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BB & T (NYSE:BBT)

Q1 2011 Earnings Call

April 21, 2011 8:00 am ET

Executives

Clarke Starnes - Chief Risk Officer and Senior Executive Vice President

Daryl Bible - Chief Financial Officer and Senior Executive Vice President

Kelly King - Chairman, Chief Executive Officer, President, Member of Executive & Risk Management Committee, Chairman of Branch Banking & Trust Company and Chief Executive Officer of Branch Banking & Trust Company

Tamera Gjesdal - Senior Vice President of Investor Relations

Analysts

Michael Mayo - CLSA Asia-Pacific Markets

Todd Hagerman - Sterne Agee & Leach Inc.

Matthew Burnell - Wells Fargo Securities, LLC

Craig Siegenthaler - Crédit Suisse AG

Brian Foran - Nomura Securities Co. Ltd.

Christopher Gamaitoni

Betsy Graseck - Morgan Stanley

Jefferson Harralson - Keefe, Bruyette, & Woods, Inc.

John Pancari - Evercore Partners Inc.

Kenneth Usdin - Jefferies & Company, Inc.

Gerard Cassidy - RBC Capital Markets, LLC

Christopher Marinac - FIG Partners, LLC

Christopher Mutascio - Stifel, Nicolaus & Co., Inc.

Gregory Ketron - Citigroup Inc

Matthew O'Connor - Deutsche Bank AG

Operator

Greetings, ladies and gentlemen, and welcome to the BB&T Corporation First Quarter Earnings 2011 Conference Call on Thursday, April 21, 2011. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Tamera Gjesdal, Senior Vice President of Investor Relations for BB&T Corporation. Thank you. Ms. Gjesdal, you may begin.

Tamera Gjesdal

Thank you, Clayton, and good morning, everyone. And thanks to all of our listeners for joining us today. This call is being broadcast on the Internet from our website at bbt.com. We have with us today Kelly King, our Chairman and Chief Executive Officer; Daryl Bible, our Chief Financial Officer; and Clarke Starnes, our Chief Risk Officer, who will review the results for the first quarter of 2011, as well as provide a look ahead.

We will be referencing a slide presentation during our remarks today. A copy of the presentation, as well as our earnings release and supplemental financial information, are available on the BB&T website. After Kelly, Daryl and Clarke have made their remarks, we will pause to have Clayton come back on the line and explain how those who have dialed in to the call may participate in the Q&A session.

Before we begin, let me make a few preliminary comments. 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. Additional information concerning factors that could cause actual results to be materially different is contained on Slide 2 of our presentation and in the company's SEC filings.

Our presentation includes certain non-GAAP disclosures. Please refer to Page 3 and the appendix of our presentation for the appropriate reconciliations to GAAP. And now it is my pleasure to introduce our Chairman and Chief Executive Officer, Mr. Kelly King.

Kelly King

Thank you, Tamera, and good morning, everybody, and thanks for joining our call today. We had, overall, a solid quarter based on, particularly, continued improvement in credit cost, progress in our balance sheet diversification and, especially, strong performance in corporate banking, which I want to spend a little bit of time talking with you about.

So if you're following along into your deck, I'm on Page -- Slide 4. We had $225 million, and first quarter net income available to shareholders, up 19.7% compared to Q1 '10. EPS was $0.32, which was up 18.5% compared to Q1 '10. So good solid performance numbers there.

We also had solid average loan growth, particularly, when you look at the detail. We were pleased to have overall total loans held for investment growth of 1%, particularly, good in a challenging economy and our intentional material runoff in real estate loans. That total does mask some strong performances under there, where we have 3.8% growth in Sales Finance, 22.7% growth in Residential Mortgage and also a very strong 8.7% growth in C&I. So the components of loan growth are much stronger than the aggregate total.

Likewise, in deposits, we had strong growth in average client deposits, especially, in low-cost deposits. Our average client deposits increased $2.1 billion or 8.7%. Importantly, client deposits, excluding CDs, we have had a strategy, as you know, the last several quarters of managing down our CD cost. They increased $3.2 billion or 16.8%.

And for the second quarter on the row, our credit metrics improved across the board, which I'm very excited about. So OREO, NPLs our performing TDRs, delinquent loans, NPL inflows, watch list loans and charge-offs all declined again this quarter. So now I'm able to have 2 wonderful slides taped to in my ceiling over my bed. So this is really a good thing. I'm looking for about 10 of them, Clarke. So we'll keep that dream going.

We did sell approximately $500 million in problem assets during the quarter, and we expect to sell something more than $500 million in problem assets during the second quarter. I would point out that we are moving to, what I'd tell, a clean-up phase on loans held for sale, and remember -- and now, we only have about $189 million left. So that program is about over.

Outlook remains very positive on credit costs. They will continue to come down over the next several quarters. And Clarke will give you a lot of detail on that in just a minute.

If you turn with me to Slide 5. Remember, as we talked about this 2.5 years ago, we said that we would be focusing for the next several years on balance sheet diversification, because going through the crisis, we determined that we were heavier investing in real estate than we wanted to be, and really wanted to improve our low-cost transaction accounts. So we've been focusing very strongly on that through our community bank. The execution has been outstanding. We believe we have the best value proposition in the marketplace based on independent research, showing that our client service quality is the best amongst our peer group.

So in terms of mix improvement in the loans area, we were very pleased to see that first quarter's new production mix was 85% C&I and only 15% CRE, but that continues to move down the road in terms of improvement mix. Same thing in the deposit mix improvement area. We did have a strong 8.7% increase in average client deposits, as I mentioned on a linked-quarter basis. Importantly, we had net new transaction accounts of 15,000. And first quarter is usually one of our not strongest quarters.

Noninterest-bearing deposits increased to 21% of client deposits in the first quarter versus 18% last year. That's a material change in 1 year. We were very pleased to be a leader in introducing a money market account. It's actually a cash reloadable card. It's really good for the under-banked segment. It gives them an opportunity to have a -- effectively, a debit card, which they can load with cash at their discretion. And very, very well received.

We did move in the quarter towards Bright Banking, as we moved away from free checking, and actually, have introduced in the first couple of weeks of April, a new Bright Banking lineup, which is, effectively, a variety of products, where you can have it free, but you have to have various qualifiers. Note there's no pure free [ph], with no otherwise justifying balances. The cash results we did during the first quarter on this new product lineup were very, very strong. And so now, as I said that's effective in the second quarter. And we think, that will be well executed on.

In the small business area, we continue to do -- be strong and make progress. We had 2% growth in total households compared to last year. And I would point out that we are a very strong small business lender, and particularly, in the SBA program, which really helps a lot of our smaller clients and amount is capitalized as they'd like to be. So we were the most active lender in SBA in North Carolina and Virginia, two of our largest states. We're very pleased about that. We have a number of other growing niche lending businesses, like small ticket consumer, prime auto, commercial leasing, commercial mortgage. All those businesses are doing well.

So we've mentioned to you in the past last 3 years or so, we've been focusing on our Trust and Investment Advisory business that continues to go well. Trust and Investment Advisory revenues were up a strong 9.7%. Wealth is doing even better, revenues up 14% compared to first quarter of '10. So that business is really gaining traction for us. And our Investment Services produced a record quarter.

As I mentioned in my preliminary comment, I'm very excited about our opportunity in Corporate Banking. This continues to do extraordinarily well. For example, we had 21% growth in large corporate banking than compared to the first quarter of '10. In the first quarter, we were in the top 10 in Southeast, in bookrunning in the middle market space.

Our energy team, which we mentioned to you before, is now in place. It's been in place for about 5 or 6 weeks. We actually had a report from them earlier this week. They're off to a great start. They've already done several deals. There's several more deals that will be closed in the next 30 days. And they've only been with us a few weeks. So very, very impressive, this new team. Opportunity there for us is very, very strong.

And in this whole corporate space, I would tell you that our pipeline is very strong. It gained momentum in the first quarter. We are expanding some industry specializations. And so, we expect a very, very good performance in this corporate banking area, where, in general, we have just been underrepresented. The fact is, for a bank our size, we have a tiny share of the national corporate banking market. And so now that we are out, aggressively looking for it, we've been extremely well received. Our name is well known. Our quality institution plays well. And frankly, a lot of these large companies need and want to bank like us in their groups. So good results, so far; excellent opportunity, going forward.

I'll remind you that we've been aggressively adding revenue-producing FTEs. We've hired 200 or so since last year, this time. The others added during the course of the year, because we think the revenue opportunity is budding, and we're making the investments to take advantage of that.

So if you turn with me to Slide 6. A little more detail in the loan area. I'd say our loan performance is very solid, particularly, given our diversification. I know there's a lot of concern out there about what's happening in the market, what happened in the first quarter. I would describe the first quarter as a mixed quarter. The first part was pretty strong. We did definitely experience a slowdown in the second half of the first quarter.

I, personally, think this had to do with all that's going on in Japan and Northern Africa. Every time we have these major global events, it just kind of puts people back. They take a little bit of time to digest and think about it. But the underlying strength of economy, we think, is very firm. Comps, as we believe will continue to build. Fact is, companies need to invest. And they've been sitting on their hands for several years. And they've got in there some plant equipment and other revenue-producing opportunities.

I believe, based on discussions, that business leaders are very encouraged by the tone in Washington around deficit discussions. I know S&P didn't feel too good about it, but given the reality of that group, up there, I think, it's very encouraging that both sides are talking about credits, and both sides are throwing out big numbers. And so that's the first time that's happened in a long time. So I'm pretty optimistic that while it'll be nasty, probably, in the process, we'll get some meaningful deficit reduction, and that would be very encouraging to the market.

So if you look at our average loan growth, our highlights -- our C&I, again, is a strong 8.7% on a linked-quarter annualized basis. Other CRE did see a linked-quarter decline, which, again, part of that portfolio, we are trying to run off. Although we're down a little bit from what we would hope, 3.8%, but still good. It, probably, will pick up and go later through the year.

Residential Mortgage was a strong 22.7%. Specialized lending, on a linked-quarter basis, did decline 7.2%. But we have the lowest group of specialized lendings. And then, a couple of them are pretty seasonal, particularly, our insurance premium finance businesses. So you have to kind of look under the covers. So for example, our Commercial Mortgage business is up 131%, commercial leasing's up 23%, small ticket consumers, up 4.5%. So all of our special lending strategies are working great, it's just you get some seasonality there. And it will come back stronger as we had into the rest of the year.

I would point out that as you know, we have been very conscious, say, for the last 3 years, very focused on running down our ADC portfolio. We peaked at like $9 billion. We're down to about $3 billion. You'd see for this quarter, annualized is down a whopping 41%. Covered and other acquired loans were down 35%. So if you look at our total loan growth, again, at 1%, that's masked all [ph] those substantial runoffs. The sub-total, excluding that is a pretty strong 5.2%. And then C&I is up 8.7% and large core's at 21%. So if you kind of walk through the progression of the strategies that we're focusing on, we feel pretty good about our loan growth and prospects going forward. We did say in January, that we expected 3% to 5% in loan growth for the year. And frankly, we still feel very good about that guidance for the year.

If you follow with me on Page 7. Our diversification plan in deposits is very much on track. You could see that over the year, deposits are relatively flat. But again, that's been the mix change. So you will notice that noninterest-bearing deposits quarter-over -- year-over-year is up 13.7%. Now the first quarter annualized is down 0.7%, but remember, we get seasonality in the first quarter. So it's best to look really on deposits at common quarters. And so other client deposits are up 8.1%.

Client CDs are down 31%. That is exactly on plan. Remember, we inherited a lot of single service, very expensive CDs through Colonial, and some are managed through some of our previous mergers that were just really not full banking relationships. And so given the relatively soft loan demand, it just didn't make sense to keep paying high prices for CDs, and so we've been consciously running that portfolio down.

We continue to help improve our cost. Our interest-bearing deposit cost decreased to 0.82% in the first quarter compared to 0.90% in the fourth. So it's coming way down already and continue to improve, which is a part of that strategy. I will point out that we have kind of completed that strategy of CD runoff. We fell bottom. We now have a strategy of stabilized and relatively slow growth, as we go forward. And you could see that in the distinction between the common-quarter comparison and the linked-quarter comparison. So you can look for that to be stable to kind of slowly growing as the rest progress through rest of the year.

Importantly, our average client deposits including CDs increased $3.2 billion or 16.8% on annualized linked-quarter basis. That is very strong growth in the deposit area. So we feel good about our loan diversification strategy our deposit diversification strategy and think they will continue as we go forward.

Now let's turn to Clarke and get some more detail in our credit trends.

Clarke Starnes

Thank you, Kelly, and good morning, everyone. I'm very pleased to report continued positive trends in our credit performance for the first quarter. As Kelly indicated earlier, we, again, experienced broad-based improvement, reflected by linked-quarter improvements in our key credit performance measures from the early stage indicators, all the way through to nonperforming asset levels and losses.

This performance reflects the second consecutive linked-quarter improvement in our credit indicators and is very consistent with our efforts to move more aggressively and resolve problem credits and move through the last stage of this credit cycle. Given these solid results and an improving economic outlook, we continue to feel confident about our future credit direction. Over the next several slides, I'll share some color and key drivers for these improving trends.

Slide 9 provides more detail providing the early stage indicators. As we discussed last quarter, our internal watch list problems continue to decline, reflected by a 2.6% decrease this quarter. We also experienced a very strong reduction in early-stage delinquencies that would be the 30- to 89- and 90-day plus buckets of over 20%. This is, in fact, the lowest level of delinquencies in 3 years. A 21.8% reduction in commercial delinquencies, together with the very strong results in our retail oriented portfolios, contributed to these results.

As we've discussed with you, on numerous times during this credit cycle, our primary credit issue has been the stress in the single-family ADC portfolio. Remind everyone, it still only represents 3% of total loans, yet, accounted for approximately 22% of the NPLs, 21% of nonaccrual inflows and 17% of losses this quarter. Therefore, we've been working very diligently to work through the problems in this portfolio as quickly as possible.

I'm really pleased to tell you, we made excellent progress this quarter, reducing balances by quarter end by over $500 million, including the held-for-sale bucket. As a result, we feel very good about the progress towards rightsizing this Lending segment, which should help us substantially reduce nonaccruals and total nonperforming assets as we look ahead.

Turning to Slide 10. We're very pleased to report a third consecutive quarterly decrease in both performing TDRs and nonaccrual inflows. Total performing TDRs decreased 11.3% this quarter, including a 27% decrease in commercial TDRs. Even though TDRs are low, we continue to believe that prudent modification efforts do positively impact our portfolio performance. You can see this as 73% of all TDRs are in the performing status and 90% of performing TDRs are in fact, current.

Our nonaccrual inflows were also lower this quarter, down 8.3%, with commercial inflows down 8.1%. If commercial inflows make up the majority of total inflows, their continued improvement is another indicator of improved credit quality. We'll note that the current level of commercial inflows continues to reflect our aggressive efforts to resolve existing watch list credits. As our watch list continues to decline, we would expect that inflows would continue to improve each quarter, as we move ahead.

Slide 11 indicates the total nonperforming assets peaked about a year ago and has steadily decreased for 4 consecutive quarters. Total NPAs were down 2.7% in the quarter, with NPLs down 2% and OREO down 4.2%. Looking ahead, we expect to see steady reductions in nonperforming assets each quarter with a major opportunity to accelerate the reduction associated credit cost in the second half of this year.

Strong execution of our problem asset disposition strategy drove these results. As Kelly indicated, we sold more than $500 million of problem assets in the quarter, but we're very pleased that the average sales prices were consistent with our targets. This includes OREO sales of approximately $177 million, which we think, frankly, is very good, given that the first quarter's usually a seasonal low point for OREO sales. We also had nonperforming note sales of approximately $326 million. So the total nonperforming held-for-sale note bucket was reduced to $189 million by quarter end. Remind you all that it started at $1.3 million a couple of quarters ago. We continue to revalue this remaining inventory on a quarterly basis since market down to about 50%, which is consistent with our actual results for the program to date.

Kelly also mentioned earlier, we expect to produce a similar level of problem asset sales in the second quarter, likely to be more than $500 million. This will include certain loans probably that will classified today as held-for-investment. I do want to reiterate what Kelly said. While we don't expect to continue to transfer of large blocks of loans to held for sale, we will, from time to time, sell problem assets, when we get a good opportunity.

On Slide 12, you'll note that our charge-offs for the quarter were down nicely 1.65%, almost 25% compared to the fourth quarter. This is the second consecutive quarter with considerably lower losses. As a result, we continue to reaffirm our prior charge-off guidance, which is for charge-offs to decline through about 150 basis points later this year.

Due to the improved portfolio performance, our provision expense decreased significantly this quarter and came in at about 84% of net charge-offs. While our provision was down for the quarter, we continue to maintain very strong NPL coverage ratios at 103%, excluding our covered loans. Our current allowance now is approximately 1.5% current quarter charge-offs, which we feel very good about.

So continued improvement in our credit quality trends against the more positive economic outlook should allow for further reductions in provisioning and other credit-related costs in 2011. Daryl will give you more color in a moment regarding those specific credit-related costs.

Finally, looking at Slide 13, I'd also like to comment on the current mortgage environment, which we believe is a very good story for BB&T. As we have told you all before, we operate a very traditional low-risk mortgage business and it's very focused on client service. Remind everyone, we were again named the highest in customer satisfaction from J.D. Power among all mortgage servicers.

Over the last several months, we've completed various reviews of our mortgage servicing processes and standards and we feel, frankly, very good about our program. We didn't participate in private label securitizations actively. We don't have issues with robo-signing or dual tracking, assignment issues. We don't foreclose through MERS. And also, we have had a very successful HAMP modification program with a much higher success rate on the conversion of the trial mods to permanent mods versus the industry.

In terms of repurchases, we had a decreased first quarter with only $38 million in total repurchases. So this issue really is immaterial for us and very modest compared to what others in the industry are experiencing. Finally, BB&T is not a participant of any regulatory or legal settlement process regarding mortgage servicing.

So in summary, everything that we're seeing from a credit perspective is positive and continues to move in a better direction. The success over the last several quarters, with the execution of our asset disposition strategy, combined with a clear improvement that we're seeing early credit quality indicators, supports our confidence that our credit problems peaked last spring. So we would expect improved results and lower credit costs each quarter as we move through 2011.

So with that, I'll turn it over to Daryl for his comments.

Daryl Bible

Thank you, Clarke, and good morning, everyone. I'm going to discuss net interest margin, fee income, noninterest expense, capital and the dividend.

I would like to continue on Slide 14. Net interest margin came in at the higher end of our range, we discussed on our last earnings call. For the first quarter, margin was 4.01%, down 3 basis points from the fourth quarter. The margin continues to benefit from positive funding mix changes, lower cost of funding and wider credit spreads. When you adjust for nonperforming assets and interest reversals to a more normalized level, our net interest margin would be about 10 basis points higher.

Net interest income on covered assets decreased $23 million compared with last quarter. However, the impact on revenues was a positive $19 million. We are raising our guidance for margin for 2011. We expect margins to remain in the 4% plus range for the rest of 2011. The drivers for this improvement are faster loan growth, positive funding mix changes and falling interest-bearing liability costs. Also, as you can see on the graph on Slide 14, we remain asset-sensitive and well positioned for rising rates.

Turning to Slide 15. Our fee income ratio of fell to 40.1% from 41.8% in the fourth quarter. The decrease was mostly attributable to lower mortgage banking income and service charges on deposits. And as we expected, service charges on deposits decreased due to regulatory changes. Our goal is to minimize this loss revenue, while continuing to be responsive to our clients.

We told you last quarter that product and pricing initiatives are being tested throughout our footprint. As a result, we introduced BB&T Bright Banking earlier this month. Bright Banking replaces our free checking product. As a client, it does not need the various qualifiers, they will be charged a monthly maintenance fee. Approximately 2/3 of our clients already meet the qualifiers to avoid the monthly maintenance fee. Bright Banking significantly reduces the number of unprofitable retail checking accounts. Going forward, we will continue to test product and pricing initiatives in order to offset the effect of new regulations.

Check card and bank card fees both remain strong due to the higher activity and increased account penetration. Mortgage banking income for the first quarter was $95 million compared to $138 million in the fourth quarter. This decrease was mostly due to a 32% decline in application volume, lower net gain on MSR hedging and lower margins on production. Investment banking and brokerage fees and commissions contributed $87 million for the quarter, still very strong compared to the all-time high of $97 million in the fourth quarter.

Finally, this quarter, the FDIC loss share returned to a net expense due to no provision offset for covered loans as we saw last quarter. The expense was $58 million.

In terms of our outlook for fee income, we expect stronger fees from insurance plus improved service charges related to Bright Banking and growth in investment banking. The insurance market is showing signs of improvement due to better economic conditions. Our focus on corporate banking will help drive stronger investment banking revenues.

On Slide 16, you will see that the efficiency ratio increased to 57.1% from 55.3% last quarter, primarily due to lower revenues this quarter. Going forward, we expect the efficiency ratio to trend down for the remainder of 2011, falling to the mid-50s due to stronger revenue and moderating expenses.

The efficiency ratio is also higher due to significant credit costs. Assuming a more normal environment, we estimate that the efficiency ratio would fall about 2.5 percentage points. Given this, we will have more significant positive impact on earnings as credit costs come down.

We estimate approximately $700 million of earnings are tied up in foreclosed property, personnel, legal, professional, loan-operating, processing and lots revenues due to higher nonperforming assets. When these costs and revenues normalize, we will see $0.60 to $0.65 lift in earnings per share, excluding the impact from lower provision expense.

Personnel expense increased $15 million or 9% annualized linked quarter, mostly, due to higher Social Security and unemployment taxes due to the annual reset. Foreclosure expense decreased $19 million or 47.6% annualized, largely due to lower losses on write-downs on foreclosed properties. We are pleased to see these costs coming down. Professional services decreased $21 million, primarily, due to improved credit environment.

Additionally, our FTEs were relatively flat on a linked-quarter basis and decreased 564 on a common-quarter basis, mainly, related to Colonial. We plan to continue adding FTEs in revenue-producing areas throughout 2011. We will continue to focus on driving positive operating leverage, which, as I said earlier, will move our efficiency ratio back towards the mid-50s this year, and ultimately, to the low-50s in the next couple of years. The first quarter effective tax rate of 19% was on target with what we communicated last quarter.

On Slide 17, you will see our capital ratios remain among the strongest in the industry. All of our capital ratios increased in the first quarter. Tangible, common at 7.2%, Tier 1 common improving to 9.3%, Tier 1 capital at 12.1%, leverage capital at 9.3% and total capital of 15.8%.

On internal capital generation provides significant financial flexibility for both organic and strategic opportunities. Based upon our preliminary assessment with our current projection of Tier 1 common under Basel III, we are well in excess of the required minimums.

Turning to Slide 18. In March, we received no objection to our proposed capital plan from the bank regulators. And we immediately raised our dividend and announced a special $0.01 dividend, which will be paid in the second quarter. Our targeted dividend payout ratio remained at 30% to 50% of earnings.

Related to future capital actions, we currently plan to call our trust preferred securities in 2013 and as the instruments start to lose regulatory capital and issue approximately $1.75 billion in late 2012 of Tier 1 qualifying instruments in order to maximize 150 basis points allowed over Tier 1 common.

Lastly, we are very pleased to remain with the strongest dividend payout ratio among the 19 stress-tested banks. With that, let me turn it back over to Kelly for closing remarks and Q&A.

Kelly King

Thank you, Daryl. So we think we are well positioned for the future based on the following: We do expect meaningful declines on our credit cost, as Clarke described. Our client service metrics and value proposition in the markets are at all-time highs. Outlook for loan growth is steadily improving. We do expect stronger revenues throughout the remainder of the year and the underlying performance of virtually all of our businesses is strong. And we have specific opportunities, I'd point out to you in C&I lending, corporate banking, prime auto, investment banking, wealth and specialized lending.

And then just as a reminder, we think, overall, long-term corporate trends are the kind of emerging re-intermediation process, which we continue to believe will be material for us and the industry; significant investment revenue growth strategies over the last several years, which are really paying off now and going forward; meaningful merger opportunities. Our community banking model is, we believe, the best in the marketplace. And we operate in some of the best growing markets in the country, maybe in the world, and we believe we have the best team on the street. So we're very optimistic about the future. We believe our best days are ahead.

So Tamera with that, let me turn it to you for Q&A.

Tamera Gjesdal

Thank you, Kelly. Before we move to the question-and-answer segment of the 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 will be limited to one primary and one follow-up. If you have further questions, please reenter the queue, so that others may also have the opportunity to participate. And now, I'll ask Clayton to come back on the line and explain how to submit your questions.

Question-and-Answer Session

Operator

[Operator Instructions] We'll go first to Brian Foran with Nomura.

Brian Foran - Nomura Securities Co. Ltd.

How should we think about the earnings or the revenue net of provision impact from acquired assets keeps going up? Maybe what's the stock of accretion left to realize there? And how do you think about replacing that revenue over time? Is it more about growing the underlying base of loans? Or as this revenue starts to phase someday, will expenses come down to offset it? How should we think about refilling that $245 million bucket over time?

Daryl Bible

Brian, this is Daryl. We have about $2.3 billion of accretable yield that will come in on the life of asset. I would say that, our core margins, as the debt has run down and things normalize, we'll probably be still on the $370 million, but that's probably a couple of years off. I think, we will continue to benefit through our diversification strategy and loan growth on the asset side as well as on the funding side. We have positive mix changes occurring on both sides, as we -- or grow both sides of the balance sheet.

Clarke Starnes

Brian, this is Clarke. I'd also mentioned to you, we have over 200 people, specifically, dedicated to managing these assets. So a good bit of that cost is variable. It will come down as the accretion burns through.

Brian Foran - Nomura Securities Co. Ltd.

And then just a follow-up. I apologize if I missed this during the prepared remarks, but securities portfolio, $8.3 billion moved to held to maturity. Can you just tell us what's going on there?

Daryl Bible

Yes, Brian. We moved, basically, our floating rate securities into held to maturity. Right now, these are basically LIBOR plus 100- to 130-type spread and they float with LIBOR. They do have interest rate caps on them in a 6% to 7% range. If rates were to take off and go up really high and get capped out in that 6% and 7% range, they will extend out and be more underwater. So by putting them in held to maturity, which we have the ability to do that, it basically, reduces any Basel III capital hit that we will have going forward. So it's a good earning asset. We can hold onto it now. There's no credit risk to it. And if rates were to go up, we only get capped out of pretty high levels, and we don't really have any capital hit for Basel III.

Operator

We'll go next to Todd Hagerman with Sterne Agee.

Todd Hagerman - Sterne Agee & Leach Inc.

Daryl, I guess, just a question on the M&A side. Obviously, I think the last couple of weeks there's been an increasing amount of chatter, so to speak, in terms of potential deal activity out there. And It seems as if the opportunities for BB&T continue to increase. Can you just talk about, I guess, from 1 standpoint, how you guys are viewing the M&A landscape right now? How are you thinking about the discipline surrounding some of these potential opportunities, and how that kind of dovetails into your capital plan that you spend with the fed?

Kelly King

Todd, this is Kelly. So you're right. There's kind of like the all-time high amount of -- I'm not sure I think, chatter is the right word about mergers. I do think that as we had been expecting a lot of companies all beginning to look forward and see that while the economy is going to grow, some are growing at a relatively slow pace. There are lots of headwinds in terms of fee incomes, and lots of headwinds in terms of scale-related cost. And so, I think, a number of institutions are beginning to think about the wisdom of remaining independent versus combining and being a part of a larger or high-quality organization. So as we have said, we are -- consider potential mergers as an important part of our future. It's certainly not the most important, the most important part is organic growth, because we're in great markets and make great investments in those markets. But it will be important. We think about mergers as having to meet 3 very strict criteria: They had to be strategically effective, and that can be a combination of scale that helps them strategically with regard to levering cost and/or entering, and of course, expanding attractive markets. The second is we have to be able to ring-fence the quality issues. We're not going to do a merger that increases our risk, so through marks and other strategies, we would have to be able to manage that risk. And then third is, it only has to turn into meaningful accretion for our shareholders. We're simply not interested in mergers here for merger's sake. We're about the business, to grow shareholder value. And then looks like mergers that make sense have to be meaningfully accretive. So we screen them through those criteria. We look at the opportunities that are available and make decisions accordingly.

Todd Hagerman - Sterne Agee & Leach Inc.

And, if I may, just -- if you could just expand in terms of the capital consideration, how that would fit in there? In other words, with some of these opportunities out there -- and you talked about ring-fencing the quality issue, so to speak, how does that kind of play in to the capital consideration, the potential perhaps that you may have to raise additional capital if it fits into some of those other buckets?

Kelly King

Well, obviously, as you know, with deals today, you do take a meaningful mark, depending on the quality of the portfolio, as opposed to deal. And then depending on the equity structure of the acquisition target and depending on our equity structure, the combination of those 3 factors determine whether or not we need to raise capital. We are very capital strong, and so we do have some opportunity there. And so we would just have to look at the target and the quality of the asset and the required mark to determine whether or not there would be any required capital raise. If, however, there was required capital raise, we think that would be reasonable and very doable, because we only do one that met our criteria, which means to potential investors, it would be strategically attractive managed asset quality and very accretive. So we think raising capital, if required, would be a very attractive opportunity.

Operator

We'll go next to Ken Usdin with Jefferies.

Kenneth Usdin - Jefferies & Company, Inc.

Thanks. Daryl, just looking at the loan balances, the averages were pretty similar to the period end. And I'm just wondering, as you look ahead, can you talk a little bit about -- more specifically, what areas of the loan bucket do you expect to grow? And also, how much more CRE decline do you think we can see over the course of the next year -- next few years?

Daryl Bible

Sure. So for the loan growth, I think, you're going to see it continue to grow C&I. That's going to be a large increase for us. Our Sales Finance will probably pick up more momentum at the beginning of the in the second and third quarters seasonally. I think, they're performing very strongly. Our mortgage loans, as we continue to maintain in portfolio 10- and 15-year mortgages, that will grow. And then in specialized, that will turn this quarter and be positive. Within there, we have 2 growth that will pick up the seasonal benefit in premium finance, as well as Sheffield. Sheffield had some strategic relationships with Polaris and Suzuki, and we think they're going to be growing very fast. As far as runoff of the portfolio, we would expect the covered portfolio to continue to come down at its phase that it's been happening. And then the ADC portfolio will continue to come down but probably at slower paces than what we've seen in the last couple quarters. We're seeing good signs. We're -- possibly, our direct retail lending stops shrinking maybe in the next quarter or 2 and maybe stabilizes, which will be a very positive sign for us.

Todd Hagerman - Sterne Agee & Leach Inc.

Okay. And then my follow-up -- this is just a clarification. But when you guys talk about average loan growth in the 3% to 5% range, are you talking about that also inclusive of both covered loans and held for sale, or is that directly core?

Daryl Bible

We're talking about total loans held for investment. So we are factoring in the runoff on covered, as well as ADC. So on our slide page, it's that line item that shows 1% growth this quarter on a linked-quarter basis.

Operator

The next, Craig Siegenthaler with Crédit Suisse.

Craig Siegenthaler - Crédit Suisse AG

Thanks. Just a question for Clarke in his comments related to the opportunity for BB&T to accelerate problem asset disposition in the second half. I'm just wondering if this deceleration did occur, could this lift total flows above guidance? And what I mean is if you break apart kind of core flow trends, and then also the flows associated with an asset disposition acceleration, could that go above guidance, or is your guidance for total flows, including any potential asset disposition?

Clarke Starnes

Our guidance is around losses anticipates continued asset disposition, not necessarily a number of additional large bulk sale transfers. So the existing charge-off guidance and guidance on NPA reductions are seeing some more -- I guess, some more normalized effort to do the problem resolution. And so we haven't really factored in any additional enhancements to that right now.

Craig Siegenthaler - Crédit Suisse AG

And Clarke, you don't expect to do any kind of bulk transfers to held for sale this year. I think you said that earlier. Was that -- can you just refine this comment?

Clarke Starnes

Oh, yes. I guess, what we're trying to say, a couple of quarters ago, as you know, we made a strategic decision to move a big block of nonperforming residential mortgages. I think it was second quarter of last year, about $500 million, and then we moved about $1.3 billion or so of nonperforming commercial loans, and that was our big strategic move to a held-for-sale strategy to accelerate the dispositions. What we're saying now is that we don't have any specific plans to consider large bulk transfers at this time. However, we'll continue to watch the market. We'll look at the trends in our portfolio. And if we think it makes sense to consider a large sale from time to time, we would consider it, but it's got to be economically more attractive than holding those assets and continue to service those.

Operator

We're, next, to Matthew O'Connor with Deutsche Bank.

Matthew O'Connor - Deutsche Bank AG

My first question is for Daryl. If you could just give maybe a little more detail on that $0.60 to $0.65 of earnings leverage over time? Maybe split it between expenses and revenues, and just some thoughts on the path to that in terms of timing.

Daryl Bible

Okay. So the first part, the $700 million. All we really did is look at the drag on the nonperforming assets, and we think that's worth about $130 million, pretax. Then on the expense side, within foreclosed property, we think that as our OREO balances declined to -- let's just say, they go down to about $500 million, that should, basically, reduce the write-downs, about $350 million, and then our maintenance cost will come down proportionately, and that's another $100 million. And then you're looking at other expenses. And other expenses would be personnel, as we have higher FTE, and our workout groups and loan sale groups and all throughout there, as well as legal, professional and all those items. We think that's worth $120 million to $130 million easily. These are very conservative estimates, and does not -- we don't count any release or any lower provisions. So we're just trying to look at what happens to the efficiency ratio, as these credit costs come down and things start to normalized. We have a lot of leverage here.

Matthew O'Connor - Deutsche Bank AG

And thoughts on the timing of that $700 million coming back into earnings?

Daryl Bible

It's going to come down proportionately as our NPAs come down. So as your NPAs continue to come down every quarter, you're going to see these expenses start to reduce every quarter. So it's probably over the next year or 2.

Matthew O'Connor - Deutsche Bank AG

Okay. And actually, the NPA is a good segue into a question for Clarke. As we think about the outlook for credit, the pace of decline in NPAs, do you think it could accelerate from here or what would be your expectation on that?

Clarke Starnes

Well we don't overpromise, but we think it will be steady decline. Frankly, I think it should be higher than what you saw this quarter. Inflows were still elevated but down from Q4. We think the key there is to see those inflows get more in the commercial side, more in $500 million range. They were still about $700 million this quarter. So as those commercial inflows move down, we clearly should see an increase in the pace of reduction each quarter. And frankly, that would be our expectation.

Operator

We'll go next to John Pancari with Evercore Partners.

John Pancari - Evercore Partners Inc.

Now Daryl, can you give us some color in terms of the seasonality that you saw in service charges this quarter, and how that could impact next quarter? And I guess more specifically, what would give you as a pretty good run rate going forward for that line?

Daryl Bible

There's a lot of moving parts there. I mean, we came down this quarter with a seasonality, as well as Reg E impacts that we're seeing. We are forecasting service charges to be up in the second quarter and continuing to be up. We have a wildcard with Durbin in there and all that. But we would say that our service charges would be up in the magnitude of approximately $15 million to $20 million on a linked-quarter basis. We have a couple of more processing days, and as we roll out Bright Banking -- Bright Banking started on earlier this month, but it rolls out to our existing customers later in the quarter. So it's really an offer to our newer customers in the first couple of months. So that impact really goes into more of the second half of the year.

John Pancari - Evercore Partners Inc.

Okay. Then my follow-up is for Clarke. I'm sorry if you have alluded to this at all yet. But the longer-term outlook for the loan loss reserve, just want to get your thoughts -- I mean, since you're around 273 basis points of loans, and as you mentioned that you expect to continue declines in NPAs and credit costs, can you talk to us about what you view is a more normalized level as you see the improvement materialize?

Clarke Starnes

Absolutely. We've had a number of discussions about that. Just some of the things that we think about is what longer-term mix of assets we have in our portfolio. To Kelly's point, we're trying to move toward a more diversified, less volatile, more capital-efficient mix and loan book. And we think, as we accomplish that strategy that we would anticipate at this point, that view of normalized losses, probably, in the 60 to 80 basis points annually, which is obviously, materially less than today. And while we continue to look at the potential new guidance around allowance methodology and the impacts that would have, just based on what we know today, and our view of the potential change in asset mix in loss performance, we would think about maybe 2x the normalize loss rates. So you maybe -- think about 150 basis points or so. And again that could change, as we have more information and more visibility. But that would be our best guess today.

Operator

We'll go next to Chris Mutascio with Stifel, Nicolaus.

Christopher Mutascio - Stifel, Nicolaus & Co., Inc.

My first question for Clarke. Clarke, I tend to look at the nonaccrual loans held for investment on a quarter-to-quarter basis versus total NPAs, because it washes out the inflows and outflows from the held-for-sale portfolio. And when I'm looking -- when I look on Page 13 of your release, it looks like the nonaccrual loans held for investment, the actually pace of those is actually increasing. The nonaccruals are up $278 million this quarter versus an increase in fourth quarter of $176 million. So can you help bridge the gap between the improvement we're seeing in several different trend items for credit quality versus the actual increase in nonaccrual loans held for investment?

Clarke Starnes

Absolutely. It's a fair question. We look at both segments, and we look at the total. So both are important to us, and so obviously, we did have an increase this quarter on a linked basis into held for investment. And we provided you a little more detail, if you'll notice, in the tables. We've broken out the commercial into the 3 key buckets, the way we manage it: C&I, other CRE and ADC. So we did have an increase in nonaccruals held for investment this quarter. But our total did come down, obviously. We do look at both buckets and the efforts to resolve credits and get the balances out whether it's through held-for-sale bucket or held-for-investment bucket is just as intense. What I think you're seeing in the held for investment this quarter is really our efforts to more aggressively push through the watch list. I mentioned earlier, our watch list is not going up. We're not seeing nearly as many new credits being identified. We know where our problems are, so we're pushing harder to get the credits out. So what I think you're seeing, and what we believe is that you're seeing us move those watch list credits we previously identified, and in many cases to resolve and will go ahead and put it on nonaccrual and seek liquidation strategy. And I feel good about that, because you can see the early indicators coming down materially. So our expectation is that you should start seeing steady declines in the held-for-investment side, each quarter as we move ahead.

Kelly King

And Chris, just a point of clarification. As you know, our long-term strategy is to be very relationship-focused, to work very hard with our clients, to go through difficult times. But in reality, this correction's lasted longer than anybody expected, particularly, in the real estate area. And so we, frankly, have hit an inflection point, where we've held on and worked with the clients as long as we can. And so now it's time to turn the attention to our shareholder. And as Clarke said, therefore, these long-standing identified credits that we've been working with, we are now into a disposition phase for those, and that's what's causing you to see a bump up in the held for sale -- on a held for investment, because we just decided to go ahead and put them on a liquidation status.

Christopher Mutascio - Stifel, Nicolaus & Co., Inc.

Thank you for the color. And my follow-up, Daryl, when does the tax rate normalize? And at what level does it normalize at?

Daryl Bible

I would say, our tax rates will continue to go up year-over-year. I would guess, probably, 2013 would be more of a normalized level. And at that point, based upon the amount of tax exempt income we have, tax credits that we're investing in, probably, in the low 30s would probably be a normal tax rate for us, would be my guess right now.

Operator

We'll go next to Greg Ketron with Citi.

Gregory Ketron - Citigroup Inc

Just a couple of questions. One, Clarke, probably, for you. In terms of the loss on the disposition of property. It looks like about $86 million this quarter versus $74 million last quarter. You disposed $500 million. It looks like a 17% mark. Overall, it's been running about 50%, 51% which is where you have the remaining disposition marked. Would you anticipate this quarter that we could see a pretty sizable drop in those losses?

Clarke Starnes

Absolutely. What we didn't tell you, yet, if you look -- you're exactly right. The program today, our marks been about 50%. This quarter, we did have a larger strategic sale ahead, a higher mark. And so that's what reflected this quarter. The remaining inventory is much smaller, and our plan right now would be a more one-by-one asset disposition to in-market buyers. And our experience for that kind of strategy has been a much lower marks. So we would anticipate it coming down.

Gregory Ketron - Citigroup Inc

Okay, Thank you. Then the other question is on insurance. Do you have any sense or color yet to: One, on what kind of insurance revenue increases we may see going forward in light of the global events; and then two, is there a reset period where the premiums are reset, like July 1, or later this year?

Kelly King

Yes. Greg, this is Kelly. We, clearly, think the global events along with the fact that we've been in a protracted soft market, are lining up to begin to harden the market. We're beginning to see that in some cases. So we think we'll see a general hardening over the next while. And in terms of the other factors that drive revenue or just to secure new business -- and we continue to add small agencies, added McGriff and CRC wholesale businesses continue to do well relative to the market. And so I think the combination of those will likely put upward pressure on insurance revenues over the next several quarters.

Operator

We'll go next to Mike Mayo with CLSA.

Michael Mayo - CLSA Asia-Pacific Markets

I just wanted to understand more about the expansion in national corporate banking. When you say that, do you mean syndicated loans, or some other areas?

Kelly King

So there is some of that growth in syndicated. We've been -- we're more willing to look at syndicated participations with syndicate partners. We, as I indicated, are much more successful now in being the lead syndicator. So the syndication business is improving. Now I would point out that we don't give just buy blind participations in syndications like some companies do. We underwrite the credit, specifically, ourselves. We only do syndications where we can have a relationship with the client and get other collateral benefits. And so we do not actively participate in a levered sponsored area. So that's a higher risk than our appetite. And then a lot of the corporate market improvement is in just our pure regional banking. And our capital market's corporate banking calling officer is calling directly owned clients, where there's not a syndication. But we're just being a part of their small groups. So they might have 2 banks, and I just want a fair bank. It's not a true syndication, it's just that we're part of their bank group.

Michael Mayo - CLSA Asia-Pacific Markets

Since you -- everyone has some hold level. So what percent of the increase in commercial loans, say, from the fourth quarter relates to these syndicated loans?

Kelly King

Clarke, do you want to take that?

Clarke Starnes

I'd say it's a fairly substantial portion. I would remind you all, we're very conservative on our client level holds and risk grade limits. And so we don't have a different level of hold limit for these credits, as we would any commercial loan in our original markets. And so the granularity in this portfolio still very attractive and very low -- very low loan sizes relative to the rest of our portfolio. But I would say that it's becoming a larger portion of our quarterly production.

Operator

Going next to Matt Burnell with Wells Fargo Securities.

Matthew Burnell - Wells Fargo Securities, LLC

Just kind of a follow-up, I guess, on the nonperforming loan increase this quarter. I'm just curious. It sounds like your guidance despite what happened quarter-over-quarter in the first quarter is that NPL and NPA balances will go down. And I'm sorry if I missed this on your prepared remarks, but I just want to make sure that you're guiding, or at least providing an outlook, for NPA formation that is below what we've seen in the past couple of quarters?

Clarke Starnes

Matt, you're exactly right. That's our guidance. That inflows to new nonaccruals would be down sequentially as we move forward each quarter and that loans held for investment in nonaccruals would go down steadily. So we are expecting to see lower levels as we progress forward.

Matthew Burnell - Wells Fargo Securities, LLC

Great. Thank you. And for my follow-up, maybe a question to Kelly. It sounds like from your comments earlier to a question that your M&A criteria really hasn't changed in terms of needing to be GAAP-accretive in the first year excluding merger charges. But I'm just curious as to whether or not your tangible book value dilution tolerance has changed at all relative to what's going on in the market?

Kelly King

No, our criteria, you're right, has not changed. We focus mostly on accretion of EPS. We think that is the primary driver. Frankly, most of the deals won't have any material book value dilution. You could see some tangible dilution because of the marks. And so -- but the primary criteria is on controlling the quality of the asset and the -- of asset quality and the earnings accretion.

Operator

We'll go next to Christopher Marinac with FIG Partners.

Christopher Marinac - FIG Partners, LLC

Thanks. Kelly, is there a [indiscernible] the next 12 months that nothing happened on M&A, and it's just organic for BB&T?

Clarke Starnes

Chris, I don't think that's likely. I think it's most likely there will be some M&A activity, to be honest. There's a lot of -- I'd say there's a material increase in interest in M&A activity. So in terms of the likelihood BB&T have in discussions, I think that's very high. In terms of us, doing deals, it's a little hard of me to judge, because I'm going to control half of the discussion. But we will be eagerly talking to candidates that to meet our criteria. There seems to be, today, some potential acquirers that don't have our same criteria, that is they're willing to take substantial and sometimes permanent dilution. We won't be a part of it those transactions. And so all of that having been said, I think, if I had to guess, I would guess, we would do some deals this year, not a lot. We're not interested with a bunch of small ones. You could see us maybe do 1 or 2 of decent size. But if it's so, they will be the kind of deals that you'd be very happy to see us announce.

Christopher Marinac - FIG Partners, LLC

Very well. Kelly, thank you.

Kelly King

Okay.

Operator

We'll go next to Betsy Graseck with Morgan Stanley.

Betsy Graseck - Morgan Stanley

I know there's been a lot of questions on NPLs. I just have 1 tweak to those -- those question flow. You talked about commercial inflows reflecting the aggressive efforts to resolve d existing watch list accounts. Can you talk about how the watch list is progressing, and how far through that kind of repositioning you think you're through now?

Clarke Starnes

Great question, Betsy. We feel very good about our repositioning of the portfolio. We said before, we think rightsizing the ADC loan term is probably something in the $2 billion to $3 billion range. We're already at $3 billion, but obviously, the housing market is still tough. So we probably will have to come down more to find the bottom and make it back up. So we're real close there. On the other CRE, we think that there are attractive future opportunities there. So we don't think we're going to consciously try to run down that portfolio anymore. So we think it'll be -- see some growth with some potential -- with strong underwriting. So from a portfolio repositioning standpoint, we think we're in really good shape. So the big growth is going -- will occur in the C&I side. So what we're doing back to the watch list is trying to identify, particularly, in the ADC and CRE area, where we think those stressed credits are that need to go ahead and be resolved. And we think we're materially through it. The watch list continues to come down each quarter, now we're just not identifying, meaning, new problems. So we're at this point of the cycle where we're just substantially moving towards our liquidation. So I would say the majority of the credits have been identified, now we're in the liquidation mode.

Betsy Graseck - Morgan Stanley

So as we look at the slide on Page 10, you got the chart on inflows to nonaccrual assets. As we think to 2Q, 3Q, that commercial inflow you're participating will be coming down at a faster rate of change than has been the case over the last quarter?

Clarke Starnes

We think so. Obviously, we could be wrong. But we would anticipate you would start seeing a sharper decline in the level of nonaccruals in those areas, as we pull through more of this watch list.

Operator

We'll go next to Chris Gamaitoni with Compass Point.

Christopher Gamaitoni

Thanks. Most of my questions have been answered. Just two clarifications. When you said you are more willing to kind of recognize losses and stop working with clients on real estate loans did you mean commercial or residential of those?

Kelly King

Well, we're really talking about both there. We treat both kinds of loans as the same. Again, we -- I'd work with them as long as we possibly can, but then there's a form of inflection, where you've done all you can do, in which case, you have to execute on liquidation. And so it covers both categories.

Christopher Gamaitoni

Okay. Sure. And then just on the M&A side. You've made a comment that there'll be one of two of decent size. I don't want to pin you down exactly, but could you give me a range of what decent size means?

Kelly King

I'd be a little hesitant try to nail down specifics. But I've said in the past that we're just really not interested in anything less than $3 billion or $4 billion dollars. I mean, it's not that you could see some kind of a assisted deal below that or something. But I think, you can generally think, when we're thinking about target deals, that would, certainly, be greater than $3 billion or $4 billion.

Operator

We'll go next to Gerard Cassidy with RBC Capital Markets.

Gerard Cassidy - RBC Capital Markets, LLC

Thank you. Daryl, can you give us an idea of what you're hearing on when the regulators might come out with their guidelines on where the capital ratios need to be on this steady [ph] buffer? And also, do you think that the federal reserves and Basel would be wrapped up by the end of this year?

Daryl Bible

Sure, Gerard. We've had discussions with the regulators throughout the last several quarters. My best guess to answer your latter question first is, probably, we're hearing maybe late third quarter, we might get a new NPR for Basel III for U.S. banks. They pushed it back a little bit. They're working really hard, trying to come up with the new rules and regulations. And they're actually taking a lot of feedbacks from banks like us and peers, just trying to understand what the impacts are. So I think they're doing as good a job as they can to come up with some really good rules when it is announced. And as far as the buffer, I don't really know how much. Obviously, the larger institutions like JPMorgan would probably have much higher buffers than an institution like BB&T. The magnitude of that is really hard to say right now, Gerard. I just don't want to stick my neck out on there. That's really in the hands of the fed and the other regulators right now.

Gerard Cassidy - RBC Capital Markets, LLC

And then finally, on the NPL formation, when you guys look at it, it's been trending down, which obviously, is positive. Is there a possibility that we could see, eventually, just gap down, where it's a -- instead of being just down $100 million or $200 million, it drops $400 million to $500 million. Is there anything like that, that could happen in the next 2 or 3 quarters on that formation?

Daryl Bible

I think our best estimate is a steady, sequential decline versus any sort of sharp movement, given what we see.

Operator

We'll take our last question today from Jefferson Harralson with KBW.

Jefferson Harralson - Keefe, Bruyette, & Woods, Inc.

Thanks. Mine's been asked. Thanks. I appreciate it.

Operator

If there are no other questions in queue. I'll turn it back over to Tamera for closing remarks.

Tamera Gjesdal

Thank you, everyone, for your questions today. We appreciate your participation in today's conference call. And if you need any clarification on any of the information presented today, please call Alan [Alan Greer] or myself. Have a great day, everybody.

Operator

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

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