Alan Greer - Investor Relations Kelly King - Chairman and CEO Daryl Bible - Chief Financial Officer Chris Henson - Chief Operating Officer Clarke Starnes - Chief Risk Officer.

Betsy Graseck - Morgan Stanley Ken Usdin - Jefferies Gerard Cassidy - RBC John Pancari - Evercore ISI Stephen Scouten - Sandler O’Neill Geoffrey Elliott - Autonomous Paul Miller - FBR Capital Markets Vivek Juneja - JP Morgan Terry McEvoy - Stephens Inc. Nancy Bush - NAB Research.

Greetings, ladies and gentlemen, and welcome to the BB&T Corporation Second Quarter 2015 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, Tracy, and good morning everyone. Thanks to all of our listeners for joining today. We have with us Kelly King, our Chairman and Chief Executive Officer; and Daryl Bible, our Chief Financial Officer, who will review the results for the second quarter of 2015.

We also have other members of our executive management team who are with us to participate in the Q&A session, Chris Henson, our Chief Operating Officer; and Clarke Starnes, our Chief Risk Officer, Ricky Brown, our Community Banking President who is normally with us on these calls, is not available today.

He is having some shoulder surgery, so we wish Ricky well with that. We will be referencing a slide presentation during our comments today. A copy of the presentation as well as our earnings release and supplemental financial information are available on the BB&T website.

Before we begin, 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.

I refer you to the forward-looking statement in our presentation and our SEC filings. In addition, please note that our presentation includes certain non-GAAP disclosures. Please refer to page two and the appendix of our presentation for the appropriate reconciliations to GAAP. And now I will turn it over to Kelly..

Thank you, Alan. Good morning, everybody. And thanks for your continued interest in BB&T, and thanks for joining our call.

So, we had a really solid quarter frankly with excellent start, [ph] strategic results, revenues were up linked and like quarters, and I might add in a relatively tough revenue environment, excellent credit quality, capital and liquidity, so overall a very solid quarter.

Net income was $454 million in the second quarter; diluted EPS totaled $0.62 but if you exclude the non-cash loss on American Coastal and merger related charges, it was $0.69.

Fee income ratio continued to improve to a very nice level of 46.3% versus 45.8% in the first quarter ‘15 and if you ex the American Coastal non-cash loss and the AmRisc, [ph] our ROA 1.17 ROE was 9.06 and importantly our return on tangible common equity is 14.05. From revenue point of view, we were very pleased.

Our revenue totaled $2.4 billion up $23 million or 3.9% annualized; revenue increased 1.3% versus second quarter of ‘14, kind of lot of fee income positive is particularly in mortgage banking and investment banking. Our fee income ratio continued to be strong, as I said and we think that is a continuing positive for our company.

In the lending area, our average loans grew 3.9% versus first quarter but if you exclude our planned residential mortgage run off, it was 7.8%, which was very good in this environment. That area was led by C&I, Direct Retail, Sheffield and Regional Acceptance. As I said, we had some very strong strategic developments during the quarter.

We did complete the sale of American Coastal and significantly increased our ownership in AmRisc but it basically, in concept it eliminates the small underwriting risk that we had in American Coastal.

We reinvested that in AmRisc which increases our ownership in a really solid fee-income business, so some net real positive from a quality point of view. We successfully closed and converted the Bank of Kentucky on June 19th. It’s going great.

I was out there last week for a visit with the groups and a whole day with them, had breakfast with a group of tellers and associates. And they were very excited to have meeting with the senior leadership team and then had a meeting with all of their officers and Board members.

And I’ll say, although very early, it’s off to an extremely positive start and Northern Kentucky, Greater Cincinnati market is really fantastic for us. Very excited about the fact we’ve got approval for Susquehanna with a planned August 1st acquisition and a conversion later in the fourth quarter. This whole process is going very- very smoothly.

The receptivity in the markets has been great. I was up in Lancaster last week, Susquehanna was a key sponsor in the LPGA, a golf tournament and so had a chance to meet a lot of clients, a lot of associates and attitudes were extremely positive. This is a great company. You may have noticed, they got number one in client service quality by J.D.

Power in the Mid-Atlantic region recently. By the way BB&T was the best, number one of large banks in that period. It’s a huge opportunity for us in really good markets.

These markets are a lot like a rest of our footprint, kind of a combination of some good solid rural and mid part of the state, good medium sized cities just like we’ve always operated in, excellent large market in Philadelphia, excellent wealth opportunity, really strong core banking opportunity. So, it’s going be really, really good for us.

And don’t forget, this is a really big scale opportunity for us with regard to expenses. If you are following along on the deck, look at slide four. We always like to point out a few selected items that affect earnings. So, we did have a positive income tax adjustment of $0.15 on an after-tax basis.

So we did extinguish about a $1 billion of federal home loan bank debt, which had $0.15 negative EPS impact. So they are just kind of washed out. We did have a non-cash loss on sale of American Coastal of $0.05 and we had $0.02 in merger-related restructuring charges. So, the way I look at it that was about $0.07 negative impact to recurring earnings.

If you follow along on slide five, I’ll give you a little more commentary with regard to the lending business. Our C&I loan growth was very strong. Average C&I loans were up $1.1 billion or 10.6% annualized. We had strong growth in corporate lending, mortgage warehouse lending and government finance.

I will tell you, the C&I lending is currently mostly in larger participations and it’s very competitive, so spreads are very tight, although I’m proud of the fact that our spreads were basically flat compared to the first quarter, which is a big achievement given the environment.

We do currently expect C&I to continue to grow in the low double-digit range in the second quarter if you exclude our pending acquisition of Susquehanna and after you’d include Susquehanna, C&I will likely see 30% annualized.

CRE in the construction and development area increased $33 million or about 4.8% annualized and the period balances were up more than $200 million but about 40% of that was from acquisition of Bank of Kentucky. Organic growth was strong based on a very positive change and then we had a material decrease in pay-off activity that we saw last quarter.

We are seeing strong growth in fundings of multifamily construction and hospitality projects. Spreads on C&I lending in this case actually improved during the second quarter and our expectation is that C&I growth to be a bit stronger in the third quarter. CRE income producing increased $50 million or 1.9%.

This was strong growth in industrial, retail property segments. And the period balance was up almost $400 million but most of that most due to the Bank of Kentucky. Market fundamentals generally continue to improve. This is a really good market now. Spreads continue to tighten but on a net adjusted basis, risk adjusted basis, they’re still very solid.

So, looking next quarter, we expect C&I TP [ph] to show strong growth due to continued organic success and the impact of full quarter of Bank of Kentucky and remember, we’ll have a partial quarter of Susquehanna. If you look at average direct retail lending, it’s a really, really strong story for us.

A lot of work has been done on that last year and a half and it’s really beginning to pay-off. We’ve increased $258 million, almost 13% annualized, primarily due to HELOCs and direct auto lending in the branches.

This is the sea change from the last 25 or 30 years, they are really beginning to make a lot of good auto loans in the branches, which is outstanding. Wealth’s contribution to the direct retail lending continued here at record levels on market [ph] basis, really good production from the community banks.

So, the wealth strategy just continues to be an outstanding success, which continued to have significant momentum in direct retail lending in the third quarter and we expect direct retail to grow at a faster pace, part of that’s due to full quarter impact of Bank of Kentucky but most of that strategy is really working.

And average sales finance, which is largely prime auto lending for us, we grew modestly in the second quarter slow and significantly from the first quarter. We’re trying to be really careful with regard to frankly pricing in that market is extraordinarily competitive and the prime space, spreads are really, really thin. It’s our lowest yielding asset.

And we’re really just kind of turning it back in terms of our volume expectations. So unless the spread opportunities change, you would expect to see that decline for us. But on the risk adjusted, capital adjusted basis that’s a net positive change. Average residential mortgage loans were down $565 million, 7.4%.

Remember this is our plan of letting that run-off because we’re essentially selling all conforming production. Our positive retail originations into the quarter were 5.5 billion, up from 4 billion in the first quarter. They were modestly versus last quarter, but stronger than the second quarter of last year.

Gain on sales declined due to slight -- our correspondent channel mix. So looking ahead, we continue to expect contraction in our resi portfolio; we hope to continue that strategy and we think we will for some period of time. So in the third quarter, absent the impact of Susquehanna, that will continue to decline.

If you include Susquehanna the residential mortgage will likely grow. But remember, that’s not a change strategy, that’s just bringing on the Susquehanna balances. And other lending subsidiaries grew $383 million or 13.6%. This was a strong seasonal quarter for us.

Strongest components were Sheffield, Grandbridge, AFCO/CAFO, it’s called our insurance premium finance business and Regional Acceptance. Third quarter also reasonably strong; that will drop-off some in the fourth quarter, but we do expect third quarter to have double-digit growth in this category.

So to sum up, we expect average total loans from investments held to be an annualized 3% to 5% in the third quarter on organic basis; excluding residential mortgage, we expect it to be 6% to 8%. Obviously if you include all the deals, we’ll have growth that will be probably in the 30% range.

And we would expect at the end of the third quarter, end of period loans to be $135 billion. So, if you will turn to the next slide, we’ll give you just a little bit of commentary with regard to deposits. That story just continues to be outstanding, excellent deposit growth, really continued to improve deposit mix.

Overall, our non-interest bearing DDA grew 18.2%; if you exclude acquisitions, it’s still a very strong 13.7%. Personal, business and public funds all grew 12.8%, 15.3%, 8.8% respectively versus second quarter ‘14. DDA deposit mix was the strong 31.5% versus 28.3% in the second quarter ‘14.

And our cost of interest-bearing deposits continues to come down steadily to 0.24%. So, we made excellent progress over last couple of years in that area. So it’s a solid quarter, as you can see. We’re very excited about the growth opportunities and the efficiency gains that we’re going to experience heading into the next year.

Before I turn it to Daryl, I just want to emphasize, we are really focused on efficiencies. The market is good; we think it’s growing at a solid 2 to 2.5 growth rate which is better than most of the world, but it’s not a really robust growth rate. And so, we believe in that environment that experienced management continues to be extremely important.

We have laser focus on organic expense management and we will absolutely gain efficiencies and expense management through the combination of Bank of Kentucky and Susquehanna. Let me turn it to Daryl now to give you some more color on some other areas..

First, mortgage banking increased $20 million, mostly reflecting higher net MSR related income and higher commercial mortgage volume. Second, investment banking and brokerage fees increased $14 million, mostly driven by higher capital markets activity.

This growth was offset by $18 million decline in insurance income mostly due to the sale of American Coastal and a seasonal decline in employee benefit related revenues. Finally, other income decreased $25 million due to the loss on sale of American Coastal.

Looking forward, we will have a seasonal decline in insurance revenues in the third quarter, plus softer mortgage revenue. We will gain a partial quarter benefit of $25 million to $30 million from Susquehanna. But overall, fee income for the third quarter is expected to be flat to down 2%.

In the fourth quarter, fee income is expected to increase 3% to 5% both versus second quarter. Turning to slide 11. Non-interest expenses increased consistent with our guidance.

Personnel expense increased due to higher production related incentives, acquisitions, annual merit increases and higher equity-based compensation for retirement eligible associates. FTEs were up 489, mostly due to acquisitions.

Excluding the loss on debt restructuring and merger charges, expenses were up $47 million, driven by personnel related costs, which include new Texas and Kentucky branches. Looking at Texas, our effective tax rate was 13.8%, due to the STARS recovery. The adjusted tax rate was 32.2%. Going forward, we expect our effective tax rate to be around 30%.

Excluding the loss on debt restructure and merger charges, we expect non-interest expense to increase 3% to 5% due to the upcoming Susquehanna acquisition. In the fourth quarter, we expect 6% to 8% increase versus second quarter in non-interest expense due to the full quarter impact of Susquehanna.

Excluding merger related costs, our fourth quarter core expenses are expected to be approximately 1,550 million. We also expect 60 million to 80 million in merger charges for both third and fourth quarters. We are very confident we will improve our efficiency and reduce these expenses.

We are already on our way to achieve our targeted savings for Susquehanna by the end of 2016. At least 32% of their expense based will be driven out of the run rate. Turning to slide 12 capital ratios remain very strong with Basel III common equity Tier 1 capital at 10.4%.

Bank of Kentucky and AmRisc transactions use 18 basis points of our common equity Tier 1 capital. Looking at liquidity, our LCR declined to 118% due to increases in interest rates affecting mark to market on securities, non-operating deposits at wholesale funding.

Our LCR was well above the minimum required 90% which starts in 2016 and our liquid asset buffer at the end of the quarter was strong at 13.3%. Looking briefly at our segments, starting on slide 13.

Community bank’s net income was up $24 million from last quarter, driven by deposit growth and higher funding spreads on deposits, partially offset by lower interest rates on new loans. Loan production was very good, commercial was up 10%; direct retail was up 35% and revolving credit was up 22%.

The conversion of Bank of Kentucky was a big success and we are preparing for third quarter closing and fourth quarter conversion of Susquehanna. Turning to slide 14. Residential mortgage net income totaled $72 million, up $8 million from the first quarter. This is driven by higher loan production and an increase in net MSR income.

And credit quality continues to remain strong. Turning to slide 15. Dealer financial services continues to generate strong loan growth with average loans up 6% for dealer finance excluding wholesale and 10% for regional acceptance. Dealer finance launched a flat-fee dealer compensation program on July 1st.

This approach eliminates pricing discretion in a consumer transaction. Asset quality indicators for dealer finance and regional acceptance continue to perform well within our risk appetite. Regional Acceptance opened a new office in Kansas City and additional office in Northern Virginia is planned for later this year. Turning to slide 16.

Specialized lending net income totaled $70 million up $13 million from last quarter. Drivers include strong loan production for commercial mortgage income, solid loan growth in small ticket and consumer loans from Sheffield, and strong production from mortgage warehouse. Credit metrics remain strong with charge-offs at 16 basis points.

Moving to slide 17. Insurance services net income total $53 million down $19 million from last quarter, mostly driven by a seasonal decrease in employing benefit insurance commissions and the sale of America Coastal. Year to date new business growth was very healthy at 14% for retail and 17% for wholesale. Same-store sales achieved growth of 2%.

As a reminder, the AmRisc transaction eliminates our exposure to underwriting risk and enhances our investment in high growth business. Insurance services acquired NAPCO, a wholesale broker with commercial property catastrophe insurance coverage.

On slide 18, since last quarter financial services generated significant corporate loan growth of 17% and wealth experienced 13% loan growth. June was a record month for wealth lending in both, dollars as well as units. And corporate banking’s average deposits grew 38% on an annualized basis. Turning to slide 19.

Let me recap the impact of our acquisitions. Including Susquehanna, we expect total loans of approximately $135 billion and securities of approximately $43 billion at the end of the quarter.

In terms of credit, we expect third quarter provision increase of $15 million to $30 million and a fourth quarter provision increase of $25 million to $40 million. These estimates are both compared to this quarter and depend on loan losses and loan growth. We will update these numbers post acquisition at our next investor conference.

Looking at net interest margin, we expect Susquehanna to result in an increase in GAAP margin of about 4 to 6 basis points in both third and fourth quarters. Fee income is expected to be flat to down 2% in the third quarter. And the fourth quarter fee income is expected to increase 3% to 5% versus second quarter ‘15.

The impact of the AmRisc investment will reduce controlling -- will reduce non-controlling interest expense in the range of $5 million to $15 million per quarter depending on seasonality.

Finally, looking at non-interest expense, excluding the loss on debt restructuring and merger charges, expenses are expected to increase 3% to 5% in the third quarter and 6% to 8% in the fourth, both off of second quarter ‘15. We are on our way to achieving targeted savings for Susquehanna by the end of 2015.

At least 32% of their expense base will be driven out of the runway. In summary, we produced a solid quarter including very strong loan growth, revenue growth and excellent credit quality. We look forward to executing the opportunities of our merger partners in the coming quarters. Now, let me turn it back over to Kelly for closing remarks and Q&A..

Thanks Daryl. So, just to hit a couple of points that Daryl made and sum it. I think it was a really solid performance organically. As I said, we had excellent strategic execution, outstanding credit quality, capital and liquidity, positive revenue forecast, expense efficiency opportunity.

And it’s a tough environment, but overall for BB&T actually we’re pretty excited about the future. So let’s go Alan to Q&A..

Thank you, Kelly.

Tracy, at this time if you would come back on the call and explain how our participants can participate in the Q&A session?.

[Operator Instructions] And we’ll go first to Betsy Graseck with Morgan Stanley..

Two questions on the acquisition; one is -- and first of all, thanks for all the details, very helpful, on slide 19. The question is just on the timing of the cost saves -- I think on the merger and integration charges, you are pretty clear that there’s going to be peak in 4Q ‘15.

How do you see the timing of the cost saves over the course of -- starting in a couple of quarters to the 4Q ‘16?.

So Betsy, the cost saves goes essentially here up [ph] in fourth quarter look what we had though, but I’d say that the cost saves will start occurring immediately and will be pretty basically completed by the end of ‘16..

Okay. But that should be like linear or there is going be a bump….

It will be a negative curve linear. [Ph] I mean it will come off fast early on and then slower as you go towards the end of the year..

Okay.

And then pulling it altogether the accretion you’re looking for from the deal, is it still in that 2% to 3% range?.

Yes. We’re still targeting 3% what we originally said and we’ll just see once we close on Susquehanna and see how we go forward and see how the loan portfolio performs and how we can efficiently find ways to run the company at future points..

Absolutely. Betsy, based on what we know now versus what we knew when we announced that thing and having spent a lot of time out there, I’d be marginally more positive than I was to start with. This is just a -- it’s a really good company and the great markets, the receptivity of that company has been outstanding. Cultural integration is really smooth.

So, it will be a great merger..

Alright, so it sounds like 3% plus. Okay, thank you..

Yes..

And we’ll take our next question from Ken Usdin from Jefferies..

Thanks a lot. Daryl, just one follow-up on the balance sheet. Thank you for giving us the period ends on the loans and the securities. And I’m just wondering is there any other mix shift changes that we should consider when we’re thinking about the size, the total size of the balance sheet going forward.

Are you mixing out of cash or any other assets or is that going to be a pretty good read on where the earning assets should be?.

I think the earning assets should pretty much be what we told you. On the liability side, we are extinguishing the Federal home loan bank advances and you’ll see us starting to call some of their trust preferred and other sub debt obligations as we’re allowed to get those calls. So those will come off the balance sheet to help with run-rate..

So, does that kind of get us in the 180 range on earning assets?.

Yes, that would be correct. I mean that’s right..

Second question, just on fee income, there is always a couple of moving parts and especially this quarter with insurance side.

So, can you just give us an update on how much that’s influencing the fee guide here in terms of the seasonality, the loss of the -- absence of the sold revenues and what you’re looking for in that part of the business looking ahead?.

This is Chris Henson, I’d be happy to do that. It is a bit confusing. Last time I think mentioned we would be up about 3.3%; we did not at that time have approval to move forward American Coastal. So that happened subsequent to that guidance.

So in fact what happened, what you should kind of look forward in third quarter is you would see fee income insurance drop in the 13%, 14% range, about 10% of that would be tagged to the loss of American Coastal, the balance would be seasonal.

And then from there, you should see fourth quarter sort of moving up in 7.5% to 8.5% range to finish off the year. So, you have overall loss of revenue due to American Coastal in 2015 would be in the 90 million 92 million kind of range. So what you ended up with is seasonality. Those introduced just a bit more seasonality into the picture.

On a go forward basis, if you were to kind of rerun this over ‘15 numbers and assuming the deal happened first quarter comparing with the deal, without a deal, look at pure seasonality. First and second quarter are going to be relatively flat, maybe a 1% or so different.

In a typical seasonality on a go forward basis, you’re going to be down in the third -- in the 8.5% kind of range and you should be up in the 4%, 5.5%, 6.5% kind of range, something like that.

So, seasonality in insurance will be relatively flat with first a little stronger, first and second, then it falls in the third and then fourth quarter will be back up..

And we’ll go next to Gerard Cassidy with RBC..

Kelly, can you really give us some thoughts on your outlook? Obviously you have two successful deals here, particularly the Susquehanna deal which is a good size win.

What your view is on M&A for maybe next year, especially in light of the fact that some of your bigger competitors seem to be getting their internal systems upto a level that I think is acceptable to the regulators to maybe allow them to start to do bigger deals in the second half of next year and into ‘17.

So, maybe give us how you see the landscape developing over the next 12 to 18 months?.

Gerard, we’ve said for some time now that of course our M&A strategy is a supplement to our organic growth strategy and it remains so. I consistently say we would like to do 5% to 10% of our asset size in good quality acquisitions; we did that this year with Bank of Kentucky and Susquehanna.

So that’s $10 billion to $20 billion in a year, I feel confident in that same category range for next year. There are a number of institutions, let’s just say in the $5 billion to $20 billion the range that I think are considering their strategic opportunities and may present some availabilities.

The fact that there may be some other competitors out there to me is not something I have spent a lot of time worrying about. The partners that we talk to are ones that we’ve known a long time and our cultures are very, very similar, our strategies are similar.

And so I think that -- I mean there are some great other competitors out there in terms of acquiring companies and we won’t get them all; we don’t want them all. So, I think there’s a very high probability that’s going be what we like to do..

As a follow-up Daryl, any commentary on -- you’ve obviously converted to single general ledger. Did you -- I know Bank of Kentucky was a small deal; Susquehanna will be a better test for you folks on the integration.

Is there a possibility you could get better expense savings because of better execution due to the newer systems you have?.

I would say that the newer systems down the road could give us some expense savings. We’re still trying to get all the general ledger to be connected to the SAP system, there are other pieces that we’re adding on to it this year and into next year. I would say that just -- opportunities that will walk you [ph] right away..

So, Gerard, the way this works, it won’t be specifically around acquisitions.

The efficiencies in the system, currencies, [ph] when you really put all the technical out of the GO [ph] out through all, they have disparate systems and when you’re drawing information in to the GO CCAR purposes and other management purposes, the host of information becomes much more seamless and efficient.

So, it’s not specific but it doesn’t mean when you do an acquisition, you are more efficient. But as Daryl said, we’ll continue to peel that out and it will take a little while before we get to the optimum state. But it is definitely a long-term efficiency improvement..

We’ll take our next question from John Pancari from Evercore ISI..

Regarding a margin outlook, I know you have indicated stable for the core margin in third quarter. That implies I guess that Susquehanna has no real benefit to the margin despite having a somewhat higher margin I guess.

So, is that the case or is there any other factor impacting that?.

John, when we bring Susquehanna in, we’re going basically mark-to-market the balance sheet. So, in essence, their loans and their deposits come over to our company. Our best guess is core remains stable and then when interest rates start to rise, when the Fed starts raising and our core gets some expansion.

We do get GAAP accretion on purchase accounting with Susquehanna, that’s in the neighborhood of over two quarters; that will be 8 to 12 basis points..

Right, okay.

But the core doesn’t benefit much?.

Not until really the Fed starts raising rates..

And then separately, also on Susquehanna, can you just give us your updated thoughts on the plans for the Hann auto lease subsidiary? I know that was kind of on the table but what you do with that? And then secondly on Susquehanna, I just wonder if you could talk a little about revenue enhancement opportunity, not that we’re out here trying to model that out, but it just seems like given their product breadth versus what BBT brings that there could really be opportunity to drive upside to that 3% accretion from the revenue side?.

John, this is Clarke Starnes. I’ll take the Hann question. We’re working very closely with our partners at Susquehanna to evaluate how we integrate that platform and how we think about it going forward.

We’re fairly large in the sales finance business, so we believe the merger gives us an excellent opportunity in the Northeast and Pennsylvania and New Jersey markets.

And so certainly Hann and the platform they have there around sales finance will be a benefit for us, but we’re still evaluating what our appetite is for the leasing -- the consumer leasing component of that and we’ll make those plans as soon as we can subsequent to the purchase..

John, just one point John and then Chris can take a point. On revenue, they have a really good start retail strategy. So, we won’t change that dramatically frankly.

But the two big areas are going to be huge left, one is in corporate where we have a broader range of products and larger size, these two larger deals that they couldn’t do, and then others as well, which Chris will talk about..

John, there is two I’ll focus on, insurance and wealth. They have a retail insurance franchise called Addis Insurance and so we’ll be converting that over in early fall. And that will give us a good beachhead start. And we typically don’t get in these type acquisitions. And then we will look to acquire our way in and around their footprint.

So we clearly have upside revenue there; timing is uncertain. We’re already beginning to talk to potential opportunities over there. Secondly, we have a really nice opportunity in wealth.

They had two subs, ones is Valley Forge that will plug into our wealth insurance business and we’ll bring all of our products to them, to be able to deliver to the client, which I think is really helpful. And then they have a business called Stratton Management, this is asset management. We will plug that into our serving capital business.

And we think a lot of opportunity again to provide more distribution to our company to help them move more far. So there are couple of additional good opportunities we believe..

And we’ll go next to Stephen Scouten with Sandler O’Neill. .

Question for you about the insurance fees and just the guidance moving forward there specifically with the American Coastal and AmRisc.

If I’m understanding the guidance there about the loss of revenues and the potential benefit, is that like a net negative to overall insurance for overall revenues by about 60 million a year?.

Well, it’s actually going to be -- it actually could be a bit more than it. let me if I could just step back again and sort of read to the concept of why we did this because I think it’s pretty important.

We had two businesses, one American Coastal which we disposed off, we owned 100% of and then AmRisc which is a faster growing business, we own just a little less than half but have control. So, given we have control, we already have consolidated 100% of their numbers into ours.

So, you won’t see a move up at the top line from AmRisc, what you will see, to Daryl’s earlier point, is you’ll see a reduction in controlling interest which thereby means we will report more profitability out of that business by like amount.

So, don’t expect to see any improvement or increase in revenues as a result of AmRisc, although it is a higher margin business and is a faster growing business, and it is critical to the long-term piece of our enterprise because it interacts directly with our wholesale business and we’re the second largest wholesaler in the country.

So, it was integral to the long term franchise to repayment. Unlike an underwriting business that frankly is not to have but it presented risk. Then actually the benefit of moving Am Coastal out is it reduces risk. So to answer your question, it’s actually about 140 million revenue company that would come out in terms of Am Coastal.

And all I was saying earlier is that in last quarter’s guidance, we did not know when it was going to close. So, we actually closed it June 1st. And so we have about 11 million in revenue this quarter and then it will drop in the third quarter we think about total revenue about 13% or so percent. And about 10% of that would be Am Coastal.

Thereafter fourth quarter we bought [ph] back up in the 7.5% we 8.5% range..

The other thing to remember is that the whole business is gone. So, it’s not just revenue that correlates, it’s expenses; it’s earnings. So, I think in short term, it be might dilutive a penny or so but long term, AmRisc was growing a lot faster, American Coastal was more of a stable cash cow company.

So, we think over the next couple of year, we’ll actually turn from being slightly dilutive to being accretive..

So, how we see it -- that is exactly right, we see it being sort of a dilutive, penny year one; roughly flattish year two and then growing thereafter. Because keep in mind, it’s directly tied to the second largest wholesaler in the country, so very critical long-term..

And then one other question about the capital deployment timeline; are there any changes to that or you still expecting to start implementing the buyback in 3Q or would there be changes to that still with the potential announcement of incremental MK&A there?.

So Stephen remember that we’ve said consistently that our strategy with regard to capital deployment is our organic growth, dividends, M&A and then adjusted forward buyback. We did have request and was approved for about $820 million or so of buyback and/or alternative uses of capital in our CCAR plan.

We did recently have the board approve 50 million shares of that so we have functionally approved. But we actually consider what we do buyback on a day to day kind of basis based on our projection of acquisition opportunities. And frankly, the price of our stock and return in terms of applying stock backs.

So, we can’t tell you what that decision will be, the decision we will be making on a real time basis based on opportunities as they present themselves..

So the implication there would be if you’re not buying back stock aggressively towards that 820 million in say 3Q then the likelihood of M&A is probably higher.

Is that fair assessment?.

That would be a rush on induction..

And we’ll take our next question from Geoffrey Elliott from Autonomous..

I’ve got a question on the expense side.

Could you give a bit more color on the 7% increase in personnel expense year-on-year, just how we reconcile that with the overall decline in average employees over the period?.

So, I mean if you look at the expenses, we noted in our deck that expenses were up due to our higher key businesses which tend to pay out higher incentives, so that would be in mortgage, Grandbridge and investment banking. So, that’s a big driver. On a year-over-year basis AmRisc kind of washes other out.

we did have higher cost in our healthcare oriented. And if you look at pension on a year-over-year basis, that’s higher. So those are probably the main drivers. We also have Citi and Bank of Kentucky that came in. Those actually are adding not just FTEs there but they do have other run rate expenses.

When I look at the delta, I look at more on a linked quarter than on a year-over-year quarter but on a linked quarter it’s about 9 million higher but absolutely in the second quarter it’s about 12 million just Bank of Kentucky and Citi so far and cost us more expenses in the second quarter before we start getting cost savings from Bank of Kentucky..

And we’ll go next to Paul Miller with FBR Capital Markets..

On the federal loan bank borrowing extinguishment, does that clear at all your federal loan bank borrowings? Is there other opportunities to lower your borrowing costs by getting really some more other stuff down the road?.

Paul, we still have a little over $2 billion of what I would call long-term federal home bank advances that have average cost of over 4.5%. Right now the plan is to keep those on the books unless we have other opportunities to offset that. I think you saw us do a debt issuance as well.

So, we’re still keeping long fixed rate but we re-price the long-term debt down well over to 200 basis points..

And then the other question. You talked about this in your opening comments about the competitiveness of lending out there or what not. And we’ve seen some of your competitors talk about the middle market commercial businesses are being really overbanked out there.

Can you add some color? You’ve seen the same stuff in the middle market and how do you define middle market at BB&T?.

We define middle market generally companies with revenues up to about a $0.5 billion or so; everyone has a different view. So we probably own more. The lower end of the middle market is where we play those prominently and certainly in that space as well as the larger in shared credit space is extremely competitive.

My personal opinion is some of the leverage lending guidance and push down around or limits around that is pushing the whole market more towards the middle market space and there is even more effort to bank those clients. And I think it’s highly competitive.

And as Kelly said though, we’re doing really well there and we’ve done excellent job, particularly in the last quarter or two in maintaining our spreads in a very, very difficult environment..

[Operator Instructions] And we’ll go next to Vivek Juneja from JP Morgan..

Hi, couple of questions, one is I want to confirm the 3% accretion from Susquehanna that already includes some revenue enhancement, right?.

I would say it was really driven more by cost saves. We do have fee income increasing over a five year time period but I would say the accretion out of the blocks in the first year or two is really more driven by cost saves, Vivek.

And that over time is [indiscernible] thing and community bank and for us to get it perform the BB&T standards and we really get higher lift in lending as well as in our fee income areas..

The efficiency ratio. Can you talk a little bit about why it’s up linked quarter? And when I look at the efficiency ratio, this is where it was in the fourth quarter, it’s been a bit jump; it’s up I think looking at your own calculations of adjusted for non-recurring, it’s up 300-400 basis points. That’s a big change.

Can you walk through why it’s gone up this quarter, linked quarter and what’s the plan for that?.

We said at the beginning of the year that we are not going to be spending as much time talking about efficiency ratio, just probably as you pointed out, it’s [indiscernible] kind of question.

And when you get so tightly focused on that one number, it gets to be misleading often times because it moves up or down based on what happens to the expenses and/or the revenues.

So generally, right now though what’s happening to us is that our expenses are elevated as we talked about all along in terms of our systems investments, risk management investments and some pre-investments with regard to some of the M&A activity. So all of that’s kind of driving some of your expenses up.

And so what we think now in terms of the general level of efficiency ratio given what I said in terms of the -- and ability to be real precise about it is that it’s kind of peaked. And we think as we hit through next year, it will be slowly coming down.

We still have an intermediate term target of 55% and we feel confident we’ll be move ahead in that direction as we heads towards the end of next year..

And one last thing, so going back to acquisitions versus buybacks, it sounds like you are ready to do -- look at further deals, Kelly, right away.

Is that -- is there a plan to just -- if you have to hold-off buybacks sort of quarter or two till you figure that out or is that -- is the approval based on a per quarter basis what you’re supposed to get done?.

Well, the approval is basically based on kind of how you earn the capital. So, we -- those spread on a linear basis over the course of the year. But we have availability in the current quarter to do buybacks if we choose to.

And as I said earlier, it’s a function of our expectations around investment opportunities and our evaluation of our price relative to return in terms of acquiring our own stock. So, you’re not going to be able to judge precisely exactly what we’ll be able to do with that because we’re not going to tell you exactly.

We don’t know exactly, it moves along. So what we really have to do is to judge the probabilities of investment opportunities and that’s not a science; this is more of an art. And I’m optimistic over the next 12 months or so we’ll do -- have additional investment opportunities.

Whether or not they coincide in a timeframe such that it would preclude us doing buybacks or not is we’re unable to tell at this point..

And we’ll take our next question from Terry McEvoy from Stephens Inc..

Daryl, I was wondering if you could talk about your thoughts on purchase accounting accretion in 2016, specifically when does it peak; is it earlier in the year? And then what type of run-off or decline are you thinking about as the year progresses?.

For Susquehanna -- Bank of Kentucky really doesn’t have a huge amount of purchase accounting. So I’ll just deal with mainly Susquehanna.

I would say that with the credit mark that we have which is about 4.5%, there will be approximately little under $600 million of accretable purchase accounting income that basically goes through net interest income over the life of the assets.

At the same time though, we will have more loans that we take losses on and those loans will increase provision. And the timing won’t necessarily match up. It’s too early to say what the losses will be in the Susquehanna portfolio but know that we pretty much locked down the $580 million over life of the assets to call it five plus years.

But it would be more earlier on and then it would tell off towards the end of the five-year period. And the losses could be sporadic over that same time period. The other thing to note is the portfolio of Susquehanna has to put it on the book; doesn’t have an allowance to it.

As new volume comes on from Susquehanna we have to provide for an allowance there. That’s why we are talking about potential growth impact also of that portfolio on the provision..

Thanks and then as a follow-up, service charge is down 2.5% year-over-year.

How much of that is a function of consumer behavior versus any specific actions you’ve taken internally? And as you look ahead, anything to make you optimistic that that line of business will stabilize? And as it relates to Susquehanna, are there practices as it relates to these types of fees consistent with BB&T’s?.

I think it is largely consumer behavior. I mean clients have more access to information technologically and their overgrowing list and….

We have higher deposit balances, so our clients are carrying larger balances now on hand, which seems they pay less in fees and just more with compensating balances..

And we’ll take our next question from Nancy Bush from NAB Research. .

We’ve had some kind of mix commentary on economic outlook in the past couple of days. Richard Davis has been kind of bear on the economy came out and made some very strongly positive statements yesterday. But we’ve had some other companies that were a little bit more subdued.

Could you just give us your outlook and particularly with regard to the Southeast?.

Yes, Nancy, I suppose between some of the commentary you heard, I would be -- where I have been which kind of in the middle of the road, nothing -- economy has done a really solid 2% to 5% -- I mean, 2% to 2.5% real GDP growth. I see very little risk of any downside on that.

I see very little opportunity, it could be substantially better than that until we get closer to election math, you get some real positive leadership information out of DC and there is some upside opportunity. But for the next 12 months, I think you will be pretty solidly focused on 2% to 2.5%, which is actually pretty good for you.

This is nominal at about 4.5% to 5%, in terms of motion as a whole. I think [indiscernible] Nancy can probably beat that a bit because you’re not talking about every year, this actually clearly took it on the chin.

And everything go devalued but it has been -- values have been reset; activity slows and Florida back to grow and 800 people a day, including Texas, 1,000 people a day, but Atlanta’s [ph] turned finally and the coastal markets of Carolina have tuned.

So, I’d say the Southeast will be net positive to the national growth rate, not dramatically but if the national is 2.5%, I wouldn’t be a bit surprised to see the Southeast has 3.5%..

And sort of ancillary to that, the outlook for the mortgage business, how do you see your mortgage banking activities proceeding over time here? Are we in sort of last -- great wave of purchase activity or how do you see BB&T proceeding in that business over the next couple of years?.

I think it will be steady to slightly up. The refinance, it is kind of last of that, I think, that’s on dramatic international events. But look, purchase activity is really picking up; new home construction is up substantially and new home purchases is up; we’re seeing a shift toward high percentage of purchases versus refis.

So I think, you can think about it in terms of the steady to up, not dramatic up, steady to up..

We are out of time for questions. So, this concludes today’s question-and-answer session. I would like to turn the call back to Mr. Alan Greer for any closing or additional remarks..

Okay. Thank you, Tracy. And thanks again everybody for joining us today. If you have further questions, feel free to contact Tamera or myself in Investor Relations. Thank you and we hope you have a great day..

This does conclude today’s conference. We thank you for your participation..