Greetings, ladies and gentlemen, and welcome to the BB&T Corporation third quarter 2014 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, Mr. Alan Greer of Investor Relations for BB&T Corporation.

Thank you, Tiffany, and good morning, everyone. Thanks to all of our listeners for joining us 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 third quarter and provide some thoughts about next quarter. We also have other members of our executive management team who are with us to participate in Q&A session; Chris Henson, our Chief Operating Officer; Ricky Brown, the President of Community Banking; and Clarke Starnes, our Chief Risk Officer. We will be referencing a slide presentation during our comments. A copy of this 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 to you to the forward-looking statement warnings in our presentation and our SEC filings. Our presentation include certain non-GAAP disclosures, please refer to Page 2 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 interest in BB&T and thanks for joining our call. So I'd say, recall, our third quarter is overall a strong quarter; solid loan and core deposit growth, positive operating leverage, and we have some very important, I think, strategic initiatives. If you look at the highlights on earnings, net income totaled $520 million versus $268 million in third quarter '13. Diluted EPS was $0.71 compared to $0.37. Now, remember the third quarter '13 had tax-related reserve adjustment. We did have a $0.01 reduction in earnings due to merger and restructuring charges, so overall a really solid quarter. ROA was 1.19%. Internal tangible common equity was a strong 15.04%. Net revenues were up 1.7% to $2.3 billion. T hat was largely due to high mortgage income, service charges and other fee income, and it did really overcome our seasonal decline in insurance, which is always a challenge for us. Very strong fee income ratio at 44%, so we feel good about fundamental earnings. Loans grew 4.9% versus second quarter, led by C&I, CRE, direct retail, sales finance, other lending subsidiaries, all was really broad-based. If you x residential mortgages, loans grew 8.8%, which is very, very good. We did, if you noticed in the releases, we did sell about $550 million in loans, primarily TDRs recorded a $42 million gain, which was reflected as a reduction in the provision for credit losses that resulted in unusual net charge-offs of $15 million, but it will reduce regulatory and servicing costs going forward. We also had a significant unusual item and we extinguished $1.1 billion of FHLB advances, which were costing 4.15% on average, and we took a $122 million pre-tax loss. We were able to replace that with less expensive short-term funding.…

Thank you, Kelly, and good morning, everyone. I'm going to talk about credit quality, net interest margin, fee income, non-interest expense, capital and our segment results. Continuing on Slide 7. We continue to see overall improvement in credit quality. Third quarter net charge-offs, excluding cover, increased slightly to 48 basis points. Excluding $15 million net charge-offs related to the sale of residential loans, mostly TDRs, net charge-offs were 43 basis points, basically flat from last quarter, down almost 11% from the same period last year. Additionally, loans 30 to 89 and loans 90 days past due decreased compared to last quarter, mostly due to the residential mortgage loans down. Looking forward, we continue to expect net charge-offs to remain between 45 basis points and 50 basis points next quarter, assuming no material decline in the economy. NPAs, excluding cover, declined 3.6% with a 10.2% decrease in commercial NPLs. NPAs as a percentage of total assets remain at their lowest level since 2007 at 48 basis points. Going forward, we expect NPAs to decline modestly in the fourth quarter. Finally, performing TDRs decreased 32.5%, driven by the sale of $550 million in mortgage loans. Turning to Slide 8. Our allowance coverage remains very strong, increasing to 1.82x from 1.78x. We had a reserve release of $17 million, excluding covered activity and change in reserve for unfunded commitments and the impact to the loan sale. This compares to $39 million relief last quarter. Going forward, we anticipate no further reserve releases. Continuing on Slide 9. Margin came in at 3.38%, down 5 basis points from last quarter and in line with our previous expectations. Core margin was 3.2%, down 2 basis points from last quarter. The decline was mostly a result of the impact of the covered asset portfolio, partially offset by…

Thank you, Daryl. So as you can see, overall we had a strong quarter, solid loan and deposit growth. Our fee strategy has been really working. Approximately flat expenses with nice improvement opportunity in the forward, based on strategies that I pointed out, that are already in effect. So we did produce operating leverage and several key strategic initiatives that will yield really good long-term benefits. It's a tough environment from a long-term perspective. All of our key strategies are working well, so we feel really positive about our business as it is moving forward, and we remain very bullish on the BB&T performance from a long-term perspective. Let me turn it to Alan now for questions.

Thank you, Kelly. At this time, we'll enter at the Q&A session. Tiffany I would invite you to come back on the line and explain how participants on the call can participate in the Q&A session.

(Operator Instructions) We'll go to the first question from Betsy Graseck with Morgan Stanley.

A couple questions Daryl. I wanted to just see if we could dig into the actions that you took this quarter on the early extinguishment of debt. Maybe if you could give us a sense of what kind of benefit you're expecting that is going to drive. Is it entirely in the 3Q run rate? And then, maybe you could talk to as well other impacts from recent rate moves and how you're thinking about managing with what the markets have given us recently?

So on the Federal Home Loan Bank unwind that we did, that was done at the very end of the third quarter, basically had almost no impact in the third quarter results. If you look out into the fourth quarter, if you look at our long-term debt line item, that's probably a 13 basis point decline in our cost there. And overall, our interest bearing liabilities, line item should probably be down average about 2 basis points, because of that unwind. As you look about the flattening of the curve that's occurred in the last couple of days, the long-end of the curve has come down easily 50 basis points since the beginning of the quarter, if you look at the tenure, maybe a little bit more than that now. If you look at our balance sheet, our balance sheet is pretty well balanced. From an asset liability perspective, we're slightly asset-sensitive, but we have about half of our assets that are fixed and about half are floating rate. So with a flatter curve, that does put a little bit pressure on net interest income. I would say that net interest income would come down maybe in the 1% to 2% range, if this persists next year, which would be between $50 million and $100 million. But then you also have the benefit that Kelly talked about in the beginning, I mean, these lower rates in just two days we've seen refi activity really spiked back up. So we could have back to what we had three or four years ago going through the recession, where you had really strong mortgage activity. So I believe that we could have potentially offset, maybe even benefit with higher mortgage revenues. Diversification is good. Our revenue for net interest income is only 55% fees or 45%, so pretty good balance, which is really why you want to be diversified and balanced overall.

But just two quick thoughts on that; one on the benefit to long-term debt and interest-bearing deposits that's baked into to your 3 basis point to 5 basis point decline in 4Q for NIM?

Yes, and that's helping keep our core margin stable. That's correct.

And the LCR final rule was relatively positive for you. Is there any actions that you're planning on taking differently as a result of that?

Yes. I think you'll see that the benefits bleed out overtime. I mean that basically, we've got a nice windfall with the treatment of public deposits and operating deposits, account classifications. I think the strategy is we basically need to have less, the higher quality investment securities, HQ1 securities on, so we can maybe buy some more Fannie and Freddie versus Ginnie and Treasuries, so that should give us some slightly higher yield benefits overtime. I wouldn't say we would restructure the balance sheet, I think we just do it as the cash flows come in. If you look at what we've been investing in investments over the last several years, we've been very diversified our investments. We've been buying short floaters, we've been buying intermediate cash flows and some longer cash flows, because we really don't know which way rates are going to go, it's a more diversifying strategy and I'm glad that we stayed with this strategy, if this longer curve persist rather than trying to keep everything short. I think we're very low balanced.

We'll take our next question from John Pancari with Evercore.

Could you give us some more color on the expenses in the third quarter and maybe how the number has changed versus your expectation that you gave at the Analyst Day. I think you had indicated slightly below $1.4 billion in total expenses, and that came in just above, and how that maybe impacting your outlook for the fourth quarter? And then, separately, if you could talk about '15 expense run rate?

So John, as I've mentioned at the Investor Day, we try to be very transparent in January, because obviously our expenses had shot up in '13, and so we said then, which we said repeatedly that we thought that the expenses ratio this year would end in the fourth quarter in the 56% range. Three weeks or so ago at Investor Day, to give a little more transparency, I said, remember you have numerator denominator. We have more control over the numerate than the denominator, and so whether it's high 56% or low 57%, I think it's just not that precise. That went backing up on the context, because in the context I said, 56% range, but anyway, it is challenging to get expenses down today. I'll be very honest. I mean it's a really different environment, because we happen to invest a lot in technology and regulatory systems and process changes. On the other hand, we've been really aggressive this whole year and it hadn't shown up yet, but we've been really aggressive this whole year in terms of making any kind of changes. Daryl said, in the third quarter, FTEs is up 800, and that was just kind of executed towards the end of the third quarter, which takes it into fourth. And so that's a big part of why we feel confident, and are still saying, we'll be down maybe not 56%, and probably 57% as the way it looks at this point. But again, if revenue were to kick up, we still -- you just don't know, it's just not that precise. We just want to dislodge ourselves a little bit from being so exaggerated. We tried to say range in the beginning to make that clear, but I understand the context of your question. The…

And then with that commentary, just how you've reconceptualized everything, given the topline environment, given the difficult yield curve here, can you talk about '15 in terms of efficiency ratio expectation. Is it fair to assume that we're looking at a 57% full year efficiency ratio for the full year of 2015?

Well, I think it's fair to say that if everything were constant, then I'd say it's 57% for '15. But as you know John, this is -- I mean during the last two days we had some more volatility, we've had two years, and prior to that it has been really volatile. So for me to sit here and say a number with regard efficiency at this point would be really, maybe not being forthright, because again, the revenue side, I can't control. I mean, if rates were really low, we'll get NIM pressure, but we'll get fee income increase in terms of mortgages. I don't expect any material changes in terms of a basic run rate expenses that we control, because we can control FTEs and we can control an awful lot of our expense structure. So given what I know today, I would say, I am pretty comfortable for the year with kind of a range of 57%, but there will be volatility within the course of that, given what happens on any one quarter with regard to our revenues. And then as I said, we have -- we do have one unusual fairly large item for us, and that's pension. And the way, you probably know that works is based on discount rate at the very end of the year. If 10 years goes back up, then those expenses will be very low for us and if they go really low then they will be spike enough. To be honest, I don't worry much about that, as I do how many people do you have, and how many branches do you have, and fundamental day-to-day operating expenses that you can manage is more of a non-manageable expense. But I will tell you that I feel very confident in terms of maintaining the efficient structure that we have today and even beginning to see smaller than this year, but incrementally improvements even as we go forward. But the big kick for us and everybody else in this business is getting revenue lift. So if we can keep expenses next year in the 57% range, with a kind of modest growth we're expecting, that would be a wonderful thing. If the economy gets a lot better, everything gets better.

Understood.

And we'll go next to John McDonald with Sanford Bernstein.

Daryl, I was wondering about the mortgage banking revenues were strong this quarter and you mentioned the better gain on sale margin with the retail mix improving. Did you see that kind of gain on sale as sustainable? And just on the origination front, do you expect things to be seasonally lower in the fourth quarter, before any refi impact?

Yes. I mean, the gain on sale was really driven by the retail activity, plus we had a little bit of increase in our correspondence spreads. So I would say gain on sale spreads prior to the last couple of days we would have expected to be pretty much consistent in the fourth quarter, but the last few days we've had spike up in activity. We have a lot more refi activity. If that really comes through, rather than having softer volume seasonally in the fourth quarter, then you could actually have that as an offset, which could be a windfall for us and the industry on mortgage revenues. It's too early to call, but we definitely saw spikes up in refi volume in the last two days. So I would say mortgage revenue is a wild card right now. Maybe down a little bit, but could be actually better than what we saw in this quarter depending on what happens to refis.

Yes. I mean, the gain on sale was really driven by the retail activity, plus we had a little bit of increase in our correspondence spreads. So I would say gain on sale spreads prior to the last couple of days we would have expected to be pretty much consistent in the fourth quarter, but the last few days we've had spike up in activity. We have a lot more refi activity. If that really comes through, rather than having softer volume seasonally in the fourth quarter, then you could actually have that as an offset, which could be a windfall for us and the industry on mortgage revenues. It's too early to call, but we definitely saw spikes up in refi volume in the last two days. So I would say mortgage revenue is a wild card right now. Maybe down a little bit, but could be actually better than what we saw in this quarter depending on what happens to refis.

And can you just remind us on the insurance seasonality, then when you go from third to fourth, you typically get that $40 million to $50 million back.

John, this is Chris. We won't get the whole thing back. You're probably looking at something like a 2% to 3% bump up in fourth. The strongest quarter is first, followed by second, followed by fourth and third is our lowest seasonal quarter.

John, this is Chris. We won't get the whole thing back. You're probably looking at something like a 2% to 3% bump up in fourth. The strongest quarter is first, followed by second, followed by fourth and third is our lowest seasonal quarter.

And just on the credit. On the credit side, Daryl, how much of that 40 to 50 basis points change-off guidance is kind of a pickup from seasonality you mentioned?

Hey John, this is Clarke Starnes. We always have defined seasonality in the fourth -- really the second half of the year, but particularly in the fourth quarter in our non-prime auto business, and so really all of the fourth quarter guidance around losses is around the non-prime seasonality. Otherwise, we feel very good about the stability in the credit trends otherwise.

Hey John, this is Clarke Starnes. We always have defined seasonality in the fourth -- really the second half of the year, but particularly in the fourth quarter in our non-prime auto business, and so really all of the fourth quarter guidance around losses is around the non-prime seasonality. Otherwise, we feel very good about the stability in the credit trends otherwise.

And do you expect to start building reserves if loan growth continues kind of in the mid-single digit pace, Daryl or Clarke?

We certainly, at this point, as we said, do not anticipate further reserves based on where our credit trends are, and so we would assume kind of stable reserves unless we had substantial growth and then we would have to pick up provisioning them.

We certainly, at this point, as we said, do not anticipate further reserves based on where our credit trends are, and so we would assume kind of stable reserves unless we had substantial growth and then we would have to pick up provisioning them.

You mean growth beyond what you've had recently?

That's right.

We'll take our next question from Matt O'Connor from Deutsche Bank.

Just a follow up on some of the expense commentary, and I guess the pension comments specifically. It would be helpful if you could let us know what the pension cost were running this year and did you have any sensitivities, if rates just stay at these levels, just how meaningful that might be for next fiscals?

I would say our pension cost this year were basically pretty much zero expense, maybe a slight credit due to what happened with rates a year ago. If rates were to stay where they are today, so that would be down basically about a 100 basis points from last year, you could probably see about $100 million increase in pension expense next year.

And that could be offset somewhat, because one of the other factors in this is when rate truly dropped and the field expectations are down for the next year, we're able to put additional funding into our pension program and we always keep it fully funded, as much as IRS allows, and that could offset that a bit.

Yes, that would be actually my follow-up question, since you have excess capital, and there's not a ton of balance sheet growth, it seems like you've got some flexibility to add there.

Yes. Absolutely. We'll add to the max.

And then just following up on the mortgage refi comment, I realize this is all very real-time, but a couple of days ago, Wells, had said, not really any signs of a pick-up in refis, obviously since then rates have come down another 20 bps, and I am just trying to compare the two, I don't know if its just too real time to reconcile or if another 20 basis points decline rates actually makes that much of a difference?

It's just a real time. Daryl sent me out some numbers couple of days ago, two days our productions almost doubled.

Say it was up about 30% in the last two days.

Yes, right. So it's incredibly hard to predict right now. And I think, we'll would tell you that it's a long time between Monday and Thursday.

Yes, I think most equity investors and banks stocks right now say the same thing.

We'll take our next question from Erika Najarian with Bank of America Merrill Lynch.

My first question, Kelly, just a follow-up on John's line of questioning, maybe I'll take the other side of the efficiency equation. You clearly have been good at controlling things that you can't control. As we look out in 2015, one of the revenue generating initiatives that you've invested in over the past year that you think could provide a benefit or lift revenues even absent help from rate backdrop?

Well, I think you've got kind of couple of things. You've got just a continuing and building revenue lift coming from the community bank, it just keeps getting better day by day, because overall the markets are getting better. And frankly a lot of strategies that Ricky put in place are just getting better. It's kind of independent of a unique strategy, that's kind of a general strategy. Our insurance business continues to get better everyday. The investment in Crump and all of those businesses are just really, really clicking, they get better everyday. The new markets that we're in is really is kind of an exponential thing. When you go into the market like Texas, it takes you while to get your feet on the ground, and then you're building on, again improving on what you have, then you layer in a couple of new investments like the two city tranches. That gets better. We'll have the opportunity in the Greater Cincinnati market. So there are number of topline initiatives that will positively impact that ratio as well. So I think the final one I would point out is that our wealth strategy is really, really working. I mean, it's probably still got another two or three years of legs, because we were kind of behind to be honest. And Chris have done a great job of working with our wealth team and if they integrate with the community bank, I mean it is just gaining momentum certainly everyday. So I'd isolate all those particular ones, but there are some others, but those would be the main ones.

And my second question is do you think that there could be an inflection point in the M&A environment in terms of seller willingness, if the curve continues to be this flat going into next year, or said another way, do you expect lower for longer to drive the propensity for conversations for potential sellers?

I would say lower for longer leads to longing for improvement and that causes people to really rethink everything to be honest. I think it's an insightful question, Erika. Yes, I think that everybody is already feeling the pressure. I mean if you read commentary from community and midsize bank, they will tell you that they are fighting everyday and we're all fighting, but they're really struggling, because an awful lot of the regulatory and technological costs pushed straight down to them just like they do us. And they are saying they have really competitive conditions out there in terms of lending. So I think every time you add one more weight on the challenges and lower longer is another weight, it causes people to think more seriously about strategic opportunities. And I would expect it to stay a little longer, that would create -- if not an outright discernible inflection point, it will certainly create higher propensity of M&A activity.

Are the regulators thinking as fluidly, and that obviously you are able to get some smaller deals done, but do you think some of the logged down and some of the more sizable deals can break as well. Just your thoughts there too and I'll step off.

Yes. So I'll tell you what I think with regard to what the regulators think, but obviously, no one knows for sure. But I believe the regulators are becoming pretty realistic with regard to this. I think they recognize that the industry needs to consolidate. I think they recognize that there is a lot of skill issues around, a lot of investment companies are having to make to meet the regulatory standards in terms of risk improvement, practices, liquidity improvement, capital stronger, etc. And so yes, I think the regulators are beginning to warm up to the idea of the need for consolidation. I think the key thing is they are not backing down in terms of their absolute expectations with regard to, almost a zero-tolerance with regard to risk management and compliance initiatives. And so if the acquirer has invested the right time and money and has the right attitude with regard to investing in those processes and procedures, then I think the regulators will probably look pretty favorably on that acquisition. If they've not, then I think they'll go, will kill it, dead in its tracks.

We'll take our next question from Ken Usdin with Jefferies.

Daryl, just with the couple of DOs coming on and you guys making some adjustments with debt retirement piece; I just wanted to see if you can help us understand just the total size of the balance sheet and how it should progress. So you're bringing on a lot more deposits than loans, but I'm wondering if that leads to balance sheet growth or are you actually going to continue to mix other parts of the balance sheet from here.

Now, that's a good question, Ken. I would tell you from the city Texas branches, what we did with the first acquisition and what we're going to do with this second acquisition is you really won't see hardly any balance sheet growth. We're just going to replace some non-client national market funding with these core deposits. So it basically just improves our overall client funding and improves our liquidity and everything, so all that comes in, and we still get a benefit, because city deposits were actually cheaper than our deposits, so we'll have a benefit there. And as Ricky gets that done then you get more revenue over time from those new markets that we're in. With the Bank of Kentucky, that is basically is going to come in; I would say, our balance sheet won't grow with that, probably little less than $2 billion, $1.5 billion to $2 billion, because that's a full bank with deposits and loans and we have a good loan portfolio, that's going to come in to the market. So the market value on the loan portfolio won't be significant enough. So it's pretty much going to come in, as you see it up for the most part. So I would say about $2 billion higher after we close both of those transactions.

Now, that's a good question, Ken. I would tell you from the city Texas branches, what we did with the first acquisition and what we're going to do with this second acquisition is you really won't see hardly any balance sheet growth. We're just going to replace some non-client national market funding with these core deposits. So it basically just improves our overall client funding and improves our liquidity and everything, so all that comes in, and we still get a benefit, because city deposits were actually cheaper than our deposits, so we'll have a benefit there. And as Ricky gets that done then you get more revenue over time from those new markets that we're in. With the Bank of Kentucky, that is basically is going to come in; I would say, our balance sheet won't grow with that, probably little less than $2 billion, $1.5 billion to $2 billion, because that's a full bank with deposits and loans and we have a good loan portfolio, that's going to come in to the market. So the market value on the loan portfolio won't be significant enough. So it's pretty much going to come in, as you see it up for the most part. So I would say about $2 billion higher after we close both of those transactions.

And then on the securities portfolio side, you had mentioned that you'll be able to just kind of use the cash flows to remix in these LCR free-up. Has the portfolio size also gotten to be around the same level, and from here it's more just about the remixing?

Yes. I would say, our portfolio is just a tad over $40 billion. That should probably stay pretty much consistent right now through 2015. We have very strong liquidity ratios, and I think we're fine from that perspective. So I think we'll continue to invest in the very diversified portfolio, some short intermediate and some longer, very good diversification, but I think the size stays pretty much the same.

Yes. I would say, our portfolio is just a tad over $40 billion. That should probably stay pretty much consistent right now through 2015. We have very strong liquidity ratios, and I think we're fine from that perspective. So I think we'll continue to invest in the very diversified portfolio, some short intermediate and some longer, very good diversification, but I think the size stays pretty much the same.

So then if I would wrap up, then it basically means that, x that $2 billion from the Bank of Kentucky deal, then your earning asset growth will probably be a little bit lower than your loan growth from here?

I mean, the earning assets were basically just be a function of what comes in with Bank of Kentucky, so that's $1.6 billion.

I mean, the earning assets were basically just be a function of what comes in with Bank of Kentucky, so that's $1.6 billion.

It mean, x that just from a -- like if the portfolio is about the same, and basically your loan growth is going to drive your -- loan growth will really drive your earning asset growth from here on.

Yes. So let's say, if we grow loans, call it, 4% next year, our earning assets will be a little less than that, because securities are flat.

Yes. So let's say, if we grow loans, call it, 4% next year, our earning assets will be a little less than that, because securities are flat.

We'll go next to Gaston Ceron with Morningstar Equity Research.

I just wanted to stay on the M&A theme just for a moment. I think you gentleman discussed, your new position in Texas, after this branch deal, I think you said you were now looking at being on the 13th spot there in Texas, and still not in top five. So I'm just curious, if you can look out a little bit further and just comment on your further aspirations in Texas and how you expect to kind of break into a top five, and any kind of timeframe that that might take you?

Well, I think our strategy for Texas going forward will be multifaceted, because we primarily focused on organic growth. We have really good base now of 120 branches and we can grow really fast off of that base organically. As we have been, we will continue to look for partners in Texas. There are a number of institutions there that would make good partners for us we believe. But the Texas Bank has done a really good job, and it's a really good market, and their price to earnings is really high. And today, I would not be willing to pay that kind of price that would be required to buy those institutions. So I think looking at us in terms of any whole bank acquisitions in Texas, odds of that is pretty low, unless things change materially, which I do not expect. So we'll look for opportunities like this city. There could be some more of those in Texas. We would be very aggressive in that. But we'll focus at this point primarily organically in Texas. Now, keep in mind, we are not unilaterally focused on Texas. We have other expansion opportunities. We overtime, we will continue to look for opportunities through M&A to expand in Florida, and maybe in other core existing markets. We certainly over time had indicted that we will continue to look at expansions that are natural extensions of our existing footprint. So you can see that out into the Midwest, maybe push it a little North. We're up there in the Baltimore area, and so some areas up around there are kind of beginning to make some sense. So like we have always done, it's kind of a strategic creep. You're unlikely to see us do something really big and whopping, way out away from where we are. You're more likely to see us do what we've done, which is natural creeping. And you can say, we wouldn't have creeped in Texas, that was a pretty big leap, it was, but it came -- it was intuitive because of the way it came along with the Colonial acquisition. And then once we had that beachhead, just decided to take advantage of it. So the natural extension program is growing incrementally in contiguous markets.

We'll go next to Gerard Cassidy with RBC.

Can you guys share with us, you mentioned in your prepared remarks that there's increased competition for the participation loans that you've got on your books -- excuse me, that you put on your books. Can you tell us how large that portfolio is and where there maybe some concentrations and where you are seeing the competition being the most intense?

Our shared credit portfolio, we have about $22 billion in commitment, that's a little under $9 billion in outstandings. And it grew about 13.5% on a linked quarter. So very nice book for you us, good growth. Nothing has changed around our focus on conservative hold sizes, so our average exposures in that book is about $38 million. So it's really fairly modest relative to our size. So we are seeing more in the non-leverage space, which you know, we don't participate in the leverage side. We're seeing more structural concessions in that area, really broad based. So what's happen is the leverage sides had a lot more attention, and there has clearly been the pullback on the bank side. We're seeing more competition in the non-leverage space that we participate in, so we're having to be very cautious and careful about that. But it's really broad based, it's not in any one particular sector as far as the competitive side. As far as our distribution, we don't have any particular concentration. So for us it's very broad based and diversified, primarily around the industry verticals that we cover out of our capital markets area.

Are the agents primarily the New York banks or who puts together the participation that you guys are most often joining?

The real larger banks, not just the large New York banks, that includes large regionals as well. So we share credits with our peer bank regional partners as well. So it's really both.

And then, a follow-up on the Investor Day, you guys were talking about return of capital, and obviously with the third quarter results, these are the results that you'll put into your CCAR submission in 2015, with a very strong Tier 1 common ratio of over 10%. Two parts; one, what do you guys see in terms of how much maybe you'll ask for? Obviously, last year it was around 30%, if I recall. I would assume it would be something higher. And then, second, what's your comfort level on your Tier 1 Basel III common ratio? Where you think you could have that eventually get to?

Well, Gerard, as you know, we've been cautious in terms of trying to establish absolute, because this is still a moving target. Although, I am very pleased that we're beginning to get some specificity, we still don't have the topline corporate unsecured debt requirement, that's not out there. We don't think it's been an issue for us, because we think we're already where everybody is glad to be, and we don't expect any substantial capital charge for us, because of the [ph] G50 charges. So if you assume that the Tier 1 common is around 7%, I would say generally we are comfortable in the 8.5% kind of range, but we would keep a cushion above that for various reasons. Today the cushion is because of waiting for things to settle on down a bit more. The global economic environment is pretty volatile, but there is opportunity there. Now, do we use that opportunity in terms of stronger organic growth, maybe so, but not highly likely to be honest, and we will have good growth, but then stocks will be enough to absorb capital. Well, we think in terms of dividend increase here, but not enough to really absorb the capital, so that gets you to M&A and buybacks. And so I would project or what I prefer would be able to absorb some of that through M&A activity. So if we can, for example, like you saw us do in Bank of Kentucky, if we can do 80-20, 70-30 kind of acquisition, where we can absorb capital that way and be a strategic attractive opportunity, it's just a win-win. Will we consider buybacks, yes. Now, I try to remind everybody that you got to remember, when you talk about buybacks, you got to look at absolute price and the internal rate of return on the investment. So we're not going to go out and buyback just to reduce capital, we'd rather hold on little excess capital and buy it on a dip. But, yes, I think there is some opportunity there. I'm hesitant to nail it down exactly whether it's 8.5% or 9.25%, it will not be that exact about it, because we're going to be flexible and always have opportunity to respond in current conditions. But I think in here, Gerard, and your basic question is, is there a meaningful opportunity for us to increase distributions to our shareholders through some combination, practically M&A and buybacks, and the answer would be, yes.

We'll take our next question from Paul Miller with FBR Capital Markets.

On Slide 6, you showed a very good increasing average non-interest bearing deposits. Can you give us some color there, because that's some pretty substantial growth? And then with the two acquisitions, one in Texas and the one in Kentucky, I mean how much more can this grow when those other banks come underneath your ownership?

So you're right, it is very strong. It's driven primarily by two general factors. One is, the community bank is doing a really good job in terms of growing non-interest deposits in its structure. Remember that the community bank, independent of the recent acquisition, has a lot of new markets, Florida, Atlanta; all of these are still relatively new for us, since every time we're growing in new commercial accounts, we are increasing DDA. And so we've got that, we've got the Texas situation, we described the Kentucky situation. So the community bank is going to be continuing to have accelerated non-interest bearing deposit growth because of the older, if you will, new markets, and then Texas and Kentucky. The other factor that is driving that is a very, very well executed national corporate banking capital market strategy. That strategy we put in place about four or five years ago. It is just being executed to precision. We've got to a guy named Rufus Yates is on our executive team. He is very experienced in that area, and he's doing a fantastic job, as are all of the members of that team. And so every time we go into Chicago or Cleveland or San Francisco or New York with our capital market structure, and this is people on ground now. You know, we're putting people on the ground, pursuing those corporate relationships, because as Clark continues to say, we are not going to just go out and buy participation, we're not going to out and initiate relationships out of market, where we don't have people on the ground. So I now define the corporate banking strategy market as a national market. But when we are out there picking up those relationships, that's adding on a very, very low base. And so the combination of the community bank excellent execution and the corporate bank excellent execution has given us really good non-interest bearing deposits growth. And I think that will continue for quite a long.

And is there other services coming along, is other fee services coming along with these products?

Yes, absolutely. Because one of the things, Paul, that happens in these is, it's not always, but almost always a credit requirement that go along with these and relatively thinly priced. But we are very diligent about our total return expectations. And we're fortunate that we have really, really good product offerings. We have, of course, all the treasury and all that that everybody else has, but we're unique in having really good insurance offerings. And so we do a really good job in terms of over a two to three-year period of time getting pretty good penetration of those large corporate clients. We often time start out with credit and insurance, and in a lot of cases we found we already have credit, and now I mean we already have insurance through our large national insurance deliverer, and we add credit and other things to it. So it's not easy, I'll say that, but we've been very successful at it.

We'll take our next question from Matt Burnell with Wells Fargo Securities.

I understand the drivers of the revised efficiency ratio and some of the challenges you're having in terms of expenses in the current environment. Just looking into 2015, Daryl, I know you've got some expenses related to some of the back office improvement that you're doing with some of the systems. Given some of the headline recently about cyber-security, is that an area where you could see some incremental increase in cost over the next year or two or is that largely embedded into your thinking with the newer systems?

I'll answer that one for you. We are investing and we'll continue to incrementally increase our investment into overall cyber-security, information security space. I have been very active on a national level in terms of chairing the BITS, the Financial Services Roundtable, and have been really concerned and outspoken frankly about the need for all of us to invest more. So BB&T has been focused on this really for the last two or three years at a very intense level. But even so, just in the last six to eight months, Chris Henson and I did a deep dive in terms of our security procedures, and what we felt really good about what we were, we decided to enhance at a substantially increased level. So why we won't be doubling, for example, in a year or something like that, it will be one of the few expense categories that's given a pretty green light in terms of making investments necessary, because we are not going to take this risk. There is risk in that, I don't care what you do, but if there are known risk that we find that we can mitigate, we're going to do it.

Daryl, a follow-up question for you. In terms of the loss sharing income with the change in or the expiration of the commercial loss sharing agreement at the beginning of this month. Should we see a ramp down in terms of that counter of fee revenue item going into 2015 or is that going to stay relatively elevated?

You know, what I would say, Matt, is that fourth quarter numbers will start to come down, the negative loss share amount. As you get into '15, I would have it continuing come down every quarter thereafter. It won't be zero by the end of '15, but it will probably be half of what it is today, so that drag really starts to fade away as the pace of that falls off.

Due to time restraints, we will turn the call back over to Alan Greer at this time.

Thank you, Tiffany, and thanks again to everyone for joining us today. This concludes our earnings call. Have a good day.

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