Edgar Filing: BB&T CORP

Form 10-Q

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: June 30, 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

27101

Winston-Salem, North Carolina

(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 July 31, 2012, 699,128,360 shares of the Registrant’s common stock, $5 par value, were outstanding.

BB&T CORPORATION

FORM 10-Q

June 30, 2012

INDEX


		Page No.
PART I

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	53

Item 3.	Quantitative and Qualitative Disclosures About Market Risk (see Market Risk Management)	90

Item 4.	Controls and Procedures	90

PART II

Item 1.	Legal Proceedings	90

Item 1A.	Risk Factors	90

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	90

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	91

BB&T CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

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


	June 30, 2012		December 31, 2011
Assets
Cash and due from banks	$	1,409	$	1,562
Interest-bearing deposits with banks		2,246		2,646
Federal funds sold and securities purchased under resale agreements or similar arrangements		212		136
Segregated cash due from banks		4		20
Trading securities at fair value		533		534
Securities available for sale at fair value ($1,578 and $1,577 covered by FDIC loss share at June 30, 2012 and December 31, 2011, respectively)		25,067		22,313
Securities held to maturity (fair value of $12,744 and $14,098 at June 30, 2012 and December 31, 2011, respectively)		12,576		14,094
Loans held for sale at fair value		2,736		3,736
Loans and leases ($3,955 and $4,867 covered by FDIC loss share at June 30, 2012 and December 31, 2011, respectively)		111,075		107,469
Allowance for loan and lease losses		(2,126)		(2,256)

Loans and leases, net of allowance for loan and lease losses		108,949		105,213

FDIC loss share receivable		831		1,100
Premises and equipment		1,816		1,855
Goodwill		6,428		6,078
Core deposit and other intangible assets		683		444
Residential mortgage servicing rights at fair value		578		563
Other assets ($349 and $415 of foreclosed property and other assets covered by FDIC loss share at June 30, 2012 and December 31, 2011, respectively)		14,461		14,285

Total assets	$	178,529	$	174,579

Liabilities and Shareholders’ Equity
Deposits:
Noninterest-bearing deposits	$	28,664	$	25,684
Interest-bearing deposits		97,395		99,255

Total deposits		126,059		124,939

Federal funds purchased, securities sold under repurchase agreements and short-term borrowed funds		3,196		3,566
Long-term debt		22,561		21,803
Accounts payable and other liabilities		7,787		6,791

Total liabilities		159,603		157,099

Commitments and contingencies (Note 13)
Shareholders’ equity:
Preferred stock, liquidation preference of $25,000 per share		559		—
Common stock, $5 par		3,494		3,486
Additional paid-in capital		5,914		5,873
Retained earnings		9,433		8,772
Accumulated other comprehensive loss, net of deferred income taxes		(541)		(713)
Noncontrolling interests		67		62

Total shareholders’ equity		18,926		17,480

Total liabilities and shareholders’ equity	$	178,529	$	174,579

Common shares outstanding		698,795		697,143
Common shares authorized		2,000,000		2,000,000
Preferred shares outstanding		23		—
Preferred shares authorized		5,000		5,000

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

BB&T CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Interest Income
Interest and fees on loans and leases	$	1,492	$	1,523	$	2,994	$	3,043
Interest and dividends on securities		230		163		464		313
Interest on other earning assets		6		4		13		10

Total interest income		1,728		1,690		3,471		3,366

Interest Expense
Interest on deposits		107		152		228		323
Interest on federal funds purchased, securities sold under repurchase agreements and short-term borrowed funds		2		3		3		7
Interest on long-term debt		157		181		342		397

Total interest expense		266		336		573		727

Net Interest Income		1,462		1,354		2,898		2,639
Provision for credit losses		273		328		561		668

Net Interest Income After Provision for Credit Losses		1,189		1,026		2,337		1,971

Noninterest Income
Insurance income		393		299		664		549
Service charges on deposits		138		145		275		280
Mortgage banking income		182		83		398		178
Investment banking and brokerage fees and commissions		88		90		177		177
Checkcard fees		45		79		88		151
Bankcard fees and merchant discounts		59		52		113		98
Trust and investment advisory revenues		46		45		91		88
Income from bank-owned life insurance		27		29		57		59
FDIC loss share income, net		(74)		(81)		(131)		(139)
Other income		64		48		116		62
Securities gains (losses), net
Realized gains (losses), net		—		16		(4)		37
Other-than-temporary impairments		(2)		(10)		(5)		(11)
Non-credit portion recognized in other comprehensive income		—		(8)		(2)		(28)

Total securities gains (losses), net		(2)		(2)		(11)		(2)

Total noninterest income		966		787		1,837		1,501

Noninterest Expense
Personnel expense		775		683		1,505		1,377
Foreclosed property expense		72		145		164		288
Occupancy and equipment expense		159		152		312		306
Loan processing expenses		62		57		125		113
Regulatory charges		43		59		84		120
Professional services		39		38		74		69
Software expense		32		29		64		55
Amortization of intangibles		29		25		51		51
Merger-related and restructuring charges, net		2		2		14		-
Other expenses		213		205		418		388

Total noninterest expense		1,426		1,395		2,811		2,767

Earnings
Income before income taxes		729		418		1,363		705
Provision for income taxes		191		91		380		144

Net income		538		327		983		561

Noncontrolling interests		20		20		34		29
Preferred stock dividends		8		—		8		—

Net income available to common shareholders	$	510	$	307	$	941	$	532

Earnings Per Common Share
Basic	$	0.73	$	0.44	$	1.35	$	0.76

Diluted	$	0.72	$	0.44	$	1.33	$	0.76

Cash dividends declared	$	0.20	$	0.16	$	0.40	$	0.33

Weighted Average Shares Outstanding
Basic		698,579		696,625		698,132		695,971

Diluted		708,454		704,969		707,990		704,583

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

BB&T CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in millions)


	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Net Income	$	538	$	327	$	983	$	561
Other Comprehensive Income, Net of Tax:
Unrealized net holding gains (losses) arising during the period on securities available for sale		66		174		185		257
Reclassification adjustment for (gains) losses on securities available for sale included in net income		1		1		7		1
Change in amounts attributable to the FDIC under the loss share agreements		14		4		(28)		(53)
Change in unrecognized gains (losses) on cash flow hedges		(16)		(51)		(15)		(42)
Change in pension and postretirement liability		11		4		22		9
Other, net		(1)		—		1		1

Total other comprehensive income		75		132		172		173

Total comprehensive income	$	613	$	459	$	1,155	$	734

Income Tax Effect of Items Included in Other Comprehensive Income:
Unrealized net holding gains (losses) arising during the period on securities available for sale	$	38	$	103	$	112	$	152
Reclassification adjustment for (gains) losses on securities available for sale included in net income		1		1		4		1
Change in amounts attributable to the FDIC under the loss share agreements		8		3		(18)		(31)
Change in unrecognized gains (losses) on cash flow hedges		(10)		(31)		(10)		(25)
Change in pension and postretirement liability		7		3		14		6
Other, net		1		—		1		(1)

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

BB&T CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

Six Months Ended June 30, 2012 and 2011

(Dollars in millions, shares in thousands)


	Shares of Common Stock		Preferred 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		—		—		—		—		532		—		29		561
Net change in other comprehensive income (loss)		—		—		—		—		—		173		—		173
Stock transactions:
In purchase acquisitions		26		—		—		1		—		—		—		1
In connection with equity awards		1,838		—		9		(9)		—		—		—		—
Shares repurchased in connection with equity awards		(617)		—		(3)		(14)		—		—		—		(17)
In connection with dividend reinvestment plan		563		—		3		12		—		—		—		15
In connection with 401(k) plan		703		—		3		16		—		—		—		19
Cash dividends declared on common stock		—		—		—		—		(226)		—		—		(226)
Equity-based compensation expense		—		—		—		49		—		—		—		49
Other, net		—		—		—		(1)		—		—		(23)		(24)

Balance, June 30, 2011		696,894	$	—	$	3,484	$	5,830	$	8,241	$	(574)	$	68	$	17,049

Balance, January 1, 2012		697,143	$	—	$	3,486	$	5,873	$	8,772	$	(713)	$	62	$	17,480

Add (Deduct):
Net income		—		—		—		—		949		—		34		983
Net change in other comprehensive income (loss)		—		—		—		—		—		172		—		172
Stock transactions:
In purchase acquisitions		28		—		—		1		—		—		—		1
In connection with equity awards		2,143		—		11		2		—		—		—		13
Shares repurchased in connection with equity awards		(534)		—		(3)		(13)		—		—		—		(16)
In connection with dividend reinvestment plan		15		—		—		—		—		—		—		—
In connection with preferred stock offering		—		559		—		—		—		—		—		559
Cash dividends declared on common stock		—		—		—		—		(280)		—		—		(280)
Cash dividends declared on preferred stock		—		—		—		—		(8)		—		—		(8)
Equity-based compensation expense		—		—		—		51		—		—		—		51
Other, net		—				—		—		—		—		(29)		(29)

Balance, June 30, 2012		698,795	$	559	$	3,494	$	5,914	$	9,433	$	(541)	$	67	$	18,926

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

BB&T CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in millions)


	Six Months Ended June 30,
	2012		2011
Cash Flows From Operating Activities:
Net income	$	983	$	561
Adjustments to reconcile net income to net cash from operating activities:
Provision for credit losses		561		668
Depreciation		131		129
Amortization of intangibles		51		51
Equity-based compensation		51		49
(Gain) loss on securities, net		11		2
Net write-downs/losses on foreclosed property		120		208
Net change in operating assets and liabilities:
Segregated cash due from banks		16		290
Loans held for sale		579		1,294
FDIC loss share receivable		269		427
Other assets		(677)		214
Accounts payable and other liabilities		699		(57)
Other, net		(159)		17

Net cash from operating activities		2,635		3,853

Cash Flows From Investing Activities:
Proceeds from sales of securities available for sale		153		330
Proceeds from maturities, calls and paydowns of securities available for sale		1,782		1,728
Purchases of securities available for sale		(4,400)		(6,250)
Proceeds from maturities, calls and paydowns of securities held to maturity		2,138		312
Purchases of securities held to maturity		(619)		(523)
Originations and purchases of loans and leases, net of principal collected		(4,115)		(965)
Net cash paid for acquisitions		(555)		—
Purchases of premises and equipment		(61)		(104)
Proceeds from sales of foreclosed property or other real estate held for sale		500		480
Other, net		78		53

Net cash from investing activities		(5,099)		(4,939)

Cash Flows From Financing Activities:
Net change in deposits		1,120		924
Net change in federal funds purchased, securities sold under repurchase agreements and short-term borrowed funds		(370)		(831)
Proceeds from issuance of long-term debt		1,072		1,999
Repayment of long-term debt		(197)		(392)
Net cash from common stock transactions		(3)		17
Net cash from preferred stock transactions		559		—
Cash dividends paid on common stock		(251)		(223)
Other, net		57		(7)

Net cash from financing activities		1,987		1,487

Net Change in Cash and Cash Equivalents		(477)		401
Cash and Cash Equivalents at Beginning of Period		4,344		2,385

Cash and Cash Equivalents at End of Period	$	3,867	$	2,786

Supplemental Disclosure of Cash Flow Information:
Cash paid (received) during the period for:
Interest	$	579	$	719
Income taxes		317		(236)
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		269		641

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

BB&T Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 1. Basis of Presentation

BB&T Corporation and subsidiaries (“BB&T,” the “Corporation” or the “Company”) is a financial holding company organized under the laws of North Carolina.

General

These consolidated financial statements and notes are presented in accordance with the instructions for Form 10-Q and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations and cash flow activity required in accordance with accounting principles generally accepted in the United States of America (“GAAP”). 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. 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.

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.

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		Gross Unrealized				Fair Value
June 30, 2012	Cost		Gains		Losses		Fair Value
	(Dollars in millions)
Securities available for sale:
U.S. government-sponsored entities (“GSE”)	$	348	$	—	$	—	$	348
Mortgage-backed securities issued by GSE		20,484		380		8		20,856
States and political subdivisions		1,982		120		120		1,982
Non-agency mortgage-backed securities		333		2		33		302
Other securities		1		—		—		1
Covered securities		1,190		388		—		1,578

Total securities available for sale	$	24,338	$	890	$	161	$	25,067


Securities held to maturity:
GSE securities	$	500	$	2	$	—	$	502
Mortgage-backed securities issued by GSE		11,326		172		1		11,497
States and political subdivisions		34		1		—		35
Other securities		716		1		7		710

Total securities held to maturity	$	12,576	$	176	$	8	$	12,744


	Amortized		Gross Unrealized				Fair Value
December 31, 2011	Cost		Gains		Losses		Fair Value
	(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 June 30, 2012 and 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.

At June 30, 2012 and December 31, 2011, securities with carrying values of approximately $13.3 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.

BB&T had certain investments in marketable debt securities and mortgage-backed securities issued by Fannie Mae and Freddie Mac that exceeded ten percent of shareholders’ equity at June 30, 2012. The Fannie Mae investments had total amortized cost and fair value of $10.4 billion and $10.6 billion, respectively, at June 30, 2012. The Freddie Mac investments had total amortized cost and fair value of $8.6 billion and $8.7 billion, respectively.

At June 30, 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 June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
	(Dollars in millions)
Gross gains	$	—	$	17	$	—	$	38
Gross losses		—		(1)		(4)		(1)

Net realized gains (losses)	$	—	$	16	$	(4)	$	37

The following table reflects activity during the three and six months ended June 30, 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. There was $4 million of other-than-temporary impairment (“OTTI”) related to covered securities during the six months ended June 30, 2012 that is not reflected in this table.


	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
	(Dollars in millions)
Balance at beginning of period	$	114	$	51	$	129	$	30
Credit losses on securities for which OTTI was previously recognized		2		18		3		39
Reductions for securities sold/settled during the period		(4)		(6)		(20)		(6)

Balance at end of period	$	112	$	63	$	112	$	63

The amortized cost and estimated fair value of the debt securities portfolio at June 30, 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 prepay the underlying mortgage loans with or without 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
June 30, 2012	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in millions)
Due in one year or less	$	185	$	185	$	1	$	1
Due after one year through five years		195		199		—		—
Due after five years through ten years		635		668		501		502
Due after ten years		23,323		24,015		12,074		12,241

Total debt securities	$	24,338	$	25,067	$	12,576	$	12,744

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
June 30, 2012	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Dollars in millions)
Securities available for sale:
GSE securities	$	215	$	—	$	—	$	—	$	215	$	—
Mortgage-backed securities issued by GSE		2,453		8		1		—		2,454		8
States and political subdivisions		69		3		536		117		605		120
Non-agency mortgage-backed securities		—		—		244		33		244		33
Covered securities		13		—		—		—		13		—

Total	$	2,750	$	11	$	781	$	150	$	3,531	$	161


Securities held to maturity:
Mortgage-backed securities issued by GSE	$	1,048	$	1	$	254	$	—	$	1,302	$	1
States and political subdivisions		1		—		2		—		3		—
Other securities		557		7		—		—		557		7

Total	$	1,606	$	8	$	256	$	—	$	1,862	$	8


	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		16		3		702		142		718		145
Non-agency mortgage-backed securities		—		—		368		55		368		55
Covered securities		29		6		—		—		29		6

Total	$	3,167	$	16	$	1,070	$	197	$	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:

•

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

•

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;

•

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

•

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

•

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

•

Whether the financial condition of the issuer has deteriorated;

•

The seniority of the security;

•

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

•

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.

At June 30, 2012, BB&T held certain securities which were non-investment grade and had continuous unrealized loss positions for more than 12 months. These securities consisted of one municipal bond and six non-agency mortgage-backed securities which had a total adjusted amortized cost of $27 million and $277 million, respectively. The unrealized loss on these securities was $2 million and $33 million, respectively. All of these non-investment grade securities were initially investment grade and have been downgraded since purchase.

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:


June 30, 2012	Amortized Cost		Cumulative Credit Loss Recognized		Adjusted Amortized Cost		Fair Value		Unrealized Loss
			(Dollars in millions)
Security:
RMBS 1	$	124	$	(33)	$	91	$	76	$	(15)

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.

NOTE 3. Loans and Leases

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


	June 30,		December 31,
	2012		2011
	(Dollars in millions)
Loans and leases, net of unearned income:
Commercial:
Commercial and industrial	$	36,938	$	36,415
Commercial real estate - other		10,457		10,689
Commercial real estate - residential ADC (1)		1,590		2,061
Direct retail lending		15,155		14,467
Sales finance		7,794		7,401
Revolving credit		2,206		2,212
Residential mortgage		23,117		20,581
Other lending subsidiaries		9,835		8,737
Other acquired		28		39

Total loans and leases held for investment (excluding covered loans)		107,120		102,602
Covered		3,955		4,867

Total loans and leases held for investment		111,075		107,469
Loans held for sale		2,736		3,736

Total loans and leases	$	113,811	$	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:


	June 30, 2012						December 31, 2011
	Purchased Impaired Loans		Purchased Nonimpaired Loans		Total		Purchased Impaired Loans		Purchased Nonimpaired Loans		Total
	(Dollars in millions)
Residential mortgage	$	611	$	548	$	1,159	$	647	$	617	$	1,264
Commercial real estate		1,079		1,264		2,343		1,407		1,597		3,004
Commercial		56		397		453		68		531		599

Total covered		1,746		2,209		3,955		2,122		2,745		4,867
Other acquired		1		27		28		2		37		39

Total		1,747		2,236		3,983		2,124		2,782		4,906

Allowance for loan losses		(87)		(52)		(139)		(113)		(36)		(149)

Net	$	1,660	$	2,184	$	3,844	$	2,011	$	2,746	$	4,757

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


	Six Months Ended June 30, 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		(131)		131		(297)		297		(359)		359		(706)		706
Payments received, net		—		(508)		—		(843)		—		(1,093)		—		(1,318)
Other, net		(92)		—		(44)		—		45		—		334		—

Balance at end of period	$	298	$	1,747	$	898	$	2,236	$	521	$	2,124	$	1,239	$	2,782

The outstanding unpaid principal balance for all purchased impaired loans as of June 30, 2012 and December 31, 2011 was $2.6 billion and $3.3 billion, respectively. The outstanding unpaid principal balance for all purchased nonimpaired loans as of June 30, 2012 and December 31, 2011 was $3.1 billion and $3.9 billion, respectively.

At June 30, 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:


	June 30, 2012		December 31, 2011
	(Dollars in millions)
Nonaccrual loans and leases held for investment	$	1,647	$	1,872
Foreclosed real estate (1)		221		536
Other foreclosed property		29		42

Total nonperforming assets (excluding covered assets) (1)	$	1,897	$	2,450

Loans 90 days or more past due and still accruing (excluding covered loans) (2)(3)(4)	$	147	$	202

(1)	Excludes foreclosed real estate totaling $310 million and $378 million as of June 30, 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 $453 million and $426 million as of June 30, 2012 and December 31, 2011, respectively.

(3)	Excludes loans 90 days or more past due that are covered by FDIC loss sharing agreements totaling $613 million and $736 million as of June 30, 2012 and December 31, 2011, respectively.

(4)	Excludes mortgage loans 90 days or more past due that are government guaranteed totaling $217 million and $206 million as of June 30, 2012 and December 31, 2011, respectively.

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”):


	June 30, 2012		December 31, 2011
	(Dollars in millions)
Performing restructurings:
Commercial:
Commercial and industrial	$	62	$	74
Commercial real estate - other		78		117
Commercial real estate - residential ADC		28		44
Direct retail lending		114		146
Sales finance		7		8
Revolving credit		58		62
Residential mortgage (1)(2)		636		608
Other lending subsidiaries		69		50

Total performing restructurings (1)(2)		1,052		1,109
Nonperforming restructurings (3)		219		280

Total restructurings (1)(2)(3)(4)	$	1,271	$	1,389

(1)	Excludes restructured mortgage loans held for investment that are government guaranteed totaling $264 million and $232 million at June 30, 2012 and December 31, 2011, respectively.

(2)	Excludes restructured mortgage loans held for sale that are government guaranteed totaling $2 million and $4 million at June 30, 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 $220 million and $266 million at June 30, 2012 and December 31, 2011, respectively.

Commitments to lend additional funds to clients with loans whose terms have been modified in restructurings was immaterial at June 30, 2012 and December 31, 2011.

NOTE 4. Allowance for Credit Losses

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


Three Months Ended June 30, 2012	Beginning Balance		Charge- Offs		Recoveries		Provision		Ending Balance
	(Dollars in millions)
Commercial:
Commercial and industrial	$	526	$	(92)	$	4	$	87	$	525
Commercial real estate - other		294		(51)		3		59		305
Commercial real estate - residential ADC		206		(74)		23		2		157
Other lending subsidiaries		13		(3)		—		3		13

Retail:
Direct retail lending		301		(56)		8		30		283
Revolving credit		94		(20)		4		12		90
Residential mortgage		301		(30)		1		37		309
Sales finance		32		(7)		2		(2)		25
Other lending subsidiaries		182		(44)		7		55		200

Covered and other acquired		137		(12)		—		14		139

Unallocated		95		—		—		(15)		80

Allowance for loan and lease losses		2,181		(389)		52		282		2,126
Reserve for unfunded lending commitments		40		—		—		(9)		31

Allowance for credit losses	$	2,221	$	(389)	$	52	$	273	$	2,157


Three Months Ended June 30, 2011	Beginning Balance		Charge- Offs		Recoveries		Provision		Ending Balance
	(Dollars in millions)
Commercial:
Commercial and industrial	$	535	$	(62)	$	9	$	(8)	$	474
Commercial real estate - other		497		(81)		6		40		462
Commercial real estate - residential ADC		421		(78)		7		32		382
Other lending subsidiaries		18		(2)		1		(4)		13

Retail:
Direct retail lending		245		(66)		8		46		233
Revolving credit		105		(24)		5		17		103
Residential mortgage		328		(129)		1		147		347
Sales finance		43		(7)		3		3		42
Other lending subsidiaries		175		(41)		6		31		171

Covered and other acquired		144		—		—		15		159

Unallocated		130		—		—		—		130

Allowance for loan and lease losses		2,641		(490)		46		319		2,516
Reserve for unfunded lending commitments		50		—		—		9		59

Allowance for credit losses	$	2,691	$	(490)	$	46	$	328	$	2,575


Six Months Ended June 30, 2012	Beginning Balance		Charge- Offs		Recoveries		Provision		Ending Balance
	(Dollars in millions)
Commercial:
Commercial and industrial	$	433	$	(155)	$	8	$	239	$	525
Commercial real estate - other		334		(124)		6		89		305
Commercial real estate - residential ADC		286		(128)		31		(32)		157
Other lending subsidiaries		11		(6)		1		7		13

Retail:
Direct retail lending		232		(113)		18		146		283
Revolving credit		112		(42)		9		11		90
Residential mortgage		365		(72)		2		14		309
Sales finance		38		(14)		5		(4)		25
Other lending subsidiaries		186		(101)		13		102		200

Covered and other acquired		149		(27)		—		17		139

Unallocated		110		—		—		(30)		80

Allowance for loan and lease losses		2,256		(782)		93		559		2,126
Reserve for unfunded lending commitments		29		—		—		2		31

Allowance for credit losses	$	2,285	$	(782)	$	93	$	561	$	2,157


Six Months Ended June 30, 2011	Beginning Balance		Charge- Offs		Recoveries		Provision		Ending Balance
	(Dollars in millions)
Commercial:
Commercial and industrial	$	621	$	(140)	$	13	$	(20)	$	474
Commercial real estate - other		446		(149)		9		156		462
Commercial real estate - residential ADC		469		(149)		11		51		382
Other lending subsidiaries		21		(4)		2		(6)		13

Retail:
Direct retail lending		246		(144)		17		114		233
Revolving credit		109		(51)		10		35		103
Residential mortgage		298		(183)		2		230		347
Sales finance		47		(17)		5		7		42
Other lending subsidiaries		177		(91)		11		74		171

Covered and other acquired		144		—		—		15		159

Unallocated		130		—		—		—		130

Allowance for loan and lease losses		2,708		(928)		80		656		2,516
Reserve for unfunded lending commitments		47		—		—		12		59

Allowance for credit losses	$	2,755	$	(928)	$	80	$	668	$	2,575

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
June 30, 2012	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Loans Acquired With Deteriorated Credit Quality		Total
	(Dollars in millions)
Commercial:
Commercial and industrial	$	83	$	442	$	—	$	525
Commercial real estate - other		47		258		—		305
Commercial real estate - residential ADC		28		129		—		157
Other lending subsidiaries		2		11		—		13

Retail:
Direct retail lending		28		255		—		283
Revolving credit		25		65		—		90
Residential mortgage		127		182		—		309
Sales finance		3		22		—		25
Other lending subsidiaries		27		173		—		200

Covered and other acquired		—		52		87		139

Unallocated		—		80		—		80

Total	$	370	$	1,669	$	87	$	2,126


	Loans and Leases
June 30, 2012	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Loans Acquired With Deteriorated Credit Quality		Total
	(Dollars in millions)
Commercial:
Commercial and industrial	$	691	$	36,247	$	—	$	36,938
Commercial real estate - other		413		10,044		—		10,457
Commercial real estate - residential ADC		272		1,318		—		1,590
Other lending subsidiaries		8		4,143		—		4,151

Retail:
Direct retail lending		154		15,001		—		15,155
Revolving credit		58		2,148		—		2,206
Residential mortgage		998		22,119		—		23,117
Sales finance		17		7,777		—		7,794
Other lending subsidiaries		72		5,612		—		5,684

Covered and other acquired		—		2,236		1,747		3,983

Total	$	2,683	$	106,645	$	1,747	$	111,075


	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 for which 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.

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.


June 30, 2012	Commercial & Industrial		Commercial Real Estate - Other		Commercial Real Estate - Residential ADC		Other Lending Subsidiaries
	(Dollars in millions)
Commercial:
Pass	$	34,200	$	8,848	$	957	$	4,110
Special mention		262		113		32		6
Substandard - performing		1,856		1,195		360		28
Nonperforming		620		301		241		7

Total	$	36,938	$	10,457	$	1,590	$	4,151


	Direct Retail Lending		Revolving Credit		Residential Mortgage		Sales Finance		Other Lending Subsidiaries
	(Dollars in millions)
Retail:
Performing	$	15,022	$	2,206	$	22,854	$	7,781	$	5,615
Nonperforming		133		—		263		13		69

Total	$	15,155	$	2,206	$	23,117	$	7,794	$	5,684


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

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
June 30, 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	$	36,263	$	53	$	2	$	620	$	36,938
Commercial real estate - other		10,140		16		—		301		10,457
Commercial real estate - residential ADC		1,340		9		—		241		1,590
Other lending subsidiaries		4,126		14		4		7		4,151

Retail:
Direct retail lending		14,865		119		38		133		15,155
Revolving credit		2,173		20		13		—		2,206
Residential mortgage (1)		21,609		495		292		263		22,659
Sales finance		7,721		49		11		13		7,794
Other lending subsidiaries		5,411		204		—		69		5,684

Other acquired		27		—		1		—		28

Total (1)	$	103,675	$	979	$	361	$	1,647	$	106,662


	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)		19,442		524		307		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)	$	99,148	$	1,177	$	405	$	1,872	$	102,602

(1)

Residential mortgage loans include $84 million and $81 million in government guaranteed loans 30-89 days past due, and $214 million and $203 million in government guaranteed loans 90 days or more past due as of June 30, 2012 and December 31, 2011, respectively. Residential mortgage loans exclude $5 million and $453 million in loans guaranteed by GNMA that BB&T has the option, but not the obligation, to repurchase, which are past due 30-89 days and 90 days or more, respectively, at June 30, 2012.

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 Six Months Ended June 30, 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	$	129	$	236	$	—	$	122	$	—
Commercial real estate - other		78		122		—		67		—
Commercial real estate - residential ADC		107		227		—		125		—

Retail:
Direct retail lending		18		75		—		20		—
Residential mortgage (1)		82		138		—		101		1
Sales finance		2		2		—		1		—
Other lending subsidiaries		2		4		—		4		—

With An Allowance Recorded:
Commercial:
Commercial and industrial		562		571		83		395		1
Commercial real estate - other		335		357		47		240		2
Commercial real estate - residential ADC		165		172		28		121		—
Other lending subsidiaries		8		8		2		2		1

Retail:
Direct retail lending		136		145		28		130		4
Revolving credit		58		58		25		60		1
Residential mortgage (1)		652		672		114		616		13
Sales finance		15		17		3		9		—
Other lending subsidiaries		70		72		27		51		1

Total (1)	$	2,419	$	2,876	$	357	$	2,064	$	24


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

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