Huntington Bancshares Inc (HBAN) — Q2 2015 Earnings Call Transcript

Thank you, Leanne and welcome. I’m Mark Muth, Director of Investor Relations for Huntington. Copies of the slides we will be reviewing can be found on our IR website at www.huntington.com. This call is being recorded and will be available as a rebroadcast starting about one hour from the close of the call. Slides 1 and 2 note several aspects of the basis of today’s presentation. I encourage you to read these but let me point out one key disclosure. This presentation will reference non-GAAP financial measures. And in that regard, I would direct you to the comparable GAAP financial measures and a reconciliation to the comparable GAAP financial measures within the presentation, the additional earnings related material we released this morning and the related 8-K filed today, all of which can be found on our website. Turning to Slide 3, today’s discussion, including the Q&A period, will contain forward-looking statements. Such statements are based on information and assumptions available at this time and are subject to changes, risks and uncertainties, which may cause actual results to differ materially. We assume no obligation to update such statements. For a complete discussion of risks and uncertainties, please refer to this slide and material filed with the SEC including our most recent forms 10-K, 10-Q and 8-K filings. As noted on Slide 4, the presenters today are Steve Steinour, Chairman, President and CEO; and Mac McCullough, Chief Financial Officer. Dan Neumeyer, our Chief Credit Officer will also be participating in the Q&A portion of the call today. Let’s get started by turning to Slide 5.

Thanks Mark. Good morning and thank you for joining the call today. We appreciate your interest in Huntington and we think we have good results to share with you this morning. Over the past several years, we have followed a contrarian path built around our fair play philosophy and our welcoming culture. We have strong recognizable brands and a differentiated product set and industry-leading customer service. In addition we have been investing in our franchise building and expanding in a time when others have been focused squarely on cost-cutting. We will continue to invest in our business although we will pace our investments to manage our positive operating leverage on an annual basis. Our second quarter results highlighted by solid revenue growth and improved margins provide proof that our strategies are working and the investments we’ve undertaken over the past few years are paying off substantially. Our investments are yet mature and should continue to drive future revenue growth and future performance improvement. We remain focused on disciplined execution and we are well-positioned to finish the year strong, delivering positive operating leverage for the third consecutive year as well as improved returns for shareholders. Slide 5 shows some of the financial highlights for the second quarter. Strong revenue growth for the record-setting quarter resulting in net income growth of 19% over the same quarter of last year. Earnings per common share of $0.23 increased 21% year-over-year. These results equated to a 1.16 return on assets and a 14.4 return on tangible common equity. The underlying strength exhibited this quarter was broad-based and included the impact of our acquisition of Macquarie Equipment Finance which we have rebranded Huntington Technology Finance or HTF. Total year-over-year revenue growth of 9% benefited equally from spread revenues and fee income. Net interest income grew 7% while fee income grew 13%. Healthy balance sheet growth included a 6% year-over-year increase in average loans and leases and a 9% increase in average deposits. For the second straight quarter deposit growth was driven largely by growth in core deposits which is a very encouraging trend as we continue to focus on deepening relationships and earning primary banking status with our customers. Core deposit growth more than fully funded loan growth over this period. While the value of our core deposits may not be fully appreciated in the current rate environment, we believe that our strong core deposit franchise will provide true differentiation when interest rates begin to rise. Our credit quality remained very strong with only 21 basis points of net charge-offs and 81 basis points of non-performing assets. We repurchased 8.8 million common shares at an average price of $11.20 per share effectively returning more than 99 million of capital to shareholders. We also completed a 750 million indirect auto loan securitization during the quarter resulting in a net gain of 5 million. This securitization demonstrated investor’s endorsement of the quality and consistency of our auto finance business, one of our distinctive capabilities. Finally we continue to be recognized for our focus on excellent customer service and our distinguished brand. During the quarter we were recognized by both J.D. Power and TNS for the third consecutive year for our customer-centric focus. We were also recognized by the American Banker for our strong reputation. Slide 7 is a summary of our quarterly trends and key performance metrics. We've already touched on many of these, so let's move to Slide 8 for a more detailed review of the numbers. Relative to last year's second quarter, total revenue increased 9% to 780 million. We are very pleased with our strong revenue growth in this challenging environment. As I mentioned previously spread revenue and fee income accounted for roughly equal parts of the increase of the revenue. Spread revenues benefited from balance sheet growth as earning assets increased 10% year-over-year partially offset by continued NIM progression of 8 basis points. Spread revenues during the second quarter included 17 million of net interest income from HTF. Fee income for the 2015 second quarter was 282 million, a 13% increase from a year ago quarter. The primary components of the increase were a 60 million increase in mortgage banking income, 12 million in fee revenue from HTF and a 9 million increase on gains on the sale of loans which included a 5 million gain on the 750 million indirect auto loan securitization. Other fee income sources also posted double-digit year-over-year growth rates including electronic banking and capital markets. We continue to see the benefits of consumer and commercial customer growth manifested in these areas. Deposit service charges also benefited from our robust customer growth as we have almost grown through the 6 million per quarter impact from changes to our consumer deposit products including All Day Deposits implemented in July of last year. Reported non-interest expense in the second quarter was 492 million, an increase of 33 million or 7% from the year ago quarter. Recurring expense related to HTF was 16 million or almost half of the year-over-year increase. The second quarter also included 2 million of merger-related expense that is not recorded as a significant item for the quarter but is expected to be recorded as a significant item for the year as we will complete the systems integration of HTF later in 2015. Slide 9 details the trends of our balance sheet mix. Average loans and leases increased 3 billion or 6% year-over-year including 839 million of leases from the HTF acquisition. During last quarter's earnings call we mentioned that we expected lower second quarter growth in C&I and CRE due to our risk-return expectations, and this was the case. However loan growth in our loan pipeline will strengthen later in the second quarter providing room for increased optimism in the back half of the year. Notably in the second quarter we experienced year-over-year growth in every loan portfolio. The indirect auto portfolio increased 10% from the year ago quarter. As shown on Slide 53 in the appendix our indirect auto operating model remains unchanged with our disciplined approach to the business reflected in the credit performance metrics. As mentioned in the opening remarks, we completed a 750 million indirect auto loan securitization. Recall that we previously moved 1 billion of auto loans to help our sale and near the end of the quarter we moved the remaining 250 million of indirect auto loans back into the portfolio. After reviewing the existing and projected size of the overall auto portfolio relative to our concentration limit as well as the transaction economics, we opted to scale back the size of the securitization. This allows us to realize the longer-term benefit of keeping these high-quality assets on our balance sheet. Previously, we mentioned that we expected to complete an additional securitization during the latter half of 2015 or perhaps in early 2016. However completion of the securitization in the second quarter led us to reexamine our appetite for indirect auto loans taking into consideration the strong consistent performance of the asset class during the past economic cycle and in the CCAR and DFAST stress tests. As a result of this review we decided to raise our auto concentration limit from 150% of capital defined as Tier 1 capital plus reserves to 175% of capital. As such we no longer anticipate the need for an off-balance sheet securitization in the back half of 2015. Turning attention to the right side of the balance sheet, average total deposits increased 9% over the year ago quarter including an 8% increase in core deposits. Average non-interest bearing demand deposits increased 18% year-over-year reflecting our focus on the consumer checking and commercial relationship level. Specifically, commercial non-interest bearing deposits increased 19% year-over-year while consumer non-interest bearing deposits increased 15%. Total core deposits from commercial customers increased 17% year-over-year while total core deposits from consumers increased 2% as we continue to remix the consumer deposit base out of higher cost CDs into other less expensive deposit products. Importantly, the year-over-year growth in total core deposits more than funded our loan growth over this period. Average short and long-term borrowings increased by 1 billion year-over-year which includes 750 million and 1 billion of bank level senior debt issued during the 2014 second quarter and 2015 first quarter respectively. We also issued 750 million of bank level senior debt on the last day of the 2015 second quarter. Average brokerage deposits increased 600 million. These deposits provide a cost-effective means for funding balance sheet growth including LCR related securities growth while maintaining focus on managing core deposit expenses. Turning to Slide 10, we see net interest margins spotted against earning asset yields and interest-bearing liability cost. The NIM increased 5 basis points quarter-over-quarter to 3.20% primarily due to the addition of higher yielding assets from the HTF acquisition. In addition, we recorded approximately 3 million of prepayment penalties within the securities portfolio, which added 2 basis points for the margin. These contributions were partially offset by continuing pricing pressure across most asset classes. The net interest margin decreased 8 basis points from the year ago quarter, also reflecting downward asset repricing pressure. Going forward, we expect pricing pressure to remain a headwind, as many asset classes continue to reprice lower while funding costs have limited room for improvement besides from continuing to remix them on deposit base. Slide 11 provides some detail on our current asset sensitivity and how we manage interest rate risk. For the past several years we have run a more neutral asset position balance sheet compared to many of our peers in part related to our swap portfolio. These swaps were added at a time when the outlook suggested a prolonged period of consistently low rates. As shown in the top chart, our models estimate that net interest income will benefit by 0.3% if interest rates were to gradually ramp 200 basis points in addition to increases that are already reflected in the current implied forward curve. This is consistent with our estimates from the past few quarters. In a hypothetical scenario without the 9.2 billion of asset swaps our models estimate that net interest income will benefit by approximately 4.3% in the same up 200 basis point ramp scenario. The chart at the bottom of the slide illustrates the weighted average life over asset and liability swaps as well as the net impact of the swaps on our net interest income. As you can see on the green line, the asset swap portfolio continues to age in and had a weighted average life of 1.5 years at 6/30/15. As we have said previously, our asset swap portfolio is a laddered portfolio. There are no cliffs looming on the horizon. Over the next two quarters, 1 billion of these asset swaps will mature and an additional 3.5 billion will mature during 2016. The maturity of these swaps would increase our estimated asset sensitivity. Slide 12 shows the trends in our capital ratios. Our regulatory capital ratios improved modestly from the first quarter, while tangible common equity remained relatively flat. We repurchased 8.8 million common shares over the quarter at an average price of $11.20 per share under our 366 million share repurchase authorization. We have 267 million in authorized capacity remaining for the next four quarters. Slide 13 provides an overview of our credit quality trends. Credit performance remains solid and in line with our expectations. Net charge-offs remain well controlled at 21 basis points, below our long-term expectations of 35 to 55 basis points. The non-performing asset ratio fell slightly in the quarter due to lower inflows compared to the prior quarter as well as the higher number of loans returning to recurring status. The criticized asset ratio also improved in the quarter aided by an increase in the volume level upgrades in the past category. The allowance for credit losses eased modestly with the ACL ratio falling from 1.3% last quarter to 1.34% currently. All credit metrics fully reflect the results of the recently completed annual shared national credit exam. Slide 14 highlights trends in criticized assets, non-performing assets and delinquencies. The chart in the upper left shows a slight decrease in the NPA ratio for the quarter to 81 basis points. The level of NPAs has been fairly consistent over the past six quarters and is in line with our expectations. The chart in the upper right reflects continued improvement in our 90-day delinquencies with the improvement coming from both the commercial and consumer loan portfolios. The chart in the bottom left shows the criticized asset ratio which also improved in the quarter as new inflows of criticized assets were more than offset by upgrades and pay downs. Finally, the chart on the bottom right shows a reduction in NPA inflows as a percentage of beginning period loans falling from 30 basis points to 26 basis points. Turning to Slide 15, the loan loss provision was 20.4 million in the second quarter compared to 25.4 million of charge-offs. The ratio of allowance for non-accrual loans remains steady at 180% compared to 181% in the prior quarter. The ACL ratio fell modestly to 1.34% from 1.38% in the prior quarter in line with modest overall improvement in credit metrics. We believe the allowance is appropriate and reflects the underlying credit quality of our loan portfolio.

Thank you, Mac. Slide 16 offers a brief overview of the long-term trends in acquiring both consumer and commercial customers. Our Fair Play banking philosophy, combined with our optimal customer relationship focus, has significantly enhanced customer acquisition since it started. We’ve seen nearly a 9% increase in consumer checking households and a 6% increase in business relationships at compound annual growth rates since 2010. We consider these to be top-tier customer acquisition rates. These strong growth figures have contributed to the revenue growth illustrated in the two lower charts on the slide. Our company prioritizes revenue and its growth, and we are committed to increasing revenues despite the challenges posed by the interest rate landscape. Our dedication to enhancing customer relationships has yielded results, but to gain a complete understanding, let’s refer to Slides 17 and 18. I’d like to emphasize that our strategy focuses not only on capturing market share but also on increasing share of wallet. As mentioned before, the foundation of our customer relationship strategy revolves around expanding the number of products and services we offer our customers, as this leads to greater loyalty and satisfaction, along with revenue growth. In the first quarter, our goal for cross-selling six or more consumer products and services exceeded the 50% threshold for the first time. This figure rose by an additional 80 basis points in the second quarter, resulting in 51% of our consumer checking households utilizing six or more products and services. Consequently, our revenue from consumer checking account households increased by 9% year-over-year. Moving to the commercial side as shown in Slide 18, 43.4% of our commercial customers have four or more accounts or products and services, which is an increase of 70 basis points from the previous quarter and 210 basis points compared to the same quarter last year. This growth was directly reflected in revenue, with commercial revenue rising by 5% year-over-year.

Slide 19 shows our year-to-date operating leverage results. Full-year positive operating leverage is a long-term strategic goal for Huntington and a commitment we have made again for 2015. We significantly narrowed the gap in the second quarter moving from negative 1.7% at the end of the first quarter to negative 40 basis points at the midpoint of the year. We have strong revenue momentum and we will pace our continued investment in the franchise appropriately for the revenue outlook. Therefore, we remain confident in our ability to achieve positive operating leverage for the full year both inclusive and exclusive of the impact of the Huntington Technology Finance. Turning to Slide 20 for some closing remarks on expectations. We remain optimistic about the ongoing economic improvement in our footprint. We are bullish on the Midwest economy. While average loan growth hit was decent this quarter, we saw momentum building in our pipelines and in our loan growth during the latter half of the second quarter. Customer activity remains encouraging. Loan utilization rates showed a slight increase during the quarter giving additional reason for optimism. While competition remains intense, we will continue to be disciplined in growing our commercial real estate and C&I portfolios. We are committed to delivering strong results regardless of the interest rate environment. Our budget has been built around the current rate environment and our execution is not dependent on a rate increase. We control our destiny and our focus and execution will deliver results. Net interest margin improved this quarter with the impact of Huntington Technology Finance, however we expect NIM pressure will remain a headwind until interest rates start moving up. We expect to grow revenue despite the pressure. Fee revenue improved this quarter with electronic banking, treasury management, capital markets and mortgage banking, all demonstrating particularly strong momentum. We continue to invest in our businesses for the future resulting in projected non-interest expense growth of 2% to 4% for the year excluding significant items, net MSR activity and acquisitions. On a reported basis, we expect non-interest expenses to remain near the second quarter 2015 level for the rest of the year. We expect revenue growth in excess of expense growth and we are committed to positive operating leverage for full year 2015. We believe the asset quality metrics will remain near current levels. We expect net charge-offs will remain at or below our long-term expected range of 35 basis points to 55 basis points. Modest changes are anticipated given the absolute low levels of our credit metrics. Longer term we continue to manage the franchise with an emphasis on consistent shareholder returns, we've built a strong and recognizable consumer brand with differentiated products and superior customer service. We are executing our strategies and adjusting to the environment when necessary. While past investments continue to pay off, we continue to move forward with investments in enhanced sales management, digital technology, data and analytics and optimizing our retail distribution network. There is a high level of alignment between the Board, management, and indeed all employees and shareholders, and while we are highly focused on our commitment to being good stewards of shareholders' capital.

Leanne, we will now take questions. We ask that as a courtesy to your peers each person ask only one question and one related follow-up. And then if that person has additional questions, he or she can add themselves back into the queue. Thank you.

On loan growth side, just wondering if you can give us a little bit more color on the C&I loan trends average show a pretty good growth, but on the end of period basis they were flattish, wanted to see if that’s a number we should grow off of or is it the average trends that think are more sustainable there?

This is Mac. So I do think what you're seeing in the quarter is consistent with the guidance we gave last quarter on the call. We do have a good pipeline that picked up later in the quarter and we are being very disciplined in terms of how we think about this from our risk appetite and reward perspective. You know, I do think that if you adjust for the Macquarie acquisition and think about the end point of the quarter that would be a good starting point for growing off of. But again we did see strength in the latter part of the quarter and again it's what we expected when we announced last quarter.

And then also on the loan fund as I follow-up, wanted to get your thoughts on auto loan growth, the growth on balance sheet balances given your commentary around the intent to retain more of your production. How should we think about growth in that portfolio going forward?

I would tell you that the growth is pretty consistent with what you've seen historically. We have made some pricing changes that have impacted volume and some of these pricing changes have stuck. I think that it's important just to think about the environments and the fact that it is, but there are good opportunities for auto growth and we’re going to be consistent with what we produce historically.

I guess just sort of follow-up on the auto, why is it a good idea to increase concentration to auto, you obviously set that 150% for a reason and I know you guys do great underwriting. But it just seems that you're intentionally adding more risk and more concentration to a single asset class and I would love to know the rational to why that is?

This is Dan. I think when you look at our auto portfolio and we measure risk in volatility, our auto portfolio has been one of the most consistent performers over time and when we run our analysis and look at struck losses versus base losses it's a very, very stable portfolio. We haven’t had to adjust our underwriting parameters in order to gain volumes, if you look at our FICO scores, our LTVs, the term, et cetera, they have been rock solid over the cycle and we just think it's a great asset class and we don’t think that at 175% of capital that that is outside at all. So we like the asset, we think it's proven itself and we think that the level of concentration is very responsible.

And then the second question I had just in terms of the margins at 320 obviously pick up presumably due to HTF is 320 a decent starting point next or was there any unusual items and then we applied the margin compression on that 320, is that fair?

It's Mac, so HTF added 7 basis points to the margin in the quarter and then there was about 2 basis points related to some security calls. So I think that’s how you got to think about it going forward at least at the starting point. And then just keep in mind that we’ve been pretty consistent in 2 to 4 basis points of compression on a quarterly basis and we don’t think that’s unreasonable.

Let's just start looking at the 2% to 4% expense guidance which implies 1.9 billion of 2015 adjusted expenses, given where you were at the year-to-date point 946 million that implies a range of somewhere between 450 million and 470 million featuring the next two quarters. I am just curious given where the second quarter run rate came out, is there realistically any chance that you end up at the low end of the range, so 2% for the year, I was a bit surprised you didn’t take up the guidance to at least maybe three to four something like that. Help us think about the range and why you are maintaining the guidance?

It's Mac, so we do feel very comfortable that expense growth for the remainder of the year is going to be very consistent with what you see in the second quarter, so we think it's important to be consistent in the guidance that we provide and make sure that we report back to you on how we are performing against that guidance. And again even with all the investments that we have coming on later this year we are opening more in-stores, we continue to make investments in digital and other technology. We feel very comfortable with expenses being at the same level second quarter of 2015.

You think it's feasible that we could end up at the low end of that range?

I’ll leave that to you to decide based upon the guidance that we’ve given here. But certainly we’re comfortable stuck in second quarter levels.

Okay. And I just wanted to follow up on raising the concentration limit of auto, can you just walk us through? So what's exactly is changing, is it better quality business reviewing, are you responding to pressure in C&I and other areas, is that why you are raising the limit?

I think it really, again the limit goes to when we look across the portfolio where is there less volatility, where we have the historical performance, et cetera. What's the allocation we want in the various asset classes on a relative basis and we think that one, we don’t think 150 to 175 is significant, but we think it's fully supportive based on the results, and past history and where we want the book to go in the future.

Thanks. Good morning guys. If I could follow up on the fee side. I just wanted to ask about you mentioned been really strong quarter for mortgage partially on the production side, also on the MSR, what your outlook would be there? And then secondly, the other line with the 12 million helper from HTF, is that consistent of a fee generator also in terms of run rating that level?

Yes, Ken, it's Mac. So we have a good performance in mortgage and we do expect continued performance. Keep in mind we did have 6 million in MSR pickup in the quarter and we certainly don’t forecast either gains or losses when we put together our models. So we do think that mortgage is going to be a good contributor to revenue growth for the remainder of the year. And when you think about HTF and the revenue on the fee side, we do think that that’s a good base to build off of.

My quick follow-up is about the overall revenue and expenses we observed. Everything seems to be in line with the expected run rate, excluding future growth. Can you clarify the 7 basis points in net interest margin, the 12 basis points in fees, and the expenses that are aligned with favorable outlooks?

Yes, so, very, very comfortable with that. And one thing I would point out is that HTF did have some operating leases and we're not going to be booking operating leases going forward. So you will start to see, if there's $8 million of revenue in the quarter and $6 million of expense in the quarter related to operating leases, those items will start to run off. But they will be replaced, obviously, on the balance sheet with new production that won’t be operating leases. So you need to think about the timing of how you adjust your fee revenue and your expenses, but just want to make you aware of that.

Mac I was wondering if you could walk us through how we should expect the balance sheet to grow especially relative to where you are or where you want to be on LCR. How we should think about earning asset growth relative to loan growth?

So Erika I would tell you that where we need to be for LCR for 2015 and as we think about what we're going to do going forward to get to 100% we're not going to increase the size of the security portfolio. So we are basically going to be able to take cash flow from the securities portfolio and get the securities that we need to be compliant with LCR at a 100% level. So you won't see the balance sheet grow due to selling compliant with LCR.

Got it. And so the pace of balance sheet growth should be roughly equivalent to that of our loan growth assumption.

That’s exactly right.

I wanted to ask on the new slide that you've given us on the impact of swaps. I am talking about what net interest income sensitivity would look like if those swaps rolled off. Is that an indication of intent at all? If rates pan out as you are expecting, are you planning to bring the swap portfolio down or is that purely kind of hypothetical exercise at this point?

So we've been pretty consistent in talking about our comfort with the way the swap portfolio is laddered and the way the swaps are rolling off naturally. We provided some guidance around 1 billion of swaps coming off in 2015 and an additional 3.5 billion in 2016 and those are the natural maturities of the portfolio. So we feel very comfortable with that.

And so the intention is not to replace them by putting on new swaps?

That our current intent, we feel like this was a very wise thing for us to do in the rate environment we were in, it actually protected the margin significantly and helped us manage interest rate risk on the balance sheet and we think the timing of these swaps and their current maturities is advantageous for us.

In regard to your expansion in Michigan with the new in-store locations in the Meijer Superstore, what kind of expenses did you see here in the second quarter from that initiative? And then with those openings, I know about July 1st, what will be the pickup in expenses we should expect here in the third quarter?

It's Mac, we’ve got 30 new locations set to open in third quarter, another 10 in the fourth quarter. And you need to keep in mind that we do hire the bankers 60 to 90 days in advance for opening those stores. The remainder of the expenses you can expect to see come online as we open those branches. So not going to go into detail around those specifics of incremental expense related to the expansion, but again I’ll take you back to the expense guidance that we’ve given and we’re very comfortable with second quarter levels.

Mac, I was hoping you could maybe just flash out, sort of what’s going on in overall commercial yields and I guess just kind of pace of degradation. I get what you said about pricing pressure is going to continue, but it can be a little tough from outside to given the impact of HTF kind of the pace of degradation whether that softened at all in the second quarter, what are your thoughts there?

This is Dan, I think that while there continues to be pressure, I do feel that it is starting to stabilize a little bit. So I think the pace of the pricing pressure and structural pressures is maybe leveling out a little bit. So maybe a lesser reduction on a go forward basis than what we’ve experienced today.

And Mac just sort of tricky-tact question, what level if any of integration charges are you expecting per quarter in the second half for the year?

I would suggest it's not going to be a material number. It's actually the cost to integrate HTF on full rate is one of the lowest costs I have ever seen in integration. So it's really not material.

So in other words, the expense guidance for the second half you reported and that’s a core number you're expecting as well?

That’s a way to think about it.

You have nice quarter-over-quarter increase in service charges is there any way to separate what is seasonal versus what’s connected to your growing customer base and so is that growth in fees coming from just more customers and does that more than offset what’s going on across the industry in terms of declining fees?

The second quarter is usually strong seasonally, and looking back over time gives a good perspective on this pattern. However, the impact of Fair Play and recent changes have made things a bit challenging for us. Notably, the growth in new households and commercial customers has helped us adjust to the changes on the Fair Play front. Our emphasis on OCR and building deeper relationships has also proven beneficial, particularly in treasury management, where we've seen significant growth. Additionally, we implemented changes last July that resulted in roughly $6 million in quarterly service charge losses, but we've now moved past that impact. Therefore, I anticipate some favorable growth in service charges for the rest of the year.

And then you’ve been showing these consumer and commercial relationship product penetration slides for years and they are all up into the right and I guess Mac my question is, what category either consumer commercial is more important for achieving the positive operating leverage, which one should we look at before the other?

It's a great question, I think they both have contributed in a pretty material way. I think we’ve had better success in revenue growth related to new customer relationships on the commercial side, I think the bigger opportunity going forward is on the consumer side. So that’s probably how I would think about it. I think a lot of the investments we’ve made on the commercial side of the business particularly on the fee side have paid off very nicely for us and as we think about the opportunity to deepen relationships on the consumer side of the business going forward and take advantage of all the new households we’ve brought to the organization that is going to be a nice driver for us going forward.

Couple of follow ups here, just one on asset sensitivity, may be, but non-interest bearing deposits have become a much large piece of your deposit base over the past several years. I am just curious how you expect those balances to behave in a rising rate environment? In other words, is the growth driven by consumer household accounts or something else in there that may be out of line?

This is Steve, we started with a strategy of share of wallet along with the share of market. And so we measured loyalty and retention and how that was impacted as we increased share of wallet. Therefore we expect our DDA to be very sticky as a consequence of cross-sell that we've been able to add on both the consumer and the commercial.

There might be a few branches that will meet into 2016, but I think for all practical purposes we accrue no expenses around Q4.

Thanks. Mac I want to touch a little bit about the decision to move around the interest rate sensitivity. You have been keeping it very neutral position which has helped the net interest margin. As you are letting things mature you are giving up a pretty wide spread with the steepness of your curve, and you are going to take all of that 4.3% increase in asset sensitivity really to replace what you are giving up on the interest rate swap. So there is trade off and I just wanted you to kind of talk a little bit on how you are thinking about that?

Yes, thanks Marty. So I do think, and we talked about this quite a bit historically that the swaps that we put on and when we put them on, actually did a great job in protecting the margin and you and I talked about that quite a bit. But when we put these on, we didn’t put them on from thinking about a timing perspective and as we let them mature we're not really thinking about it in terms of trying to time what's happening in the market place. We do have a belief as I think most do, the rates are going to rise, if it's not in third or fourth quarter, certainly it will be early next year. And when we think about just the natural maturity of the portfolio it seems like it's the right thing to do just to let these swaps mature. So that's the way we think about it and certainly we're not trying to thread the needle here.

The only thing I was, kind looking at is the 4.3% of pickup gives you about $20 million worth of earnings as rates go up, a full 200 basis points if you look prorating the benefit of the 26 million that has kind of came up with your running off all those asset swaps, you were planning on giving up about $18 million. So it really looks like you are giving up current earnings to wait on the fed funds rate to go up 200 basis points and keeping a neutral balance sheet is always probably the overall goal not be one way or the other.

We are pleased with what was a record-breaking second quarter. Results show that our investments are paying off, our strategies are working, and our execution is focused and strong, and we continue to gain market share and improve share of wallet and show no signs of slowing down. We have produced revenue growth of 9% in a challenging environment while remaining focused on pricing and underwriting discipline. In addition, we made significant progress on the integration of Huntington Technology Finance and are excited about the return profile this business provides. HTF will be a great deal for Huntington shareholders. With that said, there’s always work to be done. We can do better and I don’t want you to think we’re content with one record quarter. While we continue to make progress on improving efficiency, we still have significant opportunity for improvement to achieve our long-term goal of an efficiency ratio in the 55% to 59% range. As our past and current adjustments in the businesses mature, we will continue to become more efficient and move towards that goal. I want to close by reiterating that our Board and this management team are all long-term shareholders. Our top priorities include managing risk, reducing volatility, achieving positive operating leverage and driving solid, consistent, long-term performance and we’re well aligned in these priorities. Thank you for your interest in Huntington. We appreciate you joining us today. Have a great day everybody.

And this concludes today’s conference. You may now disconnect.