Edgar Filing: BB&T CORP

Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________

FORM 10-Q

_____________________________

Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the quarterly period ended: June 30, 2016

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)	(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 [X] No [ ]

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes [X] No [ ]

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



Large accelerated filer	X		Accelerated filer

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

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

At June 30, 2016, 814,500,215 shares of the Registrant's common stock, $5 par value, were outstanding.



BB&T CORPORATION
FORM 10-Q
June 30, 2016
INDEX

		Page No.
PART I
Item 1.	Financial Statements
	Consolidated Balance Sheets (Unaudited)	3
	Consolidated Statements of Income (Unaudited)	4
	Consolidated Statements of Comprehensive Income (Unaudited)	5
	Consolidated Statements of Changes in Shareholders' Equity (Unaudited)	6
	Consolidated Statements of Cash Flows (Unaudited)	7
	Notes to Consolidated Financial Statements (Unaudited)
	Note 1. Basis of Presentation	8
	Note 2. Acquisitions and Divestitures	10
	Note 3. Securities	12
	Note 4. Loans and ACL	15
	Note 5. Goodwill	22
	Note 6. Loan Servicing	23
	Note 7. Deposits	24
	Note 8. Long-Term Debt	25
	Note 9. Shareholders' Equity	26
	Note 10. AOCI	27
	Note 11. Income Taxes	28
	Note 12. Benefit Plans	29
	Note 13. Commitments and Contingencies	30
	Note 14. Fair Value Disclosures	30
	Note 15. Derivative Financial Instruments	38
	Note 16. Computation of EPS	43
	Note 17. Operating Segments	44
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	46
Item 3.	Quantitative and Qualitative Disclosures About Market Risk (see Market Risk Management)	72
Item 4.	Controls and Procedures	79
PART II
Item 1.	Legal Proceedings	80
Item 1A.	Risk Factors	80
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	80
Item 3.	Defaults Upon Senior Securities - (not applicable.)
Item 4.	Mine Safety Disclosures - (not applicable.)
Item 5.	Other Information - (none to be reported.)
Item 6.	Exhibits	80

Table of Contents

Glossary of Defined Terms

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



Term		Definition
2015 Repurchase Plan		Plan for the repurchase of up to 50 million shares of BB&T's common stock
ACL		Allowance for credit losses
Acquired from FDIC		Assets of Colonial Bank acquired from the Federal Deposit Insurance Corporation during 2009, which are currently covered or were formerly covered under loss sharing agreements
AFS		Available-for-sale
Agency MBS		Mortgage-backed securities issued by a U.S. government agency or GSE
ALLL		Allowance for loan and lease losses
American Coastal		American Coastal Insurance Company
AOCI		Accumulated other comprehensive income (loss)
Basel III		Global regulatory standards on bank capital adequacy and liquidity published by the BCBS
BB&T		BB&T Corporation and subsidiaries
BCBS		Basel Committee on Bank Supervision
BHC		Bank holding company
BHCA		Bank Holding Company Act of 1956, as amended
Branch Bank		Branch Banking and Trust Company
BU		Business Unit
CCAR		Comprehensive Capital Analysis and Review
CD		Certificate of deposit
CDI		Core deposit intangible assets
CFPB		Consumer Financial Protection Bureau
CEO		Chief Executive Officer
CRO		Chief Risk Officer
CMO		Collateralized mortgage obligation
Colonial		Collectively, certain assets and liabilities of Colonial Bank acquired by BB&T in 2009
Company		BB&T Corporation and subsidiaries (interchangeable with "BB&T" above)
CRA		Community Reinvestment Act of 1977
CRE		Commercial real estate
CRMC		Credit Risk Management Committee
CROC		Compliance Risk Oversight Committee
DIF		Deposit Insurance Fund administered by the FDIC
Directors' Plan		Non-Employee Directors' Stock Option Plan
Dodd-Frank Act		Dodd-Frank Wall Street Reform and Consumer Protection Act
EITSC		Enterprise IT Steering Committee
EPS		Earnings per common share
ERP		Enterprise resource planning
EVE		Economic value of equity
Exchange Act		Securities Exchange Act of 1934, as amended
FASB		Financial Accounting Standards Board
FATCA		Foreign Account Tax Compliance Act
FDIC		Federal Deposit Insurance Corporation
FHA		Federal Housing Administration
FHC		Financial Holding Company
FHLB		Federal Home Loan Bank
FHLMC		Federal Home Loan Mortgage Corporation
FINRA		Financial Industry Regulatory Authority
FNMA		Federal National Mortgage Association
FRB		Board of Governors of the Federal Reserve System
FTE		Fully taxable-equivalent
FTP		Funds transfer pricing
GAAP		Accounting principles generally accepted in the United States of America
GNMA		Government National Mortgage Association
Grandbridge		Grandbridge Real Estate Capital, LLC
GSE		U.S. government-sponsored enterprise
HFI		Held for investment

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Term		Definition
HMDA		Home Mortgage Disclosure Act
HTM		Held-to-maturity
HUD-OIG		Office of Inspector General, U.S. Department of Housing and Urban Development
IDI		Insured depository institution
IMLAFA		International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001
IPV		Independent price verification
IRC		Internal Revenue Code
IRS		Internal Revenue Service
ISDA		International Swaps and Derivatives Association, Inc.
LCR		Liquidity Coverage Ratio
LHFS		Loans held for sale
LIBOR		London Interbank Offered Rate
MBS		Mortgage-backed securities
MRLCC		Market Risk, Liquidity and Capital Committee
MSR		Mortgage servicing right
MSRB		Municipal Securities Rulemaking Board
National Penn		National Penn Bancshares, Inc., acquired by BB&T effective April 1, 2016
NIM		Net interest margin
NPA		Nonperforming asset
NPL		Nonperforming loan
NSFR		Net stable funding ratio
NYSE		NYSE Euronext, Inc.
OAS		Option adjusted spread
OCI		Other comprehensive income (loss)
OREO		Other real estate owned
ORMC		Operational Risk Management Committee
OTTI		Other-than-temporary impairment
Parent Company		BB&T Corporation, the parent company of Branch Bank and other subsidiaries
Patriot Act		Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001
PCI		Purchased credit impaired loans as well as assets of Colonial Bank acquired from the FDIC during 2009, which are currently covered or were formerly covered under loss sharing agreements
Peer Group		Financial holding companies included in the industry peer group index
RMC		Risk Management Committee
RMO		Risk Management Organization
RSU		Restricted stock unit
RUFC		Reserve for unfunded lending commitments
SBIC		Small Business Investment Company
SCAP		Supervisory Capital Assessment Program
SEC		Securities and Exchange Commission
Short-Term Borrowings		Federal funds purchased, securities sold under repurchase agreements and other short-term borrowed funds with original maturities of less than one year
Simulation		Interest sensitivity simulation analysis
Susquehanna		Susquehanna Bancshares, Inc., acquired by BB&T effective August 1, 2015
TBA		To be announced
TDR		Troubled debt restructuring
U.S.		United States of America
U.S. Treasury		United States Department of the Treasury
UPB		Unpaid principal balance
VA		U.S. Department of Veterans Affairs
VaR		Value-at-risk
VIE		Variable interest entity

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BB&T CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in millions, except per share data, shares in thousands)



	June 30,			December 31,
	2016			2015
Assets
Cash and due from banks	$	1,958		$	2,123
Interest-bearing deposits with banks	510			1,435
Federal funds sold and securities purchased under resale agreements or similar arrangements	145			153
Restricted cash	846			456
AFS securities at fair value	28,244			25,297
HTM securities (fair value of $19,157 and $18,519 at June 30, 2016 and December 31, 2015, respectively)	18,762			18,530
LHFS at fair value	2,485			1,035
Loans and leases	142,226			135,951
ALLL	(1,507		)	(1,460		)
Loans and leases, net of ALLL	140,719			134,491

Premises and equipment	2,088			2,007
Goodwill	9,621			8,548
CDI and other intangible assets	946			686
MSRs at fair value	785			880
Other assets	14,750			14,306
Total assets	$	221,859		$	209,947

Liabilities and Shareholders' Equity
Deposits:
Noninterest-bearing deposits	$	49,180		$	45,695
Interest-bearing deposits	110,058			103,429
Total deposits	159,238			149,124

Short-term borrowings	1,472			3,593
Long-term debt	24,435			23,769
Accounts payable and other liabilities	6,971			6,121
Total liabilities	192,116			182,607

Commitments and contingencies (Note 13)
Shareholders' equity:
Preferred stock, $5 par, liquidation preference of $25,000 per share	3,053			2,603
Common stock, $5 par	4,073			3,902
Additional paid-in capital	9,311			8,365
Retained earnings	14,104			13,464
AOCI, net of deferred income taxes	(837		)	(1,028		)
Noncontrolling interests	39			34
Total shareholders' equity	29,743			27,340
Total liabilities and shareholders' equity	$	221,859		$	209,947

Common shares outstanding	814,500			780,337
Common shares authorized	2,000,000			2,000,000
Preferred shares outstanding	126			107
Preferred shares authorized	5,000			5,000

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

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BB&T CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Dollars in millions, except per share data, shares in thousands)



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
Interest Income
Interest and fees on loans and leases	$	1,509		$	1,249		$	2,951		$	2,486
Interest and dividends on securities	286			232			541			472
Interest on other earning assets	10			8			34			24
Total interest income	1,805			1,489			3,526			2,982
Interest Expense
Interest on deposits	64			55			128			110
Interest on short-term borrowings	3			1			5			2
Interest on long-term debt	121			121			247			246
Total interest expense	188			177			380			358
Net Interest Income	1,617			1,312			3,146			2,624
Provision for credit losses	111			97			295			196
Net Interest Income After Provision for Credit Losses	1,506			1,215			2,851			2,428
Noninterest Income
Insurance income	465			422			884			862
Service charges on deposits	166			154			320			299
Mortgage banking income	111			130			202			240
Investment banking and brokerage fees and commissions	102			108			199			202
Trust and investment advisory revenues	67			57			129			113
Bankcard fees and merchant discounts	60			55			116			105
Checkcard fees	50			43			95			82
Operating lease income	35			30			69			59
Income from bank-owned life insurance	31			27			62			57
FDIC loss share income, net	(64		)	(64		)	(124		)	(143		)
Other income	107			58			149			141
Securities gains (losses), net
Gross realized gains	—			2			45			2
Gross realized losses	—			—			—			—
OTTI charges	—			(2		)	—			(2		)
Non-credit portion recognized in OCI	—			(1		)	—			(1		)
Total securities gains (losses), net	—			(1		)	45			(1		)
Total noninterest income	1,130			1,019			2,146			2,016
Noninterest Expense
Personnel expense	1,039			864			1,954			1,694
Occupancy and equipment expense	194			166			385			333
Software expense	53			46			104			90
Loan-related expense	36			37			68			75
Outside IT services	44			29			85			59
Professional services	26			35			48			59
Amortization of intangibles	42			23			74			44
Regulatory charges	32			25			62			48
Foreclosed property expense	8			14			19			27
Merger-related and restructuring charges, net	92			25			115			38
(Gain) loss on early extinguishment of debt	—			172			(1		)	172
Other expense	231			217			429			436
Total noninterest expense	1,797			1,653			3,342			3,075
Earnings
Income before income taxes	839			581			1,655			1,369
Provision for income taxes	252			80			498			321
Net income	587			501			1,157			1,048
Noncontrolling interests	3			10			9			32
Dividends on preferred stock	43			37			80			74
Net income available to common shareholders	$	541		$	454		$	1,068		$	942
Basic EPS	$	0.67		$	0.63		$	1.34		$	1.30
Diluted EPS	$	0.66		$	0.62		$	1.32		$	1.29
Cash dividends declared per share	$	0.28		$	0.27		$	0.55		$	0.51
Basic weighted average shares outstanding	814,261			724,880			797,727			723,268
Diluted weighted average shares outstanding	823,682			734,527			806,839			733,002

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

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BB&T CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in millions)



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
Net Income	$	587		$	501		$	1,157		$	1,048
OCI, net of tax:
Change in unrecognized net pension and postretirement costs	11			9			22			18
Change in unrealized net gains (losses) on cash flow hedges	(49		)	73			(164		)	19
Change in unrealized net gains (losses) on AFS securities	100			(107		)	297			(50		)
Change in FDIC's share of unrealized gains/losses on AFS securities	17			9			32			19
Other, net	1			1			4			(3		)
Total OCI	80			(15		)	191			3
Total comprehensive income	$	667		$	486		$	1,348		$	1,051


Income Tax Effect of Items Included in OCI:
Change in unrecognized net pension and postretirement costs	$	7		$	5		$	14		$	11
Change in unrealized net gains (losses) on cash flow hedges	(30		)	43			(98		)	11
Change in unrealized net gains (losses) on AFS securities	60			(65		)	178			(31		)
Change in FDIC's share of unrealized gains/losses on AFS securities	10			9			18			14

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

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BB&T CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Unaudited)

Six Months Ended June 30, 2016 and 2015

(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, 2015	720,698		$	2,603	$	3,603		$	6,517		$	12,317		$	(751	)	$	88		$	24,377
Add (Deduct):
Net income	—		—		—			—			1,016			—			32			1,048
Net change in AOCI	—		—		—			—			—			3			—			3
Stock transactions:
Issued in business combinations	7,847		—		39			283			—			—			—			322
Issued in connection with equity awards	6,249		—		31			64			—			—			—			95
Shares repurchased in connection with equity awards	(1,313	)	—		(6		)	(45		)	—			—			—			(51		)
Excess tax benefits in connection with equity awards	—		—		—			9			—			—			—			9
Purchase of additional ownership interest in AmRisc, LP	—		—		—			(219		)	—			—			(3		)	(222		)
Cash dividends declared on common stock	—		—		—			—			(368		)	—			—			(368		)
Cash dividends declared on preferred stock	—		—		—			—			(74		)	—			—			(74		)
Equity-based compensation expense	—		—		—			58			—			—			—			58
Other, net	—		—		—			—			—			—			(65		)	(65		)
Balance, June 30, 2015	733,481		$	2,603	$	3,667		$	6,667		$	12,891		$	(748	)	$	52		$	25,132

Balance, January 1, 2016	780,337		$	2,603	$	3,902		$	8,365		$	13,464		$	(1,028	)	$	34		$	27,340
Add (Deduct):
Net income	—		—		—			—			1,148			—			9			1,157
Net change in AOCI	—		—		—			—			—			191			—			191
Stock transactions:
Issued in business combinations	31,666		—		158			905			—			—			—			1,063
Issued in connection with equity awards	3,479		—		18			6			—			—			—			24
Shares repurchased in connection with equity awards	(982	)	—		(5		)	(28		)	—			—			—			(33		)
Issued in connection with preferred stock offerings	—		450		—			—			—			—			—			450
Cash dividends declared on common stock	—		—		—			—			(439		)	—			—			(439		)
Cash dividends declared on preferred stock	—		—		—			—			(80		)	—			—			(80		)
Equity-based compensation expense	—		—		—			65			—			—			—			65
Other, net	—		—		—			(2		)	11			—			(4		)	5
Balance, June 30, 2016	814,500		$	3,053	$	4,073		$	9,311		$	14,104		$	(837	)	$	39		$	29,743

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

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BB&T CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in millions)



	Six Months Ended
	June 30,
	2016			2015
Cash Flows From Operating Activities:
Net income	$	1,157		$	1,048
Adjustments to reconcile net income to net cash from operating activities:
Provision for credit losses	295			196
Adjustment to income tax provision	(13		)	(107		)
Depreciation	195			173
(Gain) loss on early extinguishment of debt	(1		)	172
Amortization of intangibles	74			44
Equity-based compensation expense	65			58
(Gain) loss on securities, net	(45		)	1
Net change in operating assets and liabilities:
LHFS	(1,413		)	(1,044		)
Trading securities	595			(239		)
Other assets	(438		)	(524		)
Accounts payable and other liabilities	282			180
Other, net	108			64
Net cash from operating activities	861			22

Cash Flows From Investing Activities:
Proceeds from sales of AFS securities	4,480			754
Proceeds from maturities, calls and paydowns of AFS securities	2,466			2,708
Purchases of AFS securities	(6,912		)	(3,486		)
Proceeds from maturities, calls and paydowns of HTM securities	2,964			1,733
Purchases of HTM securities	(3,122		)	(945		)
Originations and purchases of loans and leases, net of principal collected	(1,103		)	(1,704		)
Net cash received (paid) for acquisitions and divestitures	(789		)	1,742
Other, net	(38		)	29
Net cash from investing activities	(2,054		)	831

Cash Flows From Financing Activities:
Net change in deposits	3,499			277
Net change in short-term borrowings	(3,515		)	143
Proceeds from issuance of long-term debt	3,028			1,017
Repayment of long-term debt	(3,008		)	(1,266		)
Net proceeds from preferred stock issued	450			—
Cash dividends paid on common stock	(439		)	(368		)
Cash dividends paid on preferred stock	(80		)	(74		)
Other, net	160			(286		)
Net cash from financing activities	95			(557		)
Net Change in Cash and Cash Equivalents	(1,098		)	296
Cash and Cash Equivalents at Beginning of Period	3,711			2,325
Cash and Cash Equivalents at End of Period	$	2,613		$	2,621

Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest	$	395		$	360
Income taxes	263			440
Noncash investing activities:
Transfers of loans to foreclosed assets	229			249
Purchase of additional interest in AmRisc, LP	—			216
Stock issued in business combinations	1,063			322

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

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NOTE 1. Basis of Presentation

See the Glossary of Defined Terms at the beginning of this Report for terms used throughout the consolidated financial statements and related notes of this Form 10-Q.

General

These consolidated financial statements and notes are presented in accordance with the instructions for Form 10-Q and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations and cash flow activity required in accordance with GAAP. In the opinion of management, all normal recurring adjustments necessary for a fair statement of the consolidated financial position and consolidated results of operations have been made. The year-end consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. The information contained in the financial statements and notes included in the Annual Report on Form 10-K for the year ended December 31, 2015 should be referred to in connection with these unaudited interim consolidated financial statements.

Reclassifications

Certain amounts reported in prior periods' consolidated financial statements have been reclassified to conform to the current presentation. Such reclassifications had no effect on previously reported cash flows, shareholders' equity or net income.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change include the determination of the ACL, determination of fair value for financial instruments, valuation of goodwill, intangible assets and other purchase accounting related adjustments, benefit plan obligations and expenses, and tax assets, liabilities and expense.

Changes in Accounting Principles and Effects of New Accounting Pronouncements

During June 2016, the FASB issued new guidance related to Credit Losses. The new guidance replaces the incurred loss impairment methodology in current GAAP with an expected credit loss methodology and requires consideration of a broader range of information to determine credit loss estimates. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses. Purchased credit impaired loans will receive an allowance account at the acquisition date that represents a component of the purchase price allocation. Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses, with such allowance limited to the amount by which fair value is below amortized cost. This guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. The Company is currently evaluating this guidance to determine the impact on its consolidated financial statements.

During March 2016, the FASB issued new guidance related to Stock Compensation. The new guidance eliminates the concept of APIC pools for stock-based awards and requires that the related excess tax benefits and tax deficiencies be classified as an operating activity in the statement of cash flows. The new guidance also allows entities to make a one-time policy election to account for forfeitures when they occur, instead of accruing compensation cost based on the number of awards expected to vest. Additionally, the new guidance changes the requirement for an award to qualify for equity classification by permitting tax withholding up to the maximum statutory tax rate instead of the minimum statutory tax rate. Cash paid by an employer when directly withholding shares for tax withholding purposes should be classified as a financing activity in the statement of cash flows. This guidance is effective for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years. The adoption of this guidance is not expected to be material to the consolidated financial statements.

During March 2016, the FASB issued new guidance related to Investments. The new guidance eliminates the requirement to retroactively adjust the financial statements when a change in ownership or influence causes an existing investment to qualify for the equity method of accounting. The new guidance requires the investor to add the cost of acquiring the additional interest in the investee to the current basis of the investor's previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. This guidance is effective for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years. The adoption of this guidance is not expected to be material to the consolidated financial statements.

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During March 2016, the FASB issued new guidance related to Derivatives and Hedging. The new guidance clarifies the requirements for assessing whether contingent call or put options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts, which is used to determine whether the embedded derivative should be separated from the host contract and accounted for separately as a derivative. An entity performing the assessment will be required to assess the embedded call or put options solely in accordance with the pre-existing four-step decision sequence. This guidance is effective for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years. The adoption of this guidance is not expected to be material to the consolidated financial statements.

During March 2016, the FASB issued new guidance related to Liabilities. The new guidance requires companies to recognize breakage on prepaid stored-value products in accordance with the recently issued guidance on Revenue from Contracts with Customers. This guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. The adoption of this guidance is not expected to be material to the consolidated financial statements.

During March 2016, the FASB issued new guidance related to Derivatives and Hedging. The new guidance clarifies that derivative instrument novations do not require dedesignation of the related hedging relationship provided that all other hedge accounting criteria continue to be met. BB&T adopted this guidance upon issuance. The adoption of this guidance was not material to the consolidated financial statements.

During February 2016, the FASB issued new guidance related to Leases. The new guidance requires lessees to recognize assets and liabilities related to certain operating leases on the balance sheet. The new guidance also requires additional disclosures by lessees and contains targeted changes to accounting by lessors. This guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. The Company is currently evaluating this guidance to determine the impact on its consolidated financial statements.

During January 2016, the FASB issued new guidance related to Financial Instruments. The new guidance requires the majority of equity investments to be measured at fair value with changes in fair value recognized in net income, excluding equity investments that are consolidated or accounted for under the equity method of accounting. The new guidance allows equity investments without readily determinable fair values to be measured at cost minus impairment, with a qualitative assessment required to identify impairment. For financial instruments recorded at amortized cost, the new guidance requires public companies to use exit prices to measure the fair value for disclosure purposes, eliminates the disclosure requirements related to measurement assumptions and requires separate presentation of financial assets and liabilities based on form and measurement category. In addition, for liabilities measured at fair value under the fair value option, the changes in fair value due to changes in instrument-specific credit risk should be recognized in OCI. This guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. The Company is currently evaluating this guidance to determine the impact on its consolidated financial statements.

During May 2015, the FASB issued new guidance related to Insurance. The new guidance requires insurance companies to provide additional disclosures about the liability for unpaid claims and claim adjustment expenses. This guidance is effective for annual periods beginning after December 15, 2015, and interim periods within annual periods beginning after December 15, 2016. BB&T's insurance operations primarily consist of agency/broker transactions; therefore, the adoption of this guidance is not expected to be material to the consolidated financial statements.

During May 2014, the FASB issued new guidance related to Revenue from Contracts with Customers. This guidance supersedes the revenue recognition requirements in Accounting Standards Codification Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Accounting Standards Codification. The guidance requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. During August 2015, the FASB provided a one-year deferral of the effective date; therefore, the guidance is effective for interim and annual reporting periods beginning after December 15, 2017. The FASB has also issued clarification guidance as it relates to principal versus agent considerations for revenue recognition purposes and clarification guidance on other various considerations related to the new revenue recognition guidance. Additionally, during April 2016, the FASB issued further clarification guidance related to identifying performance obligations and licensing. The Company is currently evaluating this guidance to determine the impact on its consolidated financial statements.

Effective January 1, 2016, BB&T adopted new guidance related to Fair Value Measurement. The new guidance eliminates the requirement to classify in the fair value hierarchy any investments for which fair value is measured at net asset value per share using the practical expedient. The adoption of this guidance was not material to the consolidated financial statements.

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Effective January 1, 2016, BB&T adopted new guidance related to Internal-Use Software. Under the new guidance, if a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The adoption of this guidance was not material to the consolidated financial statements.

Effective January 1, 2016, BB&T adopted new guidance related to Debt Issuance Costs. The new guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The adoption of this guidance was not material to the consolidated financial statements, therefore, it was adopted on a prospective basis.

Effective January 1, 2016, BB&T adopted new guidance related to Consolidation. The new guidance provides an additional requirement for a limited partnership or similar entity to qualify as a voting interest entity, amending the criteria for consolidating such an entity and eliminating the deferral provided under previous guidance for investment companies. In addition, the new guidance amends the criteria for evaluating fees paid to a decision maker or service provider as a variable interest and amends the criteria for evaluating the effect of fee arrangements and related parties on a VIE primary beneficiary determination. The adoption of this guidance was not material to the consolidated financial statements.

NOTE 2. Acquisitions and Divestitures

On April 1, 2016, BB&T acquired all of the outstanding stock of National Penn, a Pennsylvania incorporated BHC. National Penn conducted its business operations primarily through its bank subsidiary, National Penn Bank, which was merged into Branch Bank. National Penn operated other subsidiaries in Pennsylvania, New Jersey and Maryland to provide a wide range of retail and commercial banking and financial products and services. National Penn also operated a trust and investment company, an asset management company and a property and casualty insurance brokerage company. National Penn had 126 banking offices as of the acquisition date. BB&T acquired National Penn in order to increase BB&T’s market share in these areas.

The acquisition of National Penn constituted a business combination. Accordingly, the assets acquired and liabilities assumed are presented at their fair values in the table below. The determination of fair value requires management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. These fair value estimates are considered preliminary and are subject to change for up to one year after the closing date of the acquisition as additional information becomes available. Immaterial amounts of the intangible assets recognized are deductible for income tax purposes.

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	National Penn
	UPB		Fair Value
	(Dollars in millions)
Assets acquired:
Cash, due from banks and federal funds sold			$	216
Securities			2,496
Loans and leases:
Commercial and industrial	$	2,817	2,596
CRE-income producing properties	1,450		1,202
CRE-construction and development	165		127
Direct retail lending	801		767
Revolving credit	7		7
Residential mortgage	1,217		1,000
Sales finance	166		162
PCI	181		124
Total loans and leases	$	6,804	5,985
Goodwill			802
CDI			67
Other assets			501
Total assets acquired			10,067
Liabilities assumed:
Deposits:
Noninterest-bearing deposits			1,209
Interest-bearing deposits			5,420
Total deposits			6,629
Debt			1,756
Other liabilities			64
Total liabilities assumed			8,449
Consideration paid			$	1,618

Cash paid			$	555
Fair value of common stock issued, including replacement equity awards			1,063

The purchase price allocation for this acquisition has not been finalized. The following is a description of the methods used to determine the fair values of significant assets and liabilities.

Cash, due from banks and federal funds sold: The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets.

Securities: Fair values for securities are based on quoted market prices, where available. If quoted market prices are not available, fair value estimates are based on observable inputs including quoted market prices for similar instruments, quoted market prices that are not in an active market or other inputs that are observable in the market. In the absence of observable inputs, fair value is estimated based on pricing models and/or discounted cash flow methodologies.

Loans and leases: Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan, amortization status and current discount rates. Loans were grouped together according to similar characteristics and were treated in the aggregate when applying various valuation techniques. The discount rates used for loans are based on current market rates for new originations of comparable loans and include adjustments for liquidity concerns. The discount rate does not include a factor for credit losses as that has been included as a reduction to the estimated cash flows.

CDI: This intangible asset represents the value of the relationships with deposit customers. The fair value was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the deposit base, reserve requirements and the net maintenance cost attributable to customer deposits. The CDI is being amortized over 10 years based upon the estimated economic benefits received.

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Deposits: The fair values used for the demand and savings deposits by definition equal the amount payable on demand at the acquisition date. The fair values for time deposits are estimated using a discounted cash flow calculation that applies interest rates currently being offered to the contractual interest rates on such time deposits.

Debt: The fair values of long-term debt instruments are estimated based on quoted market prices for the instrument if available, or for similar instruments if not available, or by using discounted cash flow analyses, based on current incremental borrowing rates for similar types of instruments.

Other Acquisitions and Divestitures

On April 1, 2016, BB&T purchased insurance broker CGSC North America Holdings Corporation ("Swett & Crawford") from Cooper Gay Swett & Crawford for $465 million in cash. The purchase price allocation for this acquisition has not been finalized.

See BB&T's Annual Report on Form 10-K for the year ended December 31, 2015 for additional information related to the following transactions.

During the third quarter of 2015, BB&T acquired Susquehanna Bancshares, Inc., resulting in the addition of $18.3 billion in assets and $14.1 billion in deposits. Susquehanna had 245 financial centers in Pennsylvania, Maryland, New Jersey and West Virginia. The purchase price allocation for this acquisition will be finalized within the next quarter.

During the second quarter of 2015, BB&T acquired The Bank of Kentucky, which provided $2.0 billion in assets, $1.6 billion in deposits and 32 financial centers.

During the second quarter of 2015, BB&T purchased additional ownership interest in AmRisc, LP from the noncontrolling owners in exchange for cash and full ownership of American Coastal, which resulted in a net charge to equity.

During the first quarter of 2015, BB&T acquired 41 financial centers in Texas, which provided $238 million in assets and $1.9 billion in deposits.

NOTE 3. Securities



	Amortized		Gross Unrealized				Fair
June 30, 2016	Cost		Gains		Losses		Value
	(Dollars in millions)
AFS securities:
U.S. Treasury	$	1,159	$	14	$	—	$	1,173
Agency MBS	23,727		199		87		23,839
States and political subdivisions	2,153		101		43		2,211
Non-agency MBS	68		—		—		68
Other	7		3		—		10
Acquired from FDIC	706		237		—		943
Total AFS securities	$	27,820	$	554	$	130	$	28,244

HTM securities:
U.S. Treasury	$	1,097	$	59	$	—	$	1,156
GSE	3,946		89		—		4,035
Agency MBS	13,531		255		9		13,777
States and political subdivisions	134		—		—		134
Other	54		2		1		55
Total HTM securities	$	18,762	$	405	$	10	$	19,157

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	Amortized		Gross Unrealized				Fair
December 31, 2015	Cost		Gains		Losses		Value
	(Dollars in millions)
AFS securities:
U.S. Treasury	$	1,836	$	2	$	6	$	1,832
GSE	51		—		—		51
Agency MBS	20,463		22		439		20,046
States and political subdivisions	2,025		94		40		2,079
Non-agency MBS	198		23		—		221
Other	4		—		—		4
Acquired from FDIC	772		292		—		1,064
Total AFS securities	$	25,349	$	433	$	485	$	25,297

HTM securities:
U.S. Treasury	$	1,097	$	22	$	—	$	1,119
GSE	5,045		16		98		4,963
Agency MBS	12,267		70		22		12,315
States and political subdivisions	63		—		—		63
Other	58		2		1		59
Total HTM securities	$	18,530	$	110	$	121	$	18,519

The fair value of securities acquired from the FDIC included non-agency MBS of $680 million and $768 million as of June 30, 2016 and December 31, 2015, respectively, and states and political subdivisions securities of $263 million and $296 million as of June 30, 2016 and December 31, 2015, respectively. Effective October 1, 2014, securities subject to the commercial loss sharing agreement with the FDIC related to the Colonial acquisition were no longer covered by loss sharing; however, any gains on the sale of these securities through September 30, 2017 would be shared with the FDIC. Since these securities are in a significant unrealized gain position, they continue to be effectively covered as any declines in the unrealized gains of the securities down to a contractually specified amount would reduce the liability to the FDIC at the applicable percentage. The contractually-specified amount is the acquisition date fair value less any paydowns, redemptions or maturities and OTTI and totaled approximately $449 million at June 30, 2016. Any further declines below the contractually-specified amount would not be covered.

Certain investments in marketable debt securities and MBS issued by FNMA and FHLMC exceeded 10% of shareholders' equity at June 30, 2016. The FNMA investments had total amortized cost and fair value of $15.7 billion and $15.8 billion, respectively. The FHLMC investments had total amortized cost and fair value of $7.6 billion.

The following table reflects changes in credit losses on securities with OTTI (excluding securities acquired from the FDIC) where a portion of the unrealized loss was recognized in OCI:



	Three Months Ended June 30,					Six Months Ended June 30,
	2016		2015			2016			2015
	(Dollars in millions)
Balance at beginning of period	$	18	$	61		$	42		$	64
Credit losses on securities with previously recognized OTTI	—		3			—			3
Securities sold/settled during the period	2		(4		)	(21		)	(7		)
Credit recoveries through yield	—		(1		)	(1		)	(1		)
Balance at end of period	$	20	$	59		$	20		$	59

The amortized cost and estimated fair value of the securities portfolio by contractual maturity are shown in the following table. The expected life of MBS may differ from contractual maturities because borrowers have the right to prepay the underlying mortgage loans with or without prepayment penalties.

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	AFS				HTM
June 30, 2016	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in millions)
Due in one year or less	$	228	$	228	$	—	$	—
Due after one year through five years	1,040		1,059		2,162		2,222
Due after five years through ten years	987		1,009		2,953		3,042
Due after ten years	25,565		25,948		13,647		13,893
Total debt securities	$	27,820	$	28,244	$	18,762	$	19,157

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
June 30, 2016	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Dollars in millions)
AFS securities:
Agency MBS	$	1,889	$	12	$	5,061	$	75	$	6,950	$	87
States and political subdivisions	180		1		367		42		547		43
Total	$	2,069	$	13	$	5,428	$	117	$	7,497	$	130

HTM securities:
Agency MBS	$	1,046	$	8	$	94	$	1	$	1,140	$	9
Other	52		1		—		—		52		1
Total	$	1,098	$	9	$	94	$	1	$	1,192	$	10



	Less than 12 months				12 months or more				Total
December 31, 2015	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Dollars in millions)
AFS securities:
U.S. Treasury securities	$	1,211	$	6	$	—	$	—	$	1,211	$	6
Agency MBS	12,052		199		5,576		240		17,628		439
States and political subdivisions	64		1		329		39		393		40
Total	$	13,327	$	206	$	5,905	$	279	$	19,232	$	485

HTM securities:
GSE	$	2,307	$	41	$	1,743	$	57	$	4,050	$	98
Agency MBS	3,992		21		124		1		4,116		22
Other	56		1		—		—		56		1
Total	$	6,355	$	63	$	1,867	$	58	$	8,222	$	121

The unrealized losses on GSE securities and agency MBS were the result of increases in market interest rates compared to the date the securities were acquired rather than the credit quality of the issuers or underlying loans.

At June 30, 2016, $41 million of the unrealized loss on states and political subdivisions securities was the result of fair value hedge basis adjustments that are a component of amortized cost. These securities in an unrealized loss position are evaluated for credit impairment through a qualitative analysis of issuer performance and the primary source of repayment. At June 30, 2016, none of these securities had credit impairment.

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NOTE 4. Loans and ACL

Effective October 1, 2014, loans subject to the commercial loss sharing agreement with the FDIC related to the Colonial acquisition were no longer covered by loss sharing. At June 30, 2016, these loans had a carrying value of $240 million, a UPB of $377 million and an ALLL of $45 million and are included in PCI. Loans with a carrying value of $482 million at June 30, 2016 continue to be covered by loss sharing and are included in PCI.



	Accruing
June 30, 2016	Current		30-89 Days Past Due		90 Days Or More Past Due		Nonaccrual		Total
	(Dollars in millions)
Commercial:
Commercial and industrial	$	51,631	$	20	$	—	$	452	$	52,103
CRE-income producing properties	14,828		8		—		36		14,872
CRE-construction and development	3,674		2		—		14		3,690
Dealer floor plan	1,308		—		—		—		1,308
Other lending subsidiaries	7,190		14		—		11		7,215
Retail:
Direct retail lending	11,915		53		5		52		12,025
Revolving credit	2,485		19		8		—		2,512
Residential mortgage-nonguaranteed	29,248		361		56		171		29,836
Residential mortgage-government guaranteed	317		81		415		1		814
Sales finance	9,359		61		4		5		9,429
Other lending subsidiaries	7,015		247		—		51		7,313
PCI	939		48		122		—		1,109
Total	$	139,909	$	914	$	610	$	793	$	142,226



	Accruing
December 31, 2015	Current		30-89 Days Past Due		90 Days Or More Past Due		Nonaccrual		Total
	(Dollars in millions)
Commercial:
Commercial and industrial	$	48,157	$	36	$	—	$	237	$	48,430
CRE-income producing properties	13,370		13		—		38		13,421
CRE-construction and development	3,710		9		—		13		3,732
Dealer floor plan	1,215		—		—		—		1,215
Other lending subsidiaries	6,771		18		—		6		6,795
Retail:
Direct retail lending	11,032		58		7		43		11,140
Revolving credit	2,478		22		10		—		2,510
Residential mortgage-nonguaranteed	29,038		397		55		173		29,663
Residential mortgage-government guaranteed	306		78		486		—		870
Sales finance	10,243		72		5		7		10,327
Other lending subsidiaries	6,381		286		—		59		6,726
PCI	966		42		114		—		1,122
Total	$	133,667	$	1,031	$	677	$	576	$	135,951

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The following tables present the carrying amount of loans by risk rating. PCI loans are excluded because their related ALLL is determined by loan pool performance.



June 30, 2016	Commercial & Industrial		CRE - Income Producing Properties		CRE - Construction and Development		Dealer Floor Plan		Other Lending Subsidiaries
	(Dollars in millions)
Commercial:
Pass	$	49,976	$	14,382	$	3,586	$	1,294	$	7,160
Special mention	466		167		24		—		6
Substandard - performing	1,209		287		66		14		38
Nonperforming	452		36		14		—		11
Total	$	52,103	$	14,872	$	3,690	$	1,308	$	7,215



	Direct Retail Lending		Revolving Credit		Residential Mortgage		Sales Finance		Other Lending Subsidiaries
	(Dollars in millions)
Retail:
Performing	$	11,973	$	2,512	$	30,478	$	9,424	$	7,262
Nonperforming	52		—		172		5		51
Total	$	12,025	$	2,512	$	30,650	$	9,429	$	7,313



December 31, 2015	Commercial & Industrial		CRE - Income Producing Properties		CRE - Construction and Development		Dealer Floor Plan		Other Lending Subsidiaries
	(Dollars in millions)
Commercial:
Pass	$	46,760	$	12,940	$	3,619	$	1,195	$	6,757
Special mention	305		166		29		6		3
Substandard-performing	1,128		277		71		14		29
Nonperforming	237		38		13		—		6
Total	$	48,430	$	13,421	$	3,732	$	1,215	$	6,795



	Direct Retail Lending		Revolving Credit		Residential Mortgage		Sales Finance		Other Lending Subsidiaries
	(Dollars in millions)
Retail:
Performing	$	11,097	$	2,510	$	30,360	$	10,320	$	6,667
Nonperforming	43		—		173		7		59
Total	$	11,140	$	2,510	$	30,533	$	10,327	$	6,726

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The following tables represent activity in the ACL for the periods presented:



	ACL Rollforward
Three Months Ended June 30, 2016	Beginning Balance		Charge- Offs			Recoveries		Provision (Benefit)			Acquisition		Ending Balance
	(Dollars in millions)
Commercial:
Commercial and industrial	$	499	$	(26	)	$	12	$	34		$	—	$	519
CRE-income producing properties	125		—			1		(10		)	—		116
CRE-construction and development	32		—			5		(9		)	—		28
Dealer floor plan	10		—			—		—			—		10
Other lending subsidiaries	26		(4		)	2		3			—		27
Retail:
Direct retail lending	103		(12		)	6		8			—		105
Revolving credit	100		(16		)	5		9			—		98
Residential mortgage-nonguaranteed	197		(8		)	1		4			—		194
Residential mortgage-government guaranteed	24		(1		)	—		7			—		30
Sales finance	39		(6		)	3		—			—		36
Other lending subsidiaries	270		(69		)	10		68			—		279
PCI	63		—			—		2			—		65
ALLL	1,488		(142		)	45		116			—		1,507
RUFC	92		—			—		(5		)	9		96
ACL	$	1,580	$	(142	)	$	45	$	111		$	9	$	1,603



	ACL Rollforward
Three Months Ended June 30, 2015	Beginning Balance		Charge- Offs			Recoveries		Provision (Benefit)			Acquisition		Ending Balance
	(Dollars in millions)
Commercial:
Commercial and industrial	$	448	$	(32	)	$	13	$	28		$	—	$	457
CRE-income producing properties	153		(4		)	1		(9		)	—		141
CRE-construction and development	42		—			2		(6		)	—		38
Dealer floor plan	10		—			—		—			—		10
Other lending subsidiaries	22		(2		)	1		—			—		21
Retail:
Direct retail lending	111		(13		)	7		8			—		113
Revolving credit	106		(19		)	5		10			—		102
Residential mortgage-nonguaranteed	200		(8		)	1		4			—		197
Residential mortgage-government guaranteed	30		(1		)	—		(1		)	—		28
Sales finance	48		(5		)	2		(1		)	—		44
Other lending subsidiaries	237		(55		)	9		58			—		249
PCI	57		—			—		—			—		57
ALLL	1,464		(139		)	41		91			—		1,457
RUFC	68		—			—		6			4		78
ACL	$	1,532	$	(139	)	$	41	$	97		$	4	$	1,535

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	ACL Rollforward
Six Months Ended June 30, 2016	Beginning Balance		Charge-Offs			Recoveries		Provision (Benefit)			Acquisition		Ending Balance
	(Dollars in millions)
Commercial:
Commercial and industrial	$	466	$	(82	)	$	24	$	111		$	—	$	519
CRE-income producing properties	135		(2		)	4		(21		)	—		116
CRE-construction and development	37		—			6		(15		)	—		28
Dealer floor plan	8		—			—		2			—		10
Other lending subsidiaries	22		(12		)	4		13			—		27
Retail:
Direct retail lending	105		(25		)	13		12			—		105
Revolving credit	104		(35		)	10		19			—		98
Residential mortgage-nonguaranteed	194		(15		)	2		13			—		194
Residential mortgage-government guaranteed	23		(2		)	—		9			—		30
Sales finance	40		(14		)	6		4			—		36
Other lending subsidiaries	265		(153		)	20		147			—		279
PCI	61		—			—		4			—		65
ALLL	1,460		(340		)	89		298			—		1,507
RUFC	90		—			—		(3		)	9		96
ACL	$	1,550	$	(340	)	$	89	$	295		$	9	$	1,603



	ACL Rollforward
Six Months Ended June 30, 2015	Beginning Balance		Charge-Offs			Recoveries		Provision (Benefit)			Acquisition		Ending Balance
	(Dollars in millions)
Commercial:
Commercial and industrial	$	421	$	(46	)	$	21	$	61		$	—	$	457
CRE-income producing properties	162		(13		)	3		(11		)	—		141
CRE-construction and development	48		(2		)	6		(14		)	—		38
Dealer floor plan	10		—			—		—			—		10
Other lending subsidiaries	21		(5		)	2		3			—		21
Retail:
Direct retail lending	110		(25		)	15		13			—		113
Revolving credit	110		(37		)	10		19			—		102
Residential mortgage-nonguaranteed	217		(19		)	1		(2		)	—		197
Residential mortgage-government guaranteed	36		(1		)	—		(7		)	—		28
Sales finance	40		(11		)	5		10			—		44
Other lending subsidiaries	235		(119		)	17		116			—		249
PCI	64		(1		)	—		(6		)	—		57
ALLL	1,474		(279		)	80		182			—		1,457
RUFC	60		—			—		14			4		78
ACL	$	1,534	$	(279	)	$	80	$	196		$	4	$	1,535

Table of Contents

The following table provides a summary of loans that are collectively evaluated for impairment.



	June 30, 2016				December 31, 2015
	Recorded Investment		Related ALLL		Recorded Investment		Related ALLL
	(Dollars in millions)
Commercial:
Commercial and industrial	$	51,567	$	478	$	48,110	$	439
CRE-income producing properties	14,793		109		13,339		127
CRE-construction and development	3,659		24		3,697		32
Dealer floor plan	1,308		10		1,215		8
Other lending subsidiaries	7,200		26		6,789		21
Retail:
Direct retail lending	11,943		95		11,055		93
Revolving credit	2,481		86		2,477		91
Residential mortgage-nonguaranteed	29,399		151		29,228		153
Residential mortgage-government guaranteed	466		5		553		1
Sales finance	9,412		35		10,308		39
Other lending subsidiaries	7,105		245		6,534		235
PCI	1,109		65		1,122		61
Total	$	140,442	$	1,329	$	134,427	$	1,300

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



As of / For The Six Months Ended June 30, 2016	Recorded Investment		UPB		Related ALLL		Average Recorded Investment		Interest Income Recognized
	(Dollars in millions)
With no related allowance recorded:
Commercial:
Commercial and industrial	$	245	$	273	$	—	$	195	$	—
CRE-income producing properties	11		17		—		16		—
CRE-construction and development	6		8		—		7		—
Other lending subsidiaries	10		11		—		5		—
Retail:
Direct retail lending	12		39		—		12		—
Residential mortgage-nonguaranteed	68		132		—		78		2
Residential mortgage-government guaranteed	3		3		—		4		—
Sales finance	1		2		—		1		—
Other lending subsidiaries	4		8		—		4		—
With an allowance recorded:
Commercial:
Commercial and industrial	291		311		41		240		2
CRE-income producing properties	68		68		7		73		1
CRE-construction and development	25		25		4		24		—
Other lending subsidiaries	5		6		1		3		—
Retail:
Direct retail lending	70		72		10		72		2
Revolving credit	31		31		12		32		1
Residential mortgage-nonguaranteed	369		388		43		355		8
Residential mortgage-government guaranteed	345		345		25		314		6
Sales finance	16		16		1		17		—
Other lending subsidiaries	204		206		34		193		15
Total	$	1,784	$	1,961	$	178	$	1,645	$	37

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As Of / For The Year Ended December 31, 2015	Recorded Investment		UPB		Related ALLL		Average Recorded Investment		Interest Income Recognized
	(Dollars in millions)
With no related ALLL recorded:
Commercial:
Commercial and industrial	$	129	$	164	$	—	$	95	$	1
CRE-income producing properties	8		13		—		17		—
CRE-construction and development	8		11		—		10		—
Dealer floor plan	—		—		—		2		—
Other lending subsidiaries	2		3		—		—		—
Retail:
Direct retail lending	11		40		—		12		1
Residential mortgage-nonguaranteed	84		153		—		97		4
Residential mortgage-government guaranteed	5		5		—		3		—
Sales finance	1		2		—		1		—
Other lending subsidiaries	4		8		—		3		—
With an ALLL recorded:
Commercial:
Commercial and industrial	191		194		27		223		5
CRE-income producing properties	74		77		8		96		3
CRE-construction and development	27		27		5		36		1
Dealer floor plan	—		—		—		1		—
Other lending subsidiaries	4		5		1		6		—
Retail:
Direct retail lending	74		75		12		79		4
Revolving credit	33		33		13		36		1
Residential mortgage-nonguaranteed	351		368		41		354		15
Residential mortgage-government guaranteed	312		312		22		323		13
Sales finance	18		18		1		19		1
Other lending subsidiaries	188		190		30		179		28
Total	$	1,524	$	1,698	$	160	$	1,592	$	77

Trial modifications are excluded from the following disclosures because the specific types and amounts of concessions offered to borrowers frequently change between the trial modification and the permanent modification. The following table provides a summary of TDRs, all of which are considered impaired.



	June 30, 2016		December 31, 2015
	(Dollars in millions)
Performing TDRs:
Commercial:
Commercial and industrial	$	39	$	49
CRE-income producing properties	16		13
CRE-construction and development	10		16
Direct retail lending	69		72
Sales finance	16		17
Revolving credit	31		33
Residential mortgage-nonguaranteed	276		288
Residential mortgage-government guaranteed	348		316
Other lending subsidiaries	198		178
Total performing TDRs	1,003		982
Nonperforming TDRs (also included in NPL disclosures)	146		146
Total TDRs	$	1,149	$	1,128

ALLL attributable to TDRs	$	125	$	126

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The following tables summarize the primary reason loan modifications were classified as TDRs and includes newly designated TDRs as well as modifications made to existing TDRs. Balances represent the recorded investment at the end of the quarter in which the modification was made. Rate modifications include TDRs made with below market interest rates that also include modifications of loan structures.



	Three Months Ended June 30,
	2016						2015
	Types of Modifications				Impact To ALLL		Types of Modifications				Impact To ALLL
	Rate		Structure		Impact To ALLL		Rate		Structure		Impact To ALLL
	(Dollars in millions)
Commercial:
Commercial and industrial	$	33	$	14	$	1	$	40	$	10	$	1
CRE-income producing properties	3		1		—		2		10		—
CRE-construction and development	1		3		—		—		9		—

Retail:
Direct retail lending	4		—		—		3		—		1
Revolving credit	4		—		1		4		—		1
Residential mortgage-nonguaranteed	21		6		2		21		10		2
Residential mortgage-government guaranteed	69		—		3		49		—		2
Sales finance	—		1		—		—		3		—
Other lending subsidiaries	42		—		5		29		—		4



	Six Months Ended June 30,
	2016						2015
	Types of Modifications				Impact To ALLL		Types of Modifications				Impact To ALLL
	Rate		Structure		Impact To ALLL		Rate		Structure		Impact To ALLL
	(Dollars in millions)
Commercial:
Commercial and industrial	$	95	$	23	$	2	$	49	$	24	$	2
CRE-income producing properties	11		8		—		4		13		—
CRE-construction and development	4		3		—		—		12		—
Retail:
Direct retail lending	8		1		—		6		—		2
Revolving credit	9		—		2		8		—		2
Residential mortgage-nonguaranteed	38		14		3		44		22		5
Residential mortgage-government guaranteed	108		—		5		109		—		4
Sales finance	—		3		—		—		5		—
Other lending subsidiaries	74		—		10		60		—		8

Charge-offs and forgiveness of principal and interest for TDRs were immaterial for all periods presented.

The pre-default balance for modifications that experienced a payment default that had been classified as TDRs during the previous 12 months was $16 million and $15 million for the three months ended June 30, 2016 and 2015, respectively, and $33 million and $35 million for the six months ended June 30, 2016 and 2015, respectively. Payment default is defined as movement of the TDR to nonaccrual status, foreclosure or charge-off, whichever occurs first.

Table of Contents

Changes in the carrying value and accretable yield of PCI loans are presented in the following table:



	Six Months Ended June 30, 2016												Year Ended December 31, 2015
	Purchased Impaired						Purchased Nonimpaired						Purchased Impaired						Purchased Nonimpaired
	Accretable Yield			Carrying Value			Accretable Yield			Carrying Value			Accretable Yield			Carrying Value			Accretable Yield			Carrying Value
	(Dollars in millions)
Balance at beginning of period	$	189		$	700		$	176		$	422		$	134		$	579		$	244		$	636
Additions	36			124			—			—			98			402			—			—
Accretion	(66		)	66			(41		)	41			(89		)	89			(89		)	89
Payments received, net	—			(155		)	—			(89		)	—			(370		)	—			(303		)
Other, net	131			—			28			—			46			—			21			—
Balance at end of period	$	290		$	735		$	163		$	374		$	189		$	700		$	176		$	422

Outstanding UPB at end of period				$	1,106					$	501					$	1,063					$	587

The following table presents additional information about BB&T's loans and leases:



	June 30, 2016		December 31, 2015
	(Dollars in millions)
Unearned income, discounts and net deferred loan fees and costs, excluding PCI	$	610	$	598
Residential mortgage loans in process of foreclosure	361		229

NOTE 5. Goodwill and Other Intangible Assets

The changes in the carrying amounts of goodwill attributable to BB&T's operating segments are reflected in the table below.



	Community Banking		Residential Mortgage Banking		Dealer Financial Services		Specialized Lending			Insurance Holdings		Financial Services		Other, Treasury & Corporate		Total
	(Dollars in millions)
Goodwill, January 1, 2016	$	6,187	$	326	$	111	$	243		$	1,482	$	199	$	—	$	8,548
Acquisitions	6		—		—		2			270		—		802		1,080
Other adjustments	105		—		—		(134		)	—		22		—		(7		)
Goodwill, June 30, 2016	$	6,298	$	326	$	111	$	111		$	1,752	$	221	$	802	$	9,621

The other adjustments to goodwill were primarily the result of updating the purchase price allocation for Susquehanna. Goodwill acquired in connection with the acquisition of National Penn is included in the Other, Treasury & Corporate segment for the second quarter of 2016 and will be presented in the other segments following the systems conversion date in July 2016.

The acquisition of Swett & Crawford provided goodwill of $269 million and identifiable intangible assets of $240 million. The intangible assets are being amortized over 15 years based upon the estimated economic benefits received. Approximately $135 million of the goodwill and identifiable intangible assets is deductible for tax purposes.

The following table presents information for identifiable intangible assets subject to amortization:



	June 30, 2016							December 31, 2015
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(Dollars in millions)
CDI	$	970	$	(674	)	$	296	$	903	$	(634	)	$	269
Other, primarily customer relationship intangibles	1,432		(782		)	650		1,164		(747		)	417
Total	$	2,402	$	(1,456	)	$	946	$	2,067	$	(1,381	)	$	686

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NOTE 6. Loan Servicing

Residential Mortgage Banking Activities

The following tables summarize residential mortgage banking activities. Mortgage and home equity loans managed by BB&T exclude loans serviced for others with no other continuing involvement.



	June 30, 2016		December 31, 2015
	(Dollars in millions)
UPB of mortgage loan servicing portfolio	$	117,880	$	116,817
UPB of home equity loan servicing portfolio	4,737		5,352
UPB of residential mortgage and home equity loan servicing portfolio	$	122,617	$	122,169

UPB of residential mortgage loans serviced for others (primarily agency conforming fixed rate)	$	89,970	$	91,132
Mortgage loans sold with recourse	644		702
Maximum recourse exposure from mortgage loans sold with recourse liability	306		326
Indemnification, recourse and repurchase reserves	80		79
FHA-insured mortgage loan reserve	85		85

As previously disclosed, during June 2014, BB&T received notice from the HUD-OIG that BB&T had been selected for an audit/survey to assess BB&T's compliance with FHA loan origination and quality control requirements. In late 2014 and in 2015, BB&T received subpoenas from the HUD-OIG and the Department of Justice seeking additional information regarding its lending practices in connection with loans insured by the FHA. BB&T is cooperating with the investigation. While the final outcome of the investigation has not been determined and neither the Department of Justice nor the HUD-OIG has formally asserted any claims, similar reviews and related matters with other financial institutions have resulted in cash settlements and other remedial actions. The estimated potential net exposure related to losses incurred by the FHA on defaulted loans ranges from $25 million to $105 million, and BB&T recognized an $85 million charge during 2014 that was included in other expense on the Consolidated Statements of Income.



	As of / For The Six Months Ended June 30,
	2016			2015
	(Dollars in millions)
UPB of residential mortgage loans sold from LHFS	$	6,183		$	6,804
Pre-tax gains recognized on mortgage loans sold and held for sale	59			74
Servicing fees recognized from mortgage loans serviced for others	134			136
Approximate weighted average servicing fee on the outstanding balance of residential mortgage loans serviced for others	0.28		%	0.29		%
Weighted average interest rate on mortgage loans serviced for others	4.09			4.16



	Six Months Ended June 30,
	2016			2015
	(Dollars in millions)
Residential MSRs, carrying value, beginning of period	$	880		$	844
Additions	56			68
Change in fair value due to changes in valuation inputs or assumptions:
Prepayment speeds	(209		)	166
OAS	9			(70		)
Servicing costs	2			(25		)
Realization of expected net servicing cash flows, passage of time and other	(69		)	(71		)
Residential MSRs, carrying value, end of period	$	669		$	912

Gains (losses) on derivative financial instruments used to mitigate the income statement effect of changes in fair value	$	229		$	(38	)

Table of Contents

The sensitivity of the fair value of the residential MSRs to changes in key assumptions is included in the accompanying table:



	June 30, 2016							December 31, 2015
	Range				Weighted Average			Range				Weighted Average
	Min		Max		Weighted Average			Min		Max		Weighted Average
	(Dollars in millions)
Prepayment speed	12.9	%	14.8	%	14.2		%	8.1	%	9.0	%	8.7		%
Effect on fair value of a 10% increase					$	(33	)					$	(28	)
Effect on fair value of a 20% increase					(62		)					(54		)

OAS	9.9	%	10.2	%	10.0		%	10.3	%	10.6	%	10.4		%
Effect on fair value of a 10% increase					$	(21	)					$	(32	)
Effect on fair value of a 20% increase					(41		)					(61		)

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 (in years)					4.9							6.8

The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in the above table, the effect of an adverse variation in 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:



	June 30, 2016		December 31, 2015
	(Dollars in millions)
UPB of CRE mortgages serviced for others	$	28,455	$	28,163
CRE mortgages serviced for others covered by recourse provisions	4,022		4,198
Maximum recourse exposure from CRE mortgages sold with recourse liability	1,221		1,259
Recorded reserves related to recourse exposure	7		7
Originated CRE mortgages during the year	2,981		7,012
Commercial MSRs at fair value	116		—

Effective January 1, 2016, the Company adopted the fair value option for commercial MSRs to facilitate hedging against the MSR asset. The impact of such adoption was immaterial.

NOTE 7. Deposits

A summary of deposits is presented in the accompanying table:



	June 30, 2016		December 31, 2015
	(Dollars in millions)
Noninterest-bearing deposits	$	49,180	$	45,695
Interest checking	28,528		25,410
Money market and savings	64,064		60,461
Time deposits	17,466		17,558
Total deposits	$	159,238	$	149,124

Time deposits $100,000 and greater	$	7,466	$	7,562
Time deposits $250,000 and greater	3,649		3,497

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NOTE 8. Long-Term Debt



	June 30, 2016		December 31, 2015
	(Dollars in millions)
BB&T Corporation:
3.95% senior notes due 2016	$	—	$	500
3.20% senior notes due 2016	—		1,000
2.15% senior notes due 2017	750		749
1.60% senior notes due 2017	750		749
1.45% senior notes due 2018	465		500
Floating rate senior notes due 2018 (LIBOR-based, 1.51% at June 30, 2016)	400		400
2.05% senior notes due 2018	600		600
6.85% senior notes due 2019	540		540
2.25% senior notes due 2019	648		648
Floating rate senior notes due 2019 (LIBOR-based, 1.30% at June 30, 2016)	450		450
2.45% senior notes due 2020	1,298		1,298
2.63% senior notes due 2020	999		999
Floating rate senior notes due 2020 (LIBOR-based, 1.34% at June 30, 2016)	200		200
2.05% senior notes due 2021	1,249		—
5.38% senior notes due 2022	165		166
4.25% senior notes due 2024	130		—
4.90% subordinated notes due 2017	358		356
5.25% subordinated notes due 2019	586		586
3.95% subordinated notes due 2022	299		299

Branch Bank:
1.45% senior notes due 2016	750		750
Floating rate senior notes due 2016 (LIBOR-based, 1.10% at June 30, 2016)	375		375
1.05% senior notes due 2016	500		500
1.00% senior notes due 2017	599		599
1.35% senior notes due 2017	660		750
2.30% senior notes due 2018	750		750
1.45% senior notes due 2019	1,499		—
Floating rate senior notes due 2019 (LIBOR-based, 1.16% at June 30, 2016)	250		—
2.85% senior notes due 2021	700		700
5.63% subordinated notes due 2016	386		386
Floating rate subordinated notes due 2016 (LIBOR-based, 0.98% at June 30, 2016)	350		350
Floating rate subordinated notes due 2017 (LIBOR-based, 0.95% at June 30, 2016)	262		262
3.63% subordinated notes due 2025	1,249		1,249
3.80% subordinated notes due 2026	848		848

FHLB advances to Branch Bank:
Varying maturities to 2034	4,387		5,582

Other long-term debt	232		154

Basis adjustments	751		474
Total long-term debt	$	24,435	$	23,769

Table of Contents

Basis adjustments include fair value hedge-related basis adjustments as well as debt issuance costs. The following table reflects the carrying amounts and effective interest rates for long-term debt:



	June 30, 2016				December 31, 2015
	Carrying Amount		Effective Rate		Carrying Amount		Effective Rate
	(Dollars in millions)
BB&T Corporation fixed rate senior notes	$	7,724	1.86	%	$	7,831	2.35	%
BB&T Corporation floating rate senior notes	1,049		1.43		1,050		1.20
BB&T Corporation fixed rate subordinated notes	1,388		0.90		1,382		1.52
Branch Bank fixed rate senior notes	5,520		1.30		4,071		1.62
Branch Bank floating rate senior notes	625		1.18		375		0.92
Branch Bank fixed rate subordinated notes	2,689		2.39		2,562		3.13
Branch Bank floating rate subordinated notes	612		3.45		612		3.24
FHLB advances (weighted average maturity of 5.5 years at June 30, 2016)	4,596		3.98		5,732		4.02
Other long-term debt	232				154
Total long-term debt	$	24,435			$	23,769

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

NOTE 9. Shareholders' Equity

On March 9, 2016, BB&T issued $465 million of series H non-cumulative perpetual preferred stock with a stated dividend rate of 5.625% per annum for net proceeds of $450 million. Dividends, if declared by the Board of Directors, are payable quarterly in arrears. BB&T issued depositary shares, each of which represents a fractional ownership interest in a share of the 18,600 shares of the Company’s series H preferred stock. The preferred stock has no stated maturity and redemption is solely at the option of the Company in whole, but not in part, upon the occurrence of a regulatory capital treatment event, as defined. In addition, the preferred stock may be redeemed in whole or in part, on any dividend payment date after June 1, 2021. Under current rules, any redemption of the preferred stock is subject to prior approval of the FRB. The preferred stock is not subject to any sinking fund or other obligations of the Corporation.

The activity relating to options and restricted shares/units during the period is presented in the following tables:



	Options		Wtd. Avg. Exercise Price
	(Shares in thousands)
Outstanding at January 1, 2016	20,577		$	34.89
Granted	610		32.10
Replacement awards issued in connection with business combination	566		36.12
Exercised	(516	)	28.08
Forfeited or expired	(2,809	)	40.58
Outstanding at June 30, 2016	18,428		34.16
Exercisable at June 30, 2016	17,478		34.15
Exercisable and expected to vest at June 30, 2016	18,378		34.16



	Restricted Shares/Units		Wtd. Avg. Grant Date Fair Value
	(Shares in thousands)
Nonvested at January 1, 2016	11,824		$	29.81
Granted	5,224		27.48
Vested	(2,735	)	27.45
Forfeited	(209	)	29.44
Nonvested at June 30, 2016	14,104		29.41
Expected to vest at June 30, 2016	12,930		29.41

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NOTE 10. AOCI



Three Months Ended June 30, 2016	Unrecognized Net Pension and Postretirement Costs			Unrealized Net Gains (Losses) on Cash Flow Hedges			Unrealized Net Gains (Losses) on AFS Securities			FDIC's Share of Unrealized (Gains) Losses on AFS Securities			Other, net			Total
	(Dollars in millions)
AOCI balance, April 1, 2016	$	(712	)	$	(198	)	$	163		$	(154	)	$	(16	)	$	(917	)
OCI before reclassifications, net of tax	1			(51		)	110			6			1			67
Amounts reclassified from AOCI:
Personnel expense	16			—			—			—			—			16
Interest income	—			—			(16		)	—			—			(16		)
Interest expense	—			4			—			—			—			4
FDIC loss share income, net	—			—			—			17			—			17
Securities (gains) losses, net	—			—			—			—			—			—
Total before income taxes	16			4			(16		)	17			—			21
Less: Income taxes	6			2			(6		)	6			—			8
Net of income taxes	10			2			(10		)	11			—			13
Net change in AOCI	11			(49		)	100			17			1			80
AOCI balance, June 30, 2016	$	(701	)	$	(247	)	$	263		$	(137	)	$	(15	)	$	(837	)



Three Months Ended June 30, 2015	Unrecognized Net Pension and Postretirement Costs			Unrealized Net Gains (Losses) on Cash Flow Hedges			Unrealized Net Gains (Losses) on AFS Securities			FDIC's Share of Unrealized (Gains) Losses on AFS Securities			Other, net			Total
	(Dollars in millions)
AOCI balance, April 1, 2015	$	(617	)	$	(108	)	$	209		$	(197	)	$	(20	)	$	(733	)
OCI before reclassifications, net of tax	1			60			(121		)	5			1			(54		)
Amounts reclassified from AOCI:
Personnel expense	12			—			—			—			—			12
Interest income	—			—			22			—			—			22
Interest expense	—			21			—			—			—			21
FDIC loss share income, net	—			—			—			6			—			6
Securities (gains) losses, net	—			—			1			—			—			1
Total before income taxes	12			21			23			6			—			62
Less: Income taxes	4			8			9			2			—			23
Net of income taxes	8			13			14			4			—			39
Net change in AOCI	9			73			(107		)	9			1			(15		)
AOCI balance, June 30, 2015	$	(608	)	$	(35	)	$	102		$	(188	)	$	(19	)	$	(748	)

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Six Months Ended June 30, 2016	Unrecognized Net Pension and Postretirement Costs			Unrealized Net Gains (Losses) on Cash Flow Hedges			Unrealized Net Gains (Losses) on AFS Securities			FDIC's Share of Unrealized (Gains) Losses on AFS Securities			Other, net			Total
	(Dollars in millions)
AOCI balance, January 1, 2016	$	(723	)	$	(83	)	$	(34	)	$	(169	)	$	(19	)	$	(1,028	)
OCI before reclassifications, net of tax	1			(177		)	352			11			3			190
Amounts reclassified from AOCI:
Personnel expense	33			—			—			—			—			33
Interest income	—			—			(43		)	—			1			(42		)
Interest expense	—			21			—			—			—			21
FDIC loss share income, net	—			—			—			33			—			33
Securities (gains) losses, net	—			—			(45		)	—			—			(45		)
Total before income taxes	33			21			(88		)	33			1			—
Less: Income taxes	12			8			(33		)	12			—			(1		)
Net of income taxes	21			13			(55		)	21			1			1
Net change in AOCI	22			(164		)	297			32			4			191
AOCI balance, June 30, 2016	$	(701	)	$	(247	)	$	263		$	(137	)	$	(15	)	$	(837	)



Six Months Ended June 30, 2015	Unrecognized Net Pension and Postretirement Costs			Unrealized Net Gains (Losses) on Cash Flow Hedges			Unrealized Net Gains (Losses) on AFS Securities			FDIC's Share of Unrealized (Gains) Losses on AFS Securities			Other, net			Total
	(Dollars in millions)
AOCI balance, January 1, 2015	$	(626	)	$	(54	)	$	152		$	(207	)	$	(16	)	$	(751	)
OCI before reclassifications, net of tax	3			(7		)	(54		)	7			(4		)	(55		)
Amounts reclassified from AOCI:
Personnel expense	24			—			—			—			—			24
Interest income	—			—			6			—			1			7
Interest expense	—			42			—			—			—			42
FDIC loss share income, net	—			—			—			19			—			19
Securities (gains) losses, net	—			—			1			—			—			1
Total before income taxes	24			42			7			19			1			93
Less: Income taxes	9			16			3			7			—			35
Net of income taxes	15			26			4			12			1			58
Net change in AOCI	18			19			(50		)	19			(3		)	3
AOCI balance, June 30, 2015	$	(608	)	$	(35	)	$	102		$	(188	)	$	(19	)	$	(748	)

NOTE 11. Income Taxes

The effective tax rates for the three months ended June 30, 2016 and 2015 were 30.0% and 13.8%, respectively. The effective tax rates for the six months ended June 30, 2016 and 2015 were 30.1% and 23.4%, respectively. The effective tax rates for the three and six months ended June 30, 2016 were higher than the corresponding periods of 2015 primarily due to changes in unrecognized tax benefits as described below. In addition, the second quarter of 2016 includes a $13 million tax benefit related to specific tax-advantaged assets.

In February 2010, BB&T received an IRS statutory notice of deficiency for tax years 2002-2007 related to the disallowance of foreign tax credits and other deductions claimed by a subsidiary in connection with a financing transaction. BB&T paid the disputed tax, penalties and interest during 2010 and filed a lawsuit seeking a refund in the U.S. Court of Federal Claims. During 2013, the court denied the refund claim and BB&T appealed the decision to the U.S. Court of Appeals for the Federal Circuit. During May 2015, the appeals court rendered a decision overturning a portion of the earlier ruling and affirming the remainder, resulting in the recognition of income tax benefits, including the reversal of interest and penalties, of $107 million during the second quarter of 2015. During September 2015, BB&T filed a petition requesting the case be heard by the U.S. Supreme Court. During March 2016, the U.S. Supreme Court declined to hear the case, which preserves the earlier ruling and effectively concludes this matter.

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The following table presents changes in unrecognized tax benefits:



	As of/For the Year-to-Date Period Ended
	June 30, 2016			December 31, 2015
	(Dollars in millions)
Beginning balance of unrecognized tax benefits	$	426		$	503
Additions (reductions) for tax positions of prior years	(5		)	(76		)
Settlements	(418		)	(1		)
Lapse of statute of limitations	—			(1		)
Unrecognized deferred tax benefits from acquisitions	—			1
Ending balance of unrecognized tax benefits	$	3		$	426

Unrecognized tax benefits that would have impacted effective rate if recognized
Federal	$	—		$	422
State	2			3

At June 30, 2016, the liabilities for tax-related interest and penalties recorded on the Consolidated Balance Sheets were immaterial, compared to $181 million at December 31, 2015.

NOTE 12. Benefit Plans



	Qualified Plan						Nonqualified Plans
Three Months Ended June 30,	2016			2015			2016		2015
	(Dollars in millions)
Service cost	$	44		$	42		$	3	$	3
Interest cost	41			34			4		4
Estimated return on plan assets	(81		)	(81		)	—		—
Amortization and other	16			12			3		3
Net periodic benefit cost	$	20		$	7		$	10	$	10



	Qualified Plan						Nonqualified Plans
Six Months Ended June 30,	2016			2015			2016		2015
	(Dollars in millions)
Service cost	$	86		$	85		$	6	$	6
Interest cost	81			68			9		8
Estimated return on plan assets	(162		)	(162		)	—		—
Amortization and other	33			24			6		7
Net periodic benefit cost	$	38		$	15		$	21	$	21

BB&T makes contributions to the qualified pension plan in amounts between the minimum required for funding and the maximum amount deductible for federal income tax purposes. Discretionary contributions totaling $280 million were made during the six months ended June 30, 2016. There are no required contributions for the remainder of 2016, though BB&T may elect to make additional contributions.

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NOTE 13. Commitments and Contingencies



	June 30, 2016		December 31, 2015
	(Dollars in millions)
Letters of credit	$	3,072	$	3,033
Carrying amount of the liability for letters of credit	29		27

Investments in affordable housing and historic building rehabilitation projects:
Carrying amount	1,725		1,629
Amount of future funding commitments included in carrying amount	749		654
Lending exposure	338		292
Tax credits subject to recapture	374		355

Private equity and similar investments	353		289
Future funding commitments to consolidated private equity funds	212		231

Legal Proceedings

The nature of BB&T's business ordinarily results in a certain amount of claims, litigation, investigations and legal and administrative cases and proceedings, all of which are considered incidental to the normal conduct of business. BB&T believes it has meritorious defenses to the claims asserted against it in its currently outstanding legal proceedings and, with respect to such legal proceedings, intends to continue to defend itself vigorously, litigating or settling cases according to management's judgment as to what is in the best interests of BB&T and its shareholders.

On at least a quarterly basis, liabilities and contingencies in connection with outstanding legal proceedings are assessed utilizing the latest information available. For those matters where it is probable that BB&T will incur a loss and the amount of the loss can be reasonably estimated, a liability is recorded in the consolidated financial statements. These legal reserves may be increased or decreased to reflect any relevant developments on at least a quarterly basis. For other matters, where a loss is not probable or the amount of the loss is not estimable, legal reserves are not accrued. While the outcome of legal proceedings is inherently uncertain, based on information currently available, advice of counsel and available insurance coverage, management believes that the established legal reserves are adequate and the liabilities arising from legal proceedings will not have a material adverse effect on the consolidated financial position, consolidated results of operations or consolidated cash flows. However, in the event of unexpected future developments, it is possible that the ultimate resolution of these matters, if unfavorable, may be material to the consolidated financial position, consolidated results of operations or consolidated cash flows of BB&T.

Pledged Assets

Certain assets were pledged to secure municipal deposits, securities sold under agreements to repurchase, borrowings and borrowing capacity, subject to any applicable asset discount, at the FHLB and FRB as well as for other purposes as required or permitted by law. The following table provides the total carrying amount of pledged assets by asset type, of which the majority are pursuant to agreements that do not permit the other party to sell or repledge the collateral. Assets related to employee benefit plans have been excluded from the following table.



	June 30, 2016		December 31, 2015
	(Dollars in millions)
Pledged securities	$	14,523	$	14,063
Pledged loans	74,248		69,070

NOTE 14. Fair Value Disclosures

Accounting standards define fair value as the exchange price that would be received on the measurement date to sell an asset or the price paid to transfer a liability in the principal or most advantageous market available to the entity in an orderly transaction between market participants, with a three level valuation input hierarchy.

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The following tables present fair value information for assets and liabilities measured at fair value on a recurring basis:



June 30, 2016	Total		Level 1		Level 2		Level 3
	(Dollars in millions)
Assets:
Trading securities	$	585	$	320	$	265	$	—
AFS securities:
U.S. Treasury	1,173		—		1,173		—
Agency MBS	23,839		—		23,839		—
States and political subdivisions	2,211		—		2,211		—
Non-agency MBS	68		—		68		—
Other	10		10		—		—
Acquired from FDIC	943		—		384		559
LHFS	2,485		—		2,466		19
MSRs	785		—		—		785
Derivative assets:
Interest rate contracts	1,596		1		1,561		34
Foreign exchange contracts	10		—		10		—
Private equity and similar investments	353		—		—		353
Total assets	$	34,058	$	331	$	31,977	$	1,750

Liabilities:
Derivative liabilities:
Interest rate contracts	$	1,423	$	—	$	1,422	$	1
Foreign exchange contracts	3		—		3		—
Securities sold short	125		—		125		—
Total liabilities	$	1,551	$	—	$	1,550	$	1



December 31, 2015	Total		Level 1		Level 2		Level 3
	(Dollars in millions)
Assets:
Trading securities	$	1,180	$	311	$	869	$	—
AFS securities:
U.S. Treasury	1,832		—		1,832		—
GSE	51		—		51		—
Agency MBS	20,046		—		20,046		—
States and political subdivisions	2,079		—		2,079		—
Non-agency MBS	221		—		221		—
Other	4		4		—		—
Acquired from FDIC	1,064		—		438		626
LHFS	1,035		—		1,035		—
MSRs	880		—		—		880
Derivative assets:
Interest rate contracts	964		—		956		8
Foreign exchange contracts	6		—		6		—
Private equity and similar investments	289		—		—		289
Total assets	$	29,651	$	315	$	27,533	$	1,803

Liabilities:
Derivative liabilities:
Interest rate contracts	$	788	$	—	$	784	$	4
Foreign exchange contracts	4		—		4		—
Securities sold short	147		—		147		—
Total liabilities	$	939	$	—	$	935	$	4

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The following discussion focuses on the valuation techniques and significant inputs for Level 2 and Level 3 assets and liabilities.

A third-party pricing service is generally utilized in determining the fair value of the securities portfolio. Management independently evaluates the fair values provided by the pricing service through comparisons to other 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.

Trading securities: Trading securities include various types of debt and equity securities, primarily consisting of debt securities issued by the U.S. Treasury, GSEs, or states and political subdivisions. The valuation techniques used for these investments are more fully discussed below.

U.S. Treasury securities: Treasury securities are valued using quoted prices in active over the counter markets.

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.

Other securities: These securities include mutual funds, corporate bonds and equities. These securities are valued based on a review of quoted market prices for assets as well as through the various other inputs discussed previously.

Acquired from FDIC securities: Securities acquired from the FDIC consist of re-remic non-agency MBS, municipal securities and non-agency MBS. State and political subdivision securities and certain non-agency MBS acquired from the FDIC are valued in a manner similar to the approach described above for those asset classes. The re-remic non-agency MBS, which are categorized as Level 3, are valued based on broker dealer quotes that reflected certain unobservable market inputs.

LHFS: Certain mortgage loans are originated to be sold to investors, which are carried at fair value. The fair value is primarily based on quoted market prices for securities backed by similar types of loans. The changes in fair value of these assets are largely driven by changes in interest rates subsequent to loan funding and changes in the fair value of servicing associated with the mortgage LHFS.

MSRs: Residential MSRs are valued using an OAS valuation model to project cash flows over multiple interest rate scenarios, which are then discounted at risk-adjusted rates. The model considers portfolio characteristics, contractually specified servicing fees, prepayment assumptions, delinquency rates, late charges, other ancillary revenue, costs to service and other economic factors. Fair value estimates and assumptions are compared to industry surveys, recent market activity, actual portfolio experience and, when available, other observable market data. Commercial MSRs are valued using a cash flow valuation model that calculates the present value of estimated future net servicing cash flows. BB&T considers actual and expected loan prepayment rates, discount rates, servicing costs and other economic factors that are determined based on current market conditions.

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

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Private equity and similar 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.

The following tables summarize activity for Level 3 assets and liabilities:



Three Months Ended June 30, 2016	Acquired from FDIC Securities			MSRs			Net Derivatives			Private Equity and Similar Investments
	(Dollars in millions)
Balance at April 1, 2016	$	600		$	860		$	21		$	301
Total realized and unrealized gains (losses):
Included in earnings:
Interest income	17			—			—			—
Mortgage banking income	—			(69		)	24			—
Included in unrealized net holding gains (losses) in OCI	(25		)	—			—			—
Purchases	—			—			—			55
Issuances	—			34			23			—
Settlements	(33		)	(40		)	(35		)	(3		)
Balance at June 30, 2016	$	559		$	785		$	33		$	353

Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at June 30, 2016	$	17		$	(69	)	$	33		$	(2	)



Three Months Ended June 30, 2015	Acquired from FDIC Securities			MSRs			Net Derivatives			Private Equity and Similar Investments
	(Dollars in millions)
Balance at April 1, 2015	$	719		$	764		$	23		$	366
Total realized and unrealized gains (losses):
Included in earnings:
Interest income	5			—			—			—
Mortgage banking income	—			140			20			—
Other noninterest income	—			—			2			3
Included in unrealized net holding gains (losses) in OCI	(11		)	—			—			—
Purchases	—			—			—			13
Issuances	—			42			3			—
Sales	—			—			—			(10		)
Settlements	(25		)	(34		)	(50		)	(13		)
Balance at June 30, 2015	$	688		$	912		$	(2	)	$	359

Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at June 30, 2015	$	5		$	140		$	4		$	(1	)

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Six Months Ended June 30, 2016	Acquired from FDIC Securities			MSRs			Net Derivatives			Private Equity and Similar Investments
	(Dollars in millions)
Balance at January 1, 2016	$	626		$	880		$	4		$	289
Total realized and unrealized gains (losses):
Included in earnings:
Interest income	32			—			—			—
Mortgage banking income	—			(196		)	56			—
Other noninterest income	—			—			—			3
Included in unrealized net holding gains (losses) in OCI	(45		)	—			—			—
Purchases	—			—			—			74
Issuances	—			56			63			—
Sales	—			—			—			(8		)
Settlements	(54		)	(78		)	(90		)	(5		)
Other	—			123			—			—
Balance at June 30, 2016	$	559		$	785		$	33		$	353

Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at June 30, 2016	$	32		$	(196	)	$	33		$	—

Other represents the adoption of the fair value method for commercial MSRs as of January 1, 2016.



Six Months Ended June 30, 2015	Acquired from FDIC Securities			MSRs			Net Derivatives			Private Equity and Similar Investments
	(Dollars in millions)
Balance at January 1, 2015	$	745		$	844		$	17		$	329
Total realized and unrealized gains (losses):
Included in earnings:
Interest income	16			—			—			—
Mortgage banking income	—			69			48			—
Other noninterest income	—			—			(2		)	19
Included in unrealized net holding gains (losses) in OCI	(25		)	—			—			—
Purchases	—			—			—			55
Issuances	—			68			41			—
Sales	—			—			—			(29		)
Settlements	(48		)	(69		)	(106		)	(15		)
Balance at June 30, 2015	$	688		$	912		$	(2	)	$	359

Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at June 30, 2015	$	16		$	69		$	—		$	15

BB&T's policy is to recognize transfers in and transfers out of Levels 1, 2 and 3 as of the end of a reporting period. Transfers involving Level 3, if any, are presented in the preceding tables. There were no transfers between Level 1 and Level 2 during the six months ended June 30, 2016 or 2015.

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The majority of private equity and similar investments are in SBIC qualified funds, which primarily focus on equity and subordinated debt investments in privately-held middle market companies. The majority of these 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 through 2026, is uncertain and dependent on various events such as recapitalizations, refinance transactions and ownership changes among others. Excluding the investment of future funds, these investments have an estimated weighted average remaining life of approximately three years; however, the timing and amount of distributions may vary significantly. As of June 30, 2016, restrictions on the ability to sell the investments include, but are not limited to, consent of a majority member or general partner approval for transfer of ownership. 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 4x to 11x, with a weighted average of 8x, at June 30, 2016.

The following table details the fair value and UPB of LHFS that were elected to be carried at fair value:



	June 30, 2016				December 31, 2015
	Fair Value		Aggregate UPB	Difference	Fair Value		Aggregate UPB		Difference
	(Dollars in millions)
LHFS reported at fair value	$	2,485	2,427	58	$	1,035	$	1,023	$	12

Excluding government guaranteed, LHFS that were nonaccrual or 90 days or more past due and still accruing interest were not material at June 30, 2016.

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



	June 30, 2016							June 30, 2015
	Carrying Value		Valuation Adjustments					Carrying Value		Valuation Adjustments
	Carrying Value		Three Months Ended		Six Months Ended			Carrying Value		Three Months Ended		Six Months Ended
	(Dollars in millions)
Impaired loans	$	358	(16	)	$	(54	)	$	114	(1	)	$	(13	)
Foreclosed real estate	53		(44	)	(98		)	86		(43	)	(83		)

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.

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Loans receivable: The fair values for loans are estimated using discounted cash flow analyses, applying interest rates currently being offered for loans with similar terms and credit quality, which are deemed to be indicative of orderly transactions in the current market. For commercial loans and leases, discount rates may be adjusted to address additional credit risk on lower risk grade instruments. For residential mortgage and other consumer loans, internal prepayment risk models are used to adjust contractual cash flows. Loans are aggregated into pools of similar terms and credit quality and discounted using a LIBOR based rate. The carrying amounts of accrued interest approximate fair values.

FDIC loss share receivable and payable: The fair values of the receivable and payable are estimated using discounted cash flow analyses, applying a risk free interest rate that is adjusted for the uncertainty in the timing and amount of the cash flows. The expected cash flows to/from the FDIC related to loans were estimated using the same assumptions that were used in determining the accounting values for the related loans. The expected cash flows to/from the FDIC related to securities are based upon the fair value of the related securities and the payment that would be required if the securities were sold for that amount. The loss share agreements are not transferable and, accordingly, there is no market for the receivable or payable.

Deposit liabilities: The fair values for demand deposits are equal to the amount payable on demand. Fair values for CDs are estimated using a discounted cash flow calculation that applies current interest rates to aggregate expected maturities. BB&T has developed long-term relationships with its deposit customers, commonly referred to as CDIs, that have not been considered in the determination of the deposit liabilities' fair value.

Short-term borrowings: The carrying amounts of short-term borrowings, excluding securities sold short, approximate their fair values.

Long-term debt: The fair values of long-term debt instruments are estimated based on quoted market prices for the instrument if available, or for similar instruments if not available, or by using discounted cash flow analyses, based on current incremental borrowing rates for similar types of instruments.

Contractual commitments: The fair values of commitments are estimated using the fees charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. The fair values of guarantees and letters of credit are estimated based on the counterparties' creditworthiness and average default rates for loan products with similar risks. These respective fair value measurements are categorized within Level 3 of the fair value hierarchy. Retail lending commitments are assigned no fair value as BB&T typically has the ability to cancel such commitments by providing notice to the borrower.

Financial assets and liabilities not recorded at fair value are summarized below:



June 30, 2016	Carrying Amount		Total Fair Value		Level 2		Level 3
	(Dollars in millions)
Financial assets:
HTM securities	$	18,762	$	19,157	$	19,157	$	—
Loans and leases HFI, net of ALLL	140,719		142,005		—		142,005
FDIC loss share receivable	218		47		—		47

Financial liabilities:
Deposits	159,238		159,291		159,291		—
FDIC loss share payable	673		666		—		666
Long-term debt	24,435		25,072		25,072		—

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December 31, 2015	Carrying Amount		Total Fair Value		Level 2		Level 3
	(Dollars in millions)
Financial assets:
HTM securities	$	18,530	$	18,519	$	18,519	$	—
Loans and leases HFI, net of ALLL	134,491		134,728		—		134,728
FDIC loss share receivable	285		11		—		11

Financial liabilities:
Deposits	149,124		149,300		149,300		—
FDIC loss share payable	685		676		—		676
Long-term debt	23,769		24,206		24,206		—

The following is a summary of selected information pertaining to off-balance sheet financial instruments:



	June 30, 2016				December 31, 2015
	Notional/ Contract Amount		Fair Value		Notional/ Contract Amount		Fair Value
	(Dollars in millions)
Commitments to extend, originate or purchase credit	$	62,695	$	257	$	59,019	$	253
Residential mortgage loans sold with recourse	644		9		702		8
Other loans sold with recourse	4,022		7		4,198		7
Letters of credit	3,072		29		3,033		27

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NOTE 15. Derivative Financial Instruments



Derivative Classifications and Hedging Relationships

		June 30, 2016								December 31, 2015
	Hedged Item or Transaction	Notional Amount		Fair Value						Notional Amount		Fair Value
	Hedged Item or Transaction	Notional Amount		Gain			Loss			Notional Amount		Gain			Loss
		(Dollars in millions)
Cash flow hedges:
Interest rate contracts:
Pay fixed swaps	3 mo. LIBOR funding	$	7,800	$	—		$	(461	)	$	9,300	$	—		$	(214	)

Fair value hedges:
Interest rate contracts:
Receive fixed swaps	Long-term debt	14,709		588			—			13,092		329			(1		)
Pay fixed swaps	Commercial loans	220		—			(5		)	207		—			(2		)
Pay fixed swaps	Municipal securities	240		—			(121		)	244		—			(94		)
Total		15,169		588			(126		)	13,543		329			(97		)

Not designated as hedges:
Client-related and other risk management:
Interest rate contracts:
Receive fixed swaps		9,768		568			—			8,827		337			(1		)
Pay fixed swaps		9,956		—			(606		)	8,984		1			(363		)
Other swaps		1,170		4			(7		)	1,005		3			(6		)
Other		642		1			(1		)	601		1			(2		)
Forward commitments		8,901		27			(26		)	4,403		5			(4		)
Foreign exchange contracts		568		10			(3		)	513		6			(4		)
Total		31,005		610			(643		)	24,333		353			(380		)

Mortgage banking:
Interest rate contracts:
Interest rate lock commitments		3,089		34			(1		)	1,828		8			(4		)
When issued securities, forward rate agreements and forward commitments		4,978		11			(62		)	2,725		9			(5		)
Other		527		7			—			677		4			—
Total		8,594		52			(63		)	5,230		21			(9		)

MSRs:
Interest rate contracts:
Receive fixed swaps		4,989		177			—			2,343		79			(7		)
Pay fixed swaps		2,641		—			(75		)	2,329		4			(56		)
Option trades		6,010		164			(58		)	7,765		184			(24		)
When issued securities, forward rate agreements and forward commitments		2,860		15			—			2,682		—			(5		)
Total		16,500		356			(133		)	15,119		267			(92		)
Total derivatives not designated as hedges		56,099		1,018			(839		)	44,682		641			(481		)
Total derivatives		$	79,068	1,606			(1,426		)	$	67,525	970			(792		)

Gross amounts not offset in the Consolidated Balance Sheets:
Amounts subject to master netting arrangements not offset due to policy election				(670		)	670					(391		)	391
Cash collateral (received) posted				(398		)	691					(283		)	368
Net amount				$	538		$	(65	)			$	296		$	(33	)

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The fair values of derivatives in a gain or loss position are presented on a gross basis in other assets or other liabilities, respectively, in the Consolidated Balance Sheets. Cash collateral posted for derivatives in a loss position is reported as restricted cash. Derivatives with dealer counterparties at both the bank and the parent company are governed by the terms of ISDA Master netting agreements and Credit Support Annexes. The ISDA Master agreements allow counterparties to offset trades in a gain against trades in a loss to determine net exposure and allows for the right of setoff in the event of either a default or an additional termination event. Credit Support Annexes govern the terms of daily collateral posting practices. Collateral practices mitigate the potential loss impact to affected parties by requiring liquid collateral to be posted on a scheduled basis to secure the aggregate net unsecured exposure. In addition to collateral, the right of setoff allows counterparties to offset net derivative values with a defaulting party against certain other contractual receivables from or obligations due to the defaulting party in determining the net termination amount. No portion of the change in fair value of derivatives designated as hedges has been excluded from effectiveness testing. The ineffective portion was immaterial for all periods presented.



The Effect of Derivative Instruments on the Consolidated Statements of Income
Three Months Ended June 30, 2016 and 2015

	Effective Portion
	Pre-tax Gain						Pre-tax Gain (Loss)
	(Loss) Recognized						Reclassified from
	in AOCI					Location of Amounts	AOCI into Income
	2016			2015		Reclassified from AOCI into Income	2016			2015
	(Dollars in millions)
Cash flow hedges:
Interest rate contracts	$	(83	)	$	95	Total interest expense	$	(4	)	$	(21	)

							Pre-tax Gain
							(Loss) Recognized
						Location of Amounts	in Income
						Recognized in Income	2016			2015
							(Dollars in millions)
Fair value hedges:
Interest rate contracts						Total interest income	$	(4	)	$	(5	)
Interest rate contracts						Total interest expense	59			68
Total							$	55		$	63

Not designated as hedges:
Client-related and other risk management:
Interest rate contracts						Other noninterest income	$	9		$	11
Foreign exchange contracts						Other noninterest income	13			(1		)
Mortgage banking:
Interest rate contracts						Mortgage banking income	(13		)	13
MSRs:
Interest rate contracts						Mortgage banking income	86			(119		)
Total							$	95		$	(96	)

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The Effect of Derivative Instruments on the Consolidated Statements of Income
Six Months Ended June 30, 2016 and 2015

	Effective Portion
	Pre-tax Gain							Pre-tax Gain (Loss)
	(Loss) Recognized							Reclassified from
	in AOCI						Location of Amounts	AOCI into Income
	2016			2015			Reclassified from AOCI into Income	2016			2015
	(Dollars in millions)
Cash Flow Hedges:
Interest rate contracts	$	(283	)	$	(12	)	Total interest expense	$	(21	)	$	(42	)

								Pre-tax Gain
								(Loss) Recognized
							Location of Amounts	in Income
							Recognized in Income	2016			2015
								(Dollars in millions)
Fair Value Hedges:
Interest rate contracts							Total interest income	$	(8	)	$	(10	)
Interest rate contracts							Total interest expense	119			136
Total								$	111		$	126

Not Designated as Hedges:
Client-related and other risk management:
Interest rate contracts							Other noninterest income	$	8		$	12
Foreign exchange contracts							Other noninterest income	5			9
Mortgage Banking:
Interest rate contracts							Mortgage banking income	(19		)	20
MSRs:
Interest rate contracts							Mortgage banking income	229			(38		)
Total								$	223		$	3

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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.

Treatment for portion that is highly effective	Recognized in AOCI until the related cash flows from the hedged item are recognized in earnings.	Recognized in current period income along with the corresponding changes in the fair value of the designated hedged item attributable to the risk being hedged.	Entire change in fair value recognized in current period income.

Treatment for portion that is ineffective	Recognized in current period income.	Recognized in current period income.	Not applicable

Treatment if hedge ceases to be highly effective or is terminated	Hedge is dedesignated. Effective changes in value that are recorded in AOCI before dedesignation are amortized to yield over the period the forecasted hedged transactions impact earnings.	If hedged item remains outstanding, termination proceeds are included in cash flows from financing activities and effective changes in value are reflected as part of the carrying value of the financial instrument and amortized to earnings over its estimated remaining life.	Not applicable

Treatment if transaction is no longer probable of occurring during forecast period or within a short period thereafter	Hedge accounting is ceased and any gain or loss in AOCI is reported in earnings immediately.	Not applicable	Not applicable

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The following table presents information about BB&T's cash flow and fair value hedges:



	June 30, 2016				December 31, 2015
	(Dollars in millions)
Cash flow hedges:
Net unrecognized after-tax loss on active hedges recorded in AOCI	$	(289	)		$	(134	)
Net unrecognized after-tax gain on terminated hedges recorded in AOCI (to be recognized in earnings through 2022)	41				50
Estimated portion of net after-tax loss on active and terminated hedges to be reclassified from AOCI into earnings during the next 12 months	14				(7		)
Maximum time period over which BB&T has hedged a portion of the variability in future cash flows for forecasted transactions excluding those transactions relating to the payment of variable interest on existing instruments	6			yrs	7			yrs

Fair value hedges:
Unrecognized pre-tax net gain on terminated hedges (to be recognized as interest primarily through 2019)	$	186			$	138
Portion of pre-tax net gain on terminated hedges to be recognized as a change in interest during the next 12 months	59				57

Derivatives Credit Risk – Dealer Counterparties

Credit risk related to derivatives arises when amounts receivable from a counterparty exceed those payable to the same counterparty. The risk of loss is addressed by subjecting dealer counterparties to credit reviews and approvals similar to those used in making loans or other extensions of credit and by requiring collateral. Dealer counterparties operate under agreements to provide cash and/or liquid collateral when unsecured loss positions exceed negotiated limits.

Derivative contracts with dealer counterparties settle on a monthly, quarterly or semiannual basis, with daily movement of collateral between counterparties required within established netting agreements. BB&T only transacts with dealer counterparties with strong credit standings.

Derivatives Credit Risk – Central Clearing Parties

Certain derivatives are cleared through central clearing parties that require initial margin collateral, as well as collateral for trades in a net loss position. Initial margin collateral requirements are established by central clearing parties on varying bases, with such amounts generally designed to offset the risk of non-payment. Initial margin is generally calculated by applying the maximum loss experienced in value over a specified time horizon to the portfolio of existing trades. The central clearing party used for TBA transactions does not post variation margin to the bank.



	June 30, 2016		December 31, 2015
	(Dollars in millions)
Dealer Counterparties:
Cash collateral received from dealer counterparties	$	402	$	283
Derivatives in a net gain position secured by that collateral	396		301
Unsecured positions in a net gain with dealer counterparties after collateral postings	—		18

Cash collateral posted to dealer counterparties	190		156
Derivatives in a net loss position secured by that collateral	189		161
Additional collateral that would have been posted had BB&T's credit ratings dropped below investment grade	2		6

Central Clearing Parties:
Cash collateral, including initial margin, posted to central clearing parties	505		223
Derivatives in a net loss position secured by that collateral	531		227
Securities pledged to central clearing parties	229		207

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NOTE 16. Computation of EPS

Basic and diluted EPS calculations are presented in the following table:



	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(Dollars in millions, except per share data, shares in thousands)
Net income available to common shareholders	$	541	$	454	$	1,068	$	942

Weighted average number of common shares	814,261		724,880		797,727		723,268
Effect of dilutive outstanding equity-based awards	9,421		9,647		9,112		9,734
Weighted average number of diluted common shares	823,682		734,527		806,839		733,002

Basic EPS	$	0.67	$	0.63	$	1.34	$	1.30

Diluted EPS	$	0.66	$	0.62	$	1.32	$	1.29

Anti-dilutive awards	5,755		8,344		9,958		9,938

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NOTE 17. Operating Segments

The financial information related to National Penn's operations is included in the Other, Treasury & Corporate segment for the second quarter of 2016 and will be presented in certain other segments following the systems conversion date in July 2016.

Intangible assets and related amortization resulting from other recent bank acquisitions have been reclassified from Other, Treasury and Corporate to Community Banking.

The following tables disclose selected financial information with respect to reportable segments for the periods indicated:



Reportable Segments
Three Months Ended June 30, 2016 and 2015

	Community Banking				Residential Mortgage Banking						Dealer Financial Services						Specialized Lending
	2016		2015		2016			2015			2016			2015			2016			2015
	(Dollars in millions)
Net interest income (expense)	$	532	$	431	$	333		$	343		$	226		$	216		$	186		$	153
Net intersegment interest income (expense)	391		304		(223		)	(227		)	(39		)	(38		)	(69		)	(56		)
Segment net interest income	923		735		110			116			187			178			117			97
Allocated provision for credit losses	23		11		10			3			58			48			17			11
Noninterest income	305		290		82			100			—			—			73			71
Intersegment net referral fees (expense)	40		39		1			(1		)	—			—			—			—
Noninterest expense	435		373		87			78			36			41			72			64
Amortization of intangibles	18		9		—			—			—			—			1			1
Allocated corporate expenses	330		307		25			23			11			10			19			15
Income (loss) before income taxes	462		364		71			111			82			79			81			77
Provision (benefit) for income taxes	168		133		27			42			31			30			20			19
Segment net income (loss)	$	294	$	231	$	44		$	69		$	51		$	49		$	61		$	58

Identifiable assets (period end)	$	67,952	$	56,803	$	33,651		$	34,218		$	14,463		$	13,906		$	19,739		$	17,067

	Insurance Holdings				Financial Services						Other, Treasury & Corporate (1)						Total BB&T Corporation
	2016		2015		2016			2015			2016			2015			2016			2015
	(Dollars in millions)
Net interest income (expense)	$	1	$	—	$	68		$	54		$	271		$	115		$	1,617		$	1,312
Net intersegment interest income (expense)	1		1		91			76			(152		)	(60		)	—			—
Segment net interest income	2		1		159			130			119			55			1,617			1,312
Allocated provision for credit losses	—		—		6			23			(3		)	1			111			97
Noninterest income	465		425		210			212			(5		)	(79		)	1,130			1,019
Intersegment net referral fees (expense)	—		—		5			4			(46		)	(42		)	—			—
Noninterest expense	350		310		190			177			585			587			1,755			1,630
Amortization of intangibles	18		11		1			—			4			2			42			23
Allocated corporate expenses	28		25		37			34			(450		)	(414		)	—			—
Income (loss) before income taxes	71		80		140			112			(68		)	(242		)	839			581
Provision (benefit) for income taxes	27		27		53			42			(74		)	(213		)	252			80
Segment net income (loss)	$	44	$	53	$	87		$	70		$	6		$	(29	)	$	587		$	501

Identifiable assets (period end)	$	3,590	$	2,907	$	17,577		$	14,715		$	64,887		$	51,401		$	221,859		$	191,017

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Reportable Segments
Six Months Ended June 30, 2016 and 2015

	Community Banking				Residential Mortgage Banking						Dealer Financial Services						Specialized Lending
	2016		2015		2016			2015			2016			2015			2016			2015
	(Dollars in millions)
Net interest income (expense)	$	1,061	$	857	$	665		$	684		$	455		$	429		$	364		$	299
Net intersegment interest income (expense)	780		587		(450		)	(459		)	(79		)	(76		)	(137		)	(110		)
Segment net interest income	1,841		1,444		215			225			376			353			227			189
Allocated provision for credit losses	13		24		21			(9		)	134			109			35			23
Noninterest income	593		561		153			184			1			—			138			132
Intersegment net referral fees (expense)	70		70		1			—			—			—			—			—
Noninterest expense	857		731		163			158			71			73			137			121
Amortization of intangibles	37		17		—			—			—			—			2			2
Allocated corporate expenses	662		612		51			46			22			19			37			30
Income (loss) before income taxes	935		691		134			214			150			152			154			145
Provision (benefit) for income taxes	340		252		51			81			57			58			37			34
Segment net income (loss)	$	595	$	439	$	83		$	133		$	93		$	94		$	117		$	111

Identifiable assets (period end)	$	67,952	$	56,803	$	33,651		$	34,218		$	14,463		$	13,906		$	19,739		$	17,067

	Insurance Holdings				Financial Services						Other, Treasury & Corporate (1)						Total BB&T Corporation
	2016		2015		2016			2015			2016			2015			2016			2015
	(Dollars in millions)
Net interest income (expense)	$	1	$	1	$	131		$	105		$	469		$	249		$	3,146		$	2,624
Net intersegment interest income (expense)	2		3		179			147			(295		)	(92		)	—			—
Segment net interest income	3		4		310			252			174			157			3,146			2,624
Allocated provision for credit losses	—		—		96			47			(4		)	2			295			196
Noninterest income	886		867		407			414			(32		)	(142		)	2,146			2,016
Intersegment net referral fees (expense)	—		—		8			7			(79		)	(77		)	—			—
Noninterest expense	649		612		371			339			1,020			997			3,268			3,031
Amortization of intangibles	29		23		2			1			4			1			74			44
Allocated corporate expenses	56		50		74			68			(902		)	(825		)	—			—
Income (loss) before income taxes	155		186		182			218			(55		)	(237		)	1,655			1,369
Provision (benefit) for income taxes	58		61		68			82			(113		)	(247		)	498			321
Segment net income (loss)	$	97	$	125	$	114		$	136		$	58		$	10		$	1,157		$	1,048

Identifiable assets (period end)	$	3,590	$	2,907	$	17,577		$	14,715		$	64,887		$	51,401		$	221,859		$	191,017




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

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

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

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, regarding the financial condition, results of operations, business plans and the future performance of BB&T. Forward-looking statements are not based on historical facts but instead represent management’s expectations and assumptions regarding BB&T’s business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. BB&T’s actual results may differ materially from those contemplated by the forward-looking statements. 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. While there is no assurance that any list of risks and uncertainties or risk factors is complete, important factors that could cause actual results to differ materially from those in the forward-looking statements include the following, without limitation:


•	general economic or business conditions, either nationally or regionally, may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and/or a reduced demand for credit, insurance or other services;


•	disruptions to the national or global financial markets, including the impact of a downgrade of U.S. government obligations by one of the credit ratings agencies, the adverse effects of economic instability and recessionary conditions in Europe and the impact of market disruptions in China;


•	changes in the interest rate environment, including interest rate changes made by the Federal Reserve or the possibility of a negative interest rate scenario, as well as cash flow reassessments may reduce NIM and/or the volumes and values of loans made or held as well as the value of other financial assets held;


•	competitive pressures among depository and other financial institutions may increase significantly;


•	legislative, regulatory or accounting changes, including changes resulting from the adoption and implementation of the Dodd-Frank Act may adversely affect the businesses in which BB&T is engaged;


•	local, state or federal taxing authorities may take tax positions that are adverse to BB&T;


•	a reduction may occur in BB&T's credit ratings;


•	adverse changes may occur in the securities markets;


•	competitors of BB&T may have greater financial resources or develop products that enable them to compete more successfully than BB&T and may be subject to different regulatory standards than BB&T;


•	cyber-security risks, including "denial of service," "hacking" and "identity theft," could adversely affect BB&T's business and financial performance or reputation, and BB&T could be liable for financial losses incurred by third parties due to breaches of data shared between financial institutions;


•	natural or other disasters, including acts of domestic or foreign terrorism, could have an adverse effect on BB&T in that such events could materially disrupt BB&T's operations or the ability or willingness of BB&T's customers to access the financial services BB&T offers;


•	costs related to the integration of the businesses of BB&T and its merger partners may be greater than expected;


•	failure to execute on strategic or operational plans, including the ability to successfully complete and/or integrate mergers and acquisitions or fully achieve expected cost savings or revenue growth associated with mergers and acquisitions within the expected time frames could adversely impact financial condition and results of operations;


•	significant litigation could have a material adverse effect on BB&T;

•

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;


•	deposit attrition, customer loss and/or revenue loss following completed mergers and acquisitions may be greater than expected;


•	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; and


•	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 conditions and results of operations.

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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, 2015 under the sections entitled "Item 1A. Risk Factors" and from time to time, in other filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Actual results may differ materially from those expressed in or implied by any forward-looking statements. Except to the extent required by applicable law or regulation, BB&T undertakes no obligation to revise or update publicly any forward-looking statements for any reason.

Regulatory Considerations

BB&T and its affiliates are subject to numerous examinations by federal and state banking regulators, as well as the SEC, FINRA, and various state insurance and securities regulators. BB&T has from time to time received requests for information from regulatory authorities in various states, including state insurance commissions and state attorneys general, securities regulators and other regulatory authorities, concerning their business practices. Such requests are considered incidental to the normal conduct of business. Refer to BB&T's Annual Report on Form 10-K for the year ended December 31, 2015 for additional disclosures with respect to laws and regulations affecting BB&T.

DIF Assessment

The FDIC has adopted a final rule that imposes a surcharge of 4.5 cents per $100 of the assessment base, after making certain adjustments, for banks with total assets of at least $10 billion. The surcharge will last for a period currently estimated by the FDIC to be two years and will begin the first quarter after the reserve ratio reaches 1.15%. BB&T estimates that the net effect of the new surcharge will increase BB&T's total annual assessment by an amount within the range of $40 million to $50 million.

Amendments to Stress Test Rules

The FDIC has modified the "as-of" dates for financial data that covered banks with more than $10 billion in assets use to perform their stress tests as well as the reporting dates and public disclosure dates of the annual stress tests. The revisions to the regulations became effective on January 1, 2016.

HMDA Regulations

The CFPB has issued final rules changing the reporting requirements for lenders under the HMDA. The new rules expand the range of transactions subject to these requirements to include small business lending. The rules also increase the overall amount of data required to be collected and submitted, including additional data points about the applicable loans and expanded data about the borrowers. BB&T will be required to begin collecting the expanded data on January 1, 2018.

Liquidity Coverage Ratio: Liquidity Risk Measurement Standards

The OCC, the FRB, and the FDIC have adopted a final rule that implements a quantitative liquidity requirement consistent with the liquidity coverage ratio requirement established by the BCBS. Refer to "Market Risk Management" in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section herein for additional information.

U.S. Implementation of Basel III

BB&T is currently under the standardized approach for risk weightings. Institutions with greater than $250 billion in assets or $10 billion in foreign assets are considered advanced approaches banking organizations, which results in a more complex calculation of RWA that includes an assessment of the impact of operational risk, among other changes. In addition, advanced approaches institutions have additional reporting requirements and must calculate capital under both the standardized approach and the advanced approaches and use the more conservative result. BB&T is preparing to comply with the advanced approaches requirements as it would become subject to these requirements upon exceeding either of the asset thresholds.

Effective January 1, 2016, Branch Bank became subject to the capital conservation buffer, which requires calculation and public disclosure of the amount of the buffer, the eligible retained income and any limitations on distributions and discretionary bonuses resulting from the buffer, including the maximum payout amount for the quarter. The capital conservation buffer requirements do not currently result in any limitations on distributions or discretionary bonuses for Branch Bank.

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Pay Ratio Disclosure

The SEC has adopted amendments to Item 402 of Regulation S-K to require disclosure of: (1) the median compensation amount of the annual total compensation of all employees of a registrant (excluding the CEO), (2) the annual total compensation of that registrant's CEO and (3) the ratio of the median of the annual total compensation of all employees (excluding the CEO) to the annual total compensation of the CEO. The rules will require such pay ratio disclosure information for the first fiscal year beginning on or after January 1, 2017.

Volcker Rule

The Volcker Rule prohibits IDIs from engaging in short-term proprietary trading of certain securities, derivatives, commodity futures and options for their own account. The rule provides certain exemptions and also clarify that certain activities are not prohibited, including acting as agent, broker, or custodian. Banking entities were required to conform proprietary trading activities to the final rule by July 21, 2015.

The rule also imposes limits on certain relationships with hedge funds or private equity funds. The FRB extended the compliance deadline to July 21, 2017 for purposes of conforming investments in and relationships with certain funds that were in place prior to December 31, 2013. Complying with these requirements is not expected to have a material impact on BB&T's consolidated financial position, results of operations or cash flows.

FDIC Recordkeeping Requirements

The FDIC has released a proposed rule to facilitate prompt payment of FDIC-insured deposits when large IDIs fail. The proposal would require IDIs with two million or more deposit accounts to maintain complete and accurate data on each depositor's ownership interest by right and capacity and to develop the capability to calculate the insured and uninsured amounts for each deposit owner by ownership right and capacity. If enacted, this proposed rule would result in additional costs to BB&T.

Net Stable Funding Ratio: Liquidity Risk Measurement, Standards and Monitoring

The OCC, the FRB and the FDIC have issued a proposed rule that would implement a quantitative liquidity requirement consistent with the net stable funding ratio standard established by the BCBS. Refer to the "Liquidity" section in "Management's Discussion and Analysis of Financial Condition and Results of Operations" herein for additional information.

Incentive-Based Compensation Arrangements

During May 2016, several financial regulators jointly issued a proposed rule designed to prohibit incentive-based compensation arrangements that could encourage inappropriate risks by providing excessive compensation or that could lead to a material financial loss. The proposed rule would require the applicable compensation arrangements to be considered against a number of factors, including a requirement that the arrangements contain both financial and non-financial measures of performance. In addition, the requirements would differ based on the size of the institution, and institutions with assets exceeding $50 billion would be subject to mandatory deferral, forfeiture/adjustment and clawback requirements for employees subject to the rule. BB&T is currently reviewing the proposed rule to determine the potential impact.

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Executive Summary

Consolidated net income available to common shareholders for the second quarter of 2016 was $541 million, an increase of $87 million compared to the same quarter of 2015. On a diluted per common share basis, earnings for the second quarter of 2016 were $0.66, an increase of $0.04 compared to the second quarter of 2015.

BB&T's results of operations for the second quarter of 2016 produced an annualized return on average assets of 1.06%, an annualized return on average risk-weighted assets of 1.38% and an annualized return on average common shareholders' equity of 8.21%, compared to earlier quarter ratios of 1.06%, 1.32% and 8.20%, respectively.

On April 1, 2016, BB&T acquired National Penn for total consideration of $1.6 billion, which consisted of approximately $555 million in cash and the remainder in stock. National Penn had 126 financial centers, $10.1 billion of total assets and $6.6 billion of deposits. Also on April 1, 2016, BB&T purchased insurance broker CGSC North America Holdings Corporation ("Swett & Crawford") from Cooper Gay Swett & Crawford for $465 million in cash.

Total revenues on a FTE basis were $2.8 billion for the second quarter of 2016, an increase of $420 million compared to the same period in 2015 largely the result of acquisition activity.

Net interest margin was 3.41%, compared to 3.27% for the second quarter of 2015. Average earning assets increased $29.4 billion, or 17.8%, while average interest-bearing liabilities increased $21.7 billion, or 18.7%, both of which were primarily driven by acquisitions. The annualized yield on the total loan portfolio for the second quarter was 4.31%, up 13 basis points compared to the earlier quarter, which was also primarily due to acquisitions. The annualized fully taxable-equivalent yield on the average securities portfolio for the second quarter was 2.47%, up six basis points compared to the earlier quarter primarily due to securities duration adjustments.

The average annualized cost of interest-bearing deposits was 0.23%, down one basis point compared to the second quarter of 2015. The average annualized rate paid on long-term debt was 2.10%, down four basis points.

Noninterest income was up $111 million compared to the second quarter of 2015, which reflects higher insurance income due to the Swett & Crawford acquisition and an increase in other income due to the loss on sale of American Coastal recorded in the earlier period.

Excluding PCI loans, the provision for credit losses was $109 million, compared to $97 million in the second quarter of 2015. Net charge-offs for the second quarter of 2016, excluding PCI loans, totaled $97 million, essentially flat compared to the earlier quarter.

Noninterest expense was $1.8 billion for the second quarter of 2016, was up $144 million compared to the earlier quarter. This increase reflects higher expense in a number of categories primarily resulting from acquisition activity and current quarter restructuring activities, partially offset by a $172 million loss on early extinguishment of debt recorded in the earlier quarter.

The provision for income taxes was $252 million for the second quarter of 2016, compared to $80 million for the earlier quarter. This produced an effective tax rate for the second quarter of 2016 of 30.0%, compared to 13.8% for the second quarter of 2015. The current quarter included a $13 million tax benefit related to specific tax-advantaged assets while the earlier quarter included a $107 million tax benefit in connection with a U.S. Court of Appeals ruling related to previously disallowed deductions in connection with a financing transaction.

The Company released the results of its annual company-run stress tests and announced that the FRB accepted its capital plan and did not object to the Company’s proposed capital actions. On July 26, 2016, BB&T's Board of Directors approved an increase in the quarterly dividend from $0.02 to $0.30 and authorized cumulative share buybacks of up to $640 million beginning during the third quarter of 2016. These capital actions were consistent with BB&T's capital plan.

Refer to BB&T's Annual Report on Form 10-K for the year ended December 31, 2015 for additional information with respect to BB&T's recent accomplishments and significant challenges.

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Analysis of Results of Operations

Net Interest Income and NIM

Second Quarter 2016 compared to Second Quarter 2015

Net interest income on a FTE basis was $1.7 billion for the second quarter of 2016, an increase of $309 million compared to the same period in 2015. Interest income increased $320 million, which reflects prior year acquisitions and the current quarter acquisition of National Penn. Interest expense was up $11 million, also largely driven by acquisitions.

Net interest margin was 3.41%, compared to 3.27% for the earlier quarter. Average earning assets increased $29.4 billion, or 17.8% while average interest-bearing liabilities increased $21.7 billion, or 18.7%, both of which were primarily driven by acquisitions. The annualized yield on the total loan portfolio for the second quarter was 4.31%, up 13 basis points compared to the earlier quarter, which primarily reflects the impact of purchase accounting. The annualized fully taxable-equivalent yield on the average securities portfolio for the second quarter was 2.47%, compared to 2.41% for the earlier period. This increase is primarily due to securities duration adjustments in the second quarter of 2016.

The average annualized cost of interest-bearing deposits was 0.23%, down one basis point compared to the earlier quarter. The average annualized rate paid on long-term debt was 2.10%, a decrease of four basis points compared to 2.14% for the second quarter of 2015. This decrease is due to favorable rates on new issuances and the extinguishment of higher cost FHLB advances in the earlier quarter.

Six Months of 2016 compared to Six Months of 2015

Net interest income on a FTE basis was $3.2 billion for the six months ended June 30, 2016, an increase of $530 million compared to the same period in 2015. The increase in net interest income reflects a $552 million increase in interest income and a $22 million increase in funding costs. The increase in interest income was driven by an increase in average earning assets of $24.8 billion compared to the same period of 2015, a higher balance of agency MBS and an increase in yields that reflects the impact of purchase accounting. The increase in funding costs was due to a $17.3 billion increase in interest-bearing liabilities, the majority of which were deposits obtained through acquisitions.

The NIM was 3.42% for the six months ended June 30, 2016, compared to 3.30% for the same period of 2015. The 12 basis point increase in NIM reflects the impact of purchase accounting and the impact from deposits representing a greater percentage of overall funding.

The annualized FTE yield on the average securities portfolio for the six months ended June 30, 2016 was 2.44%, flat compared to the annualized yield earned during the same period of 2015.

The annualized FTE yield for the total loan portfolio for the six months ended June 30, 2016 was 4.33%, compared to 4.20% in the corresponding period of 2015. This increase primarily reflects the impact of acquisitions.

The average annualized cost of interest-bearing deposits for the six months ended June 30, 2016 was 0.24%, compared to 0.25% for the same period in the prior year, reflecting improvements in mix.

The average annualized rate paid on long-term debt for the six months ended June 30, 2016 was 2.15%, compared to 2.16% for the same period in 2015. This decrease reflects the early extinguishments of higher cost FHLB advances during the second quarter of 2015 and the issuance of $3.0 billion of long-term debt at lower rates during the second quarter of 2016, partially offset by higher rates on variable rate debt.

The following tables set forth the major components of net interest income and the related annualized yields and rates as well as the variances between the periods caused by changes in interest rates versus changes in volumes. Changes attributable to the mix of assets and liabilities have been allocated proportionally between the changes due to rate and the changes due to volume.

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Table 1-1
FTE Net Interest Income and Rate / Volume Analysis (1)
Three Months Ended June 30, 2016 and 2015

	Average Balances (6)				Annualized Yield/Rate				Income/Expense				Increase			Change due to
	2016		2015		2016		2015		2016		2015		(Decrease)			Rate			Volume
	(Dollars in millions)
Assets
Total securities, at amortized cost (2)
U.S. Treasury	$	2,252	$	2,561	1.76	%	1.56	%	$	10	$	10	$	—		$	1		$	(1	)
GSE	4,199		5,400		2.06		2.13		21		28		(7		)	(1		)	(6		)
Agency MBS	38,911		29,245		2.09		2.05		203		149		54			3			51
States and political subdivisions	2,289		1,834		5.17		5.80		30		27		3			(3		)	6
Non-agency MBS	71		220		5.14		7.88		1		5		(4		)	(1		)	(3		)
Other	67		623		1.91		1.11		1		2		(1		)	1			(2		)
Acquired from FDIC	721		844		19.03		11.36		34		24		10			14			(4		)
Total securities	48,510		40,727		2.47		2.41		300		245		55			14			41
Other earning assets (3)	3,215		2,645		1.22		1.19		9		7		2			—			2
Loans and leases, net of unearned income (4)(5)
Commercial:
Commercial and industrial	51,646		42,541		3.37		3.15		433		335		98			24			74
CRE-income producing properties	14,786		10,730		3.79		3.37		139		90		49			12			37
CRE-construction and development	3,669		2,767		3.74		3.31		34		23		11			3			8
Dealer floor plan	1,305		1,010		2.04		1.81		7		5		2			1			1
Direct retail lending	12,031		8,449		4.33		4.04		127		86		41			6			35
Sales finance	9,670		9,507		3.05		2.70		74		64		10			9			1
Revolving credit	2,477		2,365		8.73		8.68		54		51		3			—			3
Residential mortgage	30,471		29,862		4.09		4.14		312		308		4			(4		)	8
Other lending subsidiaries	13,961		11,701		8.39		8.72		292		255		37			(10		)	47
PCI	1,130		1,055		16.91		14.66		48		38		10			7			3
Total loans and leases HFI	141,146		119,987		4.32		4.19		1,520		1,255		265			48			217
LHFS	1,951		2,069		3.43		3.48		16		18		(2		)	—			(2		)
Total loans and leases	143,097		122,056		4.31		4.18		1,536		1,273		263			48			215
Total earning assets	194,822		165,428		3.80		3.69		1,845		1,525		320			62			258
Nonearning assets	28,577		23,605
Total assets	$	223,399	$	189,033

Liabilities and Shareholders' Equity
Interest-bearing deposits:
Interest-checking	$	28,376	$	20,950	0.15		0.08		11		4		7			5			2
Money market and savings	63,195		53,852		0.19		0.18		29		23		6			1			5
Time deposits	18,101		14,800		0.51		0.72		23		28		(5		)	(10		)	5
Foreign deposits - interest-bearing	1,865		764		0.38		0.09		1		—		1			1			—
Total interest-bearing deposits	111,537		90,366		0.23		0.24		64		55		9			(3		)	12
Short-term borrowings	2,951		3,080		0.34		0.16		3		1		2			2			—
Long-term debt	23,272		22,616		2.10		2.14		121		121		—			(2		)	2
Total interest-bearing liabilities	137,760		116,062		0.55		0.61		188		177		11			(3		)	14
Noninterest-bearing deposits	48,801		41,502
Other liabilities	7,228		6,581
Shareholders' equity	29,610		24,888
Total liabilities and shareholders' equity	$	223,399	$	189,033
Average interest rate spread					3.25	%	3.08	%
NIM/net interest income					3.41	%	3.27	%	$	1,657	$	1,348	$	309		$	65		$	244
Taxable-equivalent adjustment									$	40	$	36




(1) Yields are stated on a FTE basis assuming tax rates in effect for the periods presented.
(2) Total securities include AFS securities and HTM securities.
(3) Includes Federal funds sold, securities purchased under resale agreements or similar arrangements, interest-bearing deposits with banks, trading securities, FHLB stock and other earning assets.
(4) Loan fees, which are not material for any of the periods shown, are included for rate calculation purposes.
(5) NPLs are included in the average balances.
(6) Excludes basis adjustments for fair value hedges.

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Table 1-2
FTE Net Interest Income and Rate / Volume Analysis (1)
Six Months Ended June 30, 2016 and 2015

	Average Balances (6)				Annualized Yield/Rate				Income/Expense				Increase			Change due to
	2016		2015		2016		2015		2016		2015		(Decrease)			Rate			Volume
	(Dollars in millions)
Assets
Total securities, at amortized cost (2)
U.S. Treasury	$	2,514	$	2,529	1.73	%	1.53	%	$	22	$	19	$	3		$	3		$	—
GSE	4,632		5,397		2.09		2.13		48		57		(9		)	(1		)	(8		)
Agency MBS	36,343		29,461		2.04		2.05		370		302		68			(1		)	69
States and political subdivisions	2,139		1,828		5.23		5.80		56		53		3			(6		)	9
Non-agency MBS	119		224		7.33		7.87		4		9		(5		)	(1		)	(4		)
Other	64		633		1.75		1.25		1		4		(3		)	1			(4		)
Acquired from FDIC	734		857		18.10		12.93		66		55		11			20			(9		)
Total securities	46,545		40,929		2.44		2.44		567		499		68			15			53
Other earning assets (3)	3,310		2,324		2.07		2.02		34		23		11			1			10
Loans and leases, net of unearned income (4)(5)
Commercial:
Commercial and industrial	49,830		41,998		3.33		3.17		825		661		164			35			129
CRE-income producing properties	14,138		10,705		3.78		3.38		266		179		87			23			64
CRE-construction and development	3,644		2,750		3.75		3.32		68		45		23			6			17
Dealer floor plan	1,272		1,025		2.03		1.80		13		10		3			1			2
Direct retail lending	11,569		8,320		4.29		4.06		245		168		77			10			67
Sales finance	9,859		9,483		3.03		2.71		149		127		22			17			5
Revolving credit	2,470		2,375		8.78		8.76		108		103		5			—			5
Residential mortgage	30,167		30,143		4.09		4.12		617		620		(3		)	(3		)	—
Other lending subsidiaries	13,700		11,511		8.47		8.82		578		504		74			(21		)	95
PCI	1,114		1,105		19.27		15.28		107		83		24			23			1
Total loans and leases HFI	137,763		119,415		4.34		4.21		2,976		2,500		476			91			385
LHFS	1,599		1,735		3.56		3.53		28		31		(3		)	—			(3		)
Total loans and leases	139,362		121,150		4.33		4.20		3,004		2,531		473			91			382
Total earning assets	189,217		164,403		3.82		3.73		3,605		3,053		552			107			445
Nonearning assets	27,534		23,767
Total assets	$	216,751	$	188,170

Liabilities and Shareholders' Equity
Interest-bearing deposits:
Interest-checking	$	26,990	$	20,787	0.14		0.08		19		8		11			8			3
Money market and savings	61,809		52,754		0.20		0.17		61		45		16			8			8
Time deposits	17,493		15,894		0.53		0.72		46		57		(11		)	(16		)	5
Foreign deposits - interest-bearing	1,308		664		0.37		0.09		2		—		2			1			1
Total interest-bearing deposits	107,600		90,099		0.24		0.25		128		110		18			1			17
Short-term borrowings	2,861		3,308		0.35		0.14		5		2		3			3			—
Long-term debt	23,090		22,828		2.15		2.16		247		246		1			(1		)	2
Total interest-bearing liabilities	133,551		116,235		0.57		0.62		380		358		22			3			19
Noninterest-bearing deposits	47,502		40,607
Other liabilities	6,980		6,600
Shareholders' equity	28,718		24,728
Total liabilities and shareholders' equity	$	216,751	$	188,170
Average interest rate spread					3.25	%	3.11	%
NIM/net interest income					3.42	%	3.30	%	$	3,225	$	2,695	$	530		$	104		$	426
Taxable-equivalent adjustment									$	79	$	71




(1) Yields are stated on a FTE basis assuming tax rates in effect for the periods presented.
(2) Total securities include AFS securities and HTM securities.
(3) Includes Federal funds sold, securities purchased under resale agreements or similar arrangements, interest-bearing deposits with banks, trading securities, FHLB stock and other earning assets.
(4) Loan fees, which are not material for any of the periods shown, are included for rate calculation purposes.
(5) NPLs are included in the average balances.
(6) Excludes basis adjustments for fair value hedges.

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Provision for Credit Losses

Second Quarter 2016 compared to Second Quarter 2015

The provision for credit losses totaled $111 million for the second quarter of 2016, compared to $97 million for the same period of the prior year.

Net charge-offs were $97 million for the second quarter of 2016 and $98 million for the second quarter of 2015. Net charge-offs were 0.28% of average loans and leases on an annualized basis for the second quarter of 2016, compared to 0.33% of average loans and leases for the same period in 2015.

Six Months of 2016 compared to Six Months of 2015

The provision for credit losses totaled $295 million for the six months ended June 30, 2016, compared to $196 million for the same period of 2015. The increase was primarily driven by exposure in the energy lending portfolio, which resulted in approximately $58 million of additional provision recorded during the first quarter of 2016.

Net charge-offs for the six months ended June 30, 2016 were $251 million, compared to $199 million for the six months ended June 30, 2015. This increase includes $30 million of net charge-offs recorded during the first quarter of 2016 related to the energy lending portfolio. Net charge-offs in the other lending subsidiaries portfolio increased $36 million, primarily due to lower collateral values in the nonprime auto lending portfolio.

Net charge-offs were 0.37% of average loans and leases on an annualized basis for the six months ended June 30, 2016, compared to 0.33% of average loans and leases for the same period in 2015.

Noninterest Income

Second Quarter 2016 compared to Second Quarter 2015

Noninterest income for the second quarter of 2016 increased $111 million compared to the earlier quarter. This increase was driven by higher other income, insurance income, service charges on deposits and trust and investment advisory revenues, partially offset by lower mortgage banking income.

Insurance income increased $43 million, due to $57 million in revenues attributable to the Swett & Crawford acquisition, partially offset by the loss of $23 million in revenues from American Coastal, which was sold in the earlier quarter. Service charges on deposits increased $12 million, while trust and investment advisory revenues increased $10 million, both of which were largely the result of acquisition-related volumes.

Other income increased $49 million primarily due to a $26 million loss on sale of American Coastal recorded in the earlier period as well as $18 million of higher income related to assets for certain post-employment benefits (which is offset in personnel expense) during the current period.

Mortgage banking income declined $19 million, driven by net mortgage servicing rights valuation adjustments.

The remaining categories of noninterest income totaled $214 million for the current quarter, compared to $198 million for the second quarter of 2015.

Six Months of 2016 compared to Six Months of 2015

Noninterest income for the six months ended June 30, 2016 totaled $2.1 billion, compared to $2.0 billion for the same period in 2015, an increase of $130 million. This change was primarily driven by higher securities gains, insurance income and service charges on deposits, along with smaller increases in a number of other categories, partially offset by lower mortgage banking income.

Securities gains were $45 million for the six months ended June 30, 2016, compared to net securities losses of $1 million for the six months ended June 30, 2015. The current year net gains were the result of first quarter sales activity.

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Insurance income was $884 million, compared to $862 million for the first six months of 2015. This increase is primarily due to increased revenues across most insurance businesses as the acquisition of Swett & Crawford, which was acquired April 1, 2016 and contributed $57 million, was largely offset by lower revenue due to the sale of American Coastal.

Service charges on deposits were $320 million for the six months ended June 30, 2016, compared to $299 million for the same period of the prior year. This increase primarily reflects higher volume as a result of acquisitions.

FDIC loss share income was $19 million better in the current period due to lower accretion, partially offset by the impact of securities duration adjustments.

Trust and investment advisory revenues were $129 million for the first half of 2016, compared to $113 million for the prior year period. This increase primarily reflects organic growth along with a smaller benefit from acquisitions.

Mortgage banking income was $202 million for the six months ended June 30, 2016, down from $240 million for the same period of 2015. The decline was primarily due to lower volume for production and sales, and a $15 million net change in MSR valuation.

The remaining categories of noninterest income totaled $690 million for the first six months of 2016, compared to $646 for the first six months of 2015, which reflects a general increase due to acquisition activity.

Noninterest Expense

Second Quarter 2016 compared to Second Quarter 2015

Noninterest expense for the second quarter of 2016 was $1.8 billion, an increase of $144 million compared to the earlier quarter. This increase reflects higher expense in a number of categories as a result of acquisitions and restructuring activities, partially offset by a loss on early extinguishment of debt during the earlier quarter.

Personnel expense increased $175 million, driven by a $94 million increase in salaries, which reflects an increase in full time equivalent employees of 5,046 primarily resulting from acquisitions. Personnel expense also reflects a $31 million increase in incentives due to improved performance relative to target measures and the Swett and Crawford acquisition. Additionally, expense related to certain post-employment benefits expense (offset in other income) was higher $18 million, and pension expense increased $13 million primarily due to changes in actuarial assumptions.

Occupancy and equipment expense, amortization of intangibles and merger-related and restructuring charges increased $28 million, $19 million and $67 million, respectively, as a result of acquisition activity. Merger-related and restructuring charges also included $29 million in restructuring charges related to severance and real estate initiated during the quarter.

Outside IT services was up $15 million primarily due to various systems-related initiatives. Other expense increased $14 million primarily due to higher checkcard expense and higher depreciation of property held under operating leases.

The earlier period included a loss on early extinguishment of debt of $172 million related to the termination of higher-cost FHLB advances totaling $931 million. The loss amounts were driven by the difference between market interest rates at the time of extinguishment and the stated rates on the FHLB advances that were extinguished.

The remaining categories of noninterest expense totaled $155 million for the current quarter, compared to $157 million for the second quarter of 2015.

Six Months of 2016 compared to Six Months of 2015

Noninterest expense totaled $3.3 billion for the six months ended June 30, 2016, an increase of $267 million, or 8.7%, over the same period of the prior year. Primary drivers for the increase in noninterest expense include higher personnel expense, merger-related and restructuring charges, occupancy and equipment expense, amortization of intangibles and outside IT services. These increases were partially offset by the loss on early extinguishment of debt recorded during the earlier period.

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Personnel expense was $2.0 billion for the six months ended June 30, 2016, an increase of $260 million compared to the six months ended June 30, 2015. Salary expense was $161 million higher as a result of approximately 4,300 additional full time equivalent employees, primarily due to acquisitions. Incentives were $48 million higher due to acquisitions and improved performance relative to target measures. The increase in personnel expense also includes a $24 million increase in pension plan expense that was driven by higher amortization of net actuarial losses and higher interest cost. Other components of personnel expense experienced smaller increases as a result of the overall increase in headcount.

Merger-related and restructuring charges totaled $115 million for the six months ended June 30, 2016, compared to $38 million for the prior year period. This increase is primarily due to activity related to National Penn, as well as $29 million in restructuring charges related to severance and real estate initiated during the second quarter of 2016.

Occupancy and equipment expense and amortization of intangibles increased $52 million and $30 million, respectively, as a result of acquisition activity. Outside IT services increased $26 million, primarily due to various systems-related initiatives.

The earlier period included a loss on early extinguishment of debt of $172 million related to the termination of higher-cost FHLB advances totaling $931 million.

Other categories of noninterest expense totaled $730 million for the six months ended June 30, 2016, compared to $735 million for the same period of 2015.

Provision for Income Taxes

Second Quarter 2016 compared to Second Quarter 2015

The provision for income taxes was $252 million for the second quarter of 2016, compared to $80 million for the earlier quarter. This produced an effective tax rate for the second quarter of 2015 of 30.0%, compared to 13.8% for the earlier quarter. The current quarter includes a $13 million tax benefit related to specific tax-advantaged assets, while the second quarter of 2015 includes a $107 million tax benefit recorded in connection with a U.S. Court of Appeals ruling related to previously disallowed deductions in connection with a financing transaction.

Six Months of 2016 compared to Six Months of 2015

The provision for income taxes was $498 million for the six months ended June 30, 2016, compared to $321 million for the same period of the prior year. BB&T's effective income tax rate for the six months ended June 30, 2016 was 30.1%, compared to 23.4% for the same period of the prior year. This reflects the $13 million tax benefit in 2016 and the $107 million tax benefit in 2015 discussed previously.

Refer to Note 11 "Income Taxes" in the "Notes to Consolidated Financial Statements" for a discussion of uncertain tax positions and other tax matters.

Segment Results

See the "Operating Segments" Note in the "Notes to Consolidated Financial Statements" contained herein and BB&T's Annual Report on Form 10-K for the year ended December 31, 2015, 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.

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Table 2
Net Income by Reportable Segments

	Three Months Ended June 30,					Six Months Ended June 30,
	2016		2015			2016		2015
	(Dollars in millions)
Community Banking	$	294	$	231		$	595	$	439
Residential Mortgage Banking	44		69			83		133
Dealer Financial Services	51		49			93		94
Specialized Lending	61		58			117		111
Insurance Holdings	44		53			97		125
Financial Services	87		70			114		136
Other, Treasury and Corporate	6		(29		)	58		10
BB&T Corporation	$	587	$	501		$	1,157	$	1,048

Second Quarter 2016 compared to Second Quarter 2015

Community Banking

Community Banking serves individual and business clients by offering a variety of loan and deposit products and other financial services. The segment is primarily responsible for acquiring and maintaining client relationships.

Community Banking net income was $294 million for the second quarter of 2016, an increase of $63 million compared to the earlier quarter. Segment net interest income and noninterest income increased $188 million and $15 million, respectively, primarily driven by prior-year acquisition activity and higher funding spreads on deposits. The allocated provision for credit losses increased $12 million as a result of higher loss estimates in the commercial and industrial loan portfolio, partially offset by lower net charge-offs. Noninterest expense increased $62 million driven by higher personnel and occupancy and equipment expense, primarily attributable to the prior-year acquisitions. Allocated corporate expense increased by $23 million compared to the earlier quarter, primarily driven by acquisitions.

Residential Mortgage Banking

Residential Mortgage Banking 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 net income was $44 million for the second quarter of 2016, a decrease of $25 million compared to the earlier quarter. Segment net interest income was down slightly, primarily due to lower average loan balances. Noninterest income decreased $18 million, driven by lower net mortgage servicing rights income and production-related revenue. The increase in noninterest expense was driven by higher personnel and loan processing expense, partially offset by lower professional services expense.

Dealer Financial Services

Dealer Financial Services originates loans to consumers for the purchase of automobiles. These loans are originated on an indirect basis through approved franchised and independent automobile dealers throughout BB&T's market area through BB&T Dealer Finance, and on a national basis through Regional Acceptance Corporation. Dealer Financial Services also originates loans for the purchase of recreational and marine vehicles. In conjunction with Community Banking, Dealer Financial Services provides financing and servicing to dealers for their inventories in Community Banking’s footprint.

Dealer Financial Services net income was $51 million for the second quarter of 2016, an increase of $2 million compared to the earlier quarter. Segment net interest income was up, primarily due to the addition of Susquehanna’s consumer auto leasing business as well as growth in the Regional Acceptance loan portfolio. The allocated provision for credit losses increased $10 million, driven by higher net charge-offs in the Regional Acceptance loan portfolio due to portfolio mix and an increase in loss severity.

Table of Contents

Specialized Lending

Specialized Lending consists of businesses that provide specialty finance solutions to commercial and consumer clients including: commercial finance, mortgage warehouse lending, tax-exempt financing for local governments and special-purpose districts, equipment leasing, full-service commercial mortgage banking, commercial and retail insurance premium finance and dealer-based financing of equipment for consumers and small businesses.

Specialized Lending net income was $61 million for the second quarter of 2016, an increase of $3 million compared to the earlier quarter. Segment net interest income increased $20 million, primarily attributable to the addition of Susquehanna’s small business equipment finance group as well as growth in the small ticket dealer-based finance portfolio, partially offset by lower interest rates on new loans. The allocated provision for credit losses was up slightly, primarily due to mortgage warehouse loan growth and higher net charge-offs in the small business equipment finance portfolio and the small ticket dealer-based finance portfolio. Noninterest expense was up, primarily due to higher personnel expense and depreciation of property held under operating leases related to growth in Equipment Finance’s lease portfolio.

Insurance Holdings

BB&T's insurance agency / brokerage network is the fifth largest in the United States and sixth largest in the world. Insurance Holdings provides property and casualty, life, and health insurance to businesses and individual clients. It also provides small business and corporate products, such as workers compensation and professional liability, as well as surety coverage and title insurance. The results for wholesale insurance broker Swett & Crawford are included in the segment.

Insurance Holdings net income was $44 million for the second quarter of 2016, a decrease of $9 million compared to the earlier quarter. Noninterest income increased $40 million, which primarily reflects the addition of Swett and Crawford and higher life insurance commissions, partially offset by the sale of American Coastal in the second quarter of 2015. Noninterest expense increased $40 million, primarily due to the Swett & Crawford acquisition that led to higher personnel, occupancy and equipment expense, and amortization of intangibles.

Financial Services

Financial Services provides personal trust administration, estate planning, investment counseling, wealth management, asset management, employee benefits services, corporate banking and corporate trust services to individuals, corporations, institutions, foundations and government entities. In addition, Financial Services offers clients a variety of investment services, including discount brokerage services, equities, annuities, mutual funds and government bonds through BB&T Investment Services, Inc. The segment includes BB&T Securities, a full-service brokerage and investment banking firm, and the Corporate Banking Division, which originates and services large corporate relationships, syndicated lending relationships and client derivatives. The segment also includes the company's SBIC private equity investments.

Financial Services net income was $87 million in the second quarter of 2016, an increase of $17 million compared to the earlier quarter. Segment net interest income increased $29 million, primarily driven by higher loan balances and higher funding spreads on deposits for Corporate Banking and BB&T Wealth. The allocated provision for credit losses decreased $17 million, driven by increased loss estimates in the earlier quarter for the Corporate Banking loan portfolio. Noninterest expense increased $13 million compared to the earlier quarter, primarily due to higher personnel expense and restructuring charges.

Other, Treasury & Corporate

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

Other, Treasury & Corporate net income was $6 million, an increase of $35 million compared to the earlier quarter. Segment net interest income increased $64 million driven by the addition of National Penn. Noninterest income increased $74 million, primarily attributable to an increase in income related to assets for certain post-employment benefits and the addition of National Penn. In addition, noninterest income in the earlier quarterly included the previously discussed loss on sale of American Coastal. The segment allocated $36 million more of expense to other operating segments compared to the earlier quarter.

Table of Contents

Six Months of 2016 compared to Six Months of 2015

Community Banking

Community Banking net income was $595 million for the six months ended June 30, 2016, an increase of $156 million compared to the same period of the prior year. Segment net interest income increased $397 million driven by prior-year acquisition activity and higher funding spreads on deposits. Noninterest income increased $32 million, primarily due to higher service charges on deposits, checkcard fees and bankcard and merchant services fees. The allocated provision for credit losses decreased $11 million as a result of lower net charge-offs. Noninterest expense increased $126 million driven by higher personnel and occupancy and equipment expense, primarily attributable to the prior-year acquisitions. Amortization of intangibles increased $20 million and allocated corporate expense increased by $50 million, also primarily attributable to the prior-year acquisitions.

Residential Mortgage Banking

Residential Mortgage Banking net income was $83 million for the six months ended June 30, 2016, a decrease of $50 million compared to the same period in the prior year. Segment net interest income decreased $10 million primarily the result of lower average loan balances and lower interest rates on new loans held for investment. Noninterest income decreased $31 million driven by lower net MSR income and production-related revenue. The allocated provision for credit losses increased $30 million as the prior year reflected an improvement in loss severity trends compared to the current year.

Dealer Financial Services

Dealer Financial Services net income was $93 million for the six months ended June 30, 2016, a decrease of $1 million compared to the same period of the prior year. Segment net interest income increased $23 million, primarily due to the addition of Susquehanna’s consumer auto leasing business and growth in the Regional Acceptance loan portfolio. The allocated provision for credit losses increased $25 million driven by higher net charge-offs in the Regional Acceptance loan portfolio due to portfolio mix and an increase in loss severity.

Specialized Lending

Specialized Lending net income was $117 million for the six months ended June 30, 2016, an increase of $6 million compared to the same period of the prior year. Segment net interest income increased $38 million, primarily attributable to the addition of Susquehanna’s small business equipment finance group as well as growth in the small ticket dealer-based finance portfolio, partially offset by lower interest rates on new loans. The allocated provision for credit losses increased $12 million driven by higher net charge-offs in the small business equipment finance and small ticket dealer-based finance portfolios. Noninterest expense increased $16 million primarily due to higher personnel expense, loan processing expense and depreciation of property under operating leases related to growth in the lease portfolio.

Insurance Holdings

Insurance Holdings net income was $97 million for the six months ended June 30, 2016, a decrease of $28 million compared to the same period of the prior year. Noninterest income increased $19 million, which primarily reflects the addition of Swett and Crawford, higher property and casualty insurance, life insurance and employee benefit commissions, partially offset by the sale of American Coastal in the second quarter of 2015. Noninterest expense increased $37 million driven by higher personnel expense primarily attributable to the addition of Swett and Crawford, partially offset by lower business referral and insurance claims expense driven by the sale of American Coastal.

Financial Services

Financial Services net income was $114 million for the six months ended June 30, 2016, a decrease of $22 million compared to the same period of the prior year. Segment net interest income increased $58 million, primarily driven by higher loan and deposit balances and higher funding spreads on deposits for Corporate Banking and BB&T Wealth. The allocated provision for credit losses increased $49 million driven by loan growth, higher net charge-offs and increased loss estimates primarily related to energy lending exposure within the Corporate Banking loan portfolio. Noninterest expense increased $32 million compared to the prior year, primarily due to higher personnel expense and restructuring charges.

Table of Contents

Other, Treasury & Corporate

Other, Treasury & Corporate net income was $58 million for the six months ended June 30, 2016, an increase of $48 million compared to the same period of the prior year. Segment net interest income increased $17 million driven by the addition of National Penn in the current quarter, partially offset by higher funding credits on deposits allocated to other segments. Noninterest income increased $110 million, primarily attributable to security gains on the investment portfolio, higher FDIC loss share income and the addition of National Penn. Noninterest expense increased $23 million driven by higher personnel and occupancy and equipment expense partially attributable to National Penn, merger-related and restructuring charges, regulatory charges, IT professional services and software expense. These increases were partially offset by the previously discussed loss on early extinguishment of debt in the prior year. Allocated corporate expense decreased by $77 million compared to the prior year, reflecting increases in corporate expense allocated to the operating segments.

Analysis of Financial Condition

Investment Activities

The total securities portfolio was $47.0 billion at June 30, 2016, compared to $43.8 billion at December 31, 2015. As of June 30, 2016, the securities portfolio included $28.2 billion of AFS securities (at fair value) and $18.8 billion of HTM securities (at amortized cost).

The effective duration of the securities portfolio was 3.1 years at June 30, 2016, compared to 4.0 years at December 31, 2015. The duration of the securities portfolio excludes equity securities, auction rate securities and certain non-agency residential MBS that were acquired in the Colonial acquisition.

See the "Securities" Note in the "Notes to Consolidated Financial Statements" herein for additional disclosures related to BB&T's evaluation of securities for OTTI.

Lending Activities

Loans HFI totaled $142.2 billion at June 30, 2016, compared to $136.0 billion at December 31, 2015. The increase in loans HFI was primarily due to the acquisition of National Penn, which included $6.0 billion in loans as of the acquisition date.

Commercial and industrial loans increased $3.7 billion or $1.1 billion excluding National Penn, primarily due to growth in large corporate lending and mortgage warehouse lending. CRE-income producing properties loans were up $1.5 billion (up $249 million excluding National Penn) and direct retail lending loans were up $885 million (up $118 million excluding National Penn).

Other lending subsidiaries loans were up $1.0 billion, which represents organic growth and seasonality.

Residential mortgage loans were up $117 million but down $883 million excluding National Penn, which reflects the continuing strategy to sell conforming residential mortgage loan production. Sales finance loans were down $898 million (down $1.1 billion excluding National Penn) due to the continued effects of the dealer pricing structure changes implemented during the third quarter of 2015.

Table of Contents

The following table presents the composition of average loans and leases:



Table 3
Composition of Average Loans and Leases

	For the Three Months Ended
	6/30/2016		3/31/2016		12/31/2015		9/30/2015		6/30/2015
	(Dollars in millions)
Commercial and industrial	$	51,646	$	48,013	$	48,047	$	46,462	$	42,541
CRE-income producing properties	14,786		13,490		13,264		12,514		10,730
CRE-construction and development	3,669		3,619		3,766		3,502		2,767
Dealer floor plan	1,305		1,239		1,164		1,056		1,010
Direct retail lending	12,031		11,107		10,896		9,926		8,449
Sales finance	9,670		10,049		10,533		10,386		9,507
Revolving credit	2,477		2,463		2,458		2,421		2,365
Residential mortgage	30,471		29,864		30,334		30,384		29,862
Other lending subsidiaries	13,961		13,439		13,281		12,837		11,701
PCI	1,130		1,098		1,070		1,052		1,055
Total average loans and leases HFI	$	141,146	$	134,381	$	134,813	$	130,540	$	119,987

Average loans held for investment for the second quarter of 2016 were $141.1 billion, up $6.8 billion compared to the first quarter of 2016. National Penn contributed $5.9 billion in average loans, which included commercial and industrial loans of $2.5 billion, CRE-income producing properties loans of $1.2 billion, $967 million of residential mortgage loans and $889 million of direct retail lending loans. The following discussion describes the growth of average loans excluding National Penn for the second quarter of 2016 compared to the first quarter.

Average commercial and industrial loans increased 9.4% annualized primarily due to growth in large corporate lending as well as seasonal growth in mortgage warehouse lending.

Average CRE-income producing properties loans increased 4.3% annualized, while average CRE-construction and development loans decreased 8.8% annualized. These fluctuations reflect the completion of client construction projects and the related movement to permanent financing sources.

Dealer floor plan average loans were up 21.4% annualized, due to organic client additions during the first half of 2016 and higher utilization by existing clients.

Average sales finance loans declined approximately 21.3% annualized, primarily due to the continued effects of the dealer pricing structure changes implemented during the third quarter of 2015.

Average residential mortgage loans decreased 4.8% annualized, which primarily reflects the continuing strategy to sell conforming residential mortgage loan production.

Other lending subsidiaries average loans increased 15.6% annualized, due to strong seasonal growth.

Asset Quality

NPAs totaled $886 million at June 30, 2016, compared to $712 million at December 31, 2015. This increase reflects $206 million of commercial and industrial NPLs that were downgraded as a result of a review of shared national credits in the energy lending portfolio during the first quarter of 2016, partially offset by the sale of a $46 million NPL during the second quarter of 2016.

At June 30, 2016, nonperforming loans and leases represented 0.56% of loans and leases held for investment, compared to 0.42% at December 31, 2015. This increase is due to the energy lending portfolio review discussed above.

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The following table presents activity related to NPAs, excluding foreclosed real estate acquired from the FDIC:



Table 4
Rollforward of NPAs

	Six Months Ended June 30,
	2016			2015
	(Dollars in millions)
Beginning balance	$	686		$	726
New NPAs	970			570
Advances and principal increases	88			36
Disposals of foreclosed assets (1)	(253		)	(220		)
Disposals of NPLs (2)	(109		)	(75		)
Charge-offs and losses	(159		)	(126		)
Payments	(291		)	(159		)
Transfers to performing status	(65		)	(70		)
Other, net	2			—
Ending balance	$	869		$	682

_________


(1)	Includes charge-offs and losses recorded upon sale of $90 million and $72 million for the six months ended June 30, 2016 and 2015, respectively.


(2)	Includes charge-offs and losses recorded upon sale of $7 million and $12 million for the six months ended June 30, 2016 and 2015, respectively.

Table of Contents

The following tables summarize asset quality information for the past five quarters.



Table 5
Asset Quality

	Three Months Ended
	6/30/2016		3/31/2016		12/31/2015		9/30/2015		6/30/2015
	(Dollars in millions)
NPAs (1)
NPLs:
Commercial and industrial	$	452	$	442	$	237	$	211	$	198
CRE-income producing properties	36		48		38		45		59
CRE-construction and development	14		11		13		24		16
Dealer floor plan	—		—		—		7		7
Direct retail lending	52		51		43		39		41
Sales finance	5		7		7		6		6
Residential mortgage (2)	172		163		173		196		188
Other lending subsidiaries	62		64		65		57		57
Total nonaccrual loans and leases held for investment (2)	793		786		576		585		572
Foreclosed real estate	53		66		82		85		86
Foreclosed real estate-acquired from FDIC and PCI	17		23		26		45		47
Other foreclosed property	23		28		28		29		24
Total nonperforming assets (1)(2)	$	886	$	903	$	712	$	744	$	729

Performing TDRs (3)
Commercial and industrial	$	39	$	52	$	49	$	54	$	75
CRE-income producing properties	16		18		13		12		21
CRE-construction and development	10		13		16		14		23
Direct retail lending	69		70		72		75		81
Sales finance	16		17		17		18		18
Revolving credit	31		32		33		34		36
Residential mortgage-nonguaranteed	276		281		288		275		273
Residential mortgage-government guaranteed (4)	348		317		316		321		328
Other lending subsidiaries	198		181		178		173		172
Total performing TDRs (3)(4)	$	1,003	$	981	$	982	$	976	$	1,027

Loans 90 days or more past due and still accruing
Direct retail lending	$	5	$	6	$	7	$	12	$	10
Sales finance	4		4		5		4		4
Revolving credit	8		10		10		9		9
Residential mortgage-nonguaranteed	56		55		55		61		60
Residential mortgage-government guaranteed (5)	415		434		486		481		492
PCI	122		100		114		167		124
Total loans 90 days or more past due and still accruing (5)	$	610	$	609	$	677	$	734	$	699

Loans 30-89 days past due
Commercial and industrial	$	20	$	27	$	36	$	26	$	16
CRE-income producing properties	8		7		13		6		4
CRE-construction and development	2		6		9		2		3
Direct retail lending	53		48		58		46		41
Sales finance	61		53		72		63		53
Revolving credit	19		18		22		20		19
Residential mortgage-nonguaranteed	361		350		397		368		362
Residential mortgage-government guaranteed (6)	81		66		78		76		76
Other lending subsidiaries	261		207		304		274		230
PCI	48		43		42		28		31
Total loans 30-89 days past due (6)	$	914	$	825	$	1,031	$	909	$	835

Table of Contents

___________

Excludes loans held for sale.


(1)	PCI loans are accounted for using the accretion method.


(2)	During the second quarter of 2016, approximately $46 million of nonaccrual commercial and industrial loans were sold. During the first quarter of 2016, approximately $32 million of nonaccrual residential mortgage loans were sold. During the fourth quarter of 2015, approximately $50 million of nonaccrual residential mortgage loans were sold.


(3)	Includes $33 million of performing TDRs at June 30, 2016 related to government guaranteed GNMA mortgage loans that were previously TDRs and have been repurchased by BB&T.


(4)	Excludes TDRs that are nonperforming totaling $146 million, $172 million, $146 million, $154 million and $127 million at June 30, 2016, March 31, 2016, December 31, 2015, September 30, 2015 and June 30, 2015, respectively. These amounts are included in total NPAs.


(5)	Includes government guaranteed GNMA mortgage loans that BB&T has the right but not the obligation to repurchase that are 90 days or more past due totaling $49 million, $323 million, $365 million, $353 million and $338 million at June 30, 2016, March 31, 2016, December 31, 2015, September 30, 2015 and June 30, 2015, respectively. In prior quarters, these amounts were excluded from this table.


(6)	Includes government guaranteed GNMA mortgage loans that BB&T has the right but not the obligation to repurchase that are past due 30-89 days totaling $2 million, $2 million, $2 million, $3 million and $3 million at June 30, 2016, March 31, 2016, December 31, 2015, September 30, 2015 and June 30, 2015, respectively. In prior quarters, these amounts were excluded from this table.



Table 6
Asset Quality Ratios

	As of / For the Three Months Ended
	6/30/2016		3/31/2016		12/31/2015		9/30/2015		6/30/2015
Asset Quality Ratios:
Loans 30-89 days past due and still accruing as a percentage of loans and leases HFI	0.64	%	0.61	%	0.76	%	0.67	%	0.68	%
Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI	0.43		0.45		0.50		0.54		0.57
NPLs as a percentage of loans and leases HFI	0.56		0.58		0.42		0.43		0.47
NPAs as a percentage of:
Total assets	0.40		0.42		0.34		0.36		0.38
Loans and leases HFI plus foreclosed property	0.62		0.67		0.52		0.55		0.60
Net charge-offs as a percentage of average loans and leases HFI	0.28		0.46		0.38		0.32		0.33
ALLL as a percentage of loans and leases HFI	1.06		1.10		1.07		1.08		1.19
Ratio of ALLL to:
Net charge-offs	3.88x		2.40x		2.83x		3.44x		3.71x
NPLs	1.90		1.89		2.53		2.49		2.55

Asset Quality Ratios (Excluding Government Guaranteed and PCI): (1)
Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI	0.05	%	0.06	%	0.06	%	0.06	%	0.07	%

___________

Applicable ratios are annualized.

(1)

These asset quality ratios have been adjusted to remove the impact of government guaranteed mortgage loans and PCI. Appropriate adjustments to the numerator and denominator have been reflected in the calculation of these ratios. Management believes the inclusion of such assets in these asset quality ratios results in distortion of these ratios such that they might not be reflective of asset collectibility or might not be comparable to other periods presented or to other portfolios that were not impacted by purchase accounting.

Loans 30-89 days past due and still accruing totaled $914 million at June 30, 2016, down $117 million compared to December 31, 2015. Other lending subsidiaries declined $43 million, reflecting normal seasonality in certain consumer loans. The remaining decline was broad-based, as most categories continued to display strong credit metrics.

Table of Contents

Loans 90 days or more past due and still accruing totaled $610 million at June 30, 2016, a decline of $67 million compared to December 31, 2015. This decline includes a $71 million reduction for past due government guaranteed residential mortgage loans, which reflects general improvements in credit quality within that portfolio. 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 0.05% at June 30, 2016, a decline of one basis point compared to December 31, 2015.

Problem loans include loans on nonaccrual status or loans that are 90 days or more past due and still accruing as disclosed in Table 5. In addition, for the commercial portfolio segment, loans that are rated special mention or substandard performing are closely monitored by management as potential problem loans. Refer to the "Loans and ACL" Note in the "Notes to Consolidated Financial Statements" herein for additional disclosures related to these potential problem loans.

Certain residential mortgage loans have an initial period where the borrower is only required to pay the periodic interest. After the interest-only period, the loan will require the payment of both interest and principal over the remaining term. At June 30, 2016, approximately 2.9% of the outstanding balances of residential mortgage loans were in the interest-only phase, compared to 3.3% at December 31, 2015. Approximately 90.1% of the interest-only balances will begin amortizing within the next three years. Approximately 2.1% of interest-only loans are 30 days or more past due and still accruing and 1.5% are on nonaccrual status.

Home equity lines, which are a component of the direct retail portfolio, generally require interest-only payments during the first 15 years after origination. After this initial period, the outstanding balance begins amortizing and requires the payment of both interest and principal. At June 30, 2016, approximately 72.4% of the outstanding balances of home equity lines were in the interest-only phase. Approximately 9.3% of these balances will begin amortizing within the next three years. The delinquency rate of interest-only lines is similar to amortizing lines.

TDRs occur when a borrower is experiencing, or is expected to experience, financial difficulties in the near-term and a concession has been granted to the borrower. As a result, BB&T will work with the borrower to prevent further difficulties and ultimately improve the likelihood of recovery on the loan. To facilitate this process, a concessionary modification that would not otherwise be considered may be granted, resulting in classification of the loan as a TDR. Refer to the "Summary of Significant Accounting Policies" Note in the "Notes to Consolidated Financial Statements" in the Annual Report on Form 10-K for the year ended December 31, 2015 for additional policy information regarding TDRs.

Performing TDRs totaled $1.0 billion at June 30, 2016, an increase of $21 million compared to December 31, 2015. This increase was primarily the result of implementing a change in the strategy of repurchasing loans from GNMA pools that BB&T has the right but not the obligation to repurchase. The following table provides a summary of HFI performing TDR activity:



Table 7
Rollforward of Performing TDRs

	Six Months Ended June 30,
	2016			2015
	(Dollars in millions)
Beginning balance	$	982		$	1,050
Inflows	243			240
Payments and payoffs	(98		)	(122		)
Charge-offs	(18		)	(21		)
Transfers to nonperforming TDRs, net	(35		)	(31		)
Removal due to the passage of time	(23		)	(9		)
Non-concessionary re-modifications	—			(1		)
Sold and transferred to LHFS	(48		)	(79		)
Ending balance	$	1,003		$	1,027

Table of Contents

The following table provides further details regarding the payment status of TDRs outstanding at June 30, 2016:



Table 8
TDRs

	June 30, 2016
					Past Due				Past Due
	Current Status				30-89 Days				90 Days Or More				Total
	(Dollars in millions)
Performing TDRs (1):
Commercial and industrial	$	39	100.0	%	$	—	—	%	$	—	—	%	$	39
CRE—income producing properties	16		100.0		—		—		—		—		16
CRE—construction and development	10		100.0		—		—		—		—		10
Direct retail lending	67		97.1		2		2.9		—		—		69
Sales finance	15		93.8		1		6.2		—		—		16
Revolving credit	26		83.9		4		12.9		1		3.2		31
Residential mortgage—nonguaranteed	235		85.1		38		13.8		3		1.1		276
Residential mortgage—government guaranteed	185		53.2		61		17.5		102		29.3		348
Other lending subsidiaries	168		84.8		30		15.2		—		—		198
Total performing TDRs (1)	761		75.9		136		13.5		106		10.6		1,003
Nonperforming TDRs (2)	62		42.5		24		16.4		60		41.1		146
Total TDRs (1)(2)	$	823	71.6		$	160	13.9		$	166	14.5		$	1,149

___________


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


(2)	Nonperforming TDRs are included in NPL disclosures.

Allowance for Credit Losses

The ACL, which consists of the ALLL and the RUFC, totaled $1.6 billion at June 30, 2016, an increase of $53 million compared to December 31, 2015.

The allowance for loan and lease losses, excluding PCI, was $1.4 billion, up $43 million compared to December 31, 2015. The allowance for loans acquired from the FDIC and PCI loans was $65 million, up $4 million compared to December 31, 2015. As of June 30, 2016, the total allowance for loan and lease losses was 1.06% of loans and leases held for investment, compared to 1.07% at December 31, 2015. These amounts include acquired loans, which did not receive an ALLL at the acquisition date.

The allowance for loan and lease losses was 1.90 times NPLs held for investment, compared to 2.53 times at December 31, 2015. This change reflects the increase in commercial nonaccrual loans discussed above. The remaining NPLs identified in the shared national credits review were current as of June 30, 2016. At June 30, 2016, the allowance for loan and lease losses was 3.88 times annualized net charge-offs, compared to 2.83 times at December 31, 2015.

The energy portfolio totals approximately $1.5 billion and has allocated reserves of 9.3%. This portfolio does not include any offshore, second lien or mezzanine loans.

Net charge-offs during the second quarter of 2016 totaled $97 million, or 0.28% of average loans and leases, compared to $98 million, or 0.33% of average loans and leases for the second quarter of 2015. For the six months ended June 30, 2016, net charge-offs totaled $251 million, compared to $199 million for the comparable prior year period. The other lending subsidiaries portfolio represents $36 million of the increase, driven by higher loss frequency and lower collateral values in the nonprime auto lending business. The remaining increase is primarily due to the $30 million of charge-offs related to the energy lending portfolio that were recorded during the first quarter of 2016. As a percentage of average loans and leases, annualized net charge-offs were 0.37% for the six months ended June 30, 2016, compared to 0.33% for the comparable prior year period.

Charge-offs related to PCI loans represent realized losses in certain acquired loan pools that exceed the amounts originally estimated at the acquisition date. This impairment was provided for in prior quarters and therefore the charge-offs have no impact on the Consolidated Statements of Income.

Refer to the "Loans and ACL" Note in the "Notes to Consolidated Financial Statements" for additional disclosures.

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The following table presents an allocation of the ALLL at June 30, 2016 and December 31, 2015. This allocation of the ALLL is calculated on an approximate basis and is not necessarily indicative of future losses or allocations. The entire amount of the allowance is available to absorb losses occurring in any category of loans and leases.



Table 9
Allocation of ALLL by Category

	June 30, 2016				December 31, 2015
	Amount		% Loans in each category		Amount		% Loans in each category
	(Dollars in millions)
Commercial and industrial	$	519	36.5	%	$	466	35.8	%
CRE-income producing properties	116		10.5		135		9.9
CRE-construction and development	28		2.6		37		2.7
Dealer floor plan	10		0.9		8		0.9
Direct retail lending	105		8.5		105		8.2
Sales finance	36		6.6		40		7.6
Revolving credit	98		1.8		104		1.8
Residential mortgage-nonguaranteed	194		21.0		194		21.8
Residential mortgage-government guaranteed	30		0.6		23		0.6
Other lending subsidiaries	306		10.2		287		9.9
PCI	65		0.8		61		0.8
Total ALLL	1,507		100.0	%	1,460		100.0	%
RUFC	96				90
Total ACL	$	1,603			$	1,550

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



Table 10
Analysis of ACL

	Three Months Ended
	6/30/2016			3/31/2016			12/31/2015			9/30/2015			6/30/2015
	(Dollars in millions)
Beginning balance	$	1,580		$	1,550		$	1,551		$	1,535		$	1,532
Provision for credit losses (excluding PCI)	109			182			128			100			97
Provision (benefit) for PCI loans	2			2			1			3			—
Charge-offs:
Commercial and industrial	(26		)	(56		)	(19		)	(16		)	(32		)
CRE-income producing properties	—			(2		)	(3		)	(4		)	(4		)
CRE-construction and development	—			—			(1		)	(1		)	—
Direct retail lending	(12		)	(13		)	(14		)	(15		)	(13		)
Sales finance	(6		)	(8		)	(10		)	(5		)	(5		)
Revolving credit	(16		)	(19		)	(16		)	(17		)	(19		)
Residential mortgage-nonguaranteed	(8		)	(7		)	(14		)	(7		)	(8		)
Residential mortgage-government guaranteed	(1		)	(1		)	(2		)	(3		)	(1		)
Other lending subsidiaries	(73		)	(92		)	(85		)	(77		)	(57		)
Total charge-offs	(142		)	(198		)	(164		)	(145		)	(139		)

Recoveries:
Commercial and industrial	12			12			8			8			13
CRE-income producing properties	1			3			1			3			1
CRE-construction and development	5			1			2			3			2
Direct retail lending	6			7			6			8			7
Sales finance	3			3			2			2			2
Revolving credit	5			5			5			5			5
Residential mortgage-nonguaranteed	1			1			1			1			1
Other lending subsidiaries	12			12			9			8			10
Total recoveries	45			44			34			38			41
Net charge-offs	(97		)	(154		)	(130		)	(107		)	(98		)
Other	9			—			—			20			4
Ending balance	$	1,603		$	1,580		$	1,550		$	1,551		$	1,535

ALLL (excluding PCI)	$	1,442		$	1,425		$	1,399		$	1,398		$	1,400
ALLL for PCI loans	65			63			61			60			57
RUFC	96			92			90			93			78
Total ACL	$	1,603		$	1,580		$	1,550		$	1,551		$	1,535

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	Six Months Ended June 30,
	2016			2015
	(Dollars in millions)
Beginning balance	$	1,550		$	1,534
Provision for credit losses (excluding PCI)	291			202
Provision (benefit) for PCI loans	4			(6		)
Charge-offs:
Commercial and industrial	(82		)	(46		)
CRE-income producing properties	(2		)	(13		)
CRE-construction and development	—			(2		)
Direct retail lending	(25		)	(25		)
Sales finance	(14		)	(11		)
Revolving credit	(35		)	(37		)
Residential mortgage-nonguaranteed	(15		)	(19		)
Residential mortgage-government guaranteed	(2		)	(1		)
Other lending subsidiaries	(165		)	(124		)
PCI	—			(1		)
Total charge-offs	(340		)	(279		)

Recoveries:
Commercial and industrial	24			21
CRE-income producing properties	4			3
CRE-construction and development	6			6
Direct retail lending	13			15
Sales finance	6			5
Revolving credit	10			10
Residential mortgage-nonguaranteed	2			1
Other lending subsidiaries	24			19
Total recoveries	89			80
Net charge-offs	(251		)	(199		)
Other	9			4
Ending balance	$	1,603		$	1,535

FDIC Loss Share Receivable and Assets Acquired from the FDIC

In connection with the Colonial acquisition, Branch Bank entered into loss sharing agreements with the FDIC that outline the terms and conditions under which the FDIC will reimburse Branch Bank for a portion of the losses incurred on certain loans, OREO, investment securities and other assets. Refer to BB&T's Annual Report on Form 10-K for the year ended December 31, 2015 for additional information regarding the loss sharing agreements and a summary of the accounting treatment for related assets and liabilities. The following table presents the carrying amount of assets by loss share agreement:



Table 11
Assets Acquired from the FDIC by Loss Share Agreement

	June 30, 2016						December 31, 2015
	Commercial		Single Family		Total		Commercial		Single Family		Total
	(Dollars in millions)
Loans and leases	$	240	$	482	$	722	$	273	$	539	$	812
AFS securities	943		—		943		1,064		—		1,064
Other assets	23		22		45		32		27		59
Total assets acquired from the FDIC	$	1,206	$	504	$	1,710	$	1,369	$	566	$	1,935

UPB of loans and leases	$	377	$	654	$	1,031	$	462	$	725	$	1,187

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As of October 1, 2014, the loss share provisions of the commercial loss sharing agreement expired; however, gains on the disposition of assets subject to this agreement will be shared with the FDIC through September 30, 2017. Any gains realized after September 30, 2017 would not be shared with the FDIC. Assets subject to the single family loss sharing agreement are indemnified through August 31, 2019. BB&T has commenced negotiations with the FDIC to terminate the loss sharing agreements. While a final termination agreement has not been reached, the impact of a settlement is not expected to be material to the financial condition of BB&T. Should a final agreement be reached, future financial results would no longer include amounts related to the FDIC loss sharing provisions. However, the accounting for the related loans and securities would not be affected by the termination of these agreements.

The gain/loss sharing coverage related to the acquired AFS securities is based on a contractually-specified value of the securities as of the date of the commercial loss sharing agreement, adjusted to reflect subsequent pay-downs, redemptions or maturities on the underlying securities. The contractually-specified value of these securities was approximately $449 million and $492 million at June 30, 2016 and December 31, 2015, respectively. During the period of gain sharing (October 1, 2014 through September 30, 2017), any decline in the fair value of the acquired AFS securities down to the contractually-specified value would reduce BB&T's liability to the FDIC at the applicable loss sharing percentage. BB&T is not indemnified for declines in the fair value of the acquired securities below the contractually-specified amount.

The following table provides information related to the carrying amounts and fair values of the components of the FDIC loss share receivable (payable):



Table 12
FDIC Loss Share Receivable (Payable)

	June 30, 2016						December 31, 2015
Attributable to:	Carrying Amount			Fair Value			Carrying Amount			Fair Value
	(Dollars in millions)
Loans	$	218		$	47		$	285		$	11
Securities	(520		)	(507		)	(536		)	(518		)
Aggregate loss calculation	(153		)	(159		)	(149		)	(158		)
Total	$	(455	)	$	(619	)	$	(400	)	$	(665	)

The decrease in the carrying amount of the FDIC loss share receivable attributable to loans acquired from the FDIC was due to the receipt of cash from the FDIC, negative accretion due to credit loss improvement and the offset to the provision for loans acquired from the FDIC. The change in the carrying amount attributable to the aggregate loss calculation is primarily due to accretion up to the expected payment. The fair values are based upon a discounted cash flow methodology that is consistent with the acquisition date methodology. The fair value attributable to acquired loans and the aggregate loss calculation changes over time due to the receipt of cash from the FDIC, updated credit loss assumptions and the passage of time. The fair value attributable to securities acquired from the FDIC is based upon the timing and amount that would be payable to the FDIC should the securities settle at the current fair value at the conclusion of the gain sharing period.

The cumulative amount recognized through earnings related to securities acquired from the FDIC resulted in a liability of $299 million as of June 30, 2016. Securities acquired from the FDIC are classified as AFS and carried at fair market value, and the changes in unrealized gains/losses are offset by the applicable loss share percentage in AOCI, which resulted in an additional pre-tax liability of $221 million as of June 30, 2016. BB&T would only owe these amounts to the FDIC if BB&T were to sell these securities prior to October 1, 2017. BB&T does not currently intend to dispose of the acquired securities.

Following the conclusion of the 10 year loss share period in 2019, should actual aggregate losses, excluding securities, be less than an amount determined in accordance with these agreements, BB&T will pay the FDIC a portion of the difference. As of June 30, 2016, BB&T projects that in 2019 it would owe the FDIC approximately $170 million under the aggregate loss calculation. This liability is expensed over time and BB&T has recognized total expense of approximately $153 million through June 30, 2016.

Deposits

Deposits totaled $159.2 billion at June 30, 2016, an increase of $10.1 billion from December 31, 2015. This change is primarily due to the acquisition of National Penn, which provided $6.6 billion in deposits as of the acquisition date.

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



Table 13
Composition of Average Deposits

	For the Three Months Ended
	6/30/2016		3/31/2016		12/31/2015		9/30/2015		6/30/2015
	(Dollars in millions)
Noninterest-bearing deposits	$	48,801	$	46,203	$	45,824	$	44,153	$	41,502
Interest checking	28,376		25,604		24,157		22,593		20,950
Money market and savings	63,195		60,424		61,431		59,306		53,852
Time deposits	18,101		16,884		16,981		16,837		14,800
Foreign office deposits - interest-bearing	1,865		752		98		948		764
Total average deposits	$	160,338	$	149,867	$	148,491	$	143,837	$	131,868

Average deposits for the second quarter were $160.3 billion, an increase of $10.5 billion compared to the prior quarter. National Penn contributed $6.6 billion of average deposits. Excluding National Penn, average deposits were up 10.5% annualized. The following discussion describes growth of average deposits excluding National Penn for the second quarter of 2016 compared to the first quarter.

Average noninterest-bearing deposits increased 12.1% annualized due to increases in personal balances and commercial balances, partially offset by decreases in public funds.

Interest checking grew 15.8% annualized primarily due to increases in personal balances and commercial balances.

Money market and savings increased 2.2% annualized as increases in personal balances and commercial balances were partially offset by declines in public funds.

Average foreign office deposits were up $1.1 billion primarily due to elevated short-term funding needs as a result of the acquisitions of National Penn and Swett & Crawford.

Including acquisitions, noninterest-bearing deposits represented 30.4% of total average deposits for the second quarter, compared to 30.8% for the prior quarter and 31.5% a year ago. The cost of interest-bearing deposits was 0.23% for the second quarter, down two basis points compared to the prior quarter.

Borrowings

At June 30, 2016, short-term borrowings totaled $1.5 billion, a decrease of $2.1 billion compared to December 31, 2015. Short-term borrowings fluctuate based on the Company's funding needs. Long-term debt totaled $24.4 billion at June 30, 2016, an increase of $666 million from the balance at December 31, 2015, which reflects the issuance of $3.0 billion worth of senior notes, partially offset by normal repayment activity and maturities.

Shareholders' Equity

Total shareholders' equity at June 30, 2016 was $29.7 billion, compared to $27.3 billion at December 31, 2015. This increase was primarily driven by net income of $1.2 billion, net common stock issuances of $1.1 billion (primarily due to National Penn), a preferred stock issuance for net proceeds of $450 million and a $191 million net change in AOCI, partially offset by common and preferred dividends totaling $519 million. BB&T's book value per common share at June 30, 2016 was $32.72, compared to $31.66 at December 31, 2015.

Merger-Related and Restructuring Activities

In conjunction with the consummation of an acquisition and completion of other requirements, BB&T typically accrues certain merger-related expenses, which may include estimated severance and other personnel-related costs, costs to terminate lease contracts, costs related to the disposal of duplicate facilities and equipment, costs to terminate data processing contracts and other costs associated with the acquisition. Merger-related and restructuring accruals are re-evaluated periodically and adjusted as necessary. The remaining accruals at June 30, 2016 are expected to be utilized within one year, unless they relate to specific contracts that expire later. The following table presents a summary of BB&T's merger accrual activity.

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Table 14
Merger-Related and Restructuring Accrual Rollforward

	Three Months Ended June 30, 2016									Six Months Ended June 30, 2016
	Beginning Balance		Expense		Utilized			Ending Balance		Beginning Balance		Expense		Utilized			Ending Balance
	(Dollars in millions)
Personnel-related items	$	20	$	30	$	(8	)	$	42	$	26	$	34	$	(18	)	$	42
Occupancy and equipment	7		40		(26		)	21		11		42		(32		)	21
Professional services	16		2		(17		)	1		13		10		(22		)	1
Systems conversion and related charges	1		7		(8		)	—		—		12		(12		)	—
Other adjustments	1		13		(11		)	3		2		17		(16		)	3
Total	$	45	$	92	$	(70	)	$	67	$	52	$	115	$	(100	)	$	67

Critical Accounting Policies

The accounting and reporting policies of BB&T are in accordance with GAAP and conform to the accounting and reporting guidelines prescribed by bank regulatory authorities. BB&T's financial position and results of operations are affected by management's application of accounting policies, including estimates, assumptions and judgments made to arrive at the carrying value of assets and liabilities and amounts reported for revenues and expenses. Different assumptions in the application of these policies could result in material changes in the consolidated financial position and/or consolidated results of operations and related disclosures. The more critical accounting and reporting policies include accounting for the ACL, determining fair value of financial instruments, intangible assets, costs and benefit obligations associated with pension and postretirement benefit plans, and income taxes. Understanding BB&T's accounting policies is fundamental to understanding the consolidated financial position and consolidated results of operations. Accordingly, the critical accounting policies are discussed in detail in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in BB&T's Annual Report on Form 10-K for the year ended December 31, 2015. Significant accounting policies and changes in accounting principles and effects of new accounting pronouncements are discussed in detail in "Basis of Presentation" Note in the "Notes to Consolidated Financial Statements" in BB&T's Annual Report on Form 10-K for the year ended December 31, 2015. Effective January 1, 2016, BB&T adopted the fair value method for commercial MSRs. There have been no other changes to the significant accounting policies during 2016. Additional disclosures regarding the effects of new accounting pronouncements are included in the "Basis of Presentation" Note included herein.

Risk Management

BB&T has a strong and consistent risk culture, based on established risk values, which promotes predictable and consistent performance within an environment of open communication and effective challenge. The strong culture influences all associates in the organization daily and helps them evaluate whether risks are acceptable or unacceptable while making decisions that balance quality, profitability and growth appropriately. BB&T's effective risk management framework establishes an environment which enables it to achieve superior performance relative to peers, ensures that BB&T is viewed among the safest of banks and assures the operational freedom to act on opportunities.

BB&T ensures that there is an appropriate return for the amount of risk taken, and that the expected return is in line with its strategic objectives and business plan. Risk-taking activities are evaluated and prioritized to identify those that present attractive risk-adjusted returns while preserving asset value. BB&T only undertakes risks that are understood and can be managed effectively. By managing risk well, BB&T ensures sufficient capital is available to maintain and grow core business operations in a safe and sound manner.

Regardless of financial gain or loss to the Company, associates are held accountable if they do not follow the established risk management policies and procedures. Compensation decisions take into account an associate's adherence to and successful implementation of BB&T's risk values. The compensation structure supports the Company's core values and sound risk management practices in an effort to promote judicious risk-taking behavior.

BB&T's risk culture encourages transparency and open dialogue between all levels in the performance of organizational functions, such as the development, marketing and implementation of a product or service.

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The principal types of inherent risk include compliance, credit, liquidity, market, operational, reputation and strategic risks. Refer to BB&T's Annual Report on Form 10-K for the year ended December 31, 2015 for disclosures related to each of these risks under the section titled "Risk Management."

Market Risk Management

The effective management of market risk is essential to achieving BB&T's strategic financial objectives. As a financial institution, BB&T's most significant market risk exposure is interest rate risk in its balance sheet; however, market risk also includes product liquidity risk, price risk and volatility risk in BB&T's BUs. The primary objectives of market risk management are to minimize any adverse effect that changes in market risk factors may have on net interest income, net income and capital and to offset the risk of price changes for certain assets recorded at fair value. At BB&T, market risk management also includes the enterprise-wide IPV function.

Interest Rate Market Risk (Other than Trading)

BB&T actively manages market risk associated with asset and liability portfolios with a focus on the strategic pricing of asset and liability accounts and management of appropriate maturity mixes of assets and liabilities. The goal of these activities is the development of appropriate maturity and repricing opportunities in BB&T's portfolios of assets and liabilities that will produce reasonably consistent net interest income during periods of changing interest rates. These portfolios are analyzed for proper fixed-rate and variable-rate mixes under various interest rate scenarios.

The asset/liability management process is designed to achieve relatively stable NIM and assure liquidity by coordinating the volumes, maturities or repricing opportunities of earning assets, deposits and borrowed funds. Among other things, this process gives consideration to prepayment trends related to securities, loans and leases and certain deposits that have no stated maturity. Prepayment assumptions are developed using a combination of market data and internal historical prepayment experience for residential mortgage-related loans and securities, and internal historical prepayment experience for client deposits with no stated maturity and loans that are not residential mortgage related. These assumptions are subject to monthly back-testing, and are adjusted as deemed necessary to reflect changes in interest rates relative to the reference rate of the underlying assets or liabilities. On a monthly basis, BB&T evaluates the accuracy of its Simulation model, which includes an evaluation of its prepayment assumptions, to ensure that all significant assumptions inherent in the model appropriately reflect changes in the interest rate environment and related trends in prepayment activity. It is the responsibility of the MRLCC to determine and achieve the most appropriate volume and mix of earning assets and interest-bearing liabilities, as well as to ensure an adequate level of liquidity and capital, within the context of corporate performance goals. The MRLCC also sets policy guidelines and establishes long-term strategies with respect to interest rate risk exposure and liquidity. The MRLCC meets regularly to review BB&T's interest rate risk and liquidity positions in relation to present and prospective market and business conditions, and adopts funding and balance sheet management strategies that are intended to ensure that the potential impacts on earnings and liquidity as a result of fluctuations in interest rates are within acceptable tolerance guidelines.

BB&T uses derivatives primarily to manage economic risk related to securities, commercial loans, MSRs and mortgage banking operations, long-term debt and other funding sources. BB&T also uses derivatives to facilitate transactions on behalf of its clients. As of June 30, 2016, BB&T had derivative financial instruments outstanding with notional amounts totaling $79.1 billion, with a net fair value gain of $180 million. See the "Derivative Financial Instruments" Note in the "Notes to Consolidated Financial Statements" herein for additional disclosures.

The majority of BB&T's assets and liabilities are monetary in nature and, therefore, differ greatly from most commercial and industrial companies that have significant investments in fixed assets or inventories. Fluctuations in interest rates and actions of the FRB to regulate the availability and cost of credit have a greater effect on a financial institution's profitability than do the effects of higher costs for goods and services. Through its balance sheet management function, which is monitored by the MRLCC, management believes that BB&T is positioned to respond to changing needs for liquidity, changes in interest rates and inflationary trends.

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Management uses the Simulation to measure the sensitivity of projected earnings to changes in interest rates. The Simulation projects net interest income and interest rate risk for a rolling two-year period of time. The Simulation takes into account the current contractual agreements that BB&T has made with its customers on deposits, borrowings, loans, investments and commitments to enter into those transactions. Furthermore, the Simulation considers the impact of expected customer behavior. Management monitors BB&T's interest sensitivity by means of a model that incorporates the current volumes, average rates earned and paid, and scheduled maturities and payments of asset and liability portfolios, together with multiple scenarios that include projected prepayments, repricing opportunities and anticipated volume growth. Using this information, the model projects earnings based on projected portfolio balances under multiple interest rate scenarios. This level of detail is needed to simulate the effect that changes in interest rates and portfolio balances may have on the earnings of BB&T. This method is subject to the accuracy of the assumptions that underlie the process, but management believes that it provides a better illustration of the sensitivity of earnings to changes in interest rates than other analyses such as static or dynamic gap. In addition to the Simulation, BB&T uses EVE analysis to focus on projected changes in capital given potential changes in interest rates. This measure also allows BB&T to analyze interest rate risk that falls outside the analysis window contained in the Simulation. The EVE model is a discounted cash flow of the portfolio of assets, liabilities, and derivative instruments. The difference in the present value of assets minus the present value of liabilities is defined as the economic value of equity.

The asset/liability management process requires a number of key assumptions. Management determines the most likely outlook for the economy and interest rates by analyzing external factors, including published economic projections and data, the effects of likely monetary and fiscal policies, as well as any enacted or prospective regulatory changes. BB&T's current and prospective liquidity position, current balance sheet volumes and projected growth, accessibility of funds for short-term needs and capital maintenance are also considered. This data is combined with various interest rate scenarios to provide management with the information necessary to analyze interest sensitivity and to aid in the development of strategies to reach performance goals.

The following table shows the effect that the indicated changes in interest rates would have on net interest income as projected for the next twelve months assuming a gradual change in interest rates as described below. Key assumptions in the preparation of the table include prepayment speeds of mortgage-related and other assets, cash flows and maturities of derivative financial instruments, loan volumes and pricing, deposit sensitivity, customer preferences and capital plans. The resulting change in net interest income reflects the level of interest rate sensitivity that income has in relation to the investment, loan and deposit portfolios.



Table 15
Interest Sensitivity Simulation Analysis

Interest Rate Scenario						Annualized Hypothetical Percentage Change in Net Interest Income June 30,
Linear Change in Prime Rate		Prime Rate June 30,
Linear Change in Prime Rate		2016		2015		2016		2015
Up 200	bps	5.50	%	5.25	%	3.18	%	2.23	%
Up 100		4.50		4.25		2.42		1.60
No Change		3.50		3.25		—		—
Down 25		3.25		3.00		(1.42	)	0.18

The MRLCC has established parameters related to interest sensitivity that prescribe a maximum negative impact on net interest income under different interest rate scenarios. In the event the results of the Simulation model fall outside the established parameters, management will make recommendations to the MRLCC on the most appropriate response given the current economic forecast. The following parameters and interest rate scenarios are considered BB&T's primary measures of interest rate risk:


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


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

If a rate change of 200 basis points cannot be modeled due to a low level of rates, a proportional limit applies. Management currently only models a negative 25 basis point decline because larger declines would have resulted in a Federal funds rate of less than zero. In a situation such as this, the maximum negative impact on net interest income is adjusted on a proportional basis. Regardless of the proportional limit, the negative risk exposure limit will be the greater of 2% or the proportional limit.

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Management has also established a maximum negative impact on net interest income of 4% for an immediate 100 basis points change in rates and 8% for an immediate 200 basis points change in rates. These "interest rate shock" limits are designed to create an outer band of acceptable risk based upon a significant and immediate change in rates.

Management also considers potential negative interest rate scenarios, which implies that a depositor would pay a premium for a financial institution to hold funds on deposit. In such a scenario, some depositors may choose to withdraw their deposits in lieu of paying an interest rate to BB&T to hold such deposits. As a result, management considers potential pricing and structure changes, such as the movement to a primarily fee-based deposit system. Negative rates would also diminish the spreads on loans and securities. As a result, management considers interest rate floors or rate index floors in loans to mitigate this risk. BB&T purchases both fixed and variable rate securities. The fixed rate securities would be beneficial in a negative interest rate environment.

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

Beta represents the correlation between overall market interest rates and the rates paid by BB&T on interest-bearing deposits. BB&T applies an average beta of approximately 80% to its managed rate deposits for determining its interest rate sensitivity. Managed rate deposits are high beta, premium money market and interest checking accounts, which attract significant client funds when needed to support balance sheet growth. BB&T regularly conducts sensitivity on other key variables to determine the impact they could have on the interest rate risk position. This allows BB&T to evaluate the likely impact on its balance sheet management strategies due to a more extreme variation in a key assumption than expected.

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



Table 16
Deposit Mix Sensitivity Analysis

Linear Change in Rates		Base Scenario at June 30, 2016 (1)		Results Assuming a Decrease in Noninterest Bearing Demand Deposits

				$1 Billion		$5 Billion
Up 200	bps	3.18	%	2.97	%	2.10	%
Up 100		2.42		2.29		1.75

___________

(1) The base scenario is equal to the annualized hypothetical percentage change in net interest income at June 30, 2016 as presented in the preceding table.

If rates increased 200 basis points, BB&T could absorb the loss of $14.6 billion, or 29.4%, of noninterest bearing deposits and replace them with managed rate deposits with a beta of 100% before becoming neutral to interest rate changes.

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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 17
EVE Simulation Analysis

		EVE/Assets				Hypothetical Percentage Change in EVE
Change in		June 30,				June 30,
Interest Rates		2016		2015		2016		2015
Up 200	bps	10.4	%	11.5	%	5.5	%	(0.5	)%
Up 100		10.3		11.7		5.2		1.3
No Change		9.8		11.5		—		—
Down 25		9.5		11.4		(3.0	)	(1.2	)

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 June 30, 2016 and 2015 were each less than $1 million. Market risk disclosures under Basel II.5 are available in the Additional Disclosures section of the Investor Relations site on www.bbt.com.

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

Refer to BB&T's Annual Report on Form 10-K for the year ended December 31, 2015 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 the "Commitments and Contingencies" Note and "Fair Value Disclosures" Note in the "Notes to Consolidated Financial Statements."

The following table presents activity in residential mortgage indemnification, recourse and repurchase reserves:



Table 18
Mortgage Indemnification, Recourse and Repurchase Reserves Activity

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
	(Dollars in millions)
Balance, at beginning of period	$	83		$	88		$	79		$	94
Payments	(1		)	(2		)	(2		)	(4		)
Expense (benefit)	(2		)	(3		)	3			(7		)
Balance, at end of period	$	80		$	83		$	80		$	83

Liquidity

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

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BB&T monitors the ability to meet customer demand for funds under both normal and stressed market conditions. In considering its liquidity position, management evaluates BB&T's funding mix based on client core funding, client rate-sensitive funding and non-client rate-sensitive funding. In addition, management also evaluates exposure to rate-sensitive funding sources that mature in one year or less. Management also measures liquidity needs against 30 days of stressed cash outflows for Branch Bank. To ensure a strong liquidity position, management maintains a liquid asset buffer of cash on hand and highly liquid unpledged securities. The Company has established a policy that the liquid asset buffer would be a minimum of 5% of total assets, but intends to maintain the ratio well in excess of this level. As of June 30, 2016 and December 31, 2015, BB&T's liquid asset buffer was 13.7% and 13.5%, 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 operations were to fall under the "internationally active" rules, which would generally be triggered if BB&T's assets were to increase above $250 billion. BB&T 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 LCR was approximately 135% at June 30, 2016, compared to the regulatory minimum for such entities of 90%, which puts BB&T in full compliance with the rule. The regulatory minimum will increase to 100% on January 1, 2017.

On April 27, 2016, the OCC, the FRB and the FDIC released a notice of proposed rulemaking for the US version of the net stable funding ratio. Under the proposal, BB&T will be a "modified NSFR" holding company. BB&T would be subject to full NSFR requirements if it has $250 billion or more in assets or $10 billion or more in total on-balance sheet foreign exposure. BB&T is evaluating the information in the release but does not currently expect a material impact on its results of operations or financial condition. The proposed rule would become effective January 1, 2018.

Parent Company

The purpose of the Parent Company is to serve as the primary capital financing vehicle for the operating subsidiaries. The assets of the Parent Company primarily consist of cash on deposit with Branch Bank, equity investments in subsidiaries, advances to subsidiaries, accounts receivable from subsidiaries, and other miscellaneous assets. The principal obligations of the Parent Company are principal and interest payments on long-term debt. The main sources of funds for the Parent Company are dividends and management fees from subsidiaries, repayments of advances to subsidiaries, and proceeds from the issuance of equity and long-term debt. The primary uses of funds by the Parent Company are for investments in subsidiaries, advances to subsidiaries, dividend payments to common and preferred shareholders, retirement of common stock and interest and principal payments due on long-term debt.

Liquidity at the Parent Company is more susceptible to market disruptions. BB&T prudently manages cash levels at the Parent Company to cover a minimum of one year of projected contractual cash outflows which includes unfunded external commitments, debt service, preferred dividends and scheduled debt maturities without the benefit of any new cash infusions. Generally, BB&T maintains a significant buffer above the projected one year of contractual cash outflows. In determining the buffer, BB&T considers cash requirements for common and preferred dividends, unfunded commitments to affiliates, being a source of strength to its banking subsidiaries and being able to withstand sustained market disruptions that could limit access to the capital markets. As of June 30, 2016 and December 31, 2015, the Parent Company had 33 months and 36 months, respectively, of cash on hand to satisfy projected contractual cash outflows as described above.

Branch Bank

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

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Branch Bank has several major sources of funding to meet its liquidity requirements, including access to capital markets through issuance of senior or subordinated bank notes and institutional CDs, access to the FHLB system, dealer repurchase agreements and repurchase agreements with commercial clients, access to the overnight and term Federal funds markets, use of a Cayman branch facility, access to retail brokered CDs and a borrower in custody program with the FRB for the discount window. As of June 30, 2016, Branch Bank has approximately $79.5 billion of secured borrowing capacity, which represents approximately 9.0 times the amount of one year wholesale funding maturities.

Capital

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

Management regularly monitors the capital position of BB&T on both a consolidated and bank level basis. In this regard, management's overriding policy is to maintain capital at levels that are in excess of the operating capital guidelines, which are above the regulatory "well capitalized" levels. Management has implemented stressed capital ratio minimum guidelines to evaluate whether capital ratios calculated with planned capital actions are likely to remain above minimums specified by the FRB for the annual CCAR. Breaches of stressed minimum guidelines prompt a review of the planned capital actions included in BB&T's capital plan.



Table 19
BB&T's Internal Capital Guidelines

	Operating		Stressed
Tier 1 Capital Ratio	10.0	%	7.5	%
Total Capital Ratio	12.0		9.5
Tier 1 Leverage Capital Ratio	8.0		5.5
Tangible Common Equity Ratio	6.0		4.0
Common Equity Tier 1 Ratio	8.5		6.0

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

Basel III capital requirements became effective on January 1, 2015. Risk-based capital ratios for the quarter ended June 30, 2016, which include common equity tier 1, Tier 1 capital, total capital and leverage capital, are calculated based on Basel III regulatory transitional guidance related to the measurement of capital, risk-weighted assets and average assets.

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Table 20
Capital Ratios (1)

	June 30, 2016			December 31, 2015
	(Dollars in millions, except per share data, shares in thousands)
Risk-based:
Common equity tier 1	10.0		%	10.3		%
Tier 1	11.7			11.8
Total	13.9			14.3
Leverage capital	9.6			9.8

Non-GAAP capital measures (2):
Tangible common equity as a percentage of tangible assets	7.6		%	7.7		%
Tangible common equity per common share	$	19.75		$	19.82

Calculations of tangible common equity and tangible assets (2):
Total shareholders' equity	$	29,743		$	27,340
Less:
Preferred stock	3,053			2,603
Noncontrolling interests	39			34
Intangible assets	10,567			9,234
Tangible common equity	$	16,084		$	15,469

Total assets	$	221,859		$	209,947
Less:
Intangible assets	10,567			9,234
Tangible assets	$	211,292		$	200,713

Risk-weighted assets	$	176,232		$	166,611
Common shares outstanding at end of period	814,500			780,337

___________


(1)	Current quarter regulatory capital information is preliminary and based on transitional approach.


(2)	Tangible common equity and related ratios are non-GAAP measures. Management uses these measures to assess the quality of capital and believes that investors may find them useful in their analysis of the Company. These capital measures are not necessarily comparable to similar capital measures that may be presented by other companies.

The Company's estimated common equity tier 1 ratio using the Basel III standardized approach on a fully phased-in basis was 9.8% at June 30, 2016 and 10.0% at December 31, 2015. Capital levels remained strong at June 30, 2016. BB&T declared total common dividends of $0.28 per share during the second quarter of 2016, which represents a $0.01 increase and resulted in a dividend payout ratio of 41.8%. Capital ratios decreased during the second quarter as the deployment of capital for acquisitions was greater than the impact of earnings in excess of dividends.



Table 21
Capital Requirements Under Basel III

	Minimum		Well-		Minimum Capital Plus Capital Conservation Buffer								BB&T
	Capital		Capitalized		2016		2017		2018		2019 (1)		Target
Common equity Tier 1 to risk-weighted assets	4.5	%	6.5	%	5.125	%	5.750	%	6.375	%	7.000	%	8.5	%
Tier 1 capital to risk-weighted assets	6.0		8.0		6.625		7.250		7.875		8.500		10.0
Total capital to risk-weighted assets	8.0		10.0		8.625		9.250		9.875		10.500		12.0
Leverage ratio	4.0		5.0		N/A		N/A		N/A		N/A		8.0

(1) BB&T's goal is to maintain capital levels above the 2019 requirements.

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Share Repurchase Activity

During June of 2015, the Board of Directors authorized a new stock repurchase plan, the 2015 Repurchase Plan, to repurchase up to 50 million shares of the Company's common stock. Repurchases under the 2015 Repurchase Plan may be effected through open market purchases or privately negotiated transactions. The timing and exact amount of repurchases will be consistent with the Company's capital plan and subject to various factors, including the Company's capital position, liquidity, financial performance, alternative uses of capital, stock trading price and general market conditions, and may be suspended at any time. The 2015 Repurchase Plan does not have an expiration date. Shares that are repurchased pursuant to the 2015 Repurchase Plan will constitute authorized but unissued shares of the Company and will therefore be available for future issuances. No shares were repurchased in connection with the 2015 Repurchase Plan through June 30, 2016. The Board of Directors has authorized up to $640 million of share repurchases over a one-year period beginning with the third quarter of 2016.



Table 22
Share Repurchase Activity

	Total Shares Repurchased (1)	Average Price Paid Per Share (2)		Total Shares Purchased Pursuant to Publicly-Announced Plan (3)
	(Shares in thousands)
April 2016	19	$	34.09	—
May 2016	11	34.86		—
June 2016	24	34.65		—
Total	54	34.49		—

___________


(1)	Repurchases reflect shares exchanged or surrendered in connection with the exercise of equity-based awards under BB&T's equity-based compensation plans.


(2)	Excludes commissions.


(3)	The maximum remaining number of shares available for repurchase pursuant to publicly-announced plan was 50 million at June 30, 2016.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Refer to "Market Risk Management" in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section herein.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control over Financial Reporting

There were no changes in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarter ended June 30, 2016 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Refer to the "Commitments and Contingencies" and "Income Taxes" notes in the "Notes to Consolidated Financial Statements."

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed in BB&T's Annual Report on Form 10-K for the year ended December 31, 2015. Additional risks and uncertainties not currently known to BB&T or that management has deemed to be immaterial also may materially adversely affect BB&T's business, financial condition, and/or operating results.

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

(c) Refer to "Share Repurchase Activity" in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section herein.

ITEM 6. EXHIBITS



10.1		Modification of 2016-2018 Long-Term Incentive Performance Award - Summary.
12		Statement re: Computation of Ratios.
31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document.
101.SCH		XBRL Taxonomy Extension Schema.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase.
101.LAB		XBRL Taxonomy Extension Label Linkbase.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase.
101.DEF		XBRL Taxonomy Definition Linkbase.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		BB&T CORPORATION (Registrant)

Date:	July 27, 2016	By:	/s/ Daryl N. Bible
			Daryl N. Bible Senior Executive Vice President and Chief Financial Officer (Principal Financial Officer)

Date:	July 27, 2016	By:	/s/ Cynthia B. Powell
			Cynthia B. Powell Executive Vice President and Corporate Controller (Principal Accounting Officer)

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EXHIBIT INDEX

Exhibit No.	Description	Location

10.1*	Modification of 2016-2018 Long-Term Incentive Performance Award - Summary.	Filed herewith.

12†	Statement re: Computation of Ratios.	Filed herewith.

31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith.

31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith.

32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Furnished herewith.

101.INS	XBRL Instance Document.	Filed herewith.

101.SCH	XBRL Taxonomy Extension Schema.	Filed herewith.

101.CAL	XBRL Taxonomy Extension Calculation Linkbase.	Filed herewith.

101.LAB	XBRL Taxonomy Extension Label Linkbase.	Filed herewith.

101.PRE	XBRL Taxonomy Extension Presentation Linkbase.	Filed herewith.

101.DEF	XBRL Taxonomy Definition Linkbase.	Filed herewith.


* Management compensatory plan or arrangement.
† Exhibit filed with the Securities and Exchange Commission and available upon request.