UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

 

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2014

2016


Commission File Number: 1-10853

BB&T CORPORATION

(Exact name of Registrantregistrant as specified in its Charter)

charter)
North Carolina56-0939887
(State or other jurisdiction of Incorporation)incorporation or organization)(I.R.S. Employer Identification No.)
  

200 West Second Street

Winston-Salem, North Carolina

27101
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (336) 733-2000

(336) 733-2000

(Registrant’s telephone number, including area code)

Securities Registered Pursuantregistered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Act:
Title of each class

Name of each exchange

on which registered

Common Stock, $5 par valueNew York Stock Exchange

Depositary Shares each representing 1/1,000th1,000th interest in a share of Series D Non-Cumulative Perpetual Preferred Stock

New York Stock Exchange

Depositary Shares each representing 1/1,000th1,000th interest in a share of Series E Non-Cumulative Perpetual Preferred Stock

New York Stock Exchange

Depositary Shares each representing 1/1,000th1,000th interest in a share of Series F Non-Cumulative Perpetual Preferred Stock

New York Stock Exchange

Depositary Shares each representing 1/1,000th1,000th interest in a share of Series G Non-Cumulative Perpetual Preferred Stock

New York Stock Exchange
Depositary Shares each representing 1/1,000th interest in a share of Series H Non-Cumulative Perpetual Preferred Stock New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrantregistrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  [X]   No  [  ]

Indicate by check mark if the Registrantregistrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  [  ]   No  [X]

Indicate by check mark whether the Registrantregistrant (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 Registrantregistrant 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 Registrantregistrant has submitted electronically and posted on its corporate website, 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 Registrantregistrant was required to submit and post such files).     Yes  [X]   No  [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’sregistrant’s knowledge, in definitive proxy or information statements incorporated by references in Part III of this Form 10-K or any amendment to this Form 10-K.    [X]

[  ]

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

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

Indicate by check mark whether the Registrantregistrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  [  ]   No  [X]

At January 31, 2015,2017, the Company had 720,801,219808,394,189 shares of its Common Stock, $5 par value, outstanding. As of June 30, 2014,2016, the aggregate market value of voting stock held by nonaffiliates of the Company was approximately $28.3$28.9 billion.

Documents incorporated by reference: Portions of the definitive proxy statement relating to the registrant’s annual meeting of stockholders scheduled to be held on April 25, 2017 are incorporated by reference in this Form 10-K in response to Items 10, 11, 12, 13 and 14 of Part III.
 

BB&T CORPORATION
Index
December 31, 2014
2016
   Page Nos.
PART I
Item 1
Business
7 
4
Item 1A
Risk Factors
21 
17
Item 1BUnresolved Staff Comments - (NoneComments-(None to be reported) 
Item 2
Properties
28 
26
Item 3
Legal Proceedings (see Note 137, Note 12 and Note 15)14)
124, 129
110, 116, 120
Item 4Mine Safety Disclosures - (NotDisclosures-(Not applicable)
  
PART II
Item 5
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
28 
26
Item 6
Selected Financial Data
32 
30
Item 7
Management's Discussion and Analysis of Financial Condition and Results of Operations
33 
31
Item 7A
Quantitative and Qualitative Disclosures About Market Risk (see Market Risk Management)
71 
65
Item 8Financial Statements and Supplementary Data 
 
Quarterly Financial Summary
75
 
Report of Independent Registered Public Accounting Firm
81
Consolidated Balance Sheets
88 
82
 
Consolidated Statements of Income
89 
83
 
Consolidated Statements of Comprehensive Income
90 
84
 
Consolidated Statements of Changes in Shareholders' Equity
91 
85
 
Consolidated Statements of Cash Flows
92 
86
 Notes to Consolidated Financial Statements93 
 
Note 1. ReportSummary of Independent Registered PublicSignificant Accounting FirmPolicies
87
 
Note 2. Quarterly Financial SummaryAcquisitions and Divestitures
98
 81 
Note 3. Securities
100
Note 4. Loans and ACL
102
Note 5. Premises and Equipment
109
Note 6. Goodwill and Other Intangible Assets
109
Note 7. Loan Servicing
110
Note 8. Deposits
112
Note 9. Long-Term Debt
112
Note 10. Shareholders' Equity
113
Note 11. AOCI
115
Note 12. Income Taxes
116
Note 13. Benefit Plans
117
Note 14. Commitments and Contingencies
120
Note 15. Regulatory Requirements and Other Restrictions
122
Note 16. Parent Company Financial Statements
123
Note 17. Fair Value Disclosures
125
Note 18. Derivative Financial Instruments
132
Note 19. Computation of EPS
136
Note 20. Operating Segments
136
Item 9Changes in and Disagreements Withwith Accountants on Accounting and Financial Disclosure - (NoneDisclosure-(None to be reported)
Item 9A
Controls and Procedures
86 
80
Item 9BOther Information - (NoneInformation-(None to be reported)
  
PART III
Item 10Directors, Executive Officers and Corporate Governance*
Item 11Executive Compensation*
Item 12Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters*
Item 13Certain Relationships and Related Transactions, and Director Independence*
Item 14Principal Accounting Fees and Services*
 *
PART IV
Item 15Exhibits, Financial Statement Schedules 
 Financial Statements - (seeStatements-(see Listing in Item 8 above) 
 
Exhibits
150 
142
 Financial Statement Schedules - (NoneSchedules-(None required) 
Item 16Form 10-K Summary-(None) 

2
Table of Contents

*For information regarding executive officers, refer to “Executive"Executive Officers of BB&T”&T" in Part I. The other information required by Item 10 is incorporated herein by reference to the information that appears under the headings “Proposal"Proposal 1-Election of Directors,” “Corporate" "Corporate Governance Matters”Matters," "Corporate Governance Matters-Board Committees, Membership and “SectionAttendance," "Audit Committee Report" and "Section 16(a) Beneficial Ownership Reporting Compliance”Compliance" in the Registrant’s Proxy Statement for the 20152017 Annual Meeting of Shareholders.

The information required by Item 11 is incorporated herein by reference to the information that appears under the headings “Compensation Discussion and Analysis,” “Compensation of Executive Officers,” “Compensation Committee Report on Executive Compensation,” “Compensation Committee Interlocks and Insider Participation” and “Compensation of Directors” in the Registrant’s Proxy Statement for the 2015
The information required by Item 11 is incorporated herein by reference to the information that appears under the headings "Compensation Discussion and Analysis," "Compensation of Executive Officers," "Compensation Committee Report on Executive Compensation," "Compensation Committee Interlocks and Insider Participation" and "Compensation of Directors" in the Registrant’s Proxy Statement for the 2017 Annual Meeting of Shareholders.

For information regarding the registrant’s securities authorized for issuance under equity compensation plans, refer to “Equity Compensation Plan Information” in Part II.

The other information required by Item 12 is incorporated herein by reference to the information that appears under the headings “Stock Ownership Information” and “Compensation of Executive Officers” in the Registrant’s Proxy Statement for the 2015 Annual Meeting of Shareholders.

The information required by Item 13 is incorporated herein by reference to the information that appears under the headings “Corporate Governance Matters” and “Transactions with Executive Officers and Directors” in the Registrant’s Proxy Statement for the 2015 Annual Meeting of Shareholders.

The information required by Item 14 is incorporated herein by reference to the information that appears under the headings “Fees to Auditors” and “Corporate Governance Matters” in the Registrant’s Proxy Statement for the 2015 Annual Meeting of Shareholders.
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For information regarding the registrant’s securities authorized for issuance under equity compensation plans, refer to "Equity Compensation Plan Information" in Part II.

The other information required by Item 12 is incorporated herein by reference to the information that appears under the headings "Stock Ownership Information" in the Registrant’s Proxy Statement for the 2017 Annual Meeting of Shareholders.
The information required by Item 13 is incorporated herein by reference to the information that appears under the headings "Corporate Governance Matters-Director Independence" and "Transactions with Executive Officers and Directors" in the Registrant’s Proxy Statement for the 2017 Annual Meeting of Shareholders.
The information required by Item 14 is incorporated herein by reference to the information that appears under the headings "Fees to Auditors" and "Audit Committee Pre-Approval Policy" in the Registrant’s Proxy Statement for the 2017 Annual Meeting of Shareholders.

Glossary of Defined Terms

The following terms may be used throughout this Report, including the consolidated financial statements and related notes.

Term Definition
20062015 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 orthat were formerly covered under loss sharing agreements
AFS Available-for-sale
Agency MBSMortgage-backed securities issued by a U.S. government agency or GSE
ALLL Allowance for loan and lease losses
American CoastalAmerican Coastal Insurance Company
AOCI Accumulated other comprehensive income (loss)
BankAtlanticBankAtlantic, a federal savings association acquired by BB&T from BankAtlantic Bancorp, Inc.
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
BSA/AMLBank Secrecy Act/Anti-Money Laundering
BUBusiness Unit
CCAR Comprehensive Capital Analysis and Review
CD Certificate of deposit
CDI Core deposit intangible assets
CEOChief Executive Officer
CET1Common equity Tier 1
CFPB Consumer Financial Protection Bureau
CEOCISA Chief Executive Officer
CROChief Risk OfficerCybersecurity Information Sharing Act
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)
CouncilFinancial Stability Oversight Council
CRA Community Reinvestment Act of 1977
CRE Commercial real estate
CRMC Credit Risk Management Committee
CROChief Risk Officer
CROC Compliance Risk Oversight Committee
Crump InsuranceThe life and property and casualty insurance operations acquired from the Crump Group
DIF Deposit Insurance Fund administered by the FDIC
Directors’ PlanNon-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
ERPEnterprise resource planning
EUEuropean Union
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
FTEFully taxable-equivalent
FTP Funds transfer pricing
GAAP Accounting principles generally accepted in the United States of America
GNMA Government National Mortgage Association
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TermDefinition
Grandbridge Grandbridge Real Estate Capital, LLC
GSE U.S. government-sponsored enterprise
HFI Held for investment

TermDefinition
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
IMLAFAInternational Money Laundering Abatement and Financial Anti-Terrorism Act of 2001
IPV Independent price verification
IRAIndividual 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
LOBLine of business
MBS Mortgage-backed securities
MRLCC Market Risk, Liquidity and Capital Committee
MRMDModel Risk Management Department
MSR Mortgage servicing right
MSRB Municipal Securities Rulemaking Board
National PennNational Penn Bancshares, Inc., previously a Pennsylvania incorporated BHC, acquired April 1, 2016
NCCOBNorth Carolina Office of the Commissioner of Banks
NIM Net interest margin, computed on a taxable-equivalent basis
NMNot meaningful
NPA Nonperforming asset
NPL Nonperforming loan
NPRNotice of Proposed Rulemaking
NYSE NYSE Euronext, Inc.
OAS Option adjusted spread
OCCOffice of the Comptroller of the Currency
OCI Other comprehensive income (loss)
OREOOther 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 GroupPCI Financial holding companies included inPurchased credit impaired loans as well as assets of Colonial Bank acquired from the industry peer group indexFDIC during 2009, which were formerly covered under loss sharing agreements
Reform ActRe-REMICs Federal Deposit Insurance Reform ActRe-securitizations of 2005Real Estate Mortgage Investment Conduits
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
SCAPSupervisory 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
SusquehannaSusquehanna Bancshares, Inc., acquired by BB&T effective August 1, 2015
Swett & CrawfordCGSC North America Holdings Corporation, acquired by BB&T effective April 1, 2016
TBA To be announced
TDR Troubled debt restructuring
TETaxable-equivalent
U.S. United States of America
U.S. Treasury United States Department of the Treasury
UPB Unpaid principal balance
VAU.S. Department of Veterans Affairs
VaR Value-at-risk
VIE Variable interest entity

5
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Forward-Looking Statements

This Annual Report on Form 10-K contains “forward-looking statements”"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,”"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 credit and financial markets, either nationally or globally, 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;

·expected cost savings or revenue growth associated with completed mergers and acquisitions may not be fully realized or realized within the expected time frames;

·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 implement part or all 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.


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, the economic instability and recessionary conditions in Europe, the potential exit of the United Kingdom from the European Union and the economic slowdown in China;
changes in the interest rate environment, including interest rate changes made by the FRB, as well as 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 or develop products that enable them to compete more successfully than BB&T and may be subject to different regulatory standards than BB&T;
cybersecurity risks, including "denial of service," "hacking" and "identity theft," could adversely affect BB&T's business and financial performance or reputation, and BB&T could be liable for financial losses incurred by third parties due to breaches of data shared between financial institutions;
natural or other disasters, including acts of terrorism, 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 customers to access the 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 and regulatory proceedings could have a material adverse effect on BB&T;
unfavorable resolution of legal proceedings or other claims and regulatory and other governmental investigations or other inquiries could result in negative publicity, protests, fines, penalties, restrictions on BB&T's operations or ability to expand its business and other negative consequences, all of which could cause reputational damage and adversely impact BB&T's financial conditions and results of operations;
risks resulting from the extensive use of models;
risk management measures may not be fully effective;
deposit attrition, customer loss and/or revenue loss following completed mergers/acquisitions may exceed expectations;
higher than expected costs related to information technology infrastructure or a failure to successfully implement future system enhancements could adversely impact BB&T's financial condition and results of operations and could result in significant additional costs to BB&T;
widespread system outages, caused by the failure of critical internal systems or critical services provided by third parties, could adversely impact BB&T's financial condition and results of operations; and
the other risks and uncertainties detailed in Part I, Item 1A: Risk Factors in this Annual Report on Form 10-K.

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 statement. 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.

6
Readers should, however, consult any further disclosures of a forward-looking nature BB&T may make in any subsequent Annual Reports on Form 10‑K, Quarterly Reports on Form 10‑Q, or Current Reports on Form 8‑K.
Table of Contents

ITEM 1. BUSINESS

BB&T is a FHC headquartered in Winston-Salem, North Carolina. BB&T conducts its business operations primarily through its bank subsidiary, Branch Bank, and other nonbank subsidiaries.

Operating Subsidiaries

Branch Bank (Winston-Salem, North Carolina), BB&T’s largest subsidiary, was chartered in 1872 and is the oldest bank headquartered in North Carolina. Branch Bank provides a wide range of banking and trust services for retail and commercial clients in its geographic markets, including small and mid-size businesses, public agencies, local governments and individuals, through 1,8392,196 offices (as of December 31, 2014)2016). Branch Bank’s principal operating subsidiaries include:

·BB&T Equipment Finance Corporation (Charlotte, North Carolina), provides loan and lease financing to commercial and small businesses;

·BB&T Insurance Services, Inc. (Raleigh, North Carolina), offers property and casualty, life, health, employee benefits, commercial general liability, surety, title and other insurance products through its agency network;

·BB&T Investment Services, Inc. (Charlotte, North Carolina), is a registered broker-dealer and offers clients non-deposit investment products, including discount brokerage services, equities, fixed-rate, variable-rate and index annuities, mutual funds, government and municipal bonds, and money market funds;

·CRC Insurance Services, Inc. (Birmingham, Alabama), is a wholesale insurance broker authorized to do business nationwide;

·Crump Life Insurance Services, Inc. (Roseland, New Jersey), is a wholesale insurance broker authorized to do business nationwide;

·Grandbridge (Charlotte, North Carolina), specializes in arranging and servicing commercial mortgage loans;

·McGriff, Seibels & Williams, Inc. (Birmingham, Alabama), is authorized to do business nationwide and specializes in providing insurance products on an agency basis to large commercial clients, including many Fortune 500 companies; and

·Prime Rate Premium Finance Corporation, Inc. (Florence, South Carolina), and its subsidiaries, which include AFCO Credit Corporation, provide insurance premium financing to clients in the United States and Canada.

BB&T Equipment Finance Corporation (Charlotte, North Carolina) provides loan and lease financing to commercial and small businesses;

BB&T Insurance Services, Inc. (Raleigh, North Carolina) offers property and casualty, life, health, employee benefits, commercial general liability, surety, title and other insurance products through its agency network;

BB&T Investment Services, Inc. (Charlotte, North Carolina) is a registered broker-dealer and offers clients non-deposit investment products, including discount brokerage services, equities, fixed-rate, variable-rate and index annuities, mutual funds, government and municipal bonds, and money market funds;

CRC Insurance Services, Inc. (Birmingham, Alabama) is a wholesale insurance broker authorized to do business nationwide;

Crump Life Insurance Services, Inc. (Roseland, New Jersey) is a wholesale insurance broker authorized to do business nationwide;

Grandbridge (Charlotte, North Carolina) specializes in arranging and servicing commercial mortgage loans;

McGriff, Seibels & Williams, Inc. (Birmingham, Alabama) is authorized to do business nationwide and specializes in providing insurance products on an agency basis to large commercial clients, including many Fortune 500 companies;

Prime Rate Premium Finance Corporation, Inc. (Florence, South Carolina) and its subsidiaries, which include AFCO Credit Corporation, provide insurance premium financing to clients in the United States and Canada; and

Susquehanna Commercial Finance, Inc. (Malvern, Pennsylvania) provides loans and lease financing to commercial and small businesses.

Major Nonbank Subsidiaries

BB&T also has a number of nonbank subsidiaries, including:

·BB&T Securities, LLC (Richmond, Virginia), is a registered investment banking and full-service brokerage firm that provides services in retail brokerage, equity and debt underwriting, investment advice, corporate finance and equity research; and facilitates the origination, trading and distribution of fixed-income securities and equity products in both the public and private capital markets. BB&T Securities, LLC also provides correspondent clearing services to broker-dealers and entities involved in the securities industry;

·Regional Acceptance Corporation (Greenville, North Carolina), specializes in nonprime, indirect financing for consumer purchases of primarily mid-model and late-model used automobiles;

·Sterling Capital Management, LLC (Charlotte, North Carolina), is a registered investment advisor, which provides tailored investment management solutions to meet the specific needs and objectives of individual and institutional clients through a full range of investment strategies; and

·American Coastal Insurance Company (Davie, Florida), is an admitted Florida specialty insurance company that underwrites property insurance risks for commercial condominium or cooperative associations.

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BB&T Securities, LLC (Richmond, Virginia) is a registered investment banking and full-service brokerage firm that provides services in retail brokerage, equity and debt underwriting, investment advice, corporate finance and equity research; and facilitates the origination, trading and distribution of fixed-income securities and equity products in both the public and private capital markets. BB&T Securities, LLC also provides correspondent clearing services to broker-dealers and entities involved in the securities industry;

Regional Acceptance Corporation (Greenville, North Carolina) specializes in nonprime, indirect financing for consumer purchases of primarily mid-model and late-model used automobiles; and

Sterling Capital Management, LLC (Charlotte, North Carolina) is a registered investment advisor, which provides tailored investment management solutions to meet the specific needs and objectives of individual and institutional clients through a full range of investment strategies.


Services


BB&T’s subsidiaries offer a variety of services targeted to retail and commercial clients. BB&T’s objective is to offer clients a full array of products to meet all their financial needs.

BB&T’s insurance operations primarily consist of a wholesale/agency network.

 Retail Services: Commercial Services:
 Asset management Asset management
 Automobile lending Association services
 Bankcard lending Capital markets services
 Consumer finance Commercial deposit services
 Home equity lending Commercial finance
 Home mortgage lending Commercial middle market lending
 Insurance Commercial mortgage lending
 Investment brokerage services Corporate banking
 Mobile/online banking Institutional trust servicesFloor plan lending
 Payment solutions InsuranceInstitutional trust services
 Retail deposit services Insurance premium finance
 Sales finance International banking servicesInsurance premium finance
 Small business lending LeasingInternational banking services
 Wealth management/private banking Merchant servicesLeasing
  Merchant services
   Mortgage warehouse lending
   Payment solutions
   Private equity investments
   Real estate lending
   Supply chain management

Market Area

The following table reflects BB&T’s deposit market share and branch locations by state:
Table 1
BB&T Deposit Market Share and Branch Locations by State
       
  % of BB&T's Deposits (2) Deposit Market Share Rank (2) Number of Branches (3)
North Carolina (1) 20% 2nd 352
Virginia 16
 4th 344
Florida 12
 6th 318
Pennsylvania 10
 4th 262
Georgia 9
 5th 155
Maryland 7
 6th 165
South Carolina 6
 3rd 111
Kentucky 4
 2nd 110
Texas 4
 14th 124
West Virginia 4
 1st 73
Alabama 3
 5th 84
New Jersey 2
 15th 33
Tennessee 2
 7th 48
Washington, D.C. 1
 9th 13
__________________
(1)Excludes home office deposits.

Market Area
               
The following table reflects BB&T’s deposit market share and branch locations by state:
               
Table 1
BB&T Deposit Market Share and Branch Locations by State
               
       % of BB&T's Deposits (2) Deposit Market Share Rank (2) Number of Branches (3) 
 North Carolina (1)  23 %  2nd  358  
 Virginia  20    4th  361  
 Florida  14    6th  325  
 Georgia  10    5th  161  
 South Carolina  7    3rd  113  
 Maryland  7    7th  125  
 West Virginia  5    1st  77  
 Kentucky  4    4th  82  
 Alabama  3    5th  88  
 Texas  3    19th  82  
 Tennessee  2    7th  52  
 Washington, D.C.  2    7th  13  
               
               
 (1)Excludes home office deposits.
 (2)Source: FDIC.gov-data as of June 30, 2014.
 (3)As of December 31, 2014. Excludes two branches in Indiana.

(2)Source: FDIC.gov-data as of June 30, 2016.
(3)As of December 31, 2016. Excludes two branches in Indiana and two in Ohio.



BB&T operates in markets that have a diverse employment base covering numerous industries. Management strongly believes that BB&T’s community bank approach to providing client service is a competitive advantage that strengthens the Company’s ability to effectively provide financial products and services to businesses and individuals in its markets. Furthermore, BB&T believes its current market area will support growth in assets and deposits in the future.

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Competition


The financial services industry is highly competitive and constantly evolving. BB&T’s subsidiaries compete actively with national, regional and local financial services providers, including banks, thrifts, securities dealers, mortgage bankers, finance companies and insurance companies. In recent years, competition has increased from institutions not subject to the same regulatory restrictions as domestic banks and BHCs. Consumers have the opportunity to select from a variety of traditional and nontraditional alternatives. The industry frequently sees merger activity, which affects competition by eliminating some regional and local institutions, while strengthening the franchises of acquirers. For additional information concerning markets, BB&T’s competitive position and business strategies and recent government interventions, see “Market Area”"Market Area" above and “General"General Business Development”Development" below.


General Business Development


BB&T is a regional FHC and has maintained a long-term focus on a strategy that includes expansion of asset size and diversification in terms of revenues and sources of profitability. This strategy encompasses both organic growth and acquisitions of complementary banks and financial businesses.


Merger and Acquisition Strategy


BB&T’s growth in business, profitability and market share has historically been enhanced by strategic mergers and acquisitions. Management intends to remain disciplined and focused with regard to future merger and acquisition opportunities.BB&T is not currently pursuing significant mergers or acquisitions, but BB&T will continue to assess bank and thrift acquisitions subject to market conditions,future opportunities, primarily within or contiguous to BB&T’s existing footprint, based on market conditions and willmay pursue economically advantageous acquisitions of insurance agencies, specialized lending businesses and fee income generating financial services businesses. BB&T’s acquisition strategy is currently focusedwill focus on meeting the following threecriteria:

the organization must be a good fit with BB&T’s culture;

the acquisition criteria:

·must be strategically attractive – meaning that any bank acquisition should be in BB&T’s existing footprint to allow for cost savings and economies of scale or in contiguous states to provide market diversification, or the transaction must be otherwise strategically compelling;

·any risk-related issues would need to be quantified and addressed; and

·the transaction must meet BB&T’s financial criteria.

must be strategically attractive – meaning that any bank acquisition should be in BB&T’s existing footprint to allow for cost savings and economies of scale or in contiguous states to provide market diversification, or the transaction must be otherwise strategically compelling;


any risk-related issues would need to be quantified and addressed; and

the transaction must meet BB&T’s financial criteria.

Regulatory actions, such as the orders more fully discussed in the "BSA/AML and Suspicious Activity" section below, can limit BB&T’s and Branch Bank’s ability to pursue mergers and acquisitions for a period of time and require new or additional regulatory approvals before engaging in certain other business activities.

On April 1, 2016, BB&T acquired National Penn for total consideration of $1.6 billion. National Penn had 126 financial centers, $10.1 billion of total assets and $6.6 billion of deposits. Also on April 1, 2016, BB&T purchased insurance broker Swett & Crawford from Cooper Gay Swett & Crawford for $461 million in cash.

During 2014,2015, BB&T completed the purchasepurchases of 21 bank branches in Texas, providing $1.2 billion in deposits. BB&T reached an agreementSusquehanna Bancshares, Inc. and obtained regulatory approval to acquire 41 additional retail branches in Texas with approximately $2.3 billion in deposits.

BB&T also reached agreements to acquire The Bank of Kentucky Financial Corporation, which has $1.9 billionCorporation. BB&T also acquired 41 retail branches in assets, $1.6 billionTexas from Citigroup. During 2014, BB&T purchased 21 retail branches in depositsTexas from Citigroup. See the "Acquisitions and 32 branches with a strong market shareDivestitures" note in the northern Kentucky/Cincinnati market, and Susquehanna Bancshares, Inc., which has $18.7 billion in assets, $13.7 billion in deposits and 245 branches in Pennsylvania, Maryland, New Jersey, and West Virginia (balances as of December 31, 2014).

"Notes to the Consolidated Financial Statements" for further information about these transactions.



Regulatory Considerations


The following discussion describes elements of an extensive regulatory framework applicable to BHCs, FHCs and banks and contains specific information about BB&T. Regulation of banks, BHCs and FHCsfinancial institutions is intended primarily for the protection of depositors, the DIF and the stability of the financial system, rather than for the protection of shareholders and creditors. As described in more detail below, comprehensive reform of the legislative and regulatory landscape occurred with the passage of the Dodd-Frank Act in 2010. Implementation of the Dodd-Frank Act and related rulemaking activities continued in 2014. In addition to banking laws, regulations and regulatory agencies, BB&T is subject to various other laws, regulations, supervision and examination by other regulatory agencies, all of which directly or indirectly affect the operations and management of BB&T and its ability to make distributions to shareholders.

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BB&T’s earnings are affected by general economic conditions, management policies, changes in state and federal laws and regulations and actions of various regulatory authorities, including those referred to in this section. Following the November 2016 election, the new administration and members of Congress have publicly disclosed proposals to change certain laws and regulations (e.g., pay ratio disclosure and the DOL fiduciary rule). Proposals to change the laws and regulations to which BB&T is subject are frequently introduced at both the federal and state levels. The likelihood and timing of any such changes and the impact such changes may have on BB&T is impossible to determine with any certainty.

The description hereinbelow summarizes the significant state and federal laws to which BB&T currently is subject. To the extent statutory or regulatory provisions are described in this section, suchThe descriptions are qualified in their entirety by reference to the particular statutory or regulatory provisions.

provisions summarized. The descriptions below do not summarize any possible or proposed changes in current laws or regulations.


Financial Regulatory Reform


During the past several years, there has been a significant increase in regulation and regulatory oversight for U.S. financial services firms, primarily resulting from the Dodd-Frank Act. The Dodd-Frank Act is extensive, complicatedcomplex and comprehensive legislation that impacts practically all aspects of a banking organization, representing a significant overhaul of many aspects of the regulation of the financial services industry.organization. The Dodd-Frank Act implementshas led to numerous and far-reaching changes that affect financial companies, including banks, BHCs and FHCs such as BB&T.

Many of theinstitutions.


Certain provisions of the Dodd-Frank Act and other laws are subject to further rulemaking, guidance and interpretation by the applicable federal regulators. BB&T will continue to evaluate the impact of any new regulations so promulgated, including changes in regulatory costs and fees, modifications to consumer products or disclosures required by the CFPB and the requirements of the enhanced supervision provisions, among others.


As a BHC and a FHC under federal law, BB&T is subject to regulation under the BHCA and the examination and reporting requirements of the FRB. Branch Bank, a North Carolina state-chartered commercial bank, is subject to regulation, supervision and examination by the North Carolina Commissioner of Banks,NCCOB, the FDIC and the CFPB.


State and federal law govern the activities in which Branch Bank engages, the investments it makes and the aggregate amount of loans that may be granted to one borrower. Various consumer and compliance laws and regulations also affect its operations. Branch Bank is also is affected by the actions of the FRB as it implements monetary policy.


In addition to federal and state banking laws and regulations, BB&T and certain of its subsidiaries and affiliates, including those that engage in securities underwriting, dealing, brokerage, investment advisory and insurance activities, are subject to other federal and state laws and regulations andas well as supervision and examination by other statefederal and federalstate regulatory agencies and other regulatory authorities, including the SEC, FINRA, NYSE and various state insurance and securities regulators.

NYSE.


FHC Regulation


Under current federal law, as a BHC, BB&T has elected to become a FHC, which allows it to offer customers virtually any type of service that is financial in nature or incidental thereto, including banking and activities closely related thereto, securities underwriting, insurance (both underwriting and agency) and merchant banking. In order to maintain its status as a FHC, BB&T and all of its affiliated depository institutionsIDIs must be well-capitalized and well-managed and have at least a satisfactory CRA rating. The FRB has responsibility for overseeing compliance with these requirements and monitoring FHC status.requirements. If the FRB determines that a FHC is not well-capitalized or well-managed, the FHC has a period of time to comply, but during the period of noncompliance, the FRB can place any limitations on the FHC that it believes to be appropriate. Furthermore, if the FRB determines that a FHC has not maintained a satisfactory CRA rating, the FHC would not be able to commence any new financial activities or acquire a company that engages in such activities, although the FHC would still be allowed to engage in activities closely related to banking and make investments in the ordinary course of conducting banking activities.



Most of the financial activities that are permissible for FHCs also are permissible for a bank’s “financial"financial subsidiary,”" except for insurance underwriting, insurance company portfolio investments, real estate investments and development, and merchant banking, which must be conducted by a FHC. In order for a financial subsidiary of a bank to engage in permissible financial activities, federal law requires the parent bank (and its sister-bank affiliates) to be well-capitalized and well-managed; the aggregate consolidated assets of all of that bank’s financial subsidiaries may not exceed the lesser of 45% of its consolidated total assets or $50 billion; the bank must have at least a satisfactory CRA rating; and, if that bank is one of the 100 largest national banks, it must meet certain financial rating or other comparable requirements.

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Current federal law also establishes a system of functional regulation under which the FRB is the umbrella regulator for BHCs, but BHC affiliates are principally regulated by functional regulators such as the FDIC for state nonmember bank affiliates, the SEC for securities affiliates and state insurance regulators for insurance affiliates. Certain specific activities, including traditional bank trust and fiduciary activities, may be conducted in the bank without the bank being deemed a “broker”"broker" or a “dealer”"dealer" in securities for purposes of functional regulation. Although states generally must regulate bank insurance activities in a nondiscriminatory manner, states may continue to adopt and enforce rules that specifically regulate bank insurance activities in certain identifiable areas.

The Dodd-Frank Act also imposes new prudential regulation on depository institutions and their holding companies. As such, BB&T is subject to more stringent standards and requirements with respect to (1) bank and nonbank acquisitions and mergers, (2) the “financial activities” in which it engages as a FHC, (3) affiliate transactions and (4) proprietary trading, among other provisions.

Enhanced Supervision Standards for Systemically Important Financial Institutions

The Dodd-Frank Act requires the FRB to monitor emerging risks to financial stability and establish enhanced supervision and prudential standards applicable to large, interconnected financial institutions, including BHCs like BB&T, with total consolidated assets of $50 billion or more (often referred to as systemically important financial institutions). During February 2014, the FRB published the final rule implementing the enhanced prudential standards required to be established under section 165 of the Dodd-Frank Act. The enhanced prudential standards include risk-based capital and leverage requirements, liquidity standards, risk management and risk committee requirements, stress test requirements and a debt-to-equity limit for companies that the Council has determined pose a grave threat to financial stability were they to fail such limits.


Resolution Planning and Regulation QQ


FRB and FDIC regulations require “covered companies”"covered companies" such as BB&T and systemically important financial institutions such as Branch Bank to file, maintain and update plans for a rapid and orderly resolution in the event of material financial distress or failure (a “living will”"living will"). Both the FRB and the FDIC must review and approveevaluate BB&T’s and Branch Bank’s living wills and are authorized to impose restrictions on BB&T’s and Branch Bank’s growth and activities or operations if deemed necessary. The public portions of BB&T’s and Branch Bank’sthe resolution plans are available in the Additional Disclosures section of the Investor Relations site atwww.bbt.combbt.investorroom.com/additional-disclosures.


CCAR and Stress Test Requirements

Current


FRB rules require BB&T and other BHCs with $50 billion or more of total consolidated assets to submit annual capital plans based on pre-defined stress scenarios. BB&T and other such BHCs areis also required to collect and report certain related data on a quarterly basis to allow the FRB to monitor the companies’ progress against theirthe annual capital plans. Covered BHCs, includingplan. BB&T may pay dividends and repurchase stock only in accordance with a capital plan that has been reviewed by the FRB and as to which the FRBthat has not objected. The rules also require, among other things, that a covered BHC may not make areceived any objections from the FRB. A capital distribution unless,can only occur if, after giving effect to the distribution, it will meet all minimum regulatory capital ratios and havewill be maintained, including a ratio of Basel I Tier 1 common capital to risk-weighted assets of at least 5%. In addition, effective January 1, 2015, BB&T must maintain apost-stress Basel III common equity tier 1CET1 ratio of at least 4.5%. See Table 332 for additional information about Basel III requirements. The FRB did not object to BB&T’s 20142016 capital plan.

The 2015 capital plan was submitted during January 2015.

The Dodd-Frank Act requires the FRB to conductconducts an annual supervisory stress test for BHCs, such as BB&T, with $50 billion or more of total consolidated assets. The FRB’s stress test rules also requireand requires that BB&T (as well as other covered BHCs) conduct a separate mid-yearmid-cycle stress test, file the results of such test with the FRB and publicly disclose details of the scenario and the impact on its capital. BB&T’s annual and midcyclemid-cycle stress test results are available in the Additional Disclosures section of the Investor Relations site on its website at www.bbt.combbt.investorroom.com/additional-disclosures.

During October 2014, the FRB adopted a rule that amends the capital plan and stress test rules to modify the


The start date of the capital plan andannual stress test cycles from October 1 tocycle is January 1 of the following calendar year. This rule is effective for 2015. The rule also amends the capital plan rule to limit a BHC’s ability toperiod starts July 1 of the following calendar year. A BHC can only make capital distributions to the extent the BHC’s actual capital issuances are less than the amount indicatedas provided for in its capital plan under baseline conditions, measured on a quarterly basis.

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The Dodd-Frank Act also requires the FDIC to conductconducts an annual supervisory stress test for FDIC-insured state nonmember banks such asand requires Branch Bank with $50 billion or more of total consolidated assets and requires such institutions to conduct annual company-run stress tests. The results of the annual supervisory stress test are included in the annual capital plan submitted to the FDIC.

The FDIC published rulemaking that revises FDIC rules and regulations regarding 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, which implement section 165(i)(2) of the Dodd-Frank Act, require covered banks to conduct annual stress tests and report the results of such stress tests to the FDIC and the FRB and publicly disclose a summary of the results of the required stress tests. The FDIChas modified the “as-of”"as-of" dates for financial data that covered banks with more than $10 billion in assets 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 becomebecame effective on January 1, 2016.


During January 2017, the FRB finalized a rule modifying the capital plan and stress testing rules for the 2017 cycle. The rule removes the qualitative assessment of CCAR for BHCs with total consolidated assets between $50 billion and $250 billion. For these entities, the rule also reduces certain reporting requirements. The rule also decreases the amount of capital that can be distributed by CCAR banks to shareholders outside of an approved capital plan without seeking prior approval from the FRB. Previously, if an entity did not receive an objection to its capital plan, it could distribute up to 1% of its tier 1 capital above the distributions in its capital plan. The rule reduces that amount to 0.25% of tier 1 capital. The rule also adds a blackout period in the second quarter of each year during which a firm cannot change its capital distribution. While no longer subject to the qualitative assessment, BB&T intends to maintain the processes and infrastructure to facilitate future compliance.


Acquisitions


BB&T complies with numerous laws related to its acquisition activity. Under the BHCA, a BHC may not directly or indirectly acquire ownership or control of more than 5% of the voting shares or substantially all of the assets of any BHC or bank or merge or consolidate with another BHC without the prior approval of the FRB.


Current federal law authorizes interstate acquisitions of banks and BHCs without geographic limitation. Furthermore,limitation, and a bank headquartered in one state is authorized to merge with a bank headquartered in another state, subject to market share limitations, regulatory approvals and any state requirement that the target bank shall have been in existence and operating for a minimum period of time. After a bank has established branches in a state through an interstate merger transaction, the bank may establish and acquire additional branches at any location in the state where a bank headquartered in that state could have established or acquired branches under applicable federal or state law. These regulatory considerations are applicable to privately negotiated acquisition transactions.

During 2014, the


FRB issued a final rule to implement section 622 of the Dodd-Frank Act, which generally prohibitsrules prohibit a financial company from combining with another company if the ratio of the resulting company's liabilities exceeds 10 percent10% of the aggregate consolidated liabilities of all financial companies.


Other Safety and Soundness Regulations


The FRB has enforcement powers over BHCs and their nonbanking subsidiaries. The FRB has authority to prohibit activities that represent unsafe or unsound practices or constitute violations of law, rule, regulation, administrative order or written agreement with a federal regulator. These powers may be exercised through the issuance of cease and desist orders, civil money penalties or other actions.


There also are a number of obligations and restrictions imposed on BHCs and their depository institutionIDI subsidiaries by federal law and regulatory policy that are designed to reduce potential loss exposure to the depositors of such depository institutions and to the FDIC insurance fund in the event the depository institutionIDI is insolvent or is in danger of becoming insolvent. For example, under requirements of the FRB with respect to BHC operations,requires a BHC is required to serve as a source of financial strength to its subsidiary depository institutionsIDIs and to commit financial resources to support such institutions in circumstances where it might not do so otherwise. In addition, the “cross-guarantee”"cross-guarantee" provisions of federal law require IDIs under common control to reimburse the FDIC for any loss suffered or reasonably anticipated by the DIF as a result of the insolvency or potential failure of commonly controlled IDIs or for any assistance provided by the FDIC to commonly controlled IDIs in danger of failure.IDIs. The FDIC’s claim for reimbursement under the cross-guarantee provisions is superior to claims of shareholders of the IDI or its holding company but is subordinate to claims of depositors, secured creditors and nonaffiliated holders of subordinated debt of the commonly controlled IDI.

Federal and state bankingdebt.


Banking regulators also have broad enforcement powers over Branch Bank, including the power to impose fines and other civil and criminal penalties, and to appoint a receiver in order to conserve the assets of Branch Bank for the benefit of depositors and other creditors. The North Carolina Commissioner of BanksNCCOB also has the authority to take possession of a North Carolina state bank in certain circumstances, including, among other things, when it appears that such bank has violated its charter or any applicable laws, is conducting its business in an unauthorized or unsafe manner, is in an unsafe or unsound condition to transact its business or has an impairment of its capital stock.

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Payment of Dividends; Capital Requirements


The Parent Company is a legal entity separate and distinct from Branch Bank and its subsidiaries. The majority of the Parent Company’s revenue is from dividends paid by Branch Bank. Branch Bank, is subject towhich are limited by laws and regulations that limit the amount of dividends it can pay.regulations. In addition, BB&T and Branch Bank are subject to various regulatory restrictions relating to the payment of dividends, including requirements to maintainregulatory capital at or above regulatory minimums and the requirement to remain “well-capitalized”"well-capitalized" under the prompt corrective action regulations summarized elsewhere in this section. Federal bankingBanking regulators have indicated that banking organizationsdividends should generally pay dividends only be paid if (1) the organization’s net income available to common shareholders over the past year has been sufficient to fully fund the dividends and (2) the prospective rate of earnings retention appears consistent with the organization’s capital needs, asset quality and overall financial condition. BB&T’s 2015future capital actions will depend on the FRB’s review of BB&T’s 2015annual capital plan.

plans.


North Carolina law states that, provided a bank does not make distributions that reduce its capital below its applicable required capital, the board of directors of a bank chartered under the laws of North Carolina may declare such distributions as the directors deem proper.

Capital Requirements
                     
Information related to certain capital ratios is shown in the following table:
                     
Table 2
Capital Adequacy Ratios
December 31, 2014
                     
     Regulatory Minimum Regulatory Minimum to be Well-Capitalized BB&T Branch Bank 
                     
 Risk-based capital ratios:                
  Tier 1 capital  4.0 %   6.0 %   12.4 %   11.7 % 
  Total risk-based capital  8.0     10.0     14.9     13.4   
  Tier 1 common capital N/A   N/A    10.6     11.7   
 Tier 1 leverage capital ratio  3.0     5.0     9.9     9.3   



The federal banking agencies including the FRB and the FDIC, are required to take “prompt"prompt corrective action”action" in respect of depositoryfinancial institutions and their BHCs that do not meet minimum capital requirements. The law establishes five capital categories for IDIs for this purpose: “well-capitalized,” “adequately"well-capitalized," "adequately capitalized,” “undercapitalized,” “significantly undercapitalized”" "undercapitalized," "significantly undercapitalized" and “critically"critically undercapitalized.”" To be considered “well-capitalized” under these standards,"well-capitalized," an institutionIDI must maintain theminimum capital ratios shown above and must not be subject to any order or written directive to meet and maintain a specific capital level for any capital measure.

Federal law also requires the bank regulatory agencies to implement systems for “prompt corrective action” for institutions that fail to meet minimum capital requirements within the five capital categories, with progressively more severe restrictions on operations, management and capital distributions according to the category in which an institution is placed. Additionally, failure to meet capital requirements may cause an institution to be directed to raise additional capital. Federal law further mandates that the agencies adopt safety and soundness standards generally relating to operations and management, asset quality and executive compensation, and authorizes administrative action against an institution that fails to meet such standards.


In addition, to the “prompt corrective action” directives, failure to meet capital guidelines may subject a banking organization to a variety of other enforcement remedies, including additional substantial restrictions on its operations and activities, termination of deposit insurance by the FDIC and, under certain conditions, the appointment of a conservator or receiver.

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U.S. Implementation of

Basel III

During 2013,


The U.S. capital requirements follow the FRB published final rules establishingaccord of the BCBS. The Company currently qualifies as a new comprehensivestandardized approach banking organization under the FRB's Basel III capital framework for U.S. banking organizations known as Basel III.rules. The rules substantially revisestipulate the risk-based capital requirements applicable to BHCs and depository institutions, including BB&T and Branch Bank, compared to the current U.S. risk-based capital rules. The rulesIDIs, define the components of capital and address other issuesareas affecting banking institutions' regulatory capital ratios. The rules also address risk weights and other issuesitems affecting the denominator in banking institutions' regulatory capital ratios, and replace the existing risk-weighting approach, which was derived from Basel I capital accords of the BCBS, withrules use a more risk-sensitive approach based, in part, onthan the standardized approach in the BCBS's 2004 “Basel II” capital accords. The Baselpre-Basel III rules also implement the requirements of Section 939A of the Dodd-Frank Act to remove references to credit ratings from the federal banking agencies' rules. BB&T qualifies as a standardized approach banking organization and must comply with the new requirements beginning on January 1, 2015.

Institutions with greater than $250 billion in assets or $10 billion in foreign assets are considered advanced approachapproaches banking organizations, which requiresresults in a more conservativecomplex calculation of risk-weighted assets.

assets that includes an assessment of the impact of operational risk, among other differences. In addition, advanced approaches institutions have additional reporting requirements and must calculate capital under both the standardized approach and the advanced approaches and use the more conservative result. BB&T would become subject to these requirements upon exceeding either of the asset thresholds.


The Basel III rules, among other things, (1) introduceinclude a new capital measure referred to as common equity Tier 1;CET1; (2) specify that Tier 1 capital consist of Tier 1 common equity and additional Tier 1 capital instruments meeting specified requirements; (3) define Tier 1 common equity narrowly by requiring that most deductions/adjustments to regulatory capital measures be made to Tier 1 common equity and not to the other components of capital; and (4) expand the scope of the deductions/adjustments from capital as compared to existingprior regulations.


The Basel III rules prescribe a standardized approach for risk weightings that expand the risk-weighting categories from the current four Basel I-derived categories (0%, 20%, 50% and 100%) to a much larger and more risk-sensitive number of categories, depending on the nature of the assets, generally rangingrange from 0% for U.S. government and agency securities to 600% for certain equity exposures, resultingwith a maximum risk weight classification of 1,250% for certain securitizations. This results in higher risk weights for a variety of asset categories. In addition, the rules provide more advantageous risk weights for derivatives and repurchase-style transactions cleared through a qualifying central counterparty and increase the scope of eligible guarantors and eligible collateral for purposes of credit risk mitigation.


The Basel III rules revise the “prompt corrective action” directives by establishingalso establish more conservative ratio levels for well-capitalized status. In addition to the minimum risk-based capital requirements, all banks must hold additional capital, referred to as the capital conservation buffer (which is in the form of common equity), to avoid being subject to limits on capital distributions such as dividend payments, discretionary payments on Tier 1 instruments, share buybacks, and certain discretionary bonus payments to executive officers, including heads of major business lines and similar employees.officers. The required amount of the capital conservation buffer will be phased-in annually through January 1, 2019.

During September 2014,


Effective January 1, 2016, Branch Bank became subject to the FDIC, FRBcapital conservation buffer, which requires calculation and OCC issued a final rule on the U.S. implementationpublic disclosure of the Basel III LCR rule. Underamount of the buffer, the eligible retained income and any limitations on distributions and discretionary bonuses resulting from the buffer, including the maximum payout amount for the quarter. The capital conservation buffer requirements do not currently result in any limitations on distributions or discretionary bonuses for Branch Bank.

See the "Liquidity" section in "Management's Discussion and Analysis of Financial Condition and Results of Operations" for additional information about BB&T's liquidity requirements.

See the "Capital" section in "Management's Discussion and Analysis of Financial Condition and Results of Operations" for additional information about BB&T's capital requirements.


HMDA Regulations

The CFPB has issued final rule,rules changing the reporting requirements for lenders under the HMDA. The new rules expand the range of transactions subject to these requirements to include most securitized residential mortgage loans and credit lines. The rules also increase the overall amount of data required to be collected and submitted, including additional data points about the applicable loans and expanded data about the borrowers. BB&T will be considered a “modified LCR” holding company. BB&T would be subjectrequired to full LCR requirements if its operations were to fall underbegin collecting 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, BB&T’s LCR was approximately 130% at December 31, 2014, compared to the regulatory minimum of 90% that will be effective January 1, 2016, which puts BB&T in full compliance with the rule. The regulatory minimum will increase to 100%expanded data on January 1, 2017. The final rule2018.

FATCA

FATCA was enacted by Congress to target non-compliance by U.S. taxpayers using foreign accounts. FATCA 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.

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The following table summarizes the capital requirements and BB&T’s internal targets under Basel III:
                         
Table 3
Capital 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)Upon Basel III becoming effective on January 1, 2015, BB&T's goal is to maintain capital levels above the 2019 requirements.

The following table presents the calculation of the common equity Tier 1 ratio under the U.S. Basel III guidelines:

Table 4
Basel III Capital Ratios (1)
 
     December 31, 
     2014 2013 
             
     (Dollars in millions) 
 Tier 1 common equity under Basel I definition$ 15,237   $ 13,471   
  Net impact of differences between Basel I and Basel III definitions  86     98   
 Tier 1 common equity under Basel III definition$ 15,323   $ 13,569   
 Risk-weighted assets under Basel III definition$ 149,071   $ 140,670   
 Common equity Tier 1 ratio under Basel III  10.3 %   9.7 % 
             
             
 (1)The Basel III amounts are based upon management's interpretation of the rules adopted by the FRB, which became effective on January 1, 2015.

Home Mortgage Disclosure (Regulation C)

The CFPB 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 requireforeign 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.

Enhanced Prudential Standards for BHCs and Foreign Banking

The FRB has adopted amendments to Regulation YY to implement certain components of the enhanced prudential standards required to be established under Section 165 of the Dodd-Frank Act. The amendments became effective on June 1, 2014. The enhanced prudential standards include risk-based and leverage capital requirements, liquidity standards, requirements for overall risk management, stress-test requirements, and a 15-to-1 debt-to-equity limit for companies that the Council has determined pose a grave threat to financial stability. The amendments also establish risk committee requirements and capital stress-testing requirements for certain BHCs and foreign banking organizations with total consolidated assets of $10 billion or more.

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Foreign Account Tax Compliance Act and Conforming Regulations

In May 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,information about financial accounts held by U.S. taxpayers may relyor by foreign entities in which U.S. taxpayers hold a substantial ownership interest. Foreign financial institutions not complying with the reporting requirements are subject to a 30% withholding tax 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.all U.S. sourced payments. BB&T expects to beis in compliance with FATCA and its related provisions by the applicable effective dates.

requirements currently in effect. Beginning January 1, 2019, the regulations will be expanded to include sales of property that can produce certain types of U.S. source income.


Volcker Rule


The Volcker Rule implements section 619 of the Dodd-Frank Act and prohibits IDIs and affiliated companies ("banking entities")their affiliates from engaging in short-term proprietary trading of certain securities, derivatives, and commodity futures and options on these instruments, for their own account. The final rulesrule provides certain exemptions and also impose limits on banking entities' investments in, and other relationships with, hedge funds or private equity funds. Like the Dodd-Frank Act, the rules provide exemptions for certain activities, including market making, underwriting, hedging, trading in government obligations, insurance company activities, and organizing and offering hedge funds or private equity funds. The rules also clarifyclarifies that certain activities are not prohibited, including acting as agent, broker, or custodian.

The compliance requirements under the rules vary based on the size of the banking entity and the scope of activities conducted. Banking entities with significant trading operations will bewere required to establish a detailed compliance program, and their Chief Executive Officers will be required to attest that the program is reasonably designed to achieve compliance with the final rules. Independent testing and analysis of an institution's compliance program also will be required. The final rules reduce the burden on smaller, less-complex institutions by limiting their compliance and reporting requirements. Additionally, a banking entity that does not engage in covered trading activities will not need to establish a compliance program.

Banking entities must conform proprietary trading activities to the final rule by July 21, 2015.


The rule also imposes limits on certain relationships with hedge funds or private equity funds. The FRB has extended the compliance deadline to July 21, 20162017 for purposes of conforming investments in and relationships with covered funds and foreigncertain funds that were in place prior to December 31, 2013. The FRB also announced its intention to grant banking entities an additional one-year extension of the conformance period for legacy funds to July 21, 2017. TheseComplying with these requirements areis not expected to have a material impact on BB&T’s&T's consolidated financial position, results of operations or cash flows.

Deposit Insurance


DIF Assessments


Branch Bank’s deposits are insured by the DIF of the FDIC up to the limits set forth under applicable law. The FDIC imposes a risk-based deposit premium assessment system that determines assessment rates for an IDI based on an assessment rate calculator, which is based on a number of elements to measure the risk each IDI poses to the DIF. The assessment rate is applied to total average assets less tangible equity, as defined under the Dodd-Frank Act. The assessment rate schedule can change from time to time at the discretion of the FDIC, subject to certain limits. Under the current system, premiums are assessed quarterly.


The FDIC adopted a final rule that imposes a surcharge of 4.5 cents per $100 of the assessment base, after making certain adjustments, for banks with total assets of at least $10 billion. The surcharge became effective July 1, 2016 and will last for a period currently estimated by the FDIC to be two years but ending no later than December 31, 2018. If the DIF has not reached the required level at that time, then the FDIC will impose a special assessment on institutions with assets greater than $10 billion. The net effect of the new surcharge is estimated to increase BB&T's total annual assessment by an amount within the range of $40 million to $50 million, and the applicable portion is included in results for the third and fourth quarters of 2016.

Consumer Protection Laws and Regulations


In connection with its lending and leasing activities, Branch Bank is subject to a number of federal and state laws designed to protect borrowers and promote lending to various sectors of the economy and population. These laws include the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, and their respective state law counterparts.

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CFPB


The CFPB has broad rulemaking, supervisory and enforcement powers under various federal consumer financial protection laws, including the laws referenced above, fair lending laws and certain other statutes. The CFPB has examination and primary enforcement authority with respect to depository institutions with $10 billion or more in assets, their service providers and certain non-depository entities such as debt collectors and consumer reporting agencies. The CFPB has authority to prevent unfair, deceptive or abusive practices in connection with the offering of consumer financial products.

The Dodd-Frank Act permits states to adopt consumer protection laws and standards that are more stringent than those adopted at the federal level and, in certain circumstances, permits state attorneys general to enforce compliance with both the state and federal laws and regulations.


The CFPB has concentrated much of its rulemaking efforts on a variety of mortgage-related topics required under the Dodd-Frank Act, including mortgage origination disclosures, minimum underwriting standards and ability to repay, high-cost mortgage lending, and servicing practices. The rules related to ability to repay, qualified mortgage standards and mortgage servicing became effective in January 2014. Theduring 2014, while the escrow and loan originator compensation rules became effective during 2013.

A final rule integrating disclosuremortgage loan disclosures required by the Truth in Lending Act and the Real Estate Settlement and Procedures Act becomesbecame effective August 1,during October 2015. The final rule consolidated four existing and separate disclosures required under these acts for closed-end credit transactions secured by real property into two forms with a view towards making the mortgage loan disclosures less confusing and more consumer friendly. Branch Bank delivered the functionality required to meet the effective date of October 3, 2015 for the new integrated disclosures.

As a result of these rules, BB&T transferred the management of certain home equity loans from direct retail lending within the Community Banking segment to the Residential Mortgage Banking segment.

Interchange Fees

segment during 2014.


Patriot Act

The FRB adopted rules establishing standards for assessing whetherPatriot Act is intended to strengthen the interchange fees that may be charged with respectability of U.S. law enforcement agencies and intelligence communities to cooperate in the prevention, detection and prosecution of international money laundering and the financing of terrorism. The Patriot Act contains anti-money laundering measures affecting IDIs, broker-dealers and certain electronic debit transactions are “reasonableother financial institutions. The Patriot Act includes the International Money Laundering Abatement and proportional”Financial Anti-Terrorism Act of 2001, which requires such financial institutions to implement policies and procedures to combat money laundering and the costs incurred by issuers for such transactions. Interchange fees, or “swipe” fees, are charges that merchants payfinancing of terrorism and grants the Secretary of the U.S. Treasury broad authority to BB&Testablish regulations and to impose requirements and restrictions on financial institutions’ operations. The Patriot Act imposes substantial obligations on financial institutions to maintain appropriate policies, procedures and processes to detect, prevent and report money laundering, terrorist financing and other card-issuing banks for processing electronic payment transactions.

financial crimes. Failure to comply with these regulations may result in fines, penalties, lawsuits, regulatory sanctions, reputation damage, or restrictions on business. In addition, the Patriot Act requires the federal bank regulatory agencies to consider the effectiveness of a financial institution’s anti-money laundering activities when reviewing bank mergers and BHC acquisitions.


BSA/AML and Suspicious Activity

BB&T is subject to several federal laws that are designed to combat money laundering, terrorist financing and transactions with persons, companies, or foreign governments designated by U.S. authorities. This category of laws includes the Bank Secrecy Act, the Money Laundering Control Act, and the Patriot Act.

During 2013,December 2016, Branch Bank entered into a U.S. Federal District Court judge ruled againstconsent order with the debit card interchange fee limits imposed byFDIC and the NCCOB and in January 2017, BB&T entered into a cease and desist order with the FRB and NCCOB. These orders call for corrective actions and enhancements to address certain internal control deficiencies within the BSA/AML Compliance Program. No criminal activity has been identified as the result of such deficiencies, and no financial penalty was levied. BB&T has already taken significant steps towards the improvement of its BSA/AML program, including:

additional investment into processes and system upgrades to strengthen anti-money laundering controls;
continued emphasis on education, training and the importance of compliance for all associates; and
the hiring and placement of a highly experienced BSA/AML professional to oversee these efforts.


BB&T expects to continue to devote significant resources to its BSA/AML program, particularly as risks persistently emerge and evolve and as regulatory expectations escalate.

BSA/AML laws and regulations obligate depository institutions and broker/dealers to verify their customers’ identity, conduct customer due diligence, report on suspicious activity, file reports of transactions in currency and conduct enhanced due diligence on certain accounts, individuals and businesses. Depository institutions and broker/dealers are required by their respective federal regulators to maintain policies and procedures in order to ensure compliance with the above obligations. Federal regulators regularly examine such policies and procedures to ensure their adequacy and effectiveness, and the frequency and extent of such examinations and the remedial actions resulting therefrom have been increasing. Non-compliance with BSA/AML laws or failure to maintain adequate policies and procedures can lead to significant monetary penalties and reputational damage, and federal regulators evaluate the effectiveness of an applicant in the potential for further reductionscombating money laundering when determining whether to these caps. During March 2014, the Washington, D.C. Circuit Court of Appeals overturned the 2013 lower court decision. During January 2015, the U.S. Supreme Court declined to hear the case, which preserved the limits established by the FRB.

approve a bank merger, BHC acquisitions or other expansionary activity.


Privacy


Federal law currently contains extensive customer privacy protection provisions, including substantial customer privacy protections provided under the Financial Services Modernization Act of 1999 (commonly known as the Gramm-Leach-Bliley Act). Under these provisions, a financial institution must provide to its customers, at the inception of the customer relationship and annually thereafter, the institution’s policies and procedures regarding the handling of customers’ nonpublic personal financial information. TheseDuring December 2015, Congress amended the Gramm-Leach-Bliley Act privacy provisions alsoto include an exception under which if a financial institution meets certain conditions, it is not required to provide that, except for certain limited exceptions, anannual privacy notices to customers. In July 2016, the CFPB proposed a rule implementing this provision.

An institution may not provide suchcustomers’ nonpublic personal financial information to unaffiliated third parties unless the institution discloses to the customer that such information may be so provided and the customer is given the opportunity to opt out of such disclosure. Federal law makes it a criminal offense, except in limited circumstances, to obtain or attempt to obtain customer information of a financial nature by fraudulent or deceptive means.


CRA


The CRA requires Branch Bank’s primary federal bank regulatory agency, the FDIC, to assess the bank’s record in meeting the credit needs of the communities served by the bank, including low- and moderate-income neighborhoods and persons. Institutions are assigned one of four ratings: “Outstanding,” “Satisfactory,” “Needs"Outstanding," "Satisfactory," "Needs to Improve”Improve" or “Substantial"Substantial Noncompliance.”" This assessment is reviewed for any bank that applies to merge or consolidate with or acquire the assets or assume the liabilities of an IDI, or to open or relocate a branch office. The CRA record of each subsidiary bank of a FHC such as BB&T, also is assessed by the FRB in connection with any acquisition or merger application.

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Automated Overdraft Payment Regulation

The FRB and FDIC have enacted


There are federal consumer protection regulationslaws related to automated overdraft payment programs offered by financial institutions. Regulation EThe FRB prohibits financial institutions from charging consumers fees for paying overdrafts on automated teller machine and one-time debit card transactions, unless a consumer consents, or opts in, to the overdraft service for those types of transactions.service. Financial institutions must also provide consumers with a notice that explains the financial institution’s overdraft services, including the fees associated with the servicefees and the consumer’s choices. In addition, FDIC-supervised institutions must monitor overdraft payment programs for “excessive"excessive or chronic”chronic" customer use and undertake “meaningful"meaningful and effective”effective" follow-up action with customers that overdraw their accounts more than six times during a rolling 12-month period. Financial institutions must also impose daily limits on overdraft charges, review and modify check-clearing procedures, prominently distinguish account balances from available overdraft coverage amounts and ensure board and management oversight regarding overdraft payment programs.

Patriot


Pay Ratio Disclosure
The SEC has adopted amendments to require the disclosure of: (1) the median compensation amount of the annual total compensation of all employees of a registrant (excluding the CEO), (2) the annual total compensation of that registrant's CEO and (3) the ratio of the median of the annual total compensation of all employees (excluding the CEO) to the annual total compensation of the CEO. The rules require such information for the first fiscal year beginning on or after January 1, 2017.


DOL Fiduciary Rule

During April 2016, the DOL issued a final rule related to fiduciary standards in regards to the investing of clients' retirement assets. The final rule expands the definition of a fiduciary under the Employee Retirement Income Security Act

of 1974. Those who provide investment advice to plans, plan sponsors, fiduciaries, plan participants, beneficiaries and IRAs and IRA owners must either avoid payments that create conflicts of interest or comply with the protective terms of an exemption issued by the DOL. Under new exemptions adopted with the rule, financial institutions will be obligated to acknowledge their status and the status of their individual advisers as "fiduciaries." Firms and advisers will be required to make prudent investment recommendations without regard to their own interests, or the interests of those other than the customer; charge only reasonable compensation; and make no misrepresentations to their customers regarding recommended investments. Additionally, the new rule requires certain disclosures to be made to the investor, and ongoing compliance must be monitored and documented. The Patriot Act contains anti-money laundering measures affectingrequirements under the new rule will be phased in from April 10, 2017 to January 1, 2018. The estimated impact for 2017 of additional expense and reduced revenue ranges from $10 million to $15 million.

FDIC Recordkeeping Requirements

The FDIC has released a final rule to facilitate prompt payment of FDIC-insured deposits when large IDIs broker-dealersfail. The rule requires IDIs with two million or more deposit accounts to maintain complete and certain otheraccurate data on each depositor's ownership interest by right and capacity and to develop the capability to calculate the insured and uninsured amounts for each deposit owner by ownership right and capacity. The requirements under the rule must be in place by April 1, 2020. This rule is expected to result in additional costs to BB&T; however, the amount has not been quantified.

Cybersecurity
Effective December 2015, the CISA is intended to improve cybersecurity in the U.S. by enhanced sharing of information about security threats among the U.S. government and private sector entities, including financial institutions. The Patriot ActCISA also authorizes companies to monitor their own systems notwithstanding any other provision of law, and allows companies to carry out defensive measures on their own systems from cyber attacks. The law includes liability protections for companies that share cyber threat information with third parties so long as such sharing activity is conducted in accordance with CISA.
Incentive-Based Compensation Arrangements

During May 2016, several financial regulators jointly issued a proposed rule designed to prohibit incentive-based compensation arrangements that could encourage inappropriate risks by providing excessive compensation or that could lead to a material financial loss. The proposed rule would require the IMLAFA, which requires suchapplicable compensation arrangements to be considered against a number of factors, including a requirement that the arrangements contain both financial institutions to implement policies and procedures to combat money laundering and the financingnon-financial measures of terrorism and grants the Secretary of the U.S. Treasury broad authority to establish regulations and to impose requirements and restrictions on financial institutions’ operations.performance. In addition, the Patriot Act requiresrequirements would differ based on the federal bank regulatory agenciessize of the institution, and institutions with assets exceeding $50 billion would be subject to considermandatory deferral, forfeiture/adjustment and clawback requirements for employees subject to the effectiveness of a financial institution’s anti-money laundering activities whenrule. BB&T is currently reviewing bank mergers and BHC acquisitions. The U.S. Treasury has issued a number of regulationsthe proposed rule to implementdetermine the Patriot Act, which impose obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing.

potential impact.


Other Regulatory Matters

BB&T is subject to examinations by federal and state banking regulators, as well as the SEC, the FINRA, the NYSE, various taxing authorities and various state insurance and securities regulators. BB&T periodically receives requests for information from regulatory authorities in various states, including state insurance commissions and state attorneys general, securities regulators and other regulatory authorities, concerning BB&T’s business and accounting practices. Such requests are considered incidental to the normal conduct of business.

Employees

At

For the quarter ended December 31, 2014,2016, BB&T had approximately 33,40037,500 full-time equivalent employees, the majority of which were full time, compared to approximately 35,00036,000 full-time equivalent employees atfor the quarter ended December 31, 2013.

2015.


Website Access to BB&T’s Filings with the SEC

BB&T’s electronic filings with the SEC, including the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Exchange Act, as amended, are made available at no cost in the Investor Relations section of the Company’s website,www.bbt.comBBT.com, as soon as reasonably practicable after BB&T files such material with, or furnishes it to, the SEC. BB&T’s SEC filings are also available through the SEC’s website atwww.sec.govsec.gov.

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Corporate Governance


Information with respect to BB&T’s Board of Directors, Executive Officers and corporate governance policies and principles is presented on BB&T’s website,www.bbt.comBBT.com, and includes:

·Corporate Governance Guidelines

·Corporate Board of Directors

·Committees of the Corporate Board of Directors and Committee Charters

·Codes of Ethics for Directors, Senior Financial Officers and Associates

·Executive Officers

·Policy and Procedures for Accounting, Securities and Legal Complaints, including Whistleblower Procedures

·Statement of Political Activity

Corporate Governance Guidelines

Corporate Board of Directors, including Biographical Information

Committees of the Corporate Board of Directors and Committee Charters

Codes of Ethics for Directors, Senior Financial Officers and Associates

Executive Officers, including Biographical Information

Policy and Procedures for Accounting, Securities and Legal Complaints, including Whistleblower Procedures

Statement of Political Activity

Corporate Social Responsibility Report

BB&T intends to disclose any substantive amendments or waivers to the Codes of Ethics for Directors or Senior Financial Officers on BB&T’sits website atwww.bbt.comBBT.com.

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Executive Officers of BB&T

Executive Officer Recent Work Experience Years of Service Age
Kelly S. King Chairman since January 2010. Chief Executive Officer since January 2009. 42  66 
Chairman and Chief Executive Officer     
        
Christopher L. Henson Chief Operating Officer since January 2009. 30  53 
Chief Operating Officer     
        
Daryl N. Bible Chief Financial Officer since January 2009. 7  53 
Senior Executive Vice President and     
Chief Financial Officer     
        
Ricky K. Brown President, Community Banking since July 2004. 37  59 
Senior Executive Vice President and     
President, Community Banking     
        
Barbara F. Duck Enterprise Risk Manager since July 2009. 27  48 
Senior Executive Vice President and     
Enterprise Risk Manager     
        
Donna C. Goodrich Deposit Services Manager since April 2004. 29  52 
Senior Executive Vice President and     
Deposit Services Manager     
        
Robert J. Johnson, Jr. General Counsel, Secretary and Chief Corporate Governance Officer since September 2010. Deputy General Counsel from January 2008 to August 2010. 10  42

  Senior Executive Vice President and

  General Counsel, Secretary and Chief Corporate Governance Officer

     
       
Clarke R. Starnes III Chief Risk Officer since July 2009. 32  55 
Senior Executive Vice President and     
Chief Risk Officer     
        
Steven B. Wiggs Chief Marketing Officer since February 2005. Lending Group Manager since July 2009. 35  57 
Senior Executive Vice President and     
Chief Marketing Officer and Lending     
 Group Manager      
        
Cynthia A. Williams Chief Corporate Communications Officer since June 2009. 29  62 
Senior Executive Vice President and     
Chief Corporate Communications Officer     
        
W. Rufus Yates President and CEO of BB&T Securities since January 2013. President and CEO of Scott & Stringfellow, LLC from 2009 through 2012. 28  57 
Senior Executive Vice President and     
Capital Markets Manager     
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Executive Officer Recent Work Experience Yrs of Service Age
Kelly S. King Chairman since January 2010. Chief Executive Officer since January 2009. 44 68
Chairman and Chief Executive Officer    
       
Christopher L. Henson President since December 2016. Chief Operating Officer since January 2009. 32 55
President and Chief Operating Officer    
       
Daryl N. Bible Chief Financial Officer since January 2009. 9 55
Senior Executive Vice President and     
Chief Financial Officer     
       
Clarke R. Starnes III Chief Risk Officer since July 2009. 34 57
Senior Executive Vice President and     
Chief Risk Officer     
       
W. Bennett Bradley Chief Digital Officer since January 2016. President, Payment Solutions from September 2005 to December 2015. 31 55
Senior Executive Vice President and     
Chief Digital Officer     
  


    
Barbara F. Duck Chief Information Officer since July 2016. Data and Technology Services Manager from January 2016 to June 2016. Enterprise Risk Manager from July 2009 to December 2015. 29 50
Senior Executive Vice President and    
Chief Information Officer    
       
Jim. D. Godwin Deputy Chief Risk Officer since January 2016. Chief Operational Risk Officer from September 2012 to December 2015. Credit Risk Review Manager from May 2009 to September 2012. 21 48
Senior Executive Vice President and     
Deputy Chief Risk Officer     
      
       
Donna C. Goodrich Deposit, Payment and Operations Services Manager since January 2016. Deposit Services Manager from April 2004 to December 2015. 31 54
Senior Executive Vice President and    
Deposit, Payment and Operations Services Manager    
       
Robert J. Johnson, Jr. General Counsel, Secretary and Chief Corporate Governance Officer since August 2010. 12 44
Senior Executive Vice President and    
General Counsel, Secretary and      
Chief Corporate Governance Officer      
       
Brant J. Standridge Lending Group Manager since August 2016. Regional President in Texas from January 2015 to August 2016. Regional President in Georgia from November 2011 to December 2014. Regional President in Maryland from August 2009 to November 2011. 18 41
Senior Executive Vice President and     
Lending Group Manager     
      
      
       
David H. Weaver President Community Banking since December 2016. Community Banking Group Executive from 2010 to December 2016. 21 50
Senior Executive Vice President and     
President Community Banking     
       
Dontá L. Wilson Chief Client Experience Officer since August 2016. Regional President in Georgia from December 2014 to July 2016. Regional President in Alabama from August 2009 to November 2014. 18 40
Senior Executive Vice President and     
Chief Client Experience Officer     
      
       
W. Rufus Yates President and CEO of BB&T Securities since January 2013. President and CEO of Scott & Stringfellow, LLC from 2009 through 2012. 30 59
Senior Executive Vice President and    
Financial Services Manager    

ITEM 1A. RISK FACTORS

The following discussion sets forth some of the more important risk factors that could materially affect BB&T’s financial condition and operations. When a risk factor spans several risk categories, the below risks have been listed by their primary risk category. Other factors that could affect the Company’s financial condition and operations are discussed in the “Forward-Looking Statements”"Forward-Looking Statements" section above. However, there may be additional risks that are not presently material or known, and factors besides those discussed below, or elsewhere in this or other reports that BB&T filed or furnished with the SEC, that also could adversely affect the Company.

Compliance Risk

Changes in banking laws could have a material adverse effect on BB&T.

BB&T is extensively regulated under federal and state banking laws and regulations that are intended primarily for the protection of depositors, federal DIFsthe DIF and the banking system as a whole. In addition, BB&T is subject to changes in federal and state laws as well as changes in banking and credit regulations and governmental economic and monetary policies. Any of these changes could adversely and materially affect BB&T. The current regulatory environment for financial institutions entails significant potential increases in compliance requirements and associated costs, including those related to consumer credit, with a focus on mortgage lending.

Federal and state banking regulators also possess broad powers to take supervisory actions as they deem appropriate. These supervisory actions may result in higher capital requirements, higher deposit insurance premiums and limitations on BB&T’s activities that could have a material adverse effect on its business and profitability.


For example, as discussed in "Regulatory Considerations" above, the FDIC adopted a final rule that imposes a DIF assessment surcharge for banks with total assets of at least $10 billion. The ongoing implementationsurcharge became effective July 1, 2016 and will last for a period currently estimated by the FDIC to be two years but ending no later than December 31, 2018. If the DIF has not reached the required level at that time, then the FDIC will impose a special assessment on institutions with assets greater than $10 billion. The net effect of the new surcharge is estimated to increase BB&T's total annual assessment by an amount ranging from$40 million to $50 million.

The Dodd-Frank Act, and its related rulemaking activities, may result in lower revenues, higher costs and ratings downgrades. In addition, failure to meet the FRB’s capital planning and adequacy requirements and liquidity requirements under the Dodd-Frank Act and other banking laws may limit the ability to pay dividends, pursue acquisitions and repurchase common stock.

The Dodd-Frank Act represents a significant overhaul of many aspects of the regulation of the financial services industry, addressing, among other things, systemic risk, capital adequacy, deposit insurance assessments, consumer financial protection, interchange fees, derivatives, lending limits, and changes among the bank regulatory agencies. Under Dodd-Frank, BB&T is deemed to be a “systemically important”"systemically important" institution. During 2014, federalFederal agencies continued implementationcontinue to implement the provisions of the Dodd-Frank Act. Many of these provisions remain subject to further rulemaking, guidance and interpretation by the applicable federal regulators, such as the Council, which will regulate the systemic risk of the financial system.regulators. Additionally, the CFPB has finalized a number of significant rules that impact nearly every aspect of the lifecycle of a residential mortgage. These rules implement the Dodd-Frank Act amendments to the Equal Credit Opportunity Act, the Truth in Lending Act and the Real Estate Settlement Procedures Act. These rules have a direct impact on BB&T’s operations, as BB&T is both a mortgage originator and a servicer.

Due to BB&T’s size, it is subject to additional regulations such as the “living will”"living will" requirements relating to the rapid and orderly resolution of systemically important financial institutions in the event of material financial distress or failure. BB&T cannot predict the additional effects that compliance with the Dodd-Frank Act or any regulations will have on BB&T’s businesses or its ability to pursue future business opportunities. Additional regulations resulting from the Dodd-Frank Act may materially adversely affect BB&T’s business, financial condition or results of operations. See “Regulatory Considerations”"Regulatory Considerations" for additional information regarding the Dodd-Frank Act and its impact upon BB&T.



BB&T is subject to enhanced capital requirements and may be subject to more stringent capital requirements, which could diminish its ability to pay dividends or require BB&T to reduce its operations.
The Dodd-Frank Act requires federal banking agencies to establish more stringent risk-based capital requirements and leverage limits applicable to banks and BHCs. The FRB approved final rules that established a new comprehensive capital framework for U.S. banking organizations and established a more conservative definition of capital. These requirements, known as Basel III, became effective on January 1, 2015, and as a result, BB&T became subject to enhanced minimum capital and leverage ratios. These requirements, and any other new regulations, including those that have been proposed but not yet implemented as a result of the requirements established by the BCBS, could adversely affect BB&T’s ability to pay dividends or raise capital, or could require BB&T to limit certain business activities, which may adversely affect its results of operations or financial condition. BB&T currently qualifies as a standardized approach banking organization under Basel III. Financial institutions with greater than $250 billion in assets or $10 billion in foreign assets are considered advanced approaches banking organizations, which are subject to a more complex calculation of RWA that includes an assessment of the impact of operational risk, among other requirements. BB&T is preparing to comply with the advanced approaches requirements, and these more stringent requirements, or BB&T’s failure to properly comply with them, could materially and adversely impact BB&T’s financial results and regulatory status once the requirements become applicable to BB&T. In addition, the costs associated with complying with more stringent capital requirements, such as the requirement to formulate and submit capital plans based on pre-defined stress scenarios on an annual basis, could have a material adverse effect on BB&T. See "Regulatory Considerations" for additional information regarding the capital requirements under the Dodd-Frank Act and Basel III.
For example, BB&T has beenis subject to assessment by the FRB as part of the CCAR program. CCAR is an annual exercise by the FRB to ensure that institutions have forward-looking capital planning processes that account for their risks and sufficient capital to continue operations throughout times of economic and financial stress. BB&T cannot be certain that the FRB will have no objections to BB&T’s future capital plans submitted through the CCAR program. Failure to pass the CCAR review could adversely affect BB&T’s ability to pay dividends, enter into acquisitions and repurchase common stock.

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BB&T may beis subject to more stringent capital requirements,extensive and expanding government regulation and supervision, which could diminish itscan lead to costly enforcement actions while increasing the cost of doing business and limiting BB&T’s ability to pay dividends or require BB&Tgenerate revenue.
The financial services industry is subject to reduce its operations.

The Dodd-Frankintense scrutiny from bank supervisors in the examination process and aggressive enforcement of regulations on both the federal and state levels, particularly with respect to mortgage-related practices and other consumer compliance matters, as well as compliance with anti-money laundering, Bank Secrecy Act requiresand Office of Foreign Assets Control efforts, and economic sanctions against certain foreign countries and nationals. Federal banking law grants substantial enforcement powers to federal banking agenciesregulators. This enforcement authority includes, among other things, the ability to establish more stringent risk-based capital requirementsassess significant civil or criminal monetary penalties, fines, or restitution; to issue cease and leverage limits applicabledesist or removal orders; and to banks and BHCs. During 2013, the FRB approved final rules that established a new comprehensive capital framework for U.S.initiate injunctive actions against banking organizations and established a more conservative definitioninstitution-affiliated parties. These enforcement actions may be initiated for violations of capital. Once adoptedlaws and fully phasedregulations and unsafe or unsound practices. Failure to comply with these and other regulations, and supervisory expectations related thereto, may result in banking organizations such as BB&T would befines, penalties, lawsuits, regulatory sanctions, reputation damage or restrictions on business.


In addition, federal bank regulatory agencies are required to meet enhanced minimum capitalconsider the effectiveness of a financial institution’s anti-money laundering activities and leverage ratios. These requirements,other regulatory compliance matters when reviewing bank mergers and any other newBHC acquisitions and, consequently, non-compliance with the applicable regulations including those that have been proposed but not yet implemented as a result of the requirements established by the BCBS, could adversely affectmaterially impair BB&T’s ability to pay dividends,enter into or could requirecomplete mergers and acquisitions.

For example, as discussed in "Regulatory Considerations" above, Branch Bank entered into a consent order with the FDIC and the NCCOB during December 2016 and BB&T entered into a cease and desist order with the FRB and NCCOB in January 2017. The orders call for corrective actions and enhancements to limitaddress certain business activities orinternal control deficiencies within the BSA/AML Compliance Program. BB&T’s and Branch Bank’s ability to raise capital, whichpursue mergers and acquisitions may adversely affect its resultsbe limited for a period of operations or financial condition. In addition,time.
For another example, as discussed in the costs associated"Loan Servicing" note in the "Notes to Consolidated Financial Statements," during 2014, BB&T received notice from the HUD-OIG that BB&T had been selected for an audit/survey to assess BB&T's compliance with complying with more stringent capital requirements, such asFHA loan origination and quality control requirements. BB&T subsequently received subpoenas from the requirement to formulateHUD-OIG and submit capital plans based on pre-defined stress scenarios on an annual basis, could have a material adverse effect on BB&T. See “Regulatory Considerations” forthe Department of Justice seeking additional information regarding its lending practices in connection with loans insured by the capital requirements underFHA. During 2014, BB&T recognized an $85 million charge that was included in other expense on the Dodd-Frank Act and Basel III.

Consolidated Statements of Income. During the third quarter of 2016, the Company paid $83 million to settle these matters pursuant to an agreement with the Department of Justice.


Differences in interpretation of tax laws and regulations and any potential resulting litigation may adversely impact BB&T’s financial statements.

Local, state or federal tax authorities may interpret tax laws and regulations differently than BB&T and challenge tax positions that BB&T has taken on its tax returns. This may result in differences in the treatment of revenues, deductions or credits and/or differences in the timing of these items. The differences in treatment may result in payment of additional taxes, interest or penalties that could have a material adverse effect on BB&T’sfinancial results. For example, as discussed in Note 13 “Income Taxes”the "Income Taxes" note in the “Notes"Notes to Consolidated Financial Statements,” in February" during 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 developments resulted in a $516 million charge induring 2013. Potential developments in BB&T’s litigation or in similar cases could adversely affect BB&T’s financial position or results of operations.

Credit Risk

Changes in national, regional and local economic conditions and deterioration in the geographic and financial markets in which BB&T operates could lead to higher loan charge-offs and reduce BB&T’s net income and growth.

BB&T’s business is subject to periodic fluctuations based on national, regional and local economic conditions.conditions, as well as conditions that may be specific to particular sectors or industries. These fluctuations are not predictable, cannot be controlled and may have a material adverse impact on BB&T’s operations and financial condition even if other favorable events occur. BB&T’s banking operations are primarily locally oriented and community-based. Accordingly, BB&T expects to continue to be dependent upon local business conditions as well as conditions in the local residential and CRE markets it serves. For example, an increase in unemployment, a decrease in real estate values or increases in interest rates, as well as other factors, could weaken the economies of the communities BB&T serves. Weakness in BB&T’s market area could depress its earnings and consequently its financial condition because:

·customers may not want or need BB&T’s products or services;

·borrowers may not be able or willing to repay their loans;

·the value of the collateral securing loans to borrowers may decline; and

·the quality of BB&T’s loan portfolio may decline.

customers may not want or need BB&T’s products or services;
borrowers may not be able or willing to repay their loans;
the value of the collateral securing loans to borrowers may decline; and
the quality of BB&T’s loan portfolio may decline.

Any of the latter three scenarios could require BB&T to charge off a higher percentage of loans and/or increase provisions for credit losses, which would reduce BB&T’s net income. Credit deterioration, combined with flatFor example, our loan portfolio includes loans for oilfield services, oil and gas exploration and production, and pipeline transportation of gas and crude oil. Oil prices have declined in recent years, which has had an adverse effect on some of our borrowers in this portfolio and on the value of the collateral securing some of these loans. If such downturn in the oil and gas industry continues, the cash flows of our customers in this industry could be adversely impacted, which could impair their ability to declining real estate values, wouldservice any loans outstanding to them and/or reduce demand for loans. These factors could result in increased loanhigher delinquencies and greater charge-offs and higher provisions for credit losses,in future periods, which may negatively impact BB&T’s net income.

could adversely affect our business, financial condition or results of operations.

A systemic lack of available credit, a lack of confidence in the financial sector, volatility in the financial markets and/or reduced business activity could materially adversely affect BB&T’s business, financial condition and results of operations.

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Further

Potential downgrades of U.S. government securities by one or more of the credit ratings agencies could have a material adverse effect on BB&T’s operations, earnings and financial condition.

In 2011, the S&P credit rating agency lowered its long term sovereign credit rating on the United States from AAA to AA+, which reflected S&P’s view that an August 2011 agreement of U.S. lawmakers regarding the debt ceiling fell short of what would be necessary to stabilize the U.S. government’s medium term debt dynamics. In June 2013, S&P reaffirmed that rating, while raising its outlook from “Negative” to “Stable.” The three other major credit rating agencies did not downgrade their previously issued U.S. sovereign credit ratings, though some have issued negative outlooks at various times over the last several years. While the risk of a sovereign credit ratings downgrade of the U.S. government, including the rating of U.S. Treasury securities, has been reduced, the possibility still remains. It is foreseeable that the ratings and perceived creditworthiness of instruments issued, insured or guaranteed by institutions or agencies directly linked to the U.S. government could also be correspondingly affected by any such downgrade. Instruments of this nature are key assets on the balance sheets of financial institutions, including BB&T, and are widely used as collateral by financial institutions to meet their day-to-day cash flow needs in the short-term debt market.

A possible future downgrade of the sovereign credit ratings of the U.S. government and a decline in the perceived creditworthiness of U.S. government-related obligations could impact BB&T’s ability to obtain funding that is collateralized by affected instruments, as well as affect the pricing of that funding when it is available. A downgrade may also adversely affect the market value of such instruments. BB&T cannot predict if, when or how any changes to the credit ratings or perceived creditworthiness of these organizationsobligations will affect economic conditions. Such ratings actions could result in a significant adverse impact on BB&T. For example, BB&T’s securities portfolio consists largely of MBS issued by GSEs, such as FHLMC and FNMA. Among other things, a further downgrade in the U.S. government’s credit rating could adversely impact the value of these securities and may trigger requirements that the Company post additional collateral for trades relative to these securities. A downgrade of the sovereign credit ratings of the U.S. government or the credit ratings of related institutions, agencies or instruments would significantly exacerbate the other risks to which BB&T is subject and any related adverse effects on theits business, financial condition and results of operations.


The soundness of other financial institutions could adversely affect BB&T.

Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships. BB&T has exposure to many different industries and counterparties, and BB&T and certain of its subsidiaries routinely execute transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, mutual and hedge funds and other institutions. Many of these transactions expose BB&T to credit risk in the event of default of its counterparty. In addition, BB&T’s credit risk may be exacerbated when collateral is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure. These types of losses could materially and adversely affect BB&T’s results of operations or financial condition.

The expiration


BB&T could be affected by the United Kingdom’s potential withdrawal from the European Union.
In June 2016, the United Kingdom electorate voted to leave the European Union. This referendum was advisory and does not have binding legal effect. In the event that the United Kingdom formally notifies the European Union of its intention to leave the union (commonly referred to as "Brexit"), then the terms of the loss sharing agreementsUnited Kingdom’s withdrawal from, and future relationships with, the European Union will be negotiated, and legislation implementing the withdrawal must be enacted. The ultimate impact of Brexit and its effects on BB&T still remain uncertain and will depend on the terms of withdrawal and the post-Brexit relationships that the United Kingdom will negotiate with the European Union and other nations that are not a part of the European Union. Increased market volatility and further global economic deterioration resulting from Brexit, or concern about Brexit, could have significant adverse effects on BB&T's businesses, results of operations, financial condition, liquidity and capital. In addition, specific impacts from Brexit could include requirements that BB&T make certain changes to its operational model, business practices and regulatory authorizations in order to continue servicing customers across Europe; detrimental impacts on revenues and expenses; increased difficulties related to the Colonial acquisition could result in increased lossesrecruitment, retention, and mobility of certain European-based associates; and other adverse impacts on loans and securities.

In connection with its acquisition of Colonial, BB&T entered into loss sharing agreements with the FDIC, which provided that a significant portion of losses related to the acquired loan portfolios would be borne by the FDIC. Effective October 1, 2014, loans and securities subject to the commercial loss sharing agreement with the FDIC were no longer covered by loss sharing. These loans and securities totaled $561 million and $1.2 billion, respectively, as of December 31, 2014.

Additionally, the single family loss sharing agreement ends in 2019. Any charge-off of related losses that BB&T experiences after the term of the single family loss sharing agreement will not be reimbursed by the FDIC and will negatively impact BB&T’s net income.

business operations. 


Liquidity Risk

BB&T’s liquidity could be impaired by an inability to access the capital markets, an unforeseen outflow of cash or a reduction in the credit ratings for BB&T or its subsidiaries.

Liquidity is essential to BB&T’s businesses. When volatility or disruptions occur in the capital markets, BB&T’s ability to access capital could be materially impaired. Additionally, other factors outside of BB&T’s control, such as a general market disruption or an operational problem that affects third parties, could impair BB&T’s ability to access capital markets or create an unforeseen outflow of cash or deposits. BB&T’s inability to access the capital markets could constrain its ability to make new loans toor meet its existing lending commitments and could ultimately jeopardize its overall liquidity and capitalization.

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BB&T’s credit ratings are also important to its liquidity. Rating agencies regularly evaluate BB&T and its subsidiaries, and their ratings are based on a number of factors, including the financial strength of BB&T and its subsidiaries, as well as factors not entirely within BB&T’s control, including conditions affecting the financial services industry generally. As a result, there can be no assurance that BB&T will maintain its current ratings. A reduction in BB&T’s credit ratings could adversely affect BB&T’s liquidity and competitive position, increase its borrowing costs, limit its access to the capital markets or trigger unfavorable contractual obligations.

Market Risk

Turmoil

Instability in economic conditions and volatility in global financial markets could have a material adverse effect on BB&T’s operations, earnings and financial condition.

The macroeconomic environment in the United States is susceptible to global events and volatility. The negative impact on economic conditions and global markets from the EU, Puerto Ricoforeign sovereign debt matters and other sovereign debt matters could adversely affect BB&T’s business, financial condition and liquidity. Global conflictsDomestic and global political activity, geopolitical matters, including international political unrest or disturbances, concerns over energy prices and economic instability or recession in certain regions could cause turmoil and volatility in the financial markets, which could reduce the value of BB&T’s assets or cause a reduction in liquidity that adversely impacts BB&T’s financial condition and results of operations.


The monetary, tax and other policies of governmental agencies, including the FRB, have a significant impact on market interest rates, and BB&T’s business and financial performance is impacted significantly by such interest rates.

BB&T’s businesses and earnings are affected by the fiscal and other policies adopted by various regulatory authorities of the U.S., non-U.S. governments and international agencies. The FRB regulates the supply of money and credit in the U.S. The federal policies determine in large part the cost of funds for lending and investing and the return earned on those loans and investments. The market impact from such policies can also materially decrease the value of certain of BB&T’s financial assets, most notably debt securities. Changes in the federal policies are beyond BB&T’s control and, consequently, the impact of these changes on BB&T’s activities and results of operations is difficult to predict.

Changes in interest rates may have an adverse effect on BB&T’s profitability.

BB&T’s earnings and financial condition are largely dependent on net interest income, which is the difference between interest earned from loans and investments and interest paid on deposits and borrowings. The narrowing of interest rate spreads could adversely affect BB&T’s earnings and financial condition. BB&T cannot control or predict with certainty changes in interest rates. Regional and local economic conditions, competitive pressures and the policies of regulatory authorities, including monetary policies of the FRB, affect interest income and interest expense. As discussed in “Market"Market Risk Management – Interest Rate Market Risk (Other than Trading),”" BB&T has ongoing policies and procedures designed to manage the risks associated with changes in market interest rates. However, changes in interest rates still may have an adverse effect on BB&T’s profitability. For example, rising interest rates could adversely affect BB&T’s mortgage banking business because higher interest rates could cause customers to apply for fewer mortgages. Similarly, rising interest rates would increase the required periodic payment for variable rate loans and may result in borrowers becoming unable to pay. Additionally, rising interest rates may increase the cost of BB&T’s deposits, which are a primary source of funding. While BB&T actively manages against these risks through hedgingis also subject to the risk of a negative interest rate scenario, which implies that a depositor would pay a premium for a financial institution to hold funds on deposit. In such a scenario, some depositors may choose to withdraw their deposits in lieu of paying an interest rate to BB&T to hold such deposits. Negative rates would also diminish the spreads on loans and other risk mitigation strategies, ifsecurities. This scenario could have a material adverse effect on BB&T’s assumptions regarding borrower behavior are wrong or overall economic conditions are significantly different than anticipated, the Company’s risk mitigation techniques may be insufficient.

financial condition and results of operations.


Loss of deposits or a change in deposit mix could increase the Company’s funding costs.

Deposits are a low cost and stable source of funding. BB&T competes with banks and other financial institutions for deposits. Funding costs may increase because the Company may lose deposits and replace them with more expensive sources of funding, clients may shift their deposits into higher cost products or the Company may need to raise its interest rates to avoid losing deposits. Higher funding costs reduce the Company’s NIM, net interest income and net income.

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Operational Risk

BB&T faces cybersecurity risks, including “denial"denial of service attacks,” “hacking”" "hacking" and “identity theft”"identity theft" that could result in the disclosure of confidential information, adversely affect BB&T’s business or reputation and create significant legal and financial exposure.

BB&T’s computer systems and network infrastructure are subject to security risks and could be susceptible to cyber-attacks,cyber attacks, such as denial of service attacks, hacking, terrorist activities or identity theft. Financial services institutions and companies engaged in data processing have reported breaches in the security of their websites or other systems, some of which have involved sophisticated and targeted attacks intended to obtain unauthorized access to confidential information, destroy data, disable or degrade service, or sabotage systems, often through the introduction of computer viruses or malware, cyber-attacks cyber attacks
and other means.Denial of service attacks have been launched against a number of large financial services institutions, including BB&T. NoneAs a result of these events resulted in a breach of BB&T’s client data or account information; however,attacks, the performance of BB&T’s website,www.bbt.comBBT.com, was adversely affected, and in some instances customers were prevented from accessing BB&T’s website. BB&T expects to be subject to similar attacks in the future. While events to date primarily resulted in inconvenience, future cyber-attackscyber attacks could be more disruptive and damaging. Hacking and identity theft risks, in particular, could cause serious reputational harm. Cyber threats are rapidly evolving and BB&T may not be able to anticipate or prevent all such attacks. BB&T may incur increasing costs in an effort to minimize these risks and could be held liable for any security breach or loss.


Despite efforts to ensure the integrity of its systems, BB&T will not be able to anticipate all security breaches of these types, and BB&T may not be able to implement effective preventive measures against such security breaches. The techniques used by cyber criminals change frequently and can originate from a wide variety of sources, including outside groups such as external service providers, organized crime affiliates, terrorist organizations or hostile foreign governments. Those parties may also attempt to fraudulently induce employees,associates, customers or other users of BB&T’s systems to disclose sensitive information in order to gain access to its data or that of its clients. These risks may increase in the future as the Company continues to increase its mobile-payment and other internet-based product offerings and expands its internal usage of web-based products and applications.

A successful penetration or circumvention of system security could cause serious negative consequences to BB&T, including significant disruption of operations, misappropriation of confidential information of BB&T or that of its customers, or damage to computers orcomputer systems of the CompanyBB&T or those of its customers and counterparties. A security breach could result in violations of applicable privacy and other laws, financial loss to BB&T or to its customers, loss of confidence in BB&T’s security measures, significant litigation exposure and harm to BB&T’s reputation, all of which could have a material adverse effect on the Company.

effect.

BB&T relies on its employees,associates, systems and certain counterparties, and certain failures could materially adversely affect operations.

BB&T’s business is dependent on the ability to process, record and monitor a large number of complex transactions. The Company could be materially adversely affected if one or more of its employeesassociates causes a significant operational breakdown or failure, either as a result of human error or intentionally. Financial, accounting or other data processing systems may fail or have other significant shortcomings that materially adversely affect BB&T’s business. BB&T’s systems may not be able to handle certain scenarios, such as a negative interest rate environment. In addition, products, services and processes are continually changing and BB&T may not fully identify new operational risks that may arise from such changes. Any of these occurrences could diminish the ability to operate one or more LOBsBUs or result in potential liability to clients, increased operating expenses, higher litigation costs (including fines and sanctions), reputational damage, regulatory intervention or weaker competitive standing, any of which could be material to the Company.

If personal, confidential or proprietary information of clients were to be mishandled or misused, significant regulatory consequences, reputational damage and financial loss could occur. Such mishandling or misuse could include circumstances where, for example, such information was erroneously provided to parties who are not permitted to have the information, either through the fault of systems, employees,associates, or counterparties, or where such information was intercepted or otherwise inappropriately taken by third parties.

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BB&T may be subject to disruptions of its operating systems arising from events that are wholly or partially beyond its control, which may include, for example, security breaches; electrical or telecommunications outages; failures of computer servers or other damage to property or assets; natural disasters; health emergencies or pandemics; or events arising from political events, including terrorist acts. There can be no assurance that disaster recovery or other plans will fully mitigate all potential business continuity risks. Any failures or disruptions of systems or operations could impact BB&T’s ability to service its clients, which could adversely affect BB&T’s results of operations by subjecting BB&T to losses, litigation, regulatory fines or penalties or by requiring the expenditure of significant resources to correct the failure or disruption.

Significant litigation and regulatory proceedings could have a material adverse effect on BB&T.

BB&T faces legal riskssignificant litigation and regulatory proceedings in its business, and thebusiness. The volume of claims and amount of damages and penalties claimed in litigation and regulatory proceedings against financial institutions remains high. SubstantialGiven the inherent uncertainties involved in litigation and regulatory proceedings, and the very large or indeterminate damages sought in some matters asserted against BB&T, there can be significant uncertainty as to the ultimate liability BB&T may incur from such matters. The finding, or even the assertion, of substantial legal liability or significant regulatory action against BB&T may have material adverse financial effects or cause significant reputational harm to BB&T, which in turn could seriously harm BB&T’s business prospects.


BB&T faces significant operational and other risks related to its activities, which could expose it to negative publicity, litigation and/or regulatory action.

BB&T is exposed to many types of risks, including operational, reputational, legal and compliance risk, the risk of fraud or theft by employeesassociates or outsiders (including identity and information theft), unauthorized transactions by employeesassociates or operational errors, including clerical or record-keeping errors or those resulting from faulty or disabled computer or telecommunications systems. Negative public opinion can result from BB&T’s actual or alleged conduct in any number of activities, including lending practices, corporate governance and acquisitions, activities related to asset sales and balance sheet management and from actions taken by government regulators and community organizations in response to those activities. Negative public opinion can adversely affect BB&T’s ability to attract and keep customers and can expose it to litigation and regulatory action.

Because the nature of the financial services businessindustry involves a high volume of transactions, certain errors may be repeated or compounded before they are discovered and successfully rectified. BB&T’s necessary dependence upon automated systems to record and process its transaction volume may further increase the risk that technical flaws or employeeassociate tampering or manipulation of those systems will result in losses that are difficult to detect. BB&T also may be subject to disruptions of its operating systems arising from events that are wholly or partially beyond its control (for example, computer viruses or electrical or telecommunications outages), which may give rise to disruption of service to customers and to financial loss or liability. BB&T is further exposed to the risk that its external vendors may be unable to fulfill their contractual obligations (or will be subject to the same risk of fraud or operational errors by their respective employees as is BB&T) and to the risk that BB&T’s (or its vendors’) business continuity and data security systems prove to be inadequate.

BB&T relies on other companies to provide certain key components of its business infrastructure.

Third party vendors provide certain key components of BB&T’s business infrastructure such as internet connections, network access and mutual fund distribution.certain transaction processing. While BB&T has selected these third party vendors carefully, it does not control their operations. Any failure by these third parties to perform or provide agreed upon goods and services for any reason, or their poor performance of services, could adversely affect BB&T’s ability to deliver products and services to its customers and otherwise conduct its business. Replacing these third party vendors could also entail significant delay and expense.

BB&T may not be able to successfully integrate bank or nonbank mergers and acquisitions.

Difficulties may arise in the integration of the business and operations of BHCs, banks and other nonbanknon-bank entities that BB&T acquires and, as a result, BB&T may not be able to achieve the cost savings and synergies that it expects will result from such transactions. Achieving cost savings is dependent on consolidating certain operational and functional areas, eliminating duplicative positions and terminating certain agreements for outside services. Additional operational savings are dependent upon the integration of the acquired or merged entity’s businesses with BB&T or one of BB&T’s subsidiaries, the conversion of core operating systems, data systems and products and the standardization of business practices. Complications or difficulties in the conversion of core operating systems, data systems and products may result in the loss of customers, damage to BB&T’s reputation within the financial services industry, operational problems, one-time costs currently not anticipated or reduced cost savings resulting from such mergers or acquisitions. Annual cost savings in each such transaction may be materially less than anticipated if the holding company, bank merger or nonbank merger or acquisition is delayed unexpectedly, the integration of operations is delayed beyond what is anticipated or the conversion to a single set of data systems is not accomplished on a timely basis.

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Difficulty in integrating an acquired company may causeprevent BB&T not to realizefrom realizing expected revenue increases, cost savings, increases in geographic or product presence and/or other projected benefits from the acquisition. The integration could result in higher than expected deposit attrition, loss of key employees,associates, disruption of BB&T’s businesses or the businesses of the acquired company, or otherwise adversely affect BB&T’s ability to maintain relationships with customers and employeesassociates or achieve the anticipated benefits of the acquisition. Also, the negative effect of any divestitures required by regulatory authorities in acquisitions or business combinations may be greater than expected. As a result of these and other factors, BB&T could incur losses on acquired assets and increased expenses resulting from the failure to successfully integrate an acquired company, which could adversely impact its financial condition or results of operations.


BB&T may not be able to successfully implement a new ERPfuture information technology system enhancements, which could adversely affect BB&T’s business operations and profitability.

BB&T is investinginvests significant resources in information technology system enhancements in order to provide functionality and security at an enterprise-wide initiative aimed at implementing an integrated ERP financial platform, utilizing certain modules of SAP software. The objective of the new ERP system is to modernize and consolidate many of the existing systems that are currently used for a variety of functions throughout the Company, including both internal and external financial reporting.appropriate level. BB&T may not be able to successfully implement and integrate the new ERPfuture system enhancements, which could adversely impact the ability to provide timely and accurate financial information in compliance with legal and regulatory requirements, which could result in sanctions from regulatory authorities. Such sanctions could include fines and suspension of trading in BB&T stock, among others. In addition, future system enhancements could have higher than expected costs and/or result in operating inefficiencies, which could increase the costs associated with the implementation as well as ongoing operations.
Failure to properly utilize system enhancements that are implemented in the future could result in impairment charges that adversely impact BB&T’s financial condition and results of operations and could result in significant costs to remediate or replace the defective components. In addition, BB&T may incur significant training, licensing, maintenance, consulting and amortization expenses during and after systems implementations, and any such costs may continue for an extended period of time.

BB&T is investing significant resources in a number of core business processesnew commercial loan system. BB&T may not be able to successfully implement and integrate the new commercial loan system, which could be affected.adversely impact the ability to provide timely and accurate financial information in compliance with legal and regulatory requirements, which could result in sanctions and fines from regulatory authorities. The implementation could extend past the expected timing and/or result in operating inefficiencies, which could increase the costs associated with the implementation as well as ongoing operations.

Failure to implement part or all of the ERP system could result in impairment charges that adversely impact BB&T’s financial condition and results of operations and could result in significant costs to remediate or replace the defective components. In addition, BB&T may incur significant training, licensing, maintenance, consulting and amortization expenses during and after the implementation, and any such costs may continue for an extended period of time.

There are risks resulting from the extensive use of models in BB&T’s business.

BB&T relies on quantitative models to measure risks and to estimate certain financial values. Models may be used in such processes as determining the pricing of various products, grading loans and extending credit, measuring interest rate and other market risks, predicting or estimating losses, assessing capital adequacy and calculating economic and regulatory capital levels, as well as to estimate the value of financial instruments and balance sheet items. Poorly designed or implemented models present the risk that BB&T’s business decisions based on information incorporating model output would be adversely affected due to the inadequacy of that information. Also, information BB&T provides to the public or to its regulators based on poorly designed or implemented models could be inaccurate or misleading. Some of the decisions that the regulators make, including those related to capital distributions to BB&T’s shareholders, could be affected adversely due to the perception that the quality of the models used to generate the relevant information is insufficient.

BB&T’s risk management measures may not be fully effective.
Management of risk, including compliance, credit, liquidity, market, operational, reputation and strategic risks, requires policies and procedures to properly record and verify a large number of transactions and events. BB&T’s risk management measures may not be fully effective in identifying and mitigating its risk exposure in all market environments or against all types of risk, including risks that are unidentified or unanticipated, even if the models for assessing risk are properly designed and implemented. Some of BB&T’s methods of managing risk are based upon its use of observed historical market behavior and management's judgment. These methods may not accurately predict future exposures, which could be significantly greater than the historical measures indicate. In addition, credit risk is inherent in the financial services business. BB&T’s ability to assess the creditworthiness of its customers may be impaired if the models and approaches it uses to select, manage and underwrite consumer and commercial customers become less predictive of future charge-offs.

BB&T's set of risk monitoring and risk mitigation techniques, and the judgments that accompany their application, cannot anticipate every economic and financial outcome or the timing of such outcomes. BB&T may, therefore, incur losses in the course of its risk management or investing activities.


Strategic and Other Risk

BB&T may experience significant competition in its market area,from new or existing competitors, which may reduce its customer base or cause it to lower prices for its products and services in order to maintain market share.

There is intense competition among commercial banks in BB&T’s market area. In addition, BB&T competes with other providers of financial services, such as savings and loan associations, credit unions, consumer finance companies, securities firms, insurance companies, commercial finance and leasing companies, the mutual funds industry, full-service brokerage firms and discount brokerage firms, some of which are subject to less extensive regulations than BB&T is with respect to the products and services they provide. BB&T’s success depends, in part, on its ability to adapt its products and services to evolving industry standards and customer expectations. There is increasing pressure to provide products and services at lower prices. Lower prices can reduce BB&T’s NIM and revenues from its fee-based products and services.

In addition, the adoption of new technologies by competitors, including internet banking services, mobile phone applications and advanced ATM functionality could require BB&T to make substantial expenditures to modify or adapt its existing products and services. Also, these and other capital investments in BB&T’s business may not produce expected growth in earnings anticipated at the time of the expenditure. BB&T may not be successful in introducing new products and services, achieving market acceptance of its products and services, anticipating or reacting to consumers’ changing technological preferences or developing and maintaining loyal customers.

In addition, BB&T could lose market share to the shadow banking system or other non-traditional banking organizations.

Some of BB&T’s larger competitors, including certain national banks that have a significant presence in BB&T’s market area, may have greater capital and resources than BB&T, may have higher lending limits and may offer products and services not offered by BB&T. Any potential adverse reactions to BB&T’s financial condition or status in the marketplace, as compared to its competitors, could limit BB&T’s ability to attract and retain customers and to compete for new business opportunities. The inability to attract and retain customers or to effectively compete for new business may have a material and adverse effect on BB&T’s financial condition and results of operations.

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BB&T also experiences competition from a variety of institutionsnonbank companies inside and outside of its market area. Some of these institutions conduct businessarea and, in some cases, from companies other than those traditionally considered financial sector participants. In particular, technology companies have begun to focus on the financial sector and offer software and products primarily over the Internet, with an increasing focus on mobile device delivery. These companies generally are not subject to the comparable regulatory burdens as financial institutions and thus may be able toaccordingly realize certain cost savings and offer products and services at more favorable rates and with greater convenience to the customer, who cancustomer. For example, a number of companies offer bill pay bills and funds transfer funds directly without going throughservices that allow customers to avoid using a bank. Technology companies are generally positioned and structured to quickly adapt to technological advances and directly focus resources on implementing those advances. This competition could result in the loss of fee income as well as the loss ofand customer deposits and income generated from those deposits.related income. In addition, changes in consumer spending and saving habits could adversely affect BB&T’s operations, and the Company may be unable to develop competitive and timely new products and services in responseresponse. As the pace of technology and change advance, continuous innovation is expected to these changesexert long-term pressure on a timely basis or at all.

the financial services industry.


BB&T may not be able to complete future acquisitions.

BB&T must generally satisfy a number of meaningful conditions before it can complete an acquisition of another bank or BHC, including federal and/or state regulatory approvals. In determining whether to approve a proposed bank or BHC acquisition, bank regulators will consider, among other factors, the effect of the acquisition on competition, financial condition and future prospects, including current and projected capital ratios and levels, the competence, experience and integrity of management and record of compliance with laws and regulations, the convenience and needs of the communities to be served, including the acquiring institution’s record of compliance under the CRA, the effectiveness of the acquiring institution in combating money laundering activities and protests from various stakeholders of both BB&T and its acquisition partner. Also, under the Dodd-Frank Act, U.S. regulators must now take systemic risk into account when evaluating whether to approve a potential acquisition transaction involving a large financial institution like BB&T. BB&T cannot be certain when or if, or on what terms and conditions, any required regulatory approvals will be granted. In specific cases, BB&T may be required to sell banks or branches, or take other actions as a condition to receiving regulatory approval. An inability to satisfy other conditions necessary to consummate an acquisition transaction, such as third-party litigation, a judicial order blocking the transaction or lack of shareholder approval, could also prevent BB&T from completing an announced acquisition.


Catastrophic events could have a material adverse effect on BB&T.

The occurrence of catastrophic events such as hurricanes, tropical storms, tornados, winter storms and other large scale catastrophes could adversely affect BB&T’s consolidated financial condition or results of operations. BB&T has operations and customers along the Gulf and Atlantic coasts as well as other parts of the southeastern United States, which could be adversely impacted by hurricanes and other severe weather in those regions. Unpredictable natural and other disasters could have an adverse effect on BB&T in that such events could materially disrupt its operations or the ability or willingness of its customers to access the financial services offered by BB&T. BB&T’s property and casualty insurance operations also expose it to claims arising out of catastrophes. The incidence and severity of catastrophes are inherently unpredictable. Although BB&T carries insurance to mitigate its exposure to certain catastrophicThese events these events could nevertheless reduce BB&T’s earnings and cause volatility in its financial results for any fiscal quarter or year and have a material adverse effect on BB&T’s financial condition and/or results of operations.


ITEM 2. PROPERTIES

BB&T leases its headquarters inat 200 West Second Street, Winston-Salem, North Carolina 27101 and owns or leases other significant office space in the vicinity of its headquarters.  BB&T owns or leases free-standing operations centers, with its primary operations and information technology centercenters located in Wilson, North Carolina.various locations in the southeastern and mid-Atlantic United States.  Offices are either owned or operated under long-term leases.  At December 31, 2014, Branch Bank operated 1,839 branchBB&T operates retail branches and other offices in North Carolina, Virginia, Florida, Georgia, Maryland, South Carolina, West Virginia, Kentucky, Alabama, Texas, Tennessee, Washington DCa number of states, primarily concentrated in the southeastern and Indiana.mid-Atlantic United States. See Table 1 for a list of BB&T’s branches by state. BB&T also operates numerous insurance agencies and other businesses that occupy facilities.facilities throughout the U.S. and Canada. Management believes that the premises are well-located and suitably equipped to serve as financial services facilities. See Note 5 “Premisesthe "Premises and Equipment”Equipment" note in the “Notes"Notes to Consolidated Financial Statements”Statements" in this report for additional disclosures related to properties and other fixed assets.


ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

BB&T’s common stock is traded on the NYSE under the symbol “BBT.”"BBT." The common stock was held by approximately 346,000450,000 shareholders at December 31, 20142016 compared to approximately 342,000384,000 shareholders at December 31, 2013.2015. The following table sets forth the quarterly high and low trading prices and closing sales prices for BB&T’s common stock and the cash dividends declared per share of common stock for each of the last eight quarters.

28
Table of Contents

Table 5
Quarterly Summary of Market Prices and Cash Dividends Declared on Common Stock
                              
      2014 2013 
               Cash          Cash 
      Sales Prices Dividends Sales Prices Dividends 
      High Low Close Declared High Low Close Declared 
 Quarter Ended:                        
  March 31$ 41.04  $ 36.28  $ 40.17  $ 0.23  $ 31.81  $ 29.54  $ 31.39  $ 0.23  
  June 30  40.95    36.38    39.43    0.24    34.37    29.18    33.88    0.23  
  September 30  40.21    35.86    37.21    0.24    36.59    33.30    33.75    0.23  
  December 31  39.69    34.50    38.89    0.24    37.42    32.65    37.32    0.23  
   Year$ 41.04  $ 34.50  $ 38.89  $ 0.95  $ 37.42  $ 29.18  $ 37.32  $ 0.92  

Table 2
Quarterly Summary of Market Prices and Cash Dividends Declared on Common Stock
     
  2016 2015
  Sales Prices Cash Dividends Declared Sales Prices Cash Dividends Declared
  High Low Close  High Low Close 
Quarter Ended:                
March 31 $37.03
 $29.95
 $33.27
 $0.27
 $40.17
 $34.95
 $38.99
 $0.24
June 30 37.02
 32.22
 35.61
 0.28
 41.70
 37.33
 40.31
 0.27
September 30 38.81
 33.72
 37.72
 0.30
 41.90
 34.73
 35.60
 0.27
December 31 47.85
 37.40
 47.02
 0.30
 39.47
 34.24
 37.81
 0.27
Year 47.85
 29.95
 47.02
 $1.15
 41.90
 34.24
 37.81
 $1.05
The stock price reached an all-time high during the first quarter of 2017.


Common Stock, Dividends and Share Repurchases

BB&T’s ability to pay dividends is primarily dependent on earnings from operations, the adequacy of capital and the availability of liquid assets for distribution and is subject to the FRB not objecting to its capital plan. BB&T’s ability to generate liquid assets for distribution is dependent on the ability of Branch Bank to pay dividends to the Parent Company. The payment of cash dividends is an integral part of providing a competitive return on shareholders’ investments. The Company’s policy is to accomplish this while retaining sufficient capital to support future growth and to meet regulatory requirements. Management has established a guideline that the common dividend payout ratio (computed by dividing common stock dividends by net income available to common shareholders) will be between 30% and 50% and the total payout ratio (including dividends and share repurchases) will be between 30% and 80% of basic EPS during normal economic conditions. BB&T’s common dividend payout ratio computed by dividing dividends declared per common share by basic EPS, was 34.1%40.9% in 20142016 compared to 41.4%40.8% in 2013.2015 and 34.3% in 2014. BB&T has paid a cash dividend to shareholders every year since 1903. BB&T expects common dividend declarations, if declared, to occur in January, April, July and October with payment dates on or about the first of March, June, September and December. A discussion of dividend restrictions is included in Note 16 “Regulatorythe "Regulatory Requirements and Other Restrictions”Restrictions" note in the “Notes"Notes to Consolidated Financial Statements”Statements" and in the “Regulatory Considerations”"Regulatory Considerations" section.

Share Repurchases

BB&T has periodically repurchased shares of its own common stock. In accordance with North Carolina law, repurchased shares cannot be held as treasury stock, but revert to the status of authorized and unissued shares upon repurchase.


The Board of Directors has granted authority under the 20062015 Repurchase Plan, announced on June 25, 2015, allows for the repurchase of up to 50 million shares of BB&T’sthe Company's common stock. The 2006Repurchases under the 2015 Repurchase Plan remains in effect until allmay be effected through open market purchases or privately negotiated transactions. The timing and exact amount of repurchases will be consistent with the authorized sharesCompany'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. The 2015 Repurchase Plan does not have an expiration date. Shares that are repurchased unlesspursuant to the plan is modified by2015 Repurchase Plan constitute authorized but unissued shares of the Company and are therefore available for future issuances.

On July 26, 2016, the Company announced that the Board of Directors. NoDirectors authorized up to $640 million of share repurchases over a one-year period beginning with the third quarter of 2016. The Company completed $160 million of share repurchases during each of the third and fourth quarters of 2016. On December 20, 2016, the Company announced that the Board of Directors also authorized an additional $200 million of share repurchases through an accelerated share repurchase program, which resulted in the retirement of 3.4 million shares wereduring the fourth quarter of 2016 and concluded in January 2017 with approximately 910,000 additional shares being retired.

Management's guideline for the total payout ratio (computed by dividing the sum of common stock dividends declared and share repurchases, excluding shares repurchased in connection with the 2006 Repurchase Planequity awards, by net income available to common shareholders) is that it will range between 30% and 80% during normal economic conditions. The total payout ratio was 64.0%, 40.8% and 34.3% in 2016, 2015 and 2014, 2013, or 2012.

Table 6
Share Repurchase Activity
              
            Maximum Remaining 
            Number of Shares 
     Total  Average Total Shares Repurchased Available for Repurchase 
     Shares  Price Paid Pursuant to Pursuant to 
     Repurchased (1)  Per Share (2) Publicly-Announced Plan Publicly-Announced Plan 
              
     (Shares in thousands) 
 October 2014 54  $ 37.16   ―     44,139  
 November 2014 5    37.80   ―     44,139  
 December 2014 5    37.81   ―     44,139  
  Total 64    37.26   ―     44,139  
              
              
(1)Repurchases reflect shares exchanged or surrendered in connection with the exercise of equity-based awards under BB&T’s equity-based compensation plans.
(2)Excludes commissions.

respectively. BB&T may consider higher total distributions based on its capital position, earnings and prevailing economic conditions.
Table 3
Share Repurchase Activity
         
  Total Shares Repurchased (1) Average Price Paid Per Share (2) Total Shares Purchased Pursuant to Publicly-Announced Plan Maximum Remaining Number of Shares Available for Repurchase Pursuant to Publicly-Announced Plan
  (shares in thousands)
October 2016 1,959
 $39.07
 1,955
 43,751
November 2016 2,156
 39.00
 2,145
 41,606
December 2016 3,409
 46.68
 3,375
 38,231
Total 7,524
 42.50
 7,475
  
__________________
29
(1)Includes shares exchanged or surrendered in connection with the exercise of equity-based awards under BB&T’s equity-based compensation plans.
Table
(2)Excludes commissions. For the December 2016 period, the average price paid per share includes the final average price of Contents$46.68 per share used to determine the total shares repurchased under the accelerated share repurchase program upon its conclusion in January 2017.

Preferred Stock

See Note 11 “Shareholders’ Equity”"Shareholders’ Equity" note in the “Notes"Notes to Consolidated Financial Statements”Statements" for information about BB&T’s preferred stock.

Equity Compensation Plan Information

The following table provides information concerning securities to be issued upon the exercise of outstanding equity-based awards the weighted average price of such awards and the securities remaining available for future issuance as of December 31, 2014.

 Table 7 
 Equity Compensation Plan Information 
                  
      (a)(1) (b)(2) (c)(3) 
      Number of securities Weighted-average Number of securities remaining 
      to be issued upon exercise price of available for future issuance 
      exercise of outstanding outstanding options, under equity compensation plans 
 Plan Category options, warrants and rights warrants and rights (excluding securities reflected in (a)) 
 Approved by security holders   40,195,870   $ 35.09     26,832,221   
 Not approved by security holders   ―       ―       ―     
  Total   40,195,870     35.09     26,832,221   
                  
                  
(1)Includes 11,821,700 RSUs.
(2)Excludes RSUs because they do not have an exercise price.
(3)All awards remaining available for future issuance will be issued under the terms of the 2012 Incentive Plan.

2016.

Table 4
Equity Compensation Plan Information
       
Plan Category 
(a)(1)
Number of securities to be issued upon exercise of outstanding options, warrants and rights
 
(b)(2)
Weighted-average exercise price of outstanding options, warrants and rights
 
(c)(3)
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in (a))
Approved by security holders 24,548,547
 $33.35 16,626,809
Not approved by security holders (4) —
 — —
Total 24,548,547
 33.35 16,626,809
__________________
(1)Includes 13,184,898 RSUs.
(2)Excludes RSUs because they do not have an exercise price.
(3)All awards remaining available for future issuance will be issued under the terms of the 2012 Incentive Plan.
(4)Excludes 432,061 options outstanding with a weighted average exercise price of $37.42 for plans that BB&T will not make future awards under and were assumed in mergers and acquisitions.

Performance Graph

Set forth below areGraphs

The following graphs comparingcompare the cumulative total returns (assuming concurrent $100 investments at the beginning of each period and reinvestment of dividends) of BB&T common stock, the S&P 500 Index, and an industry Peer Group. The Peer Group consists of FHCs and BHCs with assets between approximately $50 billion and $410 billion as of December 31, 2014.peer group. The companies in the Peer Grouppeer group were Comerica Incorporated, Fifth-Third Bancorp, Huntington Bancshares, Incorporated, KeyCorp, M&T Bank Corporation, PNC Financial Services Group, Inc., Regions Financial Corporation, SunTrust Banks, Inc., U.S. Bancorp, Wells Fargo & Company and Zions Bancorporation.


  As of / Through December 31, Cumulative Total Return Through December 31, 2016
  Invested Cumulative Total Return 

 2011 2012 2013 2014 2015 2016 10 Year 20 Year
BB&T Corporation $100.00
 $118.57
 $157.37
 $168.22
 $168.05
 $215.90
 $153.49
 $504.75
S&P 500 Index 100.00
 115.99
 153.54
 174.54
 176.94
 198.09
 195.72
 438.79
BB&T's Peer Group 100.00
 124.93
 170.20
 201.35
 203.51
 237.25
 154.50
 508.27

ITEM 6. SELECTED FINANCIAL DATA
   
  As of/ For the Year Ended December 31,
  2016 2015 2014 2013 2012
  (Dollars in millions, except per share data, shares in thousands)
Summary Income Statement:          
Revenue-TE (1) $10,953
 $9,757

$9,373

$9,798

$9,979
Less: TE adjustment (2) 160
 146
 143
 146
 149
Revenue-reported (1) 10,793
 9,611
 9,230
 9,652
 9,830
Provision for credit losses 572
 428
 251
 592
 1,057
Noninterest expense 6,721
 6,266
 5,852
 5,777
 5,828
Income before income taxes 3,500

2,917

3,127

3,283

2,945
Provision for income taxes 1,058
 794
 921
 1,553
 892
Net income 2,442

2,123

2,206

1,730

2,053
Noncontrolling interest 16
 39
 75
 50
 49
Dividends and accretion on preferred stock 167
 148
 148
 117
 63
Net income available to common shareholders 2,259

1,936

1,983

1,563

1,941
           
Per Common Share:      
  
  
Basic EPS $2.81
 $2.59
 $2.76
 $2.22
 $2.78
Diluted EPS 2.77
 2.56
 2.72
 2.19
 2.74
Cash dividends declared 1.15
 1.05
 0.95
 0.92
 0.80
Common equity 33.14
 31.66
 30.09
 28.48
 27.17
           
Average Balances:      
  
  
Total assets $218,945
 $197,347
 $185,095
 $181,282
 $178,592
Securities (3) 46,279
 42,103
 40,541
 36,772
 36,334
Loans and leases (4) 141,759
 127,802
 118,830
 117,527
 113,733
Deposits 157,469
 138,498
 129,077
 128,555
 127,617
Long-term debt 22,791
 23,343
 22,210
 19,301
 20,651
Shareholders' equity 29,355
 25,871
 23,954
 21,860
 19,435
           
Period-End Balances:      
  
  
Total assets $219,276
 $209,947
 $186,834
 $183,043
 $184,469
Securities (3) 43,606
 43,827
 41,147
 40,205
 38,731
Loans and leases (4) 145,038
 136,986
 121,307
 117,139
 118,364
Deposits 160,234
 149,124
 129,040
 127,475
 133,075
Long-term debt 21,965
 23,769
 23,312
 21,493
 19,114
Shareholders' equity 29,926
 27,340
 24,377
 22,780
 21,193
           
Selected Ratios:      
    
NIM 3.39% 3.32% 3.42% 3.68% 3.91%
Rate of return on:      
    
Average total assets 1.12
 1.08
 1.19
 0.95
 1.15
Average common equity 8.57
 8.34
 9.32
 8.07
 10.52
Average total shareholders' equity 7.70
 8.21
 9.21
 7.91
 10.56
Average total shareholders' equity to average total assets 13.41
 13.11
 12.94
 12.06
 10.88
__________________
30
(1)Revenue is defined as net interest income plus noninterest income.
Table
(2)TE adjustment is based on the marginal income tax rates for the periods presented.
(3)Excludes trading securities. HTM securities at amortized cost. AFS securities at fair value.
(4)Loans and leases are net of Contentsunearned income and include LHFS.

                               
*$100 invested on December 31, 1994, 2004 or 2009, including reinvestment of dividends. Fiscal year ended December 31.
                               
    Cumulative Total Return Through December 31,    Cumulative Total Return 
    2009  2010  2011  2012  2013  2014    Through December 31, 2014 
    $100 Invested December 31, 2009    10 Year 20 Year 
 BB&T Corporation$ 100.00  $ 105.93  $ 103.94  $ 123.25  $ 163.57  $ 174.85     $ 134.70  $ 801.99  
 S&P 500 Index  100.00    115.06    117.48    136.26    180.38    205.05       209.46    653.60  
 BB&T’s Peer Group  100.00    131.02    116.16    142.15    192.91    215.85       117.20    608.97  

31

ITEM 6. SELECTED FINANCIAL DATA
(Dollars in millions, except per share data, shares in thousands)
                              
                            Five Year
    As of/ For the Year Ended December 31, Compound
    2014 2013 2012 2011 2010 2009 Growth Rate
Summary of Operations:                          
 Interest income$ 6,142   $ 6,507   $ 6,917   $ 6,885   $ 7,115   $ 6,884    (2.3)%
 Interest expense  768     891     1,060     1,378     1,795     2,040    (17.7) 
 Net interest income  5,374     5,616     5,857     5,507     5,320     4,844    2.1  
 Provision for credit losses  251     592     1,057     1,190     2,638     2,811    (38.3) 
 Net interest income after                          
  provision for credit losses  5,123     5,024     4,800     4,317     2,682     2,033    20.3  
 Noninterest income  3,784     3,937     3,820     3,113     3,957     3,934    (0.8) 
 Noninterest expense  5,921     5,837     5,828     5,802     5,670     4,931    3.7  
 Income before income taxes  2,986     3,124     2,792     1,628     969     1,036    23.6  
 Provision for income taxes  760     1,395     764     296     115     159    36.7  
 Net income  2,226     1,729     2,028     1,332     854     877    20.5  
 Noncontrolling interest  75     50     49     43     38     24    25.6  
 Dividends and accretion on                          
  preferred stock  148     117     63     ―       ―       124    3.6  
 Net income available to                          
  common shareholders$ 2,003   $ 1,562   $ 1,916   $ 1,289   $ 816   $ 729    22.4  
                              
Per Common Share:                          
 Average shares outstanding:                          
  Basic  718,140     703,042     698,739     696,532     692,489     629,583    2.7  
  Diluted  728,372     714,363     708,877     705,168     701,039     635,619    2.8  
 Earnings:                          
  Basic$ 2.79   $ 2.22   $ 2.74   $ 1.85   $ 1.18   $ 1.16    19.2  
  Diluted  2.75     2.19     2.70     1.83     1.16     1.15    19.0  
 Cash dividends declared (1)  0.95     0.92     0.80     0.65     0.60     0.92    0.6  
 Book value  30.16     28.52     27.21     24.98     23.67     23.47    5.1  
                              
Average Balances:                          
 Securities, at amortized cost (2)$ 40,541   $ 36,772   $ 36,334   $ 29,923   $ 27,610   $ 31,226    5.4  
 Loans and leases (3)  118,830     117,527     113,733     105,962     104,787     102,146    3.1  
 Other assets  25,697     26,963     28,567     27,081     27,261     21,810    3.3  
  Total assets$ 185,068   $ 181,262   $ 178,634   $ 162,966   $ 159,658   $ 155,182    3.6  
 Deposits$ 129,077   $ 128,555   $ 127,617   $ 112,318   $ 106,773   $ 102,381    4.7  
 Long-term debt  22,210     19,301     20,651     22,257     21,653     19,085    3.1  
 Other liabilities  9,790     11,516     10,889     11,124     14,346     17,478    (10.9) 
 Shareholders' equity  23,991     21,890     19,477     17,267     16,886     16,238    8.1  
 Total liabilities and                          
  shareholders' equity$ 185,068   $ 181,262   $ 178,634   $ 162,966   $ 159,658   $ 155,182    3.6  
                             
Period-End Balances:                          
 Total assets$ 186,814   $ 183,010   $ 184,499   $ 175,011   $ 157,081   $ 165,764    2.4  
 Loans and leases (3)  121,307     117,139     118,364     111,205     107,264     106,207    2.7  
 Deposits  129,040     127,475     133,075     124,939     107,213     114,965    2.3  
 Long-term debt  23,312     21,493     19,114     21,803     21,730     21,376    1.7  
 Shareholders' equity  24,426     22,809     21,223     17,480     16,498     16,241    8.5  
                              
Selected Ratios:                          
 Rate of return on:                          
  Average total assets  1.20 %   0.95 %   1.14 %   0.82 %   0.54 %   0.56 %   
  Average common equity  9.40     8.06     10.35     7.49     4.85     4.93     
  Average total equity  9.28     7.90     10.41     7.71     5.06     5.40     
 Dividend payout  34.05     41.44     29.20     35.14     50.85     79.31     
 Average equity to average assets  12.96     12.08     10.90     10.60     10.58     10.46     
                              
                              
(1)2011 included a special $0.01 dividend.
(2)Excludes trading securities.
(3)Loans and leases are net of unearned income and include LHFS.
32

Table of Contents

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Overview

Overview of Significant Accomplishments

Significant accomplishmentsEvents and Financial Results

Net income available to common shareholders totaled $2.3 billion for 2016, a 16.7% increase from the prior year. On a diluted per common share basis, earnings for 2016 were $2.77, compared to $2.56 for 2015. BB&T’s results of operations for 2016 produced a return on average assets of 1.12% and a return on average common shareholders’ equity of 8.57% compared to prior year ratios of 1.08% and 8.34%, respectively. These results include merger-related and restructuring charges of $171 million for 2016 compared to $165 million for 2015. Net interest income and noninterest income were both higher following acquisition activity in 2015 and 2016. Noninterest expense was higher due to increases in headcount and locations, primarily the result of the acquisitions, and the provision for credit losses increased due to higher provisions largely related to energy credits.

On April 1, 2016, BB&T acquired National Penn for total consideration of $1.6 billion, which consisted of approximately $555 million in cash and the remainder in common stock. National Penn had 126 financial centers, $10.1 billion of total assets and $6.6 billion of deposits. Also on April 1, 2016, BB&T purchased insurance broker CGSC North America Holdings Corporation ("Swett & Crawford") from Cooper Gay Swett & Crawford for $461 million in cash.

During the third quarter of 2016, Branch Bank entered into an agreement with the FDIC that terminated the loss share agreements related to Colonial. Branch Bank made a payment of approximately $230 million to the FDIC as consideration for the early termination. As a result, the FDIC loss share receivable/payable associated with the indemnification by the FDIC was eliminated and pre-tax expense of $18 million was recognized during the third quarter of 2016. No future loss sharing or gain sharing will occur related to the Colonial acquisition.

During the third quarter of 2016, the Company reached an agreement with the U.S. Department of Justice that settled certain legacy mortgage matters involving the origination of mortgage loans insured by the FHA. The Company had previously recorded an $85 million reserve in 2014 included:

·Record net income available to common shareholders of $2.0 billion, a 28.2% increase over the prior year.

·Continued improvement in credit quality:

oNPAs declined $392 million, or 33.4%.

oNet charge-offs as a percentage of average loans and leases were 0.46% for 2014, compared to 0.69% for 2013.

oALLL was 274% of net charge-offs at December 31, 2014, compared to 219% at December 31, 2013.

·Continued improvement in deposit mix and average cost:

oAverage noninterest-bearing deposits increased 10.0% during 2014 and represented 28.9% of total average deposits for 2014 compared to 26.4% in 2013.

oThe average cost of interest-bearing deposits for 2014 was 0.26%, a decline of six basis points compared to the prior year.

·Strong growth in regulatory capital ratios during 2014:

oTier 1 risk-based capital was 12.4% at year-end 2014, compared to 11.8% at year-end 2013.

oTotal capital was 14.9% at year-end 2014, compared to 14.3% at year-end 2013.

oLeverage capital was 9.9% at year-end 2014, compared to 9.3% at year-end 2013.

·Strategic mergers to complement organic growth:

oCompleted the purchase of 21 branches in Texas, providing $1.2 billion in deposits.

oReached an agreement to acquire 41 additional branches in Texas with approximately $2.3 billion in deposits.

oReached an agreement to acquire The Bank of Kentucky Financial Corporation, which has $1.9 billion in assets, $1.6 billion in deposits and 32 branches and a strong market share in the northern Kentucky/Cincinnati market.

oReached an agreement to acquire Susquehanna Bancshares, Inc., which has $18.7 billion in assets, $13.7 billion in deposits and 245 branches in Pennsylvania, New Jersey, West Virginia and Maryland.

in connection with this matter. Pursuant to the agreement, the Company paid $83 million and separately received a recovery of $71 million, resulting in a net benefit of $73 million for the third quarter of 2016.


Additionally, during the third quarter of 2016, the Company made a $50 million charitable contribution.

During the fourth quarter, BB&T recognized $34 million of pre-tax charges for securities duration adjustments and hedge ineffectiveness, which were primarily due to higher interest rates. Also impacting the fourth quarter earnings was a $31 million release of mortgage repurchase reserves, which was primarily driven by lower anticipated loan repurchase requests.

BB&T’s revenue for 2016 was $10.8 billion. On a TE basis, revenue was $11.0 billion, which represents an increase of $1.2 billion compared to 2015. Net interest income on a TE basis was $743 million higher than the prior year, which reflects a $753 million increase in interest income and a $10 million increase in interest expense. Noninterest income increased $453 million for the year, driven by improvements in FDIC loss share income, higher insurance income primarily from the acquisition of Swett and Crawford, higher securities gains and losses, and increases in other categories of income that include the impact of the Susquehanna and National Penn acquisitions.
NIM was 3.39% for 2016, compared to 3.32% for the prior year. Average earning assets increased $18.6 billion, or 10.8%, while average interest-bearing liabilities increased $11.3 billion, or 9.3%, both of which were primarily driven by acquisitions. The annualized TE yield on the total loan portfolio for 2016 was 4.30%, up four basis points compared to the prior year. The annualized TE yield on the average securities portfolio was 2.33%, down three basis points compared to the prior year primarily due to securities duration adjustments.

The provision for credit losses was $572 million, compared to $428 million for the prior year. This increase reflects the higher provisions largely related to energy credits.
NPAs increased $101 million compared to 2015. This included a $160 million increase in NPLs primarily within commercial lending, and a $59 million decrease in foreclosed real estate and other property. Net charge-offs for 2016 were $532 million, compared to $436 million for the prior year. The ratio of the ALLL to net charge-offs was 2.80x for 2016, compared to 3.36x in 2015.

Noninterest expense increased $455 million primarily due to higher personnel expense, which was primarily the result of acquisition activity. Other categories of noninterest expense reflected higher costs due to the impact of acquisitions. Partially offsetting these increases were lower losses from the extinguishment of debt, as 2015 included a $172 million charge compared to a small gain in 2016. In addition to the impact from acquisitions, regulatory charges reflect the FDIC surcharge assessed against large banks that was implemented in the third quarter of 2016.
BB&T’s total assets at December 31, 2016 were $219.3 billion, an increase of $9.3 billion compared to December 31, 2015. This includes a $7.4 billion increase in loans and leases HFI due to acquisitions and organic growth. Commercial and industrial loans were up $3.3 billion, CRE-income producing properties loans were up $1.1 billion and direct retail lending loans were up $952 million. Sales finance loans increased $940 million, primarily due to portfolio acquisitions. Mortgage loans declined $612 million due to management’s continuing decision to sell substantially all conforming mortgage loan production, partially offset by acquisition activity. The fair value of AFS securities totaled $26.9 billion at December 31, 2016, compared to $25.3 billion at December 31, 2015. The amortized cost of HTM securities was $16.7 billion at December 31, 2016 compared to $18.5 billion in the prior year. Goodwill, CDI and other intangible assets were also higher as the result of acquisitions.
Total deposits at December 31, 2016 were $160.2 billion, an increase of $11.1 billion from the prior year. Noninterest-bearing deposits increased $5.0 billion, interest checking increased $4.9 billion and money market and savings increased $4.4 billion. Time deposits declined $3.2 billion. The overall growth in lower-cost deposits reflects acquisition activity and continued organic growth. The average cost of interest-bearing deposits for 2016 was 0.23%, a decline of one basis point compared to the prior year.
Total shareholders’ equity increased $2.6 billion, or 9.5%, compared to the prior year. This increase was the result of net income in excess of dividends totaling $1.4 billion, a $450 million issuance of preferred stock and $1.3 billion of common stock issued (primarily for National Penn), partially offset by $520 million of share repurchases. BB&T’s Tier 1 risk-based capital and total risk-based capital ratios at December 31, 2016 were 12.0% and 14.1%, respectively, compared to 11.8% and 14.3% at December 31, 2015, respectively. The CET1 ratio was 10.2% at December 31, 2016 compared to 10.3% at December 31, 2015.
Subsequent to year end, BB&T terminated $2.9 billion (par value) of higher-cost FHLB advances resulting in a loss on early extinguishment of debt totaling $392 million.

Current Political Environment

Over the past several years, BB&T has made substantial investments and incurred significant costs related to personnel, infrastructure and other items in response to increased regulations. While the impact of any relief is uncertain, the new U.S. administration has stated its intention to potentially alleviate part of the regulatory burden on financial institutions. In addition, income tax reform is being considered that may potentially reduce federal corporate income tax rates. If enacted, this reduction may result in deferred tax assets and liabilities being repriced. Since BB&T is in a net deferred tax asset position, the impact from this repricing would be an income tax provision.  However, our effective income tax rate would be reduced prospectively.

Key Challenges

BB&T’s business has become moreis dynamic and complex in recent years.complex. Consequently, management has annually evaluatedevaluates and, as necessary, adjustedadjusts the Company’s business strategy in the context of the current operating environment. During this process, management considers the current financial condition and performance of the Company and its expectations for future economic activity from both a national and local market perspective. The achievement of BB&T’s key strategic objectives and established long-term financial goals is subject to many uncertainties and challenges. In the opinion of management, the challenges that are most relevant and likely to have a near term impact on performance are presented below:

·Intense competition within the financial services industry given the challenge in growing assets during a period of sustained low interest rates.

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·Global economic and geopolitical risk, including potential financial system instability and ramifications of sovereign debt issues.

·Cost and risk associated with regulatory reform and initiatives and IT projects.

·Merger integration risk.

Intense competition within the financial services industry given the challenge in growing assets during a period of sustained low interest rates.

New technologies and evolving consumer preferences will put pressure on market share and customer loyalty.

Global economic and geopolitical risk, including potential financial system instability and ramifications of sovereign debt issues.

Cost and risk associated with regulatory reform and initiatives and IT projects.


In addition, certain other challenges and unforeseen events could have a near term impact on BB&T’s financial condition and results of operations. See the section titled “Forward-Looking Statements”"Forward-Looking Statements" for additional examples of such challenges.

Overview of Significant Events and Financial Results

BB&T generated strong operating results for 2014, despite the challenges associated with the continued low interest rate environment, increased costs associated with certain regulatory initiatives and intense competition for loans to qualified borrowers. From a NIM perspective, the negative impact associated with lower yields on new loans and securities was partially mitigated by a decrease in funding costs from 0.75% to 0.65%, primarily driven by a decline in the cost of interest-bearing deposits and the early extinguishment of certain FHLB advances during the third quarter of 2014.

Consolidated net income available to common shareholders for 2014 totaled $2.0 billion, an increase of $441 million compared to $1.6 billion earned during 2013. On a diluted per common share basis, earnings for 2014 were $2.75, compared to $2.19 for 2013. Earnings for 2013 were reduced by $516 million of tax adjustments. BB&T’s results of operations for 2014 produced a return on average assets of 1.20% and a return on average common shareholders’ equity of 9.40% compared to prior year ratios of 0.95% and 8.06%, respectively.

BB&T’s revenues for 2014 were $9.3 billion on a FTE basis, a decrease of $398 million compared to 2013. Net interest income on a FTE basis was $245 million lower than the prior year, which reflects a $368 million decrease in interest income that was partially offset by a decrease in funding costs totaling $123 million. Noninterest income decreased $153 million for the year, driven by a $170 million decline in mortgage banking income, which reflects a decline in the volume of residential mortgage loan production and sales and tighter margins.

The provision for credit losses declined $341 million, or 57.6%, compared to the prior year, reflecting continued improvement in credit quality. The provision for credit losses also benefited from loan sales that generated a combined $66 million in gains through the release of the related ALLL.

Asset quality improved significantly during 2014 as NPAs declined $392 million, or 33.4%, compared to 2013. This decline included a $319 million decrease in NPLs, partially due to loan sales, and a $73 million decrease in foreclosed real estate and other property. Net charge-offs for 2014 were $538 million, compared to $792 million for the prior year. The ratio of the ALLL to net charge-offs was 2.74x for 2014, compared to 2.19x in 2013.

Noninterest expense increased $84 million primarily due to a $122 million loss on early extinguishment of debt and $118 million in charges related to the FHA-insured loan origination process. These increases were partially offset by a $113 million decrease in personnel expense primarily due to reduced pension expense.

Effective October 1, 2014, loans and securities subject to the commercial loss sharing agreement with the FDIC related to the Colonial acquisition were no longer covered by loss sharing. At December 31, 2014, these loans had a carrying value of $561 million and a UPB of $836 million, and the securities had a carrying value of $1.2 billion.

BB&T’s total assets at December 31, 2014 were $186.8 billion, an increase of $3.8 billion compared to December 31, 2013. This increase includes a $4.2 billion increase in loans and leases due to broad-based loan growth, with commercial and industrial up $2.9 billion, sales finance up $1.2 billion and other lending subsidiaries up $1.0 billion. A decline in direct retail lending balances and a corresponding increase in residential mortgage balances reflect the impact of an $8.3 billion transfer that occurred during the first quarter of 2014. Excluding this transfer, mortgage balances declined due to the previously mentioned loan sales, lower origination volume and management’s decision to sell substantially all conforming mortgage loan production. HTM securities increased $2.1 billion, while AFS securities declined $1.2 billion. Other assets declined $1.4 billion due to a $309 million decrease in the FDIC loss share receivable and a $1.0 billion decline in commercial factoring balances.

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Total deposits at December 31, 2014 were $129.0 billion, an increase of $1.6 billion, or 1.2%, from the prior year. The increase in deposits reflects strong growth in noninterest-bearing deposits, which were up $3.8 billion or 10.9% compared to the prior year. Interest checking and money market and savings grew $1.4 billion and $2.0 billion, respectively, while time deposits and IRAs declined $5.7 billion. The increase in total deposits also reflects the previously mentioned acquisition of 21 branches in Texas during the second quarter. The average cost of interest-bearing deposits for 2014 was 0.26%, a decline of six basis points compared to the prior year.

Total shareholders’ equity increased $1.6 billion, or 7.1%, compared to the prior year. This increase was primarily driven by net income in excess of dividends totaling $1.4 billion. BB&T’s Tier 1 risk-based capital and total risk-based capital ratios at December 31, 2014 increased to 12.4% and 14.9%, respectively, compared to 11.8% and 14.3% at December 31, 2013, respectively. BB&T’s risk-based capital ratios remain well above regulatory standards for well-capitalized banks. BB&T’s Basel III common equity tier 1 ratio, which is based on management’s interpretation of the FRB rules that became effective on January 1, 2015, was 10.3% at December 31, 2014, versus 9.7% at December 31, 2013.

Net Interest Income and NIM

Net interest income is BB&T’s primary source of revenue. Net interest income is influenced by a number of factors, including the volume, mix and maturity of interest-earning assets and interest-bearing liabilities and the interest rates earned and paid thereon. The difference between rates earned on interest-earning assets and the cost of funds (with a FTETE adjustment made to tax-exempt items to provide comparability with taxable items) is measured by the NIM.

2014


2016 compared to 2013

2015

For 2014,2016, net interest income on a FTETE basis totaled $5.5$6.5 billion, a decreasean increase of $245$743 million or 4.3%12.9% compared to the prior year. The decrease in netincrease reflects higher interest income reflectsdue to acquisitions and organic loan growth, partially offset by lower yields on new loans and securities and runoff in the loan portfolio acquired from the FDIC,FDIC. Interest expense increased slightly, reflecting higher balances from acquisitions, partially offset by lower funding costs, which declined $123 million compared to 2013. The improvement in the mix of funding costs reflects a six basis point reduction in the average cost of interest-bearing deposits due to improved mix and a 67 basis point reduction in the average cost of long-term debt primarily due to the early extinguishment of $1.1 billion of higher-cost FHLB advances during the third quarter and lower rates on new issuances.

sources.

The FTE-adjusted NIM is the primary measure used in evaluating the gross profit margin from the portfolios of earning assets. The FTE-adjusted NIM was 3.39% in 2016 compared with 3.32% in 2015. The increase in the NIM reflects higher yields on loans and improved funding mix, partially offset by lower yields on securities. The average annualized TE yield for total loans and leases was 4.30% for 2016, compared to 4.26% for the prior year. The increase was primarily due to acquisitions, partially offset by lower yields on new loan originations and the runoff of higher yielding loans acquired from the FDIC. The TE yield on the total securities portfolio was 2.33% for the year ended December 31, 2016, compared to 2.36% for the prior year.
The average rate paid on interest-bearing deposits for 2016 dropped to 0.23%, from 0.24% in 2015. This improvement was driven by changes in mix, with time deposits representing a lower percentage of interest-bearing deposits at December 31, 2016.
The rate paid on average short-term borrowings was 0.35% in 2016, compared to 0.15% in 2015. The increase in the rate on short-term borrowings reflects the federal funds target rate increase from December 2015. The average rate on long-term debt was 2.13% during 2016, flat compared to the prior year. At December 31, 2016, the targeted Federal funds rate was a range of 0.50% to 0.75%.
2015 compared to 2014
For 2015, net interest income on a TE basis totaled $5.7 billion, an increase of $221 million or 4.0% compared to the prior year. The increase reflects higher interest income due to acquisitions and organic loan growth, partially offset by lower yields on new loans and securities and runoff in the loan portfolio acquired from the FDIC. Interest expense declined, reflecting lower rates and improvement in the mix of funding sources. The average cost of interest-bearing deposits declined two basis points to 0.24%, reflecting reductions in time deposits and growth in interest checking and money market and savings. The average cost of long-term debt declined from 2.36% to 2.13%, primarily due to the early extinguishment of $2.0 billion of higher-cost FHLB advances during the last two years.
The NIM was 3.32% in 2015 compared with 3.42% in 2014 compared with 3.68% in 2013.2014. The decline in the NIM reflects lower yields on loans and securities, partially offset by the lower funding costs described above. The average annualized FTETE yield for total loans and leases was 4.42%4.26% for 2014,2015, compared to 4.85%4.42% for the prior year. The decrease was primarily due to lower yields on new loan originations and the runoff of higher yielding loans acquired from the FDIC.FDIC, partially offset by acquisition impact. The FTETE yield on the total securities portfolio was 2.45%2.36% for the year ended December 31, 2014,2015, compared to 2.51%2.45% for the prior year.

The average rate paid on interest-bearing deposits for 20142015 dropped to 0.26%0.24%, from 0.32%0.26% in 2013.2014. This improvement was driven by an 18 basis point reductionchanges in the cost ofmix, with time deposits and IRAs.

representing a lower percentage of interest-bearing deposits at December 31, 2015.

The ratesrate paid on average short-term borrowings declinedwas 0.15% in 2015, compared to 0.13% in 2014 from 0.16% in 2013. At December 31, 2014, the targeted Federal funds rate was a range of zero percent to 0.25%.2014. The average rate on long-term debt during 20142015 was 2.36%2.13%, compared to 3.03%2.36% for the prior year. This decline reflects the previously mentioned early extinguishment of $1.1 billion of higher-cost FHLB advances and lower rates on new issuances.

2013 compared to 2012

For 2013, net interest income on an FTE-adjusted basis totaled $5.8 billion, a decrease of $244 million or 4.1%, compared to the prior year. The decrease in net interest income reflects lower yields on new loans and securities and runoff in the loan portfolio acquired from the FDIC, partially offset by lower funding costs, which declined $170 million compared to 2012. The improvement in funding costs reflects an 11 basis point reduction in the average cost of interest-bearing deposits and a lower average long-term debt balance.

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The FTE-adjusted NIM is the primary measure used in evaluating the gross profit margin from the portfolios of earning assets. The FTE-adjusted NIM was 3.68% in 2013 compared with 3.91% in 2012. The decline in the NIM primarily reflects lower yields on new loans and securities and runoff of loans acquired from the FDIC, partially offset by the lower funding costs described above. The average annualized FTE yield for total loans and leases was 4.85% for 2013, compared to 5.35% for the prior year. The decrease was primarily due to lower yields on new loan originations and the runoff of higher yielding loans acquired from FDIC. The FTE yield on the total securities portfolio was 2.51% for the year ended December 31, 2013, compared to 2.64% for the prior year. This decrease reflects runoff in the security portfolio acquired from FDIC and security duration adjustments.

The average rate paid on interest-bearing deposits dropped to 0.32% during 2013, from 0.43% in 2012. This improvement included a 16 basis point reduction in the cost of time deposits and IRAs and a five basis point reduction in the cost of money market and savings accounts.

The rates paid on average short-term borrowings declined from 0.26% in 2012 to 0.16% during 2013. At December 31, 2013, the targeted Federal funds rate was a range of zero percent to 0.25%. The average rate on long-term debt during 2013 was 3.03%, an increase of one basis point compared to the prior year. This increase reflects the redemption of all higher cost junior subordinated debt to unconsolidated trusts and the related benefit associated with accelerated amortization of derivatives that were unwound in a gain position during 2012, partially offset by lower effective rates on new debt issued during 2013.

Acquired from the FDIC and FDIC Loss Share Receivable/Payable

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. The FDIC’s obligation to reimburse Branch Bank for losses with respect to assets acquired from the FDIC began with the first dollar of loss incurred.

Table 8
Assets Acquired from the FDIC by Loss Share Agreement
December 31, 2014
              
      Commercial Loss Share Agreement (1)  Single Family Loss Share Agreement  Total 
              
      (dollars in millions) 
 Loans and leases (2) $ 561  $ 654  $ 1,215  
 AFS securities   1,243    ―      1,243  
 Other assets   58    38    96  
  Total assets acquired from the FDIC $ 1,862  $ 692  $ 2,554  
              
              
(1)The loss sharing provisions of the commercial loss sharing agreement have expired; however, gains on the disposition of assets subject to this agreement will be shared with the FDIC through September 30, 2017.
(2)Loans and leases subject to the commercial and single family loss share agreements had a UPB of $836 million and $888 million, respectively.

Assets subject to the single family loss sharing agreement are indemnified through August 31, 2019.

As of October 1, 2014, the loss sharing provisions of the commercial loss sharing agreement expired. As a result, losses on the assets subject to this agreement (commercial loans, other related assets and certain AFS securities) are no longer shared with the FDIC. 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.

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 loss sharing agreement, adjusted to reflect subsequent pay-downs, redemptions or maturities on the underlying securities. The contractually-specified value of these securities totaled approximately $626 million at December 31, 2014. 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.

36

The terms of the loss sharing agreement with respect to certain non-agency MBS provided that Branch Bank would be reimbursed by the FDIC for 95% of any and all losses incurred through the third quarter of 2014. For other assets acquired from the FDIC, the FDIC reimbursement was as follows:

Table 5
TE Net Interest Income and Rate / Volume Analysis (1)
Year Ended December 31, 2016, 2015 and 2014
  2016 vs. 2015 2015 vs. 2014
  Average Balances (7) Yield/Rate Income/Expense Incr. Change due to Incr. Change due to
  2016 2015 2014 2016 2015 2014 2016 2015 2014 (Decr.) Rate Vol. (Decr.) Rate Vol.
  (Dollars in millions)
Assets  
    
      
      
  
  
  
  
  
  
Total securities, at amortized cost: (2)  
    
      
      
  
  
  
  
  
  
U.S. Treasury $3,061
 $2,650
 $1,969
 1.67% 1.58% 1.51% $51
 $42
 $30
 $9
 $2
 $7
 $12
 $1
 $11
GSE 3,601
 5,338
 5,516
 2.13
 2.13
 2.10
 77
 113
 116
 (36) —
 (36) (3) 2
 (5)
Agency MBS 36,658
 30,683
 29,504
 2.05
 1.98
 2.00
 750
 605
 589
 145
 22
 123
 16
 (5) 21
States and political subdivisions 2,361
 2,204
 2,122
 5.20
 5.65
 5.80
 123
 125
 124
 (2) (11) 9
 1
 (4) 5
Non-agency MBS 534
 751
 883
 14.56
 13.51
 14.23
 78
 102
 126
 (24) 7
 (31) (24) (6) (18)
Other 64
 477
 547
 1.87
 1.31
 1.43
 —
 7
 8
 (7) 1
 (8) (1) (1) —
Total securities 46,279
 42,103
 40,541
 2.33
 2.36
 2.45
 1,079
 994
 993
 85
 21
 64
 1
 (13) 14
Other earning assets (3) 3,202
 2,768
 1,881
 1.64
 1.39
 2.13
 53
 38
 40
 15
 (2) 7
 (2) (17) 15
Loans and leases, net of unearned income: (4)(5)  
  
  
    
  
    
  
  
  
    
  
  
Commercial:  
  
  
    
  
    
  
  
  
    
  
  
Commercial and industrial 50,623
 44,648
 39,537
 3.33
 3.21
 3.35
 1,687
 1,434
 1,325
 253
 55
 198
 109
 (57) 166
CRE-income producing properties 14,379
 11,806
 10,489
 3.73
 3.66
 3.49
 536
 432
 366
 104
 8
 96
 66
 35
 31
CRE-construction and development 3,742
 3,196
 2,616
 3.71
 3.57
 3.51
 139
 114
 92
 25
 5
 20
 22
 7
 15
Dealer floor plan 1,295
 1,068
 985
 2.08
 1.85
 1.87
 27
 20
 18
 7
 3
 4
 2
 —
 2
Direct retail lending (6) 11,796
 9,375
 8,249
 4.27
 4.07
 4.10
 503
 381
 338
 122
 20
 102
 43
 (1) 44
Sales finance 9,914
 9,975
 9,022
 3.12
 2.86
 2.80
 310
 286
 253
 24
 26
 (2) 33
 6
 27
Revolving credit 2,521
 2,406
 2,385
 8.77
 8.76
 8.70
 221
 211
 208
 10
 —
 10
 3
 1
 2
Residential mortgage (6) 30,184
 30,252
 31,528
 4.05
 4.15
 4.20
 1,224
 1,255
 1,325
 (31) (28) (3) (70) (16) (54)
Other lending subsidiaries 14,277
 12,291
 10,848
 8.22
 8.68
 9.08
 1,173
 1,067
 985
 106
 (59) 165
 82
 (45) 127
PCI 1,063
 1,083
 1,613
 19.55
 16.57
 17.22
 208
 179
 278
 29
 32
 (3) (99) (10) (89)
Total loans and leases HFI 139,794
 126,100
 117,272
 4.31
 4.27
 4.42
 6,028
 5,379
 5,188
 649
 62
 587
 191
 (80) 271
LHFS 1,965
 1,702
 1,558
 3.34
 3.63
 4.19
 66
 62
 65
 4
 (5) 9
 (3) (9) 6
Total loans and leases 141,759
 127,802
 118,830
 4.30
 4.26
 4.42
 6,094
 5,441
 5,253
 653
 57
 596
 188
 (89) 277
Total earning assets 191,240
 172,673
 161,252
 3.78
 3.75
 3.90
 7,226
 6,473
 6,286
 753
 76
 667
 187
 (119) 306
Nonearning assets 27,705
 24,674
 23,843
    
  
    
  
  
  
    
  
  
Total assets $218,945
 $197,347
 $185,095
    
  
    
  
  
  
    
  
  
                               
Liabilities and Shareholders’ Equity  
    
  
    
  
  
  
    
  
  
Interest-bearing deposits:  
  
  
    
  
    
  
  
  
    
  
  
Interest checking $27,595
 $22,092
 $18,731
 0.14
 0.08
 0.07
 $39
 $18
 $13
 $21
 $16
 $5
 $5
 $2
 $3
Money market and savings 62,966
 56,592
 49,728
 0.20
 0.19
 0.15
 123
 107
 74
 16
 5
 11
 33
 22
 11
Time deposits 16,619
 16,405
 22,569
 0.51
 0.66
 0.67
 85
 107
 151
 (22) (23) 1
 (44) (1) (43)
Foreign office deposits - interest-bearing 1,034
 593
 722
 0.38
 0.12
 0.07
 4
 1
 1
 3
 2
 1
 —
 —
 —
Total interest-bearing deposits 108,214
 95,682
 91,750
 0.23
 0.24
 0.26
 251
 233
 239
 18
 —
 18
 (6) 23
 (29)
Short-term borrowings 2,554
 3,221
 3,421
 0.35
 0.15
 0.13
 9
 5
 5
 4
 5
 (1) —
 —
 —
Long-term debt 22,791
 23,343
 22,210
 2.13
 2.13
 2.36
 485
 497
 525
 (12) —
 (12) (28) (54) 26
Total interest-bearing liabilities 133,559
 122,246
 117,381
 0.56
 0.60
 0.65
 745
 735
 769
 10
 5
 5
 (34) (31) (3)
Noninterest-bearing deposits 49,255
 42,816
 37,327
    
  
    
  
  
  
  
  
  
  
Other liabilities 6,776
 6,414
 6,433
    
  
    
  
  
  
  
  
  
  
Shareholders’ equity 29,355
 25,871
 23,954
    
  
    
  
  
  
  
  
  
  
Total liabilities and shareholders’ equity $218,945
 $197,347
 $185,095
    
  
    
  
  
  
  
  
  
  
Average interest rate spread  
  
  
 3.22% 3.15% 3.25%    
  
  
  
  
  
  
  
NIM / net interest income  
     3.39% 3.32% 3.42% $6,481
 $5,738
 $5,517
 $743
 $71
 $662
 $221
 $(88) $309
TE adjustment  
          
 $160
 $146
 $143
  
  
  
  
  
  
__________________
·
(1)80%Yields are stated on a TE basis utilizing the marginal income tax rates for the periods presented. The change in interest not solely due to changes in yield/rate or volume has been allocated on a pro-rata basis based on the absolute dollar amount of net losses incurred up to $5 billioneach.
·
(2)95% of net losses in excess of $5 billion.

BB&T does not expect cumulative net losses to exceed $5 billion on the respective assets acquired from FDIC. Gains and recoveries on assets acquired from FDIC, net of related expenses, will offset losses or be paid to the FDIC at the applicable loss share percentage at the time of recovery.

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 December 31, 2014, BB&T projects that in 2019 Branch Bank would owe the FDIC approximately $177 million under the aggregate loss calculation. As described below, this liability is expensed over time and BB&T has recognized total expense of approximately $132 million through December 31, 2014.

The fair value of the net reimbursement the Company expected to receive from the FDIC under these agreements was recorded as the FDIC loss share receivable at the date of acquisition. The fair value of the FDIC loss share receivable/payable was estimated using a discounted cash flow methodology.

Acquired loans were aggregated into separate pools based upon common risk characteristics. Each pool is considered a unit of account and the cash flows expected to be collected, credit losses and other relevant information are developed for each pool. A summary of the accounting treatment related to changes in credit losses on each loan pool and the related FDIC loss share asset follows.

·If the estimated credit loss on a loan pool is increased:

oThe reduction in the net present value of the loan pool is recognized immediately as provision expenseTotal securities include AFS and an increase to the ALLL.HTM securities.
o
(3)The FDIC loss share asset is increased by 80% of the adjustment to the ALLL through income.

·If the estimated credit loss on a loan pool is reduced:

oIf the loan pool has an allowance, the allowance is first reduced to $0 (and 80% of this reduction decreases the FDIC loss share asset) through income.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.
o
(4)If the loan pool doesLoan fees, which are not have an allowance (or it is first reduced to $0 and there remains additional expected cash flows), the excess of expected cash flows is recognized as a yield adjustment over the remaining expected lifematerial for any of the loan.periods shown, are included for rate calculation purposes.
o
(5)The decreaseNPLs are included in expected reimbursement from the FDIC is recognized in income prospectively using a level yield methodology over the remaining life of the loss share agreements.average balances.
o
(6)The increase in the amount expected to be paid to the FDIC as a result of the aggregate loss calculation is recognized prospectively in proportion to expected loan income over the remaining life of the loss share agreements.Excludes basis adjustments for fair value hedges.

The accounting treatment for securities acquired from the FDIC is summarized below:

·Prior to the recognition of OTTI on a security acquired from the FDIC:

oThe purchase discount established at acquisition is accreted into income over the expected life of the underlying securities using a level yield methodology.
oChanges to the expected life of the securities are recognized with a cumulative adjustment to the accretion recognized.

·Subsequent to recognition of OTTI, which is determined using the same methodology that is applied to securities that were not acquired from the FDIC, an increase in expected cash flows is recognized as a yield adjustment over the remaining expected life of the security based on an evaluation of the nature of the increase.

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·The income statement effect of the above items is offset by the applicable loss share percentage in FDIC loss share income, net, which cumulatively resulted in a liability of $235 million as of December 31, 2014. Subsequent to September 30, 2014, any OTTI will not be offset with the expiration of commercial loss sharing.

·Securities acquired from the FDIC are classified as AFS and carried at fair market value. The changes in unrealized gains/losses (down to the contractually specified amount) are offset by the applicable loss share percentage in AOCI, which resulted in a liability of $330 million as of December 31, 2014.

·BB&T would only owe these amounts to the FDIC if BB&T were to sell these securities prior to the end of the third quarter of 2017. BB&T has no current intent to dispose of the securities.

The following table provides information related to the components of the FDIC loss share receivable (payable):

Table 9
FDIC Loss Share Receivable (Payable)
                
    December 31, 
    2014 2013 
    Carrying Amount Fair Value Carrying Amount Fair Value 
                
    (Dollars in millions) 
 Loans$ 534  $ 123  $ 843  $ 464  
 Securities  (565)   (535)   (565)   (521) 
 Aggregate loss calculation  (132)   (161)   (104)   (131) 
  Total$ (163) $ (573) $ 174  $ (188) 

The decrease in the carrying amount 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, which is included in “Accretion due to credit loss improvement” below. 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 they settle at the current fair value at the conclusion of the gain sharing period.

The following table provides information related to the income statement impact of loans and securities acquired from the FDIC and the FDIC loss sharing receivable/payable. The table excludes all amounts related to other assets acquired and liabilities assumed in the acquisition.

Table 10
Revenue Impact from Assets Acquired from the FDIC, Net
             
    Year Ended December 31, 
     2014  2013 2012  
             
    (Dollars in millions) 
 Interest income-loans$ 278  $ 451  $ 765  
 Interest income-securities  125    137    172  
  Total interest income - acquired from FDIC  403    588    937  
 Benefit (provision) for loans acquired from FDIC  29    (5)   (13) 
 OTTI for securities acquired from FDIC  ―      ―      (4) 
 FDIC loss share income, net  (343)   (293)   (318) 
  Adjusted net revenue$ 89  $ 290  $ 602  
             
 FDIC loss share income, net:         
  Offset to provision for covered loans$ (25) $ 4  $ 11  
  Accretion due to credit loss improvement  (276)   (255)   (271) 
  Offset to OTTI for securities acquired from FDIC  ―      ―      3  
  Accretion for securities  (42)   (42)   (61) 
   Total$ (343) $ (293) $ (318) 

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2014 compared to 2013

Interest income for 2014 on loans and securities acquired from the FDIC decreased $185 million compared to 2013, primarily due to lower average acquired loan balances. The yield on acquired loans for 2014 was 17.22% compared to 16.93% in 2013. At December 31, 2014, the accretable yield balance on acquired loans was $378 million. Accretable yield represents the excess of expected future cash flows above the current net carrying amount of loans and will be recognized in income over the remaining life of the loans.

During 2014, BB&T increased the accretable yield balance on loans acquired from the FDIC by $116 million, compared to a $107 million increase in 2013, primarily due to improved loss results. These adjustments are recognized on a prospective basis over the remaining lives of the loan pools. Loans acquired from FDIC have experienced better performance than originally anticipated, which has resulted in the recognition of additional interest income on a level yield basis over the expected life of the corresponding loans. A significant portion of this increase in interest income is offset by a reduction in noninterest income recorded in FDIC loss share income.

The provision for loans acquired from the FDIC was a benefit of $29 million in 2014, compared to a provision of $5 million for 2013, which reflects improvements in credit quality on acquired loans.

FDIC loss share income, net, was $50 million worse than 2013, primarily due to a $29 million change in the offset to the provision for covered loans and $21 million higher negative accretion related to credit losses on covered loans.

2013 compared to 2012

Interest income for 2013 on loans and securities acquired from the FDIC decreased $349 million compared to 2012, primarily due to lower average acquired loan balances. The yield on acquired loans for 2013 was 16.93% compared to 18.91% in 2012. At December 31, 2013, the accretable yield balance on acquired loans was $538 million. Accretable yield represents the excess of expected future cash flows above the current net carrying amount of loans and will be recognized in income over the remaining life of the acquired loans.

During 2013, BB&T increased the accretable yield balance on loans acquired from the FDIC by $107 million, compared to a $72 million reduction in 2012, primarily due to improved loss results in 2013 and changes in the expected lives of the underlying loans in 2012. These adjustments are recognized on a prospective basis over the remaining lives of the loan pools.

The provision for loans acquired from the FDIC was $5 million in 2013, a decrease of $8 million compared to 2012. This decrease resulted from the quarterly reassessment process.

FDIC loss share income, net, was $25 million better than 2012, primarily due to securities duration adjustments that increased the expected lives of securities in 2013, compared to duration adjustments that shortened the lives in 2012.

FTE Net Interest Income and Rate / Volume Analysis

The following table sets forth the major components of net interest income and the related 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.

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Table 11
FTE Net Interest Income and Rate / Volume Analysis (1)
Year Ended December 31, 2014, 2013 and 2012
                                 2014 vs. 2013 2013 vs. 2012
      Average Balances (7) Yield/Rate Income/Expense Increase Change due to Increase Change due to
      2014 2013  2012  2014 2013  2012  2014 2013  2012  (Decrease) Rate Volume (Decrease) Rate Volume
                                                  
      (Dollars in millions)
Assets                                             
Total securities, at amortized cost: (2)                                             
 U.S. Treasuries $ 1,969  $ 486  $ 272   1.51 %  0.42 %  0.22 % $ 30  $ 2  $ 1  $ 28  $ 13  $ 15  $ 1  $ ―    $ 1 
 GSEs   5,516    5,032    1,329   2.10    2.04    1.92     116    103    25    13    3    10    78    2    76 
 MBS issued by GSE   29,504    27,598    30,848   2.00    2.00    2.02     589    552    624    37    ―      37    (72)   (6)   (66)
 States and political subdivisions   1,827    1,836    1,851   5.78    5.80    5.83     106    107    108    (1)   ―      (1)   (1)   (1)   ―   
 Non-agency MBS   246    283    346   7.55    5.69    5.76     19    16    20    3    5    (2)   (4)   ―      (4)
 Other   547    470    505   1.43    1.45    1.65     8    7    8    1    ―      1    (1)   ―      (1)
 Acquired from FDIC   932    1,067    1,183   13.35    12.82    14.53     125    137    172    (12)   5    (17)   (35)   (19)   (16)
  Total securities   40,541    36,772    36,334   2.45    2.51    2.64     993    924    958    69    26    43    (34)   (24)   (10)
Other earning assets (3)   1,881    2,412    3,359   2.13    1.39    0.91     40    34    31    6    15    (9)   3    13    (10)
Loans and leases, net of unearned income: (4)(5)                                             
 Commercial:                                             
  Commercial and industrial   39,537    38,206    36,966   3.35    3.63    3.96     1,325    1,386    1,464    (61)   (108)   47    (78)   (126)   48 
  CRE-income producing properties   10,489    9,916    9,046   3.49    3.72    3.82     366    368    346    (2)   (23)   21    22    (9)   31 
  CRE-construction and development   2,616    2,589    3,398   3.51    3.86    3.76     92    100    128    (8)   (9)   1    (28)   5    (33)
 Direct retail lending (6)   8,249    15,952    15,270   4.10    4.64    4.87     338    741    744    (403)   (78)   (325)   (3)   (35)   32 
 Sales finance   10,007    8,658    7,680   2.71    3.18    3.97     271    275    305    (4)   (44)   40    (30)   (66)   36 
 Revolving credit   2,385    2,303    2,217   8.70    8.56    8.41     208    197    186    11    3    8    11    3    8 
 Residential mortgage (6)   31,528    23,598    22,623   4.20    4.22    4.37     1,325    996    989    329    (5)   334    7    (35)   42 
 Other lending subsidiaries   10,848    10,468    9,525   9.08    10.20    11.04     985    1,068    1,051    (83)   (121)   38    17    (83)   100 
  Total loans and leases held for investment (excluding acquired from FDIC)   115,659    111,690    106,725   4.25    4.59    4.88     4,910    5,131    5,213    (221)   (385)   164    (82)   (346)   264 
 Acquired from FDIC   1,613    2,667    4,045   17.22    16.93    18.91     278    451    765    (173)   8    (181)   (314)   (74)   (240)
  Total loans and leases held for investment   117,272    114,357    110,770   4.42    4.88    5.40     5,188    5,582    5,978    (394)   (377)   (17)   (396)   (420)   24 
 LHFS   1,558    3,170    2,963   4.19    3.59    3.42     65    114    101    (49)   17    (66)   13    5    8 
  Total loans and leases   118,830    117,527    113,733   4.42    4.85    5.35     5,253    5,696    6,079    (443)   (360)   (83)   (383)   (415)   32 
  Total earning assets   161,252    156,711    153,426   3.90    4.25    4.61     6,286    6,654    7,068    (368)   (319)   (49)   (414)   (426)   12 
  Nonearning assets   23,816    24,551    25,208                                     
   Total assets $ 185,068  $ 181,262  $ 178,634                                     
                                                  
Liabilities and Shareholders’ Equity                                             
Interest-bearing deposits:                                             
 Interest-checking $ 18,731  $ 19,305  $ 19,904   0.07    0.08    0.12     13    15    25    (2)   (2)   ―      (10)   (9)   (1)
 Money market and savings   49,728    48,640    46,927   0.15    0.13    0.18     74    64    85    10    9    1    (21)   (24)   3 
 Time deposits and IRAs   22,569    26,006    31,647   0.67    0.85    1.01     151    221    319    (70)   (43)   (27)   (98)   (46)   (52)
 Foreign office deposits - interest-bearing   722    672    214   0.07    0.08    0.11     1    1    ―      ―      ―      ―      1    ―      1 
  Total interest-bearing deposits   91,750    94,623    98,692   0.26    0.32    0.43     239    301    429    (62)   (36)   (26)   (128)   (79)   (49)
Short-term borrowings   3,421    4,459    3,408   0.13    0.16    0.26     5    7    9    (2)   (1)   (1)   (2)   (4)   2 
Long-term debt   22,210    19,301    20,651   2.36    3.03    3.02     525    584    624    (59)   (139)   80    (40)   2    (42)
  Total interest-bearing liabilities   117,381    118,383    122,751   0.65    0.75    0.86     769    892    1,062    (123)   (176)   53    (170)   (81)   (89)
  Noninterest-bearing deposits   37,327    33,932    28,925                                     
  Other liabilities   6,369    7,057    7,481                                     
  Shareholders’ equity   23,991    21,890    19,477                                     
   Total liabilities and shareholders’ equity $ 185,068  $ 181,262  $ 178,634                                     
Average interest rate spread           3.25 %  3.50 %  3.75 %                           
NIM/ net interest income           3.42 %  3.68 %  3.91 % $ 5,517  $ 5,762  $ 6,006  $ (245) $ (143) $ (102) $ (244) $ (345) $ 101 
Taxable-equivalent adjustment                   $ 143  $ 146  $ 149                   
                                                  
                                                  
(1)Yields are stated on a taxable equivalent basis assuming tax rates in effect for the periods presented.
(2)Total securities include AFS 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, have been included for rate calculation purposes.
(5)Nonaccrual loans have been 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.
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Provision for Credit Losses

2014

2016 compared to 2013

2015

The provision for credit losses was $251$572 million in 2014, a decrease2016, compared to $428 million in the prior year. The increase in the provision for credit losses was driven by other lending subsidiaries and commercial and industrial loans, which reflects higher net charge-offs in these portfolios. The ratio of $341the ALLL to net charge-offs was 2.80x for 2016, compared to 3.36x for 2015.
Net charge-offs were 0.38% of average loans and leases held for investment for 2016, compared to 0.35% of average loans and leases held for investment during 2015. Net charge-offs were $532 million for 2016 compared to $436 million in 2015. Net charge-offs increased by $59 million in the other lending subsidiaries portfolio, driven by an increase in loss severity associated with used car values and loan growth. Commercial and industrial net charge-offs increased $44 million, primarily due to the energy portfolio.
2015 compared to 2014
The provision for credit losses was $428 million in 2015, an increase of $177 million compared to the prior year. The decreaseincrease in the provision for credit losses reflects continued improvementallowance releases on loan sales in the prior year and stabilization in credit trends and outlook, as net charge-offs in 2014 decreased 32.1% compared to the prior year. Improving credit conditions also resulted inafter an increase in theextended period of improvements. The ratio of the ALLL to net charge-offs which increasedwas 3.36x for 2015, compared to 2.74x for 2014, compared to 2.19x for 2013.

2014. During 2014, approximately $550the prior year, loan sales resulted in a combined $66 million in gains recognized through the release of residential mortgage loans that were primarily performing TDRs and approximately $140 million of residential mortgage loans that were primarily nonperforming were sold at a pre-tax gain of $42 million and $24 million, respectively. Both of these gains were recognized as a reduction to the provision for credit losses.

ALLL.

Net charge-offs were 0.35% of average loans and leases held for investment for 2015, compared to 0.46% of average loans and leases held for investment for 2014, compared to 0.69% of average loans and leases held for investment during 2013.2014. Net charge-offs declined $254$102 million, or 32.1%19.0%, with improvement across mostseveral loan portfolios led by commercial and industrial loans, which declined $112$45 million, compared to 2013. Net charge-offs in other lending subsidiaries were $15 million higher primarily due to a process change that resulted in the accelerated recognition of charge-offs in the nonprime automobile lending portfolio.

2013 compared to 2012

The provision for credit losses was $592 million in 2013, a decrease of $465 million compared to the prior year. The decrease in the provision for credit losses reflected continued improvement in credit trends and outlook, as net charge-offs in 2013 decreased 38.8% compared to the prior year. Improving credit conditions also resulted in an increase in the ratio of the ALLL to net charge-offs,residential mortgage-nonguaranteed, which increased to 2.19x for 2013, compared to 1.56x for 2012.

Net charge-offs were 0.69% of average loans and leases held for investment during 2013, compared to 1.17% of average loans and leases held for investment during 2012. Net charge-offs decreased in nearly all loan portfolios, including significant decreases in the CRE-construction and development, CRE-income producing properties and direct retail lending portfolios.

declined $38 million.

Noninterest Income

Noninterest income is a significant contributor to BB&T’s financial results. Management focuses on diversifying its sources of revenue to further reduce BB&T’s reliance on traditional spread-based interest income, as certain fee-based activities are a relatively stable revenue source during periods of changing interest rates.

Table 12
Noninterest Income
                   
             % Change 
    Year Ended December 31, 2014 2013 
    2014 2013 2012 vs. 2013 vs. 2012 
                   
    (Dollars in millions)       
 Insurance income$ 1,643  $ 1,517  $ 1,359   8.3 %  11.6 % 
 Service charges on deposits  600    584    566   2.7    3.2   
 Mortgage banking income  395    565    840   (30.1)   (32.7)  
 Investment banking and brokerage fees and commissions  387    383    365   1.0    4.9   
 Bankcard fees and merchant discounts  269    256    236   5.1    8.5   
 Trust and investment advisory revenues  221    200    184   10.5    8.7   
 Checkcard fees  203    199    185   2.0    7.6   
 Income from bank-owned life insurance  110    113    116   (2.7)   (2.6)  
 FDIC loss share income, net  (343)   (293)   (318)  17.1    (7.9)  
 Securities gains (losses), net  (3)   51    (12)  (105.9)  NM  
 Other income  302    362    299   (16.6)   21.1   
  Total noninterest income$ 3,784  $ 3,937  $ 3,820   (3.9)   3.1   
                   
                   

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2014

Table 6
Noninterest Income
     
  Year Ended December 31, % Change
   2016 vs. 2015 2015 vs. 2014
  2016 2015 2014  
  (Dollars in millions)    
Insurance income $1,713
 $1,596
 $1,643
 7.3 % (2.9)%
Service charges on deposits 664
 631
 632
 5.2
 (0.2)
Mortgage banking income 463
 455
 395
 1.8
 15.2
Investment banking and brokerage fees and commissions 408
 398
 387
 2.5
 2.8
Trust and investment advisory revenues 266
 240
 221
 10.8
 8.6
Bankcard fees and merchant discounts 237
 218
 207
 8.7
 5.3
Checkcard fees 195
 174
 163
 12.1
 6.7
Operating lease income 137
 124
 95
 10.5
 30.5
Income from bank-owned life insurance 123
 113
 110
 8.8
 2.7
FDIC loss share income, net (142) (253) (343) (43.9) (26.2)
Securities gains (losses), net 46
 (3) (3) NM
 —
Other income 362
 326
 349
 11.0
 (6.6)
Total noninterest income $4,472
 $4,019
 $3,856
 11.3
 4.2
2016 compared to 2013

2015

Noninterest income was $3.8a record $4.5 billion for 2014, a decline2016, an increase of 3.9%$453 million compared to 2013.2015. This decreaseincrease was driven by declines in mortgage banking income, FDIC loss share income, net securities gainsacross all categories and other income, partially offset by growth in insurance income.

primarily reflects the impact from acquisitions.


Income from BB&T’s insurance agency/brokerage operations was the largest source of noninterest income in 2014.2016. Insurance income was a record $1.6totaled $1.7 billion up $126for 2016, an increase of $117 million compared to 2013, as increased volume2015. The increase was largely the result of the acquisition of Swett and improving market conditions drove broad-based increases acrossCrawford on April 1, 2016, which was partially offset by the insurance business. This growth was ledimpact from selling American Coastal in 2015.

FDIC loss share income improved by a $95$111 million, increase in property and casualty commissions and a $17 million increase in contingent insurance commissions.

Mortgage bankingprimarily due to the termination of the loss sharing agreements during the third quarter of 2016.

Other income totaled $395$362 million for 2016, an increase of $36 million from 2015. This increase is primarily due to the $26 million loss on sale of American Coastal during the second quarter of 2015, $19 million for client derivatives revenues and $10 million of trading gains. These increases were partially offset by lower partnerships and other investment income, which was the result of an opportunistic sale that resulted in 2014, a decrease$28 million gain during the third quarter of $170 million, or 30.1%,2015.
2015 compared to the prior year. The decrease in2014
Noninterest income was $4.0 billion for 2015, an increase of $163 million compared to 2014. This increase was driven by improved FDIC loss share income, higher mortgage banking income includes a $182and higher operating lease income, partially offset by lower insurance income and lower other income.

FDIC loss share income improved by $90 million, decrease in residential mortgage production revenues primarily due to decreases in the volume and margins on loan sales, which have come under pressure due to increased competition and sustained low interest rates. The decline also reflects an $18 million reduction in fees primarily due to a $58 million reduction in volume. These declines were partially offset by increased servicing income duenegative accretion related to credit losses on covered loans and a larger servicing portfolio as well as an increase in derivative income.

Net securities gains declined $54 million as the prior year contained a $46 million gain on the sale of GNMA securities. FDIC loss share income, net, was $50 million worse than 2013, primarily due to a $29$20 million change in the offset to the provision for covered loans, which was a benefit in 2014loans.


Mortgage banking income increased $60 million, primarily due to improved credit quality on the acquired loans.

Trusthigher volume and investment advisory revenues increased $21$17 million to a record $221 million, primarily the result of higher investment advisory revenues during the current year. OtherMSR valuation adjustments.


Operating lease income decreased $60increased $29 million, in 2014 compared to 2013, primarily due to a $31 million gain on the sale of a consumer lending subsidiary in 2013, a $24 million decrease in income from assets relatedlarger leasing portfolio size as this business has continued to certain post-employment benefits, which is offset in personnel expense, and an $8 million decrease in letter of credit fees. These declines and other smaller declines were partially offset by an increase of $19 million related to affordable housing investments, primarily due to decreased impairment, and a $19 million increase in leasing income.

2013 compared to 2012

Noninterest income was $3.9 billion for 2013, up 3.1% compared to 2012. This increase was driven by strong resultsdemonstrate steady growth.


Income from BB&T’s insurance, investment banking and brokerage, bankcard fees and merchant discounts, and trust and investment advisory LOBs, along with strong growth in checkcard fees and steady growth in service charges on deposits. This growth in noninterest income was negatively impacted by a decrease in mortgage banking income.

Income from the insurance agency/brokerage operations was the largest source of noninterest income in 2013.2015. Insurance income was up 11.6%totaled $1.6 billion for 2015, a decline of $47 million compared to 2012, with approximately one-half2014. The second quarter sale of American Coastal resulted in a $79 million decline in insurance income, which was partially offset by higher volume in the growth attributableproperty and casualty business.


Other income totaled $326 million for 2015, a decline of $23 million from 2014. This decline is primarily due to the acquisition$26 million loss on sale of Crump InsuranceAmerican Coastal during April 2012,the second quarter of 2015 and the remainder primarily$18 million of lower income related to assets for certain post-employment benefits (which is offset in personnel expense). These declines were partially offset by higher partnerships and other investment income, which was the result of an improving market for insurance premiums and a $13 million experience-based refund of reinsurance premiumsopportunistic sale that was receivedresulted in the second quarter of 2013.

Investment banking and brokerage fees and commissions increased $18 million, or 4.9%, compared to 2012. This increase was largely driven by higher investment commission income and increased investment banking activities. Bankcard fees and merchant discounts increased $20 million, or 8.5%, in 2013, based on higher retail and commercial bankcard transaction volumes and an increase in merchant discount income. Trust and investment advisory revenues increased $16 million, primarily the result of higher investment advisory revenues during the current year. Checkcard fees were $14 million higher than the prior year, an increase of 7.6%, reflecting increased transaction volume, a portion of which is attributable to the acquisition of BankAtlantic in the prior year. Service charges totaled $584 million, an increase of $18 million, or 3.2%, compared to 2012, reflecting growth in cash management products, an increase in other deposit fees and the impact of the BankAtlantic acquisition.

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Mortgage banking income totaled $565 million in 2013, a decrease of $275 million, or 32.7%, compared to the prior year. The decrease in mortgage banking income includes a $247 million decrease in residential mortgage production revenues and a $61 million decrease in net MSR and related hedge valuation adjustments compared to the prior year. These decreases were partially offset by a $12 million increase in residential mortgage servicing revenues, which primarily reflects growth in the servicing portfolio, and a $28 million decrease ingain during the amortizationthird quarter of MSRs that was primarily driven by slower prepayment speeds. The decrease in residential mortgage production revenues primarily resulted from lower gain on sale margins, which reflects increased competition and a higher proportion of loans originated through the correspondent network. The weighted average gain on sale margin for 2013 was 1.15%, a 49.2% decline compared to the prior year. Correspondent loan originations represented 65.1% of mortgage loan originations in 2013, compared to 60.5% of mortgage loan originations in 2012.

FDIC loss share income, net reflects accretion of the FDIC loss share receivable due to credit loss improvement (including expense associated with the aggregate loss calculation) and accretion related to securities acquired from FDIC, partially reduced by the offset to the provision for loans acquired from FDIC. Loans acquired from FDIC have experienced better performance than originally anticipated, which has resulted in the recognition of additional interest income on a level yield basis over the expected life of the corresponding loans. A significant portion of this increase in interest income is offset by a reduction in noninterest income recorded in FDIC loss share income. For 2013, noninterest income was reduced by $255 million related to improvement in loan performance compared to a reduction of $271 million in 2012. These decreases in income were partially offset by increases of $4 million and $11 million, respectively, which reflected 80% of the provision for credit losses recorded on loans acquired from FDIC for 2013 and 2012.

Net securities gains were $51 million during 2013, compared to $12 million of net securities losses in 2012. Other income increased $63 million in 2013 compared to 2012, primarily due to a $31 million gain on the sale of a consumer lending subsidiary in 2013, a $22 million increase in income from operating leases and a $21 million increase in income from assets related to certain post-employment benefits, which is offset in personnel expense. These increases were partially offset by a $10 million decrease in client derivative related activities.

2015.


Noninterest Expense

The following table provides a breakdown of BB&T’s noninterest expense:

Table 13
Noninterest Expense
                    
              % Change 
     Year Ended December 31, 2014 2013 
     2014 2013 2012 vs. 2013 vs. 2012 
                    
     (Dollars in millions)       
 Personnel expense$ 3,180  $ 3,293  $3,125   (3.4)%  5.4 % 
 Occupancy and equipment expense  682    692   650   (1.4)   6.5   
 Loan-related expense  342    255   283   34.1    (9.9)  
 Software expense  174    158   138   10.1    14.5   
 Professional services  139    189   156   (26.5)   21.2   
 Outside IT services  115    89   58   29.2    53.4   
 Regulatory charges  106    143   159   (25.9)   (10.1)  
 Amortization of intangibles  91    106   110   (14.2)   (3.6)  
 Foreclosed property expense  40    55   266   (27.3)   (79.3)  
 Merger-related and restructuring charges, net  46    46   68   ―      (32.4)  
 Loss on early extinguishment of debt  122    ―     2  NM  NM  
 Other expense  884    811   813   9.0    (0.2)  
  Total noninterest expense$ 5,921  $ 5,837  $ 5,828   1.4    0.2   

2014

Table 7
Noninterest Expense
     
  Year Ended December 31, % Change
   2016 vs. 2015 2015 vs. 2014
  2016 2015 2014  
  (Dollars in millions)    
Personnel expense $3,964
 $3,469
 $3,180
 14.3 % 9.1 %
Occupancy and equipment expense 786
 708
 682
 11.0
 3.8
Software expense 224
 192
 174
 16.7
 10.3
Outside IT services 186
 135
 115
 37.8
 17.4
Amortization of intangibles 150
 105
 91
 42.9
 15.4
Regulatory charges 145
 101
 106
 43.6
 (4.7)
Professional services 102
 130
 139
 (21.5) (6.5)
Loan-related expense 95
 150
 267
 (36.7) (43.8)
Merger-related and restructuring charges, net 171
 165
 46
 3.6
 NM
Loss (gain) on early extinguishment of debt (1) 172
 122
 (100.6) 41.0
Other expense 899
 939
 930
 (4.3) 1.0
Total noninterest expense $6,721
 $6,266
 $5,852
 7.3
 7.1
2016 compared to 2013

2015

Noninterest expense totaled $6.7 billion for 2016, an increase of $455 million from 2015. This increase was primarily driven by higher personnel expense.
Personnel expense is the largest component of noninterest expense and includes salaries, wages and incentives, as well as pension and other employee benefit costs. Personnel expense totaled $3.2$4.0 billion, a decrease of $113$495 million increase compared to 2013.2015. This declineincrease was driven by a $110$284 million reductionincrease in qualified pension plan expense,salaries, which was primarily due to additional headcount from acquisitions. Incentives expense was higher $110 million due to performance against targets and acquisitions. Personnel expense also increased due to a $48 million increase in pension expense that reflects higher expected returnamortization, service and interest costs. Additionally, personnel expense reflects a $26 million increase in payroll taxes as a result of higher salaries and incentives.
Loss on plan assetsearly extinguishment of debt was down $173 million for 2016, as the prior year included a loss of $172 million, compared to a small gain for 2016.

Occupancy and a change inequipment expense totaled $786 million for 2016, compared to $708 million for 2015. The increase reflects the actuarial discount rate usedacquisition activity. Software expense was higher $32 million compared to determine the projected benefit obligation as of the beginning of the year that resulted in reduced amortization expense during 2014.

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2015, primarily reflecting higher depreciation on recent investments.
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Professional

Outside IT services expense totaled $139$186 million for 2016, compared to $135 million in the prior year. This increase was due to higher costs related to projects.
Loan-related expense totaled $95 million for 2016, a decrease of $50$55 million compared to the prior year. This decrease is largely the result of a release of $31 million in reserves during the fourth quarter of 2016, which was primarily driven by a reduction in legal fees as well as services associated with regulatory initiatives. lower anticipated loan repurchase requests.

Regulatory charges totaled $106$145 million for 2014, a decline of $37 million compared to 2013, which primarily reflects a reduction in FDIC insurance due to current and prior year long-term debt issuances and improved credit conditions.

Loan-related expense totaled $342 million for 2014,2016, an increase of $87$44 million compared to the prior year. This increase includesreflects the impact from acquisitions and the surcharge assessed to large banks, which was implemented in the third quarter of 2016.


Other expense decreased $40 million primarily due to a net benefit of $73 million in the third quarter related to the settlement of certain legacy mortgage matters involving the origination of mortgage loans insured by the FHA. In addition, business referral expense decreased $16 million primarily due to the sale of American Coastal in the prior year. Partially offsetting these decreases was a $50 million charitable contribution that was also made in the third quarter.


2015 compared to 2014
Noninterest expense totaled $6.3 billion for 2015, an increase of $414 million from 2014. This increase was driven by higher personnel expense, merger-related and restructuring charges and loss on early extinguishment of debt, partially offset by lower loan-related expense.

Personnel expense totaled $3.5 billion, a $289 million increase compared to 2014. This increase was driven by a $114 million increase in salaries, which was primarily due to additional headcount from acquisitions. Personnel expense also increased due to a $74 million increase in pension expense that reflects higher amortization, service and interest costs, partially offset by the estimated return on higher plan assets. Additionally, personnel expense reflects a $50 million increase in employee medical and insurance benefits and a $32 million increase in incentives.

Merger-related and restructuring charges totaled $165 million, an increase of $119 million compared to 2014. This increase was primarily related to the Susquehanna acquisition, with additional amounts related to The Bank of Kentucky and the planned acquisition of National Penn.

Loss on early extinguishment of debt was $172 million for 2015, compared to $122 million for 2014. The combined debt extinguishments for the two years totaled $2.0 billion of FHLB advances with a weighted average interest rate of 4.5%.

Occupancy and equipment expense totaled $708 million for 2015, compared to $682 million for 2014. The increase reflects the acquisition activity occurring during the year.

Loan-related expense totaled $150 million for 2015, a decrease of $117 million compared to the prior year. This decrease is largely the result of lower claims and charge-offs in the current year, as well as charges recorded in the prior year of $33 million mortgagerelated to the FHA-insured loan indemnification reserve adjustment, which represents an increase in estimated losses that may be incurred on FHA-insured mortgage loans that have not yet defaulted,origination process and a mortgage reserve adjustment of $27 million related to a review of mortgage lending processes.

Outside IT services totaled $115 million during 2014, compared

Merger-Related and Restructuring Charges
BB&T has incurred certain merger-related and restructuring charges, which are reflected in BB&T’s Consolidated Statements of Income as a category of noninterest expense. Merger-related and restructuring expenses or credits include:
severance and personnel-related costs or credits, which typically occur in corporate support and data processing functions;
occupancy and equipment charges or credits, which relate to $89 million for 2013. This increase was due to third-party costs or gains associated with lease terminations, obsolete equipment write-offs and the new ERPsale of duplicate facilities and commercial loan systems.

A loss on early extinguishment of debt of $122 million was recorded during 2014 in connection with the early termination of $1.1 billion of higher cost FHLB advances. The transaction occurred during the third quarterequipment;

professional services, which relate to investment banking advisory fees and had a beneficial impact to net interest income for the remainder of the year.

Other expense was $884 million for 2014, an increase of $73 million, or 9.0%, compared to 2013. During the second quarter of 2014, BB&T was notified that its FHA-insured loan origination process would be the subject of an audit survey by the HUD-OIG. While there are no findings at this time, in light of announcements made by other financial institutions relatedconsulting services pertaining to the outcomes of similar auditstransaction;

systems conversion and related matterscharges, which represent costs to integrate the acquired entity’s information technology systems; and after further review
other merger-related and restructuring charges or credits, which include expenses necessary to convert and combine the acquired branches and operations of the exposure, an $85 million reserve was established related to BB&T’s FHA-insured loan origination process. The increase in other expense also includes a $17 million increase in depreciation related to operating leases. These increases were partially offset by a $15 million favorable franchise tax adjustment and a decline in expense due to the prior year $11 million write-down of owned real estate.

2013 compared to 2012

Personnel expense totaled $3.3 billion in 2013, an increase of $168 million, or 5.4%, compared to 2012. The increase in personnel expense includes an increase of $128 million in salaries and wages, which reflects increasesmerged companies, direct media advertising related to the acquisitions, asset and supply inventory write-offs, and other similar charges.


Merger-related and restructuring accruals are established when the costs are incurred or once all requirements for a plan to dispose of Crump Insurance and BankAtlantic during 2012certain business functions have been approved by management. In general, a major portion of accrued costs are utilized in conjunction with or immediately following the systems conversion, when most of the duplicate positions are eliminated and the impactterminated employees begin to receive severance. Other accruals are utilized over time based on the sale, closing or disposal of normal salary increasesduplicate facilities or equipment or the expiration of lease contracts. Merger and job class changes. Other personnel expenses increased approximately $40 million, which included an increaserestructuring accruals are re-evaluated periodically and adjusted as necessary. The remaining accruals at December 31, 2016 are generally expected to be utilized within one year, unless they relate to specific contracts that expire later.

The following table presents a summary of $22 million in post-employment benefits expense that is offset in other income. activity with respect to merger-related and restructuring accruals:
Table 8
Merger-related and Restructuring Accrual Activity
           
  Year Ended December 31, 2016 Year Ended December 31, 2015
  Beginning Balance Expense Utilized Ending Balance Beginning Balance Expense Utilized Ending Balance
  (Dollars in millions)
Severance and personnel-related $26
 $51
 $(52) $25
 $2
 $60
 $(36) $26
Occupancy and equipment 11
 49
 (39) 21
 7
 16
 (12) 11
Professional services 13
 14
 (26) 1
 17
 34
 (38) 13
Systems conversion and related costs —
 27
 (26) 1
 —
 25
 (25) —
Other adjustments 2
 30
 (31) 1
 5
 30
 (33) 2
Total $52
 $171
 $(174) $49
 $31
 $165
 $(144) $52
The remainder of the increase in other personnel expenses was driven by smaller increases in employment taxes and other fringe benefits.

Occupancy and equipment expense increased $42 million, or 6.5%, compared to 2012, with a portion of this increase attributable to2016 costs primarily reflect the acquisitions of Crump InsuranceNational Penn and BankAtlantic acquisitions inSwett & Crawford, while the prior year and the remainder attributable to increases in rent and IT-related depreciation and maintenance.

Professional services expense totaled $189 million, an increase of $33 million compared to the prior year. This increase was2015 activities were largely driven by costs associated with systems and project-related expenses, partially offset by a decrease in legal fees.

Other expense increased $27 million, or 3.1%, compared to 2012, primarily the result of higher project-related expenses, increased depreciation expense related to assets used in the equipment finance leasing business and lower of cost or fair value adjustments on certain owned real estate. These increases were partially offset by a decrease in advertising and marketing expenses, lower insurance-related expenses and the loss on the sale of a leveraged lease that was recorded in the prior year. Software expense increased $20 million compared to the prior year, which primarily reflects higher maintenance and depreciation expense.

Foreclosed property expense includes the gain or loss on sale of foreclosed property, valuation adjustments resulting from updated appraisals and the ongoing expense of maintaining foreclosed properties. Foreclosed property expense decreased $211 million, or 79.3% in 2013, due to fewer losses and write-downs and lower maintenance costs on foreclosed property. Loan-related expense totaled $255 million, a decrease of $28 million, or 9.9% compared to the prior year. This decrease was primarily the result of improvements in mortgage repurchase expense and lower costs associated with certain mortgage loan indemnifications.

Merger-related and restructuring charges were $22 million lower than the prior year, which reflects the impact of merger-related charges associated with the Crump Insurance and BankAtlantic acquisitions in the prior year, partially offset by restructuring charges associated with optimization activities in Community Banking that were initiated during the second quarter of 2013. Regulatory charges decreased $16 million in 2013 due to improved credit quality, which led to lower deposit insurance premiums.

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Susquehanna.
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Provision for Income Taxes

BB&T’s provision for income taxes totaled $760$1.1 billion, $794 million $1.4 billion and $764$921 million for 2014, 20132016, 2015 and 2012,2014, respectively. BB&T’s effective tax rates for the years ended 2016, 2015 and 2014 2013were 30.2%, 27.2% and 2012 were 25.5%, 44.7% and 27.4%29.5%, respectively.

The decreasedifferences in the effective tax raterates for 2016, 2015 and 2014 compared to 2013 waswere primarily due to prior year adjustments totaling $516 million related tofor uncertain tax positions. During 2013, the U.S. Court of Federal Claims denied BB&T’s refund claim related to the IRS’s disallowance of tax deductions and foreign tax credits taken in connection with a financing transaction entered into by BB&T in 2002. BB&T has appealed this ruling. The decrease in the effective tax rate also reflects a net $36 million benefit recorded during 2014 as a result of developments in the IRS’s examination of tax years 2008-2010.

BB&T has extended credit to and invested in the obligations of states and municipalities and their agencies and has made other investments and loans that produce tax-exempt income. The income generated from these investments, together with certain other transactions that have favorable tax treatment, have reduced BB&T’s overall effective tax rate from the statutory rate in all periods presented.

Refer to Note 13 “Income Taxes”the "Income Taxes" note in the “Notes"Notes to Consolidated Financial Statements”Statements" for a reconciliation of the effective tax rate to the statutory tax rate and a discussion of uncertain tax positions and other tax matters.


Segment Results

See Note 21 “Operating Segments”the note titled "Operating Segments" in the “Notes"Notes to Consolidated Financial Statements” hereinStatements" for additional disclosures related to BB&T’s operating segments, the internal accounting and reporting practices used to manage these segments and financial disclosures for these segments.

Fluctuations in noninterest income and noninterest expense incurred directly by the segments are more fully discussed in the “Noninterest Income”"Noninterest Income" and “Noninterest Expense”"Noninterest Expense" sections above.

2014 The operating results for Susquehanna and National Penn were included in Other, Treasury and Corporate prior to their systems conversions in mid-November 2015 and mid-July 2016, respectively. Post-conversion results are included in the segments that received the various lines of business, with the majority going to Community Banking.

Effective January 2017, several business activities were realigned within the segments as discussed in the "Operating Segments" note in the "Notes to Consolidated Financial Statements." The following discussion is based upon segment results before realignment.

2016 compared to 2013

2015

Community Banking

Community Banking had a network of 1,8392,196 banking offices at the end of 2014,2016, an increase of 1457 offices compared to December 31, 2013.2015. The increase in offices was primarily driven by the acquisition of 21126 branches in Texas,with the acquisition of National Penn, partially offset by the consolidation of nearby financial centers and the closure of certain lower volume branches.


Community Banking net income was $923 million$1.3 billion in 2014,2016, an increase of $32$304 million, or 3.6%31.7%, compared to 2013.

2015, primarily driven by acquisitions.


Segment net interest income totaled $2.9 billion, a decrease of $134 million compared to 2013, primarily due to lower yields on new loans and lower funding spreads earned on deposits, partially offset by loan and noninterest-bearing deposit growth.

The allocated provision for credit losses decreased $156increased $728 million, driven by lower businessacquisition activity, deposit growth and consumer loan charge-offs, partially offset by a stabilization in loss factors.

higher funding spreads on deposits. Noninterest income of $1.2 billion increased $18$61 million, primarily due to higher service charges on deposits, checkcard fees and bankcard and merchant services fees.


The allocated provision for credit losses decreased $31 million, primarily the result of lower net charge-offs. Noninterest expense totaled $1.5 billion for 2014. The $157increased $226 million decrease was primarily attributable to lowerdriven by higher personnel, occupancy and equipment professional servicesexpense, amortization of intangibles and regulatory expense.

Intersegment net referral fees decreased $60 million driven by lower mortgage banking referrals.

Allocatedallocated corporate expensesexpense all of which increased $96 million driven primarily by internal business initiatives, including the ongoing implementation of the ERP system.

During the second quarter of 2014, BB&T completed thedue to acquisition of 21 branches in Texas, which included $1.2 billion in deposits and $112 million in loans.

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activity.
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During 2014, BB&T also announced that it reached agreements to acquire additional branches in Texas, The Bank of Kentucky Financial Corporation, and Susquehanna Bancshares, Inc.

Residential Mortgage Banking

Residential Mortgage Banking net income was $204$264 million in 2014, a decrease2016, an increase of $179$24 million, or 46.7%10.0%, compared to 2013.

2015. Mortgage originations totaled $17.4$20.7 billion in 2014, a decrease2016, an increase of $14.2$2.6 billion compared to $31.6$18.1 billion in 2013.2015. BB&T’s residential mortgage servicing portfolio, which includes both retained loans and loans serviced for others, totaled $122.3$121.6 billion at the end of 2014,2016, compared to $121.2$122.2 billion at December 31, 2013.

2015.


Segment net interest income decreased $87 million to $498$9 million, primarily the result of lower average loan balances.

The allocated provision for credit losses was a benefit of $107 million in 2014, compared to expense of $12 million in 2013, reflecting the benefit of the previously discussed sales of residential mortgages in the third and fourth quarters of 2014 and a decrease in loan balances consistent with the current strategy of selling substantially all conforming mortgage loan production.

interest rates on new loans. Noninterest income decreased $174$11 million driven by lower gains on residential mortgage loan production and sales due to lower origination volume and tighter pricing due to competitive factors. This decrease was partially offset by an increase in net servicing income of $31 million, primarily due to slower prepayment speeds and a $2.8 billion, or 3.2%, increase in the investor-owned servicing portfolio.

Noninterest expense increased $134 million, which primarily reflects a $27 million charge in the fourth quarter of 2014 related to the previously discussed ongoing review of mortgage processes, as well as adjustments in the second quarter of 2014 totaling $118 million related to the previously described FHA-insured loan exposures.

The provision for income taxes decreased $111 million, primarily due to lower pre-tax income.

Dealer Financial Services

Dealer Financial Services net income was $183 million in 2014, a decrease of $21 million, or 10.3%, compared to 2013.

sales.


The allocated provision for credit losses increased $23$36 million driven by a decline in the rate of improvement in credit trends compared to the prior year. Noninterest expense decreased $110 million driven by the previously discussed settlement of FHA-insured mortgage loan matters in the current year, a decline in foreclosure related expenses, the release of $31 million in repurchase reserves during the fourth quarter of 2016 and a decline in professional services, which was partially offset by higher personnel expense.
Dealer Financial Services
Dealer Financial Services net income was $174 million in 2016, essentially flat compared to 2015.

Segment net interest income increased $41 million, primarily due to the addition of Susquehanna’s consumer auto leasing business and growth in the Regional Acceptance loan portfolio.

The allocated provision for credit losses increased $43 million, driven by higher net charge-offs in the Regional Acceptance loan portfolio due to an increase in loss severity associated with used car values and loan growth.

Dealer Financial Services grew average loans by $843 million, or 6.1%, compared to 2015 primarily as a result of the acquisition of Susquehanna’s consumer auto leasing business and growth in dealer floor plan and the Regional Acceptance loan portfolio.
Specialized Lending
Specialized Lending net income was $236 million in 2016, essentially flat compared to 2015.

Segment net interest income increased $56 million, primarily attributable to the addition of Susquehanna’s small business equipment finance group as well as growth in the small ticket dealer-based finance portfolio, partially offset by a decline in loan spreads. Noninterest income increased $37 million, driven by higher commercial mortgage banking income and operating lease income.

The allocated provision for credit losses increased $27 million, driven by higher net charge-offs in the commercial finance, small business equipment finance and small ticket dealer-based finance portfolios. Noninterest expense increased $46 million, primarily due to higher charge-offspersonnel expense, restructuring charges and depreciation of property under operating leases related to growth in the nonprime automobile loanlease portfolio and asset write-downs. Allocated corporate expense increased by $18 million, primarily attributable to investments in the segment’s corporate support functions.

Specialized Lending grew average loans by $2.2 billion, or 14.9%, compared to 2015 as credit trendsa result of the acquisition of Susquehanna’s small business equipment finance portfolio and strong growth in that portfolio continuesmall ticket consumer, commercial mortgage, equipment finance, governmental finance loans and mortgage warehouse lending.


Insurance Holdings
Insurance Holdings net income was $154 million in 2016, a decrease of $28 million, or 15.4%, compared to normalize.

2015.


Noninterest income increased $118 million, which primarily reflects the acquisition of Swett and Crawford and higher property and casualty insurance, employee benefit commissions and life insurance, partially offset by the sale of American Coastal in the second quarter of 2015.

Noninterest expense increased $8$122 million, driven by higher personnel expense primarily relatedattributable to Regional Acceptance Corporation’s geographic expansionthe Swett and operating charge-offs.

Dealer Financial Services grew average loansCrawford acquisition, partially offset by $1.1 billion, or 10.5%, compared to 2013 as the result of strong growth in the primelower business referral and nonprime auto lending businesses.

Specialized Lending

Specialized Lending net income was $254 million in 2014, a decrease of $16 million, or 5.9%, compared to 2013.

Segment net interest income decreased $120 million to $432 million, which primarily reflectsinsurance claims expense driven by the sale of a consumer lending subsidiary duringAmerican Coastal. Amortization of intangibles increased $13 million due to the fourth quarter of 2013Swett and lower credit spreads on loans earned during 2014.

The sale of the specialized lending subsidiary also had a beneficial impact on theCrawford acquisition, while allocated provision for credit losses, which decreased $46 million.

Noninterest incomecorporate expense increased $10$12 million driven by higher operating lease income.

Noninterest expense decreased $36 million driven by lower personnel, occupancyacquisitions and equipment, loan processing and professional services expense.

Small ticket consumer finance, equipment finance, governmental finance and commercial mortgage experienced strong growth compared to 2013.

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additional information technology investments.
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Insurance Services

Insurance Services net income was $233 million in 2014, an increase of $46 million, or 24.6%, compared to 2013.

Insurance Services’ noninterest income of $1.7 billion increased $128 million, primarily due to increased commissions on new and renewal property and casualty business, higher performance-based commissions and an increase in employee benefit commissions.

Noninterest expense increased $54 million driven by higher salaries, performance-based incentives, operating charge-offs and business referral expense.

Financial Services

Financial Services net income was $280$318 million in 2014, a decrease of $23 million, or 7.6%,2016, essentially flat compared to 2013.

2015.


Segment net interest income increased $99 million, primarily driven by higher loan and deposit balances and higher funding spreads on deposits for both Corporate Banking and BB&T Wealth. Noninterest income increased $38 million, primarily driven by higher trust and investment advisory revenues, client derivatives revenues and investment banking and brokerage fees and commissions, partially offset by lower income from SBIC equity investments.

The allocated provision for credit losses increased $7$60 million, primarily driven by higher net charge-offs within the energy sector for the Corporate Banking loan portfolio. Noninterest expense increased $70 million compared to the prior year, as the result of growth in the Corporate Banking and BB&T Wealth loan portfolios.

Noninterest income increased $26 million, primarily due to higher trust, investment advisory and investment banking income. Client invested assets totaled $119.0 billion as of December 31, 2014, an increase of $7.8 billion, or 7.0%, compared to 2013.

Noninterest expense increased $28 million, primarily due to higher personnel expense operating charge-offs, sub-advisory fees and occupancy and equipment expense.

Allocated corporate expenses increased $21 million, primarily driven by internal business initiatives and growth in the segment.

restructuring charges.


Financial Services continues to generate significant loan growth through expanded lending strategies, with Corporate Banking’s average loan balances increasing $1.7$2.1 billion, or 23.3%17.7%, compared to 2013,2015, while BB&T Wealth’s average loan balances increased $229$213 million, or 25.6%14.3%. Corporate Banking’s average transaction account deposits grew $495 million, or 31.3%, while BB&T Wealth also grew transaction account balances by $438$743 million, or 18.8%19.9%, and money market and savings balances by $575$808 million, or 9.4%10.5%, compared to 2013.

2015, partially attributable to the ongoing identification and servicing of wealth clients in the Community Bank. Client invested assets totaled $143.7 billion as of December 31, 2016, an increase of $13.1 billion, or 10.0%, compared to 2015.


Other, Treasury &and Corporate

Other, Treasury &and Corporate net income was $149$32 million in 20142016, an increase of $25 million compared to 2015.

Segment net interest income decreased $185 million due to the inclusion of Susquehanna for a netportion of the prior year, partially offset by growth in the securities portfolio and the inclusion of National Penn for part of 2016.

Noninterest income increased $208 million, which reflects improved FDIC loss share income primarily due to the third quarter early termination, securities gains on the investment portfolio and the prior year loss on sale of $509American Coastal.

Noninterest expense increased $58 million in 2013. Resultsdue to higher personnel, occupancy and equipment, IT professional services and software expense, as well as higher regulatory charges and charitable contributions. These increases were partially offset by the previously discussed loss on early extinguishment of debt in the prior year include $516and the inclusion of Susquehanna for a portion of prior year. Allocated corporate expense decreased by $178 million compared to the prior year, reflecting increases in corporate expense allocated to the operating segments.


2015 compared to 2014
Community Banking
Community Banking had a network of 2,139 banking offices at the end of 2015, an increase of 300 offices compared to December 31, 2014. The increase in offices was primarily driven by the acquisition of 41 branches in Texas, 32 branches with the acquisition of The Bank of Kentucky and 245 branches with the acquisition of Susquehanna Bancshares, partially offset by the consolidation of nearby financial centers and the closure of certain lower volume branches within the BB&T branch network.
Community Banking net income was $960 million in adjustments for uncertain2015, an increase of $50 million, or 5.5%, compared to 2014. Net income tax positionsresults include the impact of acquisitions as previously described.

described previously.

Segment net interest income increased $103 million to $401$155 million, primarily driven by growth in commercial loans and direct retail loans due to an increase inorganic growth and the investment portfolio, lower funding credits on deposits allocated to Community Banking and Financial Services and lower corporate borrowing costs,acquisitions, partially offset by runoff inlower interest rates on new loans.
Noninterest income decreased $18 million driven by lower service charges on deposits, international factoring commissions and letter of credit fees. Intersegment net referral fee income increased $15 million driven by higher loan referrals to the acquired from FDIC loan portfolio.

Residential Mortgage Banking segment and higher capital markets referrals to the Financial Services segment.

The allocated provision for credit losses was a benefit of $66decreased $56 million compared to a benefit of $16 million in the prior year. This current year includes a $29 million benefit for loans acquired from the FDIC and a $29 million reduction in the reserve for unfunded lending commitments driven by improvements related to the mix of lines of credit, letters of credit, and bankers’ acceptances.

Noninterest income decreased $159 million primarily due to lower securities gains in the investment portfolio, lower FDIC loss share income, the sale of a consumer lending subsidiary during the fourth quarter of 2013 and lower income from assets related to certain post-employment benefits.

Noninterest expense increased $68 million, primarily due to $122 million in expense related to early extinguishment of FHLB debt, and higher outside IT services and merger-related expense, partially offset by lower personnel, professional services and tax and license expense.

Intersegment net referral fee expense decreased $61 million as the result of a lower level of mortgage banking referral income that was allocated to both Community Banking and Financial Services.

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The credit for allocated corporate expenses increased $150 million compared to the prior year primarily related to investments in application systems and business initiatives allocated to the other segments and centralization of certain business activities into corporate functions to allow for efficiencies.

2013 compared to 2012

Community Banking

Community Banking had a network of 1,825 banking offices at the end of 2013, a decrease of seven offices compared to December 31, 2012. The decrease in offices was driven by the closure of low volume branches, partially offset by de novo branch openings.

Community Banking net income was $891 million in 2013, an increase of $173 million, or 24.1%, compared to 2012.

Segment net interest income totaled $3.0 billion, a decrease of $185 million compared to 2012. The decrease in segment net interest income was primarily attributable to lower funding spreads earned on deposits, partially offset by improvements in deposit mix as a result of growth in noninterest-bearing deposits, money marketlower commercial and savings deposits and a decrease in certificates of deposits.

The allocated provision forretail loan and lease losses decreased $307 million as the result of lower business and consumer loannet charge-offs.

Noninterest income of $1.2 billion increased $60 million, primarily due to higher checkcard fees, bankcard fees, merchant discounts and service charges on deposits.

Noninterest expense of $1.7 billion decreased $123increased $88 million primarily driven by lower foreclosed property, regulatoryhigher salary, incentive, pension and professional services expense.

franchise tax expense as well as higher merger-related charges. The increase in salary expense reflects the acquisition activity. Allocated corporate expense increased $21 million driven by internal business initiatives.

Residential Mortgage Banking

Residential Mortgage Banking net income was $383$240 million in 2013, a decrease2015, an increase of $6$36 million, or 1.5%17.6%, compared to 2012.

2014. Mortgage originations totaled $31.6$18.1 billion in 2013, a decrease2015, an increase of $1.5 billion, or 4.5%,$706 million compared to $33.1$17.4 billion in 2012.2014. BB&T’s residential mortgage servicing portfolio, which includes both retained loans and loans serviced for others, totaled $121.2$122.2 billion at the end of 2013,2015, compared to $110.1$122.3 billion at December 31, 2012.

2014.

Segment net interest income decreased $46 million, primarily the result of lower loans HFI balances reflecting the current strategy of selling substantially all conforming mortgage loan production, partially offset by higher credit spreads. Noninterest income increased $65$45 million, to $585 million. Thedriven by higher gains on residential mortgage loan production and sales and an increase in segment net interestMSR income, was driven by growth in loans held for investment, which was partially attributableprimarily due to the decision to begin retaining certain originated mortgage loans, and higher credit spreads on average loan balances.

improved MSR hedging results.

The allocated provision for loan and leasecredit losses decreased $162reflected a charge of $9 million primarily reflecting anin 2015, compared to a benefit of $107 million in 2014, partially attributable to stabilization in the rate of improvement in mix due tocredit trends. Earlier period results reflect the runoffimpact of lower quality loans. Net charge-offs of $78 million were recorded in 2013, compared to $133loan sales that generated a combined $66 million in 2012, as nonaccrual and aged loans (excluding guaranteed loans) decreased during the period.

Noninterest income decreased $272 million, primarily driven by lower gain on sale margins, which reflects increased competition and a higher proportion of loans originatedgains through the correspondent network, and a decrease in net MSR valuation adjustments.

release of the related ALLL. Noninterest expense decreased $46$177 million, primarily due to prior-year adjustments totaling $118 million relating to the previously discussed FHA-insured loan exposures and a $27 million prior-year charge related to a review of mortgage processes. The decrease in noninterest expense was also partially attributable to lower foreclosure-related expense and lower expensecosts associated with mortgage repurchase reserves.

repurchased loans. 


Dealer Financial Services

Dealer Financial Services net income was $204$177 million in 2013,2015, a decrease of $15$6 million, or 6.8%3.3%, compared to 2012.

2014.


Segment net interest income of $676 million increased $27$53 million, primarily the result of loandriven by growth and wider credit spreads in the Dealer Finance and Regional Acceptance Corporation portfolio. Dealer Financial Services averageloan portfolios, the inclusion of dealer floor plan loans grew by $840 million, or 8.5%, compared to 2012.

48
in the segment results beginning in the first quarter of 2015 and the acquisition of Susquehanna’s consumer auto leasing business.
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The allocated provision for loan and leasecredit losses increased $50$16 million, primarily due to higher charge-offs. Noninterest expense increased $37 million driven by higher personnel, professional services, loan-related expense and other expenses.
Dealer Financial Services grew average loans by $911 million, or 7.1%, compared to 2014 as a more normalized volumeresult of charge-offsstrong growth in the Regional Acceptance Corporation portfolio after experiencing a lower charge-off volume inprime and nonprime auto lending businesses and the prior year.

acquisition of Susquehanna’s consumer auto leasing business.


Specialized Lending

Specialized Lending net income was $270$235 million in 2013,2015, an increase of $33$20 million, or 13.9%9.3%, compared to 2012.

2014.

Segment net interest income of $552increased $44 million, decreased $10 million compared to 2012. During the fourth quarter, BB&T sold a consumer lending subsidiary that focused its business on the nonprime consumer market. The sale of this subsidiary included loans totaling approximately $500 million. In connection with this sale transaction, loans totaling approximately $230 million were transferred to Residential Mortgage Banking.

Excluding this sales transaction, Specialized Lending grew average balancesdriven by $966 million, or 6.9%, over 2012. This increase was primarily driven bystrong growth in small ticket consumer loans and the acquisition of Susquehanna’s small business equipment finance portfolio, partially offset by lower rates on new loans. Noninterest income increased $38 million driven by higher commercial insurance premium financemortgage and equipment finance.

operating lease income.

The allocated provision for credit losses increased $7 million, primarily due to higher net charge-offs in the small ticket consumer and commercial finance loan portfolios. Noninterest expense increased $44 million, primarily due to higher personnel expense and lease losseshigher depreciation of property under operating leases.
Specialized Lending grew average loans by $2.1 billion, or 16.1%, compared to 2014 as a result of strong growth in small ticket consumer, commercial mortgage and governmental finance loans and the acquisition of the small business equipment finance portfolio.
Insurance Holdings

Insurance Holdings net income was $182 million in 2015, a decrease of $51 million, or 21.9%, compared to 2014.
Insurance Holdings noninterest income of $1.6 billion decreased $50$55 million, which primarily reflects the removal of reserves in connection with the loan sales and transfers previously discussed. Loss rates are also affected by shifts in the portfolio mix of the underlying subsidiaries.

Insurance Services

Insurance Services net income was $187 million in 2013, an increase of $44 million, or 30.8%, compared to 2012.

Noninterest income was $1.5 billion, an increase of $170 million compared to 2012. The increase reflects the acquisition of Crump Insurance during April 2012, firming market conditions for insurance premiums, organic growth in wholesale and retaillower direct commercial property and casualty insurance operations, wholesale life insurance growthpremiums due to the previously discussed sale of American Coastal, partially offset by higher new and an experience-based refund of reinsurance premiums totaling $13 million that was received during the second quarter of 2013. Wholesalerenewal commercial property and casualty insurance incomebusiness.

Noninterest expense increased $59$1 million while retail propertydriven by higher salary, employee insurance and casualtypension expense as well as higher merger-related charges, partially offset by lower business referral and insurance incomeclaims expense. Allocated corporate expenses increased $36$13 million compared to 2012. Wholesale life insurance income increased $43 million compared to 2012, primarily attributabledue to the Crump Insurance acquisition.

Higher noninterest income growth was offset by a $119 million increase in noninterest expense, primarily the resultcentralization of higher salary costs and performance-based incentives. The increase in noninterest expense was partially attributable to the Crump Insurance acquisition in 2012.

certain corporate support functions during mid-2014.

Financial Services


Financial Services net income was $303$322 million in 2013,2015, an increase of $26$40 million, or 9.4%14.2%, compared to 2012.

2014.

Segment net interest income for Financial Services increased $13$83 million, to $448 million in 2013. The increase in segment net interest income during 2013 was primarily attributable to strong organicdriven by Corporate Banking and BB&T Wealth loan growth and an improved deposit mix,growth, partially offset by lower NIM.

rates on new loans. Noninterest income increased $70 million as a result of higher investment commissions and brokerage fees, trust and investment advisory fees, commercial unused commitment fees and income from SBIC private equity investments. Client invested assets totaled $130.6 billion as of December 31, 2015, an increase of $11.7 billion, or 9.8%, compared to 2014.

The allocated provision for credit losses increased $40 million as a result of the Corporate Banking loan growth, portfolio mix and risk expectations related to the energy sector. Noninterest expense increased $46 million compared to 2014, driven by higher salary, incentive, pension and professional services expense.

Financial Services generated strong loan growth, with Corporate Banking’s average loan balances increased by $1.6increasing $2.8 billion, or 26.5%, in 2013.

The allocated provision for loan and lease losses increased $7 million, primarily attributable to lower reserves in 2012 resulting from improved credit trends in the commercial and industrial loan portfolio.

Noninterest income for Financial Services increased $20 million, primarily due to higher investment banking and brokerage fees and commissions and trust and investment advisory revenues. Client invested assets totaled $111.2 billion as of December 31, 2013, an increase of $15.0 billion, or 15.6%30.4%, compared to 2012.

Noninterest expense incurred2014, while BB&T Wealth’s average loan balances increased $367 million, or 32.7%. BB&T Wealth also grew transaction account balances by Financial Services decreased $25$595 million, primarily dueor 21.5%, and money market and savings balances by $974 million, or 14.5%, compared to lower occupancy and equipment expense and an operating charge-off in the prior year, partially offset by an increase in personnel expense.

49
2014.
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Other, Treasury &and Corporate

Net income in


Other, Treasury &and Corporate can vary due to changing needs of the Company, including the size of the investment portfolio, the need for wholesale funding,net income received from derivatives used to hedge the balance sheet and, in certain cases, income associated with acquisition activities.

Other, Treasury & Corporate generated a net loss of $509was $7 million in 2013,2015 compared to net income of $45$179 million in the prior year. The net loss was primarily the result of $516 million in adjustments for uncertain income tax positions as previously described.

2014.

Segment net interest income decreased $153$71 million, to $298driven by lower average PCI loan balances as well as lower yields on the securities portfolio, partially offset by higher funding spreads on deposits. Noninterest income increased $85 million, primarily attributabledue to runoff of loans acquired from the FDIC.

The $136 million increase in noninterest income primarily reflects the gain on the sale of a consumer lending subsidiary totaling $31 million, higher income from assets related to certain post-employment benefits, higher securities gains in the investment portfolio and higherimproved FDIC loss share income.

income, partially offset by the loss on the previously discussed sale of American Coastal.

The $84allocated provision for credit losses reflected a benefit of $10 million increase in noninterest2015, compared to a benefit of $64 million in 2014, primarily due to a release in the RUFC in the earlier period driven by improvements related to the mix of unfunded lending exposures and a lower provision benefit for PCI loans.

Noninterest expense was primarilyincreased $361 million, driven by higher salary, employee insurance and pension expense, partially attributable to personnel expense related to certain post-employment benefits mentioned above,the Susquehanna acquisition, as well as higher professional services, data processing software, and IT professional services and software expense, franchise taxes, loss on early extinguishment of FHLB advances and merger-related charges. Intersegment net referral fee expenses decreased $22 million driven largely by higher mortgage loan referrals shared by other segments. Allocated corporate expense decreased $52 million compared to the earlier period as a 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 allocated corporate project initiatives.

centers.


Analysis of Financial Condition

Investment Activities

BB&T’s board-approved investment policy is carried out by the MRLCC, which meets regularly to review the economic environment and establish investment strategies. The MRLCC also has much broader responsibilities, which are discussed in the “Market"Market Risk Management”Management" section in “Management’s"Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein.

Operations."

Investment strategies are reviewed by the MRLCC based on the interest rate environment, balance sheet mix, actual and anticipated loan demand, funding opportunities and the overall interest rate sensitivity of the Company. In general, the goals of the investment portfolio are: (i) to provide a sufficient margin of liquid assets to meet unanticipated deposit and loan fluctuations and overall funds management objectives; (ii) to provide eligible securities to secure public funds, trust deposits as prescribed by law and other borrowings; and (iii) to earn the maximuman optimal return on funds invested that is commensurate with meeting the requirements of (i) and (ii).

and consistent with our risk appetite.

Branch Bank invests in securities allowable under bank regulations. These securities may include obligations of the U.S. Treasury, U.S. government agencies, GSEs (including MBS), bank eligible obligations of any state or political subdivision, non-agency MBS, structured notes, bank eligible corporate obligations (including corporate debentures), commercial paper, negotiable CDs, bankers acceptances, mutual funds and limited types of equity securities. Branch Bank also may deal in securities subject to the provisions of the Gramm-Leach-Bliley Act. BB&T’s full-service brokerage and investment banking subsidiary engages in the underwriting, trading and sales of equity and debt securities subject to the risk management policies of the Company.

50
Table of Contents

The following table provides information regarding the composition of the securities portfolio for the years presented:
              
Table 14
Composition of Securities Portfolio
              
     December 31, 
     2014 2013 2012 
              
     (Dollars in millions) 
 AFS securities (at fair value):         
  U.S. Treasury$ 1,231  $ 595  $ 281  
  GSE  ―      ―      9  
  MBS issued by GSE  16,154    17,929    20,930  
  States and political subdivisions  1,974    1,851    2,011  
  Non-agency MBS  264    291    312  
  Other  41    45    3  
  Acquired from FDIC  1,243    1,393    1,591  
 Total AFS securities  20,907    22,104    25,137  
            
 HTM securities (at amortized cost):         
  U.S. Treasury  1,096    392    ―    
  GSE  5,394    5,603    3,808  
  MBS issued by GSE  13,120    11,636    9,273  
  States and political subdivisions  22    33    34  
  Other  608    437    479  
 Total HTM securities  20,240    18,101    13,594  
 Total securities$ 41,147  $ 40,205  $ 38,731  

The following table provides information regarding the composition of the securities portfolio for the years presented:
Table 9
Composition of Securities Portfolio
   
  December 31,
  2016 2015 2014
  (Dollars in millions)
AFS securities (at fair value):      
U.S. Treasury $2,587
 $1,832
 $1,231
GSE 180
 51
 —
Agency MBS 21,264
 20,046
 16,154
States and political subdivisions 2,205
 2,375
 2,286
Non-agency MBS 679
 989
 1,195
Other 11
 4
 41
Total AFS securities 26,926

25,297

20,907
       
HTM securities (at amortized cost):  
  
  
U.S. Treasury 1,098
 1,097
 1,096
GSE 2,197
 5,045
 5,394
Agency MBS 13,225
 12,267
 13,120
States and political subdivisions 110
 63
 22
Other 50
 58
 608
Total HTM securities 16,680

18,530

20,240
Total securities $43,606

$43,827

$41,147


The securities portfolio totaled $41.1$43.6 billion at December 31, 2014, an increase of $942 million, or 2.3%, over2016, compared to $43.8 billion at December 31, 2015. The overall portfolio was relatively flat compared to the prior year. The increase was driven by higheryear, with a slight change in the mix between AFS and HTM portfolio balances in responseas new purchases and reinvestments were directed to new regulatory requirements related to liquidity. the AFS portfolio.
As of December 31, 2014,2016, approximately 14.0%7.5% of the securities portfolio was variable rate, compared to 14.7%12.4% as of December 31, 2013.2015. The effective duration of the securities portfolio was 3.94.8 years at December 31, 2014,2016, compared to 5.54.0 years at the end of 2013.2015. The duration of the securities portfolio excludes equity securities auction rate securities, and certain non-agency MBS acquired from the FDIC.

Agency MBS issued by GSEs were 71.1%represented 79.1% of the total securities portfolio at year-end 2014,2016, compared to 73.5%73.7% as of prior year end. As
BB&T transferred $517 million of December 31, 2014,HTM securities to AFS during the AFSthird quarter of 2015. These securities, portfolio also includes $1.2 billion of securities thatwhich were acquired fromsold by the FDIC as partend of the Colonial acquisition. Effective October 1, 2014, securities subjectthird quarter, represented investments in student loans for which there was a significant increase in risk weighting as a result of the implementation of Basel III.
Refer to the commercial loss sharing agreement with the FDIC related to the Colonial acquisition were no longer subject to 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 are effectively covered as any declines"Securities" note in the unrealized gains of the securities down to a contractually specified amount would reduce the liability to the FDIC at the applicable percentage. Securities acquired from the FDIC consisted of $931 million of non-agency MBS and $312 million of municipal securities as of December 31, 2014.

During 2014, securities totaling $1.3 billion were sold for a net realized gain of $3 million. During 2013, $2.2 billion of securities were sold that produced a net realized gain of $51 million. During 2012, $306 million of securities were sold for a net realized loss of $3 million. In addition, BB&T recognized $6 million in OTTI charges for 2014 and $9 million in OTTI charges for 2012.

Refer to Note 3 “Securities” in the “Notes"Notes to Consolidated Financial Statements” hereinStatements" for additional disclosures related to the evaluation of securities for OTTI.


The following table presents the securities portfolio at December 31, 2016, segregated by major category with ranges of maturities and average yields disclosed:
Table 10
Securities Yields By Major Category and Maturity
   
  December 31, 2016
  AFS HTM
  Fair Value Effective Yield (1) Amortized Cost Effective Yield (1)
  (Dollars in millions)
U.S. Treasury:        
Within one year $246
 0.75% $—
 —%
One to five years 696
 1.23
 1,098
 2.21
Five to ten years 1,645
 1.40
 —
 —
Total 2,587
 1.29
 1,098
 2.21
         
GSE:  
  
  
  
One to five years —
 —
 582
 2.29
Five to ten years 167
 1.49
 1,615
 2.18
After ten years 13
 2.60
 —
 —
Total 180
 1.57
 2,197
 2.21
         
Agency MBS: (2)  
  
  
  
One to five years 4
 3.69
 —
 —
Five to ten years 9
 2.22
 —
 —
After ten years 21,251
 1.99
 13,225
 2.26
Total 21,264
 1.99
 13,225
 2.26
         
States and political subdivisions: (3)  
  
  
  
Within one year 18
 5.19
 —
 —
One to five years 318
 5.91
 3
 2.12
Five to ten years 759
 5.62
 73
 1.16
After ten years 1,110
 6.33
 34
 1.45
Total 2,205
 6.02
 110
 1.28
         
Non-agency MBS: (2)  
  
  
  
After ten years 679
 18.12
 —
 —
Total 679
 18.12
 —
 —
         
Other:  
  
  
  
Within one year 11
 0.17
 —
 —
After ten years —
 —
 50
 2.16
Total 11
 0.17
 50
 2.16
         
Total securities $26,926
 2.66
 $16,680
 2.24
__________________
51
(1)Yields represent interest computed using the effective interest method on a TE basis using marginal income tax rates and the amortized cost of the securities.
Table
(2)For purposes of Contentsthe maturity table, MBS, which are not due at a single maturity date, have been included in maturity groupings based on the contractual maturity. The expected life of MBS will differ from contractual maturities because borrowers may have the right to call or prepay the underlying mortgage loans.

The following table presents the securities portfolio at December 31, 2014, segregated by major category with ranges of maturities and average yields disclosed:
                 
Table 15
Securities
                 
     December 31, 2014 
     AFS  HTM 
        Effective    Effective 
     Fair Value Yield (1) Amortized Cost Yield (1) 
                 
     (Dollars in millions) 
 U.S. Treasury:            
  Within one year$ 571   0.22 % $ ―     ―   % 
  One to five years  660   1.15     ―     ―     
  Five to ten years  ―     ―       1,096   2.21   
   Total  1,231   0.72     1,096   2.21   
                 
 GSE:            
  One to five years  ―     ―       750   1.53   
  Five to ten years  ―     ―       4,644   2.19   
   Total  ―     ―       5,394   2.10   
                 
 MBS issued by GSE: (2)            
  One to five years  20   3.95     ―     ―     
  Five to ten years  4   1.43     ―     ―     
  After ten years  16,130   1.96     13,120   2.22   
   Total  16,154   1.96     13,120   2.22   
                 
 Obligations of states and political subdivisions: (3)            
  One to five years  46   6.72     ―     ―     
  Five to ten years  408   6.50     ―     ―     
  After ten years  1,520   6.54     22   5.94   
   Total  1,974   6.53     22   5.94   
                 
 Non-agency MBS: (2)            
  After ten years  264   7.48     ―     ―     
   Total  264   7.48     ―     ―     
                 
 Other:            
  Within one year  41   1.82     ―     ―     
  One to five years  ―     ―       1   1.29   
  Five to ten years  ―     ―       266   1.24   
  After ten years  ―     ―       341   1.38   
   Total  41   1.82     608   1.32   
                 
 Acquired from FDIC:            
  One to five years  112   3.70     ―     ―     
  Five to ten years  200   3.89     ―     ―     
  After ten years  931   17.44     ―     ―     
   Total  1,243   14.03     ―     ―     
    Total securities$ 20,907   3.10   $ 20,240   2.17   
                 
                 
(1)Yields represent interest computed at the end of the period using the effective interest method on an FTE basis applying the statutory federal income tax rate of 35% and the amortized cost of the securities.
(2)For purposes of the maturity table, MBS, which are not due at a single maturity date, have been included in maturity groupings based on the contractual maturity. The expected life of MBS will differ from contractual maturities because borrowers may have the right to call or prepay the underlying mortgage loans.
(3)Weighted-average yield excludes the effect of pay-fixed swaps hedging municipal securities.

52
(3)Weighted-average yield excludes the effect of pay-fixed swaps hedging municipal securities.

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Lending Activities

The primary goal of the BB&T lending function is to help clients achieve their financial goals by providing quality loan products that are fair to the client and profitable to the Company. Management believes that this purpose can best be accomplished by building strong, profitable client relationships over time, with BB&T becoming an important contributor to the prosperity and well-being of its clients. In addition to the importance placed on client knowledge and continuous involvement with clients, BB&T’s lending process incorporates the standards of a consistent company-wide credit culture and an in-depth local market knowledge. Furthermore, the Company employs strict underwriting criteria governing the degree of assumed risk and the diversity of the loan portfolio in terms of type, industry and geographical concentration. In this context, BB&T strives to meet the credit needs of businesses and consumersclients in its markets while pursuing a balanced strategy of loan profitability, loan growth and loan quality.

Table 16
Quarterly Average Balances of Loans and Leases
                  
    For the Three Months Ended
    12/31/14 9/30/14 6/30/14 3/31/14 12/31/13
                  
     (Dollars in millions)
Commercial:              
 Commercial and industrial$ 40,383  $ 39,906  $ 39,397  $ 38,435  $ 38,101 
 CRE - income producing properties  10,681    10,596    10,382    10,293    10,031 
 CRE - construction and development  2,772    2,670    2,566    2,454    2,433 
Direct retail lending (1)  8,085    7,912    7,666    9,349    15,998 
Sales finance  10,247    10,313    10,028    9,428    9,262 
Revolving credit  2,427    2,396    2,362    2,357    2,357 
Residential mortgage (1)  31,046    32,000    32,421    30,635    23,979 
Other lending subsidiaries  11,351    11,234    10,553    10,236    10,448 
 Total average loans and leases held for              
   investment (excluding acquired from FDIC)  116,992    117,027    115,375    113,187    112,609 
Acquired from FDIC  1,309    1,537    1,739    1,874    2,186 
 Total average loans and leases held              
   for investment  118,301    118,564    117,114    115,061    114,795 
LHFS  1,611    1,907    1,396    1,311    2,206 
 Total average loans and leases$ 119,912  $ 120,471  $ 118,510  $ 116,372  $ 117,001 
                  
                  
(1)During the first quarter of 2014, $8.3 billion of loans were transferred from direct retail lending to residential mortgage.

Table 11
Quarterly Average Balances of Loans and Leases
   
  For the Three Months Ended
  12/31/2016 9/30/2016 6/30/2016 3/31/2016 12/31/2015
  (Dollars in millions)
Commercial and industrial $51,306
 $51,508
 $51,646
 $48,013
 $48,047
CRE-income producing properties 14,566
 14,667
 14,786
 13,490
 13,264
CRE-construction and development 3,874
 3,802
 3,669
 3,619
 3,766
Dealer floor plan 1,367
 1,268
 1,305
 1,239
 1,164
Direct retail lending 12,046
 11,994
 12,031
 11,107
 10,896
Sales finance 10,599
 9,339
 9,670
 10,049
 10,533
Revolving credit 2,608
 2,537
 2,477
 2,463
 2,458
Residential mortgage 30,044
 30,357
 30,471
 29,864
 30,334
Other lending subsidiaries 14,955
 14,742
 13,961
 13,439
 13,281
PCI 974
 1,052
 1,130
 1,098
 1,070
Total loans and leases HFI 142,339
 141,266
 141,146
 134,381
 134,813
LHFS 2,230
 2,423
 1,951
 1,247
 1,377
Total loans and leases $144,569
 $143,689
 $143,097
 $135,628
 $136,190
Average loans held for investment for the fourth quarter of 20142016 were $118.3$142.3 billion, down $263 millionup $1.1 billion compared to the prior quarter.third quarter of 2016. The decreaseincrease was driven by sales finance loans. There was also modest growth in averageother lending subsidiaries loans, held for investmentwhich was offset by a continued decline in residential mortgage loans.

Average sales finance loans increased $1.3 billion, primarily due to a decline of $954 million$1.0 billion portfolio acquisition late in the residential mortgagethird quarter of 2016 and a $1.9 billion portfolio and continued run-off of loans acquired fromacquisition in the FDIC.fourth quarter. These declinesincreases were partially offset by a $477 million increasethe continued effects of dealer pricing structure changes implemented during 2015 and also reflect the continued runoff of the auto lease portfolio obtained in connection with the commercialSusquehanna acquisition.


The following table excludes sales finance and industrial portfolio as well as smaller increases in the CRE – construction and development, direct retail lending and other lending subsidiaries portfolios.

The decrease of $954 million, or 11.8% annualized, in the residential mortgage portfolio reflects the $550 million loan sale that occurred during the third quarter, which had a partial impact on third quarter averages and a full impact on fourth quarter averages. The decrease also reflects lower origination volume and a reduction in fixed rate home equity loans due to continued runoff. The previously described $140 million loan sale occurred late in the fourth quarter and therefore had minimal impact on average balances.

Average commercial and industrial loans increased $477 million, or 4.7% annualized, which reflects strong growth from large corporate clients. Growth in this sector has benefited from the expansion of BB&T’s footprint into new markets. CRE – construction and development loans were up 15.2% annualized, reflecting a continued strong growth trend in that portfolio.

The average direct retail lending portfolio increased $173 million, or 8.7% annualized, while average other lending subsidiaries loans increased $117 million, or 4.1% on an annualized basis.

as the substantial majority of those loans have fixed interest rates:
Table 12
Variable Rate Loans (Excluding PCI and LHFS)
        
December 31, 2016 Outstanding Balance Wtd. Avg. Contractual Rate Wtd. Avg. Remaining Term
  (Dollars in millions)
Commercial:       
Commercial and industrial $35,851
 2.60% 3.0
yrs
CRE-income producing properties 10,755
 3.27
 4.6
 
CRE-construction and development 3,597
 3.56
 2.7
 
Dealer floor plan (1) 1,413
 2.08
 NM
 
Other lending subsidiaries 797
 2.70
 1.8
 
Retail:  
  
  
 
Direct retail lending (2) 9,945
 3.72
 8.4
 
Revolving credit 2,352
 9.79
 NM
 
Residential mortgage-nonguaranteed 5,805
 3.50
 24.6
 
Residential mortgage-government guaranteed 25
 3.05
 19.2
 
__________________
53
(1)The weighted average remaining term for dealer floor plan is excluded as the balance primarily represents loans that are callable on demand.
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(2)Margin loans totaling $90 million have been excluded because they do not have a contractual end date and are callable on demand.

Table 17
Variable Rate Loans (Excluding Acquired from FDIC and LHFS)
               
 December 31, 2014 Outstanding Balance Wtd. Avg. Contractual Rate Wtd. Avg. Remaining Term 
               
      (Dollars in millions) 
 Commercial:          
  Commercial and industrial $28,448  2.36 % 2.6 yrs 
  CRE - income producing properties  7,965  3.13   3.8   
  CRE - construction and development  2,565  3.44   2.5   
  Other lending subsidiaries  456  3.04   2.6   
 Retail:          
  Direct retail lending (1)  6,303  3.44   8.9   
  Revolving credit  2,108  9.14   NM  
  Residential mortgage  6,520  3.45   25.5   
  Sales finance (2)  1,113  1.83   NM  
  Other lending subsidiaries  --   N/A  N/A  
               
               
 (1)The weighted average remaining term for direct retail lending represents the remaining contractual draw period. Margin loans totaling $103 million have been excluded from the calculation of the weighted average remaining term because they do not have a contractual end date and are callable on demand. 
 (2)The weighted average remaining term for sales finance is excluded as the balance primarily represents dealer floor plan loans that are callable on demand. 
 NM - not meaningful.  

As of December 31, 2014,2016, approximately 5.3% of the outstanding balance$258 million of variable rate residential mortgage loans isare currently in an interest-only phase. Approximately 85.6%94.8% of these balances will begin amortizing within the next three years. Variable rate residential mortgage loans typically reset every 12 months beginning after a 3 to 10 year fixed period, with an annual cap on rate changes ranging from 2%2.0% to 6%6.0%.

As of December 31, 2014,2016, the direct retail lending portfolio includes $5.6$8.7 billion of variable rate home equity lines.lines, $946 million of variable rate other lines of credit and $326 million of variable rate loans. Approximately 67%$6.4 billion of the outstanding balance of variable rate home equity lines is currently in the interest-only phase. Approximately 8.2%phase and approximately 8.5% of these balances will begin scheduled amortizationamortizing within the next three years. Approximately $788 million of the outstanding balance of variable rate other lines of credit is in the interest-only phase and 23.2% of these balances will begin amortizing within the next three years. Variable rate home equity lines and other lines of credit typically reset on a monthly basis. Variable rate home equity loans were immaterial as of December 31, 2014.

BB&T monitors the performance of its home equity loans and lines secured by second liens similarsimilarly to other consumer loans and utilizes assumptions specific to these loans in determining the necessary ALLL. BB&T also receives notification when the first lien holder, whether BB&T or another financial institution, has initiated foreclosure proceedings against the borrower. When notified that the first lien is in the process of foreclosure, BB&T obtains valuations to determine if any additional charge-offs or reserves are warranted. These valuations are updated at least annually thereafter.

BB&T has limited ability to monitor the delinquency status of the first lien, unless the first lien is held or serviced by BB&T. As a result, using migration assumptions that are based on historical experience and adjusted for current trends, BB&T estimates the volume of second lien positions where the first lien is delinquent and adjusts the ALLL to reflect the increased risk of loss on these credits. Finally, BB&T also provides additional reserves to second lien positions when the estimated combined current loan to value ratio for the credit exceeds 100%. As of December 31, 2014,2016, BB&T held or serviced the first lien on 37.2%31.5% of its second lien positions.

Scheduled repayments are reported in the maturity category in which the payment is due. Determinations of maturities are based on contract terms. BB&T’s credit policy typically does not permit automatic renewal of loans. At the scheduled maturity date (including balloon payment date), the customer generally must request a new loan to replace the matured loan and execute either a new note or note modification with rate, terms and conditions negotiated at that time.


BB&T lends to a diverse customer base that is substantially located within the Company’s primary market area. At the same time, the loan portfolio is geographically dispersed throughout BB&T’s branch network to mitigate concentration risk arising from local and regional economic downturns. Refer to the “Risk Management”"Risk Management" section herein for a discussion of each of the loan portfolios and the credit risk management policies used to manage the portfolios.

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The following table presents the loan portfolio based upon BB&T’s LOBs:

Table 18
Composition of Loan and Lease Portfolio Based on LOB
                   
    December 31, 
    2014 2013 2012  2011  2010  
                   
    (Dollars in millions) 
 Commercial:               
  Commercial and industrial$ 41,454  $ 38,508  $ 38,295  $ 36,415  $ 34,050  
  CRE—income producing properties  10,722    10,228    9,861    8,860    9,083  
  CRE—construction and development  2,735    2,382    2,861    3,890    5,753  
 Direct retail lending (1)  8,146    15,869    15,817    14,506    13,807  
 Sales finance  10,600    9,382    7,736    7,401    7,050  
 Revolving credit  2,460    2,403    2,330    2,212    2,127  
 Residential mortgage-nonguaranteed (1)  30,107    23,513    23,189    20,057    17,102  
 Residential mortgage-government guaranteed  983    1,135    1,083    524    448  
 Other lending subsidiaries  11,462    10,462    10,137    8,737    7,953  
  Total loans and leases held for investment               
   (excluding acquired from FDIC)  118,669    113,882    111,309    102,602    97,373  
 Acquired from FDIC  1,215    2,035    3,294    4,867    6,194  
  Total loans and leases held for investment  119,884    115,917    114,603    107,469    103,567  
 LHFS  1,423    1,222    3,761    3,736    3,697  
  Total loans and leases$ 121,307  $ 117,139  $ 118,364  $ 111,205  $ 107,264  
                   
                   
(1)During the first quarter of 2014, $8.3 billion of loans were transferred from direct retail lending to residential mortgage.

TotalBUs:

Table 13
Composition of Loan and Lease Portfolio
   
  December 31,
  2016 2015 2014 2013 2012
  (Dollars in millions)
Commercial:          
Commercial and industrial $51,719
 $48,430
 $41,454
 $38,508
 $38,295
CRE-income producing properties 14,538
 13,421
 10,722
 10,228
 9,861
CRE-construction and development 3,819
 3,732
 2,735
 2,382
 2,861
Dealer floor plan 1,413
 1,215
 1,091
 904
 431
Other lending subsidiaries 7,691
 6,795
 5,356
 4,502
 4,138
Retail:          
Direct retail lending (1) 12,092
 11,140
 8,146
 15,869
 15,817
Sales finance 11,267
 10,327
 9,509
 8,478
 7,305
Revolving credit 2,655
 2,510
 2,460
 2,403
 2,330
Residential mortgage-nonguaranteed (1) 29,022
 29,663
 30,107
 23,513
 23,189
Residential mortgage-government guaranteed 899
 870
 983
 1,135
 1,083
Other lending subsidiaries 7,297
 6,726
 6,106
 5,960
 5,999
PCI 910
 1,122
 1,215
 2,035
 3,294
Total loans and leases HFI 143,322

135,951

119,884

115,917

114,603
LHFS 1,716
 1,035
 1,423
 1,222
 3,761
Total loans and leases $145,038

$136,986

$121,307

$117,139

$118,364
__________________
(1) During the first quarter of 2014, $8.3 billion of loans were transferred from direct retail lending to residential mortgage.

Loans and leases HFI were $121.3$143.3 billion at year-end 2014,December 31, 2016, an increase of $4.2$7.4 billion compared to the balance at year-end 2013.prior year. This increase reflects broad-based loan growth, with commercialthe impact of the April 1, 2016 acquisition of National Penn, which contributed $6.0 billion in loans.

Commercial and industrial loans were up $2.9$3.3 billion, sales finance up $1.2 billion and other lending subsidiaries loans were up $1.0 billion. A decline in$1.5 billion, CRE-income producing properties loans were up $1.1 billion and direct retail lending balancesloans were up $952 million, all of which were primarily due to the acquisition of National Penn.

Sales finance loans were up $940 million over the prior year, primarily due to a $1.0 billion portfolio acquisition late in the third quarter of 2016 and a corresponding increase in residential mortgage balances$1.9 billion portfolio acquisition during the fourth quarter. These increases were partially offset by the continued effects of dealer pricing structure changes implemented during 2015 and also reflect the impactcontinued runoff of an $8.3 billion transfer that occurred during the first quarter of 2014.

auto lease portfolio obtained in connection with the Susquehanna acquisition.


The increase in commercial and industrial loans reflects solid growth from large corporate clients, which typically have strong credit profiles and therefore put downward pressure on pricing. The yield on commercial and industrial loans declined to 3.35% in 2014 from 3.63% in 2013.

The$612 million decline in residential mortgage balances after excluding the effects of the loan transfer, reflects the competitive environment, lower originations and the impact of the loans sales previously discussed. Additionally, BB&T implemented a mid-year change incontinuing strategy that resulted in originations of loans with eligible collateral types, including adjustable rate mortgages with 10 and 15 year terms, being directed to the LHFS portfolio.

sell conforming residential mortgage loan production.


The acquired from FDICPCI loan portfolio, which totaled $1.2 billion$910 million at December 31, 2014,2016, continued to runoff during the year, resultingpartially offset by the addition of $124 million of PCI loans in a decline of $820 million compared toconnection with the prior year-end.

National Penn acquisition.

The majority of BB&T’s loans are with clients in domestic market areas, which are primarily concentrated in the southeastern United States. International loans were immaterial as of December 31, 20142016 and 2013.

The following tables summarize the loan portfolio based on regulatory classifications, which focuses on the underlying loan collateral, and differs from internal classifications presented herein that focus on the primary purpose of the loan. Acquired from FDIC loans are included in their respective categories.

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Table 19
Composition of Loan and Lease Portfolio
                   
    December 31, 
    2014 2013 2012  2011  2010  
                   
    (Dollars in millions) 
 Commercial, financial and agricultural$ 27,615  $ 25,260  $ 23,863  $ 21,452  $ 20,490  
 Lease receivables  1,120    1,126    1,114    1,067    1,158  
 Real estate-construction and land development  4,736    4,630    5,900    7,714    10,969  
 Real estate-mortgage  63,464    65,485    65,760    60,821    57,418  
 Consumer  22,949    19,416    17,966    16,415    13,532  
  Total loans and leases held for investment  119,884    115,917    114,603    107,469    103,567  
 LHFS  1,423    1,222    3,761    3,736    3,697  
  Total loans and leases$ 121,307  $ 117,139  $ 118,364  $ 111,205  $ 107,264  

Table 20
Selected Loan Maturities and Interest Sensitivity
              
     December 31, 2014 
     Commercial, Real Estate:    
     Financial Construction    
     and and Land    
     Agricultural Development Total 
              
     (Dollars in millions) 
 Fixed Rate:         
  1 year or less (1)$ 2,644  $ 399  $ 3,043  
  1-5 years  3,322    379    3,701  
  After 5 years  4,350    729    5,079  
   Total  10,316    1,507    11,823  
 Variable Rate:         
  1 year or less (1)  4,101    877    4,978  
  1-5 years  10,338    1,760    12,098  
  After 5 years  2,860    592    3,452  
   Total  17,299    3,229    20,528  
    Total loans and leases (2)$ 27,615  $ 4,736  $ 32,351  
              
              
(1)Includes loans due on demand. 
(2)The above table excludes:   (Dollars in millions) 
 (i)consumer $ 22,949  
 (ii)real estate mortgage   63,464  
 (iii)LHFS   1,423  
 (iv)lease receivables   1,120  
  Total $ 88,956  


Table 14
Commercial Loan Maturities and Interest Sensitivity
 
  December 31, 2016
  1 Year or Less Over 1 to 5 Years After 5 Years Total
  (Dollars in millions)
Fixed rate:        
Commercial and industrial $878
 $5,971
 $9,019
 $15,868
CRE-income producing properties 353
 2,338
 1,092
 3,783
CRE-construction and development 28
 128
 66
 222
Other lending subsidiaries 2,531
 2,881
 1,482
 6,894
Total fixed rate 3,790
 11,318

11,659

26,767
Variable rate:    
  
  
Commercial and industrial 18,453
 9,484
 7,914
 35,851
CRE-income producing properties 1,086
 5,786
 3,883
 10,755
CRE-construction and development 1,128
 1,830
 639
 3,597
Dealer floor plan 1,413
 —
 —
 1,413
Other lending subsidiaries 57
 631
 109
 797
Total variable rate 22,137
 17,731

12,545

52,413
Total commercial loans and leases $25,927
 $29,049

$24,204

$79,180
Asset Quality

The following discussion includes assets acquired from the FDIC. Loans acquired from the FDIC,PCI loans, which are considered performing due to the application of the expected cash flows method were $1.2 billionand totaled $910 million at December 31, 20142016 and $2.0$1.1 billion in the prior year. Refer to “Acquired from FDIC and FDIC Loss Share Receivable/Payable”in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein for additional information. Foreclosed real estate acquired from the FDIC totaled $56 million and $121 million at December 31, 2014 and 2013, respectively.

NPAs, which include foreclosed real estate, repossessions and NPLs, totaled $782 million at December 31, 2014 compared to $1.2 billion at December 31, 2013. The decline in NPAs of $392 million was driven by decreases of $319 million in NPLs and $73 million in foreclosed property. Commercial and industrial NPLs were down $124 million due to continued improvement in credit quality. Residential mortgage NPLs declined $77 million due to the fourth quarter sale of $121 million of residential mortgage NPLs, partially offset by the first quarter loan transfer from direct retail lending to residential mortgage, which included $55 million of NPLs.

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NPAs as a percentage of loans and leases plus foreclosed property were 0.65% at December 31, 2014 compared with 1.01% at December 31, 2013.

The following table presents the changes in NPAs during 2014 and 2013 (excludes foreclosed property acquired from the FDIC):

Table 21
Rollforward of NPAs
 
       Year Ended December 31, 
       2014 2013 
             
       (Dollars in millions) 
 Balance at beginning of year$ 1,053  $ 1,536  
  New NPAs  1,307    1,583  
  Advances and principal increases  74    177  
  Disposals of foreclosed assets  (487)   (533) 
  Disposals of NPLs (1)  (332)   (348) 
  Charge-offs and losses  (309)   (511) 
  Payments  (398)   (636) 
  Transfers to performing status  (192)   (212) 
  Other, net  10    (3) 
 Balance at end of year$ 726  $ 1,053  
             
             
(1)Includes charge-offs and losses recorded upon sale of $25 million and $73 million for the years ended December 31, 2014 and 2013, 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 22.

·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 23 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.

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 Table 22 
 Asset Quality 
                        
     December 31, 
     2014 2013 2012 2011 2010 
                        
      (Dollars in millions) 
 Nonaccrual loans and leases:                   
  Commercial and industrial$ 239   $ 363   $ 545   $ 582   $ 508  
  CRE - income producing properties  74     113     171     275     212  
  CRE - construction and development  26     51     170     495     706  
  Direct retail lending (1)  48     109     132     142     191  
  Sales finance  5     5     7     7     6  
  Residential mortgage (1)(2)(3)  166     243     269     308     466  
  Other lending subsidiaries (2)(4)  58     51     86     63     60  
 Total nonaccrual loans and leases HFI (3)(4)  616     935     1,380     1,872     2,149  
  Nonaccrual LHFS  ―       ―       ―       ―       521  
 Total nonaccrual loans and leases (3)(4)  616     935     1,380     1,872     2,670  
  Foreclosed real estate  87     71     107     536     1,259  
  Foreclosed real estate-acquired from FDIC  56     121     254     378     313  
  Other foreclosed property  23     47     49     42     42  
 Total NPAs (3)(4)$ 782   $ 1,174   $ 1,790   $ 2,828   $ 4,284  
                        
 Loans 90 days or more past due and still accruing:                   
  Commercial and industrial$ ―     $ ―     $ 1   $ 2   $ 8  
  CRE - income producing properties  ―       ―       ―       ―       3  
  CRE - construction and development  ―       ―       ―       ―       9  
  Direct retail lending (1)  12     33     38     56     79  
  Sales finance  5     5     10     18     27  
  Revolving credit  9     10     16     17     20  
  Residential mortgage (1)  83     69     91     103     143  
  Residential mortgage-government guaranteed (5)  238     296     252     204     152  
  Other lending subsidiaries  ―       5     10     5     6  
  Acquired from FDIC  188     304     442     736     1,147  
 Total loans 90 days or more past due and still accruing (5)$ 535   $ 722   $ 860   $ 1,141   $ 1,594  
                        
 Loans 30-89 days past due and still accruing:                   
  Commercial and industrial$ 23   $ 35   $ 42   $ 85   $ 163  
  CRE - income producing properties  4     8     11     18     52  
  CRE - construction and development  1     2     3     18     100  
  Direct retail lending (1)  41     132     145     162     190  
  Sales finance  62     56     56     75     95  
  Revolving credit  23     23     23     22     28  
  Residential mortgage (1)(2)  392     454     477     450     511  
  Residential mortgage-government guaranteed (6)  80     88     84     74     74  
  Other lending subsidiaries (2)(4)  237     221     290     273     248  
  Acquired from FDIC  33     88     135     222     363  
 Total loans 30 - 89 days past due and still accruing (4)(6)$ 896   $ 1,107   $ 1,266   $ 1,399   $ 1,824  
                        
(1)During the first quarter of 2014, approximately $55 million of nonaccrual loans, $22 million of loans 90 days or more past due and $83 million of loans 30-89 days past due were transferred from direct retail lending to residential mortgage.
(2)During the fourth quarter of 2013, approximately $16 million of nonaccrual loans and $40 million of loans 30-89 days past due were transferred from other lending subsidiaries to residential mortgage.
(3)During the fourth quarter of 2014, approximately $121 million of nonaccrual residential mortgage loans were sold.
(4)During the fourth quarter of 2013, approximately $9 million of nonaccrual loans and $26 million of loans 30-89 days past due were sold in connection with the sale of a consumer lending subsidiary.
(5)Excludes government guaranteed GNMA mortgage loans that BB&T does not have the obligation to repurchase that are 90 days or more past due totaling $410 million, $511 million, $517 million, $426 million and $425 million at December 31, 2014, 2013, 2012, 2011 and 2010, respectively.
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Table of Contents

(6)Excludes government guaranteed GNMA mortgage loans that BB&T does not have the obligation to repurchase that are past due 30-89 days totaling $2 million, $4 million, $5 million, $7 million and $7 million at December 31, 2014, 2013, 2012, 2011 and 2010, respectively.

Loans 90 days or more past due and still accruing interest, excluding government guaranteed GNMA mortgage loans, totaled $535 million at December 31, 2014, compared with $722 million at year-end 2013, a decline of 25.9%. Loans 30-89 days past due, excluding government guaranteed GNMA mortgage loans, totaled $896 million at December 31, 2014, which was a decline of $211 million, or 19.1%, compared to prior year. These reductions reflect continued improvement in credit quality and the effects of the sale of residential mortgage NPLs as previously discussed.

Table 23
Asset Quality Ratios
                    
     As Of / For The Year Ended December 31, 
     2014 2013  2012  2011  2010  
 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) 0.75 %  0.95 %  1.10 %  1.30 %  1.76 % 
  Loans 90 days or more past due and still accruing as a               
   percentage of loans and leases HFI (1) 0.45    0.62    0.75    1.06    1.54   
  NPLs as a percentage of loans and leases HFI 0.51    0.81    1.20    1.74    2.07   
  NPAs as a percentage of:               
   Total assets 0.42    0.64    0.97    1.62    2.40   
   Loans and leases HFI plus foreclosed property 0.65    1.01    1.56    2.63    3.63   
  Net charge-offs as a percentage of average loans               
   and leases HFI (2) 0.46    0.69    1.17    1.60    2.47   
  ALLL as a percentage of loans and leases HFI 1.23    1.49    1.76    2.10    2.62   
  Ratio of ALLL to:               
   Net charge-offs (2) 2.74 x  2.19 x  1.56 x  1.36 x  1.07 x 
   NPLs 2.39    1.85    1.46    1.21    1.26   
                    
 Asset Quality Ratios (excluding acquired from FDIC)(3)               
  Loans 90 days or more past due and still accruing as a               
   percentage of loans and leases HFI (1) 0.29 %  0.37 %  0.38 %  0.39 %  0.46 % 
                    
(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 22 for amounts related to these loans.
(2)Net charge-offs for 2011 and 2010 include $236 million and $695 million, respectively, related to BB&T’s NPA disposition strategy. In connection with this strategy, approximately $271 million and $1.9 billion of problem loans were transferred from loans held for investment to LHFS in 2011 and 2010, respectively. The disposition of all such loans was complete as of December 31, 2011.
(3)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.

Potential problem loans include loans on nonaccrual status or past due as disclosed in Table 22.16. 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 “Loansthe "Loans and ACL”ACL" note in the “Notes"Notes to Consolidated Financial Statements” hereinStatements" for additional disclosures related to these potential problem loans.

TDRs generally occur when a borrower is experiencing, or is expected to experience, financial difficulties in the near-term. As a result, BB&T will work with the borrower to prevent further difficulties, and ultimately to 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. Trial modifications are excluded from the following discussion because the specific types and amounts of concessions offered to borrowers frequently change between the trial modification and the permanent modification. Refer to Note 1 “Summarythe "Summary of Significant Accounting Policies”Policies" note in the “Notes"Notes to Consolidated Financial Statements”Statements" for additional policy information regarding TDRs.


The following table presents activity related to NPAs. Foreclosed real estate acquired from the FDIC is excluded for periods prior to the loss share termination.
Table 15
Rollforward of NPAs
  Year Ended December 31,
  2016 2015
  (Dollars in millions)
Balance at beginning of year $686
 $726
New NPAs 1,716
 1,266
Advances and principal increases 253
 85
Disposals of foreclosed assets (1) (516) (484)
Disposals of NPLs (2) (302) (165)
Charge-offs and losses (279) (246)
Payments (586) (358)
Transfers to performing status (179) (149)
Foreclosed real estate, included as a result of loss share termination 17
 —
Other, net 3
 11
Balance at end of year $813
 $686
__________________
(1)Includes charge-offs and losses recorded upon sale of $210 million and $170 million for the year ended December 31, 2016 and 2015, respectively.
(2)Includes charge-offs and losses recorded upon sale of $30 million and $17 million for the year ended December 31, 2016 and 2015, respectively.
NPAs, which include foreclosed real estate, repossessions and NPLs, totaled $813 million at December 31, 2016 compared to $712 million (or $686 million excluding foreclosed real estate acquired from the FDIC) at December 31, 2015. This increase consisted of a $160 million increase in NPLs partially offset by a $59 million decrease in foreclosed real estate and other property.

The increase in NPLs is primarily due to commercial and industrial NPLs that were downgraded as a result of a review of shared national credits in the energy lending portfolio during the first quarter, partially offset by the sale of several energy-related credits during the year.
NPAs as a percentage of loans and leases plus foreclosed property were 0.57% at December 31, 2016 compared with 0.52% at December 31, 2015.



The following tables summarize asset quality information for the past five years.
Table 16
Asset Quality
   
  December 31,
  2016 2015 2014 2013 2012
  (Dollars in millions)
Nonaccrual loans and leases:          
Commercial and industrial (1) $363
 $237
 $239
 $363
 $545
CRE-income producing properties 40
 38
 74
 113
 171
CRE-construction and development 17
 13
 26
 51
 170
Direct retail lending 63
 43
 48
 109
 132
Sales finance 6
 7
 5
 5
 7
Residential mortgage-nonguaranteed (2) 172
 173
 164
 243
 269
Residential mortgage-government guaranteed —
 —
 2
 —
 —
Other lending subsidiaries 75
 65
 58
 51
 86
Total nonaccrual loans and leases (1)(2) 736

576

616

935

1,380
Foreclosed real estate 37
 82
 87
 71
 107
Foreclosed real estate-acquired from FDIC 13
 26
 56
 121
 254
Other foreclosed property 27
 28
 23
 47
 49
Total NPAs (1)(2) $813

$712

$782

$1,174

$1,790
           
Performing TDRs:          
Commercial and industrial $55
 $49
 $64
 $77
 $77
CRE-income producing properties 16
 13
 27
 50
 53
CRE-construction and development 9
 16
 30
 39
 35
Direct retail lending (3) 67
 72
 84
 187
 197
Sales finance 16
 17
 19
 17
 19
Revolving credit 29
 33
 41
 48
 56
Residential mortgage-nonguaranteed (3)(4) 332
 288
 261
 785
 769
Residential mortgage-government guaranteed 420
 316
 360
 376
 313
Other lending subsidiaries 226
 178
 164
 126
 121
Total performing TDRs (4) $1,170
 $982
 $1,050
 $1,705
 $1,640
           
Loans 90 days or more past due and still accruing:  
  
  
  
  
Commercial and industrial $—
 $—
 $—
 $—
 $1
Direct retail lending 6
 7
 12
 33
 38
Sales finance 6
 5
 5
 5
 10
Revolving credit 12
 10
 9
 10
 16
Residential mortgage-nonguaranteed 79
 55
 83
 69
 91
Residential mortgage-government guaranteed 443
 486
 648
 807
 769
Other lending subsidiaries —
 —
 —
 5
 10
PCI 90
 114
 188
 304
 442
Total loans 90 days or more past due and still accruing $636
 $677

$945

$1,233

$1,377
           
Loans 30-89 days past due and still accruing:  
  
  
  
  
Commercial and industrial $27
 $36
 $23
 $35
 $42
CRE-income producing properties 6
 13
 4
 8
 11
CRE-construction and development 2
 9
 1
 2
 3
Direct retail lending 60
 58
 41
 132
 145
Sales finance 76
 72
 62
 56
 56
Revolving credit 23
 22
 23
 23
 23
Residential mortgage-nonguaranteed 393
 397
 392
 454
 477
Residential mortgage-government guaranteed 132
 78
 82
 92
 89
Other lending subsidiaries 322
 304
 237
 221
 290
PCI 36
 42
 33
 88
 135
Total loans 30-89 days past due and still accruing $1,077

$1,031

$898

$1,111

$1,271

__________________
(1)During 2016, approximately $191 million of nonaccrual energy-related loans were sold.
(2)During 2014, approximately $121 million of nonaccrual residential mortgage loans were sold.
(3)During 2014, approximately $94 million of performing TDRs were transferred from direct retail lending to residential mortgage.
(4)During 2014, approximately $540 million of performing residential mortgage TDRs were sold.

BB&T’s performing TDRs excluding government guaranteed GNMA mortgage loans, totaled $1.1$1.2 billion at December 31, 2014, a reduction2016, an increase of $655$188 million compared to the prior year. This increase includes a $148 million increase for residential mortgage loans, which was primarily the result of the permanent restructuring of certain mortgage loan modifications that successfully completed their trial periods and of implementing a change in the strategy of repurchasing loans from GNMA pools that BB&T has the right but not the obligation to repurchase.

Loans 90 days or more past due and still accruing interest totaled $636 million at December 31, 2016, compared with $677 million at prior year-end, a decline of $41 million. This decline includes a $43 million reduction for past due government guaranteed residential mortgage loans, which reflects general improvements in credit quality within that portfolio.
Loans 30-89 days past due totaled $1.1 billion at December 31, 2016, an increase of $46 million compared to the sale of $540 millionprior year, primarily due to higher loan balances.
Table 17
Asset Quality Ratios
  
 As Of / For The Year Ended December 31,
 2016 2015 2014 2013 2012
Asset Quality Ratios:         
Loans 30-89 days past due and still accruing as a percentage of loans and leases HFI0.75% 0.76% 0.75% 0.96% 1.11%
Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI0.44
 0.50
 0.79
 1.06
 1.20
NPLs as a percentage of loans and leases HFI0.51
 0.42
 0.51
 0.81
 1.20
NPAs as a percentage of:     
  
  
Total assets0.37
 0.34
 0.42
 0.64
 0.97
Loans and leases HFI plus foreclosed property0.57
 0.52
 0.65
 1.01
 1.56
Net charge-offs as a percentage of average loans and leases HFI0.38
 0.35
 0.46
 0.69
 1.17
ALLL as a percentage of loans and leases HFI1.04
 1.07
 1.23
 1.49
 1.76
Ratio of ALLL to:     
  
  
Net charge-offs2.80 x 3.36 x 2.74 x 2.19 x 1.56 x
NPLs2.03
 2.53
 2.39
 1.85
 1.46
          
Asset Quality Ratios (Excluding Government Guaranteed and PCI): (1) 
  
  
  
  
Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI0.07% 0.06% 0.09% 0.11% 0.15%
__________________
(1)These asset quality ratios have been adjusted to remove the impact of government guaranteed and PCI assets. Appropriate adjustments to the numerator and denominator have been reflected in the calculation of these ratios.


The following table provides a summary of performing residential mortgage TDRs during the third quarter of 2014.

59
TDR activity: 
Table of Contents

The following table provides a summary of performing TDR activity:
             
Table 24
Rollforward of Performing TDRs
 
       Year Ended December 31, 
       2014 2013 
             
       (Dollars in millions) 
 Balance at beginning of year$ 1,705  $ 1,640  
  Inflows  594    608  
  Payments and payoffs  (222)   (229) 
  Charge-offs  (78)   (50) 
  Transfers to nonperforming TDRs, net  (73)   (65) 
  Removal due to the passage of time  (108)   (108) 
  Non-concessionary re-modifications  (25)   (41) 
  Sold and transferred to held for sale  (745)   (50) 
  Other  2    ―    
 Balance at end of year$ 1,050  $ 1,705  

Table 18
Rollforward of Performing TDRs
  Year Ended December 31,
  2016 2015
  (Dollars in millions)
Balance at beginning of year $982
 $1,050
Inflows 681
 448
Payments and payoffs (216) (224)
Charge-offs (41) (44)
Transfers to nonperforming TDRs, net (68) (85)
Removal due to the passage of time (54) (31)
Non-concessionary re-modifications —
 (2)
Sold and transferred to LHFS (114) (130)
Balance at end of year $1,170
 $982
Payments and payoffs represent cash received from borrowers in connection withinclude scheduled principal payments, prepayments and payoffs of amounts outstanding. Transfers to nonperforming TDRs represent loans that no longer meet the requirements necessary to reflect the loan in accruing status and as a result are subsequently classified as a nonperforming TDR.

status.

TDRs may be removed due to the passage of time if they: (1) did not include a forgiveness of principal or interest, (2) have performed in accordance with the modified terms (generally a minimum of six months), (3) were reported as a TDR over a year end reporting period, and (4) reflected an interest rate on the modified loan that was no less than a market rate at the date of modification. These loans were previously considered TDRs as a result of structural concessions such as extended interest-only terms or an amortization period that did not otherwise conform to normal underwriting guidelines.

In addition, certain loans may be removed from classification as a TDR as a result of a subsequent non-concessionary re-modification. Non-concessionary re-modifications represent TDRs that did not contain concessionary terms at the date of a subsequent renewal/modification and there was a reasonable expectation that the borrower would continue to comply with the terms of the loan subsequent to the date of the re-modification. A re-modification may be considered for such a re-classification if the loan has not had a forgiveness of principal or interest and the modified terms qualify as more than minor such that the re-modified loan is considered a new loan. Alternatively, such loans may be considered for reclassification in years subsequent to the date of the re-modification based on the passage of time as described in the preceding paragraph.

In connection with consumer loan TDRs, a NPL will be returned to accruing status when current as to principal and interest and upon a sustained historical repayment performance (generally a minimum of six months). The following table provides further details regarding the payment status of TDRs:

60
Table of Contents

Table 25
TDRs
                        
     December 31, 2014
          Past Due Past Due   
    Current Status 30-89 Days 90 Days Or More Total
                        
    (Dollars in millions)
Performing TDRs (1):                    
 Commercial:                    
  Commercial and industrial$ 64   100.0 % $ ―     ―   % $ ―     ―   % $ 64 
  CRE - income producing properties  27   100.0     ―     ―       ―     ―       27 
  CRE - construction and development  30   100.0     ―     ―       ―     ―       30 
 Direct retail lending  82   97.6     2   2.4     ―     ―       84 
 Sales finance  18   94.7     1   5.3     ―     ―       19 
 Revolving credit  35   85.4     5   12.2     1   2.4     41 
 Residential mortgage - nonguaranteed  199   76.3     52   19.9     10   3.8     261 
 Residential mortgage - government guaranteed  162   45.0     68   18.9     130   36.1     360 
 Other lending subsidiaries  141   86.0     23   14.0     ―     ―       164 
  Total performing TDRs  758   72.2     151   14.4     141   13.4     1,050 
Nonperforming TDRs (2)  50   39.7     8   6.3     68   54.0     126 
  Total TDRs$ 808   68.7   $ 159   13.5   $ 209   17.8   $ 1,176 
                        
Table 19
Payment Status of TDRs
  December 31, 2016
  Current Past Due 30-89 Days Past Due 90 Days Or More Total
  (Dollars in millions)
Performing TDRs (1):          
    
Commercial and industrial $55
 100.0% $—
 —% $—
 —% $55
CRE-income producing properties 16
 100.0
 —
 —
 —
 —
 16
CRE-construction and development 9
 100.0
 —
 —
 —
 —
 9
Direct retail lending 64
 95.5
 3
 4.5
 —
 —
 67
Sales finance 15
 93.8
 1
 6.2
 —
 —
 16
Revolving credit 24
 82.8
 4
 13.8
 1
 3.4
 29
Residential mortgage-nonguaranteed 259
 78.0
 47
 14.2
 26
 7.8
 332
Residential mortgage-government guaranteed 170
 40.5
 73
 17.4
 177
 42.1
 420
Other lending subsidiaries 188
 83.2
 38
 16.8
 —
 —
 226
Total performing TDRs 800
 68.4
 166
 14.2
 204
 17.4
 1,170
Nonperforming TDRs (2) 101
 55.2
 16
 8.7
 66
 36.1
 183
Total TDRs $901
 66.6
 $182
 13.4
 $270
 20.0
 $1,353
__________________
(1)Past due performing TDRs are included in past due disclosures.
(2)Nonperforming TDRs are included in NPL disclosures.
61

ACL

Information related to the ACL is presented in the following table:

Table 26 
Analysis of ACL 
                    
     Year Ended December31, 
     2014 2013 2012 2011 2010 
                    
      (Dollars in millions) 
 Beginning balance$ 1,821  $ 2,048  $ 2,285  $ 2,755  $ 2,672  
 Provision for credit losses (excluding acquired from FDIC)  280    587    1,044    1,119    2,494  
 Provision for loans acquired from FDIC  (29)   5    13    71    144  
  Charge-offs:               
   Commercial: (1)               
    Commercial and industrial  (131)   (248)   (337)   (324)   (373) 
    CRE - income producing properties  (31)   (74)   (150)   (167)   (193) 
    CRE - construction and development  (11)   (58)   (245)   (407)   (942) 
   Direct retail lending (2)  (69)   (148)   (224)   (276)   (338) 
   Sales finance  (23)   (23)   (26)   (32)   (48) 
   Revolving credit  (71)   (85)   (81)   (95)   (118) 
   Residential mortgage-nonguaranteed (2)(3)  (82)   (79)   (135)   (269)   (394) 
   Residential mortgage-government guaranteed  (2)   (2)   (1)   ―      ―    
   Other lending subsidiaries  (269)   (255)   (225)   (190)   (252) 
   Acquired from FDIC  (21)   (19)   (34)   (66)   ―    
    Total charge-offs (1)(3)  (710)   (991)   (1,458)   (1,826)   (2,658) 
                    
  Recoveries:               
   Commercial:               
    Commercial and industrial  42    47    17    28    18  
    CRE - income producing properties  14    20    9    10    4  
    CRE - construction and development  19    31    45    33    15  
   Direct retail lending (2)  29    38    36    37    33  
   Sales finance  9    9    10    9    9  
   Revolving credit  19    17    18    19    16  
   Residential mortgage-nonguaranteed (2)  7    3    3    5    4  
   Other lending subsidiaries  33    34    26    25    31  
    Total recoveries  172    199    164    166    130  
 Net charge-offs (1)(3)  (538)   (792)   (1,294)   (1,660)   (2,528) 
 Other changes, net  ―      (27)   ―      ―      (27) 
 Ending balance$ 1,534  $ 1,821  $ 2,048  $ 2,285  $ 2,755  
                    
 ALLL (excluding acquired from FDIC loans)$ 1,410  $ 1,618  $ 1,890  $ 2,107  $ 2,564  
 Allowance for acquired from FDIC loans  64    114    128    149    144  
 RUFC  60    89    30    29    47  
  Total ACL$ 1,534  $ 1,821  $ 2,048  $ 2,285  $ 2,755  
                    
(1)Includes charge-offs of $464 million in commercial loans and leases during 2010 in connection with BB&T's NPL disposition strategy. 
(2)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. 
(3)Includes charge-offs of $11 million related to  performing TDR and NPL sales in 2014. Includes charge-offs of $87 million and $141 million in residential mortgage loans during 2011 and 2010, respectively, in connection with BB&T's NPL disposition strategy. 

Table 20
Analysis of ACL
   
  Year Ended December 31,
  2016 2015 2014 2013 2012
  (Dollars in millions)
Beginning balance $1,550
 $1,534
 $1,821
 $2,048
 $2,285
Provision for credit losses (excluding PCI) 574
 430
 280
 587
 1,044
Provision for PCI loans (2) (2) (29) 5
 13
Charge-offs:  
  
  
  
  
Commercial and industrial (128) (81) (131) (248) (337)
CRE-income producing properties (8) (20) (31) (74) (150)
CRE-construction and development (1) (4) (11) (58) (245)
Direct retail lending (1) (53) (54) (69) (148) (224)
Sales finance (29) (26) (23) (23) (26)
Revolving credit (69) (70) (71) (85) (81)
Residential mortgage-nonguaranteed (1) (35) (40) (82) (79) (135)
Residential mortgage-government guaranteed (5) (6) (2) (2) (1)
Other lending subsidiaries (358) (286) (269) (255) (225)
PCI (15) (1) (21) (19) (34)
Total charge-offs (701)
(588)
(710)
(991)
(1,458)
           
Recoveries:  
  
  
  
  
Commercial and industrial 40
 37
 42
 47
 17
CRE-income producing properties 8
 7
 14
 20
 9
CRE-construction and development 11
 11
 19
 31
 45
Direct retail lending (1) 26
 29
 29
 38
 36
Sales finance 12
 9
 9
 9
 10
Revolving credit 20
 20
 19
 17
 18
Residential mortgage-nonguaranteed (1) 3
 3
 7
 3
 3
Other lending subsidiaries 49
 36
 33
 34
 26
Total recoveries 169

152

172

199

164
Net charge-offs (532) (436) (538) (792) (1,294)
Other changes, net 9
 24
 —
 (27) —
Ending balance $1,599

$1,550

$1,534

$1,821

$2,048
           
ALLL (excluding PCI loans) $1,445
 $1,399
 $1,410
 $1,618
 $1,890
Allowance for PCI loans 44
 61
 64
 114
 128
RUFC 110
 90
 60
 89
 30
Total ACL $1,599

$1,550

$1,534

$1,821

$2,048
__________________
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(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.
Table of Contents

The ACL which totaled $1.5 billion and $1.8 billion at December 31, 2014 and 2013, respectively, consists of the ALLL, which is presented separately on the Consolidated Balance Sheets, and the RUFC, which is included in other liabilities on the Consolidated Balance Sheets. The ACL totaled $1.6 billion at December 31, 2016, an increase of $49 million compared to the prior year.


The ALLL amounted to 1.23%1.04% of loans and leases held for investment at December 31, 2014,2016, compared to 1.49%1.07% at December 31, 2013. The2015. This decline is primarily due to the acquisitions of National Penn during 2016 and Susquehanna during 2015, which provided a total of $18.9 billion in loans and no related allowance as of the ALLL reflects continued improvement in credit quality in most loan portfolios.acquisition dates. The ratio of the ALLL to NPLs held for investment was 2.39x2.03x at December 31, 20142016 compared to 1.85x2.53x at December 31, 2013.

2015.



The energy portfolio totals approximately $1.2 billion and has allocated reserves of 11.7%. This portfolio does not include any offshore, second lien or mezzanine loans. The allowance includes the impact of the shared national credit review related to the energy lending portfolio.

Net charge-offs totaled $538$532 million for 2014,2016, compared to $792$436 million in 2013.2015. Net charge-offs as a percentage of average loans and leases were 0.46%0.38% for 2014,2016, compared to 0.69%0.35% in 2013.2015. Net charge-offs declined in most loan portfolios, including decreasesincreased by $59 million in the commercialother lending subsidiaries portfolio, driven by an increase in loss severity associated with used car values and loan growth. Commercial and industrial and direct retail lending portfolios of 55.7%% and 63.6%, respectively. CRE – construction and development had net recoveries of $8charge-offs increased $44 million, forprimarily due to the year.

energy portfolio.

Refer to Note 4 “Loansthe "Loans and ACL”ACL" note in the “Notes"Notes to Consolidated Financial Statements”Statements" for additional disclosures.

The following table presents an estimated allocation of the ALLL at the end of each of the last five years. This allocation of the ALLL is calculated on an approximate basis and is not necessarily indicative of future losses or allocations. The entire amount of the allowance is available to absorb losses occurring in any category of loans and leases. During 2013, the balance in the unallocated ALLL was incorporated into the loan portfolio segments.

Table 27
Allocation of ALLL by Category
                                 
    December 31,
    2014 2013 2012 2011 2010
       % Loans    % Loans    % Loans    % Loans    % Loans
       in each    in each    in each    in each    in each
    Amount category Amount category Amount category Amount category Amount category
                                 
    (Dollars in millions)
Balances at end of period applicable to:                        
 Commercial and industrial$ 422   34.6 % $ 454   33.2 % $ 470   33.4 % $ 433   33.9 % $ 620   32.7 %
 CRE - income producing                             
  properties  162   8.9     149   8.8     170   8.6     249   8.2     315   8.8  
 CRE - construction and                             
  development  48   2.3     76   2.1     134   2.5     371   3.6     601   5.6  
 Direct retail lending (1)  110   6.8     209   13.7     300   13.8     232   13.5     246   13.3  
 Sales finance  50   8.8     45   8.1     29   6.8     38   6.9     47   6.8  
 Revolving credit  110   2.1     115   2.1     102   2.0     112   2.1     109   2.1  
 Residential mortgage-                             
  nonguaranteed (1)  217   25.1     269   20.3     296   20.3     318   18.7     280   16.6  
 Residential mortgage-                             
  government guaranteed  36   0.8     62   1.0     32   0.9     47   0.5     18   0.4  
 Other lending subsidiaries  255   9.6     239   9.0     277   8.8     197   8.1     198   7.7  
 Acquired from FDIC  64   1.0     114   1.7     128   2.9     149   4.5     144   6.0  
 Unallocated  ―     ―       ―     ―       80   ―       110   ―       130   ―    
  Total ALLL  1,474   100.0 %   1,732   100.0 %   2,018   100.0 %   2,256   100.0 %   2,708   100.0 %
  RUFC  60       89       30       29       47    
  Total ACL$ 1,534     $ 1,821     $ 2,048     $ 2,285     $ 2,755    
                                 
                                 
(1)During the first quarter of 2014, $8.3 billion in loans were transferred from direct retail lending to residential mortgage.

Table 21
Allocation of ALLL by Category
   
  December 31,
  2016 2015 2014 2013 2012
  Amount % Loans in each category Amount % Loans in each category Amount % Loans in each category Amount % Loans in each category Amount % Loans in each category
  (Dollars in millions)
Balances at end of period applicable to:                    
Commercial and industrial $500
 36.1% $466
 35.8% $422
 34.6% $454
 33.2% $470
 33.4%
CRE-income producing properties 117
 10.1
 135
 9.9
 162
 8.9
 149
 8.8
 170
 8.6
CRE-construction and development 25
 2.7
 37
 2.7
 48
 2.3
 76
 2.1
 134
 2.5
Dealer floor plan 11
 1.0
 8
 0.9
 10
 0.9
 8
 0.8
 2
 0.4
Direct retail lending (1) 103
 8.4
 105
 8.2
 110
 6.8
 209
 13.7
 300
 13.8
Sales finance 38
 7.9
 40
 7.6
 40
 7.9
 37
 7.3
 27
 6.4
Revolving credit 106
 1.9
 104
 1.8
 110
 2.1
 115
 2.1
 102
 2.0
Residential mortgage-nonguaranteed (1) 186
 20.2
 194
 21.8
 217
 25.1
 269
 20.3
 296
 20.3
Residential mortgage-government guaranteed 41
 0.6
 23
 0.6
 36
 0.8
 62
 1.0
 32
 0.9
Other lending subsidiaries 318
 10.5
 287
 9.9
 255
 9.6
 239
 9.0
 277
 8.8
PCI 44
 0.6
 61
 0.8
 64
 1.0
 114
 1.7
 128
 2.9
Unallocated —
 —
 —
 —
 —
 —
 —
 —
 80
 —
Total ALLL 1,489
 100.0% 1,460
 100.0% 1,474
 100.0% 1,732
 100.0% 2,018
 100.0%
RUFC 110
  
 90
  
 60
  
 89
  
 30
  
Total ACL $1,599




$1,550




$1,534




$1,821




$2,048
  
__________________
(1)During the first quarter of 2014, $8.3 billion in loans were transferred from direct retail lending to residential mortgage.
FDIC Loss Share Receivable/Payable and Assets Acquired from the FDIC
In connection with the Colonial acquisition, Branch Bank entered into loss sharing agreements with the FDIC that outlined the terms and conditions under which the FDIC would reimburse Branch Bank for a portion of the losses incurred on certain loans, investment securities and other assets. The loss sharing provisions of the commercial loss sharing agreement expired during 2014 with the exception of certain gain sharing that was to be effective through September 30, 2017. The loss sharing provisions of the single family loss sharing agreement were to be effective through August 31, 2019.


During the third quarter of 2016, Branch Bank entered into an early termination agreement with the FDIC that terminated the loss share agreements. Branch Bank made a payment of approximately $230 million to the FDIC as consideration for the early termination of the loss share agreements. The early termination eliminates the FDIC loss share receivable/payable associated with the indemnification by the FDIC. As a result of the settlement, BB&T recognized pre-tax expense of $18 million during the third quarter of 2016 (resulting in total expense of $142 million for fiscal 2016), and no future loss sharing or gain sharing will occur related to the Colonial acquisition.

Funding Activities

Deposits are the primary source of funds for lending and investing activities. Scheduled payments, as well as prepayments, and maturities from portfolios of loans and investment securities also provide a stable source of funds. FHLB advances, other secured borrowings, Federal funds purchased and other short-term borrowed funds, as well as long-term debt issued through the capital markets, all provide supplemental liquidity sources. Funding activities are monitored and governed through BB&T’s overall asset/liability management process, which is further discussed in the “Market"Market Risk Management”Management" section in “Management’s"Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein.Operations." The following section provides a brief description of the various sources of funds.

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Deposits

Deposits are attracted principally from clients within BB&T’s branch network through the offering of a broad selection of deposit instruments to individuals and businesses, including noninterest-bearing checking accounts, interest-bearing checking accounts, savings accounts, money market deposit accounts, CDs and IRAs. Deposit account terms vary with respect to the minimum balance required, the time period the funds must remain on deposit and service charge schedules. Interest rates paid on specific deposit types are determined based on (i) the interest rates offered by competitors, (ii) the anticipated amount and timing of funding needs, (iii) the availability and cost of alternative sources of funding, and (iv) anticipated future economic conditions and interest rates. Deposits are attractive sources of funding because of their stability and relative cost. Deposits are regarded as an important part of the overall client relationship and provide opportunities to cross-sell other BB&T services.

Total deposits were $129.0$160.2 billion at December 31, 2014,2016, an increase of $1.6$11.1 billion compared to year-end 2013.2015. This increase was driven by acquisition activity and organic growth. Noninterest-bearing deposits totaled $38.8$50.7 billion at December 31, 2014,2016, an increase of $3.8$5.0 billion from December 31, 2013.2015. The majority of the increase in noninterest-bearing deposits was broad based in nature, with increases in deposits from personal,attributable to business and public funds clients. During 2014, interestpersonal deposits, which grew $3.8 billion (12.7%) and $1.3 billion (11.0%), respectively.
Interest checking increased $1.4$4.9 billion and money market and savings increased $2.0$4.4 billion during 2016, while time deposits and IRAs decreased $5.7 billion.

$3.2 billion during 2016.

For the year ended December 31, 2014,2016, total deposits averaged $129.1$157.5 billion, an increase of $522 million$19.0 billion compared to 2013.2015, primarily due to the acquisitions previously discussed. The cost of interest-bearing deposits was 0.26%0.23% for 2014,2016, compared to 0.32%0.24% for 2013.

2015.

The following table presents the composition of average deposits for the last five quarters:

 Table 28 
 Composition of Average Deposits 
                  
   For the Three Months Ended 
   12/31/14 9/30/14 6/30/14 3/31/14 12/31/13 
                  
   (Dollars in millions) 
 Noninterest-bearing deposits$ 39,130  $ 38,103  $ 36,634  $ 35,392  $ 35,347  
 Interest checking  19,308    18,588    18,406    18,615    18,969  
 Money market and savings  51,176    49,974    48,965    48,767    49,298  
 Time deposits and IRAs  20,041    23,304    25,010    21,935    21,580  
 Foreign office deposits - interest-bearing  660    639    584    1,009    712  
  Total average deposits$ 130,315  $ 130,608  $ 129,599  $ 125,718  $ 125,906  

Table 22
Quarterly Composition of Average Deposits
   
  For the Three Months Ended
  12/31/2016 9/30/2016 6/30/2016 3/31/2016 12/31/2015
  (Dollars in millions)
Noninterest-bearing deposits $51,421
 $50,559
 $48,801
 $46,203
 $45,824
Interest checking 28,634
 27,754
 28,376
 25,604
 24,157
Money market and savings 63,884
 64,335
 63,195
 60,424
 61,431
Time deposits 15,693
 15,818
 18,101
 16,884
 16,981
Foreign office deposits - interest-bearing 486
 1,037
 1,865
 752
 98
Total average deposits $160,118

$159,503

$160,338

$149,867

$148,491
Average deposits for the fourth quarter of 20142016 were $130.3$160.1 billion, a decrease of $293up $615 million or 0.9% annualized compared to the thirdprior quarter. The change in average deposits reflects improved mix, with

Average noninterest-bearing deposits up $1.0 billion, or 10.7% annualized, while interest-bearingincreased $862 million, primarily due to increases in commercial balances with smaller increases in public funds and personal balances.


Interest checking increased $880 million, primarily due to increases in personal and commercial balances.

Money market and savings decreased $451 million primarily due to commercial balances partially offset by increased personal balances.

Average time deposits decreased $125 million as decreases in IRAs and personal balances were down $1.3 billion, or 5.7% annualized. partially offset by higher commercial balances.

Average foreign office deposits decreased $551 million due to lower overall funding needs.

Noninterest-bearing deposits represented 30.0%32.1% of total average deposits for the fourth quarter, of 2014, compared to 29.2%31.7% for the prior quarter and 28.1% for the fourth quarter of 2013.

The growth in average noninterest-bearing deposits during the quarter includes an increase in average commercial accounts totaling $678 million and an increase in average public funds accounts totaling $325 million. The decline in interest-bearing accounts was driven by30.9% a $3.3 billion decline in time deposits and IRAs, partially offset by a $1.2 billion increase in money market and savings and a $720 million increase in interest checking.

year ago. The cost of interest-bearing deposits was 0.25%0.22% for the fourth quarter, of 2014, a decrease ofdown one basis point compared to the thirdprior quarter.

The following table provides information regarding the scheduled maturities of time deposits that are $100,000 and greater at December 31, 2014:

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Table 29
Scheduled Maturities of Time Deposits $100,000 and Greater
December 31, 2014
(Dollars in millions)
Three months or less$ 4,621 
Over three through six months 1,106 
Over six through twelve months 1,054 
Over twelve months 3,001 
Total$ 9,782 

Short-term

Table 23
Scheduled Maturities of Time Deposits $100,000 and Greater
  
 December 31, 2016
 (Dollars in millions)
Three months or less$1,545
Over three through six months558
Over six through twelve months1,160
Over twelve months2,131
Total$5,394

Short-Term Borrowings

BB&T also uses various types of short-term borrowings to meet funding needs. While deposits remain the primary source for funding loan originations, management uses short-term borrowings as a supplementary funding source for loan growth and other balance sheet management purposes. Short-term borrowings were 1.8%1.2% of total funding on average in 20142016 as compared to 2.5%1.6% in 2013. See Note 8 “Short-Term Borrowings” in the “Notes to Consolidated Financial Statements” herein for further disclosure.2015. The types of short-term borrowings that have been, or may be, used by the Company include Federal funds purchased, securities sold under repurchase agreements, master notes, commercial paper, short-term bank notes and short-term bank notes.FHLB advances. Short-term borrowings at the end of 20142016 were $3.7$1.4 billion, a decrease of $421 million, or 10.2%, compared to $3.6 billion at year-end 2013.2015. Average short-term borrowings totaled $3.4$2.6 billion during 20142016 compared to $4.5$3.2 billion last year, a decrease of 23.3%.year. The decrease in the average balance of short-term borrowings during 20142016 primarily reflects an increase in deposits and long-term debt as a funding sources.

source.

The following table summarizes certain information for the past three years with respect to short-term borrowings:

Table 30
Short-Term Borrowings
                   
       As Of / For The Year Ended December 31, 
       2014 2013 2012 
                   
       (Dollars in millions)  
 Securities Sold Under Agreements to Repurchase:            
  Maximum outstanding at any month-end during the year$ 1,073   $ 1,537   $ 813   
  Balance outstanding at end of year  317     463     514   
  Average outstanding during the year  526     662     651   
  Average interest rate during the year  0.20 %   0.25 %   0.30 % 
  Average interest rate at end of year  0.18     0.28     0.33   
                   
 Federal Funds Purchased and Short-Term Borrowed Funds:            
  Maximum outstanding at any month-end during the year$ 4,405   $ 4,722   $ 3,627   
  Balance outstanding at end of year  3,400     3,675     2,350   
  Average outstanding during the year  2,895     3,797     2,757   
  Average interest rate during the year  0.12 %   0.13 %   0.20 % 
  Average interest rate at end of year  0.08     0.09     0.19   

Long-term

Table 24
Short-Term Borrowings
   
  As Of / For The Year Ended December 31,
  2016 2015 2014
  (Dollars in millions)
Securities Sold Under Agreements to Repurchase:      
Maximum outstanding at any month-end during the year $2,265
 $1,327
 $1,073
Balance outstanding at end of year 970
 617
 317
Average outstanding during the year 1,600
 901
 526
Average interest rate during the year 0.37% 0.23% 0.20%
Average interest rate at end of year 0.52
 0.70
 0.18
       
Federal Funds Purchased and Short-Term Borrowed Funds:  
  
  
Maximum outstanding at any month-end during the year $3,003
 $4,041
 $4,405
Balance outstanding at end of year 436
 2,976
 3,400
Average outstanding during the year 954
 2,320
 2,895
Average interest rate during the year 0.30% 0.11% 0.12%
Average interest rate at end of year 0.71
 0.32
 0.08

Long-Term Debt

Long-term debt provides funding and, to a lesser extent, regulatory capital. During 2014,2016, long-term debt represented 12.0%10.4% of average total funding compared to 10.6%11.8% during 2013.2015. At December 31, 2014,2016, long-term debt totaled $23.3$22.0 billion, an increasea decrease of $1.8 billion compared to year-end 2013.2015. The increasedecrease in long-term debt reflects the issuancematurity and repayment of $2.6$5.8 billion of BB&T Corporation senior notes, $2.0 billion of Branch Bank senior notes and $850 million of Branch Bank subordinated notes,long-term debt, partially offset by the early extinguishmentnew issuances of $1.1 billion of FHLB debt and other payments and maturities.$3.9 billion. The average cost of long-term debt was 2.36%2.13% in 2014,2016, flat compared to 3.03% in 2013.2015. See Note 10 “Long-Term Debt”the "Long-Term Debt" note in the “Notes"Notes to Consolidated Financial Statements” hereinStatements" for further disclosure.

Exclusive of hedge basis adjustments,


FHLB advances represented 28.5%18.7% of total outstanding long-term debt at December 31, 2014,2016, compared to 38.5%24.1% at December 31, 2013.2015. Subsequent to year end, BB&T terminated $2.9 billion of higher-cost FHLB advances, are long-term funding sources that provide flexibility to structure the debtresulting in a manner that aids in the managementloss on early extinguishment of interest rate risk$392 million. The remainder of long-term debt is primarily issuances of senior and liquidity.

65
subordinated notes by BB&T and Branch Bank.
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Shareholders’ Equity

Shareholders’ equity totaled $24.4$29.9 billion at December 31, 2014,2016, an increase of $1.6$2.6 billion, or 7.1%9.5%, from year-end 2013.2015. Book value per common share at December 31, 20142016 was $30.16,$33.14, compared to $28.52$31.66 at December 31, 2013.

Shareholders’2015.

The change in shareholders' equity increasedreflects net income of $2.4 billion, net common stock issuances of $1.3 billion (primarily due to National Penn) and a preferred stock issuance for net income in excessproceeds of dividends declared of $1.4 billion and $313$450 million, of issuances of shares and other transactions in connection with equity-based compensation plans, the 401(k) plan and the dividend reinvestment plan. The net loss in AOCI increased $158 million, primarily due to a $323 million after-tax pension impact, partially offset by a $194$520 million after-tax net increase in the value of the AFS securities portfolio.

share repurchases and common and preferred dividends totaling $1.1 billion.

Tangible book value per common share, which is a non-GAAP measure, at December 31, 20142016 was $19.93$20.18 compared to $18.08$19.82 at December 31, 2013. As of December 31, 2014, measures of tangible capital were not required by the regulators and, therefore, were considered non-GAAP measures.2015. Refer to the section titled “Capital” herein"Capital" for a discussion of how BB&T calculates and uses these measures in the evaluation of the Company.

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.

BB&T has established a risk management framework based on a “three"three lines of defense”defense" model:

·First Line of Defense: Risk management begins with the business units and corporate support groups, the point at which risk is originated and where risks must be managed. Business unit managers in the first line identify, assess, control and report their group’s risk profile compared to its approved risk limits.

·Second Line of Defense: The RMO provides independent oversight and guidance of risk-taking across the enterprise. The RMO aggregates, integrates, and correlates risk information into a holistic picture of the corporation’s risk profile and concentrations. The RMO establishes policies and limits and reports sources and amounts of risk to Executive Management and the Board of Directors.

·Third Line of Defense: Audit Services (BB&T’s internal audit function) evaluates the design and effectiveness of the risk management framework and its results. Results are reported to Executive Management and the Board Of Directors according to Audit Services Policy.

66
First Line of Defense: Risk management begins with the BUs, the point at which risk is originated and where risks must be managed. Business unit managers in the first line identify, assess, control and report their group’s risk profile compared to its approved risk limits.


Second Line of Defense: The RMO provides independent oversight and guidance of risk-taking across the enterprise. The RMO aggregates, integrates, and correlates risk information into a holistic picture of the corporation’s risk profile and concentrations. The RMO establishes policies and limits and reports sources and amounts of risk to Executive Management and the Board of Directors.

Third Line of Defense: Audit Services (BB&T’s internal audit function) evaluates the design and effectiveness of the risk management framework and its results. Results are reported to Executive Management and the Board of Directors according to Audit Services Policy.

The following chart depicts the three lines of defense model:
Table of Contents

The following chart depicts the three lines of defense model:
Risk CommitteesBoard of DirectorsExecutive Management
   
1st Line of Defense2nd Line of Defense3rd Line of Defense
Business UnitsRisk FunctionsAudit Services
   
Chief Risk Officer

The CRO leads the RMO, which designs, organizes and manages BB&T’s risk management framework. The RMO is responsible for ensuring effective risk management oversight, measurement, monitoring, reporting and consistency. The CRO has direct access to the Board of Directors and Executive Management. The CRO is responsible for identifying and communicating in a timely manner to the CEO and the Board of Directors meaningful risks and significant instances when the RMO’s assessment of risk differs from that of a business unit,BU, significant instances when a business unitBU is not adhering to the risk governance framework, and BB&T’s risk profile in relation to its risk appetite on at least a quarterly basis. In the event that the CRO and CEO’s assessment of risk management were to differ or if the CEO didwere to not adhere to the risk management framework, the CRO would have the responsibility to report such matters to the Board of Directors.

The Executive Management-led enterprise risk committees provide oversight of the first and second lines of defense and communicate risk appetite and values to the RMO. The CRO and the enterprise risk committees approve policies, set risk limits and tolerances and monitor results.

The RMC, CRMC, ORMC, CROC and the MRLCC are the enterprise risk committees and provide oversight of the risks as described in the common risk language. Executive Management members participate in all five committees.

The risk management framework is composed of specialized risk functions focused on specific types of risk. The MRLCC, CRMC, CROC and ORMC provide oversight of market, liquidity, capital, credit, compliance, and operational risk while RMC provides a fully integrated view of all material risks across the company. The RMC provides oversight of all risks and its purpose is to review BB&T’s aggregate risk exposure, evaluate risk appetite, and evaluate risks not reviewed by other risk committees.

The RMC is responsible for taking a broad view of risk, incorporating information from all risk functions. This combination of broad and specific focus provides the most effective framework for the management of risk. The RMC is chaired by the CRO and its membership includes all members of Executive Management, the General Auditor (ex officio) and senior leaders from Financial Management, the RMO and other areas.


The principal types of inherent risk include compliance, credit, liquidity, market, operational, reputation and strategic risks.


Compliance risk

Compliance risk is the risk to current or anticipated earnings or capital arising from violations of laws, rules or regulations, or from non-conformance with prescribed practices, internal policies and procedures or ethical standards. This risk exposes BB&T to fines, civil money penalties, payment of damages and the voiding of contracts. Compliance risk can result in diminished reputation, reduced franchise or enterprise value, limited business opportunities and lessened expansion potential.


Credit risk

Credit risk is the risk to current or anticipated earnings or capital arising from the default, inability or unwillingness of a borrower, obligor, or counterparty to meet the terms of any financial obligation with BB&T or otherwise perform as agreed. Credit risk exists in all activities where success depends on the performance of a borrower, obligor, or counterparty. Credit risk arises when BB&T funds are extended, committed, invested, or otherwise exposed through actual or implied contractual agreements, whether on or off balance sheet. Credit risk also occurs when the credit quality of an issuer whose securities or other instruments the bank holds deteriorates.

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BB&T has established the following general practices to manage credit risk:

·limiting the amount of credit that individual lenders may extend to a borrower;

·establishing a process for credit approval accountability;

·careful initial underwriting and analysis of borrower, transaction, market and collateral risks;

·ongoing servicing and monitoring of individual loans and lending relationships;

·continuous monitoring of the portfolio, market dynamics and the economy; and

·periodically reevaluating the bank’s strategy and overall exposure as economic, market and other relevant conditions change.

limiting the amount of credit that individual lenders may extend to a borrower;

establishing a process for credit approval accountability;

careful initial underwriting and analysis of borrower, transaction, market and collateral risks;

ongoing servicing and monitoring of individual loans and lending relationships;

continuous monitoring of the portfolio, market dynamics and the economy; and

periodically reevaluating the bank’s strategy and overall exposure as economic, market and other relevant conditions change.

The following discussion presents the principal types of lending conducted by BB&T and describes the underwriting procedures and overall risk management of BB&T’s lending function.

Underwriting Approach

The loan portfolio is a primary source of profitability and risk, therefore, proper loan underwriting is critical to BB&T’s long-term financial success. BB&T’s underwriting approach is designed to define acceptable combinations of specific risk-mitigating features that ensure credit relationships conform to BB&T’s risk philosophy. Provided below is a summary of the most significant underwriting criteria used to evaluate new loans and loan renewals:

·Cash flow and debt service coverage—cash flow adequacy is a necessary condition of creditworthiness, meaning that loans must either be clearly supported by a borrower’s cash flow or, if not, must be justified by secondary repayment sources.

·Secondary sources of repayment—alternative repayment funds are a significant risk-mitigating factor as long as they are liquid, can be easily accessed and provide adequate resources to supplement the primary cash flow source.

·Value of any underlying collateral—loans are generally secured by the asset being financed. Because an analysis of the primary and secondary sources of repayment is the most important factor, collateral, unless it is liquid, does not justify loans that cannot be serviced by the borrower’s normal cash flows.

·Overall creditworthiness of the customer, taking into account the customer’s relationships, both past and current, with BB&T and other lenders—BB&T’s success depends on building lasting and mutually beneficial relationships with clients, which involves assessing their financial position and background.

·Level of equity invested in the transaction—in general, borrowers are required to contribute or invest a portion of their own funds prior to any loan advances.

Cash flow and debt service coverage—cash flow adequacy is a necessary condition of creditworthiness, meaning that loans must either be clearly supported by a borrower’s cash flow or, if not, must be justified by secondary repayment sources.

Secondary sources of repayment—alternative repayment funds are a significant risk-mitigating factor as long as they are liquid, can be easily accessed and provide adequate resources to supplement the primary cash flow source.

Value of any underlying collateral—loans are generally secured by the asset being financed. Because an analysis of the primary and secondary sources of repayment is the most important factor, collateral, unless it is liquid, does not justify loans that cannot be serviced by the borrower’s normal cash flows.

Overall creditworthiness of the customer, taking into account the customer’s relationships, both past and current, with BB&T and other lenders—BB&T’s success depends on building lasting and mutually beneficial relationships with clients, which involves assessing their financial position and background.

Level of equity invested in the transaction—in general, borrowers are required to contribute or invest a portion of their own funds prior to any loan advances.

Commercial Loan and Lease Portfolio

The commercial loan and lease portfolio represents the largest category of the Company’s total loan portfolio. BB&T’s commercial lending program is generally targeted to serve small-to-middle market businesses with sales of $250 million or less. In addition, BB&T’s Corporate Banking Group provides lending solutions to large corporate clients. Traditionally, lending to small and mid-sized businesses has been among BB&T’s strongest market segments.


Commercial and small business loans are primarily originated through BB&T’s Community Bank. In accordance with the Company’s lending policy, each loan undergoes a detailed underwriting process, which incorporates BB&T’s underwriting approach, procedures and evaluations described above. Commercial loans are typically priced with an interest rate tied to market indices, such as the prime rate or LIBOR. Commercial loans are individually monitored and reviewed for any possible deterioration in the ability of the client to repay the loan. Approximately 89%87.6% of BB&T’s commercial loans are secured by real estate, business equipment, inventories and other types of collateral.

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Direct Retail Loan Portfolio

The direct retail loan portfolio primarily consists of a wide variety of loan products offered through BB&T’s branch network. Various types of secured and unsecured loans are marketed to qualifying existing clients and to other creditworthy candidates in BB&T’s market area. The vast majority of direct retail loans are revolving home equity lines of credit secured by first or second liens on residential real estate and include both closed-end home equity loans and revolving home equity lines of credit.estate. Direct retail loans are subject to the same rigorous lending policies and procedures as described above for commercial loans and are underwritten with note amounts and credit limits that ensure consistency with the Company’s risk philosophy.

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.

Sales Finance Loan Portfolio

The sales finance category primarily includes secured indirect installment loans to consumers for the purchase of new and used automobiles, boats and recreational vehicles. Such loans are originated through approved franchised and independent dealers throughout the BB&T market area. These loans are relatively homogenoushomogeneous and no single loan is individually significant in terms of its size and potential risk of loss. Sales finance loans are subject to the same rigorous lending policies and procedures as described above for commercial loans and are underwritten with note amounts and credit limits that ensure consistency with the Company’s risk philosophy. In addition to its normal underwriting due diligence, BB&T uses application systems and “scoring systems”"scoring systems" to help underwrite and manage the credit risk in its sales finance portfolio. Also included in the sales finance category are commercial lines, serviced by the Dealer Finance Department, to finance dealer wholesale inventory (“Floor Plan Lines”) for resale to consumers. Floor Plan Lines are underwritten by commercial loan officers in compliance with the same rigorous lending policies described above for commercial loans. In addition, Floor Plan Lines are subject to intensive monitoring and oversight to ensure quality and to mitigate risk, including from fraud.

Revolving Credit Loan Portfolio

The revolving credit portfolio consists of the outstanding balances on credit cards and BB&T’s checking account overdraft protection product, Constant Credit. BB&T markets credit cards to its existing banking client base and does not solicit cardholders through nationwide programs or other forms of mass marketing. Such balances are generally unsecured and actively managed.

Residential Mortgage Loan Portfolio

Branch Bank offers various types of fixed- and adjustable-rate loans for the purpose of constructing, purchasing or refinancing residential properties. BB&T primarily originates conforming mortgage loans and higher quality jumbo and construction-to-permanent loans for owner-occupied properties. Conforming loans are loans that are underwritten in accordance with the underwriting standards set forth by FNMA and FHLMC. They are generally collateralized by one-to-four-family residential real estate, typically have loan-to-collateral value ratios of 80% or less at origination, and are made to borrowers in good credit standing.

Risks associated with the mortgage lending function include interest rate risk, which is mitigated through the sale of a substantial portion of conforming fixed-rate loans in the secondary mortgage market, and an effective MSR hedging process. Borrower risk is lessened through rigorous underwriting procedures and mortgage insurance. The right to service the loans and receive servicing income is generally retained when conforming loans are sold. Management believes that the retention of mortgage servicing is a relationship driver in retail banking and a part of management’s strategy to establish profitable long-term customer relationships and offer high quality client service. BB&T also purchases residential mortgage loans from correspondent originators. The loans purchased from third-party originators are subject to the same underwriting and risk-management criteria as loans originated internally.


Other Lending Subsidiaries Portfolio

BB&T’s other lending subsidiaries portfolio consists of loans originated through six LOBsBUs that provide specialty finance alternatives to consumers and businesses including: dealer-based financing of equipment for small businesses and consumers, commercial equipment leasing and finance, insurance premium finance, indirect nonprime automobile finance, and full-service commercial mortgage banking. BB&T offers these services to bank clients as well as nonbank clients within and outside BB&T’s primary geographic market area.

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BB&T’s other lending subsidiaries adhere to the same overall underwriting approach as the commercial and consumer lending portfolio and also utilize automated credit scoring to assist with underwriting credit risk. The majority of these loans are relatively homogenoushomogeneous and no single loan is individually significant in terms of its size and potential risk of loss. The majority of the loans are secured by real estate, automobiles, equipment or unearned insurance premiums. As of December 31, 2014, included in2016, the other lending subsidiaries portfolio areincludes loans to nonprime borrowers of approximately $3.1 billion, or 2.5% of the total BB&T loan and lease portfolio.

Acquired from FDIC

BB&T’s loan portfolio$3.4 billion.


PCI
The PCI balance includes $1.2 billion of loans acquired from the FDIC. This balance includes $654 million of loans that are covered by loss sharing agreements and $561 million ofwith credit deterioration subsequent to origination as well as loans that were formerly covered by loss sharing agreements. Refer to Note 4 “Loansthe "Loans and ACL”ACL" note in the “Notes"Notes to Consolidated Financial Statements” and to “Acquired from FDIC and FDIC Loss Share Receivable/Payable”section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations”Statements" in this report for additional disclosures related to loans acquired from the FDIC.

information.

Liquidity risk

Liquidity risk is the risk to current or anticipated earnings or capital that BB&T will be unable to meet its obligations as they come due because of an inability to liquidate assets or obtain adequate funding (funding liquidity risk) or that it cannot easily unwind or offset specific exposures without significantly lowering market prices because of inadequate market depth or market disruptions (market liquidity risk).

Market risk

Market risk is the risk to current or anticipated earnings or capital arising from changes in the market value of portfolios, securities, or other financial instruments. Market risk results from changes in the level, volatility or correlations among financial market rates or prices, including interest rates, foreign exchange rates, equity prices, commodity prices or other relevant rates or prices.

Interest rate risk results from differences between the timing of rate changes and the timing of cash flows (re-pricing risk); from changing rate relationships among different yield curves affecting bank activities (basis risk); from changing rate relationships across the spectrum of maturities (yield curve risk); and from interest-related options embedded in bank products (options risk).

For additional information concerning BB&T’s management of market risk, see the “Market"Market Risk Management”Management" section of “Management’s"Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein.

Operations."

Operational risk

Operational risk is the risk to current or anticipated earnings or capital arising from inadequate or failed internal processes, people and systems or from external events. This definition includes legal risk, which is the risk of loss arising from defective transactions, litigation or claims made, or the failure to adequately protect company-owned assets.

Cybersecurity

In recent years, cybersecurity has gained prominence within the financial services industry due to increases in the quantity and sophistication of cyber attacks, which include significant distributed denial-of-service and credential validation attacks, malicious code and viruses and attempts to breach the security of systems, which, in certain instances, have resulted in unauthorized access to customer account data.


BB&T has a number of complex information systems used for a variety of functions by customers, employees and vendors. In addition, third parties with which BB&T does business or that facilitate business activities (e.g., vendors, exchanges, clearing houses, central depositories and financial intermediaries) could also be sources of cybersecurity risk to BB&T, including with respect to breakdowns or failures of their systems, misconduct by the employees of such parties, or cyber attacks which could affect their ability to deliver a product or service to BB&T.

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As a FHC, BB&T must adhere to the security requirements and expectations of the applicable regulatory agencies, which include requirements related to data privacy, systems availability and business continuity planning, among others. The regulatory agencies have established guidelines for the responsibilities of the boardBoard of directorsDirectors and senior management, which include establishing policy, appointing and training personnel, implementing review and testing functions and ensuring an appropriate frequency of updates.


The primary responsibility for cybersecurity at BB&T lies with the Risk Committee of the Board of Directors, which has delegated the day-to-day operations to management via the RMC, ORMC and EITSC. The EITSC serves as the primary team responsible for monitoring and reporting on cybersecurity risks. The EITSC, which is led by the Chief Information Officer, reportsprovides a bi-monthly report on cybersecurity to executive management and provides other periodic cybersecurity reporting to the RMC and ORMC once a monththe ORMC. In addition, the Chief Information Officer and also providesChief Information Security Officer provide a quarterly Cyber Security Update to the Risk Committee or the full Board of Directors.Directors on a rotating basis. Annually, the EITSC provides a formal IT risk assessment and Information Security reports to the Risk Committee.

As a complement to the overall cybersecurity infrastructure, BB&T utilizes a number of internal training methods, both formally through mandatory courses and informally through written communications and other updates. Internal policies and procedures have been implemented to encourage the reporting of potential phishing attacks or other security risks. BB&T also uses third party services as part of its cybersecurity framework, and any such third parties are required to comply with BB&T’s policies regarding information security and confidentiality. BB&T also uses third party groups to assess and supplement the Company’s cybersecurity needs.

These cyber attacks have not, to date, resulted in any material disruption to BB&T’s operations or harm to its customers and have not had a material adverse effect on BB&T’s results of operations; however, there can be no assurance that a sophisticated cyber attack can be detected or thwarted.


Model Risk Management
Model risk is the risk to current or anticipated earnings or capital from decisions based on incorrect or misused model outputs. BB&T uses models for many purposes, including the valuation of financial positions and the measurement of risk. Valuation models are used to value certain financial instruments for which quoted prices may not be readily available. Valuation models are also used as inputs for VaR, regulatory capital, stress testing and the ACL. Models are owned by the applicable BUs, who are responsible for the development, implementation and use of their models. Oversight of these functions is performed by the MRMD, which is a component of the RMO. Once models have been approved, model owners are responsible for the maintenance of an appropriate operating environment and must monitor and evaluate the performance of the models on a recurring basis. Models are updated in response to changes in portfolio composition, industry and economic conditions, technological capabilities and other developments.

The MRMD utilizes internal validation analysts and managers with skill sets in predictive modeling to perform detailed reviews of model development, implementation and conceptual soundness. On certain occasions, the MRMD will also engage external parties to assist with validation efforts. The MRMD maintains documented quality assurance procedures that are used to confirm that validation analysts have completed the necessary field work in an auditable and complete fashion. The MRMD tracks issues that have been identified by validation analysts and engages with model owners to ensure their timely remediation. The MRMD presents model limitations and risks to management and the Board of Directors via model validation reports and regular meetings with the Model Risk Committee and the ORMC.

Reputation risk

Reputation risk is the risk to current or anticipated earnings, capital, enterprise value, the BB&T brand, and public confidence arising from negative publicity or public opinion, whether real or perceived, regarding BB&T’s business practices, products, services, transactions, or other activities undertaken by BB&T, its representatives, or its partners. A negative reputation may impair BB&T’s relationship with clients, associates, communities or shareholders, and it is often a residual risk that arises when other risks are not managed properly.


Strategic risk

Strategic risk is the risk to current or anticipated earnings, capital, enterprise value and the achievement of BB&T’s vision, mission, purpose and business objectives consistent with its values that arises from BB&T’s business strategy or potentially adverse business decisions, improper or ineffective implementation of business decisions or lack of responsiveness to changes in the banking industry and operating environment. Strategic risk is a function of BB&T’s strategic goals, business strategies, resources and quality of implementation. The responsibility for managing this risk rests with the Board of Directors, Executive Management and the Senior Leadership Team.

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 LOBs.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.

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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,review and adjustment, and are adjustedmodified 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 December 31, 2014,2016, BB&T had derivative financial instruments outstanding with notional amounts totaling $72.3$75.3 billion, with a net fair value loss of a gain of $109$181 million. See Note 19 “Derivativethe "Derivative Financial Instruments”Instruments" note in the “Notes"Notes to Consolidated Financial Statements” hereinStatements" 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 capitalassets and liabilities 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.

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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 31
Interest Sensitivity Simulation Analysis
                     
    Interest Rate Scenario Annualized Hypothetical Percentage 
    Linear Prime Rate  Change in Net Interest Income  
    Change in December 31,  December 31,  
    Prime Rate  2014  2013   2014  2013  
    Up 200 bps  5.25 %  5.25 %   2.06 %  2.27 %  
    Up 100   4.25    4.25     1.46    1.35    
    No Change   3.25    3.25     ―      ―      
    Down 25   3.00    3.00     0.33    0.39    

 Table 25 
 Interest Sensitivity Simulation Analysis 
     
 Interest Rate Scenario Annualized Hypothetical Percentage Change in Net Interest Income 
    Prime Rate  
 Linear Change in Prime Rate December 31, December 31, 
  2016 2015 2016 2015 
 Up 200bps 5.75% 5.50% 3.13 % 2.23 % 
 Up 100  4.75
 4.50
 2.14
 1.58
 
 No Change  3.75
 3.50
 —
 —
 
 Down 25  3.50
 3.25
 (0.93) (0.69) 
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.

Maximum negative impact on net interest income of 2% for the next 12 months assuming a 25 basis point change in interest rates each month for four months followed by a flat interest rate scenario for the remaining eight month period.

Maximum negative impact on net interest income of 4% for the next 12 months assuming a 25 basis point change in interest rates each month for eight months followed by a flat interest rate scenario for the remaining four month period.


If a parallel rate change of 200 basis points cannot be modeled due to a low level of rates, a proportional limit applies. 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,applies, and the maximum negative impact on net interest income is adjusted on a proportional basis. Regardless of the proportional limit, the negative risk exposure limit will be the greater of 1%the 4% or the proportional limit.

Management has also established a maximum negative impact on net interest income of 4% for an immediate 100 basis points parallel change in rates and 8% for an immediate 200 basis points parallel change in rates. As noted above, management currently only models a negative 25 basis point decline, and the maximum negative impact on net interest income is adjusted on a proportional basis. Regardless of the proportional limit, the negative risk exposure limit will be the greater of 4% or the proportional limit. These “interest"interest rate shock”shock" limits are designed to create an outer band of acceptable risk based upon a significant and immediate change in rates.

Management also considers potential negative interest rate scenarios, which implies that a depositor would pay a premium for a financial institution to hold funds on deposit. In such a scenario, some depositors may choose to withdraw their deposits in lieu of paying an interest rate to BB&T to hold such deposits. As a result, management considers potential pricing and structure changes, such as the movement to a primarily fee-based deposit system. Negative rates would also diminish the spreads on loans and securities. As a result, management considers interest rate floors or rate index floors in loans to mitigate this risk. BB&T purchases both fixed and variable rate securities. The fixed rate securities would be beneficial in a negative interest rate environment.
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%60% to its managed rate depositsnon-maturity interest bearing deposit accounts for determining its interest rate sensitivity.  Managed rate deposits are high beta, premium money market andNon-maturity interest bearing deposit accounts include interest checking accounts, which attract significant client funds when neededsavings accounts, and money market accounts that do not have a contractual maturity.  Due to support balance sheet growth.current market conditions the actual deposit beta on non-maturity interest bearing deposits has been less than 15%; however, BB&T expects the beta to increase as rates continue to rise.  BB&T regularly conducts sensitivity on other key variables to determine the impact they could have on the interest rate risk position.  This allows BB&T to evaluate the likely impact on its balance sheet management strategies due to a more extreme variation in a key assumption than expected.

The following table shows the effect that the loss of demand deposits and an associated increase in managed rate deposits would have on BB&T’s interest-rate sensitivity position. For purposes of this analysis, BB&T modeled the incremental beta for the replacement of the lost demand deposits at 100%.

 Table 26 
 Deposit Mix Sensitivity Analysis 
       
 Increase in Rates Base Scenario at December 31, 2016 (1) Results Assuming a Decrease in Noninterest-Bearing Demand Deposits 
   $1 Billion $5 Billion 
 Up 200bps 3.13% 2.92% 2.07% 
 Up 100  2.14
 2.01
 1.49
 
__________________
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(1) The base scenario is equal to the annualized hypothetical percentage change in net interest income at December 31, 2016 as presented in the preceding table.

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Table 32
Deposit Mix Sensitivity Analysis
                 
          Results Assuming a Decrease in 
    Increase in  Base Scenario Noninterest Bearing Demand Deposits 
    Rates  at December 31, 2014 (1) $1 Billion $5 Billion 
    Up 200bps   2.06 %  1.79 %  0.74 % 
    Up 100    1.46    1.29    0.64   
                 
                 
(1)The base scenario is equal to the annualized hypothetical percentage change in net interest income at December 31, 2014 as presented in the preceding table.

If rates increased 200 basis points, BB&T could absorb the loss of $7.5$14.8 billion, or 19.2%29.3%, of noninterest bearingnoninterest-bearing demand deposits and replace them with managed rate deposits with a beta of 100% before becoming neutral to interest rate changes.


The following table shows the effect that the indicated changes in interest rates would have on EVE. Key assumptions in the preparation of the table include prepayment speeds of mortgage-related and other assets, cash flows and maturities of derivative financial instruments, loan volumes and pricing and deposit sensitivity. 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 33
EVE Simulation Analysis
                   
             Hypothetical Percentage 
       EVE/Assets Change in EVE 
    Change in  December 31,  December 31, 
    Rates  2014  2013  2014  2013 
    Up 200bps  10.9 %  10.3 %  (1.5)%  (4.5)% 
    Up 100   11.1    10.6    0.6    (1.4)  
    No Change   11.1    10.8    ―      ―     
    Down 25   10.9    10.8    (1.0)   (0.4)  

 Table 27 
 EVE Simulation Analysis 
         
     EVE/Assets Hypothetical Percentage Change in EVE 
   December 31, December 31, 
 Change in Rates 2016 2015 2016 2015 
 Up 200 bps 11.6% 10.9% 1.3 % 0.6 % 
 Up 100   11.7
 11.0
 1.8
 1.6
 
 No Change   11.5
 10.8
 —
 —
 
 Down 25   11.3
 10.7
 (1.1) (1.1) 
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.BUs. 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 years ended December 31, 20142016 and 20132015 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 onwww.bbt.comBBT.com.


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.

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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-sensitivenational markets 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.Bank and BB&T. 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 thatBB&T follows the FRB's enhanced prudential standards for purposes of determining the liquid asset buffer would be a minimumbuffer. BB&T’s policy is to use the greater of 5% or a range of total assets, but intends to maintain the ratio well in excess of this level.projected net cash outflows over a 30 day period. As of December 31, 20142016 and December 31, 2013,2015, BB&T’s liquid asset buffer was 13.6%12.6% and 14.6%13.5%, respectively, of total assets.

During 2013, the FDIC, FRB and OCC released

BB&T is considered to be 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”"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.billion or if it were to be considered internationally active. BB&T implementedproduces LCR calculations to effectively manage the position of High-Quality Liquid Assets and the 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,optimize BB&T’s&T's liquidity position. BB&T's LCR was approximately 130%121% at December 31, 2014,2016, compared to the regulatory minimum for such entities of 90%, which puts BB&T in full compliance with the rule. The regulatory minimum will increaseincreased to 100% on January 1, 2017. The final rule requires each financial institutionLCR can experience volatility due to issues like maturing debt rolling into the 30 day measurement period, or client inflows and outflows.  The daily change in BB&T’s LCR averaged less than 2% during 2016 with a maximum change of approximately 12%.

As noted above, BB&T is currently subject to the modified LCR requirement. BB&T routinely evaluates the impact of becoming subject to the full LCR requirement. This includes an evaluation of the changes to the balance sheet and investment strategy that would be necessary to comply with the requirement. Management does not currently expect the required changes to have a methodmaterial impact on BB&T’s financial condition or results of operations.


On April 27, 2016, the OCC, the FRB and the FDIC released a notice of proposed rulemaking for determining “operational deposits” as defined by the rule. The number above includes an estimateUS version of operational deposits; however,the net stable funding ratio. Under the proposal, BB&T continueswill be a "modified NSFR" holding company. BB&T would be subject to evaluatefull NSFR requirements if it has $250 billion or more in assets or $10 billion or more in total on-balance sheet foreign exposure. BB&T is evaluating the information in the release but does not currently expect a material impact on its method to identify and measure operational deposits.

results of operations or financial condition. The proposed rule would become effective January 1, 2018.


Parent Company

The purpose of the Parent Company is to serve as the primary source of capital financing vehicle for the operating subsidiaries. Thesubsidiaries, with assets of the Parent Company primarily consistconsisting 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.

The primary source of funds used for Parent Company cash requirements was dividends received from subsidiaries. See the "Parent Company Financial Statements" note for additional information regarding dividends from subsidiaries which totaled $1.7 billion during 2014. In addition, the Parent Company issued $2.6 billion of senior notes and repaid $1.5 billion of maturing long-term debt. Funds raised through master note agreements with commercial clients are placed in a note receivable at Branch Bank primarily for its use in meeting short-term funding needs and, to a lesser extent, to support the short-term temporary cash needs of the Parent Company. At December 31, 2013, master note balances totaled $24 million.

debt transactions.

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 December 31, 20142016 and December 31, 2013,2015, the Parent Company had 3125 months and 2736 months, respectively, of cash on hand to satisfy projected contractual cash outflows as described above.

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and 19 and 24 months, respectively, taking into account common stock dividends.
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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 December 31, 2014,2016, BB&T has approximately $68.4$77.3 billion of secured borrowing capacity, which represents approximately 686%11.7 times the amount of one year wholesale funding maturities.

The ability to raise funding at competitive prices is affected by the rating agencies’ views of the Parent Company’s and Branch Bank’s credit quality, liquidity, capital and earnings. Management meets with the rating agencies on a regular basis to discuss current outlooks. The ratings for BB&T and Branch Bank by the major rating agencies are detailed in the table below:



Table 3428
Credit Ratings of BB&T Corporation and Branch Bank
December 31, 20142016
        
 S&P Moody's S&PFitch Moody'sFitchDBRS
BB&T Corporation:       
Commercial PaperA-2 P-1N/A F1 R-1(low)
IssuerA- A2 A+ A(high)
LT/Senior debtA- A2 A+ A(high)
Subordinated debtBBB+ A3A2 A A
        
Branch Bank:       
Bank financial strengthN/A B-N/A a+ N/A
Long term depositsN/A A1Aa1 AA- AA(low)
LT/Senior unsecured bank notesA A1 A+ AA(low)
Other longLong term senior obligationsissuerA A1 A+ AA(low)
Other long term senior obligationsA N/AA+AA(low)
Other short term senior obligationsA-1 P-1N/A F1 R-1(middle)
Short term bank notesA-1 P-1 F1 R-1(middle)
Short term depositsN/A P-1 F1+ R-1(middle)
Subordinated bank notesA- A2 A A(high)
        
Ratings Outlook:       
Credit TrendStableNegative Stable Stable Stable

BB&T and Branch Bank have Contingency Funding Plans designed to ensure that liquidity sources are sufficient to meet their ongoing obligations and commitments, particularly in the event of a liquidity contraction. These plans are designed to examine and quantify the organization’s liquidity under various “stress”"stress" scenarios. Additionally, the plans provide a framework for management and other critical personnel to follow in the event of a liquidity contraction or in anticipation of such an event. The plans address authority for activation and decision making, liquidity options and the responsibilities of key departments in the event of a liquidity contraction. The liquidity options available to management could include seeking secured funding, asset sales, and under the most extreme scenarios, curtailing new loan originations.

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Management believes current sources of liquidity are adequate to meet BB&T’s current requirements and plans for continued growth. See Note 5 “Premisesthe "Premises and Equipment,” Note 10 “Long-Term Debt”" "Long-Term Debt" and Note 15 “Commitments"Commitments and Contingencies”Contingencies" notes in the “Notes"Notes to Consolidated Financial Statements”Statements" for additional information regarding outstanding balances of sources of liquidity and contractual commitments and obligations.

Contractual Obligations, Commitments, Contingent Liabilities, Off-Balance Sheet Arrangements and Related Party Transactions

The following table presents, as of December 31, 2014,2016, BB&T’s contractual obligations by payment date. The payment amounts represent those amounts contractually due to the recipient. The table excludes liabilities recorded where management cannot reasonably estimate the timing of any payments that may be required in connection with these liabilities. Further discussion of the nature of each obligation is included in Note 15 “Commitmentsthe "Commitments and Contingencies”Contingencies" note in the “Notes"Notes to Consolidated Financial Statements.”

Table 35
Contractual Obligations and Other Commitments
December 31, 2014
                     
        Less than 1 to 3 3 to 5 After 5 
      Total One Year Years Years Years 
��                    
      (Dollars in millions) 
 Long-term debt$ 23,307  $ 1,115  $ 9,491  $ 4,511  $ 8,190  
 Operating leases  1,464    224    391    297    552  
 Commitments to fund affordable housing investments  459    236    191    21    11  
 Private equity commitments (1)  217    58    112    45    2  
 Time deposits  19,049    11,199    7,013    837    ―    
 Contractual interest payments (2)  3,916    846    1,208    896    966  
 Purchase obligations (3)  267    120    105    32    10  
  Total contractual cash obligations$ 48,679  $ 13,798  $ 18,511  $ 6,639  $ 9,731  
                     
                     
 (1)Maturities are based on estimated payment dates. 
 (2)Includes accrued interest, future contractual interest obligations and the impact of hedges used to manage interest rate risk. Variable rate payments are based upon the rate in effect at December 31, 2014.
 (3)Includes purchase obligations for goods and services covered by noncancellable contracts.

The table above excludes the future cash payments associated with the nonqualified pension plans. Refer to Note 14 “Benefit Plans” for information related to future payments under these plans.

"


Table 29
Contractual Obligations and Other Commitments
December 31, 2016
           
  Total Less than 1 Year 1 to 3 Years 3 to 5 Years After 5 Years
  (Dollars in millions)
Long-term debt and capital leases $21,728
 $3,696
 $6,208
 $7,238
 $4,586
Operating leases 1,619
 263
 449
 333
 574
Commitments to fund affordable housing investments 738
 470
 233
 15
 20
Private equity and other investments commitments (1) 200
 49
 98
 41
 12
Time deposits 14,391
 7,929
 5,028
 1,411
 23
Contractual interest payments (2) 3,401
 725
 1,260
 745
 671
Purchase obligations (3) 968
 522
 356
 58
 32
Nonqualified benefit plan obligations (4) 1,204
 15
 33
 38
 1,118
Total contractual cash obligations $44,249
 $13,669
 $13,665
 $9,879
 $7,036
__________________
(1)Based on estimated payment dates.
(2)Includes accrued interest, future contractual interest obligations and the impact of hedges in a loss position. Other derivatives are excluded. Variable rate payments are based upon the rate in effect at December 31, 2016.
(3)Represents obligations to purchase goods or services that are enforceable and legally binding. Many of the purchase obligations have terms that are not fixed and determinable and are included in the table above based upon the estimated timing and amount of payment. In addition, certain of the purchase agreements contain clauses that would allow BB&T to cancel the agreement with specified notice; however, that impact is not included in the table above.
(4)Although technically unfunded plans, Rabbi Trusts and insurance policies on the lives of certain of the covered employees are available to finance future benefit plan payments.
BB&T’s commitments include investments in affordable housing and historic building rehabilitation projects throughout its market area and private equity funds. Refer to Note 1 “Summarythe "Summary of Significant Accounting Policies”Policies" note and to Note 15 “Commitmentsthe "Commitments and Contingencies”Contingencies" note in the “Notes"Notes to Consolidated Financial Statements”Statements" for further discussion of these commitments.

In addition, BB&T enters into derivative contracts to manage various financial risks. A derivative is a financial instrument that derives its cash flows, and therefore its value, by reference to an underlying instrument, index or referenced interest rate. Derivative contracts are carried at fair value on the Consolidated Balance Sheets with the fair value representing the net present value of expected future cash receipts or payments based on market interest rates as of the balance sheet date. Derivative contracts are written in amounts referred to as notional amounts, which only provide the basis for calculating payments between counterparties and are not a measure of financial risk. Therefore, the derivative liabilities recorded on the balance sheet as of December 31, 20142016 do not represent the amounts that may ultimately be paid under these contracts. Further discussion of derivative instruments is included in Note 1 “Summarythe "Summary of Significant Accounting Policies”Policies" note and Note 19 “Derivativethe "Derivative Financial Instruments”Instruments" note in the “Notes"Notes to Consolidated Financial Statements.”

"

In the ordinary course of business, BB&T indemnifies its officers and directors to the fullest extent permitted by law against liabilities arising from litigation. BB&T also issues standard representation and warranties in underwriting agreements, merger and acquisition agreements, loan sales, brokerage activities and other similar arrangements. Counterparties in many of these indemnifications provide similar indemnifications to BB&T. Although these agreements often do not specify limitations, BB&T does not believe that any payments related to these guarantees would materially change the financial condition or results of operations of BB&T.

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BB&T holds public funds in certain states that do not require 100% collateralization on public fund bank deposits. In these states, should the failure of another public fund depository institution result in a loss for the public entity, the resulting shortfall would have to be absorbed on a pro-rata basis by the remaining financial institutions holding public funds in that state.

As a member of the FHLB, BB&T is required to maintain a minimum investment in capital stock. The board of directors of the FHLB can increase the minimum investment requirements in the event it has concluded that additional capital is required to allow it to meet its own regulatory capital requirements. Any increase in the minimum investment requirements outside of specified ranges requires the approval of the Federal Housing Finance Agency. Because the extent of any obligation to increase BB&T’s investment in the FHLB depends entirely upon the occurrence of a future event, potential future payments to the FHLB are not determinable.



In the normal course of business, BB&T is also a party to financial instruments to meet the financing needs of clients and to mitigate exposure to interest rate risk. Such financial instruments include commitments to extend credit and certain contractual agreements, including standby letters of credit and financial guarantee arrangements. Further discussion of BB&T’s commitments is included in Note 15 “Commitmentsthe "Commitments and Contingencies”Contingencies" note and Note 18 “Fairthe "Fair Value Disclosures”Disclosures" note in the “Notes"Notes to Consolidated Financial Statements.”

Table 36
Mortgage Indemnification, Recourse and Repurchase Reserves Activity (1)
             
    Year Ended December 31, 
    2014 2013 2012 
             
 Balance, at beginning of period$ 72  $ 71  $ 35  
  Payments  (23)   (27)   (27) 
  Expense  45    28    63  
 Balance, at end of period$ 94  $ 72  $ 71  
             
             
(1)Excludes the FHA-insured mortgage loan reserve of $85 million established during the second quarter of 2014.

"

Table 30
Mortgage Indemnification, Recourse and Repurchase Reserves Activity (1)
   
  Year Ended December 31,
  2016 2015 2014
  (Dollars in millions)
Balance, at beginning of period $79
 $94
 $72
Payments (2) (5) (23)
Expense (37) (15) 45
Acquisitions —
 5
 —
Balance, at end of period $40
 $79
 $94
__________________
(1)Excludes the FHA-insured mortgage loan reserve of $85 million established during 2014 and settled in 2016.
Related Party Transactions

The Company may extend credit totransact with its officers, directors and directorsother related parties in the ordinary course of business. These loans are made undertransactions include substantially the same terms as comparable third-party lending arrangements and are in compliance with applicable banking regulations.

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,targets, which are above the regulatory “well capitalized”"well capitalized" levels. Management has implemented stressed capital ratio minimum guidelinestargets 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 guidelinestargets prompt a review of the planned capital actions included in BB&T’s capital plan.

Table 31
BB&T's Capital Targets
     
  Operating Stressed
CET1 to risk-weighted assets 8.5% 6.0%
Tier 1 capital to risk-weighted assets 10.0
 7.5
Total capital to risk-weighted assets 12.0
 9.5
Leverage ratio 8.0
 5.5
Tangible common equity ratio 6.0
 4.0

Table 32
Capital Requirements Under Basel III
               
  Minimum Capital Well-Capitalized Minimum Capital Plus Capital Conservation Buffer BB&T Target
    2016 2017 2018 2019 (1) 
CET1 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
 8.0
__________________
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(1)BB&T's goal is to maintain capital levels above the 2019 requirements.

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Table 37
BB&T's Internal Capital Guidelines Prior to Basel III
  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   
 Tier 1 Common Equity Ratio 8.5    6.0   

Payments of cash dividends and repurchases of common shares are the methods used to manage any excess capital generated. In addition, management closely monitors the Parent Company’s double leverage ratio (investments in subsidiaries as a percentage of shareholders’ equity). The active management of the subsidiaries’ equity capital, as described above, is the process used to manage this important driver of Parent Company liquidity and is a key element in the management of BB&T’s capital position.


Management intends to maintain capital at Branch Bank at levels that will result in classification as “well-capitalized”"well-capitalized" for regulatory purposes. Secondarily, it is management’s intent to maintain Branch Bank’s capital at levels that result in regulatory risk-based capital ratios that are generally comparable with peers of similar size, complexity and risk profile. If the capital levels of Branch Bank increase above these guidelines, excess capital may be transferred to the Parent Company in the form of special dividend payments, subject to regulatory and other operating considerations.

While nonrecurring events or management decisions may result in the Company temporarily falling below its operating minimum guidelines for one or more of these ratios, it is management’s intent through capital planning to return to these targeted operating minimums within a reasonable period of time. Such temporary decreases below the operating minimums shown above are not considered an infringement of BB&T’s overall capital policy, provided a return above the minimums is forecast to occur within a reasonable time period.

BB&T regularly performs stress testing on its capital levels and is required to periodically submit the company’s capital plans to the banking regulators. During March 2014, BB&T announced that theThe FRB did not object to the Company’s 2014 capital plan. The 20152016 capital plan, wasand the 2017 capital plan is expected to be submitted during January 2015.April 2017. Management’s capital deployment plan in order of preference is to focus on 1) organic growth, 2) dividends strategicand 3) acquisitions and/or share repurchases depending on opportunities in the marketplace and share repurchases.

our interest and ability to proceed with acquisitions.

Risk-based capital ratios, which include Tier 1 Capital, Total Capital and Tier 1 Common Equity, are calculated based on regulatory guidance related to the measurement of capital and risk-weighted assets.

BB&T’s Tier 1 common equity ratio was 10.6% at December 31, 2014 compared to 9.9% at December 31, 2013. The increase


Branch Bank's capital ratios are presented in regulatorythe following table:
Table 33
Capital Ratios - Branch Bank
 
  December 31,
  2016 2015
CET1 to risk-weighted assets 11.5% 11.3%
Tier 1 capital to risk-weighted assets 11.5
 11.3
Total capital to risk-weighted assets 13.6
 13.4
Leverage ratio 9.6
 9.3


BB&T's capital was primarily due to strong capital generation during 2014.

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ratios are presented in the following table:
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 Table 38 
 Capital Ratios 
             
     December 31, 
     2014 2013 
             
     (Dollars in millions, except per share data, shares in thousands) 
 Risk-based:        
  Tier 1  12.4 %   11.8 % 
  Total  14.9     14.3   
 Leverage capital  9.9     9.3   
             
 Non-GAAP capital measures (1)        
  Tangible common equity as a percentage of tangible assets  8.0 %   7.3 % 
  Tier 1 common equity as a percentage of risk-weighted assets  10.6     9.9   
  Tangible common equity per common share$ 19.93   $ 18.08   
             
 Calculations of tangible common equity, Tier 1 common equity and tangible assets (1):       
  Total shareholders' equity$ 24,426   $ 22,809   
  Less:        
   Preferred stock  2,603     2,603   
   Noncontrolling interests  88     50   
   Intangible assets  7,374     7,383   
  Tangible common equity  14,361     12,773   
  Add:        
   Regulatory adjustments  876     698   
  Tier 1 common equity (Basel I)$ 15,237   $ 13,471   
             
  Total assets$ 186,814   $ 183,010   
  Less:        
   Intangible assets  7,374     7,383   
  Tangible assets$ 179,440   $ 175,627   
             
 Total risk-weighted assets$ 143,675   $ 136,489   
 Common shares outstanding at end of period  720,698     706,620   
             
Table 34
Capital Ratios - BB&T Corporation
   
  December 31,
  2016 2015
  (Dollars in millions, except per share data, shares in thousands)
Risk-based:    
CET1 10.2% 10.3%
Tier 1 12.0
 11.8
Total 14.1
 14.3
Leverage capital 10.0
 9.8
     
Non-GAAP capital measures (1):  
  
Tangible common equity per common share $20.18
 $19.82
     
Calculations of tangible common equity (1):    
Total shareholders' equity $29,926
 $27,340
Less:    
Preferred stock 3,053
 2,603
Noncontrolling interests 45
 34
Intangible assets 10,492
 9,234
Tangible common equity $16,336
 $15,469
     
Risk-weighted assets $176,138
 $166,611
Common shares outstanding at end of period 809,475
 780,337
__________________
(1)Tangible common equity, Tier 1 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.

BB&T’s


The Company’s estimated common equity Tier 1CET1 ratio underusing the Basel III standardized approach on a fully phased-in basis was approximately 10.3%10.0% at December 31, 2014 based on management’s interpretation2016 and 2015.

During April 2016, BB&T's Board of Directors approved a $0.01 increase in the quarterly dividend. During July 2016, BB&T's Board of Directors approved an additional $0.02 increase in the quarterly dividend, which increased the amount of the rules adopted byquarterly dividend to $0.30.

The Board of Directors also authorized cumulative share buybacks of up to $640 million beginning during the FRB, which became effective onthird quarter of 2016. Pursuant to this authorization, the Company completed $160 million of share repurchases during the third quarter of 2016 and $160 million of share repurchases during the fourth quarter of 2016. The Board of Directors also approved an additional $200 million of share repurchases through an accelerated share repurchase program that began in December and resulted in the retirement of 3.4 million shares. The program concluded in January 1, 2015.2017 with approximately 910,000 additional shares being retired. The minimum required commonconclusion of the program in January does not impact capital as the full cost was charged to equity Tier 1in the fourth quarter. The total payout ratio includingwas 64.0% for the capital conservation buffer, will gradually increase from 4.5% on January 1, 2015 to 7.0% on January 1, 2019. See “Regulatory Considerations” for additional information regarding Basel III.

year ended December 31, 2016.


Table 35
Quarterly Financial Summary – Unaudited
     
  2016 2015
  Fourth Quarter Third Quarter Second Quarter First Quarter Fourth Quarter Third Quarter Second Quarter First Quarter
  (Dollars in millions, except per share data)
Consolidated Summary of Operations:                
Interest income $1,745
 $1,795
 $1,805
 $1,721
 $1,695
 $1,650
 $1,489
 $1,493
Interest expense 180
 185
 188
 192
 191
 186
 177
 181
Provision for credit losses 129
 148
 111
 184
 129
 103
 97
 99
Noninterest income 1,162
 1,164
 1,130
 1,016
 1,015
 988
 1,019
 997
Noninterest expense 1,668
 1,711
 1,797
 1,545
 1,597
 1,594
 1,653
 1,422
Provision for income taxes 287
 273
 252
 246
 251
 222
 80
 241
Net income 643

642
 587
 570
 542
 533
 501
 547
Noncontrolling interest 7
 —
 3
 6
 3
 4
 10
 22
Preferred stock dividends 44
 43
 43
 37
 37
 37
 37
 37
Net income available to common shareholders $592
 $599
 $541
 $527
 $502
 $492
 $454
 $488
Basic EPS $0.73
 $0.74
 $0.67
 $0.67
 $0.64
 $0.64
 $0.63
 $0.68
Diluted EPS $0.72
 $0.73
 $0.66
 $0.67
 $0.64
 $0.64
 $0.62
 $0.67
                 
Selected Average Balances:                
Assets $220,165
 $222,065
 $223,399
 $210,102
 $209,217
 $203,531
 $189,033
 $187,297
Securities, at amortized cost 44,881
 47,152
 48,510
 44,580
 43,468
 43,048
 40,727
 41,133
Loans and leases (1) 144,569
 143,689
 143,097
 135,628
 136,190
 132,499
 122,056
 120,235
Total earning assets 192,574
 193,909
 194,822
 183,612
 183,151
 178,464
 165,428
 163,367
Deposits 160,118
 159,503
 160,338
 149,867
 148,491
 143,837
 131,868
 129,531
Short-term borrowings 2,373
 2,128
 2,951
 2,771
 2,698
 3,572
 3,080
 3,539
Long-term debt 21,563
 23,428
 23,272
 22,907
 24,306
 23,394
 22,616
 23,043
Total interest-bearing liabilities 132,633
 134,500
 137,760
 129,342
 129,671
 126,650
 116,062
 116,412
Shareholders' equity 30,054
 29,916
 29,610
 27,826
 27,378
 26,612
 24,888
 24,566
__________________
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(1)Loans and leases are net of unearned income and include LHFS.

Table 39
Quarterly Financial Summary―Unaudited
                           
    2014 2013
    Fourth Third Second First Fourth Third Second First
    Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
                           
    (Dollars in millions, except per share data)
Consolidated Summary of Operations:                       
 Interest income$ 1,518  $ 1,541  $ 1,537  $ 1,546  $ 1,566  $ 1,639  $ 1,643  $ 1,659 
 Interest expense  183    192    194    199    204    222    228    237 
 Provision for credit losses  83    34    74    60    60    92    168    272 
 Securities gains (losses), net  ―      (5)   ―      2    5    -    23    23 
 Other noninterest income  1,004    941    933    909    980    905    1,023    978 
 Noninterest expense  1,411    1,556    1,551    1,403    1,456    1,471    1,496    1,414 
 Provision for income taxes (1)  236    134    173    217    243    450    221    481 
 Net income (1)  609    561    478    578    588    309    576    256 
 Noncontrolling interest  15    4    16    40    14    4    16    16 
 Preferred stock dividends  37    37    37    37    37    37    13    30 
 Net income available to common                       
  shareholders (1)$ 557  $ 520  $ 425  $ 501  $ 537  $ 268  $ 547  $ 210 
 Basic EPS (1)$ 0.77  $ 0.72  $ 0.59  $ 0.70  $ 0.76  $ 0.38  $ 0.78  $ 0.30 
 Diluted EPS (1)$ 0.76  $ 0.71  $ 0.58  $ 0.69  $ 0.75  $ 0.37  $ 0.77  $ 0.29 
                           
Selected Average Balances:                       
 Assets$ 186,441  $ 186,309  $ 185,065  $ 182,397  $ 179,534  $ 181,021  $ 182,508  $ 182,013 
 Securities, at amortized cost  40,817    40,566    40,656    40,117    37,022    36,547    36,719    36,801 
 Loans and leases (2)  119,912    120,471    118,510    116,372    117,001    118,265    117,852    116,981 
 Total earning assets  162,559    162,879    161,143    158,364    156,045    156,985    157,197    156,620 
 Deposits  130,315    130,608    129,599    125,718    125,906    127,948    129,983    130,437 
 Short-term borrowings  3,095    3,321    2,962    4,321    3,865    4,637    5,118    4,217 
 Long-term debt  22,139    22,069    22,206    22,432    20,756    19,447    18,287    18,690 
 Total interest-bearing liabilities  116,419    117,895    118,133    117,079    115,180    117,788    119,802    120,826 
 Shareholders' equity  24,619    24,187    23,876    23,264    22,305    22,139    21,789    21,315 
                           
                           
(1)Results for the first and third quarters of 2013 include tax adjustments of $281 million and $235 million, respectively.
(2)Loans and leases are net of unearned income and include LHFS.

Fourth Quarter Results

Consolidated net income available to common shareholders for the fourth quarter of 20142016 totaling $557$592 million was up 3.7%17.9% compared to $537$502 million earned during the same period in 2013.2015. On a diluted per common share basis, earnings for the fourth quarter of 20142016 were $0.76,$0.72, up 1.3%12.5% compared to $0.75$0.64 for the same period in 2013.2015. BB&T’s results of operations for the fourth quarter of 20142016 produced an annualized return on average assets of 1.30%1.16% and an annualized return on average common shareholders’ equity of 10.08%8.75%, compared to prior year ratios of 1.30%1.03% and 10.85%8.06%, respectively.

These results include merger-related and restructuring charges of $13 million and $50 million, respectively.

Total revenues on a FTETE basis were $2.4$2.8 billion for the fourth quarter of 2014, essentially flat2016, up 8.3% compared to the earlier quarter as a decrease in taxable-equivalent net interest income of $26 millionquarter. This increase was largely offsetdriven by a $19$147 million increase in noninterest income.

income, largely the result of acquisitions.

Net interest margin was 3.36%3.32%, down 20 basis points compared to 3.35% for the earlier quarter. Average earning assets increased $6.5$9.4 billion, or 4.2%5.1%, while average interest-bearing liabilities increased $1.2$3.0 billion, or 1.1%.both of which were primarily driven by acquisition activity. The annualized yield on the total loan portfolio for the fourth quarter was 4.29%4.24%, a decrease of 34seven basis points compared to the earlier quarter, which primarily reflects the impact of lower yieldsrates on new loansproduction and continued runoff of higher yielding loans acquired from the FDIC. The annualized FTEfully taxable-equivalent yield on the average securities portfolio for the fourth quarter was 2.45%2.13%, which was seven basis points lower thancompared to 2.30% for the earlier period.

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This decline was primarily due to securities duration adjustments during 2016.
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The average annualized cost of interest-bearing deposits was 0.25% during the fourth quarter of 2014, a decline of three0.22%, down two basis points compared to the fourth quarter of 2013.earlier quarter. The average annualized rate paid on long-term debt was 2.22% during the fourth quarter of 2014, a decrease of 42 basis points2.16%, compared to 2.11% for the same quarter of the prior year.earlier quarter. This decrease was the result of lower rates on new issues during the last twelve months and the early extinguishment of higher cost FHLB advances in the third quarter of 2014.

The $19 million increase in noninterest income, including securities gains (losses), net, was primarily driven by higher insurancedue to lower benefits from hedging.


Excluding acquired from FDIC and mortgage banking income, which increased $38 million and $28 million, respectively, partially offset by a $51 million decrease in other income.

ThePCI loans, the provision for credit losses increased $23was $133 million, compared to the earlier quarter primarily due to the reserve release$128 million in the earlier quarter partially offset by the impact of the fourth quarter loan sale.quarter. Net charge-offs for the fourth quarter of 2014,2016, excluding loans acquired from the FDIC and the impact of the loan sale,PCI, totaled $106 million, down $35$136 million, compared to the earlier quarter. Excluding the reserve for unfunded lending commitments and the impact of the loan sale, the reserve release was $67$130 million for the fourth quarter of 2013 compared to a provision of $5earlier quarter.

The $147 million increase in the current quarter.

noninterest income was driven by higher insurance income, FDIC loss share income, investment banking and brokerage fees and commissions and other income.

Noninterest expense was $1.4$1.7 billion for the fourth quarter of 2014, a decrease2016, an increase of $45$71 million compared to the earlier quarter. This decrease reflects the impact of broad cost control measures, including a 1,280 decrease in FTEs,increase was primarily driven by higher personnel expense, which was partially offset by higherdeclines in loan-related expense due to the $27 million charge related to an ongoing review of mortgage lending processes.

and merger-related and restructuring charges.

The provision for income taxes was $236$287 million for the fourth quarter of 2014,2016, compared to $243$251 million for the earlier quarter. This produced an effective tax rate for the fourth quarter of 20142016 of 27.9%30.9%, compared to 29.2%31.7% for the earlier quarter.

Reclassifications

In certain circumstances, reclassifications have been made to prior period information to conform to the 2014current presentation. Such reclassifications had no effect on previously reported shareholders’ equity or net income.

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. The 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. Understanding BB&T’s accounting policies is fundamental to understanding the consolidated financial position and consolidated results of operations. Accordingly, BB&T’s significant accounting policies and changes in accounting principles and effects of new accounting pronouncements are discussed in detail in Note 1 “Summarythe "Summary of Significant Accounting Policies”Policies" note in the “Notes"Notes to Consolidated Financial Statements.”

"

The following is a summary of BB&T’s critical accounting policies that are highly dependent on estimates, assumptions and judgments. These critical accounting policies are reviewed with the Audit Committee of the Board of Directors on a periodic basis.

ACL

BB&T’s policy is to maintain an ALLL and a RUFC that represent management’s best estimate of probable credit losses inherent in the loan and lease portfolios and off-balance sheet lending commitments at the balance sheet date. Estimates for loan and lease losses are determined by analyzing historical loan and lease losses, historical loan and lease migration to charge-off experience, current trends in delinquencies and charge-offs, expected cash flows on purchased loans, current assessment of problemimpaired loans and leases, the results of regulatory examinations and changes in the size, composition and risk assessment of the loan and lease portfolio. As part of this process, BB&T develops a series of loss estimate factors, which are modeled projections of the frequency, timing and severity of losses. These loss estimate factors are based on historical loss experience, economic and political environmental considerations and any other data that management believes will provide evidence about the expected collectability of outstanding loan and lease amounts. The following table summarizes the loss estimate factors used to determine the ALLL.

ALLL:
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Loss Estimate Factor Description
Loss Frequency Indicates the likelihood of a borrower defaulting on a loan
Loss Severity Indicates the amount of estimated loss at the time of default



For collectively evaluated loans, the ALLL is determined by multiplying the loan exposure estimated at the time of default by the loss frequency and loss severity factors. For individually evaluated loans, the ALLL is determined through review of data specific to the borrower. For TDRs, default expectations and estimated slower prepayment speeds that are specific to each of the restructured loan populations are incorporated in the determination of the ALLL. Also included in management’s estimates for loan and lease losses are considerations with respect to the impact of current economic events, the outcomes of which are uncertain. These events may include, but are not limited to, fluctuations in overall interest rates, political conditions, legislation that may directly or indirectly affect the banking industry and economic conditions affecting specific geographical areas and industries in which BB&T conducts business.

The methodology used to determine an estimate for the RUFC is inherently similar to the methodology used in calculating the ALLL adjusted for factors specific to binding commitments, including the probability of funding and exposure at the time of funding. A detailed discussion of the methodology used in determining the ALLL and the RUFC is included in Note 1 “Summarythe "Summary of Significant Accounting Policies”Policies" note in the “Notes"Notes to Consolidated Financial Statements.”

"

Fair Value of Financial Instruments

The vast majority of assets and liabilities carried at fair value are based on either quoted market prices or market prices for similar instruments. See Note 18 “Fairthe "Fair Value Disclosures”Disclosures" note in the “Notes"Notes to Consolidated Financial Statements” hereinStatements" for additional disclosures regarding the fair value of financial instruments.

Securities

BB&T generally utilizes a third-party pricing service in determining the fair value of its AFS and trading securities. 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. Management performs various procedures to evaluate the accuracy of the fair values provided by the third-party service provider. These procedures, which are performed independent of the responsible LOB,BU, include comparison of pricing information received from the third party pricing service 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 third party pricing service. The IPV committee, which provides oversight to BB&T’s enterprise-wide IPV function, is responsible for oversight of the comparison of pricing information received from the third party pricing service to other third party pricing sources, approving tolerance limits determined by IPV for price comparison exceptions, reviewing significant changes to pricing and valuation policies and reviewing and approving the pricing decisions made on any illiquid and hard-to-price securities. When market observable data is not available, which generally occurs due to the lack of liquidity for certain securities, the valuation of the security is subjective and may involve substantial judgment by management.

BB&T periodically reviews AFS securities with an unrealized loss. An unrealized loss exists when the current fair value of an individual security is less than its amortized cost basis. The purpose of the review is to consider the length of time and the extent to which the market value of a security has been below its amortized cost. The primary factors BB&T considers in determining whether an impairment is other-than-temporary are long-term expectations and recent experience regarding principal and interest payments and BB&T’s intent to sell and whether it is more likely than not that the Company would be required to sell those securities before the anticipated recovery of the amortized cost basis.

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MSRs

BB&T has a significant mortgage loan servicing portfolio with two primary classes of MSRs for which it separately manages the economic risk:risks: residential and commercial. ResidentialBoth classes of MSRs are recorded on the Consolidated Balance Sheets primarily carried at fair value with changes in fair value recorded as a component of mortgage banking income. BB&T uses various derivativeDerivative instruments are used to mitigate the income statement effect of changes in fair value due to changes in valuation inputs and assumptions of its residentialthe MSRs.

MSRs do not trade in an active, open market with readily observable prices. While sales of MSRs do occur, the precise terms and conditions typically are not readily available. Accordingly, BB&T estimates the fair value of residential MSRs using ana stochastic OAS valuation model to project MSR cash flows over multiple interest rate scenarios, which are then discounted at risk-adjusted rates. The OAS model considers portfolio characteristics, contractually specified servicing fees, prepayment assumptions, delinquency rates, late charges, other ancillary revenue, costs to service and other economic factors. BB&T reassesses and periodically adjusts the underlying inputs and assumptions in the OAS model to reflect market conditions and assumptions that a market participant would consider in valuing the MSR asset.


Fair value estimates and assumptions are compared to industry surveys, recent market activity, actual portfolio experience and, when available, observable market data. Due to the nature of the valuation inputs, MSRs are classified within Level 3 of the valuation hierarchy. The value of residential MSRs is significantly affected by mortgage interest rates available in the marketplace, which influence mortgage loan prepayment speeds. In general, during periods of declining interest rates, the value of MSRs declines due to increasing prepayments attributable to increased mortgage-refinance activity. Conversely, during periods of rising interest rates, the value of MSRs generally increases due to reduced refinance activity. Commercial MSRs are carried atBB&T typically hedges against market value changes in the lower of cost or market and amortized over the estimated period that servicing income is expected to be received based on projections of the amount and timing of estimated future cash flows. The amount and timing of servicing asset amortization is based on actual results and updated projections.MSRs. Refer to Note 7 “Loan Servicing”the "Loan Servicing" note in the “Notes"Notes to Consolidated Financial Statements”Statements" for quantitative disclosures reflecting the effect that changes in management’s assumptions would have on the fair value of MSRs.

Prior to January 1, 2016, commercial MSRs were carried at the lower of cost or market and amortized over the estimated period that servicing income was expected to be received based on projections of the amount and timing of estimated future cash flows. Effective January 1, 2016, BB&T adopted the fair value method for commercial MSRs to facilitate hedging against changes in the fair value of the MSR asset. The impact of this adoption was not material. Commercial MSRs are valued using a cash flow valuation model that calculates the present value of estimated future net servicing cash flows. BB&T considers actual and expected loan prepayment rates, discount rates, servicing costs and other economic factors that are determined based on current market conditions. Compared to residential MSRs, commercial MSR prepayments tend to be significantly lower, subject to the level of prevailing commercial mortgage rates. Commercial loans tend to have prepayment penalty clauses, and some of the loans may be defeased or assumable. As a result, unlike for residential MSRs, BB&T does not employ a stochastic interest rate model for valuation of commercial MSRs.

LHFS


BB&T originates certain mortgage loans for sale to investors that are carried at fair value. The fair value is primarily based on quoted market prices for securities backed by similar types of loans. Changes in the fair value are recorded as a component of mortgage banking income, while the related origination costs are recognized in noninterest expense when incurred. The changes in fair value are largely driven by changes in interest rates subsequent to loan funding and changes in the fair value of servicing associated with the LHFS. BB&T uses various derivative instruments to mitigate the economic effect of changes in fair value of the underlying loans.


Derivative Assets and Liabilities

BB&T uses derivatives to manage various financial risks. The fair values of derivative financial instruments are determined based on quoted market prices and internal pricing models that are primarily sensitive to market observable data. BB&T mitigates the credit risk by subjecting counterparties to credit reviews and approvals similar to those used in making loans and other extensions of credit. In addition, certain counterparties are required to provide collateral to BB&T when their unsecured loss positions exceed certain negotiated limits. The fair values of derivative financial instruments are determined based on quoted market prices and internal pricing models that use market observable data. The fair value of interest rate lock commitments, which are related to mortgage loan commitments, is based on quoted market prices adjusted for commitments that BB&T does not expect to fund and includes the value attributable to the net servicing fee.

Private Equity and Similar Investments

BB&T has private equity and similar investments that are carried at fair value. Changes in the fair value of these investments are recorded in other noninterest income each period. In many cases there are no observable market values for these investments and 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. As of December 31, 2014, BB&T had $329 million of these investments, which represented less than 1% of total assets.

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Intangible Assets

The acquisition method of accounting requires that acquired assets and liabilities are recorded at their fair values. This often involves estimates based on third party valuations or internal valuations based on discounted cash flow analyses or other valuation techniques, all of which are inherently subjective. The amortization of identified intangible assets is based upon the estimated economic benefits to be received, which is also subjective. Acquisitions typically result in goodwill, which is subject to ongoing periodic impairment tests based on the fair values of the reporting units to which the acquired goodwill relates. Refer to Note 1 “Summarythe "Summary of Significant Accounting Policies”Policies" note in the “Notes"Notes to Consolidated Financial Statements”Statements" for a description of the impairment testing process. Management considers the sensitivity of the significant assumptions in its impairment analysis including consideration of a 10% change in estimated future cash flows or the discount rate for each reporting unit.



Pension and Postretirement Benefit Obligations

BB&T offers various pension plans and postretirement benefit plans to employees. Calculation of the obligations and related expenses under these plans requires the use of actuarial valuation methods and assumptions, which are subject to management judgment and may differ significantly if different assumptions are used. The discount rate assumption used to measure the postretirement benefit obligations is set by reference to a high-quality (AA-rated or higher) corporate bond yield curve and the individual characteristics of the plans such as projected cash flow patterns and payment durations. Management evaluated the sensitivity changes that the expected return on plan assets and the discount rate would have on pension expense for 2015.expense. A decrease of 25 basis points in the discount rate would result in additional pension expense of approximately $26$29 million for 2015,2017, while a decrease of 100 basis points in the expected return on plan assets would result in an increase of approximately $43$53 million in pension expense for 2015.2017. Refer to Note 14 “Benefit Plans”the "Benefit Plans" note in the “Notes"Notes to Consolidated Financial Statements”Statements" for disclosures related to BB&T’sthe benefit plans.

Income Taxes

The calculation of BB&T’s income tax provision is complex and requires the use of estimates and judgments. As part of the Company’s analysis and implementation of business strategies, consideration is given to the tax laws and regulations that apply to the specific facts and circumstances for any tax position under evaluation. For tax positions that are uncertain in nature, management determines whether the tax position is more likely than not to be sustained upon examination. For tax positions that meet this threshold, management then estimates the amount of the tax benefit to recognize in the financial statements. Management closely monitors tax developments in order to evaluate the effect they may have on the Company’s overall tax position and the estimates and judgments used in determining the income tax provision and records adjustments as necessary.

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ITEM 9A. CONTROLS AND PROCEDURES

Management’s Report on Internal Control Over Financial Reporting and Evaluation of Disclosure Controls and Procedures

Management of BB&T is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Exchange Act. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. BB&T’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that in reasonable detail, accurately and fairly reflect the transactions and disposition of the Company’s assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of the financial statements in accordance with GAAP and that receipts and expenditures of the Company are being made only in accordance with the authorizations of BB&T’s management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material impact on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

Under the supervision and with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the internal control over financial reporting based on the framework in “Internal"Internal Control—Integrated Framework (2013)”" promulgated by the Committee of Sponsoring Organizations of the Treadway Commission, commonly referred to as the “COSO”"COSO" criteria. Based on this evaluation under the COSO criteria, management concluded that the internal control over financial reporting was effective as of December 31, 2014.

2016.

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 Company’s disclosure controls and procedures as defined in Rule 13a-15(e) of the Exchange Act. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective.

There was no change in the Company’s internal control over financial reporting that occurred during the fourth quarter of 20142016 that has materially affected, or is likely to materially affect, the Company’s internal control over financial reporting.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 20142016 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their accompanying report, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2014.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of BB&T Corporation:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows present fairly, in all material respects, the financial position of BB&T Corporation and its subsidiaries at December 31, 20142016 and 2013,2015, and the results of their operations and their cash flows for each of the three years in the three-year period ended December 31, 20142016 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014,2016, based on criteria established inInternal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Charlotte,

Greensboro, North Carolina

February 25, 2015

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21, 2017

BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except per share data, shares in thousands)
          
     December 31,
     2014 2013
Assets     
 Cash and due from banks$ 1,639  $ 1,565 
 Interest-bearing deposits with banks  529    452 
 Federal funds sold and securities purchased under resale agreements or similar     
  arrangements  157    148 
 Restricted cash  374    422 
 AFS securities at fair value ($1,393 covered by FDIC loss share at December 31, 2013)  20,907    22,104 
 HTM securities (fair value of $20,313 and $17,530 at December 31, 2014     
   and December 31, 2013, respectively)  20,240    18,101 
 LHFS at fair value  1,423    1,222 
 Loans and leases ($654 and $2,035 covered by FDIC loss share at December 31,     
  2014 and December 31, 2013, respectively)  119,884    115,917 
 ALLL  (1,474)   (1,732)
  Loans and leases, net of ALLL  118,410    114,185 
          
 Premises and equipment  1,827    1,869 
 Goodwill  6,869    6,814 
 Core deposit and other intangible assets  505    569 
 Residential MSRs at fair value  844    1,047 
 Other assets ($38 and $163 of foreclosed property and other assets covered by FDIC     
  loss share at December 31, 2014 and December 31, 2013, respectively)  13,090    14,512 
   Total assets$ 186,814  $ 183,010 
          
Liabilities and Shareholders’ Equity     
 Deposits:     
  Noninterest-bearing deposits$ 38,786  $ 34,972 
  Interest-bearing deposits  90,254    92,503 
   Total deposits  129,040    127,475 
          
 Short-term borrowings  3,717    4,138 
 Long-term debt  23,312    21,493 
 Accounts payable and other liabilities  6,319    7,095 
   Total liabilities  162,388    160,201 
          
 Commitments and contingencies (Note 15)     
 Shareholders’ equity:     
  Preferred stock, $5 par, liquidation preference of $25,000 per share  2,603    2,603 
  Common stock, $5 par  3,603    3,533 
  Additional paid-in capital  6,517    6,172 
  Retained earnings  12,366    11,044 
  AOCI, net of deferred income taxes  (751)   (593)
  Noncontrolling interests  88    50 
   Total shareholders’ equity  24,426    22,809 
   Total liabilities and shareholders’ equity$ 186,814  $ 183,010 
          
 Common shares outstanding  720,698    706,620 
 Common shares authorized  2,000,000    2,000,000 
 Preferred shares outstanding  107    107 
 Preferred shares authorized  5,000    5,000 

BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except per share data, shares in thousands)
   
  December 31,
  2016 2015
Assets    
Cash and due from banks $1,897
 $2,123
Interest-bearing deposits with banks 1,895
 1,435
Federal funds sold and securities purchased under resale agreements or similar arrangements 144
 153
Restricted cash 488
 456
AFS securities at fair value 26,926
 25,297
HTM securities (fair value of $16,546 and $18,519 at December 31, 2016 and 2015 respectively) 16,680
 18,530
LHFS at fair value 1,716
 1,035
Loans and leases 143,322
 135,951
ALLL (1,489) (1,460)
Loans and leases, net of ALLL 141,833
 134,491
     
Premises and equipment 2,107
 2,007
Goodwill 9,638
 8,548
CDI and other intangible assets 854
 686
MSRs at fair value 1,052
 880
Other assets 14,046
 14,306
Total assets $219,276
 $209,947
     
Liabilities and Shareholders’ Equity    
Deposits:    
Noninterest-bearing deposits $50,697
 $45,695
Interest-bearing deposits 109,537
 103,429
Total deposits 160,234
 149,124
     
Short-term borrowings 1,406
 3,593
Long-term debt 21,965
 23,769
Accounts payable and other liabilities 5,745
 6,121
Total liabilities 189,350
 182,607
     
Commitments and contingencies (Note 14) 
 
Shareholders’ equity:    
Preferred stock, $5 par, liquidation preference of $25,000 per share 3,053
 2,603
Common stock, $5 par 4,047
 3,902
Additional paid-in capital 9,104
 8,365
Retained earnings 14,809
 13,464
AOCI, net of deferred income taxes (1,132) (1,028)
Noncontrolling interests 45
 34
Total shareholders’ equity 29,926
 27,340
Total liabilities and shareholders’ equity $219,276
 $209,947
     
Common shares outstanding 809,475
 780,337
Common shares authorized 2,000,000
 2,000,000
Preferred shares outstanding 126
 107
Preferred shares authorized 5,000
 5,000

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

88

BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in millions, except per share data, shares in thousands)
 
      Year Ended December 31,
       2014   2013   2012 
Interest Income        
 Interest and fees on loans and leases$ 5,163  $ 5,603  $ 5,980 
 Interest and dividends on securities  939    871    907 
 Interest on other earning assets  40    33    30 
   Total interest income  6,142    6,507    6,917 
Interest Expense        
 Interest on deposits  239    301    429 
 Interest on short-term borrowings  4    6    7 
 Interest on long-term debt  525    584    624 
   Total interest expense  768    891    1,060 
Net Interest Income  5,374    5,616    5,857 
 Provision for credit losses  251    592    1,057 
Net Interest Income After Provision for Credit Losses  5,123    5,024    4,800 
Noninterest Income        
 Insurance income  1,643    1,517    1,359 
 Service charges on deposits  600    584    566 
 Mortgage banking income  395    565    840 
 Investment banking and brokerage fees and commissions  387    383    365 
 Bankcard fees and merchant discounts  269    256    236 
 Trust and investment advisory revenues  221    200    184 
 Checkcard fees  203    199    185 
 Income from bank-owned life insurance  110    113    116 
 FDIC loss share income, net  (343)   (293)   (318)
 Other income  302    362    299 
 Securities gains (losses), net        
   Gross realized gains  7    57    1 
   Gross realized losses  (4)   (6)   (4)
   OTTI charges  (23)   ―      (5)
   Non-credit portion recognized in OCI  17    ―      (4)
     Total securities gains (losses), net  (3)   51    (12)
   Total noninterest income  3,784    3,937    3,820 
Noninterest Expense        
 Personnel expense  3,180    3,293    3,125 
 Occupancy and equipment expense  682    692    650 
 Loan-related expense  342    255    283 
 Software expense  174    158    138 
 Professional services  139    189    156 
 Outside IT services  115    89    58 
 Regulatory charges  106    143    159 
 Amortization of intangibles  91    106    110 
 Foreclosed property expense  40    55    266 
 Merger-related and restructuring charges, net  46    46    68 
 Loss on early extinguishment of debt  122    ―      2 
 Other expense  884    811    813 
   Total noninterest expense  5,921    5,837    5,828 
Earnings        
 Income before income taxes  2,986    3,124    2,792 
 Provision for income taxes  760    1,395    764 
   Net income  2,226    1,729    2,028 
 Noncontrolling interests  75    50    49 
 Dividends on preferred stock  148    117    63 
   Net income available to common shareholders$ 2,003  $ 1,562  $ 1,916 
EPS        
   Basic$ 2.79  $ 2.22  $ 2.74 
   Diluted$ 2.75  $ 2.19  $ 2.70 
 Cash dividends declared$ 0.95  $ 0.92  $ 0.80 
Weighted Average Shares Outstanding        
   Basic  718,140    703,042    698,739 
   Diluted  728,372    714,363    708,877 

BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in millions, except per share data, shares in thousands)
   
  Year Ended December 31,
  2016 2015 2014
Interest Income      
Interest and fees on loans and leases $5,985
 $5,347
 $5,163
Interest and dividends on securities 1,029
 941
 939
Interest on other earning assets 52
 39
 40
Total interest income 7,066
 6,327
 6,142
Interest Expense      
Interest on deposits 251
 233
 239
Interest on short-term borrowings 9
 4
 4
Interest on long-term debt 485
 498
 525
Total interest expense 745
 735
 768
Net Interest Income 6,321
 5,592
 5,374
Provision for credit losses 572
 428
 251
Net Interest Income After Provision for Credit Losses 5,749
 5,164
 5,123
       
Noninterest Income      
Insurance income 1,713
 1,596
 1,643
Service charges on deposits 664
 631
 632
Mortgage banking income 463
 455
 395
Investment banking and brokerage fees and commissions 408
 398
 387
Trust and investment advisory revenues 266
 240
 221
Bankcard fees and merchant discounts 237
 218
 207
Checkcard fees 195
 174
 163
Operating lease income 137
 124
 95
Income from bank-owned life insurance 123
 113
 110
FDIC loss share income, net (142) (253) (343)
Other income 362
 326
 349
Securities gains (losses), net      
Gross realized gains 46
 41
 7
Gross realized losses —
 (40) (4)
OTTI charges —
 (2) (23)
Non-credit portion recognized in OCI —
 (2) 17
Total securities gains (losses), net 46
 (3) (3)
Total noninterest income 4,472
 4,019
 3,856
Noninterest Expense      
Personnel expense 3,964
 3,469
 3,180
Occupancy and equipment expense 786
 708
 682
Software expense 224
 192
 174
Outside IT services 186
 135
 115
Amortization of intangibles 150
 105
 91
Regulatory charges 145
 101
 106
Professional services 102
 130
 139
Loan-related expense 95
 150
 267
Merger-related and restructuring charges, net 171
 165
 46
Loss (gain) on early extinguishment of debt (1) 172
 122
Other expense 899
 939
 930
Total noninterest expense 6,721
 6,266
 5,852
Earnings      
Income before income taxes 3,500
 2,917
 3,127
Provision for income taxes 1,058
 794
 921
Net income 2,442
 2,123
 2,206
Noncontrolling interests 16
 39
 75
Dividends on preferred stock 167
 148
 148
Net income available to common shareholders $2,259
 $1,936
 $1,983
Basic EPS $2.81
 $2.59
 $2.76
Diluted EPS $2.77
 $2.56
 $2.72
Cash dividends declared per share $1.15
 $1.05
 $0.95
Basic weighted average shares outstanding 804,680
 748,010
 718,140
Diluted weighted average shares outstanding 814,916
 757,765
 728,372

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

89

BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in millions)
 
      Year Ended December 31,
       2014   2013   2012 
Net Income$ 2,226  $ 1,729  $ 2,028 
OCI, Net of Tax:        
 Change in unrecognized pension and postretirement amounts  (323)   411    (111)
 Change in unrecognized gains (losses) on cash flow hedges  (56)   175    (14)
 Unrealized net holding gains (losses) on AFS securities  194    (640)   327 
 Change in amounts attributable to the FDIC under loss share agreements  28    21    (61)
 Other, net  (1)   (1)   13 
  Total OCI  (158)   (34)   154 
  Total comprehensive income$ 2,068  $ 1,695  $ 2,182 
              
              
Income Tax Effect of Items Included in OCI:        
 Change in unrecognized pension and postretirement amounts$ (192) $ 252  $ (70)
 Change in unrecognized gains (losses) on cash flow hedges  (34)   106    (9)
 Unrealized net holding gains (losses) on AFS securities  117    (384)   200 
 Change in amounts attributable to the FDIC under loss share agreements  17    14    (38)
 Other, net  2    2    6 

BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in millions)
   
  Year Ended December 31,
  2016 2015 2014
Net Income $2,442
 $2,123
 $2,206
OCI, Net of Tax:   ��  
Change in unrecognized net pension and postretirement costs (41) (97) (323)
Change in unrealized net gains (losses) on cash flow hedges (9) (29) (56)
Change in unrealized net gains (losses) on AFS securities (225) (186) 194
Change in FDIC's share of unrealized gains/losses on AFS securities 169
 38
 28
Other, net 2
 (3) (1)
Total OCI (104) (277) (158)
Total comprehensive income $2,338
 $1,846
 $2,048
       
       
Income Tax Effect of Items Included in OCI:    
  
Change in unrecognized net pension and postretirement costs $(20) $(59) $(192)
Change in unrealized net gains (losses) on cash flow hedges (4) (18) (34)
Change in unrealized net gains (losses) on AFS securities (130) (120) 117
Change in FDIC 's share of unrealized gains/losses on AFS securities 98
 25
 17
Other, net 1
 3
 2

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

90
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BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Dollars in millions, shares in thousands)
                           
     Shares of Common Stock Preferred Stock Common Stock Additional Paid-In Capital Retained Earnings AOCI Noncontrolling Interests Total Shareholders' Equity
Balance, January 1, 2012 697,143  $ ―    $ 3,486  $ 5,873  $ 8,772  $ (713) $ 62  $ 17,480 
Add (Deduct):                      
 Net income ―      ―      ―      ―      1,979    ―      49    2,028 
 Net change in AOCI ―      ―      ―      ―      ―      154    ―      154 
 Stock transactions:                      
  Issued in purchase acquisitions 28    ―      ―      1    ―      ―      ―      1 
  Issued in connection with equity awards 3,147    ―      16    17    ―      ―      ―      33 
  Shares repurchased in connection                      
   with equity awards (590)   ―      (3)   (15)   ―      ―      ―      (18)
  Issued in connection with preferred stock                      
   offerings ―      2,116    ―      ―      ―      ―      ―      2,116 
 Cash dividends declared on common stock ―      ―      ―      ―      (559)   ―      ―      (559)
 Cash dividends declared on preferred stock ―      ―      ―      ―      (63)   ―      ―      (63)
 Equity-based compensation expense ―      ―      ―      97    ―      ―      ―      97 
 Other, net ―      ―      ―      ―      ―      ―      (46)   (46)
Balance, December 31, 2012 699,728  $ 2,116  $ 3,499  $ 5,973  $ 10,129  $ (559) $ 65  $ 21,223 
Add (Deduct):                      
 Net income ―      ―      ―      ―      1,679    ―      50    1,729 
 Net change in AOCI ―      ―      ―      ―      ―      (34)   ―      (34)
 Stock transactions:                      
  Issued in connection with equity awards 6,257    ―      31    74    ―      ―      ―      105 
  Shares repurchased in connection                      
   with equity awards (879)   ―      (4)   (23)   ―      ―      ―      (27)
  Issued in connection with dividend                      
   reinvestment plan 656    ―      3    19    ―      ―      ―      22 
  Issued in connection with 401(k) plan 858    ―      4    25    ―      ―      ―      29 
  Issued in connection with preferred stock                      
   offerings ―      487    ―      ―      ―      ―      ―      487 
 Cash dividends declared on common stock ―      ―      ―      ―      (647)   ―      ―      (647)
 Cash dividends declared on preferred stock ―      ―      ―      ―      (117)   ―      ―      (117)
 Equity-based compensation expense ―      ―      ―      96    ―      ―      ―      96 
 Other, net ―      ―      ―      8    ―      ―      (65)   (57)
Balance, December 31, 2013 706,620  $ 2,603  $ 3,533  $ 6,172  $ 11,044  $ (593) $ 50  $ 22,809 
Add (Deduct):                      
 Net income ―      ―      ―      ―      2,151    ―      75    2,226 
 Net change in AOCI ―      ―      ―      ―      ―      (158)   ―      (158)
 Stock transactions:                      
  Issued in connection with equity awards 15,321    ―      76    233    ―      ―      ―      309 
  Shares repurchased in connection                      
   with equity awards (2,287)   ―      (11)   (74)   ―      ―      ―      (85)
  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 ―      ―      ―      ―      (681)   ―      ―      (681)
 Cash dividends declared on preferred stock ―      ―      ―      ―      (148)   ―      ―      (148)
 Equity-based compensation expense ―      ―      ―      102    ―      ―      ―      102 
 Other, net ―      ―      ―      ―      ―      ―      (37)   (37)
Balance, December 31, 2014 720,698  $ 2,603  $ 3,603  $ 6,517  $ 12,366  $ (751) $ 88  $ 24,426 


BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Dollars in millions, shares in thousands)
                 
  Shares of Common Stock Preferred Stock Common Stock Additional Paid-In Capital Retained Earnings AOCI Noncontrolling Interests Total Shareholders' Equity
Balance, January 1, 2014 706,620
 $2,603
 $3,533
 $6,172
 $11,015
 $(593) $50
 $22,780
Add (Deduct):                
Net income —
 —
 —
 —
 2,131
 —
 75
 2,206
Net change in AOCI —
 —
 —
 —
 —
 (158) —
 (158)
Stock transactions:    
  
          
Issued in connection with equity awards 15,321
 —
 76
 233
 —
 —
 —
 309
Shares repurchased in connection with equity awards (2,287) —
 (11) (74) —
 —
 —
 (85)
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 —
 —
 —
 —
 (681) —
 —
 (681)
Cash dividends declared on preferred stock —
 —
 —
 —
 (148) —
 —
 (148)
Equity-based compensation expense —
 —
 —
 102
 —
 —
 —
 102
Other, net —
 —
 —
 —
 —
 —
 (37) (37)
Balance, December 31, 2014 720,698
 2,603
 3,603
 6,517
 12,317
 (751) 88
 24,377
Add (Deduct):                
Net income —
 —
 —
 —
 2,084
 —
 39
 2,123
Net change in AOCI —
 —
 —
 —
 —
 (277) —
 (277)
Stock transactions:    
  
          
Issued in business combination 54,000
 —
 270
 1,918
 —
 —
 —
 2,188
Issued in connection with equity awards 6,995
 —
 35
 79
 —
 —
 —
 114
Shares repurchased in connection with equity awards (1,356) —
 (6) (46) —
 —
 —
 (52)
Excess tax benefits in connection with equity awards —
 —
 —
 11
 —
 —
 —
 11
Purchase of additional ownership interest in AmRisc, LP —
 —
 —
 (219) —
 —
 (3) (222)
Cash dividends declared on common stock —
 —
 —
 —
 (789) —
 —
 (789)
Cash dividends declared on preferred stock —
 —
 —
 —
 (148) —
 —
 (148)
Equity-based compensation expense —
 —
 —
 106
 —
 —
 —
 106
Other, net —
 —
 —
 (1) —
 —
 (90) (91)
Balance, December 31, 2015 780,337
 2,603
 3,902
 8,365
 13,464
 (1,028) 34
 27,340
Add (Deduct):                
Net income —
 —
 —
 —
 2,426
 —
 16
 2,442
Net change in AOCI —
 —
 —
 —
 —
 (104) —
 (104)
Stock transactions:                
Issued in business combinations 31,665
 —
 158
 905
 —
 —
 —
 1,063
Issued in connection with equity awards 10,311
 —
 51
 204
 —
 —
 —
 255
Shares repurchased in connection with equity awards (1,070) —
 (5) (30) —
 —
 —
 (35)
Excess tax benefits in connection with equity awards —
 —
 —
 7
 —
 —
 —
 7
Issued in connection with preferred stock offering —
 450
 —
 —
 —
 —
 —
 450
Repurchase of common stock pursuant to Board approved plans (11,768) —
 (59) (461) —
 —
 —
 (520)
Cash dividends declared on common stock —
 —
 —
 —
 (925) —
 —
 (925)
Cash dividends declared on preferred stock —
 —
 —
 —
 (167) —
 —
 (167)
Equity-based compensation expense —
 —
 —
 115
 —
 —
 —
 115
Other, net —
 —
 —
 (1) 11
 —
 (5) 5
Balance, December 31, 2016 809,475
 $3,053
 $4,047
 $9,104
 $14,809
 $(1,132) $45
 $29,926

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

91
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BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
 
       Year Ended December 31,
       2014 2013 2012
Cash Flows From Operating Activities:        
 Net income$ 2,226  $ 1,729  $ 2,028 
 Adjustments to reconcile net income to net cash from operating activities:        
   Provision for credit losses  251    592    1,057 
   Adjustment to income tax provision  (39)   516    ―   
   Depreciation  333    315    281 
   Amortization of intangibles  91    106    110 
   Deferred tax expense  127    288    419 
   Equity-based compensation  102    96    97 
   (Gain) loss on securities, net  3    (51)   12 
   Net write-downs/losses on foreclosed property  22    28    168 
   Net change in operating assets and liabilities:        
      LHFS  (201)   2,445    (433)
      Other assets  280    92    (210)
      Accounts payable and other liabilities  (4)   (812)   346 
   Other, net  67    (5)   (161)
      Net cash from operating activities  3,258    5,339    3,714 
               
Cash Flows From Investing Activities:        
 Proceeds from sales of AFS securities  1,309    2,209    303 
 Proceeds from maturities, calls and paydowns of AFS securities  3,915    6,214    4,396 
 Purchases of AFS securities  (3,685)   (6,463)   (7,026)
 Proceeds from maturities, calls and paydowns of HTM securities  1,866    2,863    5,536 
 Purchases of HTM securities  (4,030)   (7,399)   (5,055)
 Originations and purchases of loans and leases, net of principal collected  (5,041)   (3,077)   (6,651)
 Net cash from divestitures  ―      522    ―   
 Net cash from business combinations  1,025    (6)   675 
 Proceeds from sales of foreclosed property  239    394    799 
 Other, net  339    503    (24)
   Net cash from investing activities  (4,063)   (4,240)   (7,047)
               
Cash Flows From Financing Activities:        
 Net change in deposits  337    (5,600)   4,676 
 Net change in short-term borrowings  (421)   1,274    (702)
 Proceeds from issuance of long-term debt  5,510    4,164    2,327 
 Repayment of long-term debt  (3,912)   (1,634)   (5,112)
 Net proceeds from preferred stock issued  ―      487    2,116 
 Cash dividends paid on common stock  (666)   (765)   (531)
 Cash dividends paid on preferred stock  (148)   (147)   (33)
 Other, net  265    248    55 
   Net cash from financing activities  965    (1,973)   2,796 
Net Change in Cash and Cash Equivalents  160    (874)   (537)
Cash and Cash Equivalents at Beginning of Period  2,165    3,039    3,576 
Cash and Cash Equivalents at End of Period$ 2,325  $ 2,165  $ 3,039 
               
Supplemental Disclosure of Cash Flow Information:        
 Cash paid (received) during the period for:        
   Interest$ 765  $ 918  $ 1,120 
   Income taxes  322    677    347 
 Noncash investing and financing activities:        
   Transfers of loans to foreclosed assets  547    609    770 
   Transfers of loans held for investment to LHFS  684    ―      ―   


BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
  Year Ended December 31,
  2016 2015 2014
Cash Flows From Operating Activities:      
Net income $2,442
 $2,123
 $2,206
Adjustments to reconcile net income to net cash from operating activities:      
Provision for credit losses 572
 428
 251
Adjustment to income tax provision (6) (107) (39)
Depreciation 405
 356
 333
Loss (gain) on early extinguishment of debt (1) 172
 122
Amortization of intangibles 150
 105
 91
Equity-based compensation expense 115
 106
 102
(Gain) loss on securities, net (46) 3
 3
Net change in operating assets and liabilities:      
LHFS (644) 422
 (201)
Trading securities 432
 (698) (101)
Other assets (568) (493) 346
Accounts payable and other liabilities 186
 263
 (4)
Cash paid to terminate FDIC loss share agreements (230) —
 —
Other, net (135) 235
 101
Net cash from operating activities 2,672
 2,915
 3,210
       
Cash Flows From Investing Activities:      
Proceeds from sales of AFS securities 4,612
 6,302
 1,309
Proceeds from maturities, calls and paydowns of AFS securities 5,888
 5,064
 3,915
Purchases of AFS securities (10,033) (12,698) (3,685)
Proceeds from maturities, calls and paydowns of HTM securities 7,022
 3,791
 1,866
Purchases of HTM securities (5,124) (2,557) (4,030)
Originations and purchases of loans and leases, net of principal collected (2,757) (2,984) (5,041)
Net cash received (paid) for acquisitions and divestitures (785) 1,055
 1,025
Other, net 495
 389
 626
Net cash from investing activities (682) (1,638) (4,015)
       
Cash Flows From Financing Activities:      
Net change in deposits 4,507
 2,506
 337
Net change in short-term borrowings (3,581) (982) (421)
Proceeds from issuance of long-term debt 3,878
 2,272
 5,510
Repayment of long-term debt (5,849) (2,433) (3,912)
Net cash from common stock transactions (293) 73
 298
Net proceeds from preferred stock issued 450
 —
 —
Cash dividends paid on common stock (925) (789) (666)
Cash dividends paid on preferred stock (167) (148) (148)
Other, net 215
 (390) (33)
Net cash from financing activities (1,765) 109
 965
Net Change in Cash and Cash Equivalents 225
 1,386
 160
Cash and Cash Equivalents at Beginning of Period 3,711
 2,325
 2,165
Cash and Cash Equivalents at End of Period $3,936
 $3,711
 $2,325
       
Supplemental Disclosure of Cash Flow Information:      
Cash paid during the period for:      
Interest $775
 $734
 $765
Income taxes 844
 655
 322
Noncash investing and financing activities:      
Transfers of loans to foreclosed assets 487
 532
 547
Transfers of loans HFI to LHFS 263
 153
 684
Stock issued in acquisitions 1,063
 2,188
 —
Purchase of additional interest in AmRisc, LP —
 216
 —
Transfer of HTM securities to AFS —
 517
 —

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

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NOTE 1. Summary of Significant Accounting Policies

General

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-K.

The accounting and reporting policies are in accordance with GAAP. Additionally, where applicable, the policies conform to the accounting and reporting guidelines prescribed by bank regulatory authorities. The following is a summary of the more significant accounting policies.

Nature of Operations

BB&T is a FHC organized under the laws of North Carolina. BB&T conducts operations through a bank subsidiary, Branch Bank, and nonbank subsidiaries. Branch Bank hasBank’s offices are concentrated primarily in North Carolina, Virginia, Florida, Georgia, South Carolina, Maryland, West Virginia, Kentucky, Alabama, Texas, Tennessee, Washington DCthe southeastern and Indiana.mid-Atlantic United States. BB&T provides a wide range of banking services to individuals, businesses and municipalities. BB&T offers a variety of loans and lease financing to individuals and entities primarily within BB&T’s geographic footprint, including insurance premium financing; permanent CRE financing arrangements; loan servicing for third-party investors; direct consumer finance loans to individuals; credit card lending; automobile financing; factoring and equipment financing. BB&T also markets a wide range of other services, including deposits; discount and full service brokerage, annuities and mutual funds; life insurance, property and casualty insurance, health insurance and commercial general liability insurance on an agency basis and through a wholesale insurance brokerage operation; merchant services; trust and retirement services; comprehensive wealth advisory services; asset management and capital markets services.

Principles of Consolidation

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

BB&T holds investments in certain legal entities that are considered VIEs. VIEs are legal entities in which equity investors do not have sufficient equity at risk for the entity to independently finance its activities, or as a group, the holders of the equity investment at risk lack the power through voting or similar rights to direct the activities of the entity that most significantly impact its economic performance, or do not have the obligation to absorb the expected losses of the entity or the right to receive expected residual returns of the entity. Consolidation of a VIE is required if a reporting entity is the primary beneficiary of the VIE.

Investments in VIEs are evaluated to determine if BB&T is the primary beneficiary. This evaluation gives appropriate consideration to the design of the entity and the variability that the entity was designed to pass along, the relative power of each party, and to BB&T’s relative obligation to absorb losses or receive residual returns of the entity, in relation to such obligations and rights held by each party. During 2015, BB&T holds adisposed of its variable interestinterests in its Tender Option Bond program trusts, which allowallowed for tax-advantaged financing of certain debt instruments issued by tax-exempt entities. As of December 31, 2014, BB&T was considered the primary beneficiary of the Tender Option Bond program trusts, resulting in the consolidation of approximately $1.9 billion oftheir assets and $1.7 billion of liabilities.liabilities in prior years. BB&T also has variable interests in certain entities that were not required to be consolidated, including affordable housing partnership interests, historic tax credit partnerships and other partnership interests. Refer to Note 15 “Commitmentsthe "Commitments and Contingencies”Contingencies" note for additional disclosures regarding BB&T’s significant VIEs.

BB&T accounts for unconsolidated partnerships and similarcertain other investments using the equity method of accounting. BB&T records its portion of income or loss in other noninterest income in the Consolidated Statements of Income. These investments are periodically evaluated for impairment. BB&T also has investments in, and future funding commitments to, private equity investments, which are accounted for based on BB&T’s ownership and control rights specific to each investment.

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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.

Business Combinations

BB&T accounts for business combinations using the acquisition method of accounting. The accounts of an acquired entity are included as of the date of acquisition, and any excess of purchase price over the fair value of the net assets acquired is capitalized as goodwill.

BB&T typically issues common stock and/or pays cash for an acquisition, depending on the terms of the acquisition agreement. The value of common shares issued is determined based on the market price of the stock as of the closing of the acquisition.

Cash and Cash Equivalents

Cash and cash equivalents include cash and due from banks, interest-bearing deposits with banks and Federal funds sold and securities purchased under resale agreements or similar arrangements. Cash and cash equivalents have maturities of three months or less. Accordingly, the carrying amount of such instruments is considered a reasonable estimate of fair value.

Restricted Cash

Restricted cash primarily represents amounts posted as collateral for derivatives in a loss position.

Securities

BB&T classifies marketable

Marketable investment securities are classified as HTM, AFS or trading. Interest income and dividends on securities are recognized in income on an accrual basis. Premiums and discounts on debt securities are amortized as an adjustment to interest income using the effective interest method.

  For MBS, prepayment speeds are evaluated quarterly in order to determine the estimated lives of the securities.  When the estimated lives of MBS are changed, the amortization of premiums or discounts is adjusted with a corresponding charge or credit to interest income as if the current estimated lives had been applied since the acquisition of the securities.


Debt securities are classified as HTM wherewhen BB&T has both the intent and ability to hold the securities to maturity. These securities are reported at amortized cost.

Debt securities whichthat may be sold to meet liquidity needs arising from unanticipated deposit and loan fluctuations, changes in regulatory capital requirements or unforeseen changes in market conditions are classified as AFS. AFS securities are reported at estimated fair value, with unrealized gains and losses reported in AOCI, net of deferred income taxes, in the shareholders’ equity section of the Consolidated Balance Sheets. Gains or losses realized from the sale of AFS securities are determined by specific identification and are included in noninterest income.

Each HTM and AFS security in a loss position is evaluated for OTTI. BB&T considers such factors as the length of time and the extent to which the marketfair value has been below amortized cost, long term expectations and recent experience regarding principal and interest payments, BB&T’s intent to sell and whether it is more likely than not that the Company would be required to sell those securities before the anticipated recovery of the amortized cost basis. The credit component of an OTTI loss is recognized in earnings and the non-credit component is recognized in AOCI in situations where BB&T does not intend to sell the security and it is more-likely-than-not that BB&T will not be required to sell the security prior to recovery. Subsequent to recognition of OTTI, an increase in expected cash flows is recognized as a yield adjustment over the remaining expected life of the security based on an evaluation of the nature of the increase.

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Trading account securities, which include both debt and equity securities, are reported at fair value.value and included in other assets in the Consolidated Balance Sheets. Unrealized marketfair value adjustments, fees, and realized gains or losses from trading account activities (determined by specific identification) are included in noninterest income. Interest income on trading account securities is included in interest on other earning assets.


LHFS

BB&T accounts for new originations of prime residential and commercial mortgage LHFS at fair value. BB&T accounts for the derivatives used to economically hedge the LHFS at fair value. The fair value of LHFS is primarily based on quoted market prices for securities collateralized by similar types of loans. Direct loan origination fees and costs related to LHFS are not capitalized and are recorded as mortgage banking income in the case of the direct loan origination fees and primarily personnel expense in the case of the direct loan origination costs. Gains and losses on sales of residential mortgage loans are included in mortgage banking income. Gains and losses on sales of commercial LHFS are included in other noninterest income.

BB&T sells a significant portion of its fixed-rate commercial and conforming residential mortgage loan originations, which are typically converted into MBS by FHLMC, FNMA and GNMA and subsequently sold to other third party investors. BB&T records these transactions as a sale when the transferred loans are legally isolated from BB&T’s creditors and the other accounting criteria for a sale are met. Gains or losses recorded on these transactions are based in part on the net carrying amount of the loans sold which is allocated betweenand the loans sold and retained interests based on their relative fair values at the datevalue of sale.related mortgage servicing, which BB&T generally retains the mortgage servicing on loans sold. Since quoted market prices are not typically available, BB&T estimates the fair value of these retained interests using modeling techniques to determine the net present value of expected future cash flows. Such models incorporate management’s best estimates of key variables, such as prepayment speeds, servicing costs and discount rates, that would be used by market participants based on the risks involved.

Gains on residential mortgage loan sales, including marking LHFS to fair value and the impact of interest rate lock commitments, are recorded in noninterest income as a component of mortgage banking income. For certain of these transactions, the loan servicing rights were retained, including the related MSRs and on-going servicing fees.

BB&T also issues standard representations and warranties related to mortgage loan sales to GSEs. Although these agreements often do not specify limitations, management does not believe that any payments related to these warranties would materially change the financial condition or results of operations of BB&T.

Loans and Leases

The Company’s accounting methods for loans differ depending on whether the loans are originated or acquired,purchased, and if acquired,purchased, whether or not the acquired loans reflect credit deterioration since the date of origination such that it is probable at the date of acquisition that BB&T will be unable to collect all contractually required payments.

Originated Loans and Leases

Loans and leases that management has the intent and ability to hold for the foreseeable future are reported at their outstanding principal balances net of any unearned income, charge-offs, and unamortized fees and costs. The net amount of nonrefundable loan origination fees and certain direct costs associated with the lending process are deferred and amortized to interest income over the contractual lives of the loans using methods that approximate the effective interest method.

BB&T classifies loans and leases as past due when the payment of principal and interest based upon contractual terms is greater than 30 days delinquent or if one payment is past due. When commercial loans are placed on nonaccrual status as described below, a charge-off is recorded, as applicable, to decrease the carrying value of such loans to the estimated recoverable amount. ConsumerRetail loans are subject to mandatory charge-off at a specified delinquency date consistent with regulatory guidelines. As such, consumerretail loans are subject to collateral valuation and charge-off, as applicable, when they are moved to nonaccrual status as described below.

Purchased Loans

Purchased loans are recorded at their fair value at the acquisition date. Credit discounts are included in the determination of fair value; therefore, an ALLL is not recorded at the acquisition date.

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Acquired

Purchased loans are evaluated upon acquisition and classified as either purchased impaired or purchased non-impaired. Purchased impairedPCI loans reflect credit deterioration since origination such that it is probable at acquisition that BB&T will be unable to collect all contractually required payments. For purchased impairedPCI loans, expected cash flows at the acquisition date in excess of the fair value of loans are recorded as interest income over the life of the loans using a level yield method if the timing and amount of the future cash flows is reasonably estimable. Subsequent to the acquisition date, increases in cash flows over those expected at the acquisition date are recognized prospectively as interest income. Decreases in expected cash flows due to credit deterioration are recognized by recording an ALLL. For purchased non-impaired loans, the difference between the fair value and UPB of the loan at the acquisition date is amortized or accreted to interest income over the estimatedcontractual life of the loans using a method that approximates the effective interest method.

In the event of prepayment, the remaining unamortized amount is recognized in interest income.


TDRs

Modifications to a borrower’s debt agreement are considered TDRs if a concession is granted for economic or legal reasons related to a borrower’s financial difficulties that otherwise would not be considered. TDRs are undertaken in order to improve the likelihood of recovery on the loan and may take the form of modifications made with the stated interest rate lower than the current market rate for new debt with similar risk, other modifications to the structure of the loan that fall outside of normal underwriting policies and procedures, or in certain limited circumstances forgiveness of principal or interest. Modifications of PCI loans acquired from the FDIC that are part of a pool accounted for as a single asset are not considered TDRs. TDRs can involve loans remaining on nonaccrual, moving to nonaccrual, or continuing on accruing status, depending on the individual facts and circumstances of the borrower. In circumstances where the TDR involves charging off a portion of the loan balance, BB&T typically classifies these TDRs as nonaccrual.

In connection with commercial TDRs, the decision to maintain a loan that has been restructured on accrual status is based on a current, well documented credit evaluation of the borrower’s financial condition and prospects for repayment under the modified terms. This evaluation includes consideration of the borrower’s current capacity to pay, which among other things may include a review of the borrower’s current financial statements, an analysis of cash flow available to pay debt obligations, and an evaluation of secondary sources of payment from the client and any guarantors. This evaluation also includes an evaluation of the borrower’s current willingness to pay, which may include a review of past payment history, an evaluation of the borrower’s willingness to provide information on a timely basis, and consideration of offers from the borrower to provide additional collateral or guarantor support. The credit evaluation may also include review of cash flow projections, consideration of the adequacy of collateral to cover all principal and interest and trends indicating improving profitability and collectability of receivables.

The evaluation of mortgage and consumerretail loans includes an evaluation of the client’s debt to income ratio, credit report, property value, loan vintage, and certain other client-specific factors that impact their ability to make timely principal and interest payments on the loan.

Nonaccrual commercial TDRs may be returned to accrual status based on a current, well-documented credit evaluation of the borrower’s financial condition and prospects for repayment under the modified terms. This evaluation must include consideration of the borrower’s sustained historical repayment performance for a reasonable period (generally a minimum of six months) prior to the date on which the loan is returned to accrual status. Sustained historical repayment performance for a reasonable time prior to the TDR may be taken into account. In connection with retail TDRs, a NPL will be returned to accruing status when current as to principal and interest and upon a sustained historical repayment performance (generally a minimum of six months).

TDR classification may be removed for a loan upon the occurrence of a non-concessionary subsequent modification that is at market terms and within current underwriting guidelines.

NPAs

NPAs include NPLs and foreclosed property. Foreclosed property consists of real estate and other assets acquired as a result of customers’ loan defaults. BB&T’s policies for placing loans on nonaccrual status conform to guidelines prescribed by bank regulatory authorities. The majority of commercial loans and leases are placed on nonaccrual status when it is probable that principal or interest is not fully collectible, or generally when principal or interest becomes 90 days past due, whichever occurs first. Other lending subsidiaries’ loans, which includes both consumerretail and commercial loans, are placed on nonaccrual status generally when principal and interest becomes 90 days past due. Direct retail, mortgage and sales finance loans are placed on nonaccrual status at varying intervals, based on the type of product, generally when principal and interest becomes between 90 days and 180120 days past due. Loans acquired from the FDICPCI loans are considered to be performing due to the application of the expected cash flows method.

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Residential mortgage NPLs secured by 1-4 family properties are generally charged down to the fair value of the collateral securing the loan less costs to sell upon becoming 180120 days past due, unless the shortfall is covered by private mortgage insurance. Nonperforming residential mortgage TDRs generally incur charge-offs at 120 days. If a known loss is identified prior to these time periods, the applicable charge-off occurs immediately. BB&T recognizes charge-offs on government guaranteed NPLs to the extent that the carrying value of the NPL exceeds the guaranteed amount.


During the fourth quarter of 2015, BB&T implemented a residential mortgage and direct retail lending policy change to move loans to nonaccrual status at 120 days past due instead of 180 days.
Charge-offs are recorded on revolving credit loans after they become 180 days past due and commercial bank card balances after they become 90 days past due. Unpaid fees and finance charges are reversed against interest income in the period in which the charge-off occurs. Other retail loans not secured by 1-4 family properties are charged down to the fair value of the collateral securing the loan less costs to sell upon becoming between 90 and 120 days past due, depending on the type of loan.

Secured consumerretail loans discharged through bankruptcy are charged down to the fair value of the related collateral, and the remaining balance is placed on nonaccrual status.

Certain loans past due 90 days or moreloans may remain on accrual status if management determines that it does not have concern over the collectability of principal and interest. Generally, when loans are placed on nonaccrual status, accrued interest receivable is reversed against interest income in the current period.period and amortization of deferred loan fees and expenses is suspended. Interest payments received thereafter are applied as a reduction to the remaining principal balance as long as concern exists as to the ultimate collection of the principal. Nonaccrual mortgage loans are accounted for using the cash basis. Loans and leases are generally removed from nonaccrual status when they become current as to both principal and interest and concern no longer exists as to the collectability of principal and interest.

Assets acquired as a result of foreclosure are subsequently carried at the lower of cost or net realizable value. Net realizable value equals fair value less estimated selling costs. Any excess of cost over net realizable value at the time of foreclosure is charged to the ALLL. NPAs are subject to periodic revaluations of the collateral underlying impaired loans and foreclosed real estate. The periodic revaluations are generally based on the appraised value of the property and may include additional liquidity adjustments based upon the expected retention period. BB&T’s policies require that valuations be updated at least annually and that upon foreclosure, the valuation must not be more than six months old, otherwise an updated appraisal is required. Routine maintenance costs, other costs of ownership, subsequent declines in marketfair value and net losses on disposal are included in foreclosed property expense.

ACL

The ACL includes the ALLL and the RUFC. The ACL represents management’s best estimate of probable credit losses inherent in the loan and lease portfolios and off-balance sheet lending commitments at the balance sheet date. Estimates for loan and lease losses are determined by analyzing historical loan and lease losses, historical loan and lease migration to charge-off experience, current trends in delinquencies and charge-offs, expected cash flows on purchasedPCI loans, current assessment of problemimpaired loans and leases, the results of regulatory examinations and changes in the size, composition and risk assessment of the loan and lease portfolio. As part of this process, BB&T develops a series of loss estimate factors, which are modeled projections of the frequency, timing and severity of losses. Changes to the ACL are made by charges to the provision for credit losses, which is reflected in the Consolidated Statements of Income. Loan or lease balances deemed to be uncollectible are charged off against the ALLL. Recoveries of amounts previously charged off are credited to the ALLL. The methodology used to determine the RUFC is inherently similar to that used to determine the collectively evaluated component of the ALLL, adjusted for factors specific to binding commitments, including the probability of funding and exposure at default. While management uses the best information available to establish the ACL, future adjustments may be necessary if economic conditions differ substantially from the assumptions used in computing the ACL or, if required by regulators based upon information available to them at the time of their examinations.

Accounting standards require the presentation of certain disclosure information at the portfolio segment level, which represents the level at which an entity develops and documents a systematic methodology to determine its ACL. BB&T concluded that its loan and lease portfolio consists of three portfolio segments; commercial, retail and acquired from FDIC.PCI. The commercial portfolio segment includes CRE, commercial and industrial and other loans originated by certain other lending subsidiaries, and was identified based on the risk-based approach used to estimate the ALLL for the vast majority of these loans. The retail portfolio segment includes direct retail lending, revolving credit, residential mortgage, sales finance and other loans originated by certain retail-oriented subsidiaries, and was identified based on the delinquency-based approach used to estimate the ALLL. The acquired from FDICPCI portfolio segment was identified based on the expected cash flows approach used to estimate the ALLL.

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See the "Loans and ACL" note for additional information about the classes of financing receivables included within each of these loan portfolio segments.
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A portion of the ALLL may not be allocated to any specific category of loans. Any unallocated portion of the ALLL reflects management’s best estimate of the elements of imprecision and estimation risk inherent in the calculation of the overall ALLL. During 2013, BB&T incorporated these elements into the ALLL determination for each loan category such that there is not an unallocated ALLL as of December 31, 2014 or 2013.

The entire amount of the ACL is available to absorb losses on any loan category or lending-related commitment.


The following provides a description of accounting policies and methodologies related to each of the portfolio segments:

Commercial

The vast majority of loans in the commercial lending portfolio are assigned risk ratings based on an assessment of conditions that affect the borrower’s ability to meet contractual obligations under the loan agreement. This process includes reviewing borrowers’ financial information, historical payment experience, credit documentation, public information, and other information specific to each borrower. Risk ratings are reviewed on an annual basis for all credit relationships with total credit exposure of $1 million or more, or at any point management becomes aware of information affecting the borrowers’ ability to fulfill their obligations.

 Risk Rating Description
 Pass Loans not considered to be problem credits
 Special Mention Loans that have a potential weakness deserving management’s close attention
Substandard Loans for which a well-defined weakness has been identified that may put full collection of contractual cash flows at risk

For commercial clients with total credit exposure less than $1 million, BB&T has developed an automated loan review system to identify and proactively manage accounts with a higher risk of loss. The “score”"score" produced by this automated system is updated monthly.

During 2013 and 2012,

To establish a reserve, BB&T reviewed&T's policy is to review all commercial lending relationships with outstanding debt of $5 million or more that were classified as substandard. During the first quarter of 2014, this process was revised such that any obligor with an outstanding nonaccrual balance of $3 million or more is reviewed.more. While this review is largely focused on the borrower’s ability to repay the loan, BB&T also considers the capacity and willingness of a loan’s guarantors to support the debt service on the loan as a secondary source of repayment. When a guarantor exhibits the documented capacity and willingness to support the loan, BB&T may consider extending the loan maturity and/or temporarily deferring principal payments if the ultimate collection of both principal and interest is not in question. In these cases, BB&T may not deem the loan to not be impaired due to the documented capacity and willingness of the guarantor to repay the loan. Loans are considered impaired when the borrower (or guarantor in certain circumstances) does not have the cash flow capacity or willingness to service the debt according to contractual terms, or it does not appear reasonable to assume that the borrower will continue to pay according to the contractual agreement. BB&T establishes a specific reserve for each loan that has been deemed impaired based on the criteria outlined above. The amount of the reserve is based on the present value of expected cash flows discounted at the loan’s effective interest rate and/or the value of collateral, net of costs to sell. In addition, beginning with the first quarter of 2014, BB&T reviews any collateral-dependent commercial loan balances between $1 million and $3 million to establish a specific reserve based on the underlying collateral value.

value, net of costs to sell.

BB&T also has a review process related to TDRs and other commercial impaired loans that are in commercial lending relationships with outstanding debt of less than $1 million at the balance sheet date.loans. In connection with this process, BB&T establishes reserves related to these loans that are calculated using an expected cash flow approach. These discounted cash flow analyses incorporate adjustments to future cash flows that reflect management’s best estimate of the default risk related to TDRs based on a combination of historical experience and management judgment.

BB&T also maintains reserves for collective impairment that reflect an estimate of losses related to non-impaired commercial loans as of the balance sheet date. Embedded loss estimates for BB&T’s commercial loan portfolio are based on estimated migration rates, which are based on historical experience, and current risk mix as indicated by the risk grading or scoring process described above. Embedded loss estimates may be adjusted to reflect current economic conditions and current portfolio trends including credit quality, concentrations, aging of the portfolio, and significant policy and underwriting changes.

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Retail

The majority of the ALLL related to the retail lending portfolio is calculated on a collective basis using delinquency status, which is the primary factor considered in determining whether a retail loan should be classified as nonaccrual. Embedded loss estimates for BB&T’s retail lending portfolio are based on estimated migration rates that are developed based on historical experience, and current risk mix as indicated by prevailing delinquency rates. These estimates may be adjusted to reflect current economic conditions and current portfolio trends. The remaining portion of the ALLL related to the retail lending portfolio relates to loans that have been deemed impaired based on their classification as a TDR at the balance sheet date. BB&T establishes specific reserves related to these TDRs using an expected cash flow approach. The ALLL for retail TDRs is based on discounted cash flow analyses that incorporate adjustments to future cash flows that reflect management’s best estimate of the default risk related to TDRs based on a combination of historical experience and management judgment.

Acquired Loans

Purchased impaired


PCI
PCI loans and(including all loans acquired in an FDIC-assisted transactiontransaction) are typically aggregated into loan pools based upon common risk characteristics. The ALLL for each loan pool is based on an analysis that is performed each period to estimate the expected cash flows. To the extent that the expected cash flows of a loan pool have decreased due to credit deterioration, BB&T establishes an ALLL. For non-FDIC assisted purchased non-impaired loans, BB&T uses an approach consistent with that described above for originated loans and leases.

Assets Acquired from the FDIC and Related FDIC Loss Share Receivable/Payable

Assets labeled “acquired from FDIC” include certain

Certain loans, securities and other assets that were acquired from the FDIC in conjunctionconnection with the Colonial transaction and are subject to one of thewere previously divided between two loss sharing agreements. The loss sharing agreement applicable to single family residential mortgage loans and related foreclosed property expires in 2019 and provides for loss and recovery sharing with the FDIC during its term. Assets subject toagreements, the single family loss sharingshare agreement are referred to as “covered” assets. Effective October 1,and the commercial loss share agreement. During 2014, the loss sharing provisions applicablerelated to the commercial loans, securities and other covered assets expired; however, Branch Bank must reimburse the FDIC for realized gains and recoveriesloss share agreement expired, but certain gain/recovery sharing was to occur through September 2017. During the third quarter of 2016, the loss share agreements were terminated. Refer to Note 3 “Securities”the "Securities" note and Note 4 “Loansthe "Loans and ACL”ACL" note for additional information. The FDIC loss share receivable includesincluded amounts related to net reimbursements that were expected to be received from the FDIC and iswas included in Otherother assets on the Consolidated Balance Sheets.Sheets for periods prior to the termination. The recognized amounts related to expected future payments to the FDIC, including any amounts resultingthat resulted from the aggregate loss calculation, arewere included in Accountsaccounts payable and other liabilities.

The FDIC’s obligation to reimburse Branch Bank with respect to loss sharing agreements began with the first dollar of loss incurred by BB&T on the covered assets. Covered assets, excluding certain non-agency MBS, are subject to a stated threshold of $5 billion that providesliabilities for the FDIC to reimburse Branch Bank for (1) 80% of cumulative net losses incurred up to $5 billion and (2) 95% of net losses in excess of $5 billion. Gains and recoveries on covered assets will offset losses, or be paidperiods prior to the FDIC, at the applicable loss share percentage in effect at the time of gain/recovery. Losses and gains on certain non-agency MBS are to be shared with the FDIC at 95% of such losses/gains. At the conclusion of the 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.

termination.

The income statement effect of the changes in the FDIC loss share receivable/payable includesincluded the accretion due to discounting and changes in expected net reimbursements. Decreases in expected net reimbursements, including the amounts expected to be paid to the FDIC as a result of the aggregate loss calculation, arewere recognized in income prospectively over the term of the loss share agreements consistent with the approach taken to recognize increases in cash flows on acquired loans. Increases in expected reimbursements arewere recognized in income in the same period that the provision for credit losses for the related loans iswas recognized. Subsequent to the recognition of ALLL related to specific assets, any decrease in expected net reimbursement would bewas recognized in income in the same period that the provision for loan losses for the related loans iswas released.

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Premises and Equipment

Premises, equipment, capital leases and leasehold improvements are stated at cost less accumulated depreciation and amortization. Land is stated at cost. In addition, purchased software and costs of computer software developed for internal use are capitalized provided certain criteria are met. Depreciation and amortization are computed principally using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized on a straight-line basis over the lesser of the lease terms, including certain renewals that were deemed probable at lease inception, or the estimated useful lives of the improvements. Capitalized leases are amortized using the same methods as premises and equipment over the estimated useful lives or lease terms, whichever is less. Obligations under capital leases are amortized using the effective interest method to allocate payments between principal reduction and interest expense. Rent expense and rental income on operating leases is recorded using the straight-line method over the appropriate lease terms.

Short-Term Borrowings

Federal funds purchased represent unsecured borrowings from

Bank-Owned Life Insurance

Life insurance policies on certain directors, officers, and employees, for which BB&T is the owner and beneficiary are stated at the cash surrender value within other banks and generally mature daily. Securities sold under repurchase agreements are borrowings collateralized primarily by securities of the U.S. government or its agencies and generally have maturities ranging from 1 day to 36 months. The terms of repurchase agreements may require BB&T to provide additional collateral if the fair value of the securities underlying the borrowings declines during the term of the agreement. Master notes are unsecured, non-negotiable obligations of BB&T (variable rate commercial paper) that matureassets in 270 days or less. Other short-term borrowed funds include unsecured bank notes that mature in less than one year and bank obligations with a seven day put option that are collateralized by municipal securities. These amounts are reflected as short-term borrowings on the Consolidated Balance SheetsSheet. Changes in cash surrender value and proceeds from insurance benefits are recorded based onin income from bank-owned life insurance in the amountConsolidated Statements of cash received in connection with the borrowing.

Income.


Income Taxes

Deferred income taxes have been provided when different accounting methods have been used in determining income for income tax purposes and for financial reporting purposes. Deferred tax assets and liabilities are recognized based on future tax consequences attributable to differences between the financial statement carrying values of assets and liabilities and their tax bases. In the event of changes in the tax laws, deferred tax assets and liabilities are adjusted in the period of the enactment of those changes, with the cumulative effects included in the current year’s income tax provision. Net deferred tax assets are included in other assets, and net deferred tax liabilities are included in accounts payable and other liabilities, in the Consolidated Balance Sheets.

Interest and penalties related to income taxes are recognized as a component of the provision for income taxes in the Consolidated Statements of Income.


Derivative Financial Instruments

A derivative is a financial instrument that derives its cash flows, and therefore its value, by reference to an underlying instrument, index or referenced interest rate. These instruments include interest rate swaps, caps, floors, collars, financial forwards and futures contracts, swaptions, when-issued securities, foreign exchange contracts and options written and purchased. 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. The fair value of derivatives in a gain or loss position is included in other assets or liabilities, respectively, on the Consolidated Balance Sheets. Cash collateral posted for derivative instruments in a loss position is included in restricted cash on the Consolidated Balance Sheets.

BB&T classifies its derivative financial instruments as either (1) a fair value hedge - hedge of an exposure to changes in the fair value of a recorded asset or liability, (“fair value hedge”), (2) a cash flow hedge - hedge of an exposure to changes in the cash flows of a recognized asset, liability or forecasted transaction, (“cash flow hedge”), (3) a hedge of a net investment in a subsidiary, or (4) derivatives not designated as hedges. Changes in the fair value of derivatives not designated as hedges are recognized in current period earnings. BB&T has master netting agreements with the derivatives dealers with which it does business, but BB&T presents gross assets and liabilities on the Consolidated Balance Sheets.

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BB&T uses the long-haul method to assess hedge effectiveness. BB&T documents, bothAt inception and at inception andleast quarterly over the life of the hedge, at least quarterly,BB&T documents its analysis of actual and expected hedge effectiveness. This analysis includes techniques such as regression analysis and hypothetical derivatives to demonstrate that the hedge has been, and is expected to be, highly effective in off-setting corresponding changes in the fair value or cash flows of the hedged item. For cash flow hedges involving interest rate caps and collars, this analysis also includes consideration of whether critical terms match, the strike price of the hedging option matches the specified level beyond (or within) which the entity’s exposure is being hedged, the hedging instrument’s inflows (outflows) at its maturity date completely offset the change in the hedged transaction’s cash flows for the risk being hedged and the hedging instrument can be exercised only on its contractual maturity date. For a qualifying fair value hedge, changes in the value of the derivatives that have been highly effective as hedges are recognized in current period earnings along with the corresponding changes in the fair value of the designated hedged item attributable to the risk being hedged. For a qualifying cash flow hedge, changes in the fair value of the derivatives that have been highly effective are recognized in OCI until the related cash flows from the hedged item are recognized in earnings. For qualifying cash flow hedges involving interest rate caps and collars, the initial fair value of the premium paid is allocated and recognized in the same future period that the hedged forecasted transaction impacts earnings.

For either fair value hedges or cash flow hedges, ineffectiveness may be recognized to the extent that changes in the value of the derivative instruments do not perfectly offset changes in the value of the hedged items. If the hedge ceases to be highly effective, BB&T discontinues hedge accounting and recognizes the interim changes in fair value in current period earnings. If a derivative that qualifies as a fair value or cash flow hedge is terminated or de-designated, the designation removed, the realized or then unrealized gain or loss iscumulative changes in value are recognized in income over the life of the hedged item (fair value hedge) or in the period in which the hedged item affects earnings (cash flow hedge). Immediate recognition in earnings is required upon sale or extinguishment of the hedged item (fair value hedge) or if it is probable that the hedged cash flows will not occur (cash flow hedge).


Derivatives used to manage economic risk not designated as hedges are primarily represent economic risk management instruments ofused to manage economic risk from MSRs and mortgage banking operations, with gains or losses included in mortgage banking income. In connection with its mortgage banking activities, BB&T enters into loan commitments to fund residential mortgage loans at specified rates and for specified periods of time. To the extent that BB&T’s interest rate lock commitments relate to loans that will be held for sale upon funding, they are also accounted for as derivatives, with gains or losses included in mortgage banking income. Gains and losses on other derivatives used to manage economic risk are primarily associated with client derivative activity and are included in other income.

Credit risk resulting from derivatives arises when amounts receivable from a counterparty exceed those payable to the same counterparty.counterparty, taking into account posted collateral. The risk of loss with respect to over-the-counter derivatives, eligible margin loans and repurchase-style transactions is addressed by subjecting counterparties to a credit review and approval process similar to the process in making loans or other extensions of credit and/or by requiring collateral.

Derivative dealer counterparties operate under agreements to provide cash and/or highly liquid securities on a daily basis for unsecured credit exposure beyond negotiated limits, while client derivatives that are associated with loans are cross-collateralized with the loan.

BB&T only transacts with dealer counterparties that are national market makers with strong credit standings and requires liquid collateral (cash or government securities) to secure credit exposure. Due to these factors, the fair value of derivatives with dealer counterparties is primarily based on the interest rate mark of each trade. The fair value of interest rate derivatives with clients includes a credit valuation adjustment.


Collateral obtained to secure margin loans includes equities, corporate and municipal securities, and repurchase-style transactions are generally secured by government and agency securities. The value of collateral for margin loans and repurchase-style transactions is monitored daily with settlement required when changes in value exceed established limits by counterparty. Due to the liquid nature of collateral, the frequency of transactions and collateral monitoring, a reserve for credit loss is established only when a risk of loss is identified.

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Goodwill and Other Intangible Assets

Goodwill represents the cost in excess of the fair value of net assets acquired (including identifiable intangibles) in transactions accounted for as acquisitions.business combinations. BB&T allocates goodwill to the reporting unit(s) that receives significant benefits from the acquisition. Goodwill is tested at least annually for impairment during the fourth quarteras of October 1st each year and more frequently if circumstances exist that indicate a possible reduction in the fair value of the business below its carrying value. BB&T measures impairment using the present value of estimated future cash flows based upon available information.flows. Discount rates are based upon the cost of capital specific to the industry in which the reporting unit operates. If the carrying value of the reporting unit exceeds its fair value, a second analysis is performed to measure the fair value of all assets and liabilities. If, based on the second analysis, it is determined that the fair value of the assets and liabilities of the reporting unit is less than the carrying value, BB&T would recognize impairment for the excess of carrying value over fair value.

CDI and other intangible assets include premiums paid for acquisitions of core deposits and other identifiable intangible assets. Intangible assets other than goodwill, which are determined to have finite lives, are amortized based upon the estimated economic benefits received.

MSRs

BB&T has two primary classes of MSRs for which it separately manages the economic risks: residential and commercial. ResidentialBoth classes of MSRs are recorded on the Consolidated Balance Sheets primarily at fair value with changes in fair value recorded as a component of mortgage banking income. Various derivative instruments are used to mitigate the income statement effect of changes in fair value due to changes in valuation inputs and assumptions of the residential MSRs. Commercial MSRs are recorded as other assets on the Consolidated Balance Sheets at the lower of cost or market and are amortized in proportion to, and over the estimated period, that net servicing income is expected to be received based on projections of the amount and timing of estimated future net cash flows. The amount and timing of estimated future net cash flows are updated based on actual results and updated projections. BB&T periodically evaluates its commercial MSRs for impairment.


Equity-Based Compensation

BB&T maintains various equity-based compensation plans that provide for the granting of stock options (incentive and nonqualified), stock appreciation rights, restricted stock, RSUs, performance units and performance shares to selected employees and directors. BB&T values share-based awards at the grant date fair value and recognizes the expense over the requisite service period taking into account retirement eligibility.

Pension and Postretirement Benefit Obligations

BB&T offers various pension plans and postretirement benefit plans to employees. Calculation of the obligations and related expenses under these plans requires the use of actuarial valuation methods and assumptions. The discount rate assumption used to measure the postretirement benefit obligations is set by reference to a high quality corporate bond yield curve and the individual characteristics of the plan such as projected cash flow patterns and payment durations. The expected long-term rate of return on assets is based on the expected returns for each major asset class in which the plan invests, adjusted for the weight of each asset class in the target mix.

Insurance Income

Insurance commission revenue is generally recognized at the later of the billing date or the effective date of the related insurance policies. Insurance premiums from underwriting activities are recognized as income over the policy term. The portion of premiums that will be earned in the future is deferred and included in accounts payable and other liabilities in the Consolidated Balance Sheets.

Segments

Segment results are presented based on internal management accounting policies that were designed to support BB&T’s strategic objectives. The Other, Treasury and Corporate segment includes financial data from subsidiaries below the quantitative and qualitative thresholds requiring disclosure. Refer to Note 21 “Operating Segments”the "Operating Segments" note for additional disclosures regarding BB&T’s segments.

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Changes in Accounting Principles and Effects of New Accounting Pronouncements

In February 2015,

Standards Adopted DuringYear Ended December 31, 2016 - BB&T adopted the FASB issued newfollowing guidance effective January 1, 2016 (unless otherwise specified), none of which were material to the consolidated financial statements:

Derivatives and Hedging (adopted March 2016) - clarified that derivative instrument novations do not require dedesignation of the related hedging relationship provided that all other hedge accounting criteria continue to be met.

Fair Value Measurement- eliminated 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.

Internal-Use Software - requires the software license element of a cloud computing arrangement be accounted for consistent with the acquisition of other software licenses; otherwise, the arrangement should be accounted for as a service contract.

Debt Issuance Costs- 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.

Consolidation. The new guidance - provides an additional requirement for a limited partnership or similar entity to qualify as a voting interest entity, and also amendsamending the criteria for consolidating such an entity.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

Standards Adopted Subsequent to December 15, 2015. The Company is currently evaluating this guidance to determine31, 2016 or Not Yet Adopted - the impact on its consolidated financial statements.

In August 2014, the FASB issued new guidance related toReceivables. 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. This guidance is effective for interim and annual reporting periods beginning after December 15, 2014. The adoption of thisthe guidance was not material, or for standards not yet adopted is not expected to be material, to the consolidated financial statements.

In June 2014,statements unless otherwise specified:


Stock Compensation (adopted January 1, 2017) - eliminates the FASB issued newconcept of additional paid-in capital pools for equity-based awards and requires that the related excess tax benefits and tax deficiencies be classified as an operating activity in the statement of cash flows. The guidance relatedalso allows entities toRepurchase-to-Maturity Transactions and Repurchase Financings. The new make a one-time policy election to account for forfeitures when they occur, instead of accruing compensation cost based on the number of awards expected to vest. Additionally, the guidance changes the requirement for an award to qualify for equity classification by permitting tax withholding up to the maximum statutory tax rate instead of the minimum statutory tax rate. Cash paid by an employer when directly withholding shares for tax withholding purposes should be classified as a financing activity in the Statement of Cash Flows. The Company has elected to account for forfeitures of equity-based awards when they occur.

Investments (adopted January 1, 2017) - eliminates the requirement to retroactively adjust the financial statements when a change in ownership or influence causes an existing investment to qualify for the equity method of accounting. Also requires the investor to add the cost of acquiring the additional interest in the investee to the current basis of the investor's previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for repurchase-to-maturity transactionsequity method accounting.

Derivatives and Hedging (adopted January 1, 2017) - clarifies that an exercise contingency does not need to secured borrowing accounting. The guidance also requires separate accounting for a transferbe evaluated to determine whether it relates to interest rates and credit risk in an embedded derivative analysis. An entity performing the assessment will be required to assess the embedded call or put options solely in accordance with the pre-existing decision sequence.

Business Combinations (adopted January 1, 2017) -provides clarification on the definition of a financial asset executed contemporaneouslybusiness and provides criteria to aid in the assessment of whether an integrated set of assets and activities constitutes a business.

Statement of Cash Flows- requires restricted cash and restricted cash equivalents to be included with a repurchase agreement withcash and cash equivalents when reconciling the same counterparty, which will result in secured borrowing accounting forbeginning-of-period and end-of-period total amounts shown on the repurchase agreement.statement of cash flows. This guidance is effective for interim and annual reporting periodsfiscal years beginning after December 15, 2014.2017 and interim periods within those fiscal years. The adoption of this guidance will only affect the Consolidated Statements of Cash Flows.


Statement of Cash Flows- clarifies the classification within the statement of cash flows for certain transactions, including debt extinguishment costs, zero-coupon debt, contingent consideration related to business combinations, insurance proceeds, equity method distributions and beneficial interests in securitizations. The guidance also clarifies that cash flows with aspects of multiple classes of cash flows or that cannot be separated by source or use should be classified based on the activity that is not expectedlikely to be materialthe predominant source or use of cash flows for the item. This guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years.

Liabilities- requires companies to recognize breakage on prepaid stored-value products in accordance with the consolidated financial statements.

In May 2014, the FASBrecently issued new guidance related toon Revenue from Contracts with Customers. This guidance supersedes the revenue recognition requirements in Accounting Standards Codification Topic 605,is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years.


Revenue Recognition, and most industry-specific guidance throughout the Accounting Standards Codification. The guidance from Contracts with Customers- 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. ThisThe guidance is effective for interim and annual reporting periods beginning after December 15, 2016.2017. Because the guidance does not apply to revenue associated with financial instruments, including loans and securities, the new guidance is not expected to have a material impact on the components of the Consolidated Statement of Income most closely associated with financial instruments, including securities gains/losses and interest income. The Company is currently evaluating this guidance to determine the impact on itsother components of noninterest income.

Financial Instruments- requires the majority of equity investments to be measured at fair value with changes in fair value recognized in net income, excluding equity investments that are consolidated financial statements.

In January 2014,or accounted for under the FASB issued new guidance related toInvestments in Qualified Affordable Housing Projects.equity method of accounting. The new guidance allows an entity, provided certain criteria are met,equity investments without readily determinable fair values to electbe measured at cost minus impairment, with a qualitative assessment required to identify impairment. For financial instruments recorded at amortized cost, the proportional amortization methodnew guidance requires public companies to accountuse exit prices to measure the fair value for these investments. The proportional amortization method allows an entitydisclosure purposes, eliminates the disclosure requirements related to amortizemeasurement assumptions and requires separate presentation of financial assets and liabilities based on form and measurement category. In addition, for liabilities measured at fair value under the initial cost offair value option, the investmentchanges in proportionfair value due to the amount of tax credits and other tax benefits received and recognize the net investment performancechanges in the income statement as a component of the provision for income taxes.instrument-specific credit risk should be recognized in OCI. This guidance is effective for interim and annual reporting periodsfiscal years beginning after December 15, 2014. See Note 15 “Commitments2017 and Contingencies” forinterim periods within those fiscal years.


Leases- requires lessees to recognize assets and liabilities related to certain operating leases on the estimated impact of the adoption of this guidance.

Effective January 1, 2014, the Company adopted new guidance related toTroubled Debt Restructurings.balance sheet. The new guidance clarifies the timing of when an in substance repossession or foreclosure of collateralized residential real property is deemed to have occurred and also requires disclosureadditional disclosures by lessees and contains targeted changes to accounting by lessors. This guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Upon adoption, the Company expects to report higher assets and liabilities as a result of including additional leases on the Consolidated Balance Sheet.


Credit Losses- replaces the incurred loss impairment methodology in current GAAP with an expected credit loss methodology and requires consideration of a broader range of information to determine credit loss estimates. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses. Purchased credit deteriorated loans will receive an allowance account for expected credit losses at the acquisition date that represents a component of the purchase price allocation. Credit losses relating to AFS debt securities will be recorded through an allowance for expected credit losses, with such allowance limited to the amount of foreclosed residential real estate propertyby which fair value is below amortized cost. An allowance will be established for estimated credit losses on HTM securities. This guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Upon adoption, the recorded investment in consumer mortgage loans collateralized by residential real estate propertyCompany expects that arethe ACL will likely be materially higher; however, the Company is still in the process of foreclosure. determining the magnitude of the increase and its impact on the Consolidated Financial Statements.

Intangibles—Goodwill and Other- simplifies the measurement of goodwill impairment. An entity will no longer perform a hypothetical purchase price allocation to measure goodwill impairment. Instead, impairment will be measured using the difference between the carrying amount and the fair value of the reporting unit. This guidance is effective for impairment tests in fiscal years beginning after December 15, 2019 and interim periods within those fiscal years.


NOTE 2. Acquisitions and Divestitures
On April 1, 2016, BB&T acquired all of the outstanding stock of National Penn, which conducted its business operations primarily through its bank subsidiary, National Penn Bank, which was merged into Branch Bank. National Penn operated other subsidiaries in Pennsylvania, New Jersey and Maryland to provide a wide range of retail and commercial banking and financial products and services. National Penn also operated a trust and investment company, an asset management company and a property and casualty insurance brokerage company. National Penn had 126 banking offices as of the acquisition date. BB&T acquired National Penn in order to increase BB&T’s market share in these areas.

The adoptionacquisition of National Penn constituted a business combination. Accordingly, the assets acquired and liabilities assumed are presented at their fair values in the table below. The determination of fair value requires 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. These fair value estimates 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. Immaterial amounts of the intangible assets recognized are deductible for income tax purposes.
  National Penn
  UPB Fair Value
  (Dollars in millions)
Assets acquired:    
Cash, due from banks and federal funds sold   $216
Securities   2,499
Loans and leases:    
Commercial and industrial $2,817
 2,596
CRE-income producing properties 1,450
 1,202
CRE-construction and development 165
 127
Direct retail lending 801
 767
Revolving credit 7
 7
Residential mortgage 1,217
 1,004
Sales finance 166
 162
PCI 181
 124
Total loans and leases $6,804
 5,989
Goodwill   795
CDI   67
Other assets   503
Total assets acquired   10,069
Liabilities assumed:    
Deposits:    
Noninterest-bearing deposits   1,209
Interest-bearing deposits   5,420
Total deposits   6,629
Debt   1,756
Other liabilities   66
Total liabilities assumed   8,451
Consideration paid   $1,618
     
Cash paid   $555
Fair value of common stock issued, including replacement equity awards   1,063

The purchase price allocation for this guidance wasacquisition has not materialbeen finalized. The following is a description of the methods used to determine the fair values of significant assets and liabilities.
Cash, due from banks and federal funds sold: The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets.
Securities: Fair values for securities are based on quoted market prices, where available. If quoted market prices are not available, fair value estimates are based on observable inputs including quoted market prices for similar instruments, quoted market prices that are not in an active market or other inputs that are observable in the market. In the absence of observable inputs, fair value is estimated based on pricing models and/or discounted cash flow methodologies.

Loans and leases: Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan, amortization status and current discount rates. Loans were grouped together according to similar characteristics and were treated in the aggregate when applying various valuation techniques. The discount rates used for loans are based on current market rates for new originations of comparable loans and include adjustments for liquidity concerns. The discount rate does not include a factor for credit losses as that has been included as a reduction to the consolidated financial statements.

Effective January 1, 2014,estimated cash flows.

CDI: This intangible asset represents the Company adopted new guidance relatedvalue of the relationships with deposit customers. The fair value was estimated based on a discounted cash flow methodology that gave appropriate consideration toInvestment Companies. expected customer attrition rates, cost of the deposit base, reserve requirements and the net maintenance cost attributable to customer deposits. The new guidance amendsCDI is being amortized over 10 years based upon the criteriaestimated economic benefits received.
Deposits: The fair values used for an entity to qualify as an investment companythe demand and requires an investment company to measure all of its investmentssavings deposits by definition equal the amount payable on demand at the acquisition date. The fair value. The adoption of this guidance was not materialvalues for time deposits are estimated using a discounted cash flow calculation that applies interest rates currently being offered to the consolidated financial statements.

NOTE 2. Business Combinations

During 2014,contractual interest rates on such time deposits.

Debt: The fair values of long-term debt instruments are estimated based on quoted market prices for the instrument if available, or for similar instruments if not available, or by using discounted cash flow analyses, based on current incremental borrowing rates for similar types of instruments.

Other Acquisitions and Divestitures

On April 1, 2016, BB&T purchased 21 bank branchesinsurance broker Swett & Crawford from Cooper Gay Swett & Crawford for $461 million in Texas from Citigroup,cash. The purchase price allocation for this acquisition has not been finalized. Refer to the “Goodwill and Other Intangible Assets” note in the "Notes to Consolidated Financial Statements" for additional information.
See BB&T's Annual Report on Form 10-K for the year ended December 31, 2015 for additional information related to the following transactions.

During the third quarter of 2015, BB&T acquired Susquehanna Bancshares, Inc., resulting in the acquisitionaddition of $1.2$18.3 billion in deposits, $112 million in loansassets and $1.1$14.1 billion in cashdeposits. Susquehanna had 245 financial centers in Pennsylvania, Maryland, New Jersey and other assets. GoodwillWest Virginia.

During the second quarter of $29 million and CDI of $20 million were recognized in connection with the transaction.

During 2012, BB&T completed the acquisition of Fort Lauderdale, Florida-based BankAtlantic.2015, BB&T acquired approximately $1.7 billion in loans and assumed approximately $3.5 billion in deposits.

BB&T has reached agreements to acquire Susquehanna Bancshares, Inc., The Bank of Kentucky, Financial Corporationwhich provided $2.0 billion in assets, $1.6 billion in deposits and 32 financial centers.


During the second quarter of 2015, BB&T purchased additional retail branchesownership interest in Texas.

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AmRisc, LP from the noncontrolling owners in exchange for cash and full ownership of American Coastal, which resulted in a net charge to equity.
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During the first quarter of 2015, BB&T acquired 41 financial centers in Texas, which provided $238 million in assets and $1.9 billion in deposits.


NOTE 3. Securities

     Amortized Gross Unrealized Fair 
 December 31, 2014 Cost Gains Losses Value 
                 
     (Dollars in millions) 
 AFS securities:             
  U.S. Treasury $ 1,230  $ 1  $ —    $ 1,231  
  MBS issued by GSE   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  
  MBS issued by GSE   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  

     Amortized Gross Unrealized Fair 
 December 31, 2013 Cost Gains Losses Value 
                 
     (Dollars in millions) 
 AFS securities:             
  U.S. Treasury $595  $ —    $ —    $595  
  MBS issued by GSE   18,397    78    546    17,929  
  States and political subdivisions   1,877    65    91    1,851  
  Non-agency MBS   264    27    —      291  
  Other   46    —      1    45  
  Securities acquired from FDIC   989    404    —      1,393  
   Total AFS securities $ 22,168  $ 574  $ 638  $ 22,104  
                 
 HTM securities:             
  U.S. Treasury $ 392  $ —    $ 8  $ 384  
  GSE   5,603    2    397    5,208  
  MBS issued by GSE   11,636    38    220    11,454  
  States and political subdivisions   33    2    —      35  
  Other   437    12    —      449  
   Total HTM securities $ 18,101  $ 54  $ 625  $ 17,530  

The fair value

  Amortized Cost Gross Unrealized Fair Value
December 31, 2016  Gains Losses 
  (Dollars in millions)
AFS securities:        
U.S. Treasury $2,669
 $2
 $84
 $2,587
GSE 190
 —
 10
 180
Agency MBS 21,819
 13
 568
 21,264
States and political subdivisions 2,198
 56
 49
 2,205
Non-agency MBS 446
 233
 —
 679
Other 11
 —
 —
 11
Total AFS securities $27,333
 $304
 $711
 $26,926
         
HTM securities:        
U.S. Treasury $1,098
 $20
 $—
 $1,118
GSE 2,197
 14
 30
 2,181
Agency MBS 13,225
 40
 180
 13,085
States and political subdivisions 110
 —
 —
 110
Other 50
 2
 —
 52
Total HTM securities $16,680
 $76
 $210
 $16,546
  Amortized Cost Gross Unrealized Fair Value
December 31, 2015  Gains Losses 
  (Dollars in millions)
AFS securities:        
U.S. Treasury $1,836
 $2
 $6
 $1,832
GSE 51
 —
 —
 51
Agency MBS 20,463
 22
 439
 20,046
States and political subdivisions 2,312
 103
 40
 2,375
Non-agency MBS 683
 306
 —
 989
Other 4
 —
 —
 4
Total AFS securities $25,349
 $433
 $485
 $25,297
         
HTM securities:        
U.S. Treasury $1,097
 $22
 $—
 $1,119
GSE 5,045
 16
 98
 4,963
Agency MBS 12,267
 70
 22
 12,315
States and political subdivisions 63
 —
 —
 63
Other 58
 2
 1
 59
Total HTM securities $18,530
 $110
 $121
 $18,519
During the third quarter of securities acquired from the FDIC included non-agency MBS of $931 million and $1.1 billion as of December 31, 2014 and December 31, 2013, respectively, and state and political subdivision securities of $312 million and $314 million as of December 31, 2014 and December 31, 2013. Effective October 1, 2014, securities subject to the commercial loss sharing2016, Branch Bank entered into an early termination agreement with the FDIC that terminated the loss share agreements. As a result of the settlement, no future loss sharing or gain sharing will occur related to the Colonial acquisition were no longer covered by loss sharing;acquisition. The accounting for the affected securities has not changed; however, any gains on the sale of these securities through September 30, 2017 would be shared withhave been classified into their respective categories and prior periods have been revised to conform to the FDIC. Since thesecurrent presentation.

During 2015, BB&T transferred $517 million of HTM securities areto AFS. These securities, which were sold in 2015, represented securities collateralized by student loans for which there was a significant unrealized gain position, they continue to be effectively coveredincrease in risk weighting as any declines in the unrealized gainsa result 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 $626 million at December 31, 2014. Any further declines below the contractually-specified amount would not be covered.

implementation of Basel III.


Certain investments in marketable debt securities and MBS issued by FNMA and FHLMC exceeded ten percent10% of shareholders’ equity at December 31, 2014.2016. The FNMA investments had total amortized cost and fair value of $12.5$13.9 billion and $12.3$13.6 billion, respectively. The FHLMC investments had total amortized cost and fair value of $5.5 billion.

104
$7.8 billion and $7.6 billion, respectively.
Table of Contents


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.

     Year Ended December 31, 
     2014 2013 2012 
              
     (Dollars in millions) 
 Balance at beginning of period$ 78  $ 98  $ 130  
  Credit losses on securities without previous OTTI  6    ―      ―    
  Credit losses on securities for which OTTI was previously recognized  ―      ―      5  
  Reductions for securities sold/settled during the period  (17)   (20)   (37) 
  Credit recoveries through yield  (3)   ―      ―    
 Balance at end of period$ 64  $ 78  $ 98  

Assets acquired from the FDIC were excluded from this table prior to the termination of the loss share agreements.

  Year Ended December 31,
  2016 2015 2014
  (Dollars in millions)
Balance at beginning of period $42
 $64
 $78
Credit losses on securities without previous OTTI —
 —
 6
Credit losses on securities for which OTTI was previously recognized —
 4
 —
Reductions for securities sold/settled during the period (21) (22) (17)
Credit recoveries through yield (1) (4) (3)
Included as a result of loss share termination 1
 —
 —
Balance at end of period $21
 $42
 $64
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 
 December 31, 2014 Cost Value Cost Value 
                 
     (Dollars in millions) 
 Due in one year or less $ 612  $ 612  $ ―    $ ―    
 Due after one year through five years   828    839    750    734  
 Due after five years through ten years   583    611    6,007    5,960  
 Due after ten years   18,637    18,845    13,483    13,619  
  Total debt securities $ 20,660  $ 20,907  $ 20,240  $ 20,313  

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 
 December 31, 2014 Value Losses Value Losses Value Losses 
                        
      (Dollars in millions) 
 AFS securities:                   
  MBS issued by GSE $ 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  
  MBS issued by GSE   1,329    5    800    7    2,129    12  
   Total $ 2,225  $ 10  $ 4,768  $ 110  $ 6,993  $ 120  

105
Table of Contents

      Less than 12 months 12 months or more Total 
      Fair Unrealized Fair Unrealized Fair Unrealized 
 December 31, 2013 Value Losses Value Losses Value Losses 
                        
      (Dollars in millions) 
 AFS securities:                   
  MBS issued by GSE $ 10,259  $ 406  $ 1,935  $ 140  $ 12,194  $ 546  
  States and political subdivisions   232    8    441    83    673    91  
  Securities acquired from FDIC   34    1    ―      ―      34    1  
   Total $ 10,525  $ 415  $ 2,376  $ 223  $ 12,901  $ 638  
                        
 HTM securities:                   
  U.S. Treasury $ 384  $ 8  $ ―    $ ―    $ 384  $ 8  
  GSE   4,996    397    ―      ―      4,996    397  
  MBS issued by GSE   8,800    219    48    1    8,848    220  
   Total $ 14,180  $ 624  $ 48  $ 1  $ 14,228  $ 625  

  AFS HTM
December 31, 2016 Amortized Cost Fair Value Amortized Cost Fair Value
  (Dollars in millions)
Due in one year or less $275
 $275
 $—
 $—
Due after one year through five years 1,013
 1,018
 1,683
 1,703
Due after five years through ten years 2,670
 2,580
 1,688
 1,672
Due after ten years 23,375
 23,053
 13,309
 13,171
Total debt securities $27,333
 $26,926
 $16,680
 $16,546
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
December 31, 2016 Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
  (Dollars in millions)
AFS securities:            
U.S. Treasury $2,014
 $84
 $—
 $—
 $2,014
 $84
GSE 180
 10
 —
 —
 180
 10
Agency MBS 14,842
 342
 5,138
 226
 19,980
 568
States and political subdivisions 365
 7
 314
 42
 679
 49
Total $17,401
 $443
 $5,452
 $268
 $22,853
 $711
             
HTM securities:  
  
  
  
  
  
GSE $1,762
 $30
 $—
 $—
 $1,762
 $30
Agency MBS 7,717
 178
 305
 2
 8,022
 180
Total $9,479
 $208

$305
 $2
 $9,784
 $210


  Less than 12 months 12 months or more Total
December 31, 2015 Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
  (Dollars in millions)
AFS securities:            
U.S. Treasury $1,211
 $6
 $—
 $—
 $1,211
 $6
Agency MBS 12,052
 199
 5,576
 240
 17,628
 439
States and political subdivisions 64
 1
 329
 39
 393
 40
Total $13,327
 $206
 $5,905
 $279
 $19,232
 $485
             
HTM securities:  
  
  
  
  
  
GSE $2,307
 $41
 $1,743
 $57
 $4,050
 $98
Agency MBS 3,992
 21
 124
 1
 4,116
 22
Other 56
 1
 —
 —
 56
 1
Total $6,355
 $63
 $1,867
 $58
 $8,222
 $121
Periodic reviews are conducted to identify and evaluate each investment with an unrealized loss for OTTI. An unrealized loss exists when the current fair value of an individual security is less than its amortized cost basis. Unrealized losses that are determined to be temporary in nature are recorded, net of tax, in AOCI for AFS securities. The unrealized losses on GSE securities and agency MBS issued by GSE were the result of increases in market interest rates compared to the date the securities were acquired rather than the credit quality of the issuers.

Cash flow modeling is used to evaluate non-agency MBS in an unrealized loss position for potential credit impairment. These models give consideration to long-term macroeconomic factors applied to current security default rates, prepayment rates and recovery rates and security-level performance. At December 31, 2014, one2016, there were no non-agency MBS had an immaterial amount ofwith other than temporary credit impairment.

At December 31, 2014, $55 million2016, the majority of the unrealized loss on municipal securities was the result of fair value hedge basis adjustments that are a component of amortized cost. Municipal securities in an unrealized loss position are evaluated for credit impairment through a qualitative analysis of issuer performance and the primary source of repayment. At December 31, 2014,2016, the evaluation of municipal securities indicated onedid not indicate any municipal security had an immaterial amount ofsecurities with other than temporary credit impairment.


NOTE 4. Loans and ACL


During the third quarter of 2016, Branch Bank entered into an early termination agreement with the FDIC that terminated the loss share agreements. As a result, the assets acquired from the FDIC are no longer covered by loss sharing. The accounting for the related loans is unaffected by the termination, and these loans will continue to be carried in PCI.

During the third quarter of 2016, a sales finance portfolio totaling $1.0 billion was acquired. During the fourth quarter of 2016, a sales finance portfolio totaling $1.9 billion was acquired.
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 first quarter of 2014, the CRE loan categories were realigned into CRE – income producing properties and CRE – construction and development in order to better reflect the nature of the underlying loans. Prior period data has been reclassified to conform to this new presentation.

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,


  Accruing    
December 31, 2016 Current 30-89 Days Past Due 90 Days Or More Past Due Nonaccrual Total
  (Dollars in millions)
Commercial:          
Commercial and industrial $51,329
 $27
 $—
 $363
 $51,719
CRE-income producing properties 14,492
 6
 —
 40
 14,538
CRE-construction and development 3,800
 2
 —
 17
 3,819
Dealer floor plan 1,413
 —
 —
 —
 1,413
Other lending subsidiaries 7,660
 21
 —
 10
 7,691
Retail:         

Direct retail lending 11,963
 60
 6
 63
 12,092
Revolving credit 2,620
 23
 12
 —
 2,655
Residential mortgage-nonguaranteed 28,378
 393
 79
 172
 29,022
Residential mortgage-government guaranteed 324
 132
 443
 —
 899
Sales finance 11,179
 76
 6
 6
 11,267
Other lending subsidiaries 6,931
 301
 —
 65
 7,297
PCI 784
 36
 90
 —
 910
Total $140,873
 $1,077
 $636
 $736
 $143,322

  Accruing    
December 31, 2015 Current 30-89 Days Past Due 90 Days Or More Past Due Nonaccrual Total
  (Dollars in millions)
Commercial:          
Commercial and industrial $48,157
 $36
 $—
 $237
 $48,430
CRE-income producing properties 13,370
 13
 —
 38
 13,421
CRE-construction and development 3,710
 9
 —
 13
 3,732
Dealer floor plan 1,215
 —
 —
 —
 1,215
Other lending subsidiaries 6,771
 18
 —
 6
 6,795
Retail:  
  
  
  
 

Direct retail lending 11,032
 58
 7
 43
 11,140
Revolving credit 2,478
 22
 10
 —
 2,510
Residential mortgage-nonguaranteed 29,038
 397
 55
 173
 29,663
Residential mortgage-government guaranteed 306
 78
 486
 —
 870
Sales finance 10,243
 72
 5
 7
 10,327
Other lending subsidiaries 6,381
 286
 —
 59
 6,726
PCI 966
 42
 114
 —
 1,122
Total $133,667
 $1,031
 $677
 $576
 $135,951
The following tables present the carrying amount of loans subject to the commercial loss sharing agreement with the FDICby risk rating. PCI loans are excluded because their related to the Colonial acquisition were no longer coveredALLL is determined by loss sharing. At December 31, 2014, these loans hadloan pool performance.
December 31, 2016 Commercial & Industrial CRE-Income Producing Properties CRE-Construction and Development Dealer Floor Plan Other Lending Subsidiaries
  (Dollars in millions)
Commercial:          
Pass $49,921
 $14,061
 $3,718
 $1,404
 $7,604
Special mention 314
 124
 38
 —
 33
Substandard-performing 1,121
 313
 46
 9
 44
Nonperforming 363
 40
 17
 —
 10
Total $51,719
 $14,538
 $3,819
 $1,413
 $7,691

December 31, 2016 Direct Retail Lending Revolving Credit Residential Mortgage Sales Finance Other Lending Subsidiaries
  (Dollars in millions)
Retail:          
Performing $12,029
 $2,655
 $29,749
 $11,261
 $7,232
Nonperforming 63
 —
 172
 6
 65
Total $12,092
 $2,655
 $29,921
 $11,267
 $7,297
December 31, 2015 Commercial & Industrial CRE-Income Producing Properties CRE-Construction and Development Dealer Floor Plan Other Lending Subsidiaries
  (Dollars in millions)
Commercial:          
Pass $46,760
 $12,940
 $3,619
 $1,195
 $6,757
Special mention 305
 166
 29
 6
 3
Substandard-performing 1,128
 277
 71
 14
 29
Nonperforming 237
 38
 13
 —
 6
Total $48,430
 $13,421
 $3,732
 $1,215
 $6,795

December 31, 2015 Direct Retail Lending Revolving Credit Residential Mortgage Sales Finance Other Lending Subsidiaries
  (Dollars in millions)
Retail:          
Performing $11,097
 $2,510
 $30,360
 $10,320
 $6,667
Nonperforming 43
 —
 173
 7
 59
Total $11,140
 $2,510
 $30,533
 $10,327
 $6,726

 The following tables present a carrying valuesummary of $561 million, a UPB of $836 million and an allowance of $38 million and are included in acquired from FDIC loans. Loans totaling $654 million at December 31, 2014 continue to be covered by loss sharing and are includedactivity in the acquired from FDIC balance.

During 2013, BB&T soldACL:

Year Ended December 31, 2016 Beginning Balance Charge-Offs Recoveries Provision (Benefit) Other Ending Balance
  (Dollars in millions)
Commercial:            
Commercial and industrial $466
 $(128) $40
 $122
 —
 $500
CRE-income producing properties 135
 (8) 8
 (18) —
 117
CRE-construction and development 37
 (1) 11
 (22) —
 25
Dealer floor plan 8
 —
 —
 3
 —
 11
Other lending subsidiaries 22
 (22) 6
 23
 —
 29
Retail:  
  
  
  
    
Direct retail lending 105
 (53) 26
 25
 —
 103
Revolving credit 104
 (69) 20
 51
 —
 106
Residential mortgage-nonguaranteed 194
 (35) 3
 24
 —
 186
Residential mortgage-government guaranteed 23
 (5) —
 23
 —
 41
Sales finance 40
 (29) 12
 15
 —
 38
Other lending subsidiaries 265
 (336) 43
 317
 —
 289
PCI 61
 (15) —
 (2) —
 44
ALLL 1,460
 (701) 169
 561
 —
 1,489
RUFC 90
 —
 —
 11
 9
 110
ACL $1,550
 $(701) $169
 $572
 $9
 $1,599

Year Ended December 31, 2015 Beginning Balance Charge-Offs Recoveries Provision (Benefit) Other Ending Balance
  (Dollars in millions)
Commercial:            
Commercial and industrial $421
 $(81) $37
 $89
 $—
 $466
CRE-income producing properties 162
 (20) 7
 (14) —
 135
CRE-construction and development 48
 (4) 11
 (18) —
 37
Dealer floor plan 10
 —
 —
 (2) —
 8
Other lending subsidiaries 21
 (9) 3
 7
 —
 22
Retail:  
  
  
  
  
  
Direct retail lending 110
 (54) 29
 20
 —
 105
Revolving credit 110
 (70) 20
 44
 —
 104
Residential mortgage-nonguaranteed 217
 (40) 3
 14
 —
 194
Residential mortgage-government guaranteed 36
 (6) —
 (7) —
 23
Sales finance 40
 (26) 9
 17
 —
 40
Other lending subsidiaries 235
 (277) 33
 274
 —
 265
PCI 64
 (1) —
 (2) —
 61
ALLL 1,474
 (588) 152
 422
 —
 1,460
RUFC 60
 —
 —
 6
 24
 90
ACL $1,534
 $(588) $152
 $428
 $24
 $1,550

Year Ended December 31, 2014 Beginning Balance Charge-Offs Recoveries Provision (Benefit) Other Ending Balance
  (Dollars in millions)
Commercial:            
Commercial and industrial $454
 $(131) $42
 $56
 $—
 $421
CRE-income producing properties 149
 (31) 14
 30
 —
 162
CRE-construction and development 76
 (11) 19
 (36) —
 48
Dealer floor plan 8
 —
 —
 2
 —
 10
Other lending subsidiaries 15
 (8) 3
 11
 —
 21
Retail:  
  
  
  
  
  
Direct retail lending 209
 (69) 29
 26
 (85) 110
Revolving credit 115
 (71) 19
 47
 —
 110
Residential mortgage-nonguaranteed 269
 (82) 7
 (62) 85
 217
Residential mortgage-government guaranteed 62
 (2) —
 (24) —
 36
Sales finance 37
 (23) 9
 17
 —
 40
Other lending subsidiaries 224
 (261) 30
 242
 —
 235
PCI 114
 (21) —
 (29) —
 64
ALLL 1,732
 (710) 172
 280
 —
 1,474
RUFC 89
 —
 —
 (29) —
 60
ACL $1,821
 $(710) $172
 $251
 $—
 $1,534


The following table provides a consumer lending subsidiary with approximately $500 million in loans and $27 million of related ALLL. In addition, approximately $230 millionsummary of loans with $38 millionthat are collectively evaluated for impairment.
  December 31, 2016 December 31, 2015
  Recorded Investment Related ALLL Recorded Investment Related ALLL
  (Dollars in millions)
Commercial:        
Commercial and industrial $51,253
 $463
 $48,110
 $439
CRE-income producing properties 14,455
 112
 13,339
 127
CRE-construction and development 3,787
 21
 3,697
 32
Dealer floor plan 1,413
 11
 1,215
 8
Other lending subsidiaries 7,678
 28
 6,789
 21
Retail:      
  
Direct retail lending 12,011
 93
 11,055
 93
Revolving credit 2,626
 95
 2,477
 91
Residential mortgage-nonguaranteed 28,488
 136
 29,199
 153
Residential mortgage-government guaranteed 466
 8
 553
 1
Sales finance 11,251
 37
 10,308
 39
Other lending subsidiaries 7,057
 249
 6,534
 235
PCI 910
 44
 1,122
 61
Total $141,395
 $1,297
 $134,398
 $1,300

The following tables set forth certain information regarding impaired loans, excluding PCI and LHFS, that were individually evaluated for reserves.
As Of / For The Year Ended December 31, 2016 Recorded Investment UPB Related ALLL Average Recorded Investment Interest Income Recognized
  (Dollars in millions)
With no related ALLL recorded:          
Commercial:          
Commercial and industrial $201
 $225
 $—
 $217
 $1
CRE-income producing properties 25
 27
 —
 16
 —
CRE-construction and development 10
 11
 —
 8
 —
Dealer floor plan —
 —
 —
 —
 —
Other lending subsidiaries 4
 6
 —
 6
 —
Retail:          
Direct retail lending 13
 38
 —
 12
 1
Residential mortgage-nonguaranteed 94
 141
 —
 97
 4
Residential mortgage-government guaranteed 3
 3
 —
 3
 —
Sales finance 1
 2
 —
 1
 —
Other lending subsidiaries 4
 9
 —
 4
 —
With an ALLL recorded:          
Commercial:          
Commercial and industrial 265
 269
 37
 259
 5
CRE-income producing properties 58
 61
 5
 68
 2
CRE-construction and development 22
 22
 4
 22
 1
Dealer floor plan —
 —
 —
 —
 —
Other lending subsidiaries 9
 9
 1
 5
 —
Retail:          
Direct retail lending 68
 69
 10
 71
 4
Revolving credit 29
 29
 11
 31
 1
Residential mortgage-nonguaranteed 440
 451
 50
 383
 16
Residential mortgage-government guaranteed 430
 431
 33
 360
 14
Sales finance 15
 15
 1
 16
 1
Other lending subsidiaries 236
 239
 40
 206
 32
Total $1,927
 $2,057
 $192
 $1,785
 $82


December 31, 2015 Recorded Investment UPB Related ALLL Average Recorded Investment Interest Income Recognized
  (Dollars in millions)
With no related ALLL recorded:          
Commercial:          
Commercial and industrial $129
 $164
 $—
 $95
 $1
CRE-income producing properties 8
 13
 —
 17
 —
CRE-construction and development 8
 11
 —
 10
 —
Dealer floor plan —
 —
 —
 2
 —
Other lending subsidiaries 2
 3
 —
 —
 —
Retail:  
  
  
  
  
Direct retail lending 11
 40
 —
 12
 1
Residential mortgage-nonguaranteed 103
 153
 —
 99
 4
Residential mortgage-government guaranteed 5
 5
 —
 3
 —
Sales finance 1
 2
 —
 1
 —
Other lending subsidiaries 4
 8
 —
 3
 —
With an ALLL recorded:  
  
  
  
  
Commercial:          
Commercial and industrial 191
 194
 27
 223
 5
CRE-income producing properties 74
 77
 8
 96
 3
CRE-construction and development 27
 27
 5
 36
 1
Dealer floor plan —
 —
 —
 1
 —
Other lending subsidiaries 4
 5
 1
 6
 —
Retail:  
  
  
  
  
Direct retail lending 74
 75
 12
 79
 4
Revolving credit 33
 33
 13
 36
 1
Residential mortgage-nonguaranteed 361
 368
 41
 354
 15
Residential mortgage-government guaranteed 312
 312
 22
 323
 13
Sales finance 18
 18
 1
 19
 1
Other lending subsidiaries 188
 190
 30
 179
 28
Total $1,553
 $1,698
 $160
 $1,594
 $77
Trial modifications are excluded from the following disclosures because the specific types and amounts of related ALLL, was transferred from retail other lending subsidiariesconcessions offered to residential mortgageborrowers frequently change between the trial modification and $47 millionthe permanent modification. The following table provides a summary of unallocated ALLL was allocated to the loan portfolio segments.

106
TDRs, all of which are considered impaired.
Table of Contents

     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  

      Accruing      
           90 Days Or     
        30-89 Days More Past     
 December 31, 2013 Current Past Due Due Nonaccrual Total 
                     
      (Dollars in millions) 
 Commercial:                
  Commercial and industrial $ 38,110  $ 35  $ ―    $ 363  $ 38,508  
  CRE - income producing properties   10,107    8    ―      113    10,228  
  CRE - construction and development   2,329    2    ―      51    2,382  
  Other lending subsidiaries   4,482    14    5    1    4,502  
 Retail:                
  Direct retail lending   15,595    132    33    109    15,869  
  Revolving credit   2,370    23    10    ―      2,403  
  Residential mortgage-nonguaranteed   22,747    454    69    243    23,513  
  Residential mortgage-government guaranteed   236    93    806    ―      1,135  
  Sales finance   9,316    56    5    5    9,382  
  Other lending subsidiaries   5,703    207    ―      50    5,960  
 Acquired from FDIC   1,643    88    304    ―      2,035  
   Total $ 112,638  $ 1,112  $ 1,232  $ 935  $ 115,917  

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 
 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  

107
Table of Contents

     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  

        CRE - CRE -   
     Commercial Income Producing Construction and Other Lending 
 December 31, 2013 & Industrial Properties Development Subsidiaries 
                 
     (Dollars in millions) 
 Commercial:             
  Pass $ 36,804  $ 9,527  $ 2,150  $ 4,464  
  Special mention   219    52    17    8  
  Substandard - performing   1,122    536    164    29  
  Nonperforming   363    113    51    1  
   Total $ 38,508  $ 10,228  $ 2,382  $ 4,502  

      Direct Retail Revolving Residential Sales Other Lending 
      Lending Credit Mortgage Finance Subsidiaries 
                     
      (Dollars in millions) 
 Retail:                
  Performing $ 15,760  $ 2,403  $ 24,405  $ 9,377  $ 5,910  
  Nonperforming   109    ―      243    5    50  
   Total $ 15,869  $ 2,403  $ 24,648  $ 9,382  $ 5,960  

   ACL Rollforward 
 Year Ended December 31, 2014 Beginning Balance Charge-Offs Recoveries Provision (Benefit) Other Ending Balance 
                      
    (Dollars in millions) 
 Commercial:                   
  Commercial and industrial $ 454  $ (131) $ 42  $ 56  $ ―    $ 421  
  CRE - income producing properties   149    (31)   14    30    ―      162  
  CRE - construction and development   76    (11)   19    (36)   ―      48  
  Other lending subsidiaries   15    (10)   3    13    ―      21  
 Retail:                   
  Direct retail lending   209    (69)   29    26    (85)   110  
  Revolving credit   115    (71)   19    47    ―      110  
  Residential mortgage-nonguaranteed   269    (82)   7    (62)   85    217  
  Residential mortgage-government guaranteed   62    (2)   ―      (24)   ―      36  
  Sales finance   45    (23)   9    19    ―      50  
  Other lending subsidiaries   224    (259)   30    240    ―      235  
 Acquired from FDIC   114    (21)   ―      (29)   ―      64  
 ALLL   1,732    (710)   172    280    ―      1,474  
 RUFC   89    ―      ―      (29)   ―      60  
 ACL $ 1,821  $ (710) $ 172  $ 251  $ ―    $ 1,534  

108
  December 31,
  2016 2015
  (Dollars in millions)
Performing TDRs:    
Commercial:    
Commercial and industrial $55
 $49
CRE-income producing properties 16
 13
CRE-construction and development 9
 16
Direct retail lending 67
 72
Revolving credit 29
 33
Residential mortgage-nonguaranteed 332
 288
Residential mortgage-government guaranteed 420
 316
Sales finance 16
 17
Other lending subsidiaries 226
 178
Total performing TDRs 1,170
 982
Nonperforming TDRs (also included in NPL disclosures) 183
 146
Total TDRs $1,353
 $1,128
ALLL attributable to TDRs $146
 $126
Table of Contents

   ACL Rollforward 
 Year Ended December 31, 2013 Beginning Balance Charge-Offs Recoveries Provision (Benefit) Other Ending Balance 
                      
    (Dollars in millions) 
 Commercial:                   
  Commercial and industrial $ 470  $ (248) $ 47  $ 166  $ 19  $ 454  
  CRE - income producing properties   170    (74)   20    23    10    149  
  CRE - construction and development   134    (58)   31    (39)   8    76  
  Other lending subsidiaries   13    (3)   2    3    ―      15  
 Retail:                   
  Direct retail lending   300    (148)   38    15    4    209  
  Revolving credit   102    (85)   17    81    ―      115  
  Residential mortgage-nonguaranteed   296    (79)   3    5    44    269  
  Residential mortgage-government guaranteed   32    (2)   ―      32    ―      62  
  Sales finance   29    (23)   9    30    ―      45  
  Other lending subsidiaries   264    (252)   32    245    (65)   224  
 Acquired from FDIC   128    (19)   ―      5    ―      114  
 Unallocated   80    ―      ―      (33)   (47)   ―    
 ALLL   2,018    (991)   199    533    (27)   1,732  
 RUFC   30    ―      ―      59    ―      89  
 ACL $ 2,048  $ (991) $ 199  $ 592  $ (27) $ 1,821  

   ACL Rollforward 
    Beginning Charge-      Ending 
 Year Ended December 31, 2012 Balance Offs Recoveries Provision Balance 
                   
    (Dollars in millions) 
 Commercial:                
  Commercial and industrial $ 433  $ (337) $ 17  $ 357  $ 470  
  CRE - income producing properties   249    (150)   9    62    170  
  CRE - construction and development   371    (245)   45    (37)   134  
  Other lending subsidiaries   11    (8)   2    8    13  
 Retail:                
  Direct retail lending   232    (224)   36    256    300  
  Revolving credit   112    (81)   18    53    102  
  Residential mortgage-nonguaranteed   318    (135)   3    110    296  
  Residential mortgage-government guaranteed   47    (1)   ―      (14)   32  
  Sales finance   38    (26)   10    7    29  
  Other lending subsidiaries   186    (217)   24    271    264  
 Acquired from FDIC   149    (34)   ―      13    128  
 Unallocated   110    ―      ―      (30)   80  
 ALLL   2,256    (1,458)   164    1,056    2,018  
 RUFC   29    ―      ―      1    30  
 ACL $ 2,285  $ (1,458) $ 164  $ 1,057  $ 2,048  

109

The following table provides a summary of loans that are collectively evaluated for impairment.
                 
     December 31, 2014 December 31, 2013 
   Recorded Investment Related ALLL Recorded Investment Related ALLL 
                 
     (Dollars in millions) 
 Commercial:             
  Commercial and industrial $ 41,120  $ 379  $ 38,042  $ 382  
  CRE - income producing properties   10,583    147    10,033    128  
  CRE - construction and development   2,670    39    2,289    60  
  Other lending subsidiaries   5,351    20    4,501    15  
 Retail:             
  Direct retail lending   8,048    86    15,648    166  
  Revolving credit   2,419    94    2,355    96  
  Residential mortgage-nonguaranteed   29,660    181    22,557    160  
  Residential mortgage-government guaranteed   622    4    759    7  
  Sales finance   10,579    46    9,363    41  
  Other lending subsidiaries   5,930    204    5,823    196  
 Acquired from FDIC   1,215    64    2,035    114  
   Total $ 118,197  $ 1,264  $ 113,405  $ 1,365  

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 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  

110

Table of Contents

              Average Interest 
      Recorded   Related Recorded Income 
 As Of / For The Year Ended December 31, 2013 Investment UPB ALLL Investment Recognized 
                     
      (Dollars in millions) 
 With no related ALLL recorded:                
  Commercial:                
   Commercial and industrial $ 91  $ 165  $ ―    $ 111  $ ―    
   CRE - income producing properties   22    35    ―      43    ―    
   CRE - construction and development   19    42    ―      41    ―    
  Retail:                
   Direct retail lending   23    76    ―      23    1  
   Residential mortgage-nonguaranteed   144    237    ―      129    4  
   Residential mortgage-government guaranteed   1    1    ―      2    ―    
   Sales finance   1    2    ―      1    ―    
   Other lending subsidiaries   2    6    ―      4    ―    
 With an ALLL recorded:                
  Commercial:                
   Commercial and industrial   375    409    72    453    5  
   CRE - income producing properties   172    174    21    197    4  
   CRE - construction and development   75    76    16    112    3  
   Other lending subsidiaries   1    1    ―      2    ―    
  Retail:                
   Direct retail lending   198    204    43    204    12  
   Revolving credit   48    48    19    52    2  
   Residential mortgage-nonguaranteed   812    830    109    763    34  
   Residential mortgage-government guaranteed   375    376    55    356    15  
   Sales finance   18    19    4    20    1  
   Other lending subsidiaries   135    137    28    173    18  
    Total $ 2,512  $ 2,838  $ 367  $ 2,686  $ 99  

The following table provides a summary of TDRs, all of which are considered impaired.
          
    December 31, 
    2014 2013 
          
    (Dollars in millions) 
 Performing TDRs:      
  Commercial:      
   Commercial and industrial$ 64  $ 77  
   CRE - income producing properties  27    50  
   CRE - construction and development  30    39  
  Direct retail lending  84    187  
  Sales finance  19    17  
  Revolving credit  41    48  
  Residential mortgage-nonguaranteed  261    785  
  Residential mortgage-government guaranteed  360    376  
  Other lending subsidiaries  164    126  
   Total performing TDRs  1,050    1,705  
 Nonperforming TDRs (also included in NPL disclosures)  126    193  
   Total TDRs$ 1,176  $ 1,898  
          
 ALLL attributable to TDRs$ 159  $ 283  
111
Table of Contents

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.

      Year Ended December 31,
      2014 2013 2012
      Type of   Type of   Type of  
      Modification ALLL ModificationALLL ModificationALLL
      Rate Structure Impact Rate Structure Impact Rate Structure Impact
                                
      (Dollars in millions)
Commercial:                          
 Commercial and industrial$ 112  $ 48  $ 4  $ 99  $ 27  $ 3  $ 51  $ 63  $ ―   
 CRE - income producing properties  18    18    ―      33    44    1    55    29    ―   
 CRE - construction and development  25    22    ―      51    20    (2)   56    50    (2)
Retail:                          
 Direct retail lending  32    4    6    45    9    6    120    17    35 
 Revolving credit  24    ―      4    26    ―      4    30    ―      5 
 Residential mortgage-nonguaranteed  127    36    16    103    68    11    241    88    22 
 Residential mortgage-government guaranteed  282    ―      12    141    ―      12    85    ―      9 
 Sales finance  1    14    3    4    7    3    16    ―      4 
 Other lending subsidiaries  130    ―      17    167    ―      34    123    2    35 

  Year Ended December 31,
  2016 2015 2014
  Type of Modification   Type of Modification   Type of Modification  
  Rate Structure ALLL Impact Rate Structure ALLL Impact Rate Structure ALLL Impact
  (Dollars in millions)
Commercial:                  
Commercial and industrial $112
 $128
 $3
 $99
 $45
 $2
 $112
 $48
 $4
CRE-income producing properties 21
 17
 —
 9
 15
 —
 18
 18
 —
CRE-construction and development 7
 11
 —
 8
 25
 1
 25
 22
 —
                   
Retail:  
  
  
  
  
  
  
  
  
Direct retail lending 19
 1
 —
 16
 4
 4
 32
 4
 6
Revolving credit 17
 —
 4
 16
 —
 4
 24
 —
 4
Residential mortgage-nonguaranteed 129
 54
 10
 88
 37
 9
 127
 36
 16
Residential mortgage-government guaranteed 335
 —
 18
 189
 —
 7
 282
 —
 12
Sales finance —
 7
 —
 —
 10
 1
 1
 14
 3
Other lending subsidiaries 169
 —
 21
 129
 —
 17
 130
 —
 17
The following table summarizes the pre-default balance for modifications that experienced a payment default that had been classified as TDRs during the previous 12 months.months was $73 million, $81 million and $78 million for the twelve months ended December 31, 2016, 2015 and 2014, respectively. Payment default is defined as movement of the TDR to nonaccrual status, foreclosure or charge-off, whichever occurs first.

     Year Ended December 31, 
     2014  2013  2012  
              
     (Dollars in millions) 
 Commercial:         
  Commercial and industrial$ 5  $ 5  $ 8  
  CRE - income producing properties  1    11    6  
  CRE - construction and development  4    4    14  
 Retail:         
  Direct retail lending  2    4    8  
  Revolving credit  9    10    12  
  Residential mortgage-nonguaranteed  23    17    36  
  Sales finance  1    1    ―    
  Other lending subsidiaries  33    26    12  
              
If a TDR subsequently defaults, BB&T evaluates the TDR for possible impairment. As a result, the related ALLL may be increased or charge-offs may be taken to reduce the carrying value of the loan.

Changes in the carrying value and accretable yield of loans acquired from the FDIC are presented in the following table:
                          
   Year Ended December 31, 2014 Year Ended December 31, 2013
   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$ 187  $ 863  $ 351  $ 1,172  $ 264  $ 1,400  $ 617  $ 1,894 
 Accretion  (107)   107    (169)   169    (149)   149    (301)   301 
 Payments received, net  ―      (391)   ―      (705)   ―      (686)   ―      (1,023)
 Other, net  54    ―      62    ―      72    ―      35    ―   
Balance at end of period$ 134  $ 579  $ 244  $ 636  $ 187  $ 863  $ 351  $ 1,172 
                          
Outstanding UPB at end of period   $ 864     $ 860     $ 1,266     $ 1,516 

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The following table presents additional information about BB&T’s loans and leases:
          
    December 31, 
    2014 2013 
          
    (Dollars in millions) 
 Unearned income and net deferred loan fees and costs$ 147  $ 261  
 Residential mortgage loans in process of foreclosure  379    531  

Changes in the carrying value and accretable yield of PCI loans are presented in the following table:
  December 31, 2016 December 31, 2015
  Purchased Impaired Purchased Nonimpaired Purchased Impaired Purchased Nonimpaired
  Accretable Yield Carrying Value Accretable Yield Carrying Value Accretable Yield Carrying Value Accretable Yield Carrying Value
  (Dollars in millions)
Balance at beginning of period $189
 $700
 $176
 $422
 $134
 $579
 $244
 $636
Additions 36
 124
 —
 —
 98
 402
 —
 —
Accretion (134) 134
 (73) 73
 (89) 89
 (89) 89
Payments received, net —
 (344) —
 (199) —
 (370) —
 (303)
Other, net 162
 —
 52
 —
 46
 —
 21
 —
Balance at end of period $253
 $614
 $155
 $296
 $189
 $700
 $176
 $422
                 
Outstanding UPB at end of period  
 $910
  
 $423
  
 $1,063
  
 $587
The following table presents additional information about BB&T’s loans and leases:
  December 31,
  2016 2015
  (Dollars in millions)
Unearned income, discounts and net deferred loan fees and costs, excluding PCI $396
 $598
Residential mortgage loans in process of foreclosure 366
 229


NOTE 5. Premises and Equipment

A summary of premises and equipment is presented in the accompanying table:

    Estimated December 31, 
    Useful Life 2014 2013 
              
    (Years) (Dollars in millions) 
 Land and land improvements    $ 533  $ 527  
 Buildings and building improvements 40    1,431    1,288  
 Furniture and equipment 5 - 10    986    1,102  
 Leasehold improvements      670    633  
 Construction in progress      47    38  
 Capitalized leases on premises and equipment      61    58  
  Total      3,728    3,646  
 Accumulated depreciation and amortization      (1,901)   (1,777) 
  Net premises and equipment    $ 1,827  $ 1,869  

           Year Ended December 31, 
           2014 2013  2012  
                    
            (Dollars in millions) 
 Rent expense applicable to operating leases         $ 227  $ 230  $ 215  
 Rental income from owned properties and subleases           7    8    8  
                    
  Year Ended December 31,    
  2015 2016  2017  2018  2019  Thereafter 
                    
   (Dollars in millions) 
 Future minimum lease payments for operating leases$ 224  $ 205  $ 186  $ 160  $ 137  $ 552  
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  Estimated Useful Life December 31,
   2016 2015
  (Years) (Dollars in millions)
Land and land improvements   $611
 $596
Buildings and building improvements 40 1,628
 1,503
Furniture and equipment 3 - 15 1,121
 1,030
Leasehold improvements   791
 721
Construction in progress   62
 122
Capitalized leases on premises and equipment   66
 67
Total   4,279
 4,039
Accumulated depreciation and amortization   (2,172) (2,032)
Net premises and equipment   $2,107
 $2,007

The following table excludes assets related to the lease financing business.
  Year Ended December 31,
  2016 2015 2014
  (Dollars in millions)
Rent expense applicable to operating leases $278
 $245
 $227
Rental income from owned properties and subleases 8
 7
 7
  Year Ended December 31,  
  2017 2018 2019 2020 2021 Thereafter
  (Dollars in millions)
Future minimum lease payments for operating leases $263
 $239
 $210
 $179
 $154
 $574
NOTE 6. 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. There have been no goodwill impairments recorded to date.

   Community Banking Residential Mortgage Banking Dealer Financial Services Specialized Lending Insurance Services Financial Services Total 
                        
   (Dollars in millions) 
Goodwill balance, January 1, 2012$ 4,542  $ 7  $ 111  $ 94  $ 1,132  $ 192  $ 6,078  
 Acquired goodwill, net  358    ―      ―      5    358    ―      721  
 Contingent consideration  ―      ―      ―      ―      3    ―      3  
 Other adjustments  ―      ―      ―      ―      2    ―      2  
Goodwill balance, December 31, 2012$ 4,900  $ 7  $ 111  $ 99  $ 1,495  $ 192  $ 6,804  
 Contingent consideration  ―      ―      ―      ―      6    ―      6  
 Other adjustments  24    ―      ―      (11)   (9)   ―      4  
Goodwill balance, December 31, 2013$ 4,924  $ 7  $ 111  $ 88  $ 1,492  $ 192  $ 6,814  
 Acquired goodwill, net  29    ―      ―      ―      12    ―      41  
 Contingent consideration  ―      ―      ―      ―      14    ―      14  
 Other adjustments  (319)   319    ―      ―     ―    ―      ―    
Goodwill balance, December 31, 2014$ 4,634  $ 326  $ 111  $ 88  $ 1,518  $ 192  $ 6,869  

  Community Banking Residential Mortgage Banking Dealer Financial Services Specialized Lending Insurance Holdings Financial Services Total
  (Dollars in millions)
Goodwill, January 1, 2014 $4,924
 $7
 $111
 $88
 $1,492
 $192
 $6,814
Acquired goodwill, net 29
 —
 —
 —
 12
 —
 41
Contingent consideration —
 —
 —
 —
 14
 —
 14
Other adjustments (319) 319
 —
 —
 —
 —
 —
Goodwill, December 31, 2014 4,634
 326
 111
 88
 1,518
 192
 6,869
Acquired goodwill, net 1,501
 43
 —
 155
 16
 11
 1,726
American Coastal sale —
 —
 —
 —
 (49) —
 (49)
Other adjustments 5
 —
 —
 —
 (3) —
 2
Goodwill, December 31, 2015 6,140
 369
 111
 243
 1,482
 203
 8,548
Acquired goodwill, net 753
 39
 —
 2
 270
 9
 1,073
Other adjustments 139
 8
 —
 (132) —
 2
 17
Goodwill, December 31, 2016 $7,032
 $416
 $111
 $113
 $1,752
 $214
 $9,638
During 2012, BB&T completed the acquisition of Fort Lauderdale, Florida-based BankAtlantic. The 2012 change in Community Banking goodwill was primarily the result of this acquisition. Also during 2012, BB&T acquired the life and property and casualty insurance divisions of Crump Group Inc. The 2012 changes in Insurance Services goodwill and other identifiable intangibles were primarily due to this acquisition.

The 2013 adjustments to goodwill within Community Banking and Insurance Services reflect the finalization of valuations for certain assets and liabilities of the above acquisitions. The 2013 adjustment to Specialized Lending primarily represents the goodwill associated with a subsidiary that was sold.

During 2014, BB&T purchased 21 bank branches in Texas from Citigroup, Inc., resulting in Community Banking’s acquired goodwill above. Also during 2014, the transfer of closed-end, first and second lien position residential mortgage loans from Community Banking to Residential Mortgage Banking resulted in a reallocation of the related goodwill, which is included in other adjustments in the above table.

The following table presents information for identifiable intangible assets subject to amortization:
                         
    December 31, 2014 December 31, 2013 
    Wtd. Avg. Remaining Life Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount 
                         
    (Years) (Dollars in millions) 
 CDI  6.8  $ 693  $ (585) $ 108  $ 672  $ (555) $ 117  
 Other, primarily customer relationship                     
  intangibles  14.7    1,088    (691)   397    1,082    (630)   452  
  Total   $ 1,781  $ (1,276) $ 505  $ 1,754  $ (1,185) $ 569  

  Year Ended December 31, 
  2015 2016  2017  2018  2019  
                 
   (Dollars in millions) 
 Estimated amortization expense of identifiable intangibles$ 79  $ 68  $ 59  $ 52  $ 43  
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During 2015, BB&T sold American Coastal, which resulted in the allocation and write-off of goodwill from the Insurance Holdings segment.

During 2016, the valuations and purchase price allocation for Susquehanna were finalized and are included in other adjustments in the above table.

The acquisition of Swett & Crawford provided goodwill of $269 million and identifiable intangible assets of $224 million. The identifiable intangible assets are being amortized over a weighted average term of 13 years based upon the estimated economic benefits received. Approximately $135 million of the goodwill and identifiable intangible assets is deductible for tax purposes.

The following table presents information for identifiable intangible assets subject to amortization:
    December 31, 2016 December 31, 2015
  Wtd. Avg. Remaining Life Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount
  (Years) (Dollars in millions)
CDI 7.9 $970
 $(710) $260
 $903
 $(634) $269
Other, primarily customer relationship intangibles 13.0 1,415
 (821) 594
 1,164
 (747) 417
Total   $2,385
 $(1,531)
$854

$2,067
 $(1,381) $686
  Year Ended December 31,
  2017 2018 2019 2020 2021
  (Dollars in millions)
Estimated amortization expense of identifiable intangibles $141
 $123
 $104
 $87
 $74
NOTE 7. Loan Servicing

Residential Mortgage Banking Activities

The following tables summarize residential mortgage banking activities. Mortgage and home equityBB&T manages its own residential mortgage loans, managed or securitized exclude loans serviced for others with no other continuing involvement.

    December 31, 
    2014 2013 
          
    (Dollars in millions) 
 Mortgage loans managed or securitized$ 27,001  $ 27,349  
 Home equity loans managed (excludes home equity lines)  6,741    8,329  
 Total mortgage and home equity loans managed or securitized  33,742    35,678  
 Less:      
  LHFS  1,317    1,116  
  Mortgage loans acquired from FDIC  668    802  
  Mortgage loans sold with recourse  667    783  
 Mortgage loans held for investment$ 31,090  $ 32,977  
          
 UPB of mortgage loan servicing portfolio$ 115,476  $ 112,835  
 UPB of home equity loan servicing portfolio  6,781    8,386  
 UPB of residential mortgage and home equity loan servicing portfolio$ 122,257  $ 121,221  
 UPB of residential mortgage loans serviced for others (primarily agency      
  conforming fixed rate)$ 90,230  $ 87,434  
 Maximum recourse exposure from mortgage loans sold with recourse liability  344    372  
 Indemnification, recourse and repurchase reserves  94    72  
 FHA-insured mortgage loan reserve  85    ―    

In Juneincluding PCI loans.

  December 31,
  2016 2015
  (Dollars in millions)
UPB of residential mortgage and home equity loan servicing portfolio $121,639
 $122,169
UPB of residential mortgage loans serviced for others (primarily agency conforming fixed rate) 90,325
 91,132
Mortgage loans sold with recourse 578
 702
Maximum recourse exposure from mortgage loans sold with recourse liability 282
 326
Indemnification, recourse and repurchase reserves 40
 79
FHA-insured mortgage loan reserve —
 85
During 2014, HUD-OIG notified BB&T received a letter from the HUD-OIG stating that BB&T hasit had been selected for an audit audit/survey to assess BB&T’s compliance with FHA requirements related to theloan origination of loans insured by the FHA. In addition, HUD-OIG will evaluate BB&T’s compliance with FHA requirements related to the implementation of aand quality control program associated withrequirements. BB&T subsequently received subpoenas from the origination of FHA-insured loans. In NovemberHUD-OIG and December of 2014, BB&T received HUD-OIG subpoenas from the Department of Justice seeking additional information related to the HUD-OIG review. BB&T is cooperating and isregarding its lending practices in the process of responding to these subpoenas. While the outcome of the review process is unknown and the HUD-OIG has not asserted any claims, similar reviews and related mattersconnection with other financial institutions have resulted in cash settlements and other remedial actions. BB&T identified a potential exposure related to losses incurredloans insured by the FHA on defaulted loans that ranges from $25 million to $105 million andFHA. During 2014, BB&T recognized an $85 million charge. The income statement impact of this adjustment ischarge that was included in other expense on the Consolidated Statements of Income. The ultimate resolution of this matter is uncertain and the estimates of this exposure are subject to the application of significant judgment and therefore cannot be predicted with certainty at this time.

During the year ended December 31,third quarter of 2016, BB&T paid $83 million to settle these matters pursuant to an agreement with the Department of Justice. In addition, the Company separately received recoveries of $71 million, resulting in a net benefit of $73 million, which was included in other expense on the Consolidated Statements of Income.

During 2014, BB&T also recognized a $33 million adjustment related to the indemnification reserves for mortgage loans sold, which represents an increase in estimated losses that may be incurred on FHA-insured mortgage loans that have not yet defaulted. The income statement impactDuring 2016, BB&T released $31 million of this adjustment ismortgage repurchase reserves, which was primarily driven by lower anticipated loan repurchase requests. These adjustments were included in loan-related expense on the Consolidated Statements of Income.

Payments made to date for recourse exposure on residential mortgage loans sold with recourse liability have been immaterial.

    As Of / For The 
    Year Ended December 31, 
    2014 2013 2012 
                
    (Dollars in millions) 
 UPB of residential mortgage loans sold from the LHFS portfolio$ 13,400   $ 28,900   $ 25,640   
 Pre-tax gains recognized on mortgage loans sold and held for sale  110     292     539   
 Servicing fees recognized from mortgage loans serviced for others  275     259     247   
 Approximate weighted average servicing fee on the outstanding balance            
  of residential mortgage loans serviced for others  0.29 %   0.30 %   0.32 % 
 Weighted average interest rate on mortgage loans serviced for others  4.20     4.24     4.59   

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The following table presents a roll forward of the carrying value of residential MSRs recorded at fair value:
               
      Year Ended December 31, 
      2014 2013 2012 
               
      (Dollars in millions) 
 Carrying value, January 1,$ 1,047  $ 627  $ 563  
  Additions  141    336    270  
  Change in fair value due to changes in valuation inputs or assumptions:         
   Prepayment speeds  (219)   287    19  
   Weighted average OAS  ―      (31)   (36) 
   Servicing costs  (2)   (29)   (22) 
  Realization of expected net servicing cash flows, passage of time and other  (123)   (143)   (167) 
 Carrying value, December 31,$ 844  $ 1,047  $ 627  
               
 Gains (losses) on derivative financial instruments used to mitigate the         
  income statement effect of changes in fair value$ 251  $ (197) $ 128  


  As Of / For The Year Ended December 31,
  2016 2015 2014
  (Dollars in millions)
UPB of residential mortgage loans sold from the LHFS portfolio $15,675
 $14,764
 $13,400
Pre-tax gains recognized on mortgage loans sold and held for sale 139
 148
 110
Servicing fees recognized from mortgage loans serviced for others 268
 273
 275
Approximate weighted average servicing fee on the outstanding balance of residential mortgage loans serviced for others 0.28% 0.29% 0.29%
Weighted average interest rate on mortgage loans serviced for others 4.03
 4.12
 4.20
The following table presents a roll forward of the carrying value of residential MSRs recorded at fair value:
  Year Ended December 31,
  2016 2015 2014
  (Dollars in millions)
Carrying value, beginning of year $880
 $844
 $1,047
Additions 146
 156
 141
Change in fair value due to changes in valuation inputs or assumptions:    
  
Prepayment speeds 13
 91
 (219)
Weighted average OAS 10
 (52) —
Servicing costs 2
 (25) (2)
Realization of expected net servicing cash flows, passage of time and other (136) (134) (123)
Carrying value, end of year $915
 $880
 $844
       
Gains (losses) on derivative financial instruments used to mitigate the income statement effect of changes in fair value $32
 $32
 $251
The sensitivity of the fair value of the residential MSRs to changes in key assumptions is included in the accompanying table:

    December 31, 2014 December 31, 2013 
    Range Weighted Range Weighted 
    Min Max Average Min Max Average 
                        
    (Dollars in millions) 
 Prepayment speed 10.8 %  12.8 %   12.0 %  5.5 %  8.0 %   6.9 % 
  Effect on fair value of a 10% increase      $ (30)        $ (33)  
  Effect on fair value of a 20% increase        (58)          (64)  
                        
 OAS 9.1 %  9.9 %   9.3 %  9.1 %  9.9 %   9.3 % 
  Effect on fair value of a 10% increase      $ (26)        $ (39)  
  Effect on fair value of a 20% increase        (50)          (75)  
                        
 Composition of loans serviced for others:                    
  Fixed-rate residential mortgage loans        99.4 %         99.7 % 
  Adjustable-rate residential mortgage loans        0.6           0.3   
   Total        100.0 %         100.0 % 
                        
 Weighted average life        5.7 yrs         7.9 yrs 

  December 31, 2016 December 31, 2015
  Range Weighted Average Range Weighted Average
  Min Max  Min Max 
  (Dollars in millions)
Prepayment speed 7.5% 8.4% 8.1% 8.1% 9.0% 8.7%
Effect on fair value of a 10% increase     $(28)     $(29)
Effect on fair value of a 20% increase     (54)     (56)
             
OAS 9.8% 10.2% 10.0% 10.3% 10.6% 10.4%
Effect on fair value of a 10% increase  
  
 $(33)  
  
 $(33)
Effect on fair value of a 20% increase  
  
 (64)  
  
 (63)
             
Composition of loans serviced for others:  
  
  
  
  
  
Fixed-rate residential mortgage loans  
  
 99.1%  
  
 99.2%
Adjustable-rate residential mortgage loans  
  
 0.9
  
  
 0.8
Total  
  
 100.0%  
  
 100.0%
             
Weighted average life (in years)  
  
 7.0
  
  
 6.8
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:

     December 31, 
     2014 2013 
           
     (Dollars in millions) 
 UPB of CRE mortgages serviced for others$ 27,599  $ 28,095  
 CRE mortgages serviced for others covered by recourse provisions  4,264    4,594  
 Maximum recourse exposure from CRE mortgages      
  sold with recourse liability  1,278    1,320  
 Recorded reserves related to recourse exposure  7    9  
 Originated CRE mortgages during the year  5,265    4,881  

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  December 31,
  2016 2015
  (Dollars in millions)
UPB of CRE mortgages serviced for others $29,333
 $28,163
CRE mortgages serviced for others covered by recourse provisions 4,240
 4,198
Maximum recourse exposure from CRE mortgages sold with recourse liability 1,272
 1,259
Recorded reserves related to recourse exposure 7
 7
Originated CRE mortgages during the year 7,145
 7,012
Commercial MSRs at fair value 137
 —

Effective January 1, 2016, the Company adopted the fair value option for commercial MSRs, which are included in MSRs at fair value on the Consolidated Balance Sheets, to facilitate hedging against changes in the fair value of the MSR asset. Prior to adoption, commercials MSRs were included in other assets. The impact of the adoption was immaterial.
NOTE 8. Short-Term Borrowings

       December 31, 
       2014 2013 
             
       (Dollars in millions) 
 Federal funds purchased$ 1,402  $ 1,443  
 Securities sold under agreements to repurchase  317    463  
 Other short-term borrowed funds  1,998    2,232  
  Total short-term borrowings$ 3,717  $ 4,138  

A summary of selected data related to short-term borrowings follows:

       As Of / For The Year Ended December 31, 
       2014 2013 2012 
                   
       (Dollars in millions) 
 Maximum outstanding at any month-end during the year$ 5,056   $ 5,196   $ 4,385   
 Balance outstanding at end of year  3,717     4,138     2,864   
 Average outstanding during the year  3,421     4,459     3,408   
 Average interest rate during the year (includes derivative impact)  0.11 %   0.13 % 0.20 % 
 Average interest rate at end of year  0.09     0.12     0.22   

Deposits

  December 31,
  2016 2015
  (Dollars in millions)
Noninterest-bearing deposits $50,697
 $45,695
Interest checking 30,263
 25,410
Money market and savings 64,883
 60,461
Time deposits 14,391
 17,558
Total deposits $160,234
 $149,124
     
Time deposits $100,000 and greater $5,394
 $7,562
Time deposits $250,000 and greater 2,179
 3,497

NOTE 9. Deposits

A summary of deposits is presented in the accompanying table:
           
     December 31, 
     2014 2013 
           
     (Dollars in millions) 
 Noninterest-bearing deposits$ 38,786  $ 34,972  
 Interest checking  20,262    18,861  
 Money market and savings  50,085��   48,040  
 Time deposits and IRAs  19,907    25,602  
  Total deposits$ 129,040  $ 127,475  
           
 Time deposits $100,000 and greater$ 9,782  $ 14,051  
 Time deposits $250,000 and greater  5,753    9,585  
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NOTE 10. Long-Term Debt

The following table reflects the carrying amounts and effective interest rates for long-term debt:
              
   December 31, 2014 December 31, 2013
   Carrying Effective Carrying Effective
 Amount Rate Amount Rate
              
   (Dollars in millions)
BB&T Corporation fixed rate senior notes$ 6,583  2.39 % $ 5,845  2.60 %
BB&T Corporation floating rate senior notes  1,050  1.07     700  1.13  
BB&T Corporation fixed rate subordinated notes  2,170  2.30     2,166  2.47  
Branch Bank fixed rate senior notes  4,047  1.72     1,999  1.71  
Branch Bank floating rate senior notes  500  0.72     1,150  0.69  
Branch Bank fixed rate subordinated notes  1,234  2.86     386  1.71  
Branch Bank floating rate subordinated notes  612  3.27     612  2.56  
FHLB advances (weighted average maturity of 5.9 years at December 31, 2014)  6,496  4.12     8,110  3.96  
Other long-term debt  119       101    
Fair value hedge-related basis adjustments  501       424    
 Total long-term debt$ 23,312     $ 21,493    


The following table reflects the carrying amounts at December 31, 2016 and 2015, and the related maturity dates, contractual rate and effective interest rates at December 31, 2016:
      Stated Rate Effective Rate December 31,
  Maturity Min Max  2016 2015
            (Dollars in millions)
BB&T Corporation              
Fixed rate senior notes 2017to2024 1.45% 6.85% 2.33% $7,600
 $7,831
Floating rate senior notes 2018 2020 1.55
 1.82
 1.67
 1,898
 1,050
Fixed rate subordinated notes 2017 2022 3.95
 5.25
 1.53
 1,338
 1,382
Branch Bank              
Fixed rate senior notes 2017 2021 1.00
 2.85
 1.80
 4,209
 4,071
Floating rate senior notes 2019 1.42
 1.42
 1.48
 250
 375
Fixed rate subordinated notes 2025 2026 3.63
 3.80
 3.48
 2,138
 2,562
Floating rate subordinated notes 2017 1.22
 1.22
 3.73
 262
 612
FHLB advances (5.5 years weighted average maturity at December 31, 2016) 2017 2034 —
 6.38
 4.20
 4,118
 5,732
Other long-term debt         

 152
 154
Total long-term debt         

 $21,965
 $23,769
The effective rates above reflect the impact of cash flowhedges and fair value hedges, as applicable.issuance costs. Subordinated notes with a remaining maturity of one year or greater qualify under the risk-based capital guidelines as Tier 2 supplementary capital, subject to certain limitations.

During the third quarter of 2014,


Subsequent to year end, BB&T extinguished $1.1terminated FHLB advances totaling $2.9 billion of FHLB advances, resultingpar value, which resulted in a $122 millionpre-tax loss on early extinguishment of debt.

  Year Ended December 31,  2020 
  2015 2016  2017  2018  2019  and later
                   
   (Dollars in millions)
Future debt maturities (excluding capital leases)$ 1,064  $ 5,674  $ 3,829  $ 2,309  $ 2,269  $ 8,126 
118
debt totaling $392 million. During 2015, BB&T terminated FHLB advances totaling $931 million, which resulted in a pre-tax loss on early extinguishment of debt totaling $172 million. During 2014, BB&T terminated FHLB advances totaling $1.1 billion, resulting in a pre-tax loss on early extinguishment of debt totaling $122 million.
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  Year Ended December 31, Thereafter
  2017 2018 2019 2020 2021 
  (Dollars in millions)
Future debt maturities $3,696
 $2,223
 $3,985
 $3,357
 $3,881
 $4,586

NOTE 11.10. Shareholders’ Equity

Preferred Stock
                  
The following table presents a summary of the non-cumulative perpetual preferred stock as of December 31, 2014:
                  
       Earliest       
     Issuance Redemption Liquidation Carrying Dividend 
 Issue Date Date Amount Amount Rate 
                  
         (Dollars in millions)    
 Series D 5/1/12 5/1/17 $ 575  $ 559  5.850 % 
 Series E 7/31/12 8/1/17   1,150    1,120  5.625   
 Series F 10/31/12 11/1/17   450    437  5.200   
 Series G 5/1/13 6/1/18   500    487  5.200   
        $ 2,675  $ 2,603     

Preferred Stock

The following table presents a summary of the non-cumulative perpetual preferred stock as of December 31, 2016:
Preferred Stock Issue Issuance Date Earliest Redemption Date Liquidation Amount Carrying Amount Dividend Rate
      (Dollars in millions)  
Series D 5/1/2012 5/1/2017 $575
 $559
 5.850%
Series E 7/31/2012 8/1/2017 1,150
 1,120
 5.625
Series F 10/31/2012 11/1/2017 450
 437
 5.200
Series G 5/1/2013 6/1/2018 500
 487
 5.200
Series H 3/9/2016 6/1/2021 465
 450
 5.625
      $3,140
 $3,053
  
Dividends on the preferred stock, if declared, accrue and are payable quarterly, in arrears. For each issuance, BB&T issued depositary shares, each of which represents a fractional ownership interest in a share of the Company’s preferred stock. The preferred stock has no stated maturity and redemption is solely at the option of the Company in whole, but not in part, upon the occurrence of a regulatory capital treatment event, as defined. In addition, the preferred stock may be redeemed in whole or in part, on any dividend payment date after five years from the date of issuance. Under current rules, any redemption of the preferred stock is subject to prior approval of the FRB. The preferred stock is not subject to any sinking fund or other obligations of the Company.

Equity-Based Compensation Plans

At December 31, 2014,2016, options, restricted shares and RSUs were outstanding from equity-based compensation plans that have been approved by shareholders.shareholders and plans assumed from acquired entities. Those plans are intended to assist the Company in recruiting and retaining employees, directors and independent contractors and to associate the interests of eligible participants with those of BB&T and its shareholders.

The majority of outstanding awards and awards available to be issued relate to plans that allow for accelerated vesting of awards for holders who retire and have met all retirement eligibility requirements or in connection with certain other events.Certainevents. Until vested, certain of these awards are subject to forfeiture under specified circumstances until vested that may result in cancellation prior to vesting.

circumstances.

The following table provides a summary of the equity-based compensation plans:

Equity-Based Compensation PlansDecember 31, 2014
 December 31, 2016
Shares available for future grants (in thousands)  26,832 16,627
 
    
Vesting period, awards granted prior to 2010 5.0
yrs
Vesting period, awards granted after 2009 (minimum years) 3.0 to 5.01.0
 
Vesting period, awards granted after 2009 (maximum years)5.0
Option term 10.0

 

The fair value of RSUs is based on the common stock price on the grant date less the present value of expected dividends that will be foregone during the vesting period. The fair value of options is measured on the grant date using the Black-Scholes option-pricing model. Substantially all awards are granted in February of each year. Grants to non-executive employees primarily consist of RSUs.

119

A summary of selected data related to equity-based compensation costs follows:
              
     Year Ended December 31, 
     2014  2013  2012  
              
     (Dollars in millions) 
 Equity-based compensation expense$ 102  $ 96  $ 97  
 Income tax benefit from equity-based compensation expense  39    36 ��  36  
 Intrinsic value of options exercised and RSUs that vested during the year  280    102    62  
 Grant date fair value of equity-based awards that vested during the year  113    80    88  
              
        December 31, 
        2014  2013  
              
        (Dollars in millions) 
 Unrecognized compensation cost related to equity-based awards   $ 99  $ 94  
 Weighted-average life over which compensation cost is expected to be recognized (years)   2.2    2.1  

The following tables present the activity during 2014 related to equity-based compensation awards:  
   
           Wtd. Avg. 
     Wtd. Avg. Aggregate Remaining 
     Exercise Intrinsic Contractual 
   Options Price Value  Life 
              
   (Dollars in millions, except per share data, shares in thousands) 
 Outstanding at January 1, 2014 37,996  $ 34.90        
  Granted 276    37.55        
  Exercised (8,838)   34.17        
  Forfeited or expired (1,060)   36.73        
 Outstanding at December 31, 2014 28,374    35.09  $ 134   3.28 yrs 
 Exercisable at December 31, 2014 25,074    35.74    105   2.77   
 Exercisable and expected to vest at December 31, 2014 28,138    35.13    132   3.25   

     Wtd. Avg. 
   RestrictedGrant Date 
   Shares/Units Fair Value 
        
   (shares in thousands) 
 Nonvested at January 1, 2014 15,181  $ 20.46  
  Granted 3,615    33.18  
  Vested (6,425)   14.31  
  Forfeited (296)   26.88  
 Nonvested at December 31, 2014 12,075    27.38  
 Expected to vest at December 31, 2014 11,055    27.39  

A summary of selected data related to equity-based compensation costs follows:
  Year Ended December 31,
  2016 2015 2014
  (Dollars in millions)
Equity-based compensation expense $115
 $106
 $102
Income tax benefit from equity-based compensation expense 43
 40
 39
Intrinsic value of options exercised and RSUs that vested during the year 159
 170
 280
Grant date fair value of equity-based awards that vested during the year 98
 115
 113
       
    December 31,
    2016 2015
    (Dollars in millions)
Unrecognized compensation cost related to equity-based awards  
 $109
 $103
Weighted-average life over which compensation cost is expected to be recognized (years)   2.3
 2.2
The following tables present the activity during 2016 related to equity-based compensation awards:
  Options Wtd. Avg. Exercise Price Per Share Aggregate Intrinsic Value Wtd. Avg. Remaining Contractual Life
  (Dollars in millions, except per share data, shares in thousands)
Outstanding at January 1, 2016 20,577
 $34.89
     
Replacement awards granted in connection with acquisitions 566
 36.12
     
Granted 610
 32.10
     
Exercised (7,101) 34.87
     
Forfeited or expired (2,856) 40.64
     
Outstanding at December 31, 2016 11,796
 33.42
 $166
 3.47yrs
Exercisable at December 31, 2016 11,023
 33.36
 156
 3.11 
Exercisable and expected to vest at December 31, 2016 11,755
 33.42
 166
 3.46 
  Restricted Shares/Units Wtd. Avg. Grant Date Fair Value
  (Shares in thousands)
Nonvested at January 1, 2016 11,824
 $29.81
Granted 5,235
 27.49
Vested (3,150) 27.76
Forfeited (393) 29.74
Nonvested at December 31, 2016 13,516
 29.39
Expected to vest at December 31, 2016 12,384
 29.39
Share Repurchase Activity

During 2016, the Company repurchased $320 million shares of common stock, which represented 8.4 million shares, through open market purchases. In addition, the Company commenced a $200 million accelerated share repurchase program, which resulted in the retirement of 3.4 million shares during the fourth quarter of 2016 and concluded in January 2017 with approximately 910,000 additional shares being retired. The conclusion of the program in January does not impact shareholders' equity as the full cost was recognized in the fourth quarter. These repurchases were made pursuant to the 2015 Repurchase Plan, and the repurchased shares revert to the status of authorized and unissued shares upon repurchase. At December 31, 2014,2016, BB&T was authorizedhad remaining authorization to repurchase an additional 44up to 38.2 million shares of common stock under the June 27, 2006 Board of Directors’ authorization.2015 Repurchase Plan. No shares of common stock were repurchased under this planpursuant to repurchase plans during 2014, 20132015 or 2012.

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2014.
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NOTE 11. AOCI
Year Ended December 31, 2016 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, 2016 $(723) $(83) $(34) $(169) $(19) $(1,028)
OCI before reclassifications, net of tax (91) (16) (201) 148
 1
 (159)
Amounts reclassified from AOCI:            
Personnel expense 80
 —
 —
 —
 —
 80
Interest income —
 —
 7
 —
 1
 8
Interest expense —
 11
 —
 —
 —
 11
FDIC loss share income, net —
 —
 —
 33
 —
 33
Securities (gains) losses, net —
 —
 (46) —
 —
 (46)
Total before income taxes 80
 11
 (39) 33
 1
 86
Less: Income taxes 30
 4
 (15) 12
 —
 31
Net of income taxes 50
 7
 (24) 21
 1
 55
Net change in AOCI (41) (9) (225) 169
 2
 (104)
AOCI balance, December 31, 2016 $(764) $(92) $(259) $—
 $(17) $(1,132)
Year Ended December 31, 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 (139) (81) (206) 19
 (9) (416)
Amounts reclassified from AOCI:  
  
  
  
  
  
Personnel expense 67
 —
 —
 —
 —
 67
Interest income —
 —
 29
 —
 9
 38
Interest expense —
 83
 —
 —
 —
 83
FDIC loss share income, net —
 —
 —
 31
 —
 31
Securities (gains) losses, net —
 —
 3
 —
 —
 3
Total before income taxes 67
 83
 32
 31
 9
 222
Less: Income taxes 25
 31
 12
 12
 3
 83
Net of income taxes 42
 52
 20
 19
 6
 139
Net change in AOCI (97) (29) (186) 38
 (3) (277)
AOCI balance, December 31, 2015 $(723) $(83) $(34) $(169) $(19) $(1,028)

Year Ended December 31, 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 (334) (107) 207
 —
 (5) (239)
Amounts reclassified from AOCI:  
  
  
  
  
  
Personnel expense 17
 —
 —
 —
 —
 17
Interest income —
 —
 (24) —
 6
 (18)
Interest expense —
 82
 —
 —
 —
 82
FDIC loss share income, net —
 —
 —
 45
 —
 45
Securities (gains) losses, net —
 —
 3
 —
 —
 3
Total before income taxes 17
 82
 (21) 45
 6
 129
Less: Income taxes 6
 31
 (8) 17
 2
 48
Net of income taxes 11
 51
 (13) 28
 4
 81
Net change in AOCI (323) (56) 194
 28
 (1) (158)
AOCI balance, December 31, 2014 $(626) $(54) $152
 $(207) $(16) $(751)

NOTE 12. AOCI

Year Ended December 31, 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   (334)   (107)   207    ―      (5)   (239)
 Amounts reclassified from AOCI:                  
  Personnel expense   17    ―      ―      ―      ―      17 
  Interest income   ―      ―      (24)   ―      6    (18)
  Interest expense   ―      82    ―      ―      ―      82 
  FDIC loss share income, net   ―      ―      ―      45    ―      45 
  Securities (gains) losses, net   ―      ―      3    ―      ―      3 
   Total before income taxes   17    82    (21)   45    6    129 
   Less: Income taxes   6    31    (8)   17    2    48 
    Net of income taxes   11    51    (13)   28    4    81 
 Net change in AOCI   (323)   (56)   194    28    (1)   (158)
AOCI balance, December 31, 2014 $ (626) $ (54) $ 152  $ (207) $ (16) $ (751)

Year Ended December 31, 2013 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, 2013 $ (714) $ (173) $ 598  $ (256) $ (14) $ (559)
 OCI before reclassifications, net of tax   354    127    (669)   (18)   (2)   (208)
 Amounts reclassified from AOCI:                  
  Personnel expense   91    ―      ―      ―      ―      91 
  Interest income   ―      ―      97    ―      2    99 
  Interest expense   ―      77    ―      ―      ―      77 
  FDIC loss share income, net   ―      ―      ―      63    ―      63 
  Securities (gains) losses, net   ―      ―      (51)   ―      ―      (51)
   Total before income taxes   91    77    46    63    2    279 
   Less: Income taxes   34    29    17    24    1    105 
    Net of income taxes   57    48    29    39    1    174 
 Net change in AOCI   411    175    (640)   21    (1)   (34)
AOCI balance, December 31, 2013 $ (303) $ 2  $ (42) $ (235) $ (15) $ (593)

Year Ended December 31, 2012 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, 2012 $ (603) $ (159) $ 263  $ (195) $ (19) $ (713)
 OCI before reclassifications, net of tax   (158)   (52)   280    (113)   ―      (43)
 Amounts reclassified from AOCI:                  
  Personnel expense   76    ―      ―      ―      ―      76 
  Interest income   ―      (11)   76    ―      8    73 
  Interest expense   ―      72    ―      ―      ―      72 
  FDIC loss share income, net   ―      ―      ―      83    ―      83 
  Securities (gains) losses, net   ―      ―      12    ―      ―      12 
   Total before income taxes   76    61    88    83    8    316 
   Less: Income taxes   29    23    33    31    3    119 
    Net of income taxes   47    38    55    52    5    197 
 Net change in AOCI   (111)   (14)   335    (61)   5    154 
AOCI balance, December 31, 2012 $ (714) $ (173) $ 598  $ (256) $ (14) $ (559)

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NOTE 13. Income Taxes

The components of the income tax provision are as follows:
                
       Year Ended December 31, 
       2014 2013 2012 
                
       (Dollars in millions) 
 Current expense:         
  Federal$ 551  $ 1,007  $ 275  
  State  82    100    70  
 Total current expense  633    1,107    345  
 Deferred expense:         
  Federal  115    256    396  
  State  12    32    23  
 Total deferred expense  127    288    419  
 Provision for income taxes$ 760  $ 1,395  $ 764  

The components of the income tax provision are as follows:
  Year Ended December 31,
  2016 2015 2014
  (Dollars in millions)
Current expense:      
Federal $959
 $585
 $706
State 97
 99
 81
Total current expense 1,056
 684
 787
Deferred expense:  
  
  
Federal (14) 99
 122
State 16
 11
 12
Total deferred expense 2
 110
 134
Provision for income taxes $1,058
 $794
 $921
The reasons for the difference between the provision for income taxes and the amount computed by applying the statutory Federal income tax rate to income before income taxes were as follows:

       Year Ended December 31, 
       2014 2013 2012 
                   
       (Dollars in millions)  
 Federal income taxes at statutory rate of 35%$ 1,045   $ 1,093   $ 977   
 Increase (decrease) in provision for income taxes as a result of:            
  State income taxes, net of Federal tax benefit  61     86     61   
  Federal tax credits  (171)    (152)    (126)  
  Tax exempt income  (125)    (128)    (133)  
  Adjustments for uncertain tax positions  (39)    516     ―    ��
  Other, net  (11)    (20)    (15)  
 Provision for income taxes$ 760   $ 1,395   $ 764   
 Effective income tax rate  25.5 %   44.7 %   27.4 % 

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The tax effects of temporary differences that gave rise to deferred tax assets and liabilities are reflected in the table below:
             
       December 31, 
       2014 2013 
             
       (Dollars in millions) 
 Deferred tax assets:      
  ALLL$ 556  $ 655  
  Postretirement plans  372    180  
  Net unrealized loss on AFS securities  36    172  
  Equity-based compensation  137    152  
  Reserves and expense accruals  247    181  
  Other  242    189  
 Total deferred tax assets  1,590    1,529  
             
 Deferred tax liabilities:      
  Prepaid pension plan expense  477    431  
  MSRs  312    380  
  Lease financing  375    315  
  Loan fees and expenses  265    263  
  Identifiable intangible assets  139    128  
  Derivatives and hedging  122    45  
  Other  93    120  
 Total deferred tax liabilities  1,783    1,682  
   Net deferred tax liability$ (193) $ (153) 

  Year Ended December 31,
  2016 2015 2014
  (Dollars in millions)
Federal income taxes at statutory rate of 35% $1,225
 $1,021
 $1,094
Increase (decrease) in provision for income taxes as a result of:  
  
  
State income taxes, net of federal tax benefit 73
 72
 61
Affordable housing projects proportional amortization 205
 181
 159
Affordable housing projects tax credits and other tax benefits (279) (249) (221)
Tax exempt income (151) (129) (125)
Adjustments for uncertain tax positions (6) (107) (39)
Other, net (9) 5
 (8)
Provision for income taxes $1,058
 $794
 $921
Effective income tax rate 30.2% 27.2% 29.5%

The tax effects of temporary differences that gave rise to deferred tax assets and liabilities are reflected in the table below:
  December 31,
  2016 2015
  (Dollars in millions)
Deferred tax assets:    
ALLL $564
 $553
Postretirement plans 451
 431
Net unrealized loss on AFS securities 155
 124
Equity-based compensation 124
 129
Reserves and expense accruals 238
 255
Investments in qualified affordable housing projects 116
 110
Other 317
 292
Total deferred tax assets 1,965
 1,894
     
Deferred tax liabilities:  
  
Prepaid pension plan expense 558
 509
MSRs 358
 331
Lease financing 587
 663
Loan fees and expenses 103
 70
Identifiable intangible assets 224
 207
Other 45
 169
Total deferred tax liabilities 1,875
 1,949
Net deferred tax asset (liability) $90
 $(55)

On a periodic basis, BB&T evaluates its income tax positions based on tax laws and regulations and financial reporting considerations, and records adjustments as appropriate. This evaluation takes into consideration the status of current taxing authorities’ examinations of BB&T’s tax returns, recent positions taken by the taxing authorities on similar transactions and the overall tax environment in relation to tax-advantaged transactions. The following table presents changes in unrecognized tax benefits:

       As of/ For the Year Ended December 31, 
       2014 2013 2012 
                
       (Dollars in millions) 
 Beginning balance of unrecognized tax benefits$ 644  $ 297  $ 301  
  Additions based on tax positions related to current year  1    18    14  
  Additions (reductions) for tax positions of prior years  (34)   343    ―    
  Settlements  (17)   ―      (5) 
  Unrecognized deferred tax benefits from business acquisitions  (91)   (14)   (13) 
 Ending balance of unrecognized tax benefits$ 503  $ 644  $ 297  
                
 Unrecognized tax benefits that would have impacted effective rate if recognized         
  Federal$ 497  $ 631  $ 288  
  State  4    11    9  
                

The Company had $210 million, $213 million and $37 million in liabilities for tax-related interest and penalties recorded on its Consolidated Balance Sheets at December 31, 2014, 2013, and 2012, respectively. The amount of net interest and penalties related to unrecognized tax benefits recognized in the 2014 and 2012 Consolidated Statements of Income was immaterial. The amount of net interest and penalties related to unrecognized tax benefits recognized in the 2013 Consolidated Statement of Income was $176 million.

The IRS has completed its Federal income tax examinations of BB&T through 2010. Various years remain subject to examination by state taxing authorities.

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In February

  As of/ For the Year Ended December 31,
  2016 2015 2014
  (Dollars in millions)
Beginning balance of unrecognized tax benefits $426
 $503
 $644
Additions based on tax positions related to current year —
 —
 1
Additions (reductions) for tax positions of prior years (5) (76) (34)
Settlements (420) (1) (17)
Lapse of statute of limitations —
 (1) —
Unrecognized deferred tax benefits from acquisitions —
 1
 (91)
Ending balance of unrecognized tax benefits $1
 $426
 $503
       
Unrecognized tax benefits that would have impacted effective rate if recognized  
  
  
Federal $—
 $422
 $497
State 1
 3
 4

During 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 Marchduring 2010 and filed a lawsuit seeking a refund in the U.S. Court of Federal Claims. On September 20, 2013, the courtClaims, which denied the refund claim. BB&T appealed the decision to the U.S. Court of Appeals for the Federal Circuit. Oral arguments were heardDuring 2015, the appeals court overturned a portion of the earlier ruling, resulting in the appeal on January 7, 2015; however, norecognition of a $107 million income tax benefit during 2015. The remainder of the decision has been rendered. As ofwas affirmed. BB&T filed a petition requesting the case be heard by the U.S. Supreme Court. During 2016, the U.S. Supreme Court declined to hear the case, which preserves the earlier ruling and effectively concluded this matter.
The Company had immaterial amounts accrued for tax-related interest and penalties at December 31, 2014, the exposure for this financing transaction is fully reserved.

It is reasonably possible that the litigation associated with the financing transaction may conclude within the next twelve months; however, further proceedings could delay a final resolution. Changes in the2016 and $181 million at December 31, 2015. The amount of net interest and penalties related to unrecognized tax benefits penalties and interest could resultrecognized in the Consolidated Statements of Income was a benefit of up$29 million for 2015.

The IRS has completed its Federal income tax examinations of BB&T through 2013. Various years remain subject to approximately $700 million. The ultimate resolution of these matters may take longer.

examination by state taxing authorities.


NOTE 14.13. Benefit Plans

Defined Benefit Retirement Plans

BB&T provides a defined benefit retirement planplans qualified under the IRC that covers most employees. Benefits are based on years of service, age at retirement and the employee's compensation during the five highest consecutive years of earnings within the last ten years of employment.

In addition, supplemental retirement benefits are provided to certain key officers under supplemental defined benefit executive retirement plans, which are not qualified under the IRC. Although technically unfunded plans, a Rabbi TrustTrusts and insurance policies on the lives of certain of the covered employees are available to finance future benefits.

The following actuarial assumptions were used to determine net periodic pension costs for the qualified pension plan:
              
     December 31, 
     2014 2013  2012  
 Weighted average assumed discount rate 5.10 %  4.25 %  4.82 % 
 Weighted average expected long-term rate of return on plan assets 7.75    8.00    8.00   
 Assumed long-term rate of annual compensation increases 5.00    4.50    4.50   

The following actuarial assumptions were used to determine net periodic pension costs for the qualified pension plans:
  December 31,
  2016 2015 2014
Weighted average assumed discount rate 4.68% 4.27% 5.10%
Weighted average expected long-term rate of return on plan assets 7.00
 7.50
 7.75
Assumed long-term rate of annual compensation increases 4.50
 4.50
 5.00


The weighted average expected long-term rate of return on plan assets represents the average rate of return expected to be earned on plan assets over the period the benefits included in the benefit obligation are to be paid. In developing the expected rate of return, BB&T considers long-term compound annualized returns of historical market data for each asset category, as well as historical actual returns on the plan assets. Using this reference information, the Company develops forward-looking return expectations for each asset category and a weighted average expected long-term rate of return for the plan based on target asset allocations contained in BB&T's Investment Policy Statement. TheFor 2017, the expected rate of return has been reduced to 7.5% for fiscal 2015.

During October 2014, the Society of Actuaries released new mortality tables that reflected longer life expectancies. BB&T adopted these tables, which resulted in increases to the projected benefit obligations.

on plan assets is 7.0%.

Financial data relative to thequalified and nonqualified defined benefit pension plans is summarized in the following tables for the years indicated. TheOn the Consolidated Balance Sheets, the qualified pension plan prepaid asset is recorded on the Consolidated Balance Sheets as a component of other assets and the nonqualified pension plans accrued liability is recorded on the Consolidated Balance Sheets as a component of other liabilities. The data is calculated using an actuarial measurement date of December 31.

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      Year Ended December 31, 
      2014  2013  2012  
               
      (Dollars in millions) 
 Net Periodic Pension Cost:         
  Service cost$ 138  $ 150  $ 120  
  Interest cost  140    120    110  
  Estimated return on plan assets  (296)   (257)   (200) 
  Net amortization and other  17    91    76  
   Net periodic benefit cost  (1)   104    106  
               
 Pre-Tax Amounts Recognized in OCI:         
  Net actuarial loss (gain)  532    (535)   270  
  Net amortization  (17)   (91)   (76) 
   Net amount recognized in OCI  515    (626)   194  
    Total net periodic pension costs (income) recognized in         
     total comprehensive income, pre-tax$ 514  $ (522) $ 300  

The following actuarial assumptions were used to determine benefit obligations: 
            
      December 31, 
      2014  2013  
 Weighted average assumed discount rate4.27 % 5.10 % 
 Assumed rate of annual compensation increases4.50   5.00   

     Qualified Pension Plan Nonqualified Pension Plans 
     Year Ended December 31, Year Ended December 31, 
     2014  2013  2014  2013  
                 
     (Dollars in millions) 
 Projected benefit obligation, beginning of year $ 2,437  $ 2,548  $ 304  $ 287  
  Service cost   128    139    10    11  
  Interest cost   124    107    16    12  
  Actuarial (gain) loss   607    (294)   45    2  
  Benefits paid   (69)   (63)   (8)   (8) 
 Projected benefit obligation, end of year $ 3,227  $ 2,437  $ 367  $ 304  
 Accumulated benefit obligation, end of year $ 2,744  $ 2,062  $ 295  $ 215  

     Qualified Pension Plan Nonqualified Pension Plans 
     Year Ended December 31, Year Ended December 31, 
     2014 2013 2014 2013 
                 
     (Dollars in millions) 
 Fair value of plan assets, beginning of year $ 3,733  $ 2,952  $ —  $ —  
  Actual return on plan assets   416    499    —    —  
  Employer contributions   143    345    8    8  
  Benefits paid   (69)   (63)   (8)   (8) 
 Fair value of plan assets, end of year $ 4,223  $ 3,733  $ —  $ —  
 Funded status at end of year $ 996  $ 1,296  $ (367) $ (304) 

The following are the pre-tax amounts recognized in AOCI:
                 
     Qualified Pension Plan Nonqualified Pension Plans 
     Year Ended December 31, Year Ended December 31, 
     2014  2013  2014  2013  
                 
     (Dollars in millions) 
 Prior service credit (cost) $ -    $ -    $ (2) $ (2) 
 Net actuarial loss   (859)   (377)   (149)   (117) 
  Net amount recognized $ (859) $ (377) $ (151) $ (119) 

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  Year Ended December 31,
  2016 2015 2014
  (Dollars in millions)
Net Periodic Pension Cost:      
Service cost $186
 $176
 $138
Interest cost 181
 157
 140
Estimated return on plan assets (326) (327) (296)
Net amortization and other 80
 67
 17
Net periodic benefit cost 121
 73
 (1)
       
Pre-Tax Amounts Recognized in OCI:  
  
  
Net actuarial loss (gain) 138
 230
 532
Net amortization (80) (67) (17)
Net amount recognized in OCI 58
 163
 515
Total net periodic pension costs (income) recognized in total comprehensive income, pre-tax $179
 $236
 $514

The following table presents the amount expected to be amortized from AOCI into net periodic pension cost during 2015:
         
   Qualified Nonqualified 
   Pension Plan Pension Plans 
         
   (Dollars in millions) 
 Net actuarial gain (loss)$ (47) $ (14) 
  Net amount expected to be amortized in 2015$ (47) $ (14) 

The following actuarial assumptions were used to determine benefit obligations:
  December 31,
  2016 2015
Weighted average assumed discount rate 4.43% 4.68%
Assumed rate of annual compensation increases 4.50
 4.50
  Qualified Plans Nonqualified Plans
  Year Ended December 31, Year Ended December 31,
  2016 2015 2016 2015
  (Dollars in millions)
Projected benefit obligation, beginning of year $3,473
 $3,227
 $392
 $367
Service cost 174
 164
 12
 12
Interest cost 163
 141
 18
 16
Actuarial (gain) loss 152
 (164) 15
 (3)
Benefits paid (94) (80) (11) (15)
Acquisitions 71
 185
 —
 15
Projected benefit obligation, end of year $3,939
 $3,473
 $426
 $392
Accumulated benefit obligation, end of year $3,403
 $2,997
 $363
 $309

  Qualified Plans Nonqualified Plans
  Year Ended December 31, Year Ended December 31,
  2016 2015 2016 2015
  (Dollars in millions)
Fair value of plan assets, beginning of year $4,369
 $4,223
 $—
 $—
Actual return on plan assets 356
 (70) —
 —
Employer contributions 360
 126
 11
 15
Benefits paid (94) (80) (11) (15)
Acquisitions 53
 170
 —
 —
Fair value of plan assets, end of year $5,044
 $4,369
 $—
 $—
Funded status at end of year $1,105
 $896
 $(426) $(392)

The following are the pre-tax amounts recognized in AOCI:
  Qualified Plans Nonqualified Plans
  Year Ended December 31, Year Ended December 31,
  2016 2015 2016 2015
  (Dollars in millions)
Prior service credit (cost) $—
 $—
 $(1) $(2)
Net actuarial loss (1,095) (1,040) (135) (131)
Net amount recognized $(1,095) $(1,040) $(136) $(133)
The following table presents the amount expected to be amortized from AOCI into net periodic pension cost during 2017:
  Qualified Plans Nonqualified Plans
  (Dollars in millions)
Net actuarial loss $(66) $(12)
Net amount expected to be amortized in 2017 $(66) $(12)

BB&T makes contributions to the qualified pension plan in amounts between the minimum required for funding and the maximum amount deductible for federal income tax purposes. BB&T made discretionary contributions of $143 million during 2014 and $117$260 million during the first quarter of 2015.2017. Management may make additional contributions in 2015.2017. For the nonqualified plans, the employer contributions are based on benefit payments.

The following table reflects the estimated benefit payments for the periods presented:
        
  Qualified Nonqualified 
  Pension Plan Pension Plans 
        
  (Dollars in millions) 
 2015$ 76  $ 11  
 2016  84    12  
 2017  93    13  
 2018  102    14  
 2019  111    15  
 2020-2024  719    93  

The following table reflects the estimated benefit payments for the periods presented:
  Qualified Plans Nonqualified Plans
  (Dollars in millions)
2017 $104
 $15
2018 115
 16
2019 125
 17
2020 137
 18
2021 149
 20
2022-2026 949
 119
BB&T's primary total return objective is to achieve returns that, over the long term, will fund retirement liabilities and provide for the desired plan benefits in a manner that satisfies the fiduciary requirements of the Employee Retirement Income Security Act of 1974. The plan assets have a long-term time horizon that runs concurrent with the average life expectancy of the participants. As such, the Plan can assume a time horizon that extends well beyond a full market cycle, and can assume an above-average level of risk, as measured by the standard deviation of annual return. It is expected, however, that both professional investment management and sufficient portfolio diversification will smooth volatility and help to generate a reasonable consistency of return. The investments are broadly diversified among economic sector, industry, quality and size in order to reduce risk and to produce incremental return. Within approved guidelines and restrictions, investment managers have wide discretion over the timing and selection of individual investments.



BB&T periodically reviews its asset allocation and investment policy and makes changes to its target asset allocation. BB&T has established guidelines within each asset category to ensure the appropriate balance of risk and reward. For the year ended December 31, 2014,2016, the target asset allocations for the plan assets included a range of 30% to 40%50% for U.S. equity securities, 10%11% to 18% for international equity securities, 35% to 50%53% for fixed income securities, and 0% to 12%14% for alternative investments, which include real estate, hedge funds and private equities and commodities, with any remainder to be held in cash equivalents.equities. The plan may hold BB&T common stock up to 10% of its assets subject to the target range for total U.S. equity securities.

in BB&T common stock.

The fair valuevalues of thecertain pension plan assets at December 31, 2014 and 2013 by asset category are reflected in the following tables. The three leveltable.
  December 31, 2016 December 31, 2015
  Total Level 1 Level 2 Total Level 1 Level 2
  (Dollars in millions)
Cash and cash-equivalents $179
 $179
 $—
 $266
 $266
 $—
U.S. equity securities 1,892
 1,018
 874
 1,627
 1,627
 —
International equity securities 839
 165
 674
 712
 614
 98
Fixed income securities 1,914
 10
 1,904
 1,631
 10
 1,621
Total $4,824
 $1,372
 $3,452
 $4,236
 $2,517
 $1,719

Investments measured at fair value hierarchy that describesusing the inputs usednet asset value per share or equivalent as a practical expedient are not required to measure thesebe classified in the fair value hierarchy. The pension plan assets is defined in Note 18 "Fair Value Disclosures.”

    December 31, 2014 December 31, 2013 
    Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 
                            
    (Dollars in millions) 
 Cash and cash-equivalents$ 66  $ 66  $ —  $ —  $ 74  $ 74  $ —  $ —  
 U.S. equity securities  1,635    1,635    —    —    1,701    1,701    —    —  
 International equity securities  657    539    118    —    741    626    115    —  
 Fixed income securities  1,717    10    1,707    —    1,090    94    996    —  
 Alternative investments  124    —    —    124    101    —    —    101  
  Total plan assets$ 4,199  $ 2,250  $ 1,825  $ 124  $ 3,707  $ 2,495  $ 1,111  $ 101  

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held alternative investments valued using net asset values totaling $199 million and $115 million at December 31, 2016 and 2015, respectively.
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U.S. equity securities includeincluded 3.0 million and 3.7 million shares of BB&T common stock valued at $117 million and $138$113 million at December 31, 2014 and 2013, respectively.2015. International equity securities include a common/commingled fund that consists of assets from several accounts, pooled together, to reduce management and administration costs. Total plan assets exclude accrued income of $23$21 million and $26$18 million at December 31, 20142016 and 2013,2015, respectively.

The following table presents the activity for Level 3 plan assets, all of which are in alternative investments: 
              
     Year Ended December 31, 
     2014 2013 2012 
              
     (Dollars in millions) 
 Balance at beginning of year$ 101  $ 98  $ 99  
  Actual return on plan assets  11    11    7  
  Purchases, sales and settlements  12    (8)   (8) 
 Balance at end of year$ 124  $ 101  $ 98  

Defined Contribution Plans

BB&T offers a 401(k) Savings Plan and other defined contribution plans that permit employees to contribute from 1% to 50% of their cash compensation. For full-time employees who are 21 years of age or older with one year or more of service, BB&T makes matching contributions of up to 6% of the employee's compensation. BB&T's contribution toexpense for the 401(k) Savings Plan and nonqualified defined contribution plans totaled $103$129 million, $102$114 million and $97$103 million for the years ended December 31, 2016, 2015 and 2014, 2013 and 2012, respectively. BB&T also offers defined contribution plans to certainCertain employees of subsidiaries who do not participate in the 401(k) Savings Plan.

Plan with different matching formulas.

Other Benefits

There are various other employment contracts, deferred compensation arrangements and covenants not to compete with selected members of management and certain retirees. These plans and their obligations are not material to the financial statements.

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NOTE 15.14. Commitments and Contingencies

BB&T utilizes a variety of financial instruments to meet the financing needs of clients and to reduce exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit, letters of credit and financial guarantees and derivatives. BB&T also has commitments to fund certain affordable housing investments and contingent liabilities related to certain sold loans.

Commitments to extend, originate or purchase credit are primarily lines of credit to businesses and consumers and have specified rates and maturity dates. Many of these commitments also have adverse change clauses, which allow BB&T to cancel the commitment due to deterioration in the borrowers’ creditworthiness.

       December 31, 
       2014 2013 
             
       (Dollars in millions) 
 Letters of credit and financial guarantees$ 3,462  $ 4,355  
 Carrying amount of the liability for letter of credit guarantees  22    39  
             
 Investments related to affordable housing and historic building rehabilitation projects  1,416    1,302  
 Amount of future funding commitments included in investments related to affordable      
  housing and historic rehabilitation projects  459    464  
 Lending exposure to these affordable housing projects  169    151  
 Tax credits subject to recapture related to affordable housing projects  300    250  
             
 Investments in private equity and similar investments  329    291  
 Future funding commitments to consolidated private equity funds  202    245  


  December 31,
  2016 2015
  (Dollars in millions)
Letters of credit $2,786
 $3,033
Carrying amount of the liability for letters of credit 27
 27
     
Investments in affordable housing and historic building rehabilitation projects:    
Carrying amount 1,719
 1,629
Amount of future funding commitments included in carrying amount 738
 654
Lending exposure 495
 292
Tax credits subject to recapture 413
 355
     
Private equity investments 362
 289
Future funding commitments to private equity investments 197
 231
Letters of credit and financial guarantees written are unconditional commitments issued by BB&T to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support borrowing arrangements, including commercial paper issuance, bond financing and similar transactions, the majority of which are to tax exempt entities. The credit risk involved in the issuance of these guarantees is essentially the same as that involved in extending loans to clients and as such, the instruments are collateralized when necessary.

BB&T invests in certain affordable housing and historic building rehabilitation projects throughout its market area as a means of supporting local communities. BB&T receives tax credits related to these investments. BB&T typically acts as a limited partner in these investments and does not exert control over the operating or financial policies of the partnerships. BB&T typically provides financing during the construction and development of the properties; however, permanent financing is generally obtained from independent third parties upon completion of a project. Tax credits are subject to recapture by taxing authorities based on compliance features required to be met at the project level. BB&T’s maximum potential exposure to losses relative to investments in VIEs is generally limited to the sum of the outstanding balance, future funding commitments and any related loans to the entity. Loans to these entities are underwritten in substantially the same manner as are other loans and are generally secured.

Effective January 1, 2015, BB&T adopted new guidance related toInvestments in Qualified Affordable Housing Projects. The following table summarizes the estimated impact to the Consolidated Statements of Income that will be reflected in future filings.

       Year Ended December 31, 
       2014��2013 
             
       (Dollars in millions) 
 Increase in other income$ 141  $ 160  
 Increase in provision for income taxes  (162)   (159) 
 Increase (decrease) in net income$ (21) $ 1  
             
         January 1, 2015 
             
           (Dollars in millions) 
 Decrease to retained earnings   $ (49) 

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BB&T has investments in and future funding commitments to certain private equity and similar investments. The majority of these investments are private equity funds that are consolidated into BB&T’s&T's financial statements. The risk exposure relating to such commitments is generally limited to the amount of investments and future funding commitments made.

A derivative is a financial instrument that derives its cash flows, and therefore its value, by reference to an underlying instrument, index or interest rate. For additional disclosures related to BB&T’s derivatives refer to Note 19 “Derivative Financial Instruments.”


BB&T has sold certain mortgage-related loans that contain recourse provisions. These provisions generally require BB&T to reimburse the investor for a share of any loss that is incurred after the disposal of the property. BB&T also issues standard representations and warranties related to mortgage loan sales to GSEs. Refer to Note 7 “Loan Servicing”the "Loan Servicing" note in the "Notes to Consolidated Financial Statements" for additional disclosures related to these exposures.

In the ordinary course of business, BB&T indemnifies its officers and directors to the fullest extent permitted by law against liabilities arising from pending litigation. BB&T also issues standard representations and warranties in underwriting agreements, merger and acquisition agreements, loan sales, brokerage activities and other similar arrangements. Counterparties in many of these indemnification arrangements provide similar indemnifications to BB&T. Although these agreements often do not specify limitations, BB&T does not believe that any payments related to these guarantees would materially change the financial position or results of operations of BB&T.

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 quarterlyregular 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,any applicable asset discount, 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.

    December 31, 
    2014 2013 
          
    (Dollars in millions) 
 Pledged securities$ 14,636  $ 11,911  
 Pledged loans  67,248    66,391  
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  December 31,
  2016 2015
  (Dollars in millions)
Pledged securities $15,549
 $14,063
Pledged loans 75,015
 69,070

NOTE 16.15. Regulatory Requirements and Other Restrictions

Branch Bank is required by the FRB to maintain reserve balances in the form of vault cash or deposits with the FRB based on specified percentages of certain deposit types, subject to various adjustments. At December 31, 2014,2016, the net reserve requirement amounted to $272$124 million.

Branch Bank is subject to laws and regulations that limit the amount of dividends it can pay. In addition, both BB&T and Branch Bank are subject to various regulatory restrictions relating to the payment of dividends, including requirements to maintain capital at or above regulatory minimums, and to remain “well-capitalized”"well-capitalized" under the prompt corrective action regulations. BB&T does not expect that any of these laws, regulations or policies will materially affect the ability of Branch Bank to pay dividends.

BB&T is subject to various regulatory capital requirements administered by the Federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory—and possibly additional discretionary—actions by regulators that, if undertaken, could have a direct material effect on the financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance-sheet items calculated pursuant to regulatory directives. BB&T’s capital amounts and classification also are subject to qualitative judgments by the regulators about components, risk weightings and other factors. BB&T is in full compliance with these requirements. Banking regulations also identify five capital categories for IDIs: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. At December 31, 20142016 and 2013,2015, BB&T and Branch Bank were classified as “well-capitalized,”"well-capitalized," and management believes that no events or changes have occurred subsequent to December 31, 2014year end that would change this designation.

Quantitative measures established by regulation to ensure capital adequacy require BB&T to maintain minimum amounts and ratios of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital to average tangible assets (leverage ratio).

Risk-based capital ratios, which include CET1, Tier 1 Capital and Total Capital, and Tier 1 Common Equity, are calculated based on regulatory guidance related to the measurement of capital and risk-weighted assets.

    December 31, 2014 December 31, 2013
    Actual Capital Capital Requirements Actual Capital Capital Requirements
    Ratio Amount Minimum Well-Capitalized Ratio Amount Minimum Well-Capitalized
                           
    (Dollars in millions)
Tier 1 Capital:                        
 BB&T 12.4 % $ 17,840  $ 5,747  $ 8,620  11.8 % $ 16,074  $ 5,460  $ 8,189 
 Branch Bank 11.7     16,329    5,591    8,387  11.9     15,785    5,315    7,973 
Total Capital:                        
 BB&T 14.9     21,381    11,494    14,367  14.3     19,514    10,919    13,649 
 Branch Bank 13.4     18,761    11,183    13,979  13.4     17,872    10,631    13,288 
Leverage Capital:                        
 BB&T 9.9     17,840    7,191    8,989  9.3     16,074    6,897    8,621 
 Branch Bank 9.3     16,329    5,265    8,775  9.4     15,785    5,058    8,429 


  December 31, 2016 December 31, 2015
  Actual Capital Capital Requirements Actual Capital Capital Requirements
  Ratio Amount Minimum Well-Capitalized Ratio Amount Minimum Well-Capitalized
  (Dollars in millions)
CET1 Capital:      
          
BB&T 10.2% $18,050
 $7,926
 $11,449
 10.3% $17,081
 $7,497
 $10,830
Branch Bank 11.5
 19,839
 7,730
 11,166
 11.3
 18,382
 7,319
 10,572
Tier 1 Capital:      
        
  
BB&T 12.0
 21,102
 10,568
 14,091
 11.8
 19,682
 9,997
 13,329
Branch Bank 11.5
 19,839
 10,307
 13,743
 11.3
 18,382
 9,759
 13,012
Total Capital:  
  
  
  
  
  
  
  
BB&T 14.1
 24,872
 14,091
 17,614
 14.3
 23,753
 13,329
 16,661
Branch Bank 13.6
 23,289
 13,743
 17,179
 13.4
 21,859
 13,012
 16,265
Leverage Capital:  
  
  
  
  
  
  
  
BB&T 10.0
 21,102
 8,460
 10,576
 9.8
 19,682
 8,062
 10,077
Branch Bank 9.6
 19,839
 8,249
 10,311
 9.3
 18,382
 7,866
 9,833
As an approved seller/servicer, Branch Bank is required to maintain minimum levels of capital, as specified by various agencies, including the United StatesU.S. Department of Housing and Urban Development, GNMA, FHLMC and FNMA. At December 31, 20142016 and 2013,2015, Branch Bank’s capital was above all required levels.

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NOTE 17.16. Parent Company Financial Statements

 Parent Company 
 Condensed Balance Sheets 
           
     December 31, 
     2014 2013 
           
     (Dollars in millions) 
 Assets:      
  Cash and due from banks$ 79  $ ―    
  Interest-bearing deposits with banks  7,612    5,727  
  AFS securities at fair value  125    26  
  HTM securities at amortized cost  23    35  
  Investment in banking subsidiaries  22,711    22,314  
  Investment in other subsidiaries  1,452    1,281  
  Advances to / receivables from banking subsidiaries  63    106  
  Advances to / receivables from other subsidiaries  2,430    2,308  
  Other assets  168    194  
   Total assets$ 34,663  $ 31,991  
           
 Liabilities and Shareholders' Equity:      
  Short-term borrowed funds$ ―    $ 24  
  Short-term borrowed funds due to subsidiaries  40    50  
  Long-term debt  10,081    9,032  
  Accounts payable and other liabilities  116    76  
   Total liabilities  10,237    9,182  
   Total shareholders' equity  24,426    22,809  
   Total liabilities and shareholders' equity$ 34,663  $ 31,991  

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 Parent Company 
 Condensed Income Statements 
   
    Year Ended December 31, 
    2014  2013  2012  
             
    (Dollars in millions) 
 Income:         
  Dividends from banking subsidiaries$ 1,636  $ 1,220  $ 1,720  
  Dividends from other subsidiaries  71    79    81  
  Interest and other income from subsidiaries  67    67    79  
  Other income  7    14    1  
   Total income  1,781    1,380    1,881  
 Expenses:         
  Interest expense  148    219    239  
  Other expenses  55    50    52  
   Total expenses  203    269    291  
             
 Income before income taxes and equity in         
  undistributed earnings of subsidiaries  1,578    1,111    1,590  
 Income tax benefit  43    2    20  
 Income before equity in undistributed earnings of subsidiaries  1,621    1,113    1,610  
 Equity in undistributed earnings of subsidiaries in excess of        ��
  dividends from subsidiaries  605    616    418  
 Net income  2,226    1,729    2,028  
             
 Noncontrolling interests  75    50    49  
 Dividends on preferred stock  148    117    63  
 Net income available to common shareholders$ 2,003  $ 1,562  $ 1,916  

 Parent Company 
 Condensed Statements of Comprehensive Income 
   
       Year Ended December 31, 
        2014   2013   2012  
                
       (Dollars in millions) 
 Net Income$ 2,226  $ 1,729  $ 2,028  
 OCI, Net of Tax:         
  Change in unrecognized pension and postretirement amounts  1    (4)   ―    
  Change in unrecognized gains (losses) on cash flow hedges  ―      ―      (2) 
  Other, net  2    1    1  
   Total OCI  3    (3)   (1) 
   Total comprehensive income$ 2,229  $ 1,726  $ 2,027  
                
                
 Income Tax Effect of Items Included in OCI         
  Change in unrecognized pension and postretirement amounts$ ―    $ (1) $ ―    
  Change in unrecognized gains (losses) on cash flow hedges  ―      ―      (1) 
  Other, net  1    ―      ―    

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 Parent Company 
 Condensed Statements of Cash Flows 
   
       Year Ended December 31, 
       2014  2013  2012  
                
       (Dollars in millions) 
 Cash Flows From Operating Activities:         
  Net income$ 2,226  $ 1,729  $ 2,028  
  Adjustments to reconcile net income to net cash provided by         
   operating activities:         
   Equity in earnings of subsidiaries in excess of dividends         
    from subsidiaries  (605)   (616)   (418) 
   Net change in other assets  27    95    265  
   Net change in accounts payable and accrued liabilities  40    42    (71) 
   Other, net  (86)   (79)   (228) 
    Net cash from operating activities  1,602    1,171    1,576  
                
 Cash Flows From Investing Activities:         
  Proceeds from sales, calls and maturities of AFS securities  25    24    26  
  Purchases of AFS securities  (124)   (24)   (26) 
  Proceeds from maturities, calls and paydowns of HTM securities  16    2    4  
  Investment in subsidiaries  (1)   (4)   (30) 
  Advances to subsidiaries  (7,145)   (5,815)   (10,785) 
  Proceeds from repayment of advances to subsidiaries  7,060    5,898    11,325  
  Net cash from business combinations  ―      ―      51  
  Net cash from divestitures  ―      9    ―    
   Net cash from investing activities  (169)   90    565  
                
 Cash Flows From Financing Activities:         
  Net change in long-term debt  1,085    499    (2,764) 
  Net change in short-term borrowings  (24)   (13)   (259) 
  Net change in advances from subsidiaries  (10)   50    (72) 
  Net proceeds from common stock issued  294    108    15  
  Net proceeds from preferred stock issued  ―      487    2,116  
  Cash dividends paid on common and preferred stock  (814)   (912)   (564) 
  Other, net  ―      8    62  
   Net cash from financing activities  531    227    (1,466) 
                
 Net Change in Cash and Cash Equivalents  1,964    1,488    675  
 Cash and Cash Equivalents at Beginning of Year  5,727    4,239    3,564  
 Cash and Cash Equivalents at End of Year$ 7,691  $ 5,727  $ 4,239  
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  December 31,
Parent Company - Condensed Balance Sheets 2016 2015
  (Dollars in millions)
Assets:    
Cash and due from banks $21
 $109
Interest-bearing deposits with banks 7,094
 7,383
AFS securities at fair value 134
 124
HTM securities at amortized cost 1
 3
Investment in banking subsidiaries 28,444
 25,823
Investment in other subsidiaries 1,279
 1,101
Advances to / receivables from banking subsidiaries 850
 —
Advances to / receivables from other subsidiaries 2,981
 3,086
Other assets 131
 211
Total assets $40,935
 $37,840
     
Liabilities and Shareholders' Equity:    
Short-term borrowed funds $46
 $105
Long-term debt 10,836
 10,274
Accounts payable and other liabilities 127
 121
Total liabilities 11,009
 10,500
Total shareholders' equity 29,926
 27,340
Total liabilities and shareholders' equity $40,935
 $37,840
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  Year Ended December 31,
Parent Company - Condensed Income and Comprehensive Income Statements 2016 2015 2014
  (Dollars in millions)
Income:  
    
Dividends from banking subsidiaries $1,350
 $1,600
 $1,636
Dividends from other subsidiaries 6
 411
 71
Interest and other income from subsidiaries 73
 64
 67
Other income 3
 3
 7
Total income 1,432
 2,078
 1,781
Expenses:  
  
  
Interest expense 160
 165
 148
Other expenses 56
 103
 55
Total expenses 216
 268
 203
       
Income before income taxes and equity in undistributed earnings of subsidiaries 1,216
 1,810
 1,578
Income tax benefit 38
 40
 43
Income before equity in undistributed earnings of subsidiaries 1,254
 1,850
 1,621
Equity in undistributed earnings of subsidiaries in excess of dividends from subsidiaries 1,188
 273
 585
Net income 2,442
 2,123
 2,206
       
Total OCI (104) (277) (158)
Total comprehensive income $2,338
 $1,846
 $2,048

  Year Ended December 31,
Parent Company - Statements of Cash Flows 2016 2015 2014
  (Dollars in millions)
Cash Flows From Operating Activities:  
    
Net income $2,442
 $2,123
 $2,206
Adjustments to reconcile net income to net cash from operating activities:      
Equity in earnings of subsidiaries in excess of dividends from subsidiaries (1,188) (273) (585)
Net change in operating assets and liabilities:  
  
  
Other assets 41
 88
 27
Accounts payable and other liabilities (42) (14) 40
Other, net (88) 32
 (86)
Net cash from operating activities 1,165
 1,956
 1,602
       
Cash Flows From Investing Activities:  
  
  
Proceeds from sales, calls and maturities of AFS securities 27
 49
 25
Purchases of AFS securities (31) (21) (124)
Proceeds from maturities, calls and paydowns of HTM securities 2
 27
 16
Investment in subsidiaries (85) —
 (1)
Advances to subsidiaries (7,719) (7,461) (7,145)
Proceeds from repayment of advances to subsidiaries 6,975
 6,848
 7,060
Net cash from acquisitions and divestitures (254) (595) —
Net cash from investing activities (1,085) (1,153) (169)
       
Cash Flows From Financing Activities:  
  
  
Net change in short-term borrowings —
 (40) (34)
Net change in long-term debt 476
 (92) 1,085
Net cash from common stock transactions (293) 73
 298
Net proceeds from preferred stock issued 450
 —
 —
Cash dividends paid on common and preferred stock (1,092) (937) (814)
Other, net 2
 (6) (4)
Net cash from financing activities (457) (1,002) 531
Net Change in Cash and Cash Equivalents (377) (199) 1,964
Cash and Cash Equivalents at Beginning of Period 7,492
 7,691
 5,727
Cash and Cash Equivalents at End of Period $7,115
 $7,492
 $7,691

The transfer of funds in the form of dividends, loans or advances from bank subsidiaries to the Parent Company is restricted. Federal law requires loans to the Parent Company or its affiliates to be secured and at market terms and generally limits loans to the Parent Company or an individual affiliate to 10% of Branch Bank’s unimpaired capital and surplus. In the aggregate, loans to the Parent Company and all affiliates cannot exceed 20% of the bank’s unimpaired capital and surplus.

Dividend payments to the Parent Company by Branch Bank are subject to regulatory review and statutory limitations and, in some instances, regulatory approval. In general, dividends from Branch Bank to the Parent Company are limited by rules which compare dividends to net income for regulatory-defined periods. Furthermore, dividends are restricted by regulatory minimum capital constraints.

NOTE 18.17. 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 on a recurring basis:
                 
 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    ―    
   MBS issued by GSE   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  

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 December 31, 2013 Total Level 1 Level 2 Level 3 
                 
     (Dollars in millions) 
 Assets:             
  Trading securities $ 381  $ 256  $ 125  $ ―    
  AFS securities:             
   U.S. Treasury   595    ―      595    ―    
   MBS issued by GSE   17,929    ―      17,929    ―    
   States and political subdivisions   1,851    ―      1,851    ―    
   Non-agency MBS   291    ―      291    ―    
   Other   45    10    35    ―    
   Acquired from FDIC   1,393    ―      532    861  
  LHFS   1,222    ―      1,222    ―    
  Residential MSRs   1,047    ―      ―      1,047  
  Derivative assets:             
   Interest rate contracts   862    ―      859    3  
   Foreign exchange contracts   2    ―      2    ―    
  Private equity and similar investments   291    ―      ―      291  
   Total assets $ 25,909  $ 266  $ 23,441  $ 2,202  
                 
 Liabilities:             
  Derivative liabilities:             
   Interest rate contracts $ 967  $ ―    $ 953  $ 14  
   Foreign exchange contracts   3    ―      3    ―    
  Short-term borrowings   84    ―      84    ―    
   Total liabilities $ 1,054  $ ―    $ 1,040  $ 14  

The following tables present fair value information for assets and liabilities measured at fair value on a recurring basis.
December 31, 2016 Total Level 1 Level 2 Level 3
  (Dollars in millions)
Assets:  
  
  
  
Trading securities $748
 $324
 $424
 $—
AFS securities:  
      
U.S. Treasury 2,587
 —
 2,587
 —
GSE 180
 —
 180
 —
Agency MBS 21,264
 —
 21,264
 —
States and political subdivisions 2,205
 —
 2,205
 —
Non-agency MBS 679
 —
 172
 507
Other 11
 8
 3
 —
LHFS 1,716
 —
 1,716
 —
MSRs 1,052
 —
 —
 1,052
Derivative assets: 

      
Interest rate contracts 814
 —
 807
 7
Foreign exchange contracts 8
 —
 8
 —
Private equity investments 362
 —
 —
 362
Total assets $31,626
 $332
 $29,366
 $1,928
         
Liabilities:  
  
  
  
Derivative liabilities:  
  
  
  
Interest rate contracts $998
 $—
 $978
 $20
Foreign exchange contracts 5
 —
 5
 —
Securities sold short 137
 —
 137
 —
Total liabilities $1,140
 $—
 $1,120
 $20

December 31, 2015 Total Level 1 Level 2 Level 3
  (Dollars in millions)
Assets:        
Trading securities $1,180
 $311
 $869
 $—
AFS securities:  
  
  
  
U.S. Treasury 1,832
 —
 1,832
 —
GSE 51
 —
 51
 —
Agency MBS 20,046
 —
 20,046
 —
States and political subdivisions 2,375
 —
 2,375
 —
Non-agency MBS 989
 —
 363
 626
Other 4
 4
 —
 —
LHFS 1,035
 —
 1,035
 —
MSRs 880
 —
 —
 880
Derivative assets:        
Interest rate contracts 964
 —
 956
 8
Foreign exchange contracts 6
 —
 6
 —
Private equity investments 289
 —
 —
 289
Total assets $29,651
 $315
 $27,533
 $1,803
         
Liabilities:  
      
Derivative liabilities:  
      
Interest rate contracts $788
 $—
 $784
 $4
Foreign exchange contracts 4
 —
 4
 —
Securities sold short 147
 —
 147
 —
Total liabilities $939
 $—
 $935
 $4
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 partyexternal 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 MBS issued by GSE:agency MBS: GSE pass-through securities are valued using market-based pricing matrices that are based onreference 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 onreference 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.

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Non-agency MBS also include investments in Re-REMIC trusts that primarily hold non-agency MBS, which are valued based on broker pricing models that use baseline securities yields and tranche-level yield adjustments to discount cash flows modeled using market convention prepayment speed and default assumptions.
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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.

Commercial MSRs are valued using a cash flow valuation model that calculates the present value of estimated future net servicing cash flows. BB&T considers actual and expected loan prepayment rates, discount rates, servicing costs and other economic factors that are determined based on current market conditions.

Derivative assets and liabilities: The fair values of derivatives are determined based on quoted market prices and internal pricing models that are primarily sensitive touse 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

Securities sold short: Securities sold short represent debt securities sold short that are entered into as a hedging strategy for the purposes of supporting institutional and retail client trading activities.

The following tables presentsummarize activity for financialLevel 3 assets and liabilities that are valued using Level 3 inputs:

                Private 
       Acquired       Equity and 
       from FDIC Residential Net Similar 
 Year Ended December 31, 2014 Securities MSRs Derivatives Investments 
              
        
 Balance at January 1, 2014 $ 861  $ 1,047  $ (11) $ 291  
  Total realized and unrealized gains (losses):             
   Included in earnings:             
    Interest income   33    ―      ―      ―    
    Mortgage banking income   ―      (221)   94    ―    
    Other noninterest income   ―      ―      (2)   27  
   Included in unrealized net holding gains (losses) in OCI   (38)   ―      ―      ―    
  Purchases   ―      ―      ―      67  
  Issuances   ―      141    75    ―    
  Sales   ―      ―      ―      (50) 
  Settlements   (111)   (123)   (139)   (7) 
  Transfers into Level 3   ―      ―      ―      1  
 Balance at December 31, 2014 $ 745  $ 844  $ 17  $ 329  
                   
 Change in unrealized gains (losses) included in earnings for the period,             
  attributable to assets and liabilities still held at December 31, 2014 $ 33  $ (221) $ 17  $ 15  

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                Private 
       Acquired     Equity and 
       from FDIC Residential Net Similar 
 Year Ended December 31, 2013 Securities MSRs Derivatives Investments 
              
        
 Balance at January 1, 2013 $ 994  $ 627  $ 54  $ 323  
  Total realized and unrealized gains (losses):             
   Included in earnings:             
    Interest income   37    ―      ―      ―    
    Mortgage banking income   ―      229    21    ―    
    Other noninterest income   ―      ―      ―      33  
   Included in unrealized net holding gains (losses) in OCI   (14)   ―      ―      ―    
  Purchases   ―      ―      ―      58  
  Issuances   ―      336    65    ―    
  Sales   ―      ―      ―      (59) 
  Settlements   (156)   (145)   (151)   (64) 
 Balance at December 31, 2013 $ 861  $ 1,047  $ (11) $ 291  
                   
 Change in unrealized gains (losses) included in earnings for the period,             
  attributable to assets and liabilities still held at December 31, 2013 $ 37  $ 229  $ (11) $ 22  

              Private 
       Acquired     Equity and 
        from FDIC Residential Net Similar 
 Year Ended December 31, 2012 Securities MSRs Derivatives Investments 
               
                   
 Balance at January 1, 2012 $ 984  $ 563  $ 59  $ 261  
  Total realized and unrealized gains (losses):             
   Included in earnings:             
    Interest income   48    ―      ―      ―    
    Mortgage banking income   ―      (32)   458    ―    
    Other noninterest income   ―      ―      ―      21  
   Included in unrealized holding gains (losses) in OCI   88    ―      ―      ―    
  Purchases   ―      ―      ―      101  
  Issuances   ―      270    308    ―    
  Sales   ―      ―      ―      (59) 
  Settlements   (126)   (174)   (771)   (1) 
 Balance at December 31, 2012 $ 994  $ 627  $ 54  $ 323  
                   
 Change in unrealized gains (losses) included in earnings for the period,             
  attributable to assets and liabilities still held at December 31, 2012 $ 48  $ (32) $ 54  $ 12  

Year Ended December 31, 2016 Non-agency MBS MSRs Net Derivatives Private Equity Investments
  (Dollars in millions)
Balance at January 1, 2016 $626
 $880
 $4
 $289
Total realized and unrealized gains (losses):  
  
  
  
Included in earnings:  
  
  
  
Interest income 25
 —
 —
 —
Mortgage banking income —
 63
 97
 —
Other noninterest income —
 —
 —
 20
Included in unrealized net holding gains (losses) in OCI (45) —
 —
 —
Purchases —
 —
 —
 106
Issuances —
 146
 82
 —
Sales —
 —
 —
 (38)
Settlements (99) (160) (196) (15)
Adoption of fair value option for commercial MSRs —
 123
 —
 —
Balance at December 31, 2016 $507
 $1,052
 $(13) $362
         
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at December 31, 2016 $25
 $63
 $(13) $7


Year Ended December 31, 2015 Non-agency MBS MSRs Net Derivatives Private Equity Investments
  (Dollars in millions)
Balance at January 1, 2015 $745
 $844
 $17
 $329
Total realized and unrealized gains (losses):  
  
  
  
Included in earnings:  
  
  
  
Interest income 23
 —
 —
 —
Mortgage banking income —
 10
 87
 —
Other noninterest income —
 —
 (6) 49
Included in unrealized net holding gains (losses) in OCI (45) —
 —
 —
Purchases —
 —
 1
 81
Issuances —
 156
 74
 —
Sales —
 —
 —
 (154)
Settlements (97) (130) (169) (16)
Balance at December 31, 2015 $626
 $880
 $4
 $289
         
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at December 31, 2015 $23
 $10
 $4
 $(2)
Year Ended December 31, 2014 Non-agency MBS MSRs Net Derivatives Private Equity Investments
  (Dollars in millions)
Balance at January 1, 2014 $861
 $1,047
 $(11) $291
Total realized and unrealized gains (losses):  
  
  
  
Included in earnings:  
  
  
  
Interest income 33
 —
 —
 —
Mortgage banking income —
 (221) 94
 —
Other noninterest income —
 —
 (2) 27
Included in unrealized holding gains (losses) in OCI (38) —
 —
 —
Purchases —
 —
 —
 67
Issuances —
 141
 75
 —
Sales —
 —
 —
 (50)
Settlements (111) (123) (139) (7)
Transfers into Level 3 —
 —
 —
 1
Balance at December 31, 2014 $745
 $844
 $17
 $329
         
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at December 31, 2014 $33
 $(221) $17
 $15

BB&T’s policy is to recognize transfers in and transfers out of Levels 1, 2 and 3between levels as of the end of a reporting period. Transfers in and out of Level 3 are shown in the preceding tables.

BB&T’s There were no transfers between Level 1 and Level 2 during 2016, 2015 or 2014.


The non-agency MBS categorized as Level 3 represent ownership interest in various tranches of Re-REMIC trusts. These securities are valued at a discount, which is unobservable in the market, to the fair value of the underlying securities owned by the trusts. The Re-REMIC tranches do not have an active market and therefore are categorized as Level 3. At December 31, 2016, the fair value of the Re-REMIC non-agency MBS represented a discount of 14.1% to the fair value of the underlying securities owned by the Re-REMIC trusts.  


The majority of private equity and similar investments are primarily in SBIC qualified funds, which primarily focus on equity and subordinated debt investments in privately-held middle market companies. TheseThe majority of these VIE investments generally 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 2025,2026, is uncertain and dependent on various events such as recapitalizations, refinance transactions and ownership changes, among others. Excluding the investment of future funds, BB&T estimates these investments have a weighted average remaining life of approximately two years; however, the timing and amount of distributions may vary significantly. As of December 31, 2014,2016, restrictions on the ability to sell the investments include, but are not limited to, consent of a majority member or general partner approval for transfer of ownership. BB&T’s investments are spread over numerous privately-held middle market companies, and thus the sensitivity to a change in fair value for any single investment is limited. The significant unobservable inputs for these investments are EBITDA multiples that ranged from 4x5x to 10x,13x, with a weighted average of 8x, at December 31, 2014.

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The following table details the fair value and UPB of LHFS that were elected to be carried at fair value:
                       
     December 31, 2014 December 31, 2013 
     Fair Aggregate   Fair Aggregate   
     Value UPB Difference Value UPB Difference 
                       
     (Dollars in millions) 
 LHFS reported at fair value$ 1,423  $ 1,390  $ 33  $ 1,222  $ 1,223  $ (1) 

The following table details the fair value and UPB of LHFS that were elected to be carried at fair value:
  December 31, 2016 December 31, 2015
  Fair Value Aggregate UPB Difference Fair Value Aggregate UPB Difference
  (Dollars in millions)
LHFS reported at fair value $1,716
 $1,736
 $(20) $1,035
 $1,023
 $12
Excluding government guaranteed, there were no LHFS that were in nonaccrual status or 90 days or more past due and still accruing interest were not material at December 31, 2014.

The following table provides information about certain financial assets measured at fair value on a nonrecurring basis, which are considered to be Level 3 assets (excludes acquired from FDIC):
                 
     As Of / For the Year Ended 
     December 31, 2014 December 31, 2013 
     Carrying Value Valuation Adjustments Carrying Value Valuation Adjustments 
                 
     (Dollars in millions) 
 Impaired loans $ 109  $ (52) $50  $ (41) 
 Foreclosed real estate   87    1   71    (6) 

2016.

The following table provides information about certain financial assets measured at fair value on a nonrecurring basis, which are primarily collateral dependent and may be subject to liquidity adjustments. The carrying values represent end of period values, which approximate the fair value measurements that occurred on the various measurement dates throughout the period. The valuation adjustments represent the amounts recorded during the period regardless of whether the asset is still held at period end. These assets are considered to be Level 3 assets (excludes PCI).
  As Of / For the Year Ended
  December 31, 2016 December 31, 2015
  Carrying Value Valuation Adjustments Carrying Value Valuation Adjustments
  (Dollars in millions)
Impaired loans $278
 $(89) $149
 $(30)
Foreclosed real estate 50
 (221) 82
 (190)
Refer to the "Acquisitions and Divestitures" note for fair value measurements related to acquisitions.
For financial instruments not recorded at fair value, estimates of fair value are based on relevant market data and information about the instrument and are based on the value ofinstrument. Values obtained relate to one trading unit without regard to any premium or discount that may result from concentrations of ownership, possible tax ramifications, estimated transaction costs that may result from bulk sales or the relationship between various instruments.

An active market does not exist for certain financial instruments. Fair value estimates for these instruments are based on current economic conditions, currency and interest rate risk characteristics, loss experience and other factors. Many of these estimates involve uncertainties and matters of significant judgment and cannot be determined with precision. Therefore, the fair value estimates in many instances cannot be substantiated by comparison to independent markets and, in many cases, may not be realizable in a current sale of the instrument. In addition, changes in assumptions could significantly affect these fair value estimates. The following assumptions were used to estimate the fair value of these financial instruments.

Cash and cash equivalents and restricted cash: For these short-term instruments, the carrying amounts are a reasonable estimate of fair values.

HTM securities: The fair values of HTM securities are based on a market approach using observable inputs such as benchmark yields and securities, TBA prices, reported trades, issuer spreads, current bids and offers, monthly payment information and collateral performance.


Loans receivable: The fair values for loans are estimated using discounted cash flow analyses, applying interest rates currently being offered for loans with similar terms and credit quality, which are deemed to be indicative of orderly transactions in the current market. For commercial loans and leases, discount rates may be adjusted to address additional credit risk on lower risk grade instruments. For residential mortgage and other consumer loans, internal prepayment risk models are used to adjust contractual cash flows. Loans are aggregated into pools of similar terms and credit quality and discounted using a LIBOR based rate. The carrying amounts of accrued interest approximate fair values.

FDIC loss share receivable and payable: The fair values of the receivable and payable arewere estimated using discounted cash flow analyses, applying a risk free interest rate that iswas 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 arewere 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 arewere not transferrabletransferable and, accordingly, there iswas 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.

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Short-term borrowings: The carrying amounts of short-term borrowings, excluding securities sold short, approximate their fair values.

Long-term debt: The fair values of long-term debt instruments are estimated based on quoted market prices for the instrument if available, or for similar instruments if not available, or by using discounted cash flow analyses, based on current incremental borrowing rates for similar types of instruments.

Contractual commitments: The fair values of commitments are estimated using the fees charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. The fair values of guarantees and letters of credit are estimated based on the counterparties’ creditworthiness and average default rates for loan products with similar risks. These respective fair value measurements are categorized within Level 3 of the fair value hierarchy. Retail lending commitments are assigned no fair value as BB&T typically has the ability to cancel such commitments by providing notice to the borrower.

   
   
     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, net of ALLL excluding acquired from FDIC   117,259    117,268    ―      117,268  
  Acquired from FDIC loans, net of ALLL   1,151    1,337    ―      1,337  
  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    ―    

     Carrying Total     
 December 31, 2013 Amount Fair Value Level 2 Level 3 
             
     (Dollars in millions) 
 Financial assets:             
  HTM securities $ 18,101  $ 17,530  $ 17,491  $ 39  
  Loans and leases, net of ALLL excluding acquired from FDIC   112,264    112,261    ―      112,261  
  Acquired from FDIC loans, net of ALLL   1,921    2,200    ―      2,200  
  FDIC loss share receivable   843    464    ―      464  
                 
 Financial liabilities:             
  Deposits   127,475    127,810    127,810    ―    
  FDIC loss share payable   669    652    ―      652  
  Long-term debt   21,493    22,313    22,313    ―    

The following is a summary of selected information pertaining to off-balance sheet financial instruments:
                
    December 31, 2014  December 31, 2013 
    Notional/   Notional/   
    Contract   Contract   
   Amount Fair Value Amount Fair Value 
            
    (Dollars in millions) 
 Commitments to extend, originate or purchase credit $ 49,333  $ 97  $ 45,333  $ 86  
 Residential mortgage loans sold with recourse   667    9    783    13  
 Other loans sold with recourse   4,264    7    4,594    9  
 Letters of credit and financial guarantees   3,462    22    4,355    39  
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Financial assets and liabilities not recorded at fair value are summarized below:
December 31, 2016 Carrying Amount Total Fair Value Level 2 Level 3
  (Dollars in millions)
Financial assets:        
HTM securities $16,680
 $16,546
 $16,546
 $—
Loans and leases HFI, net of ALLL 141,833
 142,044
 —
 142,044
         
Financial liabilities:  
    
  
Deposits 160,234
 160,403
 160,403
 —
Long-term debt 21,965
 22,423
 22,423
 —
December 31, 2015 Carrying Amount Total Fair Value Level 2 Level 3
  (Dollars in millions)
Financial assets:        
HTM securities $18,530
 $18,519
 $18,519
 $—
Loans and leases HFI, net of ALLL 134,491
 134,728
 —
 134,728
FDIC loss share receivable 285
 11
 —
 11
         
Financial liabilities:    
    
Deposits 149,124
 149,300
 149,300
 —
FDIC loss share payable 685
 676
 —
 676
Long-term debt 23,769
 24,206
 24,206
 —

The following is a summary of selected information pertaining to off-balance sheet financial instruments:
  December 31, 2016 December 31, 2015
  Notional/Contract Amount Fair Value Notional/Contract Amount Fair Value
  (Dollars in millions)
Commitments to extend, originate or purchase credit $64,395
 $250
 $59,019
 $253
Residential mortgage loans sold with recourse 578
 7
 702
 8
Other loans sold with recourse 4,240
 7
 4,198
 7
Letters of credit 2,786
 27
 3,033
 27


NOTE 19.18. Derivative Financial Instruments

Derivative Classifications and Hedging Relationships
                         
        December 31, 2014 December 31, 2013
      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 swaps3 mo. LIBOR funding $ 9,300  $ ―    $ (289) $ 4,300  $ ―    $ (203)
                         
Fair value hedges:                   
 Interest rate contracts:                   
  Receive fixed swapsLong-term debt   11,902    269    (5)   6,822    102    (3)
  Pay fixed swapsCommercial loans   161    ―      (3)   178    ―      (3)
  Pay fixed swapsMunicipal securities   336    ―      (126)   345    ―      (83)
    Total    12,399    269    (134)   7,345    102    (89)
                         
Not designated as hedges:                   
 Client-related and other risk management:                   
  Interest rate contracts:                   
   Receive fixed swaps    7,995    350    (3)   8,619    370    (37)
   Pay fixed swaps    8,163    1    (375)   8,401    31    (396)
   Other swaps    1,372    5    (7)   1,586    6    (8)
   Other    528    1    (1)   424    2    (2)
  Forward commitments    5,326    10    (12)   ―      ―      ―   
  Foreign exchange contracts    571    8    (6)   384    2    (3)
    Total    23,955    375    (404)   19,414    411    (446)
                         
 Mortgage banking:                   
  Interest rate contracts:                   
   Interest rate lock commitments    1,566    20    ―      1,869    3    (14)
   When issued securities, forward rate agreements and forward                  
    commitments   2,623    3    (25)   3,100    34    (7)
   Other    916    7    ―      531    8    (7)
    Total    5,105    30    (25)   5,500    45    (28)
                         
 MSRs:                   
  Interest rate contracts:                   
   Receive fixed swaps    4,119    215    (1)   6,139    36    (141)
   Pay fixed swaps    4,362    1    (124)   5,449    89    (29)
   Option trades    9,350    229    (36)   9,415    181    (31)
   When issued securities, forward rate agreements and forward                  
    commitments   3,731    3    ―      1,756    ―      (3)
    Total    21,562    448    (161)   22,759    306    (204)
     Total derivatives not designated as hedges   50,622    853    (590)   47,673    762    (678)
Total derivatives $ 72,321    1,122    (1,013) $ 59,318    864    (970)
                         
Gross amounts not offset in the Consolidated Balance Sheets:                  
 Amounts subject to master netting arrangements not offset due to policy election   (629)   629       (514)   514 
 Cash collateral (received) posted      (190)   342       (44)   386 
  Net amount    $ 303  $ (42)    $ 306  $ (70)
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Assets

The following table presents the notional amount and liabilities related to derivatives are presented on a gross basis in the Consolidated Balance Sheets. estimated fair value of derivative instruments:
    December 31, 2016 December 31, 2015
    Notional Amount Fair Value Notional Amount Fair Value
  Hedged Item or Transaction  Gain Loss  Gain Loss
    (Dollars in millions)
Cash flow hedges:              
Interest rate contracts:              
Pay fixed swaps 3 mo. LIBOR funding $7,050
 $—
 $(187) $9,300
 $—
 $(214)
               
Fair value hedges:    
  
  
  
  
  
Interest rate contracts:    
  
  
  
  
  
Receive fixed swaps Long-term debt 12,099
 202
 (100) 13,092
 329
 (1)
Options Long-term debt 2,790
 —
 (1) —
 —
 —
Pay fixed swaps Commercial loans 346
 4
 (2) 207
 —
 (2)
Pay fixed swaps Municipal securities 231
 —
 (83) 244
 —
 (94)
Total   15,466
 206
 (186) 13,543
 329
 (97)
               
Not designated as hedges:    
  
  
  
  
  
Client-related and other risk management:  
  
  
  
  
  
Interest rate contracts:    
  
  
  
  
  
Receive fixed swaps   9,989
 235
 (44) 8,827
 337
 (1)
Pay fixed swaps   10,263
 43
 (252) 8,984
 1
 (363)
Other swaps   1,086
 2
 (5) 1,005
 3
 (6)
Other   709
 2
 (2) 601
 1
 (2)
Forward commitments   5,972
 29
 (28) 4,403
 5
 (4)
Foreign exchange contracts 669
 8
 (5) 513
 6
 (4)
Total   28,688
 319
 (336) 24,333
 353
 (380)
               
Mortgage banking:    
  
  
  
  
  
Interest rate contracts:    
  
  
  
  
  
Interest rate lock commitments 2,219
 7
 (20) 1,828
 8
 (4)
When issued securities, forward rate agreements and forward commitments 3,657
 51
 (14) 2,725
 9
 (5)
Other   449
 2
 (1) 677
 4
 —
Total   6,325
 60
 (35) 5,230
 21
 (9)
               
MSRs:    
  
  
  
  
  
Interest rate contracts:    
  
  
  
  
  
Receive fixed swaps   5,034
 18
 (236) 2,343
 79
 (7)
Pay fixed swaps   3,768
 56
 (7) 2,329
 4
 (56)
Options   5,710
 160
 (8) 7,765
 184
 (24)
When issued securities, forward rate agreements and forward commitments 3,210
 3
 (8) 2,682
 —
 (5)
Total   17,722
 237
 (259) 15,119
 267
 (92)
Total derivatives not designated as hedges 52,735
 616
 (630) 44,682
 641
 (481)
Total derivatives   $75,251
 822
 (1,003) $67,525
 970
 (792)
               
Gross amounts not offset in the Consolidated Balance Sheets:  
  
  
  
  
Amounts subject to master netting arrangements not offset due to policy election   (443) 443
  
 (391) 391
Cash collateral (received) posted  
 (119) 450
  
 (283) 368
Net amount    
 $260
 $(110)  
 $296
 $(33)


The fair valuevalues of derivatives in a gain or loss position is includedare presented on a gross basis in other assets or other liabilities, respectively, onin 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
Year Ended December 31,
                           
        Effective Portion   
        Pre-tax Gain (Loss) Location of Pre-tax Gain (Loss) Reclassified
        Recognized in OCI Amounts Reclassified from AOCI into Income
        2014 2013  2012  from AOCI into Income 2014 2013  2012 
                           
         (Dollars in millions)
Cash Flow Hedges:                   
 Interest rate contracts$ (172) $ 204  $ (84) Total interest income $ ―    $ ―    $ 11 
                 Total interest expense   (82)   (77)   (72)
                   $ (82) $ (77) $ (61)
                           
                   Pre-tax Gain (Loss)
                 Location of Amounts Recognized in Income
                 Recognized in Income 2014 2013  2012 
                           
                  (Dollars in millions)
Fair Value Hedges:                   
 Interest rate contracts         Total interest income $ (22) $ (21) $ (21)
                 Total interest expense   233    141    288 
              $ 211  $ 120  $ 267 
Not Designated as Hedges:                 
 Client-related and other risk management:           
   Interest rate contracts       Other income $ 18  $ 26  $ 35 
   Foreign exchange contracts Other income   16    11    9 
 Mortgage Banking:                 
  Interest rate contracts       Mortgage banking income   (16)   (27)   59 
 MSRs:                 
  Interest rate contracts       Mortgage banking income   251    (197)   128 
              $ 269  $ (187) $ 231 

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The following table presents the effect of hedging derivative instruments on the consolidated statements of income:
Table of Contents

  Effective Portion
  Pre-tax Gain (Loss) Recognized in OCI Location of Amounts Reclassified from AOCI into Income Pre-tax Gain (Loss) Reclassified from AOCI into Income
Year Ended December 31 2016 2015 2014  2016 2015 2014
  (Dollars in millions)
Cash Flow Hedges:              
Interest rate contracts $(24) $(130) $(172) Total interest expense $(11) $(83) $(82)
           
        Location of Amounts Recognized in Income Pre-tax Gain (Loss) Recognized in Income
         2016 2015 2014
          (Dollars in millions)
Fair Value Hedges:              
Interest rate contracts       Total interest income $(18) $(20) $(22)
Interest rate contracts       Total interest expense 226
 279
 233
Total         $208
 $259
 $211
               
Not Designated as Hedges:          
  
  
Client-related and other risk management:      
  
  
Interest rate contracts       Other income $52
 $27
 $18
Foreign exchange contracts     Other income 11
 21
 16
Mortgage Banking:          
  
  
Interest rate contracts       Mortgage banking income 8
 7
 (16)
MSRs:          
  
  
Interest rate contracts       Mortgage banking income 31
 32
 251
Total         $102
 $87
 $269


The following table provides a summary of derivative strategies and the related accounting treatment:
  Cash Flow Hedges Fair Value Hedges 
Cash Flow HedgesFair Value HedgesDerivatives Not Designated as Hedges
       
Risk exposure Variability in cash flows of interest payments on floating rate business loans, overnight funding FHLB advances, medium-term bank notes and long-term debt.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 OCIAOCI 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 OCIAOCI 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 OCIAOCI is reported in earnings immediately. Not applicable Not applicable

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The following table presents information about BB&T's cash flow and fair value hedges:
              
      December 31, 
       2014  2013 
              
      (Dollars in millions) 
 Cash flow hedges:         
  Net unrecognized after-tax loss on active hedges recorded in AOCI $ (181)  $ (127)  
  Net unrecognized after-tax gain on terminated hedges recorded in AOCI         
   (to be recognized in earnings primarily from 2016 through 2021)   127     129   
  Estimated portion of net after-tax loss on active and terminated hedges         
   to be reclassified from AOCI into earnings during the next 12 months   (51)    (50)  
  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  8 yrs  7 yrs 
              
 Fair value hedges:         
  Unrecognized pre-tax net gain on terminated hedges (to be recognized         
   as interest primarily through 2019) $ 227   $ 317   
  Portion of pre-tax net gain on terminated hedges to be recognized as a change         
   in interest during the next 12 months    88     87   


The following table presents information about BB&T's cash flow and fair value hedges:
  December 31,
  2016 2015
  (Dollars in millions)
Cash flow hedges:     
 
Net unrecognized after-tax loss on active hedges recorded in AOCI $(118)  $(134) 
Net unrecognized after-tax gain on terminated hedges recorded in AOCI (to be recognized in earnings through 2022) 26
  50
 
Estimated portion of net after-tax loss on active and terminated hedges to be reclassified from AOCI into earnings during the next 12 months (4)  (7) 
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 6
yrs 7
yrs
Fair value hedges:  
   
 
Unrecognized pre-tax net gain on terminated hedges (to be recognized as interest primarily through 2019) $169
  $138
 
Portion of pre-tax net gain on terminated hedges to be recognized as a change in interest during the next 12 months 56
  57
 
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.

          December 31, 
         2014  2013 
                
          (Dollars in millions) 
 Cash collateral received from dealer counterparties $ 191  $ 44  
 Derivatives in a net gain position secured by that collateral   201    46  
 Unsecured positions in a net gain with dealer counterparties after collateral postings   10    3  
               
 Cash collateral posted to dealer counterparties   227    356  
 Derivatives in a net loss position secured by that collateral   231    357  
 Additional collateral that would have been posted had BB&T's credit ratings       
  dropped below investment grade   3    4  
                
 Derivatives in a net gain position with central clearing parties   -      26  
               
 Cash collateral, including initial margin, posted to central clearing parties   114    43  
 Derivatives in a net loss position secured by that collateral   129    43  
 Securities pledged to central clearing parties   116    82  

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 December 31,
 2016 2015
 (Dollars in millions)
Dealer Counterparties:   
Cash collateral received from dealer counterparties$123
 $283
Derivatives in a net gain position secured by that collateral123
 301
Unsecured positions in a net gain with dealer counterparties after collateral postings4
 18
    
Cash collateral posted to dealer counterparties138
 156
Derivatives in a net loss position secured by that collateral144
 161
    
Additional collateral that would have been posted had BB&T's credit ratings dropped below investment grade8
 6
    
Central Clearing Parties: 
  
Cash collateral, including initial margin, posted to central clearing parties313
 223
Derivatives in a net loss position secured by that collateral318
 227
Securities pledged to central clearing parties119
 207


NOTE 20.19. Computation of EPS

Basic and diluted EPS calculations are presented in the following table:
           
  Year Ended December 31, 
  2014 2013  2012  
           
  (Dollars in millions, except per share data, 
  shares in thousands) 
 Net income available to common shareholders$ 2,003  $ 1,562  $ 1,916  
           
 Weighted average number of common shares  718,140    703,042    698,739  
 Effect of dilutive outstanding equity-based awards  10,232    11,321    10,138  
 Weighted average number of diluted common shares  728,372    714,363    708,877  
           
 Basic EPS$ 2.79  $ 2.22  $ 2.74  
           
 Diluted EPS$ 2.75  $ 2.19  $ 2.70  
           
 Anti-dilutive equity-based awards  14,333    28,456    36,589  

Basic and diluted EPS calculations are presented in the following table:
  Year Ended December 31,
  2016 2015 2014
  (Dollars in millions, except per share data, shares in thousands)
Net income available to common shareholders $2,259
 $1,936
 $1,983
       
Weighted average number of common shares 804,680
 748,010
 718,140
Effect of dilutive outstanding equity-based awards 10,236
 9,755
 10,232
Weighted average number of diluted common shares 814,916
 757,765
 728,372
       
Basic EPS $2.81
 $2.59
 $2.76
       
Diluted EPS $2.77
 $2.56
 $2.72
       
Anti-dilutive awards 5,609
 8,620
 14,333
NOTE 21.20. Operating Segments

BB&T's operations are divided into six reportable business segments that have been identified based on BB&T’s organizational structure. The segments require unique technology and marketing strategies and offer different products and services through a number of distinctdistinctly branded LOBs.BUs. In addition, there is an Other, Treasury and Corporate segment. While BB&T is managed as an integrated organization, individual executive managers are held accountable for the operations of these business segments.

BB&T emphasizes revenue growth by focusing on client service, sales effectiveness and relationship management along with an organizational focus on referring clients between LOBs.BUs. The business objective is to provide BB&T’s entire suite of products to our clients with the end goal of providing our clients the best financial experience in the marketplace. The segment results contained herein are presented based on internal management accounting policies that were designed to support these strategic objectives. Unlike financial accounting, there is no comprehensive authoritative body of guidance for management accounting equivalent to GAAP. The performance of the segments is not comparable with BB&T’s consolidated results or with similar information presented by any other financial institution. Additionally, because of the interrelationships of the various segments, the information presented is not indicative of how the segments would perform if they operated as independent entities.

The management accounting process uses various estimates and allocation methodologies to measure the performance of the operating segments. To determine financial performance for each segment, BB&T allocates capital, funding charges and credits, an allocated provisionprovisions for loan and leasecredit losses, certain noninterest expenses and income tax provisions to each segment, as applicable. To promote revenue growth, certain revenues are reflected in noninterest income in the individual segment results and also allocated to Community Banking and Financial Services. These allocated revenues are reflected in intersegment net referral fees and eliminated in Other, Treasury and Corporate. Additionally certain client groups of Community Banking have also been identified as clients of other LOBsBUs within the business segments. Periodically, existing clients within the Community Banking segment may be identified and assigned as wealth and private banking clients. At the time of identification, these clients’ loan and deposit balances are reported in the Financial Services segment from the time of assignment forward. The net interest income and associated net FTP associated with these customers’ loans and deposits is accounted for in Community Banking in the respective line categories of net interest income (expense) and net intersegment interest income (expense). For the Commercial Finance LOB and the Wealth Division, NIM and net intersegment interest income have been combined in the net intersegment interest income (expense) line with an appropriate offsetting amount to the Other, Treasury and Corporate line item to ensure consolidated totals reflect the Company’s total NIM for loans and deposits. Allocation methodologies are subject to periodic adjustment as the internal management accounting system is revised and business or product lines within the segments change. Also, because the development and application of these methodologies is a dynamic process, the financial results presented may be periodically revised.

BB&T utilizes an FTP system to eliminate the effect of interest rate risk from the segments’ net interest income because such risk is centrally managed within the Treasury function. The FTP system credits or charges the segments with the economic value or cost of the funds the segments create or use. The net FTP credit or charge, which includes intercompany interest income and expense, is reflected as net intersegment income (expense) in the accompanying tables.

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The allocated provision for loan and leasecredit losses is also allocated to the relevant segments based on management’s assessment of the segments’ credit risks. The allocated provision is designed to achieve a high degree of correlation between the loan loss experience and the GAAP basis provision at the segment level, while at the same time providing management with a measure of operating performance that gives appropriate consideration to the risks inherent in each of the Company’s operating segments. Any over or under allocated provision for loan and leasecredit losses is reflected in Other, Treasury and Corporate to arrive at consolidated results.

BB&T allocates expenses to the reportable segments based on various methodologies, including volume and amount of loans and deposits and the number of full-time equivalent employees. Allocation systems are refined from time to time along with further identification of certain cost pools. These cost pools and refinements are implemented to provide for improved managerial reporting of cost to the appropriate business segments. A portion of corporate overhead expense is not allocated, but is retained in corporate accounts and reflected as Other, Treasury and Corporate in the accompanying tables. The majority of depreciation expense is recorded in support units and allocated to the segments as part of allocated corporate expense. Income taxes are allocated to the various segments based on taxable income and statutory rates applicable to the segment.

Community Banking

Community Banking serves individual and business clients by offering a variety of loan and deposit products and other financial services. Community Banking is primarily responsible for serving client relationships and, therefore, is credited with certain revenue from the Residential Mortgage Banking, Financial Services, Insurance Services,Holdings, Specialized Lending, and other segments, which is reflected in net referral fees.

Residential Mortgage Banking

Residential Mortgage Banking retains and services mortgage loans originated by Community BankingBB&T as well as those purchased from various correspondent originators. Mortgage loan products include fixed and adjustable rate government and conventional loans for the purpose of constructing, purchasing or refinancing residential properties. Substantially all of the properties are owner occupied. BB&T generally retains the servicing rights to loans sold. Residential Mortgage Banking earns interest on loans held in the warehouse and portfolio, earns fee income from the origination and servicing of mortgage loans and recognizes gains or losses from the sale of mortgage loans.

Dealer Financial Services

Dealer Financial Services originates loans to consumers on a prime and nonprime basis for the purchase of automobiles. Such loans are originated on an indirect basis through approved franchised and independent automobile dealers throughout the BB&T market area and nationally through Regional Acceptance Corporation. This segment also originates loans for the purchase of boats and recreational vehicles originated through dealers in BB&T’s market area. In addition, financing and servicing to dealers for their inventories is provided through a joint relationship between Dealer Financial Services and Community Banking.

Specialized Lending

BB&T's

Specialized Lending consists of LOBsBUs and subsidiaries that provide specialty finance products to consumers and businesses. The LOBsBUs include Commercial Finance and Governmental Finance. Commercial Finance structures and manages asset-based working capital financing, supply chain financing, export-import finance, accounts receivable management and credit enhancement. Commercial Finance also contains the Mortgage Warehouse Lending business whichand Governmental Finance. Mortgage Warehouse Lending provides short-term lending solutions to finance first-lien residential mortgage LHFS by independent mortgage companies. Governmental Finance provides tax-exempt financing to meet the capital project needs of local governments. Operating subsidiaries include BB&T Equipment Finance and BB&T Commercial Equipment Capital, which providesprovide equipment leasing largelyfor large and small-to-middle market clients primarily within BB&T’s banking footprint; Sheffield Financial, a dealer-based financer of small ticket equipment for both small businesses and consumers; Prime Rate Premium Finance Corporation, which includes AFCO and CAFO, insurance premium finance LOBsBUs that provide funding to businesses in the United States and Canada and to consumers in certain markets within BB&T’s banking footprint; and Grandbridge, a full-service commercial mortgage banking lender providing loans on a national basis. Lendmark Financial Services, a direct consumer finance lending company, was sold during the fourth quarter of 2013, resulting in the sale of $500 million of loans and the transfer of $230 million of loans to Residential Mortgage Banking. Branch Bank clients as well as nonbank clients within and outside BB&T’s primary geographic market area are served by these LOBs.BUs. The Community Banking segment receives credit for referrals to these LOBsBUs with the corresponding charge retained as part of Other, Treasury and Corporate in the accompanying tables.

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Insurance Services

Holdings

BB&T's insurance agency / brokerage network is the sixth largest in the world. Insurance ServicesHoldings provides property and casualty, employee benefits and life insurance to businesses and individuals. It also provides small business and corporate services, such as workers compensation and professional liability, as well as surety coverage and title insurance. In addition, Insurance Services underwrites a limited amount of property and casualty coverage. Community Banking and Financial Services receive credit for insurance commissions on referred accounts, with the corresponding charge retained in the corporate office, which is reflected as part of Other, Treasury and Corporate in the accompanying tables.

Financial Services

Financial Services provides personal trust administration, estate planning, investment counseling, wealth management, asset management, corporate retirement services, corporate banking and corporate trust services. Financial Services also 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., a subsidiary of Branch Bank.

Financial Services includes BB&T Securities, a full-service brokerage and investment banking firm that provides services in retail brokerage, equity and debt underwriting and investment advice corporate finance and equity research and facilitates the origination, trading and distribution of fixed-income securities and equity products in both the public and private capital markets. BB&T Securities also has a public finance department that provides investment banking services, financial advisory services and municipal bond financing to a variety of regional taxable and tax-exempt issuers.

Financial Services includes a group of BB&T-sponsoredconsolidated SBIC private equity and mezzanine investment funds that investsinvest in privately owned middle-market operating companies to facilitate growth or ownership transition while leveraging the Community Banking network for referrals and other bank services.transition. Financial Services also includes the Corporate Banking Division that originates and services large corporate relationships, syndicated lending relationships and client derivatives. Community Banking receives an interoffice credit for referral fees, with the corresponding charge reflected as part of Other, Treasury and Corporate in the accompanying tables. Also captured within the net intersegment interest income for Financial Services is the NIM for the loans and deposits associated with client relationships assigned to the Wealth Management Division that are housed in the Community Bank.

Other, Treasury and Corporate

Other, Treasury and Corporate is the combination of the Other segment that represents operating entities that do not meet the quantitative or qualitative thresholds for disclosure; BB&T’s Treasury function, which is responsible for the management of the securities portfolios, overall balance sheet funding and liquidity, and overall management of interest rate risk; the corporate support functions that have not been allocated to the business segments; certain merger-related charges or credits that are incurred as part of the acquisition and conversion of acquired entities; certain nonrecurring charges that are considered to be unusual in nature or infrequent and not reflective of the normal operations of the segments; and intercompany eliminations including intersegment net referral fees and net intersegment interest income (expense).

The loan portfolio acquired in the Colonial acquisition is managed outside of the Community Banking segment. The assets and related interest income from this loan portfolio have an expected finite business life and are therefore included in the Other, Treasury and Corporate segment.

The investment balances and results related to affordable housing investments are also included in this segment. Results for BankAtlantic were included in the Other, Treasury and Corporate segment untilsegment. PCI loans from the system conversionColonial acquisition and related net interest income are also included in October 2012. Historically, performancethis segment. Performance results of bank acquisitions prior to system conversion are typically reported in this segment and on a post-conversion date are reported in the Community Banking segment.

Segment Asset Transfer

DuringRealignment

Effective January 2014, approximately $8.32017, several business activities were realigned within the segments. First, certain client relationships with $218 million of loans and $2.0 billion of home equity loansdeposits were no longer included in Financial Services and linesare only reported in Community Banking. Second, the Mortgage Warehouse Lending and Domestic Factoring businesses within Specialized Lending were transferred from Community Bankingmoved to Residential Mortgage Banking based on a change in how these loans will be managed as a result of new qualified mortgage regulations.and Other, Treasury and Corporate, respectively. Third, the International division was restructured with components integrated into Community Banking and Financial Services from Other, Treasury and Corporate.  The following table has been retrospectively adjusted forpresents segment results prior to the loan transfer.

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BB&T Corporation
Reportable Segments
Year Ended December 31
                                       
    Community Banking Residential Mortgage Banking Dealer Financial Services Specialized Lending
    2014  2013  2012  2014  2013  2012  2014  2013  2012  2014  2013  2012 
                                       
     (Dollars in millions)
Net interest income (expense)$ 1,726  $ 1,712  $ 1,668  $ 1,482  $ 1,584  $ 1,564  $ 835  $ 834  $ 844  $ 578  $ 678  $ 701 
Net intersegment interest income (expense)  1,188    1,336    1,565    (984)   (999)   (1,044)   (160)   (158)   (195)   (146)   (126)   (139)
Segment net interest income  2,914    3,048    3,233    498    585    520    675    676    649    432    552    562 
                                    
Allocated provision for loan and lease losses  123    279    586    (107)   12    174    237    214    164    39    85    135 
Noninterest income  1,247    1,229    1,169    310    484    756    2    4    7    232    222    216 
Intersegment net referral fees (expense)  118    178    190    2    (1)   ―      ―      ―      ―      ―      ―      ―   
Noninterest expense  1,535    1,692    1,815    504    370    416    116    108    101    219    255    258 
Amortization of intangibles  29    36    37    ―      ―      ―      ―      ―      1    5    5    5 
Allocated corporate expenses  1,137    1,041    1,024    85    68    59    29    29    36    59    65    78 
Income (loss) before income taxes  1,455    1,407    1,130    328    618    627    295    329    354    342    364    302 
Provision (benefit) for income taxes  532    516    412    124    235    238    112    125    135    88    94    65 
Segment net income (loss)$ 923  $ 891  $ 718  $ 204  $ 383  $ 389  $ 183  $ 204  $ 219  $ 254  $ 270  $ 237 
                                       
Identifiable segment assets (period end)$ 55,494  $ 55,666  $ 56,496  $ 34,463  $ 36,083  $ 37,654  $ 12,823  $ 11,525  $ 10,264  $ 18,218  $ 16,564  $ 17,003 
                                       
    Insurance Services Financial Services Other, Treasury and Corporate (1) Total BB&T Corporation
    2014  2013  2012  2014  2013  2012  2014  2013  2012  2014  2013  2012 
                                       
    (Dollars in millions)
Net interest income (expense)$ 2  $ 3  $ 3  $ 183  $ 166  $ 132  $ 568  $ 639  $ 945  $ 5,374  $ 5,616  $ 5,857 
Net intersegment interest income (expense)  6    6    4    263    282    303    (167)   (341)   (494)   ―      ―      ―   
Segment net interest income  8    9    7    446    448    435    401    298    451    5,374    5,616    5,857 
                                    
Allocated provision for loan and lease losses  ―      ―      ―      25    18    11    (66)   (16)   (13)   251    592    1,057 
Noninterest income  1,663    1,535    1,365    770    744    724    (440)   (281)   (417)   3,784    3,937    3,820 
Intersegment net referral fees (expense)  ―      ―      ―      24    28    33    (144)   (205)   (223)   ―      ―      ―   
Noninterest expense  1,189    1,135    1,016    644    616    641    1,623    1,555    1,471    5,830    5,731    5,718 
Amortization of intangibles  53    61    61    2    3    3    2    1    3    91    106    110 
Allocated corporate expenses  86    64    82    119    98    91    (1,515)   (1,365)   (1,370)   ―      ―      ―   
Income (loss) before income taxes  343    284    213    450    485    446    (227)   (363)   (280)   2,986    3,124    2,792 
Provision (benefit) for income taxes  110    97    70    170    182    169    (376)   146    (325)   760    1,395    764 
Segment net income (loss)$ 233  $ 187  $ 143  $ 280  $ 303  $ 277  $ 149  $ (509) $ 45  $ 2,226  $ 1,729  $ 2,028 
                                       
Identifiable segment assets (period end)$ 2,978  $ 2,990  $ 3,297  $ 12,849  $ 10,001  $ 8,929  $ 49,989  $ 50,181  $ 50,856  $ 186,814  $ 183,010  $ 184,499 
                                       
                                       
(1)Includes financial data from subsidiaries below the quantitative and qualitative thresholds requiring disclosure.
147

Table of Contents


  Community Banking Residential Mortgage Banking Dealer Financial Services Specialized Lending
Year Ended December 31, 2016 2015 2014 2016 2015 2014 2016 2015 2014 2016 2015 2014
  (Dollars in millions)
Net interest income (expense) $2,208
 $1,798
 $1,726
 $1,341
 $1,357
 $1,482
 $930
 $881
 $835
 $752
 $648
 $575
Net intersegment interest income (expense) 1,589
 1,271
 1,188
 (898) (905) (984) (161) (153) (160) (283) (235) (206)
Segment net interest income 3,797
 3,069
 2,914
 443
 452
 498
 769
 728
 675
 469
 413
 369
Allocated provision for credit losses 36
 67
 123
 45
 9
 (107) 296
 253
 237
 70
 43
 36
Noninterest income 1,227
 1,166
 1,184
 344
 355
 310
 2
 —
 2
 297
 260
 222
Intersegment net referral fees (expense) 153
 135
 120
 1
 2
 2
 —
 —
 —
 —
 —
 —
Noninterest expense 1,742
 1,516
 1,428
 211
 321
 498
 149
 151
 114
 300
 254
 210
Amortization of intangibles 74
 39
 29
 —
 —
 —
 —
 —
 —
 5
 4
 5
Allocated corporate expenses 1,337
 1,225
 1,204
 107
 93
 91
 45
 38
 31
 81
 63
 62
Income (loss) before income taxes 1,988
 1,523
 1,434
 425
 386
 328
 281
 286
 295
 310
 309
 278
Provision (benefit) for income taxes 724
 563
 524
 161
 146
 124
 107
 109
 112
 74
 74
 63
Segment net income (loss) $1,264
 $960
 $910
 $264
 $240
 $204
 $174
 $177
 $183
 $236
 $235
 $215
                         
Identifiable assets (period end) $73,640
 $68,250
 $55,495
 $33,473
 $33,407
 $34,463
 $16,556
 $15,130
 $12,821
 $19,976
 $18,243
 $15,671
                         
  Insurance Holdings Financial Services Other, Treasury and Corporate (1) Total BB&T Corporation
  2016 2015 2014 2016 2015 2014 2016 2015 2014 2016 2015 2014
  (Dollars in millions)
Net interest income (expense) $3
 $2
 $2
 $260
 $219
 $187
 $827
 $687
 $567
 $6,321
 $5,592
 $5,374
Net intersegment interest income (expense) 4
 6
 6
 372
 314
 263
 (623) (298) (107) —
 —
 —
Segment net interest income 7
 8
 8
 632
 533
 450
 204
 389
 460
 6,321
 5,592
 5,374
Allocated provision for credit losses —
 —
 —
 126
 66
 26
 (1) (10) (64) 572
 428
 251
Noninterest income 1,726
 1,608
 1,663
 888
 850
 780
 (12) (220) (305) 4,472
 4,019
 3,856
Intersegment net referral fees (expense) —
 —
 —
 23
 22
 15
 (177) (159) (137) —
 —
 —
Noninterest expense 1,312
 1,190
 1,189
 753
 683
 637
 2,104
 2,046
 1,685
 6,571
 6,161
 5,761
Amortization of intangibles 60
 47
 53
 5
 3
 2
 6
 12
 2
 150
 105
 91
Allocated corporate expenses 111
 99
 86
 151
 136
 128
 (1,832) (1,654) (1,602) —
 —
 —
Income (loss) before income taxes 250
 280
 343
 508
 517
 452
 (262) (384) (3) 3,500
 2,917
 3,127
Provision (benefit) for income taxes 96
 98
 110
 190
 195
 170
 (294) (391) (182) 1,058
 794
 921
Segment net income (loss) $154
 $182
 $233
 $318
 $322
 $282
 $32
 $7
 $179
 $2,442
 $2,123
 $2,206
                         
Identifiable assets (period end) $3,463
 $2,804
 $2,965
 $17,451
 $16,650
 $12,887
 $54,717
 $55,463
 $52,532
 $219,276
 $209,947
 $186,834
__________________
(1) Includes financial data from subsidiaries below the quantitative and qualitative thresholds requiring disclosure.


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, as of February 25, 2015:

21, 2017:
 BB&T Corporation
 (Registrant)
  
 /s/ Kelly S. King
 Kelly S. King
 Chairman and Chief Executive Officer

Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated as of February 25, 2015:

21, 2017:
 /s/ Kelly S. King
 Kelly S. King
 Chairman and Chief Executive Officer
 (Principal Executive Officer)
  
 /s/ Daryl N. Bible
 Daryl N. Bible
 Senior Executive Vice President and
 Chief Financial Officer
 (Principal Financial Officer)
  
 /s/ Cynthia B. Powell
 Cynthia B. Powell
 Executive Vice President and
 Corporate Controller
 (Principal Accounting Officer)

148


A Majority of the Directors of the Registrant are included:

Table of Contents

A Majority of the Directors of the Registrant are included:
 /s/ Kelly S. King /s/ Tollie W. Rich, Jr.Thomas E. Skains 
 Kelly S. King Thomas E. Skains 
 Kelly S. KingTollie W. Rich, Jr.
Chairman and Chief Executive Officer Director 
     
 /s/ Jennifer S. Banner /s/ Thomas E. SkainsN. Thompson 
 Jennifer S. Banner Thomas N. Thompson 
 Jennifer S. BannerDirector Thomas E. Skains
DirectorDirector 
     
 /s/ K. David Boyer, Jr. /s/ Thomas N. Thompson 
 K. David Boyer, Jr. Stephen T. Williams 
 K. David Boyer, Jr.Director Thomas N. Thompson
DirectorDirector 
     
 /s/ Anna R. Cablik /s/ Edwin H. Welch, Ph.D. 
 Anna R. Cablik   
 Anna R. CablikEdwin H. Welch, Ph.D.
DirectorDirector
  
/s/ Ronald E. Deal/s/ Stephen T. Williams
Ronald E. DealStephen T. Williams
DirectorDirector 
     
 /s/ James A. Faulkner   
 James A. Faulkner   
 James A. Faulkner
Director   
     
 /s/ I. Patricia Henry   
 I. Patricia Henry   
 I. Patricia Henry
Director
/s/ John P. Howe III, M.D.
John P. Howe III, M.D.
Director   
     
 /s/ Eric C. Kendrick   
 Eric C. Kendrick   
 Eric C. Kendrick
Director   
     
 /s/ Dr. Louis B. Lynn   
 Dr. Louis B. Lynn   
 Dr. Louis B. Lynn
Director
/s/ Edward C. Milligan
Edward C. Milligan
Director   
     
 /s/ Charles A. Patton   
 Charles A. Patton   
 Charles A. Patton
Director   
     
 /s/ Nido R. Qubein   
 Nido R. Qubein   
 Nido R. Qubein
Director   
     
149/s/ William J. Reuter
William J. Reuter
Director
/s/ Tollie W. Rich, Jr.
Tollie W. Rich, Jr.
Director
/s/ Christine Sears
Christine Sears
Director

EXHIBIT INDEX
Table of Contents

EXHIBIT INDEX

Exhibit No. Description Location
2.1
 Purchase and Assumption Agreement Whole Bank All Deposits, among the Federal Deposit Insurance Corporation, receiver of Colonial Bank, Montgomery, Alabama, the Federal Deposit Insurance Corporation and Branch Banking and Trust Company, dated as of August 14, 2009. Incorporated herein by reference to Exhibit 2.1 of the Current Report on Form 8-K, filed August 17, 2009.
2.2
Termination agreement among Federal Deposit Insurance Corporation, receiver of Colonial Bank, Federal Deposit Insurance Corporation and Branch Banking & Trust Company dated as of September 14, 2016.Incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K, filed September 15, 2016.
2.3
 Agreement and Plan of Merger, dated as of November 11, 2014, by and between BB&T Corporation and Susquehanna Bancshares, Inc. Incorporated herein by reference to Exhibit 2.1 of the Current Report on Form 8-K, filed November 17, 2014.
2.4
Agreement and Plan of Merger, dated as of August 17, 2015, by and between BB&T Corporation and National Penn Bancshares, Inc.Incorporated herein by reference to Exhibit 2.1 of the Current Report on Form 8-K, filed August 20, 2015.
3(i)
 Articles of Incorporation of the Registrant, as amended and restated April 30, 2014. Incorporated herein by reference to Exhibit 3(i) of the Current Report on Form 8-K, filed May 2, 2014.
3(ii)
Articles of Amendment of the Registrant, dated as of March 4, 2016Incorporated herein by reference to Exhibit 4.1 of the Current Report on Form 8-K, filed March 9, 2016.
3(iii)
 Bylaws of the Registrant, as amended and restated December 17, 2013.20, 2016 Incorporated herein by reference to Exhibit 3(ii)3.1 of the Current Report on Form 8-K, filed December 19, 2013.22, 2016.
4.1Articles of Incorporation of the Registrant, as amended and restated April 30, 2014.Incorporated herein by reference to Exhibit 3(i) of the Current Report on Form 8-K, filed May 2, 2014.
4.2
 Indenture Regarding Senior Securities (including form of Senior Debt Security) between Registrant and U.S. Bank National Association (as successor in interest to State Street Bank and Trust Company), as trustee, dated as of May 24, 1996. Incorporated herein by reference to Exhibit 4(c) of Form S-3 Registration Statement No. 333-02899.
4.34.2
 First Supplemental Indenture, dated May 4, 2009, to the Indenture Regarding Senior Securities, dated as of May 24, 1996, between the Registrant and U.S. Bank National Association. Incorporated herein by reference to Exhibit 4.2 of the Current Report on Form 8-K, filed May 4, 2009.
4.44.3
 Indenture Regarding Subordinated Securities (including Form of Subordinated Debt Security) between the Registrant and U.S. Bank National Association (as successor in interest to State Street Bank and Trust Company), as trustee, dated as of May 24, 1996. Incorporated herein by reference to Exhibit 4(d) of Form S-3 Registration Statement No. 333-02899.
4.54.4
 First Supplemental Indenture, dated as of December 23, 2003, to the Indenture Regarding Subordinated Securities, dated as of May 24, 1996, between the Registrant and U.S. Bank National Association. Incorporated herein by reference to Exhibit 4.5 of the Annual Report on Form 10-K, filed February 27, 2009.
4.64.5
 Second Supplemental Indenture, dated as of September 24, 2004, to the Indenture Regarding Subordinated Securities, dated as of May 24, 1996, between the Registrant and U.S. Bank National Association. Incorporated herein by reference to Exhibit 4.7 of the Annual Report on Form 10-K, filed February 26, 2010.
4.74.6
 Third Supplemental Indenture, dated May 4, 2009, to the Indenture Regarding Subordinated Securities, dated as of May 24, 1996, between the Registrant and U.S. Bank National Association. Incorporated herein by reference to Exhibit 4.6 of the Current Report on Form 8-K, filed May 4, 2009.
10.1*
 BB&T Corporation Amended and Restated Non-Employee Directors’ Deferred Compensation and Stock Option Plan (amended and restated January 1, 2005). Incorporated herein by reference to Exhibit 10.1 of the Annual Report on Form 10-K, filed February 28, 2008.
150
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Exhibit No.DescriptionLocation
10.2*†Form of Non-Employee Director Nonqualified Stock Option Agreement for the BB&T Corporation Amended and Restated Non-Employee Directors’ Deferred Compensation and Stock Option Plan.Incorporated herein by reference to Exhibit 10.2 of the Annual Report on Form 10-K, filed February 25, 2011.
10.3*BB&T Corporation 1995 Omnibus Stock Incentive Plan (as amended and restated through February 25, 2003).Incorporated herein by reference to Exhibit 99 of Form S-8 Registration Statement No. 333-116502.
10.4*2008 Declaration of Amendment to BB&T Corporation 1995 Omnibus Stock Incentive Plan.Incorporated herein by reference to Exhibit 10.2.a of the Annual Report on Form 10-K, filed February 27, 2009.
10.5*409A Declaration of Amendment to BB&T Corporation 1995 Omnibus Stock Incentive Plan.Incorporated herein by reference to Exhibit 10.2.b of the Annual Report on Form 10-K, filed February 27, 2009.
10.6*Form of Employee Nonqualified Stock Option Agreement for the BB&T Corporation 1995 Omnibus Stock Incentive Plan, as amended and restated.Incorporated herein by reference to Exhibit 10.5 of the Annual Report on Form 10-K, filed February 25, 2011.
10.7*
 BB&T Corporation Amended and Restated 2004 Stock Incentive Plan, as amended (as amended through February 24, 2009). Incorporated herein by reference to the Appendix to the Proxy Statement for the 2009 Annual Meeting of Shareholders on Schedule 14A, filed March 13, 2009.
10.8*10.3*
BB&T Corporation 2012 Incentive PlanIncorporated herein by reference to the Appendix to the Proxy Statement for the 2012 Annual Meeting of Shareholders on Schedule 14A, filed March 12, 2012.

Exhibit No.DescriptionLocation
10.4*
 Form of Restricted Stock Unit Agreement (Performance-Based Vesting Component)(Non-Employee Directors) for Executive Officers under the BB&T Corporation Amended and Restated 2004 Stock2012 Incentive Plan (June 2010 Performance Award).Plan. Incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K, filed June 25, 2010.
10.9*Form of Performance Unit Award Agreement for the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (3-Year Vesting).Incorporated herein by reference to Exhibit 10.6 of the Quarterly Report on Form 10-Q, filed May 7, 2010.April 27, 2015.
10.10*10.5*Form of Non-Employee Director Restricted Stock Unit Agreement for the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (5-Year Vesting).Incorporated herein by reference to Exhibit 10.6 of the Annual Report on Form 10-K, filed February 28, 2008.
10.11*
 Form of Non-Employee Director Restricted Stock Unit Agreement for the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (4-Year Vesting). Incorporated herein by reference to Exhibit 10.2 of the Quarterly Report on Form 10-Q, filed May 7, 2010.
10.12*10.6*
 Form of Non-Employee Director Nonqualified Stock Option Agreement for the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (5-Year Vesting). Incorporated herein by reference to Exhibit 10.7 of the Annual Report on Form 10-K, filed February 28, 2008.
10.13*10.7*
 Form of Non-Employee Director Nonqualified Stock Option Agreement for the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (4-Year Vesting). Incorporated herein by reference to Exhibit 10.3 of the Quarterly Report on Form 10-Q, filed May 7, 2010.
151
Table of Contents

Exhibit No.10.8*DescriptionLocation
10.14*
 Form of Employee Nonqualified Stock Option Agreement for the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (5-Year Vesting). Incorporated herein by reference to Exhibit 10.8 of the Annual Report on Form 10-K, filed February 28, 2008.
10.15*10.9*
 Form of Employee Nonqualified Stock Option Agreement for the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (4-Year Vesting). Incorporated herein by reference to Exhibit 10.5 of the Quarterly Report on Form 10-Q, filed May 7, 2010.
10.16*10.10*Form of Restricted Stock Unit Agreement for the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (5-Year Vesting).Incorporated herein by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q, filed May 8, 2009.
10.17*Form of Restricted Stock Unit Agreement for the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (4-Year Vesting).Incorporated herein by reference to Exhibit 10.4 of the Quarterly Report on Form 10-Q, filed May 7, 2010.
10.18*BB&T Corporation Amended and Restated Short-term Incentive Plan.Incorporated herein by reference to Exhibit 10.11 of the Annual Report on Form 10-K, filed February 27, 2009.
10.19*First Amendment to BB&T Corporation Short-term Incentive Plan (January 1, 2009 Restatement).Incorporated herein by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q, filed May 7, 2010.
10.20*
 Southern National Deferred Compensation Plan for Key Executives including amendments. Incorporated herein by reference to Exhibit 10.21 of the Annual Report on Form 10-K, filed February 25, 2011.
10.21*10.11*
 BB&T Corporation Target Pension Plan.Non-Qualified Defined Benefit Plan (January 1, 2012 Restatement).Incorporated herein by reference to Exhibit 10.11 of the Annual Report on Form 10-K, filed February 25, 2016.
10.12*
First Amendment to the BB&T Non-Qualified Defined Benefit Plan (January 1, 2012 Restatement).Incorporated herein by reference to Exhibit 10.12 of the Annual Report on Form 10-K, filed February 25, 2016.
10.13*
Second Amendment to the BB&T Non-Qualified Defined Benefit Plan (January 1, 2012 Restatement). Incorporated herein by reference to Exhibit 10.13 of the Annual Report on Form 10-K, filed February 27, 2009.25, 2016.
10.22*10.14*First Amendment to the BB&T Corporation Target Pension Plan.Incorporated herein by reference to Exhibit 10.23 of the Annual Report on Form 10-K, filed February 25, 2011.
10.23*†Second Amendment to the BB&T Corporation Target Pension Plan.Incorporated herein by reference to Exhibit 10.24 of the Annual Report on Form 10-K, filed February 25, 2011.
10.24*†Third Amendment to the BB&T Corporation Target Pension Plan.Incorporated herein by reference to Exhibit 10.25 of the Annual Report on Form 10-K, filed February 25, 2011.
10.25*
 BB&T Corporation Non-Qualified Defined Benefit Plan.Contribution Plan (January 1, 2012 Restatement). Incorporated herein by reference to Exhibit 10.14 of the Annual Report on Form 10-K, filed February 27, 2009.25, 2016.
10.26*10.15*First Amendment to the BB&T Corporation Non-Qualified Defined Benefit Plan.Incorporated herein by reference to Exhibit 10.25 of the Annual Report on Form 10-K, filed February 25, 2011.
152
Table of Contents

Exhibit No.DescriptionLocation
10.27*†Second Amendment to the BB&T Corporation Non-Qualified Defined Benefit Plan.Incorporated herein by reference to Exhibit 10.28 of the Annual Report on Form 10-K, filed February 25, 2011.
10.28*†Third Amendment to the BB&T Corporation Non-Qualified Defined Benefit Plan.Incorporated herein by reference to Exhibit 10.29 of the Annual Report on Form 10-K, filed February 25, 2011.
10.29*
 BB&T Corporation Non-Qualified Defined Contribution Plan.Deferred Compensation Trust (Amended and Restated Effective January 1, 2012). Incorporated herein by reference to Exhibit 10.15 of the Annual Report on Form 10-K, filed February 27, 2009.25, 2016.
10.30*10.16*BB&T Corporation Non-Qualified Deferred Compensation Trust Amended and Restated effective November 1, 2001 (including amendments).Incorporated herein by reference to Exhibit 10.16 of the Annual Report on Form 10-K, filed February 27, 2009.
10.31*BB&T Corporation Non-Qualified Deferred Compensation Trust Amended and Restated effective November 1, 2001 (including amendments).Incorporated herein by reference to Exhibit 10.17 of the Annual Report on Form 10-K, filed February 28, 2008.
10.32*
 Form of Employee Nonqualified Stock Option Agreement for the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (4-Year Vesting with Clawback Provision). Incorporated herein by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q, filed May 4, 2012.
10.33*10.17*
 Form of Employee Restricted Stock Unit Agreement for the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (4-Year Vesting with Clawback Provision). Incorporated herein by reference to Exhibit 10.2 of the Quarterly Report on Form 10-Q, filed May 4, 2012.
10.34*10.18*Form of Performance Unit Award Agreement for the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (3-Year Vesting 2012 - 2014).Incorporated herein by reference to Exhibit 10.3 of the Quarterly Report on Form 10-Q, filed May 4, 2012.
10.35*
 Form of Employee Nonqualified Stock Option Agreement for the BB&T Corporation 2012 Incentive Plan. Incorporated herein by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q, filed May 2, 2013.
10.36*10.19*
 Form of Nonqualified Option Agreement (Senior Executive) for the BB&T Corporation 2012 Incentive Plan. Incorporated herein by reference to Exhibit 10.4 of the Quarterly Report on Form 10-Q, filed April 30, 2014.
10.37*10.20*
 Form of Employee Restricted Stock Unit Agreement for the BB&T Corporation 2012 Incentive Plan. Incorporated herein by reference to Exhibit 10.2 of the Quarterly Report on Form 10-Q, filed August 7, 2012.
10.38*10.21*
 Form of Director Restricted Stock Unit Agreement for the BB&T Corporation 2012 Incentive Plan. Incorporated herein by reference to Exhibit 10.2 of the Quarterly Report on Form 10-Q, filed May 2, 2013.
10.39*10.22*
 Form of Restricted Stock Unit Agreement (Performance-Based Vesting Component) for Executive Officers under the BB&T Corporation 2012 Incentive Plan (2013 grants). Incorporated herein by reference to Exhibit 10.3 of the Quarterly Report on Form 10-Q, filed May 2, 2013.
153

Table of Contents

Exhibit No. Description Location
10.40*10.23*
 Form of Restricted Stock Unit Agreement (Performance-Based Vesting Component)(Senior Executive) for the BB&T Corporation 2012 Incentive Plan (2014 grants).Plan. Incorporated herein by reference to Exhibit 10.3 of the Quarterly Report on Form 10-Q, filed April 30, 2014.
10.41*10.24*
 Form of Restricted Stock Unit Agreement (Tier 2 Employee) for the BB&T Corporation 2012 Incentive Plan. Incorporated herein by reference to Exhibit 10.2 of the Quarterly Report on Form 10-Q, filed April 30, 2014.
10.42*10.25*
 Form of LTIP Award Agreement for Executive Officers under the BB&T Corporation 2012 Incentive Plan (2013 – 2015 performance period). Incorporated herein by reference to Exhibit 10.4 of the Quarterly Report on Form 10-Q, filed May 2, 2013.
10.43*10.26*
 Form of LTIP Award Agreement for Executive Officers under the BB&T Corporation 2012 Incentive Plan (2014 – 2016 performance period). Incorporated herein by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q, filed April 30, 2014.
10.44*10.27*
Form of LTIP Award Agreement for the BB&T Corporation 2012 Incentive Plan.Incorporated herein by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q, filed April 29, 2016.
10.28*
Modification of 2016-2018 Long-Term Incentive Performance Award - Summary.Incorporated herein by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q, filed July 27, 2016.
10.29*
 Amended and Restated Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Co. and Kelly S. King dated as of December 19, 2012. Incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K, filed December 19, 2012.
10.45*10.30*
 2008 Amended and Restated Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Co. and Christopher L. Henson. Incorporated herein by reference to Exhibit 10.21 of the Annual Report on Form 10-K, filed February 27, 2009.
10.46*10.31*
 2008 Amended and Restated Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Co. and Daryl N. Bible. Incorporated herein by reference to Exhibit 10.22 of the Annual Report on Form 10-K, filed February 27, 2009.
10.47*10.32*2008 Amended and Restated Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Co. and Ricky K. Brown.Incorporated herein by reference to Exhibit 10.23 of the Annual Report on Form 10-K, filed February 27, 2009.
10.48*
 2008 Amended and Restated Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Co. and Barbara F. Duck. Incorporated herein by reference to Exhibit 10.24 of the Annual Report on Form 10-K, filed February 27, 2009.
10.49*10.33*
 2008 Amended and Restated Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Co. and Donna C. Goodrich. Incorporated herein by reference to Exhibit 10.25 of the Annual Report on Form 10-K, filed February 27, 2009.
10.50*10.34*
 2008 Amended and Restated Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Co. and Clarke R. Starnes, III. Incorporated herein by reference to Exhibit 10.27 of the Annual Report on Form 10-K, filed February 27, 2009.
10.51*10.35*2008 Amended and Restated Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Co. and Steven B. Wiggs.Incorporated herein by reference to Exhibit 10.28 of the Annual Report on Form 10-K, filed February 27, 2009.
10.52*2012 Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Co. and Cynthia A. Williams.Incorporated herein by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q, filed November 2, 2012.
154
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Exhibit No.DescriptionLocation
10.53*
 2012 Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Co. and William R. Yates. Incorporated herein by reference to Exhibit 10.2 of the Quarterly Report on Form 10-Q, filed November 2, 2012.
10.54*10.36*
 2014 Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Company and Robert J. Johnson, Jr. Incorporated herein by reference to Exhibit 10.5 of the Quarterly Report on Form 10-Q, filed April 30, 2014.
10.37*
2016 Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Company and W. Bennett Bradley.Incorporated herein by reference to Exhibit 10.38 of the Annual Report on Form 10-K, filed February 25, 2016.
10.38*
2016 Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Company and David H. Weaver.Incorporated herein by reference to Exhibit 10.38 of the Annual Report on Form 10-K, filed February 25, 2016.
10.39*
2016 Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Company and Jimmy D. Godwin.

Incorporated herein by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q, filed October 24, 2016.
10.40*
2016 Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Company and Brant J. Standridge.

Incorporated herein by reference to Exhibit 10.2 of the Quarterly Report on Form 10-Q, filed October 24, 2016.

Exhibit No.DescriptionLocation
10.41*
2016 Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Company and Dontá L. Wilson.

Incorporated herein by reference to Exhibit 10.3 of the Quarterly Report on Form 10-Q, filed October 24, 2016.
11
 Statement re computation of earnings per share. Filed herewith as Note 2019 to the consolidated financial statements.
12†
 Statement re computation of ratios. Filed herewith.
21†
 Subsidiaries of the Registrant. Filed herewith.
23†
 Consent of Independent Registered Public Accounting Firm. Filed herewith.
31.1
 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15(d)-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 15(d)-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. Filed herewith.
101.CAL
 XBRL Taxonomy Extension Calculation Linkbase. Filed herewith.
101.DEF
 XBRL Taxonomy Definition Linkbase. Filed herewith.
101.INS
 XBRL Instance Document. Filed herewith.
101.LAB
 XBRL Taxonomy Extension Label Linkbase. Filed herewith.
101.PRE
 XBRL Taxonomy Extension Presentation Linkbase. Filed herewith.
101.SCH
 XBRL Taxonomy Extension Schema. Filed herewith.

    
    
*Management compensatory plan or arrangement.
†Exhibit filed with the SEC and available upon request.

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