Alan Greer - Investor Relations Kelly King - Chairman & Chief Executive Officer Daryl Bible - Senior Executive Vice President & Chief Financial Officer Chris Henson - President, Chief Operating Office Clarke Starnes - Senior Executive Vice President & Chief Risk Officer.

Nancy Bush - NAB Research Betsy Graseck - Morgan Stanley Matt O'Connor - Deutsche Bank John McDonald - Bernstein Gerard Cassidy - RBC Capital Markets Erika Najarian - Bank of America John Pancari - Evercore ISI Kevin Barker - Piper Jaffray.

Greetings ladies and gentlemen and welcome to the BB&T Corporation Third Quarter 2017 Earnings Conference. Currently, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this event is being recorded.

It is now my pleasure to introduce your host Alan Greer of Investor Relations for BB&T Corporation..

Thank you, Laura and good morning everyone. Thanks to all of our listeners for joining us today. On today's call, we have Kelly King, our Chairman and Chief Executive Officer; and Daryl Bible, our Chief Financial Officer, who will review the results for the third quarter and provide some thoughts about the fourth quarter.

We also have Chris Henson, our President and Chief Operating Officer; and Clarke Starnes, our Chief Risk Officer to participate in the Q&A session. We will be referencing a slide presentation during our comments. A copy of the presentation as well as our earnings release and supplemental financial information are available on the BB&T Web site.

Let me remind you that BB&T does not provide public earnings predictions or forecasts. However, there may be statements made during the course of this call that express management's intentions, beliefs or expectations. BB&T's actual results may differ materially from those contemplated by these forward-looking statements.

Please refer to the cautionary statements regarding forward-looking information in our presentation and our SEC filings. Please also note that our presentation includes certain non-GAAP disclosures. Please refer to Page 2 and the appendix of the presentation for the appropriate reconciliations to GAAP. And now, I will turn it over to Kelly..

Thanks Alan and good morning everybody. Hope you're having a great day and thanks for joining call. So, we had a solid third quarter with growth in revenues that despite the hurricanes which as you know impacted a meaningful part of our market.

We did have growth in core loans and we had very good expense control and net income available to common shareholders totaled $597 million, diluted EPS was $0.74 up $1.04 versus third quarter 2016.

But, if you adjust for the four penny effect because of merger-related and researcher charges, it would be an adjusted $0.78, which is up 2.6% versus third quarter 2016.

Our adjusted and return on assets, return on common equity and return on tangible common equity were 1.2, 9.2 and 15.6, which I think are very respectable performance ratios in this environment. Positively, we did have adjusted positive operating leverage which we were very pleased with.

Taxable revenues totaled $2.9 billion, which is up $1.04 versus the third quarter and that was led primarily by a good core loan growth and we did have the [benefits] [ph] and higher rates. Net interest margin increased 1 basis point to 348 as did our core net interest margin and we are pleased about that.

Adjusted efficiency ratio improved to 58.3 from 58.6, if you recall early on the year, we talked about our -- our cost began to kind of peak in the middle part of the year and begin to kind of common down that proving out as we hope to it was.

Non-interest expenses excluding merger-related restructuring charges totaled $1.698 billion and that was notably a decrease of 7.8% annualized versus the second quarter.

Our point of view, we are spending a lot of time on reconceptualization around all aspects of our business; it's the new world, simply many of the old methods and strategies don't work any more.

So, we are continuing, but on a more aggressive pace, our reconceptualization strategy around all aspects of the business, so if you are seeing and you will expect to continue to see meaningful changes that will result in FTE reductions and have positive expense impact going forward.

Still on Page 3, our non-performing assets climbed 1.4%, our net charge-offs declined to 35 apart from giving more detail, if you like it, the truth is we are just having great credit quality.

We did increase our quarterly dividend 10%, $0.33 completed a 920 million in share repurchases and our common equity ratio is still a strong 10.1%, so good return on capital to our shareholder.

If you look at Slide 4, we just had just one merger related restructuring charges of 47 million, $0.04 a share after-tax, almost all of those are restructuring cost including severance accruals and facility charges related to branch closings. We closed 61 branches in the third quarter.

We project at a high probability level closing about 78 in the fourth quarter, so we will have closed about 140 branches for this year.

This will of course produce positive run rate savings as we go forward and we would expect to continue to look aggressively at our branch distribution system next year and I will relate to that again in just a moment. If you look at Page 5, we started recently just trying to give you a little report card in terms of our performance versus guidance.

With regard to loans, we did miss as we indicated at a mid-year conference, what really happened was there was a huge spike in pay-offs in August, if you recall there was a meaningful reduction in the tenure and that just drove a lot of people to go ahead and refinance, so that drove our pay-offs up, which frankly we didn't see the time we did our last earnings call and I don't know that almost anybody did.

And we did have some slower production due to hurricanes not a dramatic impact, but some particularly in Florida where our power was out anywhere from 10, 12, 13 days, for lots of people across the entire state. Obviously, when power is out, and trees are down people are back on taking care of their family versus that the bank making loans.

So, we lost some production, we think we will get that back, but we did have some of that impact. Credit quality of asset was just impeccably good, our net interest margin, we did hit our guidance there, we were actually up a little bit of basis point in each area. Net interest income was stable.

Non-interest income, we did have a slight miss, but that was primarily because of lower performance commission coming out of the hurricane effect, if you want more detail on that Chris is certainly available talk about that.

But, basically the immediate impact of storms, yes, we have lower performance commission, we tend to get that back reasonably soon as rate suggest, but that did have some impact on this quarter -- we've had a nice quarter probably.

And we did lose some insurance production during the hurricane as well because again some people just didn't have power [indiscernible]. We think we will get that back but that was a diluted impact. Expenses were inline with our guidance and we felt good about that.

If you look at Page 6, as I said we had solid loan growth, I notice was a little bit messy but let me try to hit and see what we did.

So, if you look, you will see that our total loans were down 1.1% annualized, but our sub-total for commercial is up 1.2, I will point out that there is a reclass -- a one-time reclass between C&I and CRE, RPP coming out of our reset commercial loan system conversion.

So, basically what that meant was we shifted some loans out of C&I to CRE, but this is basically loans that are like to think about investment grade drug store, investment grade grocery with [land] [ph], we tended to call that RPP, we think it's RPP, but this system also wants to call it CRE.

So, this was not a change in quality, it's just a shift in that. So, the best way to look at is to put that together, we had commercial growth of 1.2. We had some very strong growth in a number of our categories, premium finance was up 34% annualized, Sheffield up 19% annualized, finance up 15%.

And so, we think that those particular segment and categories we have are doing very, very well. Just a little more color on the loan portfolio. If you look at the next page, we have been trying to break out four year to help you understand we are fully growing on our business.

It can look -- it can look and also good if you just look at the decline of 1.1%. But, if you look at our core portfolios, we are growing 3.8% and as I said, commercial is growing when you make that adjustment. So, we feel good about that and then our core season portfolios have grown 28%.

So, we are getting our core business are growing but simply focusing on these strategies which we have for the last two or three quarters to improve the long-term profitability by adjusting some of these optimizing portfolios.

So, in terms of key strategy, we continue to focus on growing more profitable loans that are better risk return, what that means is, that we are growing C&I, we are growing, deferred the level of CRE. We are pricing prime auto at a level which are through profitability and returns.

Frankly, their market to guidance so over delivered the returns were just low and so we just want to book of assets to generate total low returns for our shareholders. So, we are adjusting that and that's causing some volume reduction. But, that's okay because our relative profitability is going up.

We continue to sell most of our confirming residential mortgages, while we are meeting all the needs of our clients because we are booking all of them we just are selling most of the confirming because we still think the most likely the rate rise and we don't want to hold-off huge amount of mortgages at this time.

We continue to focus again on sales finance, so sales finance, we give you perspective decrease [$60 million to $70 million] [ph] or 25%, so that's a material impact in before run, residential decreased 6.3% in the short run.

Now, with regard to our expectations, going forward we think core loans are expected to grow 2% to 4% annualized in the fourth, so our basic core business is doing well, not great but well in this environment. Our prime holder and prime residential, I'm pleased to say we expect to take a lot of them in the first half of 2018.

So, you begin to see our total loan growth begin to move up as we head through 2018 because of those optimizing portfolios haven't gotten into where we want them to be. So, total loans will decline slightly end of fourth, but good solid growth in the core portfolios.

Look, it is a very challenging market out there, it is important from a long-term point of view to stay focused on quality and profitability attempting to have faster loan growth in the short run that is a fools game and we want to grow all the good loans from our clients that are well priced and well structured that we can and we are not going to try to improve short-term earnings by making bad loans.

I have been around 45 years, I have seen things, thanks to that many, many times, it's not like a strategy, we are not going to do it.

Still I would say to you that we are turning EBITDA we can, so we have a number of special strategies, run our specialized lending businesses, our core corporate portfolio is growing very, very well and a number of things that Clarke and our [many] working on to enhance performance and we think we can, but this will be in a context proper quality and profitability.

Recent acquisitions, I will say you are beginning to gain traction, they are not nearly where they need to be but they term to occur every time we do a merger we know that you go through a 18 to 24 months period of time that takes you to kind of stabilize and begin to grow we have been through, stabilization period is beginning to grow so that's good news and they were good benefits as we go forward.

Quick look at deposits on Page 8, I feel pretty good about this while our core deposits are down 7% that is totally about plan. Our non-interest bearing deposits of our plan are up 6.9% which is very, very good. We are beginning to see interest rates move up a bit particularly in commercial.

We have been holding our betas pretty tight, we will probably give up a little bit of that as we go forward, Daryl will talk about that in his report and so, we will begin to see that. That will correspond as we go along during the year, but loan growth and so that will be appropriate.

Importantly our non-interest deposits did increase again from 32.8% of deposits to 34% which is really important from a long-term point of view. So, just before I turn it to Daryl, just a couple of strategic comments.

We have this call every quarter, every quarter we spend a lot of time talking about what happened to the every little detail and income of the balance sheet on this quarter. And that's fine, we have to answer questions about it. But, it's not the most important thing for us to talk about.

Most important thing for us to talk about is what's going on in the world, what's going on, end of people going on in terms of our strategies and I would just say to you that look world has changed and if we need to be, and we are focusing on every aspect of our business to make sure that we are benefiting the old times strategies and processes that don't work and reinvesting in strategies and processes that didn't work, recognized in the new environment.

For example, we are tightly focused on strategies that where we can differentiate. It makes more sense in the world today to focus on a strategy you can differentiate on, unless you are the biggest player in town where you can have really low prices and based on huge scale.

And of course, that's not what we are, we are focused on differentiation, where we can operate with an inelastic demand curve meaning by differentiation we can get a meaningful price improvement that of course of the differentiation of the -- that's a whopping big deal conceptually and we are spending a lot of time on that.

We have these areas that we really can't differentiate unlike our middle market commercial, our small business are well, our insurance, our specialized lending business, we are focusing more and more and more time on those and frankly spending relative less time on other areas where we can't get the differentiated advantage.

We are spending a lot of time on digital AR and all the investors we need to make to be an aggressive player in the new world to play to the excess wires millennials et cetera and we are focusing to rationalize on branch networks that's been paid for conceptually by focusing on this branch conceptualization network strategy.

We are able to return some of that to the shareholders and we are able to invest substantially and the new strategies of the future which are really important in terms of growing the franchise as we go forward. We believe we are assembled to going forward, the winners are going to be the once that have solid strategies but have excellent execution.

That's exactly what we are focused on. Now, I will turn it to Daryl for some more commentary..

Thank you, Kelly, and good morning, everyone. Today I'm going to talk about credit quality, net interest margin, fee income, non-interest expense capital; our segment results and provide some guidance for the fourth quarter. Turning to Slide 9, we had a really strong quarter with regard to improved charge offs and non-performing assets.

Net charge offs totaled 127 million or 35 basis points, it decreased from 37 basis points last quarter. Loans 90 days or more past due and still accruing increased 2.4% versus last quarter. This is mainly due to government guaranteed residential mortgages.

Loans 30 to 89 days past due increased 113 million or 12.9% mostly due to seasonality and hurricane related impacts. NPAs were down $10 million or 1.4% from last quarter mostly due to improvement in the commercial portfolio.

Looking to the fourth quarter, we expect net charge offs to be in a range of 40 to 50 basis points assuming no unexpected deterioration in the economy. The slight increase in the expected net charge off range is due to seasonality. Continuing on Slide 10, our allowance coverage ratio remain strong at 2.93x for net charge offs and 2.44x for MPLs.

The allowance to loans ratio was 1.04% up slightly from last quarter. The allowance includes 35 million qualitative adjustment for the stores. Excluding the acquired portfolio, the allowance to loans ratio was 1.12x unchanged from last quarter. So our effective allowance coverage ratios remain strong.

Third quarter provision of $126 million compared to net charge offs of $127 million. Going forward, we expect loan loss provision to net charge offs plus longer. Turning to Slide 11. Compared to last quarter net interest margin was 3.48% up 1 basis point. Core margin was 3.32% also up 1 basis point from last quarter.

GAAP and core margin benefited from higher loan yields partially offset from funding rate increases. Deposit betas continue to be very modest exceeding our expectations. Asset sensitivity was unchanged from the prior quarter. GAAP and core margin both expected to be down 3 to 5 basis points next quarter due to higher funding cost and asset mix changes.

Continuing on Slide 12. Our fee income ratio was 41.4% down from last quarter mostly due to seasonality and insurance. Non-interest income totaled $1.12 billion down $54 million compared to last quarter. Both mortgage banking and other income had nice increases from last quarter.

Other income was up due to private equity investments which is partially offset in minority interest. A primary driver for the decrease in non-interest income was lower insurance income. It was down $84 million mostly driven by seasonality and lower performance based commissions.

Looking ahead to the fourth quarter, we expect fee income to be up slightly versus the fourth quarter of last year. Turning to Slide 13. Adjusted non-interest expense was slightly under $1.7 billion down $34 million from last quarter's adjusted expense number.

Personnel expense decreased $18 million mostly due to lower benefit expense and lower production-based incentives. While we had a modest drop in personnel this quarter, we expect the much larger reduction in salary expense to show up in future quarters.

Merger-related and restructuring charges increased $37 million mostly due to facility charges and severance. The professional services expense decreased $11 million primarily from lower AML expenses.

Going forward expenses are expected to be stable versus fourth quarter of last year excluding merger-related and restructuring charges, which equates to $1.65 billion for next quarter. We will achieve positive operating leverage in the fourth quarter for growth like and linked quarters. We expect fourth quarter effective tax rate to be about 31%.

Continuing on Slide 14. Our capital and liquidity remained strong. Common equity tier 1 was 10.1%; we are very pleased with this quarter with the third quarter payouts. Dividend payout ratio was 44% and our total payout ratio was 198% reflecting $920 million in share repurchases.

The remainder of our proved $1.88 billion of share repurchases are expected to incur evenly through the next three quarters. Now let's look at our segment results beginning on Slide 15. Community Bank net income was $396 million an increase of $51 million from last quarter.

Net interest income increased $24 million from the second quarter mostly due to positive performance in deposit betas. Loan production was disrupted in part by hurricanes well down since were impacted by larger pay-offs. We had a good increase in our commercial pipeline which was 15.4% from the end of last quarter.

As you can see we closed 70 branches through the third quarter we are planning to close as Kelly said about 78 this quarter. Turning to Slide 16. Residential mortgage banking net income was $67 million up $21 million from last quarter. Non-interest income increased $14 million driven by increased gains in the sale of residential mortgages.

Production mix was 70% purchased and 30% refi relatively stable compared to the second quarter. And our gain on sale margin was 1.85% versus 1.61% last quarter. Continuing on Slide 17. Dealer financial services net income totaled $38 million unchanged from last quarter.

Net charge-offs and regional acceptance set a slight year-over-year increase to 7.5%. Net charge-offs for prime portfolio remained excellent at 18 basis points. Turning to Slide 18. Specialized lending net income totaled $54 million unchanged from last quarter.

Compared to second quarter we had a strong loan growth in premium finance, Sheffield and equipment finance. Turning to Slide 19. Insurance holdings net income totaled $13 million down $42 million from last quarter. Non-interest income totaled $399 million down $84 million; this was driven by seasonality as well as lower performance-based commissions.

The fourth quarter fee income guidance includes lower expected performance-based commissions like-quarter organic growth was down 28% mostly due to timing of renewals and storm-related losses. Non-interest expense totaled $378 million down $18 million from last quarter driven by seasonally lower incentives. Continuing on Slide 20.

Financial services had a $106 million in net income down $9 million from last quarter. Fee income was up due to private equity investments, corporate banking has strong loan growth of 8.4% while wealth generated strong loan growth of 18.2% from last quarter.

A decline in deposits was mostly due to managed run off a larger balanced rate sensitive deposits. On Slide 21, you will see our outlook for the fourth quarter.

While we continue investing in our businesses to drive improved revenue growth, we feel very confident that non-interest expenses will continue to decline and we will strive to have positive operating leveraging.

In summary, we had solid third quarter earnings, positive adjusted operating leverage, decline net charge-offs and non-performers and increase to the GAAP and core margins and good expense control for the quarter. Now let me turn it back over to Kelly for closing remarks and Q&A..

Thanks Daryl. So very good Daryl it was a solid quarter take on a challenging environment, our revenues grew we had good core loans and growth, we had good core deposit growth, we have excellent expense control.

We have a lot of focus on the future, focusing on our branch - rationalizing, our strategy, our digital strategy and most importantly we continue to be tightly focused on our vision mission and values. At BB&T we clearly believe our best days are ahead..

Okay. Thank you, Kelly. At this time, we'll begin our Q&A session, and we would ask our operator alone to come back on the line and explain how our listeners may participate..

Thank you, sir. [Operator Instructions] Our first question comes from Nancy Bush with NAB Research. Nancy your line is open please go ahead..

Good morning Kelly, how are you?.

Hi, Nancy.

How are you?.

Good.

In this differentiation that you are talking about and in this rethinking of the franchise what has been the biggest emphasis to this, I mean when you are thinking about the factors that are out there right now, what really plays into this?.

So Nancy, I think it's, its broadly speaking is that the, world is changing frankly a lot faster than I would have four, five years ago, is largely around, the whole digitalization, artificial intelligence, robotics, all of which are allowing us in the back room to restructure and, frankly we can robotize many, many processes that were manually handled forever.

And we get that quality and more efficiency. So the back room offers, really prefers them in my career offers huge opportunities to recentralize and do the same with less expense.

In the front room as you know the world has changed in terms of their expectations of convenience banking and is not just Xs and Ys in the many years although they are the most strategically focused on it, but everybody who just have very, very high quality mobile banking et cetera.

So that is where we are having a spend an enormous amount of focus on being sure that we have the best offerings in terms of digitized delivery of services think mobile banking and et cetera and be able to do it in a efficient way.

So in order to pay for all of the front room, we are rationalized in the back room and we rationalize in the branch structure.

So it's, simple way to answer and I think about is just, you actually wrote to our commentary about some time ago, the world if really changed and so, we are thinking about every aspect of our business that we are today, than we were three years ago, two years ago..

Did this that thought process include and we just saw JPM by WePay doesn't include, the bringing in fintech franchises, have you thought that for ahead is that something and that would be attractive to you?.

Absolutely, we have for 18 months, you may have heard how we wanted first to have one of our executive officers as our Chief Digital Officer.

He is full time focused on scouting the role figuring out what the best fintech offerings are, looking for opportunities to buy partner loan from we are just completely open minded about how we can integrate the advanced technique to fintech brought to the world. So, the answer is clearly yes..

And I would just ask as the final part of this, in looking at the banking franchise and rationalizing the banking franchise is it possible, I mean you guys have spend decades now building a franchise is it possible that you will look at regions to exit?.

In today's world Nancy, everything is possible. So, well we think about that is we first frankly focusing on, pardon me, we are first focusing on what I call residual business and that we have that, don't really make sense because of not that we might not be making money, but we just can't make much money.

So we get as I mean those kind of strategies recall they won't be tightly focused on the ones that do make sense. In terms of regions, in terms of the market outreach, as I sit here I don't have any particular regions that I would say we are in that we don't want to be in.

But, the clear thought process that I will be focusing is, de-emphasizing regions that don't offer as much opportunity and improving our profitability.

Now that may ultimately lead to your point lead to actually exiting, but right now our focus is on improving profitability in those regions that don't offer substantial growth, but do offer good solid relationships today, we were focusing on providing still good, always quality, but because we have such huge brand value there, we think we can provide this solid service quality value with less expense.

And then reinvesting those expenses and the market instead our higher growth markets and offer more long-term potential..

Thank you..

You bet..

Thank you. Our next question comes from Betsy Graseck with Morgan Stanley..

Hi good morning..

Hi Betsy..

Hi good morning..

Good morning..

Good morning..

I just want to focus in on the loan growth opportunities here, because I know that you are looking for the core portfolio to be growing in the 2% to 4% range or so, yet in the near term it's going to come in below that because of the run-off portfolios which feel like they are going to be done running off in 1Q, 2Q next year.

But maybe if you can give us a sense as to that piece of change and what's the issues in the run-off portfolio that you really want them to be moving off as oppose to sticking with them in this low growthish environment? And then maybe highlight where you see opportunities in your regions for accelerating loan growth? Thanks..

Betsy, I'll take a start and then Clarke can add some detail.

So we are really focusing on, as you how to say optimizing these the mortgage portfolio and the prime portfolio there is no surprising those portfolios are now generating adequate returns on equity and in terms of when you think mortgage in terms of rising rates, now we are about to have auto where we wanted to be, I mean the business we're going to stay in, but this would be and not chasing volume, but chasing margins and profitability that's heading towards stabilization, mortgages heading towards stabilization just a natural run-off.

So, you are right first half that being, they would be where they want to be. But really the more important thing it doesn't really come through I think in our numbers is that we have really good traction in a lot of areas. Our corporate banking strategy is growing extremely well, strong double-digit growth and has a good long runway.

Because, as you know we weren't natural player in the big, the high-end market until the last few years, we have a fantastic team in that area and it is doing really well and we'll continue to do well going forward.

Our growth strategy is really hitting in all cylinders in terms of fees and asset generation is doing extremely well, all of our specialized lending businesses are doing fantastic.

I mean you grow in double, you grow in 20%, 24%, 25% growth rate and as seasonal somewhat, but I mean still they are doing extremely well and we are differentiating it, so I don't worry about it comparative prices much on that.

The biggest challenge is in the community bank, where we are competing with everybody in the world, but what we are doing there is focusing on, the quality service delivery, but also frankly differentiation.

We are in the midst of rolling out today in our community bank a very, very exciting a quality differentiating approach which is around what we call financial insights.

And what that it is rather than going to decline, so I'm talking about loans and deposits, we go and talking to them about how we can help them grow their businesses, we try to get clear about what their goals and strategies are going forward. So that we can better augment their performance by support them.

For example, we, I believe the only bank out there that through our BB&T leadership institute that goes into companies and talks to them about how to help their companies for better by having better leadership talent and we have, a very, very long history of providing excellent executive leadership training that we bring to our clients.

And they really appreciate that, they appreciate if that we don't come in day one and ask for a loan, but the positive is we come in and talk about how can we help them grow their business, how can we help them their individuals grow and that's got really, really good attraction.

The number of all those Betsy that we are focusing on is well so, I wouldn't want you or others to think that, we got a decline in loans and that's the whole story that's not the story at all.

The decline in loans is simply a smart profitability strategy of restructuring our portfolios that don't make as much sense and reinvesting more time and energy in ones that do. And we think that forms in those areas are very strong..

Okay, thanks. Very helpful answer. I appreciate it Kelly..

Thank you..

Our next question comes from Matt O'Connor with Deutsche Bank. Matt your line is open..

Good morning..

Hi Matt..

I was hoping you could elaborate on the insurance performance-based commissions, how much of the insurance fees, does that represent what are drivers and what's the outlook?.

Yes. Happy to do that Matt, this is Chris. First thing I would maybe point out that, I think that there might be some mistake about the inline performance.

We come off our second quarter which is our highest quarter of the year to our lowest which is in the third, when you call out that $84 million reduction about $56 million of that is seasonality about $9 million was just directly related to hurricane losses due to performance-based commissions, three was like Kelly said was just production loss, facilities are really shutdown, so we couldn't do business.

And there is about $16 million related to timing through various businesses where we might have received something in the second quarter of this year, we received in the first quarter in the year's prior.

So just to clear that on seasonality, but the outlook I think it's a great question that the storms do cause a reduction in performance-based commissions in the short-term, but we get improvement over the intermediate term.

So, really over the long-term this is good for brokers, you have to go through this wonder of short-term paying to really get pricing up to the long-term. I think what you could expect from us in fourth quarter is commission is being up around the 5% level and that includes in the reductions we would have in performance-based commissions.

We still see economic expansion driving our unit growth, this quarter we had 5% new business growth, when you drive insurance one is pricing and its stabilized down from 4 and to say the 2 to 3 range and we have the opportunity now through storms for pricing to actually improve further.

Second, it would be client retention and we're industry leading at 91%, 92% or so there. So economic expansion, I think is one pricing new business growth we commented on.

But to your point that outlook on performance-based commission this is really too early impact, you can't get the impact, the recent catastrophes, we focus on hurricanes there have been four of those, but you also have the Mexican earthquake, you've got the wildfires in California.

So, given there is lots of capital in the market, today the industry is in transition as it relates to all this. Of offsets, the most that I read range up to $150 billion plus by the way.

Most of what you read is, if you, if it exceeds a 100 and its going to put capital pressure on the industry side, I think it is likely to causing pricing increase as going forward. Obviously depends on levels of new capital coming and I think we will likely see some sort of price increase.

We've also got the impact of standard cares and support to retail market that really freeze pricing after the storms and what they really trying to wait on so see what the reinsurers do which is a price reset at the first of the year. So, I think that also will likely drop pricing out for carriers..

Okay that's helpful.

And then if I could just squeeze in on a follow-up on expenses, I know there was a comment about hoping to continue to push cost down obviously fourth quarter, the ability on does you think about 2018 any early thoughts on can you reduce cost on absolute basis, are you trying to offset kind of inflationary pressures, what are the thoughts on the expert plan heading into next year?.

Yes Matt, this is Daryl. We are still putting together our 2018 plan.

I think the best way I can tell you right now is what Kelly said is that we are continuing to look forward our efficiencies and kind of redistribution of our cost structure and you will continue to see the salary line item and more severance payments which will drive our personnel cost down for the next couple of quarters.

We're going to use that into 2018, we are going to give guidance on 2018 yet, but no that we have pretty much wind in our sales right now from an expense basis because its headed down right now and well we're going to make investments in our company, we still have a pretty good trajectory down..

Okay, thank you..

Our next question comes from John McDonald with Bernstein..

Good morning, Daryl, I was hoping to ask just a little bit about the NII outlook and net interest margin on.

For the net interest margin down 3 to 5 basis points next quarter, can you give a little details on the funding cost and asset mix pressures that you referenced?.

Yes, I think we made a decision John to grow our investment securities portfolio, over the next quarter or two consistent with what we think we're going to see loan growth over the next year or two. So our securities portfolio is going to ramp up a little bit kind of close to what it was a year or so ago.

So, consistent with maybe three plus percent that's basically given us a negative asset mix change, but gives us positive net interest income, a contribution from that perspective. And then from a deposit beta perspective if you look at the last four rate increases, our deposit beta has been about 14% today on interest bearing deposits.

We continue to respond and, be a aggressive on the commercial side as we need to and I think retail side is still pretty tame though we are starting to have a couple competition more for wealth clients and all that.

So we're trying to be responsive, but I think over the next couple of rate increases you are going to see that 14% start to drift up probably back to normal levels you had, but closer to higher levels than where they are today..

Okay, and the change in mindset about the securities is driven more about the loan growth and challenges of loan growth rather than a rate outlook change or anything like that it sounds like?.

Yes, I don't think we're smart enough to know exactly which way rates are going to go, but alone that the shape of the curve and you have adverse as long and all that, I think we just want to keep our portfolio approximately 20 plus percent of our balance sheet, from a liquidity perspective.

We're really gearing up to have pretty solid loan growth into 2018 and we just want to make sure we have liquidity, so we want to make sure that we're funded with our core clients, we have been liquidity with our securities portfolio as our important loan portfolio starts to take-off..

Okay.

And then just on the fourth quarter outlook for net charge-offs, so can you remind us what portfolios see that seasonal up tick in the fourth quarter and also is that charge-off guidance the 40 or 50 include any hurricane impact on charge-offs that you might expect for the fourth quarter?.

Yes. John, this is Clarke.

Primary seasonality impact in the fourth is always going to be in our retail portfolios, but more specifically its Regional Acceptance or some problem or wind or so while we are not expecting any increase in deterioration it would be the normal year-over-year seasonality that's the biggest impact, but also just to remind you, well we had extremely low third quarter number in our commercial losses and we're just forecasting maybe a little more normal losses, hopefully we'll do better, but those are the two primary factors..

Okay, got it. Thank you..

Thanks..

Our next question comes from Gerard Cassidy with RBC..

Good morning guys..

Good morning, how are you doing?.

Kelly, can you give us a little more color you talked about looking over the long-term and not necessarily the short term when it comes to loan growth and some of the things that you folks are seeing in the marketplace on underwriting.

What are you seeing that makes you little nervous especially at this point the cycle and can you bring that by loan category whether its CRE or commercial or consumer?.

Yes. Gerard, I think the mega issue here is that you know we've been on a nine year slow economy.

Asset returns for all investors have declined steadily that's driven the profitability down and so everybody is scrambling for profitability which means they are scrambling for assets and is invariable happens as you know when people are scrambling for assets and there is a lot of people scrambling then you get declines in prices and you get, stretching in terms of term.

So, the mega issue is we did a lot of pricing and to two level of underwriting, two longer terms not special covenants et cetera.

I think that's generally occurring across the board, it was more specific and, like more to family although we would tell you that as improved two years ago, 18 months ago we've heard about that, but I think everybody is going to rationalize that down a bit more, little more rationale.

And so, I don't think that there is any one particular area that we were, there is a little bit of a spike in story facilities, fee links like that, but nothing that's dramatic, and Clarke would you add anything to that..

I would just add to what Kelly said, on the corporate side to our generally probably the most rationale, but what we see its time to continue to get a mandatory, to deliver the mandates for the syndication or loosening covenants, reducing the number of covenants, dispose federal structural weaknesses that we know in the long-term, you got to be careful on, I think we see the most hyper competition in the small regional community bank winning space which is again a lot of structural consideration give ups and little pricing for that's probably the most hyper compared to and your third point, I think you'll had to always look at is not all growth is per saying, so I think everyone in the slow environment is trying to find a little niche or something to get it growth that they are not highly experienced into kind of the herbs chasing some of these new forms of lending to have it being tested yet and that's underneath the lot of these numbers.

So, we're just trying to be mindful of all those issues..

Could you guys equate this period to 2005 or is that, or is too aggressive back then when you think back about it?.

I think it was too aggressive back then. Then you had a much less informed, you for around chasing bubbles. And you know we have a much more inflated level of bubbles throughout all asset classes. So this is nothing like 2005 and 2006, but totally in the real estate category.

So, I personally think anything impressive we would make about lending today should not suggest, we think its way out of control and its leading to recession and all of that not at all..

Very good. And then on the deposit side, obviously you guys are very clearly about taking down the interest bearing deposits and you grew your non-interest bearing obviously quite well.

Aside from the betas that you've already touched on, was there something else in the interest bearing that prompted you to kind of take them down the way you did this quarter?.

Yes. Gerard, it was basically just lower funding play, we had some deposit that was close to LIBOR flat that was indexed to market rates, and we just made a decision to basically fund them for federal more bank advances which was sub-LIBOR probably by 10 or 15 basis points.

So it's just an economic decision, when you are being paid LIBOR flat that's really not a, I would call core client, they are very, very sensitive from that perspective. So we didn't lose any core clients, it was just a economic decision..

Great, thank you..

You're welcome..

Our next question comes from Erika Najarian with Bank of America..

Yes, hi good morning..

Good morning..

Good morning..

My first question Kelly is on maybe asking further little bit more detailed and how you are thinking about the branch reduction strategy for 2018 and 2019? And, as you think about your distribution channel, do you think that could naturally lower the efficiency ratio all those being equal from the 58% that you've been, booking all year?.

Yes. So conceptually, we're going through cannibal process and the, the first phase of the process is looking at kind of what we call the life free that's where you have, in the market you may have 15 and 20 branches on this one particular street you have three branches all that are within 5 or 6 miles each other.

So you close the one in the middle, you move the associates to the, of the two and it doesn't really change and your expenses go down.

So that's what we've been doing kind of this year, as we head into 2018 and 2019 then what we have to do is think in terms of eliminating the branches but being assured that we are investing properly in the other areas, other forms of distribution so for example you might see us there closing branches but adding free standing ATMs or you might see us closing branches but adding ATMs and drug stores or Wal-Marts or places like that, because while most of the declines still go to the branches for more complex products, I'll now for a lot I feel just making a deposit in cash and checks, as we go through 2018, 2019 it will be a little more complex, but still a plenty of opportunity it just may require a bit more add back not terribly expensive add back in terms of the way to meet the convenience needs of the client.

In terms of the efficiency ratio all of those to get will improve our efficiency ratio, because we're simply able to reduce expenses and have relatively small negative impact in terms of income. So, everyone that we closed improves our efficiency..

The other thing I would add with that Erika is as we are closing branches what we have found is our retention rates are really, really high in the high 90s. So, we are maintaining the almost 100% of clients in revenue and deposits that from the closed branches. So, I think there has been really little impact on revenue or core deposits..

That's really helpful. Thank you. And the follow-up to that is, so essentially you are telling investors is the value of the branch and changing world has declined, how should we think about this relative to the strategy in terms of how BB&T grow up.

So, in terms of you had been community bank roll up story, so as we think about potential other roll ups going forward does that mean your less likely to do them or does that simply mean that the natural cause savings going forward from here is it completely differently and maybe higher math than we had seen in the past?.

So Erika, that's a very good question, I have addressed that in a couple of conferences. So it does make a material change and here is how.

So historically, when we acquired an institution you could very reasonably mathematically project the future cash flows from the projected operations of a branch discount those cash flow and back them figure out what paid for and it makes sense, because the projected cash flow is relatively constant and in many cases it's growing.

Now as we look at a bank acquisition, we have to be thoughtful about the future cash flows of those branches going down, because in the last two or three years especially the level of branch activity has been going down for us and everybody else though we have been 6 and in some cases higher percentage of lower activity three year.

And so what that means is if you are looking, an out of market acquisition where you're going to keep the branches it doesn't mean it's not valuable, but it means is meaningfully less valuable, because when you look forward the predictability the cash flow is less and you are sure will be a decline in cash flow.

And so you have factor that in, so you would be discounting back a lower projected cash flow with more volatility and so necessarily you pay less of that. For all of that means and as it's said the value of out of market acquisition for somebody like us doesn't make any sense.

There is a price you do it, it may have a price that [fell when they expect] [ph]. End market hasn't changed the reason for that is because you got the same factors with regard to the changes in the future projected cash flows of those branches.

But, in an end market where you have dramatic overlap you do, what I call effectively monetizing the value of that branch by closing it immediately and drawing those lines over to other branches and to other forms of digital interaction and so you cut the expenses, you don't have the revenue which can do that out of market you got the branches you just got off your relationship with the client.

End market you got the expenses just like -- it's just exactly what we are doing in terms of rightsizing our branch size, it's the same concept when you are doing end market merger. And so we would continue to have a strong appetite for end market M&A.

We have it release our own internal pause, you have to be putting in place back 2.5 year, but I would tell you we are very, very close to releasing that -- we basically have moved through the period we were concerned about in terms of the major projects and somebody in Pennsylvania and so forth. So, we are pretty close to either left release a pause.

In terms of M&A, there is the issue with the BSA, issue, we are in the bottom half of the [8, so the top half of the 9] [ph], top half of the [9] [ph], on average we feel very good about where we are, we expect, and we have done all that we need to do in terms of changing and assessing the processes.

We are just working with our regulator in terms of their evaluation of that. And while, I cannot promise anything, I'm optimistic that in the not too distant future, we will be removed from that order and have capability of just paying back in the M&A again.

I want to be very clear, however, that is now signal BB&T is getting ready to go out on some big rampage of M&A. As the M&A strategies I just described is very different than what it was few years ago. We are very conservative.

There will be some partners who would be interested in doing business with, where it's good for everybody that we are most focused on our shareholders and we are simply not going to do to lose a deal..

Got it. Thank you..

Our next question comes from John Pancari with Evercore ISI..

Good morning..

Good morning, John..

On that -- just going back to the M&A topic, can you just remind us though -- in terms of bank versus non-bank acquisition interest and would you be interested in ensuring some properties if they come about or you're not looking when they are growing that inorganically anywhere? Thanks..

We are very interested in insurance acquisitions today we are not prohibitive regarding insurance acquisitions and we are open for business as you will. And very interested into an insurance acquisition today. We like to think of our insurance business and Chris can give you more color if you want.

We would like to ideally keep it at about [2010] [ph] revenues, we are about 17% that's why we have room to expand there. And there are good opportunities out therefore. We would consider other non-bank acquisitions, but to be honest other than insurance, I don't really see that happening. People talk about asset acquisition businesses.

Most of the times now we don't work in those and so we are -- I would say we are currently tightly focused on insurance. The single -- any small things and by the payment business we look at but they are not meaningful in terms of moving the numbers. And then, we reopen the bank acquisition opportunities I just described to Erika..

Great and that's helpful.

And just remind me on the bank side, what will be your suite spot again in terms of target asset size, if you were to do whole bank deals?.

I think, the suite spot would be 20 plus billion..

Okay. All right. Thanks guys. And then, separately back to the competition discussion, I know you flagged it a few times here in terms of where you are seeing that pressure particularly on the lending side.

Can you talk a little bit about what that means for -- your loan yield here borrowing any incremental moves from the fed? How do you think the competition could weigh on loan pricing and how that could play out in terms of your loan yield as we look in the out quarters? Thanks..

As we said, it's highly competitive out there. So, this quarter we did see some compression and the new loan spreads not material.

So we have been doing a really good job despite the competition of generally holding up our spread although they continue to be pressured comparatively -- a wrong yield was actually up as we benefited from the rate increases and as Kelly laid out very well earlier in the presentation, mixed strategies around better pricing schemes for things like our indirect auto, the business that we get out of some of the subs which have higher margin.

So, we think those help to offset some of those competitive pressures. But, it is a real challenge as we look forward and we fairly don't want to comment on….

The only thing I would add to that John is, you have to look -- so, we are optimizing mortgage and auto. When you look at the spreads like for example auto is big chunk of the book was put on as spread that was a little over 100 basis points or at 120 basis points. We now optimize that the spreads are not close to 200 basis points.

So as those old ones renewal and roll over that's going to give us some left. As Clarke said, there is competition in specific C&I credit, whatever, but if you point it all together, I think our credit spreads are still hanging in there pretty well because of our optimization efforts that we have there.

And rate sensitivity wise, we are about -- very still up or the short end is about 2/3rds going in, it is our net interest income come up at the -- curve actually even and then shifts, we will also benefit from that. So, it really just depends what the rate outlook is..

Got it. All right. Thanks Daryl..

And our final question comes from Kevin Barker with Piper Jaffray..

Thank you. Good morning..

Hey, good morning..

So, you obviously talked about M&A quite a bit here and you are looking at that as a longer term strategy, you have to deal with consent or first but taking the other side of it, there has been an increased talk of the Sify buffer potentially moving into $250 billion or going to some type of quality approach.

Given then, you are a little bit over $220 billion in assets right now, have you ever considered staying below $250 billion in assets in order to not have to deal with possibly the liquidity coverage ratio or having more flexibility with your capital ratio..

So, Kevin, I -- first of all, the value of the $250 billion is very much in slice, there are a number of conceptually proposals and converse the ensuing bill et cetera, it's not at all clear, what's going to happen with regard to the value is at $250 million.

What's most likely getting ready to happen is, I'm going to eliminate the hard ones when the fed is reshuffle in terms with their board of governors. I think they are going to eliminate the hard full 50, 250 and unless they can go away and banks that will be gauged based on the weighted average assessment of their risk.

And so, if that happens, it's actually for us given that our weighted average category of risk, but relative to some of the biggest banks, we could be $400 billion, $500 billion and still not be just be a Sify or require a huge amounts of excessive regulation. So, we will see how that plays out.

But, independent of that, as we look at the next deal, it's already, this is close to $250 billion, if that's still the existing rule, we will be mindful of exactly how we do that deal.

But, look here is the thing Kevin, for us sit back here now and say that we are not going to go over $250 billion because there are some things that we have to deal with -- would be redeeming ourselves a long player.

In this business, you are growing or you are dying and we are a growth company and robust right $250 billion, when the appropriate time comes we will be real happy about it..

Okay. And then, when you think that you talked about this and it has but some of the expenses as you build up or some of the investment that you made in order to prepare for the $250 billion in assets.

At what point, as far as the investments, how far long do you think you are in preparation for a $250 billion?.

It really depends on what happens to the rose Kevin. I would say that we are hopeful that the advanced approach kind of fans away when Governor Tarullo was in office. He was not a fan of the advanced approach. We believe that will continue on, but we really need to see and hear that from the new board of governors.

That would be one big expense you can take off the table. As far as the capital, the OCI market that's just something that we would manage and I think we were very comfortable managing that with our held to maturity portfolio.

OCR and got talked about that in the past, I think with the combination of our core deposits and our current liquidity coupled with usage of letters of credit from the home loan bank, we can minimize that cost, so until we significantly. So, there are couple of other things, but as Kelly said, we will grow over $250 billion.

We will -- you pay us to manage our business and do it effectively and we will minimize the cost as much as possible. We don't see anything prohibitive there..

Okay. Thank you for taking my questions..

At this time, I would like to turn things back to Alan Greer for any additional or closing remarks..

Okay. Thank you, Laura. This concludes our call for today. Hope everyone has a great day. If you have further questions, please don't hesitate to contact Investor Relations. Thank you..

This concludes today's conference. Thank you for your participation. You may now disconnect..