Greetings, ladies and gentlemen, and welcome to the BB and T Corporation October 17, Third Quarter 2019 Quarterly Earnings Conference. Currently, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this event is being recorded. It is now my pleasure to introduce your host, Mr.
Rich Baytosh, Director of Investor Relations for BB and T Corporation. Please go ahead.
Thank you, John, and good morning, everyone. Thanks to all of our listeners for joining us today. On today's call, we have Kelly King, our Chairman and Chief Executive Officer Chris Henson, our President and Chief Operating Officer and Darryl Bible, our Chief Financial Officer, who will review the results for the Q3 and provide some thoughts for the Q4 of 2019. We also have Clark Starnes, our Chief Risk Officer, participating in the Q and A session. We will be referencing a slide presentation during the call.
A copy of the presentation as well as our earnings release and supplemental financial information are available on the BB and T website. Before we begin, let me remind you BB and T does not provide public earnings predictions or forecasts. However, there may be statements made during the course of this presentation that express management's intentions, beliefs or expectations. BB and T's actual results may differ materially from those contemplated by these forward looking statements. In addition, in connection with the proposed merger with SunTrust, BB and T has filed with the SEC a registration statement on Form S-four to register the shares of BB and T's capital stock to be issued in connection with the merger, which contains a joint proxy statement perspective that has been sent to the shareholders of BB and T and SunTrust.
Please refer to the cautionary statements on Page 2 regarding forward looking information in our presentation, our SEC filings and the letters on Page 3 that relate to additional information and participants in the solicitation. Please also note that our presentation includes certain non GAAP disclosures. Please refer to Page 2 and the appendix of our presentation for the appropriate reconciliations to GAAP. And now, I'll turn it over to Kelly.
Thank you, Rich. Good morning, everybody, and thanks for joining our call. This is really a very strong quarter for BB and T, especially when you look at the amount of work and effort that is going into preparing for our MOE with SunTrust, which is going very well and I'll talk about in a bit. It was a quarter that was driven primarily by noninterest income. Loan growth is very strong, ex a $4,300,000,000 mortgage sale, which we'll talk about a little bit later.
We're making excellent progress on our MOE with SunTrust, and I'll talk more about that in a bit. Just looking at some of the numbers, our adjusted net income was 830 $2,000,000 up 3.7 percent versus common quarter. Diluted EPS on an adjusted basis was $1.07 up 3.9 percent versus common quarter and very respectable returns on an adjusted basis ROE, ROCE and ROTCE respectively were 1.5%, 11.36% and 18.07%. Our taxable equivalent revenue was up $3,000,000,000 up 2.5 percent versus 3rd quarter. Our fee income was very good, dollars 1,300,000,000 up $64,000,000 or 5.2%, which is a bit better than our earlier guidance.
It was driven by mortgage banking, which was up 42%. Insurance is really out performing, up organically 8.7% versus Q3 of 2018. Chris is going to give you more color on that in a bit. And also, investment banking and mortgage were up 12 percent on a like quarter basis. So loans held for investments were actually down 4.8%.
But again, if you exclude this $4,300,000,000 mortgage sale, we're up 6.5%, which was over our guidance. Daryl can give you more detail if you have questions, but the 4 point $3,000,000,000 mortgage sale was simply purchased loans that we had purchased at a premium. They were paying off at an accelerated rate. It makes sense for us to effectively redeem those or pay sell those and it improved our rate positioning going forward. Our reported NIM decreased 5 basis points to 3.37%.
Core NIM decreased also 5 basis points. But if you exclude the Lone Star reported and core NIM only decreased 2 basis points. And again, Daryl is going to give you a lot of color with regard to that. Our adjusted efficiency ratio was 57.1%, down slightly from 57.3% on a common quarter. Expenses reflect higher incentives and commissions versus Q3 2018 due to the improved performance in insurance mortgage banking and investment banking as a brokerage.
Credit quality was just really strong. We'll answer questions about that, but across the board, credit quality continues to be very, very strong. We did have some strategic activity during the quarter. We redeemed $1,700,000,000 of preferred stock and replaced it with a like amount at a lower cost. It was just a really good economic transaction.
We did sell the $4,300,000,000 I just talked about. We did increase our dividend 11.1 percent at July meeting, which is a very, very healthy 3 plus percent dividend yield. We also did receive shareholder approval to nearly unanimous BB and T and SunTrust on the merger and on the name. And we have talked about and we have named 75% of our tourist leaders. So I'm going to give you a little more detail in just a minute about the overall really positive progress that we've made with regard to the upcoming merger.
If you follow along on Page 5 on the selected items, just to call these out, as I said, we had preferred stock redemption, where we were covering the expense of the capitalized insurance cost. That was $46,000,000 pre and after tax, dollars 0.06 a share negative hit. Incremental operating expenses related to the merger was $40,000,000 after tax, that was $0.05 negative hit. Merger related and restructuring charges, dollars 26,000,000 after, which was $0.03 Now on the positive side, we did have a gain on the impact of the mortgage sale that was a positive $0.02 So when you net that out, we had a negative impact on EPS of $0.12 for the quarter. So if you want to take a look at the next slide, Slide 6, on loan growth.
I feel really good about loan growth. If you look at the underlying performance, again, next to mortgage sale, we had 6.5% annualized, which is very strong, I think, relative to what's going on in the marketplace, what's happening with a lot of our competitors. Very pleased that C and I was up 7.6% 3rd quarter to 2nd quarter annualized. We did have a very low performance in CRE, very much by design. As we talked to you last couple of quarters, we've been dialing back because we see some fluffiness in some of the CRE categories, and so we're being careful about that.
But if you look on the table, I won't go through all of them. If you look on the table on Page 6, you'll see that the C and I performance is really broad based across 8 or 10 different categories. So it's not just a one off type of loan category performance. It's really, really broad based and very, very good. Mortgage loan, by the way, did very well.
They were up 7.4% versus Q2 1Q excluded to sell. So just talking a bit about what's going on in the marketplace. As all of you, I'm sure, know, it's difficult to figure out what's going on with all of the conversation, much of the rhetoric. But what I try to do is just talk to our people, talk to clients and see what's going on. The fact is today, as I just indicated, our clients are still borrowing.
They still feel basically confident production and our pipelines are very strong. But I will tell you that there is more conversation going on today about concerns about the trade wars. Is beginning to create a level of uncertainty. And even though the economy is still strong today, over time, uncertainty will begin to enter way in terms of negative impact on the economy. We saw some negative retail sales yesterday.
Is that a one off? We just don't know. I personally think it's challenging for all of us to be calm right now, not try to draw huge conclusions over individual anecdotes that pop up every day or sometimes multiple times during the day. It's better, in my view, to back away and take a long view. And the truth is, the long view of the U.
S. Economy today is very strong. We do have these clouds around the globe in terms of Brexit, although there was some potential positive good news out of that this morning. I personally think we'll have a reasonable trade deal with China by the end of the year. I personally think we'll have the new NAFTA approved, and we'll head into 2020 with substantially better sense of feeling of confidence than we have today.
But I could be wrong, and that's why we're being very cautious in terms of everything we do in terms of capital liquidity and diversification because we simply are in an environment where to place a high debt on any one scenario up or down is not a smart debt. So we're being cautious with basically guiding to neutral with a slight psychological attempt towards the upside, which we think will serve us well. If you look at the page 7 on deposits, I was very pleased with deposits. Obviously, this is kind of the big story today. How do we all react to the substantial decline in the long end, the potentially inverted yield curve as we go back and forth kind of every day.
It's very challenging for everybody. We're doing very well. Our total deposits 3rd to second, are up 5.2%, but we are managing the categories, for example, our non interest bearing deposits are down 1.4%. That's kind of the normal kind of disintermediation that's going on across the industry today, but 1.4 is really pretty low in that environment. Our money market savings are up 9.6.
6%, so that's looking very good. So we've seen some movement in the categories, but when you get through that 5%, 14% is very, very strong. We see a little movement in our mix, but our non interest bearing deposits are holding strong. Client deposits relative to national market funding actually increased 3.6% annualized versus Q2 of 2019. Our cost of interest bearing deposits were 0.99, down 3 basis points versus the 2nd quarter and cost of total deposits was 0.67, down 1 basis point So really good management of that by Daryl and Donna and all of our people in treasury.
So I feel very, very good about that. It will be problematic as we go forward if we have some substantial spike down or up, but we're not actually expecting that. We're planning to be relatively neutral going forward, but with a psychological little bit up. And with that, let me pass it over to Daryl.
Thank you, Kelly, and good morning, everyone. Today, I'm going to talk about our excellent asset quality, margin dynamics, solid fee income, expenses and provide guidance for the Q4. Turning to Slide 8. Asset quality remains excellent. Net charge offs were $153,000,000 up 3 basis points as a percentage of average loans.
This is largely due to indirect loan seasonality and the resolution of a commercial credit. Our nonperforming asset ratio was 22 basis points and is better than the previous low seen in 2,006. Continuing on Slide 9. Our allowance coverage ratios remain strong. The allowance ratio was primarily impacted by the sale of $4,300,000,000 of residential mortgage loans and the resolution of a commercial credit, which lowered the reserve for unfunded commitments.
Including these one time items, the allowance to loan ratio remained at 1.05%. The provision was $117,000,000 below net charge offs of $153,000,000 Turning to Slide 10. The reported net interest margin decreased 2 basis points after adjusting for the sale of residential mortgage loans and related reinvestments. You might recall that the timing differences between the settlement of the mortgage sale and the securities reinvestment temporarily increased earning assets by about $2,000,000,000 and impacted the margin by 3 basis points. Excluding these items, core margin was also decreased 2 basis points.
Net interest margin was impacted by lower rates, which reduced annualized yields by 7 basis points on the loan portfolio and 2 basis points on the securities portfolio. The cost of interest bearing deposits decreased 3 basis points, which partially offset the drop in asset yields. We pre invested $5,000,000,000 in securities late in the 3rd quarter to build liquidity for the merger and that reduced our asset sensitivity. This also creates negative pressure on our standalone margins in the Q4. In addition, we are evaluating opportunities to restructure our balance sheet as we wait for a merger close.
Continuing on Slide 11. Non interest income was $1,300,000,000 up 5.2% versus like quarter. Our fee income ratio was 43.4 percent down seasonally from 44.4%. Insurance income income was down $79,000,000 due to seasonality, but increased 8.7% from a year ago on frothy market pricing and organic growth. Mortgage banking income was stable as higher production and servicing related revenues of $24,000,000 were offset by a decline of $25,000,000 in net MSR valuation.
Investment banking and brokerage commissions were relatively flat, but up 12% versus last year. This was primarily due to higher managed fee accounts. Service charges on deposits increased $7,000,000 partly reflecting more days in the quarter. Other income increased $35,000,000 primarily due to a $23,000,000 increase in income related to assets for certain post employment benefits and $17,000,000 for client derivatives. Turning to Slide 12.
Non interest expense was $1,800,000,000 an increase of $89,000,000 The increase was largely driven by Merx and MOE expenses, which were up a combined $54,000,000 Merx totaled $34,000,000 which included relocation expenses, legal fees, project management costs and professional services. MOE expenses were $52,000,000 which included $39,000,000 for personnel and $12,000,000 for professional services. You can see the details on Page 16 in our quarterly performance summary. Core expenses were up $35,000,000 including $9,000,000 increase for professional services, dollars 6,000,000 increase in personnel expense, which includes $23,000,000 increase for certain post employment benefit expense that was offset by decreased incentives and equity based comp and a $19,000,000 increase in other expense due to higher advertising and marketing costs and other items. Expenses increased 1.7 percent or $30,000,000 from last year, excluding Merx and MOE expenses.
Year over year increase in adjusted noninterest expense was primarily driven by an $18,000,000 increase in personnel expense due to higher incentives, $34,000,000 increase in expense reflecting higher nonservice related pension expense, higher operating charge offs, higher advertising and marketing costs, which was partially offset by a $17,000,000 decrease in regulatory charges. FTEs were essentially flat versus Q2, but down approximately 1500 from a year ago. Turning to Slide 13. Capital and liquidity remained strong. The CET ratio was 10.6%, up 20 basis points due to strong earnings and the mortgage loan sale.
The dividend payout and total payout ratios were 46.9%. We issued $1,700,000,000 of preferred stock and redeemed a similar amount of higher cost issuances, which will save $4,000,000 per quarter and have an earn back of 2.8 years. Our modified average LCR ratio was 139%. To build liquidity for the merger, we pre invested high quality liquid assets at the end of the Q3 to facilitate compliance with the LCR ratio for TRULIST. In addition, we issued debt to bill parent company cash, which now exceeds $10,000,000,000 These actions will provide negative pressure to BB and T's net interest margin, but it's prudent for Truist starting out with very strong liquidity.
Now let's turn to Slide 14 to review SIPA. Community Bank Retail and Consumer Finance net income increased slightly to $446,000,000 Fee income decreased $15,000,000 primarily due to the decline in the net MSR valuation, partially offset by increased production revenue. Average loans and leases decreased $2,500,000,000 reflecting the mortgage loans now. Loan yields increased 12 basis points, while interest bearing deposit costs were down 4 basis points. Non interest bearing deposits were about flat.
In residential mortgage, originations were up 11% from 2nd quarter, production mix was 68% purchased and 32% refi. And excluding the mortgage loan sale, again, our sale margins declined 28 basis points due to a mix change to higher correspondent production. Continuing on Slide 15. Community Bank Commercial net income was 19 $1,000,000 increased $19,000,000 to $338,000,000 Loan production increased 22% as higher C and I and CRE production offset lower dealer floor plan production. Loan yields were down 17 basis points versus interest bearing costs down only 1 basis point.
Non interest bearing deposits were essentially flat. Turning to Slide 16. Financial Services and Commercial Finance net income was $185,000,000 an increase of $16,000,000 Total revenue increased $26,000,000 primarily due to higher Grandbridge income, capital markets and client derivative revenue. Average loan balances grew 7.6% annualized, helped by equipment finance and corporate banking. Loan yields were down 15 basis points and interest bearing deposit costs were down 13 basis points.
Non interest bearing deposits were flat from last quarter. Additionally, invested assets increased $2,700,000,000 versus linked quarter and $5,300,000,000 versus last year. Turning to Slide 17. Insurance holdings net income decreased $50,000,000 to 61,000,000 dollars primarily due to seasonality. Now I'll turn it over to Chris to provide more perspective on our performance this quarter.
Thanks, Daryl. So if you turn to Page 18, the purpose of these two slides really is to reinforce our transformation plan that we call which Insurance Holdings Operating Plan, continues to gain momentum. This is the plan John Howard shared with you last fall at Investor Day And it's really built with assistance from BCG a little more than a year ago, about 15 months or so, and built around 32 initiatives that we're working to execute over the next 3 years. And as I said, we're about a year in. That includes implementation of new operating models, both in retail and wholesale and a myriad of other revenue growth and expense synergy initiatives.
And if you look at the upper left hand chart there on Page 18, you can see revenue for the segments up 9.3% or $44,000,000 like quarter. As I've pointed out
a number of times in
the past, really three drivers to strong organic growth. First is good client retention in retail. We're up about 91%, wholesale about 76%. New business volume, not renewals, totally new business volume was up 17% light core. That's the best number that I ever remember seeing.
And what's more impressive is it has built each quarter throughout the year. And then the 3rd driver really is pricing. And on the heels of the 2 largest insurable loss years in 2017 2018,
we're continuing to see price
lift because of tightening capacity in the market. So for example, 2nd quarter was up about 3.5%, this quarter up about 4%. So retention, new business and pricing is really driving the result you see in the lower left hand corner of organic growth. So our organic growth is up 200 basis points to 8.7% in the quarter, which is about double what we would expect to see in the industry. We expect probably mid-4s in the industry.
We believe the backdrop allows for additional tightening in capacity and continued lift in pricing as we go through 2019. If you flip over Page 19, I would say that IHOP is really designed to help us drive be laser focused on enhancing the margin and then using the dollars of EBITDA production to reinvest in the business. So we have, I'll just point out, in almost every business, new technology implementations, which will help both revenue and cost in the future. If you look at the chart in the upper left there, EBITDA, you can see absolute EBITDA is up $24,000,000 like quarter, 27.6%. And the strong organic growth that I've shared with you on the prior page combined with good solid cost control.
And then the 3rd leg was really, remember, we acquired Regions July of last year. We're now 15 months into that, and we have exceeded all of our expense and revenue synergies. And the combination of those three things have really helped us drive the result in the lower left chart on Page 19, which is EBITDA margin. You can see our margin right quarter is up 310 basis points to 21.4%. Now this is the lowest quarter of the year for us.
So if you look at what our year to date margin would be, it would be in the 25% range. So a lot of improvement has been made in margin enhancement. And lastly, I'd just leave you with a lot of focus on using data and analytics to really help our underwriters better understand the true risk of the client, which helps them long term keep their rates down. And I would say that's especially in wholesale. So in summary, just continue to be very pleased with the progress that we have made in insurance.
And I'll turn it back to Daryl.
Thank you, Chris. Continuing on Slide 20, you will see our outlook. The following guidance is based on BB and T standalone. However, we continue to expect the merger of Equals of SunTrust will close in the Q4. We expect total loans held for investment to be flat versus 3rd quarter, mainly due to seasonality.
Excluding this, loans would be up 1% to 3% versus linked quarter. We expect net charge offs to be in the range of 35 to 45 basis points and the provision is expected to match net charge offs plus loan growth. We also expect GAAP and core net interest margin to be down 7 basis points to 9 basis points. As we discussed earlier, we are building liquidity for the merger for LCR, a liquid asset buffer and parent company cash. This will negatively impact net interest margin by approximately 3 to 5 basis points in the 4th quarter.
Adjusted for the liquidity build, we expect net interest margin to decrease 3 to 5 basis points. We anticipate fee income to be up 2% to 4% versus 5 quarter driven by insurance and mortgage banking. We expect expenses excluding merger related expenses to be flat versus like quarter. We expect one time expenses for the MOE to be about $60,000,000 to $80,000,000 in the 4th quarter, mainly driven by personnel and professional costs. And we anticipate an effective tax rate of 20% to 21%.
Finally, BB and T's full year guidance remains intact. In a challenging rate environment, we will continue to grow in revenues faster than expenses, driving positive operating leverage. We will be more pronounced which will be more pronounced once we close the MOE. In summary, the quality of our core earnings this quarter was excellent, resulting in strong loan growth, solid fee income versus last year and excellent asset quality. Now let me turn it back to Kelly for updates on the merger of Equals and closing Q and A.
Thanks, Al. So as you can see, it was it really was a great quarter. And I particularly highlight the work that's been done in the loan area and the expense area and the insurance area, all very, very good. So let me give you a few comments with regard to the merger update, which is going extremely well. Our executive management team, which is 14 August 7th, continues to meet weekly.
The team is working extremely well together. I cannot be more pleased. If you were a fly on the wall watching us meet, you would have thought we've been working together for years years years. Bill and I are working together extremely well. The whole team is working together well.
And I must tell you, I really appreciated the focus of the team. I mean, the focus is working together, and we're focused on the goal of making Truist number 1 best financial institution that we possibly can. Making great progress in terms of naming the key leadership. Recently, we've named 8,000 positions, which is about 75% of the leadership roles. We believe that by legal day, 1 of those, virtually all positions will be named and everybody will be ready to go.
We've been very successful in meeting our diversity goals, which is one of our primary focuses. And we've done a really good job of picking our benefits programs going forward for Truist. One of the great things about an MRE is you really get a chance to look at both companies and pick the best of each side, and that's what we've done with regard to benefits. So we're going to have a world standard benefit program. And remember, for it to work for our clients, communities and shareholders, it really must work for our teammates and associates.
So we feel really, really good about that. So we've had some marks in terms of activity. July 30, SunTrust and BBG shareholders both almost unanimously approved the deal and the name. When we go to the regulatory process, it has been approved by the North Carolina Commissioner of Banks, which is very important. The next step is approval of our divestiture plan by the Department of Justice.
And then we believe that the remaining regulatory approvals will follow. We feel good about where things stand with the regulators. They are being delivered given the size and significance of this deal as they should be and as we are being. I mean, so everybody has the same goal of making sure that when we move forward with this that we've dotted all the I's and crossed the T's. And so given all of that, we believe that we are still on track for a closing in the Q4.
We can't guarantee that, but we believe that we are based on all of the information that we have at this time. We made really good progress in the last several months with regard to merging the technology of the 2 companies. So during September, we finalized the vast majority of the technology ecosystems. And remember what we try to do there is we pick the best of breed. So if SunTrust has the best teller program, we picked our program.
If we have the best loan system, we pick that system. So the end result is you get really, really first class systems across the board, which is fantastic. We did recently complete a dress rehearsal for Legal Day 1 flows. There were about 100 merger related work streams that had to be tested, and they all passed very, very well. So we're absolutely ready for the legal day 1 to close.
And very, very importantly, we have had 2 off-site, several day meetings, working on developing the truest culture. This has not been a process of throwing out BB and T and throwing out SunTrust. It's been a process of taking the best of each one. And I've been extremely excited about how this has worked. The culture, as we define it, is our purpose, our mission and our values.
And then the various activity approaches kind of the way we do things around here. We've already agreed to our purpose, our mission and our values. And I'll tell you that Bill and I are very passionate about this process. We believe it's the most important part of the entire journey, and we could not feel better. The teams had a complete meeting of the minds, good discussion, but no aggravated interaction, no real divergent views, just really fine tuning wording in terms of how we present this to the world.
So frankly, it has gone extraordinarily well. We could not feel better. Our teams are 100% aligned. I will tell you as we roll this out later that our purpose, mission and values are engaging and very, very exciting. So as we go forward, once we have legal day 1, there'll be a number of things that will happen.
Kind of the first thing is we have to affirm to the Board all the various committees and policies and practices, all of which are being worked on now by various groups, So we're ready to go day 1 to present all of that to the new company Board, to its Board, to be able to approve all of that. We will share shortly after that our purpose, mission and values with all teammates. We think that's our number one job is to get out. We plan kind of a ratio, if you will, to get out and talk to our teams across the entire enterprise about our culture. We are working into our marketing area on our branding plan, closing in on that, making really, really good progress.
So that's very, very exciting. And as that rolls out, it will build more excitement. We remain importantly very confident in achieving our 1 point $6,000,000 in net cost saves. And I would simply point out to you that we have not included in any of the numbers any revenue opportunities, but we're doing a lot of work on that. Bill and Chris are leading the effort we're going to focusing on revenue opportunities and there are, I don't know, 20 different work streams right now in terms of pretty low fruit.
And so we wanted to be conservative in our projections. And I'll just tell you, there are huge opportunities when you combine these two companies because there's virtually no overlap. There's just opportunity to take what SunTrust does and bring it over to BB and T and take what BB and T does and take it over to SunTrust. And we know how to do that. And so we're very, very excited about that.
I'll tell you that when we announced this deal back in February, I was very, very excited. Today, I'm even more excited and more confident than before, and here's why. So the deal is basically the same. The synergies are as good as they were. Economic opportunity is good.
The transformative nature of this in terms of making the world better is good. But now not much into the process, I feel even better because our executive team is deep, it's strong, it's committed. Our teammates are excited. They see that world the same. They see the opportunity the same.
We truly believe that we can help our clients have a brighter financial future. And create a place where our teammates will enjoy and have a long and fulfilling career. We believe our communities need help today. The world is changing really fast. We are having a dramatic increase in the gap in terms of economic inequality, and we don't feel good about that, and we want to do our part.
And I can tell you that legal day 1, Truist will be ready to be a leader in finding solutions to making life better. And of course, we will, through all of these efforts, optimize the long term return to our shareholders, which we feel very, very confident about. So I want to thank Bill and the SunTrust team and all of my fellow BBT associates, and thanks for all the hard work that has gone into it. Very soon, we will be one team. I will tell you all, we are ready to go.
Back to you, Rich.
Thank you, Kelly. John, at this time, if you would come back on the line and explain how our listeners can participate in the Q and A session.
Thank you, We will now take our first question from John McDonald of Autonomous Research. Please go ahead, sir. Your line is open.
Hi, good morning. I wanted to ask Daryl, just a question on the Q4 outlook. When we kind of combine the outlook for loans to be relatively flat and NIM to be down, If we add in and I guess average securities are probably up given the liquidity build, how does the dollars of NII look? How should we think about that for the Q4?
I would say, John, that if you look at linked quarter, it will probably be down a touch just because of the drop that we have in margin and flat earnings assets for the most part linked quarter. A lot of that is just due to seasonality on the loan side, like I said in the prepared remarks. And then the margin decline, core margin is really down 3 to 5 basis points. The rest of it is just due to building up excess liquidity for the combination with SunTrust so that we can have strong liquidity, LCR ratios and just strong overall cash on hand how we're going to run our company.
Got it. That's great. And then just a bigger picture question in terms of the truest MOE. With the environment changed since February and you've also had a chance to fine tune your assumptions with the 3rd party review, do Do you have any updates on kind of the financial targets that you set out for the 51% cash efficiency and the ROTCE of 2022? Obviously, there's a lot of changes further out, but any updates on that?
John, this is Kelly. The market is substantially different than it was back in February. The most difficult thing to view our rent on today is efficiency ratio because the denominator is under a lot of pressure. We believe with regard to our efficiency ratio, whether we hit 51% or not, we believe we will be top in class in terms of our efficiency ratio. I would say I feel more confident in the 22% return on tangible common equity.
But regardless of whether numbers are exactly what we said 9 months ago, because the world has changed, we think there'll be top performers. Dell, can you comment on that?
The only thing I would say, John, is we still have 100 percent clarity between both companies. So we have high level estimates. I would say once we close this quarter, if you give us a little bit of time a month or so, we'll come out with more clear guidance on a go forward basis on the timing of our cost saves and how we're going to get the cost saves. So we know you guys need that information. We will provide it for us, but we got to get the deal closed and we have to make sure we understand where all the savings dollars are coming from first.
Totally understand. Thanks very much guys. Excellent. We
will now move on to our next
Sorry about that. Yes. So just back to the deal close discussion. I know, Kelly, you mentioned that you're confident in the Q4 close of the deal, but you also indicated you can't guarantee it. Is there anything that's leading you to believe that it could be after 4Q?
Any change in your thinking as you're going through the process where you're thinking it could be into next year? Well, as I said, John, we're focusing on the Q4. Obviously, we are aware that possibly could slip to the Q1 and we're doing some part of that, but most of our focus is on the Q4. We are not aware of any reason today to expect it to go into the Q1. I only say that today, this is beyond our control.
This is in the regulatory framework, and they move at their own pace. And so all we can do is give you our best information based on what we know. And based on what I now know, I still expect a 4th quarter close. Okay. All right.
Got it. Thank you. And then separately, Daryl, I know you mentioned that in your remarks that you're evaluating additional opportunities to further restructure the balance sheet. I know you've already pre funded the merger as well as sold some of the residential mortgage portfolio. But just want to get if you can elaborate possibly on what incremental actions you could evaluate for the balance sheet?
Thanks.
Yes. So John, I mean both companies are looking at their balance sheets very thoroughly right now. As Kelly said earlier, one of the things we want to do when we combine is we want to make sure that our interest rate sensitivity is relatively neutral to slightly by us up a little bit. So but try to get it to be more neutral so we don't have a huge impact to NII as rates continue to change. We also, as I said earlier, we'll have strong liquidity.
From a credit perspective, if there are certain portfolios or loans that can be sold that Clark and Ellen Coldler want to get off their balance sheet, we will take advantage and do that as well. And lastly, we will look at assets, not so much a decision on the business, but if there's assets on the books that might be marginally not the best performance from a capital return perspective, we might see us shed some of those as well. So all that's coming together. We'll have more color on that later in the
quarter as we close.
Okay, great. Thanks, Daryl.
We'll now move on to our next question from Mike Mayo of Wells Fargo Securities.
It's another question on the merger. So you say you have 75% of the leadership roles named. When do you get to 100%? And you say you have most of the tech ecosystems identified.
What do
you have left there? And most importantly, I know you've been asked twice already, but can you put more meat on the bones on the technology related savings? I mean, that was the number one reason for merging so that you can make more tech investments and get more out of tech? And so what have you learned over these last 9 months? Thanks.
Yes. So with regard to the staffing, I fully expect virtually 100% of all the staffing to be agreed to by around the 1st November. I mean, we're very close. I mean, it's there won't be many that will be hanging out there by 1st November. In terms of ecosystems, we've covered all of them.
I said it was 100 of them. So we've gone through that very thoroughly. And so we feel really, really good. And that's the first step, by the way, in the whole conversion process. You certainly have to decide which ecosystems and then all the various systems within those ecosystems.
So all of that is going along really, really well. We are completely on track with regard to that. In terms of the technology savings, it has multiple facets. The first thing is you have redundant hardware, which of course goes away. You have redundant programmers with regard to because you're operating 2 different hardware systems and 2 different software systems.
And when you pick one system over another system, that necessarily frees up expenses to that. And then, of course, you're thinking in terms of reinvesting for the technology of the future. And you're right, when we announced this deal, we said this was really about putting together 2 companies that, of course, would become more economically sound, but really leaning into the future by investing in technology that will allow us to be a leader with regard to meeting our clients' needs. That's a process that's not like as easy, to be honest, as hooking the computers up on the existing systems because we're having to look at what's available today out there that we don't have. And to be honest, there's not a lot out there today we don't have.
We're in really good shape. If you look at like our digital platform, I mean, we're constantly rated as number 1, 2 or 3 in the entire system, including all the big banks. In spite of what some people say, that's we are extremely well positioned with regard to that. But the world changed really fast. And so we have to invest a lot to be sure we stay at the top.
And then we're already beginning to do work in terms of thinking about what's the next step, what's the new frontier, what is the next investment that we can make that will creating a group of teams. So we'll have 20 to 40 agile teams that will be focusing on improving existing products and services and approaches, but creating new products and services in small business, in retail, across the board. We are canvassing the world in terms of what's out there. We don't believe in recreating your wheel. If there's something out there around the world that we can bring to our clients, we're going to do that.
But we also recognize that this world is changing so fast that there is opportunity for us to create the new wheel. And so innovation is a part of this whole process. So the mechanics of all that is very complicated, but it's really a bifurcated process of hooking the existing computers up, as I say, which I think we're going to chuckle when I say it, but it really is that simple. They're hooking the computers up and make sure we operate efficiently from day 1, and then making sure we're layering on top of that improvements that will make our clients' lives better.
And then just one follow-up. So November 1, you have all the leadership identified. That would be good. But culturally, you gave a presentation recently talking about the cultural similarities, and you gave some data. And I didn't really understand that data.
I mean, it seemed kind of pie in the sky to me. And look, you're close to the situation. You're dealing with the employees. You're saying, hey, culturally, we're similar. Many people on the outside who have followed you for a decade or 2 say, you know what, you guys really aren't similar to BB and T and SunTrust.
So I guess, where is the disconnect in the perceptions about the difference in cultures and what you're finding out? And when there are differences, how are those resolved?
Well, I'm not sure which meeting you were talking about, but I don't much believe
in the Barclays Conference.
I don't much believe in time to describe. Let's just put that out there. I try to be straightforward and honest about everything I say and be always right, I'll tell you the truth. And so what I was referring to is that we've had a number of statistically valid feedback sessions from 20 plus 1,000 of SunTrust and BB and T clients that have associates, I'm sorry, associates that have validated what I said. So for example, early on when we were doing the main research, we had 20,000 plus responses to about 10,000 mixed eyes.
And we gave them a list of 16 words to describe the companies and all groups on both sides speak the exact same four words, which was pretty incredible. And then we did a more culture. And we were shown by the research people statistically driven graphs that show BB and T associate responses and SunTrust associate responses. And they it was a virtual complete overlap, meaning you go to the masses of our employees and you ask them, how do you feel about this, about or the other, they give you the exact same response. And I get that anecdotally when I'm traveling around in the field and talk to our people and when I ran to SunTrust people.
And I asked them, how's it going? It's going great. We work together. We have lunch together. Not competitive.
We better get to know each other. They're all friends. And they talk about each other just very positively and affirmatively. And so when you put all that together, I'm quite certain there are no material differences. There's always some differences.
These are big companies. I'm sure you'd find something that's different about the companies. But where there are what I call minor differences, they will just fade as we come together as truest and operate on our new purpose, mission and values. So they will just fade away. If we were to encounter any material, which we're not, we would deal with it straight up in the executive team and we would reach a consensus and look forward.
But we've covered a lot of issues at this point. It's been 9 months. We have covered a lot of Waterfront and teams are working great, as I said. And we've not discovered material issues that I could say to you was a real culture crack. Bill Rogers and I have this working arrangement together where we talk about no light between us.
And so we've committed to each other very deeply that if either one of them sees any light, we get on the phone immediately, talk about it. And we haven't found any light yet. I'm not saying we won't, but I don't think we will. But we have the mechanism and the commitment and the trust between Bill and I and all the way through the change that if we do have issues, we deal with them promptly, quickly and decisive.
All right. Thank you. We will now move on to our
next question from Betsy Graseck of Morgan Stanley. Please go ahead. Your line is now open.
Hey, good morning.
Good morning.
Couple of questions. First, just a clarification, Daryl, on kind of the LCR and the commentary you gave around HQLA and re the balance sheet a little bit for post merger. On Page 10, when we look at the change in NII scenarios and you've got this negative sensitivity both down 100 and down and up 200. I just want to get, how you're thinking about what that looks like post merger because I don't think you would set yourself up like this on a standalone basis. So just want to understand where this is going and whether or not you had to get ready for LCR even if the tailoring rule didn't go through?
In other words, are you carrying a little bit too much HQLA at this stage post tailoring rule or not? Just if you could speak to that a little bit.
So we're still working on our numbers at the 85% number. Both companies operate at 70%. So we will have to have one form or another higher high quality assets on our balance sheet will take some form. So we started to build that at the end of this past quarter. So that's it.
From an interest rate sensitivity, by us purchasing those securities, We also did unwound some AFIX swaps, put on some receive fixed swaps. It did create us so that we improved our sensitivity on the down hard on the upside. Ideally, when we close or shortly thereafter, we would want it to be somewhat symmetrical in that we would still probably lose a little bit on the downside, but benefit on the upside as we can work on that. Donna and her team are working together and they are coming up with strategies post legal day 1 such that we will try to get into that position. You're right, we're kind of kind of in the middle of what we're trying to do right now is what you saw at the end of this quarter.
But we will work towards that and we'll see how that all comes together. But I feel confident we'll get into a position where we need to be post close.
And that's in part because STI is a little more asset sensitive than you, I'm guessing, is part of that answer?
That's true. That is true. That will help some exactly. And I think there will be some other adjustments we might make as well.
And then just separately, Daryl, could you speak and color, could you speak a little bit to how you are thinking about the buybacks as you get to close and then beyond close? I think last time we spoke, there was an expectation that the CET1 might be closer to 10%, but then there was some mid quarter release that talked that seemed like maybe you would be a little bit below 10% at close. So can you tell us where the parts are moving there and how it impacts your outlook for the buyback?
So Betsy, just as a general level, you'll recall that we said that we want to target 10% CET1 at close. And we really are not going to consider buybacks until after we hit that level. Now I recognize that many investors, since you have already asked me, well, why do you need such a healthy CET1 level because that's got a lot of cushion in it, which it does. But the reason is because we're going through a whopping big merger, which has got a lot of uncertainty. The economic environment has uncertainty.
Geopolitical units have uncertainty. For all those reasons, we're conservatively still stuck on 10 Dar will give you a little color in just a second about kind of where we are. From my point of view, it's hard to know and it kind of depends on what rates are. These marks have a huge impact in terms of capital position. But it's going to be close to 10, which means it's not going to be too far past legal day 1 that we're going to be back in the biotech business.
But at a specific base, Daryl can give you a better feel for that.
Yes. So where we stand right now, right now, we'll probably a touch under 10. But as Kelly said, we don't really know the exact date we're going to close when interest rates are. We're still working with Deloitte, our 3rd party on the actual mark for SunTrust. All that is coming together nicely.
My guess is we'll be close to 10. We may not be at 10 right now, but it also depends on depending on what assets we decide to shed or whatever could have an RWA lift potentially. So you never know of how you get there right now. It's we're in the hunt, but there's no guarantee that we'll be over tenant close. But this company combined generates a lot of capital, a lot of earnings and we will get to 10%, I think in a relatively short amount of time.
But it's still a wild card because you don't really know because rates are so volatile right now where you're going to be. I just know that we have a lot of flexibility and we're working to try to do what we can to maximize and optimize the balance sheet.
Okay. Got it. All right. And Kelly, your point is that 10 is a high number anyway?
Right. Exactly.
All right. Thank you.
Thank you.
We will now move on to our next question from Ken Usdin of Jefferies. Please go ahead. Your line is open.
Thanks. Good morning, everyone. A follow-up on just things that are going to be potentially slipping time wise depending on the close date. But Daryl, any understanding at least on the BB and T side of what the expected CECL day 1 looks like? And then just any considerations in terms of any changes with regards to how you think the credit mark looks and the potential breakdown of that credit mark?
Thanks.
Yes. So I mean, for BB and T, our seasonal reserves are going to be higher than where we operate other than the incurred right now. We're probably up in the neighborhood of 30% to 50% in that range. All that could be a moot point when we if we close this quarter in Q4. So Clark and Helen Koehler and our teams have been working on the combined Truist number.
We are at a point now where we can disclose that number yet. We're still working on that. But the teams are working together and just coming up with it. As far as the purchase accounting marks go, I would say when we announced this transaction in February, we were saying that credit mark would be at 2%. We believe the marks are coming in close to that level, but that's not final yet.
Could be a little give or take, plus or minus on that, but I think we're in the ballpark of that. The other marks on the liquidity and interest rate marks right now, it is at a slight discount, but that's also volatile to what happens in the marketplace. And hopefully that's helpful.
Yes. Thank you. And a follow-up, just
on the insurance side, you talked a
lot about the color, how the current business trends are going from a growth perspective. Can you talk about how insurance is expected to grow within the outlook you've given for total fees just in terms of the ballpark of the type of growth rate that you think could be sustained in the insurance business?
Sure. For 4th quarter, this is our lowest quarter of the year, so it's going to be 4th quarter to be our 2nd lowest. So we would expect from here commissions to step up in the 3% range. But sort of looking out further and forth and into maybe the first half of twenty twenty, what you have really is post the 2 years, large years of attributable losses, 2017, 2018, as I mentioned earlier, you have tightening of capacity in the market such that there's still upward pressure on pricing. It's hard to know exactly sort of how long that lasts.
But certainly, Q4, we expect it to hold, possibly even push up a bit. Depending on how the reinsurance renewals go in January, I think you also could see some further commitment to that pressure. So when we look at the balance of the year, we're expecting sort of full year organic growth to come in at least for us in the 6% to 7% kind of range. We're at year to date, we're at 9.1% right now. Possibly, we could beat those numbers, and we expect the industry probably be in the mid-4s.
So I think feeling very, very strong about the backdrop of the market as a result of that. But also, I would say, because of the IHOP approach we started over a year ago, we feel really good about our team.
As I said,
our new business growth has built upon itself every quarter throughout this year, and we've got technology going in, in just about every business, which has helped us be more efficient, more effective. So I think the prospects for us to outperform the market as we look forward are very, very solid, both in margin and in overall growth.
Thank you.
Sure.
We will now move on to our next question from Matt O'Connor of Deutsche Bank. Please go ahead. Your line is open. Good morning.
Good morning. Good morning. I first just wanted to follow-up on the capital discussion. I can appreciate it wanting to keep a little more capital as the integrations going on. As you think kind of post integration or once you're confident in the execution of the integration, we see the 10% CET1 is really kind of well above where some of your direct peers are pointing to.
You might have seen yesterday a very similar bank to you in size, talked about bringing it down to 9%, another one's in the 8.5% to 9% range.
So I'm just wondering if you could
give some thoughts on kind of medium term post some of the deal integration, what you think an ongoing CET1 target might be?
So I think predicting what your capital level needs to be out into the future is a bit of a guessing game because you really can't predetermine what your capital levels will be until you unless you could predetermine what the many additional circumstances are going to be. So it always has to be a hedge. And the best way to think about us is relative to the environment. If the environment is relatively risky, you will see us be relatively more conservative in terms of capital liquidity, and we'll always have strong diversification. Capital and liquidity vary depending on the circumstances that we see at the time and the forecast that we make.
As I said earlier, today, from a conservative point of view, you just have to recognize that doing a large deal, there are just lots of issues. And while we feel extraordinarily confident about the conversion and all of that, there's still things that I can't guarantee. And my prediction is by the end of the year, we'll have a trade war reconciliation and a NAFTA approval, a new NAFTA approval, etcetera, but I can't guarantee that. So when you get through all that, that anchors you back to the 10%. Now to your point about, all those moving to 9% or so, I certainly don't think, I mean, when we get to a more tranquil or predictable environment, I don't think 9% is inappropriate at all.
I think pushing down to 8.5%, we'll still get you 150 basis points target at minimum, I don't know, 7%. But remember, 7 is a really hard 7. You don't ever want to get close to 7. There's some pretty bad stuff that happens when you get there. So the debate is really between 28.5% and 9% ongoing more stable environment position in my view.
And so as things stabilize, I will be recommending to the Board that we consider a lower target capital level. And based on the work that Dale and Hensin does, we'll come up with whatever that number looks like. But we're not going to be rushed, and I want to be fair for our shareholders. There's opportunity here, but we're going to be conservative and I want the market to understand that. I'm not going to over promise.
I'd rather overdeliver.
That's helpful. And then just separately, any early signs of, call it, either client attrition or clients kind of taking a wait and see approach from doing business with you? And I know you can't talk to SunTrust, but is there any kind of wait and see? Or on the flip side, are there discussions with clients saying, hey, now that you're going to be a lot bigger, can you do more for us, whether it's, say, taking bigger positions in lending or you've got a broader product set, so there's more we can do with you there? Talk about those kind of puts and takes if you're seeing any so far.
Thank you.
Yes. Well, Tyler, it's a great question. And you're right, we have limited insight into that because we've been very, very clear to our people. We are outright competitors today as we have since day 1. And we're not going to walk anywhere close to that line of not being competitive.
So therefore, we have very limited information. We do pick up a little bit of anecdotal feedback. And certainly, there are clients out there talking about, hey, this would be great when you guys get together. You will have more expanded lending capacity. You'll have more products and services.
If they were B and T or SunTrust, they would both say the same thing, which is true. And so I think everybody recognizes the opportunity out there by us combining. In terms of any attrition materially that I've heard regarding the BBT side, there has not been. I know there's been a lot of conversation out in the market about everybody saying they're taking all our business. That's not true.
You just saw our growth numbers. We grew as long as 6.5%. Deposits grew 5%. I'm sorry, I don't know how to be clear than that. There's not any material attrition.
Our turnover rate is about same or lower than it has been. So I would say to you that this is extraordinarily successful to this point. There's no indication of any decay and there's no expectation of any decay. Rather, the expectation is a rather positive optimistic opportunity as we come together.
And John, can you take our next caller, please?
Yes, sir. We will now move on to our next question from Michael Rose of Raymond James. Please go ahead. Your line is now open.
Open.
Just going back to the merger, I think when you guys announced this, you talked about $2,000,000,000 in one time charges. Just wanted to see if there are any adjustments to that and any adjustments to the time line? I think you talked about a conversion somewhere 12 to 18 months after close. Should we expect the majority of the one time costs to come around that time frame? Thanks.
So Michael, it's Daryl. So numbers are still coming together. So year to date between BB and P and SunTrust, if you look at our charges today, we're about $250,000,000 between Merx and MOE related expenses. We got some more information on the IT conversions that's getting finalized. That's going to be a really large number.
So I don't have all the numbers in yet, but I'm pretty sure that we're going to probably utilize the bulk of the 2,000,000,000 dollars We'll give you more color as we close because we still don't have all the information that we really need between each of ourselves until we close the transaction. But what I'm seeing right now, there's some very complicated integration as Kelly talks about hooking these computers together. That's going to take some a lot of need for outside assistance to help that all come together. So I would say it's going to be the bulk of the $2,000,000,000 from what we're seeing right now, but we'll give you better information. First, timing goes, we're trying to get majority of all the systems put together by the end of 2021, if that's possible.
The teams are working really hard to work out those plans and feel very comfortable that, that can be done in that time frame. But we'll give you more specifics as we get more clarity probably over the next couple of months. But things are coming in as expected, and I think we're going to have a really robust combination of IT systems when it's all said and done.
Okay. That's great color. And maybe just as a follow-up. Now you've had some time kind of dig into their side. Can you just explain where you think the greatest opportunities could be for revenue synergies and maybe what areas you're working on as you prepare for the close?
Yes. Mike, this is Chris. Bill and I have been working together, as Kelly alluded to earlier, on a number of fronts. I would just maybe get the highlights. Certainly, they have a much more built out Capital Markets business to bring strategic advice sort of down segment, if you will.
We have a very strong community bank that from I'll call it revenue companies down to $25,000,000 that need those type of services, many of which we did not offer prior. So we see a great opportunity to bring strategic value to those commercial clients on many, many fronts from a fee perspective to really build out their overall needs and planning for their future. The flip of that would be so that's a big one. The flip of that would be we have a substantial insurance business, I think a best in class insurance business. There's really not much we don't offer that we can take to their entire commercial business, up and down small business all the way up to the largest corporate clients they handle.
We also have a the largest life insurance distributor in the country with Trump Life that we have built a business within our company of offering to our clients. We will extend that nationally to the SunTrust clients on the both the commercial and the individual side. If you think about the connectivity with wealth and the broker dealer and the strong wealth business they have, The state planning need to fund buy sale plans, buy sale agreements, that kind of thing. We have a tremendous opportunity to offer life into the wealth business and also into key man insurance on the commercial side. So tremendous opportunity there.
3rd, that's kind of common sense is we have a very strong business we call BB and T at Work, where we provide sort of turnkey deposit programs to our commercial clients for their employees. SunTrust has a plan. It has not been as effective, and it's one thing that we think we can turn on day 1 to help grow deposits in that sector. That's just a handful of 3 that I think are high potential, but we've got another 15 to 18 behind that, that maybe begin to kind of all sizes and shapes that were not modeled in the MOB that we're very, very excited about.
That's great color. Thanks for taking my questions.
We will now move on to our final question from Stephen Scouten of Sandler O'Neill. Please go ahead. Your line is
open. Yes. Good morning, everyone.
Good morning,
Stephen. I was curious how you guys are thinking about the move to Charlotte and kind of protecting the legacy brands and the standings that you guys have in Winston Salem for BB and T and obviously Atlanta for SunTrust And particularly as that pertains to Atlanta and it continues to grow and look like kind of the capital of the Southeast and how you think about protecting that as you move the headquarters to Charlotte and not letting somebody else kind of take that position over time?
So, Segan, we're very excited about the move for all three markets, Charlotte, Atlanta and Winston Salem. Charlotte is a super dynamic market. I mean, it's growing extremely fast. It's got to be a real kind of a major focus for young professionals to be attracting a lot of technology people there, a lot of technology companies there, a lot of technology companies there, a lot of companies moving their technology operations there. When this merger is done, Charlotte will be the 2nd largest financial district in the country.
And so Charlotte is going to be a mega place for us to do business. But Atlanta is fantastic as well. Atlanta, as you say, is clearly the dominant city in the Southeast. It's a fantastic place. We love Atlanta.
And we will continue to love Atlanta. This is not we're not moving out of Atlanta. We will have a superstar leader in Atlanta from SunTrust, who is one of the most accomplished bankers in the country today. And she is extraordinarily plugged in. We won't miss a beat in Atlanta.
Our commitment will be increased in terms of our community support. Our commitment in terms of marketing and execution will be increased. We would expect our execution of business attraction in Atlanta to be greater going forward than it has been in the past. And keep in mind that our commitment was and is that we will have kind of domiciled our headquarters for capital markets, Investment Banking, Wealth Management in Atlanta. Likewise, in Winston Salem, our Retail Community Bank will be headquartered in the Winston Salem Triad area.
And so neither market loses. It's just that we happen to be blessed by having 3 fantastic markets that are now the kind of the foundational anchor geographical location to Truist. So don't think about it as Truist being anchored to Charlotte, think about true as being anchored to the 3. And we still have a toehold in markets that we generated from in Wilson, North Carolina and Orlando. So we are a community bank.
We don't think in terms of one market driving everything. We think of it being a coalition of a group of community banks coming together under the advantages of a holding company. So nobody loses, everybody wins.
Perfect. Helpful. And then maybe just one follow-up. You spoke to kind of seeing long term strength in the economy and obviously your growth remains solid ex the mortgage sale, but we've seen some mixed economic numbers, manufacturing, etcetera. Can you talk a little bit about what you're seeing from your customer base in terms of incremental investment and overall market demand?
Thanks.
Yes. I'll make a comment and I'm going to Clark to make a comment. The feedback that I get primarily is from our regional presidents, but also talking directly to clients when I'm traveling around. For 10 years, Main Street America really kind of suffered as the biggest companies were doing more robust international business and Main Street was still recovering from the recession. But Main Street has recovered from the recession.
And after 10 years of not investing, Main Street is now needing to invest, wanting to invest and they are investing. So Main Street is kind of a broad based business activity that we see across the array of our business activities. And of course, we don't participate as much in the larger global international businesses. So as they are seeing more of the impact of the trade war, that's not impacting us as much as it would some of the mega banks. So all of a sudden, another way was, we are still here we are beginning to hear some conversation from our local Street clients around uncertainties around trade wars because after a while it drifts down the Main Street and everybody talks about it.
If that persists for a long time, it will affect Main Street, but it's not having a material impact today. Clark, any color on that? Yes.
I would just echo what Kelly is saying that while there's more conversation about the headline news and maybe some more cautious tones in some conversations, Our opportunities continue to be very robust across the board. We have good pipelines really. I think one of the benefits that Kelly brought out earlier is just the diversification in the various platforms we have. So while there is more conversation, I'd say it's more on the higher end than it is at this point on Main Street or the retail side, but people are conscious and thinking about it and we're trying to respond appropriately. But we still think there's plenty of opportunities with all the different levers that we have to pull.
Great. Thank you guys so much.
That concludes today's question and answer session. At this time, I'll turn the conference back to Mr. Rich Beitosch for any additional or closing remarks.
Okay. Thank you, John. Thank you, everyone, for joining us. I apologize for those who didn't have time to get to today, and we'll call you later. And I hope everyone have a good day.
Thank you very much.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.