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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________
FORM 10-Q
_____________________________

Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended: March 31, 2019
Commission File Number: 1-10853
_____________________________
BB&T CORPORATION
(Exact name of registrant as specified in its charter)
_____________________________
North Carolina
56-0939887
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
200 West Second Street
Winston-Salem, North Carolina
27101
(Address of principal executive offices)
(Zip Code)
(336) 733-2000
(Registrant's telephone number, including area code)
______________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý   No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý   No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
ý
 
Accelerated filer
¨
Non-accelerated filer
¨
 
Smaller reporting company
¨
 
 
 
Emerging growth company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ¨   No  ý
At March 31, 2019, 765,919,922 shares of the registrant's common stock, $5 par value, were outstanding.
 
 
 
 
 


 
 
10-Q
TABLE OF CONTENTS
BB&T CORPORATION
FORM 10-Q
March 31, 2019
 
 
Page No.
PART I - Financial Information
 
Glossary of Defined Terms
1
 
Forward-Looking Statements
3
Item 1.
Financial Statements
 
 
Consolidated Balance Sheets (Unaudited)
4
 
Consolidated Statements of Income (Unaudited)
5
 
Consolidated Statements of Comprehensive Income (Unaudited)
6
 
Consolidated Statements of Changes in Shareholders' Equity (Unaudited)
7
 
Consolidated Statements of Cash Flows (Unaudited)
8
 
Notes to Consolidated Financial Statements (Unaudited)
 
 
Note 1. Basis of Presentation
9
 
Note 2. Business Combinations
11
 
Note 3. Securities
11
 
Note 4. Loans and ACL
13
 
Note 5. Other Assets and Liabilities
16
 
Note 6. Goodwill and Other Intangible Assets
17
 
Note 7. Loan Servicing
17
 
Note 8. Deposits
19
 
Note 9. Long-Term Debt
19
 
Note 10. Shareholders' Equity
19
 
Note 11. AOCI
20
 
Note 12. Income Taxes
20
 
Note 13. Benefit Plans
20
 
Note 14. Commitments and Contingencies
21
 
Note 15. Fair Value Disclosures
22
 
Note 16. Derivative Financial Instruments
27
 
Note 17. Computation of EPS
31
 
Note 18. Operating Segments
31
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
33
Item 3.
Quantitative and Qualitative Disclosures About Market Risk (see Market Risk Management)
46
Item 4.
Controls and Procedures
53
PART II - Other Information
Item 1.
Legal Proceedings
53
Item 1A.
Risk Factors
53
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
53
Item 3.
Defaults Upon Senior Securities - (none)
 
Item 4.
Mine Safety Disclosures - (not applicable)
 
Item 5.
Other Information - (none to be reported)
 
Item 6.
Exhibits
54



Glossary of Defined Terms
The following terms may be used throughout this Report, including the consolidated financial statements and related notes. 
Term
Definition
2018 Repurchase Plan
Plan for the repurchase of up to $1.7 billion of BB&T's common stock for the one-year period ended June 30, 2019
ACL
Allowance for credit losses
AFS
Available-for-sale
Agency MBS
Mortgage-backed securities issued by a U.S. government agency or GSE
ALLL
Allowance for loan and lease losses
AOCI
Accumulated other comprehensive income (loss)
Basel III
Global regulatory standards on bank capital adequacy and liquidity published by the BCBS
BB&T
BB&T Corporation and subsidiaries
BCBS
Basel Committee on Banking Supervision
BHC
Bank holding company
Branch Bank
Branch Banking and Trust Company
BU
Business Unit
CB-Commercial
Community Banking Commercial, an operating segment
CB-Retail
Community Banking Retail and Consumer Finance, an operating segment
CCAR
Comprehensive Capital Analysis and Review
CCRC
Culture and Conduct Risk Committee
CD
Certificate of deposit
CDI
Core deposit intangible assets
CEO
Chief Executive Officer
CFO
Chief Financial Officer
CET1
Common equity Tier 1
CMO
Collateralized mortgage obligation
Company
BB&T Corporation and subsidiaries (interchangeable with "BB&T" above)
CRE
Commercial real estate
DIF
Deposit Insurance Fund administered by the FDIC
Dodd-Frank Act
Dodd-Frank Wall Street Reform and Consumer Protection Act
EPS
Earnings per common share
EVE
Economic value of equity
Exchange Act
Securities Exchange Act of 1934, as amended
FASB
Financial Accounting Standards Board
FDIC
Federal Deposit Insurance Corporation
FHA
Federal Housing Administration
FHC
Financial Holding Company
FHLB
Federal Home Loan Bank
FHLMC
Federal Home Loan Mortgage Corporation
FNMA
Federal National Mortgage Association
FRB
Board of Governors of the Federal Reserve System
FS&CF
Financial Services and Commercial Finance, an operating segment
FTE
Full-time equivalent employee
GAAP
Accounting principles generally accepted in the United States of America
GNMA
Government National Mortgage Association
Grandbridge
Grandbridge Real Estate Capital, LLC
GSE
U.S. government-sponsored enterprise
HFI
Held for investment
HTM
Held-to-maturity
IH
Insurance Holdings, an operating segment
IPV
Independent price verification
LCR
Liquidity Coverage Ratio
LHFS
Loans held for sale
LIBOR
London Interbank Offered Rate
MBS
Mortgage-backed securities
MRLCC
Market Risk, Liquidity and Capital Committee
MRM
Model Risk Management
MSR
Mortgage servicing right

BB&T Corporation 1


Term
Definition
MSRB
Municipal Securities Rulemaking Board
N/A
Not applicable
NCCOB
North Carolina Office of the Commissioner of Banks
NIM
Net interest margin, computed on a TE basis
NM
Not meaningful
NPA
Nonperforming asset
NPL
Nonperforming loan
NYSE
NYSE Euronext, Inc.
OAS
Option adjusted spread
OCI
Other comprehensive income (loss)
OPEB
Other post-employment benefit
OREO
Other real estate owned
ORMC
Operational Risk Management Committee
OT&C
Other, Treasury and Corporate
OTTI
Other-than-temporary impairment
Parent Company
BB&T Corporation, the parent company of Branch Bank and other subsidiaries
PCI
Purchased credit impaired loans
Peer Group
Financial holding companies included in the industry peer group index
PSU
Performance share units
Re-REMICs
Re-securitizations of Real Estate Mortgage Investment Conduits
Regions Insurance
Regions Insurance Group, acquired by BB&T effective July 2, 2018
ROU Assets
Right-of-use assets
RSU
Restricted stock unit
RUFC
Reserve for unfunded lending commitments
SBIC
Small Business Investment Company
SEC
Securities and Exchange Commission
Short-Term Borrowings
Federal funds purchased, securities sold under repurchase agreements and other short-term borrowed funds with original maturities of less than one year
Simulation
Interest sensitivity simulation analysis
SunTrust
SunTrust Banks, Inc.
TBA
To be announced
TDR
Troubled debt restructuring
TE
Taxable-equivalent
U.S.
United States of America
U.S. Treasury
United States Department of the Treasury
UPB
Unpaid principal balance
VaR
Value-at-risk
VIE
Variable interest entity

2 BB&T Corporation

Forward-Looking Statements
 
This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, regarding the financial condition, results of operations, business plans and the future performance of BB&T that are based on the beliefs and assumptions of the management of BB&T and the information available to management at the time that these disclosures were prepared. Words such as "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "plans," "projects," "may," "will," "should," "could," and other similar expressions are intended to identify these forward-looking statements. Such statements are subject to factors that could cause actual results to differ materially from anticipated results. Such factors include, but are not limited to, the following:
l 
risks, uncertainties and other factors relating to the merger of SunTrust with and into BB&T, including the ability to obtain regulatory approvals and meet other closing conditions to the merger, including approval of the merger by BB&T shareholders and SunTrust shareholders and delay in closing the merger;
l 
general economic or business conditions, either nationally or regionally, may be less favorable than expected, resulting in, among other things, slower deposit and/or asset growth, and a deterioration in credit quality and/or a reduced demand for credit, insurance or other services;
l 
disruptions to the national or global financial markets, including the impact of a downgrade of U.S. government obligations by one of the credit ratings agencies, the economic instability and recessionary conditions in Europe;
l 
changes in the interest rate environment, including interest rate changes made by the Federal Reserve, the discontinuation of LIBOR as an interest rate benchmark, as well as cash flow reassessments may reduce net interest margin and/or the volumes and values of loans and deposits as well as the value of other financial assets and liabilities;
l 
competitive pressures among depository and other financial institutions may increase significantly;
l 
legislative, regulatory or accounting changes, including changes resulting from the adoption and implementation of the Dodd-Frank Act may adversely affect the businesses in which BB&T is engaged;
l 
local, state or federal taxing authorities may take tax positions that are adverse to BB&T;
l 
a reduction may occur in BB&T's credit ratings;
l 
adverse changes may occur in the securities markets;
l 
competitors of BB&T may have greater financial resources or develop products that enable them to compete more successfully than BB&T and may be subject to different regulatory standards than BB&T;
l 
cyber security risks could adversely affect BB&T's business and financial performance or reputation, and BB&T could be liable for financial losses incurred by third parties due to breaches of data shared between financial institutions;
l 
higher-than-expected costs related to information technology infrastructure or a failure to successfully implement future system enhancements could adversely impact BB&T's financial condition and results of operations and could result in significant additional costs to BB&T;
l 
natural or other disasters, including acts of terrorism, could have an adverse effect on BB&T, materially disrupting BB&T's operations or the ability or willingness of customers to access BB&T's products and services;
l 
costs related to the integration of the businesses of BB&T and its merger partners may be greater than expected;
l 
failure to execute on strategic or operational plans, including the ability to successfully complete and/or integrate mergers and acquisitions or fully achieve expected cost savings or revenue growth associated with mergers and acquisitions within the expected time frames could adversely impact financial condition and results of operations;
l 
significant litigation and regulatory proceedings could have a material adverse effect on BB&T;
l 
unfavorable resolution of legal proceedings or other claims and regulatory and other governmental investigations or other inquiries could result in negative publicity, protests, fines, penalties, restrictions on BB&T's operations or ability to expand its business and other negative consequences, all of which could cause reputational damage and adversely impact BB&T's financial conditions and results of operations;
l 
risks resulting from the extensive use of models;
l 
risk management measures may not be fully effective;
l 
deposit attrition, customer loss and/or revenue loss following completed mergers/acquisitions may exceed expectations; and
l 
widespread system outages, caused by the failure of critical internal systems or critical services provided by third parties, could adversely impact BB&T's financial condition and results of operations.

These and other risk factors are more fully described in this report and in BB&T's Annual Report on Form 10-K for the year ended December 31, 2018 under the sections entitled "Item 1A. Risk Factors" and from time to time, in other filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Actual results may differ materially from those expressed in or implied by any forward-looking statement. Except to the extent required by applicable law or regulation, BB&T undertakes no obligation to revise or update publicly any forward-looking statements for any reason. Readers should, however, consult any further disclosures of a forward-looking nature BB&T may make in any subsequent Annual Reports on Form 10‑K, Quarterly Reports on Form 10‑Q, or Current Reports on Form 8‑K.


BB&T Corporation 3


ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS
BB&T CORPORATION AND SUBSIDIARIES
Unaudited
(Dollars in millions, except per share data, shares in thousands)
March 31, 2019
 
December 31, 2018
Assets
 
 
 
Cash and due from banks
$
1,873

 
$
2,753

Interest-bearing deposits with banks
751

 
984

Cash equivalents
252

 
143

Restricted cash
96

 
107

AFS securities at fair value
26,315

 
25,038

HTM securities (fair value of $19,886 and $20,047 at March 31, 2019 and December 31, 2018, respectively)
20,095

 
20,552

LHFS at fair value
834

 
988

Loans and leases
149,057

 
149,013

ALLL
(1,561
)
 
(1,558
)
Loans and leases, net of ALLL
147,496

 
147,455

Premises and equipment
2,078

 
2,118

Goodwill
9,818

 
9,818

CDI and other intangible assets
726

 
758

MSRs at fair value
1,036

 
1,108

Other assets
16,313

 
13,875

Total assets
$
227,683

 
$
225,697

Liabilities
 
 
 
Deposits
$
159,766

 
$
161,199

Short-term borrowings
6,305

 
5,178

Long-term debt
24,729

 
23,709

Accounts payable and other liabilities
6,000

 
5,433

Total liabilities
196,800

 
195,519

Commitments and contingencies (Note 14)

 

Shareholders' Equity
 
 
 
Preferred stock, $5 par, liquidation preference of $25,000 per share
3,053

 
3,053

Common stock, $5 par
3,830

 
3,817

Additional paid-in capital
6,843

 
6,849

Retained earnings
18,518

 
18,118

AOCI, net of deferred income taxes
(1,421
)
 
(1,715
)
Noncontrolling interests
60

 
56

Total shareholders' equity
30,883

 
30,178

Total liabilities and shareholders' equity
$
227,683

 
$
225,697

Common shares outstanding
765,920

 
763,326

Common shares authorized
2,000,000

 
2,000,000

Preferred shares outstanding
126

 
126

Preferred shares authorized
5,000

 
5,000


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

4 BB&T Corporation


CONSOLIDATED STATEMENTS OF INCOME
BB&T CORPORATION AND SUBSIDIARIES
Unaudited
Three Months Ended March 31,
(Dollars in millions)
2019
 
2018
Interest Income
 
 
 
Interest and fees on loans and leases
$
1,839

 
$
1,605

Interest and dividends on securities
302

 
291

Interest on other earning assets
32

 
25

Total interest income
2,173

 
1,921

Interest Expense
 
 
 
Interest on deposits
253

 
118

Interest on short-term borrowings
32

 
20

Interest on long-term debt
192

 
150

Total interest expense
477

 
288

Net Interest Income
1,696

 
1,633

Provision for credit losses
155

 
150

Net Interest Income After Provision for Credit Losses
1,541

 
1,483

Noninterest Income
 
 
 
Insurance income
510

 
436

Service charges on deposits
171

 
165

Investment banking and brokerage fees and commissions
111

 
113

Mortgage banking income
63

 
99

Trust and investment advisory revenues
68

 
72

Bankcard fees and merchant discounts
70

 
69

Checkcard fees
55

 
52

Operating lease income
35

 
37

Income from bank-owned life insurance
28

 
31

Other income
91

 
106

Securities gains (losses), net
 
 
 
Gross realized gains
22

 
—

Gross realized losses
(22
)
 
—

Total securities gains (losses), net
—

 
—

Total noninterest income
1,202

 
1,180

Noninterest Expense
 
 
 
Personnel expense
1,087

 
1,039

Occupancy and equipment expense
187

 
194

Software expense
72

 
65

Outside IT services
30

 
32

Regulatory charges
18

 
40

Amortization of intangibles
32

 
33

Loan-related expense
25

 
29

Professional services
31

 
30

Merger-related and restructuring charges, net
80

 
28

Other expense
206

 
196

Total noninterest expense
1,768

 
1,686

Earnings
 
 
 
Income before income taxes
975

 
977

Provision for income taxes
177

 
186

Net income
798

 
791

Noncontrolling interests
6

 
3

Dividends on preferred stock
43

 
43

Net income available to common shareholders
$
749

 
$
745

Basic EPS
$
0.98

 
$
0.96

Diluted EPS
0.97

 
0.94

Basic weighted average shares outstanding
764,135

 
779,617

Diluted weighted average shares outstanding
774,071

 
791,005


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

BB&T Corporation 5


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
BB&T CORPORATION AND SUBSIDIARIES
Unaudited
Three Months Ended March 31,
(Dollars in millions)
 
2019
 
2018
Net income
 
$
798

 
$
791

OCI, net of tax:
 
 

 
 

Change in unrecognized net pension and postretirement costs
 
17

 
14

Change in unrealized net gains (losses) on cash flow hedges
 
(34
)
 
78

Change in unrealized net gains (losses) on AFS securities
 
309

 
(268
)
Other, net
 
2

 
(2
)
Total OCI
 
294

 
(178
)
Total comprehensive income
 
$
1,092

 
$
613

Income Tax Effect of Items Included in OCI:
 
 
 
 
Change in unrecognized net pension and postretirement costs
 
$
6

 
$
4

Change in unrealized net gains (losses) on cash flow hedges
 
(11
)
 
26

Change in unrealized net gains (losses) on AFS securities
 
95

 
(84
)
Other, net
 
—

 
1


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


6 BB&T Corporation


CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
BB&T CORPORATION AND SUBSIDIARIES
Unaudited
(Dollars in millions, shares in thousands)
Shares of Common Stock
 
Preferred Stock
 
Common Stock
 
Additional Paid-In Capital
 
Retained Earnings
 
AOCI
 
Noncontrolling Interests
 
Total Shareholders' Equity
Balance, January 1, 2018
782,006

 
$
3,053

 
$
3,910

 
$
7,893

 
$
16,259

 
$
(1,467
)
 
$
47

 
$
29,695

Add (Deduct):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
—

 
—

 
—

 
—

 
788

 
—

 
3

 
791

OCI
—

 
—

 
—

 
—

 
—

 
(178
)
 
—

 
(178
)
Issued in connection with equity awards, net
3,599

 
—

 
18

 
(31
)
 
—

 
—

 
—

 
(13
)
Repurchase of common stock
(5,853
)
 
—

 
(29
)
 
(291
)
 
—

 
—

 
—

 
(320
)
Cash dividends declared on common stock
—

 
—

 
—

 
—

 
(292
)
 
—

 
—

 
(292
)
Cash dividends declared on preferred stock
—

 
—

 
—

 
—

 
(43
)
 
—

 
—

 
(43
)
Equity-based compensation expense
—

 
—

 
—

 
31

 
—

 
—

 
—

 
31

Other, net
—

 
—

 
—

 
(9
)
 
—

 
—

 
—

 
(9
)
Balance, March 31, 2018
779,752


$
3,053


$
3,899


$
7,593


$
16,712


$
(1,645
)

$
50


$
29,662

Balance, January 1, 2019
763,326

 
$
3,053

 
$
3,817

 
$
6,849

 
$
18,118

 
$
(1,715
)
 
$
56

 
$
30,178

Add (Deduct):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
—

 
—

 
—

 
—

 
792

 
—

 
6

 
798

OCI
—

 
—

 
—

 
—

 
—

 
294

 
—

 
294

Issued in connection with equity awards, net
2,594

 
—

 
13

 
(41
)
 
—

 
—

 
—

 
(28
)
Cash dividends declared on common stock
—

 
—

 
—

 
—

 
(309
)
 
—

 
—

 
(309
)
Cash dividends declared on preferred stock
—

 
—

 
—

 
—

 
(43
)
 
—

 
—

 
(43
)
Equity-based compensation expense
—

 
—

 
—

 
32

 
—

 
—

 
—

 
32

Other, net
—

 
—

 
—

 
3

 
(40
)
 
—

 
(2
)
 
(39
)
Balance, March 31, 2019
765,920

 
$
3,053

 
$
3,830

 
$
6,843

 
$
18,518

 
$
(1,421
)
 
$
60

 
$
30,883


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

BB&T Corporation 7


CONSOLIDATED STATEMENTS OF CASH FLOWS
BB&T CORPORATION AND SUBSIDIARIES
Unaudited
Three Months Ended March 31,
(Dollars in millions)
2019
 
2018
Cash Flows From Operating Activities:
 
 
 
Net income
$
798

 
$
791

Adjustments to reconcile net income to net cash from operating activities:
 

 
 
Provision for credit losses
155

 
150

Depreciation
105

 
105

Amortization of intangibles
32

 
33

Equity-based compensation expense
32

 
31

Net change in operating assets and liabilities:
 

 
 
LHFS
77

 
(90
)
Trading and equity securities
(1,131
)
 
10

Other assets, accounts payable and other liabilities
(1,006
)
 
(583
)
Other, net
193

 
(139
)
Net cash from operating activities
(745
)
 
308

Cash Flows From Investing Activities:
 

 
 
Proceeds from sales of AFS securities
1,797

 
95

Proceeds from maturities, calls and paydowns of AFS securities
861

 
959

Purchases of AFS securities
(3,525
)
 
(1,863
)
Proceeds from maturities, calls and paydowns of HTM securities
450

 
626

Purchases of HTM securities
—

 
(39
)
Originations and purchases of loans and leases, net of principal collected
(193
)
 
385

Other, net
133

 
40

Net cash from investing activities
(477
)
 
203

Cash Flows From Financing Activities:
 

 
 
Net change in deposits
(1,432
)
 
830

Net change in short-term borrowings
1,127

 
(617
)
Proceeds from issuance of long-term debt
2,015

 
7

Repayment of long-term debt
(1,103
)
 
(41
)
Repurchase of common stock
—

 
(320
)
Cash dividends paid on common stock
(309
)
 
(292
)
Cash dividends paid on preferred stock
(43
)
 
(43
)
Other, net
(48
)
 
(7
)
Net cash from financing activities
207

 
(483
)
Net Change in Cash, Cash Equivalents and Restricted Cash
(1,015
)
 
28

Cash, Cash Equivalents and Restricted Cash, January 1
3,987

 
3,083

Cash, Cash Equivalents and Restricted Cash, March 31
$
2,972

 
$
3,111

Supplemental Disclosure of Cash Flow Information:
 
 
 
Net cash paid (received) during the period for:
 
 
 
Interest expense
$
419

 
$
256

Income taxes
62

 
15


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


8 BB&T Corporation


NOTE 1. Basis of Presentation

General
 
See the Glossary of Defined Terms at the beginning of this Report for terms used herein. These consolidated financial statements and notes are presented in accordance with the instructions for Form 10-Q and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations and cash flow activity required in accordance with GAAP. In the opinion of management, all normal recurring adjustments necessary for a fair statement of the consolidated financial position and consolidated results of operations have been made. The year-end consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. The information contained in the financial statements and notes included in the Annual Report on Form 10-K for the year ended December 31, 2018 should be referred to in connection with these unaudited interim consolidated financial statements.
 
Reclassifications

Certain amounts reported in prior periods' consolidated financial statements have been reclassified to conform to the current presentation.
 
Use of Estimates in the Preparation of Financial Statements
 
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change include the determination of the ACL, determination of fair value for financial instruments, valuation of MSRs, goodwill, intangible assets and other purchase accounting related adjustments, benefit plan obligations and expenses, and tax assets, liabilities and expense.

Leases - Lessee

BB&T has operating and finance leases for data centers, corporate offices, branches, retail centers, and certain equipment. BB&T determines if an arrangement is a lease at inception. Operating leases with an original lease term in excess of one year are included in other assets and accounts payable and other liabilities in the Consolidated Balance Sheets. Finance leases are included in premises and equipment and long-term debt in the Consolidated Balance Sheets. 

ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. BB&T uses an implicit interest rate in determining the present value of lease payments when readily determinable, and a collateralized incremental borrowing rate when an implicit rate is not available. Lease terms consider options to extend or terminate based on the determination of whether such renewal or termination options are deemed reasonably certain. Rent expense and rental income on operating leases is generally recorded using the straight-line method over the appropriate lease terms.

Lease agreements that contain non-lease components are generally accounted for as a single lease component. Variable costs, such as maintenance expenses, property and sales taxes, association dues and index based rate increases, are expensed as they are incurred.

Leases - Lessor

BB&T's commercial lease portfolio consists of dealer-based financing of equipment for small businesses and commercial equipment leasing. The fair market value of the leased asset is generally equal to the original capitalized cost. Assets under operating leases are included in other assets in the Consolidated Balance Sheets. Depreciation expense for assets under operating leases is generally recorded using the straight-line method over the appropriate lease terms in other expense in the Consolidated Statements of Income.


BB&T Corporation 9


Changes in Accounting Principles and Effects of New Accounting Pronouncements
Standard/Adoption Date
Description
Effects on the Financial Statements
Standards Adopted During the Current Year
Leases
Jan 1, 2019
Requires lessees to recognize assets and liabilities related to certain operating leases on the balance sheet, requires additional disclosures by lessees, and contains targeted changes to accounting by lessors.
BB&T established ROU assets of $860 million and lease liabilities of $997 million. The net impact to equity was a reduction of $40 million. There was no material impact to its Consolidated Statements of Income. BB&T adopted the guidance on a prospective basis and did not reassess whether any expired or existing contract contains a lease, the classification of leases or the initial direct costs.
Standards Not Yet Adopted
Credit Losses
Jan 1, 2020
Replaces the incurred loss impairment methodology with an expected credit loss methodology and requires consideration of a broader range of information to determine credit loss estimates. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses. Purchased credit deteriorated loans will receive an allowance for expected credit losses. Any credit impairment on AFS debt securities for which the fair value is less than cost will be recorded through an allowance for expected credit losses. The standard also requires expanded disclosures related to credit losses and asset quality.
BB&T expects that the ACL could be materially higher; however, the magnitude of the increase, which is highly dependent on existing and forecasted economic conditions at the time of adoption, has not yet been quantified. Model development and fit-for-purpose testing is substantially complete for most portfolios, and significant progress has been made on testing designed to evaluate the sensitivity of the models to economic forecasts, length of the reasonable and supportable period and reversion to historical loss information. BB&T expects to continue limited parallel testing in the second quarter of 2019, with plans for a more comprehensive parallel testing program in the second half of the year that will include consideration of new or modified internal controls.



10 BB&T Corporation


NOTE 2. Business Combinations
 
On February 7, 2019, BB&T and SunTrust announced that both companies' Boards of Directors unanimously approved an agreement to combine in an all-stock merger of equals. Upon closing, each SunTrust share will be exchanged for 1.295 shares of BB&T stock. The merger is expected to close late in the third or fourth quarter of 2019, subject to satisfaction of closing conditions, including receipt of regulatory approvals and approval by the shareholders of each company. The merger is subject to a break-up fee of approximately $1.1 billion, payable in customary circumstances.

NOTE 3. Securities

The following tables summarize AFS and HTM securities:
March 31, 2019
(Dollars in millions)
 
Amortized Cost
 
Gross Unrealized
 
Fair Value
 
 
Gains
 
Losses
 
AFS securities:
 
 
 
 
 
 
 
 
U.S. Treasury
 
$
1,920

 
$
1

 
$
43

 
$
1,878

GSE
 
238

 
1

 
6

 
233

Agency MBS
 
23,450

 
65

 
468

 
23,047

States and political subdivisions
 
607

 
31

 
12

 
626

Non-agency MBS
 
313

 
184

 
—

 
497

Other
 
34

 
—

 
—

 
34

Total AFS securities
 
$
26,562

 
$
282

 
$
529

 
$
26,315

HTM securities:
 
 
 
 
 
 
 
 
U.S. Treasury
 
$
1,099

 
$
—

 
$
2

 
$
1,097

GSE
 
2,199

 
6

 
15

 
2,190

Agency MBS
 
16,792

 
25

 
223

 
16,594

States and political subdivisions
 
4

 
—

 
—

 
4

Other
 
1

 
—

 
—

 
1

Total HTM securities
 
$
20,095

 
$
31

 
$
240

 
$
19,886

 
 
 
 
 
 
 
 
 
December 31, 2018
(Dollars in millions)
 
Amortized Cost
 
Gross Unrealized
 
Fair Value
 
 
Gains
 
Losses
 
AFS securities:
 
 
 
 
 
 
 
 
U.S. Treasury
 
$
3,503

 
$
22

 
$
84

 
$
3,441

GSE
 
209

 
—

 
9

 
200

Agency MBS
 
20,927

 
15

 
787

 
20,155

States and political subdivisions
 
694

 
25

 
18

 
701

Non-agency MBS
 
321

 
184

 
—

 
505

Other
 
35

 
1

 
—

 
36

Total AFS securities
 
$
25,689

 
$
247

 
$
898

 
$
25,038

HTM securities:
 
 
 
 
 
 
 
 
U.S. Treasury
 
$
1,099

 
$
—

 
$
6

 
$
1,093

GSE
 
2,199

 
4

 
43

 
2,160

Agency MBS
 
17,248

 
27

 
487

 
16,788

States and political subdivisions
 
5

 
—

 
—

 
5

Other
 
1

 
—

 
—

 
1

Total HTM securities
 
$
20,552

 
$
31

 
$
536

 
$
20,047



Certain securities issued by FNMA and FHLMC exceeded 10% of shareholders' equity at March 31, 2019. The FNMA investments had total amortized cost and fair value of $14.2 billion and $13.9 billion, respectively. The FHLMC investments had total amortized cost and fair value of $10.3 billion and $10.2 billion, respectively.


BB&T Corporation 11


The amortized cost and estimated fair value of the securities portfolio by contractual maturity are shown in the following table. The expected life of MBS may differ from contractual maturities because borrowers have the right to prepay the underlying mortgage loans.
 
 
AFS
 
HTM
March 31, 2019
(Dollars in millions)
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
Due in one year or less
 
$
285

 
$
285

 
$
1

 
$
1

Due after one year through five years
 
1,674

 
1,631

 
3,300

 
3,289

Due after five years through ten years
 
502

 
503

 
597

 
591

Due after ten years
 
24,101

 
23,896

 
16,197

 
16,005

Total debt securities
 
$
26,562

 
$
26,315

 
$
20,095

 
$
19,886



The following tables present the fair values and gross unrealized losses of investments based on the length of time that individual securities have been in a continuous unrealized loss position:
 
 
Less than 12 months
 
12 months or more
 
Total
March 31, 2019
(Dollars in millions)
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
AFS securities:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury
 
$
49

 
$
—

 
$
1,442

 
$
43

 
$
1,491

 
$
43

GSE
 
12

 
—

 
179

 
6

 
191

 
6

Agency MBS
 
1,165

 
2

 
16,679

 
466

 
17,844

 
468

States and political subdivisions
 
44

 
—

 
241

 
12

 
285

 
12

Total
 
$
1,270

 
$
2

 
$
18,541

 
$
527

 
$
19,811

 
$
529

HTM securities:
 
 

 
 

 
 

 
 

 
 

 
 

U.S. Treasury
 
$
400

 
$
—

 
$
496

 
$
2

 
$
896

 
$
2

GSE
 
—

 
—

 
1,768

 
15

 
1,768

 
15

Agency MBS
 
1,121

 
5

 
13,748

 
218

 
14,869

 
223

Total
 
$
1,521

 
$
5

 
$
16,012

 
$
235

 
$
17,533

 
$
240

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Less than 12 months
 
12 months or more
 
Total
December 31, 2018
(Dollars in millions)
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
AFS securities:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury
 
$
111

 
$
—

 
$
2,121

 
$
84

 
$
2,232

 
$
84

GSE
 
3

 
—

 
176

 
9

 
179

 
9

Agency MBS
 
322

 
2

 
18,478

 
785

 
18,800

 
787

States and political subdivisions
 
100

 
1

 
288

 
17

 
388

 
18

Total
 
$
536

 
$
3

 
$
21,063

 
$
895

 
$
21,599

 
$
898

HTM securities:
 
 

 
 

 
 

 
 

 
 

 
 

U.S. Treasury
 
$
698

 
$
3

 
$
395

 
$
3

 
$
1,093

 
$
6

GSE
 
—

 
—

 
1,749

 
43

 
1,749

 
43

Agency MBS
 
264

 
3

 
14,976

 
484

 
15,240

 
487

Total
 
$
962

 
$
6

 
$
17,120

 
$
530

 
$
18,082

 
$
536


Substantially all of the unrealized losses on the securities portfolio were the result of changes in market interest rates compared to the date the securities were acquired rather than the credit quality of the issuers or underlying loans.


12 BB&T Corporation


NOTE 4. Loans and ACL

The following tables present loans and leases HFI by aging category:
 
 
Accruing
 
 
 
 
March 31, 2019
(Dollars in millions)
 
Current
 
30-89 Days Past Due
 
90 Days Or More Past Due
 
Nonperforming
 
Total
Commercial:
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 
$
61,746

 
$
36

 
$
—

 
$
196

 
$
61,978

CRE
 
20,751

 
3

 
—

 
75

 
20,829

Lease financing
 
2,094

 
3

 
—

 
1

 
2,098

Retail:
 
 
 
 
 
 
 
 
 
 
Residential mortgage
 
30,596

 
478

 
377

 
121

 
31,572

Direct
 
11,337

 
67

 
7

 
53

 
11,464

Indirect
 
17,122

 
316

 
5

 
80

 
17,523

Revolving credit
 
3,111

 
27

 
14

 
—

 
3,152

PCI
 
395

 
18

 
28

 
—

 
441

Total
 
$
147,152

 
$
948

 
$
431

 
$
526

 
$
149,057

 
 
 
 
 
 
 
 
 
 
 
 
 
Accruing
 
 
 
 
December 31, 2018
(Dollars in millions)
 
Current
 
30-89 Days Past Due
 
90 Days Or More Past Due
 
Nonperforming
 
Total
Commercial:
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 
$
61,701

 
$
34

 
$
—

 
$
200

 
$
61,935

CRE
 
20,990

 
5

 
—

 
65

 
21,060

Lease financing
 
2,014

 
1

 
—

 
3

 
2,018

Retail:
 
 

 
 

 
 

 
 

 
 
Residential mortgage
 
30,413

 
456

 
405

 
119

 
31,393

Direct
 
11,463

 
61

 
7

 
53

 
11,584

Indirect
 
16,901

 
436

 
6

 
82

 
17,425

Revolving credit
 
3,090

 
28

 
14

 
—

 
3,132

PCI
 
413

 
23

 
30

 
—

 
466

Total
 
$
146,985

 
$
1,044

 
$
462

 
$
522

 
$
149,013


The following table presents the carrying amount of loans by risk rating. PCI loans are excluded because their related ALLL is determined by loan pool performance and revolving credit loans are excluded as the loans are charged-off rather than reclassifying to nonperforming:
 
 
March 31, 2019
 
December 31, 2018
(Dollars in millions)
 
Commercial & Industrial
 
CRE
 
Lease Financing
 
Commercial & Industrial
 
CRE
 
Lease Financing
Commercial:
 
 
 
 
 
 
 
 
 
 
 
 
Pass
 
$
60,514

 
$
20,460

 
$
2,082

 
$
60,655

 
$
20,712

 
$
2,012

Special mention
 
395

 
71

 
3

 
216

 
61

 
—

Substandard-performing
 
873

 
223

 
12

 
864

 
222

 
3

Nonperforming
 
196

 
75

 
1

 
200

 
65

 
3

Total
 
$
61,978

 
$
20,829

 
$
2,098

 
$
61,935

 
$
21,060

 
$
2,018

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential Mortgage
 
Direct
 
Indirect
 
Residential Mortgage
 
Direct
 
Indirect
Retail:
 
 
 
 
 
 
 
 
 
 
 
 
Performing
 
$
31,451

 
$
11,411

 
$
17,443

 
$
31,274

 
$
11,531

 
$
17,343

Nonperforming
 
121

 
53

 
80

 
119

 
53

 
82

Total
 
$
31,572

 
$
11,464

 
$
17,523

 
$
31,393

 
$
11,584

 
$
17,425




BB&T Corporation 13


The following tables present activity in the ACL:
(Dollars in millions)
 
Balance at Jan 1, 2018
 
Charge-Offs
 
Recoveries
 
Provision (Benefit)
 
Balance at Mar 31, 2018
Commercial:
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 
$
522

 
$
(23
)
 
$
8

 
$
15

 
$
522

CRE
 
160

 
(6
)
 
2

 
19

 
175

Lease financing
 
9

 
(1
)
 
—

 
2

 
10

Retail:
 
 
 
 
 
 
 
 
 
 
Residential mortgage
 
209

 
(4
)
 
—

 
11

 
216

Direct
 
106

 
(19
)
 
6

 
6

 
99

Indirect
 
348

 
(107
)
 
15

 
91

 
347

Revolving credit
 
108

 
(21
)
 
5

 
12

 
104

PCI
 
28

 
—

 
—

 
(3
)
 
25

ALLL
 
1,490

 
(181
)
 
36

 
153

 
1,498

RUFC
 
119

 
—

 
—

 
(3
)
 
116

ACL
 
$
1,609

 
$
(181
)
 
$
36

 
$
150

 
$
1,614

 
 
 
 
 
 
 
 
 
 
 
(Dollars in millions)
 
Balance at Jan 1, 2019
 
Charge-Offs
 
Recoveries
 
Provision (Benefit)
 
Balance at Mar 31, 2019
Commercial:
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 
$
546

 
$
(17
)
 
$
6

 
$
13

 
$
548

CRE
 
190

 
(8
)
 
1

 
13

 
196

Lease financing
 
11

 
(1
)
 
—

 
1

 
11

Retail:
 
 
 
 
 
 
 
 
 
 
Residential mortgage
 
232

 
(5
)
 
1

 
(3
)
 
225

Direct
 
97

 
(18
)
 
6

 
11

 
96

Indirect
 
356

 
(109
)
 
17

 
94

 
358

Revolving credit
 
117

 
(26
)
 
6

 
22

 
119

PCI
 
9

 
—

 
—

 
(1
)
 
8

ALLL
 
1,558

 
(184
)
 
37

 
150

 
1,561

RUFC
 
93

 
—

 
—

 
5

 
98

ACL
 
$
1,651

 
$
(184
)
 
$
37

 
$
155

 
$
1,659



The following table provides a summary of loans that are collectively evaluated for impairment:
 
 
March 31, 2019
 
December 31, 2018
(Dollars in millions)
 
Recorded Investment
 
Related ALLL
 
Recorded Investment
 
Related ALLL
Commercial:
 
 
 
 
 
 
 
 
Commercial and industrial
 
$
61,683

 
$
522

 
$
61,629

 
$
521

CRE
 
20,721

 
175

 
20,960

 
181

Lease financing
 
2,097

 
11

 
2,015

 
11

Retail:
 
 
 
 
 
 
 
 
Residential mortgage
 
30,697

 
159

 
30,539

 
164

Direct
 
11,398

 
91

 
11,517

 
92

Indirect
 
17,194

 
299

 
17,099

 
299

Revolving credit
 
3,123

 
108

 
3,104

 
106

PCI
 
441

 
8

 
466

 
9

Total
 
$
147,354

 
$
1,373

 
$
147,329

 
$
1,383




14 BB&T Corporation


The following tables set forth certain information regarding impaired loans, excluding PCI and LHFS, that were individually evaluated for impairment:

UPB
 
Recorded Investment
 
Related ALLL
 
Average Recorded Investment
 
Interest Income Recognized
As of / For The Three Months Ended March 31, 2019
(Dollars in millions)
 
Without an ALLL
 
With an ALLL
 
 
 
Commercial:
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
308

 
$
90

 
$
205

 
$
26

 
$
308

 
$
1

CRE
113

 
18

 
90

 
21

 
112

 
—

Lease financing
2

 
—

 
1

 
—

 
2

 
—

Retail:
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
927

 
126

 
749

 
66

 
869

 
8

Direct
84

 
26

 
40

 
5

 
66

 
1

Indirect
339

 
5

 
324

 
59

 
328

 
12

Revolving credit
29

 
—

 
29

 
11

 
29

 
—

Total
$
1,802

 
$
265

 
$
1,438

 
$
188

 
$
1,714

 
$
22

 
 
 
 
 
 
 
 
 
 
 
 
 
UPB
 
Recorded Investment
 
Related ALLL
 
Average Recorded Investment
 
Interest Income Recognized
As of / For The Year Ended December 31, 2018
(Dollars in millions)
 
Without an ALLL
 
With an ALLL
 
 
 
Commercial:
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
318

 
$
95

 
$
211

 
$
25

 
$
343

 
$
6

CRE
102

 
29

 
71

 
9

 
97

 
2

Lease financing
3

 
—

 
3

 
—

 
6

 
—

Retail:
 
 
 

 
 

 
 

 
 

 
 

Residential mortgage
904

 
122

 
732

 
68

 
841

 
34

Direct
86

 
26

 
41

 
5

 
72

 
4

Indirect
335

 
6

 
320

 
57

 
306

 
46

Revolving credit
28

 
—

 
28

 
11

 
29

 
1

Total
$
1,776

 
$
278

 
$
1,406

 
$
175

 
$
1,694

 
$
93


The following table presents a summary of TDRs, all of which are considered impaired:
(Dollars in millions)
 
Mar 31, 2019
 
Dec 31, 2018
Performing TDRs:
 
 
 
 
Commercial:
 
 
 
 
Commercial and industrial
 
$
63

 
$
65

CRE
 
9

 
10

Retail:
 
 
 
 
Residential mortgage
 
669

 
656

Direct
 
54

 
55

Indirect
 
306

 
305

Revolving credit
 
29

 
28

Total performing TDRs
 
1,130

 
1,119

Nonperforming TDRs (also included in NPL disclosures)
 
178

 
176

Total TDRs
 
$
1,308

 
$
1,295

ALLL attributable to TDRs
 
$
146

 
$
146




BB&T Corporation 15


The primary reason loan modifications were classified as TDRs is summarized below. Balances represent the recorded investment at the end of the quarter in which the modification was made. Rate modifications consist of TDRs made with below market interest rates, including those that also have modifications of loan structures.
 
2019
 
2018
Three Months Ended March 31,
(Dollars in millions)
Type of Modification
 
ALLL Impact
 
Type of Modification
 
ALLL Impact
Rate
 
Structure
 
 
Rate
 
Structure
 
Newly designated TDRs:
 
 
 
 
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
26

 
$
3

 
$
1

 
$
10

 
$
10

 
$
—

CRE
1

 
—

 
—

 
19

 
1

 
—

Retail:
 

 
 

 
 

 
 

 
 

 
 

Residential mortgage
73

 
8

 
4

 
82

 
10

 
5

Direct
3

 
1

 
—

 
2

 
—

 
—

Indirect
48

 
1

 
6

 
42

 
1

 
5

Revolving credit
6

 
—

 
1

 
5

 
—

 
1

Re-modification of previously designated TDRs
23

 
5

 
—

 
21

 
5

 
—



Charge-offs and forgiveness of principal and interest for TDRs were immaterial for all periods presented.
 
The pre-default balance for modifications that had been classified as TDRs during the previous 12 months that experienced a payment default was $18 million and $23 million for the three months ended March 31, 2019 and 2018, respectively. Payment default is defined as movement of the TDR to nonperforming status, foreclosure or charge-off, whichever occurs first.

Unearned income, discounts and net deferred loan fees and costs were immaterial for all periods presented. Residential mortgage loans in the process of foreclosure were $258 million at March 31, 2019 and $253 million at December 31, 2018.

NOTE 5. Other Assets and Liabilities
 
Lessee Operating and Finance Leases

Operating leases costs were $49 million and finance lease costs were immaterial for the three months ended March 31, 2019.

The following table presents additional information on operating and finance leases:
March 31, 2019
(Dollars in millions)
Operating Leases
 
Finance Leases
ROU assets
$
822

 
$
19

 
 
 
 
Maturities of lease liabilities:
 
 
 
2019
$
138

 
$
6

2020
188

 
7

2021
164

 
6

2022
139

 
5

2023
109

 
3

2024
85

 
2

Thereafter
264

 
3

Total lease payments
1,087

 
32

Less: imputed interest
128

 
5

Total lease liabilities
$
959

 
$
27

 
 
 
 
Weighted average remaining term
7.5 years

 
5.1 years

Weighted average discount rate
3.1
%
 
7.0
%



16 BB&T Corporation


Lessor Operating Leases

The following tables present a summary of assets under operating leases and activity related to assets under operating leases. These tables exclude subleases on assets included in premises and equipment.
(Dollars in millions)
Mar 31, 2019
 
Dec 31, 2018
Assets held under operating leases
$
1,365

 
$
1,378

Accumulated depreciation
(389
)
 
(374
)
Net
$
976

 
$
1,004


Three Months Ended March 31,
(Dollars in millions)
2019
 
2018
Depreciation expense for assets under operating leases
$
29

 
$
30



The residual value of assets no longer under operating leases was immaterial.

NOTE 6. Goodwill and Other Intangible Assets

The following table, which excludes fully amortized intangibles, presents information for identifiable intangible assets:
 
 
March 31, 2019
 
December 31, 2018
March 31,
(Dollars in millions)
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
CDI
 
$
605

 
$
(471
)
 
$
134

 
$
605

 
$
(460
)
 
$
145

Other, primarily customer relationship intangibles
 
1,318

 
(726
)
 
592

 
1,329

 
(716
)
 
613

Total
 
$
1,923

 
$
(1,197
)
 
$
726

 
$
1,934

 
$
(1,176
)
 
$
758



NOTE 7. Loan Servicing

Residential Mortgage Banking Activities

The following tables summarize residential mortgage banking activities:
(Dollars in millions)
 
Mar 31, 2019
 
Dec 31, 2018
UPB of residential mortgage loan servicing portfolio
 
$
117,980

 
$
118,605

UPB of residential mortgage loans serviced for others, primarily agency conforming fixed rate
 
86,119

 
87,270

Mortgage loans sold with recourse
 
404

 
419

Maximum recourse exposure from mortgage loans sold with recourse liability
 
217

 
223

Indemnification, recourse and repurchase reserves
 
22

 
24

 
 


 


As of / For the Three Months Ended March 31,
(Dollars in millions)
 
2019
 
2018
UPB of residential mortgage loans sold from LHFS
 
$
1,300

 
$
2,553

Pre-tax gains recognized on mortgage loans sold and held for sale
 
17

 
39

Servicing fees recognized from mortgage loans serviced for others
 
61

 
65

Approximate weighted average servicing fee on the outstanding balance of residential mortgage loans serviced for others
 
0.28
%
 
0.28
%
Weighted average interest rate on mortgage loans serviced for others
 
4.06

 
4.00



BB&T Corporation 17



The following table presents a roll forward of the carrying value of residential MSRs recorded at fair value:
Three Months Ended March 31,
(Dollars in millions)
 
2019
 
2018
Residential MSRs, carrying value, January 1
 
$
957

 
$
914

Additions
 
15

 
28

Change in fair value due to changes in valuation inputs or assumptions:
 
 
 
 
Prepayment speeds
 
(55
)
 
61

OAS
 
4

 
2

Servicing costs
 
—

 
—

Realization of expected net servicing cash flows, passage of time and other
 
(33
)
 
(32
)
Residential MSRs, carrying value, March 31
 
$
888

 
$
973

Gains (losses) on derivative financial instruments used to mitigate the income statement effect of changes in residential MSR fair value
 
$
52

 
$
(63
)

 
The sensitivity of the fair value of the residential MSRs to changes in key assumptions is presented in the following table:
 
 
March 31, 2019
 
December 31, 2018
 
 
Range
 
Weighted Average
 
Range
 
Weighted Average
(Dollars in millions)
 
Min
 
Max
 
 
Min
 
Max
 
Prepayment speed
 
9.7
%
 
12.0
%
 
11.2
%
 
9.1
%
 
10.5
%
 
9.9
%
Effect on fair value of a 10% increase
 
 
 
 
 
$
(36
)
 
 
 
 
 
$
(34
)
Effect on fair value of a 20% increase
 
 
 
 
 
(70
)
 
 
 
 
 
(66
)
OAS
 
6.5
%
 
8.2
%
 
6.8
%
 
6.6
%
 
8.3
%
 
7.0
%
Effect on fair value of a 10% increase
 
 
 
 
 
$
(22
)
 
 
 
 
 
$
(24
)
Effect on fair value of a 20% increase
 
 
 
 
 
(42
)
 
 
 
 
 
(47
)
Composition of loans serviced for others:
 
 
 
 
 
 
 
 
 
 
Fixed-rate residential mortgage loans
 
 
 
 
 
99.2
%
 
 
 
 
 
99.2
%
Adjustable-rate residential mortgage loans
 
 
 
 
 
0.8

 
 
 
 
 
0.8

Total
 
 

 
 

 
100.0
%
 
 
 
 
 
100.0
%
Weighted average life
 
 

 
 

 
5.6 years

 
 
 
 
 
6.1 years



The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in the above table, the effect of an adverse variation in one assumption on the fair value of the MSRs is calculated without changing any other assumption; while in reality, changes in one factor may result in changes in another, which may magnify or counteract the effect of the change.
 
Commercial Mortgage Banking Activities

The following table summarizes commercial mortgage banking activities for the periods presented:
(Dollars in millions)
Mar 31, 2019
 
Dec 31, 2018
UPB of CRE mortgages serviced for others
$
27,749

 
$
27,761

CRE mortgages serviced for others covered by recourse provisions
4,685

 
4,699

Maximum recourse exposure from CRE mortgages sold with recourse liability
1,312

 
1,317

Recorded reserves related to recourse exposure
6

 
6

CRE mortgages originated during the year-to-date period
1,261

 
7,072

Commercial MSRs at fair value
148

 
151




18 BB&T Corporation


NOTE 8. Deposits
 
The composition of deposits is presented in the following table:
(Dollars in millions)
 
Mar 31, 2019
 
Dec 31, 2018
Noninterest-bearing deposits
 
$
53,021

 
$
53,025

Interest checking
 
28,028

 
28,130

Money market and savings
 
63,739

 
63,467

Time deposits
 
14,978

 
16,577

Total deposits
 
$
159,766

 
$
161,199

Time deposits greater than $250,000
 
$
3,880

 
$
5,713


 
NOTE 9. Long-Term Debt

The following table presents a summary of long-term debt:
 
 
Mar 31, 2019
 
Dec 31, 2018
 
 
 
 
 
 
Stated Rate
 
Effective Rate
 
Carrying Amount
 
Carrying Amount
(Dollars in millions)
 
Maturity
 
Min
 
Max
 
 
 
BB&T Corporation:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed rate senior notes
 
2019
to
2025
 
2.05
%
 
6.85
%
 
3.28
%
 
$
11,147

 
$
10,408

Floating rate senior notes
 
2020
 
2022
 
2.95

 
3.50

 
3.26

 
1,948

 
2,398

Fixed rate subordinated notes
 
2019
 
2029
 
3.88

 
5.25

 
2.90

 
1,562

 
903

Branch Bank:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed rate senior notes
 
2019
 
2022
 
1.45

 
2.85

 
3.02

 
4,918

 
4,895

Floating rate senior notes
 
2019
 
2020
 
2.85

 
3.27

 
3.22

 
1,149

 
1,149

Fixed rate subordinated notes
 
2025
 
2026
 
3.63

 
3.80

 
3.61

 
2,114

 
2,075

FHLB advances (1)
 
2019
 
2034
 
—

 
5.50

 
2.98

 
1,746

 
1,749

Other long-term debt
 
 
 
 
 
 
 
 
 
 
 
145

 
132

Total long-term debt
 
 
 
 
 
 
 
 
 
 
 
$
24,729

 
$
23,709


(1)
FHLB advances had a weighted average maturity of 3.8 years at March 31, 2019.

The effective rates above reflect the impact of fair value hedges and debt issuance costs. Subordinated notes with a remaining maturity of one year or greater qualify under the risk-based capital guidelines as Tier 2 supplementary capital, subject to certain limitations.

NOTE 10. Shareholders' Equity

Dividends

The following table presents the dividends declared related to common stock. For information related to preferred stock dividends, see Note 10. Shareholders' Equity of the Annual Report on Form 10-K for the year ended December 31, 2018.
Three Months Ended March 31,
 
2019
 
2018
Cash dividends declared per share
 
$
0.405

 
$
0.375



Equity-Based Compensation Plans

The following table presents the activity related to awards of RSUs, PSUs and restricted shares:
(Shares in thousands)
 
Units/Shares
 
Wtd. Avg. Grant Date Fair Value
Nonvested at January 1, 2019
 
12,060

 
$
38.03

Granted
 
3,914

 
44.39

Vested
 
(3,181
)
 
35.02

Forfeited
 
(50
)
 
39.73

Nonvested at March 31, 2019
 
12,743

 
40.72




BB&T Corporation 19


NOTE 11. AOCI

AOCI includes the after-tax change in unrecognized net costs related to defined benefit pension and OPEB plans, and unrealized gains and losses on cash flow hedges and AFS securities.
Three Months Ended
(Dollars in millions)
Pension and OPEB Costs
 
Cash Flow Hedges
 
AFS Securities
 
Other, net
 
Total
AOCI balance, January 1, 2018
$
(1,004
)
 
$
(92
)
 
$
(356
)
 
$
(15
)
 
$
(1,467
)
OCI before reclassifications, net of tax
—

 
70

 
(282
)
 
(2
)
 
(214
)
Amounts reclassified from AOCI:
 
 
 
 
 
 
 
 
 
Before tax
18

 
11

 
19

 
—

 
48

Tax effect
4

 
3

 
5

 
—

 
12

Amounts reclassified, net of tax
14

 
8

 
14

 
—

 
36

Total OCI, net of tax
14

 
78

 
(268
)
 
(2
)
 
(178
)
AOCI balance, March 31, 2018
$
(990
)
 
$
(14
)
 
$
(624
)
 
$
(17
)
 
$
(1,645
)
AOCI balance, January 1, 2019
$
(1,164
)
 
$
(31
)
 
$
(500
)
 
$
(20
)
 
$
(1,715
)
OCI before reclassifications, net of tax
—


(30
)

314

 
2

 
286

Amounts reclassified from AOCI:
 
 
 
 
 
 
 
 
 
Before tax
23

 
(5
)
 
(6
)
 
—

 
12

Tax effect
6

 
(1
)
 
(1
)
 
—

 
4

Amounts reclassified, net of tax
17

 
(4
)
 
(5
)
 
—

 
8

Total OCI, net of tax
17

 
(34
)
 
309

 
2

 
294

AOCI balance, March 31, 2019
$
(1,147
)
 
$
(65
)
 
$
(191
)
 
$
(18
)
 
$
(1,421
)
Primary income statement location of amounts reclassified from AOCI
Other expense
 
Net interest income
 
Net interest income
 
Net interest income
 
 


NOTE 12. Income Taxes

The effective tax rates for the three months ended March 31, 2019 and 2018 were 18.2% and 19.0%, respectively.

NOTE 13. Benefit Plans

The components of net periodic benefit cost for defined benefit pension plans are summarized in the following table:
Three Months Ended March 31,
(Dollars in millions)
Location
2019
 
2018
Service cost
Personnel expense
$
54

 
$
60

Interest cost
Other expense
57

 
50

Estimated return on plan assets
Other expense
(113
)
 
(112
)
Amortization and other
Other expense
25

 
20

Net periodic benefit cost
 
$
23

 
$
18



BB&T makes contributions to the qualified pension plans in amounts between the minimum required for funding and the maximum deductible for federal income tax purposes. Discretionary contributions totaling $549 million were made during the three months ended March 31, 2019. There are no required contributions for the remainder of 2019.


20 BB&T Corporation


NOTE 14. Commitments and Contingencies

The following table summarizes certain commitments and contingencies. Refer to Note 15. Fair Value Disclosures for additional disclosures related to off-balance sheet financial instruments.
(Dollars in millions)
 
Mar 31, 2019
 
Dec 31, 2018
Investments in affordable housing projects:
 
 
 
 
Carrying amount
 
$
2,152

 
$
2,088

Amount of future funding commitments included in carrying amount
 
949

 
919

Lending exposure
 
455

 
460

Tax credits subject to recapture
 
489

 
523

Private equity investments:
 
 
 
 
Carrying amount
 
460

 
458

Amount of future funding commitments not included in carrying amount
 
313

 
331



Legal Proceedings

The nature of BB&T's business ordinarily results in a certain amount of claims, litigation, investigations and legal and administrative cases and proceedings, all of which are considered incidental to the normal conduct of business. BB&T believes it has meritorious defenses to the claims asserted against it in its currently outstanding legal proceedings and, with respect to such legal proceedings, intends to continue to defend itself vigorously, litigating or settling cases according to management's judgment as to what is in the best interests of BB&T and its shareholders.
 
On at least a quarterly basis, liabilities and contingencies in connection with outstanding legal proceedings are assessed utilizing the latest information available. For those matters where it is probable that BB&T will incur a loss and the amount of the loss can be reasonably estimated, and is more than nominal, a liability is recorded in the consolidated financial statements. These legal reserves may be increased or decreased to reflect any relevant developments on at least a quarterly basis. For other matters, where a loss is not probable or the amount of the loss is not estimable, legal reserves are not accrued. While the outcome of legal proceedings is inherently uncertain, based on information currently available, advice of counsel and available insurance coverage, management believes that the established legal reserves are adequate and the liabilities arising from legal proceedings will not have a material adverse effect on the consolidated financial position, consolidated results of operations or consolidated cash flows. However, in the event of unexpected future developments, it is possible that the ultimate resolution of these matters, if unfavorable, may be material to the consolidated financial position, consolidated results of operations or consolidated cash flows of BB&T.

Following the announcement of the proposed merger with SunTrust, five civil actions were filed challenging, among other things, the adequacy of the disclosures contained in the preliminary proxy statement/prospectus filed with the SEC in connection with the proposed transaction. Four of these suits were filed by purported SunTrust stockholders against SunTrust and its board of directors and assert claims under Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 challenging the adequacy of the public disclosures made concerning the proposed transaction. One of these suits asserts a claim against BB&T under Section 20(a). The fifth suit was filed by a purported BB&T stockholder against BB&T and its board of directors and asserts claims under state law challenging, among other things, the adequacy of the public disclosures made concerning the proposed transaction. The plaintiffs in these actions seek, among other things, an injunction preventing consummation of the proposed transaction, rescission of the proposed transaction or damages in the event it is consummated, and the award of attorneys' fees and expenses.  BB&T believes the claims asserted in these actions are without merit.

Pledged Assets
 
Certain assets were pledged to secure municipal deposits, securities sold under agreements to repurchase, borrowings and borrowing capacity, subject to any applicable asset discount, at the FHLB and FRB as well as for other purposes as required or permitted by law. The following table provides the total carrying amount of pledged assets by asset type, of which the majority are pursuant to agreements that do not permit the other party to sell or repledge the collateral, excluding assets related to employee benefit plans:
(Dollars in millions)
 
Mar 31, 2019
 
Dec 31, 2018
Pledged securities
 
$
14,070

 
$
13,237

Pledged loans
 
78,430

 
77,847




BB&T Corporation 21


NOTE 15. Fair Value Disclosures

The following tables present fair value information for assets and liabilities measured at fair value on a recurring basis:
March 31, 2019
(Dollars in millions)
 
Total
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 

 
 

 
 

 
 

AFS securities:
 
 

 
 
 
 
 
 
U.S. Treasury
 
$
1,878

 
$
—

 
$
1,878

 
$
—

GSE
 
233

 
—

 
233

 
—

Agency MBS
 
23,047

 
—

 
23,047

 
—

States and political subdivisions
 
626

 
—

 
626

 
—

Non-agency MBS
 
497

 
—

 
111

 
386

Other
 
34

 
—

 
34

 
—

Total AFS securities
 
26,315

 
—

 
25,929

 
386

LHFS
 
834

 
—

 
834

 
—

MSRs
 
1,036

 
—

 
—

 
1,036

Other assets:
 

 
 
 
 
 
 
Trading and equity securities
 
1,898

 
371

 
1,516

 
11

Derivative assets
 
338

 
1

 
327

 
10

Private equity investments
 
388

 
—

 
—

 
388

Total assets
 
$
30,809

 
$
372


$
28,606


$
1,831

Liabilities:
 
 

 
 

 
 

 
 

Derivative liabilities
 
$
180

 
$
—

 
$
177

 
$
3

Securities sold short
 
250

 
—

 
250

 
—

Total liabilities
 
$
430

 
$
—

 
$
427

 
$
3

 
 
 
 
 
 
 
 
 
December 31, 2018
(Dollars in millions)
 
Total
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
 
 
AFS securities:
 
 

 
 

 
 

 
 

U.S. Treasury
 
$
3,441

 
$
—

 
$
3,441

 
$
—

GSE
 
200

 
—

 
200

 
—

Agency MBS
 
20,155

 
—

 
20,155

 
—

States and political subdivisions
 
701

 
—

 
701

 
—

Non-agency MBS
 
505

 
—

 
114

 
391

Other
 
36

 
—

 
36

 
—

Total AFS securities
 
25,038

 
—

 
24,647

 
391

LHFS
 
988

 
—

 
988

 
—

MSRs
 
1,108

 
—

 
—

 
1,108

Other assets:
 
 
 
 
 
 
 
 
Trading and equity securities
 
767

 
374

 
390

 
3

Derivative assets
 
246

 
—

 
234

 
12

Private equity investments
 
393

 
—

 
—

 
393

Total assets
 
$
28,540

 
$
374

 
$
26,259

 
$
1,907

Liabilities:
 
 

 
 

 
 

 
 

Derivative liabilities
 
$
247

 
$
1

 
$
246

 
$
—

Securities sold short
 
145

 
—

 
145

 
—

Total liabilities
 
$
392

 
$
1

 
$
391

 
$
—


Accounting standards define fair value as the exchange price that would be received on the measurement date to sell an asset or the price paid to transfer a liability in the principal or most advantageous market available to the entity in an orderly transaction between market participants, with a three level valuation input hierarchy. The following discussion focuses on the valuation techniques and significant inputs for Level 2 and Level 3 assets and liabilities.


22 BB&T Corporation


A third-party pricing service is generally utilized in determining the fair value of the securities portfolio. Management independently evaluates the fair values provided by the pricing service through comparisons to other external pricing sources, review of additional information provided by the pricing service and other third party sources for selected securities and back-testing to compare the price realized on any security sales to the daily pricing information received from the pricing service. Fair value measurements are derived from market-based pricing matrices that were developed using observable inputs that include benchmark yields, benchmark securities, reported trades, offers, bids, issuer spreads and broker quotes. As described by security type below, additional inputs may be used, or some inputs may not be applicable. In the event that market observable data was not available, which would generally occur due to the lack of an active market for a given security, the valuation of the security would be subjective and may involve substantial judgment by management.
 
U.S. Treasury securities: Treasury securities are valued using quoted prices in active over-the-counter markets.
 
GSE securities and agency MBS: GSE pass-through securities are valued using market-based pricing matrices that reference observable inputs including benchmark TBA security pricing and yield curves that were estimated based on U.S. Treasury yields and certain floating rate indices. The pricing matrices for these securities may also give consideration to pool-specific data supplied directly by the GSE. GSE CMOs are valued using market-based pricing matrices that are based on observable inputs including offers, bids, reported trades, dealer quotes and market research reports, the characteristics of a specific tranche, market convention prepayment speeds and benchmark yield curves as described above.
 
States and political subdivisions: These securities are valued using market-based pricing matrices that reference observable inputs including MSRB reported trades, issuer spreads, material event notices and benchmark yield curves.
 
Non-agency MBS: Pricing matrices for these securities are based on observable inputs including offers, bids, reported trades, dealer quotes and market research reports, the characteristics of a specific tranche, market convention prepayment speeds and benchmark yield curves as described above. Non-agency MBS also include investments in Re-REMIC trusts that primarily hold non-agency MBS, which are valued based on broker pricing models that use baseline securities yields and tranche-level yield adjustments to discount cash flows modeled using market convention prepayment speed and default assumptions.
 
Other securities: These securities consist primarily of corporate bonds. These securities are valued based on a review of quoted market prices for assets as well as through the various other inputs discussed previously.
 
LHFS: Certain mortgage loans are originated to be sold to investors, which are carried at fair value. The fair value is primarily based on quoted market prices for securities backed by similar types of loans. The changes in fair value of these assets are largely driven by changes in interest rates subsequent to loan funding and changes in the fair value of servicing associated with the mortgage LHFS.
 
MSRs: Residential MSRs are valued using an OAS valuation model to project cash flows over multiple interest rate scenarios, which are discounted at risk-adjusted rates. The model considers portfolio characteristics, contractually specified servicing fees, prepayment assumptions, delinquency rates, late charges, other ancillary revenue, costs to service and other economic factors. Fair value estimates and assumptions are compared to industry surveys, recent market activity, actual portfolio experience and, when available, other observable market data. Commercial MSRs are valued using a cash flow valuation model that calculates the present value of estimated future net servicing cash flows. BB&T considers actual and expected loan prepayment rates, discount rates, servicing costs and other economic factors that are determined based on current market conditions.
 
Trading and equity securities: Trading and equity securities primarily consist of exchange traded equity securities, and debt securities issued by the U.S. Treasury, GSEs, or states and political subdivisions. The valuation techniques for debt securities are more fully discussed above.

Derivative assets and liabilities: The fair values of derivatives are determined based on quoted market prices and internal pricing models that use market observable data. The fair values of interest rate lock commitments, which are related to mortgage loan commitments and are categorized as Level 3, are based on quoted market prices adjusted for commitments that are not expected to fund and include the value attributable to the net servicing fees.

Private equity investments: In many cases there are no observable market values for these investments and therefore management must estimate the fair value based on a comparison of the operating performance of the company to multiples in the marketplace for similar entities. This analysis requires significant judgment, and actual values in a sale could differ materially from those estimated.
 
Securities sold short: Securities sold short represent debt securities sold short that are entered into as a hedging strategy for the purposes of supporting institutional and retail client trading activities.


BB&T Corporation 23


Activity for Level 3 assets and liabilities is summarized below:
Three Months Ended
(Dollars in millions)
 
Trading and Equity Securities
 
Non-agency MBS
 
MSRs
 
Net Derivatives
 
Private Equity Investments
Balance at January 1, 2018
 
$
—

 
$
432

 
$
1,056

 
$
3

 
$
404

Total realized and unrealized gains (losses):
 
 
 
 
 
 
 
 
 
 
Included in earnings
 
—

 
(1
)
 
68

 
—

 
6

Included in unrealized net holding gains (losses) in OCI
 
—

 
23

 
—

 
—

 
—

Purchases
 
—

 
—

 
—

 
—

 
24

Issuances
 
—

 
—

 
37

 
(5
)
 
—

Sales
 
—

 
—

 
—

 
—

 
(24
)
Settlements
 
—

 
(13
)
 
(42
)
 
9

 
(10
)
Balance at March 31, 2018
 
$
—

 
$
441

 
$
1,119

 
$
7

 
$
400

Balance at January 1, 2019
 
$
3

 
$
391

 
$
1,108

 
$
12

 
$
393

Total realized and unrealized gains (losses):
 
 
 
 
 
 
 
 
 
 
Included in earnings
 
—

 
2

 
(54
)
 
8

 
23

Included in unrealized net holding gains (losses) in OCI
 
—

 
1

 
—

 
—

 
—

Purchases
 
15

 
—

 
—

 
—

 
7

Issuances
 
—

 
—

 
22

 
17

 
—

Sales
 
(7
)
 
—

 
—

 
—

 
(33
)
Settlements
 
—

 
(8
)
 
(40
)
 
(30
)
 
(2
)
Balance at March 31, 2019
 
$
11

 
$
386

 
$
1,036

 
$
7

 
$
388

Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at March 31, 2019
 
$
—

 
$
2

 
$
(54
)
 
$
7

 
$
4

Primary income statement location of realized gains (losses) included in earnings
 
Interest income
 
Interest income
 
Mortgage banking income
 
Mortgage banking income
 
Other income


The non-agency MBS categorized as Level 3 represent ownership interests in various tranches of Re-REMIC trusts. These securities are valued at a discount, which is unobservable in the market, to the fair value of the underlying securities owned by the trusts. The Re-REMIC tranches do not have an active market and therefore are categorized as Level 3. At March 31, 2019, the fair value of Re-REMIC non-agency MBS represented a discount of 20.3% to the fair value of the underlying securities owned by the Re-REMIC trusts.

The majority of private equity investments are in SBIC qualified funds, which primarily focus on equity and subordinated debt investments in privately-held middle market companies. The majority of these VIE investments are not redeemable and distributions are received as the underlying assets of the funds liquidate. The timing of distributions, which are expected to occur on various dates on an approximately ratable basis through 2029, is uncertain and dependent on various events such as recapitalizations, refinance transactions and ownership changes among others. As of March 31, 2019, restrictions on the ability to sell the investments include, but are not limited to, consent of a majority member or general partner approval for transfer of ownership. These investments are spread over numerous privately-held middle market companies, and thus the sensitivity to a change in fair value for any single investment is limited. The significant unobservable inputs for these investments are EBITDA multiples that ranged from 5x to 14x, with a weighted average of 9x, at March 31, 2019.

The following table details the fair value and UPB of LHFS that were elected to be carried at fair value:
 
 
March 31, 2019
 
December 31, 2018
(Dollars in millions)
 
Fair Value
 
UPB
 
Difference
 
Fair Value
 
UPB
 
Difference
LHFS at fair value
 
$
834

 
$
824

 
$
10

 
$
988

 
$
975

 
$
13



Excluding government guaranteed, LHFS that were nonperforming or 90 days or more past due and still accruing interest were not material at March 31, 2019.


24 BB&T Corporation


The following table provides information about certain assets measured at fair value on a nonrecurring basis, which are primarily collateral dependent and may be subject to liquidity adjustments. The carrying values represent end of period values, which approximate the fair value measurements that occurred on the various measurement dates throughout the period. The valuation adjustments represent the amounts recorded during the period regardless of whether the asset is still held at period end. These assets are considered to be Level 3 assets (excludes PCI).

 
2019
 
2018
As of / For The Three Months Ended March 31,
(Dollars in millions)
 
Carrying Value
 
Valuation Adjustments
 
Carrying Value
 
Valuation Adjustments
Impaired loans
 
$
154

 
$
(18
)
 
$
185

 
$
(12
)
Foreclosed real estate
 
33

 
(63
)
 
40

 
(66
)

 
For financial instruments not recorded at fair value, estimates of fair value are based on relevant market data and information about the instrument. Values obtained relate to one trading unit without regard to any premium or discount that may result from concentrations of ownership, possible tax ramifications, estimated transaction costs that may result from bulk sales or the relationship between various instruments.
 
An active market does not exist for certain financial instruments. Fair value estimates for these instruments are based on current economic conditions, currency and interest rate risk characteristics, loss experience and other factors. Many of these estimates involve uncertainties and matters of significant judgment and cannot be determined with precision. Therefore, the fair value estimates in many instances cannot be substantiated by comparison to independent markets and, in many cases, may not be realizable in a current sale of the instrument. In addition, changes in assumptions could significantly affect these fair value estimates. The following assumptions were used to estimate the fair value of these financial instruments.
 
Cash and cash equivalents and restricted cash: For these short-term instruments, the carrying amounts are a reasonable estimate of fair values.
 
HTM securities: The fair values of HTM securities are based on a market approach using observable inputs such as benchmark yields and securities, TBA prices, reported trades, issuer spreads, current bids and offers, monthly payment information and collateral performance.
 
Loans receivable: The fair values for loans are estimated using discounted cash flow analyses, applying interest rates currently being offered for loans with similar terms and credit quality, which are deemed to be indicative of orderly transactions in the current market. For commercial loans and leases, discount rates may be adjusted to address additional credit risk on lower risk grade instruments. For residential mortgage and other consumer loans, internal prepayment risk models are used to adjust contractual cash flows. Loans are aggregated into pools of similar terms and credit quality and discounted using a LIBOR based rate. The carrying amounts of accrued interest approximate fair values.

Deposit liabilities: The fair values for demand deposits are equal to the amount payable on demand. Fair values for CDs are estimated using a discounted cash flow calculation that applies current interest rates to aggregate expected maturities. BB&T has developed long-term relationships with its deposit customers, commonly referred to as CDIs, that have not been considered in the determination of the deposit liabilities' fair value.
 
Short-term borrowings: The carrying amounts of short-term borrowings, excluding securities sold short, approximate their fair values.
 
Long-term debt: The fair values of long-term debt instruments are estimated based on quoted market prices for the instrument if available, or for similar instruments if not available, or by using discounted cash flow analyses, based on current incremental borrowing rates for similar types of instruments.

Contractual commitments: The fair values of commitments are estimated using the fees charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. The fair values of guarantees and letters of credit are estimated based on the counterparties' creditworthiness and average default rates for loan products with similar risks. These respective fair value measurements are categorized within Level 3 of the fair value hierarchy. Retail lending and revolving credit commitments have an immaterial fair value as BB&T typically has the ability to cancel such commitments.
 

BB&T Corporation 25


Financial assets and liabilities not recorded at fair value are summarized below:
 
 
March 31, 2019
 
December 31, 2018
(Dollars in millions)
Fair Value Hierarchy
Carrying Amount
 
Fair Value
 
Carrying Amount
 
Fair Value
Financial assets:
 
 
 
 
 
 
 
 
HTM securities
Level 2
$
20,095

 
$
19,886

 
$
20,552

 
$
20,047

Loans and leases HFI, net of ALLL
Level 3
147,496

 
146,077

 
147,455

 
145,591

Financial liabilities:
 
 

 
 

 
 

 
 

Time deposits
Level 2
14,978

 
15,026

 
16,577

 
16,617

Long-term debt
Level 2
24,729

 
24,977

 
23,709

 
23,723



The following is a summary of selected information pertaining to off-balance sheet financial instruments:
 
March 31, 2019
 
December 31, 2018
(Dollars in millions)
Notional/Contract Amount
 
Fair Value
 
Notional/Contract Amount
 
Fair Value
Commitments to extend, originate or purchase credit
$
73,918

 
$
302

 
$
72,435

 
$
280

Residential mortgage loans sold with recourse
404

 
3

 
419

 
3

CRE mortgages serviced for others covered by recourse provisions
4,685

 
6

 
4,699

 
6

Letters of credit
2,267

 
17

 
2,389

 
18




26 BB&T Corporation


NOTE 16. Derivative Financial Instruments

The following table provides a summary of derivative strategies and the related accounting treatment:
 
Cash Flow Hedges
Fair Value Hedges
Derivatives Not Designated as Hedges
Risk exposure
Variability in cash flows of interest payments on floating rate business loans, overnight funding and various LIBOR funding instruments.
Changes in value on fixed rate long-term debt, CDs, FHLB advances, loans and state and political subdivision securities due to changes in interest rates.
Risk associated with an asset or liability, including mortgage banking operations and MSRs, or for client needs. Includes exposure to changes in market rates and conditions subsequent to the interest rate lock and funding date for mortgage loans originated for sale.
Risk management objective
Hedge the variability in the interest payments and receipts on future cash flows for forecasted transactions related to the first unhedged payments and receipts of variable interest.
Convert the fixed rate paid or received to a floating rate, primarily through the use of swaps.
For interest rate lock commitment derivatives and LHFS, use mortgage-based derivatives such as forward commitments and options to mitigate market risk. For MSRs, mitigate the income statement effect of changes in the fair value of the MSRs. For client swaps, hedges are executed with dealer counterparties to offset market risk.
Treatment during the hedge period
Changes in value of the hedging instruments are recognized in AOCI until the related cash flows from the hedged item are recognized in earnings.
Changes in value of both the hedging instruments and the assets or liabilities being hedged are recognized in the income statement line item associated with the instrument being hedged.
Entire change in fair value recognized in current period income.
Treatment if hedge ceases to be highly effective or is terminated
Hedge is dedesignated. Changes in value recorded in AOCI before dedesignation are amortized to yield over the period the forecasted hedged transactions impact earnings.
If hedged item remains outstanding, the basis adjustment that resulted from hedging is amortized into earnings over the lesser of the designated hedged period or the maturity date of the instrument, and cash flows from terminations are reported in the same category as the cash flows from the hedged item.
Not applicable
Treatment if transaction is no longer probable of occurring during forecast period or within a short period thereafter
Hedge accounting ceases and any gain or loss in AOCI is reported in earnings immediately.
Not applicable
Not applicable



BB&T Corporation 27


Impact of Derivatives on the Consolidated Balance Sheets

The following table presents the notional amount and estimated fair value of derivative instruments:
 
 
 
 
March 31, 2019
 
December 31, 2018
 
 
Hedged Item or Transaction
 
Notional Amount
 
Fair Value
 
Notional Amount
 
Fair Value
(Dollars in millions)
 
 
 
Gain
 
Loss
 
 
Gain
 
Loss
Cash flow hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pay fixed swaps
 
3 mo. LIBOR funding
 
$
6,500

 
$
—

 
$
—

 
$
6,500

 
$
—

 
$
—

Fair value hedges:
 
 
 
 

 
 

 
 

 
 
 
 
 
 
Interest rate contracts:
 
 
 
 

 
 

 
 

 
 
 
 
 
 
Receive fixed swaps
 
Long-term debt
 
13,029

 
40

 
(54
)
 
12,908

 
5

 
(74
)
Options
 
Long-term debt
 
4,785

 
—

 
(2
)
 
4,785

 
—

 
(2
)
Pay fixed swaps
 
Commercial loans
 
499

 
1

 
—

 
505

 
2

 
—

Pay fixed swaps
 
Municipal securities
 
259

 
—

 
—

 
259

 
—

 
—

Total
 
 
 
18,572

 
41

 
(56
)
 
18,457

 
7

 
(76
)
Not designated as hedges:
 
 
 
 

 
 

 
 

 
 

 
 

 
 

Client-related and other risk management:
 
 

 
 

 
 

 
 

 
 

 
 

Interest rate contracts:
 
 
 
 

 
 

 
 

 
 

 
 

 
 

Receive fixed swaps
 
 
 
12,452

 
228

 
(46
)
 
11,577

 
128

 
(98
)
Pay fixed swaps
 
 
 
11,774

 
9

 
(43
)
 
11,523

 
19

 
(32
)
Other
 
 
 
1,384

 
1

 
(2
)
 
1,143

 
2

 
(3
)
Forward commitments
 
 
 
5,042

 
12

 
(11
)
 
2,883

 
11

 
(13
)
Foreign exchange contracts
 
568

 
3

 
(2
)
 
529

 
5

 
(2
)
Total
 
 
 
31,220

 
253

 
(104
)
 
27,655

 
165

 
(148
)
Mortgage banking:
 
 
 
 

 
 

 
 

 
 

 
 

 
 

Interest rate contracts:
 
 
 
 

 
 

 
 

 
 

 
 

 
 

Interest rate lock commitments
 
1,092

 
10

 
(3
)
 
702

 
12

 
—

When issued securities, forward rate agreements and forward commitments
 
2,314

 
1

 
(15
)
 
1,753

 
2

 
(20
)
Other
 
 
 
198

 
1

 
—

 
271

 
2

 
(1
)
Total
 
 
 
3,604

 
12

 
(18
)
 
2,726

 
16

 
(21
)
MSRs:
 
 
 
 

 
 

 
 

 
 

 
 

 
 

Interest rate contracts:
 
 
 
 

 
 

 
 

 
 

 
 

 
 

Receive fixed swaps
 
 
 
4,629

 
1

 
—

 
4,328

 
—

 
—

Pay fixed swaps
 
 
 
3,822

 
—

 
(1
)
 
3,224

 
—

 
—

Options
 
 
 
2,080

 
25

 
—

 
3,155

 
48

 
(2
)
When issued securities, forward rate agreements and forward commitments
 
2,517

 
6

 
(1
)
 
1,590

 
10

 
—

Other
 
 
 
54

 
—

 
—

 
103

 
—

 
—

Total
 
 
 
13,102

 
32

 
(2
)
 
12,400

 
58

 
(2
)
Total derivatives not designated as hedges
 
47,926

 
297

 
(124
)
 
42,781

 
239

 
(171
)
Total derivatives
 
 
 
$
72,998

 
338

 
(180
)
 
$
67,738

 
246

 
(247
)
Gross amounts not offset in the Consolidated Balance Sheets:
 
 
 

 
 

 
 

 
 

 
 

Amounts subject to master netting arrangements not offset due to policy election
 
 
 
(44
)
 
44

 
 

 
(47
)
 
47

Cash collateral (received) posted
 
 

 
(50
)
 
64

 
 

 
(53
)
 
82

Net amount
 
 
 
 

 
$
244

 
$
(72
)
 
 

 
$
146

 
$
(118
)



28 BB&T Corporation


The following table presents additional information for fair value hedging relationships:
 
 
March 31, 2019
 
December 31, 2018
 
 
 
 
Hedge Basis Adjustment
 
 
 
Hedge Basis Adjustment
(Dollars in millions)
 
Hedged Asset / Liability Basis
 
Items Currently Designated
 
Items No Longer Designated
 
Hedged Asset / Liability Basis
 
Items Currently Designated
 
Items No Longer Designated
AFS securities
 
$
497

 
$
12

 
$
53

 
$
493

 
$
5

 
$
54

Loans and leases
 
563

 
8

 
(2
)
 
562

 
—

 
(3
)
Long-term debt
 
15,505

 
18

 
5

 
15,397

 
(98
)
 
12



Impact of Derivatives on the Consolidated Statements of Income and Comprehensive Income

No portion of the change in fair value of derivatives designated as hedges has been excluded from effectiveness testing.
The following table summarizes amounts related to cash flow hedges, which consist of interest rate contracts.
Three Months Ended March 31,
(Dollars in millions)
2019
 
2018
Pre-tax gain (loss) recognized in OCI:
 
 
 
Deposits
$
(10
)
 
$
21

Short-term borrowings
(10
)
 
—

Long-term debt
(20
)
 
72

Total
$
(40
)
 
$
93

Pre-tax gain (loss) reclassified from AOCI into interest expense:
 
 
 
Deposits
$
2

 
$
(2
)
Short-term borrowings
1

 
—

Long-term debt
2

 
(9
)
Total
$
5

 
$
(11
)

The following table summarizes the impact on net interest income related to fair value hedges, which consist of interest rate contracts.
Three Months Ended March 31,
(Dollars in millions)
2019
 
2018
AFS securities:
 
 
 
Amounts related to interest settlements
$
—

 
$
(2
)
Recognized on derivatives
(7
)
 
11

Recognized on hedged items
5

 
(11
)
Net income (expense) recognized
(2
)
 
(2
)
Loans and leases:
 
 
 
Amounts related to interest settlements
—

 
—

Recognized on derivatives
(8
)
 
3

Recognized on hedged items
8

 
(3
)
Net income (expense) recognized
—

 
—

Long-term debt:


 


Amounts related to interest settlements
(22
)
 
8

Recognized on derivatives
116

 
(181
)
Recognized on hedged items
(108
)
 
192

Net income (expense) recognized
(14
)
 
19

Net income (expense) recognized, total
$
(16
)
 
$
17



BB&T Corporation 29


The following table presents pre-tax gain (loss) recognized in income for derivative instruments not designated as hedges:
Three Months Ended March 31,
(Dollars in millions)
Location
2019
 
2018
Client-related and other risk management:
 
 

 
 

Interest rate contracts
Other noninterest income
$
10

 
$
15

Foreign exchange contracts
Other noninterest income
2

 
7

Mortgage banking:
 
 
 
 
Interest rate contracts
Mortgage banking income
(3
)
 
4

MSRs:
 
 
 
 
Interest rate contracts
Mortgage banking income
54

 
(67
)
Total
 
$
63

 
$
(41
)


The following table presents information about BB&T's cash flow and fair value hedges:
(Dollars in millions)
 
Mar 31, 2019
 
Dec 31, 2018
Cash flow hedges:
 
 
 
 

Net unrecognized after-tax gain (loss) on active hedges recorded in AOCI
 
$
(49
)
 
$
(18
)
Net unrecognized after-tax gain (loss) on terminated hedges recorded in AOCI (to be recognized in earnings through 2022)
 
(16
)
 
(13
)
Estimated portion of net after-tax gain (loss) on active and terminated hedges to be reclassified from AOCI into earnings during the next 12 months
 
(10
)
 
4

Maximum time period over which BB&T has hedged a portion of the variability in future cash flows for forecasted transactions excluding those transactions relating to the payment of variable interest on existing instruments
 
3 years

 
4 years

Fair value hedges:
 
 

 
 
Unrecognized pre-tax net gain (loss) on terminated hedges (to be recognized as interest primarily through 2029)
 
$
(46
)
 
$
(39
)
Portion of pre-tax net gain (loss) on terminated hedges to be recognized as a change in interest during the next 12 months
 
7

 
15


 
Derivatives Credit Risk – Dealer Counterparties
 
Credit risk related to derivatives arises when amounts receivable from a counterparty exceed those payable to the same counterparty. The risk of loss is addressed by subjecting dealer counterparties to credit reviews and approvals similar to those used in making loans or other extensions of credit and by requiring collateral. Dealer counterparties operate under agreements to provide cash and/or liquid collateral when unsecured loss positions exceed minimal limits.
 
Derivative contracts with dealer counterparties settle on a monthly, quarterly or semiannual basis, with daily movement of collateral between counterparties required within established netting agreements. BB&T only transacts with dealer counterparties with strong credit standings.
 
Derivatives Credit Risk – Central Clearing Parties
 
With the exception of the central clearing party used for TBA transactions that does not post variation margin to BB&T, central clearing parties exchange cash on a daily basis to settle changes in exposure. Certain derivatives are cleared through central clearing parties that require initial margin collateral. Initial margin collateral requirements are established on varying bases, with such amounts generally designed to offset the risk of non-payment. Initial margin is generally calculated by applying the maximum loss experienced in value over a specified time horizon to the portfolio of existing trades.
 
Derivatives Credit Risk – Risk Participation Agreements
 
BB&T has entered into risk participation agreements to share the credit exposure with other financial institutions on client-related interest rate derivative contracts. The notional amount of interest rate derivative risk participation agreements was $674 million at March 31, 2019 and $446 million at December 31, 2018, reported in Other in the table above. Assuming all underlying third party customers referenced in the interest rate contracts defaulted in a zero LIBOR rate environment, the maximum exposure from these agreements would be $38 million at March 31, 2019 and $26 million at December 31, 2018.


30 BB&T Corporation


The following table summarizes collateral positions with counterparties:
(Dollars in millions)
Mar 31, 2019
 
Dec 31, 2018
Dealer counterparties:
 
 
 
Cash collateral received from dealer counterparties
$
53

 
$
56

Derivatives in a net gain position secured by collateral received
52

 
55

Unsecured positions in a net gain with dealer counterparties after collateral postings
2

 
2

Cash collateral posted to dealer counterparties
56

 
75

Derivatives in a net loss position secured by collateral received
59

 
76

Additional collateral that would have been posted had BB&T's credit ratings dropped below investment grade
3

 
1

Central clearing parties:
 
 
 
Cash collateral, including initial margin, posted to central clearing parties
14

 
17

Derivatives in a net loss position
22

 
8

Securities pledged to central clearing parties
141

 
124

 

NOTE 17. Computation of EPS
 
Basic and diluted EPS calculations are presented in the following table:
Three Months Ended March 31,
(Dollars in millions, except per share data, shares in thousands)
2019
 
2018
Net income available to common shareholders
$
749

 
$
745

Weighted average number of common shares
764,135

 
779,617

Effect of dilutive outstanding equity-based awards
9,936

 
11,388

Weighted average number of diluted common shares
774,071

 
791,005

Basic EPS
$
0.98

 
$
0.96

Diluted EPS
$
0.97

 
$
0.94

Anti-dilutive awards
—

 
90


 
NOTE 18. Operating Segments
 
BB&T's business segment structure aligns with how management reviews performance and makes decisions by client, segment and business unit. There are four major reportable business segments: CB-Retail, CB-Commercial, FS&CF and IH. In addition, there is an OT&C segment. For additional information, see Note 19. Operating Segments of the Annual Report on Form 10-K for the year ended December 31, 2018.

The following table presents results by segment:
Three Months Ended March 31,
(Dollars in millions)
CB-Retail
 
CB-Commercial
 
FS&CF
2019
 
2018
 
2019
 
2018
 
2019
 
2018
Net interest income (expense)
$
843

 
$
837

 
$
536

 
$
464

 
$
189

 
$
159

Net intersegment interest income (expense)
109

 
48

 
44

 
70

 
21

 
18

Segment net interest income
952

 
885

 
580

 
534

 
210

 
177

Allocated provision for credit losses
130

 
122

 
19

 
37

 
1

 
(5
)
Segment net interest income after provision
822

 
763

 
561

 
497

 
209

 
182

Noninterest income
322

 
340

 
109

 
106

 
284

 
301

Noninterest expense
645

 
660

 
251

 
253

 
297

 
301

Income (loss) before income taxes
499

 
443

 
419

 
350

 
196

 
182

Provision (benefit) for income taxes
120

 
109

 
91

 
79

 
40

 
38

Segment net income (loss)
$
379

 
$
334

 
$
328

 
$
271

 
$
156

 
$
144

 
 
 
 
 
 
 
 
 
 
 
 
Identifiable assets (period end)
$
73,379

 
$
70,102

 
$
56,702

 
$
56,438

 
$
33,141

 
$
29,766

 
 
 
 
 
 
 
 
 
 
 
 


BB&T Corporation 31


 
IH
 
OT&C (1)
 
Total
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
Net interest income (expense)
$
34

 
$
26

 
$
94

 
$
147

 
$
1,696

 
$
1,633

Net intersegment interest income (expense)
(11
)
 
(6
)
 
(163
)
 
(130
)
 
—

 
—

Segment net interest income
23

 
20

 
(69
)
 
17

 
1,696

 
1,633

Allocated provision for credit losses
3

 
1

 
2

 
(5
)
 
155

 
150

Segment net interest income after provision
20

 
19

 
(71
)
 
22

 
1,541

 
1,483

Noninterest income
515

 
439

 
(28
)
 
(6
)
 
1,202

 
1,180

Noninterest expense
417

 
375

 
158

 
97

 
1,768

 
1,686

Income (loss) before income taxes
118

 
83

 
(257
)
 
(81
)
 
975

 
977

Provision (benefit) for income taxes
30

 
21

 
(104
)
 
(61
)
 
177

 
186

Segment net income (loss)
$
88

 
$
62

 
$
(153
)
 
$
(20
)
 
$
798

 
$
791

 
 
 
 
 
 
 
 
 
 
 
 
Identifiable assets (period end)
$
6,376

 
$
5,789

 
$
58,085

 
$
58,634

 
$
227,683

 
$
220,729


(1)
Includes financial data from business units below the quantitative and qualitative thresholds requiring disclosure.


32 BB&T Corporation


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

BB&T is a financial holding company organized under the laws of North Carolina. BB&T conducts operations through its principal bank subsidiary, Branch Bank, and its nonbank subsidiaries.

Regulatory Considerations
 
The extensive regulatory framework applicable to financial institutions is intended primarily for the protection of depositors, the DIF and the stability of the financial system, rather than for the protection of shareholders and creditors. In addition to banking laws, regulations and regulatory agencies, BB&T is subject to various other laws, regulations, supervision and examination by other regulatory agencies, all of which affect the operations and management of BB&T and its ability to make distributions to shareholders. Refer to BB&T's Annual Report on Form 10-K for the year ended December 31, 2018 for additional disclosures with respect to significant laws and regulations affecting BB&T.

In April 2019, the FRB terminated its cease and desist order related to BB&T's anti-money laundering program. No money laundering activity was identified and no financial penalty was levied in relation to this order.

Executive Overview
 
Overview of Significant Events and Financial Results

On February 7, 2019, BB&T entered into an agreement and plan of merger, by and between BB&T and SunTrust, pursuant to which SunTrust will merge with and into BB&T, with BB&T as the surviving entity in the merger. Immediately following the merger, SunTrust's wholly owned subsidiary, SunTrust Bank, will merge with and into Branch Bank, with Branch Bank as the surviving entity. Under the terms of the merger agreement, shareholders of SunTrust will receive 1.295 shares of BB&T common stock for each share of SunTrust common stock. The merger agreement was unanimously approved by both companies' Boards of Directors. The merger is expected to close late in the third or fourth quarter of 2019, subject to satisfaction of closing conditions, including receipt of regulatory approvals and approval by the shareholders of each company. The merger is subject to a mutual break-up fee of approximately $1.1 billion, payable in customary circumstances.

Consolidated net income available to common shareholders for the first quarter of 2019 was $749 million. On a diluted per common share basis, earnings for the first quarter of 2019 were $0.97, an increase of $0.03 compared to the first quarter of 2018.
 
BB&T's results of operations for the first quarter of 2019 produced an annualized return on average assets of 1.43% and an annualized return on average common shareholders' equity of 11.08%, compared to ratios for the same quarter of the prior year of 1.45% and 11.43%, respectively.

Total revenues on a TE basis were $2.9 billion for the first quarter of 2019, an increase of $86 million compared to the same period in 2018, which reflects an increase of $64 million in TE net interest income and an increase of $22 million in noninterest income.

The provision for credit losses was $155 million compared to $150 million for the first quarter of 2018. Net charge-offs were 0.40% of average loans and leases on an annualized basis for the first quarter of 2019, down one basis point compared to the first quarter of 2018.

Noninterest income for the first quarter of 2019 was up $22 million compared to the earlier quarter. Noninterest expense for the first quarter of 2019 was up $82 million compared to the earlier quarter. Merger-related and restructuring charges increased $52 million, primarily due to the announced merger of equals with SunTrust. Excluding these charges, noninterest expense was up $30 million.

The provision for income taxes was $177 million for the first quarter of 2019, compared to $186 million for the earlier quarter. This produced an effective tax rate for the first quarter of 2019 of 18.2%, compared to 19.0% for the earlier quarter.

BB&T declared common dividends of $0.405 per share during the first quarter of 2019, which resulted in a dividend payout ratio of 41.3%. As previously communicated, BB&T has suspended its share repurchase program until after the completion of the merger of equals.


BB&T Corporation 33


Analysis of Results of Operations

Net Interest Income and NIM
 
First Quarter 2019 compared to First Quarter 2018
 
Net interest income on a TE basis was $1.7 billion for the first quarter of 2019, an increase of $64 million compared to the same period in 2018. Interest income increased $253 million, which primarily reflects higher rates. Interest expense increased $189 million primarily due to higher funding costs reflecting the impact of rate increases.
 
Net interest margin was 3.51%, up seven basis points compared to the earlier quarter. Average earning assets increased $3.2 billion. The increase in average earning assets reflects a $4.9 billion increase in average total loans and leases, partially offset by a decrease of $1.6 billion in average securities. Average interest-bearing liabilities increased $3.7 billion compared to the earlier quarter. Average interest-bearing deposits increased $4.0 billion, while average long-term debt decreased $430 million. The annualized yield on the total loan portfolio for the first quarter of 2019 was 5.06%, up 49 basis points compared to the earlier quarter, reflecting the impact of rate increases. The annualized yield on the average securities portfolio was 2.60%, up 16 basis points compared to the earlier period.

The average annualized cost of total deposits was 0.64%, up 34 basis points compared to the earlier quarter. The average annualized cost of interest-bearing deposits was 0.95%, up 49 basis points compared to the earlier quarter. The average annualized rate on long-term debt was 3.30%, up 76 basis points compared to the earlier quarter. The average annualized rate on short-term borrowings was 2.32%, up 89 basis points compared to the earlier quarter. The higher rates on interest-bearing liabilities reflect the impact of rate increases.

The major components of net interest income and the related annualized yields and rates as well as the variances between the periods caused by changes in interest rates versus changes in volumes are summarized below.


34 BB&T Corporation


Table 1: TE Net Interest Income and Rate / Volume Analysis (1)
Three Months Ended March 31,
(Dollars in millions)
Average Balances (6)
 
Annualized Yield/Rate
 
Income/Expense
 
Incr.
(Decr.)
 
Change due to
2019
 
2018
 
2019
 
2018
 
2019
 
2018
 
 
Rate
 
Volume
Assets
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Total securities, at amortized cost: (2)
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

U.S. Treasury
$
3,302

 
$
3,538

 
2.01
%
 
1.77
%
 
$
16

 
$
15

 
$
1

 
$
2

 
$
(1
)
GSE
2,418

 
2,385

 
2.24

 
2.23

 
14

 
13

 
1

 
—

 
1

Agency MBS
40,044

 
40,813

 
2.58

 
2.42

 
258

 
248

 
10

 
15

 
(5
)
States and political subdivisions
620

 
1,215

 
3.73

 
3.78

 
6

 
11

 
(5
)
 
—

 
(5
)
Non-agency MBS
315

 
375

 
12.51

 
7.73

 
10

 
7

 
3

 
4

 
(1
)
Other
35

 
48

 
3.96

 
2.28

 
—

 
—

 
—

 
—

 
—

Total securities
46,734

 
48,374

 
2.60

 
2.44

 
304

 
294

 
10

 
21

 
(11
)
Other earning assets (3)
2,197

 
2,250

 
6.01

 
4.54

 
33

 
25

 
8

 
9

 
(1
)
Loans and leases, net of unearned income: (4)(5)
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
Commercial and industrial
61,370

 
58,627

 
4.33

 
3.72

 
656

 
537

 
119

 
93

 
26

CRE
20,905

 
21,398

 
5.06

 
4.47

 
261

 
234

 
27

 
33

 
(6
)
Lease financing
2,021

 
1,872

 
3.33

 
3.00

 
17

 
14

 
3

 
2

 
1

Residential mortgage
31,370

 
28,824

 
4.13

 
4.00

 
324

 
289

 
35

 
9

 
26

Direct
11,493

 
11,791

 
5.75

 
4.90

 
163

 
141

 
22

 
26

 
(4
)
Indirect
17,337

 
16,914

 
7.91

 
7.31

 
338

 
304

 
34

 
26

 
8

Revolving credit
3,110

 
2,798

 
9.49

 
8.94

 
73

 
67

 
6

 
2

 
4

PCI
455

 
631

 
17.99

 
19.21

 
20

 
30

 
(10
)
 
(2
)
 
(8
)
Total loans and leases HFI
148,061

 
142,855

 
5.06

 
4.57

 
1,852

 
1,616

 
236

 
189

 
47

LHFS
729

 
1,051

 
4.38

 
3.66

 
8

 
9

 
(1
)
 
2

 
(3
)
Total loans and leases
148,790

 
143,906

 
5.06

 
4.57

 
1,860

 
1,625

 
235

 
191

 
44

Total earning assets
197,721

 
194,530

 
4.49

 
4.04

 
2,197

 
1,944

 
253

 
221

 
32

Nonearning assets
27,852

 
26,889

 
 

 
 

 
 

 
 

 
 

 
 

 
 
Total assets
$
225,573

 
$
221,419

 
 

 
 

 
 

 
 

 
 

 
 

 
 
Liabilities and Shareholders' Equity
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
Interest-bearing deposits:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
Interest-checking
$
27,622

 
$
27,270

 
0.59

 
0.37

 
40

 
25

 
15

 
15

 
—

Money market and savings
63,325

 
61,690

 
0.96

 
0.44

 
150

 
67

 
83

 
81

 
2

Time deposits
16,393

 
13,847

 
1.50

 
0.68

 
60

 
23

 
37

 
32

 
5

Foreign deposits - interest-bearing
422

 
935

 
2.43

 
1.42

 
3

 
3

 
—

 
2

 
(2
)
Total interest-bearing deposits (7)
107,762

 
103,742

 
0.95

 
0.46

 
253

 
118

 
135

 
130

 
5

Short-term borrowings
5,624

 
5,477

 
2.32

 
1.43

 
32

 
20

 
12

 
11

 
1

Long-term debt
23,247

 
23,677

 
3.30

 
2.54

 
192

 
150

 
42

 
45

 
(3
)
Total interest-bearing liabilities
136,633

 
132,896

 
1.41

 
0.87

 
477

 
288

 
189

 
186

 
3

Noninterest-bearing deposits (7)
52,283

 
53,396

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Other liabilities
6,116

 
5,599

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Shareholders' equity
30,541

 
29,528

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Total liabilities and shareholders' equity
$
225,573

 
$
221,419

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Average interest-rate spread
 

 
 
 
3.08
%
 
3.17
%
 
 

 
 

 
 

 
 

 
 

NIM/net interest income
 

 
 
 
3.51
%
 
3.44
%
 
$
1,720

 
$
1,656

 
$
64

 
$
35

 
$
29

Taxable-equivalent adjustment
 

 
 
 
 
 
 

 
$
24

 
$
23

 
 

 
 

 
 

(1)
Yields are stated on a TE basis utilizing the marginal income tax rates. The change in interest not solely due to changes in rate or volume has been allocated on a pro-rata basis based on the absolute dollar amount of each.
(2)
Total securities include AFS and HTM securities.
(3)
Includes cash equivalents, interest-bearing deposits with banks, trading securities, FHLB stock and other earning assets.
(4)
Loan fees, which are not material for any of the periods shown, are included for rate calculation purposes.
(5)
NPLs are included in the average balances.
(6)
Excludes basis adjustments for fair value hedges.
(7)
Total deposit costs were 0.64% and 0.30% for the three months ended March 31, 2019 and 2018, respectively.

BB&T Corporation 35


Provision for Credit Losses

First Quarter 2019 compared to First Quarter 2018
 
The provision for credit losses was $155 million, compared to $150 million for the earlier quarter. Net charge-offs for the first quarter of 2019 totaled $147 million compared to $145 million in the earlier period.

Net charge-offs were 0.40% of average loans and leases on an annualized basis for the first quarter of 2019, down one basis point compared to the first quarter of 2018.

Noninterest Income

Noninterest income is a significant contributor to BB&T's financial results. Management focuses on diversifying its sources of revenue to further reduce BB&T's reliance on traditional spread-based interest income, as certain fee-based activities are a relatively stable revenue source during periods of changing interest rates.
Table 2: Noninterest Income
Three Months Ended March 31,
(Dollars in millions)
2019
 
2018
 
% Change
Insurance income
$
510

 
$
436

 
17.0
 %
Service charges on deposits
171

 
165

 
3.6

Investment banking and brokerage fees and commissions
111

 
113

 
(1.8
)
Mortgage banking income
63

 
99

 
(36.4
)
Trust and investment advisory revenues
68

 
72

 
(5.6
)
Bankcard fees and merchant discounts
70

 
69

 
1.4

Checkcard fees
55

 
52

 
5.8

Operating lease income
35

 
37

 
(5.4
)
Income from bank-owned life insurance
28

 
31

 
(9.7
)
Other income
91

 
106

 
(14.2
)
Total noninterest income
$
1,202

 
$
1,180

 
1.9


First Quarter 2019 compared to First Quarter 2018
 
Noninterest income for the first quarter of 2019 was up $22 million compared to the earlier quarter. Insurance income increased $74 million to record levels due to higher production and the acquisition of Regions Insurance. Mortgage banking income decreased $36 million primarily due to lower residential mortgage sales, as well as a decrease in commercial mortgage banking revenue. Other income decreased $15 million due to sundry items.

Noninterest Expense

The following table provides a breakdown of BB&T's noninterest expense:
Table 3: Noninterest Expense
Three Months Ended March 31,
(Dollars in millions)
2019
 
2018
 
% Change
Personnel expense
$
1,087

 
$
1,039

 
4.6
 %
Occupancy and equipment expense
187

 
194

 
(3.6
)
Software expense
72

 
65

 
10.8

Outside IT services
30

 
32

 
(6.3
)
Regulatory charges
18

 
40

 
(55.0
)
Amortization of intangibles
32

 
33

 
(3.0
)
Loan-related expense
25

 
29

 
(13.8
)
Professional services
31

 
30

 
3.3

Merger-related and restructuring charges, net
80

 
28

 
185.7

Other expense
206

 
196

 
5.1

Total noninterest expense
$
1,768


$
1,686

 
4.9



36 BB&T Corporation


First Quarter 2019 compared to First Quarter 2018
 
Noninterest expense for the first quarter of 2019 was up $82 million compared to the earlier quarter. Merger-related and restructuring charges increased $52 million, primarily due to the announced merger of equals with SunTrust. Excluding these charges, noninterest expense was up $30 million. Personnel expense increased $48 million compared to the earlier quarter, primarily due to higher incentives, partially due to the Regions Insurance acquisition, and lower capitalized employee costs. The lower capitalized employee costs reflect efficiencies in the loan closing process. Regulatory charges decreased $22 million as a result of the DIF reaching the targeted level.

Merger-Related and Restructuring Charges

The following table presents a summary of merger-related and restructuring charges and the related accruals:
Table 4: Merger-Related and Restructuring Accrual Activity
Three Months Ended March 31, 2019
(Dollars in millions)
Accrual at Jan 1, 2019
 
Expense
 
Utilized
 
Accrual at Mar 31, 2019
Severance and personnel-related
$
43

 
$
16

 
$
(49
)
 
$
10

Occupancy and equipment (1)
—

 
9

 
(9
)
 
—

Professional services
1

 
51

 
(8
)
 
44

Systems conversion and related costs
—

 
—

 
—

 
—

Other adjustments
—

 
4

 
(2
)
 
2

Total
$
44

 
$
80

 
$
(68
)
 
$
56

(1) Certain lease reserves are no longer required as a result of new lease accounting guidance adopted in the first quarter of 2019. See additional information in Note 1. Basis of Presentation.

Provision for Income Taxes

Three Months of 2019 compared to Three Months of 2018
 
The provision for income taxes was $177 million for the first quarter of 2019, compared to $186 million for the earlier quarter. This produced an effective tax rate for the first quarter of 2019 of 18.2%, compared to 19.0% for the earlier quarter.

Segment Results
 
See Note 18. Operating Segments herein and Note 19. Operating Segments in BB&T's Annual Report on Form 10-K for the year ended December 31, 2018, for additional disclosures related to BB&T's reportable business segments. Fluctuations in noninterest income and noninterest expense incurred directly by the segments are more fully discussed in the Noninterest Income and Noninterest Expense sections above.
Table 5: Net Income by Reportable Segment
Three Months Ended March 31,
(Dollars in millions)
2019
 
2018
 
% Change
Community Banking Retail and Consumer Finance
$
379

 
$
334

 
13.5
%
Community Banking Commercial
328

 
271

 
21.0

Financial Services and Commercial Finance
156

 
144

 
8.3

Insurance Holdings
88

 
62

 
41.9

Other, Treasury & Corporate
(153
)
 
(20
)
 
NM

BB&T Corporation
$
798

 
$
791

 
0.9



BB&T Corporation 37


First Quarter 2019 compared to First Quarter 2018

Community Banking Retail and Consumer Finance

CB-Retail serves retail clients by offering a variety of loan and deposit products, payment services, bankcard products and other financial services by connecting clients to a wide range of financial products and services. CB-Retail includes Dealer Retail Services, which originates loans on an indirect basis to consumers for the purchase of automobiles, boats and recreational vehicles. Additionally, CB-Retail includes specialty finance lending, small equipment leasing and other products for consumers. CB-Retail also includes Residential Mortgage Banking, which originates and purchases mortgage loans to either hold for investment or sell to third parties. BB&T generally retains the servicing rights to loans sold. Mortgage products include fixed and adjustable-rate government guaranteed and conventional loans used for the purpose of constructing, purchasing or refinancing residential properties. Substantially all of the properties are owner-occupied. Residential Mortgage Banking also includes Mortgage Warehouse Lending, which provides short-term lending solutions to finance first-lien residential mortgages held-for-sale by independent mortgage companies.

CB-Retail net income was $379 million for the first quarter of 2019, an increase of $45 million compared to the earlier quarter. Segment net interest income increased $67 million primarily due to higher funding spreads on deposits and average loan growth, partially offset by lower credit spreads on loans. Noninterest income decreased primarily due to a decline in mortgage banking income due to a lower volume of loan sales. Noninterest expense decreased primarily due to lower personnel expense.

CB-Retail average loans and leases held for investment increased $3.1 billion, or 4.9%, compared to the earlier period. The increase was primarily driven by growth in average residential mortgage loans of $2.5 billion, or 8.8% and growth in indirect loans of $429 million, or 2.5%.

CB-Retail average total deposits increased $167 million, or 0.2%, compared to the earlier period. The increase was primarily driven by growth in average money market and savings of $706 million, or 2.0% and noninterest-bearing deposits of $460 million, or 2.8%. These increases were mostly offset by a decrease in interest checking of $1.1 billion, or 6.6%.

Community Banking Commercial

CB-Commercial serves large, medium and small business clients by offering a variety of loan and deposit products and connecting clients to the combined organization's broad array of financial services. CB-Commercial includes CRE lending, commercial and industrial lending, corporate banking, asset-based lending, dealer inventory financing, tax-exempt financing, cash management and treasury services, and commercial deposit products.

CB-Commercial net income was $328 million for the first quarter of 2019, an increase of $57 million compared to the earlier quarter. Segment net interest income increased $46 million primarily driven by higher funding spreads, partially offset by lower credit spreads on loans. Noninterest income was essentially flat compared to the earlier quarter. The allocated provision for credit losses decreased primarily due to the impact of average loan growth in the earlier quarter and lower net charge offs. Noninterest expense was essentially flat compared to the earlier quarter.

CB-Commercial average loans and leases held for investment increased $295 million, or 0.6%, compared to the earlier period. Average commercial and industrial loans increased $984 million, or 3.0%, while average commercial real estate loans declined $590 million, or 3.0% and average PCI loans declined $91 million, or 32.7%.

Average total deposits decreased $660 million, or 1.1%, compared to the earlier period driven by declines in average noninterest bearing deposits of $1.3 billion, or 3.7%, partially offset by an increase in average money market and savings of $477 million, or 3.2%, and time deposits of $147 million, or 17.3%.

Financial Services and Commercial Finance

FS&CF provides personal trust administration, estate planning, investment counseling, wealth management, asset management, corporate retirement services, capital markets and corporate banking services, specialty finance and corporate trust services to individuals, corporations, institutions, foundations and government entities. In addition, the segment includes BB&T Securities, a full-service brokerage and investment banking firm, which offers clients a variety of investment services, including discount brokerage services, equities, annuities, mutual funds and government bonds. The Corporate Banking Division originates and services large corporate relationships, syndicated lending relationships and client derivatives while the specialty finance products offered by FS&CF include equipment finance, tax-exempt financing for local governments and special-purpose entities, and full-service commercial mortgage banking lending.

FS&CF net income was $156 million for the first quarter of 2019, an increase of $12 million compared to the earlier quarter. Segment net interest income increased $33 million primarily driven by average loan growth and higher funding spreads, partially offset by lower credit spreads on loans. Noninterest income decreased primarily due to a decline in commercial mortgage banking income.


38 BB&T Corporation


FS&CF average loans and leases held for investment increased $2.1 billion, or 7.8%, compared to the earlier period. The increase was primarily driven by higher loans held for investment for Corporate Banking of $1.8 billion, or 11.8%, and Wealth and Retirement Services of $185 million, or 10.0%.

FS&CF average total deposits increased $676 million, or 2.4%, compared to the earlier period primarily driven by growth in average total deposits for Wealth and Retirement Services of $459 million, or 2.8%.

Insurance Holdings and Premium Finance

BB&T's insurance agency / brokerage network is the fifth largest in the world. IH provides property and casualty, employee benefits and life insurance to businesses and individuals. It also provides small business and corporate services, such as workers compensation and professional liability, as well as surety coverage and title insurance. In addition, IH includes commercial and retail insurance premium finance.

IH net income was $88 million for the first quarter of 2019, an increase of $26 million compared to the earlier quarter. Noninterest income increased $76 million, primarily due to higher production and the acquisition of Regions Insurance, which contributed $46 million. Noninterest expense increased $42 million primarily due to the acquisition of Regions Insurance.

Other, Treasury & Corporate

Net income in OT&C can vary due to the changing needs of the Corporation, including the size of the investment portfolio, the need for wholesale funding and income received from derivatives used to hedge the balance sheet.

OT&C generated a net loss of $153 million in the first quarter of 2019, compared to a net loss of $20 million in the earlier quarter. Segment net interest income decreased $86 million primarily due to an increase in the rates on long-term debt, and an increase in the net credit for funds provided to other operating segments. Noninterest income decreased $22 million primarily due to sundry items. Noninterest expense increased $61 million primarily due to merger-related charges in the current quarter. The benefit for income taxes increased $43 million primarily due to a higher pre-tax loss and a higher tax benefit from discrete items compared to the earlier quarter.

Analysis of Financial Condition

Investment Activities

The securities portfolio totaled $46.4 billion at March 31, 2019, compared to $45.6 billion at December 31, 2018, primarily driven by a $2.4 billion increase in agency MBS, partially offset by a $1.6 billion decrease in U.S. Treasury securities.
 
As of March 31, 2019, approximately 6.4% of the securities portfolio was variable rate, compared to 6.5% as of December 31, 2018. The effective duration of the securities portfolio was 4.2 years at March 31, 2019, compared to 4.8 years at December 31, 2018. The duration of the securities portfolio excludes certain non-agency MBS.

U.S. Treasury, GSE and Agency MBS represented 97.5% of the total securities portfolio as of March 31, 2019, compared to 97.3% as of prior year end.

Lending Activities

Loans HFI totaled $149.1 billion at March 31, 2019, compared to $149.0 billion at December 31, 2018. Management continuously evaluates the composition of the loan portfolio taking into consideration the current and expected market conditions, interest rate environment and risk profiles to optimize profitability. Based upon this evaluation, management may decide to focus efforts on growing or decreasing exposures in certain portfolios through both organic changes and portfolio acquisitions or sales.

Certain residential mortgage loans have an initial period where the borrower is only required to pay the periodic interest. After the interest-only period, the loan will require the payment of both interest and principal over the remaining term. The outstanding balances of variable rate residential mortgage loans in the interest-only phase were approximately $60 million and $64 million at March 31, 2019 and December 31, 2018, respectively. At March 31, 2019, approximately 96.6% of the interest-only balances will begin amortizing within the next three years compared to 95.9% at December 31, 2018.

The direct retail portfolio includes variable rate home equity lines and other lines of credit whose rate typically reset on a monthly basis. Home equity lines generally require interest-only payments during the first 15 years after origination. After this initial period, the outstanding balance begins amortizing and requires the payment of both interest and principal. The following table presents additional information over variable rate lines of credit:

BB&T Corporation 39


Table 6: Variable Rate Lines of Credit
 
 
 
 
 
 
 
 
Home Equity Lines
 
Other Lines of Credit
(Dollars in millions)
Mar 31, 2019
 
Dec 31, 2018
 
Mar 31, 2019
 
Dec 31, 2018
Total variable rate lines
$
6,979

 
$
7,201

 
$
1,064

 
$
1,067

Amount in interest-only phase
5,580

 
5,730

 
952

 
949

Percent in interest-only phase that will begin amortizing within 3 years
10.5
%
 
10.3
%
 
15.0
%
 
15.9
%

The following table presents the most recent composition of average loans and leases:
Table 7: Composition of Average Loans and Leases
For the Three Months Ended
(Dollars in millions)
 
Mar 31, 2019
 
Dec 31, 2018
 
Sep 30, 2018
 
Jun 30, 2018
 
Mar 31, 2018
Commercial:
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 
$
61,370

 
$
60,553

 
$
59,900

 
$
59,548

 
$
58,627

CRE
 
20,905

 
21,301

 
21,496

 
21,546

 
21,398

Lease financing
 
2,021

 
1,990

 
1,941

 
1,862

 
1,872

Retail:
 
 
 
 
 
 
 
 
 
 
Residential mortgage
 
31,370

 
31,103

 
30,500

 
29,272

 
28,824

Direct
 
11,493

 
11,600

 
11,613

 
11,680

 
11,791

Indirect
 
17,337

 
17,436

 
17,282

 
16,804

 
16,914

Revolving credit
 
3,110

 
3,070

 
2,947

 
2,831

 
2,798

PCI
 
455

 
486

 
518

 
559

 
631

Total average loans and leases HFI
 
$
148,061

 
$
147,539

 
$
146,197

 
$
144,102

 
$
142,855


Average loans held for investment for the first quarter of 2019 were $148.1 billion, up $522 million, or 1.4% annualized compared to the fourth quarter of 2018.

Average commercial and industrial loans increased $817 million driven by strong growth in corporate banking, as well as growth from the community bank, partially offset by a decline in mortgage warehouse lending. Average CRE loans decreased $396 million, primarily due to a decrease in construction loans. Average residential mortgage loans increased $267 million primarily due to the retention of a portion of the conforming mortgage production.

Average direct loans decreased $107 million. The decrease was primarily due to acquired portfolio run off.

Average indirect retail loans decreased $99 million. The decrease was primarily due to seasonality for power sports, partially offset by growth in automobile lending.


40 BB&T Corporation


Asset Quality

The following tables summarize asset quality information for the past five quarters:
Table 8: Asset Quality
(Dollars in millions)
Mar 31, 2019
 
Dec 31, 2018
 
Sep 30, 2018
 
Jun 30, 2018
 
Mar 31, 2018
NPAs:
 
 
 
 
 
 
 
 
 
NPLs:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
196

 
$
200

 
$
238

 
$
243

 
$
257

CRE
75

 
65

 
46

 
61

 
67

Lease financing
1

 
3

 
6

 
9

 
13

Residential mortgage
121

 
119

 
120

 
119

 
127

Direct
53

 
53

 
55

 
58

 
64

Indirect
80

 
82

 
72

 
68

 
74

Total NPLs HFI
526

 
522

 
537

 
558

 
602

Foreclosed real estate
33

 
35

 
39

 
43

 
40

Other foreclosed property
25

 
28

 
25

 
23

 
27

Total nonperforming assets (1)
$
584

 
$
585

 
$
601

 
$
624

 
$
669

Performing TDRs:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
63

 
$
65

 
$
56

 
$
44

 
$
38

CRE
9

 
10

 
12

 
11

 
12

Residential mortgage
669

 
656

 
643

 
647

 
627

Direct
54

 
55

 
56

 
58

 
59

Indirect
306

 
305

 
295

 
284

 
277

Revolving credit
29

 
28

 
28

 
29

 
29

Total performing TDRs (2)(3)
$
1,130

 
$
1,119

 
$
1,090

 
$
1,073

 
$
1,042

Loans 90 days or more past due and still accruing:
 
 
 
 
 
 
 
 
 
Residential mortgage
$
377

 
$
405

 
$
367

 
$
374

 
$
420

Direct
7

 
7

 
6

 
4

 
6

Indirect
5

 
6

 
6

 
4

 
5

Revolving credit
14

 
14

 
12

 
10

 
11

PCI
28

 
30

 
40

 
43

 
48

Total loans 90 days or more past due and still accruing
$
431

 
$
462

 
$
431

 
$
435

 
$
490

Loans 30-89 days past due:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
36

 
$
34

 
$
35

 
$
26

 
$
31

CRE
3

 
5

 
4

 
4

 
10

Lease financing
3

 
1

 
1

 
2

 
1

Residential mortgage
478

 
456

 
510

 
441

 
400

Direct
67

 
61

 
59

 
52

 
55

Indirect
316

 
436

 
418

 
337

 
272

Revolving credit
27

 
28

 
27

 
21

 
21

PCI
18

 
23

 
21

 
22

 
24

Total loans 30-89 days past due
$
948

 
$
1,044

 
$
1,075

 
$
905

 
$
814

Excludes loans held for sale.     
(1)
Sales of nonperforming loans totaled $30 million, $30 million, $20 million, $12 million and $33 million for the quarter ended March 31, 2019, December 31, 2018, September 30, 2018, June 30, 2018 and March 31, 2018, respectively.
(2)
Excludes TDRs that are nonperforming totaling $178 million, $176 million, $176 million, $191 million and $196 million at March 31, 2019, December 31, 2018, September 30, 2018, June 30, 2018 and March 31, 2018, respectively. These amounts are included in total nonperforming assets.
(3)
Sales of performing TDRs, which were primarily residential mortgage loans, totaled $33 million, $15 million, $34 million, $17 million and $29 million for the quarter ended March 31, 2019, December 31, 2018, September 30, 2018, June 30, 2018 and March 31, 2018, respectively.

Nonperforming assets totaled $584 million at March 31, 2019, essentially flat compared to December 31, 2018. Nonperforming loans and leases represented 0.35% of loans and leases held for investment, unchanged compared to December 31, 2018.

Performing TDRs were up $11 million during the first quarter primarily in residential mortgage loans.

Loans 90 days or more past due and still accruing totaled $431 million at March 31, 2019, down $31 million compared to the prior quarter. The ratio of loans 90 days or more past due and still accruing as a percentage of loans and leases was 0.29% at March 31, 2019, compared to 0.31% for the prior quarter. Excluding government guaranteed and PCI loans, the ratio of loans 90 days or more past due and still accruing as a percentage of loans and leases was 0.04% at March 31, 2019, unchanged from the prior quarter.


BB&T Corporation 41


Loans 30-89 days past due and still accruing totaled $948 million at March 31, 2019, down $96 million compared to the prior quarter, primarily due to an expected seasonal decline in indirect automobile lending.

Problem loans include NPLs and loans that are 90 days or more past due and still accruing as disclosed in Table 8. In addition, for the commercial portfolio segment, loans that are rated special mention or substandard performing are closely monitored by management as potential problem loans. Refer to Note 4. Loans and ACL herein for additional disclosures related to these potential problem loans.
Table 9: Asset Quality Ratios
As of / For the Three Months Ended
Mar 31, 2019
 
Dec 31, 2018
 
Sep 30, 2018
 
Jun 30, 2018
 
Mar 31, 2018
Loans 30-89 days past due and still accruing as a percentage of loans and leases HFI
0.64
%
 
0.70
%
 
0.73
%
 
0.62
%
 
0.57
%
Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI
0.29

 
0.31

 
0.29

 
0.30

 
0.34

NPLs as a percentage of loans and leases HFI
0.35

 
0.35

 
0.37

 
0.38

 
0.42

NPAs as a percentage of:
 
 
 
 
 
 
 
 
 
Total assets
0.26

 
0.26

 
0.27

 
0.28

 
0.30

Loans and leases HFI plus foreclosed property
0.39

 
0.39

 
0.41

 
0.43

 
0.47

Net charge-offs as a percentage of average loans and leases HFI
0.40

 
0.38

 
0.35

 
0.30

 
0.41

ALLL as a percentage of loans and leases HFI
1.05

 
1.05

 
1.05

 
1.05

 
1.05

Ratio of ALLL to:
 
 
 
 
 
 
 
 
 
Net charge-offs
2.62x

 
2.76x

 
3.05x

 
3.49x

 
2.55x

NPLs
2.97x

 
2.99x

 
2.86x

 
2.74x

 
2.49x

Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI (1)
0.04
%
 
0.04
%
 
0.04
%
 
0.04
%
 
0.04
%
Applicable ratios are annualized.
(1)
This asset quality ratio has been adjusted to remove the impact of government guaranteed mortgage loans and PCI. Management believes the inclusion of such assets in this asset quality ratio results in distortion of this ratio such that it might not be reflective of asset collectability or might not be comparable to other periods presented or to other portfolios that do not have government guarantees or were not impacted by PCI accounting requirements.

The following table presents activity related to NPAs:
Table 10: Rollforward of NPAs
(Dollars in millions)
 
2019
 
2018
Balance, January 1
 
$
585

 
$
627

New NPAs
 
294

 
363

Advances and principal increases
 
64

 
89

Disposals of foreclosed assets (1)
 
(122
)
 
(119
)
Disposals of NPLs (2)
 
(30
)
 
(33
)
Charge-offs and losses
 
(71
)
 
(64
)
Payments
 
(106
)
 
(152
)
Transfers to performing status
 
(30
)
 
(41
)
Other, net
 
—

 
(1
)
Ending balance, March 31
 
$
584

 
$
669

(1) 
Includes charge-offs and losses recorded upon sale of $58 million and $23 million for the three months ended March 31, 2019 and 2018, respectively.
(2)
Includes charge-offs and losses recorded upon sale of $6 million and $10 million for the three months ended March 31, 2019 and 2018, respectively.
 
TDRs occur when a borrower is experiencing, or is expected to experience, financial difficulties in the near-term and a concession has been granted to the borrower. As a result, BB&T will work with the borrower to prevent further difficulties and ultimately improve the likelihood of recovery on the loan. To facilitate this process, a concessionary modification that would not otherwise be considered may be granted, resulting in classification of the loan as a TDR.
 
The following table provides a summary of performing TDR activity: 

42 BB&T Corporation


Table 11: Rollforward of Performing TDRs
(Dollars in millions)
 
2019
 
2018
Balance, January 1
 
$
1,119

 
$
1,043

Inflows
 
152

 
133

Payments and payoffs
 
(55
)
 
(42
)
Charge-offs
 
(16
)
 
(17
)
Transfers to nonperforming TDRs, net
 
(19
)
 
(27
)
Removal due to the passage of time
 
(14
)
 
(14
)
Non-concessionary re-modifications
 
(4
)
 
(5
)
Transferred to LHFS and/or sold
 
(33
)
 
(29
)
Balance, March 31
 
$
1,130

 
$
1,042


The following table provides further details regarding the payment status of TDRs outstanding at March 31, 2019:
Table 12: Payment Status of TDRs (1)
March 31, 2019
(Dollars in millions)
 
Current
 
Past Due 30-89 Days
 
Past Due 90 Days Or More
 
Total
Performing TDRs:
 
 
 
 
 
 
 
 
 
 

 
 
 
 
Commercial:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 
$
62

 
98.4
%
 
$
1

 
1.6
%
 
$
—

 
—
%
 
$
63

CRE
 
9

 
100.0

 
—

 
—

 
—

 
—

 
9

Retail:
 


 


 


 


 


 


 


Residential mortgage
 
384

 
57.4

 
121

 
18.1

 
164

 
24.5

 
669

Direct
 
52

 
96.3

 
2

 
3.7

 
—

 
—

 
54

Indirect
 
261

 
85.3

 
45

 
14.7

 
—

 
—

 
306

Revolving credit
 
25

 
86.3

 
3

 
10.3

 
1

 
3.4

 
29

Total performing TDRs
 
793

 
70.2

 
172

 
15.2

 
165

 
14.6

 
1,130

Nonperforming TDRs
 
85

 
47.8

 
13

 
7.3

 
80

 
44.9

 
178

Total TDRs
 
$
878

 
67.2

 
$
185

 
14.1

 
$
245

 
18.7

 
$
1,308

(1)
Past due performing TDRs are included in past due disclosures and nonperforming TDRs are included in NPL disclosures.


BB&T Corporation 43


ACL

Activity related to the ACL is presented in the following tables:
Table 13: Activity in ACL
 
As of / For The Three Months Ended
(Dollars in millions)
Mar 31, 2019
 
Dec 31, 2018
 
Sep 30, 2018
 
Jun 30, 2018
 
Mar 31, 2018
Balance, beginning of period
$
1,651

 
$
1,648

 
$
1,640

 
$
1,614

 
$
1,609

Provision for credit losses (excluding PCI loans)
156

 
147

 
141

 
142

 
153

Provision (benefit) for PCI loans
(1
)
 
(1
)
 
(6
)
 
(7
)
 
(3
)
Charge-offs:
 

 
 

 
 

 
 

 
 

Commercial and industrial
(17
)
 
(18
)
 
(28
)
 
(23
)
 
(23
)
CRE
(8
)
 
(5
)
 
—

 
(2
)
 
(6
)
Lease financing
(1
)
 
(1
)
 
(1
)
 
(1
)
 
(1
)
Residential mortgage
(5
)
 
(8
)
 
(4
)
 
(5
)
 
(4
)
Direct
(18
)
 
(18
)
 
(17
)
 
(17
)
 
(19
)
Indirect
(109
)
 
(108
)
 
(94
)
 
(82
)
 
(107
)
Revolving credit
(26
)
 
(22
)
 
(20
)
 
(21
)
 
(21
)
PCI
—

 
—

 
(2
)
 
—

 
—

Total charge-offs
(184
)
 
(180
)
 
(166
)
 
(151
)
 
(181
)
Recoveries:
 

 
 

 
 

 
 

 
 

Commercial and industrial
6

 
7

 
13

 
11

 
8

CRE
1

 
4

 
1

 
1

 
2

Lease financing
—

 
—

 
—

 
1

 
—

Residential mortgage
1

 
1

 
—

 
1

 
—

Direct
6

 
5

 
6

 
6

 
6

Indirect
17

 
15

 
15

 
17

 
15

Revolving credit
6

 
5

 
4

 
5

 
5

Total recoveries
37

 
37

 
39

 
42

 
36

Net charge-offs
(147
)
 
(143
)
 
(127
)
 
(109
)
 
(145
)
Balance, end of period
$
1,659

 
$
1,651

 
$
1,648

 
$
1,640

 
$
1,614

ALLL (excluding PCI loans)
$
1,553

 
$
1,549

 
$
1,528

 
$
1,512

 
$
1,473

ALLL for PCI loans
8

 
9

 
10

 
18

 
25

RUFC
98

 
93

 
110

 
110

 
116

Total ACL
$
1,659

 
$
1,651

 
$
1,648

 
$
1,640

 
$
1,614


The ACL consists of the ALLL, which is presented separately on the Consolidated Balance Sheets, and the RUFC, which is included in other liabilities on the Consolidated Balance Sheets. The ACL totaled $1.7 billion at March 31, 2019, up $8 million compared to December 31, 2018.

The ALLL, excluding PCI, was $1.6 billion, up $4 million compared to December 31, 2018. The allowance for PCI loans was $8 million, down $1 million compared to December 31, 2018. As of March 31, 2019, the total allowance for loan and lease losses was 1.05% of loans and leases held for investment, unchanged compared to December 31, 2018. These amounts include acquired loans, which were marked to fair value and did not receive an ALLL at the acquisition date.

The ALLL was 2.97 times NPLs held for investment, compared to 2.99 times at December 31, 2018. At March 31, 2019, the ALLL was 2.62 times annualized quarterly net charge-offs, compared to 2.98 times annual net-charge-offs at December 31, 2018.

Net charge-offs during the first quarter of 2019 totaled $147 million, or 0.40% of average loans and leases, down one basis point compared to the first quarter of 2018.


44 BB&T Corporation


The following table presents an allocation of the ALLL at the periods shown. This allocation of the ALLL is calculated on an approximate basis and is not necessarily indicative of future losses or allocations. The entire amount of the allowance is available to absorb losses occurring in any category of loans and leases.
Table 14: Allocation of ALLL by Category
 
 
March 31, 2019
 
December 31, 2018
(Dollars in millions)
 
Amount
 
% Loans in each category
 
Amount
 
% Loans in each category
Commercial and industrial
 
$
548

 
41.5
%
 
$
546

 
41.5
%
CRE
 
196

 
14.0

 
190

 
14.1

Lease financing
 
11

 
1.4

 
11

 
1.4

Residential mortgage
 
225

 
21.2

 
232

 
21.1

Direct
 
96

 
7.7

 
97

 
7.8

Indirect
 
358

 
11.8

 
356

 
11.7

Revolving credit
 
119

 
2.1

 
117

 
2.1

PCI
 
8

 
0.3

 
9

 
0.3

Total ALLL
 
1,561

 
100.0
%
 
1,558

 
100.0
%
RUFC
 
98

 
 

 
93

 
 

Total ACL
 
$
1,659

 
 

 
$
1,651

 
 


BB&T monitors the performance of its home equity loans and lines secured by second liens similarly to other consumer loans and utilizes assumptions specific to these loans in determining the necessary ALLL. BB&T also receives notification when the first lien holder, whether BB&T or another financial institution, has initiated foreclosure proceedings against the borrower. When notified that the first lien is in the process of foreclosure, BB&T obtains valuations to determine if any additional charge-offs or reserves are warranted. These valuations are updated at least annually thereafter.
 
BB&T has limited ability to monitor the delinquency status of the first lien, unless the first lien is held or serviced by BB&T. As a result, using migration assumptions that are based on historical experience and adjusted for current trends, BB&T estimates the volume of second lien positions where the first lien is delinquent and adjusts the ALLL to reflect the increased risk of loss on these credits. Finally, BB&T also provides additional reserves for second lien positions when the estimated combined current loan to value ratio for the credit exceeds 100%. As of March 31, 2019, BB&T held or serviced the first lien on 29.7% of its second lien positions.

Funding Activities

Deposits

Deposits totaled $159.8 billion at March 31, 2019, a decrease of $1.4 billion from December 31, 2018, primarily due to a decline in commercial time deposits.

The following table presents the most recent composition of average deposits:
Table 15: Composition of Average Deposits
Three Months Ended
(Dollars in millions)
 
Mar 31, 2019
 
Dec 31, 2018
 
Sep 30, 2018
 
Jun 30, 2018
 
Mar 31, 2018
Noninterest-bearing deposits
 
$
52,283

 
$
53,732

 
$
54,174

 
$
53,963

 
$
53,396

Interest checking
 
27,622

 
26,921

 
26,655

 
26,969

 
27,270

Money market and savings
 
63,325

 
62,261

 
62,957

 
62,105

 
61,690

Time deposits
 
16,393

 
14,682

 
13,353

 
13,966

 
13,847

Foreign office deposits - interest-bearing
 
422

 
246

 
132

 
673

 
935

Total average deposits
 
$
160,045

 
$
157,842

 
$
157,271

 
$
157,676

 
$
157,138

 
Average deposits for the first quarter of 2019 were $160.0 billion, up $2.2 billion compared to the prior quarter. Average noninterest-bearing deposits decreased $1.4 billion, reflecting seasonality and decreases in commercial balances.

Average interest checking increased $701 million primarily due to increases in commercial and public fund balances. Average money market and savings deposits increased $1.1 billion primarily due to increases in personal and commercial balances. Average time deposits increased $1.7 billion primarily due to an increase in commercial balances. Average foreign office deposits increased $176 million due to changes in the overall funding mix.


BB&T Corporation 45


Noninterest-bearing deposits represented 32.7% of total average deposits for the first quarter, compared to 34.0% for the prior quarter and the same quarter a year ago. The cost of total deposits was 0.64% for the first quarter, up 12 basis points compared to the prior quarter. The cost of interest-bearing deposits was 0.95% for the first quarter, up 17 basis points compared to the prior quarter.

Borrowings

At March 31, 2019, short-term borrowings totaled $6.3 billion, an increase of $1.1 billion compared to December 31, 2018. Short-term borrowings fluctuate based on the Company's funding needs. Average short-term borrowings were $5.6 billion or 2.5% of total funding on average in the first quarter of 2019 as compared to $5.5 billion or 2.5% in the same period of 2018.

Long-term debt provides funding and, to a lesser extent, regulatory capital, and primarily consists of senior and subordinated notes issued by BB&T and Branch Bank. Long-term debt totaled $24.7 billion at March 31, 2019, an increase of $1.0 billion compared to December 31, 2018. The corporation issued $1.4 billion of senior notes and $650 million of subordinated notes, which was partially offset by the maturity of $1.1 billion of senior notes. The average cost of long-term debt was 3.30% in the first quarter of 2019, up 11 basis points compared to the fourth quarter of 2018.

FHLB advances represented 7.1% of total outstanding long-term debt at March 31, 2019, compared to 7.4% at December 31, 2018. See Note 9. Long-Term Debt for additional disclosures.

Shareholders' Equity

Total shareholders' equity was $30.9 billion at March 31, 2019, an increase of $705 million from December 31, 2018. Significant additions include net income of $798 million and an increase in AOCI of $294 million, which was partially offset by a decrease of $352 million for common and preferred dividends. BB&T's book value per common share at March 31, 2019 was $36.26, compared to $35.46 at December 31, 2018.
 
Risk Management

BB&T has a strong and consistent risk culture, based on established risk values, which promotes predictable and consistent performance within an environment of open communication and effective challenge. The strong culture influences all associates in the organization daily and helps them evaluate whether risks are acceptable or unacceptable while making decisions that balance quality, profitability and growth appropriately. BB&T's effective risk management framework establishes an environment which enables it to achieve superior performance relative to peers, ensures that BB&T is viewed among the safest of banks and assures the operational freedom to act on opportunities.
 
BB&T ensures that there is an appropriate return for the amount of risk taken, and that the expected return is in line with its strategic objectives and business plan. Risk-taking activities are evaluated and prioritized to identify those that present attractive risk-adjusted returns while preserving asset value. BB&T only undertakes risks that are understood and can be managed effectively. By managing risk well, BB&T ensures sufficient capital is available to maintain and grow core business operations in a safe and sound manner.
 
Regardless of financial gain or loss to the Company, associates are held accountable if they do not follow the established risk management policies and procedures. Compensation decisions take into account an associate's adherence to, and successful implementation of, BB&T's risk values. The compensation structure supports the Company's core values and sound risk management practices in an effort to promote judicious risk-taking behavior.
 
BB&T's risk culture encourages transparency and open dialogue between all levels in the performance of organizational functions, such as the development, marketing and implementation of a product or service.
 
The principal types of inherent risk include compliance, credit, liquidity, market, operational, cyber security, model, reputation and strategic risks. Refer to BB&T's Annual Report on Form 10-K for the year ended December 31, 2018 for disclosures related to each of these risks under the section titled "Risk Management."
 
Market Risk Management
 
The effective management of market risk is essential to achieving BB&T's strategic financial objectives. As a financial institution, BB&T's most significant market risk exposure is interest rate risk in its balance sheet; however, market risk also includes product liquidity risk, price risk and volatility risk in BB&T's BUs. The primary objectives of market risk management are to minimize any adverse effect that changes in market risk factors may have on net interest income, net income and capital and to offset the risk of price changes for certain assets recorded at fair value. At BB&T, market risk management also includes the enterprise-wide IPV function.
 

46 BB&T Corporation


Interest Rate Market Risk (Other than Trading)
 
BB&T actively manages market risk associated with asset and liability portfolios with a focus on the strategic pricing of asset and liability accounts and management of appropriate maturity mixes of assets and liabilities. The goal of these activities is the development of appropriate maturity and repricing opportunities in BB&T's portfolios of assets and liabilities that will produce reasonably consistent net interest income during periods of changing interest rates. These portfolios are analyzed for proper fixed-rate and variable-rate mixes under various interest rate scenarios.
 
The asset/liability management process is designed to achieve relatively stable NIM and assure liquidity by coordinating the volumes, maturities or repricing opportunities of earning assets, deposits and borrowed funds. Among other things, this process gives consideration to prepayment trends related to securities, loans and leases and certain deposits that have no stated maturity. Prepayment assumptions are developed using a combination of market data and internal historical prepayment experience for residential mortgage-related loans and securities, and internal historical prepayment experience for client deposits with no stated maturity and loans that are not residential mortgage related. These assumptions are subject to monthly review and adjustment, and are modified as deemed necessary to reflect changes in interest rates relative to the reference rate of the underlying assets or liabilities. On a monthly basis, BB&T evaluates the accuracy of its Simulation model, which includes an evaluation of its prepayment assumptions, to ensure that all significant assumptions inherent in the model appropriately reflect changes in the interest rate environment and related trends in prepayment activity. It is the responsibility of the MRLCC to determine and achieve the most appropriate volume and mix of earning assets and interest-bearing liabilities, as well as to ensure an adequate level of liquidity and capital, within the context of corporate performance goals. The MRLCC also sets policy guidelines and establishes long-term strategies with respect to interest rate risk exposure and liquidity. The MRLCC meets regularly to review BB&T's interest rate risk and liquidity positions in relation to present and prospective market and business conditions, and adopts funding and balance sheet management strategies that are intended to ensure that the potential impacts on earnings and liquidity as a result of fluctuations in interest rates are within acceptable tolerance guidelines.
 
BB&T uses derivatives primarily to manage economic risk related to securities, commercial loans, MSRs and mortgage banking operations, long-term debt and other funding sources. BB&T also uses derivatives to facilitate transactions on behalf of its clients. As of March 31, 2019, BB&T had derivative financial instruments outstanding with notional amounts totaling $73.0 billion, with a net fair value of $158 million. See Note 16. Derivative Financial Instruments for additional disclosures.
 
The majority of BB&T's assets and liabilities are monetary in nature and, therefore, differ from most commercial and industrial companies that have significant investments in fixed assets or inventories. Fluctuations in interest rates and actions of the FRB to regulate the availability and cost of credit have a greater effect on a financial institution's profitability than do the effects of higher costs for goods and services. Through its balance sheet management function, which is monitored by the MRLCC, management believes that BB&T is positioned to respond to changing needs for liquidity, changes in interest rates and inflationary trends.
 
Management uses the Simulation to measure the sensitivity of projected earnings to changes in interest rates. The Simulation projects net interest income and interest rate risk for a rolling two-year period of time. The Simulation takes into account the current contractual agreements that BB&T has made with its customers on deposits, borrowings, loans, investments and commitments to enter into those transactions. Furthermore, the Simulation considers the impact of expected customer behavior. Management monitors BB&T's interest sensitivity by means of a model that incorporates the current volumes, average rates earned and paid, and scheduled maturities and payments of asset and liability portfolios, together with multiple scenarios that include projected prepayments, repricing opportunities and anticipated volume growth. Using this information, the model projects earnings based on projected portfolio balances under multiple interest rate scenarios. This level of detail is needed to simulate the effect that changes in interest rates and portfolio balances may have on the earnings of BB&T. This method is subject to the accuracy of the assumptions that underlie the process, but management believes that it provides a better illustration of the sensitivity of earnings to changes in interest rates than other analyses such as static or dynamic gap. In addition to the Simulation, BB&T uses EVE analysis to focus on projected changes in asset and liability values given potential changes in interest rates. This measure also allows BB&T to analyze interest rate risk that falls outside the analysis window contained in the Simulation. The EVE model is a discounted cash flow of the portfolio of assets, liabilities, and derivative instruments. The difference in the present value of assets minus the present value of liabilities is defined as the economic value of equity.
 
The asset/liability management process requires a number of key assumptions. Management determines the most likely outlook for the economy and interest rates by analyzing external factors, including published economic projections and data, the effects of likely monetary and fiscal policies, as well as any enacted or prospective regulatory changes. BB&T's current and prospective liquidity position, current balance sheet volumes and projected growth, accessibility of funds for short-term needs and capital maintenance are also considered. This data is combined with various interest rate scenarios to provide management with the information necessary to analyze interest sensitivity and to aid in the development of strategies to reach performance goals.

The following table shows the effect that the indicated changes in interest rates would have on net interest income as projected for the next twelve months assuming a gradual change in interest rates as described below. Key assumptions in the preparation of the table include prepayment speeds of mortgage-related and other assets, cash flows and maturities of derivative financial instruments, loan volumes and pricing, deposit beta, 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.

BB&T Corporation 47


Table 16: Interest Sensitivity Simulation Analysis
Interest Rate Scenario
 
Annualized Hypothetical Percentage Change in Net Interest Income
Linear Change in Prime Rate
 
Prime Rate
 
 
Mar 31, 2019
 
Mar 31, 2018
 
Mar 31, 2019
 
Mar 31, 2018
Up 200
 
7.50
%
 
6.75
%
 
1.33
 %
 
3.76
 %
Up 100
 
6.50

 
5.75

 
1.04

 
2.40

No Change
 
5.50

 
4.75

 
—

 
—

Down 100
 
4.50

 
3.75

 
(3.89
)
 
(5.64
)
Down 200
 
3.50

 
N/A

 
(7.25
)
 
N/A


Rate sensitivity decreased from March 31, 2018, primarily driven by loan and deposit mix changes partially offset by higher balances of fixed rate long-term debt.

Management considers how the balance sheet and interest rate risk position could be impacted by changes in balance sheet mix. Liquidity in the banking industry has been very strong during the current economic cycle. Much of this liquidity increase has been due to a significant increase in noninterest-bearing demand deposits. Consistent with the industry, Branch Bank has seen a significant increase in this funding source. The behavior of these deposits is one of the most important assumptions used in determining the interest rate risk position of BB&T. A loss of these deposits in the future would reduce the asset sensitivity of BB&T's balance sheet as the Company increases interest-bearing funds to offset the loss of this advantageous funding source.

Beta represents the correlation between overall market interest rates and the rates paid by BB&T on interest-bearing deposits. BB&T applies an average deposit beta of approximately 55% to its non-maturity interest-bearing deposit accounts for determining its interest rate sensitivity. Non-maturity interest-bearing deposit accounts include interest checking accounts, savings accounts and money market accounts that do not have a contractual maturity. The actual deposit beta on non-maturity interest-bearing deposits has been less than 40% since rates began to rise in December 2015. BB&T regularly conducts sensitivity on other key variables to determine the impact they could have on the interest rate risk position. This allows BB&T to evaluate the likely impact on its balance sheet management strategies due to a more extreme variation in a key assumption than expected.
 
The following table shows the results of BB&T's interest-rate sensitivity position assuming the loss of demand deposits and an associated increase in managed rate deposits under various scenarios. For purposes of this analysis, BB&T modeled the incremental beta for the replacement of the lost demand deposits at 100%.
Table 17: Deposit Mix Sensitivity Analysis
Linear Change in Rates
 
Base Scenario at March 31, 2019 (1)
 
Results Assuming a Decrease in Noninterest-Bearing Demand Deposits
 
 
 
 
$1 Billion
 
$5 Billion
Up 200 bps
 
1.33
%
 
1.13
%
 
0.31
%
Up 100
 
1.04

 
0.91

 
0.40

(1) The base scenario is equal to the annualized hypothetical percentage change in net interest income at March 31, 2019 as presented in the preceding table.

If rates increased 200 basis points, BB&T could absorb the loss of $6.5 billion, or 12.3%, of noninterest-bearing deposits and replace them with managed rate deposits with a beta of 100% before becoming neutral to interest rate changes.
 
The following table shows the effect that the indicated changes in interest rates would have on EVE. Key assumptions in the preparation of the table include prepayment speeds of mortgage-related and other assets, cash flows and maturities of derivative financial instruments, loan volumes and pricing and deposit sensitivity.
Table 18: EVE Simulation Analysis
Change in Interest Rates
 
EVE/Assets
 
Hypothetical Percentage Change in EVE
 
Mar 31, 2019
 
Mar 31, 2018
 
Mar 31, 2019
 
Mar 31, 2018
Up 100
 
11.9
 
12.4
 
1.1

 
(2.2
)
No Change
 
11.8
 
12.7
 
—

 
—

Down 100
 
10.5
 
12.3
 
(11.0
)
 
(3.5
)


48 BB&T Corporation


Market Risk from Trading Activities
 
BB&T also manages market risk from trading activities which consists of acting as a financial intermediary to provide its customers access to derivatives, foreign exchange and securities markets. Trading market risk is managed through the use of statistical and non-statistical risk measures and limits. BB&T utilizes a historical VaR methodology to measure and aggregate risks across its covered trading BUs. This methodology uses two years of historical data to estimate economic outcomes for a one-day time horizon at a 99% confidence level. The average 99% one-day VaR and the maximum daily VaR for the three months ended March 31, 2019 and 2018, respectively, were each less than $1 million. Market risk disclosures under Basel II.5 are available in the Additional Disclosures section of the Investor Relations site on BBT.com.

Liquidity
 
Liquidity represents the continuing ability to meet funding needs, including deposit withdrawals, timely repayment of borrowings and other liabilities, and funding of loan commitments. In addition to the level of liquid assets, such as cash, cash equivalents and AFS securities, many other factors affect the ability to meet liquidity needs, including access to a variety of funding sources, maintaining borrowing capacity in national money markets, growing core deposits, the repayment of loans and the ability to securitize or package loans for sale. BB&T has the ability to utilize sources such as FHLB letters of credit to reduce the securities we have pledged.

BB&T monitors the ability to meet customer demand for funds under both normal and stressed market conditions. In considering its liquidity position, management evaluates BB&T's funding mix based on client core funding, client rate-sensitive funding and national markets funding. In addition, management also evaluates exposure to rate-sensitive funding sources that mature in one year or less. Management also measures liquidity needs against 30 days of stressed cash outflows for Branch Bank and BB&T. To ensure a strong liquidity position, management maintains a liquid asset buffer of cash on hand and highly liquid unpledged securities. BB&T follows the FRB's enhanced prudential standards for purposes of determining the liquid asset buffer. BB&T's policy is to use the greater of either 5% of total assets or a range of projected net cash outflows over a 30 day period. As of March 31, 2019 and December 31, 2018, BB&T's liquid asset buffer was 14.8% and 14.7%, respectively, of total assets.
 
BB&T is considered to be a "modified LCR" holding company. BB&T would be subject to full LCR requirements if its assets were to increase above $250 billion or if it were to be considered internationally active. In October 2018, the federal banking agencies proposed changes to applicability thresholds for liquidity requirements that would amend the full LCR such that BHC's with assets between $250 billion and $700 billion, and less than $75 billion in certain other risk related exposures, would be subject to a reduced full LCR. See additional disclosures in the "Regulatory Considerations" section.

BB&T produces LCR calculations to effectively manage the position of high-quality liquid assets and the balance sheet deposit mix to optimize BB&T's liquidity position. BB&T's preliminary modified average LCR was approximately 130% for the three months ended March 31, 2019, compared to the regulatory minimum for such entities of 100%, which puts BB&T in full compliance with the rule. The LCR can experience volatility due to issues like maturing debt rolling into the 30 day measurement period, or client inflows and outflows. The daily change in BB&T's modified LCR averaged less than 2% for the three months ended March 31, 2019 with a maximum daily change of approximately 7%.

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

Parent Company
 
The purpose of the Parent Company is to serve as the primary source of capital for the operating subsidiaries. The Parent Company's assets primarily consist of cash on deposit with Branch Bank, equity investments in subsidiaries, advances to subsidiaries, accounts receivable from subsidiaries, and other miscellaneous assets. The principal obligations of the Parent Company are payments on long-term debt. The main sources of funds for the Parent Company are dividends and management fees from subsidiary, repayments of advances to subsidiaries, and proceeds from the issuance of equity and long-term debt. The primary uses of funds by the Parent Company are for investments in subsidiaries, advances to subsidiaries, dividend payments to common and preferred shareholders, retirement of common stock and payments on long-term debt.
 
The primary source of funds used for Parent Company cash requirements was dividends received from subsidiaries. See Note 15. Parent Company Financial Information of the Annual Report on Form 10-K for the year ended December 31, 2018 for additional information regarding dividends from subsidiaries and debt transactions.


BB&T Corporation 49


Liquidity at the Parent Company is more susceptible to market disruptions. BB&T prudently manages cash levels at the Parent Company to cover a minimum of one year of projected cash outflows which includes unfunded external commitments, debt service, common and preferred dividends and scheduled debt maturities without the benefit of any new cash infusions. Generally, BB&T maintains a significant buffer above the projected one year of cash outflows. In determining the buffer, BB&T considers cash requirements for common and preferred dividends, unfunded commitments to affiliates, being a source of strength to its banking subsidiary and being able to withstand sustained market disruptions that could limit access to the capital markets. At March 31, 2019 and December 31, 2018, the Parent Company had 36 months and 28 months, respectively, of cash on hand to satisfy projected contractual cash outflows, and 25 months and 19 months, respectively, taking into account common stock dividends.

Branch Bank
 
BB&T carefully manages liquidity risk at Branch Bank. Branch Bank's primary source of funding is customer deposits. Continued access to customer deposits is highly dependent on the confidence the public has in the stability of Branch Bank and its ability to return funds to the client when requested. BB&T maintains a strong focus on its reputation in the market to ensure continued access to client deposits. BB&T integrates its risk appetite into its overall risk management framework to ensure Branch Bank does not exceed its risk tolerance through its lending and other risk taking functions and thus risk becoming undercapitalized. BB&T believes that sufficient capital is paramount to maintaining the confidence of its depositors and other funds providers. BB&T has extensive capital management processes in place to ensure it maintains sufficient capital to absorb losses and maintain a highly capitalized position that will instill confidence in Branch Bank and allow continued access to deposits and other funding sources. Branch Bank monitors many liquidity metrics including funding concentrations, diversification, maturity distribution, contingent funding needs and ability to meet liquidity requirements under times of stress.

Branch Bank has several major sources of funding to meet its liquidity requirements, including access to capital markets through issuance of senior or subordinated bank notes and institutional CDs, access to the FHLB system, dealer repurchase agreements and repurchase agreements with commercial clients, access to the overnight and term Federal funds markets, use of a Cayman branch facility, access to retail brokered CDs and a borrower in custody program with the FRB for the discount window. At March 31, 2019, Branch Bank has approximately $83.1 billion of secured borrowing capacity, which represents approximately 5.5 times the amount of one year wholesale funding maturities.

Contractual Obligations, Commitments, Contingent Liabilities and Off-Balance Sheet Arrangements
 
Refer to BB&T's Annual Report on Form 10-K for the year ended December 31, 2018 for discussion with respect to BB&T's quantitative and qualitative disclosures about its fixed and determinable contractual obligations. Additional disclosures about BB&T's contractual obligations, commitments and derivative financial instruments are included in Note 14. Commitments and Contingencies, Note 15. Fair Value Disclosures and Note 16. Derivative Financial Instruments.

Capital
 
The maintenance of appropriate levels of capital is a management priority and is monitored on a regular basis. BB&T's principal goals related to the maintenance of capital are to provide adequate capital to support BB&T's risk profile consistent with the Board-approved risk appetite, provide financial flexibility to support future growth and client needs, comply with relevant laws, regulations, and supervisory guidance, achieve optimal credit ratings for BB&T and its subsidiaries and provide a competitive return to shareholders. Risk-based capital ratios, which include CET1 capital, Tier 1 capital and Total capital are calculated based on regulatory guidance related to the measurement of capital and risk-weighted assets.

BB&T regularly performs stress testing on its capital levels and is required to periodically submit the company's capital plans to the banking regulators. On February 5, 2019, the FRB notified banks with less than $250 billion in assets that they will not need to participate in the 2019 supervisory stress test. However, as a result of the pending merger with SunTrust, BB&T is required to submit a joint supervisory stress test and capital plan in May 2019.
 
Management regularly monitors the capital position of BB&T on both a consolidated and bank-level basis. In this regard, management's overriding policy is to maintain capital at levels that are in excess of internal capital targets, which are above the regulatory "well capitalized" levels. Management has implemented stressed capital ratio minimum targets to evaluate whether capital ratios calculated with planned capital actions are likely to remain above minimums specified by the FRB for the annual CCAR. Breaches of stressed minimum targets prompt a review of the planned capital actions included in BB&T's capital plan. 

50 BB&T Corporation


Table 19: Capital Requirements Under Basel III
 
Minimum Capital
 
Well-Capitalized
 
Minimum Capital Plus Capital Conservation Buffer
 
BB&T Targets
 
 
 
 
Operating (1)
 
Stressed
CET1 capital to risk-weighted assets
4.5
%
 
6.5
%
 
7.0
%
 
8.5
%
 
6.0
%
Tier 1 capital to risk-weighted assets
6.0

 
8.0

 
8.5

 
10.0

 
7.5

Total capital to risk-weighted assets
8.0

 
10.0

 
10.5

 
12.0

 
9.5

Leverage ratio
4.0

 
5.0

 
N/A
 
8.0

 
5.5

(1)
BB&T's goal is to maintain capital levels above all regulatory minimums.

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

BB&T's capital ratios are presented in the following table:
Table 20: Capital Ratios - BB&T Corporation
(Dollars in millions, except per share data, shares in thousands)
 
Mar 31, 2019
 
Dec 31, 2018
Risk-based:
 
(preliminary)
 
 
CET1 capital to risk-weighted assets
 
10.3
%
 
10.2
%
Tier 1 capital to risk-weighted assets
 
11.9

 
11.8

Total capital to risk-weighted assets
 
14.2

 
13.8

Leverage ratio
 
10.1

 
9.9

Non-GAAP capital measure (1):
 
 

 
 
Tangible common equity per common share
 
$
22.78

 
$
21.89

Calculation of tangible common equity (1):
 
 
 
 
Total shareholders' equity
 
$
30,883

 
$
30,178

Less:
 
 
 
 
Preferred stock
 
3,053

 
3,053

Noncontrolling interests
 
60

 
56

Intangible assets, net of deferred taxes
 
10,326

 
10,360

Tangible common equity
 
$
17,444

 
$
16,709

Risk-weighted assets
 
$
183,377

 
$
181,260

Common shares outstanding at end of period
 
765,920

 
763,326

(1)
Tangible common equity and related measures are non-GAAP measures that exclude the impact of intangible assets, net of deferred taxes, and their related amortization. These measures are useful for evaluating the performance of a business consistently, whether acquired or developed internally. BB&T's management uses these measures to assess the quality of capital and returns relative to balance sheet risk and believes investors may find them useful in their analysis of the Corporation. These capital measures are not necessarily comparable to similar capital measures that may be presented by other companies.

Capital levels remained strong at March 31, 2019. BB&T declared common dividends of $0.405 per share during the first quarter of 2019, which resulted in dividend and total payout ratios of 41.3%. As previously communicated, BB&T has suspended its share repurchases under the 2018 Repurchase Plan until after the completion of the merger of equals.


BB&T Corporation 51


Share Repurchase Activity
Table 21: Share Repurchase Activity
(Dollars in millions, except per share data, shares in thousands)
Total Shares Repurchased (1)
 
Average Price Paid Per Share (2)
 
Total Shares Repurchased Pursuant to Publicly-Announced Plan (3)
 
Maximum Remaining Dollar Value of Shares Available for Repurchase Pursuant to Publicly-Announced Plan
January 2019
1

 
$
49.14

 
—

 
$
1,125

February 2019
26

 
51.41

 
—

 
1,125

March 2019
48

 
50.13

 
—

 
1,125

Total
75

 
50.56

 
—

 
 
(1)
Includes shares exchanged or surrendered in connection with the exercise of equity-based awards under BB&T's equity-based compensation plans.
(2)
Excludes commissions.
(3)
Pursuant to the 2018 Repurchase Plan, announced on June 28, 2018, which authorized up to $1.7 billion of share repurchases over the one-year period ending June 30, 2019.


52 BB&T Corporation


Critical Accounting Policies
 
The accounting and reporting policies of BB&T are in accordance with GAAP and conform to the accounting and reporting guidelines prescribed by bank regulatory authorities. BB&T's financial position and results of operations are affected by management's application of accounting policies, including estimates, assumptions and judgments made to arrive at the carrying value of assets and liabilities and amounts reported for revenues and expenses. Different assumptions in the application of these policies could result in material changes in the consolidated financial position and/or consolidated results of operations and related disclosures. The more critical policies include accounting for the ACL, determining fair value of financial instruments, intangible assets, and costs and benefit obligations associated with pension and postretirement benefit plans. Understanding BB&T's accounting policies is fundamental to understanding the consolidated financial position and consolidated results of operations. The critical accounting policies are discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in BB&T's Annual Report on Form 10-K for the year ended December 31, 2018. Significant accounting policies and changes in accounting principles and effects of new accounting pronouncements are discussed in Note 1. Basis of Presentation in Form 10-K for the year ended December 31, 2018. Additional disclosures regarding the effects of new accounting pronouncements are included in the Note 1. Basis of Presentation included herein. There have been no other changes to the significant accounting policies during 2019.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures
 
As of the end of the period covered by this report, the management of the Company, under the supervision and with the participation of the Company's CEO and CFO, carried out an evaluation of the effectiveness of the Company's disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on that evaluation, the CEO and CFO concluded that the Company's disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

There were no changes in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarter ended March 31, 2019 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II. OTHER INFORMATION
 
ITEM 1. LEGAL PROCEEDINGS

Refer to the Legal Proceeding section in Note 14. Commitments and Contingencies, which is incorporated by reference into this item.

ITEM 1A. RISK FACTORS
 
There have been no material changes to the risk factors disclosed in BB&T's Annual Report on Form 10-K for the year ended December 31, 2018. Additional risks and uncertainties not currently known to BB&T or that management has deemed to be immaterial also may materially adversely affect BB&T's business, financial condition, and/or operating results.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Refer to the Share Repurchase Activity section in the Management's Discussion and Analysis of Financial Condition and Results of Operations section, which is incorporated by reference into this item.


BB&T Corporation 53


ITEM 6. EXHIBITS
Exhibit No.
 
Description
 
Location
2.1**
 
Agreement and Plan of Merger, dated as of February 7, 2019, by and between SunTrust Banks, Inc. and BB&T Corporation.

 
3.1
 
Bylaws of the Registrant, as amended and restated January 29, 2019.
 
10.1*
 
Form of Restricted Stock Unit Agreement (Non-Employee Directors) for the BB&T 2012 Incentive Plan (effective 2019).
 
10.2*
 
Form of LTIP Award Agreement for the BB&T Corporation 2012 Incentive Plan (effective 2019).
 
10.3*
 
Form of Performance Unit Award Agreement for the BB&T Corporation 2012 Incentive Plan (effective 2019).
 
10.4*
 
Amended and Restated Employment Agreement by and among BB&T Corporation, Branch Banking and Trust Co. and Kelly S. King dated as of February 7, 2019.
 
10.5*
 
Form of Notice of Term Non-Renewal under Employment Agreements

 
31.1
 
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
31.2
 
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
32
 
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
101.INS
 
XBRL Instance Document.
 
Filed herewith.
101.SCH
 
XBRL Taxonomy Extension Schema.
 
Filed herewith.
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase.
 
Filed herewith.
101.LAB
 
XBRL Taxonomy Extension Label Linkbase.
 
Filed herewith.
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase.
 
Filed herewith.
101.DEF
 
XBRL Taxonomy Definition Linkbase.
 
Filed herewith.
*    Management compensatory plan or arrangement.
**    Pursuant to Item 601(b)(2) of Regulation S-K, certain schedules and similar attachments have been omitted. The registrant hereby agrees to furnish a copy of any omitted schedule or similar attachment to the SEC upon request.


54 BB&T Corporation


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
BB&T CORPORATION
(Registrant)
 
 
 
 
 
Date:
April 29, 2019
 
By:
/s/ Daryl N. Bible
 
 
 
 
Daryl N. Bible
 
 
 
 
Senior Executive Vice President and Chief Financial Officer
 
 
 
 
(Principal Financial Officer)
 
 
 
 
 
Date:
April 29, 2019
 
By:
/s/ Cynthia B. Powell
 
 
 
 
Cynthia B. Powell
 
 
 
 
Executive Vice President and Corporate Controller
 
 
 
 
(Principal Accounting Officer)

BB&T Corporation 55


Exhibit 10.1
BB&T CORPORATION
2012 INCENTIVE PLAN
Restricted Stock Unit Agreement
(Non-Employee Directors)

Grant Date:
February 26, 2019
Date Vested (Subject to Section 3):
December 31, 2019
THIS AGREEMENT (the “Agreement”), made effective as of February 26, 2019 (the “Grant Date”), between BB&T CORPORATION, a North Carolina corporation (“BB&T”), for itself and its Affiliates, and the Non-Employee Director (the “Participant”) specified in the above Notice of Grant and Agreement (the “Notice of Grant”), is made pursuant to and subject to the provisions of the BB&T Corporation 2012 Incentive Plan, as it may be amended and/or restated from time to time (the “Plan”).
RECITALS:
BB&T desires to carry out the purposes of the Plan by affording the Participant an opportunity to acquire shares of BB&T Common Stock, $5.00 par value per share (the “Common Stock”), as hereinafter provided.
In consideration of the foregoing, of the mutual promises set forth below and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:
1.Incorporation of Plan. The rights and duties of BB&T and the Participant under this Agreement shall in all respects be subject to and governed by the provisions of the Plan, the terms of which are incorporated herein by reference. In the event of any conflict between the provisions in this Agreement and those of the Plan, the provisions of the Plan shall govern. Unless otherwise provided herein, capitalized terms in this Agreement shall have the same definitions as set forth in the Plan.
2.    Grant of Restricted Stock Unit. Subject to the terms of this Agreement and the Plan, BB&T hereby grants the Participant a Restricted Stock Unit (the “Award”) for the number of whole shares of Common Stock (the “Shares”) specified in the Notice of Grant. The “Restriction Period” is the period beginning on the Grant Date and ending on such date or dates, and satisfaction of such conditions, as described in Section 3 and Section 4 herein. For the purposes herein, the Shares subject to the Award are units that will be reflected in a book account maintained by BB&T and that will be settled in whole shares of Common Stock, if and to the extent permitted pursuant to this Agreement and the Plan. Prior to distribution of the Shares upon vesting of the Award, the Award shall represent an unsecured obligation of BB&T, payable (if at all) only from BB&T’s general assets.
3.    Vesting of Award. Subject to the terms of the Plan and this Agreement (including but not limited to the provisions of Section 4 and Section 5 herein), the Award shall become fully vested and earned on the earlier of (a) December 31, 2019, or (b) the “Effective Time” as that term is defined in the Agreement and Plan of Merger by and between SunTrust Banks, Inc. and BB&T Corporation dated February 7, 2019.




The Administrator has sole authority to determine whether and to what degree the Award has vested and is payable, and to interpret the terms and conditions of this Agreement and the Plan.
4.    Termination of Service; Forfeiture of Award; Effect of Change of Control.
(a)    Except as may be otherwise provided in the Plan or Section 4(b) of this Agreement, in the event that the service of the Participant as a Director terminates for any reason and the Award has not vested pursuant to Section 3, then the Award, to the extent not vested as of the Participant’s termination of service date, shall be forfeited immediately upon such termination of service, and the Participant shall have no further rights with respect to the Award or the Shares underlying the Award. The Administrator (or its designee, to the extent permitted under the Plan) shall have sole discretion to determine if a Participant’s rights have terminated pursuant to the Plan and this Agreement, including but not limited to the authority to determine the basis for the Participant’s termination of service. The Participant expressly acknowledges and agrees that, except as otherwise provided herein, the termination of the Participant’s service as a Director shall result in forfeiture of the Award and the underlying Shares to the extent the Award has not vested as of the Participant’s termination of service date. As used in this Agreement, the phrase “termination of service” means a “separation from service,” within the meaning of Section 409A, as a Director.

(b)    Notwithstanding the provisions of Section 3 and Section 4(a), the following provisions shall apply if any of the following shall occur prior to December 31, 2019:

(i)
Death. In the event that the Participant remains in the continuous service of BB&T or an Affiliate as a Director from the Grant Date until the Participant’s death, the Award shall become fully vested as of the date of death without regard to the vesting schedule set forth in Section 3 herein.

(ii)
Disability. In the event that the Participant remains in the continuous service of BB&T or an Affiliate as a Director from the Grant Date until the date of the Participant’s disability (as determined by the Administrator or its designee in accordance with the Plan and, if applicable, Section 409A), the Award shall become fully vested as of the Participant’s date of termination of service as a Director on account of disability without regard to the vesting schedule set forth in Section 3 herein.

(iii)    Change of Control.

(A)
In the event that there is “Change of Control,” as defined in Section 4(b)(iii)(B), of BB&T subsequent to the date hereof, the Award shall be payable in accordance with this Agreement and become fully vested as of the effective date of such event without regard to the vesting schedule set forth in Section 3 herein.
(B)
For purposes of this Section 4(b)(iii), a “Change of Control” will be deemed to have occurred on the earliest of the following dates: (i) the date any person or group of persons (as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), together with its affiliates, excluding employee benefit plans of BB&T and its Affiliates, is or becomes, directly or indirectly, the “beneficial owner” (as defined in Rule 13d-3




promulgated under the Exchange Act) of securities of BB&T representing thirty percent (30%) or more of the combined voting power of BB&T’s then outstanding securities; or (ii) the date when, as a result of a tender offer or exchange offer for the purchase of securities of BB&T (other than such an offer by BB&T for its own securities), or as a result of a proxy contest, merger, consolidation or sale of assets, or as a result of any combination of the foregoing, individuals who at the beginning of any consecutive twelve- (12-) month period during the Restriction Period of the Award constituted BB&T’s Board, plus new directors whose election or nomination for election by BB&T’s shareholders is approved by a vote of at least two-thirds of the directors still in office who were directors at the beginning of such twelve- (12-) month period (collectively, the “Continuing Directors”), cease for any reason during such twelve- (12-) month period to constitute at least two-thirds of the members of such board of directors; (iii) the date the shareholders of BB&T approve an agreement for the sale or disposition by BB&T of all or substantially all of BB&T’s assets within the meaning of Section 409A; or (iv) the date that any one person, or more than one person acting as a group, acquires ownership of stock of BB&T that, together with stock held by such person or group constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of BB&T within the meaning of Section 409A.
5.    Settlement of Award and Distribution of Shares.
(a)    Upon vesting, the Award shall be payable in a lump sum in whole shares of Common Stock. Fractional Shares shall not be issuable hereunder, and unless the Administrator determines otherwise, any such fractional Share shall be disregarded.

(b)    Shares of Common Stock subject to the Award shall, upon vesting of the Award, be issued and distributed to the Participant (or, if the Participant is deceased, to the Participant’s beneficiary or beneficiaries) in a lump sum within two and one-half (2 ½) months after the end of the Restriction Period (provided that if such two and one-half (2 ½) month period begins in one calendar year and ends in another, the Participant (or the Participant’s beneficiary or beneficiaries) shall not have the right to designate the calendar year of payment).

6.    No Right to Continued Service. Neither the Plan, the grant of the Award, nor any other action related to the Plan shall confer upon the Participant any right to continue in the service of BB&T or an Affiliate as a Director or in any other capacity or affect in any way with the right of BB&T or an Affiliate to terminate the Participant’s service at any time. Except as otherwise expressly provided in the Plan or this Agreement or as determined by the Administrator, all rights of the Participant with respect to the Award shall terminate upon termination of the service of the Participant with BB&T or an Affiliate. The grant of the Award does not create any obligation on the part of BB&T to grant any further Awards.

7.    Nontransferability of Award and Shares. The Award shall not be transferable (including by sale, assignment, pledge or hypothecation) other than by will or the laws of intestate succession. The designation of a beneficiary in accordance with Plan procedures does not constitute a transfer; provided, however, that unless disclaimer provisions are specifically included in a beneficiary designation form accepted by the Administrator, no beneficiary of the Participant may disclaim the Award. The Participant shall not




sell, transfer, assign, pledge or otherwise encumber the Shares subject to the Award until the Restriction Period has expired and all conditions to vesting and distribution have been met.

8.    Superseding Agreement; Binding Effect. This Agreement supersedes any statements, representations or agreements of BB&T with respect to the grant of the Award or any related rights, and the Participant hereby waives any rights or claims related to any such statements, representations or agreements. This Agreement does not supersede or amend any existing confidentiality agreement, nonsolicitation agreement, noncompetition agreement, service agreement, or any other similar agreement between the Participant and BB&T or an Affiliate, including, but not limited to, any restrictive covenants contained in such agreements.

9.    Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of North Carolina, without regard to the principles of conflicts of law, and in accordance with applicable United States federal laws.

10.    Amendment and Termination; Waiver. Subject to the terms of the Plan, this Agreement may be amended or terminated only by the written agreement of the parties hereto. The waiver by BB&T of a breach of any provision of this Agreement by the Participant shall not operate or be construed as a waiver of any subsequent breach by the Participant. Notwithstanding the foregoing, the Administrator shall have unilateral authority to amend the Plan and this Agreement (without Participant consent) to the extent necessary to comply with applicable law or changes to applicable law (including but in no way limited to Section 409A and federal securities laws), and the Participant hereby consents to any such amendments to the Plan and this Agreement.

11.    Issuance of Shares; Rights as Shareholder. The Participant and the Participant’s legal representatives, legatees or distributees shall not be deemed to be the holder of any Shares subject to the Award and shall not have any voting rights, dividend rights or other rights of a shareholder unless and until such Shares have been issued to the Participant or them. No Shares subject to the Award shall be issued at the time of grant of the Award. Shares subject to the Award shall be issued in the name of the Participant (or, if the Participant is deceased, in the name of the Participant’s beneficiary or beneficiaries) as soon as practicable after, and only to the extent that, the Award has vested and if such distribution is otherwise permitted under the terms of Section 5 herein. Neither dividends nor dividend equivalent rights shall be granted in connection with the Award, and the Award shall not be adjusted to reflect the distribution of any dividends on the Common Stock (except as may be otherwise provided under the Plan). No dividends on the Shares shall be payable prior to both (i) the vesting of the Award and (ii) the issuance and distribution of Shares to the Participant.

12.    Withholding; Tax Matters; Fees.

(a)    BB&T shall report all income and prior to the delivery or transfer of Shares or any other benefit conferred under the Plan, BB&T or its agent shall withhold all required local, state, federal, foreign and other income tax obligations and any other amount required to be withheld by any governmental authority or law and paid over by BB&T to such authority for the account of such recipient. In accordance with procedures established by the Administrator (including, without limitation, procedures established by the Administrator after BB&T’s adoption of ASU 2016-09, Compensation - Stock Compensation (Topic 718) dated March, 2016), the Participant may arrange to pay all applicable taxes in cash. In the event the Participant does not make such arrangements, such tax obligations shall be satisfied by the withholding of Shares to which the Participant is entitled. The number of Shares to be withheld shall have a Fair Market Value as of




the date that the amount of tax to be withheld is determined as nearly equal as possible to the amount of such obligations being satisfied.

(b)    BB&T has made no warranties or representations to the Participant with respect to the tax consequences (including but not limited to income tax consequences) related to the Award or issuance, transfer or disposition of Shares (or any other benefit) pursuant to the Award, and the Participant is in no manner relying on BB&T or its representatives for an assessment of such tax consequences. The Participant acknowledges that there may be adverse tax consequences with respect to the Award (including but not limited to the acquisition or disposition of the Shares subject to the Award) and that the Participant should consult a tax advisor prior to such acquisition or disposition. The Participant acknowledges that the Participant has been advised that the Participant should consult with the Participant’s own attorney, accountant, and/or tax advisor regarding the decision to enter into this Agreement and the consequences thereof. The Participant also acknowledges that BB&T has no responsibility to take or refrain from taking any actions in order to achieve a certain tax result for the Participant.

(c)    All third party fees relating to the release, delivery, or transfer of any Award or Shares shall be paid by the Participant or other recipient. To the extent the Participant or other recipient is entitled to any cash payment from BB&T or any of its Affiliates, the Participant hereby authorizes the deduction of such fees from such payment(s) without further action or authorization of the Participant or other recipient; and to the extent the Participant or other recipient is not entitled to any such payments, the Participant or other recipient shall pay BB&T or its designee an amount equal to such fees immediately upon the third party’s charge of such fees.

13.    Administration. The authority to construe and interpret this Agreement and the Plan, and to administer all aspects of the Plan, shall be vested in the Administrator, and the Administrator shall have all powers with respect to this Agreement as are provided in the Plan. Any interpretation of this Agreement by the Administrator and any decision made by it with respect to this Agreement is final and binding on the parties hereto.

14.    Notices. Any and all notices under this Agreement shall be in writing and sent by hand delivery or by certified or registered mail (return receipt requested and first-class postage prepaid), in the case of BB&T, to its Human Systems Division, 200 West Second Street (27101), PO Box 1215, Winston-Salem, NC 27102, attention: Human Systems Division Manager, and in the case of the Participant, to the last known address of the Participant as reflected in BB&T’s records.

15.    Severability. The provisions of this Agreement are severable, and if any one or more provisions may be determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

16.    Compliance with Laws; Restrictions on Award and Shares. BB&T may impose such restrictions on the Award and the Shares or other benefits underlying the Award as it may deem advisable, including without limitation restrictions under the federal securities laws, federal tax laws, the requirements of any stock exchange or similar organization and any blue sky, state or foreign securities laws applicable to such Award or Shares. Notwithstanding any other provision in the Plan or this Agreement to the contrary, BB&T shall not be obligated to issue, deliver or transfer any shares of Common Stock, make any other distribution of benefits under the Plan, or take any other action, unless such delivery, distribution or action is in compliance with all applicable laws, rules and regulations (including but not limited to the requirements of the Securities Act). BB&T may cause a restrictive legend or legends to be placed on any Shares issued




pursuant to the Award in such form as may be prescribed from time to time by applicable laws and regulations or as may be advised by legal counsel.

17.    Successors and Assigns. Subject to the limitations stated herein and in the Plan, this Agreement shall be binding upon and inure to the benefit of the Participant and the Participant’s executors, administrators and permitted transferees and beneficiaries and BB&T and its successors and assigns.

18.    Counterparts; Further Instruments. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. The parties hereto agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Agreement.

19.    Right of Offset. Notwithstanding any other provision of the Plan or this Agreement, subject to any applicable laws to the contrary, BB&T may reduce the amount of any benefit or payment otherwise payable to or on behalf of the Participant by the amount of any obligation of the Participant to BB&T or an Affiliate that is or becomes due and payable, and the Participant shall be deemed to have consented to such reduction; provided, however, that to the extent Section 409A is applicable, such offset shall not exceed the greater of Five Thousand Dollars ($5,000) or the maximum offset amount then permitted under Section 409A.

20.    Adjustment of Award. The Administrator shall have authority to make adjustments to the terms and conditions of the Award in recognition of unusual or nonrecurring events affecting BB&T or any Affiliate, or the financial statements of BB&T or any Affiliate, or of changes in applicable laws, regulations or accounting principles, if the Administrator determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or necessary or appropriate to comply with applicable laws, rules or regulations.

IN WITNESS WHEREOF, BB&T and the Participant have entered into this Agreement effective as of the Grant Date. Should the Participant fail to acknowledge his or her electronic acceptance of this Agreement, this Agreement may become null and void as of the Grant Date and the Participant may forfeit any and all rights hereunder at the discretion of the Administrator.




Exhibit 10.2
BB&T CORPORATION
2012 INCENTIVE PLAN
LTIP Award Agreement
(Senior Executive)

Name of Participant:
<<First Name>> <<MI>> <<Last Name>>
Grant Date:
February __, 2019
Performance Period:
January 1, 2019 through December 31, 2021
THIS AGREEMENT (the “Agreement”), made effective as of February __, 2019 (the “Grant Date”), between BB&T CORPORATION, a North Carolina corporation (“BB&T”), and <<First Name>> <<MI>> <<Last Name>>, an Employee (the “Participant”).
RECITALS:
BB&T desires to carry out the purposes of the BB&T Corporation 2012 Incentive Plan, as it may be amended and/or restated (the “Plan”), by affording the Participant a long-term incentive compensation opportunity as hereinafter provided.
In consideration of the foregoing, of the mutual promises set forth below and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:
1.Incorporation of Plan. The rights and duties of BB&T and the Participant under this Agreement shall in all respects be subject to and governed by the provisions of the Plan, the terms of which are incorporated herein by reference. In the event of any conflict between the provisions in the Agreement and those of the Plan, the provisions of the Plan shall govern. Unless otherwise provided herein, capitalized terms in this Agreement shall have the same definitions as set forth in the Plan. Notwithstanding the foregoing, as a result of changes to Section 162(m) by the Tax Cut and Jobs Act of 2017, the performance-based compensation provisions of Section 162(m) are inapplicable to this Agreement.
2.    Performance Award. Subject to the terms of this Agreement and the Plan, BB&T hereby grants the Participant an LTIP Award (the “Award”) in accordance with the following provisions:
(a)    Performance Period. The performance period (“Performance Period”) for the Award shall be January 1, 2019 through December 31, 2021.
(b)    Partial Performance Period.
(i)
(1) Death or Disability. If the Participant ceases to be a Participant in the Plan during the Performance Period due to the Participant’s termination of employment due to death or Disability, the Participant’s Award for the Performance Period shall be payable in accordance with this Agreement, based upon the attainment of the Absolute Performance Goal and at least the Threshold Level of Achievement and the application of the TSR Modifier as provided in Section 2(c) and Exhibit A herein, and prorated to reflect such




Participant’s actual number of full months of employment during the Performance Period; provided that, for the avoidance of doubt, in the case of a Change of Control, the Performance Period shall end as of the date of the Change of Control and payment shall be made (for Participants who are not Employees on the date of the Change of Control), within two and one-half (2 ½) months following a Change of Control as provided in Section 5(b) herein, calculated as provided in Section 2(b)(i)(3) below. For the avoidance of doubt, the phrase “termination of employment” means a Separation from Service.
(2)    Involuntary Termination Without Cause and Retirement. If the Participant ceases to be a Participant in the Plan during the Performance Period due to the Participant’s termination of employment (A) involuntarily by the Company and/or its Affiliates without Cause, or (B) due to Retirement, the Participant’s Award for the Performance Period shall be payable in accordance with this Agreement, based upon the attainment of the Absolute Performance Goal and at least the Threshold Level of Achievement and the application of the TSR Modifier as provided in Section 2(c) and Exhibit A herein, and prorated to reflect such Participant’s actual number of full months of employment during the Performance Period; provided that, for the avoidance of doubt, in the case of a Change of Control, the Performance Period shall end as of the date of the Change of Control and payment shall be made (for Participants who are not Employees on the date of the Change of Control), within two and one-half (2 ½) months following a Change of Control as provided in Section 5(b) herein, calculated as provided in Section 2(b)(i)(3) below. A termination shall be for “Cause” if the termination of the Participant’s employment by the Company and/or its Affiliates is on account of the Participant’s (x) dishonesty, theft or embezzlement; (y) refusal or failure to perform the Participant’s assigned duties for BB&T or an Affiliate in a satisfactory manner; or (z) engaging in any conduct that could be materially damaging to BB&T or its Affiliates without a reasonable good faith belief that such conduct was in the best interest of BB&T or any of its Affiliates. The determination of whether termination is for Cause shall be made by the Administrator (or its designee, to the extent permitted under the Plan), and its determination shall be final and conclusive. For the avoidance of doubt, the phrase “termination of employment” means a Separation from Service.

(3)    Change of Control. If, while the Participant is an Employee, there is a Change of Control during the Performance Period, the Performance Period shall, notwithstanding anything to the contrary elsewhere in this Agreement, end upon the date of the Change of Control and the Participant’s Award shall be paid within two and one-half (2 ½) months following a Change of Control as provided in Section 5(b) herein, calculated based on the Participant’s base salary received during the shortened Performance Period (that commenced on January 1, 2019, and ended on the date of the Change of Control) averaged over the original three (3) year Performance Period (“Averaged Base Salary”) as follows:
(aa)    the Participant’s Averaged Base Salary shall first be multiplied by the Participant’s Target % to arrive at a dollar amount (the “Product”);




(bb)     the Product shall then be divided by the number of months in the shortened Performance Period to arrive at a dollar amount (the “Quotient”);
(cc)     provided that the Absolute Performance Goal of Section 2(c)(i)(aa) is met for the completed calendar years during such shortened Performance Period (and if there are no completed calendar years during such shortened Performance Period, the Absolute Performance Goal of Section 2(c)(i)(aa) shall be deemed to be met), Participant’s Award shall be the sum of (1) and (2) as follows (and payable in accordance with Section 5(b) of this Agreement): (1) for completed calendar year(s) during the shortened Performance Period, an Award amount shall be calculated by multiplying the Quotient by the number of months in the completed calendar year(s) and then by the actual Level of Achievement attained during such completed calendar year(s) adjusted by the TSR Modifier for the completed calendar year(s) (and subject to the Maximum Award payment of 150% of the Participant’s Target %); and (2) for a partially completed calendar year in which a Change of Control occurs, an Award amount calculated by multiplying the Quotient by the number of months in the partially completed calendar year and then by the Target Level of Achievement for the Relative Performance Goal in Exhibit A.
(ii)
(1)     For purposes of Section 2(b)(i)(3) above, a “Change of Control” will be deemed to have occurred on the earliest of the following dates: (A) the date any person or group of persons (as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), together with its affiliates, excluding employee benefit plans of BB&T and its Affiliates, is or becomes, directly or indirectly, the “beneficial owner” (as defined in Rule 13d-3 promulgated under the Exchange Act) of securities of BB&T representing thirty percent (30%) or more of the combined voting power of BB&T’s then outstanding securities; or (B) the date when, as a result of a tender offer or exchange offer for the purchase of securities of BB&T (other than such an offer by BB&T for its own securities), or as a result of a proxy contest, merger, consolidation or sale of assets, or as a result of any combination of the foregoing, individuals who at the beginning of any consecutive twelve- (12-) month period during the Performance Period of the Award constituted BB&T’s Board, plus new directors whose election or nomination for election by BB&T’s shareholders is approved by a vote of at least two-thirds of the directors still in office who were directors at the beginning of such twelve- (12-) month period (collectively, the “Continuing Directors”), cease for any reason during such twelve- (12-) month period to constitute at least two-thirds of the members of such board of directors; (C) the date the shareholders of BB&T approve an agreement for the sale or disposition by BB&T of all or substantially all of BB&T’s assets within the meaning of Section 409A; or (D) the date that any one person, or more than one person acting as a group, acquires ownership of stock of BB&T that, together with stock held by such person or group constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of BB&T within the meaning of Section 409A.




(2)    Notwithstanding Section 2(b)(i)(3) and (ii)(1) above, the term “Change of Control” shall not include any event that is a “Merger of Equals.” For purposes of the Plan and this Agreement, the term “Merger of Equals” means any event that would otherwise qualify as a Change of Control if the event (including, if applicable, the terms and conditions of the related agreements, exhibits, annexes, and similar documents) satisfies all of the following conditions as of the date of such event: (A) the Board of BB&T or, if applicable, a majority of the Continuing Directors has, prior to the change in control event, approved the event; (B) at least fifty percent (50%) of the common stock of the surviving corporation outstanding immediately after consummation of the event, together with at least fifty percent (50%) of the voting securities representing at least fifty percent (50%) of the combined voting power of all voting securities of the surviving corporation outstanding immediately after the event shall be owned, directly or indirectly, by the persons who were the owners, directly or indirectly, of the common stock and voting securities of BB&T immediately before the consummation of such event in substantially the same proportions as their respective direct or indirect ownership immediately before such event of the common stock and voting securities of BB&T, respectively; (C) at least fifty percent (50%) of the directors of the surviving corporation immediately after the event shall be composed of directors who were Directors or Continuing Directors immediately before the event; and (D) the person who was the Chief Executive Officer (“CEO”) of BB&T immediately before the event shall be the CEO of the surviving corporation immediately after the event. If a transaction constitutes a Merger of Equals, then, notwithstanding the provisions of Section 2(b)(i)(3) and (ii)(1) above, the vesting of the Award will not be accelerated due to the Merger of Equals, but the Award shall instead continue to vest, if at all, in accordance with the provisions of Sections 2, 3 and 4 herein.
(c)    Performance Measures for Award. The pre-established three- (3-) year Performance Period’s Performance Measures (as defined in Section 2(c)(i) below) applicable to the Award, the Participant’s targeted percentage of the Participant’s average base salary during the Performance Period (“Participant’s Target %”), Levels of Achievement, and the potential projected cash payout to the Participant, based upon the Level of Achievement, are as follows:
(i)
Performance Measures and Relative TSR/TSR Modifier:
(aa)     Absolute Performance Goal: The average return on shareholders’ common equity for BB&T during the Performance Period determined in accordance with United States generally accepted accounting principles, as adjusted by BB&T (“BB&T ROCE”), must be at least three percent (3%), and if less than three percent (3%) there will not be an Award payout.
(bb)     Relative Performance Goal: If the Absolute Performance Goal is achieved, the next Performance Measure shall be BB&T ROCE relative to the average, by company, return on shareholders’ common equity, determined in accordance with United States generally accepted accounting principles, achieved by each company, as adjusted by BB&T, of the Peer Group




during the Performance Period (“Peer Group ROCE”).
(cc)    Relative TSR/TSR Modifier: After the Level of Achievement of the Relative Performance Goal is determined by the Administrator as provided in this Agreement, the Relative TSR and TSR Modifier shall be determined and applied in accordance with the TSR Modifier chart in Exhibit A attached hereto and made a part hereof. As used in this Agreement, “Relative Total Shareholder Return” and “Relative TSR” means BB&T’s total Common Stock shareholder return performance rank defined as a percentile for the Performance Period relative to the range of the Peer Group members’ total common stock shareholder return for the Performance Period. Total shareholder return for BB&T and each Peer Group member shall be calculated based upon BB&T’s Common Stock and the Peer Group members’ common stock appreciation during the Performance Period plus the value of dividends on the ex-dividend dates during the Performance Period on such stock (which dividends shall be deemed to have been reinvested in such underlying stock) and using a trailing twenty (20) trading day average stock price to determine both the Performance Period beginning stock price and the Performance Period ending stock price.
(ii)
For purposes of the Relative Performance Goal of the Award, there shall be levels of achievement (“Levels of Achievement”), including, threshold (“Threshold”), target (“Target”), and maximum (“Maximum”). The Threshold Level of Achievement shall be a BB&T ROCE of the twenty-fifth (25th) percentile of the Peer Group ROCE; the Target Level of Achievement shall be a BB&T ROCE of the fiftieth (50th) percentile of the Peer Group ROCE; and the Maximum Level of Achievement shall be a BB&T ROCE of the seventy-fifth (75th) percentile of the Peer Group ROCE. The Levels of Achievement range from the Threshold Level of Achievement to the Maximum Level of Achievement as illustrated in the Level of Achievement Chart attached hereto as Exhibit A and made a part hereof.
(iii)
For avoidance of doubt in the interpretation of the Exhibit A Level of Achievement Chart, there will not be an Award payout if the Threshold Level of Achievement is not attained for the Performance Period. If the Threshold Level of Achievement is attained for the Performance Period, the Award payout to the Participant will, subject to the TSR Modifier of Exhibit A, be fifty percent (50%) of the Participant’s Target %. If the Target Level of Achievement is attained for the Performance Period, the Award payout to the Participant will, subject to the TSR Modifier of Exhibit A, be one hundred percent (100%) of the Participant’s Target %. If the Maximum Level of Achievement is attained for the Performance Period, the Award payout to the Participant will, subject to the TSR Modifier of Exhibit A, be one hundred fifty percent (150%) of the Participant’s Target %.
(iv)
The projected Award payout to the Participant, if either the Target Level of Achievement or if the Maximum Level of Achievement is attained for the




Performance Period, with potential Relative TSR at a fiftieth (50th) percentile for a Target payout and at a seventy-fifth (75th) percentile for a Maximum payout, is summarized in the following chart (with certain assumptions concerning the Participant’s base salary for 2019, 2020 and 2021):
2019 Base Salary1
2020 Base Salary1
2021 Base Salary1
Participant’s
Target %
Target Payout (if Target Level of Achievement Attained and Relative TSR is 50th Percentile2
Maximum Payout (if Maximum Level of Achievement is Attained and Relative TSR is 75th Percentile or greater)2   
$_________
$_________
$_________
_________%
$________________3
$____________3


(v)
For purposes hereof, the term “Peer Group” means Capital One Financial Corporation; Bank of America Corporation; Fifth-Third Bancorp; Huntington Bancshares, Incorporated; KeyCorp; M&T Bank Corporation; PNC Financial Services Group, Inc.; Regions Financial Corporation; SunTrust Banks, Inc.; U.S. Bancorp; Wells Fargo & Company; and Citizens Financial Group, Inc.
3.    Vesting of Award. Subject to the terms of the Plan and the Agreement (including but not limited to the provisions of Sections 2, 4 and 5 herein), the Award shall be one hundred percent (100%) vested and, to the extent any Award payout is determined by the Administrator, earned on January 1, 2022, following the December 31, 2021 expiration of the Performance Period, provided that the Administrator has not determined that all or any part of the Award shall be cancelled or forfeited as a result of either (i) a significant, negative risk outcome as a result of a corporate or individual action, or (ii) BB&T incurring an aggregate operating loss for the Performance Period. The Administrator has sole authority to determine whether and to what degree the Award has vested and is payable and to interpret the terms and conditions of this Agreement and the Plan.
4.    Forfeiture of Award. Except as may be otherwise provided in the Plan or in this Agreement (including, without limitation, the provisions of Section 2(b) herein), in the event that the employment of the Participant with BB&T or an Affiliate terminates for any reason and the Award has not vested pursuant to Section 3, then the Award, to the extent not vested as of the Participant’s termination of employment date, shall be forfeited immediately upon such termination, and the Participant shall have no further rights with respect to the Award. The Administrator (or its designee, to the extent permitted under the Plan) shall have sole discretion to determine if a Participant’s rights have terminated pursuant to the Plan and this Agreement, including but not limited to the authority to determine the basis for the Participant’s termination of employment. The Participant expressly acknowledges and agrees that, except as otherwise provided in this Agreement, the termination of the Participant’s employment shall result in forfeiture of the Award and any underlying payout to the extent the Award has not vested as of the Participant’s termination of employment date.
________________________
1
Solely for illustration purposes, projections assume certain salary increases on April 1st of each year. Projections do not reflect negative discretion reductions by the Administrator.
2
The projected payouts will change based upon the Participant’s actual base salary for 2019, 2020 and 2021.
3
Pursuant to the terms of the Plan, in the Administrator’s discretion the Award may be payable in cash, in shares of Common Stock, or in a combination of both.





5.    Award Payout.
(a)    The amount of the Award payout, if any, shall be determined by the Administrator following the end of the Performance Period in accordance with the terms of this Agreement and the Plan including, without limitation, all applicable adjustments to the calculation of the Performance Goals.
(b)    The Award payout determined pursuant to Section 5(a) shall be payable, and paid, in cash, shares of Common Stock, or a combination of cash and shares of Common Stock, as determined by the Administrator in its sole discretion.
(c)    Award payout shall, upon vesting of the Award, be made to the Participant (or in the event of the Participant’s death, to the Participant’s beneficiary or beneficiaries) in a lump sum within two and one-half (2 ½) months following the end of the Performance Period; or if a Change of Control occurs during the Performance Period, payment shall be made in a lump sum within two and one-half (2 ½) months following the Change of Control (provided that if such two and one-half (2 ½) month period begins in one calendar year and ends in another, the Participant (or the Participant’s beneficiary or beneficiaries) shall not have the right to designate the calendar year of payment).
6.    No Right to Continued Employment or Service. Neither the Plan, the grant of the Award, nor any other action related to the Plan shall confer upon the Participant any right to continue in the employment or service of BB&T or an Affiliate or affect in any way with the right of BB&T or an Affiliate to terminate the Participant’s employment or service at any time. Except as otherwise expressly provided in the Plan or this Agreement or as determined by the Administrator, all rights of the Participant with respect to the Award shall terminate upon termination of the employment or service of the Participant with BB&T or an Affiliate. The grant of the Award does not create any obligation on the part of BB&T or an Affiliate to grant any further awards. So long as the Participant shall continue to be an Employee of BB&T or an Affiliate, the Award shall not be affected by any change in the duties or position of the Participant.
7.    Nontransferability of Award and Shares. The Award, and any Award payout, shall not be transferable (including by sale, assignment, pledge or hypothecation) other than by will or the laws of intestate succession. The designation of a beneficiary in accordance with Plan procedures does not constitute a transfer; provided, however, that unless disclaimer provisions are specifically included in a beneficiary designation form accepted by the Administrator, no beneficiary of the Participant may disclaim the Award.
8.    Superseding Agreement; Binding Effect. This Agreement supersedes any statements, representations or agreements of BB&T with respect to the grant of the Award or any related rights, and the Participant hereby waives any rights or claims related to any such statements, representations or agreements. This Agreement does not supersede or amend any existing confidentiality agreement, nonsolicitation agreement, noncompetition agreement, employment agreement or any other similar agreement between the Participant and BB&T or an Affiliate, including, but not limited to, any restrictive covenants contained in such agreements.
9.    Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of North Carolina, without regard to the principles of conflicts of law, and in accordance with applicable United States federal laws.




10.    Amendment and Termination; Waiver. Subject to the terms of the Plan, this Agreement may be amended or terminated only by the written agreement of the parties hereto. The waiver by BB&T of a breach of any provision of the Agreement by the Participant shall not operate or be construed as a waiver of any subsequent breach by the Participant. Notwithstanding the foregoing, the Administrator shall have unilateral authority to amend the Plan and this Agreement (without Participant consent) to the extent necessary to comply with applicable law or changes to applicable law (including but in no way limited to Section 409A and federal securities laws), and the Participant hereby consents to any such amendments to the Plan and this Agreement.
11.    Issuance of Shares; Rights as Shareholder. The Participant and the Participant’s legal representatives, legatees or distributees shall not be deemed to be the holder of any Shares subject to the Award and shall not have any voting rights, dividend rights or other rights of a shareholder unless and until such Shares have been issued to the Participant or them. No Shares subject to the Award shall be issued at the time of grant of the Award. Shares subject to the Award shall be issued in the name of the Participant (or, if the Participant is deceased, in the name of the Participant’s beneficiary or beneficiaries) as soon as practicable after, and only to the extent that, the Award has vested and if such distribution is otherwise permitted under the terms of Section 5 herein. Neither dividends nor dividend equivalent rights shall be granted in connection with the Award, and the Award shall not be adjusted to reflect the distribution of any dividends on the Common Stock (except as may be otherwise provided under the Plan). No dividends on the Shares shall be payable prior to both (i) the vesting of the Award and (ii) the issuance and distribution of Shares to the Participant.
12.    Withholding; Tax Matters.
(a)    BB&T or an Affiliate shall report all income and withhold all required local, state, federal, foreign income and other taxes and any other amounts required to be withheld by any governmental authority or law from any amount payable in cash with respect to the Award. Prior to the delivery or transfer of any shares of Common Stock or any other benefit conferred under the Plan, BB&T shall require the Participant to pay to BB&T in cash the amount of any tax or other amount required by any governmental authority to be withheld and paid over by BB&T or an Affiliate to such authority for the account of such recipient. Notwithstanding the foregoing, the Administrator may establish procedures to permit a recipient to satisfy such obligation in whole or in part, and any local, state, federal, foreign or other income, employment and other tax obligations relating to the Award, by electing (the “election”) to have BB&T withhold shares of Common Stock from any shares of Common Stock to which the recipient is entitled. The number of shares of Common Stock to be withheld shall have a Fair Market Value as of the date that the amount of tax to be withheld is determined as nearly equal as possible to the amount of such obligations being satisfied. Each election must be made in writing to the Administrator in accordance with election procedures established by the Administrator, including, without limitation, procedures established by the Administrator after BB&T’s adoption of ASU 2016-09, Compensation – Stock Compensation (Topic 718) dated March, 2016.
(b)    BB&T has made no warranties or representations to the Participant with respect to the tax consequences (including but not limited to income tax consequences) related to the Award or the payout, if any, pursuant to the Award, and the Participant is in no manner relying on BB&T or its representatives for an assessment of such tax consequences. The Participant acknowledges that there may be adverse tax consequences with respect to the Award and that the Participant should consult a tax advisor. The Participant acknowledges that the Participant has been advised that the Participant should consult with the Participant’s own attorney, accountant, and/or tax advisor regarding the decision to enter into this Agreement and the consequences thereof. The Participant also acknowledges that BB&T has no responsibility to take or refrain from taking any actions in order to achieve a certain tax result for the Participant.




13.    Administration. The authority to construe and interpret this Agreement and the Plan, and to administer all aspects of the Plan, shall be vested in the Administrator, and the Administrator shall have all powers with respect to this Agreement as are provided in the Plan. Any interpretation of the Agreement by the Administrator and any decision made by it with respect to the Agreement are final and binding on the parties hereto.
14.    Notices. Any and all notices under this Agreement shall be in writing and sent by hand delivery or by certified or registered mail (return receipt requested and first-class postage prepaid), in the case of BB&T, to its Human Systems Division, 200 West Second Street (27101), PO Box 1215, Winston-Salem, NC 27102, attention: Human Systems Division Manager, and in the case of the Participant, to the last known address of the Participant as reflected in BB&T’s records.
15.    Severability. The provisions of this Agreement are severable; and if any one or more provisions may be determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
16.    Compliance with Laws; Restrictions on Award and Shares of Common Stock. BB&T may impose such restrictions on the Award and any shares of Common Stock relating to the payout of the Award as it may deem advisable, including without limitation restrictions under the federal securities laws, federal tax laws, the requirements of any stock exchange or similar organization and any blue sky, state or foreign securities laws applicable to such Award or shares of Common Stock. Notwithstanding any other provision in the Plan or this Agreement to the contrary, BB&T shall not be obligated to issue, deliver or transfer any shares of Common Stock, make any other distribution of benefits under the Plan, or take any other action, unless such delivery, distribution or action is in compliance with all applicable laws, rules and regulations (including but not limited to the requirements of the Securities Act). BB&T may cause a restrictive legend or legends to be placed on any certificate for shares of Common Stock issued pursuant to the Award in such form as may be prescribed from time to time by applicable laws and regulations or as may be advised by legal counsel.
17.    Successors and Assigns. Subject to the limitations stated herein and in the Plan, this Agreement shall be binding upon and inure to the benefit of the Participant and the Participant’s executors, administrators and permitted transferees and beneficiaries and BB&T and its successors and assigns.
18.    Counterparts, Further Instruments. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. The parties hereto agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Agreement.
19.    Right of Offset. Notwithstanding any other provision of the Plan or this Agreement, subject to any applicable laws to the contrary, BB&T may reduce the amount of any benefit or payment otherwise payable to or on behalf of the Participant by the amount of any obligation of the Participant to BB&T or an Affiliate that is or becomes due and payable, and the Participant shall be deemed to have consented to such reduction; provided, however, that to the extent Section 409A is applicable, such offset shall not exceed the greater of Five Thousand Dollars ($5,000) or the maximum offset amount then permitted under Section 409A.
20.    Adjustment of Award.
(a)    The Administrator shall have authority to make adjustments to the terms and conditions of the Award in recognition of unusual or nonrecurring events affecting BB&T or any Affiliate, or the financial




statements of BB&T or any Affiliate, or of changes in applicable laws, regulations or accounting principles, if the Administrator determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or necessary or appropriate to comply with applicable laws, rules or regulations.
(b)    Notwithstanding anything contained in the Plan or elsewhere in this Agreement to the contrary, (i) the Administrator, in order to comply with applicable law (including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act) and any risk management requirements and/or policies adopted by BB&T, retains the right at all times to decrease or terminate the Award and payments under the Plan, and any and all amounts payable under the Plan or paid under the Plan shall be subject to clawback, forfeiture, and reduction to the extent determined by the Administrator as necessary to comply with applicable law and/or policies adopted by BB&T; and (ii) in the event any legislation, regulation(s), or formal or informal guidance require(s) any compensation payable under the Plan (including, without limitation, the Award) to be deferred, reduced, eliminated, or subjected to vesting, the Award shall be deferred, reduced, eliminated, paid in a different form or subjected to vesting or other restrictions as, and solely to the extent, required by such legislation, regulation(s), or formal or informal guidance.
21.    Award Conditions.
(a)    Notwithstanding anything in the Plan or this Agreement to the contrary, to the extent that either (i) the Administrator or the Board of Governors of the Federal Reserve System determines that any change to the Plan and/or this Agreement is required, necessary, advisable, or deemed appropriate to improve the risk sensitivity of the Award, whether by (a) adjusting the Award quantitatively or judgmentally based on the risk the Participant’s activities pose to BB&T or an Affiliate; (b) extending the Performance Period for determining the Award; (c) extending the Performance Period and adjusting for actual losses or other performance issues; or (d) otherwise as required by the Administrator or the Federal Reserve System; or (ii) the Administrator or the United States government (including, without limiting any agency thereof) determines that any change to the Plan and/or this Agreement is required, necessary, advisable, or deemed appropriate to comply with any applicable law, regulation, or requirement; then this Agreement and/or the Award shall be automatically amended to incorporate such change, without further action of the Participant, and the Administrator shall provide the Participant notice thereof.
(b)    Notwithstanding anything contained in the Plan or this Agreement to the contrary, to the extent that either the Administrator or the United States government (including, without limitation, any agency thereof) determines that the Award granted to the Participant pursuant to this Agreement is prohibited or substantially restricted by, or subjects BB&T or an Affiliate to any adverse tax consequences that BB&T or an Affiliate is not otherwise subject to on the Grant Date because of, any current or future United States law, any rule, regulation, or other authority, then this Agreement shall automatically terminate effective as of the Grant Date and the Award shall automatically be cancelled as of the Grant Date without further action on the part of the Administrator or the Participant and without any compensation to the Participant for such termination and cancellation. The Administrator agrees to provide notice to the Participant of any such termination and cancellation.

[Signature Page to Follow]






IN WITNESS WHEREOF, this Agreement has been executed in behalf of BB&T and by the Participant effective as of the Grant Date.

BB&T CORPORATION
By:
 
 
 
PARTICIPANT
 
 
 
<<First Name>> <<MI>> <<Last Name>> 






EXHIBIT A
TO
BB&T CORPORATION
2012 INCENTIVE PLAN
LTIP Award Agreement
(Senior Executive)

(January 1, 2019 through December 31, 2021 Performance Period - 2022 Payout)

1.    Absolute Performance Goal: The Absolute Performance Goal is an average BB&T ROCE of three percent (3%) for the Performance Period.

2.    Relative Performance Goal: If the Absolute Performance Goal is achieved, the Award payout for the Performance Period will then be evaluated by the Administrator against the Peer Group based upon BB&T ROCE relative to Peer Group ROCE pursuant to the following:

Level of Achievement
Percentile Performance
(BB&T ROCE Relative to Peer Group ROCE)
Payout Percent of
Participant’s Target %
 
 
 
Threshold
25th
50%
 
30th
60%
 
35th
70%
 
40th
80%
 
45th
90%
Target
50th
100%
 
55th
110%
 
60th
120%
 
65th
130%
 
70th
140%
Maximum
75th or greater
150%

Straight line interpolation will be used to calculate payout percentages not specifically listed in the “Payout Percent of Participant’s Target %” column above. For performance that is less than the 25th percentile, the payout percentage is 0%.

3.    Relative Total Shareholder Return (“TSR”) Modifier:

Relative TSR (Percentile Performance of BB&T TSR Relative to Peer Group TSR)
TSR Modifier
 
 
Less than 25th
20% Reduction in Award payout
50th
  0% Reduction or increase in Award payout
75th or greater
20% Increase in Award payout, provided that the maximum Award payout shall be 150% of Participant’s Target %
Straight line interpolation will be used to calculate TSR Modifier percentage reductions or increases not specifically listed in the “TSR Modifier” column above.




4.    Discretionary Decreases: The Administrator has the discretion to decrease Award payouts based on business factors, including but not limited to, industry conditions, performance relative to peers, regulatory developments, and changes in capital requirements.





Exhibit 10.3
BB&T CORPORATION
2012 INCENTIVE PLAN
Performance Unit Award Agreement
(Senior Executive)

Grant Date:
February 26, 2019
Performance Period:
January 1, 2019 through December 31, 2021
THIS AGREEMENT (the “Agreement”), made effective as of February 26, 2019 (the “Grant Date”), between BB&T CORPORATION, a North Carolina corporation (“BB&T”), for itself and its Affiliates, and the Employee (the “Participant”) specified in the above Notice of Grant and Agreement (the “Notice of Grant”), is made pursuant to and subject to the provisions of the BB&T Corporation 2012 Incentive Plan, as it may be amended and/or restated (the “Plan”).
RECITALS:
BB&T desires to carry out the purposes of the Plan by affording the Participant an opportunity to acquire shares of BB&T Common Stock, $5.00 par value per share (the “Common Stock”), as hereinafter provided.
In consideration of the foregoing, of the mutual promises set forth below and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:
1.Incorporation of Notice of Grant and Plan. The Notice of Grant is part of this Agreement and incorporated herein. The rights and duties of BB&T and the Participant under this Agreement shall in all respects be subject to and governed by the provisions of the Plan, the terms of which are incorporated herein by reference. In the event of any conflict between the provisions in the Agreement and those of the Plan, the provisions of the Plan shall govern. Unless otherwise provided herein, capitalized terms in this Agreement shall have the same definitions as set forth in the Plan. Notwithstanding the foregoing, as a result of changes to Section 162(m) of the Tax Cut and Jobs Act of 2017, the performance-based compensation provisions of Section 162(m) are inapplicable to this Agreement.
2.    Grant of Performance Units. Subject to the terms of this Agreement and the Plan, BB&T hereby grants the Participant an Award of Performance Units (the “Award”) for the number of whole shares of Common Stock at the Target Level of Achievement (the “Shares”) specified in the Notice of Grant and in accordance with the following provisions:
(a)    Performance Period. The performance period (“Performance Period”) for the Award shall be January 1, 2019 through December 31, 2021.
(b)    Partial Performance Period.
(i)
(1) Death or Disability. If the Participant ceases to be a Participant in the Plan during the Performance Period due to the Participant’s termination of employment due to death or Disability, the Participant’s Award for the




Performance Period shall be payable in accordance with this Agreement, based upon the attainment of the Absolute Performance Goal and at least the Threshold Level of Achievement and the application of the TSR Modifier as provided in Section 2(c) and Exhibit A herein; provided that, for the avoidance of doubt, in the case of a Change of Control, the Performance Period shall end as of the date of the Change of Control and payment shall be made (for Participants who are not Employees on the date of the Change of Control), within two and one-half (2 ½) months following a Change of Control as provided in Section 5(b) herein, calculated as provided in Section 2(b)(i)(3) below. For the avoidance of doubt, the phrase “termination of employment” means a Separation from Service.
(2)    Involuntary Termination Without Cause and Retirement. If the Participant ceases to be a Participant in the Plan during the Performance Period due to the Participant’s termination of employment (A) involuntarily by the Company and/or its Affiliates without Cause, or (B) due to Retirement, the Participant’s Award for the Performance Period shall be payable in accordance with this Agreement, based upon the attainment of the Absolute Performance Goal and at least the Threshold Level of Achievement and the application of the TSR Modifier as provided in Section 2(c) and Exhibit A herein; provided that, for the avoidance of doubt, in the case of a Change of Control, the Performance Period shall end as of the date of the Change of Control and payment shall be made (for Participants who are not Employees on the date of the Change of Control), within two and one-half (2 ½) months following a Change of Control as provided in Section 5(b) herein, calculated as provided in Section 2(b)(i)(3) below. A termination shall be for “Cause” if the termination of the Participant’s employment by the Company and/or its Affiliates is on account of the Participant’s (x) dishonesty, theft or embezzlement; (y) refusal or failure to perform the Participant’s assigned duties for BB&T or an Affiliate in a satisfactory manner; or (z) engaging in any conduct that could be materially damaging to BB&T or its Affiliates without a reasonable good faith belief that such conduct was in the best interest of BB&T or any of its Affiliates. The determination of whether termination is for Cause shall be made by the Administrator (or its designee, to the extent permitted under the Plan), and its determination shall be final and conclusive. For the avoidance of doubt, the phrase “termination of employment” means a Separation from Service.

(3)    Change of Control. If, while the Participant is an Employee, there is a Change of Control during the Performance Period, the Performance Period shall, notwithstanding anything to the contrary elsewhere in this Agreement, end upon the date of the Change of Control and the Participant’s Award shall be paid within two and one-half (2 ½) months following a Change of Control as provided in Section 5(b) herein, calculated as follows: provided that the Absolute Performance Goal of Section 2(c)(i)(aa) is met for the completed calendar year(s) during such shortened Performance Period (and if there are no completed calendar years during such shortened Performance Period, the Absolute Performance Goal of Section 2(c)(i)(aa) shall be deemed to be met), Participant’s Award shall be the sum of (1) and (2) as follows (and payable in




accordance with Section 5(b) of this Agreement): (1) for completed calendar year(s) during the shortened Performance Period, an Award amount shall be calculated by multiplying the Shares by a fraction, the numerator of which is the number of completed year(s) and the denominator of which is 3, and then by determining the actual Level of Achievement attained during such completed calendar year(s) adjusted by the TSR Modifier (and subject to the Maximum Award payment of 150% of the Shares) as provided in Section 2(c)(i)(cc) and Exhibit A, applied thereto for the completed calendar year(s) of the Performance Period; and (2) for the remaining uncompleted calendar year(s) in the Performance Period, an Award amount calculated by multiplying the Shares by a fraction, the numerator of which is the number of uncompleted calendar year(s) and the denominator of which is 3, and then multiplying the product thereof by the Target Level of Achievement for the Relative Performance Goal in Exhibit A.

(ii)
(1)     For purposes of Section 2(b)(i)(3) above, a “Change of Control” will be deemed to have occurred on the earliest of the following dates: (A) the date any person or group of persons (as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), together with its affiliates, excluding employee benefit plans of BB&T and its Affiliates, is or becomes, directly or indirectly, the “beneficial owner” (as defined in Rule 13d-3 promulgated under the Exchange Act) of securities of BB&T representing thirty percent (30%) or more of the combined voting power of BB&T’s then outstanding securities; or (B) the date when, as a result of a tender offer or exchange offer for the purchase of securities of BB&T (other than such an offer by BB&T for its own securities), or as a result of a proxy contest, merger, consolidation or sale of assets, or as a result of any combination of the foregoing, individuals who at the beginning of any consecutive twelve- (12-) month period during the Performance Period of the Award constituted BB&T’s Board, plus new directors whose election or nomination for election by BB&T’s shareholders is approved by a vote of at least two-thirds of the directors still in office who were directors at the beginning of such twelve- (12-) month period (collectively, the “Continuing Directors”), cease for any reason during such twelve- (12-) month period to constitute at least two-thirds of the members of such board of directors; (C) the date the shareholders of BB&T approve an agreement for the sale or disposition by BB&T of all or substantially all of BB&T’s assets within the meaning of Section 409A; or (D) the date that any one person, or more than one person acting as a group, acquires ownership of stock of BB&T that, together with stock held by such person or group constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of BB&T within the meaning of Section 409A.
(2)    Notwithstanding Section 2(b)(i)(3) and (ii)(1) above, the term “Change of Control” shall not include any event that is a “Merger of Equals.” For purposes of the Plan and this Agreement, the term “Merger of Equals” means any event that would otherwise qualify as a Change of Control if the event (including, if applicable, the terms and conditions of the related agreements, exhibits, annexes, and similar documents) satisfies all of the following




conditions as of the date of such event: (A) the Board of BB&T or, if applicable, a majority of the Continuing Directors has, prior to the change in control event, approved the event; (B) at least fifty percent (50%) of the common stock of the surviving corporation outstanding immediately after consummation of the event, together with at least fifty percent (50%) of the voting securities representing at least fifty percent (50%) of the combined voting power of all voting securities of the surviving corporation outstanding immediately after the event shall be owned, directly or indirectly, by the persons who were the owners, directly or indirectly, of the common stock and voting securities of BB&T immediately before the consummation of such event in substantially the same proportions as their respective direct or indirect ownership immediately before such event of the common stock and voting securities of BB&T, respectively; (C) at least fifty percent (50%) of the directors of the surviving corporation immediately after the event shall be composed of directors who were Directors or Continuing Directors immediately before the event; and (D) the person who was the Chief Executive Officer (“CEO”) of BB&T immediately before the event shall be the CEO of the surviving corporation immediately after the event. If a transaction constitutes a Merger of Equals, then, notwithstanding the provisions of Section 2(b)(i)(3) and (ii)(1) above, the vesting of the Award will not be accelerated due to the Merger of Equals, but the Award shall instead continue to vest, if at all, in accordance with the provisions of Sections 2, 3 and 4 herein.
(c)    Performance Measures for Award. The pre-established three- (3-) year Performance Period’s Performance Measures (as defined in Section 2(c)(i) below) applicable to the Award and Levels of Achievement are as follows:
(i)
Performance Measures and Relative TSR/TSR Modifier:
(aa)     Absolute Performance Goal: The average return on shareholders’ common equity for BB&T during the Performance Period determined in accordance with United States generally accepted accounting principles, as adjusted by BB&T (“BB&T ROCE”), must be at least three percent (3%), and if less than three percent (3%) there will not be an Award payout.
(bb)     Relative Performance Goal: If the Absolute Performance Goal is achieved, the next Performance Measure shall be BB&T ROCE relative to the average, by company, return on shareholders’ common equity, determined in accordance with United States generally accepted accounting principles, achieved by each company, as adjusted by BB&T, of the Peer Group during the Performance Period (“Peer Group ROCE”).
(cc)    Relative TSR/TSR Modifier: After the Level of Achievement of the Relative Performance Goal is determined by the Administrator as provided in this Agreement, the Relative TSR and TSR Modifier shall be determined and applied in accordance with the TSR Modifier chart in Exhibit A attached hereto and made a part hereof. As used in this Agreement, “Relative Total Shareholder Return” and “Relative TSR” means BB&T’s total Common Stock shareholder return performance rank defined as a percentile for the Performance Period relative to the range of the Peer Group members’ total




common stock shareholder return for the Performance Period. Total shareholder return for BB&T and each Peer Group member shall be calculated based upon BB&T’s Common Stock and the Peer Group members’ common stock appreciation during the Performance Period plus the value of dividends on the ex-dividend dates during the Performance Period on such stock (which dividends shall be deemed to have been reinvested in such underlying stock) and using a trailing twenty (20) trading day average stock price to determine both the Performance Period beginning stock price and the Performance Period ending stock price.
(ii)
For purposes of the Relative Performance Goal of the Award, there shall be levels of achievement (“Levels of Achievement”), including, threshold (“Threshold”), target (“Target”), and maximum (“Maximum”). The Threshold Level of Achievement shall be a BB&T ROCE of the twenty-fifth (25th) percentile of the Peer Group ROCE; the Target Level of Achievement shall be a BB&T ROCE of the fiftieth (50th) percentile of the Peer Group ROCE; and the Maximum Level of Achievement shall be a BB&T ROCE of the seventy-fifth (75th) percentile of the Peer Group ROCE. The Levels of Achievement range from the Threshold Level of Achievement to the Maximum Level of Achievement as illustrated in the Level of Achievement Chart attached hereto as Exhibit A and made a part hereof.
(iii)
For avoidance of doubt in the interpretation of the Exhibit A Level of Achievement Chart, there will not be an Award payout if the Threshold Level of Achievement is not attained for the Performance Period. If the Threshold Level of Achievement is attained for the Performance Period, the Award payout to the Participant will, subject to the TSR Modifier of Exhibit A, be fifty percent (50%) of the Shares. If the Target Level of Achievement is attained for the Performance Period, the Award payout to the Participant will, subject to the TSR Modifier of Exhibit A, be one hundred percent (100%) of the Shares. If the Maximum Level of Achievement is attained for the Performance Period, the Award payout to the Participant will, subject to the TSR Modifier of Exhibit A, be one hundred fifty percent (150%) of the Shares.
(iv)
For purposes hereof, the term “Peer Group” means Capital One Financial Corporation; Bank of America Corporation; Fifth-Third Bancorp; Huntington Bancshares, Incorporated; KeyCorp; M&T Bank Corporation; PNC Financial Services Group, Inc.; Regions Financial Corporation; SunTrust Banks, Inc.; U.S. Bancorp; Wells Fargo & Company; and Citizens Financial Group, Inc.
3.    Vesting of Award. Subject to the terms of the Plan and the Agreement (including but not limited to the provisions of Sections 2, 4 and 5 herein), the Award shall be 100% vested and, to the extent any Award payout is determined by the Administrator, earned on March 15, 2022, following the December 31, 2021 expiration of the Performance Period, provided that the Administrator has not determined that all or any part of the Award shall be cancelled or forfeited as a result of either (i) a significant, negative risk outcome as a result of a corporate or individual action, or (ii) BB&T incurring an aggregate operating loss for the Performance Period. The Administrator has sole authority to determine whether and to what degree the Award has vested and is payable and to interpret the terms and conditions of this Agreement and the Plan.




4.    Forfeiture of Award. Except as may be otherwise provided in the Plan or in this Agreement (including, without limitation, the provisions of Section 2(b) herein), in the event that the employment of the Participant with BB&T or an Affiliate terminates for any reason and the Award has not vested pursuant to Section 3, then the Award, to the extent not vested as of the Participant’s termination of employment date, shall be forfeited immediately upon such termination, and the Participant shall have no further rights with respect to the Award. The Administrator (or its designee, to the extent permitted under the Plan) shall have sole discretion to determine if a Participant’s rights have terminated pursuant to the Plan and this Agreement, including but not limited to the authority to determine the basis for the Participant’s termination of employment. The Participant expressly acknowledges and agrees that, except as otherwise provided in this Agreement, the termination of the Participant’s employment shall result in forfeiture of the Award and any underlying payout to the extent the Award has not vested as of the Participant’s termination of employment date.
5.    Award Payout.
(a)    The amount of the Award payout, if any, shall be determined by the Administrator following the end of the Performance Period in accordance with the terms of this Agreement and the Plan including, without limitation, all applicable adjustments to the calculation of the Performance Goals.
(b)    The Award payout determined pursuant to Section 5(a) shall be payable, and paid, in shares of Common Stock.
(c)    Award payout shall, upon vesting of the Award, be made to the Participant (or in the event of the Participant’s death, to the Participant’s beneficiary or beneficiaries) in a lump sum within two and one-half (2 ½) months following the end of the Performance Period; or if a Change of Control occurs during the Performance Period, payment shall be made in a lump sum within two and one-half (2 ½) months following the Change of Control (provided that if such two and one-half (2 ½) month period begins in one calendar year and ends in another, the Participant (or the Participant’s beneficiary or beneficiaries) shall not have the right to designate the calendar year of payment).
6.    No Right to Continued Employment or Service. Neither the Plan, the grant of the Award, nor any other action related to the Plan shall confer upon the Participant any right to continue in the employment or service of BB&T or an Affiliate or affect in any way with the right of BB&T or an Affiliate to terminate the Participant’s employment or service at any time. Except as otherwise expressly provided in the Plan or this Agreement or as determined by the Administrator, all rights of the Participant with respect to the Award shall terminate upon termination of the employment or service of the Participant with BB&T or an Affiliate. The grant of the Award does not create any obligation on the part of BB&T or an Affiliate to grant any further awards. So long as the Participant shall continue to be an Employee of BB&T or an Affiliate, the Award shall not be affected by any change in the duties or position of the Participant.
7.    Nontransferability of Award and Shares. The Award, and any Award payout, shall not be transferable (including by sale, assignment, pledge or hypothecation) other than by will or the laws of intestate succession. The designation of a beneficiary in accordance with Plan procedures does not constitute a transfer; provided, however, that unless disclaimer provisions are specifically included in a beneficiary designation form accepted by the Administrator, no beneficiary of the Participant may disclaim the Award.
8.    Superseding Agreement; Binding Effect. This Agreement supersedes any statements, representations or agreements of BB&T with respect to the grant of the Award or any related rights, and the Participant hereby waives any rights or claims related to any such statements, representations or agreements. This Agreement does not supersede or amend any existing confidentiality agreement, nonsolicitation




agreement, noncompetition agreement, employment agreement or any other similar agreement between the Participant and BB&T or an Affiliate, including, but not limited to, any restrictive covenants contained in such agreements.
9.    Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of North Carolina, without regard to the principles of conflicts of law, and in accordance with applicable United States federal laws.
10.    Amendment and Termination; Waiver. Subject to the terms of the Plan, this Agreement may be amended or terminated only by the written agreement of the parties hereto. The waiver by BB&T of a breach of any provision of the Agreement by the Participant shall not operate or be construed as a waiver of any subsequent breach by the Participant. Notwithstanding the foregoing, the Administrator shall have unilateral authority to amend the Plan and this Agreement (without Participant consent) to the extent necessary to comply with applicable law or changes to applicable law (including but in no way limited to Section 409A and federal securities laws), and the Participant hereby consents to any such amendments to the Plan and this Agreement.
11.    Issuance of Shares; Rights as Shareholder. The Participant and the Participant’s legal representatives, legatees or distributees shall not be deemed to be the holder of any Shares subject to the Award and shall not have any voting rights, dividend rights or other rights of a shareholder unless and until such Shares have been issued to the Participant or them. No Shares subject to the Award shall be issued at the time of grant of the Award. Shares subject to the Award shall be issued in the name of the Participant (or, if the Participant is deceased, in the name of the Participant’s beneficiary or beneficiaries) as soon as practicable after, and only to the extent that, the Award has vested and if such distribution is otherwise permitted under the terms of Section 5 herein. Neither dividends nor dividend equivalent rights shall be granted in connection with the Award, and the Award shall not be adjusted to reflect the distribution of any dividends on the Common Stock (except as may be otherwise provided under the Plan). No dividends on the Shares shall be payable prior to both (i) the vesting of the Award and (ii) the issuance and distribution of Shares to the Participant.
12.    Withholding; Tax Matters.
(a)    BB&T or an Affiliate shall report all income and withhold all required local, state, federal, foreign income and other taxes and any other amounts required to be withheld by any governmental authority or law from any amount payable in cash with respect to the Award. Prior to the delivery or transfer of any shares of Common Stock or any other benefit conferred under the Plan, BB&T shall require the Participant to pay to BB&T in cash the amount of any tax or other amount required by any governmental authority to be withheld and paid over by BB&T or an Affiliate to such authority for the account of such recipient. Notwithstanding the foregoing, the Administrator may establish procedures to permit a recipient to satisfy such obligation in whole or in part, and any local, state, federal, foreign or other income, employment and other tax obligations relating to the Award, by electing (the “election”) to have BB&T withhold shares of Common Stock from any shares of Common Stock to which the recipient is entitled. The number of shares of Common Stock to be withheld shall have a Fair Market Value as of the date that the amount of tax to be withheld is determined as nearly equal as possible to the amount of such obligations being satisfied. Each election must be made in writing to the Administrator in accordance with election procedures established by the Administrator, including, without limitation, procedures established by the Administrator after BB&T’s adoption of ASU 2016-09, Compensation – Stock Compensation (Topic 718) dated March, 2016.
(b)    BB&T has made no warranties or representations to the Participant with respect to the tax consequences (including but not limited to income tax consequences) related to the Award or the




payout, if any, pursuant to the Award, and the Participant is in no manner relying on BB&T or its representatives for an assessment of such tax consequences. The Participant acknowledges that there may be adverse tax consequences with respect to the Award and that the Participant should consult a tax advisor. The Participant acknowledges that the Participant has been advised that the Participant should consult with the Participant’s own attorney, accountant, and/or tax advisor regarding the decision to enter into this Agreement and the consequences thereof. The Participant also acknowledges that BB&T has no responsibility to take or refrain from taking any actions in order to achieve a certain tax result for the Participant.
13.    Administration. The authority to construe and interpret this Agreement and the Plan, and to administer all aspects of the Plan, shall be vested in the Administrator, and the Administrator shall have all powers with respect to this Agreement as are provided in the Plan. Any interpretation of the Agreement by the Administrator and any decision made by it with respect to the Agreement are final and binding on the parties hereto.
14.    Notices. Any and all notices under this Agreement shall be in writing and sent by hand delivery or by certified or registered mail (return receipt requested and first-class postage prepaid), in the case of BB&T, to its Human Systems Division, 200 West Second Street (27101), PO Box 1215, Winston-Salem, NC 27102, attention: Human Systems Division Manager, and in the case of the Participant, to the last known address of the Participant as reflected in BB&T’s records.
15.    Severability. The provisions of this Agreement are severable; and if any one or more provisions may be determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
16.    Compliance with Laws; Restrictions on Award and Shares of Common Stock. BB&T may impose such restrictions on the Award and any shares of Common Stock relating to the payout of the Award as it may deem advisable, including without limitation restrictions under the federal securities laws, federal tax laws, the requirements of any stock exchange or similar organization and any blue sky, state or foreign securities laws applicable to such Award or shares of Common Stock. Notwithstanding any other provision in the Plan or this Agreement to the contrary, BB&T shall not be obligated to issue, deliver or transfer any shares of Common Stock, make any other distribution of benefits under the Plan, or take any other action, unless such delivery, distribution or action is in compliance with all applicable laws, rules and regulations (including but not limited to the requirements of the Securities Act). BB&T may cause a restrictive legend or legends to be placed on any certificate for shares of Common Stock issued pursuant to the Award in such form as may be prescribed from time to time by applicable laws and regulations or as may be advised by legal counsel.
17.    Successors and Assigns. Subject to the limitations stated herein and in the Plan, this Agreement shall be binding upon and inure to the benefit of the Participant and the Participant’s executors, administrators and permitted transferees and beneficiaries and BB&T and its successors and assigns.
18.    Counterparts, Further Instruments. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. The parties hereto agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Agreement.
19.    Right of Offset. Notwithstanding any other provision of the Plan or this Agreement, subject to any applicable laws to the contrary, BB&T may reduce the amount of any benefit or payment otherwise payable to or on behalf of the Participant by the amount of any obligation of the Participant to BB&T or an Affiliate that is or becomes due and payable, and the Participant shall be deemed to have consented to such




reduction; provided, however, that to the extent Section 409A is applicable, such offset shall not exceed the greater of Five Thousand Dollars ($5,000) or the maximum offset amount then permitted under Section 409A.
20.    Adjustment of Award.
(a)    The Administrator shall have authority to make adjustments to the terms and conditions of the Award in recognition of unusual or nonrecurring events affecting BB&T or any Affiliate, or the financial statements of BB&T or any Affiliate, or of changes in applicable laws, regulations or accounting principles, if the Administrator determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or necessary or appropriate to comply with applicable laws, rules or regulations.
(b)    Notwithstanding anything contained in the Plan or elsewhere in this Agreement to the contrary, (i) the Administrator, in order to comply with applicable law (including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act) and any risk management requirements and/or policies adopted by BB&T, retains the right at all times to decrease or terminate the Award and payments under the Plan, and any and all amounts payable under the Plan or paid under the Plan shall be subject to clawback, forfeiture, and reduction to the extent determined by the Administrator as necessary to comply with applicable law and/or policies adopted by BB&T; and (ii) in the event any legislation, regulation(s), or formal or informal guidance require(s) any compensation payable under the Plan (including, without limitation, the Award) to be deferred, reduced, eliminated, or subjected to vesting, the Award shall be deferred, reduced, eliminated, paid in a different form or subjected to vesting or other restrictions as, and solely to the extent, required by such legislation, regulation(s), or formal or informal guidance.
21.    Award Conditions.
(a)    Notwithstanding anything in the Plan or this Agreement to the contrary, to the extent that either (i) the Administrator or the Board of Governors of the Federal Reserve System determines that any change to the Plan and/or this Agreement is required, necessary, advisable, or deemed appropriate to improve the risk sensitivity of the Award, whether by (a) adjusting the Award quantitatively or judgmentally based on the risk the Participant’s activities pose to BB&T or an Affiliate; (b) extending the Performance Period for determining the Award; (c) extending the Performance Period and adjusting for actual losses or other performance issues; or (d) otherwise as required by the Administrator or the Federal Reserve System; or (ii) the Administrator or the United States government (including, without limiting any agency thereof) determines that any change to the Plan and/or this Agreement is required, necessary, advisable, or deemed appropriate to comply with any applicable law, regulation, or requirement; then this Agreement and/or the Award shall be automatically amended to incorporate such change, without further action of the Participant, and the Administrator shall provide the Participant notice thereof.
(b)    Notwithstanding anything contained in the Plan or this Agreement to the contrary, to the extent that either the Administrator or the United States government (including, without limitation, any agency thereof) determines that the Award granted to the Participant pursuant to this Agreement is prohibited or substantially restricted by, or subjects BB&T or an Affiliate to any adverse tax consequences that BB&T or an Affiliate is not otherwise subject to on the Grant Date because of, any current or future United States law, any rule, regulation, or other authority, then this Agreement shall automatically terminate effective as of the Grant Date and the Award shall automatically be cancelled as of the Grant Date without further action on the part of the Administrator or the Participant and without any compensation to the Participant for such termination and cancellation. The Administrator agrees to provide notice to the Participant of any such termination and cancellation.




IN WITNESS WHEREOF, BB&T and the Participant have entered into this Agreement effective as of the Grant Date. Should the Participant fail to acknowledge his or her electronic acceptance of this Agreement, this Agreement may become null and void as of the Grant Date, and the Participant may forfeit any and all rights hereunder at the discretion of the Administrator.
* * *





EXHIBIT A
TO
BB&T CORPORATION
2012 INCENTIVE PLAN
Performance Unit Award Agreement
(Senior Executive)

(January 1, 2019 through December 31, 2021 Performance Period - 2022 Payout)

1.    Absolute Performance Goal: The Absolute Performance Goal is an average BB&T ROCE of three percent (3%) for the Performance Period.

2.    Relative Performance Goal: If the Absolute Performance Goal is achieved, the Award payout for the Performance Period will then be evaluated by the Administrator against the Peer Group based upon BB&T ROCE relative to Peer Group ROCE pursuant to the following:

Level of Achievement
Percentile Performance
(BB&T ROCE Relative to Peer Group ROCE)
Payout Percent of
Participant’s Shares
 
 
 
Threshold
25th
50%
 
30th
60%
 
35th
70%
 
40th
80%
 
45th
90%
Target
50th
100%
 
55th
110%
 
60th
120%
 
65th
130%
 
70th
140%
Maximum
75th or greater
150%

Straight line interpolation will be used to calculate payout percentages not specifically listed in the “Payout Percent of Participant’s Shares” column above. For performance that is less than the 25th percentile, the payout percentage is 0%.

3.    Relative Total Shareholder Return (“TSR”) Modifier:

Relative TSR (Percentile Performance of BB&T TSR Relative to Peer Group TSR)
TSR Modifier
 
 
Less than 25th
20% Reduction in Award payout
50th
0% Reduction or increase in Award payout
75th or greater
20% Increase in Award payout, provided that the maximum Award payout shall be 150% of the Participant’s Shares
Straight line interpolation will be used to calculate TSR Modifier percentage reductions or increases not specifically listed in the “TSR Modifier” column above.




4.    Discretionary Decreases: The Administrator has the discretion to decrease Award payouts based on business factors, including but not limited to, industry conditions, performance relative to peers, regulatory developments, and changes in capital requirements.





Exhibit 31.1
CERTIFICATIONS

I, Kelly S. King, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of BB&T Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: April 29, 2019
/s/ Kelly S. King
Kelly S. King
Chairman and Chief Executive Officer




Exhibit 31.2
CERTIFICATIONS 

I, Daryl N. Bible, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of BB&T Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: April 29, 2019
/s/ Daryl N. Bible
Daryl N. Bible
Senior Executive Vice President and
Chief Financial Officer





Exhibit 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, Chief Executive Officer and Chief Financial Officer of BB&T Corporation (the "Company"), do hereby certify that:
1.
The Quarterly Report on Form 10-Q for the fiscal period ended March 31, 2019 (the "Form 10-Q") of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: April 29, 2019
/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 required by Section 906 has been provided to BB&T Corporation and will be retained by BB&T Corporation and furnished to the Securities and Exchange Commission or its staff upon request.