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-82000000 8341000000 1083000000 1521000000 1551000000 731000000 1604000000 226000000 3201000000 93000000 -4475000000 7000000 86000000 1000000 2000000 40000000 2740000000 98000000 79000000 62000000 0 0 0 0 0 0 0 0 <p style='margin-top:0pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-weight:bold;margin-left:0px;">NOTE </font><font style="font-family:Times New Roman;font-size:10pt;font-weight:bold;">1</font><font style="font-family:Times New Roman;font-size:10pt;font-weight:bold;">. </font><font style="font-family:Times New Roman;font-size:10pt;font-weight:bold;">Summary of Significant Accounting Policies</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:9px;">General</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">BB&amp;T Corporation (&#8220;BB&amp;T&#8221;, the &#8220;Company&#8221; or &#8220;Parent Company&#8221;) is a financial holding company organized under the laws of </font><font style="font-family:Times New Roman;font-size:10pt;">North Carolina</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T conducts operations through its principal bank subsidiary, Branch Banking and Trust Company (&#8220;Branch Bank&#8221;), a federally chartered thrift institution, BB&amp;T Financial, FSB (&#8220;BB&amp;T FSB&#8221;) and its nonbank subsidiaries</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">The accounting and reporting policies of BB&amp;T and its subsidiaries are in accordance with accounting principles generally accepted in the </font><font style="font-family:Times New Roman;font-size:10pt;">United States of America</font><font style="font-family:Times New Roman;font-size:10pt;"> (&#8220;GAAP&#8221;)</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Additionally, where applicable, the policies conform to the accounting and reporting guidelines prescribed by bank regulatory authorities</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The following is a summary of BB&amp;T's more significant accounting policies</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:15pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:10.1px;">Nature of Operations</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Branch Bank has offices in </font><font style="font-family:Times New Roman;font-size:10pt;">North Carolina</font><font style="font-family:Times New Roman;font-size:10pt;">, </font><font style="font-family:Times New Roman;font-size:10pt;">South Carolina</font><font style="font-family:Times New Roman;font-size:10pt;">, </font><font style="font-family:Times New Roman;font-size:10pt;">Virginia</font><font style="font-family:Times New Roman;font-size:10pt;">, </font><font style="font-family:Times New Roman;font-size:10pt;">Maryland</font><font style="font-family:Times New Roman;font-size:10pt;">, </font><font style="font-family:Times New Roman;font-size:10pt;">Georgia</font><font style="font-family:Times New Roman;font-size:10pt;">, </font><font style="font-family:Times New Roman;font-size:10pt;">West Virginia</font><font style="font-family:Times New Roman;font-size:10pt;">, </font><font style="font-family:Times New Roman;font-size:10pt;">Tennessee</font><font style="font-family:Times New Roman;font-size:10pt;">, </font><font style="font-family:Times New Roman;font-size:10pt;">Kentucky</font><font style="font-family:Times New Roman;font-size:10pt;">, </font><font style="font-family:Times New Roman;font-size:10pt;">Florida</font><font style="font-family:Times New Roman;font-size:10pt;">, </font><font style="font-family:Times New Roman;font-size:10pt;">Alabama</font><font style="font-family:Times New Roman;font-size:10pt;">, </font><font style="font-family:Times New Roman;font-size:10pt;">Indiana</font><font style="font-family:Times New Roman;font-size:10pt;">, </font><font style="font-family:Times New Roman;font-size:10pt;">Texas</font><font style="font-family:Times New Roman;font-size:10pt;"> and </font><font style="font-family:Times New Roman;font-size:10pt;">Washington</font><font style="font-family:Times New Roman;font-size:10pt;">, </font><font style="font-family:Times New Roman;font-size:10pt;">D.C</font><font style="font-family:Times New Roman;font-size:10pt;">.</font><font style="font-family:Times New Roman;font-size:10pt;"> </font><font style="font-family:Times New Roman;font-size:10pt;">Branch Bank provides a wide range of banking services to individuals and businesses, and offers a variety of loans to businesses and consumers</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Such loans are made primarily to individuals residing in the market areas described above or to businesses located within BB&amp;T's geographic footprint</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Branch Bank also markets a wide range of deposit services to individuals</font><font style="font-family:Times New Roman;font-size:10pt;">,</font><font style="font-family:Times New Roman;font-size:10pt;"> businesses</font><font style="font-family:Times New Roman;font-size:10pt;"> and public entities</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Branch Bank offers, either directly, or through its subsidiaries, lease financing to businesses and municipal governments; factoring; discount brokerage services, annuities and mutual funds; life insurance, property and casualty insurance, health insurance and commercial general liability insurance on an agency basis and through a wholesale insurance brokerage operation; insurance premium financing; permanent financing arrangements for commercial real estate; loan servicing for third-party investors; direct consumer finance loans to individuals; trust and</font><font style="font-family:Times New Roman;font-size:10pt;"> retirement services,</font><font style="font-family:Times New Roman;font-size:10pt;"> comprehensive wealth advisory services and association services</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T FSB and the direct nonbank subsidiaries of BB&amp;T provide a variety of financial services including credit card lending, automobile lending, equipment financing, full-service securities brokerage, asset management and capital markets service</font><font style="font-family:Times New Roman;font-size:10pt;">s</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:15pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:9.35px;">Principles of Consolidation</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">The consolidated financial statements of BB&amp;T include the accounts of BB&amp;T Corporation and those subsidiaries that are majority owned by BB&amp;T and over which BB&amp;T exercises control</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">In consolidation, all significant intercompany accounts and transactions are eliminated</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The results of operations of companies or assets acquired are included only from the dates of acquisition</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">All material wholly-owned and majority-owned subsidiaries are consolidated unless GAAP requires otherwise</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">BB&amp;T holds investments in certain legal entities that are considered variable interest entities (&#8220;VIE's&#8221;)</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">VIE's are legal entities in which equity investors do not have sufficient equity at risk for the entity to independently finance its activities, or as a group, the holders of the equity investment at risk lack the power through voting or similar rights to direct the activities of the entity that most significantly impact its economic performance, or do not have the obligation to absorb the expected losses of the entity or the right to receive expected residual returns of the entity</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Consolidation of a VIE is considered appropriate if a reporting entity holds a controlling financial interest in the VIE</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">BB&amp;T evaluates its investments in VIE's to determine if a controlling financial interest is held</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">This evaluation gives appropriate consideration to the design of the entity and the variability that the entity was designed to pass along, the relative power of each of the parties to the VIE, and to BB&amp;T's relative obligation to absorb losses or receive residual returns of the entity, in relation to such obligations and rights held by other parties to the VIE</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T has variable interests in certain entities that were not required to be consolidated, including affordable housing partnership interests, historic tax credit partnerships, </font><font style="font-family:Times New Roman;font-size:10pt;">and </font><font style="font-family:Times New Roman;font-size:10pt;">other partnership interests</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">R</font><font style="font-family:Times New Roman;font-size:10pt;">efer to Note </font><font style="font-family:Times New Roman;font-size:10pt;">15</font><font style="font-family:Times New Roman;font-size:10pt;"> for additional disclosures regarding BB&amp;T's significant variable interest entities</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">BB&amp;T accounts for unconsolidated partnership and similar investments using the equity method of accounting</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">In addition to affordable housing partnerships, which represent the majority of unconsolidated investments in variable interest entities, BB&amp;T also has investments and future funding commitments to venture capital and other entities</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The maximum potential exposure to losses relative to investments in variable interest entities is generally limited to the sum of the outstanding balance, future funding commitments and any related loans to the entity</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Loans to these entities are underwritten in substantially the same manner as are other loans and are generally secured</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">BB&amp;T has investments in certain entities for which BB&amp;T does not have the controlling interest</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">For these investments, the Company records its portion of income or loss in other noninterest income in the Consolidated Statements of Income</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T periodically evaluates these investments for impairmen</font><font style="font-family:Times New Roman;font-size:10pt;">t</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:15pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:9.35px;">Reclassifications</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">In certain instances, amounts reported in </font><font style="font-family:Times New Roman;font-size:10pt;">prior years'</font><font style="font-family:Times New Roman;font-size:10pt;"> consolidated financial statements have been reclassified to conform to the current presentation</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Such reclassifications had no effect on previously reported cash flows, shareholders' equity or net incom</font><font style="font-family:Times New Roman;font-size:10pt;">e.</font></p><p style='margin-top:15pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:9.35px;">Use of Estimates in the Preparation of Financial Statements</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">The preparation of financial statements in conformity with </font><font style="font-family:Times New Roman;font-size:10pt;">GAAP</font><font style="font-family:Times New Roman;font-size:10pt;"> 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</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Actual results could differ from those estimates</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Material estimates that are particularly susceptible to significant change include the determination of the allowance for </font><font style="font-family:Times New Roman;font-size:10pt;">credit</font><font style="font-family:Times New Roman;font-size:10pt;"> losses, 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 expens</font><font style="font-family:Times New Roman;font-size:10pt;">e</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:10.1px;">Business Combinations</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">BB&amp;T accounts for all business combinations using the acquisition method of accounting</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Under this method of accounting, the accounts of an acquired entity are included with the acquirer's accounts as of the date of acquisition with any excess of purchase price over the fair value of the net assets acquired (including identifiable intangibles) capitalized as goodwill</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">To consummate an acquisition, BB&amp;T typically issues common stock and/or pays cash, depending on the terms of the acquisition agreement</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The value of common shares issued is determined based upon the market price of the stock as of the closing of the acquisition</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">In connection with mergers and acquisitions, BB&amp;T </font><font style="font-family:Times New Roman;font-size:10pt;">may</font><font style="font-family:Times New Roman;font-size:10pt;"> issue options to purchase shares of its common stock in exchange for options </font><font style="font-family:Times New Roman;font-size:10pt;">to purchase shares of </font><font style="font-family:Times New Roman;font-size:10pt;">the acquired entities </font><font style="font-family:Times New Roman;font-size:10pt;">that are outstanding </font><font style="font-family:Times New Roman;font-size:10pt;">at the time the merger is completed</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">To the extent vested, the options are considered to be part of the purchase price paid</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">There is no change in the aggregate intrinsic value of the options issued compared to the intrinsic value of the options held immediately before the exchange, nor does the ratio of the exercise price per option to the market value per share change.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:10.1px;">Cash and Cash Equivalents</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Cash and cash equivalents include cash and due from banks, interest-bearing deposits with banks, Federal funds sold and securities purchased under resale agreements or similar arrangements</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Cash and cash equivalents have maturities of three months or less</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Accordingly, the carrying amount of such instruments is considered a reasonable estimate of fair value</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:10.1px;">Securities</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">BB&amp;T classifies marketable investment securities as held to maturity, available for sale or trading</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Interest income and dividends on securities are recognized in interest income on an accrual basis</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Premiums and discounts on debt securities are amortized as an adjustment to interest income using the interest method</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Debt securities </font><font style="font-family:Times New Roman;font-size:10pt;">are classified as held to maturity </font><font style="font-family:Times New Roman;font-size:10pt;">where BB&amp;T has both the intent and ability to hold </font><font style="font-family:Times New Roman;font-size:10pt;">the securities </font><font style="font-family:Times New Roman;font-size:10pt;">to maturity</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">These securities are </font><font style="font-family:Times New Roman;font-size:10pt;">reported at amortized cost</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Debt securities, which may be sold to meet liquidity needs arising from unanticipated deposit and loan fluctuations, changes in regulatory capital requirements, or unforeseen changes in market conditions, are classified as available for sale</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Securities available for sale are reported at estimated fair value, with unrealized gains and losses reported </font><font style="font-family:Times New Roman;font-size:10pt;">in</font><font style="font-family:Times New Roman;font-size:10pt;"> accumulated other comprehensive income or loss, net of deferred income taxes, in the shareholders' equity section of the Consolidated Balance Sheets</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Gains or losses realized from the sale of securities available for sale are determined by specific identification and are included in noninterest income.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">BB&amp;T evaluates each held to maturity and available</font><font style="font-family:Times New Roman;font-size:10pt;"> </font><font style="font-family:Times New Roman;font-size:10pt;">for</font><font style="font-family:Times New Roman;font-size:10pt;"> </font><font style="font-family:Times New Roman;font-size:10pt;">sale security in a loss position for other-than-temporary impairment</font><font style="font-family:Times New Roman;font-size:10pt;"> (&#8220;OTTI&#8221;)</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T considers such factors as the length of time and the extent to which the market value has been below</font><font style="font-family:Times New Roman;font-size:10pt;"> amortized</font><font style="font-family:Times New Roman;font-size:10pt;"> cost, long term expectations and recent experience regarding principal and interest payments, BB&amp;T's intent to sell and whether it is more likely than not that the Company would be required to sell those securities before the anticipated recovery of the amortized cost basis</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">T</font><font style="font-family:Times New Roman;font-size:10pt;">he credit component of an </font><font style="font-family:Times New Roman;font-size:10pt;">OTTI</font><font style="font-family:Times New Roman;font-size:10pt;"> loss is recognized in earnings and the non-credit component is recognized in accumulated other comprehensive income in situations where BB&amp;T does not intend to sell the security and it is more-likely-than-not that BB&amp;T will not be required to sell the security prior to recovery.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Trading account securities, which include both debt and equity securities, are reported at fair value</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Unrealized market value adjustments, fees, and realized gains or losses from trading account activities (determined by specific identification) are included in noninterest income</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Interest income on trading account securities is included in interest and dividends from </font><font style="font-family:Times New Roman;font-size:10pt;">other earning assets</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:10.1px;">Loans Held for </font><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;">Sale</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">BB&amp;T accounts for new originations of prime residential mortgage and commercial mortgage loans held for sale at fair value</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T accounts for the derivatives used to economically hedge the loans held for sale at fair value</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Held for investment loans that have been transferred to loans held for sale are carried at the lower of cost or market because these loans are not exchanged in an active market and BB&amp;T does not hedge these assets</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">The value for loans held for sale carried at fair value is primarily based on quoted market prices for securities backed by similar types of loans</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Direct loan origination fees and costs related to loans held for sale and accounted for at fair value are not capitalized, but rather are recorded as mortgage banking income in the case of the direct loan origination fees and primarily personnel expense in the case of the direct loan origination costs</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Gains and losses on sales of mortgage loans are included in mortgage banking income</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Gains and losses on sales of commercial loans held for sale are included in other noninterest income</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:10.1px;">Loans and Leases</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">The Company's accounting methods for loans differ depending on whether the loans are originated or acquired</font><font style="font-family:Times New Roman;font-size:10pt;">, and if acquired, </font><font style="font-family:Times New Roman;font-size:10pt;"> </font><font style="font-family:Times New Roman;font-size:10pt;">whether or not the acquired loans reflect </font><font style="font-family:Times New Roman;font-size:10pt;">credit deterioration since the date of origination</font><font style="font-family:Times New Roman;font-size:10pt;"> such that it is probable at the date of acquisition that BB&amp;T will be unable to collect all contractually required payments</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;text-decoration:underline;margin-left:10.1px;">Originated Loans and Leases</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Loans and leases that management has the intent and ability to hold for the foreseeable future are reported at their outstanding principal balances net of any unearned income, charge-offs, </font><font style="font-family:Times New Roman;font-size:10pt;">and </font><font style="font-family:Times New Roman;font-size:10pt;">unamortized fees and costs on originated loans</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The net amount of nonrefundable loan origination fees and certain direct costs associated with the lending process are deferred and amortized to interest income over the contractual lives of the loans using methods </font><font style="font-family:Times New Roman;font-size:10pt;">that</font><font style="font-family:Times New Roman;font-size:10pt;"> approximate the interest method</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">BB&amp;T classifies all loans and leases past due when the payment of principal and interest based upon contractual terms is greater than 30 days delinquent</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">When commercial loans are placed on nonaccrual status as described below, a charge-off is recorded, as applicable, to decrease the carrying value of such loans to </font><font style="font-family:Times New Roman;font-size:10pt;">the estimated</font><font style="font-family:Times New Roman;font-size:10pt;"> fair value of </font><font style="font-family:Times New Roman;font-size:10pt;">the </font><font style="font-family:Times New Roman;font-size:10pt;">collateral securing the loan</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Consumer loans are subject to mandatory charge-off at a specified delinquency date consistent with regulatory guidelines</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">As such, consumer loans are subject to collateral valuation and charge-off, as applicable, when they are moved to nonaccrual status as described below.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;text-decoration:underline;margin-left:10.1px;">Purchased Loans</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Purchased loans</font><font style="font-family:Times New Roman;font-size:10pt;"> </font><font style="font-family:Times New Roman;font-size:10pt;">are recorded at their fair value at the acquisition date</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Credit discounts are included in the determination of fair value; therefore, an allowance for loan losses is not recorded at the acquisition date</font><font style="font-family:Times New Roman;font-size:10pt;">. </font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Acquired loans are evaluated upon acquisition and classified as either purchased impaired or purchased non-impaired</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Purchased impaired loans reflect credit deterioration since origination such that it is probable at acquisition that BB&amp;T will be unable to collect all contractually required payments</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">For purchased impaired loans, e</font><font style="font-family:Times New Roman;font-size:10pt;">xpected cash flows at the acquisition date in excess of the fair value of loans are recorded as interest income over the life of the loans using a level yield method if the timing and amount of the future cash flows is reasonably estimable</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Subsequent to the acquisition date, increases in cash flows over those expected at the acquisition date are recognized </font><font style="font-family:Times New Roman;font-size:10pt;">prospectively </font><font style="font-family:Times New Roman;font-size:10pt;">as interest income</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Decreases in expected cash flows after the acquisition date are recognized by recording an allowance for loan losses</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">For purchased non-impaired loans, </font><font style="font-family:Times New Roman;font-size:10pt;">the difference between the fair value and unpaid principal balance of the loan at the acquisition date is amortized or accreted to interest income over the estimated life of the loans using a method that approximates the interest method</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Based on the characteristics of loans acquired in a </font><font style="font-family:Times New Roman;font-size:10pt;">Federal Deposit Insurance Corporation (&#8220;</font><font style="font-family:Times New Roman;font-size:10pt;">FDIC</font><font style="font-family:Times New Roman;font-size:10pt;">&#8221;) a</font><font style="font-family:Times New Roman;font-size:10pt;">ssisted transaction and the impact of associated loss-sharing arrangements, BB&amp;T determined that it was appropriate to apply the expected cash flows approach described above to all loans acquired in such transactions.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:10.1px;">Nonperforming</font><font style="font-family:Times New Roman;font-size:10pt;"> </font><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;">Assets</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Nonperforming assets include nonaccrual loans and leases and foreclosed property</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Foreclosed property consists of real estate and other assets acquired as a result of customers' loan defaults</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T's policies related to when loans are placed on nonaccrual status conform to guidelines prescribed by bank regulatory authorities</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The majority of commercial loans and leases are placed on nonaccrual status when it is probable that principal or interest is not fully collectible, or generally when principal or interest becomes 90 days past due, whichever occurs first</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Other lending subsidiaries</font><font style="font-family:Times New Roman;font-size:10pt;">'</font><font style="font-family:Times New Roman;font-size:10pt;"> </font><font style="font-family:Times New Roman;font-size:10pt;">loans, which includes both consumer and commercial loans, are placed on nonaccrual status generally when principal and interest becomes 90 days past due</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Direct retail loans, mortgage and sales finance loans are placed on nonaccrual status at varying intervals, based on the type of product, generally when principal and interest becomes between 90 days and 180 days past due</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Revolving credit loans are not placed on nonaccrual but are charged</font><font style="font-family:Times New Roman;font-size:10pt;"> </font><font style="font-family:Times New Roman;font-size:10pt;">off after they become 150 days past due, with unpaid fees and finance charges reversed against interest income</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Certain loans past due 90 days or more may remain on accrual status if management determines that it does not have concern over the collectibility of principal and interest</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Generally, when loans are placed on nonaccrual status, accrued interest receivable is reversed against interest income in the current period</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Interest payments received thereafter are applied as a reduction to the remaining principal balance as long as concern exists as to the ultimate collection of the principal</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Loans and leases are generally removed from nonaccrual status when they become current as to both principal and interest and concern no longer exists as to the collectability of principal and interest</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Assets acquired as a result of foreclosure are carried at the lower of cost or net realizable value</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Net realizable value equals fair value less estimated selling costs</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Cost is determined based on the sum of unpaid principal, accrued but unpaid interest if not required to be reversed, and acquisition costs associated with the loan</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Any excess of cost over net realizable value at the time of foreclosure is charged to the allowance for loan and lease losses</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Nonperforming assets</font><font style="font-family:Times New Roman;font-size:10pt;"> are subject to</font><font style="font-family:Times New Roman;font-size:10pt;"> periodic revaluations of the collateral underlying impaired loans and foreclosed real estate</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The periodic revaluations are generally based on the appraised value of the property</font><font style="font-family:Times New Roman;font-size:10pt;"> and may include additional liquidity adjustments based upon the expected retention period</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T's policies require that valuations be updated at least annually and that upon foreclosure, the valuation must not be aged greater than six months old, otherwise an updated appraisal is required.</font><font style="font-family:Times New Roman;font-size:10pt;"> </font><font style="font-family:Times New Roman;font-size:10pt;">Routine maintenance costs, </font><font style="font-family:Times New Roman;font-size:10pt;">subsequent </font><font style="font-family:Times New Roman;font-size:10pt;">declines in market value and net losses on disposal are included in </font><font style="font-family:Times New Roman;font-size:10pt;">foreclosed property</font><font style="font-family:Times New Roman;font-size:10pt;"> expense</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:10.1px;">Restructurings</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Modifications to a borrower's debt agreement are considered troubled debt restructurings (&#8220;restructurings&#8221;) if a concession is granted for economic or legal reasons related to a borrower's financial difficulties that otherwise would not be considered. Restructurings are undertaken in order to improve the likelihood of recovery on the loan and may take the form of modifications made with the stated interest rate lower than the current market rate for new debt with similar risk, other modifications to the structure of the loan that fall outside of normal underwriting policies and procedures, or in certain limited circumstances forgiveness of principal or interest. Modifications of covered and other acquired loans that are part of a pool accounted for as a single asset are not considered restructurings. </font><font style="font-family:Times New Roman;font-size:10pt;"> Restructurings can involve loans remaining on nonaccrual, moving to nonaccrual, or continuing on accruing status, depending on the individual facts and circumstances of the borrower. In circumstances where the restructuring involves charging off a portion of the loan balance, BB&amp;T typically classifies these restructurings as nonaccrual. </font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">In connection with commercial restructurings, the decision to maintain a loan that has been restructured on accrual status is based on a current, well documented credit evaluation of the borrower's financial condition and prospects for repayment under the modified terms</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">This evaluation includes consideration of the borrower's current capacity to pay, which among other things may include a review of the borrower's current financial statements, an analysis of global cash flow sufficient to pay all debt obligations, and an evaluation of secondary sources of payment from the client and any guarantors</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">This evaluation also includes an evaluation of the borrower's current willingness to pay, which may include a review of past payment history, an evaluation of the borrower's willingness to provide information on a timely basis, and consideration of offers from the borrower to provide additional collateral or guarantor support</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The credit evaluation also reflects consideration of the borrower's future capacity and willingness to pay, which may include evaluation of cash flow projections, consideration of the adequacy of collateral to cover all principal and interest and trends indicating improving profitability and collectability of receivables</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">The evaluation of mortgage and consumer loans includes an evaluation of the client's debt to income ratio, credit report, property value, loan vintage, and certain other client-specific factors that have impacted their ability to make timely principal and interest payments on the loan</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Restructured nonaccrual loans may be returned to accrual status based on a current, well-documented credit evaluation of the borrower's financial condition and prospects for repayment under the modified terms</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">This evaluation must include consideration of the borrower's sustained historical repayment performance for a reasonable period (generally a minimum of six months) prior to the date on which the loan is returned to accrual status</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Sustained historical repayment performance for a reasonable time prior to the restructuring may be taken into account</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">In connection with retail restructurings, a nonperforming loan will be returned to accruing status when current as to principal and interest and upon a sustained historical repayment performance (generally a minimum of six months)</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:10.1px;">Allowance for </font><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;">Credit Losses</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">The allowance for </font><font style="font-family:Times New Roman;font-size:10pt;">credit losses comprises the allowance for </font><font style="font-family:Times New Roman;font-size:10pt;">loan and lease losses and </font><font style="font-family:Times New Roman;font-size:10pt;">the </font><font style="font-family:Times New Roman;font-size:10pt;">reserve for unfunded lending commitments</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The allowance for credit losses represents </font><font style="font-family:Times New Roman;font-size:10pt;">management's best estimate of probable credit losses inherent in the loan and lease portfolios and off-balance sheet lending commitments at the balance sheet date</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The Company determines the allowance for </font><font style="font-family:Times New Roman;font-size:10pt;">credit losses</font><font style="font-family:Times New Roman;font-size:10pt;"> based on an ongoing evaluation</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">This evaluation is inherently subjective because it requires material estimates, including the amounts and timing of cash flows expected to be received on impaired loans</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Those estimates are susceptible to significant change</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Changes to the allowance for </font><font style="font-family:Times New Roman;font-size:10pt;">credit losses </font><font style="font-family:Times New Roman;font-size:10pt;">are made by charges to the provision for credit losses, which is reflected in the Consolidated Statements of Income</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Loans or lease balances deemed to be uncollectible are charged off against the allowance for loan and lease losses</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Recoveries of amounts previously charged</font><font style="font-family:Times New Roman;font-size:10pt;"> </font><font style="font-family:Times New Roman;font-size:10pt;">off are credited to the allowance for loan and lease losses</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The methodology used to determine the reserve for unfunded lending commitments is inherently similar to that used to determine the collective component of the allowance for loan and lease losses described above, adjusted for factors specific to binding commitments, including the probability of funding and exposure at default</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">While management uses the best information available to establish the allowance for </font><font style="font-family:Times New Roman;font-size:10pt;">credit losses</font><font style="font-family:Times New Roman;font-size:10pt;">, future adjustments may be necessary if economic conditions differ substantially from the assumptions used in computing the allowance or, if required by regulators, based upon information available to them at the time of their examinations</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Accounting standards require the presentation of certain disclosure information at the portfolio segment level, which represents the level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T concluded that its loan and lease portfolio comprises three portfolio segments; commercial, retail and covered and other acquired</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The commercial portfolio segment includes commercial real estate, commercial and </font><font style="font-family:Times New Roman;font-size:10pt;">industrial</font><font style="font-family:Times New Roman;font-size:10pt;"> and </font><font style="font-family:Times New Roman;font-size:10pt;">other loans originated by </font><font style="font-family:Times New Roman;font-size:10pt;">certain </font><font style="font-family:Times New Roman;font-size:10pt;">other</font><font style="font-family:Times New Roman;font-size:10pt;"> lending </font><font style="font-family:Times New Roman;font-size:10pt;">subsidiaries</font><font style="font-family:Times New Roman;font-size:10pt;">, and was identified based on the risk-based approach used to estimate the allowance for loan and lease losses for the vast majority of these loans</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The retail portfolio segment includes direct retail lending, revolving credit, mortgage, sales finance and </font><font style="font-family:Times New Roman;font-size:10pt;">other loans originated by </font><font style="font-family:Times New Roman;font-size:10pt;">certain retail-oriented </font><font style="font-family:Times New Roman;font-size:10pt;">subsidiaries</font><font style="font-family:Times New Roman;font-size:10pt;">, and was identified based on the delinquency-based approach used to estimate the allowance for these loans</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The covered and other acquired portfolio segment was identified based on the expected cash flows approach used to estimate the allowance related to loans acquired subsequent to December 31, 2008</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">A portion of the Corporation's allowance for loan and lease losses is not allocated to any specific category of loans</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">This unallocated portion of the allowance reflects management's best estimate of the elements of imprecision and estimation risk inherent in the calculation of the overall allowance</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Due to the subjectivity involved in determining the overall allowance, including the unallocated portion, the portion considered unallocated may fluctuate from period to period based on management's evaluation of the factors affecting the assumptions used in calculating the allowance, including historical loss experience, current economic conditions, industry or borrower concentrations and the status of merged institutions</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">The </font><font style="font-family:Times New Roman;font-size:10pt;">entire amount of the allowance for credit losses</font><font style="font-family:Times New Roman;font-size:10pt;"> is available to absorb losses on any loan category or lending-related commitment</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">The following provides a description of BB&amp;T's accounting policies and methodologies related to each of its portfolio segments:</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;text-decoration:underline;margin-left:10.1px;">Commercial</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">The vast majority of loans in the commercial lending portfolio are assigned risk grades based on an assessment of conditions that affect the borrower's ability to meet contractual obligations under the loan agreement</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">This process includes reviewing borrowers' financial information, historical payment experience, credit documentation, public information, and other information specific to each borrower</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Risk grades are reviewed on an annual basis for all credit relationships with total credit exposure of $</font><font style="font-family:Times New Roman;font-size:10pt;">1</font><font style="font-family:Times New Roman;font-size:10pt;"> million or more, or at any point management becomes aware of information affecting the borrower's ability to fulfill their obligations</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">For commercial clients where total credit exposure is less than $</font><font style="font-family:Times New Roman;font-size:10pt;">1</font><font style="font-family:Times New Roman;font-size:10pt;"> million, BB&amp;T has developed an automated loan review system to identify and proactively manage accounts with a higher risk of loss</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The &#8220;score&#8221; produced by this automated system is updated monthly</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">On a quarterly basis, BB&amp;T reviews all commercial lending relationships with outstanding debt of $</font><font style="font-family:Times New Roman;font-size:10pt;">5</font><font style="font-family:Times New Roman;font-size:10pt;"> million or more that have been classified as substandard or doubtful</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">While this review is largely focused on the borrower's ability to repay the loan, BB&amp;T also considers the capacity and willingness of a loan's guarantors to support the debt service on the loan as a secondary source of repayment</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">When a guarantor exhibits the documented capacity and willingness to support the loan, BB&amp;T may consider extending the loan maturity and/or temporarily deferring principal payments if the ultimate collection of both principal and interest is not in question</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">In these cases, BB&amp;T may not deem the loan to be impaired due to the documented capacity and willingness of the guarantor to repay the loan</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Loans are considered impaired when the borrower (or guarantor in certain circumstances) does not have the cash flow capacity or willingness to service the debt according to contractual terms, or it does not appear reasonable to assume that the borrower will continue to pay according to the contractual agreement</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T establishes a specific reserve for each loan that has been deemed impaired based on the criteria outlined above</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The amount of the reserve is based on the present value of expected cash flows discounted at the loan's effective interest rate, and/or the value of collateral</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T has also established a review process related to restructurings and other impaired loans that are in commercial lending relationships with outstanding debt of less than $</font><font style="font-family:Times New Roman;font-size:10pt;">5</font><font style="font-family:Times New Roman;font-size:10pt;"> million at the balance sheet date</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">In connection with this process, BB&amp;T establishes reserves related to these loans that are calculated using an expected cash flow approach</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">These discounted cash flow analyses incorporate adjustments to future cash flows that reflect management's best estimate of the default risk related to restructurings based on a combination of historical experience and management judgment.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">BB&amp;T also maintains reserves for collective impairment that reflect an estimate of losses related to non</font><font style="font-family:Times New Roman;font-size:10pt;">-</font><font style="font-family:Times New Roman;font-size:10pt;">impaired commercial loans as of the balance sheet date</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Embedded loss estimates for BB&amp;T's commercial loan portfolio are based on estimated migration rates, which are estimated based on historical experience, and current risk mix as indicated by the risk grading process described above</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Embedded loss estimates may be adjusted to reflect current economic conditions and current portfolio trends including credit quality, concentrations, aging of the portfolio, and significant policy and underwriting changes</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;text-decoration:underline;margin-left:10.1px;">Retail</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">The majority of the allowance for loan and lease losses related to the retail lending portfolio is calculated on a collective basis using a delinquency-based approach</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Embedded loss estimates for BB&amp;T's retail lending portfolio are based on estimated migration rates that are developed based on historical experience, and current risk mix as indicated by prevailing delinquency rates</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">These estimates may be adjusted to reflect current economic conditions and current portfolio trends</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The remaining portion of the allowance related to the retail lending portfolio relates to loans that have been deemed impaired based on their classification as a restructuring at the balance sheet date</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T establishes specific reserves related to these restructured loans using an expected cash flow approach</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The</font><font style="font-family:Times New Roman;font-size:10pt;"> allowance for retail restructurings </font><font style="font-family:Times New Roman;font-size:10pt;">is based on</font><font style="font-family:Times New Roman;font-size:10pt;"> discounted cash flow analyses </font><font style="font-family:Times New Roman;font-size:10pt;">that </font><font style="font-family:Times New Roman;font-size:10pt;">incorporate adjustments to future cash flows that reflect management's best estimate of the default risk related to restructurings based on a combination of historical experience and management judgment.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;text-decoration:underline;margin-left:10.1px;">Acquired Loans</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">The allowance for loan and lease losses related to </font><font style="font-family:Times New Roman;font-size:10pt;">(1) </font><font style="font-family:Times New Roman;font-size:10pt;">purchased impaired loans</font><font style="font-family:Times New Roman;font-size:10pt;"> and (2) all loans acquired in an FDIC-assisted transaction,</font><font style="font-family:Times New Roman;font-size:10pt;"> is based on </font><font style="font-family:Times New Roman;font-size:10pt;">an analysis </font><font style="font-family:Times New Roman;font-size:10pt;">that is performed each period </font><font style="font-family:Times New Roman;font-size:10pt;">to estimate the expected cash flows for each of the loan pools</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">To the extent that the expected cash flows of a loan pool have decreased since the acquisition date, BB&amp;T establishes an allowance for loan losses</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">For </font><font style="font-family:Times New Roman;font-size:10pt;">non-FDIC assisted </font><font style="font-family:Times New Roman;font-size:10pt;">purchased non-impaired loans, BB&amp;T uses an approach consistent with that described above for originated loans and leases.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:10.1px;">Covered Assets and Related FDIC Loss Share Receivable</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Assets subject to loss sharing agreements with the FDIC are labeled &#8220;covered&#8221; on the balance sheet and include certain loans, securities and other assets</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">The fair value of the reimbursement the Company expected to receive from the FDIC under those agreements was recorded in the FDIC loss share receivable at the date of acquisition on the Consolidated Balance Sheets</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The fair value of the FDIC loss share receivable was estimated using a discounted cash flow methodology</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The discount rate used in this calculation is determined using a risk-free yield curve plus a premium reflecting the uncertainty related to the timing of cash flows</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The income statement effect of the </font><font style="font-family:Times New Roman;font-size:10pt;">changes in the </font><font style="font-family:Times New Roman;font-size:10pt;">FDIC loss share receivable includes the accretion due to discounting and changes in expected reimbursements</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Decreases in expected reimbursements are recognized in income prospectively consistent with the approach taken to recognize increases in cash flows on covered loans</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Increases in expected reimbursements are recognized in income in the same period that the allowance for credit losses for the related loans is recognized</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:10.1px;">Premises and Equipment</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Premises, equipment, capital leases and leasehold improvements are stated at cost less accumulated depreciation or amortization</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Land is stated at cost</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">In addition, purchased software and costs of computer software developed for internal use are capitalized provided certain criteria are met</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Depreciation and amortization are computed principally using the straight-line method over the estimated useful lives of the related assets</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Leasehold improvements are amortized on a straight-line basis over the lesser of the lease terms, including certain renewals that were deemed probable at lease inception, or the estimated useful lives of the improvements</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Capitalized leases are amortized by the same methods as premises and equipment over the estimated useful lives or lease terms, whichever is less</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Obligations under capital leases are amortized using the interest method to allocate payments between principal reduction and interest expense</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Rent expense and rental income on operating leases is recorded using the straight-line method over the appropriate lease terms</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:10.1px;">Securities Sold Under Repurchase Agreements</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Securities sold under repurchase agreements generally have maturities ranging from 1 day to 36 months</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Securities sold under agreements to repurchase are reflected as collateralized borrowings on the Consolidated Balance Sheets and are record</font><font style="font-family:Times New Roman;font-size:10pt;">ed</font><font style="font-family:Times New Roman;font-size:10pt;"> based on the amount of cash received in connection with the borrowing</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The terms of repurchase agreements may require BB&amp;T to provide additional collateral if the fair value of the securities underlying the borrowings declines during the term of the agreement</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:10.1px;">Income Taxes</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Deferred income taxes have been provided when different accounting methods have been used in determining income for income tax purposes and for financial reporting purposes</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Deferred tax assets and liabilities are recognized based on future tax consequences attributable to differences arising from the financial statement carrying values of assets and liabilities and their tax bases</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">In the event of changes in the tax laws, deferred tax assets and liabilities are adjusted in the period of the enactment of those changes, with the cumulative effects included in the current year's income tax provision</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:10.1px;">Derivative Financial Instruments</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">A derivative is a financial instrument that derives its cash flows, and therefore its value, by reference to an underlying instrument, index or referenced interest rate</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">These instruments include interest rate swaps, caps, floors, collars, financial forwards and futures contracts, swaptions, when-issued securities, foreign exchange contracts and options written and purchased</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T uses derivatives primarily to manage economic risk related to securities, commercial loans, mortgage servicing rights and mortgage banking operations, long-term debt and </font><font style="font-family:Times New Roman;font-size:10pt;">other funding sources</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T also uses derivatives to facilitate transactions on behalf of its clients</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The fair value of derivatives in a gain or loss position is included in other assets or liabilities, respectively, on the Consolidated Balance Sheets</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">BB&amp;T classifies its derivative financial instruments as either (1) a hedge of an exposure to changes in the fair value of a recorded asset or liability (&#8220;fair value hedge&#8221;), (2) a hedge of an exposure to changes in the cash flows of a recognized asset, liability or forecasted transaction (&#8220;cash flow hedge&#8221;), (3) a hedge of a net investment in a subsidiary, or (4) derivatives not designated as hedges</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Changes in the fair value of derivatives not designated as hedges are recognized in current period earnings</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T has master netting agreements with the derivatives dealers with which it does business, but reflects gross gains and losses on the Consolidated Balance Sheets</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">BB&amp;T uses the long-haul method to assess hedge effectiveness</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T documents, both at inception and over the life of the hedge, at least quarterly, its analysis of actual and expected hedge effectiveness</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">This analysis includes techniques such as regression analysis and hypothetical derivatives to demonstrate that the hedge has been, and is expected to be, highly effective in off-setting corresponding changes in the fair value or cash flows of the hedged item</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">For cash flow hedges involving interest rate caps and collars, this analysis also includes consideration whether critical terms match, the strike price of the hedging option matches the specified level beyond (or within) which the entity's exposure is being hedged, the hedging instrument's inflows (outflows) at its maturity date completely offset the change in the hedged transaction's cash flows for the risk being hedged and the hedging instrument can be exercised only on its contractual maturity date</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">For a qualifying fair value hedge, changes in the value of the derivatives that have been highly effective as hedges are recognized in current period earnings along with the corresponding changes in the fair value of the designated hedged item attributable to the risk being hedged</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">For a qualifying cash flow hedge, the portion of changes in the fair value of the derivatives that have been highly effective are recognized in other comprehensive income until the related cash flows from the hedged item are recognized in earnings</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">For qualifying cash flow hedges involving interest rate caps and collars, the initial fair value of the premium paid is allocated and recognized in the same future period that the hedged forecasted transaction impacts earnings</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">For either fair value hedges or cash flow hedges, ineffectiveness may be recognized in noninterest income to the extent that changes in the value of the derivative instruments do not perfectly offset changes in the value of the hedged items</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">If the hedge ceases to be highly effective, BB&amp;T discontinues hedge accounting and recognizes the changes in fair value in current period earnings</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">If a derivative that qualifies as a fair value or cash flow hedge is terminated or the designation removed, the realized or then unrealized gain or loss is recognized into income over the </font><font style="font-family:Times New Roman;font-size:10pt;">life of the hedged item </font><font style="font-family:Times New Roman;font-size:10pt;">(fair value hedge) or period in which the hedged item affects earnings (cash flow hedge)</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Immediate recognition in earnings is required upon sale or extinguishment of the hedged item (fair value hedge) or if it is probable that the hedged cash flows will not occur (cash flow hedge)</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Derivatives used to manage economic risk not designated as hedges primarily represent economic risk management instruments of mortgage servicing rights and mortgage banking operations, with gains or losses included in mortgage banking income</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">In connection with its mortgage banking activities, BB&amp;T enters into loan commitments to fund residential mortgage loans at specified rates and for specified periods of time</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">To the extent that BB&amp;T's interest rate lock commitments relate to loans that will be held for sale upon funding, they are also accounted for as derivatives, with gains or losses included in mortgage banking income</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Gains and losses on other derivatives used to manage economic risk are primarily associated with client derivative activity and included in other income</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:10.1px;">Per Share Data</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Basic net income per common share is computed by dividing net income available to common shareholders by the weighted average number of shares of common stock outstanding during the years presented</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Diluted net income per common share is computed by dividing net income available to common shareholders by the weighted average number of shares of common stock, common stock equivalents and other potentially dilutive securities outstanding</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:10.1px;">Goodwill and Other Intangible Assets</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Goodwill represents the cost in excess of the fair value of net assets acquired (including identifiable intangibles) in transactions accounted for as acquisitions</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T allocates goodwill to the reporting unit(s) that receives significant benefits from the acquisition</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Goodwill is not amortized over an estimated useful life, but rather is tested at least annually for impairment</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T performs its impairment testing in the fourth quarter of each year and more frequently if circumstances exist that indicate a possible reduction in the fair value of the business below its carrying value</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T measures impairment using the present value of estimated future cash flows</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The analysis is based upon available information regarding expected future cash flows and discount rates</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Discount rates are based upon the cost of capital specific to the industry in which the reporting unit operates</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">If the carrying value of the reporting unit exceeds its fair value, a second analysis is performed to measure the fair value of all assets and liabilities</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">If, based on the second analysis, it is determined that the fair value of the assets and liabilities of the reporting unit is less than the carrying value, BB&amp;T would recognize impairment for the excess of carrying value over fair value</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Core deposit and other intangible assets include premiums paid for acquisitions of core deposits (&#8220;core deposit intangibles&#8221;) and other identifiable intangible assets</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Intangible assets other than goodwill, which are determined to have finite lives, are amortized based upon the estimated economic benefits received</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:10.1px;">Loan Securitizations</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">BB&amp;T enters into loan securitization transactions related to most of its fixed-rate conforming mortgage loans</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">In connection with these transactions, loans are converted into mortgage-backed securities issued primarily by the Federal Home Loan Mortgage Corporation (&#8220;Freddie Mac&#8221;), the Federal National Mortgage Association (&#8220;Fannie Mae&#8221;) and the Government National Mortgage Association (&#8220;Ginnie Mae&#8221;), and are subsequently sold to third party investors</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T records loan securitizations as a sale when the transferred loans are legally isolated from its creditors and the other accounting criteria for a sale are met</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Gains or losses recorded on loan securitizations are based in part on the net carrying amount of the loans sold, which is allocated between the loans sold and retained interests based on their relative fair values at the date of sale</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T generally retains the mortgage servicing on loans sold</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Since quoted market prices are not typically available, BB&amp;T estimates the fair value of these retained interests using modeling techniques to determine the net present value of expected future cash flows</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Such models incorporate management's best estimates of key variables, such as prepayment speeds and discount rates that would be used by market participants based on the risks involved</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Gains and losses incurred on loans sold to third party investors are included in mortgage banking income in the Consolidated Statements of Income</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">BB&amp;T also periodically securitizes mortgage loans that it intends to hold for the foreseeable future and transfers the resulting securities to the securities available for sale portfolio</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">This is generally accomplished by exchanging the loans for mortgage-backed securities issued primarily by Freddie Mac</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Since the transfers are not considered a sale, no gain or loss is recorded in conjunction with these transactions</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:10.1px;">Mortgage Servicing Rights</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">BB&amp;T has two primary classes of mortgage servicing rights for which it separately manages the economic risks: residential and commercial</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Residential mortgage servicing rights are recorded on the Consolidated Balance Sheets primarily at fair value with changes in fair value recorded as a component of mortgage banking income</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Commercial mortgage servicing rights are recorded as other assets on the Consolidated Balance Sheets at the lower of cost or market and are amortized in proportion to, and over the estimated period, that net servicing income is expected to be received based on projections of the amount and timing of estimated future net cash flows</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The amount and timing of estimated future net cash flows are updated based on actual results and updated projections</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T periodically evaluates its commercial mortgage servicing rights for impairment</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:10.1px;">Equity-Based Compensation</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">BB&amp;T maintains various equity-based compensation plans</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">These plans provide for the granting of stock options (incentive and nonqualified), stock appreciation rights, restricted stock, restricted stock units, performance units and performance shares to selected BB&amp;T employees and directors</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T values share-based awards at the grant date fair value and recognizes the expense over the requisite service period taking into account retirement eligibility</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:10.1px;">Changes in Accounting Principles and Effects of New Accounting Pronouncements</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">In February 2010, the </font><font style="font-family:Times New Roman;font-size:10pt;">Financial Accounting Standards Board (&#8220;</font><font style="font-family:Times New Roman;font-size:10pt;">FASB</font><font style="font-family:Times New Roman;font-size:10pt;">&#8221;)</font><font style="font-family:Times New Roman;font-size:10pt;"> issued new guidance impacting </font><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;">Fair Value Measurements and Disclosures</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The new guidance requires a gross presentation of purchases and sales of Level 3 activities and adds a new requirement to disclose transfers in and out of Level 1 and Level 2 measurements</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The guidance related to the transfers between Level 1 and Level 2 measurements was effective for BB&amp;T on January&#160;1, 2010</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The guidance that requires i</font><font style="font-family:Times New Roman;font-size:10pt;">ncreased disaggregation of the L</font><font style="font-family:Times New Roman;font-size:10pt;">evel 3 activities </font><font style="font-family:Times New Roman;font-size:10pt;">wa</font><font style="font-family:Times New Roman;font-size:10pt;">s effective for BB&amp;T on January&#160;1, 2011</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The new disclosures required by this guidance are included in Note </font><font style="font-family:Times New Roman;font-size:10pt;">18</font><font style="font-family:Times New Roman;font-size:10pt;"> to these consolidated financial statements</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">In July 2010, the FASB issued new guidance impacting </font><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;">Receivables</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The new guidance requires additional disclosures that will allow users to understand the nature of credit risk inherent in a company's loan portfolios, how that risk is analyzed and assessed in arriving at the allowance for loan and lease losses, and changes and reasons for those changes in the allowance for loan and lease losses</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The new disclosures</font><font style="font-family:Times New Roman;font-size:10pt;"> required by this guidance are included in Note </font><font style="font-family:Times New Roman;font-size:10pt;">4</font><font style="font-family:Times New Roman;font-size:10pt;"> to these consolidated financial statements</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">In April 2011, the FASB issued new guidance impacting </font><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;">Receivables</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The new guidance amended existing guidance for assisting a creditor in det</font><font style="font-family:Times New Roman;font-size:10pt;">ermining whether a loan modification</font><font style="font-family:Times New Roman;font-size:10pt;"> is a troubled debt restructuring</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The amendments clarify the guidance for a creditor's evaluation of whether it has granted a concession and whether a debtor is experiencing financia</font><font style="font-family:Times New Roman;font-size:10pt;">l difficulties</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">This guidance was</font><font style="font-family:Times New Roman;font-size:10pt;"> e</font><font style="font-family:Times New Roman;font-size:10pt;">ffective for interim </font><font style="font-family:Times New Roman;font-size:10pt;">reporting periods </font><font style="font-family:Times New Roman;font-size:10pt;">that beg</font><font style="font-family:Times New Roman;font-size:10pt;">a</font><font style="font-family:Times New Roman;font-size:10pt;">n</font><font style="font-family:Times New Roman;font-size:10pt;"> after June 15, 2011, and </font><font style="font-family:Times New Roman;font-size:10pt;">was </font><font style="font-family:Times New Roman;font-size:10pt;">applied retrospectively to the beginning of </font><font style="font-family:Times New Roman;font-size:10pt;">2011</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The new disclosures required by this guidance are included in Note </font><font style="font-family:Times New Roman;font-size:10pt;">4</font><font style="font-family:Times New Roman;font-size:10pt;"> to these consolidated financial statements.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">In May 2011, the FASB issued new guidance impacting </font><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;">Fair Value Measurements and Disclosures</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The new guidance creates a uniform framework for applying fair value measurement principles</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">It eliminates differences between GAAP and International Financial Reporting Standards issued by the International Accounting Standards Board</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">New disclosures required by the guidance include: quantitative information about the significant unobservable inputs used for Level 3 measurements; a qualitative discussion about the sensitivity of recurring Level 3 measurements to changes in the unobservable inputs disclosed, including the interrelationship between inputs; and a description </font><font style="font-family:Times New Roman;font-size:10pt;">of the c</font><font style="font-family:Times New Roman;font-size:10pt;">ompany's valuation processes</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">This guidance is effective for interim and annual periods beginning after December 15, 2011, and all amendments </font><font style="font-family:Times New Roman;font-size:10pt;">will be </font><font style="font-family:Times New Roman;font-size:10pt;">applied prospectively with any changes in measurements recognized in income in the period of adoption</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T is currently evaluating the impact the standard will have on the consolidated financial statements.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">In June</font><font style="font-family:Times New Roman;font-size:10pt;"> </font><font style="font-family:Times New Roman;font-size:10pt;">2011, the FASB issued new guidance impacting </font><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;">Comprehensive Income</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The new guidance amends disclosure requirements for the presentation of comprehensive income</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The amended guidance eliminates the option to present components of other comprehensive income (</font><font style="font-family:Times New Roman;font-size:10pt;">&#8220;</font><font style="font-family:Times New Roman;font-size:10pt;">OCI</font><font style="font-family:Times New Roman;font-size:10pt;">&#8221;</font><font style="font-family:Times New Roman;font-size:10pt;">) as part of the statement of changes in shareholders' equity</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">All changes in OCI </font><font style="font-family:Times New Roman;font-size:10pt;">will </font><font style="font-family:Times New Roman;font-size:10pt;">be presented either in a single continuous statement of comprehensive income or in two separate but consecutive financial statements</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The guidance does not change the items that must be reported in OCI</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">This guidance is effective for fiscal years and interim reporting periods within those years beginning after December&#160;15, 2011 with early adoption permitted</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The adoption of this guidance will not impact BB&amp;T's consolidated financial position, results of operations or cash flows and will only </font><font style="font-family:Times New Roman;font-size:10pt;">impact the presentation of OCI i</font><font style="font-family:Times New Roman;font-size:10pt;">n the consolidated financial statements</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">In September 2011, the FASB issued new guidance impacting </font><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;">Intangibles</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The new guidance permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">To the extent that an entity determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performance of the two step impairment test is not required</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">This guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011 with early adoption permitted</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The adoption of this guidance is not expected to be material to BB&amp;T's consolidated financial statements</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">In December 2011, the FASB issued new guidance impacting the presentation of certain items on the </font><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;">Balance Sheet. </font><font style="font-family:Times New Roman;font-size:10pt;">The new guidance requires an entity to disclose both gross and net information about both instruments and transactions that are eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. This guidance is effective for annual periods beginning on or after January 1, 2013 and interim periods within those annual periods. The adoption of this guidance will not impact BB&amp;T's consolidated financial position, results of operations or cash flows, but may result in certain additional disclosures.</font></p><p style='margin-top:10pt; margin-bottom:0pt'>&#160;</p> <p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:9px;">General</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">BB&amp;T Corporation (&#8220;BB&amp;T&#8221;, the &#8220;Company&#8221; or &#8220;Parent Company&#8221;) is a financial holding company organized under the laws of </font><font style="font-family:Times New Roman;font-size:10pt;">North Carolina</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T conducts operations through its principal bank subsidiary, Branch Banking and Trust Company (&#8220;Branch Bank&#8221;), a federally chartered thrift institution, BB&amp;T Financial, FSB (&#8220;BB&amp;T FSB&#8221;) and its nonbank subsidiaries</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">The accounting and reporting policies of BB&amp;T and its subsidiaries are in accordance with accounting principles generally accepted in the </font><font style="font-family:Times New Roman;font-size:10pt;">United States of America</font><font style="font-family:Times New Roman;font-size:10pt;"> (&#8220;GAAP&#8221;)</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Additionally, where applicable, the policies conform to the accounting and reporting guidelines prescribed by bank regulatory authorities</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The following is a summary of BB&amp;T's more significant accounting policies</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:15pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:10.1px;">Nature of Operations</font></p><p style='margin-top:10pt; 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margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">BB&amp;T accounts for new originations of prime residential mortgage and commercial mortgage loans held for sale at fair value</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T accounts for the derivatives used to economically hedge the loans held for sale at fair value</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Held for investment loans that have been transferred to loans held for sale are carried at the lower of cost or market because these loans are not exchanged in an active market and BB&amp;T does not hedge these assets</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">The value for loans held for sale carried at fair value is primarily based on quoted market prices for securities backed by similar types of loans</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Direct loan origination fees and costs related to loans held for sale and accounted for at fair value are not capitalized, but rather are recorded as mortgage banking income in the case of the direct loan origination fees and primarily personnel expense in the case of the direct loan origination costs</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Gains and losses on sales of mortgage loans are included in mortgage banking income</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Gains and losses on sales of commercial loans held for sale are included in other noninterest income</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:10.1px;">Loans and Leases</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">The Company's accounting methods for loans differ depending on whether the loans are originated or acquired</font><font style="font-family:Times New Roman;font-size:10pt;">, and if acquired, </font><font style="font-family:Times New Roman;font-size:10pt;"> </font><font style="font-family:Times New Roman;font-size:10pt;">whether or not the acquired loans reflect </font><font style="font-family:Times New Roman;font-size:10pt;">credit deterioration since the date of origination</font><font style="font-family:Times New Roman;font-size:10pt;"> such that it is probable at the date of acquisition that BB&amp;T will be unable to collect all contractually required payments</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;text-decoration:underline;margin-left:10.1px;">Originated Loans and Leases</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Loans and leases that management has the intent and ability to hold for the foreseeable future are reported at their outstanding principal balances net of any unearned income, charge-offs, </font><font style="font-family:Times New Roman;font-size:10pt;">and </font><font style="font-family:Times New Roman;font-size:10pt;">unamortized fees and costs on originated loans</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The net amount of nonrefundable loan origination fees and certain direct costs associated with the lending process are deferred and amortized to interest income over the contractual lives of the loans using methods </font><font style="font-family:Times New Roman;font-size:10pt;">that</font><font style="font-family:Times New Roman;font-size:10pt;"> approximate the interest method</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">BB&amp;T classifies all loans and leases past due when the payment of principal and interest based upon contractual terms is greater than 30 days delinquent</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">When commercial loans are placed on nonaccrual status as described below, a charge-off is recorded, as applicable, to decrease the carrying value of such loans to </font><font style="font-family:Times New Roman;font-size:10pt;">the estimated</font><font style="font-family:Times New Roman;font-size:10pt;"> fair value of </font><font style="font-family:Times New Roman;font-size:10pt;">the </font><font style="font-family:Times New Roman;font-size:10pt;">collateral securing the loan</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Consumer loans are subject to mandatory charge-off at a specified delinquency date consistent with regulatory guidelines</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">As such, consumer loans are subject to collateral valuation and charge-off, as applicable, when they are moved to nonaccrual status as described below.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;text-decoration:underline;margin-left:10.1px;">Purchased Loans</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Purchased loans</font><font style="font-family:Times New Roman;font-size:10pt;"> </font><font style="font-family:Times New Roman;font-size:10pt;">are recorded at their fair value at the acquisition date</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Credit discounts are included in the determination of fair value; therefore, an allowance for loan losses is not recorded at the acquisition date</font><font style="font-family:Times New Roman;font-size:10pt;">. </font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Acquired loans are evaluated upon acquisition and classified as either purchased impaired or purchased non-impaired</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Purchased impaired loans reflect credit deterioration since origination such that it is probable at acquisition that BB&amp;T will be unable to collect all contractually required payments</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">For purchased impaired loans, e</font><font style="font-family:Times New Roman;font-size:10pt;">xpected cash flows at the acquisition date in excess of the fair value of loans are recorded as interest income over the life of the loans using a level yield method if the timing and amount of the future cash flows is reasonably estimable</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Subsequent to the acquisition date, increases in cash flows over those expected at the acquisition date are recognized </font><font style="font-family:Times New Roman;font-size:10pt;">prospectively </font><font style="font-family:Times New Roman;font-size:10pt;">as interest income</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Decreases in expected cash flows after the acquisition date are recognized by recording an allowance for loan losses</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">For purchased non-impaired loans, </font><font style="font-family:Times New Roman;font-size:10pt;">the difference between the fair value and unpaid principal balance of the loan at the acquisition date is amortized or accreted to interest income over the estimated life of the loans using a method that approximates the interest method</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Based on the characteristics of loans acquired in a </font><font style="font-family:Times New Roman;font-size:10pt;">Federal Deposit Insurance Corporation (&#8220;</font><font style="font-family:Times New Roman;font-size:10pt;">FDIC</font><font style="font-family:Times New Roman;font-size:10pt;">&#8221;) a</font><font style="font-family:Times New Roman;font-size:10pt;">ssisted transaction and the impact of associated loss-sharing arrangements, BB&amp;T determined that it was appropriate to apply the expected cash flows approach described above to all loans acquired in such transactions.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:10.1px;">Nonperforming</font><font style="font-family:Times New Roman;font-size:10pt;"> </font><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;">Assets</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Nonperforming assets include nonaccrual loans and leases and foreclosed property</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Foreclosed property consists of real estate and other assets acquired as a result of customers' loan defaults</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T's policies related to when loans are placed on nonaccrual status conform to guidelines prescribed by bank regulatory authorities</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The majority of commercial loans and leases are placed on nonaccrual status when it is probable that principal or interest is not fully collectible, or generally when principal or interest becomes 90 days past due, whichever occurs first</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Other lending subsidiaries</font><font style="font-family:Times New Roman;font-size:10pt;">'</font><font style="font-family:Times New Roman;font-size:10pt;"> </font><font style="font-family:Times New Roman;font-size:10pt;">loans, which includes both consumer and commercial loans, are placed on nonaccrual status generally when principal and interest becomes 90 days past due</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Direct retail loans, mortgage and sales finance loans are placed on nonaccrual status at varying intervals, based on the type of product, generally when principal and interest becomes between 90 days and 180 days past due</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Revolving credit loans are not placed on nonaccrual but are charged</font><font style="font-family:Times New Roman;font-size:10pt;"> </font><font style="font-family:Times New Roman;font-size:10pt;">off after they become 150 days past due, with unpaid fees and finance charges reversed against interest income</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Certain loans past due 90 days or more may remain on accrual status if management determines that it does not have concern over the collectibility of principal and interest</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Generally, when loans are placed on nonaccrual status, accrued interest receivable is reversed against interest income in the current period</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Interest payments received thereafter are applied as a reduction to the remaining principal balance as long as concern exists as to the ultimate collection of the principal</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Loans and leases are generally removed from nonaccrual status when they become current as to both principal and interest and concern no longer exists as to the collectability of principal and interest</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Assets acquired as a result of foreclosure are carried at the lower of cost or net realizable value</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Net realizable value equals fair value less estimated selling costs</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Cost is determined based on the sum of unpaid principal, accrued but unpaid interest if not required to be reversed, and acquisition costs associated with the loan</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Any excess of cost over net realizable value at the time of foreclosure is charged to the allowance for loan and lease losses</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Nonperforming assets</font><font style="font-family:Times New Roman;font-size:10pt;"> are subject to</font><font style="font-family:Times New Roman;font-size:10pt;"> periodic revaluations of the collateral underlying impaired loans and foreclosed real estate</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The periodic revaluations are generally based on the appraised value of the property</font><font style="font-family:Times New Roman;font-size:10pt;"> and may include additional liquidity adjustments based upon the expected retention period</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T's policies require that valuations be updated at least annually and that upon foreclosure, the valuation must not be aged greater than six months old, otherwise an updated appraisal is required.</font><font style="font-family:Times New Roman;font-size:10pt;"> </font><font style="font-family:Times New Roman;font-size:10pt;">Routine maintenance costs, </font><font style="font-family:Times New Roman;font-size:10pt;">subsequent </font><font style="font-family:Times New Roman;font-size:10pt;">declines in market value and net losses on disposal are included in </font><font style="font-family:Times New Roman;font-size:10pt;">foreclosed property</font><font style="font-family:Times New Roman;font-size:10pt;"> expense</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:10.1px;">Restructurings</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Modifications to a borrower's debt agreement are considered troubled debt restructurings (&#8220;restructurings&#8221;) if a concession is granted for economic or legal reasons related to a borrower's financial difficulties that otherwise would not be considered. Restructurings are undertaken in order to improve the likelihood of recovery on the loan and may take the form of modifications made with the stated interest rate lower than the current market rate for new debt with similar risk, other modifications to the structure of the loan that fall outside of normal underwriting policies and procedures, or in certain limited circumstances forgiveness of principal or interest. Modifications of covered and other acquired loans that are part of a pool accounted for as a single asset are not considered restructurings. </font><font style="font-family:Times New Roman;font-size:10pt;"> Restructurings can involve loans remaining on nonaccrual, moving to nonaccrual, or continuing on accruing status, depending on the individual facts and circumstances of the borrower. In circumstances where the restructuring involves charging off a portion of the loan balance, BB&amp;T typically classifies these restructurings as nonaccrual. </font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">In connection with commercial restructurings, the decision to maintain a loan that has been restructured on accrual status is based on a current, well documented credit evaluation of the borrower's financial condition and prospects for repayment under the modified terms</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">This evaluation includes consideration of the borrower's current capacity to pay, which among other things may include a review of the borrower's current financial statements, an analysis of global cash flow sufficient to pay all debt obligations, and an evaluation of secondary sources of payment from the client and any guarantors</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">This evaluation also includes an evaluation of the borrower's current willingness to pay, which may include a review of past payment history, an evaluation of the borrower's willingness to provide information on a timely basis, and consideration of offers from the borrower to provide additional collateral or guarantor support</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The credit evaluation also reflects consideration of the borrower's future capacity and willingness to pay, which may include evaluation of cash flow projections, consideration of the adequacy of collateral to cover all principal and interest and trends indicating improving profitability and collectability of receivables</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">The evaluation of mortgage and consumer loans includes an evaluation of the client's debt to income ratio, credit report, property value, loan vintage, and certain other client-specific factors that have impacted their ability to make timely principal and interest payments on the loan</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Restructured nonaccrual loans may be returned to accrual status based on a current, well-documented credit evaluation of the borrower's financial condition and prospects for repayment under the modified terms</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">This evaluation must include consideration of the borrower's sustained historical repayment performance for a reasonable period (generally a minimum of six months) prior to the date on which the loan is returned to accrual status</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Sustained historical repayment performance for a reasonable time prior to the restructuring may be taken into account</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">In connection with retail restructurings, a nonperforming loan will be returned to accruing status when current as to principal and interest and upon a sustained historical repayment performance (generally a minimum of six months)</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:10.1px;">Allowance for </font><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;">Credit Losses</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">The allowance for </font><font style="font-family:Times New Roman;font-size:10pt;">credit losses comprises the allowance for </font><font style="font-family:Times New Roman;font-size:10pt;">loan and lease losses and </font><font style="font-family:Times New Roman;font-size:10pt;">the </font><font style="font-family:Times New Roman;font-size:10pt;">reserve for unfunded lending commitments</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The allowance for credit losses represents </font><font style="font-family:Times New Roman;font-size:10pt;">management's best estimate of probable credit losses inherent in the loan and lease portfolios and off-balance sheet lending commitments at the balance sheet date</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The Company determines the allowance for </font><font style="font-family:Times New Roman;font-size:10pt;">credit losses</font><font style="font-family:Times New Roman;font-size:10pt;"> based on an ongoing evaluation</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">This evaluation is inherently subjective because it requires material estimates, including the amounts and timing of cash flows expected to be received on impaired loans</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Those estimates are susceptible to significant change</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Changes to the allowance for </font><font style="font-family:Times New Roman;font-size:10pt;">credit losses </font><font style="font-family:Times New Roman;font-size:10pt;">are made by charges to the provision for credit losses, which is reflected in the Consolidated Statements of Income</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Loans or lease balances deemed to be uncollectible are charged off against the allowance for loan and lease losses</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Recoveries of amounts previously charged</font><font style="font-family:Times New Roman;font-size:10pt;"> </font><font style="font-family:Times New Roman;font-size:10pt;">off are credited to the allowance for loan and lease losses</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The methodology used to determine the reserve for unfunded lending commitments is inherently similar to that used to determine the collective component of the allowance for loan and lease losses described above, adjusted for factors specific to binding commitments, including the probability of funding and exposure at default</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">While management uses the best information available to establish the allowance for </font><font style="font-family:Times New Roman;font-size:10pt;">credit losses</font><font style="font-family:Times New Roman;font-size:10pt;">, future adjustments may be necessary if economic conditions differ substantially from the assumptions used in computing the allowance or, if required by regulators, based upon information available to them at the time of their examinations</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Accounting standards require the presentation of certain disclosure information at the portfolio segment level, which represents the level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T concluded that its loan and lease portfolio comprises three portfolio segments; commercial, retail and covered and other acquired</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The commercial portfolio segment includes commercial real estate, commercial and </font><font style="font-family:Times New Roman;font-size:10pt;">industrial</font><font style="font-family:Times New Roman;font-size:10pt;"> and </font><font style="font-family:Times New Roman;font-size:10pt;">other loans originated by </font><font style="font-family:Times New Roman;font-size:10pt;">certain </font><font style="font-family:Times New Roman;font-size:10pt;">other</font><font style="font-family:Times New Roman;font-size:10pt;"> lending </font><font style="font-family:Times New Roman;font-size:10pt;">subsidiaries</font><font style="font-family:Times New Roman;font-size:10pt;">, and was identified based on the risk-based approach used to estimate the allowance for loan and lease losses for the vast majority of these loans</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The retail portfolio segment includes direct retail lending, revolving credit, mortgage, sales finance and </font><font style="font-family:Times New Roman;font-size:10pt;">other loans originated by </font><font style="font-family:Times New Roman;font-size:10pt;">certain retail-oriented </font><font style="font-family:Times New Roman;font-size:10pt;">subsidiaries</font><font style="font-family:Times New Roman;font-size:10pt;">, and was identified based on the delinquency-based approach used to estimate the allowance for these loans</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The covered and other acquired portfolio segment was identified based on the expected cash flows approach used to estimate the allowance related to loans acquired subsequent to December 31, 2008</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">A portion of the Corporation's allowance for loan and lease losses is not allocated to any specific category of loans</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">This unallocated portion of the allowance reflects management's best estimate of the elements of imprecision and estimation risk inherent in the calculation of the overall allowance</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Due to the subjectivity involved in determining the overall allowance, including the unallocated portion, the portion considered unallocated may fluctuate from period to period based on management's evaluation of the factors affecting the assumptions used in calculating the allowance, including historical loss experience, current economic conditions, industry or borrower concentrations and the status of merged institutions</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">The </font><font style="font-family:Times New Roman;font-size:10pt;">entire amount of the allowance for credit losses</font><font style="font-family:Times New Roman;font-size:10pt;"> is available to absorb losses on any loan category or lending-related commitment</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">The following provides a description of BB&amp;T's accounting policies and methodologies related to each of its portfolio segments:</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;text-decoration:underline;margin-left:10.1px;">Commercial</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">The vast majority of loans in the commercial lending portfolio are assigned risk grades based on an assessment of conditions that affect the borrower's ability to meet contractual obligations under the loan agreement</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">This process includes reviewing borrowers' financial information, historical payment experience, credit documentation, public information, and other information specific to each borrower</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Risk grades are reviewed on an annual basis for all credit relationships with total credit exposure of $</font><font style="font-family:Times New Roman;font-size:10pt;">1</font><font style="font-family:Times New Roman;font-size:10pt;"> million or more, or at any point management becomes aware of information affecting the borrower's ability to fulfill their obligations</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">For commercial clients where total credit exposure is less than $</font><font style="font-family:Times New Roman;font-size:10pt;">1</font><font style="font-family:Times New Roman;font-size:10pt;"> million, BB&amp;T has developed an automated loan review system to identify and proactively manage accounts with a higher risk of loss</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The &#8220;score&#8221; produced by this automated system is updated monthly</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">On a quarterly basis, BB&amp;T reviews all commercial lending relationships with outstanding debt of $</font><font style="font-family:Times New Roman;font-size:10pt;">5</font><font style="font-family:Times New Roman;font-size:10pt;"> million or more that have been classified as substandard or doubtful</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">While this review is largely focused on the borrower's ability to repay the loan, BB&amp;T also considers the capacity and willingness of a loan's guarantors to support the debt service on the loan as a secondary source of repayment</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">When a guarantor exhibits the documented capacity and willingness to support the loan, BB&amp;T may consider extending the loan maturity and/or temporarily deferring principal payments if the ultimate collection of both principal and interest is not in question</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">In these cases, BB&amp;T may not deem the loan to be impaired due to the documented capacity and willingness of the guarantor to repay the loan</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Loans are considered impaired when the borrower (or guarantor in certain circumstances) does not have the cash flow capacity or willingness to service the debt according to contractual terms, or it does not appear reasonable to assume that the borrower will continue to pay according to the contractual agreement</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T establishes a specific reserve for each loan that has been deemed impaired based on the criteria outlined above</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The amount of the reserve is based on the present value of expected cash flows discounted at the loan's effective interest rate, and/or the value of collateral</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T has also established a review process related to restructurings and other impaired loans that are in commercial lending relationships with outstanding debt of less than $</font><font style="font-family:Times New Roman;font-size:10pt;">5</font><font style="font-family:Times New Roman;font-size:10pt;"> million at the balance sheet date</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">In connection with this process, BB&amp;T establishes reserves related to these loans that are calculated using an expected cash flow approach</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">These discounted cash flow analyses incorporate adjustments to future cash flows that reflect management's best estimate of the default risk related to restructurings based on a combination of historical experience and management judgment.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">BB&amp;T also maintains reserves for collective impairment that reflect an estimate of losses related to non</font><font style="font-family:Times New Roman;font-size:10pt;">-</font><font style="font-family:Times New Roman;font-size:10pt;">impaired commercial loans as of the balance sheet date</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Embedded loss estimates for BB&amp;T's commercial loan portfolio are based on estimated migration rates, which are estimated based on historical experience, and current risk mix as indicated by the risk grading process described above</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Embedded loss estimates may be adjusted to reflect current economic conditions and current portfolio trends including credit quality, concentrations, aging of the portfolio, and significant policy and underwriting changes</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;text-decoration:underline;margin-left:10.1px;">Retail</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">The majority of the allowance for loan and lease losses related to the retail lending portfolio is calculated on a collective basis using a delinquency-based approach</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Embedded loss estimates for BB&amp;T's retail lending portfolio are based on estimated migration rates that are developed based on historical experience, and current risk mix as indicated by prevailing delinquency rates</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">These estimates may be adjusted to reflect current economic conditions and current portfolio trends</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The remaining portion of the allowance related to the retail lending portfolio relates to loans that have been deemed impaired based on their classification as a restructuring at the balance sheet date</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T establishes specific reserves related to these restructured loans using an expected cash flow approach</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The</font><font style="font-family:Times New Roman;font-size:10pt;"> allowance for retail restructurings </font><font style="font-family:Times New Roman;font-size:10pt;">is based on</font><font style="font-family:Times New Roman;font-size:10pt;"> discounted cash flow analyses </font><font style="font-family:Times New Roman;font-size:10pt;">that </font><font style="font-family:Times New Roman;font-size:10pt;">incorporate adjustments to future cash flows that reflect management's best estimate of the default risk related to restructurings based on a combination of historical experience and management judgment.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;text-decoration:underline;margin-left:10.1px;">Acquired Loans</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">The allowance for loan and lease losses related to </font><font style="font-family:Times New Roman;font-size:10pt;">(1) </font><font style="font-family:Times New Roman;font-size:10pt;">purchased impaired loans</font><font style="font-family:Times New Roman;font-size:10pt;"> and (2) all loans acquired in an FDIC-assisted transaction,</font><font style="font-family:Times New Roman;font-size:10pt;"> is based on </font><font style="font-family:Times New Roman;font-size:10pt;">an analysis </font><font style="font-family:Times New Roman;font-size:10pt;">that is performed each period </font><font style="font-family:Times New Roman;font-size:10pt;">to estimate the expected cash flows for each of the loan pools</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">To the extent that the expected cash flows of a loan pool have decreased since the acquisition date, BB&amp;T establishes an allowance for loan losses</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">For </font><font style="font-family:Times New Roman;font-size:10pt;">non-FDIC assisted </font><font style="font-family:Times New Roman;font-size:10pt;">purchased non-impaired loans, BB&amp;T uses an approach consistent with that described above for originated loans and leases.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:10.1px;">Covered Assets and Related FDIC Loss Share Receivable</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Assets subject to loss sharing agreements with the FDIC are labeled &#8220;covered&#8221; on the balance sheet and include certain loans, securities and other assets</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">The fair value of the reimbursement the Company expected to receive from the FDIC under those agreements was recorded in the FDIC loss share receivable at the date of acquisition on the Consolidated Balance Sheets</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The fair value of the FDIC loss share receivable was estimated using a discounted cash flow methodology</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The discount rate used in this calculation is determined using a risk-free yield curve plus a premium reflecting the uncertainty related to the timing of cash flows</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The income statement effect of the </font><font style="font-family:Times New Roman;font-size:10pt;">changes in the </font><font style="font-family:Times New Roman;font-size:10pt;">FDIC loss share receivable includes the accretion due to discounting and changes in expected reimbursements</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Decreases in expected reimbursements are recognized in income prospectively consistent with the approach taken to recognize increases in cash flows on covered loans</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Increases in expected reimbursements are recognized in income in the same period that the allowance for credit losses for the related loans is recognized</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; 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margin-bottom:0pt'>&#160;</p> <p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:10.1px;">Securities Sold Under Repurchase Agreements</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Securities sold under repurchase agreements generally have maturities ranging from 1 day to 36 months</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Securities sold under agreements to repurchase are reflected as collateralized borrowings on the Consolidated Balance Sheets and are record</font><font style="font-family:Times New Roman;font-size:10pt;">ed</font><font style="font-family:Times New Roman;font-size:10pt;"> based on the amount of cash received in connection with the borrowing</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The terms of repurchase agreements may require BB&amp;T to provide additional collateral if the fair value of the securities underlying the borrowings declines during the term of the agreement</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'>&#160;</p> <p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:10.1px;">Income Taxes</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Deferred income taxes have been provided when different accounting methods have been used in determining income for income tax purposes and for financial reporting purposes</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Deferred tax assets and liabilities are recognized based on future tax consequences attributable to differences arising from the financial statement carrying values of assets and liabilities and their tax bases</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">In the event of changes in the tax laws, deferred tax assets and liabilities are adjusted in the period of the enactment of those changes, with the cumulative effects included in the current year's income tax provision</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'>&#160;</p> <p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:10.1px;">Derivative Financial Instruments</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">A derivative is a financial instrument that derives its cash flows, and therefore its value, by reference to an underlying instrument, index or referenced interest rate</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">These instruments include interest rate swaps, caps, floors, collars, financial forwards and futures contracts, swaptions, when-issued securities, foreign exchange contracts and options written and purchased</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T uses derivatives primarily to manage economic risk related to securities, commercial loans, mortgage servicing rights and mortgage banking operations, long-term debt and </font><font style="font-family:Times New Roman;font-size:10pt;">other funding sources</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T also uses derivatives to facilitate transactions on behalf of its clients</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The fair value of derivatives in a gain or loss position is included in other assets or liabilities, respectively, on the Consolidated Balance Sheets</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">BB&amp;T classifies its derivative financial instruments as either (1) a hedge of an exposure to changes in the fair value of a recorded asset or liability (&#8220;fair value hedge&#8221;), (2) a hedge of an exposure to changes in the cash flows of a recognized asset, liability or forecasted transaction (&#8220;cash flow hedge&#8221;), (3) a hedge of a net investment in a subsidiary, or (4) derivatives not designated as hedges</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">Changes in the fair value of derivatives not designated as hedges are recognized in current period earnings</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T has master netting agreements with the derivatives dealers with which it does business, but reflects gross gains and losses on the Consolidated Balance Sheets</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; 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margin-bottom:0pt'>&#160;</p> <p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;margin-left:10.1px;">Changes in Accounting Principles and Effects of New Accounting Pronouncements</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">In February 2010, the </font><font style="font-family:Times New Roman;font-size:10pt;">Financial Accounting Standards Board (&#8220;</font><font style="font-family:Times New Roman;font-size:10pt;">FASB</font><font style="font-family:Times New Roman;font-size:10pt;">&#8221;)</font><font style="font-family:Times New Roman;font-size:10pt;"> issued new guidance impacting </font><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;">Fair Value Measurements and Disclosures</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The new guidance requires a gross presentation of purchases and sales of Level 3 activities and adds a new requirement to disclose transfers in and out of Level 1 and Level 2 measurements</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The guidance related to the transfers between Level 1 and Level 2 measurements was effective for BB&amp;T on January&#160;1, 2010</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The guidance that requires i</font><font style="font-family:Times New Roman;font-size:10pt;">ncreased disaggregation of the L</font><font style="font-family:Times New Roman;font-size:10pt;">evel 3 activities </font><font style="font-family:Times New Roman;font-size:10pt;">wa</font><font style="font-family:Times New Roman;font-size:10pt;">s effective for BB&amp;T on January&#160;1, 2011</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The new disclosures required by this guidance are included in Note </font><font style="font-family:Times New Roman;font-size:10pt;">18</font><font style="font-family:Times New Roman;font-size:10pt;"> to these consolidated financial statements</font><font style="font-family:Times New Roman;font-size:10pt;">.</font></p><p style='margin-top:10pt; 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margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">In December 2011, the FASB issued new guidance impacting the presentation of certain items on the </font><font style="font-family:Times New Roman;font-size:10pt;font-style:italic;">Balance Sheet. </font><font style="font-family:Times New Roman;font-size:10pt;">The new guidance requires an entity to disclose both gross and net information about both instruments and transactions that are eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. 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The adoption of this guidance will not impact BB&amp;T's consolidated financial position, results of operations or cash flows, but may result in certain additional disclosures.</font></p><p style='margin-top:10pt; margin-bottom:0pt'>&#160;</p> <p style='margin-top:5pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-weight:bold;margin-left:0px;">NOTE 2. </font><font style="font-family:Times New Roman;font-size:10pt;font-weight:bold;">Securities</font></p><p style='margin-top: 0pt; margin-bottom: 0pt;'></p><div><table style="border-collapse:collapse;margin-top:20px;"><tr style="height: 30px"><td colspan="16" style="width: 682px; text-align:left;border-color:#000000;min-width:682px;"><font style="FONT-FAMILY: Times New Roman;FONT-SIZE: 10pt;COLOR: #000000;TEXT-ALIGN: left;">The amortized cost, gross unrealized gains and losses and approximate fair values of securities available for sale and held to maturity were as follows:</font></td></tr><tr style="height: 15px"><td style="width: 24px; 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text-align:left;border-color:#000000;min-width:5px;">&#160;</td><td style="width: 10px; text-align:left;border-color:#000000;min-width:10px;">&#160;</td><td style="width: 60px; text-align:left;border-color:#000000;min-width:60px;">&#160;</td><td style="width: 25px; text-align:left;border-color:#000000;min-width:25px;">&#160;</td></tr><tr style="height: 12px"><td style="width: 24px; text-align:left;border-color:#000000;min-width:24px;">&#160;</td><td style="width: 24px; text-align:left;border-color:#000000;min-width:24px;">&#160;</td><td style="width: 24px; text-align:left;border-color:#000000;min-width:24px;">&#160;</td><td style="width: 290px; text-align:left;border-color:#000000;min-width:290px;">&#160;</td><td colspan="11" style="width: 295px; border-bottom-style:solid;border-bottom-width:1px;text-align:center;border-color:#000000;min-width:295px;"><font style="FONT-WEIGHT: bold;FONT-FAMILY: Times New Roman;FONT-SIZE: 7.5pt;COLOR: #000000;TEXT-ALIGN: center;">December 31, 2011</font></td><td style="width: 25px; 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text-align:left;border-color:#000000;min-width:10px;">&#160;</td><td style="width: 40px; text-align:right;border-color:#000000;min-width:40px;">&#160;</td><td style="width: 5px; text-align:left;border-color:#000000;min-width:5px;">&#160;</td><td style="width: 10px; text-align:left;border-color:#000000;min-width:10px;">&#160;</td><td style="width: 40px; text-align:right;border-color:#000000;min-width:40px;">&#160;</td><td style="width: 5px; text-align:left;border-color:#000000;min-width:5px;">&#160;</td><td style="width: 10px; text-align:left;border-color:#000000;min-width:10px;">&#160;</td><td style="width: 40px; text-align:right;border-color:#000000;min-width:40px;">&#160;</td><td style="width: 24px; text-align:left;border-color:#000000;min-width:24px;">&#160;</td></tr><tr style="height: 16px"><td style="width: 25px; text-align:left;border-color:#000000;min-width:25px;">&#160;</td><td style="width: 24px; text-align:left;border-color:#000000;min-width:24px;">&#160;</td><td colspan="3" style="width: 440px; 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