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, 2015
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 June 30, 2015, 733,480,586 shares
of the Registrant’s common stock, $5 par value, were outstanding.
Glossary of Defined Terms
The following terms may be used throughout this Report, including
the consolidated financial statements and related notes.
Term |
|
Definition |
2015 Repurchase Plan |
|
Plan for the repurchase of up to 50 million shares of BB&T’s common stock |
2006 Repurchase Plan |
|
Plan for the repurchase of up to 50 million shares of BB&T’s common stock |
ACL |
|
Allowance for credit losses |
Acquired from FDIC |
|
Assets of Colonial Bank acquired from the Federal Deposit Insurance Corporation during 2009, which are currently covered or were formerly covered under loss sharing agreements |
AFS |
|
Available-for-sale |
Agency MBS |
|
Mortgage-backed securities issued by a U.S. government agency or GSE |
ALLL |
|
Allowance for loan and lease losses |
American Coastal |
|
American Coastal Insurance Company |
AOCI |
|
Accumulated other comprehensive income (loss) |
Basel III |
|
Global regulatory standards on bank capital adequacy and liquidity published by the BCBS |
BB&T |
|
BB&T Corporation and subsidiaries |
BCBS |
|
Basel Committee on Bank Supervision |
BHC |
|
Bank holding company |
BHCA |
|
Bank Holding Company Act of 1956, as amended |
Branch Bank |
|
Branch Banking and Trust Company |
BU |
|
Business Unit |
CCAR |
|
Comprehensive Capital Analysis and Review |
CD |
|
Certificate of deposit |
CDI |
|
Core deposit intangible assets |
CFPB |
|
Consumer Financial Protection Bureau |
CEO |
|
Chief Executive Officer |
CRO |
|
Chief Risk Officer |
CMO |
|
Collateralized mortgage obligation |
Colonial |
|
Collectively, certain assets and liabilities of Colonial Bank acquired by BB&T in 2009 |
Company |
|
BB&T Corporation and subsidiaries (interchangeable with "BB&T" above) |
CRA |
|
Community Reinvestment Act of 1977 |
CRE |
|
Commercial real estate |
CRMC |
|
Credit Risk Management Committee |
CROC |
|
Compliance Risk Oversight Committee |
DIF |
|
Deposit Insurance Fund administered by the FDIC |
Directors’ Plan |
|
Non-Employee Directors’ Stock Option Plan |
Dodd-Frank Act |
|
Dodd-Frank Wall Street Reform and Consumer Protection Act |
EITSC |
|
Enterprise IT Steering Committee |
EPS |
|
Earnings per common share |
ERP |
|
Enterprise resource planning |
EVE |
|
Economic value of equity |
Exchange Act |
|
Securities Exchange Act of 1934, as amended |
FASB |
|
Financial Accounting Standards Board |
FATCA |
|
Foreign Account Tax Compliance Act |
FDIC |
|
Federal Deposit Insurance Corporation |
FHA |
|
Federal Housing Administration |
FHC |
|
Financial Holding Company |
FHLB |
|
Federal Home Loan Bank |
FHLMC |
|
Federal Home Loan Mortgage Corporation |
FINRA |
|
Financial Industry Regulatory Authority |
FNMA |
|
Federal National Mortgage Association |
FRB |
|
Board of Governors of the Federal Reserve System |
FTE |
|
Fully taxable-equivalent |
FTP |
|
Funds transfer pricing |
GAAP |
|
Accounting principles generally accepted in the United States of America |
GNMA |
|
Government National Mortgage Association |
Term |
|
Definition |
Grandbridge |
|
Grandbridge Real Estate Capital, LLC |
GSE |
|
U.S. government-sponsored enterprise |
HFI |
|
Held for investment |
HMDA |
|
Home Mortgage Disclosure Act |
HTM |
|
Held-to-maturity |
HUD-OIG |
|
Office of Inspector General, U.S. Department of Housing and Urban Development |
IDI |
|
Insured depository institution |
IMLAFA |
|
International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001 |
IPV |
|
Independent price verification |
IRA |
|
Individual retirement account |
IRC |
|
Internal Revenue Code |
IRS |
|
Internal Revenue Service |
ISDA |
|
International Swaps and Derivatives Association, Inc. |
LCR |
|
Liquidity Coverage Ratio |
LHFS |
|
Loans held for sale |
LIBOR |
|
London Interbank Offered Rate |
MBS |
|
Mortgage-backed securities |
MRLCC |
|
Market Risk, Liquidity and Capital Committee |
MSR |
|
Mortgage servicing right |
MSRB |
|
Municipal Securities Rulemaking Board |
NIM |
|
Net interest margin |
NPA |
|
Nonperforming asset |
NPL |
|
Nonperforming loan |
NPR |
|
Notice of Proposed Rulemaking |
NYSE |
|
NYSE Euronext, Inc. |
OAS |
|
Option adjusted spread |
OCC |
|
Office of the Comptroller of the Currency |
OCI |
|
Other comprehensive income (loss) |
OREO |
|
Other real estate owned |
ORMC |
|
Operational Risk Management Committee |
OTTI |
|
Other-than-temporary impairment |
Parent Company |
|
BB&T Corporation, the parent company of Branch Bank and other subsidiaries |
Patriot Act |
|
Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 |
Peer Group |
|
Financial holding companies included in the industry peer group index |
Reform Act |
|
Federal Deposit Insurance Reform Act of 2005 |
RMC |
|
Risk Management Committee |
RMO |
|
Risk Management Organization |
RSU |
|
Restricted stock unit |
RUFC |
|
Reserve for unfunded lending commitments |
S&P |
|
Standard & Poor's |
SBIC |
|
Small Business Investment Company |
SCAP |
|
Supervisory Capital Assessment Program |
SEC |
|
Securities and Exchange Commission |
Short-Term Borrowings |
|
Federal funds purchased, securities sold under repurchase agreements and other short-term borrowed funds with original maturities of less than one year |
Simulation |
|
Interest sensitivity simulation analysis |
TBA |
|
To be announced |
TDR |
|
Troubled debt restructuring |
U.S. |
|
United States of America |
U.S. Treasury |
|
United States Department of the Treasury |
UPB |
|
Unpaid principal balance |
VA |
|
U.S. Department of Veterans Affairs |
VaR |
|
Value-at-risk |
VIE |
|
Variable interest entity |
BB&T CORPORATION AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
(Unaudited) |
(Dollars in millions, except per share data, shares in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
|
|
|
2015 |
|
2014 |
Assets |
|
|
|
|
|
|
Cash and due from banks |
$ |
1,607 |
|
$ |
1,639 |
|
Interest-bearing deposits with banks |
|
824 |
|
|
529 |
|
Federal funds sold and securities purchased under resale agreements or similar |
|
|
|
|
|
|
|
arrangements |
|
190 |
|
|
157 |
|
Restricted cash |
|
379 |
|
|
374 |
|
AFS securities at fair value |
|
21,183 |
|
|
20,907 |
|
HTM securities (fair value of $19,455 and $20,313 at June 30, 2015 |
|
|
|
|
|
|
|
and December 31, 2014, respectively) |
|
19,437 |
|
|
20,240 |
|
LHFS at fair value |
|
2,469 |
|
|
1,423 |
|
Loans and leases |
|
122,301 |
|
|
119,884 |
|
ALLL |
|
(1,457) |
|
|
(1,474) |
|
|
Loans and leases, net of ALLL |
|
120,844 |
|
|
118,410 |
|
|
|
|
|
|
|
|
|
|
|
Premises and equipment |
|
1,900 |
|
|
1,827 |
|
Goodwill |
|
7,141 |
|
|
6,869 |
|
Core deposit and other intangible assets |
|
514 |
|
|
505 |
|
Residential MSRs at fair value |
|
912 |
|
|
844 |
|
Other assets |
|
13,617 |
|
|
13,110 |
|
|
|
Total assets |
$ |
191,017 |
|
$ |
186,834 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
Noninterest-bearing deposits |
$ |
42,234 |
|
$ |
38,786 |
|
|
Interest-bearing deposits |
|
90,549 |
|
|
90,254 |
|
|
|
Total deposits |
|
132,783 |
|
|
129,040 |
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings |
|
3,883 |
|
|
3,717 |
|
Long-term debt |
|
23,271 |
|
|
23,312 |
|
Accounts payable and other liabilities |
|
5,948 |
|
|
6,388 |
|
|
|
Total liabilities |
|
165,885 |
|
|
162,457 |
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 13) |
|
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
|
|
|
Preferred stock, $5 par, liquidation preference of $25,000 per share |
|
2,603 |
|
|
2,603 |
|
|
Common stock, $5 par |
|
3,667 |
|
|
3,603 |
|
|
Additional paid-in capital |
|
6,667 |
|
|
6,517 |
|
|
Retained earnings |
|
12,891 |
|
|
12,317 |
|
|
AOCI, net of deferred income taxes |
|
(748) |
|
|
(751) |
|
|
Noncontrolling interests |
|
52 |
|
|
88 |
|
|
|
Total shareholders’ equity |
|
25,132 |
|
|
24,377 |
|
|
|
Total liabilities and shareholders’ equity |
$ |
191,017 |
|
$ |
186,834 |
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding |
|
733,481 |
|
|
720,698 |
|
Common shares authorized |
|
2,000,000 |
|
|
2,000,000 |
|
Preferred shares outstanding |
|
107 |
|
|
107 |
|
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 |
|
Six Months Ended |
|
|
|
|
|
|
|
June 30, |
|
|
June 30, |
|
|
|
|
|
|
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
Interest Income |
|
|
|
|
|
|
|
|
|
|
|
|
Interest and fees on loans and leases |
$ |
1,249 |
|
$ |
1,295 |
|
$ |
2,486 |
|
$ |
2,590 |
|
Interest and dividends on securities |
|
232 |
|
|
234 |
|
|
472 |
|
|
470 |
|
Interest on other earning assets |
|
8 |
|
|
8 |
|
|
24 |
|
|
23 |
|
|
|
Total interest income |
|
1,489 |
|
|
1,537 |
|
|
2,982 |
|
|
3,083 |
Interest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
Interest on deposits |
|
55 |
|
|
60 |
|
|
110 |
|
|
120 |
|
Interest on short-term borrowings |
|
1 |
|
|
1 |
|
|
2 |
|
|
2 |
|
Interest on long-term debt |
|
121 |
|
|
133 |
|
|
246 |
|
|
271 |
|
|
|
Total interest expense |
|
177 |
|
|
194 |
|
|
358 |
|
|
393 |
Net Interest Income |
|
1,312 |
|
|
1,343 |
|
|
2,624 |
|
|
2,690 |
|
Provision for credit losses |
|
97 |
|
|
74 |
|
|
196 |
|
|
134 |
Net Interest Income After Provision for Credit Losses |
|
1,215 |
|
|
1,269 |
|
|
2,428 |
|
|
2,556 |
Noninterest Income |
|
|
|
|
|
|
|
|
|
|
|
|
Insurance income |
|
422 |
|
|
422 |
|
|
862 |
|
|
849 |
|
Service charges on deposits |
|
154 |
|
|
158 |
|
|
299 |
|
|
308 |
|
Mortgage banking income |
|
130 |
|
|
86 |
|
|
240 |
|
|
160 |
|
Investment banking and brokerage fees and commissions |
|
108 |
|
|
92 |
|
|
202 |
|
|
180 |
|
Bankcard fees and merchant discounts |
|
55 |
|
|
54 |
|
|
105 |
|
|
100 |
|
Trust and investment advisory revenues |
|
57 |
|
|
55 |
|
|
113 |
|
|
109 |
|
Checkcard fees |
|
43 |
|
|
42 |
|
|
82 |
|
|
80 |
|
Operating lease income |
|
30 |
|
|
20 |
|
|
59 |
|
|
42 |
|
Income from bank-owned life insurance |
|
27 |
|
|
25 |
|
|
57 |
|
|
52 |
|
FDIC loss share income, net |
|
(64) |
|
|
(88) |
|
|
(143) |
|
|
(172) |
|
Other income |
|
58 |
|
|
92 |
|
|
141 |
|
|
175 |
|
Securities gains (losses), net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross realized gains |
|
2 |
|
|
― |
|
|
2 |
|
|
6 |
|
|
|
Gross realized losses |
|
― |
|
|
― |
|
|
― |
|
|
(3) |
|
|
|
OTTI charges |
|
(2) |
|
|
― |
|
|
(2) |
|
|
(23) |
|
|
|
Non-credit portion recognized in OCI |
|
(1) |
|
|
― |
|
|
(1) |
|
|
22 |
|
|
|
|
|
Total securities gains (losses), net |
|
(1) |
|
|
― |
|
|
(1) |
|
|
2 |
|
|
|
Total noninterest income |
|
1,019 |
|
|
958 |
|
|
2,016 |
|
|
1,885 |
Noninterest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
Personnel expense |
|
864 |
|
|
809 |
|
|
1,694 |
|
|
1,591 |
|
Occupancy and equipment expense |
|
166 |
|
|
168 |
|
|
333 |
|
|
344 |
|
Loan-related expense |
|
37 |
|
|
80 |
|
|
75 |
|
|
131 |
|
Software expense |
|
46 |
|
|
42 |
|
|
90 |
|
|
85 |
|
Professional services |
|
35 |
|
|
34 |
|
|
59 |
|
|
67 |
|
Outside IT services |
|
29 |
|
|
31 |
|
|
59 |
|
|
58 |
|
Regulatory charges |
|
25 |
|
|
30 |
|
|
48 |
|
|
59 |
|
Amortization of intangibles |
|
23 |
|
|
23 |
|
|
44 |
|
|
46 |
|
Foreclosed property expense |
|
14 |
|
|
10 |
|
|
27 |
|
|
19 |
|
Merger-related and restructuring charges, net |
|
25 |
|
|
13 |
|
|
38 |
|
|
21 |
|
Loss on early extinguishment of debt |
|
172 |
|
|
― |
|
|
172 |
|
|
― |
|
Other expense |
|
217 |
|
|
294 |
|
|
436 |
|
|
498 |
|
|
|
Total noninterest expense |
|
1,653 |
|
|
1,534 |
|
|
3,075 |
|
|
2,919 |
Earnings |
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
581 |
|
|
693 |
|
|
1,369 |
|
|
1,522 |
|
Provision for income taxes |
|
80 |
|
|
216 |
|
|
321 |
|
|
472 |
|
|
|
Net income |
|
501 |
|
|
477 |
|
|
1,048 |
|
|
1,050 |
|
Noncontrolling interests |
|
10 |
|
|
16 |
|
|
32 |
|
|
56 |
|
Preferred stock dividends |
|
37 |
|
|
37 |
|
|
74 |
|
|
74 |
|
|
|
Net income available to common shareholders |
$ |
454 |
|
$ |
424 |
|
$ |
942 |
|
$ |
920 |
EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.63 |
|
$ |
0.59 |
|
$ |
1.30 |
|
$ |
1.29 |
|
|
|
Diluted |
$ |
0.62 |
|
$ |
0.58 |
|
$ |
1.29 |
|
$ |
1.27 |
|
Cash dividends declared |
$ |
0.27 |
|
$ |
0.24 |
|
$ |
0.51 |
|
$ |
0.47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
724,880 |
|
|
719,080 |
|
|
723,268 |
|
|
715,978 |
|
|
|
Diluted |
|
734,527 |
|
|
728,452 |
|
|
733,002 |
|
|
726,388 |
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 |
|
Six Months Ended |
|
|
|
|
|
June 30, |
|
June 30, |
|
|
|
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
$ |
501 |
|
$ |
477 |
|
$ |
1,048 |
|
$ |
1,050 |
OCI, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrecognized net pension and postretirement costs |
|
9 |
|
|
2 |
|
|
18 |
|
|
3 |
|
Change in unrealized net gains (losses) on cash flow hedges |
|
73 |
|
|
(2) |
|
|
19 |
|
|
9 |
|
Change in unrealized net gains (losses) on AFS securities |
|
(107) |
|
|
86 |
|
|
(50) |
|
|
165 |
|
Net change in FDIC's share of unrealized gains/losses on AFS securities |
|
9 |
|
|
3 |
|
|
19 |
|
|
9 |
|
Other, net |
|
1 |
|
|
5 |
|
|
(3) |
|
|
1 |
|
|
Total OCI |
|
(15) |
|
|
94 |
|
|
3 |
|
|
187 |
|
|
Total comprehensive income |
$ |
486 |
|
$ |
571 |
|
$ |
1,051 |
|
$ |
1,237 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax Effect of Items Included in OCI: |
|
Change in unrecognized net pension and postretirement costs |
$ |
5 |
|
$ |
1 |
|
$ |
11 |
|
$ |
2 |
|
Change in unrealized net gains (losses) on cash flow hedges |
|
43 |
|
|
(1) |
|
|
11 |
|
|
6 |
|
Change in unrealized net gains (losses) on AFS securities |
|
(65) |
|
|
53 |
|
|
(31) |
|
|
98 |
|
Net change in FDIC's share of unrealized gains/losses on AFS securities |
|
9 |
|
|
1 |
|
|
14 |
|
|
4 |
|
Other, net |
|
― |
|
|
2 |
|
|
― |
|
|
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, 2015 and 2014 |
(Dollars in millions, shares in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of |
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
Common |
|
Preferred |
|
Common |
|
Paid-In |
|
Retained |
|
|
|
Noncontrolling |
|
Shareholders’ |
|
|
|
|
|
Stock |
|
Stock |
|
Stock |
|
Capital |
|
Earnings |
|
AOCI |
|
Interests |
|
Equity |
Adjusted Balance, January 1, 2014 |
706,620 |
|
$ |
2,603 |
|
$ |
3,533 |
|
$ |
6,172 |
|
$ |
11,015 |
|
$ |
(593) |
|
$ |
50 |
|
$ |
22,780 |
Add (Deduct): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
― |
|
|
― |
|
|
― |
|
|
― |
|
|
994 |
|
|
― |
|
|
56 |
|
|
1,050 |
|
Net change in AOCI |
― |
|
|
― |
|
|
― |
|
|
― |
|
|
― |
|
|
187 |
|
|
― |
|
|
187 |
|
Stock transactions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued in connection with equity awards |
14,097 |
|
|
― |
|
|
71 |
|
|
209 |
|
|
― |
|
|
― |
|
|
― |
|
|
280 |
|
|
Shares repurchased in connection with equity awards |
(2,177) |
|
|
― |
|
|
(11) |
|
|
(70) |
|
|
― |
|
|
― |
|
|
― |
|
|
(81) |
|
|
Excess tax benefits in connection with equity awards |
― |
|
|
― |
|
|
― |
|
|
49 |
|
|
― |
|
|
― |
|
|
― |
|
|
49 |
|
|
Issued in connection with dividend reinvestment plan |
391 |
|
|
― |
|
|
2 |
|
|
13 |
|
|
― |
|
|
― |
|
|
― |
|
|
15 |
|
|
Issued in connection with 401(k) plan |
653 |
|
|
― |
|
|
3 |
|
|
22 |
|
|
― |
|
|
― |
|
|
― |
|
|
25 |
|
Cash dividends declared on common stock |
― |
|
|
― |
|
|
― |
|
|
― |
|
|
(336) |
|
|
― |
|
|
― |
|
|
(336) |
|
Cash dividends declared on preferred stock |
― |
|
|
― |
|
|
― |
|
|
― |
|
|
(74) |
|
|
― |
|
|
― |
|
|
(74) |
|
Equity-based compensation expense |
― |
|
|
― |
|
|
― |
|
|
56 |
|
|
― |
|
|
― |
|
|
― |
|
|
56 |
|
Other, net |
― |
|
|
― |
|
|
― |
|
|
― |
|
|
― |
|
|
― |
|
|
(21) |
|
|
(21) |
Balance, June 30, 2014 |
719,584 |
|
$ |
2,603 |
|
$ |
3,598 |
|
$ |
6,451 |
|
$ |
11,599 |
|
$ |
(406) |
|
$ |
85 |
|
$ |
23,930 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Balance, January 1, 2015 |
720,698 |
|
$ |
2,603 |
|
$ |
3,603 |
|
$ |
6,517 |
|
$ |
12,317 |
|
$ |
(751) |
|
$ |
88 |
|
$ |
24,377 |
Add (Deduct): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
― |
|
|
― |
|
|
― |
|
|
― |
|
|
1,016 |
|
|
― |
|
|
32 |
|
|
1,048 |
|
Net change in AOCI |
― |
|
|
― |
|
|
― |
|
|
― |
|
|
― |
|
|
3 |
|
|
― |
|
|
3 |
|
Stock transactions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued in business combinations |
7,847 |
|
|
― |
|
|
39 |
|
|
283 |
|
|
― |
|
|
― |
|
|
― |
|
|
322 |
|
|
Issued in connection with equity awards |
6,249 |
|
|
― |
|
|
31 |
|
|
64 |
|
|
― |
|
|
― |
|
|
― |
|
|
95 |
|
|
Shares repurchased in connection with equity awards |
(1,313) |
|
|
― |
|
|
(6) |
|
|
(45) |
|
|
― |
|
|
― |
|
|
― |
|
|
(51) |
|
|
Excess tax benefits in connection with equity awards |
― |
|
|
― |
|
|
― |
|
|
9 |
|
|
― |
|
|
― |
|
|
― |
|
|
9 |
|
Purchase of additional ownership interest in AmRisc, LP |
― |
|
|
― |
|
|
― |
|
|
(219) |
|
|
― |
|
|
― |
|
|
(3) |
|
|
(222) |
|
Cash dividends declared on common stock |
― |
|
|
― |
|
|
― |
|
|
― |
|
|
(368) |
|
|
― |
|
|
― |
|
|
(368) |
|
Cash dividends declared on preferred stock |
― |
|
|
― |
|
|
― |
|
|
― |
|
|
(74) |
|
|
― |
|
|
― |
|
|
(74) |
|
Equity-based compensation expense |
― |
|
|
― |
|
|
― |
|
|
58 |
|
|
― |
|
|
― |
|
|
― |
|
|
58 |
|
Other, net |
― |
|
|
― |
|
|
― |
|
|
― |
|
|
― |
|
|
― |
|
|
(65) |
|
|
(65) |
Balance, June 30, 2015 |
733,481 |
|
$ |
2,603 |
|
$ |
3,667 |
|
$ |
6,667 |
|
$ |
12,891 |
|
$ |
(748) |
|
$ |
52 |
|
$ |
25,132 |
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, |
|
|
|
|
|
|
|
2015 |
|
2014 |
Cash Flows From Operating Activities: |
|
|
|
|
|
|
Net income |
$ |
1,048 |
|
$ |
1,050 |
|
Adjustments to reconcile net income to net cash from operating activities: |
|
|
|
|
|
|
|
Provision for credit losses |
|
196 |
|
|
134 |
|
|
Adjustment to income tax provision |
|
(107) |
|
|
14 |
|
|
Depreciation |
|
173 |
|
|
161 |
|
|
Loss on early extinguishment of debt |
|
172 |
|
|
― |
|
|
Amortization of intangibles |
|
44 |
|
|
46 |
|
|
Equity-based compensation expense |
|
58 |
|
|
56 |
|
|
(Gain) loss on securities, net |
|
1 |
|
|
(2) |
|
|
Net change in operating assets and liabilities: |
|
|
|
|
|
|
|
|
LHFS |
|
(1,044) |
|
|
(470) |
|
|
|
Other assets |
|
(739) |
|
|
368 |
|
|
|
Accounts payable and other liabilities |
|
180 |
|
|
(559) |
|
|
Other, net |
|
64 |
|
|
79 |
|
|
|
|
Net cash from operating activities |
|
46 |
|
|
877 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities: |
|
|
|
|
|
|
Proceeds from sales of AFS securities |
|
754 |
|
|
1,172 |
|
Proceeds from maturities, calls and paydowns of AFS securities |
|
2,708 |
|
|
1,921 |
|
Purchases of AFS securities |
|
(3,486) |
|
|
(1,644) |
|
Proceeds from maturities, calls and paydowns of HTM securities |
|
1,733 |
|
|
726 |
|
Purchases of HTM securities |
|
(945) |
|
|
(3,067) |
|
Originations and purchases of loans and leases, net of principal collected |
|
(1,704) |
|
|
(4,079) |
|
Net cash received (paid) for business combinations |
|
1,742 |
|
|
1,025 |
|
Proceeds from sales of foreclosed property |
|
105 |
|
|
134 |
|
Other, net |
|
(246) |
|
|
270 |
|
|
|
|
Net cash from investing activities |
|
661 |
|
|
(3,542) |
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities: |
|
|
|
|
|
|
Net change in deposits |
|
277 |
|
|
2,883 |
|
Net change in short-term borrowings |
|
143 |
|
|
(159) |
|
Proceeds from issuance of long-term debt |
|
1,017 |
|
|
2,407 |
|
Repayment of long-term debt |
|
(1,266) |
|
|
(2,040) |
|
Cash dividends paid on common stock |
|
(368) |
|
|
(321) |
|
Cash dividends paid on preferred stock |
|
(74) |
|
|
(74) |
|
Other, net |
|
(140) |
|
|
252 |
|
|
|
|
Net cash from financing activities |
|
(411) |
|
|
2,948 |
Net Change in Cash and Cash Equivalents |
|
296 |
|
|
283 |
Cash and Cash Equivalents at Beginning of Period |
|
2,325 |
|
|
2,165 |
Cash and Cash Equivalents at End of Period |
$ |
2,621 |
|
$ |
2,448 |
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information: |
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
|
Interest |
$ |
360 |
|
$ |
397 |
|
|
Income taxes |
|
440 |
|
|
384 |
|
Noncash investing activities: |
|
|
|
|
|
|
|
Transfers of loans to foreclosed assets |
|
249 |
|
|
228 |
|
|
Purchase of additional interest in AmRisc, LP |
|
216 |
|
|
― |
|
|
Stock issued in business combinations |
|
322 |
|
|
― |
The accompanying notes are an integral part
of these consolidated financial statements.
NOTE 1. Basis of Presentation
See the Glossary of Defined Terms at the beginning of this Report
for terms used throughout the consolidated financial statements and related notes of this Form 10-Q.
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 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 year-end consolidated balance sheet data was derived from audited financial statements
but does not include all disclosures required by GAAP. The information contained in the financial statements and notes included
in the Annual Report on Form 10-K for the year ended December 31, 2014 should be referred to in connection with these unaudited
interim consolidated financial statements.
Reclassifications
Certain 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 ACL, 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 2015, the FASB issued new guidance related to Insurance.
The new guidance requires insurance companies to provide additional disclosures about the liability for unpaid claims and claim
adjustment expenses. This guidance is effective for annual periods beginning after December 15, 2015. BB&T’s insurance
operations primarily consist of agency/broker transactions; therefore, the adoption of this guidance is not expected to be material
to the consolidated financial statements.
In May 2015, the FASB issued new guidance related to Fair Value
Measurement. The new guidance eliminates the requirement to classify in the fair value hierarchy any investments for which
fair value is measured at net asset value per share using the practical expedient. This guidance is effective for fiscal years
beginning after December 15, 2015 and interim periods within those fiscal years. The adoption of this guidance is not expected
to be material to the consolidated financial statements.
In April 2015, the FASB issued new guidance related to Internal-Use
Software. Under the new guidance, if a cloud computing arrangement includes a software license, then the customer should account
for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing
arrangement does not include a software license, the customer should account for the arrangement as a service contract. This guidance
is effective for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years. The Company is currently
evaluating this guidance to determine the impact on its consolidated financial statements.
In April 2015, the FASB issued new guidance related to Debt Issuance
Costs. The new guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance
sheet as a direct deduction from the carrying amount of that debt liability. This guidance is effective for fiscal years beginning
after December 15, 2015 and interim periods within those fiscal years. The adoption of this guidance is not expected to be material
to the consolidated financial statements.
In February 2015, the FASB issued new guidance related to Consolidation.
The new guidance provides an additional requirement for a limited partnership or similar entity to qualify as a voting interest
entity, amending the criteria for consolidating such an entity and eliminating the deferral provided under previous guidance for
investment companies. In addition, the new guidance amends the criteria for evaluating fees paid to a decision maker or service
provider as a variable interest and amends the criteria for evaluating the effect of fee arrangements and related parties on a
VIE primary beneficiary determination. This guidance is effective for interim and annual reporting periods beginning after December
15, 2015. The Company is currently evaluating this guidance to determine the impact on its consolidated financial statements.
In May 2014, the FASB issued new guidance related to Revenue
from Contracts with Customers. This guidance supersedes the revenue recognition requirements in Accounting Standards Codification
Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Accounting Standards Codification. The
guidance requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount
that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This guidance
is effective for interim and annual reporting periods beginning after December 15, 2016; however, the FASB has proposed a one year
deferral of the effective date. The Company is currently evaluating this guidance to determine the impact on its consolidated financial
statements.
Effective January 1, 2015, the Company adopted new guidance related
to Receivables. The new guidance requires that a government guaranteed mortgage loan be derecognized and that a separate
other receivable be recognized upon foreclosure if certain conditions are met. The adoption of this guidance was not material to
the consolidated financial statements.
Effective January 1, 2015, the Company adopted new guidance related
to Repurchase-to-Maturity Transactions and Repurchase Financings. The new guidance changes the accounting for repurchase-to-maturity
transactions to secured borrowing accounting. The guidance also requires separate accounting for a transfer of a financial asset
executed contemporaneously with a repurchase agreement with the same counterparty, which results in secured borrowing accounting
for the repurchase agreement. The adoption of this guidance was not material to the consolidated financial statements.
Effective January 1, 2015, the Company adopted new guidance related
to Investments in Qualified Affordable Housing Projects. The Company used the retrospective method of adoption and has elected
the proportional amortization method to account for these investments. The proportional amortization method allows an entity to
amortize the initial cost of the investment in proportion to the amount of tax credits and other tax benefits received and recognize
the net investment performance in the income statement as a component of the provision for income taxes. See Note 13 “Commitments
and Contingencies” for the impact of the adoption of this guidance.
NOTE 2. Acquisitions and Divestitures
The following table summarizes the purchase price allocations for
certain bank and branch acquisitions. Accordingly, the assets acquired and liabilities assumed are presented at their estimated
fair values. In many cases, the determination of these fair values required management to make estimates about discount rates,
future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change.
The fair value estimates for the current-year acquisitions are considered preliminary and are subject to change for up to one year
after the closing date of the acquisition as additional information becomes available.
|
|
|
|
|
The Bank of Kentucky |
|
Citi - 41 Branches in Texas |
|
Citi - 21 Branches in Texas |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Period of acquisition |
|
|
|
|
|
Q2 2015 |
|
|
Q1 2015 |
|
|
Q2 2014 |
|
|
Assets acquired: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, due from banks and fed funds sold |
|
|
|
|
$ |
135 |
|
$ |
14 |
|
$ |
6 |
|
|
|
Securities |
|
|
|
|
|
347 |
|
|
― |
|
|
― |
|
|
|
Loans |
|
|
|
|
|
1,198 |
|
|
61 |
|
|
112 |
|
|
|
Goodwill |
|
|
|
|
|
237 |
|
|
79 |
|
|
29 |
|
|
|
CDI |
|
|
|
|
|
14 |
|
|
36 |
|
|
20 |
|
|
|
Other assets |
|
|
|
|
|
98 |
|
|
48 |
|
|
16 |
|
|
|
|
Total assets acquired |
|
|
|
|
|
2,029 |
|
|
238 |
|
|
183 |
|
|
Liabilities assumed: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
|
|
|
1,558 |
|
|
1,907 |
|
|
1,228 |
|
|
|
Debt |
|
|
|
|
|
73 |
|
|
― |
|
|
― |
|
|
|
Other liabilities |
|
|
|
|
|
3 |
|
|
― |
|
|
― |
|
|
|
|
Total liabilities assumed |
|
|
|
|
|
1,634 |
|
|
1,907 |
|
|
1,228 |
|
|
Consideration paid (received) |
|
|
|
|
$ |
395 |
|
$ |
(1,669) |
|
$ |
(1,045) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid (received) |
|
|
|
|
$ |
73 |
|
$ |
(1,669) |
|
$ |
(1,045) |
|
|
Fair value of common stock issued |
|
|
|
|
|
322 |
|
|
― |
|
|
― |
|
The acquisition of The Bank of Kentucky provided 32 additional retail
branches. The UPB of loans acquired from The Bank of Kentucky was $1.3 billion, and the acquired goodwill is expected to be non-deductible
for income tax purposes.
BB&T has reached an agreement and received regulatory approval
to acquire Susquehanna Bancshares, Inc. Closing is expected to occur on August 1, 2015.
During the second quarter of 2015, BB&T purchased additional
ownership interest in AmRisc, LP. from the noncontrolling owners for cash and ownership of American Coastal. Since BB&T held
a controlling interest in AmRisc, LP prior to this transaction, the total consideration less the establishment of a deferred tax
asset was recognized as a charge to shareholders’ equity. BB&T will continue to consolidate AmRisc, LP and recognize
a noncontrolling interest for the remaining interests held by the noncontrolling owners. The transfer of the ownership of American
Coastal was accounted for as a sale, and the resulting pre-tax loss is included in other income in the Consolidated Statements
of Income. The following table summarizes these transactions:
|
Purchase of Additional Ownership of AmRisc, LP |
|
Sale of American Coastal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Fair value of American Coastal |
$ |
216 |
|
Fair value of American Coastal |
$ |
216 |
|
|
Cash paid |
|
146 |
|
Net assets sold |
|
(193) |
|
|
Total consideration |
|
362 |
|
Allocated goodwill |
|
(49) |
|
|
Deferred tax asset recognized |
|
(140) |
|
|
Pre-tax loss on sale |
|
(26) |
|
|
|
|
|
|
|
|
Income tax expense |
|
(8) |
|
|
|
Net charge to shareholders' equity |
$ |
222 |
|
|
After-tax net loss on sale |
$ |
(34) |
|
NOTE 3. Securities
|
|
|
|
|
Amortized |
|
Gross Unrealized |
|
Fair |
|
|
June 30, 2015 |
|
Cost |
|
Gains |
|
Losses |
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
AFS securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
|
$ |
1,381 |
|
$ |
5 |
|
$ |
1 |
|
$ |
1,385 |
|
|
|
Agency MBS |
|
|
16,655 |
|
|
62 |
|
|
283 |
|
|
16,434 |
|
|
|
States and political subdivisions |
|
|
1,926 |
|
|
99 |
|
|
66 |
|
|
1,959 |
|
|
|
Non-agency MBS |
|
|
217 |
|
|
26 |
|
|
— |
|
|
243 |
|
|
|
Other |
|
|
5 |
|
|
— |
|
|
— |
|
|
5 |
|
|
|
Securities acquired from FDIC |
|
|
833 |
|
|
324 |
|
|
— |
|
|
1,157 |
|
|
|
|
Total AFS securities |
|
$ |
21,017 |
|
$ |
516 |
|
$ |
350 |
|
$ |
21,183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HTM securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
|
$ |
1,097 |
|
$ |
25 |
|
$ |
— |
|
$ |
1,122 |
|
|
|
GSE |
|
|
5,395 |
|
|
17 |
|
|
114 |
|
|
5,298 |
|
|
|
Agency MBS |
|
|
12,335 |
|
|
89 |
|
|
13 |
|
|
12,411 |
|
|
|
States and political subdivisions |
|
|
21 |
|
|
1 |
|
|
— |
|
|
22 |
|
|
|
Other |
|
|
589 |
|
|
13 |
|
|
— |
|
|
602 |
|
|
|
|
Total HTM securities |
|
$ |
19,437 |
|
$ |
145 |
|
$ |
127 |
|
$ |
19,455 |
|
|
|
|
|
|
Amortized |
|
Gross Unrealized |
|
Fair |
|
|
December 31, 2014 |
|
Cost |
|
Gains |
|
Losses |
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
AFS securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
|
$ |
1,230 |
|
$ |
1 |
|
$ |
— |
|
$ |
1,231 |
|
|
|
Agency MBS |
|
|
16,358 |
|
|
93 |
|
|
297 |
|
|
16,154 |
|
|
|
States and political subdivisions |
|
|
1,913 |
|
|
120 |
|
|
59 |
|
|
1,974 |
|
|
|
Non-agency MBS |
|
|
232 |
|
|
32 |
|
|
— |
|
|
264 |
|
|
|
Other |
|
|
41 |
|
|
— |
|
|
— |
|
|
41 |
|
|
|
Securities acquired from FDIC |
|
|
886 |
|
|
357 |
|
|
— |
|
|
1,243 |
|
|
|
|
Total AFS securities |
|
$ |
20,660 |
|
$ |
603 |
|
$ |
356 |
|
$ |
20,907 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HTM securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
|
$ |
1,096 |
|
$ |
23 |
|
$ |
— |
|
$ |
1,119 |
|
|
|
GSE |
|
|
5,394 |
|
|
17 |
|
|
108 |
|
|
5,303 |
|
|
|
Agency MBS |
|
|
13,120 |
|
|
137 |
|
|
12 |
|
|
13,245 |
|
|
|
States and political subdivisions |
|
|
22 |
|
|
2 |
|
|
— |
|
|
24 |
|
|
|
Other |
|
|
608 |
|
|
14 |
|
|
— |
|
|
622 |
|
|
|
|
Total HTM securities |
|
$ |
20,240 |
|
$ |
193 |
|
$ |
120 |
|
$ |
20,313 |
|
The fair value of securities acquired from the FDIC included non-agency
MBS of $853 million and $931 million as of June 30, 2015 and December 31, 2014, respectively, and states and political subdivisions
securities of $304 million and $312 million as of June 30, 2015 and December 31, 2014, respectively. Effective October 1, 2014,
securities subject to the commercial loss sharing agreement with the FDIC related to the Colonial acquisition were no longer covered
by loss sharing; however, any gains on the sale of these securities through September 30, 2017 would be shared with the FDIC. Since
these securities are in a significant unrealized gain position, they continue to be effectively covered as any declines in the
unrealized gains of the securities down to a contractually specified amount would reduce the liability to the FDIC at the applicable
percentage. The contractually-specified amount is the acquisition date fair value less any paydowns, redemptions or maturities
and OTTI and totaled approximately $554 million at June 30, 2015. Any further declines below the contractually-specified amount
would not be covered.
Certain investments in marketable debt securities and MBS issued
by FNMA and FHLMC exceeded ten percent of shareholders’ equity at June 30, 2015. The FNMA investments had total amortized
cost and fair value of $13.0 billion and $12.8 billion, respectively. The FHLMC investments had total amortized cost and fair value
of $5.8 billion.
The following table reflects changes in credit losses on securities
with OTTI (excluding securities acquired from the FDIC) where a portion of the unrealized loss was recognized in OCI:
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
|
|
|
June 30, |
|
June 30, |
|
|
|
|
|
|
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Balance at beginning of period |
$ |
61 |
|
$ |
76 |
|
$ |
64 |
|
$ |
78 |
|
|
Credit losses on securities without previously recognized OTTI |
|
― |
|
|
― |
|
|
― |
|
|
1 |
|
|
Credit losses on securities with previously recognized OTTI |
|
3 |
|
|
― |
|
|
3 |
|
|
― |
|
|
Reductions for securities sold/settled during the period |
|
(4) |
|
|
(3) |
|
|
(7) |
|
|
(6) |
|
|
Credit recoveries through yield |
|
(1) |
|
|
(1) |
|
|
(1) |
|
|
(1) |
|
|
Balance at end of period |
$ |
59 |
|
$ |
72 |
|
$ |
59 |
|
$ |
72 |
|
The amortized cost and estimated fair value of the securities portfolio
by contractual maturity are shown in the following table. The expected life of MBS may differ from contractual maturities because
borrowers have the right to prepay the underlying mortgage loans with or without prepayment penalties.
|
|
|
|
|
AFS |
|
HTM |
|
|
|
|
|
|
Amortized |
|
Fair |
|
Amortized |
|
Fair |
|
|
June 30, 2015 |
|
Cost |
|
Value |
|
Cost |
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Due in one year or less |
|
$ |
271 |
|
$ |
271 |
|
$ |
1 |
|
$ |
1 |
|
|
Due after one year through five years |
|
|
1,332 |
|
|
1,345 |
|
|
750 |
|
|
740 |
|
|
Due after five years through ten years |
|
|
639 |
|
|
661 |
|
|
6,005 |
|
|
5,947 |
|
|
Due after ten years |
|
|
18,775 |
|
|
18,906 |
|
|
12,681 |
|
|
12,767 |
|
|
|
Total debt securities |
|
$ |
21,017 |
|
$ |
21,183 |
|
$ |
19,437 |
|
$ |
19,455 |
|
The following tables present the fair values and gross unrealized losses of investments based on the length of time that individual securities have been in a continuous unrealized loss position: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 months |
|
12 months or more |
|
Total |
|
|
|
|
|
|
|
Fair |
|
Unrealized |
|
Fair |
|
Unrealized |
|
Fair |
|
Unrealized |
|
|
June 30, 2015 |
|
Value |
|
Losses |
|
Value |
|
Losses |
|
Value |
|
Losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
AFS securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
|
$ |
259 |
|
$ |
1 |
|
$ |
— |
|
$ |
— |
|
$ |
259 |
|
$ |
1 |
|
|
|
Agency MBS |
|
|
4,151 |
|
|
45 |
|
|
5,946 |
|
|
238 |
|
|
10,097 |
|
|
283 |
|
|
|
States and political subdivisions |
|
|
79 |
|
|
2 |
|
|
431 |
|
|
64 |
|
|
510 |
|
|
66 |
|
|
|
|
Total |
|
$ |
4,489 |
|
$ |
48 |
|
$ |
6,377 |
|
$ |
302 |
|
$ |
10,866 |
|
$ |
350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HTM securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GSE |
|
$ |
2,883 |
|
$ |
59 |
|
$ |
1,995 |
|
$ |
55 |
|
$ |
4,878 |
|
$ |
114 |
|
|
|
Agency MBS |
|
|
2,166 |
|
|
11 |
|
|
387 |
|
|
2 |
|
|
2,553 |
|
|
13 |
|
|
|
|
Total |
|
$ |
5,049 |
|
$ |
70 |
|
$ |
2,382 |
|
$ |
57 |
|
$ |
7,431 |
|
$ |
127 |
|
|
|
|
|
|
|
Less than 12 months |
|
12 months or more |
|
Total |
|
|
|
|
|
|
|
Fair |
|
Unrealized |
|
Fair |
|
Unrealized |
|
Fair |
|
Unrealized |
|
|
December 31, 2014 |
|
Value |
|
Losses |
|
Value |
|
Losses |
|
Value |
|
Losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
AFS securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency MBS |
|
$ |
2,285 |
|
$ |
19 |
|
$ |
6,878 |
|
$ |
278 |
|
$ |
9,163 |
|
$ |
297 |
|
|
|
States and political subdivisions |
|
|
13 |
|
|
― |
|
|
449 |
|
|
59 |
|
|
462 |
|
|
59 |
|
|
|
|
Total |
|
$ |
2,298 |
|
$ |
19 |
|
$ |
7,327 |
|
$ |
337 |
|
$ |
9,625 |
|
$ |
356 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HTM securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GSE |
|
$ |
896 |
|
$ |
5 |
|
$ |
3,968 |
|
$ |
103 |
|
$ |
4,864 |
|
$ |
108 |
|
|
|
Agency MBS |
|
|
1,329 |
|
|
5 |
|
|
800 |
|
|
7 |
|
|
2,129 |
|
|
12 |
|
|
|
|
Total |
|
$ |
2,225 |
|
$ |
10 |
|
$ |
4,768 |
|
$ |
110 |
|
$ |
6,993 |
|
$ |
120 |
|
The unrealized losses on GSE securities and agency MBS were the
result of increases in market interest rates compared to the date the securities were acquired rather than the credit quality of
the issuers or underlying loans. At June 30, 2015, one non-agency MBS had an immaterial amount of credit impairment.
At June 30, 2015, $61 million of the unrealized loss on states and
political subdivisions securities was the result of fair value hedge basis adjustments that are a component of amortized cost.
These securities in an unrealized loss position are evaluated for credit impairment through a qualitative analysis of issuer performance
and the primary source of repayment. At June 30, 2015, four of these securities had immaterial amounts of credit impairment.
NOTE 4. Loans and ACL
During the first quarter of 2014, approximately $8.3 billion of
nonguaranteed, closed-end, first and second lien position residential mortgage loans, along with the related allowance, were transferred
from direct retail lending to residential mortgage to facilitate compliance with a series of new rules related to mortgage servicing
associated with first and second lien position mortgages collateralized by real estate.
During the third quarter of 2014, approximately $550 million of
loans, which were primarily performing residential mortgage TDRs, with a related ALLL of $57 million were sold for a gain of $42
million. During the fourth quarter of 2014, approximately $140 million of loans, which were primarily residential mortgage NPLs,
with a related ALLL of $19 million were sold for a gain of $24 million. Both gains were recognized as reductions to the provision
for credit losses.
Effective October 1, 2014, loans subject to the commercial loss
sharing agreement with the FDIC related to the Colonial acquisition were no longer covered by loss sharing. At June 30, 2015, these
loans had a carrying value of $392 million, a UPB of $617 million and an allowance of $41 million and are included in acquired
from FDIC loans. Loans with a carrying value of $600 million at June 30, 2015 continue to be covered by loss sharing and are included
in the acquired from FDIC balance.
|
|
|
|
|
Accruing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90 Days Or |
|
|
|
|
|
|
|
|
|
|
|
|
30-89 Days |
|
More Past |
|
|
|
|
|
|
June 30, 2015 |
|
Current |
|
Past Due |
|
Due |
|
Nonaccrual |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
$ |
43,393 |
|
$ |
16 |
|
$ |
― |
|
$ |
198 |
|
$ |
43,607 |
|
|
|
CRE-income producing properties |
|
|
11,069 |
|
|
4 |
|
|
― |
|
|
59 |
|
|
11,132 |
|
|
|
CRE-construction and development |
|
|
2,855 |
|
|
3 |
|
|
― |
|
|
16 |
|
|
2,874 |
|
|
|
Other lending subsidiaries |
|
|
5,475 |
|
|
18 |
|
|
― |
|
|
12 |
|
|
5,505 |
|
|
Retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct retail lending |
|
|
8,583 |
|
|
41 |
|
|
10 |
|
|
41 |
|
|
8,675 |
|
|
|
Revolving credit |
|
|
2,379 |
|
|
19 |
|
|
9 |
|
|
― |
|
|
2,407 |
|
|
|
Residential mortgage-nonguaranteed |
|
|
28,605 |
|
|
362 |
|
|
60 |
|
|
188 |
|
|
29,215 |
|
|
|
Residential mortgage-government guaranteed |
|
|
270 |
|
|
77 |
|
|
492 |
|
|
― |
|
|
839 |
|
|
|
Sales finance |
|
|
10,423 |
|
|
53 |
|
|
4 |
|
|
13 |
|
|
10,493 |
|
|
|
Other lending subsidiaries |
|
|
6,305 |
|
|
212 |
|
|
― |
|
|
45 |
|
|
6,562 |
|
|
Acquired from FDIC |
|
|
837 |
|
|
31 |
|
|
124 |
|
|
― |
|
|
992 |
|
|
|
|
Total |
|
$ |
120,194 |
|
$ |
836 |
|
$ |
699 |
|
$ |
572 |
|
$ |
122,301 |
|
|
|
|
|
|
|
Accruing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90 Days Or |
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89 Days |
|
More Past |
|
|
|
|
|
|
December 31, 2014 |
|
Current |
|
Past Due |
|
Due |
|
Nonaccrual |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
$ |
41,192 |
|
$ |
23 |
|
$ |
― |
|
$ |
239 |
|
$ |
41,454 |
|
|
|
CRE-income producing properties |
|
|
10,644 |
|
|
4 |
|
|
― |
|
|
74 |
|
|
10,722 |
|
|
|
CRE-construction and development |
|
|
2,708 |
|
|
1 |
|
|
― |
|
|
26 |
|
|
2,735 |
|
|
|
Other lending subsidiaries |
|
|
5,337 |
|
|
15 |
|
|
― |
|
|
4 |
|
|
5,356 |
|
|
Retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct retail lending |
|
|
8,045 |
|
|
41 |
|
|
12 |
|
|
48 |
|
|
8,146 |
|
|
|
Revolving credit |
|
|
2,428 |
|
|
23 |
|
|
9 |
|
|
― |
|
|
2,460 |
|
|
|
Residential mortgage-nonguaranteed |
|
|
29,468 |
|
|
392 |
|
|
83 |
|
|
164 |
|
|
30,107 |
|
|
|
Residential mortgage-government guaranteed |
|
|
251 |
|
|
82 |
|
|
648 |
|
|
2 |
|
|
983 |
|
|
|
Sales finance |
|
|
10,528 |
|
|
62 |
|
|
5 |
|
|
5 |
|
|
10,600 |
|
|
|
Other lending subsidiaries |
|
|
5,830 |
|
|
222 |
|
|
― |
|
|
54 |
|
|
6,106 |
|
|
Acquired from FDIC |
|
|
994 |
|
|
33 |
|
|
188 |
|
|
― |
|
|
1,215 |
|
|
|
|
Total |
|
$ |
117,425 |
|
$ |
898 |
|
$ |
945 |
|
$ |
616 |
|
$ |
119,884 |
|
The following tables present the carrying amount of loans by risk rating. Loans acquired from the FDIC are excluded because their related ALLL is determined by loan pool performance. |
|
|
|
|
|
|
|
|
|
CRE - |
|
CRE - |
|
|
|
|
|
|
|
|
Commercial |
|
Income Producing |
|
Construction and |
|
Other Lending |
|
|
June 30, 2015 |
|
& Industrial |
|
Properties |
|
Development |
|
Subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
|
$ |
41,951 |
|
$ |
10,657 |
|
$ |
2,761 |
|
$ |
5,464 |
|
|
|
Special mention |
|
|
296 |
|
|
102 |
|
|
17 |
|
|
15 |
|
|
|
Substandard-performing |
|
|
1,162 |
|
|
314 |
|
|
80 |
|
|
14 |
|
|
|
Nonperforming |
|
|
198 |
|
|
59 |
|
|
16 |
|
|
12 |
|
|
|
|
Total |
|
$ |
43,607 |
|
$ |
11,132 |
|
$ |
2,874 |
|
$ |
5,505 |
|
|
|
|
|
|
Direct Retail |
|
Revolving |
|
Residential |
|
Sales |
|
Other Lending |
|
|
|
|
|
|
Lending |
|
Credit |
|
Mortgage |
|
Finance |
|
Subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing |
|
$ |
8,634 |
|
$ |
2,407 |
|
$ |
29,866 |
|
$ |
10,480 |
|
$ |
6,517 |
|
|
|
Nonperforming |
|
|
41 |
|
|
― |
|
|
188 |
|
|
13 |
|
|
45 |
|
|
|
|
Total |
|
$ |
8,675 |
|
$ |
2,407 |
|
$ |
30,054 |
|
$ |
10,493 |
|
$ |
6,562 |
|
|
|
|
|
|
|
|
|
CRE - |
|
CRE - |
|
|
|
|
|
|
|
|
Commercial |
|
Income Producing |
|
Construction and |
|
Other Lending |
|
|
December 31, 2014 |
|
& Industrial |
|
Properties |
|
Development |
|
Subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
|
$ |
40,055 |
|
$ |
10,253 |
|
$ |
2,615 |
|
$ |
5,317 |
|
|
|
Special mention |
|
|
163 |
|
|
67 |
|
|
7 |
|
|
10 |
|
|
|
Substandard-performing |
|
|
997 |
|
|
328 |
|
|
87 |
|
|
25 |
|
|
|
Nonperforming |
|
|
239 |
|
|
74 |
|
|
26 |
|
|
4 |
|
|
|
|
Total |
|
$ |
41,454 |
|
$ |
10,722 |
|
$ |
2,735 |
|
$ |
5,356 |
|
|
|
|
|
|
|
Direct Retail |
|
Revolving |
|
Residential |
|
Sales |
|
Other Lending |
|
|
|
|
|
|
|
Lending |
|
Credit |
|
Mortgage |
|
Finance |
|
Subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing |
|
$ |
8,098 |
|
$ |
2,460 |
|
$ |
30,924 |
|
$ |
10,595 |
|
$ |
6,052 |
|
|
|
Nonperforming |
|
|
48 |
|
|
― |
|
|
166 |
|
|
5 |
|
|
54 |
|
|
|
|
Total |
|
$ |
8,146 |
|
$ |
2,460 |
|
$ |
31,090 |
|
$ |
10,600 |
|
$ |
6,106 |
|
|
|
|
ACL Rollforward |
|
|
|
|
|
Beginning |
|
Charge- |
|
|
|
|
Provision |
|
|
Ending |
|
|
Three Months Ended June 30, 2015 |
|
Balance |
|
Offs |
|
Recoveries |
|
(Benefit) |
|
Other |
Balance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
$ |
448 |
|
$ |
(32) |
|
$ |
13 |
|
$ |
28 |
|
$ |
― |
$ |
457 |
|
|
|
CRE-income producing properties |
|
|
153 |
|
|
(4) |
|
|
1 |
|
|
(9) |
|
|
― |
|
141 |
|
|
|
CRE-construction and development |
|
|
42 |
|
|
― |
|
|
2 |
|
|
(6) |
|
|
― |
|
38 |
|
|
|
Other lending subsidiaries |
|
|
22 |
|
|
(2) |
|
|
1 |
|
|
― |
|
|
― |
|
21 |
|
|
Retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct retail lending |
|
|
111 |
|
|
(13) |
|
|
7 |
|
|
8 |
|
|
― |
|
113 |
|
|
|
Revolving credit |
|
|
106 |
|
|
(19) |
|
|
5 |
|
|
10 |
|
|
― |
|
102 |
|
|
|
Residential mortgage-nonguaranteed |
|
|
200 |
|
|
(7) |
|
|
1 |
|
|
3 |
|
|
― |
|
197 |
|
|
|
Residential mortgage-government guaranteed |
|
|
30 |
|
|
(2) |
|
|
― |
|
|
― |
|
|
― |
|
28 |
|
|
|
Sales finance |
|
|
58 |
|
|
(5) |
|
|
2 |
|
|
(1) |
|
|
― |
|
54 |
|
|
|
Other lending subsidiaries |
|
|
237 |
|
|
(55) |
|
|
9 |
|
|
58 |
|
|
― |
|
249 |
|
|
Acquired from FDIC |
|
|
57 |
|
|
― |
|
|
― |
|
|
― |
|
|
― |
|
57 |
|
|
ALLL |
|
|
1,464 |
|
|
(139) |
|
|
41 |
|
|
91 |
|
|
― |
|
1,457 |
|
|
RUFC |
|
|
68 |
|
|
― |
|
|
― |
|
|
6 |
|
|
4 |
|
78 |
|
|
ACL |
|
$ |
1,532 |
|
$ |
(139) |
|
$ |
41 |
|
$ |
97 |
|
$ |
4 |
$ |
1,535 |
|
|
|
|
ACL Rollforward |
|
|
|
|
|
Beginning |
|
Charge- |
|
|
|
|
Provision |
|
Ending |
|
|
Three Months Ended June 30, 2014 |
|
Balance |
|
Offs |
|
Recoveries |
|
(Benefit) |
|
Balance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
$ |
423 |
|
$ |
(40) |
|
$ |
10 |
|
$ |
30 |
|
$ |
423 |
|
|
|
CRE-income producing properties |
|
|
136 |
|
|
(11) |
|
|
3 |
|
|
(1) |
|
|
127 |
|
|
|
CRE-construction and development |
|
|
65 |
|
|
(3) |
|
|
10 |
|
|
(13) |
|
|
59 |
|
|
|
Other lending subsidiaries |
|
|
16 |
|
|
(1) |
|
|
1 |
|
|
1 |
|
|
17 |
|
|
Retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct retail lending |
|
|
120 |
|
|
(19) |
|
|
7 |
|
|
16 |
|
|
124 |
|
|
|
Revolving credit |
|
|
115 |
|
|
(18) |
|
|
5 |
|
|
10 |
|
|
112 |
|
|
|
Residential mortgage-nonguaranteed |
|
|
327 |
|
|
(20) |
|
|
― |
|
|
17 |
|
|
324 |
|
|
|
Residential mortgage-government guaranteed |
|
|
69 |
|
|
(1) |
|
|
― |
|
|
(17) |
|
|
51 |
|
|
|
Sales finance |
|
|
45 |
|
|
(4) |
|
|
2 |
|
|
1 |
|
|
44 |
|
|
|
Other lending subsidiaries |
|
|
222 |
|
|
(46) |
|
|
8 |
|
|
34 |
|
|
218 |
|
|
Acquired from FDIC |
|
|
104 |
|
|
(4) |
|
|
― |
|
|
(9) |
|
|
91 |
|
|
ALLL |
|
|
1,642 |
|
|
(167) |
|
|
46 |
|
|
69 |
|
|
1,590 |
|
|
RUFC |
|
|
80 |
|
|
― |
|
|
― |
|
|
5 |
|
|
85 |
|
|
ACL |
|
$ |
1,722 |
|
$ |
(167) |
|
$ |
46 |
|
$ |
74 |
|
$ |
1,675 |
|
|
|
|
ACL Rollforward |
|
|
Six Months Ended June 30, 2015 |
|
Beginning Balance |
|
Charge-Offs |
|
Recoveries |
|
Provision (Benefit) |
|
Other |
|
Ending Balance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
$ |
421 |
|
$ |
(46) |
|
$ |
21 |
|
$ |
61 |
|
$ |
― |
|
$ |
457 |
|
|
|
CRE - income producing properties |
|
|
162 |
|
|
(13) |
|
|
3 |
|
|
(11) |
|
|
― |
|
|
141 |
|
|
|
CRE - construction and development |
|
|
48 |
|
|
(2) |
|
|
6 |
|
|
(14) |
|
|
― |
|
|
38 |
|
|
|
Other lending subsidiaries |
|
|
21 |
|
|
(5) |
|
|
2 |
|
|
3 |
|
|
― |
|
|
21 |
|
|
Retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct retail lending |
|
|
110 |
|
|
(25) |
|
|
15 |
|
|
13 |
|
|
― |
|
|
113 |
|
|
|
Revolving credit |
|
|
110 |
|
|
(37) |
|
|
10 |
|
|
19 |
|
|
― |
|
|
102 |
|
|
|
Residential mortgage-nonguaranteed |
|
|
217 |
|
|
(18) |
|
|
1 |
|
|
(3) |
|
|
― |
|
|
197 |
|
|
|
Residential mortgage-government guaranteed |
|
|
36 |
|
|
(2) |
|
|
― |
|
|
(6) |
|
|
― |
|
|
28 |
|
|
|
Sales finance |
|
|
50 |
|
|
(11) |
|
|
5 |
|
|
10 |
|
|
― |
|
|
54 |
|
|
|
Other lending subsidiaries |
|
|
235 |
|
|
(119) |
|
|
17 |
|
|
116 |
|
|
― |
|
|
249 |
|
|
Acquired from FDIC |
|
|
64 |
|
|
(1) |
|
|
― |
|
|
(6) |
|
|
― |
|
|
57 |
|
|
ALLL |
|
|
1,474 |
|
|
(279) |
|
|
80 |
|
|
182 |
|
|
― |
|
|
1,457 |
|
|
RUFC |
|
|
60 |
|
|
― |
|
|
― |
|
|
14 |
|
|
4 |
|
|
78 |
|
|
ACL |
|
$ |
1,534 |
|
$ |
(279) |
|
$ |
80 |
|
$ |
196 |
|
$ |
4 |
|
$ |
1,535 |
|
|
|
|
ACL Rollforward |
|
|
Six Months Ended June 30, 2014 |
|
Beginning Balance |
|
Charge-Offs |
|
Recoveries |
|
Provision (Benefit) |
|
Other |
|
Ending Balance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
$ |
454 |
|
$ |
(73) |
|
$ |
19 |
|
$ |
23 |
|
$ |
― |
|
$ |
423 |
|
|
|
CRE - income producing properties |
|
|
149 |
|
|
(19) |
|
|
5 |
|
|
(8) |
|
|
― |
|
|
127 |
|
|
|
CRE - construction and development |
|
|
76 |
|
|
(7) |
|
|
13 |
|
|
(23) |
|
|
― |
|
|
59 |
|
|
|
Other lending subsidiaries |
|
|
15 |
|
|
(2) |
|
|
1 |
|
|
3 |
|
|
― |
|
|
17 |
|
|
Retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct retail lending |
|
|
209 |
|
|
(38) |
|
|
15 |
|
|
23 |
|
|
(85) |
|
|
124 |
|
|
|
Revolving credit |
|
|
115 |
|
|
(36) |
|
|
10 |
|
|
23 |
|
|
― |
|
|
112 |
|
|
|
Residential mortgage-nonguaranteed |
|
|
269 |
|
|
(41) |
|
|
1 |
|
|
10 |
|
|
85 |
|
|
324 |
|
|
|
Residential mortgage-government guaranteed |
|
|
62 |
|
|
(1) |
|
|
― |
|
|
(10) |
|
|
― |
|
|
51 |
|
|
|
Sales finance |
|
|
45 |
|
|
(11) |
|
|
5 |
|
|
5 |
|
|
― |
|
|
44 |
|
|
|
Other lending subsidiaries |
|
|
224 |
|
|
(130) |
|
|
16 |
|
|
108 |
|
|
― |
|
|
218 |
|
|
Acquired from FDIC |
|
|
114 |
|
|
(7) |
|
|
― |
|
|
(16) |
|
|
― |
|
|
91 |
|
|
ALLL |
|
|
1,732 |
|
|
(365) |
|
|
85 |
|
|
138 |
|
|
― |
|
|
1,590 |
|
|
RUFC |
|
|
89 |
|
|
― |
|
|
― |
|
|
(4) |
|
|
― |
|
|
85 |
|
|
ACL |
|
$ |
1,821 |
|
$ |
(365) |
|
$ |
85 |
|
$ |
134 |
|
$ |
― |
|
$ |
1,675 |
|
The following table provides a summary of loans that are collectively evaluated for impairment. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2015 |
|
December 31, 2014 |
|
|
|
|
Recorded Investment |
|
Related ALLL |
|
Recorded Investment |
|
Related ALLL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
$ |
43,300 |
|
$ |
424 |
|
$ |
41,120 |
|
$ |
379 |
|
|
|
CRE-income producing properties |
|
|
11,009 |
|
|
131 |
|
|
10,583 |
|
|
147 |
|
|
|
CRE-construction and development |
|
|
2,832 |
|
|
30 |
|
|
2,670 |
|
|
39 |
|
|
|
Other lending subsidiaries |
|
|
5,493 |
|
|
18 |
|
|
5,351 |
|
|
20 |
|
|
Retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct retail lending |
|
|
8,585 |
|
|
91 |
|
|
8,048 |
|
|
86 |
|
|
|
Revolving credit |
|
|
2,371 |
|
|
88 |
|
|
2,419 |
|
|
94 |
|
|
|
Residential mortgage-nonguaranteed |
|
|
28,761 |
|
|
155 |
|
|
29,660 |
|
|
181 |
|
|
|
Residential mortgage-government guaranteed |
|
|
511 |
|
|
2 |
|
|
622 |
|
|
4 |
|
|
|
Sales finance |
|
|
10,473 |
|
|
50 |
|
|
10,579 |
|
|
46 |
|
|
|
Other lending subsidiaries |
|
|
6,379 |
|
|
218 |
|
|
5,930 |
|
|
204 |
|
|
Acquired from FDIC |
|
|
992 |
|
|
57 |
|
|
1,215 |
|
|
64 |
|
|
|
|
Total |
|
$ |
120,706 |
|
$ |
1,264 |
|
$ |
118,197 |
|
$ |
1,264 |
|
The following tables set forth certain information regarding impaired loans, excluding purchased impaired loans and LHFS, that were individually evaluated for reserves. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
Interest |
|
|
|
|
|
|
|
Recorded |
|
|
|
Related |
|
Recorded |
|
Income |
|
|
As Of / For The Six Months Ended June 30, 2015 |
|
Investment |
|
UPB |
|
ALLL |
|
Investment |
|
Recognized |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
With no related ALLL recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
$ |
88 |
|
$ |
120 |
|
$ |
― |
|
$ |
85 |
|
$ |
― |
|
|
|
|
CRE-income producing properties |
|
|
24 |
|
|
33 |
|
|
― |
|
|
19 |
|
|
― |
|
|
|
|
CRE-construction and development |
|
|
4 |
|
|
6 |
|
|
― |
|
|
10 |
|
|
― |
|
|
|
|
Other lending subsidiaries |
|
|
― |
|
|
2 |
|
|
― |
|
|
1 |
|
|
― |
|
|
|
Retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct retail lending |
|
|
12 |
|
|
43 |
|
|
― |
|
|
13 |
|
|
― |
|
|
|
|
Residential mortgage-nonguaranteed |
|
|
90 |
|
|
151 |
|
|
― |
|
|
107 |
|
|
2 |
|
|
|
|
Residential mortgage-government guaranteed |
|
|
2 |
|
|
3 |
|
|
― |
|
|
3 |
|
|
― |
|
|
|
|
Sales finance |
|
|
1 |
|
|
2 |
|
|
― |
|
|
1 |
|
|
― |
|
|
|
|
Other lending subsidiaries |
|
|
3 |
|
|
7 |
|
|
― |
|
|
3 |
|
|
― |
|
|
With an ALLL recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
|
219 |
|
|
225 |
|
|
33 |
|
|
237 |
|
|
2 |
|
|
|
|
CRE-income producing properties |
|
|
99 |
|
|
100 |
|
|
10 |
|
|
108 |
|
|
2 |
|
|
|
|
CRE-construction and development |
|
|
38 |
|
|
38 |
|
|
8 |
|
|
41 |
|
|
1 |
|
|
|
|
Other lending subsidiaries |
|
|
12 |
|
|
13 |
|
|
3 |
|
|
6 |
|
|
― |
|
|
|
Retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct retail lending |
|
|
78 |
|
|
80 |
|
|
22 |
|
|
82 |
|
|
2 |
|
|
|
|
Revolving credit |
|
|
36 |
|
|
36 |
|
|
14 |
|
|
38 |
|
|
1 |
|
|
|
|
Residential mortgage-nonguaranteed |
|
|
364 |
|
|
376 |
|
|
42 |
|
|
345 |
|
|
8 |
|
|
|
|
Residential mortgage-government guaranteed |
|
|
326 |
|
|
327 |
|
|
26 |
|
|
333 |
|
|
7 |
|
|
|
|
Sales finance |
|
|
19 |
|
|
19 |
|
|
4 |
|
|
19 |
|
|
― |
|
|
|
|
Other lending subsidiaries |
|
|
180 |
|
|
182 |
|
|
31 |
|
|
177 |
|
|
14 |
|
|
|
|
|
Total |
|
$ |
1,595 |
|
$ |
1,763 |
|
$ |
193 |
|
$ |
1,628 |
|
$ |
39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
Interest |
|
|
|
|
|
|
|
Recorded |
|
|
|
Related |
|
Recorded |
|
Income |
|
|
As Of / For The Year Ended December 31, 2014 |
|
Investment |
|
UPB |
|
ALLL |
|
Investment |
|
Recognized |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
With no related ALLL recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
$ |
87 |
|
$ |
136 |
|
$ |
― |
|
$ |
138 |
|
$ |
2 |
|
|
|
|
CRE-income producing properties |
|
|
18 |
|
|
25 |
|
|
― |
|
|
36 |
|
|
― |
|
|
|
|
CRE-construction and development |
|
|
14 |
|
|
21 |
|
|
― |
|
|
20 |
|
|
― |
|
|
|
|
Other lending subsidiaries |
|
|
― |
|
|
1 |
|
|
― |
|
|
― |
|
|
― |
|
|
|
Retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct retail lending |
|
|
13 |
|
|
49 |
|
|
― |
|
|
14 |
|
|
1 |
|
|
|
|
Residential mortgage-nonguaranteed |
|
|
87 |
|
|
141 |
|
|
― |
|
|
147 |
|
|
5 |
|
|
|
|
Residential mortgage-government guaranteed |
|
|
3 |
|
|
4 |
|
|
― |
|
|
7 |
|
|
― |
|
|
|
|
Sales finance |
|
|
1 |
|
|
2 |
|
|
― |
|
|
1 |
|
|
― |
|
|
|
|
Other lending subsidiaries |
|
|
3 |
|
|
7 |
|
|
― |
|
|
3 |
|
|
― |
|
|
With an ALLL recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
|
247 |
|
|
254 |
|
|
42 |
|
|
279 |
|
|
5 |
|
|
|
|
CRE-income producing properties |
|
|
121 |
|
|
123 |
|
|
15 |
|
|
133 |
|
|
4 |
|
|
|
|
CRE-construction and development |
|
|
51 |
|
|
52 |
|
|
9 |
|
|
65 |
|
|
2 |
|
|
|
|
Other lending subsidiaries |
|
|
5 |
|
|
5 |
|
|
1 |
|
|
4 |
|
|
― |
|
|
|
Retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct retail lending |
|
|
85 |
|
|
87 |
|
|
24 |
|
|
95 |
|
|
5 |
|
|
|
|
Revolving credit |
|
|
41 |
|
|
41 |
|
|
16 |
|
|
45 |
|
|
2 |
|
|
|
|
Residential mortgage-nonguaranteed |
|
|
360 |
|
|
370 |
|
|
36 |
|
|
700 |
|
|
31 |
|
|
|
|
Residential mortgage-government guaranteed |
|
|
358 |
|
|
358 |
|
|
32 |
|
|
402 |
|
|
17 |
|
|
|
|
Sales finance |
|
|
20 |
|
|
21 |
|
|
4 |
|
|
20 |
|
|
1 |
|
|
|
|
Other lending subsidiaries |
|
|
173 |
|
|
175 |
|
|
31 |
|
|
148 |
|
|
22 |
|
|
|
|
|
Total |
|
$ |
1,687 |
|
$ |
1,872 |
|
$ |
210 |
|
$ |
2,257 |
|
$ |
97 |
|
The following table provides a summary of TDRs, all of which are considered impaired. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
|
|
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Performing TDRs: |
|
|
|
|
|
|
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
Commercial and industrial |
$ |
75 |
|
$ |
64 |
|
|
|
|
CRE-income producing properties |
|
21 |
|
|
27 |
|
|
|
|
CRE-construction and development |
|
23 |
|
|
30 |
|
|
|
Direct retail lending |
|
81 |
|
|
84 |
|
|
|
Sales finance |
|
18 |
|
|
19 |
|
|
|
Revolving credit |
|
36 |
|
|
41 |
|
|
|
Residential mortgage-nonguaranteed |
|
273 |
|
|
261 |
|
|
|
Residential mortgage-government guaranteed |
|
328 |
|
|
360 |
|
|
|
Other lending subsidiaries |
|
172 |
|
|
164 |
|
|
|
|
Total performing TDRs |
|
1,027 |
|
|
1,050 |
|
|
Nonperforming TDRs (also included in NPL disclosures) |
|
127 |
|
|
126 |
|
|
|
|
Total TDRs |
$ |
1,154 |
|
$ |
1,176 |
|
|
|
|
|
|
|
|
|
|
|
|
ALLL attributable to TDRs |
$ |
151 |
|
$ |
159 |
|
The following table summarizes the primary reason loan modifications
were classified as TDRs and includes newly designated TDRs as well as modifications made to existing TDRs. Balances represent the
recorded investment at the end of the quarter in which the modification was made. Rate modifications in this table include TDRs
made with below market interest rates that also include modifications of loan structures.
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
|
|
|
|
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
Types of |
|
|
|
Types of |
|
|
|
|
|
|
|
|
|
|
Modifications |
|
Impact To |
|
Modifications |
|
Impact To |
|
|
|
|
|
|
|
|
Rate |
|
Structure |
|
Allowance |
|
Rate |
|
Structure |
|
Allowance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
$ |
40 |
|
$ |
10 |
|
$ |
1 |
|
$ |
49 |
|
$ |
10 |
|
$ |
1 |
|
|
CRE-income producing properties |
|
2 |
|
|
10 |
|
|
― |
|
|
5 |
|
|
6 |
|
|
― |
|
|
CRE-construction and development |
|
― |
|
|
9 |
|
|
― |
|
|
6 |
|
|
10 |
|
|
― |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct retail lending |
|
3 |
|
|
― |
|
|
1 |
|
|
8 |
|
|
1 |
|
|
1 |
|
|
Revolving credit |
|
4 |
|
|
― |
|
|
1 |
|
|
6 |
|
|
― |
|
|
2 |
|
|
Residential mortgage-nonguaranteed |
|
21 |
|
|
10 |
|
|
2 |
|
|
19 |
|
|
8 |
|
|
2 |
|
|
Residential mortgage-government guaranteed |
|
49 |
|
|
― |
|
|
2 |
|
|
105 |
|
|
― |
|
|
4 |
|
|
Sales finance |
|
― |
|
|
3 |
|
|
― |
|
|
1 |
|
|
1 |
|
|
― |
|
|
Other lending subsidiaries |
|
29 |
|
|
― |
|
|
4 |
|
|
29 |
|
|
― |
|
|
3 |
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
Types of |
|
|
|
Types of |
|
|
|
|
|
|
|
|
|
|
Modifications |
|
Impact To |
|
Modifications |
|
Impact To |
|
|
|
|
|
|
|
|
Rate |
|
Structure |
|
Allowance |
|
Rate |
|
Structure |
|
Allowance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
$ |
49 |
|
$ |
24 |
|
$ |
2 |
|
$ |
68 |
|
$ |
29 |
|
$ |
2 |
|
|
CRE-income producing properties |
|
4 |
|
|
13 |
|
|
― |
|
|
13 |
|
|
11 |
|
|
― |
|
|
CRE-construction and development |
|
― |
|
|
12 |
|
|
― |
|
|
11 |
|
|
13 |
|
|
― |
|
Retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct retail lending |
|
6 |
|
|
― |
|
|
2 |
|
|
19 |
|
|
3 |
|
|
4 |
|
|
Revolving credit |
|
8 |
|
|
― |
|
|
2 |
|
|
13 |
|
|
― |
|
|
3 |
|
|
Residential mortgage-nonguaranteed |
|
44 |
|
|
22 |
|
|
5 |
|
|
51 |
|
|
17 |
|
|
13 |
|
|
Residential mortgage-government guaranteed |
|
109 |
|
|
― |
|
|
4 |
|
|
144 |
|
|
― |
|
|
7 |
|
|
Sales finance |
|
― |
|
|
5 |
|
|
― |
|
|
1 |
|
|
6 |
|
|
1 |
|
|
Other lending subsidiaries |
|
60 |
|
|
― |
|
|
8 |
|
|
58 |
|
|
― |
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs and forgiveness of principal and interest for TDRs were immaterial for all periods presented. |
The pre-default balance for modifications that experienced a payment
default that had been classified as TDRs during the previous 12 months was $14 million and $17 million for the three months ended
June 30, 2015 and 2014, respectively, and $35 million and $38 million for the six months ended June 30, 2015 and 2014, respectively.
Payment default is defined as movement of the TDR to nonaccrual status, foreclosure or charge-off, whichever occurs first.
Changes in the carrying value and accretable yield of loans acquired from the FDIC are presented in the following table: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2015 |
|
Year Ended December 31, 2014 |
|
|
|
Purchased Impaired |
|
Purchased Nonimpaired |
|
Purchased Impaired |
|
Purchased Nonimpaired |
|
|
|
Accretable |
|
Carrying |
|
Accretable |
|
Carrying |
|
Accretable |
|
Carrying |
|
Accretable |
|
Carrying |
|
|
|
Yield |
|
Value |
|
Yield |
|
Value |
|
Yield |
|
Value |
|
Yield |
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
Balance at beginning of period |
$ |
134 |
|
$ |
579 |
|
$ |
244 |
|
$ |
636 |
|
$ |
187 |
|
$ |
863 |
|
$ |
351 |
|
$ |
1,172 |
|
Accretion |
|
(35) |
|
|
35 |
|
|
(49) |
|
|
49 |
|
|
(107) |
|
|
107 |
|
|
(169) |
|
|
169 |
|
Payments received, net |
|
― |
|
|
(133) |
|
|
― |
|
|
(174) |
|
|
― |
|
|
(391) |
|
|
― |
|
|
(705) |
|
Other, net |
|
23 |
|
|
― |
|
|
9 |
|
|
― |
|
|
54 |
|
|
― |
|
|
62 |
|
|
― |
Balance at end of period |
$ |
122 |
|
$ |
481 |
|
$ |
204 |
|
$ |
511 |
|
$ |
134 |
|
$ |
579 |
|
$ |
244 |
|
$ |
636 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding UPB at end of period |
|
|
|
$ |
728 |
|
|
|
|
$ |
704 |
|
|
|
|
$ |
864 |
|
|
|
|
$ |
860 |
The following table presents additional information about BB&T’s loans and leases: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
|
|
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Unearned income and net deferred loan fees and costs |
$ |
183 |
|
$ |
147 |
|
|
Residential mortgage loans in process of foreclosure |
|
295 |
|
|
379 |
|
NOTE 5. Goodwill and Other Intangible Assets
The changes in the carrying amounts of goodwill attributable to
BB&T’s operating segments are reflected in the table below. During the second quarter of 2015, BB&T sold American
Coastal, which resulted in the allocation and write-off of goodwill from the Insurance Services segment.
|
|
|
|
|
|
Residential |
|
Dealer |
|
|
|
|
|
|
|
|
|
|
|
|
|
Community |
|
Mortgage |
|
Financial |
|
Specialized |
|
Insurance |
|
Financial |
|
|
|
|
|
|
|
Banking |
|
Banking |
|
Services |
|
Lending |
|
Services |
|
Services |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Goodwill balance, January 1, 2015 |
$ |
4,634 |
|
$ |
326 |
|
$ |
111 |
|
$ |
88 |
|
$ |
1,518 |
|
$ |
192 |
|
$ |
6,869 |
|
|
|
Acquisitions |
|
316 |
|
|
― |
|
|
― |
|
|
― |
|
|
3 |
|
|
― |
|
|
319 |
|
|
|
Allocated to sale of American Coastal |
|
― |
|
|
― |
|
|
― |
|
|
― |
|
|
(49) |
|
|
― |
|
|
(49) |
|
|
|
Other adjustments |
|
5 |
|
|
― |
|
|
― |
|
|
― |
|
|
(3) |
|
|
― |
|
|
2 |
|
|
Goodwill balance, June 30, 2015 |
$ |
4,955 |
|
$ |
326 |
|
$ |
111 |
|
$ |
88 |
|
$ |
1,469 |
|
$ |
192 |
|
$ |
7,141 |
|
The following table presents information for identifiable intangible assets subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2015 |
|
December 31, 2014 |
|
|
|
|
|
|
|
Gross Carrying Amount |
|
Accumulated Amortization |
|
Net Carrying Amount |
|
Gross Carrying Amount |
|
Accumulated Amortization |
|
Net Carrying Amount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
CDI |
|
|
|
$ |
743 |
|
$ |
(601) |
|
$ |
142 |
|
$ |
693 |
|
$ |
(585) |
|
$ |
108 |
|
|
Other, primarily customer relationship |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
intangibles |
|
|
|
|
1,090 |
|
|
(718) |
|
|
372 |
|
|
1,088 |
|
|
(691) |
|
|
397 |
|
|
|
Total |
|
|
|
$ |
1,833 |
|
$ |
(1,319) |
|
$ |
514 |
|
$ |
1,781 |
|
$ |
(1,276) |
|
$ |
505 |
|
NOTE 6. Loan Servicing
Residential Mortgage Banking Activities
The following tables summarize residential mortgage banking activities.
Mortgage and home equity loans managed exclude loans serviced for others with no other continuing involvement.
|
|
|
|
June 30, |
|
December 31, |
|
|
|
|
|
2015 |
|
2014 |
|
|
|
|
|
(Dollars in millions) |
|
|
Mortgage and home equity loans managed |
$ |
33,483 |
|
$ |
33,742 |
|
|
Less: |
|
|
|
|
|
|
|
|
LHFS |
|
2,184 |
|
|
1,317 |
|
|
|
Mortgage loans acquired from FDIC |
|
626 |
|
|
668 |
|
|
|
Mortgage loans sold with recourse |
|
619 |
|
|
667 |
|
|
Mortgage loans held for investment |
$ |
30,054 |
|
$ |
31,090 |
|
|
|
|
|
|
|
|
|
|
|
|
UPB of mortgage loan servicing portfolio |
$ |
115,122 |
|
$ |
115,476 |
|
|
UPB of home equity loan servicing portfolio |
|
6,040 |
|
|
6,781 |
|
|
UPB of residential mortgage and home equity loan servicing portfolio |
$ |
121,162 |
|
$ |
122,257 |
|
|
UPB of residential mortgage loans serviced for others (primarily agency |
|
|
|
|
|
|
|
|
conforming fixed rate) |
$ |
89,235 |
|
$ |
90,230 |
|
|
Maximum recourse exposure from mortgage loans sold with recourse liability |
|
335 |
|
|
344 |
|
|
Indemnification, recourse and repurchase reserves |
|
83 |
|
|
94 |
|
|
FHA-insured mortgage loan reserve |
|
85 |
|
|
85 |
|
The potential exposure related to losses incurred by the FHA on
defaulted loans ranges from $25 million to $105 million.
|
|
|
|
As Of / For The |
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
UPB of residential mortgage loans sold from LHFS |
$ |
6,804 |
|
|
$ |
5,972 |
|
|
|
Pre-tax gains recognized on mortgage loans sold and held for sale |
|
74 |
|
|
|
38 |
|
|
|
Servicing fees recognized from mortgage loans serviced for others |
|
136 |
|
|
|
136 |
|
|
|
Approximate weighted average servicing fee on the outstanding balance of |
|
|
|
|
|
|
|
|
|
|
residential mortgage loans serviced for others |
|
0.29 |
% |
|
|
0.30 |
% |
|
|
Weighted average interest rate on mortgage loans serviced for others |
|
4.16 |
|
|
|
4.23 |
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Residential MSRs, carrying value, January 1, |
$ |
844 |
|
$ |
1,047 |
|
|
|
Additions |
|
68 |
|
|
66 |
|
|
|
Change in fair value due to changes in valuation inputs or assumptions: |
|
|
|
|
|
|
|
|
|
Prepayment speeds |
|
166 |
|
|
(100) |
|
|
|
|
OAS |
|
(70) |
|
|
3 |
|
|
|
|
Servicing costs |
|
(25) |
|
|
― |
|
|
|
Realization of expected net servicing cash flows, passage of time and other |
|
(71) |
|
|
(62) |
|
|
Residential MSRs, carrying value, June 30, |
$ |
912 |
|
$ |
954 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) on derivative financial instruments used to mitigate the |
|
|
|
|
|
|
|
|
income statement effect of changes in fair value |
$ |
(38) |
|
$ |
105 |
|
The sensitivity of the fair value of the residential MSRs to changes in key assumptions is included in the accompanying table: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2015 |
|
December 31, 2014 |
|
|
|
|
|
Range |
|
Weighted |
|
Range |
|
Weighted |
|
|
|
|
|
Min |
|
Max |
|
Average |
|
Min |
|
Max |
|
Average |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Prepayment speed |
4.8 |
% |
|
7.7 |
% |
|
|
7.0 |
% |
|
10.8 |
% |
|
12.8 |
% |
|
|
12.0 |
% |
|
|
|
Effect on fair value of a 10% increase |
|
|
|
|
|
|
$ |
(26) |
|
|
|
|
|
|
|
|
$ |
(30) |
|
|
|
|
Effect on fair value of a 20% increase |
|
|
|
|
|
|
|
(51) |
|
|
|
|
|
|
|
|
|
(58) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OAS |
10.5 |
% |
|
12.4 |
% |
|
|
11.0 |
% |
|
9.1 |
% |
|
9.9 |
% |
|
|
9.3 |
% |
|
|
|
Effect on fair value of a 10% increase |
|
|
|
|
|
|
$ |
(37) |
|
|
|
|
|
|
|
|
$ |
(26) |
|
|
|
|
Effect on fair value of a 20% increase |
|
|
|
|
|
|
|
(72) |
|
|
|
|
|
|
|
|
|
(50) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Composition of loans serviced for others: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-rate residential mortgage loans |
|
|
|
|
|
|
|
99.3 |
% |
|
|
|
|
|
|
|
|
99.4 |
% |
|
|
|
Adjustable-rate residential mortgage loans |
|
|
|
|
|
|
|
0.7 |
|
|
|
|
|
|
|
|
|
0.6 |
|
|
|
|
|
Total |
|
|
|
|
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average life |
|
|
|
|
|
|
|
7.7 |
yrs |
|
|
|
|
|
|
|
|
5.7 |
yrs |
|
The sensitivity calculations above are hypothetical and should not
be considered to be predictive of future performance. As indicated, changes in fair value based on adverse changes in assumptions
generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear.
Also, in the above table, the effect of an adverse variation in a particular assumption on the fair value of the MSRs is calculated
without changing any other assumption; while in reality, changes in one factor may result in changes in another, which may magnify
or counteract the effect of the change.
Commercial Mortgage Banking Activities
CRE mortgage loans serviced for others are not included in loans
and leases on the accompanying Consolidated Balance Sheets. The following table summarizes commercial mortgage banking activities
for the periods presented:
|
|
|
|
|
June 30, |
|
December 31, |
|
|
|
|
|
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
UPB of CRE mortgages serviced for others |
$ |
28,039 |
|
$ |
27,599 |
|
|
CRE mortgages serviced for others covered by recourse provisions |
|
4,425 |
|
|
4,264 |
|
|
Maximum recourse exposure from CRE mortgages sold with recourse liability |
|
1,331 |
|
|
1,278 |
|
|
Recorded reserves related to recourse exposure |
|
8 |
|
|
7 |
|
|
Originated CRE mortgages during the year |
|
3,264 |
|
|
5,265 |
|
NOTE 7. Deposits
A summary of deposits is presented in the accompanying table: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
|
|
|
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Noninterest-bearing deposits |
$ |
42,234 |
|
$ |
38,786 |
|
|
Interest checking |
|
20,843 |
|
|
20,262 |
|
|
Money market and savings |
|
55,269 |
|
|
50,604 |
|
|
Time deposits |
|
14,437 |
|
|
19,388 |
|
|
|
Total deposits |
$ |
132,783 |
|
$ |
129,040 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits $100,000 and greater |
$ |
5,525 |
|
$ |
9,782 |
|
|
Time deposits $250,000 and greater |
|
1,870 |
|
|
5,753 |
|
NOTE 8. Long-Term Debt
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
|
|
|
|
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
BB&T Corporation: |
|
|
|
|
|
|
|
|
3.95% senior notes due 2016 |
$ |
500 |
|
$ |
500 |
|
|
|
3.20% senior notes due 2016 |
|
1,000 |
|
|
1,000 |
|
|
|
2.15% senior notes due 2017 |
|
749 |
|
|
749 |
|
|
|
1.60% senior notes due 2017 |
|
749 |
|
|
749 |
|
|
|
1.45% senior notes due 2018 |
|
500 |
|
|
500 |
|
|
|
Floating rate senior notes due 2018 (LIBOR-based, 1.15% at June 30, 2015) |
|
400 |
|
|
400 |
|
|
|
2.05% senior notes due 2018 |
|
599 |
|
|
599 |
|
|
|
6.85% senior notes due 2019 |
|
540 |
|
|
539 |
|
|
|
2.25% senior notes due 2019 |
|
648 |
|
|
648 |
|
|
|
Floating rate senior notes due 2019 (LIBOR-based, 0.94% at June 30, 2015) |
|
450 |
|
|
450 |
|
|
|
2.45% senior notes due 2020 |
|
1,298 |
|
|
1,298 |
|
|
|
2.63% senior notes due 2020 |
|
999 |
|
|
― |
|
|
|
Floating rate senior notes due 2020 (LIBOR-based, 0.99% at June 30, 2015) |
|
200 |
|
|
200 |
|
|
|
5.20% subordinated notes due 2015 |
|
934 |
|
|
933 |
|
|
|
4.90% subordinated notes due 2017 |
|
354 |
|
|
353 |
|
|
|
5.25% subordinated notes due 2019 |
|
586 |
|
|
586 |
|
|
|
3.95% subordinated notes due 2022 |
|
299 |
|
|
298 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Branch Bank: |
|
|
|
|
|
|
|
|
1.45% senior notes due 2016 |
|
750 |
|
|
750 |
|
|
|
Floating rate senior notes due 2016 (LIBOR-based, 0.71% at June 30, 2015) |
|
375 |
|
|
500 |
|
|
|
1.05% senior notes due 2016 |
|
500 |
|
|
500 |
|
|
|
1.00% senior notes due 2017 |
|
599 |
|
|
599 |
|
|
|
1.35% senior notes due 2017 |
|
750 |
|
|
750 |
|
|
|
2.30% senior notes due 2018 |
|
750 |
|
|
750 |
|
|
|
2.85% senior notes due 2021 |
|
700 |
|
|
699 |
|
|
|
5.63% subordinated notes due 2016 |
|
386 |
|
|
386 |
|
|
|
Floating rate subordinated notes due 2016 (LIBOR-based, 0.61% at June 30, 2015) |
|
350 |
|
|
350 |
|
|
|
Floating rate subordinated note due 2017 (LIBOR-based, 0.58% at June 30, 2015) |
|
262 |
|
|
262 |
|
|
|
3.80% subordinated notes due 2026 |
|
848 |
|
|
848 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB advances to Branch Bank: |
|
|
|
|
|
|
|
|
Varying maturities to 2034 |
|
5,577 |
|
|
6,496 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term debt |
|
154 |
|
|
119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value hedge-related basis adjustments |
|
465 |
|
|
501 |
|
|
|
|
Total long-term debt |
$ |
23,271 |
|
$ |
23,312 |
|
The following table reflects the carrying amounts and effective interest rates for long-term debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2015 |
|
December 31, 2014 |
|
|
|
Carrying |
|
Effective |
|
Carrying |
|
Effective |
|
Amount |
|
Rate |
|
Amount |
|
Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
BB&T Corporation fixed rate senior notes |
$ |
7,681 |
|
2.30 |
% |
|
$ |
6,669 |
|
2.39 |
% |
BB&T Corporation floating rate senior notes |
|
1,050 |
|
1.08 |
|
|
|
1,050 |
|
1.07 |
|
BB&T Corporation fixed rate subordinated notes |
|
2,340 |
|
2.20 |
|
|
|
2,362 |
|
2.30 |
|
Branch Bank fixed rate senior notes |
|
4,074 |
|
1.56 |
|
|
|
4,060 |
|
1.72 |
|
Branch Bank floating rate senior notes |
|
375 |
|
0.76 |
|
|
|
500 |
|
0.72 |
|
Branch Bank fixed rate subordinated notes |
|
1,279 |
|
2.95 |
|
|
|
1,299 |
|
2.86 |
|
Branch Bank floating rate subordinated notes |
|
612 |
|
3.42 |
|
|
|
612 |
|
3.27 |
|
FHLB advances (weighted average maturity of 5.3 years at June 30, 2015) |
|
5,706 |
|
3.98 |
|
|
|
6,641 |
|
4.03 |
|
Other long-term debt |
|
154 |
|
|
|
|
|
119 |
|
|
|
|
Total long-term debt |
$ |
23,271 |
|
|
|
|
$ |
23,312 |
|
|
|
The effective rates above reflect the impact of cash flow and fair
value hedges, as applicable. Subordinated notes with a remaining maturity of one year or greater qualify under the risk-based capital
guidelines as Tier 2 supplementary capital, subject to certain limitations.
During the second quarter of 2015, BB&T terminated FHLB advances
totaling $931 million, which resulted in a pre-tax loss on early extinguishment of $172 million.
NOTE 9. Shareholders’ Equity
The activity relating to options and RSUs during the period is presented
in the following tables:
|
|
|
|
|
Wtd. Avg. |
|
|
|
|
|
|
Exercise |
|
|
|
|
Options |
|
Price |
|
|
|
|
|
|
|
|
|
|
|
|
(Shares in thousands) |
|
|
Outstanding at January 1, 2015 |
28,374 |
|
$ |
35.09 |
|
|
|
Granted |
434 |
|
|
38.22 |
|
|
|
Exercised |
(2,775) |
|
|
32.14 |
|
|
|
Forfeited or expired |
(5,618) |
|
|
38.66 |
|
|
Outstanding at June 30, 2015 |
20,415 |
|
|
34.58 |
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2015 |
18,687 |
|
|
34.73 |
|
|
|
|
|
|
|
|
|
|
Exercisable and expected to vest at June 30, 2015 |
20,296 |
|
|
34.59 |
|
|
|
|
|
|
Wtd. Avg. |
|
|
|
|
Restricted |
Grant Date |
|
|
|
|
Shares/Units |
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
(Shares in thousands) |
|
|
Nonvested at January 1, 2015 |
12,075 |
|
$ |
27.38 |
|
|
|
Granted |
3,680 |
|
|
33.28 |
|
|
|
Vested |
(3,400) |
|
|
24.83 |
|
|
|
Forfeited |
(193) |
|
|
30.91 |
|
|
Nonvested at June 30, 2015 |
12,162 |
|
|
29.82 |
|
|
Expected to vest at June 30, 2015 |
11,158 |
|
|
29.83 |
|
NOTE 10. AOCI
Three Months Ended June 30, 2015 |
|
Unrecognized Net Pension and Postretirement Costs |
|
Unrealized Net Gains (Losses) on Cash Flow Hedges |
|
Unrealized Net Gains (Losses) on AFS Securities |
|
FDIC's Share of Unrealized (Gains) Losses on AFS Securities |
|
Other, net |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
AOCI balance, April 1, 2015 |
|
$ |
(617) |
|
$ |
(108) |
|
$ |
209 |
|
$ |
(197) |
|
$ |
(20) |
|
$ |
(733) |
|
OCI before reclassifications, net of tax |
|
|
1 |
|
|
60 |
|
|
(121) |
|
|
5 |
|
|
1 |
|
|
(54) |
|
Amounts reclassified from AOCI: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel expense |
|
|
12 |
|
|
― |
|
|
― |
|
|
― |
|
|
― |
|
|
12 |
|
|
Interest income |
|
|
― |
|
|
― |
|
|
22 |
|
|
― |
|
|
― |
|
|
22 |
|
|
Interest expense |
|
|
― |
|
|
21 |
|
|
― |
|
|
― |
|
|
― |
|
|
21 |
|
|
FDIC loss share income, net |
|
|
― |
|
|
― |
|
|
― |
|
|
6 |
|
|
― |
|
|
6 |
|
|
Securities (gains) losses, net |
|
|
― |
|
|
― |
|
|
1 |
|
|
― |
|
|
― |
|
|
1 |
|
|
|
Total before income taxes |
|
|
12 |
|
|
21 |
|
|
23 |
|
|
6 |
|
|
― |
|
|
62 |
|
|
|
Less: Income taxes |
|
|
4 |
|
|
8 |
|
|
9 |
|
|
2 |
|
|
― |
|
|
23 |
|
|
|
|
Net of income taxes |
|
|
8 |
|
|
13 |
|
|
14 |
|
|
4 |
|
|
― |
|
|
39 |
|
Net change in OCI |
|
|
9 |
|
|
73 |
|
|
(107) |
|
|
9 |
|
|
1 |
|
|
(15) |
AOCI balance, June 30, 2015 |
|
$ |
(608) |
|
$ |
(35) |
|
$ |
102 |
|
$ |
(188) |
|
$ |
(19) |
|
$ |
(748) |
Three Months Ended June 30, 2014 |
|
Unrecognized Net Pension and Postretirement Costs |
|
Unrealized Net Gains (Losses) on Cash Flow Hedges |
|
Unrealized Net Gains (Losses) on AFS Securities |
|
FDIC's Share of Unrealized (Gains) Losses on AFS Securities |
|
Other, net |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
AOCI balance, April 1, 2014 |
|
$ |
(302) |
|
$ |
13 |
|
$ |
37 |
|
$ |
(229) |
|
$ |
(19) |
|
$ |
(500) |
|
OCI before reclassifications, net of tax |
|
|
1 |
|
|
(14) |
|
|
89 |
|
|
(6) |
|
|
8 |
|
|
78 |
|
Amounts reclassified from AOCI: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel expense |
|
|
1 |
|
|
― |
|
|
― |
|
|
― |
|
|
― |
|
|
1 |
|
|
Interest income |
|
|
― |
|
|
― |
|
|
(5) |
|
|
― |
|
|
(5) |
|
|
(10) |
|
|
Interest expense |
|
|
― |
|
|
19 |
|
|
― |
|
|
― |
|
|
― |
|
|
19 |
|
|
FDIC loss share income, net |
|
|
― |
|
|
― |
|
|
― |
|
|
14 |
|
|
― |
|
|
14 |
|
|
|
Total before income taxes |
|
|
1 |
|
|
19 |
|
|
(5) |
|
|
14 |
|
|
(5) |
|
|
24 |
|
|
|
Less: Income taxes |
|
|
― |
|
|
7 |
|
|
(2) |
|
|
5 |
|
|
(2) |
|
|
8 |
|
|
|
|
Net of income taxes |
|
|
1 |
|
|
12 |
|
|
(3) |
|
|
9 |
|
|
(3) |
|
|
16 |
|
Net change in OCI |
|
|
2 |
|
|
(2) |
|
|
86 |
|
|
3 |
|
|
5 |
|
|
94 |
AOCI balance, June 30, 2014 |
|
$ |
(300) |
|
$ |
11 |
|
$ |
123 |
|
$ |
(226) |
|
$ |
(14) |
|
$ |
(406) |
Six Months Ended June 30, 2015 |
|
Unrecognized Net Pension and Postretirement Costs |
|
Unrealized Net Gains (Losses) on Cash Flow Hedges |
|
Unrealized Net Gains (Losses) on AFS Securities |
|
FDIC's Share of Unrealized (Gains) Losses on AFS Securities |
|
Other, net |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
AOCI balance, January 1, 2015 |
|
$ |
(626) |
|
$ |
(54) |
|
$ |
152 |
|
$ |
(207) |
|
$ |
(16) |
|
$ |
(751) |
|
OCI before reclassifications, net of tax |
|
|
3 |
|
|
(7) |
|
|
(54) |
|
|
7 |
|
|
(4) |
|
|
(55) |
|
Amounts reclassified from AOCI: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel expense |
|
|
24 |
|
|
― |
|
|
― |
|
|
― |
|
|
― |
|
|
24 |
|
|
Interest income |
|
|
― |
|
|
― |
|
|
6 |
|
|
|
|
|
1 |
|
|
7 |
|
|
Interest expense |
|
|
― |
|
|
42 |
|
|
― |
|
|
― |
|
|
― |
|
|
42 |
|
|
FDIC loss share income, net |
|
|
― |
|
|
― |
|
|
― |
|
|
19 |
|
|
― |
|
|
19 |
|
|
Securities (gains) losses, net |
|
|
― |
|
|
― |
|
|
1 |
|
|
― |
|
|
― |
|
|
1 |
|
|
|
Total before income taxes |
|
|
24 |
|
|
42 |
|
|
7 |
|
|
19 |
|
|
1 |
|
|
93 |
|
|
|
Less: Income taxes |
|
|
9 |
|
|
16 |
|
|
3 |
|
|
7 |
|
|
― |
|
|
35 |
|
|
|
|
Net of income taxes |
|
|
15 |
|
|
26 |
|
|
4 |
|
|
12 |
|
|
1 |
|
|
58 |
|
Net change in AOCI |
|
|
18 |
|
|
19 |
|
|
(50) |
|
|
19 |
|
|
(3) |
|
|
3 |
AOCI balance, June 30, 2015 |
|
$ |
(608) |
|
$ |
(35) |
|
$ |
102 |
|
$ |
(188) |
|
$ |
(19) |
|
$ |
(748) |
Six Months Ended June 30, 2014 |
|
Unrecognized Net Pension and Postretirement Costs |
|
Unrealized Net Gains (Losses) on Cash Flow Hedges |
|
Unrealized Net Gains (Losses) on AFS Securities |
|
FDIC's Share of Unrealized (Gains) Losses on AFS Securities |
|
Other, net |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
AOCI balance, January 1, 2014 |
|
$ |
(303) |
|
$ |
2 |
|
$ |
(42) |
|
$ |
(235) |
|
$ |
(15) |
|
$ |
(593) |
|
OCI before reclassifications, net of tax |
|
|
2 |
|
|
(16) |
|
|
174 |
|
|
(6) |
|
|
3 |
|
|
157 |
|
Amounts reclassified from AOCI: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel expense |
|
|
1 |
|
|
― |
|
|
― |
|
|
― |
|
|
― |
|
|
1 |
|
|
Interest income |
|
|
― |
|
|
― |
|
|
(13) |
|
|
― |
|
|
(4) |
|
|
(17) |
|
|
Interest expense |
|
|
― |
|
|
40 |
|
|
― |
|
|
― |
|
|
― |
|
|
40 |
|
|
FDIC loss share income, net |
|
|
― |
|
|
― |
|
|
― |
|
|
24 |
|
|
― |
|
|
24 |
|
|
Securities (gains) losses, net |
|
|
― |
|
|
― |
|
|
(2) |
|
|
― |
|
|
― |
|
|
(2) |
|
|
|
Total before income taxes |
|
|
1 |
|
|
40 |
|
|
(15) |
|
|
24 |
|
|
(4) |
|
|
46 |
|
|
|
Less: Income taxes |
|
|
― |
|
|
15 |
|
|
(6) |
|
|
9 |
|
|
(2) |
|
|
16 |
|
|
|
|
Net of income taxes |
|
|
1 |
|
|
25 |
|
|
(9) |
|
|
15 |
|
|
(2) |
|
|
30 |
|
Net change in AOCI |
|
|
3 |
|
|
9 |
|
|
165 |
|
|
9 |
|
|
1 |
|
|
187 |
AOCI balance, June 30, 2014 |
|
$ |
(300) |
|
$ |
11 |
|
$ |
123 |
|
$ |
(226) |
|
$ |
(14) |
|
$ |
(406) |
NOTE 11. Income Taxes
The effective tax rates for the three months ended June 30, 2015
and 2014 were 13.8% and 31.2%, respectively. The effective tax rates for the six months ended June 30, 2015 and 2014 were 23.4%
and 31.0%, respectively. The effective tax rates were lower than the corresponding periods of 2014 primarily due to adjustments
for uncertain tax positions as described below. Additionally, during the second quarter of 2014, a tax provision of $14 million
related to the IRS’s change in stance related to an income tax position that was under examination was recorded. Effective
January 1, 2015, the Company adopted new accounting guidance related to investments in qualified affordable housing projects. See
Note 13 “Commitments and Contingencies” for additional information.
In February 2010, BB&T received an IRS statutory notice of deficiency
for tax years 2002-2007 asserting a liability for taxes, penalties and interest of approximately $892 million related to the disallowance
of foreign tax credits and other deductions claimed by a subsidiary in connection with a financing transaction. BB&T paid the
disputed tax, penalties and interest in March 2010 and filed a lawsuit seeking a refund in the U.S. Court of Federal Claims. On
September 20, 2013, the court denied the refund claim. BB&T appealed the decision to the U.S. Court of Appeals for the Federal
Circuit. On May 14, 2015, the appeals court overturned a portion of the earlier ruling, resulting in the recognition of income
tax benefits of $107 million during the second quarter. The remainder of the decision was affirmed. While management is continuing
to evaluate its options for responding to the court’s ruling, both BB&T and the IRS have the ability to appeal the decision
to the U.S. Supreme Court.
Depending on both parties’ chosen courses of action, it is
reasonably possible that the litigation associated with the financing transaction may conclude within the next twelve months; however,
it is also possible that the appeals process could take longer than one year. Changes in the amount of unrecognized tax benefits,
penalties and interest could result in a benefit of up to approximately $596 million.
NOTE 12. Benefit Plans
|
|
|
|
|
Qualified Plan |
|
Nonqualified Plans |
|
|
Three Months Ended June 30, |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Service cost |
|
$ |
42 |
|
$ |
32 |
|
$ |
3 |
|
$ |
3 |
|
|
Interest cost |
|
|
34 |
|
|
31 |
|
|
4 |
|
|
3 |
|
|
Estimated return on plan assets |
|
|
(81) |
|
|
(74) |
|
|
― |
|
|
― |
|
|
Amortization and other |
|
|
12 |
|
|
1 |
|
|
3 |
|
|
3 |
|
|
|
Net periodic benefit cost |
|
$ |
7 |
|
$ |
(10) |
|
$ |
10 |
|
$ |
9 |
|
|
|
|
|
|
Qualified Plan |
|
Nonqualified Plans |
|
|
Six Months Ended June 30 |
|
2015 |
|
|
2014 |
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Service cost |
|
$ |
85 |
|
$ |
65 |
|
$ |
6 |
|
$ |
6 |
|
|
Interest cost |
|
|
68 |
|
|
62 |
|
|
8 |
|
|
7 |
|
|
Estimated return on plan assets |
|
|
(162) |
|
|
(148) |
|
|
― |
|
|
― |
|
|
Amortization and other |
|
|
24 |
|
|
1 |
|
|
7 |
|
|
6 |
|
|
|
Net periodic benefit cost |
|
$ |
15 |
|
$ |
(20) |
|
$ |
21 |
|
$ |
19 |
|
BB&T makes contributions to the qualified pension plan in amounts
between the minimum required for funding and the maximum amount deductible for federal income tax purposes. Discretionary contributions
totaling $117 million were made during 2015. There are no required contributions for the remainder of 2015, though BB&T may
elect to make additional contributions.
NOTE 13. Commitments and Contingencies
|
|
|
|
|
As Of / For the Year-To-Date Period Ended |
|
|
|
|
|
June 30, 2015 |
|
December 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
Letters of credit and financial guarantees |
$ |
3,353 |
|
$ |
3,462 |
Carrying amount of the liability for letter of credit guarantees |
|
24 |
|
|
22 |
|
|
|
|
|
|
|
|
|
|
Investments in affordable housing and historic building rehabilitation projects: |
|
|
|
|
|
|
Carrying amount |
|
1,548 |
|
|
1,416 |
|
Amount of future funding commitments included in carrying amount |
|
583 |
|
|
459 |
|
Lending exposure |
|
190 |
|
|
169 |
|
Tax credits subject to recapture |
|
314 |
|
|
300 |
|
Amortization recognized in the provision for income taxes |
|
92 |
|
|
161 |
|
Tax credits and other tax benefits recognized in the provision for income taxes |
|
128 |
|
|
222 |
|
|
|
|
|
|
|
|
|
|
Investments in private equity and similar investments |
|
359 |
|
|
329 |
Future funding commitments to consolidated private equity funds |
|
176 |
|
|
202 |
Effective January 1, 2015, BB&T adopted new guidance related
to investments in qualified affordable housing projects and elected the proportional amortization method to account for these investments.
The following table summarizes the impact to certain previously reported amounts.
|
|
|
|
|
|
|
Three Months Ended June 30, 2014 |
|
Six Months Ended June 30, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Increase in other income |
$ |
42 |
|
$ |
76 |
|
|
Increase in provision for income taxes |
|
(43) |
|
|
(82) |
|
|
Decrease in net income and net income available to common shareholders |
$ |
(1) |
|
$ |
(6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in diluted EPS |
$ |
― |
|
$ |
(0.01) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, |
|
|
|
|
|
|
|
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Decrease to retained earnings |
$ |
(49) |
|
$ |
(29) |
|
Legal Proceedings
The nature of BB&T’s business ordinarily results in a
certain amount of claims, litigation, investigations and legal and administrative cases and proceedings, all of which are considered
incidental to the normal conduct of business. BB&T believes it has meritorious defenses to the claims asserted against it in
its currently outstanding legal proceedings and, with respect to such legal proceedings, intends to continue to defend itself vigorously,
litigating or settling cases according to management’s judgment as to what is in the best interests of BB&T and its shareholders.
On at least a quarterly basis, liabilities and contingencies in
connection with outstanding legal proceedings are assessed utilizing the latest information available. For those matters where
it is probable that BB&T will incur a loss and the amount of the loss can be reasonably estimated, a liability is recorded
in the consolidated financial statements. These legal reserves may be increased or decreased to reflect any relevant developments
on at least a quarterly basis. For other matters, where a loss is not probable or the amount of the loss is not estimable, legal
reserves are not accrued. While the outcome of legal proceedings is inherently uncertain, based on information currently available,
advice of counsel and available insurance coverage, management believes that the established legal reserves are adequate and the
liabilities arising from legal proceedings will not have a material adverse effect on the consolidated financial position, consolidated
results of operations or consolidated cash flows. However, in the event of unexpected future developments, it is possible that
the ultimate resolution of these matters, if unfavorable, may be material to the consolidated financial position, consolidated
results of operations or consolidated cash flows of BB&T.
Pledged Assets
Certain assets were pledged to secure municipal deposits, securities
sold under agreements to repurchase, borrowings, and borrowing capacity, subject to certain limits, at the FHLB and FRB as well
as for other purposes as required or permitted by law. The following table provides the total carrying amount of pledged assets
by asset type, of which the majority are pursuant to agreements that do not permit the other party to sell or repledge the collateral.
Assets related to employee benefit plans have been excluded from the following table.
|
|
|
|
June 30, |
|
December 31, |
|
|
|
|
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Pledged securities |
$ |
14,284 |
|
$ |
14,636 |
|
|
Pledged loans |
|
66,890 |
|
|
67,248 |
|
NOTE 14. Fair Value Disclosures
Accounting standards define fair value as the exchange price that
would be received on the measurement date to sell an asset or the price paid to transfer a liability in the principal or most advantageous
market available to the entity in an orderly transaction between market participants, with a three level valuation input hierarchy.
The following tables present fair value information for assets and liabilities measured at fair value on a recurring basis: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2015 |
|
Total |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading securities |
|
$ |
720 |
|
$ |
315 |
|
$ |
405 |
|
$ |
― |
|
|
|
AFS securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
|
|
1,385 |
|
|
― |
|
|
1,385 |
|
|
― |
|
|
|
|
Agency MBS |
|
|
16,434 |
|
|
― |
|
|
16,434 |
|
|
― |
|
|
|
|
States and political subdivisions |
|
|
1,959 |
|
|
― |
|
|
1,959 |
|
|
― |
|
|
|
|
Non-agency MBS |
|
|
243 |
|
|
― |
|
|
243 |
|
|
― |
|
|
|
|
Other |
|
|
5 |
|
|
5 |
|
|
― |
|
|
― |
|
|
|
|
Acquired from FDIC |
|
|
1,157 |
|
|
― |
|
|
469 |
|
|
688 |
|
|
|
LHFS |
|
|
2,469 |
|
|
― |
|
|
2,469 |
|
|
― |
|
|
|
Residential MSRs |
|
|
912 |
|
|
― |
|
|
― |
|
|
912 |
|
|
|
Derivative assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
|
949 |
|
|
― |
|
|
938 |
|
|
11 |
|
|
|
|
Foreign exchange contracts |
|
|
6 |
|
|
― |
|
|
6 |
|
|
― |
|
|
|
Private equity and similar investments |
|
|
359 |
|
|
― |
|
|
― |
|
|
359 |
|
|
|
|
Total assets |
|
$ |
26,598 |
|
$ |
320 |
|
$ |
24,308 |
|
$ |
1,970 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
$ |
774 |
|
$ |
― |
|
$ |
761 |
|
$ |
13 |
|
|
|
|
Foreign exchange contracts |
|
|
4 |
|
|
― |
|
|
4 |
|
|
― |
|
|
|
Short-term borrowings |
|
|
196 |
|
|
― |
|
|
196 |
|
|
― |
|
|
|
|
Total liabilities |
|
$ |
974 |
|
$ |
― |
|
$ |
961 |
|
$ |
13 |
|
|
December 31, 2014 |
|
Total |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading securities |
|
$ |
482 |
|
$ |
289 |
|
$ |
193 |
|
$ |
― |
|
|
|
AFS securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
|
|
1,231 |
|
|
― |
|
|
1,231 |
|
|
― |
|
|
|
|
Agency MBS |
|
|
16,154 |
|
|
― |
|
|
16,154 |
|
|
― |
|
|
|
|
States and political subdivisions |
|
|
1,974 |
|
|
― |
|
|
1,974 |
|
|
― |
|
|
|
|
Non-agency MBS |
|
|
264 |
|
|
― |
|
|
264 |
|
|
― |
|
|
|
|
Other |
|
|
41 |
|
|
6 |
|
|
35 |
|
|
― |
|
|
|
|
Acquired from FDIC |
|
|
1,243 |
|
|
― |
|
|
498 |
|
|
745 |
|
|
|
LHFS |
|
|
1,423 |
|
|
― |
|
|
1,423 |
|
|
― |
|
|
|
Residential MSRs |
|
|
844 |
|
|
― |
|
|
― |
|
|
844 |
|
|
|
Derivative assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
|
1,114 |
|
|
― |
|
|
1,094 |
|
|
20 |
|
|
|
|
Foreign exchange contracts |
|
|
8 |
|
|
― |
|
|
8 |
|
|
― |
|
|
|
Private equity and similar investments |
|
|
329 |
|
|
― |
|
|
― |
|
|
329 |
|
|
|
|
Total assets |
|
$ |
25,107 |
|
$ |
295 |
|
$ |
22,874 |
|
$ |
1,938 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
$ |
1,007 |
|
$ |
― |
|
$ |
1,004 |
|
$ |
3 |
|
|
|
|
Foreign exchange contracts |
|
|
6 |
|
|
― |
|
|
6 |
|
|
― |
|
|
|
Short-term borrowings |
|
|
148 |
|
|
― |
|
|
148 |
|
|
― |
|
|
|
|
Total liabilities |
|
$ |
1,161 |
|
$ |
― |
|
$ |
1,158 |
|
$ |
3 |
|
The following discussion focuses on the valuation techniques and
significant inputs for Level 2 and Level 3 assets and liabilities.
A third-party pricing service is generally utilized in determining
the fair value of the securities portfolio. Management independently evaluates the fair values provided by the pricing service
through comparisons to other third party pricing sources, review of additional information provided by the third party pricing
service and other third party sources for selected securities and back-testing to compare the price realized on any security sales
to the daily pricing information received from the pricing service. Fair value measurements are derived from market-based pricing
matrices that were developed using observable inputs that include benchmark yields, benchmark securities, reported trades, offers,
bids, issuer spreads and broker quotes. As described by security type below, additional inputs may be used, or some inputs may
not be applicable. In the event that market observable data was not available, which would generally occur due to the lack of an
active market for a given security, the valuation of the security would be subjective and may involve substantial judgment by management.
Trading securities: Trading securities include various types
of debt and equity securities, primarily consisting of debt securities issued by the U.S. Treasury, GSEs, or states and political
subdivisions. The valuation techniques used for these investments are more fully discussed below.
U.S. Treasury securities: Treasury securities are valued
using quoted prices in active over the counter markets.
GSE securities and Agency MBS: GSE pass-through securities
are valued using market-based pricing matrices that are based on observable inputs including benchmark TBA security pricing and
yield curves that were estimated based on U.S. Treasury yields and certain floating rate indices. The pricing matrices for these
securities may also give consideration to pool-specific data supplied directly by the GSE. GSE CMOs are valued using market-based
pricing matrices that are based on observable inputs including offers, bids, reported trades, dealer quotes and market research
reports, the characteristics of a specific tranche, market convention prepayment speeds and benchmark yield curves as described
above.
States and political subdivisions: These securities are valued
using market-based pricing matrices that are based on observable inputs including MSRB reported trades, issuer spreads, material
event notices and benchmark yield curves.
Non-agency MBS: Pricing matrices for these securities are
based on observable inputs including offers, bids, reported trades, dealer quotes and market research reports, the characteristics
of a specific tranche, market convention prepayment speeds and benchmark yield curves as described above.
Other securities: These securities consist primarily of mutual
funds and corporate bonds. These securities are valued based on a review of quoted market prices for assets as well as through
the various other inputs discussed previously.
Acquired from FDIC securities: Securities acquired from the
FDIC consist of re-remic non-agency MBS, municipal securities and non-agency MBS. State and political subdivision securities and
certain non-agency MBS acquired from the FDIC are valued in a manner similar to the approach described above for those asset classes.
The re-remic non-agency MBS, which are categorized as Level 3, are valued based on broker dealer quotes that reflected certain
unobservable market inputs.
LHFS: Certain mortgage loans are originated to be sold to
investors, which are carried at fair value. The fair value is primarily based on quoted market prices for securities backed by
similar types of loans. The changes in fair value of these assets are largely driven by changes in interest rates subsequent to
loan funding and changes in the fair value of servicing associated with the mortgage LHFS.
Residential MSRs: Residential MSRs are valued using an OAS
valuation model to project cash flows over multiple interest rate scenarios, which are then discounted at risk-adjusted rates.
The model considers portfolio characteristics, contractually specified servicing fees, prepayment assumptions, delinquency rates,
late charges, other ancillary revenue, costs to service and other economic factors. Fair value estimates and assumptions are compared
to industry surveys, recent market activity, actual portfolio experience and, when available, other observable market data.
Derivative assets and liabilities: The fair values of derivatives
are determined based on quoted market prices and internal pricing models that are primarily sensitive to market observable data.
The fair values of interest rate lock commitments, which are related to mortgage loan commitments and are categorized as Level
3, are based on quoted market prices adjusted for commitments that are not expected to fund and include the value attributable
to the net servicing fees.
Private equity and similar investments: Private equity and
similar investments are measured at fair value based on the investment’s net asset value. In many cases there are no observable
market values for these investments and therefore management must estimate the fair value based on a comparison of the operating
performance of the company to multiples in the marketplace for similar entities. This analysis requires significant judgment, and
actual values in a sale could differ materially from those estimated.
Short-term borrowings: Short-term borrowings represent debt
securities sold short that are entered into as a hedging strategy for the purposes of supporting institutional and retail client
trading activities.
The following tables summarize activity for Level 3 assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2015 |
|
Acquired from FDIC Securities |
|
Residential MSRs |
|
Net Derivatives |
|
Private Equity and Similar Investments |
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
Balance at April 1, 2015 |
|
$ |
719 |
|
$ |
764 |
|
$ |
23 |
|
$ |
366 |
|
Total realized and unrealized gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
5 |
|
|
― |
|
|
― |
|
|
― |
|
|
|
Mortgage banking income |
|
|
― |
|
|
140 |
|
|
20 |
|
|
― |
|
|
|
Other noninterest income |
|
|
― |
|
|
― |
|
|
2 |
|
|
3 |
|
|
Included in unrealized net holding gains (losses) in OCI |
|
|
(11) |
|
|
― |
|
|
― |
|
|
― |
|
Purchases |
|
|
― |
|
|
― |
|
|
― |
|
|
13 |
|
Issuances |
|
|
― |
|
|
42 |
|
|
3 |
|
|
― |
|
Sales |
|
|
― |
|
|
― |
|
|
― |
|
|
(10) |
|
Settlements |
|
|
(25) |
|
|
(34) |
|
|
(50) |
|
|
(13) |
Balance at June 30, 2015 |
|
$ |
688 |
|
$ |
912 |
|
$ |
(2) |
|
$ |
359 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gains (losses) included in earnings for the period, |
|
|
|
|
|
|
|
|
|
|
|
|
|
attributable to assets and liabilities still held at June 30, 2015 |
|
$ |
5 |
|
$ |
140 |
|
$ |
4 |
|
$ |
(1) |
Three Months Ended June 30, 2014 |
|
Acquired from FDIC Securities |
|
Residential MSRs |
|
Net Derivatives |
|
Private Equity and Similar Investments |
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
Balance at April 1, 2014 |
|
$ |
832 |
|
$ |
1,008 |
|
$ |
4 |
|
$ |
328 |
|
Total realized and unrealized gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
2 |
|
|
― |
|
|
― |
|
|
― |
|
|
|
Mortgage banking income |
|
|
― |
|
|
(54) |
|
|
29 |
|
|
― |
|
|
|
Other noninterest income |
|
|
― |
|
|
― |
|
|
― |
|
|
9 |
|
|
Included in unrealized net holding gains (losses) in OCI |
|
|
3 |
|
|
― |
|
|
― |
|
|
― |
|
Purchases |
|
|
― |
|
|
― |
|
|
― |
|
|
14 |
|
Issuances |
|
|
― |
|
|
33 |
|
|
28 |
|
|
― |
|
Sales |
|
|
― |
|
|
― |
|
|
― |
|
|
(29) |
|
Settlements |
|
|
(27) |
|
|
(33) |
|
|
(37) |
|
|
(1) |
|
Transfers into Level 3 |
|
|
― |
|
|
― |
|
|
― |
|
|
1 |
Balance at June 30, 2014 |
|
$ |
810 |
|
$ |
954 |
|
$ |
24 |
|
$ |
322 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gains (losses) included in earnings for the period, |
|
|
|
|
|
|
|
|
|
|
|
|
|
attributable to assets and liabilities still held at June 30, 2014 |
|
$ |
2 |
|
$ |
(54) |
|
$ |
24 |
|
$ |
(6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private |
|
|
|
|
|
|
|
|
Acquired |
|
|
|
|
|
|
|
Equity and |
|
|
|
|
|
|
|
|
from FDIC |
|
Residential |
|
Net |
|
Similar |
|
|
Six Months Ended June 30, 2015 |
|
Securities |
|
MSRs |
|
Derivatives |
|
Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Balance at January 1, 2015 |
|
$ |
745 |
|
$ |
844 |
|
$ |
17 |
|
$ |
329 |
|
|
|
Total realized and unrealized gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
16 |
|
|
― |
|
|
― |
|
|
― |
|
|
|
|
|
Mortgage banking income |
|
|
― |
|
|
69 |
|
|
48 |
|
|
― |
|
|
|
|
|
Other noninterest income |
|
|
― |
|
|
― |
|
|
(2) |
|
|
19 |
|
|
|
|
Included in unrealized net holding gains (losses) in OCI |
|
|
(25) |
|
|
― |
|
|
― |
|
|
― |
|
|
|
Purchases |
|
|
― |
|
|
― |
|
|
― |
|
|
55 |
|
|
|
Issuances |
|
|
― |
|
|
68 |
|
|
41 |
|
|
― |
|
|
|
Sales |
|
|
― |
|
|
― |
|
|
― |
|
|
(29) |
|
|
|
Settlements |
|
|
(48) |
|
|
(69) |
|
|
(106) |
|
|
(15) |
|
|
Balance at June 30, 2015 |
|
$ |
688 |
|
$ |
912 |
|
$ |
(2) |
|
$ |
359 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gains (losses) included in earnings for the period, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
attributable to assets and liabilities still held at June 30, 2015 |
|
$ |
16 |
|
$ |
69 |
|
$ |
― |
|
$ |
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private |
|
|
|
|
|
|
|
|
Acquired |
|
|
|
|
|
Equity and |
|
|
|
|
|
|
|
|
from FDIC |
|
Residential |
|
Net |
|
Similar |
|
|
Six Months Ended June 30, 2014 |
|
Securities |
|
MSRs |
|
Derivatives |
|
Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Balance at January 1, 2014 |
|
$ |
861 |
|
$ |
1,047 |
|
$ |
(11) |
|
$ |
291 |
|
|
|
Total realized and unrealized gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
17 |
|
|
― |
|
|
― |
|
|
― |
|
|
|
|
|
Mortgage banking income |
|
|
― |
|
|
(97) |
|
|
44 |
|
|
― |
|
|
|
|
|
Other noninterest income |
|
|
― |
|
|
― |
|
|
― |
|
|
12 |
|
|
|
|
Included in unrealized net holding gains (losses) in OCI |
|
|
(15) |
|
|
― |
|
|
― |
|
|
― |
|
|
|
Purchases |
|
|
― |
|
|
― |
|
|
― |
|
|
52 |
|
|
|
Issuances |
|
|
― |
|
|
66 |
|
|
40 |
|
|
― |
|
|
|
Sales |
|
|
― |
|
|
― |
|
|
― |
|
|
(30) |
|
|
|
Settlements |
|
|
(53) |
|
|
(62) |
|
|
(49) |
|
|
(4) |
|
|
|
Transfers into Level 3 |
|
|
― |
|
|
― |
|
|
― |
|
|
1 |
|
|
Balance at June 30, 2014 |
|
$ |
810 |
|
$ |
954 |
|
$ |
24 |
|
$ |
322 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gains (losses) included in earnings for the period, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
attributable to assets and liabilities still held at June 30, 2014 |
|
$ |
17 |
|
$ |
(97) |
|
$ |
24 |
|
$ |
(4) |
|
BB&T’s policy is to recognize transfers in and transfers
out of Levels 1, 2 and 3 as of the end of a reporting period.
The majority of private equity and similar investments are in SBIC
qualified funds, which primarily focus on equity and subordinated debt investments in privately-held middle market companies. The
majority of these investments are not redeemable and distributions are received as the underlying assets of the funds liquidate.
The timing of distributions, which are expected to occur on various dates through 2025, is uncertain and dependent on various events
such as recapitalizations, refinance transactions and ownership changes among others. Excluding the investment of future funds,
these investments have an estimated weighted average remaining life of approximately two years; however, the timing and amount
of distributions may vary significantly. Restrictions on the ability to sell the investments include, but are not limited to, consent
of a majority member or general partner approval for transfer of ownership. These investments are spread over numerous privately-held
middle market companies, and thus the sensitivity to a change in fair value for any single investment is limited. The significant
unobservable inputs for these investments are EBITDA multiples that ranged from 5x to 11x, with a weighted average of 8x, at June
30, 2015.
The following table details the fair value and UPB of LHFS that were elected to be carried at fair value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2015 |
|
December 31, 2014 |
|
|
|
|
|
|
Fair |
|
Aggregate |
|
|
|
Fair |
|
Aggregate |
|
|
|
|
|
|
|
|
Value |
|
UPB |
|
Difference |
|
Value |
|
UPB |
|
Difference |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
LHFS reported at fair value |
$ |
2,469 |
|
$ |
2,468 |
|
$ |
1 |
|
$ |
1,423 |
|
$ |
1,390 |
|
$ |
33 |
|
Excluding government guaranteed, LHFS that were nonaccrual or 90
days or more past due and still accruing interest were not material at June 30, 2015.
The following table provides information about certain financial assets measured at fair value on a nonrecurring basis, which are primarily collateral dependent and may be subject to liquidity adjustments. The carrying values represent end of period values, which approximate the fair value measurements that occurred on the various measurement dates throughout the period. The valuation adjustments represent the amounts recorded during the period regardless of whether the asset is still held at period end. These assets are considered to be Level 3 assets (excludes acquired from FDIC). |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2015 |
|
June 30, 2014 |
|
|
|
|
|
|
Valuation Adjustments |
|
|
|
|
Valuation Adjustments |
|
|
|
Carrying Value |
|
Three Months Ended |
|
Six Months Ended |
|
Carrying Value |
|
Three Months Ended |
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Impaired loans |
$ |
114 |
|
$ |
(1) |
|
$ |
(13) |
|
$ |
213 |
|
$ |
(19) |
|
$ |
(37) |
|
|
Foreclosed real estate |
|
86 |
|
|
(43) |
|
|
(83) |
|
|
56 |
|
|
(27) |
|
|
(86) |
|
For financial instruments not recorded at fair value, estimates
of fair value are based on relevant market data and information about the instrument and are based on the value of one trading
unit without regard to any premium or discount that may result from concentrations of ownership, possible tax ramifications, estimated
transaction costs that may result from bulk sales or the relationship between various instruments.
An active market does not exist for certain financial instruments.
Fair value estimates for these instruments are based on current economic conditions, currency and interest rate risk characteristics,
loss experience and other factors. Many of these estimates involve uncertainties and matters of significant judgment and cannot
be determined with precision. Therefore, the fair value estimates in many instances cannot be substantiated by comparison to independent
markets and, in many cases, may not be realizable in a current sale of the instrument. In addition, changes in assumptions could
significantly affect these fair value estimates. The following assumptions were used to estimate the fair value of these financial
instruments.
Cash and cash equivalents and restricted cash: For these
short-term instruments, the carrying amounts are a reasonable estimate of fair values.
HTM securities: The fair values of HTM securities are based
on a market approach using observable inputs such as benchmark yields and securities, TBA prices, reported trades, issuer spreads,
current bids and offers, monthly payment information and collateral performance.
Loans receivable: The fair values for loans are estimated
using discounted cash flow analyses, applying interest rates currently being offered for loans with similar terms and credit quality,
which are deemed to be indicative of orderly transactions in the current market. For commercial loans and leases, discount rates
may be adjusted to address additional credit risk on lower risk grade instruments. For residential mortgage and other consumer
loans, internal prepayment risk models are used to adjust contractual cash flows. Loans are aggregated into pools of similar terms
and credit quality and discounted using a LIBOR based rate. The carrying amounts of accrued interest approximate fair values.
FDIC loss share receivable and payable: The fair values of
the receivable and payable are estimated using discounted cash flow analyses, applying a risk free interest rate that is adjusted
for the uncertainty in the timing and amount of the cash flows. The expected cash flows to/from the FDIC related to loans were
estimated using the same assumptions that were used in determining the accounting values for the related loans. The expected cash
flows to/from the FDIC related to securities are based upon the fair value of the related securities and the payment that would
be required if the securities were sold for that amount. The loss share agreements are not transferrable and, accordingly, there
is no market for the receivable or payable.
Deposit liabilities: The fair values for demand deposits
are equal to the amount payable on demand. Fair values for CDs are estimated using a discounted cash flow calculation that applies
current interest rates to aggregate expected maturities. BB&T has developed long-term relationships with its deposit customers,
commonly referred to as CDIs, that have not been considered in the determination of the deposit liabilities’ fair value.
Short-term borrowings: The carrying amounts of short-term
borrowings approximate their fair values.
Long-term debt: The fair values of long-term debt instruments
are estimated based on quoted market prices for the instrument if available, or for similar instruments if not available, or by
using discounted cash flow analyses, based on current incremental borrowing rates for similar types of instruments.
Contractual commitments: The fair values of commitments are
estimated using the fees charged to enter into similar agreements, taking into account the remaining terms of the agreements and
the present creditworthiness of the counterparties. The fair values of guarantees and letters of credit are estimated based on
the counterparties’ creditworthiness and average default rates for loan products with similar risks. These respective fair
value measurements are categorized within Level 3 of the fair value hierarchy. Retail lending commitments are assigned no fair
value as BB&T typically has the ability to cancel such commitments by providing notice to the borrower.
Financial assets and liabilities not recorded at fair value are summarized below: |
|
|
|
|
|
|
|
|
Carrying |
|
Total |
|
|
|
|
|
|
June 30, 2015 |
|
Amount |
|
Fair Value |
|
Level 2 |
|
Level 3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HTM securities |
|
$ |
19,437 |
|
$ |
19,455 |
|
$ |
19,455 |
|
$ |
― |
|
|
|
Loans and leases HFI, net of ALLL |
|
|
120,844 |
|
|
120,646 |
|
|
― |
|
|
120,646 |
|
|
|
FDIC loss share receivable |
|
|
383 |
|
|
59 |
|
|
― |
|
|
59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
132,783 |
|
|
132,948 |
|
|
132,948 |
|
|
― |
|
|
|
FDIC loss share payable |
|
|
695 |
|
|
694 |
|
|
― |
|
|
694 |
|
|
|
Long-term debt |
|
|
23,271 |
|
|
23,762 |
|
|
23,762 |
|
|
― |
|
|
|
|
|
|
Carrying |
|
Total |
|
|
|
|
|
|
December 31, 2014 |
|
Amount |
|
Fair Value |
|
Level 2 |
|
Level 3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HTM securities |
|
$ |
20,240 |
|
$ |
20,313 |
|
$ |
20,313 |
|
$ |
― |
|
|
|
Loans and leases HFI, net of ALLL |
|
|
118,410 |
|
|
118,605 |
|
|
― |
|
|
118,605 |
|
|
|
FDIC loss share receivable |
|
|
534 |
|
|
123 |
|
|
― |
|
|
123 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
129,040 |
|
|
129,259 |
|
|
129,259 |
|
|
― |
|
|
|
FDIC loss share payable |
|
|
697 |
|
|
696 |
|
|
― |
|
|
696 |
|
|
|
Long-term debt |
|
|
23,312 |
|
|
24,063 |
|
|
24,063 |
|
|
― |
|
The following is a summary of selected information pertaining to off-balance sheet financial instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2015 |
|
December 31, 2014 |
|
|
|
|
|
Notional/ |
|
|
|
Notional/ |
|
|
|
|
|
|
|
Contract |
|
|
|
Contract |
|
|
|
|
|
|
Amount |
|
Fair Value |
|
Amount |
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Commitments to extend, originate or purchase credit |
|
$ |
54,071 |
|
$ |
108 |
|
$ |
49,333 |
|
$ |
97 |
|
|
Residential mortgage loans sold with recourse |
|
|
619 |
|
|
9 |
|
|
667 |
|
|
9 |
|
|
Other loans sold with recourse |
|
|
4,425 |
|
|
8 |
|
|
4,264 |
|
|
7 |
|
|
Letters of credit and financial guarantees |
|
|
3,353 |
|
|
24 |
|
|
3,462 |
|
|
22 |
|
NOTE 15. Derivative Financial Instruments
Derivative Classifications and Hedging Relationships |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2015 |
|
December 31, 2014 |
|
|
|
|
|
|
Hedged Item or |
|
Notional |
|
Fair Value |
|
Notional |
|
Fair Value |
|
|
|
|
|
|
Transaction |
|
Amount |
|
Gain |
|
Loss |
|
Amount |
|
Gain |
|
Loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
Cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pay fixed swaps |
3 mo. LIBOR funding |
|
$ |
9,300 |
|
$ |
― |
|
$ |
(138) |
|
$ |
9,300 |
|
$ |
― |
|
$ |
(289) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receive fixed swaps |
Long-term debt |
|
|
11,902 |
|
|
273 |
|
|
― |
|
|
11,902 |
|
|
269 |
|
|
(5) |
|
|
Pay fixed swaps |
Commercial loans |
|
|
216 |
|
|
― |
|
|
(3) |
|
|
161 |
|
|
― |
|
|
(3) |
|
|
Pay fixed swaps |
Municipal securities |
|
|
314 |
|
|
― |
|
|
(108) |
|
|
336 |
|
|
― |
|
|
(126) |
|
|
|
|
Total |
|
|
|
12,432 |
|
|
273 |
|
|
(111) |
|
|
12,399 |
|
|
269 |
|
|
(134) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not designated as hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Client-related and other risk management: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receive fixed swaps |
|
|
|
7,747 |
|
|
315 |
|
|
(2) |
|
|
7,995 |
|
|
350 |
|
|
(3) |
|
|
|
Pay fixed swaps |
|
|
|
7,830 |
|
|
2 |
|
|
(337) |
|
|
8,163 |
|
|
1 |
|
|
(375) |
|
|
|
Other swaps |
|
|
|
1,177 |
|
|
3 |
|
|
(6) |
|
|
1,372 |
|
|
5 |
|
|
(7) |
|
|
|
Other |
|
|
|
383 |
|
|
1 |
|
|
(2) |
|
|
528 |
|
|
1 |
|
|
(1) |
|
|
Forward commitments |
|
|
|
10,382 |
|
|
16 |
|
|
(20) |
|
|
5,326 |
|
|
10 |
|
|
(12) |
|
|
Foreign exchange contracts |
|
|
|
662 |
|
|
6 |
|
|
(4) |
|
|
571 |
|
|
8 |
|
|
(6) |
|
|
|
|
Total |
|
|
|
28,181 |
|
|
343 |
|
|
(371) |
|
|
23,955 |
|
|
375 |
|
|
(404) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate lock commitments |
|
|
|
2,581 |
|
|
11 |
|
|
(8) |
|
|
1,566 |
|
|
20 |
|
|
― |
|
|
|
When issued securities, forward rate agreements and forward |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
commitments |
|
|
4,769 |
|
|
37 |
|
|
(13) |
|
|
2,623 |
|
|
3 |
|
|
(25) |
|
|
|
Other |
|
|
|
995 |
|
|
5 |
|
|
(2) |
|
|
916 |
|
|
7 |
|
|
― |
|
|
|
|
Total |
|
|
|
8,345 |
|
|
53 |
|
|
(23) |
|
|
5,105 |
|
|
30 |
|
|
(25) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MSRs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receive fixed swaps |
|
|
|
2,521 |
|
|
54 |
|
|
(48) |
|
|
4,119 |
|
|
215 |
|
|
(1) |
|
|
|
Pay fixed swaps |
|
|
|
2,885 |
|
|
3 |
|
|
(55) |
|
|
4,362 |
|
|
1 |
|
|
(124) |
|
|
|
Option trades |
|
|
|
9,970 |
|
|
228 |
|
|
(26) |
|
|
9,350 |
|
|
229 |
|
|
(36) |
|
|
|
When issued securities, forward rate agreements and forward |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
commitments |
|
|
2,571 |
|
|
1 |
|
|
(6) |
|
|
3,731 |
|
|
3 |
|
|
― |
|
|
|
|
Total |
|
|
|
17,947 |
|
|
286 |
|
|
(135) |
|
|
21,562 |
|
|
448 |
|
|
(161) |
|
|
|
|
|
Total derivatives not designated as hedges |
|
|
54,473 |
|
|
682 |
|
|
(529) |
|
|
50,622 |
|
|
853 |
|
|
(590) |
Total derivatives |
|
$ |
76,205 |
|
|
955 |
|
|
(778) |
|
$ |
72,321 |
|
|
1,122 |
|
|
(1,013) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross amounts not offset in the Consolidated Balance Sheets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts subject to master netting arrangements not offset due to policy election |
|
|
(444) |
|
|
444 |
|
|
|
|
|
(629) |
|
|
629 |
|
Cash collateral (received) posted |
|
|
|
|
|
(218) |
|
|
293 |
|
|
|
|
|
(190) |
|
|
342 |
|
|
Net amount |
|
|
|
|
$ |
293 |
|
$ |
(41) |
|
|
|
|
$ |
303 |
|
$ |
(42) |
The fair values of derivatives in a gain or loss position are presented
on a gross basis in other assets or other liabilities, respectively, in the Consolidated Balance Sheets. Cash collateral posted
for derivatives in a loss position is reported as restricted cash. Derivatives with dealer counterparties at both the bank and
the parent company are governed by the terms of ISDA Master netting agreements and Credit Support Annexes. The ISDA Master agreements
allow counterparties to offset trades in a gain against trades in a loss to determine net exposure and allows for the right of
setoff in the event of either a default or an additional termination event. Credit Support Annexes govern the terms of daily collateral
posting practices. Collateral practices mitigate the potential loss impact to affected parties by requiring liquid collateral to
be posted on a scheduled basis to secure the aggregate net unsecured exposure. In addition to collateral, the right of setoff allows
counterparties to offset net derivative values with a defaulting party against certain other contractual receivables from or obligations
due to the defaulting party in determining the net termination amount. No portion of the change in fair value of derivatives designated
as hedges has been excluded from effectiveness testing. The ineffective portion was immaterial for all periods presented.
The Effect of Derivative Instruments on the Consolidated Statements of Income |
Three Months Ended June 30, 2015 and 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective Portion |
|
|
|
|
|
|
|
Pre-tax Gain |
|
|
|
Pre-tax Gain (Loss) |
|
|
|
|
|
|
|
(Loss) Recognized |
|
|
|
Reclassified from |
|
|
|
|
|
|
|
in AOCI |
|
Location of Amounts |
|
AOCI into Income |
|
|
|
|
|
|
|
2015 |
|
2014 |
|
Reclassified from AOCI into Income |
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
Cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
$ |
95 |
|
$ |
(22) |
|
Total interest expense |
|
$ |
(21) |
|
$ |
(19) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Gain |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) Recognized |
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of Amounts |
|
in Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized in Income |
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
Fair value hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
|
|
|
|
|
Total interest income |
|
$ |
(5) |
|
$ |
(6) |
|
Interest rate contracts |
|
|
|
|
|
|
Total interest expense |
|
|
68 |
|
|
57 |
|
|
|
|
Total |
|
|
|
|
|
|
|
|
$ |
63 |
|
$ |
51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not designated as hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Client-related and other risk management: |
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
|
|
|
|
|
Other noninterest income |
|
$ |
11 |
|
$ |
5 |
|
|
Foreign exchange contracts |
|
|
|
|
|
|
Other noninterest income |
|
|
(1) |
|
|
(1) |
|
Mortgage banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
|
|
|
|
|
Mortgage banking income |
|
|
13 |
|
|
(17) |
|
MSRs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
|
|
|
|
|
Mortgage banking income |
|
|
(119) |
|
|
60 |
|
|
|
Total |
|
|
|
|
|
|
|
|
$ |
(96) |
|
$ |
47 |
The Effect of Derivative Instruments on the Consolidated Statements of Income |
Six Months Ended June 30, 2015 and 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective Portion |
|
|
|
|
|
|
|
Pre-tax Gain |
|
|
|
Pre-tax Gain (Loss) |
|
|
|
|
|
|
|
(Loss) Recognized |
|
Location of Amounts |
|
Reclassified from |
|
|
|
|
|
|
|
in AOCI |
|
Reclassified from AOCI |
|
AOCI into Income |
|
|
|
|
|
|
|
2015 |
|
2014 |
|
into Income |
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
Cash Flow Hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
$ |
(12) |
|
$ |
(25) |
|
Total interest expense |
|
$ |
(42) |
|
$ |
(40) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective Portion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Gain |
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of Amounts |
|
(Loss) Recognized |
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized |
|
in Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
in Income |
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
Fair Value Hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
|
|
|
|
|
Total interest income |
|
$ |
(10) |
|
$ |
(11) |
|
Interest rate contracts |
|
|
|
|
|
|
Total interest expense |
|
|
136 |
|
|
110 |
|
|
|
|
Total |
|
|
|
|
|
|
|
|
$ |
126 |
|
$ |
99 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not Designated as Hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Client-related and other risk management: |
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
|
|
|
|
|
Other noninterest income |
|
$ |
12 |
|
$ |
10 |
|
|
Foreign exchange contracts |
|
|
|
|
|
|
Other noninterest income |
|
|
9 |
|
|
3 |
|
Mortgage Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
|
|
|
|
|
Mortgage banking income |
|
|
20 |
|
|
(27) |
|
MSRs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
|
|
|
|
|
Mortgage banking income |
|
|
(38) |
|
|
105 |
|
|
|
Total |
|
|
|
|
|
|
|
|
$ |
3 |
|
$ |
91 |
The following table provides a summary of derivative strategies and the related accounting treatment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow Hedges |
|
Fair Value Hedges |
|
Derivatives Not Designated as Hedges |
|
|
|
|
|
|
|
|
|
Risk exposure |
|
Variability in cash flows of interest payments on floating rate business loans, overnight funding and various LIBOR funding instruments. |
|
Losses in value on fixed rate long-term debt, CDs, FHLB advances, loans and state and political subdivision securities due to changes in interest rates. |
|
Risk associated with an asset or liability, including mortgage banking operations and MSRs, or for client needs. Includes exposure to changes in market rates and conditions subsequent to the interest rate lock and funding date for mortgage loans originated for sale. |
|
|
|
|
|
|
|
|
|
Risk management objective |
|
Hedge the variability in the interest payments and receipts on future cash flows for forecasted transactions related to the first unhedged payments and receipts of variable interest. |
|
Convert the fixed rate paid or received to a floating rate, primarily through the use of swaps. |
|
For interest rate lock commitment derivatives and LHFS, use mortgage-based derivatives such as forward commitments and options to mitigate market risk. For MSRs, mitigate the income statement effect of changes in the fair value of the MSRs. |
|
|
|
|
|
|
|
|
|
Treatment for portion that is highly effective |
|
Recognized in OCI until the related cash flows from the hedged item are recognized in earnings. |
|
Recognized in current period income along with the corresponding changes in the fair value of the designated hedged item attributable to the risk being hedged. |
|
Entire change in fair value recognized in current period income. |
|
|
|
|
|
|
|
|
|
Treatment for portion that is ineffective |
|
Recognized in current period income. |
|
Recognized in current period income. |
|
Not applicable |
|
|
|
|
|
|
|
|
|
Treatment if hedge ceases to be highly effective or is terminated |
|
Hedge is dedesignated. Effective changes in value that are recorded in OCI before dedesignation are amortized to yield over the period the forecasted hedged transactions impact earnings. |
|
If hedged item remains outstanding, termination proceeds are included in cash flows from financing activities and effective changes in value are reflected as part of the carrying value of the financial instrument and amortized to earnings over its estimated remaining life. |
|
Not applicable |
|
|
|
|
|
|
|
|
|
Treatment if transaction is no longer probable of occurring during forecast period or within a short period thereafter |
|
Hedge accounting is ceased and any gain or loss in OCI is reported in earnings immediately. |
|
Not applicable |
|
Not applicable |
The following table presents information about BB&T's cash flow and fair value hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
|
|
|
|
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
Net unrecognized after-tax loss on active hedges recorded in AOCI |
|
$ |
(87) |
|
|
$ |
(181) |
|
|
|
|
Net unrecognized after-tax gain on terminated hedges recorded in AOCI |
|
|
|
|
|
|
|
|
|
|
|
|
(to be recognized in earnings through 2022) |
|
|
51 |
|
|
|
127 |
|
|
|
|
Estimated portion of net after-tax loss on active and terminated hedges |
|
|
|
|
|
|
|
|
|
|
|
|
to be reclassified from AOCI into earnings during the next 12 months |
|
|
(47) |
|
|
|
(51) |
|
|
|
|
Maximum time period over which BB&T has hedged a portion of the variability |
|
|
|
|
|
|
|
|
|
|
|
|
in future cash flows for forecasted transactions excluding those transactions |
|
|
|
|
|
|
|
|
|
|
|
|
relating to the payment of variable interest on existing instruments |
|
|
7 |
yrs |
|
|
8 |
yrs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value hedges: |
|
|
|
|
|
|
|
|
|
|
|
Unrecognized pre-tax net gain on terminated hedges (to be recognized |
|
|
|
|
|
|
|
|
|
|
|
|
as interest primarily through 2019) |
|
$ |
177 |
|
|
$ |
227 |
|
|
|
|
Portion of pre-tax net gain on terminated hedges to be recognized as a change |
|
|
|
|
|
|
|
|
|
|
|
|
in interest during the next 12 months |
|
|
|
76 |
|
|
|
88 |
|
|
Derivatives Credit Risk – Dealer Counterparties
Credit risk related to derivatives arises when amounts receivable
from a counterparty exceed those payable to the same counterparty. The risk of loss is addressed by subjecting dealer counterparties
to credit reviews and approvals similar to those used in making loans or other extensions of credit and by requiring collateral.
Dealer counterparties operate under agreements to provide cash and/or liquid collateral when unsecured loss positions exceed negotiated
limits.
Derivative contracts with dealer counterparties settle on a monthly,
quarterly or semiannual basis, with daily movement of collateral between counterparties required within established netting agreements.
BB&T only transacts with dealer counterparties that are national market makers with strong credit standings.
Derivatives Credit Risk – Central Clearing Parties
Certain derivatives are cleared through central clearing parties
that require initial margin collateral, as well as collateral for trades in a net loss position. Initial margin collateral requirements
are established by central clearing parties on varying bases, with such amounts generally designed to offset the risk of non-payment.
Initial margin is generally calculated by applying the maximum loss experienced in value over a specified time horizon to the portfolio
of existing trades. The central clearing party used for TBA transactions does not post variation margin to the bank.
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
|
|
|
|
|
|
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Cash collateral received from dealer counterparties |
|
$ |
217 |
|
$ |
191 |
|
|
Derivatives in a net gain position secured by that collateral |
|
|
222 |
|
|
201 |
|
|
Unsecured positions in a net gain with dealer counterparties after collateral postings |
|
|
4 |
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash collateral posted to dealer counterparties |
|
|
176 |
|
|
227 |
|
|
Derivatives in a net loss position secured by that collateral |
|
|
176 |
|
|
231 |
|
|
Additional collateral that would have been posted had BB&T's credit ratings |
|
|
|
|
|
|
|
|
|
dropped below investment grade |
|
|
2 |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives in a net gain position with central clearing parties |
|
|
19 |
|
|
― |
|
|
Cash collateral, including initial margin, posted to central clearing parties |
|
|
130 |
|
|
114 |
|
|
Derivatives in a net loss position secured by that collateral |
|
|
122 |
|
|
129 |
|
|
Securities pledged to central clearing parties |
|
|
195 |
|
|
116 |
|
NOTE 16. Computation of EPS
Basic and diluted EPS calculations are presented in the following table: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions, except per share data, shares in thousands) |
|
|
Net income available to common shareholders |
$ |
454 |
|
$ |
424 |
|
$ |
942 |
|
$ |
920 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares |
|
724,880 |
|
|
719,080 |
|
|
723,268 |
|
|
715,978 |
|
|
Effect of dilutive outstanding equity-based awards |
|
9,647 |
|
|
9,372 |
|
|
9,734 |
|
|
10,410 |
|
|
Weighted average number of diluted common shares |
|
734,527 |
|
|
728,452 |
|
|
733,002 |
|
|
726,388 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS |
$ |
0.63 |
|
$ |
0.59 |
|
$ |
1.30 |
|
$ |
1.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS |
$ |
0.62 |
|
$ |
0.58 |
|
$ |
1.29 |
|
$ |
1.27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive awards |
|
8,344 |
|
|
14,379 |
|
|
9,938 |
|
|
14,815 |
|
NOTE 17. Operating Segments
As a result of new qualified mortgage regulations, during January
2014 approximately $8.3 billion of closed-end, first and second lien position residential mortgage loans were transferred from
Community Banking to Residential Mortgage Banking based on a change in how these loans are managed. In addition, $319 million of
related goodwill was also transferred.
Reportable Segments |
Three Months Ended June 30, 2015 and 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Community |
|
Residential |
|
Dealer |
|
Specialized |
|
|
|
|
Banking |
|
Mortgage Banking |
|
Financial Services |
|
Lending |
|
|
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
Net interest income (expense) |
$ |
432 |
|
$ |
430 |
|
$ |
343 |
|
$ |
375 |
|
$ |
216 |
|
$ |
207 |
|
$ |
154 |
|
$ |
143 |
Net intersegment interest income (expense) |
|
304 |
|
|
298 |
|
|
(227) |
|
|
(250) |
|
|
(38) |
|
|
(39) |
|
|
(43) |
|
|
(34) |
Segment net interest income |
|
736 |
|
|
728 |
|
|
116 |
|
|
125 |
|
|
178 |
|
|
168 |
|
|
111 |
|
|
109 |
Allocated provision for loan and lease losses |
|
11 |
|
|
35 |
|
|
3 |
|
|
(1) |
|
|
48 |
|
|
31 |
|
|
7 |
|
|
13 |
Noninterest income |
|
291 |
|
|
301 |
|
|
101 |
|
|
68 |
|
|
― |
|
|
― |
|
|
74 |
|
|
51 |
Intersegment net referral fees (expense) |
|
38 |
|
|
28 |
|
|
― |
|
|
― |
|
|
― |
|
|
― |
|
|
― |
|
|
― |
Noninterest expense |
|
385 |
|
|
384 |
|
|
76 |
|
|
206 |
|
|
41 |
|
|
28 |
|
|
67 |
|
|
52 |
Amortization of intangibles |
|
7 |
|
|
7 |
|
|
― |
|
|
― |
|
|
― |
|
|
― |
|
|
1 |
|
|
1 |
Allocated corporate expenses |
|
293 |
|
|
286 |
|
|
22 |
|
|
21 |
|
|
10 |
|
|
7 |
|
|
15 |
|
|
15 |
Income (loss) before income taxes |
|
369 |
|
|
345 |
|
|
116 |
|
|
(33) |
|
|
79 |
|
|
102 |
|
|
95 |
|
|
79 |
Provision (benefit) for income taxes |
|
135 |
|
|
126 |
|
|
44 |
|
|
(12) |
|
|
30 |
|
|
39 |
|
|
25 |
|
|
19 |
Segment net income (loss) |
$ |
234 |
|
$ |
219 |
|
$ |
72 |
|
$ |
(21) |
|
$ |
49 |
|
$ |
63 |
|
$ |
70 |
|
$ |
60 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable assets (period end) |
$ |
56,911 |
|
$ |
54,709 |
|
$ |
34,218 |
|
$ |
36,448 |
|
$ |
13,906 |
|
$ |
12,513 |
|
$ |
19,561 |
|
$ |
17,666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other, Treasury |
|
Total BB&T |
|
|
|
|
Insurance Services |
|
Financial Services |
|
and Corporate (1) |
|
Corporation |
|
|
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
Net interest income (expense) |
$ |
― |
|
$ |
1 |
|
$ |
53 |
|
$ |
45 |
|
$ |
114 |
|
$ |
142 |
|
$ |
1,312 |
|
$ |
1,343 |
Net intersegment interest income (expense) |
|
1 |
|
|
2 |
|
|
74 |
|
|
64 |
|
|
(71) |
|
|
(41) |
|
|
― |
|
|
― |
Segment net interest income |
|
1 |
|
|
3 |
|
|
127 |
|
|
109 |
|
|
43 |
|
|
101 |
|
|
1,312 |
|
|
1,343 |
Allocated provision for loan and lease losses |
|
― |
|
|
― |
|
|
23 |
|
|
3 |
|
|
5 |
|
|
(7) |
|
|
97 |
|
|
74 |
Noninterest income |
|
425 |
|
|
424 |
|
|
209 |
|
|
189 |
|
|
(81) |
|
|
(75) |
|
|
1,019 |
|
|
958 |
Intersegment net referral fees (expense) |
|
― |
|
|
― |
|
|
6 |
|
|
4 |
|
|
(44) |
|
|
(32) |
|
|
― |
|
|
― |
Noninterest expense |
|
310 |
|
|
308 |
|
|
178 |
|
|
163 |
|
|
573 |
|
|
370 |
|
|
1,630 |
|
|
1,511 |
Amortization of intangibles |
|
11 |
|
|
14 |
|
|
― |
|
|
― |
|
|
4 |
|
|
1 |
|
|
23 |
|
|
23 |
Allocated corporate expenses |
|
25 |
|
|
19 |
|
|
32 |
|
|
30 |
|
|
(397) |
|
|
(378) |
|
|
― |
|
|
― |
Income (loss) before income taxes |
|
80 |
|
|
86 |
|
|
109 |
|
|
106 |
|
|
(267) |
|
|
8 |
|
|
581 |
|
|
693 |
Provision (benefit) for income taxes |
|
27 |
|
|
29 |
|
|
41 |
|
|
39 |
|
|
(222) |
|
|
(24) |
|
|
80 |
|
|
216 |
Segment net income (loss) |
$ |
53 |
|
$ |
57 |
|
$ |
68 |
|
$ |
67 |
|
$ |
(45) |
|
$ |
32 |
|
$ |
501 |
|
$ |
477 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable assets (period end) |
$ |
2,907 |
|
$ |
3,015 |
|
$ |
14,486 |
|
$ |
11,972 |
|
$ |
49,028 |
|
$ |
51,720 |
|
$ |
191,017 |
|
$ |
188,043 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Includes financial data from subsidiaries below the quantitative and qualitative thresholds requiring disclosure. |
Reportable Segments |
Six Months Ended June 30, 2015 and 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Community |
|
Residential |
|
Dealer |
|
Specialized |
|
|
|
|
Banking |
|
Mortgage Banking |
|
Financial Services |
|
Lending |
|
|
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
Net interest income (expense) |
$ |
858 |
|
$ |
854 |
|
$ |
684 |
|
$ |
753 |
|
$ |
428 |
|
$ |
409 |
|
$ |
301 |
|
$ |
281 |
Net intersegment interest income (expense) |
|
588 |
|
|
597 |
|
|
(459) |
|
|
(501) |
|
|
(75) |
|
|
(77) |
|
|
(85) |
|
|
(68) |
Segment net interest income |
|
1,446 |
|
|
1,451 |
|
|
225 |
|
|
252 |
|
|
353 |
|
|
332 |
|
|
216 |
|
|
213 |
Allocated provision for loan and lease losses |
|
24 |
|
|
51 |
|
|
(9) |
|
|
(21) |
|
|
109 |
|
|
104 |
|
|
26 |
|
|
22 |
Noninterest income |
|
562 |
|
|
581 |
|
|
185 |
|
|
128 |
|
|
― |
|
|
1 |
|
|
138 |
|
|
100 |
Intersegment net referral fees (expense) |
|
68 |
|
|
55 |
|
|
― |
|
|
1 |
|
|
― |
|
|
― |
|
|
― |
|
|
― |
Noninterest expense |
|
756 |
|
|
766 |
|
|
156 |
|
|
292 |
|
|
73 |
|
|
57 |
|
|
126 |
|
|
103 |
Amortization of intangibles |
|
13 |
|
|
15 |
|
|
― |
|
|
― |
|
|
― |
|
|
― |
|
|
2 |
|
|
2 |
Allocated corporate expenses |
|
584 |
|
|
571 |
|
|
44 |
|
|
42 |
|
|
19 |
|
|
14 |
|
|
30 |
|
|
29 |
Income (loss) before income taxes |
|
699 |
|
|
684 |
|
|
219 |
|
|
68 |
|
|
152 |
|
|
158 |
|
|
170 |
|
|
157 |
Provision (benefit) for income taxes |
|
255 |
|
|
250 |
|
|
83 |
|
|
26 |
|
|
58 |
|
|
60 |
|
|
43 |
|
|
38 |
Segment net income (loss) |
$ |
444 |
|
$ |
434 |
|
$ |
136 |
|
$ |
42 |
|
$ |
94 |
|
$ |
98 |
|
$ |
127 |
|
$ |
119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable assets (period end) |
$ |
56,911 |
|
$ |
54,709 |
|
$ |
34,218 |
|
$ |
36,448 |
|
$ |
13,906 |
|
$ |
12,513 |
|
$ |
19,561 |
|
$ |
17,666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other, Treasury |
|
Total BB&T |
|
|
|
|
Insurance Services |
|
Financial Services |
|
and Corporate (1) |
|
Corporation |
|
|
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
Net interest income (expense) |
$ |
1 |
|
$ |
1 |
|
$ |
102 |
|
$ |
87 |
|
$ |
250 |
|
$ |
305 |
|
$ |
2,624 |
|
$ |
2,690 |
Net intersegment interest income (expense) |
|
3 |
|
|
3 |
|
|
146 |
|
|
127 |
|
|
(118) |
|
|
(81) |
|
|
― |
|
|
― |
Segment net interest income |
|
4 |
|
|
4 |
|
|
248 |
|
|
214 |
|
|
132 |
|
|
224 |
|
|
2,624 |
|
|
2,690 |
Allocated provision for loan and lease losses |
|
― |
|
|
― |
|
|
47 |
|
|
3 |
|
|
(1) |
|
|
(25) |
|
|
196 |
|
|
134 |
Noninterest income |
|
867 |
|
|
855 |
|
|
408 |
|
|
367 |
|
|
(144) |
|
|
(147) |
|
|
2,016 |
|
|
1,885 |
Intersegment net referral fees (expense) |
|
― |
|
|
― |
|
|
11 |
|
|
8 |
|
|
(79) |
|
|
(64) |
|
|
― |
|
|
― |
Noninterest expense |
|
612 |
|
|
611 |
|
|
341 |
|
|
311 |
|
|
967 |
|
|
733 |
|
|
3,031 |
|
|
2,873 |
Amortization of intangibles |
|
23 |
|
|
27 |
|
|
1 |
|
|
1 |
|
|
5 |
|
|
1 |
|
|
44 |
|
|
46 |
Allocated corporate expenses |
|
50 |
|
|
36 |
|
|
63 |
|
|
60 |
|
|
(790) |
|
|
(752) |
|
|
― |
|
|
― |
Income (loss) before income taxes |
|
186 |
|
|
185 |
|
|
215 |
|
|
214 |
|
|
(272) |
|
|
56 |
|
|
1,369 |
|
|
1,522 |
Provision (benefit) for income taxes |
|
61 |
|
|
53 |
|
|
81 |
|
|
80 |
|
|
(260) |
|
|
(35) |
|
|
321 |
|
|
472 |
Segment net income (loss) |
$ |
125 |
|
$ |
132 |
|
$ |
134 |
|
$ |
134 |
|
$ |
(12) |
|
$ |
91 |
|
$ |
1,048 |
|
$ |
1,050 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable assets (period end) |
$ |
2,907 |
|
$ |
3,015 |
|
$ |
14,486 |
|
$ |
11,972 |
|
$ |
49,028 |
|
$ |
51,720 |
|
$ |
191,017 |
|
$ |
188,043 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Includes financial data from subsidiaries below the quantitative and qualitative thresholds requiring disclosure. |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS 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 Bank, and its nonbank subsidiaries.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act of 1995, regarding the financial condition,
results of operations, business plans and the future performance of BB&T that are based on the beliefs and assumptions of the
management of BB&T and the information available to management at the time that these disclosures were prepared. Words such
as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,”
“intends,” “plans,” “projects,” “may,” “will,” “should,”
“could,” and other similar expressions are intended to identify these forward-looking statements. Such statements are
subject to factors that could cause actual results to differ materially from anticipated results. Such factors include, but are
not limited to, the following:
| · | general economic or business conditions, either nationally or regionally, may be less favorable
than expected, resulting in, among other things, a deterioration in credit quality and/or a reduced demand for credit, insurance
or other services; |
| · | disruptions to the national or global financial markets, including the impact of a downgrade
of U.S. government obligations by one of the credit ratings agencies and the adverse effects of recessionary conditions in Europe; |
| · | changes in the interest rate environment and cash flow reassessments may reduce NIM and/or the
volumes and values of loans made or held as well as the value of other financial assets held; |
| · | competitive pressures among depository and other financial institutions may increase significantly; |
| · | legislative, regulatory or accounting changes, including changes resulting from the adoption
and implementation of the Dodd-Frank Act may adversely affect the businesses in which BB&T is engaged; |
| · | local, state or federal taxing authorities may take tax positions that are adverse to BB&T; |
| · | a reduction may occur in BB&T’s credit ratings; |
| · | adverse changes may occur in the securities markets; |
| · | competitors of BB&T may have greater financial resources and develop products that enable
them to compete more successfully than BB&T and may be subject to different regulatory standards than BB&T; |
| · | cyber-security risks, including “denial of service,” “hacking” and “identity
theft,” could adversely affect our business and financial performance, or our reputation; |
| · | natural or other disasters could have an adverse effect on BB&T in that such events could
materially disrupt BB&T’s operations or the ability or willingness of BB&T’s customers to access the financial
services BB&T offers; |
| · | costs related to the integration of the businesses of BB&T and its merger partners may be
greater than expected; |
| · | failure to execute on strategic or operational plans, including the ability to successfully complete
and/or integrate mergers and acquisitions or fully achieve expected cost savings or revenue growth associated with mergers and
acquisitions within the expected time frames could adversely impact financial condition and results of operations; |
| · | significant litigation could have a material adverse effect on BB&T; |
| · | deposit attrition, customer loss and/or revenue loss following completed mergers and acquisitions
may be greater than expected; and |
| · | failure to correctly implement or properly utilize the remaining components of the Company’s
new ERP system could result in impairment charges that adversely impact BB&T’s financial condition and results of operations
and could result in significant additional costs. |
These and other risk factors are more fully described in this report
and in BB&T’s Annual Report on Form 10-K for the year ended December 31, 2014 under the sections entitled “Item
1A. Risk Factors” and from time to time, in other filings with the SEC. Readers are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of the date of this report. Actual results may differ materially from
those expressed in or implied by any forward-looking statements. Except to the extent required by applicable law or regulation,
BB&T undertakes no obligation to revise or update publicly any forward-looking statements for any reason.
Regulatory Considerations
BB&T and its affiliates are subject to numerous examinations
by federal and state banking regulators, as well as the SEC, FINRA, and various state insurance and securities regulators. BB&T
has from time to time received requests for information from regulatory authorities in various states, including state insurance
commissions and state attorneys general, securities regulators and other regulatory authorities, concerning their business practices.
Such requests are considered incidental to the normal conduct of business. Refer to BB&T’s Annual Report on Form 10-K
for the year ended December 31, 2014 for additional disclosures with respect to laws and regulations affecting BB&T.
Amendments to the Capital Plan and Stress Test Rules
During 2014, the FRB amended the start date of the capital plan
and stress test cycles from October 1 to January 1 of the following calendar year. The FRB also amended the capital plan rule to
limit a BHC’s ability to make capital distributions to the extent the BHC’s actual capital issuances are less than
the amount indicated in its capital plan under baseline conditions, measured on a quarterly basis.
The FDIC revised the annual stress testing requirements for state
non-member banks and state savings associations with total consolidated assets of more than $10 billion. FDIC regulations require
covered banks to conduct annual stress tests, report the results of such stress tests to the FDIC and the FRB and publicly disclose
a summary of the results. The FDIC modified the “as-of” dates for financial data that covered banks will use to perform
their stress tests as well as the reporting dates and public disclosure dates of the annual stress tests. The revisions to the
regulations will become effective January 1, 2016.
Home Mortgage Disclosure (Regulation C)
The CFPB has published proposed amendments to Regulation
C to implement changes to HMDA made by section 1094 of the Dodd-Frank Act. Specifically, the CFPB proposed several changes to revise
the tests for determining which financial institutions and housing-related credit transactions are covered under HMDA. The CFPB
also proposes to require financial institutions to report new data points identified in the Dodd-Frank Act, as well as other data
points the CFPB believes may be necessary to carry out the purposes of HMDA. Further, the CFPB proposes to better align the requirements
of Regulation C to existing industry standards where practicable. To improve the quality and timeliness of HMDA data, the CFPB
proposed to require financial institutions with large numbers of reported transactions to submit their HMDA data on a quarterly,
rather than an annual, basis. A final rule is expected to be issued during the third quarter of 2015.
CFPB
A final rule integrating disclosure required by the Truth in Lending
Act and the Real Estate Settlement and Procedures Act was previously scheduled to become effective August 1, 2015; however, the
CFPB has extended the effective date to October 3, 2015.
Liquidity Coverage Ratio: Liquidity Risk Measurement Standards
The OCC, the FRB, and the FDIC have adopted a final rule that implements
a quantitative liquidity requirement consistent with the liquidity coverage ratio standard established by the BCBS. Refer to “Market
Risk Management” in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
section herein for additional information.
Foreign Account Tax Compliance Act and Conforming Regulations
During 2014, the IRS issued Notice 2014-33 (the “Notice”)
regarding FATCA and its related withholding provisions. The Notice announces that calendar years 2014 and 2015 will be regarded
as a transition period for purposes of IRS enforcement and administration with respect to the implementation of FATCA by withholding
agents, foreign financial institutions and other entities with IRC chapter 4 responsibilities. The Notice also announces the IRS’s
intention to further amend the regulations under Sections 1441, 1442, 1471, and 1472 of the IRC. Prior to the IRS issuing these
amendments, taxpayers may rely on the provisions of the Notice regarding the proposed amendments to the regulations. The transition
period and other guidance described in the Notice are intended to facilitate an orderly transition for withholding agent and foreign
financial institution compliance with FATCA’s requirements and respond to comments regarding certain aspects of the regulations
under chapters 3 and 4 of the IRC. BB&T expects to be in compliance with FATCA and its related provisions by the applicable
effective dates.
U.S. Implementation of Basel III
The Basel III capital requirements became effective on January 1,
2015. As a result, capital information presented for periods after December 31, 2014 is based on the Basel III requirements, while
capital data for periods prior to January 1, 2015 is based on the former requirements under Basel I. See the section titled “Capital”
in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further information.
Executive Summary
Consolidated net income available to common shareholders for the
second quarter of 2015 was $454 million, an increase of $30 million compared to the same quarter of 2014. On a diluted per common
share basis, earnings for the second quarter of 2015 were $0.62, compared to $0.58 for the earlier quarter.
BB&T’s results of operations for the second quarter of
2015 produced an annualized return on average assets of 1.06%, an annualized return on average risk-weighted assets of 1.32% and
an annualized return on average common shareholders’ equity of 8.20%, compared to earlier quarter ratios of 1.04%, 1.38%
and 8.04%, respectively. BB&T’s return on average tangible common shareholders’ equity was 12.76% for the second
quarter of 2015, compared to 12.77% for the earlier quarter.
Effective January 1, 2015, BB&T adopted new guidance related
to the accounting for investments in qualified affordable housing projects. For periods prior to January 1, 2015, amortization
expense related to qualifying investments in low income housing tax credits was reclassified from other income to provision for
income taxes, and the amount of amortization and tax benefits recognized was revised as a result of the adoption of the proportional
amortization method. See Note 13 “Commitments and Contingencies” for additional information.
During May 2015, the U.S. Court of Appeals for the Federal Circuit
rendered its decision on BB&T’s appeal of a prior ruling that disallowed foreign tax credits and other deductions claimed
by a subsidiary in connection with a financing transaction. As a result of this decision, a portion of the earlier ruling was overturned
and BB&T recognized net tax benefits of $107 million during the second quarter of 2015. Other aspects of the earlier ruling,
which were adverse to BB&T, were affirmed by the Court of Appeals.
Results for the second quarter of 2015 included a loss on early
extinguishment of higher cost FHLB advances of $172 million, or $107 million after-tax. The terminated advances totaled approximately
$931 million and had a weighted average interest rate of 4.84% and a weighted average remaining life of approximately 6.6 years.
On June 1, 2015, BB&T closed on the sale of American Coastal,
which resulted in a pre-tax loss on sale of $26 million primarily due to the allocation of $49 million of goodwill. As a result
of the goodwill being non-deductible for income tax purposes, the sale generated income tax expense of $8 million, resulting in
a net after-tax loss of $34 million, or $0.05 per share. In connection with this transaction, BB&T also increased its ownership
interest in AmRisc, LP.
The results for the second quarter of 2014 were negatively impacted
by after-tax adjustments totaling $88 million, or $0.12 per diluted share, that were recorded in connection with the identification
of potential exposures related to residential mortgage loans originated by BB&T and insured by the FHA and an adjustment to
a previously recorded income tax reserve.
Total revenues were $2.4 billion on a taxable-equivalent basis for
the second quarter of 2015, up $31 million compared to the earlier quarter as a $61 million increase in noninterest income was
partially offset by a $30 million decrease in taxable-equivalent net interest income.
The change in taxable-equivalent net interest income includes a
$47 million decrease in interest income, driven by lower yields on new loans and the continued run-off of loans acquired from the
FDIC, partially offset by a $17 million decrease in interest expense. Net interest margin was 3.27%, compared to 3.43% for the
earlier quarter. Average earning assets increased $4.3 billion, or 2.7%, while average interest-bearing liabilities decreased $2.1
billion, or 1.8%. The annualized yield on the total loan portfolio for the second quarter was 4.18%, a decrease of 27 basis points
compared to the earlier quarter, which primarily reflects lower yields on new loans and continued runoff of higher yielding loans
acquired from the FDIC. The annualized fully taxable-equivalent yield on the average securities portfolio for the second quarter
was 2.41%, two basis points lower than the earlier period.
The average annualized cost of interest-bearing deposits was 0.24%,
a decline of two basis points compared to the earlier quarter. The average annualized rate paid on long-term debt was 2.14%, a
decrease of 24 basis points compared to the earlier quarter. This decrease was the result of lower rates on new issues during the
last twelve months and early extinguishments of higher cost FHLB advances.
The $61 million increase in noninterest income was primarily driven
by higher mortgage banking income, FDIC loss share income and investment banking and brokerage fees and commissions, which increased
$44 million, $24 million and $16 million, respectively. These increases were partially offset by a $34 million decline in other
income primarily due to the $26 million pre-tax loss on the sale of American Coastal.
Excluding loans acquired from the FDIC, the provision for credit
losses was $97 million, compared to $83 million in the earlier quarter, primarily due to a reserve release in the earlier quarter.
Net charge-offs for the second quarter of 2015, excluding loans acquired from the FDIC, totaled $98 million, down $19 million compared
to the earlier quarter.
Noninterest expense was $1.7 billion for the second quarter of 2015,
an increase of $119 million compared to the earlier quarter. This increase was driven by a $172 million loss on early extinguishment
of debt and a $55 million increase in personnel expense, partially offset by decreases of $77 million in other expense and $43
million in loan-related expense that were primarily due to charges related to FHA-insured mortgage loans in the earlier quarter.
The provision for income taxes was $80 million for the second quarter
of 2015, compared to $216 million for the earlier quarter. This produced an effective tax rate for the second quarter of 2015 of
13.8%, compared to 31.2% for the earlier quarter. The current quarter included the tax benefit of $107 million previously discussed
and the earlier quarter included a $14 million tax provision related to the IRS’s change in stance related to an income tax
position that was under examination.
During the second quarter of 2015, the Company completed the acquisition
of The Bank of Kentucky Financial Corporation, which provided $1.6 billion in deposits and $1.2 billion in loans as of the acquisition
date.
Refer to BB&T’s Annual Report on Form 10-K for the year
ended December 31, 2014 for additional information with respect to BB&T’s recent accomplishments and significant challenges.
Analysis Of Results Of Operations
Net Interest Income and NIM
Second Quarter 2015 compared to Second Quarter 2014
Net interest income on a FTE basis was $1.3 billion for the second
quarter of 2015, a decrease of 2.2% compared to the same period in 2014. The change in taxable-equivalent net interest income includes
a $47 million decrease in interest income, driven by lower yields on new loans and the continued run-off of loans acquired from
the FDIC, and a $17 million decrease in interest expense. Net interest margin was 3.27%, compared to 3.43% for the earlier quarter.
Average earning assets increased $4.3 billion, or 2.7%, while average
interest-bearing liabilities decreased $2.1 billion, or 1.8%. The annualized yield on the total loan portfolio for the second quarter
was 4.18%, a decrease of 27 basis points compared to the earlier quarter, which primarily reflects lower yields on new loans and
continued runoff of higher yielding loans acquired from the FDIC. The annualized fully taxable-equivalent yield on the average
securities portfolio for the second quarter was 2.41%, two basis points lower than the earlier period.
The average annualized cost of interest-bearing deposits was 0.24%,
a decline of two basis points compared to the earlier quarter. The average annualized rate paid on long-term debt was 2.14%, a
decrease of 24 basis points compared to the earlier quarter. This decrease was the result of lower rates on new issues during the
last twelve months and early extinguishments of higher cost FHLB advances.
Six Months of 2015 compared to Six Months of 2014
Net interest income on a FTE basis was $2.7 billion for the six
months ended June 30, 2015, a decrease of $66 million compared to the same period in 2014. The decrease in net interest income
reflects a $101 million decrease in interest income, which was partially offset by a $35 million decline in funding costs. For
the six months ended June 30, 2015, average earning assets increased $4.6 billion compared to the same period of 2014, while average
interest-bearing liabilities decreased $1.4 billion. The NIM was 3.30% for the six months ended June 30, 2015, compared to 3.47%
for the same period of 2014. The 17 basis point decrease in NIM was due to lower yields on new earning assets and runoff of assets
acquired from the FDIC, partially offset by lower funding costs.
The annualized FTE yield on the average securities portfolio for
the six months ended June 30, 2015 was 2.44%, a decrease of two basis points compared to the annualized yield earned during the
same period of 2014.
The annualized FTE yield for the total loan portfolio for the six
months ended June 30, 2015 was 4.20%, compared to 4.51% in the corresponding period of 2014. The decrease in the FTE yield on the
total loan portfolio was primarily due to lower yields on new loans due to the low interest-rate environment and the runoff of
loans acquired from the FDIC.
The average annualized cost of interest-bearing deposits for the
six months ended June 30, 2015 was 0.25%, compared to 0.26% for the same period in the prior year, primarily reflecting improvements
in mix.
The average annualized rate paid on long-term debt for the
six months ended June 30, 2015 was 2.16%, compared to 2.44% for the same period in 2014. This decrease was the result of
lower rates on new issues during the last twelve months and early extinguishments of higher cost FHLB advances.
The following tables set forth the major components of net interest
income and the related annualized yields and rates as well as the variances between the periods caused by changes in interest rates
versus changes in volumes. Changes attributable to the mix of assets and liabilities have been allocated proportionally between
the changes due to rate and the changes due to volume.
Table 1-1 |
FTE Net Interest Income and Rate / Volume Analysis (1) |
Three Months Ended June 30, 2015 and 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Balances (6) |
|
Annualized Yield/Rate |
|
Income/Expense |
|
Increase |
|
Change due to |
|
|
|
|
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
(Decrease) |
|
Rate |
|
Volume |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities, at amortized cost (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
|
$ |
2,561 |
|
$ |
1,932 |
|
1.56 |
% |
|
1.50 |
% |
|
$ |
10 |
|
$ |
7 |
|
$ |
3 |
|
$ |
― |
|
$ |
3 |
|
GSE |
|
|
5,400 |
|
|
5,604 |
|
2.13 |
|
|
2.08 |
|
|
|
28 |
|
|
29 |
|
|
(1) |
|
|
1 |
|
|
(2) |
|
Agency MBS |
|
|
29,245 |
|
|
29,627 |
|
2.05 |
|
|
1.97 |
|
|
|
149 |
|
|
146 |
|
|
3 |
|
|
5 |
|
|
(2) |
|
States and political subdivisions |
|
|
1,834 |
|
|
1,831 |
|
5.80 |
|
|
5.78 |
|
|
|
27 |
|
|
27 |
|
|
― |
|
|
― |
|
|
― |
|
Non-agency MBS |
|
|
220 |
|
|
250 |
|
7.88 |
|
|
7.65 |
|
|
|
5 |
|
|
4 |
|
|
1 |
|
|
1 |
|
|
― |
|
Other |
|
|
623 |
|
|
464 |
|
1.11 |
|
|
1.46 |
|
|
|
2 |
|
|
2 |
|
|
― |
|
|
― |
|
|
― |
|
Acquired from FDIC |
|
|
844 |
|
|
948 |
|
11.36 |
|
|
13.56 |
|
|
|
24 |
|
|
32 |
|
|
(8) |
|
|
(5) |
|
|
(3) |
|
|
Total securities |
|
|
40,727 |
|
|
40,656 |
|
2.41 |
|
|
2.43 |
|
|
|
245 |
|
|
247 |
|
|
(2) |
|
|
2 |
|
|
(4) |
Other earning assets (3) |
|
|
2,645 |
|
|
1,977 |
|
1.19 |
|
|
1.60 |
|
|
|
7 |
|
|
8 |
|
|
(1) |
|
|
(3) |
|
|
2 |
Loans and leases, net of unearned income (4)(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
|
42,541 |
|
|
39,397 |
|
3.15 |
|
|
3.38 |
|
|
|
335 |
|
|
332 |
|
|
3 |
|
|
(23) |
|
|
26 |
|
|
CRE-income producing properties |
|
|
10,730 |
|
|
10,382 |
|
3.37 |
|
|
3.50 |
|
|
|
90 |
|
|
90 |
|
|
― |
|
|
(3) |
|
|
3 |
|
|
CRE-construction and development |
|
|
2,767 |
|
|
2,566 |
|
3.31 |
|
|
3.57 |
|
|
|
23 |
|
|
23 |
|
|
― |
|
|
(2) |
|
|
2 |
|
Direct retail lending |
|
|
8,449 |
|
|
7,666 |
|
4.04 |
|
|
4.24 |
|
|
|
86 |
|
|
80 |
|
|
6 |
|
|
(4) |
|
|
10 |
|
Sales finance |
|
|
10,517 |
|
|
10,028 |
|
2.61 |
|
|
2.67 |
|
|
|
69 |
|
|
67 |
|
|
2 |
|
|
(2) |
|
|
4 |
|
Revolving credit |
|
|
2,365 |
|
|
2,362 |
|
8.68 |
|
|
8.64 |
|
|
|
51 |
|
|
51 |
|
|
― |
|
|
― |
|
|
― |
|
Residential mortgage |
|
|
29,862 |
|
|
32,421 |
|
4.14 |
|
|
4.22 |
|
|
|
308 |
|
|
342 |
|
|
(34) |
|
|
(6) |
|
|
(28) |
|
Other lending subsidiaries |
|
|
11,701 |
|
|
10,553 |
|
8.72 |
|
|
9.26 |
|
|
|
255 |
|
|
244 |
|
|
11 |
|
|
(15) |
|
|
26 |
|
Acquired from FDIC |
|
|
1,055 |
|
|
1,739 |
|
14.66 |
|
|
16.77 |
|
|
|
38 |
|
|
73 |
|
|
(35) |
|
|
(8) |
|
|
(27) |
|
|
Total loans and leases held for investment |
|
|
119,987 |
|
|
117,114 |
|
4.19 |
|
|
4.46 |
|
|
|
1,255 |
|
|
1,302 |
|
|
(47) |
|
|
(63) |
|
|
16 |
|
LHFS |
|
|
2,069 |
|
|
1,396 |
|
3.48 |
|
|
4.21 |
|
|
|
18 |
|
|
15 |
|
|
3 |
|
|
(3) |
|
|
6 |
|
|
Total loans and leases |
|
|
122,056 |
|
|
118,510 |
|
4.18 |
|
|
4.45 |
|
|
|
1,273 |
|
|
1,317 |
|
|
(44) |
|
|
(66) |
|
|
22 |
|
|
Total earning assets |
|
|
165,428 |
|
|
161,143 |
|
3.69 |
|
|
3.91 |
|
|
|
1,525 |
|
|
1,572 |
|
|
(47) |
|
|
(67) |
|
|
20 |
|
|
Nonearning assets |
|
|
23,605 |
|
|
23,951 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
189,033 |
|
$ |
185,094 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-checking |
|
$ |
20,950 |
|
$ |
18,406 |
|
0.08 |
|
|
0.06 |
|
|
|
4 |
|
|
3 |
|
|
1 |
|
|
1 |
|
|
― |
|
Money market and savings |
|
|
53,852 |
|
|
48,965 |
|
0.18 |
|
|
0.14 |
|
|
|
23 |
|
|
18 |
|
|
5 |
|
|
3 |
|
|
2 |
|
Time deposits |
|
|
14,800 |
|
|
25,010 |
|
0.72 |
|
|
0.64 |
|
|
|
28 |
|
|
39 |
|
|
(11) |
|
|
5 |
|
|
(16) |
|
Foreign deposits - interest-bearing |
|
|
764 |
|
|
584 |
|
0.09 |
|
|
0.08 |
|
|
|
― |
|
|
― |
|
|
― |
|
|
― |
|
|
― |
|
|
Total interest-bearing deposits |
|
|
90,366 |
|
|
92,965 |
|
0.24 |
|
|
0.26 |
|
|
|
55 |
|
|
60 |
|
|
(5) |
|
|
9 |
|
|
(14) |
Short-term borrowings |
|
|
3,080 |
|
|
2,962 |
|
0.16 |
|
|
0.16 |
|
|
|
1 |
|
|
1 |
|
|
― |
|
|
― |
|
|
― |
Long-term debt |
|
|
22,616 |
|
|
22,206 |
|
2.14 |
|
|
2.38 |
|
|
|
121 |
|
|
133 |
|
|
(12) |
|
|
(14) |
|
|
2 |
|
|
Total interest-bearing liabilities |
|
|
116,062 |
|
|
118,133 |
|
0.61 |
|
|
0.66 |
|
|
|
177 |
|
|
194 |
|
|
(17) |
|
|
(5) |
|
|
(12) |
|
|
Noninterest-bearing deposits |
|
|
41,502 |
|
|
36,634 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities |
|
|
6,581 |
|
|
6,486 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity |
|
|
24,888 |
|
|
23,841 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity |
|
$ |
189,033 |
|
$ |
185,094 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest rate spread |
|
|
|
|
|
|
|
3.08 |
% |
|
3.25 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NIM/net interest income |
|
|
|
|
|
|
|
3.27 |
% |
|
3.43 |
% |
|
$ |
1,348 |
|
$ |
1,378 |
|
$ |
(30) |
|
$ |
(62) |
|
$ |
32 |
Taxable-equivalent adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
36 |
|
$ |
35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Yields are stated on a FTE basis assuming tax rates in effect for the periods presented. |
(2) |
Total securities include AFS securities and HTM securities. |
(3) |
Includes Federal funds sold, securities purchased under resale agreements or similar arrangements, interest-bearing deposits with banks, trading securities, FHLB stock and other earning assets. |
(4) |
Loan fees, which are not material for any of the periods shown, are included for rate calculation purposes. |
(5) |
NPLs are included in the average balances. |
(6) |
Excludes basis adjustments for fair value hedges. |
Table 1-2 |
FTE Net Interest Income and Rate / Volume Analysis (1) |
Six Months Ended June 30, 2015 and 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Balances (7) |
|
Annualized Yield/Rate |
|
Income/Expense |
|
Increase |
|
Change due to |
|
|
|
|
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
(Decrease) |
|
Rate |
|
Volume |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities, at amortized cost (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
|
$ |
2,529 |
|
$ |
1,784 |
|
1.53 |
% |
|
1.50 |
% |
|
$ |
19 |
|
$ |
13 |
|
$ |
6 |
|
$ |
― |
|
$ |
6 |
|
GSE |
|
|
5,397 |
|
|
5,603 |
|
2.13 |
|
|
2.08 |
|
|
|
57 |
|
|
58 |
|
|
(1) |
|
|
1 |
|
|
(2) |
|
Agency MBS |
|
|
29,461 |
|
|
29,484 |
|
2.05 |
|
|
2.01 |
|
|
|
302 |
|
|
296 |
|
|
6 |
|
|
6 |
|
|
― |
|
States and political subdivisions |
|
|
1,828 |
|
|
1,832 |
|
5.80 |
|
|
5.78 |
|
|
|
53 |
|
|
53 |
|
|
― |
|
|
― |
|
|
― |
|
Non-agency MBS |
|
|
224 |
|
|
255 |
|
7.87 |
|
|
7.32 |
|
|
|
9 |
|
|
9 |
|
|
― |
|
|
1 |
|
|
(1) |
|
Other |
|
|
633 |
|
|
470 |
|
1.25 |
|
|
1.51 |
|
|
|
4 |
|
|
4 |
|
|
― |
|
|
(1) |
|
|
1 |
|
Acquired from FDIC |
|
|
857 |
|
|
960 |
|
12.93 |
|
|
13.21 |
|
|
|
55 |
|
|
63 |
|
|
(8) |
|
|
(1) |
|
|
(7) |
|
|
Total securities |
|
|
40,929 |
|
|
40,388 |
|
2.44 |
|
|
2.46 |
|
|
|
499 |
|
|
496 |
|
|
3 |
|
|
6 |
|
|
(3) |
Other earning assets (3) |
|
|
2,324 |
|
|
1,927 |
|
2.02 |
|
|
2.43 |
|
|
|
23 |
|
|
23 |
|
|
― |
|
|
(4) |
|
|
4 |
Loans and leases, net of unearned income (4)(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
|
41,998 |
|
|
38,919 |
|
3.17 |
|
|
3.40 |
|
|
|
661 |
|
|
657 |
|
|
4 |
|
|
(46) |
|
|
50 |
|
|
CRE - income producing properties |
|
|
10,705 |
|
|
10,338 |
|
3.38 |
|
|
3.54 |
|
|
|
179 |
|
|
181 |
|
|
(2) |
|
|
(8) |
|
|
6 |
|
|
CRE - construction and development |
|
|
2,750 |
|
|
2,511 |
|
3.32 |
|
|
3.60 |
|
|
|
45 |
|
|
45 |
|
|
― |
|
|
(4) |
|
|
4 |
|
Direct retail lending (6) |
|
|
8,320 |
|
|
8,503 |
|
4.06 |
|
|
4.26 |
|
|
|
168 |
|
|
179 |
|
|
(11) |
|
|
(7) |
|
|
(4) |
|
Sales finance |
|
|
10,508 |
|
|
9,729 |
|
2.62 |
|
|
2.75 |
|
|
|
137 |
|
|
133 |
|
|
4 |
|
|
(6) |
|
|
10 |
|
Revolving credit |
|
|
2,375 |
|
|
2,359 |
|
8.76 |
|
|
8.71 |
|
|
|
103 |
|
|
102 |
|
|
1 |
|
|
1 |
|
|
― |
|
Residential mortgage (6) |
|
|
30,143 |
|
|
31,533 |
|
4.12 |
|
|
4.24 |
|
|
|
620 |
|
|
667 |
|
|
(47) |
|
|
(18) |
|
|
(29) |
|
Other lending subsidiaries |
|
|
11,511 |
|
|
10,395 |
|
8.82 |
|
|
9.33 |
|
|
|
504 |
|
|
482 |
|
|
22 |
|
|
(27) |
|
|
49 |
|
Acquired from FDIC |
|
|
1,105 |
|
|
1,806 |
|
15.28 |
|
|
17.74 |
|
|
|
83 |
|
|
159 |
|
|
(76) |
|
|
(20) |
|
|
(56) |
|
|
Total loans and leases held for investment |
|
|
119,415 |
|
|
116,093 |
|
4.21 |
|
|
4.52 |
|
|
|
2,500 |
|
|
2,605 |
|
|
(105) |
|
|
(135) |
|
|
30 |
|
LHFS |
|
|
1,735 |
|
|
1,354 |
|
3.53 |
|
|
4.33 |
|
|
|
31 |
|
|
30 |
|
|
1 |
|
|
(6) |
|
|
7 |
|
|
Total loans and leases |
|
|
121,150 |
|
|
117,447 |
|
4.20 |
|
|
4.51 |
|
|
|
2,531 |
|
|
2,635 |
|
|
(104) |
|
|
(141) |
|
|
37 |
|
|
Total earning assets |
|
|
164,403 |
|
|
159,762 |
|
3.73 |
|
|
3.97 |
|
|
|
3,053 |
|
|
3,154 |
|
|
(101) |
|
|
(139) |
|
|
38 |
|
|
Nonearning assets |
|
|
23,767 |
|
|
24,007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
188,170 |
|
$ |
183,769 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-checking |
|
$ |
20,787 |
|
$ |
18,510 |
|
0.08 |
|
|
0.07 |
|
|
|
8 |
|
|
6 |
|
|
2 |
|
|
1 |
|
|
1 |
|
Money market and savings |
|
|
52,754 |
|
|
48,866 |
|
0.17 |
|
|
0.14 |
|
|
|
45 |
|
|
33 |
|
|
12 |
|
|
9 |
|
|
3 |
|
Time deposits |
|
|
15,894 |
|
|
23,481 |
|
0.72 |
|
|
0.69 |
|
|
|
57 |
|
|
81 |
|
|
(24) |
|
|
3 |
|
|
(27) |
|
Foreign deposits - interest-bearing |
|
|
664 |
|
|
795 |
|
0.09 |
|
|
0.07 |
|
|
|
― |
|
|
― |
|
|
― |
|
|
― |
|
|
― |
|
|
Total interest-bearing deposits |
|
|
90,099 |
|
|
91,652 |
|
0.25 |
|
|
0.26 |
|
|
|
110 |
|
|
120 |
|
|
(10) |
|
|
13 |
|
|
(23) |
Short-term borrowings |
|
|
3,308 |
|
|
3,638 |
|
0.14 |
|
|
0.13 |
|
|
|
2 |
|
|
2 |
|
|
― |
|
|
― |
|
|
― |
Long-term debt |
|
|
22,828 |
|
|
22,318 |
|
2.16 |
|
|
2.44 |
|
|
|
246 |
|
|
271 |
|
|
(25) |
|
|
(31) |
|
|
6 |
|
|
Total interest-bearing liabilities |
|
|
116,235 |
|
|
117,608 |
|
0.62 |
|
|
0.67 |
|
|
|
358 |
|
|
393 |
|
|
(35) |
|
|
(18) |
|
|
(17) |
|
|
Noninterest-bearing deposits |
|
|
40,607 |
|
|
36,017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities |
|
|
6,600 |
|
|
6,605 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity |
|
|
24,728 |
|
|
23,539 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity |
|
$ |
188,170 |
|
$ |
183,769 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest rate spread |
|
|
|
|
|
|
|
3.11 |
% |
|
3.30 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NIM/net interest income |
|
|
|
|
|
|
|
3.30 |
% |
|
3.47 |
% |
|
$ |
2,695 |
|
$ |
2,761 |
|
$ |
(66) |
|
$ |
(121) |
|
$ |
55 |
Taxable-equivalent adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
71 |
|
$ |
71 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Yields are stated on a FTE basis assuming tax rates in effect for the periods presented. |
(2) |
Total securities include AFS securities and HTM securities. |
(3) |
Includes Federal funds sold, securities purchased under resale agreements or similar arrangements, interest-bearing deposits with banks, trading securities, FHLB stock and other earning assets. |
(4) |
Loan fees, which are not material for any of the periods shown, are included for rate calculation purposes. |
(5) |
NPLs are included in the average balances. |
(6) |
During the first quarter of 2014, $8.3 billion in loans were transferred from direct retail lending to residential mortgage. |
(7) |
Excludes basis adjustments for fair value hedges. |
Provision for Credit Losses
Second Quarter 2015 compared to Second Quarter 2014
The provision for credit losses totaled $97 million for the second
quarter of 2015, compared to $74 million for the same period of the prior year. This change was primarily driven by a $24 million
increase in the provision for retail other lending subsidiaries, which was the result of higher net charge-offs and an increase
in delinquent loan balances compared to the earlier period.
Net charge-offs were $98 million for the second quarter of 2015
and $121 million for the second quarter of 2014. Net charge-offs were 0.33% of average loans and leases on an annualized basis
for the second quarter of 2015, compared to 0.41% of average loans and leases for the same period in 2014.
Six Months of 2015 compared to Six Months of 2014
The provision for credit losses totaled $196 million for the six
months ended June 30, 2015, compared to $134 million for the same period of 2014. The increase was primarily driven by the commercial
and industrial portfolio, which had $38 million of higher provision expense due to stabilization in the rate of improvement in
credit trends as well as risk expectations related to the energy sector. The increase was also driven by the provision related
to the reserve for unfunded lending commitments, which increased $18 million due to higher commitment balances and credit trend
stabilization.
Net charge-offs for the six months ended June 30, 2015 were $199
million, compared to $280 million for the six months ended June 30, 2014. The decrease was driven by reductions for the commercial
and industrial, residential mortgage-nonguaranteed and direct retail lending portfolios of $29 million, $23 million and $13 million,
respectively. Net charge-offs were 0.33% of average loans and leases on an annualized basis for the six months ended June 30, 2015,
compared to 0.49% of average loans and leases for the same period in 2014.
Noninterest Income
Second Quarter 2015 compared to Second Quarter 2014
Noninterest income for the second quarter of 2015 increased $61
million, or 6.4%, compared to the earlier quarter. This increase was primarily driven by $44 million of higher mortgage banking
income, which reflects higher net mortgage servicing rights income, higher gains on sales of loans and improvement in commercial
mortgage fee income due to higher loan volume. In addition, FDIC loss share income improved $24 million primarily due to lower
negative accretion related to loans, and investment banking and brokerage fees and commissions was $16 million higher primarily
due to increased capital markets activity and investment commissions. Operating lease income increased $10 million primarily due
to higher volumes. These increases were partially offset by a $34 million decrease in other income, which was primarily driven
by the loss on sale of American Coastal.
The remaining categories of noninterest income totaled $757 million
for the current quarter, compared to $756 million for the second quarter of 2014.
Six Months of 2015 compared to Six Months of 2014
Noninterest income for the six months ended June 30, 2015 totaled
$2.0 billion, compared to $1.9 billion for the same period in 2014, an increase of $131 million. This change was primarily driven
by higher mortgage banking income, FDIC loss share income, investment banking and brokerage fees and commissions and operating
lease income, partially offset by a reduction in other income.
Mortgage banking income totaled $240 million for the six months
ended June 30, 2015, compared to $160 million for the same period of the prior year. This $80 million increase reflects a higher
volume of residential and commercial mortgage loan sales and higher net mortgage servicing income.
FDIC loss share income, net was $29 million better than the prior
year, primarily due to lower accretion on acquired loans in the current period as well as the impact of the offset to the provision
for loans acquired from the FDIC.
Investment banking and brokerage fees and commissions totaled $202
million for the first six months of 2015, up $22 million compared to the first six months of 2014, primarily due to higher volume.
Operating lease income was $59 million for the first six months of 2015, which is an increase of $17 million primarily due to volume.
Other income totaled $141 million for the six months ended June
30, 2015, compared to $175 million for the comparable prior year period. This decline was primarily due to a $26 million pre-tax
loss on the sale of American Coastal during the current period.
The remaining categories of noninterest income totaled $1.5 billion
during the six months ended June 30, 2015, up $17 million compared with the same period of 2014.
Noninterest Expense
Second Quarter 2015 compared to Second Quarter 2014
Noninterest expense totaled $1.7 billion for the second quarter
of 2015, an increase of $119 million compared to the same period of 2014. The increase was primarily driven by a $172 million loss
on early extinguishment of debt, higher personnel expense and higher merger-related and restructuring charges, partially offset
by a decrease in loan-related expense.
Personnel expense totaled $864 million for the second quarter of
2015, an increase of $55 million compared to the second quarter of 2015. The increase in personnel expense reflects a $19 million
increase in qualified pension plan expense that was driven by higher amortization of net actuarial losses and higher service cost.
Personnel expense was also higher due to a $14 million increase in production-related incentives due to strong performance at fee
income-generating businesses and a $12 million increase in employee health costs. The annual merit increases effective April 1
were largely offset by approximately 1,000 fewer full-time equivalent employees.
Merger-related and restructuring charges, net were $25 million for
the second quarter of 2015, compared to $13 million for the earlier quarter. This increase is primarily due to activity related
to The Bank of Kentucky, Susquehanna Bancshares and AmRisc/American Coastal.
Other expense and loan-related expense decreased $77 million and
$43 million, respectively, primarily due to charges recognized in the earlier period related to FHA-insured loan originations.
Other categories of noninterest expense totaled $338 million for
the current quarter, flat compared to the same period of 2014.
Six Months of 2015 compared to Six Months of 2014
Noninterest expenses totaled $3.1 billion for the six months ended
June 30, 2015, an increase of $156 million, or 5.3%, over the same period of the prior year. Primary drivers for the increase in
noninterest expense include the loss on early extinguishment of debt, higher personnel expense and higher merger-related and restructuring
charges, partially offset by significant declines in loan-related expense and other expense and smaller declines in other categories.
Personnel expense was $1.7 billion for the six months ended June
30, 2015, an increase of $103 million compared to the six months ended June 30, 2014. The increase in personnel expense reflects
a $37 million increase in qualified pension plan expense that was driven by higher amortization of net actuarial losses and higher
service cost. Personnel expense was also higher due to a $40 million increase in production-related incentives due to strong performance
at fee income-generating businesses and a $26 million increase in employee health costs.
Merger-related and restructuring charges totaled $38 million for
the six months ended June 30, 2015, an increase of $17 million from the prior year period. This increase is primarily due to activity
related to The Bank of Kentucky, Susquehanna Bancshares and AmRisc/American Coastal.
Loan-related expense totaled $75 million for the first six months
of 2015, a decrease of $56 million compared to the first six months of 2014. This improvement is primarily due to the $33 million
FHA-insured loan indemnification reserve recorded during the earlier period as well as lower volume in the current period.
Other expense totaled $436 million for the first six months of 2015,
compared to $498 million for the same period of 2014. This decline is primarily due to an $88 million charge recognized in the
earlier period related to FHA-insured loan originations, partially offset by $13 million of higher depreciation on property held
for operating leases and other smaller increases.
Other categories of noninterest expense totaled $660 million for the six months ended June 30, 2015, compared to $678 million for the same
period of 2014.
Provision for Income Taxes
Second Quarter 2015 compared to Second Quarter 2014
The provision for income taxes was $80 million for the second quarter
of 2015, compared to $216 million for the earlier quarter. This produced an effective tax rate for the second quarter of 2015 of
13.8%, compared to 31.2% for the earlier quarter. The current quarter included the tax benefit of $107 million discussed previously,
and the earlier quarter included a $14 million tax provision related to the IRS’s change in stance related to an income tax
position that was under examination.
Six Months of 2015 compared to Six Months of 2014
The provision for income taxes was $321 million for the six months
ended June 30, 2015, compared to $472 million for the same period of the prior year. BB&T’s effective income tax rate
for the six months ended June 30, 2015 was 23.4%, compared to 31.0% for the same period of the prior year. The current period includes
the tax benefit of $107 million and the earlier period includes the tax provision of $14 million discussed above.
Refer to Note 11 “Income Taxes” in the “Notes
to Consolidated Financial Statements” for a discussion of uncertain tax positions and other tax matters.
Segment Results
See Note 17 “Operating Segments” in the “Notes
to Consolidated Financial Statements” contained herein and BB&T’s Annual Report on Form 10-K for the year ended
December 31, 2014, for additional disclosures related to BB&T’s reportable business segments. Fluctuations in noninterest
income and noninterest expense incurred directly by the segments are more fully discussed in the “Noninterest Income”
and “Noninterest Expense” sections above.
Table 2 |
Net Income by Reportable Segments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Community Banking |
$ |
234 |
|
$ |
219 |
|
$ |
444 |
|
$ |
434 |
|
|
Residential Mortgage Banking |
|
72 |
|
|
(21) |
|
|
136 |
|
|
42 |
|
|
Dealer Financial Services |
|
49 |
|
|
63 |
|
|
94 |
|
|
98 |
|
|
Specialized Lending |
|
70 |
|
|
60 |
|
|
127 |
|
|
119 |
|
|
Insurance Services |
|
53 |
|
|
57 |
|
|
125 |
|
|
132 |
|
|
Financial Services |
|
68 |
|
|
67 |
|
|
134 |
|
|
134 |
|
|
Other, Treasury and Corporate |
|
(45) |
|
|
32 |
|
|
(12) |
|
|
91 |
|
|
BB&T Corporation |
$ |
501 |
|
$ |
477 |
|
$ |
1,048 |
|
$ |
1,050 |
|
Second Quarter 2015 compared to Second Quarter 2014
Community Banking
Community Banking serves individual and business clients by offering
a variety of loan and deposit products and other financial services. The segment is primarily responsible for acquiring and maintaining
client relationships.
Community Banking net income was $234 million for the second quarter
of 2015, an increase of $15 million compared to the earlier quarter. Segment net interest income increased $8 million, primarily
driven by deposit growth and commercial real estate and direct retail loan growth, partially offset by lower funding spreads on
deposits and lower interest rates on new commercial loans. Noninterest income decreased $10 million, primarily due to lower service
charges on deposits and letter of credit fees. Intersegment referral fee income increased $10 million driven by higher loan referrals
to the Residential Mortgage Banking segment. The allocated provision for credit losses decreased $24 million as the result of lower
commercial and direct retail net charge-offs.
Residential Mortgage Banking
Residential Mortgage Banking retains and services mortgage loans
originated by BB&T as well as those purchased from various correspondent originators. Mortgage loan products include fixed
and adjustable-rate government guaranteed and conventional loans for the purpose of constructing, purchasing or refinancing residential
properties. Substantially all of the properties are owner-occupied.
Residential Mortgage Banking net income was $72 million for the
second quarter of 2015, compared to a net loss of $21 million in the earlier quarter. Segment net interest income decreased $9
million, primarily the result of lower average loan balances due to the current strategy of selling substantially all conforming
mortgage loan production as well as lower interest rates on new loans. Noninterest income increased $33 million driven by an increase
in net MSR valuation adjustments and an increase in gains on mortgage loan production and sales driven by higher mortgage loan
originations and margins. The improvement in gain on sale margins was primarily the result of improved pricing. Noninterest expense
decreased $130 million compared to the prior quarter, which primarily reflects the impact of prior year adjustments totaling $118
million relating to FHA-insured loan exposures.
Dealer Financial Services
Dealer Financial Services primarily originates loans to consumers
for the purchase of automobiles. These loans are originated on an indirect basis through approved franchised and independent automobile
dealers throughout BB&T’s market area through BB&T Dealer Finance, and on a national basis through Regional Acceptance
Corporation. Dealer Financial Services also originates loans for the purchase of recreational and marine vehicles and, in conjunction
with the Community Bank, provides financing and servicing to dealers for their inventories.
Dealer Financial Services net income was $49 million for the second
quarter of 2015, a decrease of $14 million compared to the earlier quarter. Segment net interest income increased $10 million,
primarily driven by growth in the Regional Acceptance loan portfolio and the inclusion of dealer floor plan loans in the segment
in the current quarter, partially offset by lower interest rates on new loans. The allocated provision for credit losses increased
$17 million, primarily due to higher net charge-offs and an increase in loss severity related to the nonprime automobile loan portfolio.
Noninterest expense increased $13 million driven by higher personnel, professional services and other expenses.
Specialized Lending
Specialized Lending consists of businesses that provide specialty
finance alternatives to commercial and consumer clients including: commercial finance, mortgage warehouse lending, tax-exempt financing
for local governments and special-purpose districts, equipment leasing, full-service commercial mortgage banking, commercial and
retail insurance premium finance, and dealer-based financing of equipment for consumers and small businesses.
Specialized Lending net income was $70 million for the second quarter
of 2015, an increase of $10 million compared to the earlier quarter. Segment net interest income increased $2 million driven by
strong growth in mortgage warehouse loans, small ticket consumer loans and commercial mortgage loans, partially offset by lower
interest rates on new loans. Noninterest income increased $23 million driven by higher commercial mortgage and operating lease
income. The allocated provision for credit losses decreased $6 million primarily due to an improvement in credit trends in the
commercial finance loan portfolio. Noninterest expense increased $15 million, primarily due to higher personnel expense, depreciation
of property under operating leases and loan processing expense.
Insurance Services
BB&T’s insurance agency / brokerage network is the fifth
largest in the United States and sixth largest in the world. Insurance Services provides property and casualty, life and health
insurance to business and individual clients. It also provides small business and corporate products, such as workers compensation
and professional liability, as well as surety coverage and title insurance.
During the second quarter of 2015, BB&T completed its sale of
American Coastal and increased its ownership interest in AmRisc, LP, a managing general underwriter for commercial property risks.
The sale of American Coastal eliminates BB&T's exposure to potential underwriting losses in the future.
Insurance Services net income was $53 million in the second quarter
of 2015, a decrease of $4 million compared to the earlier quarter. Insurance Service’s noninterest income increased $1 million,
which primarily reflects higher new and renewal commercial property and casualty insurance business and higher performance-based
commissions, partially offset by lower direct commercial property and casualty insurance premiums due to the previously discussed
sale of American Coastal. Noninterest expense increased $2 million driven by higher employee insurance and pension expense and
merger-related charges, partially offset by lower incentives and operating charge-offs and a reduction in certain actuarially determined
loss reserves.
Financial Services
Financial Services provides personal trust administration, estate
planning, investment counseling, wealth management, asset management, employee benefits services, corporate banking and corporate
trust services to individuals, corporations, institutions, foundations and government entities. In addition, Financial Services
offers clients investment alternatives, including discount brokerage services, equities, fixed-rate and variable-rate annuities,
mutual funds and governmental and municipal bonds through BB&T Investment Services, Inc. The segment also includes BB&T
Securities, a full-service brokerage and investment banking firm, the Corporate Banking Division, which originates and services
large corporate relationships, syndicated lending relationships and client derivatives, and BB&T Capital Partners, which manages
the company’s private equity investments.
Financial Services net income was $68 million in the second quarter
of 2015, an increase of $1 million compared to the earlier quarter. Segment net interest income increased $18 million driven by
Corporate Banking and BB&T Wealth loan and deposit growth, partially offset by lower interest rates on new loans and lower
funding spreads on deposits. Noninterest income increased $20 million due to higher capital market fees, investment commissions
and brokerage fees and commercial loan fees. The allocated provision for credit losses increased $20 million as the result of portfolio
mix and risk expectations related to the oil and energy sector. Noninterest expense increased $15 million compared to the earlier
quarter, primarily driven by higher incentive and employee benefit expense.
Other, Treasury & Corporate
Net income in Other, Treasury & Corporate can vary due to the
changing needs of the Corporation, including the size of the investment portfolio, the need for wholesale funding and income received
from derivatives used to hedge the balance sheet.
In the second quarter of 2015, Other, Treasury & Corporate generated
a net loss of $45 million, compared to net income of $32 million in the earlier quarter. Segment net interest income decreased
$58 million driven by lower acquired from FDIC loan balances and credit spreads, duration adjustments on securities acquired from
the FDIC, and lower funding spreads on interest-bearing deposits. Noninterest income decreased $6 million, primarily due to the
loss on the previously mentioned sale of American Coastal, partially offset by better FDIC loss share income. The allocated provision
for credit losses was $5 million in the second quarter of 2015, compared to a benefit of $7 million in the earlier quarter, which
primarily reflects changes in provision expense related to loans acquired from the FDIC and an increase in provision expense related
to the commercial finance loan portfolio shared by other segments. Noninterest expense increased $203 million, primarily due to
the previously mentioned $172 million loss on early extinguishment of FLHB advances in the current quarter and higher personnel
expense and merger-related charges. Intersegment referral fee expenses decreased $12 million driven by higher loan referrals to
the Residential Mortgage Banking segment shared by other segments. Allocated corporate expense decreased by $19 million compared
to the earlier quarter.
Six Months of 2015 compared to Six Months of 2014
Community Banking
Community Banking net income was $444 million for the six months
ended June 30, 2015, an increase of $10 million compared to the same period of the prior year. Segment net interest income decreased
$5 million, primarily driven by lower funding spreads on deposits and loans, partially offset by growth in deposits and growth
in commercial real estate and direct retail loans. Noninterest income decreased $19 million, primarily due to lower service charges
on deposits, international factoring commissions and letter of credit fees. Intersegment referral fee income increased $13 million
driven by higher loan referrals to the Residential Mortgage Banking segment. The allocated provision for credit losses decreased
$27 million as a result of lower commercial and retail loan net charge-offs, partially offset by a moderation in the improvement
in loss severity trends in the commercial loan portfolio. Noninterest expense decreased $10 million driven by lower salary, regulatory,
legal and restructuring expense, partially offset by higher pension expense and franchise taxes. Allocated corporate expense increased
$13 million driven by internal business initiatives.
Residential Mortgage Banking
Residential Mortgage Banking net income was $136 million for the
six months ended June 30, 2015, an increase of $94 million compared to the same period of the prior year. Segment net interest
income decreased $27 million, primarily the result of lower interest rates on new loans and lower balances reflecting the current
strategy of selling substantially all conforming mortgage loan production. Noninterest income increased $57 million, driven by
higher gains on residential mortgage loan production and sales and an increase in net MSR valuation adjustments. The allocated
provision for credit losses reflected a benefit of $9 million in the first half of 2015, compared to a benefit of $21 million in
the earlier period, primarily due to a moderation in the rate of improvement in loss severity trends, partially offset by lower
net charge-offs. Noninterest expense decreased $136 million, which primarily reflects the impact of adjustments totaling $118 million
relating to the previously disclosed FHA-insured loan exposures in the earlier period. The decrease in noninterest expense was
also partially attributable to lower salary and other loan processing expense.
Dealer Financial Services
Dealer Financial Services net income was $94 million for the six
months ended June 30, 2015, a decrease of $4 million compared to the same period of the prior year. Segment net interest income
increased $21 million, primarily driven by growth in the Dealer Finance and Regional Acceptance loan portfolios and the inclusion
of dealer floor plan loans in the segment during the current period. The allocated provision for credit losses increased $5 million,
primarily due to higher expectations of loss severity related to the nonprime automobile loan portfolio, partially offset by lower
net charge-offs and loan growth adjustments. Noninterest expense increased $16 million driven by higher personnel, professional
services, loan processing and other expenses.
Specialized Lending
Specialized Lending net income was $127 million for the six months
ended June 30, 2015, an increase of $8 million compared to the same period of the prior year. Segment net interest income increased
$3 million driven by strong growth in mortgage warehouse loans, small ticket consumer loans and commercial mortgage loans, partially
offset by lower interest rates on new loans. Noninterest income increased $38 million driven by higher commercial mortgage and
operating lease income. The allocated provision for credit losses increased $4 million due to higher net charge-offs. Noninterest
expense increased $23 million, primarily due to higher personnel expense, depreciation of property under operating leases and operating
charge-offs.
Insurance Services
Insurance Services net income was $125 million for the six months
ended June 30, 2015, a decrease of $7 million compared to the same period of the prior year. Insurance Service’s noninterest
income increased $12 million, which primarily reflects higher new and renewal commercial property and casualty insurance business,
partially offset by lower direct commercial property and casualty insurance premiums due to the previously discussed sale of American
Coastal. Noninterest expense decreased $1 million driven by lower salary expense, operating charge-offs and a reduction in certain
actuarially determined loss reserves, partially offset by higher incentive, employee insurance and pension expense and merger-related
charges. Allocated corporate expenses increased $14 million primarily due to the centralization of certain corporate support functions
during mid-2014.
Financial Services
Financial Services net income was $134 million for the six months
ended June 30, 2015, which was flat compared to the same period of the prior year. Segment net interest income increased $34 million
driven by Corporate Banking and BB&T Wealth loan and deposit growth, partially offset by lower interest rates on new loans
and lower funding spreads on deposits. Noninterest income increased $41 million as the result of higher capital market fees, investment
commissions and brokerage fees, trust income, commercial unused commitment fees and income from SBIC private equity investments.
The allocated provision for credit losses increased $44 million as the result of Corporate Banking loan portfolio mix and risk
expectations related to the oil and energy sector. Noninterest expense increased $30 million compared to the earlier period, driven
by higher salary, incentive and pension expense.
Other, Treasury & Corporate
Other, Treasury & Corporate generated a net loss of $12 million
for the six months ended June 30, 2015, compared to net income of $91 in the same period of the prior year. Segment net interest
income decreased $92 million driven by lower acquired from FDIC loan balances, lower funding spreads and a decrease in securities
acquired from the FDIC. Noninterest income increased $3 million, primarily due to improved FDIC loss share income, partially offset
by the loss on the previously discussed sale of American Coastal. The allocated provision for credit losses reflected a benefit
of $1 million in the first half of 2015, compared to a benefit of $25 million in the earlier period, primarily due to a release
in the RUFC in the earlier period driven by improvements related to the mix of unfunded lending exposures. Noninterest expense
increased $234 million, primarily due to higher salary, employee insurance, and pension expense, merger-related charges, and the
previously discussed $172 million loss on early extinguishment of FLHB advances in the current period. Intersegment referral fee
expenses increased $15 million driven by higher mortgage loan, insurance and capital market referrals shared by other segments.
Allocated corporate expense decreased by $38 million compared to the earlier period as the result of higher expense allocations
to the other segments related to internal business initiatives and the continued centralization of certain support functions into
the respective corporate centers.
Analysis of Financial Condition
Investment Activities
The total securities portfolio was $40.6 billion at June 30, 2015,
compared to $41.1 billion at December 31, 2014. As of June 30, 2015, the securities portfolio included $21.2 billion of AFS securities
(at fair value) and $19.4 billion of HTM securities (at amortized cost).
The effective duration of the securities portfolio was 4.0 years
at June 30, 2015, compared to 3.9 years at December 31, 2014. The duration of the securities portfolio excludes equity securities,
auction rate securities and certain non-agency residential MBS that were acquired in the Colonial acquisition.
See Note 3 “Securities” in the “Notes to Consolidated
Financial Statements” herein for additional disclosures related to BB&T’s evaluation of securities for OTTI.
Lending Activities
Loans HFI totaled $122.3 billion at June 30, 2015, up $2.4 billion
compared to December 31, 2014. The increase in loans HFI included the impact of the acquisition of The Bank of Kentucky, which
added $1.2 billion in loans. Excluding this acquisition, loans grew $1.2 billion, primarily the result of growth in commercial
and industrial loans of $1.6 billion, other lending subsidiaries loans of $605 million and direct retail lending loans of $432
million. These increases were partially offset by a $1.1 billion decline in residential mortgage loan balances reflecting the continuing
strategy of selling all conforming loan production.
The following table presents the composition of average loans and leases: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 3 |
|
|
Composition of Average Loans and Leases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
|
|
|
|
6/30/15 |
|
3/31/15 |
|
12/31/14 |
|
9/30/14 |
|
6/30/14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Commercial and industrial |
$ |
42,541 |
|
$ |
41,448 |
|
$ |
40,383 |
|
$ |
39,906 |
|
$ |
39,397 |
|
|
CRE-income producing properties |
|
10,730 |
|
|
10,680 |
|
|
10,681 |
|
|
10,596 |
|
|
10,382 |
|
|
CRE-construction and development |
|
2,767 |
|
|
2,734 |
|
|
2,772 |
|
|
2,670 |
|
|
2,566 |
|
|
Direct retail lending |
|
8,449 |
|
|
8,191 |
|
|
8,085 |
|
|
7,912 |
|
|
7,666 |
|
|
Sales finance |
|
10,517 |
|
|
10,498 |
|
|
10,247 |
|
|
10,313 |
|
|
10,028 |
|
|
Revolving credit |
|
2,365 |
|
|
2,385 |
|
|
2,427 |
|
|
2,396 |
|
|
2,362 |
|
|
Residential mortgage |
|
29,862 |
|
|
30,427 |
|
|
31,046 |
|
|
32,000 |
|
|
32,421 |
|
|
Other lending subsidiaries |
|
11,701 |
|
|
11,318 |
|
|
11,351 |
|
|
11,234 |
|
|
10,553 |
|
|
Acquired from FDIC |
|
1,055 |
|
|
1,156 |
|
|
1,309 |
|
|
1,537 |
|
|
1,739 |
|
|
|
Total average loans and leases HFI |
$ |
119,987 |
|
$ |
118,837 |
|
$ |
118,301 |
|
$ |
118,564 |
|
$ |
117,114 |
|
Average loans HFI for the second quarter of 2015 were $120.0 billion,
up $1.2 billion compared to the first quarter of 2015. The increase in average loans held for investment was primarily due to an
increase of $1.1 billion in average commercial and industrial loans, a $383 million increase in average other lending subsidiaries
loans and a $258 million increase in average direct retail lending loans. These increases were partially offset by a $565 million
decline in average residential mortgage loans and continued run-off of loans acquired from the FDIC. The acquisition of The Bank
of Kentucky contributed approximately $146 million of the increase in average loans for the quarter.
Average commercial and industrial loans increased an annualized
10.6%, which reflects growth from large corporate clients and increased mortgage warehouse lending. Average other lending subsidiaries
loans were up an annualized 13.6% primarily due to seasonal activity. Average direct retail lending loans were up an annualized
12.6% primarily due to an increase in home equity line balances.
The decrease of $565 million, or 7.4% annualized, in the residential
mortgage portfolio reflects the continued strategy to sell all conforming residential mortgage loan production.
Asset Quality
Asset quality continued to improve during the
second quarter of 2015. NPAs, which include foreclosed real estate, repossessions, NPLs and nonperforming TDRs, totaled $729 million
at June 30, 2015, compared to $782 million at December 31, 2014. The decrease in NPAs was primarily driven by a decline in NPLs
of $44 million. NPAs as a percentage of loans and leases HFI plus foreclosed property were 0.60% at June 30, 2015, compared with
0.65% at December 31, 2014.
The following table presents activity related to NPAs, excluding foreclosed real estate acquired from the FDIC: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 4 |
Rollforward of NPAs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Beginning balance |
$ |
726 |
|
$ |
1,053 |
|
|
|
New NPAs |
|
570 |
|
|
656 |
|
|
|
Advances and principal increases |
|
36 |
|
|
40 |
|
|
|
Disposals of foreclosed assets (1) |
|
(220) |
|
|
(250) |
|
|
|
Disposals of NPLs (2) |
|
(75) |
|
|
(110) |
|
|
|
Charge-offs and losses |
|
(126) |
|
|
(157) |
|
|
|
Payments |
|
(159) |
|
|
(212) |
|
|
|
Transfers to performing status |
|
(70) |
|
|
(114) |
|
|
|
Other, net |
|
― |
|
|
10 |
|
|
Ending balance |
$ |
682 |
|
$ |
916 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Includes charge-offs and losses recorded upon sale of $72 million and $82 million for the six months ended June 30, 2015 and 2014, respectively. |
(2) |
Includes charge-offs and losses recorded upon sale of $12 million and $20 million for the six months ended June 30, 2015 and 2014, respectively. |
The following tables summarize asset quality information
for the past five years. As more fully described below, this information has been adjusted to exclude certain components:
| · | BB&T has recorded certain amounts related to government guaranteed GNMA mortgage loans that
BB&T has the option, but not the obligation, to repurchase and has effectively regained control. These amounts are reported
in the Consolidated Balance Sheets but have been excluded from the asset quality disclosures, as management believes they result
in distortion of the reported metrics. The amount of government guaranteed GNMA mortgage loans that have been excluded are noted
in the footnotes to Table 5. |
| · | In addition, BB&T has concluded that the inclusion of loans acquired from the FDIC in “Loans
90 days or more past due and still accruing as a percentage of total loans and leases” may result in significant distortion
to this ratio. The inclusion of these loans could result in a lack of comparability across quarters or years, and could negatively
impact comparability with other portfolios that were not impacted by acquisition accounting. BB&T believes that the presentation
of this asset quality measure excluding loans acquired from the FDIC provides additional perspective into underlying trends related
to the quality of its loan portfolio. Accordingly, the asset quality measures in Table 6 present asset quality information on a
consolidated basis as well as “Loans 90 days or more past due and still accruing as a percentage of total loans and leases”
excluding loans acquired from the FDIC. |
|
Table 5 |
|
Asset Quality |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
6/30/2015 |
|
3/31/2015 |
|
12/31/2014 |
|
9/30/2014 |
|
6/30/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
NPAs (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NPLs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
$ |
198 |
|
$ |
230 |
|
$ |
239 |
|
$ |
259 |
|
$ |
298 |
|
|
CRE-income producing properties |
|
59 |
|
|
63 |
|
|
74 |
|
|
81 |
|
|
84 |
|
|
CRE-construction and development |
|
16 |
|
|
18 |
|
|
26 |
|
|
37 |
|
|
38 |
|
|
Direct retail lending |
|
41 |
|
|
47 |
|
|
48 |
|
|
50 |
|
|
49 |
|
|
Sales finance |
|
13 |
|
|
7 |
|
|
5 |
|
|
5 |
|
|
5 |
|
|
Residential mortgage-nonguaranteed (2) |
|
188 |
|
|
183 |
|
|
166 |
|
|
298 |
|
|
320 |
|
|
Other lending subsidiaries |
|
57 |
|
|
51 |
|
|
58 |
|
|
54 |
|
|
47 |
|
Total nonaccrual loans and leases HFI (2) |
|
572 |
|
|
599 |
|
|
616 |
|
|
784 |
|
|
841 |
|
|
Foreclosed real estate |
|
86 |
|
|
90 |
|
|
87 |
|
|
75 |
|
|
56 |
|
|
Foreclosed real estate-acquired from FDIC |
|
47 |
|
|
53 |
|
|
56 |
|
|
56 |
|
|
56 |
|
|
Other foreclosed property |
|
24 |
|
|
23 |
|
|
23 |
|
|
24 |
|
|
19 |
|
Total NPAs (1)(2) |
$ |
729 |
|
$ |
765 |
|
$ |
782 |
|
$ |
939 |
|
$ |
972 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing TDRs (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
$ |
75 |
|
$ |
54 |
|
$ |
64 |
|
$ |
90 |
|
$ |
86 |
|
|
CRE-income producing properties |
|
21 |
|
|
15 |
|
|
27 |
|
|
25 |
|
|
27 |
|
|
CRE-construction and development |
|
23 |
|
|
25 |
|
|
30 |
|
|
28 |
|
|
30 |
|
|
Direct retail lending |
|
81 |
|
|
84 |
|
|
84 |
|
|
89 |
|
|
91 |
|
|
Sales finance |
|
18 |
|
|
18 |
|
|
19 |
|
|
20 |
|
|
18 |
|
|
Revolving credit |
|
36 |
|
|
38 |
|
|
41 |
|
|
44 |
|
|
46 |
|
|
Residential mortgage-nonguaranteed (4) |
|
273 |
|
|
269 |
|
|
261 |
|
|
254 |
|
|
814 |
|
|
Residential mortgage-government guaranteed |
|
328 |
|
|
325 |
|
|
360 |
|
|
437 |
|
|
433 |
|
|
Other lending subsidiaries |
|
172 |
|
|
168 |
|
|
164 |
|
|
151 |
|
|
141 |
|
Total performing TDRs (3)(4) |
$ |
1,027 |
|
$ |
996 |
|
$ |
1,050 |
|
$ |
1,138 |
|
$ |
1,686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans 90 days or more past due and still accruing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct retail lending |
$ |
10 |
|
$ |
9 |
|
$ |
12 |
|
$ |
13 |
|
$ |
11 |
|
|
Sales finance |
|
4 |
|
|
3 |
|
|
5 |
|
|
5 |
|
|
3 |
|
|
Revolving credit |
|
9 |
|
|
10 |
|
|
9 |
|
|
10 |
|
|
8 |
|
|
Residential mortgage-nonguaranteed |
|
60 |
|
|
59 |
|
|
83 |
|
|
79 |
|
|
80 |
|
|
Residential mortgage-government guaranteed (5) |
|
154 |
|
|
157 |
|
|
238 |
|
|
232 |
|
|
254 |
|
|
Acquired from FDIC |
|
124 |
|
|
154 |
|
|
188 |
|
|
229 |
|
|
249 |
|
Total loans 90 days or more past due and still accruing (5) |
$ |
361 |
|
$ |
392 |
|
$ |
535 |
|
$ |
568 |
|
$ |
605 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans 30-89 days past due |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
$ |
16 |
|
$ |
20 |
|
$ |
23 |
|
$ |
19 |
|
$ |
21 |
|
|
CRE-income producing properties |
|
4 |
|
|
7 |
|
|
4 |
|
|
5 |
|
|
7 |
|
|
CRE-construction and development |
|
3 |
|
|
2 |
|
|
1 |
|
|
1 |
|
|
2 |
|
|
Direct retail lending |
|
41 |
|
|
40 |
|
|
41 |
|
|
40 |
|
|
41 |
|
|
Sales finance |
|
53 |
|
|
49 |
|
|
62 |
|
|
55 |
|
|
49 |
|
|
Revolving credit |
|
19 |
|
|
19 |
|
|
23 |
|
|
22 |
|
|
20 |
|
|
Residential mortgage-nonguaranteed |
|
362 |
|
|
356 |
|
|
392 |
|
|
424 |
|
|
513 |
|
|
Residential mortgage-government guaranteed (6) |
|
74 |
|
|
68 |
|
|
80 |
|
|
95 |
|
|
87 |
|
|
Other lending subsidiaries |
|
230 |
|
|
151 |
|
|
237 |
|
|
217 |
|
|
197 |
|
|
Acquired from FDIC |
|
31 |
|
|
47 |
|
|
33 |
|
|
41 |
|
|
84 |
|
Total loans 30-89 days past due (6) |
$ |
833 |
|
$ |
759 |
|
$ |
896 |
|
$ |
919 |
|
$ |
1,021 |
Excludes loans held for sale.
| (1) | Loans acquired from the FDIC are considered to be performing due to the application of the accretion method. |
| (2) | During the fourth quarter of 2014, approximately $121 million of residential mortgage NPLs were sold. |
| (3) | Excludes TDRs that are nonperforming totaling $127 million, $127 million, $126 million, $207 million, and $192 million at June
30, 2015, March 31, 2015, December 31, 2014, September 30, 2014, and June 30, 2014, respectively. These amounts are included in
total NPAs. |
| (4) | During the third quarter of 2014, approximately $540 million of performing residential mortgage TDRs were sold. |
| (5) | Excludes government guaranteed GNMA mortgage loans that BB&T has the right but not the obligation to repurchase that are
90 days or more past due totaling $338 million, $361 million, $410 million, $395 million, and $423 million at June 30, 2015, March
31, 2015, December 31, 2014, September 30, 2014, and June 30, 2014, respectively. |
| (6) | Excludes government guaranteed GNMA mortgage loans that BB&T has the right but not the obligation to repurchase that are
past due 30-89 days totaling $3 million, $2 million, $2 million, $4 million, and $3 million at June 30, 2015, March 31, 2015, December
31, 2014, September 30, 2014, and June 30, 2014, respectively. |
Table 6 |
Asset Quality Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of / For the Three Months Ended |
|
|
|
|
6/30/2015 |
|
3/31/2015 |
|
12/31/2014 |
|
9/30/2014 |
|
6/30/2014 |
Asset Quality Ratios (including assets acquired from FDIC) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans 30-89 days past due and still accruing as a |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
percentage of loans and leases HFI (1) |
0.68 |
% |
|
0.63 |
% |
|
0.75 |
% |
|
0.77 |
% |
|
0.85 |
% |
|
Loans 90 days or more past due and still accruing as a |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
percentage of loans and leases HFI (1) |
0.29 |
|
|
0.33 |
|
|
0.45 |
|
|
0.48 |
|
|
0.51 |
|
|
NPLs as a percentage of loans and leases HFI |
0.47 |
|
|
0.50 |
|
|
0.51 |
|
|
0.66 |
|
|
0.70 |
|
|
NPAs as a percentage of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
0.38 |
|
|
0.40 |
|
|
0.42 |
|
|
0.50 |
|
|
0.52 |
|
|
|
Loans and leases HFI plus foreclosed property |
0.60 |
|
|
0.64 |
|
|
0.65 |
|
|
0.79 |
|
|
0.81 |
|
|
Net charge-offs as a percentage of average loans and leases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HFI |
0.33 |
|
|
0.34 |
|
|
0.39 |
|
|
0.48 |
|
|
0.41 |
|
|
ALLL as a percentage of loans and leases HFI |
1.19 |
|
|
1.22 |
|
|
1.23 |
|
|
1.27 |
|
|
1.33 |
|
|
Ratio of ALLL to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs |
3.71 |
x |
|
3.60 |
x |
|
3.21 |
x |
|
2.67 |
x |
|
3.28 |
x |
|
|
NPLs |
2.55 |
|
|
2.45 |
|
|
2.39 |
|
|
1.92 |
|
|
1.89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Quality Ratios (excluding assets acquired from FDIC) (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans 90 days or more past due and still accruing as a |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
percentage of loans and leases HFI (1) |
0.19 |
% |
|
0.20 |
% |
|
0.29 |
% |
|
0.29 |
% |
|
0.30 |
% |
|
|
|
|
As of / For the |
|
|
|
|
Six Months Ended |
|
|
|
|
June 30, |
|
|
|
|
2015 |
|
2014 |
Asset Quality Ratios |
|
|
|
|
|
|
|
Including assets acquired from FDIC: |
|
|
|
|
|
|
|
|
Net charge-offs as a percentage of average loans and leases |
|
0.33 |
% |
|
0.49 |
% |
|
|
Ratio of ALLL to net charge-offs |
|
3.65 |
x |
|
2.81 |
x |
Applicable ratios are annualized.
| (1) | Excludes government guaranteed GNMA mortgage loans that BB&T has the right but not the obligation to repurchase. Refer
to the footnotes of Table 5 for amounts related to these loans. |
| (2) | These asset quality ratios have been adjusted to remove the impact of assets acquired from the FDIC. Appropriate adjustments
to the numerator and denominator have been reflected in the calculation of these ratios. Management believes the inclusion of assets
acquired from the FDIC in certain asset quality ratios that include nonperforming assets, past due loans or net charge-offs in
the numerator or denominator results in distortion of these ratios and they may not be comparable to other periods presented or
to other portfolios that were not impacted by loss share accounting. |
Problem loans include loans on nonaccrual status or loans that are
90 days or more past due and still accruing as disclosed in Table 5. In addition, for the commercial portfolio segment, loans that
are rated special mention or substandard performing are closely monitored by management as potential problem loans. Refer to Note
4 “Loans and ACL” in the “Notes to Consolidated Financial Statements” herein for additional disclosures
related to these potential problem loans.
Certain residential mortgage loans have an initial period where
the borrower is only required to pay the periodic interest. After the interest-only period, the loan will require the payment of
both interest and principal over the remaining term. At June 30, 2015, approximately 4.2% of the outstanding balances of residential
mortgage loans were in the interest-only phase, compared to 5.3% at December 31, 2014. Approximately 89.3% of the interest-only
balances will begin amortizing within the next three years. Approximately 2.8% of interest-only loans are 30 days or more past
due and still accruing and 1.2% are on nonaccrual status.
Home equity lines, which are a component of the direct retail portfolio,
generally require interest-only payments during the first 15 years after origination. After this initial period, the outstanding
balance begins amortizing and requires the payment of both interest and principal. At June 30, 2015, approximately 68.0% of the
outstanding balances of home equity lines were in the interest-only phase. Approximately 8.7% of these balances will begin amortizing
within the next three years. The delinquency rate of interest-only lines is similar to amortizing lines.
TDRs occur when a borrower is experiencing, or is expected to experience,
financial difficulties in the near-term and a concession has been granted to the borrower. As a result, BB&T will work with
the borrower to prevent further difficulties and ultimately improve the likelihood of recovery on the loan. To facilitate this
process, a concessionary modification that would not otherwise be considered may be granted, resulting in classification of the
loan as a TDR. Refer to Note 1 “Summary of Significant Accounting Policies” in the “Notes to Consolidated Financial
Statements” in the Annual Report on Form 10-K for the year ended December 31, 2014 for additional policy information regarding
TDRs.
Performing TDRs totaled $1.0 billion at June 30, 2015, a decrease
of $23 million compared to December 31, 2014. The following table provides a summary of performing TDR activity:
Table 7 |
Rollforward of Performing TDRs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Beginning balance |
$ |
1,050 |
|
$ |
1,705 |
|
|
|
Inflows |
|
240 |
|
|
314 |
|
|
|
Payments and payoffs |
|
(122) |
|
|
(119) |
|
|
|
Charge-offs |
|
(21) |
|
|
(36) |
|
|
|
Transfers to nonperforming TDRs, net |
|
(31) |
|
|
(33) |
|
|
|
Removal due to the passage of time |
|
(9) |
|
|
(108) |
|
|
|
Non-concessionary re-modifications |
|
(1) |
|
|
(11) |
|
|
|
Sold and transferred to held for sale |
|
(79) |
|
|
(30) |
|
|
|
Other |
|
― |
|
|
4 |
|
|
Ending balance |
$ |
1,027 |
|
$ |
1,686 |
|
The following table provides further details regarding the payment status of TDRs outstanding at June 30, 2015: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 8 |
TDRs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2015 |
|
|
|
|
|
|
|
|
|
|
Past Due |
|
Past Due |
|
|
|
|
|
|
|
Current Status |
|
30-89 Days |
|
90 Days Or More |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
Performing TDRs (1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
$ |
75 |
|
100.0 |
% |
|
$ |
― |
|
― |
% |
|
$ |
― |
|
― |
% |
|
$ |
75 |
|
CRE-income producing properties |
|
21 |
|
100.0 |
|
|
|
― |
|
― |
|
|
|
― |
|
― |
|
|
|
21 |
|
CRE-construction and development |
|
23 |
|
100.0 |
|
|
|
― |
|
― |
|
|
|
― |
|
― |
|
|
|
23 |
|
Direct retail lending |
|
77 |
|
95.1 |
|
|
|
3 |
|
3.7 |
|
|
|
1 |
|
1.2 |
|
|
|
81 |
|
Sales finance |
|
17 |
|
94.4 |
|
|
|
1 |
|
5.6 |
|
|
|
― |
|
― |
|
|
|
18 |
|
Revolving credit |
|
31 |
|
86.1 |
|
|
|
4 |
|
11.1 |
|
|
|
1 |
|
2.8 |
|
|
|
36 |
|
Residential mortgage-nonguaranteed |
|
225 |
|
82.4 |
|
|
|
42 |
|
15.4 |
|
|
|
6 |
|
2.2 |
|
|
|
273 |
|
Residential mortgage-government guaranteed |
|
177 |
|
54.0 |
|
|
|
60 |
|
18.3 |
|
|
|
91 |
|
27.7 |
|
|
|
328 |
|
Other lending subsidiaries |
|
144 |
|
83.7 |
|
|
|
28 |
|
16.3 |
|
|
|
― |
|
― |
|
|
|
172 |
|
|
Total performing TDRs |
|
790 |
|
76.9 |
|
|
|
138 |
|
13.4 |
|
|
|
99 |
|
9.7 |
|
|
|
1,027 |
Nonperforming TDRs (2) |
|
53 |
|
41.7 |
|
|
|
10 |
|
7.9 |
|
|
|
64 |
|
50.4 |
|
|
|
127 |
|
|
Total TDRs |
$ |
843 |
|
73.1 |
|
|
$ |
148 |
|
12.8 |
|
|
$ |
163 |
|
14.1 |
|
|
$ |
1,154 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) | Past due performing TDRs are included in past due disclosures. |
| (2) | Nonperforming TDRs are included in NPL disclosures. |
Allowance for Credit Losses
The ACL, which consists of the ALLL and the RUFC, totaled $1.5 billion
at June 30, 2015, essentially flat compared to December 31, 2014. The ALLL amounted to 1.19% of loans and leases held for investment
at June 30, 2015, compared to 1.23% at December 31, 2014. The decrease in the ALLL as a percentage of loans and leases reflects
continued improvement in the credit quality of the loan portfolio as well as the impact of the acquisition of The Bank of Kentucky,
as no allowance was recorded in connection with the purchase accounting. The ratio of the ALLL to nonperforming loans and leases
held for investment was 2.55 times at June 30, 2015, compared to 2.39 times at December 31, 2014.
Net charge-offs totaled $98 million for the second quarter of 2015
and amounted to 0.33% of average loans and leases, compared to $121 million, or 0.41% of average loans and leases in the second
quarter of 2014. For the six months ended June 30, 2015, net charge-offs were $199 million and amounted to 0.33% of average loans
and leases compared to $280 million, or 0.49% of average loans and leases in the same period of 2014.
Charge-offs related to loans acquired from the FDIC represent realized
losses in certain acquired loan pools that exceed the amounts originally estimated at the acquisition date. This impairment was
provided for in prior quarters and therefore the charge-offs have no impact on the Consolidated Statements of Income.
Refer to Note 4 “Loans and ACL” in the “Notes
to Consolidated Financial Statements” for additional disclosures.
The following table presents an allocation of the ALLL at June 30,
2015 and December 31, 2014. This allocation of the ALLL is calculated on an approximate basis and is not necessarily indicative
of future losses or allocations. The entire amount of the allowance is available to absorb losses occurring in any category of
loans and leases.
Table 9 |
Allocation of ALLL by Category |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2015 |
|
December 31, 2014 |
|
|
|
|
|
|
|
% Loans |
|
|
|
|
% Loans |
|
|
|
|
|
|
|
in each |
|
|
|
|
in each |
|
|
|
|
Amount |
|
category |
|
Amount |
|
category |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Commercial and industrial |
$ |
457 |
|
35.6 |
% |
|
$ |
422 |
|
34.6 |
% |
|
|
CRE-income producing properties |
|
141 |
|
9.1 |
|
|
|
162 |
|
8.9 |
|
|
|
CRE-construction and development |
|
38 |
|
2.3 |
|
|
|
48 |
|
2.3 |
|
|
|
Direct retail lending |
|
113 |
|
7.1 |
|
|
|
110 |
|
6.8 |
|
|
|
Sales finance |
|
54 |
|
8.6 |
|
|
|
50 |
|
8.8 |
|
|
|
Revolving credit |
|
102 |
|
2.0 |
|
|
|
110 |
|
2.1 |
|
|
|
Residential mortgage-nonguaranteed |
|
197 |
|
23.9 |
|
|
|
217 |
|
25.1 |
|
|
|
Residential mortgage-government guaranteed |
|
28 |
|
0.7 |
|
|
|
36 |
|
0.8 |
|
|
|
Other lending subsidiaries |
|
270 |
|
9.9 |
|
|
|
255 |
|
9.6 |
|
|
|
Acquired from FDIC |
|
57 |
|
0.8 |
|
|
|
64 |
|
1.0 |
|
|
|
|
Total ALLL |
|
1,457 |
|
100.0 |
% |
|
|
1,474 |
|
100.0 |
% |
|
|
|
RUFC |
|
78 |
|
|
|
|
|
60 |
|
|
|
|
|
|
Total ACL |
$ |
1,535 |
|
|
|
|
$ |
1,534 |
|
|
|
|
Activity related to the ACL is presented in the following table: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 10 |
|
Analysis of ACL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
6/30/2015 |
|
3/31/2015 |
|
12/31/2014 |
|
9/30/2014 |
|
6/30/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
Beginning balance |
$ |
1,532 |
|
$ |
1,534 |
|
$ |
1,567 |
|
$ |
1,675 |
|
$ |
1,722 |
|
Provision for credit losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(excluding loans acquired from the FDIC) |
|
97 |
|
|
105 |
|
|
84 |
|
|
46 |
|
|
83 |
|
Provision (benefit) for loans acquired from the FDIC |
|
― |
|
|
(6) |
|
|
(1) |
|
|
(12) |
|
|
(9) |
|
|
Charge-offs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
(32) |
|
|
(14) |
|
|
(27) |
|
|
(31) |
|
|
(40) |
|
|
|
CRE-income producing properties |
|
(4) |
|
|
(9) |
|
|
(4) |
|
|
(8) |
|
|
(11) |
|
|
|
CRE-construction and development |
|
― |
|
|
(2) |
|
|
(2) |
|
|
(2) |
|
|
(3) |
|
|
|
Direct retail lending |
|
(13) |
|
|
(12) |
|
|
(14) |
|
|
(17) |
|
|
(19) |
|
|
|
Sales finance |
|
(5) |
|
|
(6) |
|
|
(7) |
|
|
(5) |
|
|
(4) |
|
|
|
Revolving credit |
|
(19) |
|
|
(18) |
|
|
(18) |
|
|
(17) |
|
|
(18) |
|
|
|
Residential mortgage-nonguaranteed |
|
(7) |
|
|
(11) |
|
|
(10) |
|
|
(31) |
|
|
(20) |
|
|
|
Residential mortgage-government guaranteed |
|
(2) |
|
|
― |
|
|
― |
|
|
(1) |
|
|
(1) |
|
|
|
Other lending subsidiaries |
|
(57) |
|
|
(67) |
|
|
(71) |
|
|
(66) |
|
|
(47) |
|
|
|
Acquired from FDIC |
|
― |
|
|
(1) |
|
|
(14) |
|
|
― |
|
|
(4) |
|
|
Total charge-offs |
|
(139) |
|
|
(140) |
|
|
(167) |
|
|
(178) |
|
|
(167) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
13 |
|
|
8 |
|
|
13 |
|
|
10 |
|
|
10 |
|
|
|
CRE-income producing properties |
|
1 |
|
|
2 |
|
|
7 |
|
|
2 |
|
|
3 |
|
|
|
CRE-construction and development |
|
2 |
|
|
4 |
|
|
4 |
|
|
2 |
|
|
10 |
|
|
|
Direct retail lending |
|
7 |
|
|
8 |
|
|
7 |
|
|
7 |
|
|
7 |
|
|
|
Sales finance |
|
2 |
|
|
3 |
|
|
2 |
|
|
2 |
|
|
2 |
|
|
|
Revolving credit |
|
5 |
|
|
5 |
|
|
5 |
|
|
4 |
|
|
5 |
|
|
|
Residential mortgage-nonguaranteed |
|
1 |
|
|
― |
|
|
5 |
|
|
1 |
|
|
― |
|
|
|
Other lending subsidiaries |
|
10 |
|
|
9 |
|
|
8 |
|
|
8 |
|
|
9 |
|
|
Total recoveries |
|
41 |
|
|
39 |
|
|
51 |
|
|
36 |
|
|
46 |
|
Net charge-offs |
|
(98) |
|
|
(101) |
|
|
(116) |
|
|
(142) |
|
|
(121) |
|
Other |
|
4 |
|
|
― |
|
|
― |
|
|
― |
|
|
― |
|
|
Ending balance |
$ |
1,535 |
|
$ |
1,532 |
|
$ |
1,534 |
|
$ |
1,567 |
|
$ |
1,675 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALLL (excluding acquired from FDIC loans) |
$ |
1,400 |
|
$ |
1,407 |
|
$ |
1,410 |
|
$ |
1,425 |
|
$ |
1,499 |
|
Allowance for acquired from FDIC loans |
|
57 |
|
|
57 |
|
|
64 |
|
|
79 |
|
|
91 |
|
RUFC |
|
78 |
|
|
68 |
|
|
60 |
|
|
63 |
|
|
85 |
|
|
Total ACL |
$ |
1,535 |
|
$ |
1,532 |
|
$ |
1,534 |
|
$ |
1,567 |
|
$ |
1,675 |
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
June 30, |
|
|
|
|
|
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Beginning balance |
$ |
1,534 |
|
$ |
1,821 |
|
|
Provision for credit losses (excluding loans acquired from the FDIC) |
|
202 |
|
|
150 |
|
|
Provision (benefit) for loans acquired from the FDIC |
|
(6) |
|
|
(16) |
|
|
|
Charge-offs: |
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
(46) |
|
|
(73) |
|
|
|
|
CRE - income producing properties |
|
(13) |
|
|
(19) |
|
|
|
|
CRE - construction and development |
|
(2) |
|
|
(7) |
|
|
|
|
Direct retail lending (1) |
|
(25) |
|
|
(38) |
|
|
|
|
Sales finance |
|
(11) |
|
|
(11) |
|
|
|
|
Revolving credit |
|
(37) |
|
|
(36) |
|
|
|
|
Residential mortgage-nonguaranteed (1) |
|
(18) |
|
|
(41) |
|
|
|
|
Residential mortgage-government guaranteed |
|
(2) |
|
|
(1) |
|
|
|
|
Other lending subsidiaries |
|
(124) |
|
|
(132) |
|
|
|
|
Acquired from FDIC |
|
(1) |
|
|
(7) |
|
|
|
Total charge-offs |
|
(279) |
|
|
(365) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries: |
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
21 |
|
|
19 |
|
|
|
|
CRE - income producing properties |
|
3 |
|
|
5 |
|
|
|
|
CRE - construction and development |
|
6 |
|
|
13 |
|
|
|
|
Direct retail lending (1) |
|
15 |
|
|
15 |
|
|
|
|
Sales finance |
|
5 |
|
|
5 |
|
|
|
|
Revolving credit |
|
10 |
|
|
10 |
|
|
|
|
Residential mortgage-nonguaranteed (1) |
|
1 |
|
|
1 |
|
|
|
|
Other lending subsidiaries |
|
19 |
|
|
17 |
|
|
|
Total recoveries |
|
80 |
|
|
85 |
|
|
Net charge-offs |
|
(199) |
|
|
(280) |
|
|
Other |
|
4 |
|
|
― |
|
|
|
Ending balance |
$ |
1,535 |
|
$ |
1,675 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
During the first quarter of 2014, $8.3 billion of loans were transferred from direct retail lending to residential mortgage. Charge-offs and recoveries have been reflected in these line items based upon the date the loans were transferred. |
|
FDIC Loss Share Receivable and Assets Acquired from the FDIC
In connection with the Colonial acquisition, Branch Bank entered
into loss sharing agreements with the FDIC that outline the terms and conditions under which the FDIC will reimburse Branch Bank
for a portion of the losses incurred on certain loans, OREO, investment securities and other assets. Refer to BB&T’s
Annual Report on Form 10-K for the year ended December 31, 2014 for additional information regarding the loss sharing agreements
and a summary of the accounting treatment for related assets and liabilities. The following table presents the carrying amount
of assets by loss share agreement:
Table 11 |
Assets Acquired from the FDIC by Loss Share Agreement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2015 |
|
December 31, 2014 |
|
|
|
|
|
Commercial |
|
Single Family |
|
Total |
|
Commercial |
|
Single Family |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Loans and leases |
|
$ |
392 |
|
$ |
600 |
|
$ |
992 |
|
$ |
561 |
|
$ |
654 |
|
$ |
1,215 |
|
|
AFS securities |
|
|
1,158 |
|
|
― |
|
|
1,158 |
|
|
1,243 |
|
|
― |
|
|
1,243 |
|
|
Other assets |
|
|
51 |
|
|
31 |
|
|
82 |
|
|
58 |
|
|
38 |
|
|
96 |
|
|
|
Total assets acquired from the FDIC |
|
$ |
1,601 |
|
$ |
631 |
|
$ |
2,232 |
|
$ |
1,862 |
|
$ |
692 |
|
$ |
2,554 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UPB of loans and leases |
|
$ |
617 |
|
$ |
815 |
|
$ |
1,432 |
|
$ |
836 |
|
$ |
888 |
|
$ |
1,724 |
|
As of October 1, 2014, the loss provisions of the commercial loss
sharing agreement expired; however, gains on the disposition of assets subject to this agreement will be shared with the FDIC through
September 30, 2017. Any gains realized after September 30, 2017 would not be shared with the FDIC. Assets subject to the single
family loss sharing agreement are indemnified through August 31, 2019.
The gain/loss sharing coverage related to the acquired AFS securities
is based on a contractually-specified value of the securities as of the date of the commercial loss sharing agreement, adjusted
to reflect subsequent pay-downs, redemptions or maturities on the underlying securities. The contractually-specified value of these
securities was approximately $554 million and $626 million at June 30, 2015 and December 31, 2014, respectively. During the period
of gain sharing (October 1, 2014 through September 30, 2017), any decline in the fair value of the acquired AFS securities down
to the contractually-specified value would reduce BB&T’s liability to the FDIC at the applicable loss sharing percentage.
BB&T is not indemnified for declines in the fair value of the acquired securities below the contractually-specified amount.
The following table provides information related to the carrying
amounts and fair values of the components of the FDIC loss share receivable (payable):
Table 12 |
FDIC Loss Share Receivable (Payable) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2015 |
|
December 31, 2014 |
|
|
Attributable to: |
|
Carrying Amount |
|
Fair Value |
|
Carrying Amount |
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Loans |
|
$ |
383 |
|
$ |
59 |
|
$ |
534 |
|
$ |
123 |
|
|
Securities |
|
|
(554) |
|
|
(530) |
|
|
(565) |
|
|
(535) |
|
|
Aggregate loss calculation |
|
|
(141) |
|
|
(164) |
|
|
(132) |
|
|
(161) |
|
|
|
Total |
|
$ |
(312) |
|
$ |
(635) |
|
$ |
(163) |
|
$ |
(573) |
|
The decrease in the carrying amount of the FDIC loss share receivable
attributable to loans acquired from the FDIC was due to the receipt of cash from the FDIC, negative accretion due to credit loss
improvement and the offset to the provision for loans acquired from the FDIC, which was a benefit for the current year. The change
in the carrying amount attributable to the aggregate loss calculation is primarily due to accretion of the expected payment. The
fair values are based upon a discounted cash flow methodology that is consistent with the acquisition date methodology. The fair
value attributable to acquired loans and the aggregate loss calculation changes over time due to the receipt of cash from the FDIC,
updated credit loss assumptions and the passage of time. The fair value attributable to securities acquired from the FDIC is based
upon the timing and amount that would be payable to the FDIC should the securities settle at the current fair value at the conclusion
of the gain sharing period.
The cumulative amount recognized through earnings related to securities
acquired from the FDIC resulted in a liability of $257 million as of June 30, 2015. Securities acquired from the FDIC are classified
as AFS and carried at fair market value, and the changes in unrealized gains/losses are offset by the applicable loss share percentage
in AOCI, which resulted in an additional pre-tax liability of $297 million as of June 30, 2015. BB&T would only owe these amounts
to the FDIC if BB&T were to sell these securities prior to October 1, 2017. BB&T does not currently intend to dispose of
the acquired securities.
Following the conclusion of the 10 year loss share period in 2019,
should actual aggregate losses, excluding securities, be less than an amount determined in accordance with these agreements, BB&T
will pay the FDIC a portion of the difference. As of June 30, 2015, BB&T projects that in 2019 it would owe the FDIC approximately
$179 million under the aggregate loss calculation. This liability is expensed over time and BB&T has recognized total expense
of approximately $141 million through June 30, 2015.
Deposits
Deposits totaled $132.8 billion at June 30, 2015, an increase of
$3.7 billion from December 31, 2014. The acquisition of The Bank of Kentucky added $1.6 billion in deposits. Excluding this acquisition,
noninterest-bearing deposits increased $3.0 billion, money market and savings balances increased $4.3 billion and time deposit
balances declined $5.2 billion.
The following table presents the composition of average deposits for the last five quarters: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 13 |
|
|
Composition of Average Deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
|
|
|
6/30/15 |
|
3/31/15 |
|
12/31/14 |
|
9/30/14 |
|
6/30/14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Noninterest-bearing deposits |
$ |
41,502 |
|
$ |
39,701 |
|
$ |
39,130 |
|
$ |
38,103 |
|
$ |
36,634 |
|
|
Interest checking |
|
20,950 |
|
|
20,623 |
|
|
19,308 |
|
|
18,588 |
|
|
18,406 |
|
|
Money market and savings |
|
53,852 |
|
|
51,644 |
|
|
51,176 |
|
|
49,974 |
|
|
48,965 |
|
|
Time deposits |
|
14,800 |
|
|
17,000 |
|
|
20,041 |
|
|
23,304 |
|
|
25,010 |
|
|
Foreign office deposits - interest-bearing |
|
764 |
|
|
563 |
|
|
660 |
|
|
639 |
|
|
584 |
|
|
|
Total average deposits |
$ |
131,868 |
|
$ |
129,531 |
|
$ |
130,315 |
|
$ |
130,608 |
|
$ |
129,599 |
|
Average deposits for the second quarter were $131.9
billion, an increase of $2.3 billion or 7.2% annualized compared to the prior quarter. The change in average deposits reflects
improved mix, with noninterest-bearing deposits up $1.8 billion, or 18.2% annualized, while interest-bearing balances were up $536
million, or 2.4% annualized. The first quarter acquisition of 41 branches in Texas had an estimated $387 million favorable impact
on average noninterest-bearing deposits and a $1.3 billion impact on average interest-bearing deposits, while the second quarter
acquisition of The Bank of Kentucky had an estimated $190 million favorable impact on average deposits.
Noninterest-bearing deposits represented 31.5%
of total average deposits for the second quarter, compared to 30.6% for the prior quarter and 28.3% a year ago.
The growth in average noninterest-bearing deposits
includes an increase in average commercial accounts totaling $1.6 billion and an increase in average consumer accounts totaling
$503 million, partially offset by a decrease in average public funds accounts totaling $369 million.
Excluding the Texas branch acquisition and The
Bank of Kentucky acquisition, average noninterest bearing deposits increased $1.4 billion, average money market and savings increased
$1.4 billion and average time deposits declined $2.4 billion.
The cost of interest-bearing deposits was 0.24%
for the second quarter, down one basis point compared to the prior quarter.
Borrowings
At June 30, 2015, short-term borrowings totaled
$3.9 billion, an increase of $166 million compared to December 31, 2014. Long-term debt totaled $23.3 billion at June 30, 2015,
a decrease of $41 million from the balance at December 31, 2014. During the second quarter of 2015, higher cost FHLB advances totaling
$931 million with a weighted average interest rate of 4.84% were extinguished, and $1.0 billion of medium term senior notes with
a stated interest rate of 2.625% were issued.
Shareholders’ Equity
Total shareholders’ equity at June 30, 2015
was $25.1 billion, an increase of $755 million compared to December 31, 2014. This increase was primarily driven by net income
of $1.0 billion and net stock issuances of $375 million (including $322 million for the acquisition of The Bank of Kentucky), partially
offset by common and preferred dividends totaling $442 million and a reduction of $222 million for the purchase of additional ownership
interest in AmRisc, LP. BB&T’s book value per common share at June 30, 2015 was $30.64, compared to $30.09 at December
31, 2014.
Merger-Related and Restructuring Activities
At June 30, 2015 and December 31, 2014, merger-related and restructuring
accruals totaled $38 million and $31 million, respectively. Merger-related and restructuring accruals are re-evaluated periodically
and adjusted as necessary. The remaining accruals at June 30, 2015 are expected to be utilized within one year, unless they relate
to specific contracts that expire later.
Critical Accounting Policies
The accounting and reporting policies of BB&T are in accordance
with GAAP and conform to the accounting and reporting guidelines prescribed by bank regulatory authorities. BB&T’s financial
position and results of operations are affected by management’s application of accounting policies, including estimates,
assumptions and judgments made to arrive at the carrying value of assets and liabilities and amounts reported for revenues and
expenses. Different assumptions in the application of these policies could result in material changes in the consolidated financial
position and/or consolidated results of operations and related disclosures. The more critical accounting and reporting policies
include accounting for the ACL, determining fair value of financial instruments, intangible assets, costs and benefit obligations
associated with pension and postretirement benefit plans, and income taxes. Understanding BB&T’s accounting policies
is fundamental to understanding the consolidated financial position and consolidated results of operations. Accordingly, the critical
accounting policies are discussed in detail in “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” in BB&T’s Annual Report on Form 10-K for the year ended December 31, 2014. Significant accounting
policies and changes in accounting principles and effects of new accounting pronouncements are discussed in detail in Note 1 in
the “Notes to Consolidated Financial Statements” in BB&T’s Annual Report on Form 10-K for the year ended
December 31, 2014. There have been no changes to the significant accounting policies during 2015. Additional disclosures regarding
the effects of new accounting pronouncements are included in Note 1 “Basis of Presentation” included herein.
Risk Management
BB&T has a strong and consistent risk culture, based on established
risk values, which promotes predictable and consistent performance within an environment of open communication and effective challenge.
The strong culture influences all associates in the organization daily and helps them evaluate whether risks are acceptable or
unacceptable while making decisions that balance quality, profitability and growth appropriately. BB&T’s effective risk
management framework establishes an environment which enables it to achieve superior performance relative to peers, ensures that
BB&T is viewed among the safest of banks and assures the operational freedom to act on opportunities.
BB&T ensures that there is an appropriate return for the amount
of risk taken, and that the expected return is in line with its strategic objectives and business plan. Risk-taking activities
are evaluated and prioritized to identify those that present attractive risk-adjusted returns while preserving asset value. BB&T
only undertakes risks that are understood and can be managed effectively. By managing risk well, BB&T ensures sufficient capital
is available to maintain and grow core business operations in a safe and sound manner.
Regardless of financial gain or loss to the Company, associates
are held accountable if they do not follow the established risk management policies and procedures. Compensation decisions take
into account an associate’s adherence to and successful implementation of BB&T’s risk values. The compensation
structure supports the Company’s core values and sound risk management practices in an effort to promote judicious risk-taking
behavior.
BB&T’s risk culture encourages transparency and open dialogue
between all levels in the performance of organizational functions, such as the development, marketing and implementation of a product
or service.
The principal types of inherent risk include compliance, credit,
liquidity, market, operational, reputation and strategic risks. Refer to BB&T’s Annual Report on Form 10-K for the year
ended December 31, 2014 for disclosures related to each of these risks under the section titled “Risk Management.”
Market Risk Management
The effective management of market risk is essential to achieving
BB&T’s strategic financial objectives. As a financial institution, BB&T’s most significant market risk exposure
is interest rate risk in its balance sheet; however, market risk also includes product liquidity risk, price risk and volatility
risk in BB&T’s BUs. The primary objectives of market risk management are to minimize any adverse effect that changes
in market risk factors may have on net interest income, net income and capital and to offset the risk of price changes for certain
assets recorded at fair value. At BB&T, market risk management also includes the enterprise-wide IPV function.
Interest Rate Market Risk (Other than Trading)
BB&T actively manages market risk associated with asset and
liability portfolios with a focus on the strategic pricing of asset and liability accounts and management of appropriate maturity
mixes of assets and liabilities. The goal of these activities is the development of appropriate maturity and repricing opportunities
in BB&T’s portfolios of assets and liabilities that will produce reasonably consistent net interest income during periods
of changing interest rates. These portfolios are analyzed for proper fixed-rate and variable-rate mixes under various interest
rate scenarios.
The asset/liability management process is designed to achieve relatively
stable NIM and assure liquidity by coordinating the volumes, maturities or repricing opportunities of earning assets, deposits
and borrowed funds. Among other things, this process gives consideration to prepayment trends related to securities, loans and
leases and certain deposits that have no stated maturity. Prepayment assumptions are developed using a combination of market data
and internal historical prepayment experience for residential mortgage-related loans and securities, and internal historical prepayment
experience for client deposits with no stated maturity and loans that are not residential mortgage related. These assumptions are
subject to monthly back-testing, and are adjusted as deemed necessary to reflect changes in interest rates relative to the reference
rate of the underlying assets or liabilities. On a monthly basis, BB&T evaluates the accuracy of its Simulation model, which
includes an evaluation of its prepayment assumptions, to ensure that all significant assumptions inherent in the model appropriately
reflect changes in the interest rate environment and related trends in prepayment activity. It is the responsibility of the MRLCC
to determine and achieve the most appropriate volume and mix of earning assets and interest-bearing liabilities, as well as to
ensure an adequate level of liquidity and capital, within the context of corporate performance goals. The MRLCC also sets policy
guidelines and establishes long-term strategies with respect to interest rate risk exposure and liquidity. The MRLCC meets regularly
to review BB&T’s interest rate risk and liquidity positions in relation to present and prospective market and business
conditions, and adopts funding and balance sheet management strategies that are intended to ensure that the potential impacts on
earnings and liquidity as a result of fluctuations in interest rates are within acceptable tolerance guidelines.
BB&T uses derivatives primarily to manage economic risk related
to securities, commercial loans, MSRs and mortgage banking operations, long-term debt and other funding sources. BB&T also
uses derivatives to facilitate transactions on behalf of its clients. As of June 30, 2015, BB&T had derivative financial instruments
outstanding with notional amounts totaling $76.2 billion, with a net fair value gain of $177 million. See Note 15 “Derivative
Financial Instruments” in the “Notes to Consolidated Financial Statements” herein for additional disclosures.
The majority of BB&T’s assets and liabilities are monetary
in nature and, therefore, differ greatly from most commercial and industrial companies that have significant investments in fixed
assets or inventories. Fluctuations in interest rates and actions of the FRB to regulate the availability and cost of credit have
a greater effect on a financial institution’s profitability than do the effects of higher costs for goods and services. Through
its balance sheet management function, which is monitored by the MRLCC, management believes that BB&T is positioned to respond
to changing needs for liquidity, changes in interest rates and inflationary trends.
Management uses the Simulation to measure the sensitivity of projected
earnings to changes in interest rates. The Simulation projects net interest income and interest rate risk for a rolling two-year
period of time. The Simulation takes into account the current contractual agreements that BB&T has made with its customers
on deposits, borrowings, loans, investments and commitments to enter into those transactions. Furthermore, the Simulation considers
the impact of expected customer behavior. Management monitors BB&T’s interest sensitivity by means of a model that incorporates
the current volumes, average rates earned and paid, and scheduled maturities and payments of asset and liability portfolios, together
with multiple scenarios that include projected prepayments, repricing opportunities and anticipated volume growth. Using this information,
the model projects earnings based on projected portfolio balances under multiple interest rate scenarios. This level of detail
is needed to simulate the effect that changes in interest rates and portfolio balances may have on the earnings of BB&T. This
method is subject to the accuracy of the assumptions that underlie the process, but management believes that it provides a better
illustration of the sensitivity of earnings to changes in interest rates than other analyses such as static or dynamic gap. In
addition to the Simulation, BB&T uses EVE analysis to focus on projected changes in capital given potential changes in interest
rates. This measure also allows BB&T to analyze interest rate risk that falls outside the analysis window contained in the
Simulation. The EVE model is a discounted cash flow of the portfolio of assets, liabilities, and derivative instruments. The difference
in the present value of assets minus the present value of liabilities is defined as the economic value of equity.
The asset/liability management process requires a number of key
assumptions. Management determines the most likely outlook for the economy and interest rates by analyzing external factors, including
published economic projections and data, the effects of likely monetary and fiscal policies, as well as any enacted or prospective
regulatory changes. BB&T’s current and prospective liquidity position, current balance sheet volumes and projected growth,
accessibility of funds for short-term needs and capital maintenance are also considered. This data is combined with various interest
rate scenarios to provide management with the information necessary to analyze interest sensitivity and to aid in the development
of strategies to reach performance goals.
The following table shows the effect that the indicated changes
in interest rates would have on net interest income as projected for the next twelve months assuming a gradual change in interest
rates as described below. Key assumptions in the preparation of the table include prepayment speeds of mortgage-related and other
assets, cash flows and maturities of derivative financial instruments, loan volumes and pricing, deposit sensitivity, customer
preferences and capital plans. The resulting change in net interest income reflects the level of interest rate sensitivity that
income has in relation to the investment, loan and deposit portfolios.
Table 14 |
Interest Sensitivity Simulation Analysis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annualized Hypothetical |
|
|
|
|
|
Interest Rate Scenario |
|
Percentage Change in |
|
|
|
|
|
Linear |
|
Prime Rate |
|
Net Interest Income |
|
|
|
|
|
Change in |
|
June 30, |
|
June 30, |
|
|
|
|
|
Prime Rate |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
|
|
|
|
Up 200 |
bps |
|
5.25 |
% |
|
5.25 |
% |
|
2.23 |
% |
|
2.10 |
% |
|
|
|
|
|
Up 100 |
|
|
4.25 |
|
|
4.25 |
|
|
1.60 |
|
|
1.37 |
|
|
|
|
|
|
No Change |
|
|
3.25 |
|
|
3.25 |
|
|
― |
|
|
― |
|
|
|
|
|
|
Down 25 |
|
|
3.00 |
|
|
3.00 |
|
|
0.18 |
|
|
0.35 |
|
|
The MRLCC has established parameters related to interest sensitivity
that prescribe a maximum negative impact on net interest income under different interest rate scenarios. In the event the results
of the Simulation model fall outside the established parameters, management will make recommendations to the MRLCC on the most
appropriate response given the current economic forecast. The following parameters and interest rate scenarios are considered BB&T’s
primary measures of interest rate risk:
| · | Maximum negative impact on net interest income of 2% for the next
12 months assuming a linear change in interest rates totaling 100 basis points over four months followed by a flat interest rate
scenario for the remaining eight month period. |
| · | Maximum negative impact on net interest income of 4% for the next
12 months assuming a linear change of 200 basis points over eight months followed by a flat interest rate scenario for the remaining
four month period. |
If a rate change of 200 basis points cannot be modeled due to a
low level of rates, a proportional limit applies. Management currently only models a negative 25 basis point decline because larger
declines would have resulted in a Federal funds rate of less than zero. In a situation such as this, the maximum negative impact
on net interest income is adjusted on a proportional basis. Regardless of the proportional limit, the negative risk exposure limit
will be the greater of 1% or the proportional limit.
Management has also established a maximum negative impact on net
interest income of 4% for an immediate 100 basis points change in rates and 8% for an immediate 200 basis points change in rates.
These “interest rate shock” limits are designed to create an outer band of acceptable risk based upon a significant
and immediate change in rates.
Management must also consider how the balance sheet and interest
rate risk position could be impacted by changes in balance sheet mix. Liquidity in the banking industry has been very strong during
the current economic cycle. Much of this liquidity increase has been due to a significant increase in noninterest-bearing demand
deposits. Consistent with the industry, Branch Bank has seen a significant increase in this funding source. The behavior of these
deposits is one of the most important assumptions used in determining the interest rate risk position of BB&T. A loss of these
deposits in the future would reduce the asset sensitivity of BB&T’s balance sheet as the Company increases interest-bearing
funds to offset the loss of this advantageous funding source.
Beta represents the correlation between overall market interest
rates and the rates paid by BB&T on interest-bearing deposits. BB&T applies an average beta of approximately 80% to its
managed rate deposits for determining its interest rate sensitivity. Managed rate deposits are high beta, premium money market
and interest checking accounts, which attract significant client funds when needed to support balance sheet growth. BB&T regularly
conducts sensitivity on other key variables to determine the impact they could have on the interest rate risk position. This allows
BB&T to evaluate the likely impact on its balance sheet management strategies due to a more extreme variation in a key assumption
than expected.
The following table shows the effect that the loss of demand deposits
and an associated increase in managed rate deposits would have on BB&T’s interest-rate sensitivity position. For purposes
of this analysis, BB&T modeled the incremental beta for the replacement of the lost demand deposits at 100%.
Table 15 |
Deposit Mix Sensitivity Analysis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Results Assuming a Decrease in |
|
|
|
|
|
Linear Change |
|
|
Base Scenario |
|
Noninterest Bearing Demand Deposits |
|
|
|
|
|
in Rates |
|
|
at June 30, 2015 (1) |
|
$1 Billion |
|
$5 Billion |
|
|
|
|
|
Up 200 |
bps |
|
|
2.23 |
% |
|
1.97 |
% |
|
0.92 |
% |
|
|
|
|
|
Up 100 |
|
|
|
1.60 |
|
|
1.44 |
|
|
0.79 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The base scenario is equal to the annualized hypothetical percentage change in net interest income at June 30, 2015 as presented in the preceding table. |
If rates increased 200 basis points, BB&T could absorb the loss
of $8.5 billion, or 20.2%, of noninterest bearing deposits and replace them with managed rate deposits with a beta of 100% before
becoming neutral to interest rate changes.
The following table shows the effect
that the indicated changes in interest rates would have on EVE. Key assumptions in the preparation of the table include prepayment
speeds of mortgage-related and other assets, cash flows and maturities of derivative financial instruments, loan volumes and pricing
and deposit sensitivity. During the third quarter of 2014, BB&T implemented assumption
changes that impacted the reported EVE sensitivity. The primary change was a reduction to the assumed duration of indeterminate
deposits, which resulted in an increase in reported liability sensitivity in EVE rate shocks. The estimated impact on the “Hypothetical
Percentage Change in EVE” was approximately 375 basis points in the “up 200 basis points” scenario.
Table 16 |
EVE Simulation Analysis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hypothetical Percentage |
|
|
|
|
|
|
|
|
EVE/Assets |
|
Change in EVE |
|
|
|
|
|
Change in |
|
June 30, |
|
June 30, |
|
|
|
|
|
Interest Rates |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
|
|
|
|
Up 200 |
bps |
|
11.5 |
% |
|
10.7 |
% |
|
(0.5) |
% |
|
(1.4) |
% |
|
|
|
|
|
Up 100 |
|
|
11.7 |
|
|
10.9 |
|
|
1.3 |
|
|
0.3 |
|
|
|
|
|
|
No Change |
|
|
11.5 |
|
|
10.9 |
|
|
― |
|
|
― |
|
|
|
|
|
|
Down 25 |
|
|
11.4 |
|
|
10.8 |
|
|
(1.2) |
|
|
(0.8) |
|
|
Market Risk from Trading Activities
BB&T also manages market risk from trading activities which
consists of acting as a financial intermediary to provide its customers access to derivatives, foreign exchange and securities
markets. Trading market risk is managed through the use of statistical and non-statistical risk measures and limits. BB&T utilizes
a historical VaR methodology to measure and aggregate risks across its covered trading LOBs. This methodology uses two years of
historical data to estimate economic outcomes for a one-day time horizon at a 99% confidence level. The average 99% one-day VaR
and the maximum daily VaR for the three months ended June 30, 2015 and 2014 were each less than $1 million. Market risk disclosures
under Basel II.5 are available in the Additional Disclosures section of the Investor Relations site on www.bbt.com.
Contractual Obligations, Commitments, Contingent Liabilities,
Off-Balance Sheet Arrangements and Related Party Transactions
Refer to BB&T’s Annual Report on Form 10-K for the year
ended December 31, 2014 for discussion with respect to BB&T’s quantitative and qualitative disclosures about its fixed
and determinable contractual obligations. Additional disclosures about BB&T’s contractual obligations, commitments and
derivative financial instruments are included in Note 13 “Commitments and Contingencies” and Note 14 “Fair Value
Disclosures” in the “Notes to Consolidated Financial Statements.”
The following table presents activity in residential mortgage indemnification, recourse and repurchase reserves: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 17 |
Mortgage Indemnification, Recourse and Repurchase Reserves Activity (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
Balance, at beginning of period |
$ |
88 |
|
$ |
61 |
|
$ |
94 |
|
$ |
72 |
|
|
|
Payments |
|
(2) |
|
|
(4) |
|
|
(4) |
|
|
(16) |
|
|
|
Expense (benefit) |
|
(3) |
|
|
41 |
|
|
(7) |
|
|
42 |
|
|
Balance, at end of period |
$ |
83 |
|
$ |
98 |
|
$ |
83 |
|
$ |
98 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Excludes the FHA-insured mortgage loan reserve of $85 million established during the second quarter of 2014. |
Liquidity
Liquidity represents the continuing ability to meet funding needs,
including deposit withdrawals, timely repayment of borrowings and other liabilities, and funding of loan commitments. In addition
to the level of liquid assets, such as cash, cash equivalents and AFS securities, many other factors affect the ability to meet
liquidity needs, including access to a variety of funding sources, maintaining borrowing capacity in national money markets, growing
core deposits, the repayment of loans and the ability to securitize or package loans for sale.
BB&T monitors the ability to meet customer demand for funds
under both normal and stressed market conditions. In considering its liquidity position, management evaluates BB&T’s
funding mix based on client core funding, client rate-sensitive funding and non-client rate-sensitive funding. In addition, management
also evaluates exposure to rate-sensitive funding sources that mature in one year or less. Management also measures liquidity needs
against 30 days of stressed cash outflows for Branch Bank. To ensure a strong liquidity position, management maintains a liquid
asset buffer of cash on hand and highly liquid unpledged securities. The Company has established a policy that the liquid asset
buffer would be a minimum of 5% of total assets, but intends to maintain the ratio well in excess of this level. As of June 30,
2015 and December 31, 2014, BB&T’s liquid asset buffer was 13.3% and 13.6%, respectively, of total assets.
During 2013, the FDIC, FRB and OCC released a joint statement providing
a NPR concerning the U.S. implementation of the Basel III LCR rule. This rule became final on September 3, 2014. Under the final
rule, BB&T will be considered a “modified LCR” holding company. BB&T would be subject to full LCR requirements
if its operations were to fall under the “internationally active” rules, which would generally be triggered if BB&T’s
assets were to increase above $250 billion. BB&T implemented balance sheet changes to support its compliance with the rule
and to optimize its balance sheet based on the final rule. These actions included changing the mix of the investment portfolio
to include more GNMA and U.S. Treasury securities, which qualify as Level 1 under the rule, and changing its deposit mix to increase
retail and commercial deposits. Based on management’s interpretation of the final rule that will be effective January 1,
2016, BB&T’s LCR was approximately 118% at June 30, 2015, compared to the regulatory minimum of 90%, which puts BB&T
in full compliance with the rule. The regulatory minimum will increase to 100% on January 1, 2017. The final rule requires each
financial institution to have a method for determining “operational deposits” as defined by the rule. The number above
includes an estimate of operational deposits; however, BB&T continues to evaluate its method to identify and measure operational
deposits.
Parent Company
The purpose of the Parent Company is to serve as the primary capital
financing vehicle for the operating subsidiaries. The assets of the Parent Company primarily consist of cash on deposit with Branch
Bank, equity investments in subsidiaries, advances to subsidiaries, accounts receivable from subsidiaries, and other miscellaneous
assets. The principal obligations of the Parent Company are principal and interest payments on long-term debt. The main sources
of funds for the Parent Company are dividends and management fees from subsidiaries, repayments of advances to subsidiaries, and
proceeds from the issuance of equity and long-term debt. The primary uses of funds by the Parent Company are for investments in
subsidiaries, advances to subsidiaries, dividend payments to common and preferred shareholders, retirement of common stock and
interest and principal payments due on long-term debt.
Liquidity at the Parent Company is more susceptible to market disruptions.
BB&T prudently manages cash levels at the Parent Company to cover a minimum of one year of projected contractual cash outflows
which includes unfunded external commitments, debt service, preferred dividends and scheduled debt maturities without the benefit
of any new cash infusions. Generally, BB&T maintains a significant buffer above the projected one year of contractual cash
outflows. In determining the buffer, BB&T considers cash requirements for common and preferred dividends, unfunded commitments
to affiliates, being a source of strength to its banking subsidiaries and being able to withstand sustained market disruptions
that could limit access to the capital markets. As of June 30, 2015 and December 31, 2014, the Parent Company had 28 months and
31 months, respectively, of cash on hand to satisfy projected contractual cash outflows as described above.
Branch Bank
BB&T carefully manages liquidity risk at Branch Bank. Branch
Bank’s primary source of funding is customer deposits. Continued access to customer deposits is highly dependent on the confidence
the public has in the stability of the bank and its ability to return funds to the client when requested. BB&T maintains a
strong focus on its reputation in the market to ensure continued access to client deposits. BB&T integrates its risk appetite
into its overall risk management framework to ensure the bank does not exceed its risk tolerance through its lending and other
risk taking functions and thus risk becoming undercapitalized. BB&T believes that sufficient capital is paramount to maintaining
the confidence of its depositors and other funds providers. BB&T has extensive capital management processes in place to ensure
it maintains sufficient capital to absorb losses and maintain a highly capitalized position that will instill confidence in the
bank and allow continued access to deposits and other funding sources. Branch Bank monitors many liquidity metrics at the bank
including funding concentrations, diversification, maturity distribution, contingent funding needs and ability to meet liquidity
requirements under times of stress.
Branch Bank has several major sources of funding to meet its liquidity
requirements, including access to capital markets through issuance of senior or subordinated bank notes and institutional CDs,
access to the FHLB system, dealer repurchase agreements and repurchase agreements with commercial clients, access to the overnight
and term Federal funds markets, use of a Cayman branch facility, access to retail brokered CDs and a borrower in custody program
with the FRB for the discount window. As of June 30, 2015, Branch Bank has approximately $69.5 billion of secured borrowing capacity,
which represents approximately 7.7 times the amount of one year wholesale funding maturities.
Capital
The maintenance of appropriate levels of capital is a management
priority and is monitored on a regular basis. BB&T’s principal goals related to the maintenance of capital are to provide
adequate capital to support BB&T’s risk profile consistent with the Board-approved risk appetite, provide financial flexibility
to support future growth and client needs, comply with relevant laws, regulations, and supervisory guidance, achieve optimal credit
ratings for BB&T and its subsidiaries and provide a competitive return to shareholders.
Management regularly monitors the capital position of BB&T on
both a consolidated and bank level basis. In this regard, management’s overriding policy is to maintain capital at levels
that are in excess of the operating capital guidelines, which are above the regulatory “well capitalized” levels. Management
has implemented stressed capital ratio minimum guidelines to evaluate whether capital ratios calculated with planned capital actions
are likely to remain above minimums specified by the FRB for the annual CCAR. Breaches of stressed minimum guidelines prompt a
review of the planned capital actions included in BB&T’s capital plan.
Table 18 |
BB&T's Internal Capital Guidelines |
|
|
Operating |
|
Stressed |
|
|
Tier 1 Capital Ratio |
10.0 |
% |
|
7.5 |
% |
|
|
Total Capital Ratio |
12.0 |
|
|
9.5 |
|
|
|
Tier 1 Leverage Capital Ratio |
7.0 |
|
|
5.0 |
|
|
|
Tangible Common Equity Ratio |
6.0 |
|
|
4.0 |
|
|
|
Common Equity Tier 1 Ratio |
8.5 |
|
|
6.0 |
|
|
While nonrecurring events or management decisions may result in
the Company temporarily falling below its operating minimum guidelines for one or more of these ratios, it is management’s
intent through capital planning to return to these targeted operating minimums within a reasonable period of time. Such temporary
decreases below the operating minimums shown above are not considered an infringement of BB&T’s overall capital policy
provided the Company and Branch Bank remain “well-capitalized.”
Basel III capital requirements became effective on January 1, 2015.
Risk-based capital ratios for the quarter ended June 30, 2015, which include common equity tier 1, Tier 1 capital, total capital
and leverage capital, are calculated based on Basel III regulatory transitional guidance related to the measurement of capital,
risk-weighted assets and average assets.
|
Table 19 |
|
|
Capital Ratios (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2015 |
|
December 31, 2014 |
|
|
|
|
|
|
Basel III |
|
Basel I |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions, except per share data, shares in thousands) |
|
|
Risk-based: |
|
|
|
|
|
|
|
|
|
|
Common equity Tier 1 |
|
10.4 |
% |
|
|
N/A |
|
|
|
|
Tier 1 |
|
12.1 |
|
|
|
12.4 |
% |
|
|
|
Total |
|
14.3 |
|
|
|
14.9 |
|
|
|
Leverage capital |
|
10.2 |
|
|
|
9.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP capital measures (2): |
|
|
|
|
|
|
|
|
|
|
Tangible common equity as a percentage of tangible assets |
|
8.1 |
% |
|
|
8.0 |
% |
|
|
|
Tangible common equity per common share |
$ |
20.21 |
|
|
$ |
19.86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Calculations of tangible common equity and tangible assets (2): |
|
|
|
|
|
|
|
|
|
|
Total shareholders' equity |
$ |
25,132 |
|
|
$ |
24,377 |
|
|
|
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
Preferred stock |
|
2,603 |
|
|
|
2,603 |
|
|
|
|
|
Noncontrolling interests |
|
52 |
|
|
|
88 |
|
|
|
|
|
Intangible assets |
|
7,655 |
|
|
|
7,374 |
|
|
|
|
Tangible common equity |
$ |
14,822 |
|
|
$ |
14,312 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
$ |
191,017 |
|
|
$ |
186,834 |
|
|
|
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
Intangible assets |
|
7,655 |
|
|
|
7,374 |
|
|
|
|
Tangible assets |
$ |
183,362 |
|
|
$ |
179,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-weighted assets (3) |
$ |
153,512 |
|
|
$ |
143,675 |
|
|
|
Common shares outstanding at end of period |
|
733,481 |
|
|
|
720,698 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) | Current quarter regulatory capital information is preliminary and based on transitional approach. |
| (2) | Tangible common equity and related ratios are non-GAAP measures. Management uses these measures to assess the quality of capital
and believes that investors may find them useful in their analysis of the Company. These capital measures are not necessarily comparable
to similar capital measures that may be presented by other companies. |
| (3) | Risk-weighted assets are determined based on the regulatory capital requirements in effect for the periods presented. |
The Company’s estimated common equity tier 1 ratio using the
Basel III standardized approach on a fully phased-in basis was 10.2% at June 30, 2015.
Table 20 |
Capital Requirements Under Basel III |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum |
|
Well- |
|
Minimum Capital Plus Capital Conservation Buffer |
|
BB&T |
|
|
|
|
|
Capital |
|
Capitalized |
|
2016 |
|
2017 |
|
2018 |
|
2019 (1) |
|
Target |
Common equity Tier 1 to risk-weighted assets |
|
4.5 |
% |
|
6.5 |
% |
|
5.125 |
% |
|
5.750 |
% |
|
6.375 |
% |
|
7.000 |
% |
|
8.5 |
% |
Tier 1 capital to risk-weighted assets |
|
6.0 |
|
|
8.0 |
|
|
6.625 |
|
|
7.250 |
|
|
7.875 |
|
|
8.500 |
|
|
10.0 |
|
Total capital to risk-weighted assets |
|
8.0 |
|
|
10.0 |
|
|
8.625 |
|
|
9.250 |
|
|
9.875 |
|
|
10.500 |
|
|
12.0 |
|
Leverage ratio |
|
4.0 |
|
|
5.0 |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
7.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
BB&T's goal is to maintain capital levels above the 2019 requirements. |
Share Repurchase Activity
No shares were repurchased in connection with the 2006 Repurchase
Plan during 2015. During June of 2015, the Board of Directors authorized a new plan, the 2015 Repurchase Plan, to repurchase up
to 50 million shares of the Company’s common stock. Repurchases under the 2015 Repurchase Plan may be effected through open
market purchases or privately negotiated transactions. The timing and exact amount of repurchases will be consistent with the Company’s
capital plan and subject to various factors, including the Company’s capital position, liquidity, financial performance,
alternative uses of capital, stock trading price and general market conditions, and may be suspended at any time. Shares that are
repurchased pursuant to the 2015 Repurchase Plan will constitute authorized but unissued shares of the Company and will therefore
be available for future issuances. The 2015 Repurchase Plan replaces the 2006 Repurchase Plan. No shares were repurchased in connection
with the 2015 Repurchase Plan during the second quarter of 2015.
Table 21 |
|
Share Repurchase Activity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Remaining |
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares |
|
|
|
|
|
Total |
|
Average |
|
Total Shares Purchased |
|
Available for Repurchase |
|
|
|
|
|
Shares |
|
Price Paid |
|
Pursuant to |
|
Pursuant to |
|
|
|
|
|
Repurchased (1) |
|
Per Share (2) |
|
Publicly-Announced Plan |
|
Publicly-Announced Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Shares in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 2015 |
9 |
|
$ |
38.90 |
|
― |
|
44,139 |
|
|
May 2015 |
1 |
|
|
38.30 |
|
― |
|
44,139 |
|
|
June 2015 (3) |
395 |
|
|
41.02 |
|
― |
|
50,000 |
|
|
|
Total |
405 |
|
|
40.97 |
|
― |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) | Repurchases reflect shares exchanged or surrendered in connection with the exercise of equity-based awards under BB&T’s
equity-based compensation plans. |
| (3) | The increase in shares available for repurchase reflects the approval of the 2015 Repurchase Plan by the Board of Directors
during June 2015. |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Refer to “Market Risk Management” in the “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” section herein.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, the management
of the Company, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial
Officer, carried out an evaluation of the effectiveness of the Company’s disclosure controls and procedures as defined in
Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on that evaluation, the Chief Executive Officer and the Chief Financial
Officer concluded that the Company’s disclosure controls and procedures are effective.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarter ended June
30, 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over
financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Refer to the “Commitments and Contingencies” and “Income
Taxes” notes in the “Notes to Consolidated Financial Statements.”
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors disclosed
in BB&T’s Annual Report on Form 10-K for the year ended December 31, 2014. Additional risks and uncertainties not currently
known to BB&T or that management has deemed to be immaterial also may materially adversely affect BB&T’s business,
financial condition, and/or operating results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(c) Refer to “Share Repurchase Activity” in the “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” section herein.
ITEM 6. EXHIBITS |
|
|
|
|
10.1 |
|
Merger Completion Incentive
Program - Summary |
|
|
|
|
|
11 |
|
Statement re: Computation of Earnings Per Share. |
|
|
|
|
|
12 |
|
Statement re: Computation of Ratios. |
|
|
|
|
|
31.1 |
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
31.2 |
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
32 |
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
101.INS |
|
XBRL Instance Document. |
|
|
|
|
|
101.SCH |
|
XBRL Taxonomy Extension Schema. |
|
|
|
|
|
101.CAL |
|
XBRL Taxonomy Extension Calculation Linkbase. |
|
|
|
|
|
101.LAB |
|
XBRL Taxonomy Extension Label Linkbase. |
|
|
|
|
|
101.PRE |
|
XBRL Taxonomy Extension Presentation Linkbase. |
|
|
|
|
|
101.DEF |
|
XBRL Taxonomy Definition Linkbase. |
|
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
BB&T CORPORATION
(Registrant) |
|
|
|
|
Date: July 30, 2015 |
|
By: |
/s/ Daryl N. Bible |
|
|
|
Daryl N. Bible, Senior Executive Vice President
and Chief Financial Officer
(Principal Financial Officer) |
|
|
|
|
Date: July 30, 2015 |
|
By: |
/s/ Cynthia B. Powell |
|
|
|
Cynthia B. Powell, Executive Vice President
and
Corporate Controller
(Principal Accounting Officer) |
EXHIBIT INDEX |
|
|
|
|
|
|
|
|
|
Exhibit No. |
|
Description |
|
Location |
|
|
|
|
|
|
|
|
|
10.1* |
|
Merger
Completion Incentive Program - Summary |
|
Filed herewith. |
|
|
|
|
|
|
|
|
|
11 |
|
Statement re: Computation of Earnings Per Share. |
|
Filed herewith as Note 16. |
|
|
|
|
|
|
|
|
|
12† |
|
Statement re: Computation of Ratios. |
|
Filed herewith. |
|
|
|
|
|
|
|
|
|
31.1 |
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
Filed herewith. |
|
|
|
|
|
|
|
|
|
31.2 |
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
Filed herewith. |
|
|
|
|
|
|
|
|
|
32 |
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
Furnished herewith. |
|
|
|
|
|
|
|
|
|
101.INS |
|
XBRL Instance Document. |
|
Filed herewith. |
|
|
|
|
|
|
|
|
|
101.SCH |
|
XBRL Taxonomy Extension Schema. |
|
Filed herewith. |
|
|
|
|
|
|
|
|
|
101.CAL |
|
XBRL Taxonomy Extension Calculation Linkbase. |
|
Filed herewith. |
|
|
|
|
|
|
|
|
|
101.LAB |
|
XBRL Taxonomy Extension Label Linkbase. |
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Filed herewith. |
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101.PRE |
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XBRL Taxonomy Extension Presentation Linkbase. |
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Filed herewith. |
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101.DEF |
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XBRL Taxonomy Definition Linkbase. |
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Filed herewith. |
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* |
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Management compensatory plan or arrangement. |
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† |
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Exhibit filed with the Securities and Exchange Commission and available upon request. |
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81
Exhibit 10.1
BB&T Corporation
Merger Completion Incentive
Program - Summary
Under the Merger Completion Incentive Program (the “Incentive
Program”) adopted on June 23, 2015 by the Compensation Committee of the BB&T Corporation Board of Directors (the “Committee”),
an incentive may be paid to Executive Management upon the operational conversion of the Susquehanna Bank (“Susquehanna”
) banking operations into the Branch Banking and Trust Company (“BB&T”) banking operations. For purposes of the
Incentive Program, the “operational conversion” occurs at the time that BB&T’s computer systems replace Susquehanna’s
computer systems as the current and primary systems of record for the transactional and accounting data of Susquehanna. The occurrence
of the operational conversion shall be determined by the Committee. When making its determination the Committee may reduce Incentive
Program awards based on the Committee’s assessment of BB&T Corporation’s then current performance.
| 1. | Incentive Program Participants and Eligible Amounts |
For each Executive Manager, an “Eligible Amount”
was determined and is the maximum amount that may be awarded to the applicable Executive Manager under the Incentive Program upon
the operational conversion with Susquehanna. The Eligible Amount for each of the “Named Executive Officers” included
in the Summary Compensation Table of BB&T’s Proxy Statement for its 2015 Annual Meeting of Shareholders is set forth
on a Current Report on Form 8-K dated June 23, 2015 and is incorporated by reference herein.
The Incentive Program has a one-year performance period.
To receive the Eligible Amount, the operational conversion must occur on or after June 23, 2015, but on or before June 23, 2016.
The Eligible Amount will not be paid for the operational conversion occurring after June 23, 2016.
Any award under this Incentive Program may be paid
to each Executive Manager in cash, restricted stock units, or a combination thereof, as determined by the Committee. Payment will
occur as soon as administratively practicable following the Committee’s determination that the operational conversion has
occurred and determination of the award amount. Any portion of an award paid in cash and earned in a calendar year shall be paid
to all Executive Managers no later than March 15 of the following calendar year. Any portion of an award paid in restricted stock
units shall be awarded in accordance with the BB&T Corporation 2012 Incentive plan. All Incentive Program payments paid in
cash are subject to regular tax withholdings and authorized deductions.
| 4. | Termination of Employment |
If an Executive Manager’s employment terminates
during the performance period, participation in the Incentive Program ends on the date of termination, and the Executive Manager
will no longer be eligible to receive any Incentive Program payments.
| 5. | Authority of Compensation Committee |
The Committee shall have the authority to determine
the amount of any awards under this Incentive Program, to construe and interpret the Incentive Program, to administer all aspects
of the Incentive Program, and, to the extent mandated by any statute, regulation, or formal or informal guidance issued by any
regulatory authority with jurisdiction over BB&T Corporation, to modify or terminate the Incentive Program. Any interpretation
of the Incentive Program by the Committee and any decision made by it with respect to the Incentive Program are final and binding
on all parties.
This Incentive Program shall be governed by and construed
in accordance with the laws of the State of North Carolina, without regard to the principles of conflicts of law, and in accordance
with applicable United States federal laws.
2
Exhibit 12 |
BB&T Corporation |
Earnings To Fixed Charges (1) |
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Six Months |
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Ended June 30, |
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Years Ended December 31, |
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2015 |
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2014 |
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2014 |
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2013 |
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2012 |
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2011 |
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2010 |
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(Dollars in millions) |
Earnings: |
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Income before income taxes |
$ |
1,369 |
|
$ |
1,522 |
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$ |
3,127 |
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$ |
3,284 |
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$ |
2,945 |
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$ |
1,732 |
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$ |
1,055 |
Plus: |
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Fixed charges |
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397 |
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431 |
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|
843 |
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|
967 |
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1,130 |
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1,442 |
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1,855 |
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Distributions from equity method investees |
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6 |
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5 |
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9 |
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9 |
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6 |
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7 |
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2 |
Less: |
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Capitalized interest |
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1 |
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― |
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1 |
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― |
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― |
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― |
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― |
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Income from equity method investees, net |
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(3) |
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1 |
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― |
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|
9 |
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3 |
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|
3 |
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|
7 |
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Earnings |
|
1,774 |
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|
1,957 |
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|
3,978 |
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|
4,251 |
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|
4,078 |
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|
3,178 |
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|
2,905 |
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Less: |
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Interest on deposits |
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110 |
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|
120 |
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|
239 |
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301 |
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|
429 |
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|
610 |
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|
917 |
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Earnings, excluding interest on deposits |
$ |
1,664 |
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$ |
1,837 |
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$ |
3,739 |
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$ |
3,950 |
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$ |
3,649 |
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$ |
2,568 |
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$ |
1,988 |
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Fixed charges: |
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Interest expense |
$ |
358 |
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$ |
393 |
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$ |
768 |
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$ |
891 |
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$ |
1,060 |
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$ |
1,378 |
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$ |
1,795 |
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Capitalized interest |
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1 |
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― |
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1 |
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― |
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― |
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― |
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― |
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Interest portion of rent expense |
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38 |
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38 |
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|
74 |
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|
76 |
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|
70 |
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|
64 |
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|
60 |
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Total fixed charges |
|
397 |
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|
431 |
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|
843 |
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|
967 |
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1,130 |
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1,442 |
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|
1,855 |
Less: |
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Interest on deposits |
|
110 |
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|
120 |
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|
239 |
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|
301 |
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|
429 |
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|
610 |
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|
917 |
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|
Total fixed charges, excluding interest on deposits |
|
287 |
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|
311 |
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|
604 |
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|
666 |
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|
701 |
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|
832 |
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|
938 |
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Dividends/accretion on preferred stock (2) |
|
97 |
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|
107 |
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|
199 |
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|
211 |
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|
87 |
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― |
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― |
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Total fixed charges and preferred dividends |
$ |
494 |
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$ |
538 |
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$ |
1,042 |
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$ |
1,178 |
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$ |
1,217 |
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$ |
1,442 |
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$ |
1,855 |
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Total fixed charges and preferred dividends, excluding interest on deposits |
$ |
384 |
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$ |
418 |
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$ |
803 |
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$ |
877 |
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$ |
788 |
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$ |
832 |
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$ |
938 |
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Earnings to fixed charges: |
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Including interest on deposits |
|
4.47x |
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4.54x |
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4.72x |
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4.40x |
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3.61x |
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|
2.20x |
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|
1.57x |
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Excluding interest on deposits |
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5.80x |
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5.91x |
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6.19x |
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5.93x |
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5.21x |
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3.09x |
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2.12x |
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Earnings to fixed charges and preferred dividends: |
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Including interest on deposits |
|
3.59x |
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3.64x |
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|
3.82x |
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3.61x |
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3.35x |
|
|
2.20x |
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|
1.57x |
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Excluding interest on deposits |
|
4.33x |
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4.39x |
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|
4.66x |
|
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4.50x |
|
|
4.63x |
|
|
3.09x |
|
|
2.12x |
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(1) |
Prior periods have been revised to reflect the adoption of new accounting guidance related to investments in qualified affordable housing projects. |
(2) |
Dividends on preferred stock have been grossed up by the effective tax rate for the period. |
Exhibit 31.1
CERTIFICATIONS
I, Kelly S. King, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of BB&T Corporation; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter
in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting. |
Date: July 30, 2015
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/s/
Kelly S. King |
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Kelly S. King |
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Chairman and Chief Executive Officer |
Exhibit 31.2
CERTIFICATIONS
I, Daryl N. Bible, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of BB&T Corporation; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter
in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting. |
Date: July 30, 2015
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/s/
Daryl N. Bible |
|
Daryl N. Bible |
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Senior Executive Vice President and |
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Chief Financial Officer |
Exhibit 32
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION
1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, the undersigned, Chief Executive Officer and Chief Financial Officer of BB&T Corporation
(the “Company”), do hereby certify that
| 1. | The Quarterly Report on Form 10-Q for the fiscal period ended June 30, 2015 (the “Form
10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and |
| 2. | The information contained in the Form 10-Q fairly presents, in all material respects, the financial
condition and results of operations of the Company. |
Date: July 30, 2015
|
/s/
Kelly S. King |
|
Kelly S. King |
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Chairman and Chief Executive Officer |
|
|
|
/s/
Daryl N. Bible |
|
Daryl N. Bible |
|
Senior Executive Vice President and |
|
Chief Financial Officer |
A signed original of this written statement
required by Section 906 has been provided to BB&T Corporation and will be retained by BB&T Corporation and furnished
to the Securities and Exchange Commission or its staff upon request.
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