BB&T 2014 Annual Report Download

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℠
FORM 10-K
BB&T CORP - BBT
Filed: February 25, 2015 (period: December 31, 2014)
Annual report with a comprehensive overview of the company
The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user
assumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot be
limited or excluded by applicable law. Past financial performance is no guarantee of future results.

Table of contents

  • Page 1
    ...â„ FORM 10-K BB&T CORP - BBT Filed: February 25, 2015 (period: December 31, 2014) Annual report with a comprehensive overview of the company The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all...

  • Page 2
    ... 31, 2014 Commission File Number: 1-10853 BB&T CORPORTTION (Exact name of Registrant as specified in its Charter) North Carolina (State of Incorporation) 56-0939887 (I.R.S. Employer Identification No.) 200 West Second Street Winston-Salem, North Carolina (Tddress of principal executive offices...

  • Page 3
    ... on Accounting and Financial Disclosure - (None to be reported) Controls and Procedures Other Information - (None to be reported) PART III Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related...

  • Page 4
    ... of Directors" in the Registrant's Proxy Statement for the 2015 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...

  • Page 5
    ... Act of 1977 Commercial real estate Credit Risk Management Committee Compliance Risk Oversight Committee 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...

  • Page 6
    ... account Internal Revenue Code Internal Revenue Service International Swaps and Derivatives Association, Inc. Liquidity Coverage Ratio Loans held for sale London Interbank Offered Rate Line of business Mortgage-backed securities Market Risk, Liquidity and Capital Committee Mortgage servicing...

  • Page 7
    ...&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...

  • Page 8
    ... offices (as of December 31, 2014). 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...

  • Page 9
    ... 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 10
    ... 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...

  • Page 11
    ... state insurance and securities regulators. 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...

  • Page 12
    ... stability were they to fail such limits. Resolution Planning and Regulation QQ FRB and FDIC regulations require "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...

  • Page 13
    ... 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...

  • Page 14
    ... overall financial condition. BB&T's 2015 capital actions will depend on the FRB's review of BB&T's 2015 capital plan. 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...

  • Page 15
    ...rule. The regulatory minimum will increase to 100% on January 1, 2017. The final rule requires each financial institution to have a method for determining "operational deposits" as defined by the rule. The number above includes an estimate of operational deposits; however, BB&T continues to evaluate...

  • Page 16
    ... Act. Specifically, the CFPB proposed several changes to revise the tests for determining which financial institutions and housing-related credit transactions are covered under HMDA. The CFPB also proposes to require financial institutions to report new data points identified in the Dodd-Frank Act...

  • Page 17
    ... on BB&T's consolidated financial position, results of operations or cash flows. 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 system that determines...

  • Page 18
    ... 2013. A final rule integrating disclosure required by the Truth in Lending Act and the Real Estate Settlement and Procedures Act becomes effective August 1, 2015. As a result of these rules, BB&T transferred the management of certain home equity loans from direct retail lending within the Community...

  • Page 19
    ... bank mergers and BHC acquisitions. The U.S. Treasury has issued a number of regulations to implement 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...

  • Page 20
    ... Whistleblower Procedures Statement of Political Activity BB&T intends to disclose any substantive amendments or waivers to the Codes of Ethics for Directors or Senior Financial Officers on BB&T's website at www.bbt.com. 19 Source: BB&T CORP, 10-K, February 25, 2015 Powered by Morningstar...

  • Page 21
    ... Yates Senior Executive Vice President and Capital Markets Manager Chairman since January 2010. Chief Executive Officer since January 2009. Chief Operating Officer since January 2009. 42 66 30 53 Chief Financial Officer since January 2009. 7 53 President, Community Banking since July 2004...

  • Page 22
    ... 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...

  • Page 23
    ... 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...

  • Page 24
    ... 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...

  • Page 25
    ... 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...

  • Page 26
    ...a number of large financial services institutions, including BB&T. None of these events resulted in a breach of BB&T's client data or account information; however, the performance of BB&T's website, www.bbt.com, was adversely affected, and in some instances customers were prevented from accessing BB...

  • Page 27
    ... 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...

  • Page 28
    ...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...

  • Page 29
    ... located in Wilson, North Carolina. Offices are either owned or operated under long-term leases. At December 31, 2014, Branch Bank operated 1,839 branch offices in North Carolina, Virginia, Florida, Georgia, Maryland, South Carolina, West Virginia, Kentucky, Alabama, Texas, Tennessee, Washington DC...

  • Page 30
    ... 5 Quarterly Summary of Market Prices and Cash Dividends Declared on Common Stock 2014 Sales Prices Low Cash Dividends Declared 2013 Sales Prices Low Cash Dividends Declared High Close High Close Quarter Ended: March 31 June 30 September 30 December 31 Year Common Stock, Dividends and Share...

  • Page 31
    ..., KeyCorp, M&T Bank Corporation, PNC Financial Services Group, Inc., Regions Financial Corporation, SunTrust Banks, Inc., U.S. Bancorp and Zions Bancorporation. 30 Source: BB&T CORP, 10-K, February 25, 2015 Powered by Morningstar® Document Research℠The information contained herein may...

  • Page 32
    ... not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.

  • Page 33
    ...' equity Period-End Balances: Total assets Loans and leases (3) Deposits Long-term debt Shareholders' equity Selected Ratios: Rate of return on: Average total assets Average common equity Average total equity Dividend payout Average equity to average assets (1) 2011 included a special $0.01 dividend...

  • Page 34
    ... strong market share in the northern Kentucky/Cincinnati market. Reached 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. o Key Challenges BB&T's business has...

  • Page 35
    ... 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...

  • Page 36
    ... to 2012. The improvement in funding costs reflects an 11 basis point reduction in the average cost of interestbearing deposits and a lower average long-term debt balance. 35 Source: BB&T CORP, 10-K, February 25, 2015 Powered by Morningstar® Document Research℠The information contained...

  • Page 37
    ... 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...

  • Page 38
    ... 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: o o · The reduction in the net present value of the loan...

  • Page 39
    ... table provides information related to the components of the FDIC loss share receivable (payable): Table 9 FDIC Loss Share Receivable (Payable) December 31, 2014 Carrying Tmount 2013 Fair Value Carrying Tmount (Dollars in millions) Fair Value Loans Securities Aggregate loss calculation Total...

  • Page 40
    ... 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...

  • Page 41
    ...leases Total earning assets Nonearning assets Total assets Liabilities and Shareholders' Equity Interest-bearing deposits: Interest-checking Money market and savings Time deposits and IRAs Foreign office deposits - interest-bearing Total interest-bearing deposits Short-term borrowings Long-term debt...

  • Page 42
    ... 2014 2013 vs. 2013 vs. 2012 Insurance income Service charges on deposits Mortgage banking income Investment banking and brokerage fees and commissions Bankcard fees and merchant discounts Trust and investment advisory revenues Checkcard fees Income from bank-owned life insurance FDIC loss share...

  • Page 43
    ... 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 related to certain post-employment benefits, which is offset in personnel expense, and an $8 million decrease in letter of credit fees...

  • Page 44
    ... 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...

  • Page 45
    ...of $27 million related to a review of mortgage lending processes. Outside IT services totaled $115 million during 2014, compared to $89 million for 2013. This increase was due to third-party costs associated with the new ERP and commercial loan systems. A loss on early extinguishment of debt of $122...

  • Page 46
    ... tax matters. Segment Results See Note 21 "Operating Segments" in the "Notes to Consolidated Financial Statements" herein 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...

  • Page 47
    ... related to Regional Acceptance Corporation's geographic expansion and operating charge-offs. Dealer Financial Services grew average loans by $1.1 billion, or 10.5%, compared to 2013 as the result of strong growth in the prime and nonprime auto lending businesses. Specialized Lending Specialized...

  • Page 48
    ... 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...

  • Page 49
    ... result of loan growth and wider credit spreads in the Regional Acceptance Corporation portfolio. Dealer Financial Services average loans grew by $840 million, or 8.5%, compared to 2012. 48 Source: BB&T CORP, 10-K, February 25, 2015 Powered by Morningstar® Document Research℠The information...

  • Page 50
    ... sales transaction, Specialized Lending grew average balances by $966 million, or 6.9%, over 2012. This increase was primarily driven by growth in small ticket consumer finance, commercial insurance premium finance and equipment finance. The allocated provision for loan and lease losses decreased...

  • Page 51
    ... 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 higher FDIC loss share income. The $84 million increase in noninterest...

  • Page 52
    ... from the FDIC as part of the Colonial acquisition. Effective October 1, 2014, securities subject 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...

  • Page 53
    ... 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 Source: BB&T CORP, 10-K, February 25, 2015 Powered...

  • Page 54
    ... 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...

  • Page 55
    ... 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% to 6%. As of December 31, 2014, the direct retail lending portfolio includes $5.6 billion of home equity lines. Approximately 67% of the outstanding balance...

  • Page 56
    ... of Loan and Lease Portfolio Based on LOB 2014 2013 December 31, 2012 (Dollars in millions) 2011 2010 Commercial: Commercial and industrial CRE-income producing properties CRE-construction and development Direct retail lending (1) Sales finance Revolving credit Residential mortgage-nonguaranteed...

  • Page 57
    ... 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...

  • Page 58
    ... 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. · 57 Source: BB&T CORP, 10-K, February 25, 2015 Powered by Morningstar® Document...

  • Page 59
    ... 22 Tsset Quality 2014 2013 December 31, 2012 (Dollars in millions) 2011 2010 Nonaccrual loans and leases: Commercial and industrial CRE - income producing properties CRE - construction and development Direct retail lending (1) Sales finance Residential mortgage (1)(2)(3) Other lending subsidiaries...

  • Page 60
    ... reflect continued improvement in credit quality and the effects of the sale of residential mortgage NPLs as previously discussed. Table 23 Tsset Quality Ratios Ts Of / For The Year Ended December 31, 2013 2012 2011 2014 2010 Asset Quality Ratios (including assets acquired from FDIC) Loans...

  • Page 61
    ... 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...

  • Page 62
    ..., 2014 Past Due 30-89 Days (Dollars in millions) Past Due 90 Days Or More Current Status Total Performing TDRs (1): Commercial: Commercial and industrial CRE - income producing properties CRE - construction and development Direct retail lending Sales finance Revolving credit Residential mortgage...

  • Page 63
    ... Contents ACL Information related to the ACL is presented in the following table: Table 26 Tnalysis of TCL 2014 2013 Year Ended December31, 2012 2011 (Dollars in millions) 2010 Beginning balance Provision for credit losses (excluding acquired from FDIC) Provision for loans acquired from FDIC Charge...

  • Page 64
    ... (Dollars in millions) 2011 % Loans in each Tmount category 2010 % Loans in each Tmount category Tmount Balances at end of period applicable to: Commercial and industrial CRE - income producing properties CRE - construction and development Direct retail lending (1) Sales finance Revolving credit...

  • Page 65
    ...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...

  • Page 66
    ... 31, 2013. FHLB advances are long-term funding sources that provide flexibility to structure the debt in a manner that aids in the management of interest rate risk and liquidity. 65 Source: BB&T CORP, 10-K, February 25, 2015 Powered by Morningstar® Document Research℠The information contained...

  • Page 67
    ...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 million after-tax net increase in the value of the AFS securities portfolio. Tangible book value per common share at December 31, 2014 was...

  • Page 68
    ... occurs when the credit quality of an issuer whose securities or other instruments the bank holds deteriorates. 3rd Line of Defense Audit Services Executive Management 67 Source: BB&T CORP, 10-K, February 25, 2015 Powered by Morningstar® Document Research℠The information contained herein may...

  • Page 69
    ...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...

  • Page 70
    ... 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...

  • Page 71
    ... 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 in the other lending subsidiaries portfolio are loans to nonprime borrowers of...

  • Page 72
    ... 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...

  • Page 73
    ... 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...

  • Page 74
    ... 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...

  • Page 75
    ... 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. 74 Source: BB&T CORP, 10-K, February 25, 2015 Powered by...

  • Page 76
    ... 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, which...

  • Page 77
    ... 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...

  • Page 78
    ... 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. 77 Source: BB&T CORP, 10-K, February 25, 2015 Powered by Morningstar® Document Research℠The information contained herein...

  • Page 79
    ..., 2013 2012 Balance, at beginning of period Payments Expense Balance, at end of period $ $ 72 $ (23) 45 94 $ 71 $ (27) 28 72 $ 35 (27) 63 71 (1) Excludes the FHA-insured mortgage loan reserve of $85 million established during the second quarter of 2014. Related Party Transactions The Company...

  • Page 80
    ... 1 common equity ratio was 10.6% at December 31, 2014 compared to 9.9% at December 31, 2013. The increase in regulatory capital was primarily due to strong capital generation during 2014. 79 Source: BB&T CORP, 10-K, February 25, 2015 Powered by Morningstar® Document Research℠The information...

  • Page 81
    ... 31, 2014 2013 (Dollars in millions, except per share data, shares in thousands) Risk-based: Tier 1 Total Leverage capital Non-GAAP capital measures (1) Tangible common equity as a percentage of tangible assets Tier 1 common equity as a percentage of risk-weighted assets Tangible common equity per...

  • Page 82
    ... (1) Noncontrolling interest Preferred stock dividends Net income available to common shareholders (1) Basic EPS (1) Diluted EPS (1) Selected Average Balances: Assets Securities, at amortized cost Loans and leases (2) Total earning assets Deposits Short-term borrowings Long-term debt Total interest...

  • Page 83
    ...to the fourth quarter of 2013. The average annualized rate paid on long-term debt was 2.22% during the fourth quarter of 2014, a decrease of 42 basis points compared to the same quarter of the prior year. This decrease was the result of lower rates on new issues during the last twelve months and the...

  • Page 84
    ... 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...

  • Page 85
    ...results and updated 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...

  • Page 86
    ...% 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...

  • Page 87
    ..., 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 2014 that has materially affected, or...

  • Page 88
    ..., 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...

  • Page 89
    ... property and other assets covered by FDIC loss share at December 31, 2014 and December 31, 2013, respectively) Total assets Liabilities and Shareholders' Equity Deposits: Noninterest-bearing deposits Interest-bearing deposits Total deposits Short-term borrowings Long-term debt Accounts payable...

  • Page 90
    ...Credit Losses Noninterest Income Insurance income Service charges on deposits Mortgage banking income Investment banking and brokerage fees and commissions Bankcard fees and merchant discounts Trust and investment advisory revenues Checkcard fees Income from bank-owned life insurance FDIC loss share...

  • Page 91
    ... securities Change in amounts attributable to the FDIC under loss share agreements Other, net $ (192) $ (34) 117 17 2 252 $ 106 (384) 14 2 (70) (9) 200 (38) 6 The accompanying notes are an integral part of these consolidated financial statements. 90 Source: BB&T CORP, 10-K, February 25, 2015...

  • Page 92
    ... declared on preferred stock Equity-based compensation expense Other, net Balance, December 31, 2014 $ $ $ $ $ $ $ $ $ $ $ $ $ The accompanying notes are an integral part of these consolidated financial statements. 91 Source: BB&T CORP, 10-K, February 25, 2015 Powered by Morningstar...

  • Page 93
    ... property Other, net Net cash from investing activities Cash Flows From Financing Tctivities: Net change in deposits Net change in short-term borrowings Proceeds from issuance of long-term debt Repayment of long-term debt Net proceeds from preferred stock issued Cash dividends paid on common stock...

  • Page 94
    ... in North Carolina, Virginia, Florida, Georgia, South Carolina, Maryland, West Virginia, Kentucky, Alabama, Texas, Tennessee, Washington DC and Indiana. 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...

  • Page 95
    ...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...

  • Page 96
    ... 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...

  • Page 97
    ... 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 commercial TDRs...

  • Page 98
    ...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...

  • Page 99
    ... with a higher risk of loss. The "score" produced by this automated system is updated monthly. During 2013 and 2012, BB&T reviewed 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...

  • Page 100
    ... 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...

  • Page 101
    ... 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 102
    ... 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...

  • Page 103
    ...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...

  • Page 104
    ... mortgage loans collateralized by residential real estate property that are in the process of foreclosure. The adoption of this guidance was not material to the consolidated financial statements. Effective January 1, 2014, the Company adopted new guidance related to Investment Companies. The new...

  • Page 105
    ... of December 31, 2014 and December 31, 2013. Effective October 1, 2014, securities subject to the commercial loss sharing agreement with the FDIC related to the Colonial acquisition were no longer covered by loss sharing; however, any gains on the sale of these securities through September 30, 2017...

  • Page 106
    ...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. 2014 Year Ended December 31, 2013 (Dollars in millions) 2012 Balance at beginning of period Credit losses on securities without...

  • Page 107
    ... 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...

  • Page 108
    ... 31, 2013 Current Total Commercial: Commercial and industrial CRE - income producing properties CRE - construction and development Other lending subsidiaries Retail: Direct retail lending Revolving credit Residential mortgage-nonguaranteed Residential mortgage-government guaranteed Sales finance...

  • Page 109
    ... (Benefit) (Dollars in millions) Other Ending Balance Commercial: Commercial and industrial CRE - income producing properties CRE - construction and development Other lending subsidiaries Retail: Direct retail lending Revolving credit Residential mortgage-nonguaranteed Residential mortgage...

  • Page 110
    ... 31, 2012 Beginning Balance ChargeOffs Recoveries (Dollars in millions) Provision Ending Balance Commercial: Commercial and industrial CRE - income producing properties CRE - construction and development Other lending subsidiaries Retail: Direct retail lending Revolving credit Residential mortgage...

  • Page 111
    ... 31, 2014 Recorded Investment Related TLLL December 31, 2013 Recorded Investment Related TLLL (Dollars in millions) Commercial: Commercial and industrial CRE - income producing properties CRE - construction and development Other lending subsidiaries Retail: Direct retail lending Revolving credit...

  • Page 112
    ...December 31, 2014 2013 (Dollars in millions) Performing TDRs: Commercial: Commercial and industrial CRE - income producing properties CRE - construction and development Direct retail lending Sales finance Revolving credit Residential mortgage-nonguaranteed Residential mortgage-government guaranteed...

  • Page 113
    ... first. 2014 Year Ended December 31, 2013 (Dollars in millions) 2012 Commercial: Commercial and industrial CRE - income producing properties CRE - construction and development Retail: Direct retail lending Revolving credit Residential mortgage-nonguaranteed Sales finance Other lending subsidiaries...

  • Page 114
    ... loans and leases: December 31, 2014 2013 (Dollars in millions) Unearned income and net deferred loan fees and costs Residential mortgage loans in process of foreclosure NOTE 5. Premises and Equipment A summary of premises and equipment is presented in the accompanying table: Estimated Useful Life...

  • Page 115
    ... 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...

  • Page 116
    ...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 impact of this adjustment is included in loan-related expense on the Consolidated Statements of Income. Payments made to date...

  • Page 117
    ...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...

  • Page 118
    ...13 % 0.12 $ 4,385 2,864 3,408 0.20 % 0.22 December 31, 2014 2013 (Dollars in millions) Noninterest-bearing deposits Interest checking Money market and savings Time deposits and IRAs Total deposits Time deposits $100,000 and greater Time deposits $250,000 and greater 117 $ $ $ 38,786 $ 20,262...

  • Page 119
    ... limitations. During the third quarter of 2014, BB&T extinguished $1.1 billion of FHLB advances, resulting in a $122 million loss on early extinguishment of debt. 2015 2016 Year Ended December 31, 2017 2018 (Dollars in millions) 2019 2020 and later Future debt maturities (excluding capital leases...

  • Page 120
    ... plans: Equity-Based Compensation Plans December 31, 2014 Shares available for future grants (in thousands) Vesting period, awards granted prior to 2010 Vesting period, awards granted after 2009 Option term 26,832 5.0 yrs 3.0 to 5.0 10.0 The fair value of RSUs is based on the common stock price...

  • Page 121
    ...under the June 27, 2006 Board of Directors' authorization. No shares of common stock were repurchased under this plan during 2014, 2013 or 2012. 120 Source: BB&T CORP, 10-K, February 25, 2015 Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted...

  • Page 122
    ...$ Year Ended December 31, 2013 Unrecognized Net Pension and Postretirement Costs FDIC's Share of Unrealized Net Unrealized Gains (Losses) (Gains) Losses on TFS on TFS Securities Securities (Dollars in millions) Other, net Total AOCI balance, January 1, 2013 OCI before reclassifications, net of...

  • Page 123
    ... taxes were as follows: 2014 Year Ended December 31, 2013 (Dollars in millions) 2012 Federal income taxes at statutory rate of 35% Increase (decrease) in provision for income taxes as a result of: State income taxes, net of Federal tax benefit Federal tax credits Tax exempt income Adjustments for...

  • Page 124
    ... 31, 2014 2013 (Dollars in millions) Deferred tax assets: ALLL Postretirement plans Net unrealized loss on AFS securities Equity-based compensation Reserves and expense accruals Other Total deferred tax assets Deferred tax liabilities: Prepaid pension plan expense MSRs Lease financing Loan fees and...

  • Page 125
    ... finance future benefits. The following actuarial assumptions were used to determine net periodic pension costs for the qualified pension plan: 2014 December 31, 2013 2012 Weighted average assumed discount rate Weighted average expected long-term rate of return on plan assets Assumed long-term rate...

  • Page 126
    Table of Contents 2014 Year Ended December 31, 2013 (Dollars in millions) 2012 Net Periodic Pension Cost: Service cost Interest cost Estimated return on plan assets Net amortization and other Net periodic benefit cost Pre-Tax Amounts Recognized in OCI: Net actuarial loss (gain) Net amortization ...

  • Page 127
    ...estate, hedge funds, private equities and commodities, with any remainder to be held in cash equivalents. 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. The fair value of the pension plan assets at December 31, 2014 and 2013...

  • Page 128
    ... shares of BB&T common stock valued at $117 million and $138 million at December 31, 2014 and 2013, respectively. 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...

  • Page 129
    ...1, 2015, BB&T adopted new guidance related to Investments 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...

  • Page 130
    ... 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 Pledged loans 129 $ 14,636 $ 67,248 11,911 66,391 Source: BB&T CORP, 10-K, February 25, 2015 Powered...

  • Page 131
    ... the United States Department of Housing and Urban Development, GNMA, FHLMC and FNMA. At December 31, 2014 and 2013, Branch Bank's capital was above all required levels. 130 Source: BB&T CORP, 10-K, February 25, 2015 Powered by Morningstar® Document Research℠The information contained herein...

  • Page 132
    Table of Contents NOTE 17. Parent Company Financial Statements Parent Company Condensed Balance Sheets December 31, 2014 2013 (Dollars in millions) Assets: Cash and due from banks Interest-bearing deposits with banks AFS securities at fair value HTM securities at amortized cost Investment in ...

  • Page 133
    ... 20 1,610 418 2,028 49 63 1,916 $ Year Ended December 31, 2014 2013 (Dollars in millions) 2012 Net Income OCI, Net of Tax: Change in unrecognized pension and postretirement amounts Change in unrecognized gains (losses) on cash flow hedges Other, net Total OCI Total comprehensive income $ 2,226...

  • Page 134
    ... activities Cash Flows From Financing Activities: Net change in long-term debt Net change in short-term borrowings Net change in advances from subsidiaries Net proceeds from common stock issued Net proceeds from preferred stock issued Cash dividends paid on common and preferred stock Other, net Net...

  • Page 135
    ... 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. Fair Value Disclosures Accounting standards define fair value as the exchange price...

  • Page 136
    ... 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...

  • Page 137
    ...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...

  • Page 138
    ... Year Ended December 31, 2013 Tcquired from FDIC Securities Residential MSRs Net Derivatives Private Equity and Similar Investments Balance at January 1, 2013 Total realized and unrealized gains (losses): Included in earnings: Interest income Mortgage banking income Other noninterest income...

  • Page 139
    ... 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...

  • Page 140
    ... Fair Value Level 2 Level 3 (Dollars in millions) Financial assets: HTM securities Loans and leases, net of ALLL excluding acquired from FDIC Acquired from FDIC loans, net of ALLL FDIC loss share receivable Financial liabilities: Deposits FDIC loss share payable Long-term debt December 31, 2013...

  • Page 141
    ... Pay fixed swaps Option trades When issued securities, forward rate agreements and forward commitments Total Total derivatives not designated as hedges Total derivatives 3 mo. LIBOR funding $ 9,300 $ ― $ (289) $ 4,300 $ ― $ (203) Long-term debt Commercial loans Municipal securities...

  • Page 142
    ...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...

  • Page 143
    ... on floating rate business loans, overnight funding, FHLB advances, medium-term bank notes and long-term debt. 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...

  • Page 144
    ... 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 Derivatives in a net gain position secured by that collateral Unsecured positions in a net gain...

  • Page 145
    ... 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...

  • Page 146
    ... 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...

  • Page 147
    ..., 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...

  • Page 148
    ... Mortgage Banking 2014 2013 2012 1,482 $ (984) 498 (107) 310 2 504 ― 85 328 124 204 $ 1,584 $ (999) 585 12 484 (1) 370 ― 68 618 235 383 $ Dealer Financial Services 2014 2013 2012 834 $ (158) 676 214 4 ― 108 ― 29 329 125 204 844 $ (195) 649 164 7 ― 101 1 36 354 135 219 Specialized Lending...

  • Page 149
    ... 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 Tccounting Officer) 148 Source: BB&T CORP, 10-K, February 25, 2015 Powered by Morningstar® Document...

  • Page 150
    ... not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.

  • Page 151
    ... May 4, 2009, to the Indenture Regarding Subordinated Securities, dated as of May 24, 1996, between the Registrant and U.S. Bank National Association. BB&T Corporation Amended and Restated Non-Employee Directors' Deferred Compensation and Stock Option Plan (amended and restated January 1, 2005). 150...

  • Page 152
    ... 2004 Stock Incentive Plan (5-Year Vesting). Form of Non-Employee Director Nonqualified Stock Option Agreement for the BB&T Corporation Amended and Restated 2004 Stock Incentive Plan (4-Year Vesting). 151 10.9* 10.10* 10.11* 10.12* 10.13* Source: BB&T CORP, 10-K, February 25, 2015 Powered by...

  • Page 153
    ... to the BB&T Corporation Non-Qualified Defined Benefit Plan. 152 Source: BB&T CORP, 10-K, February 25, 2015 Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user...

  • Page 154
    ...Component) for Executive Officers under the BB&T Corporation 2012 Incentive Plan (2013 grants). 153 10.31* 10.32* 10.33* 10.34* 10.35* 10.36* 10.37* 10.38* 10.39* Source: BB&T CORP, 10-K, February 25, 2015 Powered by Morningstar® Document Research℠The information contained herein may...

  • Page 155
    ...the BB&T Corporation 2012 Incentive Plan (2014 grants). Form of Restricted Stock Unit Agreement (Tier 2 Employee) for the BB&T Corporation 2012 Incentive Plan. Form of LTIP Award Agreement for Executive Officers under the BB&T Corporation 2012 Incentive Plan (2013 - 2015 performance period). Form of...

  • Page 156
    ... the Quarterly Report on Form 10-Q, filed November 2, 2012. Incorporated herein by reference to Exhibit 10.5 of the Quarterly Report on Form 10-Q, filed April 30, 2014. Filed herewith as Note 20 to the consolidated financial statements. Filed herewith. Filed herewith. Filed herewith. Filed herewith...

  • Page 157
    ... to remove losses on equity method investees and to remove the adjustment for noncontrolling interests that incurred fixed charges. (2) Dividends on preferred stock have been grossed up by the effective tax rate for the period. Source: BB&T CORP, 10-K, February 25, 2015 Powered by Morningstar...

  • Page 158
    ... Delaware Florida Illinois Illinois New Jersey Illinois Illinois New York New York North Carolina Pennsylvania Tennessee California Delaware Delaware Alabama Alabama Texas Texas Texas Mexico Source: BB&T CORP, 10-K, February 25, 2015 Powered by Morningstar® Document Research℠The information...

  • Page 159
    ..., Inc. Georgia Asset Resolution Group, LLC Grandbridge Real Estate Capital LLC BB&T Real Estate Funding LLC Grandbridge Investment Sales, Inc. OVB Foreclosed Properties, Inc. Prime Rate Premium Finance Corporation, Inc. AFCO Credit Corporation AFCO Acceptance Corporation AFCO Premium Credit LLC AFCO...

  • Page 160
    ...2015 relating to the consolidated financial statements and the effectiveness of internal control over financial reporting, which appears in this Annual Report on Form 10-K. /s/ PricewaterhouseCoopers LLP Charlotte, North Carolina February 25, 2015 Source: BB&T CORP, 10-K, February 25, 2015 Powered...

  • Page 161
    ..., that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 25, 2015 /s/ Kelly S. King Kelly S. King Chairman and Chief Executive Officer Source: BB&T CORP, 10-K, February 25, 2015 Powered by Morningstar...

  • Page 162
    ...involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 25, 2015 /s/ Daryl N. Bible Daryl N. Bible Senior Executive Vice President and Chief Financial Officer Source: BB&T CORP, 10-K, February 25, 2015 Powered...

  • Page 163
    ... the financial condition and results of operations of the Company. Date: February 25, 2015 /s/ Kelly S. King Kelly S. King Chairman and Chief Executive Officer /s/ Daryl N. Bible Daryl N. Bible Senior Executive Vice President and Chief Financial Officer A signed original of this written statement...

  • Page 164
    ... not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.