Greetings, ladies and gentlemen and welcome to the BB&T Corporation Fourth Quarter 2016 Earnings Conference Call. [Operator Instructions] As a reminder, this event is being recorded. It is now my pleasure to introduce your host, Alan Greer of Investor Relations for BB&T Corporation.

Thank you, Ashley and good morning everyone. Thank you to all of our listeners for joining us today. On today’s call, we have Kelly King, our Chairman and Chief Executive Officer and Daryl Bible, our Chief Financial Officer, who will review the results for the fourth quarter of 2016 and provide some thoughts for the first quarter of ‘17. We also have other members of our executive management team who are with us to participate in the Q&A session: Chris Henson, our President and Chief Operating Officer; and Clarke Starnes, our Chief Risk Officer. We will be referencing a slide presentation during our comments. A copy of the presentation as well as our earnings release and supplemental financial information are available on the BB&T website. Let me remind you that BB&T does not provide public earnings predictions or forecasts. However, there maybe statements made during the course of this call that express management’s intentions, beliefs or expectations. BB&T’s actual results may differ materially from those contemplated by these forward-looking statements. Please refer to the cautionary statements regarding forward-looking information in our presentation and our SEC filings. Please also note that today’s presentation includes certain non-GAAP disclosures. Please refer to Page 2 and the appendix of the presentation for the appropriate reconciliations to GAAP. And now, I will turn it over to Kelly.

Thanks, Alan. Good morning, everybody and thanks for joining our call. We appreciate your interest in BB&T. So overall, we had a strong 2016 and a solid fourth quarter. Fourth quarter results were driven by good expense control and really very strong credit performance, but also had a couple of key strategic actions that we took during the quarter and the first part of this quarter that will benefit future quarters which we will talk about. We had record annual net income totaling $2.3 billion, which is up 16.7% versus 2015. Fourth quarter net income totaled $592 million, which is up 17.9% versus fourth quarter ‘15 was down slightly from the last quarter. Diluted EPS totaled $0.72, which is up 12.5% versus fourth quarter, down $0.01 from last quarter, but we did have some special items I will cover in just a minute. So, our adjusted EPS totaled $0.73 excluding merger-related and restructuring charges. We had very solid ROA, our common equity and return on tangible of 1.16%, 8.75% and 14.91%, respectively. We had taxable-equivalent revenues totaling $2.8 billion, up 8.3% versus fourth quarter of ‘15 was down slightly from last quarter. Net interest margin did decline 7 basis points to 3.32% from the third quarter, but most of the decline was due to the securities duration adjustments from our old Colonial non-agency portfolio. Remember, that was a large portfolio that was deeply marked and with the steep rate increases in fourth quarter, we had some duration adjustments there and Daryl will give you lot more color about that. So, our core net interest margin was flat for the quarter. Fee income ratio improved to 42.6%, up from 41.9%, so nice steady improvement there as well. GAAP efficiency improved to 71.1% versus 71.7%, but I will say that our adjusted…

Thank you, Kelly and good morning everyone. Today I am going to talk about credit quality, net interest margin, fee income, non-interest expense, capital and our segment results. Turning to Slide 7, overall, we had a good quarter with regard to credit quality. Net charge-offs totaled $151 million, up 5 basis points from last quarter. That includes $15 million related to PCI loans and $14 million related to loan sales. When you exclude these items, core charge-offs were $122 million, down 6% from last quarter. Loans 90 days or more past due increased 7.4%, primarily due to an increase in residential mortgage. Loans 30 days to 89 days past due increased 10% due to seasonality in our consumer related portfolios. NPAs were down 3.6% from last quarter. Looking at the first quarter, we expect net charge-offs to be in the range of 35 basis points to 45 basis points, assuming no unexpected deterioration in the economy as we expect the NPAs to remain in a similar range to this quarter. Continuing on Slide 8, our energy portfolio totaled $1.2 billion, less than 1% of our total loans. Outstanding balances, total commitments and non-accruals were all down from last quarter. Our quality mix continues to be very good with less than 10% in oilfield services. With higher oil and gas prices, conditions are trending positively in this industry. Turning to Slide 9, our allowance coverage ratios remain strong at 2.47x for charge-offs and 2x for NPLs. The allowance to loan ratio was 1.04%, relatively flat compared to last quarter. Excluding acquired portfolios, the allowance to loan’s ratio was 1.13%, slightly down from last quarter and our effective allowance coverage remains strong. We recorded a provision of $129 million. Adjusting for PCI loans, the provision was $133 million compared to core net…

Thanks Daryl. So just a couple of strategic summary points, as I said, I think it was a solid quarter, good expense control, strong credit performance. These strategic actions will do setup a meaningful better margin and potential higher CCAR payout for the next year. I would point out that all of our key strategies are working very, very well. Our Corporate Banking strategy is working well. We think we can even ramp it to a higher level as we go through this year. Our wealth strategy likewise is doing great and positioned for even an enhanced investment specialized lending continues to provide good diversification and is growing in appropriate rate. Insurance, while not performing at a high level as it will in the future because soft insurance rates will continue to build what I consider to be kind of an annuitized insurance revenue stream in that business as it gets more and more effective every year and we’re making increased investments in our digital operations, which will cause substantial improvement quality relationships with our clients and improve profitability going forward. So projected with the better economy, especially in Main Street, we are really excited about what can happen in our Community Bank. Keep in mind that our Community Bank is almost totally focused on Main Street. Main Street has been really struggling for the last 8 years. We believe what’s getting ready to happen is a substantial resurgence of Main Street. These folks, as we reported to you, have been holding back on investments in equipment, our computers, trucks and our cars, etcetera. We are getting really, really good feedback from our client contact people that this is really changing. In fact, I saw a survey yesterday on small business optimism says it’s at a 12-year high. So overall, I will just tell you that things look pretty good, lower taxes, less regulation, higher interest rates and faster GDP growth, overall a really good proposition for the banking industry. It’s a new day and we are very excited about it. I will turn it over to Alan.

Okay. Thank you, Kelly. Ashley, if you will come back on the line at this time and explain how our listeners may participate in the Q&A session.

Thank you. [Operator Instructions] And we will take our first question from John Pancari with Evercore ISI. Please go ahead.

Wanted to ask…

John…

Yes. Can you hear me, okay?

Yes. Go ahead.

Okay. I just wanted to ask around the CCAR commentary around the significant increase, wanted to just get an idea of can you help us with how to think about the magnitude given where you see earnings going and could you be nearing the 100% combined payout. And then separately the mix, if you can just talk about how you would prioritize the dividend versus buyback? Thanks.

We really think with the – as I indicated anticipated faster earnings growth and less fast growth in the balance sheet it sets us up for that opportunity. We try to be conservative. Having said that, we would expect and we have not made our CCAR final decision and the Board has not approved it, but management would expect that the total payout for next year would be in the 100% range, which will be materially higher than we have been. We would expect to see a modest increase on our dividend. Remember, our dividend was already very high, one of the highest, if not the highest dividend yields. And so that will set up then a pretty large bucket of capital opportunities for us, which will be used as we have in the past, certainly the possibility of acquisitions. There is some possibility of a special cash dividend although I don’t put that high on the list and certainly that would imply substantial increase in buybacks.

Okay, got it. And then separately, my follow-up is going to be on the expenses, have you – if you could talk a little bit about your reg and compliance spending around, particularly around the BSA consent order. How much would you say in terms of related expense is in the run-rate currently versus still to come? Thanks.

Yes. So, the BSA issue for us is an important issue, but not a substantially important issue. We have been working on this for about a year. We have already built in most of the run-rate expense increase related to that. So it would not be a material increase in terms of additional expenses. We are way down the road in terms of resolving the issues that we needed to improve on. So it’s important, we need to fix it, but we substantially already done it, to be honest. And so we have got some remaining execution work to be done. There is not going to be a material issue in terms of our expense run-rate going forward.

And given that, how quickly do you expect the potential resolution since your way down the road?

Yes. These things have a life of their own. In many cases, it’s taken companies 1.5 years, 2 years to get out. No way, I can guarantee anything, but I would expect that because of how far down the road we are that we will get out much quicker from this point going forward than you have come to expect with other institutions.

Okay, got it. Thanks, Kelly.

And we will take our next question from Gerard Cassidy with Royal Bank of Canada.

Thank you. Good morning, guys.

Good morning.

Kelly, you talked about the outlook for being better this year on the economy and stuff. Are there any parts of the franchise where you are seeing better growth opportunities, whether it’s in Florida or Texas? And on that, would you guys consider growing the oil and energy portfolio later this year if the oil prices stabilize at these levels?

So Gerard, it’s actually very broad-based. In fact, I did a survey, because I was going to the Goldman Conference back here a few weeks ago and I did a survey from all of our 26 Presidents across our entire 15 states and asked them to talk to a few of their clients to see what they were thinking, because I like to write real-time feedback and their feedback was absolutely consistent across the board that everybody was optimistic. They were making plans to invest. And it’s exactly what we thought, new drugs, new computers, some expansions. I met with some regional Presidents in person yesterday and got a real current update and the message was very, very consistent. They gave me a number of anecdotes in terms of individual companies that were already requesting loans to buy trucks to expand their plan to expand their inventory, etcetera. So it is, in fact, happening. It’s across the footprint. It is what I would call Main Street America, which was exactly where we play the best. With regard to oil and energy, yes, we would expect to expand that. We think we said all along it’s a really good long-term business. The last year or so has been a bit of an overreaction in my humble opinion with regards to the quality of that. We haven’t changed our posture during the whole period. We remained optimistic and bullish and are looking for ways to expand.

Gerard, this is Chris. I would add specifically areas if you are looking for the Triangle and Charlotte and Triad regions in North Carolina, D.C. and Houston are all areas that have really sort of building momentum in pipelines and three of those have been top of our production leaders in 2016 as well.

Great. And then Daryl, you talked about capital liquidity in your prepared remarks, on the LCR at 121%, is that the fully phased-in number that you expect to have by the – when the rules go 100%? I think it’s in 2019.

Yes. I would say we will operate in the 120 range. We might get into the teens, fluctuate, but we want to keep a little bit of a cushion. That number tends to move around a fair amount on a day-to-day basis. So, you just want to keep it elevated. So I wouldn’t want to get it to close to the threshold, but keeping a little cushion. It’s really not hurting us where it is. I think we can manage it at that – at those levels.

Thank you.

And we will take our next question from John McDonald with Bernstein.

Good morning. Daryl, I want to ask about net interest income and some of your thoughts around the dynamics there, the securities portfolio, you had some runoff this quarter as you indicated you would as you get some cash on the table, just wondering what your thoughts are there as rates have gone up, will you be investing and will we see the securities portfolio start to grow and how that might affect your net interest income dollars outlook?

Yes. So right now John, we did not reinvest the cash flows in the fourth quarter. We did repurchase our normal cash flows for this quarter. So securities are going to stay around $44 billion size. So that’s kind of our level that we are staying at. It is true that levels are higher now and I would say what we are investing in now, which are basically treasuries, 5 years and some 15-year pass-throughs, those are coming on yields that basically are not hurting our yields anymore. So there shouldn’t be any material run down in the investment if the curve stays where it is or it could even get better at some point. As far as at point where we would try to add back to it, I think we are far from that point. If you listen to Chairman, Yellen’s speech yesterday, she is clearly in the camp that she thinks short-term rates should get up close to 3%. Whether that gets fair enough, we will see, but it’s definitely going higher. We will see what happens to the longer end of the curve. Our liquidity is strong. So there is really no need to add to the investment portfolio. And with Kelly and Chris and Clarke, I mean they feel really confident that our loan growth is going to really start to come online middle part of the year and thereafter. So we feel that we are going to have pretty good balance sheet growth and good NII growth. The restructuring that we did basically ensures us that we are going to have positive NII growth year-over-year. It’s going to probably show that we are going to have revenue growth. And if we continue to have our expenses stay where they are, you should see the efficiency ratio start to fall.

Okay. And just on the NII and NIM front, could you remind us how much benefit do you expect to get from the Fed hike that occurred in December and what kind of deposit beta are you assuming that you will see this year versus last and how does that compare to what’s modeled in your disclosures?

Yes. So I would say if you look at the increase we had in December of ‘15, the beta was almost non-existent, less than 5%. To-date, we are only a month out now. Our beta is between 5% and 10%, mainly in the commercial accounts. So here again, really outperforming what we had in our models. We have in our models close to 60% beta assumptions. So I would say that the increase that we had this past quarter probably give us 3-plus percent net interest margin benefit just from that alone. So that’s one of the reasons why we are helping to guide for much higher core net interest margin.

So that’s about 3 basis points, Daryl, for a 25 hike?

Yes, for what we had this past December and the beta is less than 10% right now.

Got it. Okay, great. Thank you.

And we will take our next question from Betsy Graseck with Morgan Stanley.

Hi, good morning.

Good morning.

Hey, couple of questions, one is on the capital ratios, so bringing up the payout ratio plus loan growth, just wondering what type of CET1 you are willing to traject to, like how low will it go?

Yes. So Betsy, I mean you can see with the ASRs that we did last quarter, we still build capital ratios. And we expect to have – there was a fair amount of compensation related benefit coming through on the equity provision. So I would say that our CET1 should still stay 10% or higher. I mean we don’t see it going down more than a touch right now. So I mean if you look at our number now, we are I think 10.2, fully phased in at 10. So you might see it go down a tick, but I think we feel comfortable that we can significantly increase that and still maintain a 10% CET1.

But over time, like do you feel even a 10% you are overcapitalized, that there is economically room to bring that down?

Betsy, we are going to remain somewhat conservative on that until we see how things play out in Washington. Independent of the changes that are being talked about, with regard to the handling, etcetera, etcetera, there is an opportunity to bring that 10% down. On the other hand, there is a reasonable prospect that some variation is going to pass, which is what we call is upward pressure on capital requirements and so we don’t want to be in a position to where we get forced in to having to going to market by expenses of capital. So we are going to remain a little conservative. That will hurt EPS a little bit in short run, but it’s a smart run. It’s the best move for the shareholders. So we will stay path, see how things play out. If all that fizzles out then there is an opportunity to your point to move down a little bit. On the other hand, if it comes through, we may be having to accumulate capital.

Got it, okay. And then just a follow-up on the total return is obviously to the buyback, but then there is also the optionality for M&A. And maybe you could speak to where you think you are in that. I know there was the AML BSA out there that was holding back from M&A, but just wondering how investors should think about your comments. Is it a placeholder for buyback or are you really think look, we are not in the M&A camp over the next year or so it is a buyback?

It’s the placeholder with reservation. Independent of the BSA issue, we are not ready to get back into bank M&A yet. We are still finalizing Susquehanna and Nat Penn. We hadn’t closed, but we are still finishing up some of these big projects. And to be honest, Betsy, we are doing – and I am doing a lot of thinking just in terms of the proper value of buying institutions that have a lot of branches. I mean, there is a chance that we are facing a near-term tipping point with regard to the value of branches as the digital technologies really accelerate and reduce the interactions in the branches. It’s not to say that we would have no interest, but it changes economics. And so I am not quite sure today the sellers in any event would be ready to recognize the realities of the changing economics. And so number one, we are not ready to get back into game independent of BSA. Number two, we are being thoughtful during this call is about the real valuations of acquisitions when the time comes. And number three, we don’t think this BSA things will take all that long to get out to them. And by the way, we are not inherently precluded from acquisitions during the BSA period certainly with regard to insurance and other types of acquisitions and so – but we just don’t consider that to be a binding constraint right now, because the binding constraint is our own.

Got it. Okay, thanks.

And our next question comes from Jennifer Demba with SunTrust.

Betsy just covered my question. Let me ask a little more on M&A and your thought – your commentary on buying company with a lot of branches. I mean, that’s a pretty big statement, Kelly. Is this something you have been thinking about for a while? And I mean, when you think you are ready to buy again, what kind of institution are you looking for ideally? Is it something more larger MOE or how small will you go?

So yes, I have been thinking about it for a while. And it’s a difficult thing to get your hands around. I mean, on the one hand, it’s clearly a steady decline in branch activity. On the other hand, that is not to suggest the branches are not really, really important from the small business clients still going to branch about once a day, because they got a lot of cash. Wealthy clients go fairly often and even the millenials who don’t go very often really value the branches. So, we are just in a period right now where it’s inconclusive in terms of the future value of branches, but it’s probable that branches will be somewhat less attractive going forward than they are today. All that means is you are still interested. I am still interested, but it means it has an economic impact in terms of the evaluations. And so we will have to be thoughtful about that as we go forward. Now, there is a difference in terms of M&A in market and out of market. So, the most difficult, frankly, today would be to acquire a large branch distribution operation out of market, because there is no – there are no cost synergies in terms of overlaps and so you have to get all of your cost improvement out of the backroom. On the other hand, if you do an in market deal, you get the pretty easily achievable backroom savings, which are very predictable. And then you may get some – I mean you get a backroom and you get substantial overlap of branches. So in markets would still make a lot more attractive proposition today economically than out of market, not saying out of market can’t work, but it means valuation has to take that into consideration. As to size, we have always said that we are interested in larger deals than smaller deals, particularly in the last several years just because it takes about as much time to do a smaller deal as it does a large deal, but I am not ready to put any a lot of concreteness around the size and all of that, because as I have said we are not in the market right now. So when we get back into the market, we will give you more definitiveness with regard to what we are exactly looking for.

What are your plans for the BB&T branch network this year, any rationalization plans at this point?

Yes, we would – we will continue – we have got a long-term continue trend of what I just call natural pruning, that is to say, you have an old branch that needs to be replaced. Typically, that looks like you have two that are 2 miles apart. They are both old. You get rid of two and go to one. That’s natural pruning. And in some cases, the market just dies and you just close out completely. But we are and we started this in last year, we are being more aggressive in terms of not what I call more than pruning or non-pruning that is to say, we are being more aggressive in terms of some branch closes where they are actually profitable, but by combining two profitable ones into a new one, two plus two becomes five, because we are finding that because the branch traffic is less consistent, you can actually close more today than you could close 5 years ago because people use more mobile banking NIU platform, etcetera. So we would expect to be more aggressive this year and coming years in terms of closings, but we are not going to do a radical blind close 20% of branches or anything like that in this scenario. Chris, do you want to make any more comments with regard to that?

Yes. I will just say transactions are down about 4%. We closed about 2% of our branches this year and I would say somewhere in the neighborhood of half of that number would have been what Kelly just spoke to, would have been what I will call these sort of transformational type of approach. And we are going to be looking for more of those. I think the opportunity exist to rationalize the structure over time, where you have opportunity to capture most of the client base, but still have them run on your digital array also. I think he is exactly right.

Thank you for the color.

And our next question comes from Matt O’Connor with Deutsche Bank. Matt O’Connor: Good morning.

Good morning. Matt O’Connor: You guys gave some good NIM details for the first quarter, but I guess I was hoping to just peel back a little bit more as we think about some of the moving pieces and adapt NIM outlook of 10 basis points to 12 basis points, maybe just kind of filling the blanks like you have got, obviously the kind of step up or absence of the one-time amortization drag that was 5 bps this quarter, I assume you get most of that back, the rate hike you mentioned was 43 before, what’s the benefit of the debt prepayment and then kind of all other factors, what’s going on there?

So I think you got the pieces. Maybe you just go back, reconcile to the 10 to 12 GAAP improvement, we get 5 basis points for the home loan bank restructuring. We get 5 basis points back from the duration adjustments. Every quarter, we will probably have a couple of basis points, call it 2 basis points. We will have runoff of purchase accounting going against that. And then [Technical Difficulty] 3 plus right now for the rate increase. So I think we feel very good. Our margin will be in probably mid 3.40s. And finding out how rates go and if they continue to go up some this year, we feel comfortable that those levels can be maintained in that area. So it all depends on how much rates go up and what the betas are. And to be honest with you, we think if rates continue to go up, betas won’t stay as well as they are they eventually will have to start to increase. That said, we still feel pretty comfortable that margins should stay in the 3.40s. Matt O’Connor: Okay. So as a follow-up, the mid-3 40s if rates continue to move up and then if rates stay stable, is the core NIM stable and then you just bleed down whatever purchase accounting one-off would be?

I think so. I think we are at a point now where assets are coming on and our mix changes and with what’s going on, I think we have a pretty good core stable margin right now and with a little rate increases we might have improving core margins. So, I think that’s all positive for us right now, Matt. Matt O’Connor: Okay, great. Thank you very much.

And we will take our next question from Michael Rose with Raymond James. Please go ahead.

Hey, good morning guys. How are you?

Good morning.

Good morning.

Just wanted to ask about insurance, if I back out Swett & Crawford, it looks like it might have been a little weaker year-on-year. Can you give some color there and maybe what the outlook is as we move into ‘17? Thanks.

Sure, happy to. You are exactly right. I mean, our growth year-over-year or fourth over fourth would have been about, I think 10 and some change percent. If you pull out all acquisitions, our core organic growth would have been up 0.6% year-over-year, but that’s in a very soft insurance market, where there is just tremendous excess capital. And it is causing rates to be down in the neighborhood of 2% to 4%. We are heavy in more commercial property. So that ends with a company we have called [indiscernible] subject to cap property rates and they are down probably in the 10% to 12% range. So we would be certainly on the high end of the reduction, so probably in the 4% range down. Our new business, on the other hand, new business in retail is up in the 3% range. So taking those together, that’s what’s enabling us to remain positive. So, we are still moving market share. It’s just you have that downward pressure on rates due to capital. The other thing that occurred this year, we had some weather challenges, but it was not enough to cause rates to go up, but it was enough to cause the performance payments back to the brokers to decline. So, we actually have had a decline in contingent payments of about 12.5% year-over-year as well. So even with the reduction in contingent payments and a soft pricing, we were still able to rise above that and have positive organic growth. So I feel really good about the year overall in the neighborhood of 20% EBITDA margin. So I think looking forward what we have planned even with – we see rates as having stabilized. We don’t see them maybe jumping back up. We have been in this now for about 18 months. The normal soft market duration last about 3 years. So, we don’t see them getting worse. I think through some things we have going on internally, we think give us some organic opportunity. We are actually planning to be up 3% to 4% this year. So, we feel pretty good bullish about the business.

Okay, that’s helpful. And then maybe switching gears for Daryl can you kind of talk about what the net impact would be if there is any sort of change to the corporate tax rate and what the earn-back would be on the DTA write-down? Thanks.

So Matt, if rates, tax rates change, so right now, our corporate rate is 35%. In essence, we get almost 90% of it for our given tax rate change. So, if tax rates fall from 35% to 15%, we would get close to 18% lower taxes on it. The reason we don’t get all of it is really driven by how our state taxes impact a change in the corporate tax rate, but we get the vast majority of it. So, it’s close to 90% would basically flow through the bottom line. Now, our tax strategies are pretty simple. We really have just tax exempt loans and securities. We have BOLI and we have basically a low income tax credit. The assumption there is none of those are impacted. If any of those get impacted, then what I told you needs to get adjusted, but assuming just corporate tax rates fall, we will get about 90% of it to the bottom line.

Okay, that’s helpful. Thanks for taking my questions.

Yes, thank you.

And we will take our next question from Erika Najarian with Bank of America.

Hi, good morning. Kelly, you mentioned we are in a new world and you talked a lot about the potential upside on the revenue side. I am wondering if I could just dig deeper into John Pancari’s earlier question and get your thoughts on where you think overall regulatory costs can trend. I guess it’s a two part question, one is from a natural rate standpoint, how do you think regulatory costs are set to trend for BB&T over the next 1 year or 2 years, if you get some regulatory relief, what the opportunity could be in terms of potentially reallocating those costs?

Well, that’s a great question and it’s one that we are all trying to figure out the answer to right now, but I will give you my thoughts. So if you take time a steady course assuming there are no substantial rollbacks, then I think you would think in terms of our regulatory costs over the next year are sort of being kind of flattish. I mean we have already built down a huge amount of ramped up revenue or regulatory costs over the last 2 years or 3 years. Some of that relates to huge costs that we have had to put into some of these projects that are substantially driven by regulatory requirements and ramp up that we have already put in BSA regulatory compliance, etcetera. So independent of any substantial changes, I would call it kind of flattish. Now, if you have substantial regulatory changes, which I do believe we will have, then there is clearly the opportunity for reduction in regulatory cost. It’s hard to get your hands on, to be honest, because it depends on how much. I would say that if you get the maximum amount of regulatory changes, it’s not going to be as much reduction in regulatory costs as a lot of people think. Maybe an outlier on this, but a lot of people are thinking kind of euphorically that they will do all this stuff they are talking about and regulatory costs going to zero. That will not happen. Number one, they are not going to get everything done that they want to get done although they will get a lot done. And even if they get a lot of these changes done, their baseline regulatory requirements are not going to go away and probably shouldn’t go away. We need basics…

So Kelly, just to follow-up, it sounds like what you are saying is a potential inflection point in supervisory leadership could be meaningful to your earnings power even before we start talking about Dodd-Frank repeal, did I interpret that correctly?

You got it exactly right.

Okay, thank you.

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

Good morning. Thanks for taking my question. First of all, Kelly, you mentioned a couple of acquisitions late in September and in the fourth quarter and you also suggested relatively muted first quarter growth, which is – which seems seasonally appropriate, but growth improving over the course of the year as GDP improves, how are you thinking about future acquisitions if you are in terms of your full year 2017 thinking about loan growth?

I am not factoring acquisitions into our ‘17 loan growth expectations. I am not sure what you were talking about in terms of fourth quarter. I don’t recall mentioning any acquisition.

Are you talking about portfolio purchases?

Portfolio purchases.

Got it. I am sorry.

Yes. We are not really building that materially into our ‘17 – it could happen, but it’s not a part of our – it’s kind of part of our normal considerations there, but it’s not something that I spent a lot of time on. So we are not factoring much, it might be a little bit but not much on that. So we are really trying to signal that our loan growth is going to be core loan growth. It’s going to be relatively soft for the first quarter. And then while we are not prepared to give numbers, it will be building, we think in regard through second through the fourth quarter.

And then if I could just follow-up on that, it sounds like you are thinking about the future payout ratio rising to the 100% range, I am presuming that that’s incorporating your much – your visibly stronger expectation for loan growth in the latter half of 2017 as it sounds like you expect GDP growth to ramp from roughly 2-plus percent real GDP growth ramp from 2-plus percent to 3% or perhaps even better?

Yes. I think GDP will ramp from the 2% kind of range to 3% to 4%. I don’t think it will get to 3% to 4% for this full year. It may be getting to 3% to 4% by the end of the year on a run rate, but if you get to ‘18, I think you have got very good chance of a 3% to 4% kind of run rate for the entire year. So it will be a building year in terms of GDP, it will be a building year in terms of loan growth and so the whole year of ‘17 won’t be as strong as the whole year of ‘18 will be.

And Daryl if I can just one very quick clarification, you mentioned you expect expenses in the first quarter to be below $1.3 billion, in the slide, you have $1.7 billion?

Sorry, it’s $1.7 billion.

Okay. Thank you very much.

And that’s including the seasonality that we have.

Right. Thank you.

And we will take our next question from Ken Usdin with Jefferies.

Hi guys. This is Amanda Larsen on for Ken. How big is the capital hit you are expecting on the FHLB retirement in 1Q? And then how are you thinking about the size of your overall long-term debt footprint in ‘17? Are there remaining $1 billion of FHLB still on the table?

So we do have more home loans on the table, but they aren’t really marked at market. So we can unwind those without any gain or loss, without any impact. So they will basically price the market, so that will just be that. By the way, we want to maintain that funding or go somewhere else from a funding perspective. As far as the hit to capital, it’s about $250 million. You just take the 3.92 and just tax effect it. We typically get a fair amount of equity credit from our comp plans in the first quarter. Coupled with continued exercises from the higher stock valuation, that’s a huge offset to our capital ratios that we have there. So I would say capital ratios still be pretty strong at the end of the first quarter even with this restructuring number that we have and doing that buyback that we are going to normally do in the 1.60.

And I would just point out this is just really good effective utilization of capital during the period of time where we are building excess capital.

Absolutely.

Okay. And then thinking about average earning assets in 1Q given all the moving parts?

Average earning assets should be up just a touch depending on loan growth or securities will be relatively flat as we reinvest those cash flows, but NII growth will happen because our margin guidance is coming up significantly, so I think you will see pretty robust growth in NII.

Okay. And just one last little one, can you quantify the PE gain in other?

Private equity was $15 million if I recall that we had in other assets. There is a lot in that category, but I think this $14 million to $15 million is what we had in that. But we typically have a decent end of the year number every fourth quarter in private equity.

Okay, got it. Thank you.

You’re welcome.

And we will take your next question from Saul Martinez with UBS.

Hi, good morning. Want to continue on the M&A theme, Kelly you have mentioned in the past that you think the optimal size of a bank may be somewhere in the neighborhood, I believe if I recall correctly in the $400 billion plus range. You have also mentioned hey, this is a new day. The economic backdrop has improved. We don’t – still don’t know how exactly the regulatory environment will play out, but obviously, there is the potential for at least a lighter regulatory touch. Just curious how your thinking has evolved, if at all, on this question of what the right size or what the optimal size of a bank is?

So, I think as we reflect on the various changes, the optimum size might actually be – could actually be somewhat lower, because what we are seeing out of all this is the premium organic growth has risen while the premium on acquisition growth maybe has gone down some. And so we still believe long-term it would be advantageous to our shareholders to be larger, but to be very honest, we can get to this still we need to be through the organic growth only. And again unless you get acquisitions at a very attractive price, organic growth is going to be much more attractive. Keep in mind over the last 8 years, you couldn’t count on as much organic growth, because the state of the economy and the state of regulation and all of what’s going on. Looking forward, we think in this new day environment, there is much more opportunity for organic growth, which puts less pressure on acquisition growth, but I want to restate again to be very clear we are not in acquisition business now. So, we are totally focused on organic growth. And we believe we can get to the size and scale we need to be strictly through organic growth without any necessary requirements on acquisitions as that becomes appropriate from an economic perspective at some point in the future, we will take a look at it.

Okay, that’s clear. Thanks for that. Daryl, if I can ask a question on NIR and maybe we could just talk about it a little bit more systematically maybe what the outlook is for some of the key line items obviously. You have talked a little bit about insurance as mortgage maybe have some headwinds, some of the other lines are doing well, but what are – how should we be thinking about some of the major drivers of the major line items for NIR in ‘17?

So if you look at our fee income ratio, Chris commented on insurance, so that should be up modestly on a year-over-year basis. Service charges, we continue to make investments and service charges growing accounts, so that should continue to trend up. As far as mortgage banking, we continue to build out new markets. The MBA forecast has been down around 15% give or take, but we are hoping to be more flattish there just by building out our new markets that we have. And then we continue to make investments in investment banking and brokerage. We did have that one restructuring this past year there, but that said they have a lot of momentum. They are doing really well. So I think all that’s going well. So I’d say overall, fee income, up probably mid single-digit on a year-over-year basis.

Paul, this is Chris. I would add investment banking is probably core growth at 6% or 8% when you strip out that restructuring and in that would be capital markets as well as the retail broker and we are adding offices in the retail brokerage to complement it well throughout the footprint. And wealth, for example, even had a 22% revenue growth rate this year. So, it continues to operate really, really well.

Okay. That’s really helpful. Thanks a lot.

Thank you.

And that concludes our question-and-answer session for today. I would like to turn conference back over to Alan Greer for any additional or closing remarks.

Okay. Thank you everyone for joining our call. Apologize that we ran out of time, had a few folks still in the queue. Feel free to call Investor Relations, I would be happy to take your questions. Thank you and we hope you have a good day.

And that concludes today’s presentation. We thank you all for your participation and you may now disconnect.