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303000000 4006000000 31334000000 6049000000 3271000000 4396000000 7026000000 13926000000 26598000000 5536000000 5055000000 6651000000 6240000000 4594000000 -832000000 0 145000000 224000000 428000000 967000000 1017000000 799000000 -83000000 -106000000 -88000000 5979000000 -17826000000 -7085000000 4676000000 17799000000 -6843000000 -2434000000 -2107000000 -702000000 2327000000 2010000000 500000000 336000000 2190000000 5112000000 15000000 22000000 110000000 415000000 446000000 531000000 40000000 132000000 277000000 -9141000000 15220000000 2796000000 -591000000 1959000000 -264000000 3753000000 4344000000 2385000000 1868000000 1404000000 1120000000 -82000000 972000000 347000000 1000000 473000000 1083000000 1521000000 1604000000 226000000 0 7000000 86000000 -675000000 2649000000 97000000 98000000 79000000 921000000 1828000000 0 7578000000 0 0 8341000000 0 33000000 <p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-weight:bold;margin-left:0px;">NOTE 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-weight:bold;font-style:italic;margin-left:0px;">General</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">See the Glossary of </font><font style="font-family:Times New Roman;font-size:10pt;">Defined Terms </font><font style="font-family:Times New Roman;font-size:10pt;">at the </font><font style="font-family:Times New Roman;font-size:10pt;">beginning</font><font style="font-family:Times New Roman;font-size:10pt;"> of this Report for terms used throughout the </font><font style="font-family:Times New Roman;font-size:10pt;">consolidated financial s</font><font style="font-family:Times New Roman;font-size:10pt;">tatements and related </font><font style="font-family:Times New Roman;font-size:10pt;">n</font><font style="font-family:Times New Roman;font-size:10pt;">otes of this Form 10-K.</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 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 princip</font><font style="font-family:Times New Roman;font-size:10pt;">al bank subsidiary, Branch Bank</font><font style="font-family:Times New Roman;font-size:10pt;"> 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 GAAP</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:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-weight:bold;font-style:italic;margin-left:0px;">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;">Virginia</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;">Georgia</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;">South Carolina</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;">Kentucky</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;">Tennessee</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;">, Washington D.C and </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;">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 </font><font style="font-family:Times New Roman;font-size:10pt;">CRE</font><font style="font-family:Times New Roman;font-size:10pt;">; 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 </font><font style="font-family:Times New Roman;font-size:10pt;">financing</font><font style="font-family:Times New Roman;font-size:10pt;">, 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:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-weight:bold;font-style:italic;margin-left:0px;">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 VIEs</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">VIEs 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 </font><font style="font-family:Times New Roman;font-size:10pt;">required</font><font style="font-family:Times New Roman;font-size:10pt;"> if a reporting entity </font><font style="font-family:Times New Roman;font-size:10pt;">is the primary beneficiary of</font><font style="font-family:Times New Roman;font-size:10pt;"> 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 e</font><font style="font-family:Times New Roman;font-size:10pt;">valuates its investments in VIE</font><font style="font-family:Times New Roman;font-size:10pt;">s to determine if </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T is the primary beneficiary of the VIE</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 15 for additional disclosures regarding BB&amp;T's significant </font><font style="font-family:Times New Roman;font-size:10pt;">VIEs</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 </font><font style="font-family:Times New Roman;font-size:10pt;">VIEs</font><font style="font-family:Times New Roman;font-size:10pt;">, BB&amp;T also has investments </font><font style="font-family:Times New Roman;font-size:10pt;">in, </font><font style="font-family:Times New Roman;font-size:10pt;">and future funding commitments to</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;">private equity investments</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 </font><font style="font-family:Times New Roman;font-size:10pt;">a</font><font style="font-family:Times New Roman;font-size:10pt;"> 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:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-weight:bold;font-style:italic;margin-left:0px;">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 </font><font style="font-family:Times New Roman;font-size:10pt;">year </font><font style="font-family:Times New Roman;font-size:10pt;">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:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-weight:bold;font-style:italic;margin-left:0px;">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 </font><font style="font-family:Times New Roman;font-size:10pt;">ACL</font><font style="font-family:Times New Roman;font-size:10pt;">, 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-weight:bold;font-style:italic;margin-left:0px;">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-weight:bold;font-style:italic;margin-left:0px;">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-weight:bold;font-style:italic;margin-left:0px;">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;"> </font><font style="font-family:Times New Roman;font-size:10pt;">AOCI, </font><font style="font-family:Times New Roman;font-size:10pt;">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 </font><font style="font-family:Times New Roman;font-size:10pt;">OTTI</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 </font><font style="font-family:Times New Roman;font-size:10pt;">AOCI </font><font style="font-family:Times New Roman;font-size:10pt;">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-weight:bold;font-style:italic;margin-left:0px;">LHFS</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 </font><font style="font-family:Times New Roman;font-size:10pt;">LHFS</font><font style="font-family:Times New Roman;font-size:10pt;"> 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 </font><font style="font-family:Times New Roman;font-size:10pt;">LHFS</font><font style="font-family:Times New Roman;font-size:10pt;"> 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;"> </font><font style="font-family:Times New Roman;font-size:10pt;">The value for </font><font style="font-family:Times New Roman;font-size:10pt;">LHFS</font><font style="font-family:Times New Roman;font-size:10pt;"> carried at fair value is primarily based on quoted m</font><font style="font-family:Times New Roman;font-size:10pt;">arket prices for securities collateralized</font><font style="font-family:Times New Roman;font-size:10pt;"> 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 </font><font style="font-family:Times New Roman;font-size:10pt;">LHFS</font><font style="font-family:Times New Roman;font-size:10pt;"> 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 </font><font style="font-family:Times New Roman;font-size:10pt;">LHFS</font><font style="font-family:Times New Roman;font-size:10pt;"> 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-weight:bold;font-style:italic;margin-left:0px;">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;font-style:italic;text-decoration:underline;margin-left:0px;">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</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;"> </font><font style="font-family:Times New Roman;font-size:10pt;">recoverable amount. </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;font-style:italic;text-decoration:underline;margin-left:0px;">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 FDIC</font><font style="font-family:Times New Roman;font-size:10pt;">-</font><font style="font-family:Times New Roman;font-size:10pt;">a</font><font style="font-family:Times New Roman;font-size:10pt;">ssisted transaction and the impact of </font><font style="font-family:Times New Roman;font-size:10pt;">associated loss </font><font style="font-family:Times New Roman;font-size:10pt;">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;text-decoration:underline;margin-left:0px;">TDRs</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 </font><font style="font-family:Times New Roman;font-size:10pt;">TDRs</font><font style="font-family:Times New Roman;font-size:10pt;"> if a concession is granted for economic or legal reasons related to a borrower's financial difficulties that otherwise would not be considered. </font><font style="font-family:Times New Roman;font-size:10pt;">TDR</font><font style="font-family:Times New Roman;font-size:10pt;">s 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 loans that are part of a pool accounted for as a single asset are not considered </font><font style="font-family:Times New Roman;font-size:10pt;">TDR</font><font style="font-family:Times New Roman;font-size:10pt;">s. </font><font style="font-family:Times New Roman;font-size:10pt;">TDR</font><font style="font-family:Times New Roman;font-size:10pt;">s 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 </font><font style="font-family:Times New Roman;font-size:10pt;">TDR</font><font style="font-family:Times New Roman;font-size:10pt;"> involves charging off a portion of the loan balance, BB&amp;T typically classifies these </font><font style="font-family:Times New Roman;font-size:10pt;">TDR</font><font style="font-family:Times New Roman;font-size:10pt;">s 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 </font><font style="font-family:Times New Roman;font-size:10pt;">TDR</font><font style="font-family:Times New Roman;font-size:10pt;">s, 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. 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. 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. 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></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 cl</font><font style="font-family:Times New Roman;font-size:10pt;">ient-specific factors that impact</font><font style="font-family:Times New Roman;font-size:10pt;"> their ability to make timely principal and interest payments on the loan.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">N</font><font style="font-family:Times New Roman;font-size:10pt;">onaccrual </font><font style="font-family:Times New Roman;font-size:10pt;">TDR</font><font style="font-family:Times New Roman;font-size:10pt;">s 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. 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. Sustained historical repayment performance for a reasonable time prior to the </font><font style="font-family:Times New Roman;font-size:10pt;">TDR</font><font style="font-family:Times New Roman;font-size:10pt;"> may be taken into account. In connection with retail </font><font style="font-family:Times New Roman;font-size:10pt;">TDRs, a NPL </font><font style="font-family:Times New Roman;font-size:10pt;">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></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-weight:bold;font-style:italic;margin-left:0px;">NPAs</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">NPAs</font><font style="font-family:Times New Roman;font-size:10pt;"> include </font><font style="font-family:Times New Roman;font-size:10pt;">NPLs</font><font style="font-family:Times New Roman;font-size:10pt;"> 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 </font><font style="font-family:Times New Roman;font-size:10pt;">for placing loans</font><font style="font-family:Times New Roman;font-size:10pt;"> 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</font><font style="font-family:Times New Roman;font-size:10pt;">, 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><font style="font-family:Times New Roman;font-size:10pt;">Covered loans are considered to be performing due to the application of the accretion method.</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</font><font style="font-family:Times New Roman;font-size:10pt;"> subsequently</font><font style="font-family:Times New Roman;font-size:10pt;"> 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;">Any excess of cost over net realizable value at the time of foreclosure is charged to the </font><font style="font-family:Times New Roman;font-size:10pt;">ALLL</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">NPAs</font><font style="font-family:Times New Roman;font-size:10pt;"> are subject to periodic revaluations of the collateral underlying impaired loans and foreclosed real estate. 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;">. BB&amp;T's policies require that valuations be updated at least annually and that upon foreclosure, the valuation must not be </font><font style="font-family:Times New Roman;font-size:10pt;">more</font><font style="font-family:Times New Roman;font-size:10pt;"> than six months old, otherwise an updated appraisal is required. </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;">other costs of ownership, </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-weight:bold;font-style:italic;margin-left:0px;">ACL</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;">ACL</font><font style="font-family:Times New Roman;font-size:10pt;"> comprises the </font><font style="font-family:Times New Roman;font-size:10pt;">ALLL</font><font style="font-family:Times New Roman;font-size:10pt;"> and </font><font style="font-family:Times New Roman;font-size:10pt;">the </font><font style="font-family:Times New Roman;font-size:10pt;">RUFC</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;">ACL</font><font style="font-family:Times New Roman;font-size:10pt;"> 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 </font><font style="font-family:Times New Roman;font-size:10pt;">ACL</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 </font><font style="font-family:Times New Roman;font-size:10pt;">ACL</font><font style="font-family:Times New Roman;font-size:10pt;"> </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 </font><font style="font-family:Times New Roman;font-size:10pt;">ALLL</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 </font><font style="font-family:Times New Roman;font-size:10pt;">ALLL</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 </font><font style="font-family:Times New Roman;font-size:10pt;">RUFC</font><font style="font-family:Times New Roman;font-size:10pt;"> is inherently similar to that used to determine the collective</font><font style="font-family:Times New Roman;font-size:10pt;">ly evaluated</font><font style="font-family:Times New Roman;font-size:10pt;"> component of the </font><font style="font-family:Times New Roman;font-size:10pt;">ALLL</font><font style="font-family:Times New Roman;font-size:10pt;">, 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 </font><font style="font-family:Times New Roman;font-size:10pt;">ACL</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 </font><font style="font-family:Times New Roman;font-size:10pt;">ACL</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</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 </font><font style="font-family:Times New Roman;font-size:10pt;">CRE</font><font style="font-family:Times New Roman;font-size:10pt;">, 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 </font><font style="font-family:Times New Roman;font-size:10pt;">ALLL</font><font style="font-family:Times New Roman;font-size:10pt;"> 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 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 </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T's</font><font style="font-family:Times New Roman;font-size:10pt;"> </font><font style="font-family:Times New Roman;font-size:10pt;">ALLL</font><font style="font-family:Times New Roman;font-size:10pt;"> 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 </font><font style="font-family:Times New Roman;font-size:10pt;">ACL</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;font-style:italic;text-decoration:underline;margin-left:0px;">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 $1 million or more, or at any point management becomes aware of inf</font><font style="font-family:Times New Roman;font-size:10pt;">ormation affecting the borrower</font><font style="font-family:Times New Roman;font-size:10pt;">s</font><font style="font-family:Times New Roman;font-size:10pt;">'</font><font style="font-family:Times New Roman;font-size:10pt;"> 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 w</font><font style="font-family:Times New Roman;font-size:10pt;">ith total credit exposure </font><font style="font-family:Times New Roman;font-size:10pt;">less than $1 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 </font><font style="font-family:Times New Roman;font-size:10pt;">TDR</font><font style="font-family:Times New Roman;font-size:10pt;">s 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 </font><font style="font-family:Times New Roman;font-size:10pt;">TDR</font><font style="font-family:Times New Roman;font-size:10pt;">s 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;font-style:italic;text-decoration:underline;margin-left:0px;">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 </font><font style="font-family:Times New Roman;font-size:10pt;">ALLL</font><font style="font-family:Times New Roman;font-size:10pt;"> 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</font><font style="font-family:Times New Roman;font-size:10pt;"> TDR</font><font style="font-family:Times New Roman;font-size:10pt;"> 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 </font><font style="font-family:Times New Roman;font-size:10pt;">TDRs</font><font style="font-family:Times New Roman;font-size:10pt;"> 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 allowance for retail </font><font style="font-family:Times New Roman;font-size:10pt;">TDR</font><font style="font-family:Times New Roman;font-size:10pt;">s </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 that incorporate adjustments to future cash flows that reflect management's best estimate of the default risk related to </font><font style="font-family:Times New Roman;font-size:10pt;">TDR</font><font style="font-family:Times New Roman;font-size:10pt;">s 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;font-style:italic;text-decoration:underline;margin-left:0px;">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;">P</font><font style="font-family:Times New Roman;font-size:10pt;">urchased impaired loans</font><font style="font-family:Times New Roman;font-size:10pt;"> and all loans acquired in an FDIC-assisted transaction</font><font style="font-family:Times New Roman;font-size:10pt;"> are typically aggregated into loan pools based upon common risk characteristics. </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;">ALLL</font><font style="font-family:Times New Roman;font-size:10pt;"> </font><font style="font-family:Times New Roman;font-size:10pt;">for each loan pool </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</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-weight:bold;font-style:italic;margin-left:0px;">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; 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;">T</font><font style="font-family:Times New Roman;font-size:10pt;">he FDIC's obligation to reimburse Branch Bank for losses with respect to covered assets begins with the first dollar of loss incurred. The terms of the loss sharing agreement with respect to certain non-agency </font><font style="font-family:Times New Roman;font-size:10pt;">R</font><font style="font-family:Times New Roman;font-size:10pt;">MBS</font><font style="font-family:Times New Roman;font-size:10pt;"> provides that Branch Bank will be reimbursed by the FDIC for 95% of any and all losses. All other covered assets are subject to a stated threshold of $5 billion that provides for the FDIC to reimburse Branch Bank for (1) 80% of losses incurred up to $5 billion and (2) 95% of losses in excess of $5 billion. Gains and recoveries on covered assets will offset losses, or be paid to the FDIC, at the applicable loss share percentage at the time of recovery. The loss sharing agreement applicable to single family residential mortgage loans expires in 2019, and provides for FDIC loss sharing and Branch Bank reimbursement to the FDIC. The loss sharing agreement applicable to commercial loans and other covered assets expires in 2014, however, Branch Bank must reimburse the FDIC for </font><font style="font-family:Times New Roman;font-size:10pt;">realized </font><font style="font-family:Times New Roman;font-size:10pt;">gains and recoveries through August 2017.</font><font style="font-family:Times New Roman;font-size:10pt;"> </font><font style="font-family:Times New Roman;font-size:10pt;">At the conclusion of the loss share period should actual aggregate losses, excluding securities, be less than an amount determined in accordance with these agreements, BB&amp;T will pay the </font><font style="font-family:Times New Roman;font-size:10pt;">FDIC a portion of the difference</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 income statement effect of the changes in the FDIC loss share receivable includes the accretion due to discounting and changes in expected net reimbursements. Decreases in expected net reimbursements, including the amounts expected to be paid to the FDIC as a result of the aggregate losses calculation, are recognized in income prospectively over the term of the loss share agreements consistent with the approach taken to recognize increases in cash flows on covered loans. Increases in expected reimbursements are recognized in income in the same period that the </font><font style="font-family:Times New Roman;font-size:10pt;">ACL</font><font style="font-family:Times New Roman;font-size:10pt;"> for the related loans is recognized.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-weight:bold;font-style:italic;margin-left:0px;">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 </font><font style="font-family:Times New Roman;font-size:10pt;">and</font><font style="font-family:Times New Roman;font-size:10pt;"> 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-weight:bold;font-style:italic;margin-left:0px;">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-weight:bold;font-style:italic;margin-left:0px;">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-weight:bold;font-style:italic;margin-left:0px;">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, </font><font style="font-family:Times New Roman;font-size:10pt;">MSRs</font><font style="font-family:Times New Roman;font-size:10pt;"> 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 </font><font style="font-family:Times New Roman;font-size:10pt;">assets and liabilities</font><font style="font-family:Times New Roman;font-size:10pt;"> 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 </font><font style="font-family:Times New Roman;font-size:10pt;">of </font><font style="font-family:Times New Roman;font-size:10pt;">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 </font><font style="font-family:Times New Roman;font-size:10pt;">OCI</font><font style="font-family:Times New Roman;font-size:10pt;"> 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 </font><font style="font-family:Times New Roman;font-size:10pt;">MSRs</font><font style="font-family:Times New Roman;font-size:10pt;"> 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-weight:bold;font-style:italic;margin-left:0px;">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;">CDI</font><font style="font-family:Times New Roman;font-size:10pt;"> and other intangible assets include premiums paid for acquisitions of </font><font style="font-family:Times New Roman;font-size:10pt;">core deposits</font><font style="font-family:Times New Roman;font-size:10pt;"> 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-weight:bold;font-style:italic;margin-left:0px;">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 </font><font style="font-family:Times New Roman;font-size:10pt;">commercial and </font><font style="font-family:Times New Roman;font-size:10pt;">conforming </font><font style="font-family:Times New Roman;font-size:10pt;">residential mortgage loan originations</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 </font><font style="font-family:Times New Roman;font-size:10pt;">R</font><font style="font-family:Times New Roman;font-size:10pt;">MBS</font><font style="font-family:Times New Roman;font-size:10pt;"> issued primarily by </font><font style="font-family:Times New Roman;font-size:10pt;">FHLMC</font><font style="font-family:Times New Roman;font-size:10pt;">, </font><font style="font-family:Times New Roman;font-size:10pt;">FNMA</font><font style="font-family:Times New Roman;font-size:10pt;"> and </font><font style="font-family:Times New Roman;font-size:10pt;">GNMA</font><font style="font-family:Times New Roman;font-size:10pt;">, 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 </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T's</font><font style="font-family:Times New Roman;font-size:10pt;"> 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></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-weight:bold;font-style:italic;margin-left:0px;">MSRs</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 </font><font style="font-family:Times New Roman;font-size:10pt;">MSRs</font><font style="font-family:Times New Roman;font-size:10pt;"> 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 </font><font style="font-family:Times New Roman;font-size:10pt;">MSR</font><font style="font-family:Times New Roman;font-size:10pt;">s </font><font style="font-family:Times New Roman;font-size:10pt;">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 </font><font style="font-family:Times New Roman;font-size:10pt;">MSRs </font><font style="font-family:Times New Roman;font-size:10pt;">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 </font><font style="font-family:Times New Roman;font-size:10pt;">MSRs </font><font style="font-family:Times New Roman;font-size:10pt;">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-weight:bold;font-style:italic;margin-left:0px;">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, </font><font style="font-family:Times New Roman;font-size:10pt;">RSU</font><font style="font-family:Times New Roman;font-size:10pt;">s, 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-weight:bold;font-style:italic;margin-left:0px;">Pension and Postretirement Benefit Obligations </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 offers various pension plans and postretirement benefit plans to employees. Calculation of the obligations and related expenses under these plans requires the use of actuarial valuation methods and assumptions. The discount rate assumption used to measure the postretirement benefit obligations is set by reference to published high-quality bond indices, as well as certain hypothetical spot-rate yield curves. These yield curves were constructed from the underlying bond price and yield data collected as of the plan's measurement date and are represented by a series of annualized, individual discount rates with durations ranging from six months to thirty years. BB&amp;T also considers the individual characteristics of the plan, such as projected cash flow patterns and payment durations, when setting the discount rate. </font><font style="font-family:Times New Roman;font-size:10pt;">The expected long-term rate of return on assets </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;"> the expected returns for each major asset class in which the plan invests, </font><font style="font-family:Times New Roman;font-size:10pt;">adjusted for </font><font style="font-family:Times New Roman;font-size:10pt;">the weight of each asset class in the target mix</font><font style="font-family:Times New Roman;font-size:10pt;">. </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-weight:bold;font-style:italic;margin-left:0px;">Insurance Income</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">Insurance commission revenue is recognized at the later of the billing </font><font style="font-family:Times New Roman;font-size:10pt;">date </font><font style="font-family:Times New Roman;font-size:10pt;">or the effective date of the related insurance policies. Insurance premiums from underwriting activities are recognized as income over the policy term</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">The portion of premiums that will be earned in the future is deferred </font><font style="font-family:Times New Roman;font-size:10pt;">and included in other liabilities in 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;font-weight:bold;font-style:italic;margin-left:0px;">Changes</font><font style="font-family:Times New Roman;font-size:10pt;font-weight:bold;font-style:italic;"> 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;">Effective January 1, 2012, the Company adopted </font><font style="font-family:Times New Roman;font-size:10pt;">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 </font><font style="font-family:Times New Roman;font-size:10pt;">requires:</font><font style="font-family:Times New Roman;font-size:10pt;"> 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;">The adoption of this guidance</font><font style="font-family:Times New Roman;font-size:10pt;"> </font><font style="font-family:Times New Roman;font-size:10pt;">had no impact on BB&amp;T's consolidated financial position, results of operations or 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 new disclosures required by this guidance are included in Note 18 to these consolidated financial statements.</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 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 </font><font style="font-family:Times New Roman;font-size:10pt;">OTTI</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 </font><font style="font-family:Times New Roman;font-size:10pt;">AOCI </font><font style="font-family:Times New Roman;font-size:10pt;">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'>&#160;</p> <p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-weight:bold;font-style:italic;margin-left:0px;">LHFS</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 </font><font style="font-family:Times New Roman;font-size:10pt;">LHFS</font><font style="font-family:Times New Roman;font-size:10pt;"> 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 </font><font style="font-family:Times New Roman;font-size:10pt;">LHFS</font><font style="font-family:Times New Roman;font-size:10pt;"> 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;"> </font><font style="font-family:Times New Roman;font-size:10pt;">The value for </font><font style="font-family:Times New Roman;font-size:10pt;">LHFS</font><font style="font-family:Times New Roman;font-size:10pt;"> carried at fair value is primarily based on quoted m</font><font style="font-family:Times New Roman;font-size:10pt;">arket prices for securities collateralized</font><font style="font-family:Times New Roman;font-size:10pt;"> 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 </font><font style="font-family:Times New Roman;font-size:10pt;">LHFS</font><font style="font-family:Times New Roman;font-size:10pt;"> 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 </font><font style="font-family:Times New Roman;font-size:10pt;">LHFS</font><font style="font-family:Times New Roman;font-size:10pt;"> 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-weight:bold;font-style:italic;margin-left:0px;">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;font-style:italic;text-decoration:underline;margin-left:0px;">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</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;"> </font><font style="font-family:Times New Roman;font-size:10pt;">recoverable amount. </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;font-style:italic;text-decoration:underline;margin-left:0px;">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 FDIC</font><font style="font-family:Times New Roman;font-size:10pt;">-</font><font style="font-family:Times New Roman;font-size:10pt;">a</font><font style="font-family:Times New Roman;font-size:10pt;">ssisted transaction and the impact of </font><font style="font-family:Times New Roman;font-size:10pt;">associated loss </font><font style="font-family:Times New Roman;font-size:10pt;">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;text-decoration:underline;margin-left:0px;">TDRs</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 </font><font style="font-family:Times New Roman;font-size:10pt;">TDRs</font><font style="font-family:Times New Roman;font-size:10pt;"> if a concession is granted for economic or legal reasons related to a borrower's financial difficulties that otherwise would not be considered. </font><font style="font-family:Times New Roman;font-size:10pt;">TDR</font><font style="font-family:Times New Roman;font-size:10pt;">s 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 loans that are part of a pool accounted for as a single asset are not considered </font><font style="font-family:Times New Roman;font-size:10pt;">TDR</font><font style="font-family:Times New Roman;font-size:10pt;">s. </font><font style="font-family:Times New Roman;font-size:10pt;">TDR</font><font style="font-family:Times New Roman;font-size:10pt;">s 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 </font><font style="font-family:Times New Roman;font-size:10pt;">TDR</font><font style="font-family:Times New Roman;font-size:10pt;"> involves charging off a portion of the loan balance, BB&amp;T typically classifies these </font><font style="font-family:Times New Roman;font-size:10pt;">TDR</font><font style="font-family:Times New Roman;font-size:10pt;">s 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 </font><font style="font-family:Times New Roman;font-size:10pt;">TDR</font><font style="font-family:Times New Roman;font-size:10pt;">s, 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. 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. 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. 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></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 cl</font><font style="font-family:Times New Roman;font-size:10pt;">ient-specific factors that impact</font><font style="font-family:Times New Roman;font-size:10pt;"> their ability to make timely principal and interest payments on the loan.</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">N</font><font style="font-family:Times New Roman;font-size:10pt;">onaccrual </font><font style="font-family:Times New Roman;font-size:10pt;">TDR</font><font style="font-family:Times New Roman;font-size:10pt;">s 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. 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. Sustained historical repayment performance for a reasonable time prior to the </font><font style="font-family:Times New Roman;font-size:10pt;">TDR</font><font style="font-family:Times New Roman;font-size:10pt;"> may be taken into account. In connection with retail </font><font style="font-family:Times New Roman;font-size:10pt;">TDRs, a NPL </font><font style="font-family:Times New Roman;font-size:10pt;">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></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-weight:bold;font-style:italic;margin-left:0px;">NPAs</font></p><p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;margin-left:0px;">NPAs</font><font style="font-family:Times New Roman;font-size:10pt;"> include </font><font style="font-family:Times New Roman;font-size:10pt;">NPLs</font><font style="font-family:Times New Roman;font-size:10pt;"> 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 </font><font style="font-family:Times New Roman;font-size:10pt;">for placing loans</font><font style="font-family:Times New Roman;font-size:10pt;"> 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</font><font style="font-family:Times New Roman;font-size:10pt;">, 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><font style="font-family:Times New Roman;font-size:10pt;">Covered loans are considered to be performing due to the application of the accretion method.</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</font><font style="font-family:Times New Roman;font-size:10pt;"> subsequently</font><font style="font-family:Times New Roman;font-size:10pt;"> 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;">Any excess of cost over net realizable value at the time of foreclosure is charged to the </font><font style="font-family:Times New Roman;font-size:10pt;">ALLL</font><font style="font-family:Times New Roman;font-size:10pt;">. </font><font style="font-family:Times New Roman;font-size:10pt;">NPAs</font><font style="font-family:Times New Roman;font-size:10pt;"> are subject to periodic revaluations of the collateral underlying impaired loans and foreclosed real estate. 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;">. BB&amp;T's policies require that valuations be updated at least annually and that upon foreclosure, the valuation must not be </font><font style="font-family:Times New Roman;font-size:10pt;">more</font><font style="font-family:Times New Roman;font-size:10pt;"> than six months old, otherwise an updated appraisal is required. </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;">other costs of ownership, </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-weight:bold;font-style:italic;margin-left:0px;">ACL</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;">ACL</font><font style="font-family:Times New Roman;font-size:10pt;"> comprises the </font><font style="font-family:Times New Roman;font-size:10pt;">ALLL</font><font style="font-family:Times New Roman;font-size:10pt;"> and </font><font style="font-family:Times New Roman;font-size:10pt;">the </font><font style="font-family:Times New Roman;font-size:10pt;">RUFC</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;">ACL</font><font style="font-family:Times New Roman;font-size:10pt;"> 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 </font><font style="font-family:Times New Roman;font-size:10pt;">ACL</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 </font><font style="font-family:Times New Roman;font-size:10pt;">ACL</font><font style="font-family:Times New Roman;font-size:10pt;"> </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 </font><font style="font-family:Times New Roman;font-size:10pt;">ALLL</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 </font><font style="font-family:Times New Roman;font-size:10pt;">ALLL</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 </font><font style="font-family:Times New Roman;font-size:10pt;">RUFC</font><font style="font-family:Times New Roman;font-size:10pt;"> is inherently similar to that used to determine the collective</font><font style="font-family:Times New Roman;font-size:10pt;">ly evaluated</font><font style="font-family:Times New Roman;font-size:10pt;"> component of the </font><font style="font-family:Times New Roman;font-size:10pt;">ALLL</font><font style="font-family:Times New Roman;font-size:10pt;">, 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 </font><font style="font-family:Times New Roman;font-size:10pt;">ACL</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 </font><font style="font-family:Times New Roman;font-size:10pt;">ACL</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</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 </font><font style="font-family:Times New Roman;font-size:10pt;">CRE</font><font style="font-family:Times New Roman;font-size:10pt;">, 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 </font><font style="font-family:Times New Roman;font-size:10pt;">ALLL</font><font style="font-family:Times New Roman;font-size:10pt;"> 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 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 </font><font style="font-family:Times New Roman;font-size:10pt;">BB&amp;T's</font><font style="font-family:Times New Roman;font-size:10pt;"> </font><font style="font-family:Times New Roman;font-size:10pt;">ALLL</font><font style="font-family:Times New Roman;font-size:10pt;"> 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 </font><font style="font-family:Times New Roman;font-size:10pt;">ACL</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;font-style:italic;text-decoration:underline;margin-left:0px;">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 $1 million or more, or at any point management becomes aware of inf</font><font style="font-family:Times New Roman;font-size:10pt;">ormation affecting the borrower</font><font style="font-family:Times New Roman;font-size:10pt;">s</font><font style="font-family:Times New Roman;font-size:10pt;">'</font><font style="font-family:Times New Roman;font-size:10pt;"> 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 w</font><font style="font-family:Times New Roman;font-size:10pt;">ith total credit exposure </font><font style="font-family:Times New Roman;font-size:10pt;">less than $1 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 </font><font style="font-family:Times New Roman;font-size:10pt;">TDR</font><font style="font-family:Times New Roman;font-size:10pt;">s 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 </font><font style="font-family:Times New Roman;font-size:10pt;">TDR</font><font style="font-family:Times New Roman;font-size:10pt;">s 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;font-style:italic;text-decoration:underline;margin-left:0px;">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 </font><font style="font-family:Times New Roman;font-size:10pt;">ALLL</font><font style="font-family:Times New Roman;font-size:10pt;"> 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</font><font style="font-family:Times New Roman;font-size:10pt;"> TDR</font><font style="font-family:Times New Roman;font-size:10pt;"> 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 </font><font style="font-family:Times New Roman;font-size:10pt;">TDRs</font><font style="font-family:Times New Roman;font-size:10pt;"> 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 allowance for retail </font><font style="font-family:Times New Roman;font-size:10pt;">TDR</font><font style="font-family:Times New Roman;font-size:10pt;">s </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 that incorporate adjustments to future cash flows that reflect management's best estimate of the default risk related to </font><font style="font-family:Times New Roman;font-size:10pt;">TDR</font><font style="font-family:Times New Roman;font-size:10pt;">s 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;font-style:italic;text-decoration:underline;margin-left:0px;">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;">P</font><font style="font-family:Times New Roman;font-size:10pt;">urchased impaired loans</font><font style="font-family:Times New Roman;font-size:10pt;"> and all loans acquired in an FDIC-assisted transaction</font><font style="font-family:Times New Roman;font-size:10pt;"> are typically aggregated into loan pools based upon common risk characteristics. </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;">ALLL</font><font style="font-family:Times New Roman;font-size:10pt;"> </font><font style="font-family:Times New Roman;font-size:10pt;">for each loan pool </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</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-weight:bold;font-style:italic;margin-left:0px;">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; 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;">T</font><font style="font-family:Times New Roman;font-size:10pt;">he FDIC's obligation to reimburse Branch Bank for losses with respect to covered assets begins with the first dollar of loss incurred. The terms of the loss sharing agreement with respect to certain non-agency </font><font style="font-family:Times New Roman;font-size:10pt;">R</font><font style="font-family:Times New Roman;font-size:10pt;">MBS</font><font style="font-family:Times New Roman;font-size:10pt;"> provides that Branch Bank will be reimbursed by the FDIC for 95% of any and all losses. All other covered assets are subject to a stated threshold of $5 billion that provides for the FDIC to reimburse Branch Bank for (1) 80% of losses incurred up to $5 billion and (2) 95% of losses in excess of $5 billion. Gains and recoveries on covered assets will offset losses, or be paid to the FDIC, at the applicable loss share percentage at the time of recovery. The loss sharing agreement applicable to single family residential mortgage loans expires in 2019, and provides for FDIC loss sharing and Branch Bank reimbursement to the FDIC. The loss sharing agreement applicable to commercial loans and other covered assets expires in 2014, however, Branch Bank must reimburse the FDIC for </font><font style="font-family:Times New Roman;font-size:10pt;">realized </font><font style="font-family:Times New Roman;font-size:10pt;">gains and recoveries through August 2017.</font><font style="font-family:Times New Roman;font-size:10pt;"> </font><font style="font-family:Times New Roman;font-size:10pt;">At the conclusion of the loss share period should actual aggregate losses, excluding securities, be less than an amount determined in accordance with these agreements, BB&amp;T will pay the </font><font style="font-family:Times New Roman;font-size:10pt;">FDIC a portion of the difference</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 income statement effect of the changes in the FDIC loss share receivable includes the accretion due to discounting and changes in expected net reimbursements. Decreases in expected net reimbursements, including the amounts expected to be paid to the FDIC as a result of the aggregate losses calculation, are recognized in income prospectively over the term of the loss share agreements consistent with the approach taken to recognize increases in cash flows on covered loans. Increases in expected reimbursements are recognized in income in the same period that the </font><font style="font-family:Times New Roman;font-size:10pt;">ACL</font><font style="font-family:Times New Roman;font-size:10pt;"> for the related loans is recognized.</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-weight:bold;font-style:italic;margin-left:0px;">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 </font><font style="font-family:Times New Roman;font-size:10pt;">and</font><font style="font-family:Times New Roman;font-size:10pt;"> 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'>&#160;</p> <p style='margin-top:10pt; margin-bottom:0pt'><font style="font-family:Times New Roman;font-size:10pt;font-weight:bold;font-style:italic;margin-left:0px;">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; 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text-align:left;border-color:#000000;min-width:5px;">&#160;</td><td style="width: 10px; border-top-style:double;border-top-width:3px;text-align:left;border-color:#000000;min-width:10px;">&#160;</td><td style="width: 60px; border-top-style:double;border-top-width:3px;text-align:right;border-color:#000000;min-width:60px;">&#160;</td><td style="width: 5px; text-align:left;border-color:#000000;min-width:5px;">&#160;</td><td style="width: 10px; border-top-style:double;border-top-width:3px;text-align:left;border-color:#000000;min-width:10px;">&#160;</td><td style="width: 60px; border-top-style:double;border-top-width:3px;text-align:right;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: 16px"><td style="width: 24px; text-align:left;border-color:#000000;min-width:24px;">&#160;</td><td colspan="3" style="width: 324px; text-align:left;border-color:#000000;min-width:324px;"><font style="FONT-FAMILY: Times New Roman;FONT-SIZE: 10pt;COLOR: #000000;TEXT-ALIGN: left;">Securities held to maturity:</font></td><td style="width: 5px; 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