Truist Financial Corporation (TFC) Q2 2010 Earnings Report, Transcript and Summary

Greetings, ladies and gentlemen, and welcome to the BB&T Corporation Second Quarter Earnings 2010 Conference Call on Thursday, July 22, 2010. [Operator Instructions] It is now my pleasure to introduce your host, Ms. Tamera Gjesdal, Senior Vice President of Investor Relations for BB&T Corporation. Thank you. You may begin, Tamera.

Good morning, everyone. Thank you, Barbara, and thanks to all our listeners for joining us today. This call is being broadcast on the Internet from our website at BBT.com/investor. We have with us today Kelly King, our Chairman and Chief Executive Officer; and Daryl Bible, our Chief Financial Officer, and Clarke Starnes, our Chief Risks Officer, who will review financial results for the second quarter of 2010, as well as provide a look ahead. We will be referencing a slide presentation during our remarks today. A copy of this presentation, as well as our earnings release and quarterly performance summaries is available on the BB&T website. After Kelly, Daryl and Clarke have made their remarks, we will pause to have Barbara come back on the line and explain how those who have dialed into the call may participate in the Q&A session. Before we begin, let me make a few preliminary comments. BB&T does not make 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. Additional information concerning factors that could cause actual results to be materially different is contained on Slide 1 of our presentation and in the company's SEC filings. Our presentation includes certain non-GAAP disclosures and we would refer you to Slide 2 and the appendix of our presentation for the appropriate reconciliation to GAAP. And now it is my pleasure to introduce our Chairman and Chief Executive Officer, Kelly King.

Thank you, Tamera. Good morning, everybody. Thank you for joining our call today. It could be a little different today than in the past, we’ve asked Clarke Starnes, our Chief Risk Officer to join us and we’re introducing a slide deck for you, which we hope will make it a little easier for you to follow our commentary. So I'm going to cover the quarterly highlights, talk about a few special items effecting earnings, talk about a very significant [indiscernible] (13:58) position strategy we've embarked on. Moving on revenue and earnings power, talk about the Colonial integration and cover some of the issues and impact of the regulatory changes. And Clark's going to cover some more detail with you on credit trends and outlook and a good bit of detail on our MPA disposition strategy. Following Clarke, Daryl will give you some more detail on margin and the second quarter assessment of acquired loans. He’ll talk about our balance sheet deleveraging strategy, talk about key income, expenses and efficiency, taxes and capital, and then as Tamera said, we'll allow plenty of time for questions. So overall, we consider it to be a very solid quarter. There are several very significant strategic developments here in the quarter, we want to be sure we drill down and certainly make sure you fully understand those. But we’re very pleased that we had $210 million available for our common shareholders, which is up 73.6% on a linked quarter basis that is up an annualized 46.9%. So we did make a $0.30 a share EPS GAAP up 50% compared to second quarter '09, up 44.6% annualized linked quarter. We did have $0.03 in merger-related charges and so EPS excluding Merit would be $0.33. The margin improved substantially up from 3.88% to 4.12%. We'll be giving you some increased guidance with regard to that. We just caution everybody though, that remember that 80% of that margin increase gets offset in a reduction in non-interest income through the FDIC large share arrangement but net is still very good but it's not quite as good as it appears on the growth increase. Importantly, our nonperforming assets declined on a linked-quarter basis by about 3.1%. This is a result of our more aggressive strategy on our disposition of nonperforming assets. [indiscernible] (16:05) color on that, but we did dispose of $682 million of problem assets in the quarter. So as a result of that disposition strategy, our charge-off for the quarter did pop up to 2.66%, which includes a substantial increase due to the disposition strategy. So $148 million in the charge-offs you'll see related to this disposition strategy. So on an adjusted basis, which I may call our normalized core charge-offs were 2.06%, up a little bit from previous guidance, but not material. We want to talk to you a good bit about this the rest of the strategy that has intended to accelerate and move as we go through the cycle. But the provision for credit losses is $650 million, that does include the additional $148 million related to the disposition strategy, allows losses to loans remained strong at 2.84% including covered loans, and the coverage of [indiscernible] (17:13) and nonperforming loans improved to 98%, excluding covered loans. We executed on our material balance sheet deleveraging strategy, essentially thought the market was at an appropriate time to lock in significant gain frankly due to the market rally. It really better positions our balance sheet for the future, in terms of rising rates. And Daryl will give you a bit more detail on that. We feel very, very good about loans for the quarter. We averaged $95.1 billion. Our average loans increased an annualized 0.6% compared to first quarter of '10. Average loans increased annualized 2.6%, excluding ADC. So what we're really seeing, of course trying to give you a lot of detail on this, is very strong growth in our auto strategy, specialized lending, C&I, and some other important areas. The overall growth is muted because of the planned reduction in real estate, specifically ADC. But the strategies of diversifying our asset structure is absolutely on track and material steps this quarter with regard to that, likewise we continue to execute very effectively on our deposit diversification strategy. If you recall, a year and a half ago we told you we would be working on diversifying the balance sheet on asset and liability side. We’ve made a lot of progress in that. Daryl’s going to give you a lot of color with regards to our deposits but transaction accounts increased 28.4% compared to the second quarter of '09, so very strong client deposit growth. Our capital ratios all improved substantially during the cycle, as a result of deleveraging as well as the overall very good performance. [Audio Gap] Turn with me to Slide 4 now. I’m going to give you a little bit more color with regard to the material, unusual items. What basically happened was we deleveraged the balance sheet, by selling a net of $8 billion in securities. There were two reasons for that. One is we've had a long-standing goal on keeping our spirit in the 15% or 20% range. We had led that rise up because of the heavier capital position we had coming out of TARP and all that transition in our capital structure. And so we saw a market opportunity to de-lever and try and protect some nice gains. And really this improves our assets in particularly, we still believe, although the economy is in a bit of a stall now, as we come out of this, we think there is impending higher inflation, impending higher interest rates, so we want to be careful of the appropriately asset sensitive. We sold $661 million of mostly retail mortgage loans. We took losses of $69 million related to that. Also we had $90 million of allowance build, including the impact of the nonperforming strategy. A lot of folks I think this time are maybe rushing to release allowance, we’re not doing that, we’re choosing to be very conservative. We don't think the economy's getting ready to go into a double dip but we do think it's in a bit of a stall, we just want to be very conservative as we move to through the next couple of quarters to be sure we’re on solid footing as we go forward before we start making material changes in our allowance position. We did increase our OREO write-downs and losses during this quarter, realize the part of this whole re-focus on the disposition strategy. So we made a major effort during the quarter to get everything, really based on appraisals. For example; the average age of all our appraisals is six months, so we really shortened our appraisals, took from additional write-downs because of that and really put ourselves in a position to be able to continue to execute on this strategy over the next few quarters, assuming that current conditions remain the same. Continuing on to strategy, if you go to Slide 5, what we really saw during the quarter and slightly before the quarter started was, really a change, kind of an inflection point, in the market. We have told you going back a year in a half ago, we didn't think it was appropriate for a company as strong as BB&T to go out and dump assets in a market that was panicked and that was kind of biased at the $0.10 on the dollar. On the other hand, we never intended to be a long-term problem asset holder or real estate holder. So as we saw this inflection point, which really was a result of more buyers coming into the market, investors are always very smart, they know when to come in, there's a lot of cash in the sideline and so the bidding for assets is up materially over a year ago and even six months ago. So they get better valuations, better bids and it makes sense to have cue on this strategy. So we implemented a strategy of being aggressive this quarter. We plan to continue that in next two or three quarters, assuming the economy doesn't panic and assuming that the investor upside remains kind of consistent where it is today. So if you think about what we really did we sold $385 million of problem retail loan, we sold $45 million of problem commercial loans, we moved another $127 million to held-for-sale, which are aggressively marked so that they're ready to be disposed of and much activity with regard to doing so and we sold $252 million of foreclosed profit. The total of all that is how you get $682 million of problem asset disposals. So it was a very effective execution strategy. And again, we will continue that over the next two or three quarters, assuming pricing remains firm. If you look at Slide 6, you'll see the result of the strategy, as nonperforming assets in the top chart continues their rate of decline. The rate of increase has been declining substantially from 21% in the second quarter of '09 to 5.6% increase in first quarter '10 and a 3.1% decline this quarter, which is very, very good. [indiscernible] (23:54) the first reduction in nonperforming assets we've had since the first quarter of '06, we feel really good about that. And also the underlying trends in many of our businesses continue to either be very stable or improved. Consumer and specialized lending trends continue to improve meaningfully. Mortgage and direct retail trends are very stable. C&I and other CRE portfolio's continue to have some deterioration [indiscernible] (24:19) nothing creating any kind of a shock, nothing different than what we had expected. If you look at the bottom chart, you'll see nonperforming loans. The loans did begin to decline. And we would expect to see nonperformance continue to decline in the coming quarter, again assuming that there’s no major change in the economy and our ability to completely execute on the strategy that we are embarked on. If you look at Slide 7, you’ll see the effect of that on charge-offs where we did have again $148 million of our charge-offs were really a result of this particular strategy. We do not expect significantly higher cumulative losses through the cycle due to the strategy that is really, if you think about it, pulling charge-offs forward because we think the time is right to go ahead and resolve those transactions. We will see a benefit, as the NPA reductions will reduce overall credit costs, legal, professional and other administrative costs. So without this strategy, our core losses would've been 2.06%, now that's a little higher than the beginning of the year. I think we talked about charge-offs being in the 180-ish level. Now you might talk about the year being in the 190-ish maybe two, but not dramatically different, a little higher but not a dramatic change. Looking forward, we expect charge-offs to be relatively level, in terms of core. Now again, you'll see the actual charge-off numbers to be a little more volatile because remember what happens when you have these asset dispositions, is you eliminate those allowances that have already been set aside and you pull it through the charge-off account. So effectively, it's already pre-charged-off if you think about it that way we just now record the actual interest. And so don't get alarmed about our absolute increase in charge-offs. We’ve seen a material change with regards to our actual core charge-offs. If you look at Slide 8, you'll see that it’s kept us with regard to our reserve. As I said earlier, we maintained a very conservative view with regard to our reserve. So we chose to deal with the reserve by $90 million, excluding the impact of the NPA disposition strategy. We certainly could've taken a different view because of eliminating the assets that we did and the allowances related to that. Certainly, it would've made sense to allow the reserves to come down. But we chose to be again conservative on that with a $90 million effective build because we really want to be conservative, until we get a little bit more clarity, frankly I thought by this time in cycle we’d have more clarity, not sensitive to the last six to eight weeks the economy’s gone in to a bit of a stall. I don’t think it’s going to double dip. But it is a stall and we need to see how we come out of that. I would tell you that I think that stall is a result, fundamentally, on the European crisis, the Gulf oil spill, all the rhetoric around financial reform, all of that creating a lot of uncertainty in the marketplace. Now that most of that is coming through a reasonable conclusion, we expect some certainty to return to the market and a resumption in the kind of growth although it will probably continue to be relatively slow growth. With regard to reserves, we would expect provision on loan losses to continue to cover net charge-offs in coming quarters. We expect to maintain a relatively conservative posture in the next couple of quarter with regard to reserves but it leaves better clarity for the coming quarter, our fourth quarter, we are in a position to begin to mitigate the investment we've made in allowances as we have clarity with regard to the economy and frankly, as we dispose of more of our more difficult assets. If you look at Slide 9, just a couple of drivers of performance. We're very pleased in our loan growth, as I said and also our underlying revenue momentum. Net revenues increased 43.9% on an annualized linked-quarter basis. Now part of that’s a seasonal factor, as you know, we've had a big positive kick in insurance, we really got that this time but other things responded as well. If you exclude securities gains and loss share impact, net revenue increased on an annualized basis 6.4% compared to first quarter of '10. If you look at earnings power, pretax pre-provision earnings available to common totaled $885 million, up an annualized 36.6% compared to the first quarter. Again, if you exclude gains on securities and foreclosed property costs, our pretax pre-provision was a very strong $906 million and the way I like to look at it, which not exactly a GAAP way of looking at it, but what I like to look at is kind of what’s happened to the core normalized kind of earnings. So if you exclude purchases, mortgage banking and special items, our pretax pre-provision or earnings power increased 4.9% compared to second quarter of ’09, which in the context of the economy and in the context of the conservative provision protection with regard to our credit portfolio, I consider to be very good. If you turn to Slide 10, a brief update on Colonial. It continues to be extraordinarily successful. We did do the system conversion at end of May, with virtually no issues. We've never had a conversion, particularly this size, with virtually no issues at all and Floyd did a phenomenal job and I congratulate all of them. We did have more merger changes in the second quarter because we did the conversion in May. So we expect charges to be substantially lower in the second half in the range of $10 million to $20 million for the whole second half. We do expect to hit our cost savings run rate of $170 million by the third quarter, we are absolutely on track for that. I'm glad to report to you that the Colonial branches are doing great. The employees are, you’d think they've been with us for 30 years, they’re just completely settled in. The communities love it. The opportunities in the marketplaces, particularly places like Alabama and Texas are extremely receptive to our brand offering [indiscernible] (31:09) already the Colonial branches have originated more than $600 million in loans. And if you look at the retail client deposits, they're up from acquisition, which is very atypical, you’d expect a material decline before you start rebuilding but we've had a slight increase, which is very, very encouraging. The Colonial branches are already, have moved to kind of a current run rate base of internet and new transaction accounts at about 70% of the rate of our legacy BBT branches, so off to a great start. A huge potential, great strategic move for and frankly, turning out to be a pretty good deal for the FDIC as well because the performance of the loans are better than we expected. Daryl will describe that to you and that [indiscernible] (31:59) to the benefit of the FDIC as well as us, so it’s a win-win for everybody. Finally, before I turn it to Clarke, I want to mention a couple of solves to regards to regulatory changes on Slide 11. Obviously, there are a lot of changes, you can see a whole page. I'm not going to spend a lot of detail on this because frankly so much is uncertain today to try to assume one has a lot of specificity with regard to what all this means, I think is naïve. Just freshly signed yesterday, has 2300 pages, it’s going to take months and years to figure all this out. Who knows whether there'll be cleanup bills and what interpretations and regulators will be. So it's really it’s a yes, they have to try to nail things down. I know you want some specificity, I’ll just mention with regard to Reg E, the NSF issues, remember that the two changes with regard to that in the first quarter this year. We and others made changes on our own relative to the market with regard to changing our NSF routine. And July 1, really actually kicks in August 15 and changed so that clients have to opt in for NSF support. We had said before that we saw without any adjustments to our product make up that, that would be a negative of about $75 million [indiscernible] (33:25) could be an average of 140 to 150 in ‘11, but I'll caution you to say that is before any changes in our product lineup. We are right in the midst of deep analysis with regard to product changes, there will be substantial product changes, increasing fees and reducing costs and so a substantial portion of that reduction will be eliminated. With regard to the driven amendment to credit and debit card fees, interchange fees, it really is just hard to tell. I mean, first of all the FED has about a year to figure out what the rules will be. There's so much ambiguity in the language of the law, in terms of incremental costs, variable costs, fraud costs. It's really, really hard to know. I mean, potentially could be material. But again in all honesty, if it turns out to be material in terms of a reduction, we’ll make other changes with regard to [indiscernible] (34:27) charges on debit cards, elimination of reward programs, etc. You're just not going to see at least us take all of this negative without making material changes. So probably will be overall, in aggregate, in most of the areas probably some net negative effect over two or three years. I do not personally believe it will be substantial and material to our company. If you look at deposit insurance, there's certainly going to be changes there, but it's hard to determine any material increase in cost there will be some. But what happened there was the total FDIC coverage permanent went up from $100,000 to $250,000. Remember we were already paying insurance on our total liability base anyway, so it’s hard to know if that cost anything. We do have a two-year increase unlimited coverage of transaction accounts and then maybe some increased cost with regard to that we don't have any specificity from the FDIC yet with regard to that part. It's hard to see whether there’s any [indiscernible] (35:29) in that area. Bank capital standards, they did change the qualification of trucks in Tier 1 capital but it’s phased in over a five-year period. We will have $2.2 billion of that Tier 1 capital that will be phased out. That gives us plenty of time, take the right time to readjust our capital structure to comply with that, we’re just really not concerned about that, don't think that’ll be a material issue for us. If you look at the Bureau of Consumer Financial Protection, there's no immediate impact to us or anybody else on that. I will tell you from a long-term point of view that concerns me probably personally more than anything else in the whole legislation. But we’ll have to see how it plays out. So potentially a lot of negative, unintended consequences that depends on how it's executed, we’ll see. Financial stability oversight Council is a net positive, and we think that's good. The federal insurance office could be positive for us, since they more control over the various 50 state insurance regulators that could be good. Reg Q some minor changes, nothing material there. All the other changes you see listed at the bottom practically had no impact on us at all or it was so minimal not to be mentionable. So when you get through with all these regulatory changes in the short run, while there are certainly some negative forces with regard to Reg E and interchange, we think over the ensuing period of time, much of it will be mitigated and it’s not a dramatic impact, in terms of our ongoing performance. Yet we want to be very transparent and say there’s a lot to be understood and there’s a lot to be worked out. We just have to see how it plays out over time. So with that, let me turn it to Clarke now and let me let him give you a little bit more color on our disposition strategy and our loan growth and some of the other lone areas.

Thank you, Kelly, and good morning, everyone. If you’ll follow with me on Slide 12, I'll try to share some thoughts about our overall credit quality transfer the quarter. As Kelly indicated, we’re very pleased with the overall results which reflect directly the concerted effort to accelerate the resolution of our problem assets. And as you can see overall metrics did improve on a linked-quarter basis with lower early-stage delinquencies, a continued lower level of 90 day still accruing in our first reduction in MPAs as Kelly said since first quarter of '06. Our losses, if you exclude the marks on the loan sales and the allocated reserves that went with that, were approximately 2.06% for the quarter versus 1.99% linked-quarter first. Our heaviest losses continued to be centered in our ADC portfolio to give you some context on that. ADC represents about 10% of our commercial portfolio, but 50% of our total commercial losses. It represents 5% of our total loan portfolio and is generating 30% of our losses and represents 30% of our remaining NPLs. So that's where our focus is on an accelerated disposition strategy. We were pleased that we reduced our ADC balances about $526 million for the quarter and over $2 billion over the last four quarters. It's about a 30% reduction over the year. And I would note for you that we were able to reduce, over the last year, our Atlanta and Florida exposures by over 50% and that's where we've had our highest default rates in severity. The good news for the quarter is we continued to see stabilization in our consumer-orientated and retail likes portfolios and specialized lending and those have lower early stage moderating nonperformers and very good loss experience. We are continuously some deterioration in C&I and CRE outside ADC, however, those levels of deterioration are well within our forecast and we believe at this point they are manageable. If you look with me on Slide 13, I'll try to provide a little more color around the problem asset dispositions for the quarter. We described many times for you historically, we've approached problem asset management differently than other banks. We have a strong commitment to work with our clients during difficult periods, trying to avoid early forced liquidation. This is a form of a bridging strategy to a better market and it's served us very well over the years, and resulting in a long-term basis, lower nonperformers and losses and frankly very loyal clients for the long run. So we've been able to do this through very good client selection and what we believe is superior underwriting. While the strategies continue to work well during the cycle and we've avoided as Kelly said, dumping assets into a highly stressed market, it does appear it's time for us to be more aggressive and I think that's for two primary reasons. One is its very clear that asset pricing liquidity for these problem assets and real estate’s very much improved over the last two years. And another point that's very important is the clients are also much more realistic about where values are and what their position is and they’re more willing to be cooperative with us in these liquidation strategies, that makes it easier than adversarial liquidations. So in the second quarter, we initiated a three-pronged NPA reduction strategy and it really has three components. One was a targeted nonperforming residential mortgage folks sale, the second was the initiation of a nonperforming commercial note and short sale program, which we initiated late in the quarter; and then a very aggressive OREO liquidation effort. And that also included, as Kelly said, a major revaluation of the entire portfolio from an appraisal standpoint and that resulted in $682 million reduction in problem assets as Kelly mentioned. We additionally moved $150 million of both commercial and residential mortgage problem loans to help for sale. We have targeted sales for those in the third quarter and going into the fourth quarter. These sales were accomplished with a consolidated additional loss against the remaining unpaid balance of approximately 12%. The bulk of this additional mark was really related to the mortgage sale and that was not a surprise to us because you obviously have to pay a higher liquidity premium to do a large sale through a dealer. We're seeing much more modest marks on our commercial and mortgage short sales and you'll see I spoke heavily on that strategy and the remaining quarters. But we felt like this mortgage sale gave us a very good jump start on disposition strategy. One other point that I think is very important for the quarter, we did a deep review of our top 50 problem of commercial credits. We aggressively identified those credits that likely needed to be considered for liquidation now and this resulted in a number of those credits being put on non-accrual. So you will note a $400 million or so increase in NPLs and commercial but that was very targeted and by design and we have developed very specific acquisition strategies for these credits in upcoming quarters. So we feel very good about our plan and I believe you will see meaningful improvement, as we come through the next several quarters, as we execute on this plan. On Slide 14, it looked at early-stage indicators, which are very positive across the board. We continue to experience very stabilizing trends in our early 30 to 89 90 day still accruing outside a mortgage change we made in the quarter around FHA credits was actually down as well. We have very low levels relative to the industry in those areas. So what we believe is these early-stage improvement in role rates and migrations are clearly indicating improvement in many sub-portfolios and will help us to get better clarity around our credit as we move forward. On the next slide, we did want to give you a little bit of detail around our TDRs and restructured loans. We know that was a big topic last quarter. As we told you, we've gotten much better clarity with the regulatory agencies and auditors regarding TDR classification and as a result, our rate of increase in TDRs incrementally for the quarter actually moderated considerably 14% increase versus 60% in the quarter as we told you it would. Approximately 80% of all our modifications in the TDR status are performing and over 90% of performing TDRs and 83% of all TDRs are actually current from a delinquency standpoint and even after six months seasoning, we have very low re-default rates on these assets. So we will continue to utilize modifications as appropriate in the future as an effective strategy to help troubled borrowers. On Slide 16, we were very successful with our best quarter ever and OREO sales we liquidated $252 million of properties for the quarter, generating $231 million of proceeds. The other big note for you is that the mix dramatically improved. We sold 29% of that disposition was in lots and land, up considerably from prior quarters. The inflows were also lower than prior quarters and within our expectations. Additionally, the incremental marks we took on the sales and even the revelations for the quarter, if you go back to losses against the original unpaid balance of the loans at non-accrual that have flowed all the way through OREO, are roughly about 44% mark and that's very consistent with the low forties we've been experiencing for the last several linked-quarters. And finally, I'm very happy to report the third quarter pipeline is very strong. We're already up to $120 million under contract, and we have several of our top 10 properties ready for sale. On the next slide, we did experience the large OREO expense for the quarter related to the sales and a revaluation process. As part of the risk-reduction strategy, we did a comprehensive review of the entire OREO portfolio and reappraised over 1,600 properties for the quarter to ensure that we had appraisals on average that were no more than six months old. And that did result in an incremental write-down linked-quarter of about $61 million. But we do believe this positions us very well to accelerate disposition in the future. And finally, on Slide 18, I want to talk a little bit about growth. We feel very good about our loan growth results for the quarter even though market demand is very weak. I think some of the numbers I've seen are that the industry’s generally contracting about 6%. We believe we are bucking that trend. Our growth is much better. We believe reflecting market share movements resulting from our strong brand position. The other thing, as Kelly said, the composition of the growth also very positively supports our diversification efforts around real estate and move away from so much real estate concentration. And so outside the targeted runoff in ADC and the covered portfolio, we actually grew 2.6% for the quarter. C&I was very positive at 2.5%. We’re really benefiting from a major investment we've made in corporate middle-market banking. We have a number of new bankers aligned with our industry vertical teams and they're producing excellent results right now. Our corporate book was up 12.6% for the quarter and production from these corporate teams was actually up 60% for the quarter, so we're taking full advantage of that, and we think that’ll help us in the future. Specialized lending continues to perform particularly well around our small ticket equipment company and our low risk premium financed business. In the main general bank, our auto book and our credit card portfolio also is growing very nicely along with the excellent quality trends we're seeing there. A final note there is that we did have strong originations for the second quarter at $17.45 billion, up 13.4% on a linked-quarter basis and that's setting us up for a very strong pipeline in Q3, which will give us, we believe, better than industry growth opportunities as we move forward. So with those comments, let me turn it over to Daryl for his thoughts for the quarter.

Thank you, Clarke. Good morning, everyone by continuing on a presentation, let’s turn to Page 19. As Kelly talked about, noninterest earning deposits were up 18.2% annualized on a linked basis. Interest checking is also up 17.1%. We are very pleased with the progress we are making on improving our deposit mix. Net new accounts increased 123% on a common basis and 68% on a linked-quarter basis, primarily due to Colonial and the success in our sales initiative. We continue to manage our cost and mix by aggressively reducing CD pricing and balances given softer loan demand. As a result, CDs were down 27% on an annualized link basis. Other interest bearing deposits are down 90% as a result of not needing euro dollar funding, which is part of the deleverage strategy. If you turn to Page 20 of the presentation, our margin continues to benefit from better-than-expected performance on loans acquired from Colonial and lower deposit costs. Net interest margin increased to 4.12% for the second quarter, up 56 basis points compared to the second quarter of 2009 and 24 basis points compared to the first quarter of 2010. Excluding the benefit from the cash flows of covered assets, net interest margin would have been 3.81% in the second quarter, which is flat from the adjusted first quarter margin. The core margin benefited from lower deposits off the three basis points, as well as improved credit spreads in retail and commercial loans. Offsetting these positives was unfavorable mix change to the deleverage strategy. Adjusting for the deteriorating asset quality, including OREO, non-interest margin would've been approximately flat on a linked-quarter basis and three basis points better on a common quarter basis. If you normalize asset quality, we would probably have about 12 basis points higher net interest margin. We expect margin to be relatively stable in the forward flow range, plus or minus three basis points for the remainder of the year. Then we take a moment to talk about the second quarter cash flow assessment. The results indicate further positive performance on the acquired loan portfolio, resulting in additional loan accretion of $100 million. For the fourth quarter, we received a $242 million of accretive OREO and $3 million on other accretables, totaling $245 million. We have approximately $3.4 billion left in accretable yields to flow through earnings. This will occur over the life of these assets. Recovery of previous impaired loans will have resulted in $2.3 million reversal of provision. We have only three out of the 41 pools which are now impaired. As a reminder, approximately 80% of both the additional accretion and provision reversals are offset in the FDIC receivable and noninterest income. Also due to better performance, as Kelly talked about, we established a liability to pay the FDIC as a result of the claw back. Turning to Page 21, during the second quarter, we sold $13 billion of securities with a taxable equivalent yield of 3.99%, and purchased $5 billion of mortgage-backed securities yielding 3.32%. As you heard us say, our stated target for the securities portfolio is to be in the range of 15% to 20% of earning asset. By deleveraging, we have reduced our securities to 18% of earning assets, so we're in the right place where we want to be. While our long term goal is to be neutral to interest rate, the deleveraging strategy increases our asset sensitivity. For example, up 100 basis points in interest rates, we went from 0.47% to 1.56% in interest income over the next 12 months. As you know, that the single most important variable when looking at sensitivities is really the beta on managed rate deposits. We model very conservative re-pricing assumptions compared to market rate changes so that we will be in a position to pay very competitive rates as interest rates rise in the future. The portfolio duration on the securities portfolio decreased from 4.6% to 3.7%. And lastly, as we shrunk the balance sheet, all of our capital ratios improved across the broad. Turning to Page 22, our fee income ratio improved from 40.8% to 39% in the first quarter of this year. Insurance continues to perform reasonably well given soft market, up 2.1%. Mortgage banking income increased 96% on a linked-quarter basis due to lower interest rates resulting in higher refinance activity. Service charge on deposits were essentially flat despite the adoption of our self imposed lower fee policies. Other non-deposit fees and commission continues to show growth in the direct pay and Letters of Credit business. Check proceeds and bank proceeds are both better due to higher activity and increased penetration. Other income variance of negative $44 million is comprised primarily of decreases in $19 million in Rabbi Trust, $10 million related to lower trading gains, $10 million in client derivative rating and $2 million in decreased payable processing income due to the sale of our Payroll business in the fourth quarter of 2009. As we stated, the FDIC loss share in the amount of a negative $78 million reflects an 80% offset of additional accretion identified in the first quarter of '10 and second quarter of 2010 cash flow assessment. We expect noninterest income to be relatively stable, but down slightly in light of the regulatory changes. But over time, we believe we will be able to offset the majority of these changes and produce positive growth over a long period of time. On Page 23, our efficiency ratio experienced slight deterioration due to the Colonial conversion and the higher costs associated with the credit environment. Efficiency is expected to flatten out over the next couple of quarters and improve as credit cards start to subside. Low regulatory cost will be headwinds. Merger-related charges, as Kelly talked, peaked in the Colonial conversion we expect about $10 million to $20 million left in merger-related expenses. All of the Colonial cost savings has been realized and we expect the full run rate of $170 million this quarter. Current occupancy and equipment costs reflect reasonable run rate going forward. Professional services increased, primarily due to increased production and outsource services. Loan processing charges increased primarily due to mortgage loan repurchase reserves of $3 million, approximately $2 million for merchant expense and $1.5 million for commercial loan inspection and appraisal fees. Other noninterest expense was up due to an increase in advertising and public relations expense of approximately $8 million, $2.5 million in deposit-related expenses and $10 million in other operating charge-offs. Excluding special items and expenses related to the Colonial acquisition, noninterest expenses were up 4% compared to the second quarter of last year. The risk reduction strategy Kelly and Clarke referred to earlier will reduce our noninterest expenses over time. Turning, looking at FTE, they decreased 326 on a linked-quarter basis and 1,657 on a common quarter basis primarily attributable to Colonial. Finally, our effective tax rate for the quarter was 10% compared to 19.8% in the first quarter. We expect our effective tax rate for the full year to be in the mid-teens and no unusual items. Turning to Page 24. Capital ratios remain very strong and all improved from the first quarter level. Tangible common at 7%, up from 6.4%, Tier 1 common at 8.9% up from 8.6%, Tier 1 capital at 11.7%, up from 11.6% and leverage at 8.9%, up from 8.7%. We remain one of the strongest capitalized financial institutions in the industry. This concludes my remarks; let me turn it back over to Tamera to explain the Q&A process.

Thank you, Daryl. Before we move to the Q&A segment of this conference call, I'll ask that we use the same process as we have in the past to give fair access to all participants. You'll be limited to one primary question and one follow-up. If you have further questions, please re-enter the queue. Additionally, after we finish the Q&A segment we will ask Mr. King to come back on the line for some closing remarks. Barbara, if you wouldn't mind please, come back on the line and explain how to submit the questions.[Operator Instructions] We'll take our first question from Betsy Graseck with Morgan Stanley.

I wanted to dig in a little bit into the loan sales and just get a sense of some of the color around the loan sales? You were indicating that the market had changed a little bit, and I guess what I'm wondering is, at what type of price point are you willing to sell? Obviously, you're taking some losses, so I just wanted to understand, are you determining the volume of what you're selling based on specific hurdle rates that you're trying to hit or is it a function of something else?

Betsy, this is Clarke. I'll answer that. We are looking at the relative pricing in the market and we do have a threshold of -- we try to look at the current mark on a present value basis versus the cost to hold these assets over time. And we feel like -- of course the mortgage sale was a bulk sale through a dealer. We knew that wouldn't have a much heavier mark but our strategy for the commercial note sales and the remaining mortgage short sales that we're doing would have much more mark smart. So we factored all that into our consideration versus the write-downs we're already carrying on those loans and the allocated reserves and our strategy is to try to dispose of these assets with little remaining P&L mark and not raise our cumulative losses that we feel like we are already embedded in there.

In terms of the timing during the quarter, you indicated commercial sale was late in the quarter but I'm just wondering, did the decline in rates have anything to do with the decision to sell the loans? Did it bring down your hurdle rates to the extent that more loans you decided to sell, was there any movement within the quarter, April, May, June?

Betsy, this is Daryl. What I would tell you is, loans really don't trade too much on the direction of interest rate. When we looked at the quarter, we made a decision kind of midpoint in the quarter that we were going to sell these and we just kind of went through and executed the transaction. It was a competitive process and we just thought that timing was right, based upon what Kelly said earlier, there were more bidders, more competition and just higher valuations of what we've seen in the past for these type of credits.

I think that's particularly the case on Daryl's point there, residential mortgages would be more sensitive to rates, Betsy. But the commercial side is a lot less sensitive and it's more of customized one-off and so it's more based on the investor's view of the property and the return that's not as rate driven.

And the 120 you have under contract right now for the current quarter is more Reg E or?

That's commercial OREO. It's really OREO, it's probably a similar mix to what we're seeing. It's a pretty good percentage of lots and lands. I'd say in excess of 30% component of lots and lands, including several subdivisions.

And next, we have Craig Siegenthaler of Crédit Suisse. Craig Siegenthaler - Crédit Suisse AG: Just a follow-up to Betsy's question on the MPA disposition, and maybe actually it's even better if Clarke handles this one, but of the $682 million of loans, we know now about $79 million are delinquent but can you give us what this mix looked like in the first quarter? Meaning, what was non-accrual and what was accruing as of the first quarter for this $682 million?

The majority of the assets were not accruing in first quarter. So very little of these would've migrated this quarter. These were existing delinquent problem assets that were already on non-accrual. Craig Siegenthaler - Crédit Suisse AG: I'm wondering when is the typical timing of the safety and [indiscernible] (1:02:07) examination?

That varies over time, sometimes they're on an annual cycle, sometimes they're on a 15 to 18 month cycle. It varies all over the place. Craig Siegenthaler - Crédit Suisse AG: Was there one in the first or the second quarters?

We don't disclose when we have safety and [indiscernible] (1:02:28) examination, but as you probably know all of our regulatory relationships are all non-disclosable based on regulatory rules.

And next is Bob Patten of Morgan Keegan. Robert Patten - Morgan Keegan & Company, Inc.: Kelly, a million questions but I just want to focus on Colonial was such a good deal for you. Obviously ahead of schedule and unplanned with everything you wanted to get out of there, where do you see this landscape, obviously regulatory environment changes the rules, little banks have limited access to capital. Are you guys -- can you talk about the landscape of both little banks and larger banks in terms of the next two years and maybe the next five years? I'd like to get your view.

Yes, thanks, Bob. Well I think it's material to be honest I think as the rule-making becomes clear and as we understand the economics of all the changes. First of all, it will be very difficult for the smaller institutions to make the kind of adjustments to their cost of revenue charts that some of the bigger banks will make. So the net and visual impact on them will be worse in my view. But more importantly, I really expect for the next two or three years to see a substantial increase in regulatory compliance and cost. And I think that could be really, really problematic for the smaller institutions. It won't be easy for anybody, but it still matters. And so if you are substantially larger, complying with any one particular rule, the state cost of compliance is potentially the same for a large institution as it is a small one. So, again, both of those factors I think make it really, really difficult for the small institution in the new rules. And so, I personally predict a pretty substantial consolidation over the next few years coming out of all of this, not just the regulatory reform, but the whole economic crisis. I mean, what the crisis has done is it's revealed some of the fundamental flaws in their strategies and execution abilities of institutions. Not trying to be critical of my peers, but it's just a realistic answer to the question. And so I think the small institution have a tough row to hoe going forward. I think the bigger institutions will have to adapt their strategies and will be able to do so. And so you will definitely see a higher concentration of the business flow controlled by the top, let's say 15 institutions, five years from now than there is today. Robert Patten - Morgan Keegan & Company, Inc.: Do you see BB&T as a bigger southern power house or do you see it going more national in five, 10 years?

Bob, the way I see it over the next five or three years, 10 years in the labor [ph] (1:05:54) is kind of a long way out there. In the next five-or-so years let me say that I see us continuing to do fill-in, in the Mid-Atlantic and Southeast, as you know that our corners there and we're basically in the top-five in market share in all of our markets. And so you can continue to improve there but you don't expect to see substantial size. We have an enormous opportunity in Texas, which as you know has 26.5 million people. So we'll be focusing a lot of attention on Texas. So our core banking business, the way to think about us for the next few years is substantial additional penetration in Mid-Atlantic, Southeast and substantial penetration in Texas. On our non-core businesses, which as you know are material, you can expect to see them continue to be national businesses and even in the case of AFCO and CAFO our insurance premium business is some international business in but we have the number one market and share position in U.S. and Canada. But we will continue to grow those businesses on a national scale based on the economic reality of their performance.

And next, we have Jefferson Harralson of KBW. Jefferson Harralson - Keefe, Bruyette, & Woods, Inc.: I some more questions on the OREO class and the disposition strategy, is your target $600 million or $700 million a quarter and would you expect that the OREO class remain flattish if you're successful in what you're trying to do?

We would expect continued sales or dispositions in a similar range for the next several quarters. But we think our core OREO cost will be relatively moderating as we move forward. So we don't expect a big rise in the OREO write-down expense since we've done a deep re-evaluation of the portfolio. Jefferson Harralson - Keefe, Bruyette, & Woods, Inc.: On the margin and the increase from Colonial, it sounds like you're thinking that's a fairly recurring benefit that's going to come, as long as the losses at Colonial stay? Where do you think they're going to be?

Yes, Jefferson. I mean, the people that are working out the loans in Colonial are doing a great job, and because of that we're getting a huge benefit out of that. And one of my prepared remarks, I talked about additional accretable yield of $3.4 billion, that will flow through earnings over the life of these assets. So I think we're going to continue to have this benefit for a while. Jefferson Harralson - Keefe, Bruyette, & Woods, Inc.: How about just that 381 core margin, can you just give us some guidance what do you think it goes?

Yes, I think our core margin; excluding accretable yield is performing very well. I mean it was stable quarter-over-quarter. Our credit spreads I talked about, improved both on retail and commercial. Donna and Ricky are doing a great job on how we're managing our deposit pricing. So I think overall, our core margin in the company is holding up really well and with the positive benefit that we're getting on the work out of the Colonial assets we're seeing a huge benefits.

And next we have Heather Wolf of UBS.

I just have a couple of quick follow-up questions on the margin, Daryl, when you gave the guidance in the back half of around current levels, how much visibility do you have into the timing of the Colonial disposition assets?

What I would tell you is we run to cash flows every quarter. We've been running the cash flows the last two quarters now and what we're seeing is, is improved performance on the marks and which is basically moving dollars from non-accretable to accretable, which is why we're seeing more inflows into the accretable yield which is helping margins. I have projections for the rest of the year and into next year. That can reverse if the performance goes the other way. So right now, we have a favorable trend. Sandra and her team in Florida are doing a great job working these assets out. It takes a lot of work and effort to do a good job with these assets. And as long as the economy stays where it is, I think we'll continue to perform well but there's always variables with it, it works in certain places. But I think we feel pretty comfortable for the rest of the year that we're going to be about what we were this quarter.

Just a point of clarification on the re-class from accretable to accretable, at least at some of the other banks that we've seen, that re-class doesn't always flow through NII each quarter, is there something related to your loss share agreement that makes you recognize that in NII immediately?

It's not immediate, it moves into accretable and then it goes through earnings over time over the life of the assets. We really look at the accounting, there's three pieces, so a part of the benefit goes to net interest margin, then you have an offset in the FDIC receivable but then if you have impairments, that also flows through on the provision side. So last quarter you recall, we did have impairment on eight pools [ph] (1:11:17) now we're down to three pools [ph] (1:11:19). But you have really moving parts in all three areas on the income statement.

So the margin top that we saw this quarter related not just to the re-class from not accretable to accretable but disposition on impaired assets, is that correct?

No, what I would say is that when we're re-writing the cash flows, we had better performance on these assets, which allowed us to move $4 into accretable and then the dollars that weren't accretable, the portion of assets that actually paid off this quarter, basically think of it like a bond, it's accretion on a bond, so a portion of that accretable yield goes into earnings over time as assets are write-off.

And next we have Kevin Fitzsimmons of Sandler O'Neill. Kevin Fitzsimmons - Sandler O'Neill + Partners, L.P.: On the subject of TDRs, I know we've talked the past couple of quarters about a lot of that growth being the realignment of how you guys would define TDRs versus the regulatory guidance that came out in October 2009, wondering if are we basically at a level now where that realignment is done and so when we further increase in TDRs will be just what organically is occurring. And then secondly, just wondered if you guys could touch on the Gulf oil spill and I know a lot of the Colonial presence is basically protected by the FDIC, but in terms of your legacy Florida exposure where you're most concerned about and what you're watching closely?

Kevin, this is Clarke. As far as the TDRs, I think you're exactly right. I think the last several quarters we had noise around clarification on the classification and that's pretty much behind us, so I think any incremental TDR inflows you see at this point will be true modification due to deteriorating borrowers and our ability to helping them. So I think that's the way you ought to look at it. As far as the Gulf Coast exposure, we have taken a deep dive on that and just for reference we have about $2.5 billion of loans in those affected areas, the good news for us is the far majority of those assets are wrapped with the loss share and even at this point, we're not see a big increase or incidence of borrowers coming to us with issues related to the spill yet and for those few that are, many of the cases, they are filing claims. We are anecdotally seeing some benefit on the East Coast of Florida, and the tourism side you see some of the activity migrating over there and fortunately for those folks on the Gulf side, but as far as our legacy assets in those areas, it's very minimal and we just don't think there's going to be much impact.

And next we have Paul Miller of FBR Capital Markets. William Wallace - FBR Capital Markets & Co.: This is actually William Wallace on for Paul today. I had two quick questions, one is I appreciate how it's practically impossible to really predict the impact of any other regulatory reform changes out there. But I'm wondering if as it relates to the Durban portion, the debit fee portion of the bill that was just passed if you would be willing to quantify the debit fee income from 2009 or perhaps expectations for 2010?

Our, kind of bucket if you will, in that kind of run rate is about $230 million. What some people have tried to do is to project what percentage of that they will lose based on the vague language in the law about covering incremental cost and prod cost. But again, as I said earlier, William, it really is virtually pulling numbers out of the air. And our opinion to try to figure that out in terms of what the actual rate will be. And then again, you're just not going to see companies I think sit by and not make changes. I mean it's so easy to change, and for example, to date we don't even have a charge for a debit card. And so if we have all of these reductions income we'll simply have a $5 mark for whatever charge the debit cards. So it's not hard to substantially mitigate that, the irony for this with often times the congressman did not understand the consequences of their actions is it will probably drive up costs to the consumers. William Wallace - FBR Capital Markets & Co.: I think you mentioned in you're prepared remarks that you currently have a study to figure out where some mitigating product offerings et cetera could come from, do you expect that we might hear from that next quarter or is there something that could take a little longer to figure out?

I think you'll begin to see some of it next quarter, and then it'll be ensuing over the next several quarters but you'll begin to see definitely from us information regard to changes next quarter. William Wallace - FBR Capital Markets & Co.: Lastly, I may have missed it in the remarks, but I know you said your tax rate was about 10%. Was there any favorable recovery or anything in there? I know you said the mid teens effective rate for the year, I'm just to figure out what happened in the quarter with that rate?

No, William. It's really when you have to forecast the earnings for the company, we basically just make sure that our average tax rate for the year would be around 15%, 16%. So since we're at 19% the first quarter, we had to lower it to 10% this quarter but we think we'll be in the mid teens for the rest of the year, averaging that in the rest of the year and for the end of the year as well.

And next we have Adam Barkstrom of Sterne Agee. Adam Barkstrom - Sterne Agee & Leach Inc.: Daryl, I want to follow-up on the tax rate. I mean, remind me or remind us why is that rate, you're saying 15% to 16% for the year, why is that so low?

The function of how much tax-free income that we have, in relation to how much taxable income. So if you look, we have a couple of billion dollars of municipals and you have some portfolio, we have also government finance unit that's tax exempt. We also have a couple hundred million in tax credits. So if you factor all that in and you use that proportionately, since our taxable income is down, then it basically comes out to be what the tax rate would be. As our earnings increase and taxable income goes up, than our higher tax -- you'll see a higher tax rate out of us. But since we have all the lower tax exempt income, which is more our taxable income, that's why you're seeing a lower rate from us. Adam Barkstrom - Sterne Agee & Leach Inc.: Kelly, maybe for you and maybe Clarke, you can comment as well, but just thinking about this asset disposition plan this quarter, I think I have a sense, but is this going to be kind of an ongoing initiative or was this sort of a -- for this, at least for 2010 kind of a hard look at the portfolio. Kelly, you talked about pulling in future losses into this quarter because of a number of elements But I'm just curious and you characterized core charge-offs versus non-core charge-offs, I'm just curious if we're going to see this in the next couple of quarters or is this kind of at least for 2010 was this kind of it?

Adam, I think we basically started in the second quarter, a strategy that will be continuing for the next few quarters. Again, assuming the economy remains constant and the investor remain constant. The big change is a year and a half ago there was basically no borrowing for anything. Today, the investor community has changed dramatically and they smell that things are turning and it's time to buy. And so the demand, if you will, has increased substantially. And so we wanted to be in the market while the demand was high. So what you saw in the second quarter was a substantial bulk sale in mortgage because that's, as you know, the most commoditized types of product that they can package up and sell as kind of a total package. And then a smaller amount of commercial but the ongoing strategy is fairly intent at looking at specifically commercial types of foundations. It's possible you do both sell around that, although I say it's unlikely, mostly you'll see a fair amount of activity in commercial dispositions over the next two or three quarters and the lengthiness will be just having to get done in any one particular quarter. But the strategy will be consistent. Adam Barkstrom - Sterne Agee & Leach Inc.: Clarke, just one quick one, back in the footnotes looking at the value day [ph] (1:20:49) past due, you guys highlight a non-accrual policy change related to the FHA/VA guaranteed loans, could you just give us 20 seconds on that?

Absolutely, what we found is that we were more conservative in the industry around when we were non-accruing FHA/VA insured loans when many others were not. And what's occurring as you know, the FHA is requiring modification programs for service or so, a lot of originations we sold into the Ginnie pools we have to buy back out and do mods on them [ph] (1:21:25) let those season and go back. But they're injured and we've been overly conservative in placing those in non-accrual when we had a clearly recoverable interest on those. So we did a policy change to ensure that we only accrued what we would be entitled to on insurance recovery and that's the big change there. So it really moved out of the non-accrual bucket into the 90 days still accruing.

And next we have Chris Spahr with CLSA.

I'm calling on behalf of Mike Mayo. Just a quick question on the margin and the timing of the sales securities, can you give us a sense of what you sold it in the quarter?

Yes, the securities were sold in the middle of the quarter, so if you look at the average balance sheet, our balance sheet is showing only about $4 billion or $5 billion reduction. If you look at the balance sheet at the end of the quarter you can kind of see where the new balance sheet run rate is. From a margin perspective, I would say it didn't have a huge impact on margin. As you saw it initially, it reduces your cheapest source of funding, which is your overnight money, your Fed funds so that's why it had a little bit of pressure on benefits margin.

And under what rates now are you basing your core margin outlook?

Our base forecast basically we use blue chip and we also look at the forward curve. The model that we have on the forecast we talked about, basically has rates flat up until mid-next year when the Fed starts to increase rates and I think we have maybe a 50 or 75 basis point hedge fund rate at the end of '11. So it's a very modest rate rise. If rates stay stable though and don't go up for the foreseeable future, it would have minimal impact on our margin.

And next we have Christopher Marinac with FIG Partners.

Could you just clarify how much of the reserve is allocated towards the TDRs? Just sort of similar to what the queue has disclosed last quarter?

I'm not sure I have that with me, Daryl, but we can certainly follow-up. I don't know if I have that data with us Tamera.

Yes, Chris, we can call you after the call and give you that number.

And next we have Gary Tenner with Soleil Securities.

Question regarding non-accrual inflows if I missed it in the slides I apologize. But what were they in 2Q and then remind us what they were in 1Q?

Inflows were more modest in Q1 related to our commercial, so the big change for Q2 was on the commercial side, so we actually had inflows on commercial of about $400 million. That was up from first quarter and the inflows related to the other portfolios were relatively stable to down.

Can you not give us a total for each order or?

We can certainly follow back up. Again, we don't have that detailed information here.

We show the inflows on OREO.

But we don't have it for nonperforming loans in the deck.

Just Kelly, I wonder if you could talk about dividend buybacks, how the regulatory changes, changes your outlook there given pretty long lead time on the solutions of trust preferred, so how you look at that?

I don't think the trust preferred change, changes my view at all relative to the dividend side [indiscernible] (1:25:26) plenty of time to adjust our capital structure around that. The truth is, during that five-year period of time, we project substantial improvement in the economy, substantial improvement in earnings. We'll be creating capital at a substantial rate and so we'll have all kinds of options around building capital to common equity to replace trust preferred. I don't think we try to do all of that with income. We'll probably, along the way, replace some of that with regular preferreds or based on if we get a deal or something we might issue some extra common but a mobile way to deal with that. So our strategy with regard to dividends remains unchanged, except that, I said earlier that we had kind of thought that maybe over with by the fourth quarter, we might be in the position to have a modest increase in dividends. The stalling of the economy gives me some pause with regard to the certainty around that earlier prediction. And so I guess the way I feel today is that this stall is basically kind of pushing things out a couple of quarters. We'll have to see, that's just my own personal economic assumption. And so we would still expect to be thinking, in terms of considering a dividend increase as we head into the first part of '11 but it's very unlikely at this point that we consider in the fourth quarter of this year.

And next we have Ken Usdin with Bank of America - Merrill Lynch.

Hi, it's actually Ian Foley for Ken. Quick question on the securities portfolio, I understand repositioning it for longer-term if the Fed is presumably on hold for a while what level of loan growth would you need to kind of keep the margins stable on the coming quarters?

Right now the cash flow simply shows the portfolio is a little bit over $2 billion for the rest of the year. So I think we feel comfortable that we'll be able to replace the cash flows and securities, re-invest those to keep the size where it is and we're hopeful that loan demand starts to have growth in the third and fourth quarter.

Although we have a number of callers left in the queue, unfortunately we're out of time and I'd like to now turn the call back over to Mr. King for closing remarks.

Thank you, Tamera. Thank you, everybody for joining us. We really appreciate your interest in following us quarter-to-quarter. So thanks for your support. Overall, we consider this to be another very solid typical BB&T kind of quarter, fundamental core performance in most of our businesses remain very strong, despite sluggish economy. Consistent with what we said all along, we did implement a more aggressive strategy when prices were appropriate to reduce our balance sheet risk and exposure to nonperforming assets. That's off to a good start. We continue to remain very conservative with regard to our allowance position because of a little hesitancy in the economy. So we'll see how that plays out. We certainly saw a great opportunity in terms of desensitizing and deleveraging our balance sheet and take advantage of that. It also allowed us to strengthen our capital levels, which as you know, are amongst the leaders in the industry. We are clearly on track enabling us as core take-away with our long-term plan to diversify our loan mix and our deposit mix which will ultimately end up in a more profitable and stable revenue stream, as we have less volatile exposure to real estate. So if you think about from a long-term point of view, we remain very, very optimistic even as we struggle to get some economic footing nationally, we think that is temporary in nature and the long-term opportunity for us is wonderful. Remember, we still have this major re-intermediation that is already taking place as the shadow market is basically shut down. We don't think it'll change much, this re-intermediation is strong. The consolidation in the industry is going to allow the stronger institutions like BB&T to participate more effectively. So we feel extremely confident about the future. We're not out of the woods, we're not trying to grow big trees, we're not trying to be over confident, don't have me saying that but what we have to do, we know how to do, and we're doing it with deliberation and consistency. And so when you look beyond that temporary execution on the remainder of the credit cycle, the opportunity for us on the revenue and profitability perspective looking forward looks very, very optimistic. Thank you, all very much for covering us and your support and I hope you have a great day.

And that does conclude today's conference call. Thank you for your participation.