Operator: Good day, ladies and gentlemen. My name is Monsrat, and I will be your conference operator today. At this time, I would like to welcome everyone to the Comerica 2013 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. Following the presentation there will be a question-and-answer session. Thank you.
I would now like to turn the call over to your host Ms. Darlene Persons. Ma'am you may begin your conference.
Darlene P. Persons - SVP, Director, IR: Thank you, Monsrat. Good morning and welcome to Comerica's second quarter 2013 earnings conference call. Participating on this call will be our Chairman, Ralph Babb; Vice Chairman and Chief Financial Officer, Karen Parkhill; Vice Chairman of the Business Bank, Lars Anderson; and Chief Credit Officer, John Killian. A copy of our press release and presentation slides are available on the SEC's website, as well as in the Investor Relations section of our website, Comerica.com. As we review our second quarter results, we will be referring to the slides, which provide additional details on our earnings.
Before we get started I would like to remind you that this conference call contains forward-looking statements, and in that regard, you should be mindful of the risks and uncertainties that can cause future results to vary from expectations. Forward-looking statements speak only as of the date of this presentation, and we undertake no obligation to update any forward-looking statements. I refer you to the Safe Harbor statement contained in the release issued today, as well as Slide 2 of this presentation, which I incorporate into this call, as well as our filings with the SEC.
Also, this conference call will reference non-GAAP measures, and in that regard, I would direct you to the reconciliation of these measures within this presentation.
Now, I'll turn the call over to Ralph who will begin on Slide 3.
Ralph W. Babb Jr. - Chairman and CEO Comerica Incorporated and Comerica Bank: Good morning. Today, we rewarded second quarter 2013 earnings of $0.76 per share or $143 million compared to $0.70 per share or $134 million for the first quarter of 2013. Average loan growth, fee income growth, expense control and continued solid credit quality contributed to our 9% increase in earnings per share in the second quarter.
Turning to Slide 4, another highlights, average total loans grew $276 million compared to the first quarter and reflected an increase of $337 million or 1% in commercial loans. Our Middle Market business lines across all three of our major geographies were the key contributor to our loan growth in the second quarter.
Overall, customers remain cautious, but relatively more positive in this slow growing economy. Average total deposits increased $756 million or 1% in the second quarter, primarily reflecting an increase of $570 million or 3% in noninterest-bearing deposits.
Net interest income remained relatively stable in the second quarter declining $2 million as a contribution from an additional day in the quarter and loan growth were offset by the decline in accretion on the acquired portfolio and the impact from continued shifting loan portfolio dynamics. The net interest margin decreased 5 basis points primarily due to lower accretion on the acquired loan portfolio and lower loan yields due to the continued mix shift in the portfolio.
Credit quality was solid in the second quarter with net charge-offs of 15 basis points, which is the lowest levels since the first quarter of 2007. Nonaccrual loans also decreased as did watch list loans. These positive metrics are indicative of our strong credit culture and have resulted in a $3 million decrease in the provision for credit losses.
Noninterest income increased $8 million in the second quarter to $208 million, reflecting broad-based growth in several categories as well as an annual incentive received from our third-party credit card provider.
Noninterest expenses of $416 million in the second quarter were unchanged from the first quarter, reflecting our continued tight expense controls. Our capital position continues to be a source of strength to support our growth. We repurchased 1.9 million shares in the second quarter, under our share repurchase program and combined with dividends, returned 72% of second quarter net income to shareholders.
On July 2, the Federal Reserve approved its final version of the Basel III capital rules. We estimate that our June 30, 2013 Basel III Tier 1 common ratio is 10.1% on a fully phased-in basis. This is well in excess of the minimum requirement to be considered, well capitalized, and assumes we elect to exclude most elements of accumulated, other comprehensive income.
Turning to Slide 5, and a look at our footprint, we are well positioned in our primary markets where our relationship-based approach and experience combine to make a positive difference for our customers. Our strategy is to have balance between our markets and we are making meaningful progress.
Texas continues to be a growth leader for the U.S. economy with strong high-tech and energy sectors. Job growth is well above the U.S. average on a percent change year-over-year basis. We continue to leverage our standing in Texas as the largest U.S. commercial bank headquartered in the state.
Average loans in taxes were up 7%, year-over-year, California residential real estate markets are quickly improving and home prices are increasing in all major metropolitan areas. Many homeowners are experiencing increased wealth providing broad-based support to the state's economy. Job growth in California is above the U.S. average on percent change year-over-year basis. Average loans in California were up 10% year-over-year and average deposits were up 4%.
Increased auto production and sales have strengthened the Michigan economy. June auto sales reached the 15.9 million unit rate, the highest level in over five years. Residential real estate markets in Michigan are stabilizing statewide and home prices are increasing. And according to the National Association of Manufacturers, Michigan is the top state for manufacturing job creation from December 2009 to March 2013. Texas ranks second. Average loans in Michigan were relatively stable year-over-year, while deposits grew 5%.
In closing, we remain focused on growing revenue in the slowly expanding economy. Our relationship strategy is working well in this low rate environment, as evidenced by growth of loans, deposits and fee income. Also contributing to our strong shareholder payout were our tight expense management and solid credit performance.
And now I'll turn the call over to Karen.
Karen L. Parkhill - Vice Chairman and CFO: Thank you, Ralph, and good morning. Turning to Slide 6, as Ralph mentioned total average loan growth was $276 million or 1% quarter-over-quarter, reflecting a continued increase in commercial loans and a slowing of the decline in commercial real estate loans.
As you can see, positive trends continued with period-end loans greater than the average in the second quarter. Period-end loans increased $392 million from the end of the first quarter to $45.5 billion. By line of business, Middle Market loans across all three major geographies were a key contributor to our loan growth in the second quarter. In fact, average loans grew $250 million in our National Dealer business and $213 million in our General Middle Market business and looking at trends, loans in our General Middle Market business have increased five of the past six quarters, with the largest increases in the last two quarters. Somewhat offsetting that growth, we did have a $270 million decline in Corporate Banking, which is one of the most competitive segments and reflects our desire to maintain our pricing discipline.
Loan yields shown in the yellow diamonds declined 7 basis points in the quarter, reflecting the expected decline in purchased loan accretion as well as the continued mix shift of our portfolio. Total loan commitments increased almost a $1 billion as of June 30, with commitments increasing in all major markets and nearly all business lines. Also, line utilization increased to 48.2% from 47.7% at the end of the first quarter. Finally, our loan pipeline increased to the highest level since the first quarter of 2012. In fact, it is more than 10% higher than last quarter, with increases noted in most business lines.
Continuing with loans on Slide 7, by type as opposed to line of business, average commercial loans were up $337 million and were the main driver of our loan growth. On the top portion of the bar, mortgage banker finance which provides mortgage warehouse lines, saw average loans increase almost $100 million this past quarter. As we have noted before, Mortgage Banker outstandings can be variable and we expect that they will moderate as mortgage refinance volumes slow in line with the Mortgage Bankers Association forecast. The pace of decline in commercial real estate loans continues to slow. In fact, as depicted in the chart on the right, the combined commercial mortgage and real estate construction average loans decreased $67 million, down from a decrease of $106 million in the first quarter and $241 million in the fourth quarter of last year. Breaking the bar into pieces, developer commercial real estate has stabilized at 3 billion and is showing signs that it is starting to grow.
In fact, commitments to developers have increased for the past six quarters and construction loans grew for the third consecutive quarter, up $102 million in the second quarter with demand improving. Offsetting that growth, projects are moving quickly to the permanent long-term financing market upon completion. Before the construction loan can be converted to a mini-perm mortgage on our books.
On the other hand, owner occupied real estate, which makes up 72% of our commercial real estate exposure, declined $131 million in the quarter. These real estate loans for the factories, warehouses and offices of our commercial customers continue to be impacted by amortization and refinancings to the long-term market. Our customers are growing and performing well, but remain cautious about expanding their facilities in the current economic environment.
As shown on Slide 8, our total average deposits increased $756 million or 1% to $51.4 billion. Noninterest-bearing deposits grew $570 million, while interest-bearing deposits increased $186 million. Deposit pricing declined 2 basis points to19 basis points, depicted in the yellow diamonds on the slide. As higher rate CDs matured and we have lowered rates on select products.
Average deposits in our Financial Services Division, which provides services to title and escrow companies increased $228 million after contracting about $700 million in the first quarter. And deposits in our Corporate Banking business increased almost $400 million due to tax related seasonality. The same seasonality also impacted period-end deposits which decreased $862 million.
Slide 9 provides details on our securities portfolio which primarily consists of highly liquid, highly rated mortgage-backed securities. The NBS portfolio averaged $9.4 billion in the second quarter, down $235 million from the first quarter as we purposely slowed the reinvestment of prepayments in April and May due to the unattractive low yields that were available.
At period-end the balance of the NBS portfolio was $9.3 billion, the decline was mainly due to the slowing of reinvestments, as well as the decline in the fair value of the portfolio as a result of rising rates. The net unrealized gain on the portfolio was $10 million, a decrease of $219 million pre-tax or $139 million after-tax and was recorded through Accumulated other comprehensive income or AOCI.
With the rise in long rates and current rate expectations we believe the pace of pre-pays will slow. With $500 million to $600 million in pre-pays expected in the third quarter. Consequently at 4.1 years the estimated duration on the portfolio increased from 3.4 years at the end of the first quarter. However, we expect the duration under a 200 basis point rate chalk remained relatively constant at about 5 years, as a result of the composition of our portfolio and the fact that prepaid fees should stabilize. We will continue to manage our portfolio dynamically, taking into account many factors, including not only our loan and deposit expectations and the overall yields available, but also the duration and mark-to-market impact on our portfolio in a rising rate environment.
Turning to Slide 10, our net interest income was relatively stable, declining $2 million in the second quarter. We've summarized on the table on the right, the major moving pieces. One additional day in the quarter added $4 million to net interest income. Loan growth contributed $2 million and helped offset the effects of the low rate environment.
Lower funding cost including debt maturities in the second quarter as well as lower deposit costs added a $1 million and provided a 1 basis point increase to the margin. Offsetting these positive contributions was a $4 million decline in accretion of the purchase discount on the acquired loan portfolio, which had a 3 basis point impact on the margin. We have about $38 million of total accretion remaining to be realized on the acquired portfolio. Accretion should continue to trend downward each quarter and we expect to recognize about $25 million to $30 million in 2013.
While we remain focused on holding loan spreads for new and renewed credit facilities, there are still mix shift dynamics impacting the portfolio. These include higher yielding commercial mortgage loans shrinking while lower yielding C&I loans are growing and older fixed rates loans are maturing. In addition, 30 day LIBOR declined over a 0.5 basis point in the quarter. As a reminder, approximately 85% of our loans are floating rate, of which 75% are LIBOR-based, predominantly 30 day LIBOR. All of these factors combined had a $4 million or 2 basis points impact on the net interest margin. Dynamics in the securities portfolio, including prepayments that were reinvested at lower yields as well as a lower average balance had a $1 million or less than 1 basis points negative impact.
Finally, average excess liquidity increased almost $300 million, decreasing the net interest margin by 1 basis point. We believe our asset sensitive balance sheet remains well-positioned for rising rates. Based on our historical experience and asset liability model, we believe a 200 basis point increase in rates over a one-year period, equivalent to 100 basis points on average, would result in more than a 10% increase in net interest income of approximately $185 million.
Turning to the credit picture on Slide 11, credit quality continues to be strong in the second quarter. Net charge-offs decreased to $17 million or 15 basis points of average loans. The charts on the right show our watch list loans declined $224 million and our nonperforming loans declined $44 million. With a decline in nonperforming loans, the allowance to NPLs increased to 130% and the $613 million allowance, covers our trailing 12 month net charge-off over five times as you can see on the lower left chart. As a result of the continued positive trends in our credit metrics, our provision for credit losses declined $3 million from the first quarter to $13 million.
Finally, we received the annual Shared National Credit or SNC exam results at the end of June. They are reflected in our second quarter results, and were not significant.
Slide 12 outlines the $8 million increase in noninterest income. Second quarter customer-driven fees increased $4 million due to broad-based increases across most customer-driven fee income categories including a $3 million increase in customer derivative income. This was partially offset by a $2 million decrease in service charges on deposit accounts from the seasonally high first quarter levels. Non-customer related categories increased $4 million to $20 million, primarily due to $6 million annual incentive received from our third-party credit card provider. This was partially offset by a securities loss of $2 million.
Turning to Slide 13, we continue to maintain tight expense control, which resulted in stable expenses in the second quarter. Salaries expense decreased $6 million reflecting a slightly smaller workforce, seasonally higher stock compensation in the first quarter and decreases in incentive compensation. This was partially offset by the impact of merit increases and additional day in the quarter. Offsetting the decline in salary expense in the second quarter, we had a $4 million write-down on other foreclosed assets and $2 million increase in outside processing fees, primarily due to increased activity tied to revenue growth and the outsourcing of certain functions.
Going forward there are 3 extra days in the second half of the year which will impact our salary expense. In addition, we expect to incur additional salary, software and consulting expenses related to regulatory compliance predominantly stress testing, particularly as we migrate to becoming a full CCAR bank this year. In addition, occupancy expenses are typically seasonally higher in the second half of the year.
Moving to Slide 14 and shareholder payout, in the second quarter, we repurchased 1.9 million shares under our share repurchase program. Combined with the dividend paid, we returned 72% of net income to our shareholders in the second quarter. We believe our shareholder payout is the reflection of our strong capital position. Shares repurchased were mostly offset by the impact of share dilution from warrant and employee options, resulting from the increase in our stock price during the quarter.
We are pleased with the Basel III capital rules have been finalized. We believe we are already well above the required minimum to be considered well capitalized, with an estimated Basel III Tier 1 common capital ratio of 10.1% at June 30, on a fully phased-in basis, assuming we elect to exclude the impact of AOCI.
Finally, turning to Slide 15 and our outlook, our expectations for full year 2013 compared to full year 2012 remain unchanged from what we outlined on our call in April, with the exception of provision. We are now expecting the provision and net charge-off to decline from last year's levels, with both these levels in the second half of the year similar to the first half.
Based on current trends, we believe we should see continued improvement in credit quality partially offset by loan growth. In the slow growing economy, we will continue to focus on the things we can control, allocating resources to our faster-growing markets and industry segment, driving cross-sell opportunities and carefully managing expenses.
In closing, we are pleased with our loan deposit and fee income growth, tight expense management, solid credit performance and strong shareholder payout. We remain keenly focused on delivering a growing bottom line.
Now, we are happy to answer your questions.
Operator: John Pancari, Evercore Partners.
John Pancari - Evercore Partners: I wanted to see if you could give us some color on loan pricing, what you're seeing in your markets, if you're seeing any ability to the price better given the steepness in the curve at all?
Ralph W. Babb Jr. - Chairman and CEO Comerica Incorporated and Comerica Bank: Okay, Lars?
Lars C. Anderson - Vice Chairman, The Business Bank: Yeah John, so as you know, we typically price with the shorter end of the yield curve, as Karen mentioned earlier. So, as you're seeing a steepening in the yield curve, that hasn't had as much kind of impact on us. Obviously the pickup in the loan market did move, I think some activity to the shorter end of the yield curve, which helps senior bank debt, but overall, I don't think the interest rate shifts really had any significant impact on us and as you know, LIBOR really hasn't significantly changed. So, we're staying very – focused on our existing strategy. We haven't changed our pricing strategy at all, John.
John Pancari - Evercore Partners: Okay. Are you seeing any change in the competitiveness of some of your competing banks on that front at all or any room to improve pricing just given, any changes in the competitive landscape?
Lars C. Anderson - Vice Chairman, The Business Bank: Well, I would say that we have continued to see a very aggressive marketplace in terms of pricing. And if I look back quarters ago to today, I would say that it has gotten relatively more aggressive. We do see durations getting stretched on a number facilities and that's pretty active across a number of our businesses. So, we're continuing to just focus on our discipline, our product and what we do and feel very comfortable we're getting the kind of returns that are attracted to our shareholders and we're going to stick to your guns with that John. But I don't see it is as opportunity for us to significantly increase spreads or yields. But I do think that we're very well positioned with the businesses we have, the expertise we have, the markets that we have to continue to deliver and as you know our loan spreads have largely held here over the last year.
John Pancari - Evercore Partners: And then lastly, Karen your product – shoot me down on this, but on the margin want to see if we can get some just additional color and your thoughts on the margin, could we see a bottoming in the margin over the next couple quarters here and can you talk about the magnitude of compression that we might see?
Karen L. Parkhill - Vice Chairman and CFO: I laughed, John, because you're right. In terms of the margin as you know it's extremely difficult to predict and the key variable there is excess liquidity, which can bounce the margin up and down and just very difficult for us to predict. I would say on net interest income which does drive the margin that you will continue to see a decline in the accretion benefit. We've mentioned that we expect to see $25 million to $30 million this year. We've seen $18 million so far. That means we will continue to see a decline in the next two quarters and that will impact the margin. We do expect the loan growth to offset the decline that we've seen on our portfolio loan yield. We do expect that to continue, but eventually vain and it's just difficult to predict eventually when that will turn around.
Operator: Steven Alexopoulos, JPMorgan.
Steven Alexopoulos - JPMorgan: I wanted to start regarding the slow of the reinvestment of securities in 2Q. Where are you able to reinvest today and have you started reinvesting that cash?
Karen L. Parkhill - Vice Chairman and CFO: Yeah, Steve, we have started to reinvest. When rates did rise last month, we did move back in the market to purchase securities. Today, we are seeing yields in the 220 to 250 range.
Steven Alexopoulos - JPMorgan: What duration would that be Karen?
Karen L. Parkhill - Vice Chairman and CFO: Similar duration to what we've got on the portfolio.
Steven Alexopoulos - JPMorgan: I'm curious what impact has the stock market in terms of awareness, the yield curve steepening. What impact does that had on confidence if any of your business customers? Have you seen anything?
Ralph W. Babb Jr. - Chairman and CEO Comerica Incorporated and Comerica Bank: Lars, you want to comment on that?
Lars C. Anderson - Vice Chairman, The Business Bank: Sure. Yeah, Steven, frankly, we haven't really seen a significant change in terms of I would say the wealth effect in terms of business owners or I think we've seen more activity there, would probably be in our Wealth business. You may have noticed that our wealth loan portfolio had nice growth up almost $80 million, fiduciary fees, asset management fees continue to grow. A part of that's frankly, we continue to enhance our collaboration, cross sale across our platform and continue to work with those customers, because if you think about it and many of our Middle Market companies that are privately owned, they're feeling better. Their companies are deleveraging. They're creating liquidity and they're thinking about exit plans, and that's where we bring expertise to the table. So, I think that, that's one of the areas where we've been able to really benefit and I think that that's showed up in our numbers, but to answer your question specifically for business customers that we would see, say in Middle Market banking, no, I haven't seen that.
Ralph W. Babb Jr. - Chairman and CEO Comerica Incorporated and Comerica Bank: I think you're seeing a lot of uncertainty out there, just to add to what Lars was saying and people are waiting and watching to see what's going to happen, and they're doing quite well throughout their current operations, but they just don't want to invest until they know what the outlook's going to be, including the many uncertainties that are there on particular items that will affect their earnings.
Lars C. Anderson - Vice Chairman, The Business Bank: Yeah, I'd say cautious optimism is probably a pretty good description of the way they're feeling, but still dampened investment at this point.
Steven Alexopoulos - JPMorgan: Karen, just a final one for you. Can you help us think about the dollars of incremental expense related to the stress test now that you'll be a CCAR bank?
Karen L. Parkhill - Vice Chairman and CFO: Yes, we will have dollars related to consulting expenses, additional headcount and some software expenses. I'm not giving out the exact dollar, but I will say that related to increased regulatory expenses, we will be spending about $15 million annually a year just related to regulatory expenses. Some of that is already in our run rate, but not all of it.
Operator: Ken Zerbe, Morgan Stanley.
Ken Zerbe - Morgan Stanley: First question just in terms of loan growth. Obviously, we see your guidance that it's going to be slower that's fine. My question though is how should we think about the interplay between mortgage banker which is actually held up pretty well this quarter and I guess my suspicion is just given the rising rates, given the slowdown in refis that actually could fall pretty materially in the back half of the year versus growth in the rest of the portfolio?
Lars C. Anderson - Vice Chairman, The Business Bank: Absolutely, Ken. Yes, obviously with a rising interest rate environment on mortgage rates I think of 30 years up now on 4.5%, so that's clearly going to have, we believe an impact on Mortgage Banking Association as they are projecting a 39% decline in mortgage apps in the second half of the year, and clearly we think that could help, would moderate some of our outstanding. I would underscore a couple of things though Ken that I think are important our business continues to become more granular. We continue to add more mortgage companies, which I think with those expanded facilities and commitments that we're seeing it gives us a little bit more insulation on the downside. Also if you look at the volumes that we're doing today, if you go back a couple of quarters, our purchase volumes were 30%. Last quarter, and I'm talking about the first quarter, they were 50%. In the second quarter, they were 60%. That general migration towards a purchase volume concentration, I think helps us and positions us well. We have very strong relationships with some large national builders that are giving us some good volume. In addition to it, we're in some good growth markets like Texas, where the housing market continues to expand and we expect to gain more of the purchase volumes. So yeah, could we see some moderation? I think it's a good observation, but I think we're going to manage the business to position ourselves for the long-haul. We have great customers, some of the best cross sell we have in the bank, certainly, in the Business Bank in that particular business.
Ken Zerbe - Morgan Stanley: Understood. Then, when we think about the timing of the potential decline, I mean, is there enough carryover business from second quarter that locked in at the lower rates or should we actually see a pretty steep decline starting fairly soon, meaning third quarter, and then, maybe stable in fourth?
Lars C. Anderson - Vice Chairman, The Business Bank: Yeah, I'd say that, that'd be very difficult to tell. There's a number of dynamics that actually impact the outstandings on these facilities, including the investor and the investor market. So, I really couldn't give you a number there that would be helpful.
Ken Zerbe - Morgan Stanley: Understood, but even with that decline in mind, do you guys still believe that slow but positive total loan growth is achievable in the third and fourth quarter, correct?
Karen L. Parkhill - Vice Chairman and CFO: Yeah, we have not changed our loan growth outlook. That is correct.
Operator: Erica Penala, Bank of America Merrill Lynch.
Erica Penala - Bank of America Merrill Lynch: I just wanted to follow-up on some of John's questions. I think – or actually, my first follow-up question is, on the liquidity side Karen, I appreciate that you've started to reinvest into this higher loan rate environment. How should we think about the proper level of liquidity for the bank going forward?
Karen L. Parkhill - Vice Chairman and CFO: We are positioned well with liquidity for the rising loan growth environment. We like that position, because we do want to ultimately reinvest in loans. From an overall liquidity perspective, we are feeling very comfortable. We currently have a little bit less than 3 billion on deposit with the Fed and that moves up and down depending on our overall balance sheet position. I don't know if you need more color, Erica.
Erica Penala - Bank of America Merrill Lynch: I guess, I'm just wondering if I look at average balances, your cash with the Fed is about 7% of earning assets. If loan growth is normalizing and there are more reinvestment opportunities, can that level go down and help the margin?
Karen L. Parkhill - Vice Chairman and CFO: It certainly could go down. One of the things that we need to be mindful of though is the potential new rules coming out or new rules coming out on liquidity. Those have been proposed by the Basel Committee, but have not yet been written in the United States. So, we will be paying close attention to those, and making sure that we are ultimately compliant with them.
Ralph W. Babb Jr. - Chairman and CEO Comerica Incorporated and Comerica Bank: I think, the thing I would add to that as well, as things pick up, and people get more positive, you will see that excess liquidity go down, because people will begin to use it again to invest for the future, not only the consumer, but also our business customers.
Erica Penala - Bank of America Merrill Lynch: Just switching topics a little bit. It seems like given your reinvestment rate on the securities book, we should expect that we've perhaps hit a bottom on your bond yield, but could you remind us exactly where you're originating new loans in both Corporate Banking and Middle Market in terms of your spread to LIBOR?
Karen L. Parkhill - Vice Chairman and CFO: We don't give the origination yields out, but you should know that we are very focused on holding or increasing spreads everywhere that we can on new and renewed loans. It is something that we track every month and we have been successful.
Ralph W. Babb Jr. - Chairman and CEO Comerica Incorporated and Comerica Bank: Erica, I would just reinforce that and I know you know this but we take very much of a relationship approach. We're not just looking at the individual credit. We're looking at the entire relationship and what they're really bringing to Comerica and the ability for that customer relationship to generate shareholder value. So that's -- obviously credit is a key component of it. But we really take a relationship type approach when valuing our customers.
Erica Penala - Bank of America Merrill Lynch: Understood and just one more question before I step out of the queue. Karen, have you given us an update under the Basel III proposed rules what your liquidity coverage ratio would be?
Karen L. Parkhill - Vice Chairman and CFO: We have not given that because the rules are really just proposed at the Basel level and still have a long way to go. They have yet to be written in the United States. We and many other banks if the rules are passed as drafted under Basel would need to add liquidity and it is something that we are very focused on. But we're waiting for rules to come in the United States.
Operator: Matt O'Connor, Deutsche Bank.
Robert Placet - Deutsche Bank: This is Rob Placet on Matt's team. First question, as it relates to the decline in period-end DDA balances this quarter, you pointed to some seasonality. I guess what specifically caused the seasonal drop this quarter?
Karen L. Parkhill - Vice Chairman and CFO: They were mainly tax related seasonality due to companies building up liquidity in order to pay certain tax bills and that's why you saw a decline in period-end too.
Robert Placet - Deutsche Bank: Then looking at expenses as it relates to your comments for personnel and occupancy expenses in the second half of the year, I was wondering if you could talk to the magnitude of the increase in those categories. Then is it safe to say that the level of expenses should drift higher versus the $416 million level this quarter?
Karen L. Parkhill - Vice Chairman and CFO: Yes, we do expect expenses to be slightly higher, and that's due to 3 additional days in the second half than we've had in the first half, as well as increased headcount mostly related to stress test and the fact that our occupancy expenses are seasonally higher in the second half than they are in the first half.
Operator: Craig Siegenthaler, Credit Suisse.
Craig Siegenthaler - Credit Suisse: Just a quick question on the $80 million premium amortization balance. What was the quarterly run rate that impacted net interest income in the second quarter?
Karen L. Parkhill - Vice Chairman and CFO: Can you repeat your question, please?
Craig Siegenthaler - Credit Suisse: Yeah, on the premium amortization, I was wondering what the second quarter impact to that was, just thinking about that on a go-forward basis as durations could potentially extend.
Karen L. Parkhill - Vice Chairman and CFO: Yeah. So, about $9 million.
Craig Siegenthaler - Credit Suisse: Does the duration of the premium amortization sort of match the available for sale securities portfolio?
Karen L. Parkhill - Vice Chairman and CFO: Well, we look at premium amortization every quarter. It is something that, as interest rates have increased and the duration on our portfolio extends, we expect could increase a little bit, if that answers your question.
Craig Siegenthaler - Credit Suisse: No, it does. Just one follow-up. What was the period-ending mortgage banker balance? If you don't have that, maybe you can help us think about what was the quarterly change in the mortgage banker balance on a period-end basis, not an average basis.
Ralph W. Babb Jr. - Chairman and CEO Comerica Incorporated and Comerica Bank: Okay, yeah so, mortgage banking finance on a period-end basis was up $374 million. That was against an average of 78. One of the things that I would remind you is that often times, the ending period balances do spike. Typically mortgage companies build up their inventory throughout the month and at the end of the quarter would then sell off to investors. So, the change was $374 million and the ending balance for mortgage banker finance was $2.4 billion.
Operator: Jennifer Demba, SunTrust Robinson.
Jennifer Demba - SunTrust Robinson Humphrey: Question on the decline in Corporate Banking loan balances in the second quarter. You indicated it was largely competitively driven. I was wondering if you could give us some more color on that, and is it a trend that you expect to continue in that bucket?
Ralph W. Babb Jr. - Chairman and CEO Comerica Incorporated and Comerica Bank: Lars?
Lars C. Anderson - Vice Chairman, The Business Bank: Okay. Well, you know, as I've shared on previous conference calls as we look at the competitive landscape from a pricing structure, including duration of credit that as you go to the upper segments clearly Corporate Banking that's where we're seeing the most competition, frankly. And as we look back over the past quarter, it's been a tough market. It's been very, very aggressive. There's clearly excess liquidity. You know, if you look at some of the syndicated credit market there is a significant oversubscription in those facilities and frankly, we're a company that is just not going to overreach. We're not going to tradeoff credit quality nor relationship pricing for volume. And so at times you got it to make difficult short-term decision on some credits. But I think for the long term we're very well positioned. We've got some great customers in both U.S. banking and international and I think from a long-term perspective it's is a great growth business for us. But in the short run it's challenging. Where -- we are not going to overreach. This is not the time to do that.
Craig Siegenthaler - Credit Suisse: What do you think will offset that largely Lars, is it Middle Market and Dealer?
Lars C. Anderson - Vice Chairman, The Business Bank: We're very fortunate that we have a diversified geography between Michigan, Texas, California, with the unique businesses even embedded in those markets whether it's automotive, energy, environmental services, technology and life sciences. If you think it's about some of those businesses, from a long-term perspective they look very attractive. I might think energy, technology and life sciences you saw growth in environmental services. This quarter, our small business had its fourth consecutive quarter of growth, Wealth Management grew and we continue to have a very stable growth in just kind of our general Middle Market. What I'd say is non-industry specific, and you put on top of all of that, what we are beginning to see is the stern in kind of our commercial real estate line of business the story looks pretty attractive for the long haul, I think for us.
Operator: Ken Usdin, Jefferies.
Ken Usdin - Jefferies & Co.: A couple more questions on loans. Can you just remind us of the typical seasonal pattern of dealer floor plan and just how underlying trends are going in that business?
Ralph W. Babb Jr. - Chairman and CEO Comerica Incorporated and Comerica Bank: Lars?
Lars C. Anderson - Vice Chairman, The Business Bank: Sure. Well, typically, what you would see if you look at a calendar year over the year as you would see that inventories would build as you headed earlier in the year in the spring and then you would see a very active sale season as you headed through the summer, that is both frankly the consumers are very active and buying and also you have an interest in our dealers and clearing the past years model and making room for the New Year model. So, that's the typical seasonality that you would see in the business, but we didn't see that last year. So, you got to kind of keep that in mind. Now, the second part of your question was about utilization rates. Utilization rates today are at near record levels for us, and I think for the industry, which is a reflection of the strength of the auto industry, you saw June's numbers come out and annualized sales were 15.9 million units, which I think is very positive. One of the things that I keep a very close eye on is as those inventories build, is how rapidly they're turning, and what we're seeing is inventories turn in that high 50 to low 60 day kind of range, which over a long period of time, is a very healthy number. So, I like our business. I like the way that we're positioned and our inventory is turning, and our business – our dealers are doing very, very well. One note I would point out is that our margins on new models and used are getting compressed. It's a very competitive marketplace out there.
Ken Usdin - Jefferies & Co.: My second question is regarding, on the commercial real estate business I'm just wondering, how much more run-off you foresee I know you point out in the deck that the rate of decline continues to slow, but we're still down another $300 million when I look at that total commercial loan number at $9 billion. So, at what point do we get to stabilization there?
Ralph W. Babb Jr. - Chairman and CEO Comerica Incorporated and Comerica Bank: So, I think it's important to break apart the total commercial loan portfolio, because you both have, owner-occupied real estate, which frankly, if you think about a big part of our portfolio, Middle Market banking. These are companies that are delevering. Their credit facility is owner-occupied or amortizing. Maybe they're even paying them off, and the financing to those same companies is showing up in the expansion of other financing in Middle Market banking, like revolving credit facilities, import export facilities, so that could continue to decline. We just really don't know. I think as owner-occupied, as Middle Market companies begin to reinvest in the facilities and expand we'll see that grow. The other half of that commercial real estate portfolio is really the professional developer and this is what we often times talk about is very focused on often times multi-family, it's urban market-oriented, it's the construction portfolio that Karen referenced earlier, as well as our national developer business that does business with some of the best and biggest homebuilders in the country, as well as REITs and that part of our business we're actually seeing grow. So, I think that that's very positive for us. And I would expect our commercial real estate professional developer business to continue to grow as we get down the road. We have very good pipelines in that business.
Ken Usdin - Jefferies & Co.: And last quick one, just on Ralph your earlier comment about companies hopefully using their depositor at some point to invest. Karen mentioned that a lot of this quarter's deposit outflows were more seasonal. But I'm just wondering underneath the surface are you seeing any suggestion that companies are in fact either drawing down deposits to invest or contemplating drawing down deposits to invest versus taking out to the incremental loan.
Ralph W. Babb Jr. - Chairman and CEO Comerica Incorporated and Comerica Bank: I think we've seen it in some businesses. I wouldn't call it a trend, but it is at least shown a glimmer of hope the investment is starting. Whether it's trend or not we just don't know.
Lars C. Anderson - Vice Chairman, The Business Bank: I think that's right. Where we've primarily have seen a Reduction in deposit balances has been in general Middle Market banking, and frankly, that's when we are seeing good stable loan growth, so I think a number of those companies are putting that liquidity to work.
Operator: Brett Rabatin, Sterne Agee.
Brett Rabatin - Sterne, Agee & Leach: I was just hoping to follow-up on capital and the provision. From the capital perspective, I was wondering, now that we are getting closer to having full clarity on ratios. What do you think about capital and sort of where things might normalize over the next few years and then secondly just wanted to ask about the provision and thinking about the guidance for lower provision for the year in the back half of the year, assuming loan growth is moderate or slow as you indicated if the provision level might be similar than it was relative to 2Q anyway?
Ralph W. Babb Jr. - Chairman and CEO Comerica Incorporated and Comerica Bank: Karen, you want to talk about capital?
Karen L. Parkhill - Vice Chairman and CFO: Sure. On capital, we are feeling good that now as the final rules are out that our capital clearly complies with the rules if they were fully phased-in and they don't fully phased-in until 2019. So, we remain very well capitalized. In terms of where things should normalize, we expect to continue to be well capitalized and as our capital does grow, we expect to hopefully continue to pay back to shareholders. Does that answer your...?
Ralph W. Babb Jr. - Chairman and CEO Comerica Incorporated and Comerica Bank: John, do you want to talk about provision?
John M. Killian - EVP and Chief Credit Officer: Sure. I'd be glad to. I think it's helpful to look at the major components of the provision to get a more full understanding of this. Still at 15 basis points net charge-offs are well within the normal ranges and we expect them to be similar for the rest of the year. We've made great progress in reducing NPLs, but they should still trend a little lower. They're at 471 at the end of the second quarter, versus 515 at the end of the first. We do expect loan growth to partially offset some of this improvement, which leads us to the bottom line that we expect net charge-offs and provision to look very similar in the second half of the year to our actual results in the first half.
Brett Rabatin - Sterne, Agee & Leach: Maybe a better way to ask, just at relative level, assuming you're growing and where the reserve is today, even the credit is improving, would that provision not increase a little bit in the back half of the year, relative to the second quarter?
Ralph W. Babb Jr. - Chairman and CEO Comerica Incorporated and Comerica Bank: Very difficult to predict, how much loan growth we're going to see. So, we're pretty comfortable with the guidance that we've instituted today.
Operator: Jon Arfstrom, RBC Capital Markets.
Jon Arfstrom - RBC Capital Markets: Just a bigger picture loan growth question and then one follow-up. Just a question on the period-end loans being a bit higher, even of mortgage banker finance and then the large increase in the pipeline that you discussed, is there anything specific going on there? What's the driver?
Ralph W. Babb Jr. - Chairman and CEO Comerica Incorporated and Comerica Bank: Lars?
Lars C. Anderson - Vice Chairman, The Business Bank: Yeah, Jon, I don't think there's anything that is specific on pretty much what you pointed out. It's – what you would typically see, Mortgage Banking Finance and National Dealer, were the two big drivers for the increase at the end of the quarter. Other than that, I would say it was business as usual.
Jon Arfstrom - RBC Capital Markets: Then the pipeline?
Lars C. Anderson - Vice Chairman, The Business Bank: The pipeline was up 10%. It was very broad based in terms of the growth. I think that, that was very positive, in fact, it was kind of bit of a reverse correlation in number of businesses that maybe did not grow for the quarter. You saw some pretty good pickups in the pipeline. So, I think that that's a real positive. International finance was up, technology and life sciences as national dealer services, entertainment, energy, our Middle Market businesses in Texas and Michigan, as well as U.S. banking. So, it was very broad-based and we're encouraged with that. If you put that back against the fact that we increased our commitments for the whole portfolio by almost $1 billion in linked quarter, again, I think that paints a pretty positive picture though against what's going to be a competitive environment.
Jon Arfstrom - RBC Capital Markets: Then just this maybe subtle but probably monumental from my point of view and that Michigan is no longer your largest loan market for the first time ever I believe. How is the Michigan pipeline? You seem pretty optimistic in terms of your prepared comments, but the balances have been a little bit flat. Curious how the pipeline is and how you view the loan growth potential over that market?
Ralph W. Babb Jr. - Chairman and CEO Comerica Incorporated and Comerica Bank: Michigan is a critical market for us long-term. We have very high market shares, great long-term kind of relationships and as you noted I mean, in terms of total loan growth we did not grow in Michigan for the quarter, but for the commercial loan growth we did grow for the quarter. The automotive industry is certainly positively impacting that so I feel great about the Michigan market. We have some great bankers, great relationships and but it's clearly closely tied to the automotive industry. So, it is -- continues to be a very large Middle Market business though for Comerica and it was going to continue to be important point of growth for us I think in the long-haul. It's just not likely to have the same growth rates that you would find in Texas.
Operator: Steve Scinicariello, UBS.
Stephen Scinicariello - UBS: Just a real quick question on the loan portfolio mix shift dynamics. Just kind of curious given some of the turning that you're starting to see in the commercial real estate segments, do you necessarily need higher rates for that kind of headwind to turn into a tailwind or I'm just kind of curious how you're thinking about those portfolio dynamics going forward?
Karen L. Parkhill - Vice Chairman and CFO: There are several things that are going on in the portfolio dynamics that we've talked about before. Although we only have 15% of our portfolio in fixed-rate loans. Those do continue to mature and we do have the mix shift that you talked about with commercial real estate continuing to come down and C&I continuing to come up, that will eventually turn, as it turns it will have a positive impact on both our loan growth and on our net interest income.
Stephen Scinicariello - UBS: Just given some of the trends that you're seeing, Lars, do you feel that's something that might be able to kind of happen in this year or is it something maybe farther out?
Lars C. Anderson - Vice Chairman, The Business Bank: Well, frankly, in terms of the loan growth and our commercial real estate line of business, I think a longer – a higher, longer term rate is going to benefit us. You're are going to see less activity of our developers moving their balances to the long-term financing market and I think that's a real plus for us. It's interesting, cap rates have not moved at all. They continue to be very low. So, it continues to be a very active market and well positioned in the right markets.
Stephen Scinicariello - UBS: Then lastly for me, just on that jump in the pipeline, definitely good to see that, would you characterize the pipeline's still about two-thirds coming from new customers, still?
Ralph W. Babb Jr. - Chairman and CEO Comerica Incorporated and Comerica Bank: Yeah, it's actually declined just a little bit. So, on new customers, just slightly, but I'd say largely it's still slanted towards new customer relationships, but as I've cautioned in the past, just looking at the percentage on pipelines of new versus existing is a little tricky, because when you look at the pull through of the pipeline, it tends to be at much higher multiples with existing customers versus new, and I'm talking multiples of five times more likely to close business with an existing customer than with a new, but not a material shift, just slight.
Operator: Ryan Nash, Goldman Sachs.
Ryan Nash - Goldman Sachs: Just a couple of quick follow-ups. First, Karen, you mentioned that premium amortization was $9 million in the quarter. Can you give us the quarter-over-quarter comparison, what was it the quarter prior?
Karen L. Parkhill - Vice Chairman and CFO: We were about the same quarter-to-quarter.
Ryan Nash - Goldman Sachs: In terms of your sensitivity to higher rates, I think you talked about roughly $185 million from a 200 basis point uptick. Can you just remind us first, what are some of the underlying assumptions for that, and I know you have a slide that you put out during the quarter, where you showed it could vary from 145 to 220 depending on what happens with some of the underlying assumptions and given that we saw a 4% deposit outflows this quarter, while I understand some of that is seasonal, how sensitive are we to further outflows of noninterest-bearing deposits?
Karen L. Parkhill - Vice Chairman and CFO: Our rate sensitivity as you know is dynamic and does change. It has moved over the last few quarters because we have greater noninterest-bearing deposit and greater amount of floating rate loan, and I did show that chart sort of intra-quarter that shows the dynamics and the movement. On the sensitivities, yes our interest rate sensitivity is based on the assumptions we put into it. Some of the key assumptions in that number are that we do expect deposits to decline. We do expect to have a mix shift in our deposits from noninterest-bearing to interest-bearing as customers search for yield. We do expect continued loan growth. We expect our securities portfolio to remain relatively stable but we do expect our excess liquidity to decline, but still remain in an excess liquidity position. When we showed the rate sensitivity intra-quarter, we did show that that interest rate sensitivity could range depending on different deposits and outflows in different loan growths and those sensitivities yield us somewhere between $150 million increase to over $200 million increase depending on the various assumption that we've put in.
Ryan Nash - Goldman Sachs: And can you just give us a sense of what your assuming for competition in those underlying assumptions, I mean I would assume that if we are to see a pickup we could see further reasoning of standards and competition potentially compress spreads, but we'd just be (interested) to hear your underlying assumption?
Karen L. Parkhill - Vice Chairman and CFO: Yes, we do assume that rates remain fairly steady from where they are today. There would be a little bit of competition built into that and so a little bit of pressure, but not a lot.
Ryan Nash - Goldman Sachs: If I could just get one quick follow-up, how much did loan utilization change ex the warehouse?
Karen L. Parkhill - Vice Chairman and CFO: Ex the warehouse?
Lars C. Anderson - Vice Chairman, The Business Bank: If you actually take out the warehouse, we were relatively stable.
Operator: Michael Rose, Raymond James.
Michael Rose - Raymond James & Associates, Inc.: Just probably to get a sense on the employee count and kind of where we see that bottoming, where you're still trimming and what areas are you hiring and plan to hire going forward?
Karen L. Parkhill - Vice Chairman and CFO: Our employee count is now just a little under 9,000 employees versus slightly over last quarter. So, there was a small change in employee count. We are hiring as we mentioned, to help us work on the stress test and capital plan requirement, at the same time as we see normal attrition and we try to be focused on being as efficient as possible everywhere that we can.
Lars C. Anderson - Vice Chairman, The Business Bank: We're very focused on our growing markets and making sure that in our appropriate products. We have the necessary expertise and people in place to capitalize on it.
Ralph W. Babb Jr. - Chairman and CEO Comerica Incorporated and Comerica Bank: An example of that would be, we are continuing to invest in our Technology and Life Sciences office. We opened a new office in Houston. We have a new one opening in New York. We're continuing to invest in our general Middle Market businesses and core markets.
Operator: Brian Foran, Autonomous.
Brian Foran - Autonomous: I guess, just coming back to this capital question, and what's the right level to run out long-term, when I think about the Basel III progression, we kind of all came to grips a couple of years ago with the minimums, and then this kind of buffer on the buffer concept emerged where banks will have to carry an extra 50 bps or so for mostly AOCI risk, with AOCI opt out, really should not – kind of giving a spot level, you're going to run down to, but with AOCI opt out, you kind of get to throw away that buffer on the buffer concept or are there enough other things like the stress test uncertainty every year that you feel like even without AOCI to worry about it, it makes sense to carry an extra buffer.
Ralph W. Babb Jr. - Chairman and CEO Comerica Incorporated and Comerica Bank: I think you will have an extra buffer. The question is how much for us, longer term, as an individual bank, and we need some time to look at that, as it phases in, and I think we will eventually get back to where we were before the downturn where we looked at and actually shared where we wanted to be from a capital standpoint, so that investors understood what we were thinking about for payouts longer term.
Operator: Brian Klock, Keefe, Bruyette & Woods.
Brian Klock - Keefe, Bruyette & Woods: Really just, maybe just a quick follow-up on capital, except I think we've asked you every question we possibly can in the past hour. So maybe I guess Karen and Ralph thinking about the buyback and obviously buffers or now you guys have a significant amount of excess capital still as to my opinion maybe we need the Basel III. I guess maybe talk about the idea and your thought process with the buyback and obviously it was somewhat of a no-brainer when the stock was below tangible book, but given the run in the shares this year I guess how are you thinking about the incremental capital you're deploying, the return you're getting on that growth organically versus the buyback and then even thinking about the potential for acquisition, so maybe you can kind of talk about now how you're thinking about the buyback going forward?
Ralph W. Babb Jr. - Chairman and CEO Comerica Incorporated and Comerica Bank: Karen you want to start?
Karen L. Parkhill - Vice Chairman and CFO: Sure, happy to. So, we are disciplined around our buyback. We do look at it as a use of capital and like any other competing use of capital it should have an internal rate of return above our cost of capital. We do have an analysis in the model that looks to that and we are disciplined about it. We're not going to tell you what the output of that model is but we will say at the current stock price we feel very comfortable continuing to buyback our stock.
Brian Klock - Keefe, Bruyette & Woods: And then I guess Ralph what you think about potential for acquisition versus organic?
Ralph W. Babb Jr. - Chairman and CEO Comerica Incorporated and Comerica Bank: Well, first of all I would say as I've said in the past I'm very comfortable with where our footprint is today both in California and Texas and Michigan. And therefore internal growth is a very good strategy for us. That's not to say that there wouldn't be possibilities for an acquisition if it were in the right places in one of those markets from that standpoint. And then you'd have to look at it from all of the other focuses as well price and the culture of the given potential acquisition and whether it fits in that market.
Operator: Matt Burnell, Wells Fargo Securities.
Matt Burnell - Wells Fargo Securities: Sorry to pile on, but two quickies here. You mentioned the trends in dealer finance all look very positive. You've seen 19 -- nearly 20% year-over-year growth in that portfolio I guess I'm just curious what your outlook is over the next year for demand in that business? Do you -- are you expecting continued high-teens growth in that business or is there the potential that that could slow down?
Lars C. Anderson - Vice Chairman, The Business Bank: So, just from an accuracy perspective, there is actually about 24% year-over-year growth in the portfolio, but it's a business that if we look at it historically, we are running at numbers that were like 2008, both from outstandings perspective utilization. We feel very comfortable with that as a Company, where it is today. I'm expecting as we talked about earlier that some of the seasonality will moderate some of those balances as we head into next year. But clearly 2014's annual sales rates on auto sales is going to have an impact on the outstandings likely for our dealers and will impact us in the longer term in terms of our growth profile of the business.
Matt Burnell - Wells Fargo Securities: Lars, you mentioned earlier, you expect the prepayment fees to stabilize and I guess I'm just curious over the last couple of years as you've seen increased competition for Middle Market loans, have you been -- have your competitors been forcing you to move away from prepayment fees on some of your commitments or have you held pretty firm on that?
Ralph W. Babb Jr. - Chairman and CEO Comerica Incorporated and Comerica Bank: When I refer to structure, that's one of those things that go into that basket. It's a good insight. We obviously try to build prepayment penalty and do every transaction and every relationship we can, because there is a cost of liquidity associated with it, but it's part of the larger pricing of the overall relationship that we have, but I would say from a general industry perspective, that, that is clearly kind of an area that has given along with durations and advanced rates in a number of other areas, but for us, we've really stayed the course. We've been very disciplined. Frankly, we could've had a lot more growth in some of our businesses, if we were willing to kind of reach outside of our traditional risk management relationship pricing box, but that's what has got us here. We think it positions us well for the long-haul and frankly, our customers appreciate what we deliver, so I think we're well positioned.
Operator: Bob Ramsey, FBR.
Robert Ramsey - FBR: Just real quick, a couple of questions on the guidance. The net interest income expectation for that to trend lower, if you stripped out the purchase accounting accretion piece of that, is there sort of core net interest income? Has it reached a level where the growth offsets expected compression or would that continue to trend lower as well?
Ralph W. Babb Jr. - Chairman and CEO Comerica Incorporated and Comerica Bank: Karen?
Karen L. Parkhill - Vice Chairman and CFO: Yeah, that's difficult to say, but as you've seen in the last couple of quarters the vast majority of our decline and on net interest income has been due to accretion and so, the other impacts on the portfolio have been slowing and at some point should turn.
Robert Ramsey - FBR: Then last question, maybe if you could expand a little bit on the loan growth expectation. I mean the commentary overall seems to be that market conditions are improving and their line utilization is up. You've got a record pipeline and yet you all are saying you expect growth at a slower pace going forward and I just was hoping maybe you could reconcile those two points of view?
Karen L. Parkhill - Vice Chairman and CFO: Yeah. Keep in mind that our outlook is a full year to full year outlook. So when we look at 2011 to 2012, we did have robust loan growth. In 2012 to 2013, we're expecting continued loan growth but at a slower pace than the prior year. So that would be our overall outlook, and yes, we do have some positive signs that we talked about on loan growth going forward through the back half of the year, but remember that, that's against the backdrop of a slow economy and a very competitive environment, under which we expect to maintain our pricing structure discipline.
Lars C. Anderson - Vice Chairman, The Business Bank: One last thing I'd add on to that you mentioned line utilization being up. Remember line utilization, when you adjust really for the end of period dealer mortgage banking finance, it was really flat.
Operator: Terry McEvoy, Oppenheimer.
Terry McEvoy - Oppenheimer & Co., Inc.: Just one last thing on my list. In the release, it was mentioned that the provision connected to the mortgage banker finance book increased in the second quarter. I was wondering did the rapid move up in rates pose additional credit risk to those borrowers and have you taken a closer look at that customer base with the potential of weeding through some of those weaker borrowers that could add to the potential decline in that book in the back half of this year?
Lars C. Anderson - Vice Chairman, The Business Bank: John?
John M. Killian - EVP and Chief Credit Officer: Terry, no, it really wouldn't add to the additional risk in that business. Our Mortgage Banker Finance business is a completely a warehouse business. So, to the extent that their loan balances are up in the reserve methodology to get a higher standard loss factor, but there is no real impact other than that.
Operator: Gary Tenner, D.A. Davidson.
Gary Tenner - D.A. Davidson: Off the hook, I think all my questions have been answered at this point. I appreciate it.
Operator: That concludes our Q&A presentation. Now, I would like to turn this call over back to Mr. Ralph Babb for some closing remarks.
Ralph W. Babb Jr. - Chairman and CEO Comerica Incorporated and Comerica Bank: I would just like to thank everybody to for being on the call this morning and their interest in Comerica. We appreciate it very much, and hope everyone has a good day. Thank you.
Operator: Ladies and gentlemen, this concludes today's presentation. We thank you for joining. You may now disconnect.