BB&T 2012 Annual Report Download

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2012 Annual Report

Table of contents

  • Page 1
    2012 Annual Report

  • Page 2
    Table of Contents Consolidated Financial Highlights To Our Shareholders Executive Management Corporate Board of Directors 1 2 19 20 Annual Meeting The 2013 Annual Meeting of Shareholders will be held on Tuesday, April 23, 2013, at 11 a.m. Eastern Time, at The W Hotel, The Great Room, 401 North Fort...

  • Page 3
    ... Tier 1 risk-based capital ratio Tier 1 common equity as a percentage of risk-weighted assets MISCELLANEOUS INFORMATION 11.0 % 9.3 12.0 % 9.4 End of period shares outstanding (in thousands) Diluted weighted average shares outstanding (in thousands) Full-time equivalent associates Banking offices...

  • Page 4
    ... distributor of life insurance (and No. 2 in wholesale property and casualty insurance) after our 2012 acquisition of the Crump Group. We are expanding our corporate banking business, also national in scale, to build partnerships with large middlemarket and other companies seeking our capital and...

  • Page 5
    ... Capital commercial real estate mortgage to our commercial leasing business and Sheffield Financial power and sports equipment finance. Our revenue is balanced between our national, non-banking businesses and our community bank regions centered in the fast-growing Southeast and Mid-Atlantic markets...

  • Page 6
    Value Proposition Drives Revenue Growth Revenue Mix Community Banking Revenue Growth through the Cycle YTD 2012 vs. YTD 2007 14% Insurance Services Financial Services Residential Mortgage Banking Specialized Lending 13% 47% 8% 6% 12% Dealer Financial Services Based on segment revenues, ...

  • Page 7
    ...-Tax Pre-Credit Earnings As originally reported 15-year compound annual growth rate 13.3% Excludes foreclosed property expense, provision for loan and lease losses, and securities gains (losses). 2012 RESULTS BB&T had an outstanding year in 2012. We achieved record net income available to common...

  • Page 8
    ...also an active investor, preferring companies where he can keep a close eye on how they operate. As a client and as a shareholder, his hands-down favorite is BB&T and the Woodbridge, Virginia, branch that is four minutes from his home. During visits several times a week, he freely shares his opinion...

  • Page 9
    ...S&P 500 as well as our in-market peers. In 2012, BB&T's total return to shareholders was 18.4%. In part, our shares benefited from the appreciation of most bank stocks as investors began to assign more reasonable valuations following the financial-market crisis of the last five OUR CAPITAL STRENGTH...

  • Page 10
    ...For many years, we have invested in diversifying our assets and markets to create stable revenue and earnings, which in turn creates stable dividends and share prices for our shareholders. Those strategies now are paying off even in an economy with slow to moderate real Gross Domestic Product growth...

  • Page 11
    ... Associates. The list goes on, with top client satisfaction ratings in areas including online banking, insurance sales, auto dealer finance, 401(k) retirement plan sponsorship and capital markets equity research. Staying closely connected to client needs and opportunities has helped BB&T become one...

  • Page 12
    ...financial centers are branded "Vecino" ("neighbor" in Spanish) and complemented by a Spanish-language website (es.BBT.com). Special features include multilingual financial literacy videos and a banking product for clients who regularly send money to family members abroad. Every client is different...

  • Page 13
    ... bank is producing more of its net operating revenue from noninterest income and has more diverse sources of revenue. Excludes securities gains (losses), foreclosed property expense, amortization of intangible assets, merger-related and restructuring charges, the impact of FDIC loss share accounting...

  • Page 14
    ...area as that market recovers with firming real estate values. The acquisition adds $3 billion in core deposits, boosts our South Florida market share to No. 6 from No. 14 and complements the North Florida banking operations added in our earlier Colonial acquisition. The 2009 Colonial transaction has...

  • Page 15
    ... with 56 basis points in the fourth quarter last year, which in turn benefits our net interest margin. We opened 34,000 net new retail deposit accounts in 2012. We are winning new clients with our accessible mobile banking services. 2012 Annual Report Many corporate clients and prospects have...

  • Page 16
    ... other BB&T businesses already located in Texas - ranging from insurance and commercial real estate finance to auto loans and capital markets - are spreading BB&T's good name. BB&T's brand resonates well with can-do Texans. Our community bank model and long-held values are attracting new clients and...

  • Page 17
    ... Texas markets. "We are here not to sell, but to consult with our clients to meet all their needs," says Austin City Executive Ed Lick. That first loan to Jeff and Gary has led to three other business and banking relationships for BB&T. Left to right: Jeff Brown, Partner, Producer/Director, Wilson...

  • Page 18
    ...the market. Rob's team supports more than 30 nonprofit organizations, ranging from South Florida Urban Ministries to the YMCA. Left to right: Mario Alvarez, Chief Operating Officer, Chapman Partnership; Trish Bell, Chairman of the Board of Directors, Chapman Partnership; Dan Vincent, President and...

  • Page 19
    ...and the support of our 6,400 associates, BB&T Insurance is proud to offer comprehensive, hands-on service to individuals and families, small business owners, Fortune 500 companies and nonprofits across the country. 17 2012 Annual Report OUR DIVERSIFICATION IN INSURANCE BB&T Insurance Services, the...

  • Page 20
    ... her retirement. Also in 2012, we added two members to BB&T's Executive Management team. Cynthia Williams, chief corporate communications officer, and Rufus Yates, president and CEO of BB&T Securities (formerly Scott & Stringfellow) and manager of our Capital Markets Corporate Banking group, joined...

  • Page 21
    ... years of financial services experience, joined BB&T as part of the First Virginia Bank merger in 2003 and was promoted in 2011 to lead BB&T's corporate advertising, marketing strategy, sports marketing and communications groups. A native of Yokohama, Japan, she began her career in public accounting...

  • Page 22
    ... Point, N.C. Tollie W. Rich, Jr. Retired Chief Operating Officer Life Savings Bank Cape Coral, Fla. Thomas E. Skains Chairman, President and Chief Executive Officer Piedmont Natural Gas Company, Inc. Charlotte, N.C. Thomas N. Thompson President Thompson Homes, Inc. Representative Kentucky House...

  • Page 23
    ... Street Winston-Salem, North Carolina (Address of principal executive offices) 27101 (Zip Code) (336) 733-2000 (Registrant's telephone number, including area code) Securities Registered Pursuant to Section 12(b) of the Securities Exchange Act of 1934: Title of each class Common Stock, $5 par value...

  • Page 24
    ... Statements of Income Consolidated Statements of Comprehensive Income Consolidated Statements of Changes in Shareholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm Quarterly Financial Summary...

  • Page 25
    ... of Directors" in the Registrant' s Proxy Statement for the 2013 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...

  • Page 26
    ... of 1977 Commercial real estate The life and property and casualty insurance operations acquired from the Crump Group Deposit Insurance Fund administered by the FDIC Non-Employee Directors' Stock Option Plan Dodd-Frank Wall Street Reform and Consumer Protection Act Earnings per common share European...

  • Page 27
    ...Securities Rulemaking Board Net interest margin Nonperforming asset Nonperforming loan Notice of Proposed Rulemaking NYSE Euronext, Inc. Option adjusted spread Office of the Comptroller of the Currency Other comprehensive income (loss) 1995 Omnibus Stock Incentive Plan Other real estate owned Office...

  • Page 28
    ... broker-dealer located in Charlotte, North Carolina, which offers clients non-deposit investment alternatives, including discount brokerage services, equities, fixed-rate, variable-rate and index annuities, mutual funds, government and municipal bonds, and money market funds; BB&T Insurance Services...

  • Page 29
    ... the United States and Canada; Grandbridge, based in Charlotte, North Carolina, which specializes in arranging and servicing commercial mortgage loans; Lendmark Financial Services, Inc., located in Covington, Georgia, which offers consumer loans to clients unable to meet Branch Bank' s normal credit...

  • Page 30
    ...finance Home equity lending Home mortgage lending Insurance Investment brokerage services Mobile/online banking Payment solutions Retail deposit services Sales finance Small business lending Wealth management/private banking Commercial Services: Asset management Association services Capital markets...

  • Page 31
    ... subject to market conditions, primarily within BB&T' s existing footprint, and will pursue economically advantageous acquisitions of insurance agencies, specialized lending businesses, and fee income generating financial services businesses. BB&T' s strategy is currently focused on meeting the...

  • Page 32
    ... companies to avoid market disruption; applying the same leverage and risk-based capital requirements that apply to insured depository institutions to most BHCs, savings and loan holding companies and systemically important nonbank financial companies; limiting the FRB' s emergency authority to lend...

  • Page 33
    ... such as BB&T with $50 billion or more of total consolidated assets to submit annual capital plans based on pre-defined stress scenarios. Capital plans are required to be submitted on an annual basis. Such BHCs will also be required to collect and report certain related data on a quarterly basis 11

  • Page 34
    ...period of time, not to exceed five years; and subject to certain deposit market-share limitations. 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...

  • Page 35
    ... excellent asset quality, high liquidity, low interest rate exposure and good earnings, and that have received the highest regulatory rating must maintain a ratio of Tier 1 capital to total adjusted average assets of at least 3%. Institutions not meeting these criteria, as well as institutions with...

  • Page 36
    ... as Tier 1 capital at the holding company level for entities with greater than $15 billion in assets with a three-year phase-in period beginning on January 1, 2013. Information related to certain capital ratios is shown in the following table. Table 2 Capital Adequacy Ratios December 31, 2012...

  • Page 37
    ...for Tier 1 common equity, 8.5% for Tier 1 capital, and 10.5% for total capital, with a 4% leverage ratio. Deposit Insurance 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...

  • Page 38
    ... 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...

  • Page 39
    ... is presented on BB&T' s website, www.BBT.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 Employees Chief Executive Officer and Chief...

  • Page 40
    ... of Ethics for Directors or Senior Financial Officers on BB&T' s website at www.BBT.com/Investor. Executive Officers of BB&T Executive Officer Recent Work Experience Years of Service Age Kelly S. King Chairman and Chief Executive Officer Christopher L. Henson Chief Operating Officer Chairman since...

  • Page 41
    ... real estate markets still present credit deterioration risks for BB&T in light of the slow pace of general economic recovery. Any further credit deterioration, combined with flat to declining real estate values, would result in increased loan charge-offs and higher provisions for credit losses...

  • Page 42
    ... 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...

  • Page 43
    ...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. BB&T, under Dodd...

  • Page 44
    ...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...

  • Page 45
    ... cost savings and offer products and services at more favorable rates and with greater convenience to the customer who can pay bills and transfer funds directly without going through a bank. This "disintermediation" could result in the loss of fee income, as well as the loss of customer deposits and...

  • Page 46
    ... 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...

  • Page 47
    ... of the loss sharing agreements will not be reimbursed by the FDIC and will negatively impact BB&T' s net income. ITEM 2. PROPERTIES BB&T owns or leases significant office space used as the Company' s headquarters in Winston-Salem, North Carolina. BB&T owns free-standing operations centers, with its...

  • Page 48
    Table 3 Quarterly Summary of Market Prices and Cash Dividends Declared on Common Stock 2012 Sales Prices Low Cash Dividends Declared 2011 Sales Prices Low Cash Dividends Declared (1) High Last High Last Quarter Ended: March 31 June 30 September 30 December 31 Year $ $ 31.94 $ 32.74 34.37 33....

  • Page 49
    ... December 31, 2012. Table 5 Equity Compensation Plan Information (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights (b) Weighted-average exercise price of outstanding options, warrants and rights (c)(1) Number of securities remaining available for future...

  • Page 50
    ...50 $0 12/07 12/08 12/09 12/10 12/11 12/12 BB&T Corporation S&P 500 Index BB&T's Peer Group * $100 invested on December 31, 2007, in stock or index, including reinvestment of dividends. Fiscal year ending December 31. 12/07 12/08 Cumulative Total Return 12/09 12/10 12/11 12/12 BB&T Corporation...

  • Page 51
    ... stock Net income available to common shareholders Per Common Share: Average shares outstanding: Basic Diluted Earnings: Basic Diluted Cash dividends declared (1) Book value Average Balances: Securities, at amortized cost Loans and leases (2) Other assets Total assets Deposits Long-term debt...

  • Page 52
    ... Florida market and resulted in a $3.5 billion increase in deposits Challenges BB&T' s business has become more dynamic and complex in recent years. Consequently, management has annually evaluated and, as necessary, adjusted the Company' s business strategy in the context of the current operating...

  • Page 53
    ... billion earned during 2011. On a diluted per common share basis, earnings for 2012 were $2.70, compared to $1.83 for 2011. BB&T' s results of operations for 2012 produced a return on average assets of 1.14% and a return on average common shareholders' equity of 10.35% compared to prior year ratios...

  • Page 54
    ..., 2012, BB&T had approximately $994 million of available for sale securities, which is less than 1% of total assets, valued using unobservable inputs, the majority of which were non-agency MBS securities that are covered by a loss sharing agreement with the FDIC. BB&T periodically reviews available...

  • Page 55
    ... projections. Refer to Note 7 "Loan Servicing" in the "Notes to Consolidated Financial Statements" for quantitative disclosures reflecting the effect that changes in management' s assumptions would have on the fair value of MSRs. LHFS BB&T originates certain mortgage loans for sale to investors...

  • Page 56
    ... periodic impairment tests based on the fair values of the reporting units to which the acquired goodwill relates. Refer to Note 1 "Summary of Significant Accounting Policies" in the "Notes to Consolidated Financial Statements" for a description of BB&T' s impairment testing process. Management...

  • Page 57
    ...to 5.87% for the prior year. The decrease was primarily due to the runoff of higher yielding covered loans and a higher volume of new loans originated at lower rates. The average rate paid on interest-bearing deposits dropped to 0.43% during 2012, from 0.68% in 2011. This improvement was a result of...

  • Page 58
    ... 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. ï,· If the estimated credit loss on a loan pool is increased: o The reduction in the net present value of the loan...

  • Page 59
    ... timing and amount that would be payable to the FDIC should they settle at the current fair value at the conclusion of the loss share agreement. The following table provides information related to the income statement impact of covered loans and securities and the FDIC loss sharing asset recognized...

  • Page 60
    ... compared to 2010, which was offset by a decrease in FDIC loss share income. The majority of the increase is related to loans and reflects higher expected cash flows based on the quarterly cash flow reassessment process. The yield on covered loans for 2011 was 19.15% compared to 13.22% in 2010...

  • Page 61
    ...23 (49) Liabilities and Shareholders' Equity Interest-bearing deposits: Interest-checking Money market and savings Certificates and other time deposits Foreign office deposits - interest-bearing Total interest-bearing deposits Federal funds purchased, securities sold under repurchase agreements and...

  • Page 62
    ... includes insurance income, service charges on deposit accounts, mortgage banking income, investment banking and brokerage fees and commissions, trust and investment advisory revenues, gains and losses on securities transactions, and commissions and fees derived from other activities. Management...

  • Page 63
    ... in millions) Insurance income $ Mortgage banking income Service charges on deposits Investment banking and brokerage fees and commissions Bankcard fees and merchant discounts Checkcard fees Trust and investment advisory revenues Income from bank-owned life insurance FDIC loss share income, net...

  • Page 64
    ... billion for 2011, down 21.3% compared to 2010. The decline in noninterest revenue was due to fewer securities gains, lower income related to the FDIC loss share receivable, lower service charges on deposit accounts and lower mortgage banking revenues, while bankcard fees and merchant discounts and...

  • Page 65
    FDIC loss share income reflects the offset to the provision for covered loans, accretion of the FDIC receivable due to credit loss improvement and accretion related to covered securities. During 2011 and 2010, covered loans experienced better performance than originally anticipated resulting in ...

  • Page 66
    ... compared to 2011, primarily the result of higher advertising expenses, an increase in depreciation expense related to assets under operating leases to customers driven by growth in BB&T' s equipment financing business, higher operating charge-offs in 2012 and increased referral fee expense. The...

  • Page 67
    ...tax rate and a discussion of uncertain tax positions and other tax matters. Segment Results BB&T' s operations are divided into six reportable business segments: Community Banking, Residential Mortgage Banking, Dealer Financial Services, Specialized Lending, Insurance Services and Financial Services...

  • Page 68
    ... as adjustments to loss factors resulting from an acceleration of certain consumer loan charge-offs in the third quarter of 2012. Due to the overall higher credit risk profiles of Specialized Lending' s clients, loss rates are expected to be higher than conventional bank lending. Loss rates are also...

  • Page 69
    ...-downs on affordable housing investments and lower FDIC loss share income. The decrease in allocated corporate expenses was primarily due to changes in intersegment service center allocations. 2011 compared to 2010 Community Banking Community Banking had a network of 1,779 banking offices at the end...

  • Page 70
    ... in 2011, primarily due to higher losses on commercial NPLs held for sale, lower overdraft fees and lower debit interchange fees. This decline in noninterest income was offset by increases in merchant discounts, deposit account service charges, account analysis fees and credit card interchange fees...

  • Page 71
    ... the provision for 2011 was primarily attributable to generally improved credit performance across the lines of business. Due to the overall higher credit risk profiles of some of Specialized Lending' s clients, loss rates are expected to be higher than conventional bank lending. Loss rates are also...

  • Page 72
    ... in the underwriting, trading and sales of equity and debt securities subject to the risk management policies of the Company. The following table provides information regarding the composition of BB&T' s available-for-sale and held to maturity securities portfolio for the years presented: Table 11...

  • Page 73
    ...a rising rate environment and achieve a better mix of earning assets. In connection with this strategy, management reduced the balance sheet by approximately $8 billion through the sale of securities. During the third and fourth quarters of 2010, management executed a strategy to further de-risk the...

  • Page 74
    ... the effect of pay-fixed swaps hedging municipal securities. 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...

  • Page 75
    ...and differs from internal classifications presented herein that focus on the primary purpose of the loan. Covered loans are included in their respective categories. Table 13 Composition of Loan and Lease Portfolio 2012 2011 December 31, 2010 (Dollars in millions) 2009 2008 Commercial, financial and...

  • Page 76
    ... categories-commercial, direct retail, sales finance, revolving credit, residential mortgage and other lending subsidiaries. In addition, BB&T has a portfolio of loans that were acquired in the Colonial acquisition that are covered by FDIC loss sharing agreements. BB&T lends to a diverse customer...

  • Page 77
    ... for 2011, as management continued to reduce exposure to higher risk real estate lending. Average direct retail loans increased 10.3% during 2012, primarily due to increased demand for home equity loans and an increase in non-real estate loans generated through the wealth and small business lending...

  • Page 78
    ... and commercial real estate, had an average holding period of seven months. NPAs as a percentage of loans and leases plus foreclosed property were 1.33% at December 31, 2012 compared with 2.29% at December 31, 2011. Management expects NPAs to improve at a modest pace during the first quarter of...

  • Page 79
    ... loans and leases Foreclosed real estate (2) Other foreclosed property Total NPAs (1)(2) Loans 90 days or more past due and still accruing: Commercial Direct retail lending Sales finance loans Revolving credit loans Residential mortgage loans (3)(4) Other lending subsidiaries Total loans 90 days...

  • Page 80
    ... quality metrics are essentially at normalized levels. Table 19 Asset Quality Ratios 2012 As Of / For The Years Ended December 31, 2011 2010 2009 2008 Asset Quality Ratios (including amounts related to covered loans and covered foreclosed property): Loans 30 - 89 days past due and still accruing...

  • Page 81
    ... loans that are rated special mention or substandard performing are closely monitored by management as potential problem loans. Refer to Note 4 "Allowance for Credit Losses" in the "Notes to Consolidated Financial Statements" herein for additional disclosures related to these potential problem loans...

  • Page 82
    ... 31, 2012 Past Due Past Due 30-89 Days (1) 90 Days Or More (1) (Dollars in millions) Current Status Total Performing TDRs: Commercial loans: Commercial and industrial CRE - other CRE - residential ADC Direct retail lending Sales finance Revolving credit Residential mortgage (2) Other lending...

  • Page 83
    Refer to Note 4 "Allowance for Credit Losses" in the "Notes to Consolidated Financial 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 ...

  • Page 84
    ... checking accounts, savings accounts, money market deposit accounts, CDs and individual retirement accounts. 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...

  • Page 85
    ... and public funds clients. Interest checking and money market and savings accounts increased $3.7 billion, or 5.6% compared to the prior year, while certificates and other time deposits declined $2.3 billion, or 6.7%, during that same time period. For the year ended December 31, 2012, total deposits...

  • Page 86
    ..."Notes to Consolidated Financial Statements" herein for further disclosure. In addition, shareholders' equity increased $1.4 billion due to BB&T' s earnings available to common shareholders retained after dividends declared, and $113 million as a result of the issuance of additional shares and other...

  • Page 87
    ...retirement benefit plans and $61 million related to an increase in amounts attributable to the FDIC under loss share agreements. BB&T' s tangible book value per common share at December 31, 2012 was $17.52 compared to $16.73 at December 31, 2011. As of December 31, 2012, measures of tangible capital...

  • Page 88
    ... 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...

  • Page 89
    ... good credit standing. Additionally, BB&T' s Direct Retail Lending group provides home equity loans that can increase the loan-to-collateral value to 90% or less for certain borrowers. Risks associated with the mortgage lending function include interest rate risk, which is mitigated through the sale...

  • Page 90
    ...potential impact on earnings and liquidity as a result of fluctuations in interest rates is within acceptable standards. 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...

  • Page 91
    ... as the economic value of BB&T' s 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...

  • Page 92
    .... Managed rate deposits are high beta, premium money market and interest checking accounts, which attract significant client funds when needed to support balance sheet growth. BB&T regularly conducts sensitivity on other key variables to determine the impact they could have on the interest rate risk...

  • Page 93
    .... 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...

  • Page 94
    ... 31, 2012 and 2011, the Parent Company had 35 months and 23 months, respectively, of cash on hand to satisfy projected contractual cash outflows as described above. Branch Bank Branch Bank has several major sources of funding to meet its liquidity requirements, including access to capital markets...

  • Page 95
    ... limitations, BB&T does not believe that any payments related to these guarantees would materially change the financial condition or results of operations of BB&T. BB&T holds public funds in certain states that do not require 100% collateralization on public fund bank deposits. In these states...

  • Page 96
    ... Capital Ratio Tier 1 Common Equity Ratio 9.5 % 11.5 6.5 5.5 8.0 7.5 % 9.5 5.0 4.0 6.0 Payments of cash dividends to BB&T' s shareholders and repurchases of common shares are the methods used to manage any excess capital generated. In addition, management closely monitors the Parent Company...

  • Page 97
    ... the Company and Branch Bank remain "well-capitalized." 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 reevaluated its process related to...

  • Page 98
    ...risk-weighting of loans secured by residential properties, requiring consideration of loan-to-value ratios in determining risk-weighting. Management' s estimate of the Tier 1 common ratio under the proposed U.S. Basel III standards does not include any mitigation strategies to improve capital levels...

  • Page 99
    ... tax rate was primarily due to higher levels of pre-tax earnings relative to permanent tax differences in 2012 compared to 2011. The accompanying table, "Quarterly Financial Summary-Unaudited," presents condensed information relating to quarterly periods in the years ended December 31, 2012 and 2011...

  • Page 100
    ... 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...

  • Page 101
    ... 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...

  • Page 102
    ... assets ($297 and $415 of foreclosed property and other assets covered by FDIC loss share at December 31, 2012 and 2011, respectively) Total assets Liabilities and Shareholders' Equity Deposits: Noninterest-bearing deposits Interest-bearing deposits Total deposits Federal funds purchased, securities...

  • Page 103
    ...Credit Losses Noninterest Income Insurance income Mortgage banking income Service charges on deposits Investment banking and brokerage fees and commissions Bankcard fees and merchant discounts Checkcard fees Trust and investment advisory revenues Income from bank-owned life insurance FDIC loss share...

  • Page 104
    ... for (gains) losses on securities available for sale included in net income Change in amounts attributable to the FDIC under loss share agreements Change in unrecognized gains (losses) on cash flow hedges Change in pension and postretirement liability Other, net $ 2012 2,028 $ 2011 1,332 $ 2010...

  • Page 105
    ... preferred stock offerings Cash dividends declared on common stock, $0.80 per share Cash dividends declared on preferred stock Equity-based compensation expense Other, net Balance, December 31, 2012 Shares of Additional Common Preferred Common Paid-In Retained Stock Stock Stock Capital Earnings 689...

  • Page 106
    ... for credit losses Depreciation Amortization of intangibles Equity-based compensation (Gain) loss on securities, net Net write-downs/losses on foreclosed property Net change in operating assets and liabilities: Segregated cash due from banks LHFS FDIC loss share receivable Other assets Accounts...

  • Page 107
    ...variety of financial services including credit card lending, automobile financing, equipment financing, full-service securities brokerage, asset management and capital markets services. Principles of Consolidation The consolidated financial statements of BB&T include the accounts of BB&T Corporation...

  • Page 108
    ... BB&T will not be required to sell the security prior to recovery. Trading account securities, which include both debt and equity securities, are reported at fair value. Unrealized market value adjustments, fees, and realized gains or losses from trading account activities (determined by specific...

  • Page 109
    ... losses on sales of commercial LHFS are included in other noninterest income. Loans and Leases The Company' s accounting methods for loans differ depending on whether the loans are originated or acquired, and if acquired, whether or not the acquired loans reflect credit deterioration since the date...

  • Page 110
    ...of mortgage and consumer 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 TDRs may be returned to...

  • Page 111
    ... has developed an automated loan review system to identify and proactively manage accounts with a higher risk of loss. The "score" produced by this automated system is updated monthly. On a quarterly basis, BB&T reviews all commercial lending relationships with outstanding debt of $5 million or more...

  • Page 112
    ... above for originated loans and leases. Covered Assets and Related FDIC Loss Share Receivable Assets subject to loss sharing agreements with the FDIC are labeled "covered" and include certain loans, securities and other assets. The FDIC' s obligation to reimburse Branch Bank for losses with respect...

  • Page 113
    ... 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...

  • Page 114
    ... in mortgage banking income. Gains and losses on other derivatives used to manage economic risk are primarily associated with client derivative activity and included in other income. Goodwill and Other Intangible Assets Goodwill represents the cost in excess of the fair value of net assets acquired...

  • Page 115
    ...results of operations or cash flows. The new disclosures required by this guidance are included in Note 18 to these consolidated financial statements. Effective January 1, 2012, the Company adopted new guidance impacting Comprehensive Income that requires all changes in OCI to be presented either in...

  • Page 116
    ... for other purposes as required or permitted by law. BB&T had certain investments in marketable debt securities and RMBS issued by FNMA and FHLMC that exceeded ten percent of shareholders' equity at December 31, 2012. The FNMA investments had total amortized cost and fair value of $13.1 billion and...

  • Page 117
    ...time that individual securities have been in a continuous unrealized loss position: Less than 12 months Fair Unrealized Value Losses 12 months or more Fair Unrealized Value Losses (Dollars in millions) Total Unrealized Losses December 31, 2012 Fair Value Securities available for sale: RMBS issued...

  • Page 118
    ... unrealized loss is recognized in earnings and the non-credit component is recognized in AOCI. In making this determination, BB&T considers its expected liquidity and capital needs, including its asset/liability management needs, forecasts, strategies and other relevant information. BB&T uses cash...

  • Page 119
    ...net deferred loan fees and costs totaled $298 million and $374 million at December 31, 2012 and 2011, respectively. BB&T had $75.4 billion in loans secured by real estate at December 31, 2012. However, these loans were not concentrated in any specific market or geographic area other than Branch Bank...

  • Page 120
    ...original terms is immaterial. The following table provides a summary of BB&T' s NPAs and loans 90 days or more past due and still accruing: December 31, 2012 2011 (Dollars in millions) NPLs held for investment Foreclosed real estate (1) Other foreclosed property Total NPAs (excluding covered assets...

  • Page 121
    ... in millions) Ending Balance Year Ended December 31, 2012 Commercial: Commercial and industrial CRE - other CRE - residential ADC Other lending subsidiaries Retail: Direct retail lending Revolving credit Residential mortgage Sales finance Other lending subsidiaries Covered Unallocated ALLL RUFC...

  • Page 122
    ... loans are placed in nonaccrual status when BB&T believes it is no longer probable it will collect all contractual cash flows. BB&T assigns an internal risk rating at loan origination and reviews the relationship again on an annual basis or at any point management becomes aware of information...

  • Page 123
    ... Subsidiaries December 31, 2012 Commercial & Industrial Commercial: Pass Special mention Substandard - performing Nonperforming Total Direct Retail Lending $ $ 36,044 $ 274 1,431 546 38,295 $ Revolving Credit 10,095 $ 120 1,034 212 11,461 $ 859 $ 41 233 128 1,261 $ Sales Finance 4,093 13 29...

  • Page 124
    ... millions) December 31, 2012 Total Loans And Leases, Excluding Covered Loans Commercial: Commercial and industrial CRE - other CRE - residential ADC Other lending subsidiaries Retail: Direct retail lending Revolving credit Residential mortgage (1)(2) Sales finance Other lending subsidiaries Total...

  • Page 125
    ... (Dollars in millions) As Of / For The Year Ended December 31, 2012 With No Related Allowance Recorded: Commercial: Commercial and industrial CRE - other CRE - residential ADC Retail: Direct retail lending Residential mortgage (1) Sales finance Other lending subsidiaries With An Allowance Recorded...

  • Page 126
    ...lending Residential mortgage (1) Sales finance Other lending subsidiaries With An Allowance Recorded: Commercial: Commercial and industrial CRE - other CRE - residential ADC Other lending subsidiaries Retail: Direct retail lending Revolving credit Residential mortgage (1) Sales finance Other lending...

  • Page 127
    ...or charge-off, whichever occurs first. Years Ended December 31, 2012 2011 (Dollars in millions) Commercial: Commercial and industrial CRE - other CRE - residential ADC Retail: Direct retail lending Revolving credit Residential mortgage Sales finance Other lending subsidiaries $ 8 $ 6 14 39 92 80...

  • Page 128
    ...Assets The changes in the carrying amounts of goodwill attributable to each of BB&T' s operating segments are reflected in the table below. To date, there have been no goodwill impairments recorded by BB&T. Residential Mortgage Banking Dealer Financial Specialized Insurance Services Lending Services...

  • Page 129
    ... Servicing Residential Mortgage Banking Activities The following tables summarize residential mortgage banking activities for the periods presented: December 31, 2012 2011 (Dollars in millions) Mortgage loans managed or securitized (1) Less: Loans securitized and transferred to securities available...

  • Page 130
    ...both December 31, 2012 and 2011, BB&T has recorded reserves related to these recourse exposures. Payments made to date have been immaterial. BB&T also issues standard representations and warranties related to mortgage loan sales to GSEs. Although these agreements often do not specify limitations, BB...

  • Page 131
    ... 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, 2012 2011...

  • Page 132
    ...46 A summary of BB&T' s deposits is presented in the accompanying table: December 31, 2012 2011 (Dollars in millions) Noninterest-bearing deposits Interest checking Money market and savings Certificates and other time deposits Foreign office deposits - interest-bearing Total deposits Time deposits...

  • Page 133
    ... rate paid on these advances including the effect of the swapped portion was 3.58%, and the weighted average maturity was 6.9 years. (5) Securities that qualified under the risk-based capital guidelines as Tier 1 capital, subject to certain limitations. Excluding capitalized leases, future debt...

  • Page 134
    ...the FRB. The preferred stock is not subject to any sinking fund or other obligations of the Company. The following table presents a summary of the preferred stock as of December 31, 2012: Issue Issuance Date Liquidation Net Amount Proceeds (Dollars in millions) Dividend Rate Series D Non-Cumulative...

  • Page 135
    ... based on the price of BB&T' s common stock on the grant date less the present value of expected dividends that are foregone during the vesting period. A summary of selected data related to BB&T' s equity-based compensation costs follows: Years Ended December 31, 2012 2011 2010 (Dollars in millions...

  • Page 136
    ... hedges (277) Unrealized net gains (losses) on securities available for sale 960 FDIC' s share of unrealized (gains) losses on securities available for sale under loss share agreements (410) Other, net (30) $ (903) $ Total (432) $ (104) 362 (714) $ (173) 598 (965) $ (254) 421 (362) $ (95) 158...

  • Page 137
    ... Equity-based compensation Loan/securities basis difference Foreclosed property write-downs Net unrealized loss on cash flow hedges Other Total deferred tax assets Deferred tax liabilities: Net unrealized gain on securities available for sale Lease financing Prepaid pension plan expense Loan fees...

  • Page 138
    ... unrecognized Federal and state tax benefits that would have impacted the effective tax rate if recognized. In addition, the Company had $37 million and $39 million in liabilities for tax-related interest recorded on its Consolidated Balance Sheets at December 31, 2012 and 2011, respectively. Total...

  • Page 139
    ... 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...

  • Page 140
    ... Pension Plans Years Ended December 31, Years Ended December 31, 2012 2011 2012 2011 (Dollars in millions) Fair value of plan assets, January 1, Actual return on plan assets Employer contributions Benefits paid Acquisitions Fair value of plan assets, December 31, Funded status at end of year The...

  • Page 141
    ... which include real estate, hedge funds, private equities and commodities, with any remainder to be held in cash equivalents. The fair value of BB&T's pension plan assets at December 31, 2012 and 2011, by asset category are reflected in the following tables. The three level fair value hierarchy that...

  • Page 142
    ... 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...

  • Page 143
    ... 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" for additional disclosures related to these exposures. In the ordinary course of business, BB&T indemnifies its officers and directors to the...

  • Page 144
    ...(1) The Company has revised its calculation of risk-weighted assets and adjusted the applicable ratios. As an approved seller/servicer, Branch Bank is required to maintain minimum levels of shareholders' equity, as specified by various agencies, including the United States Department of Housing and...

  • Page 145
    NOTE 17. Parent Company Financial Statements Parent Company Condensed Balance Sheets December 31, 2012 and 2011 2012 2011 (Dollars in millions) Assets: Cash and due from banks Securities available for sale at fair value Securities held to maturity Investment in banking subsidiaries Investment in ...

  • Page 146
    ... Company Condensed Statements of Comprehensive Income Years Ended December 31, 2012, 2011 and 2010 2012 2011 (Dollars in millions) 2010 Net Income OCI, Net of Tax: Unrealized net holding gains (losses) arising during the period on securities available for sale Change in unrecognized gains (losses...

  • Page 147
    Parent Company Condensed Statements of Cash Flows Years Ended December 31, 2012, 2011 and 2010 . 2012 2011 (Dollars in millions) 2010 Cash Flows From Operating Activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Equity in earnings of subsidiaries...

  • Page 148
    ... and commercial mortgage loans originated as LHFS. 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...

  • Page 149
    ... by management. Specific valuation techniques and inputs used in determining the fair value of each significant class of assets and liabilities follows: Trading securities: Trading securities are composed of all types of debt and equity securities, but the majority consists of debt securities issued...

  • Page 150
    ... that Branch Bank will be reimbursed by the FDIC for 95% of any and all losses. LHFS: BB&T originates certain mortgage loans to be sold to investors. These loans are carried at fair value based on BB&T' s election of the Fair Value Option. The fair value is primarily based on quoted market prices...

  • Page 151
    ... Value Measurements Using Significant Unobservable Inputs Private Equity and Covered Residential Net Similar Trading Securities MSRs Derivatives Investments (Dollars in millions) Balance at January 1, 2012 Total realized and unrealized gains (losses): Included in earnings: Interest income Mortgage...

  • Page 152
    ...for the years ended December 31, 2012, 2011 or 2010. The majority of BB&T' s private equity and similar investments are in SBIC qualified funds. The significant investment strategies for these funds primarily focus on equity and subordinated debt investments in privately-held middle market companies...

  • Page 153
    ... related securities and the payment that would be required if the securities were sold for that amount. The FDIC loss share agreements are not transferrable and, accordingly, there is no market for this receivable. Deposit liabilities: The fair values for demand deposits, interest-checking accounts...

  • Page 154
    ... Amount Total Fair Value Level 2 (Dollars in millions) December 31, 2012 Level 3 Financial assets: Securities held to maturity (1) Loans and leases, net of ALLL excluding covered loans Covered loans, net of ALLL FDIC loss share receivable Financial liabilities: Deposits Long-term debt $ 13,594...

  • Page 155
    ...option trades Pay fixed swaps Pay fixed swaps Total Not Designated as Hedges: Client-related and other risk management: Interest rate contracts: Receive fixed swaps Pay fixed swaps Other swaps Option trades Futures contracts Risk participations Foreign exchange contracts Total 3 month LIBOR funding...

  • Page 156
    ..., mortgage banking operations, MSRs and client-related and other risk management activities. No portion of the change in fair value of the derivative has been excluded from effectiveness testing. The ineffective portion was immaterial for all periods presented. Cash Flow Hedges BB&T' s floating rate...

  • Page 157
    ... that hedge mortgage banking operations and MSRs. For mortgage loans originated for sale, BB&T is exposed to changes in market rates and conditions subsequent to the interest rate lock and funding date. BB&T' s risk management strategy related to its interest rate lock commitment derivatives...

  • Page 158
    ...: Years Ended December 31, 2012 2011 2010 (Dollars in millions, except per share data, shares in thousands) Basic EPS: Net income available to common shareholders Weighted average number of common shares Basic EPS Diluted EPS: Net income available to common shareholders Weighted average number of...

  • Page 159
    ... Financial Services, Specialized Lending, Insurance Services, and Financial Services. These business segments 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...

  • Page 160
    ..., asset management, employee benefits services, corporate banking and corporate trust services to individuals, corporations, institutions, foundations and government entities. Financial Services also offers clients investment alternatives, including discount brokerage services, equities, fixed-rate...

  • Page 161
    ... for Financial Services is the NIM for the loans and deposits assigned to the Wealth Management Division that are housed in the Community Bank. Other, Treasury & Corporate Other, Treasury & Corporate is the combination of the Other segment that represents operating entities that do not meet the...

  • Page 162
    ... Mortgage Banking Dealer Financial Services 2012 2011 2010 2012 2011 2010 (Dollars in millions) 1,148 $ 1,025 $ 981 $ 845 $ 852 $ 858 $ (776) (734) (721) (216) (270) (344) 372 291 260 629 582 514 Allocated provision for loan and lease losses Noninterest income Intersegment net referral fees...

  • Page 163
    ... 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...

  • Page 164
    ... Kelly S. King Chairman and Chief Executive Officer /s/ Nido R. Qubein Nido R. Qubein Director /s/ John A. Allison IV John A. Allison IV Director Tollie W. Rich, Jr. Director /s/ Jennifer S. Banner Jennifer S. Banner Director /s/ Thomas E. Skains Thomas E. Skains Director /s/ K. David Boyer Jr...

  • Page 165
    ... 10, 2010, April 27, 2012, July 24, 2012 and October 26, 2012. 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...

  • Page 166
    ... Non-Employee Directors' Deferred Compensation and Stock Option Plan. BB&T Corporation 1995 Omnibus Stock Incentive Plan (as amended and restated through February 25, 2003). Incorporated herein by reference to Exhibit 10.2 of the Annual Report on Form 10-K, filed February 25, 2011. Incorporated...

  • Page 167
    ... 2004 Stock Incentive Plan (4-Year Vesting). BB&T Corporation Amended and Restated Short-term Incentive Plan. Incorporated herein by reference to Exhibit 10.8 of the Annual Report on Form 10-K, filed February 28, 2008. Incorporated herein by reference to Exhibit 10.5 of the Quarterly Report on Form...

  • Page 168
    ... Location 10.27*†Second Amendment to the BB&T Corporation NonQualified Defined Benefit Plan. Incorporated herein by reference to Exhibit 10.28 of the Annual Report on Form 10-K, filed February 25, 2011. Incorporated herein by reference to Exhibit 10.29 of the Annual Report on Form 10-K, filed...

  • Page 169
    ..., Branch Banking and Trust Co. and William R. Yates Statement re computation of earnings per share Statement re computation of ratios Subsidiaries of the Registrant Proxy Statement for the Annual Meeting of Shareholders Incorporated herein by reference to Exhibit 10.23 of the Annual Report on Form...

  • Page 170
    Exhibit No. Description Location 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. Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 ...

  • Page 171
    ... the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; The registrant' s other certifying officer...

  • Page 172
    ...; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant' s internal control over financial reporting. Date: February 28, 2013 /s/ Daryl N. Bible Daryl N. Bible Senior Executive Vice President and Chief Financial Officer

  • Page 173
    ... and results of operations of the Company. /s/ Kelly S. King Kelly S. King Chairman and Chief Executive Officer Date: February 28, 2013 /s/ Daryl N. Bible Daryl N. Bible Senior Executive Vice President and Chief Financial Officer A signed original of this written statement required by Section 906...

  • Page 174
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  • Page 175
    ...&T operated 1,832 branch offices in 12 states and Washington, D.C. BB&T is a values-driven highly profitable growth organization. A Fortune 500 company, BB&T offers a full range of consumer and commercial banking, securities brokerage, asset management, mortgage and insurance products and services...

  • Page 176
    BB&T Corporation 200 West Second Street PO Box 1250 Winston-Salem, NC 27102-1250 C0001125038