.

At March 31, 2012 and 2011, the approximate weighted average servicing fee was 0.33% and 0.35%, respectively, of the outstanding balance of the residential mortgage loans serviced for others. The weighted average coupon interest rate on the portfolio of mortgage loans serviced for others was 4.89% and 5.17% at March 31, 2012 and 2011, respectively. BB&T recognized servicing fees of $60 million and $58 million during the first three months of 2012 and 2011, respectively, as a component of mortgage banking income.

At March 31, 2012 and December 31, 2011, BB&T had $1.2 billion and $1.3 billion, respectively, of residential mortgage loans sold with recourse liability. In the event of nonperformance by the borrower, BB&T has maximum recourse exposure of approximately $502 million and $522 million as of March 31, 2012 and December 31, 2011, respectively. At both March 31, 2012 and December 31, 2011, BB&T has recorded $6 million of reserves related to these recourse exposures. Payments made to date have been immaterial.

BB&T also issues standard representations and warranties related to mortgage loan sales to government-sponsored entities. Although these agreements often do not specify limitations, BB&T does not believe that any payments related to these warranties would materially change the financial condition or results of operations of BB&T. BB&T has recorded $39 million and $29 million of reserves related to potential losses resulting from repurchases of loans sold at March 31, 2012 and December 31, 2011, respectively.

Residential mortgage servicing rights are recorded on the Consolidated Balance Sheets at fair value with changes in fair value recorded as a component of mortgage banking income in the Consolidated Statements of Income for each period. BB&T uses various derivative instruments to mitigate the income statement effect of changes in fair value due to changes in valuation inputs and assumptions of its residential mortgage servicing rights. The following is an analysis of the activity in BB&T’s residential mortgage servicing rights:

 

		Residential Mortgage Servicing Rights Three Months Ended March 31,
		2012				2011
		(Dollars in millions)
Carrying value, January 1,		$	563			$	830
Additions			84				86
Increase (decrease) in fair value:
Due to changes in valuation inputs or assumptions			92				40
Other changes (1)			(43	)			(28	)
Carrying value, March 31,		$	696			$	928

 

(1)	Represents the realization of expected net servicing cash flows, expected borrower payments and the passage of time.

The increase in the fair value of mortgage servicing rights due to changes in valuation inputs during the first three months of 2012, was primarily a result of updated prepayment speed forecast assumptions.

 

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Refer to Note 14 for additional disclosures related to the assumptions and estimates used in determining the fair value of residential mortgage servicing rights. The sensitivity of the current fair value of the residential mortgage servicing rights to immediate 10% and 20% adverse changes in key economic assumptions is included in the accompanying table:

 

		Residential Mortgage Servicing Rights March 31, 2012
		(Dollars in millions)
Fair value of residential mortgage servicing rights		$	696
Composition of residential loans serviced for others:
Fixed-rate mortgage loans			99	%
Adjustable-rate mortgage loans			1
Total			100	%
Weighted average life			4.5	yrs
Prepayment speed			16.5	%
Effect on fair value of a 10% increase		$	(39	)
Effect on fair value of a 20% increase			(73	)
Weighted average discount rate			9.8	%
Effect on fair value of a 10% increase		$	(25	)
Effect on fair value of a 20% increase			(48	)

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 this table, the effect of an adverse variation in a particular assumption on the fair value of the mortgage servicing rights is calculated without changing any other assumption; while in reality, changes in one factor may result in changes in another (for example, increases in market interest rates may result in lower prepayments), which may magnify or counteract the effect of the change.

Commercial Mortgage Banking Activities

BB&T also arranges and services commercial real estate mortgages through Grandbridge Real Estate Capital, LLC (“Grandbridge”) the commercial mortgage banking subsidiary of Branch Bank. During the three months ended March 31, 2012 and 2011, Grandbridge originated $1.3 billion and $930 million, respectively, of commercial real estate mortgages, the majority of which were arranged for third party investors. As of March 31, 2012 and December 31, 2011, Grandbridge’s portfolio of commercial real estate mortgages serviced for others totaled $25.8 billion and $25.4 billion, respectively. Commercial real estate mortgage loans serviced for others are not included in loans and leases on the accompanying Consolidated Balance Sheets. Grandbridge had $4.8 billion and $4.5 billion in loans serviced for others that were covered by recourse provisions at March 31, 2012 and December 31, 2011, respectively. As of March 31, 2012 and December 31, 2011, Grandbridge’s maximum exposure to loss for these loans was approximately $1.3 billion and $1.2 billion, respectively. BB&T has recorded $16 million and $15 million of reserves related to these recourse exposures at March 31, 2012 and December 31, 2011, respectively.

 

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NOTE 7. Deposits

A summary of BB&T’s deposits is presented in the accompanying table:

 

		March 31, 2012				December 31, 2011
		(Dollars in millions)
Noninterest-bearing deposits		$	27,410			$	25,684
Interest checking			20,318				20,701
Money market and savings			46,759				44,618
Certificates and other time deposits			29,648				33,899
Foreign office deposits - interest-bearing			22				37
Total deposits		$	124,157			$	124,939

Time deposits that are $100,000 and greater totaled $16.5 billion and $19.8 billion at March 31, 2012 and December 31, 2011, respectively.

NOTE 8. Long-Term Debt

Long-term debt comprised the following:

 

		March 31, 2012				December 31, 2011
		(Dollars in millions)
BB&T Corporation:
3.85% Senior Notes Due 2012		$	1,000			$	1,000
3.38% Senior Notes Due 2013			500				500
5.70% Senior Notes Due 2014			510				510
2.05% Senior Notes Due 2014			700				700
Floating Rate Senior Notes Due 2014 (1)			300				300
3.95% Senior Notes Due 2016			499				499
3.20% Senior Notes Due 2016			999				999
2.15% Senior Notes Due 2017			748				—
6.85% Senior Notes Due 2019			539				538
4.75% Subordinated Notes Due 2012 (2)			490				490
5.20% Subordinated Notes Due 2015 (2)			933				933
4.90% Subordinated Notes Due 2017 (2)			343				342
5.25% Subordinated Notes Due 2019 (2)			586				586
3.95% Subordinated Notes Due 2022 (2)			298				—
Branch Bank:
Floating Rate Subordinated Notes Due 2016 (2)(3)			350				350
Floating Rate Subordinated Notes Due 2017 (2)(3)			262				262
4.875% Subordinated Notes Due 2013 (2)			222				222
5.625% Subordinated Notes Due 2016 (2)			386				386
Federal Home Loan Bank Advances to Branch Bank: (4)
Varying maturities to 2034			8,996				8,998
Junior Subordinated Debt to Unconsolidated Trusts (5)			3,271				3,271
Other Long-Term Debt			95				83
Fair value hedge-related basis adjustments			741				834
Total Long-Term Debt		$	22,768			$	21,803

 

(1)	These floating-rate senior notes are based on LIBOR and had an effective rate of 1.25% at March 31, 2012.

(2)	Subordinated notes that qualify under the risk-based capital guidelines as Tier 2 supplementary capital, subject to certain limitations.

 

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(3)	These floating-rate securities are based on LIBOR, but the majority of the cash flows have been swapped to a fixed rate. The effective rate paid on these securities including the effect of the swapped portion was 3.26% at March 31, 2012.

(4)	Certain of these advances have been swapped to floating rates from fixed rates and from fixed rates to floating rates. At March 31, 2012, the weighted average rate paid on these advances including the effect of the swapped portion was 3.61%, and the weighted average maturity was 7.3 years.

(5)	Securities that qualify under the risk-based capital guidelines as Tier 1 capital, subject to certain limitations. Refer to BB&T’s Annual Report on Form 10-K for the year ended December 31, 2011 for additional information.

In March 2011, BB&T made the decision to retire all of its junior subordinated debt to unconsolidated trusts through the exercise of certain early redemption provisions. BB&T determined that it was appropriate to amortize the remaining debt issuance costs and related discounts or premiums, including fair value hedge adjustments, over the period from March 2011 to the current expected redemption date for each of t