Truist Financial Corporation (TFC) — Q2 2015 Earnings Call Transcript

Thank you, Tracy, and good morning everyone. Thanks to all of our listeners for joining today. We have with us Kelly King, our Chairman and Chief Executive Officer; and Daryl Bible, our Chief Financial Officer, who will review the results for the second quarter of 2015. We also have other members of our executive management team who are with us to participate in the Q&A session, Chris Henson, our Chief Operating Officer; and Clarke Starnes, our Chief Risk Officer. Ricky Brown, our Community Banking President who is normally with us on these calls, is not available today. He is having some shoulder surgery, so we wish Ricky well with that. We will be referencing a slide presentation during our comments today. A copy of the presentation as well as our earnings release and supplemental financial information are available on the BB&T website. Before we begin, let me remind you that BB&T does not provide public earnings predictions or forecasts. However, there may be statements made during the course of this call that express management’s intentions, beliefs or expectations. BB&T’s actual results may differ materially from those contemplated by these forward-looking statements. I refer you to the forward-looking statement in our presentation and our SEC filings. In addition, please note that our presentation includes certain non-GAAP disclosures. Please refer to page two and the appendix of our presentation for the appropriate reconciliations to GAAP. And now I will turn it over to Kelly.

Thank you, Alan. Good morning, everybody. And thanks for your continued interest in BB&T, and thanks for joining our call. So, we had a really solid quarter frankly with excellent results, revenues were up compared to linked and like quarters, and I might add in a relatively tough revenue environment, excellent credit quality, capital and liquidity, so overall a very solid quarter. Net income was $454 million in the second quarter; diluted EPS totaled $0.62 but if you exclude the non-cash loss on American Coastal and merger-related charges, it was $0.69. Fee income ratio continued to improve to a very nice level of 46.3% versus 45.8% in the first quarter ‘15 and excluding the American Coastal non-cash loss and the AmRisc, our ROA was 1.17, ROE was 9.06, and importantly our return on tangible common equity is 14.05. From a revenue point of view, we were very pleased. Our revenue totaled $2.4 billion, up $23 million or 3.9% annualized; revenue increased 1.3% versus the second quarter of ‘14, particularly in mortgage banking and investment banking. Our fee income ratio continued to be strong, and we think that is a continuing positive for our company. In the lending area, our average loans grew 3.9% versus the first quarter, but if you exclude our planned residential mortgage runoff, it was 7.8%, which was very good in this environment. That area was led by C&I, Direct Retail, Sheffield and Regional Acceptance. We had some very strong strategic developments during the quarter. We completed the sale of American Coastal and significantly increased our ownership in AmRisc, which basically eliminates the small underwriting risk that we had in American Coastal. We reinvested that in AmRisc which increases our ownership in a solid fee-income business, so some net real positive from a quality point of view. We successfully closed and converted the Bank of Kentucky on June 19th. It’s going great. I was out there last week for a visit with the groups and a whole day with them. I had breakfast with a group of tellers and associates. They were very excited to meet with the senior leadership team and then had a meeting with all of their officers and Board members. Although very early, it’s off to an extremely positive start and the Northern Kentucky, Greater Cincinnati market is really fantastic for us. We got approval for Susquehanna with a planned August 1st acquisition and a conversion later in the fourth quarter. This whole process is going very smoothly. The receptivity in the markets has been great. I was up in Lancaster last week, where Susquehanna was a key sponsor in the LPGA golf tournament, and I had a chance to meet a lot of clients and associates, and attitudes were extremely positive. Susquehanna recently got rated number one in client service quality by J.D. Power in the Mid-Atlantic region. By the way, BB&T was rated the best, number one of large banks in that period. It’s a huge opportunity for us in really good markets. These markets are a lot like the rest of our footprint, a combination of good solid rural areas and medium-sized cities just like we’ve always operated in, with an excellent large market in Philadelphia and strong wealth opportunities. If you are following along on the deck, look at slide four. We always like to point out a few selected items that affect earnings. We did have a positive income tax adjustment of $0.15 on an after-tax basis. We extinguished about $1 billion of Federal Home Loan Bank debt, which had a $0.15 negative EPS impact, so they were just kind of washed out. We had a non-cash loss on sale of American Coastal of $0.05 and $0.02 in merger-related restructuring charges. That said, that indicates about a $0.07 negative impact to recurring earnings. If you turn to slide five, I’ll give you a little more commentary regarding the lending business. Our C&I loan growth was very strong. Average C&I loans were up $1.1 billion, or 10.6% annualized. We had strong growth in corporate lending, mortgage warehouse lending, and government finance. Although spreads are very tight, I’m proud of the fact that our spreads were basically flat compared to the first quarter, which is a big achievement given the environment. We currently expect C&I to continue to grow in the low double-digit range in the second quarter if you exclude our pending acquisition of Susquehanna, and including Susquehanna, C&I will likely see 30% annualized growth. In the construction and development area, the CRE balance increased by $33 million or about 4.8% annualized. The period balances were up more than $200 million, but about 40% of that was from the acquisition of Bank of Kentucky. Organic growth was strong based on a very positive change and a significant decrease in payoff activity observed last quarter. We're seeing strong growth in funding for multifamily construction and hospitality projects. Spreads on C&I lending actually improved during the second quarter, and we expect C&I growth to be stronger in the third quarter. The income-producing CRE increased by $50 million or 1.9%. Meanwhile, period balances were up almost $400 million with most of that due to the Bank of Kentucky acquisition. Market fundamentals generally continue to improve, making this a really good market. Spreads continue to tighten, but on a risk-adjusted basis, they remain solid. In the next quarter, we expect C&I to show strong growth due to continued organic success and the impact from a full quarter of Bank of Kentucky, along with the partial contribution from Susquehanna. Average direct retail lending is a really strong story for us. Over the last year and a half, we have increased $258 million, almost 13% annualized, primarily due to HELOCs and direct auto lending in the branches. The wealth contribution to direct retail lending continues to be outstanding, showing significant momentum going into the third quarter. If you look at average residential mortgage loans, they were down $565 million or 7.4% as we are letting that run off since we’re basically selling all conforming production. We hope to continue this strategy for some time. In the third quarter, absent the impact of Susquehanna, residential mortgage loans will continue to decline. If you include Susquehanna, they will likely grow, but that is not a change in strategy; it is just incorporating the Susquehanna balances. Our other lending subsidiaries grew $383 million or 13.6%, indicating strong seasonal performance, especially from Sheffield, Grandbridge, AFCO/CAFO, our insurance premium finance business, and Regional Acceptance. As a summary, we expect average total loans from investments held to be an annualized 3% to 5% in the third quarter; excluding residential mortgages, we expect 6% to 8% growth. Overall, we expect a strong quarter filled with growth opportunities and efficiency gains heading into the next year.

Thank you, Kelly, and good morning everyone. This morning, I am going to talk about credit quality, net interest margin, fee income, non-interest expense, capital, our segment results, and the impact of acquisitions on our results continuing on slide seven. As Kelly said a few moments ago, we are very pleased to report a solid second quarter. Credit quality was excellent; net charge-offs were 33 basis points, down 3%, which is better than we expected. Excluding Regional Acceptance, net charge-offs were only 20 basis points. Loans past due increased 4% due to seasonality in Regional Acceptance. Going forward, we expect net charge-offs, including Susquehanna, to be between 35 and 45 basis points in the third quarter, assuming no material decline in the economy. NPAs declined 5% and commercial NPLs declined 12% from last quarter. We expect NPA levels to remain stable, including acquisitions. Moving to slide eight, our allowance coverage remains very strong, increasing to 3.7 times from 3.6 times net charge-offs last quarter. The allowance includes the impact from the recent SNC exam. We recorded a provision of $97 million for the quarter compared to net charge-offs of $98 million. Going forward, our provision will likely be driven by actual losses incurred and loan growth. We currently expect the third-quarter provision to increase by $15 million to $30 million to account for the impact of the acquired portfolios and seasonal retail loan dynamics. The fourth-quarter provision is expected to be $25 million to $40 million greater than the second quarter. Moving on to slide nine, our net interest margin stood at 3.27%, down 6 basis points and within guidance we previously provided. The decline resulted from a runoff of acquired assets and lower yields on new loans and securities, offset by funding mix improvements. The core margin was at 3.16%, down 2 basis points. Looking ahead, including Susquehanna, we expect a GAAP margin increase of about 4 to 6 basis points in both the third and fourth quarters, resulting in a GAAP margin in the mid-3.30s by year-end. We expect the core margin to remain relatively flat unless interest rates begin to rise. Referring to our sensitivity table, we became slightly less asset-sensitive in the second quarter, primarily due to terminations of Federal Home Loan Bank advances and changes in our deposits funding mix. However, we will definitely benefit once the Fed starts to raise interest rates. Moving to slide 10, our fee income-producing businesses had a strong quarter, with the fee income ratio increasing to 46.3%. Total fee income reached $1 billion, up $22 million compared to the previous quarter. The change in fee income was mostly driven by these factors: First, mortgage banking increased by $20 million, reflecting higher net MSR related income and higher commercial mortgage volume. Second, investment banking and brokerage fees increased by $14 million, mostly driven by higher capital markets activity. This growth was offset by an $18 million decline in insurance income mainly due to the sale of American Coastal and a seasonal decline in employee benefit-related revenues. Finally, other income decreased by $25 million due to the loss on sale of American Coastal. Looking forward, we will likely experience a seasonal decline in insurance revenues in the third quarter along with softer mortgage revenue, but we will gain a partial quarter benefit of $25 million to $30 million from Susquehanna. Overall, fee income for the third quarter is expected to be flat to down 2%. In the fourth quarter, fee income is expected to increase by 3% to 5% compared to the second quarter. Turning to slide 11, our non-interest expenses increased, consistent with our guidance. Personnel expense went up due to higher production-related incentives, acquisitions, annual merit increases, and higher equity-based compensation for retirement-eligible associates. FTEs increased by 489, mostly related to acquisitions. Excluding the loss on debt restructuring and merger charges, expenses grew by $47 million, driven by personnel-related costs, which included new branches in Texas and Kentucky. Our effective tax rate was 13.8%, due to the STARS recovery. We expect our effective tax rate to be around 30%. Excluding the loss on debt restructuring and merger charges, we anticipate a 3% to 5% rise in non-interest expenses due to the upcoming Susquehanna acquisition. In the fourth quarter, we expect a 6% to 8% increase in non-interest expenses compared to the second quarter due to the full quarter impact of Susquehanna. Excluding merger-related costs, our fourth-quarter core expenses are projected to be approximately $1,550 million. We also expect $60 million to $80 million in merger charges for both the third and fourth quarters. We are very confident we will improve our efficiency and reduce these expenses. We are already on track to achieve our targeted savings for Susquehanna by the end of 2016, with at least 32% of that expense base driven out of the run rate. Moving to slide 12, our capital ratios remain very strong, with Basel III common equity Tier 1 capital at 10.4%. The transactions involving Bank of Kentucky and AmRisc used 18 basis points of our common equity Tier 1 capital. In terms of liquidity, our LCR declined to 118% due to increases in interest rates affecting the mark-to-market on securities and non-operating deposits at wholesale funding. Our LCR was well above the minimum required 90% that starts in 2016, and our liquid asset buffer at the end of the quarter was strong at 13.3%. Regarding our segments, starting on slide 13, the community bank's net income was up $24 million from last quarter, driven by deposit growth and higher funding spreads on deposits, partially offset by lower interest rates on new loans. Loan production was very impactful; commercial loans were up 10%; direct retail loans were up 35%; and revolving credit increased by 22%. The conversion of Bank of Kentucky was a big success, and we are preparing for a third-quarter closing and fourth-quarter conversion of Susquehanna. On slide 14, residential mortgage net income totaled $72 million, up $8 million from the first quarter, driven by higher loan production and an increase in net MSR income, with credit quality also remaining strong. Moving to slide 15, dealer financial services continues to generate strong loan growth with average loans up 6% for dealer finance, excluding wholesale and 10% for regional acceptance. Dealer finance launched a flat-fee dealer compensation program on July 1st, eliminating pricing discretion in consumer transactions, with asset quality indicators for dealer finance and regional acceptance performing well within our risk appetite. Regional Acceptance opened a new office in Kansas City, and an additional office in Northern Virginia is planned for later this year. On slide 16, specialized lending net income totaled $70 million, up $13 million from last quarter, driven by strong loan production in commercial mortgage, small ticket, and consumer loans from Sheffield, along with solid performance from mortgage warehousing. Credit metrics remain strong with charge-offs at 16 basis points. Moving to slide 17, insurance services net income totaled $53 million, down $19 million from last quarter, primarily driven by a seasonal decrease in employee benefit insurance commissions and the sale of American Coastal. Year-to-date new business growth has been very healthy at 14% for retail and 17% for wholesale, with same-store sales achieving growth of 2%. The AmRisc transaction eliminates our exposure to underwriting risk and enhances our investment in a high-growth business. Insurance services also acquired NAPCO, a wholesale broker with commercial property catastrophe insurance coverage. In slide 18, financial services generated significant corporate loan growth of 17%, and wealth experienced a 13% loan growth, with June being a record month for wealth lending, both in dollars and units, and corporate banking’s average deposits grew by 38% on an annualized basis. Turning to slide 19, let me recap the impact of our acquisitions: including Susquehanna, we expect total loans of approximately $135 billion and securities of approximately $43 billion at the end of the quarter. Regarding credit, we expect the third-quarter provision to increase by $15 million to $30 million and a fourth-quarter provision increase of $25 million to $40 million, depending on loan losses and growth. We will update these figures after the acquisition during our next investor conference. Regarding the net interest margin, we expect Susquehanna to increase the GAAP margin by about 4 to 6 basis points in both the third and fourth quarters. Fee income in the third quarter is expected to be flat to down 2%, while the fourth-quarter fee income is projected to increase by 3% to 5% compared to the second quarter. Lastly, regarding non-interest expense, excluding the loss on debt restructuring and merger charges, expenses are expected to increase by 3% to 5% in the third quarter and 6% to 8% in the fourth quarter, based on the second quarter of 2015. We are on track to achieve targeted savings for Susquehanna by the end of 2015, with at least 32% of their expense base eliminated.

Thanks, Daryl. To sum up, I think it was a really solid performance organically. We had excellent strategic execution, outstanding credit quality, capital and liquidity, positive revenue forecasts, and opportunities for expense efficiency. It’s a challenging environment, but overall for BB&T, we’re quite excited about our future. Now, let’s go to Q&A.

Thank you, Kelly. Tracy, at this time if you would come back on the call and explain how our participants can participate in the Q&A session?

Two questions on the acquisition; first of all, thanks for all the details, very helpful, on slide 19. The question is just on the timing of the cost savings -- I think on the merger and integration charges, you were pretty clear that there’s going to be a peak in Q4 ‘15. How do you see the timing of the cost savings over the course of -- starting in a couple of quarters to the fourth quarter of ‘16?

So Betsy, the cost savings will start occurring immediately and will be basically completed by the end of ‘16.

Okay. But that should be linear or is there going to be a bump…

It will be a negative curve linear. I mean it will come off fast early on and then slower as you go towards the end of the year.

Okay. And then pulling it all together the accretion you’re looking for from the deal, is it still in that 2% to 3% range?

Yes. We’re still targeting 3%, what we originally said.

Absolutely. Betsy, based on what we know now versus what we knew when we announced that this is just a really good company and the great markets, the receptivity of that company has been outstanding. Cultural integration is really smooth. It will be a great merger.

Thanks a lot. Daryl, just one follow-up on the balance sheet. Thank you for giving us the period ends on the loans and the securities. And I’m just wondering is there any other mix shift changes that we should consider when we’re thinking about the size, the total size of the balance sheet going forward?

I think the earning assets should pretty much fit what we told you. On the liability side, we are extinguishing the Federal Home Loan Bank advances and you’ll see us starting to call some of their trust preferred and other sub debt obligations as we’re allowed to get those calls. So those will come off the balance sheet to help with run-rate.

So, does that kind of get us in the $180 range on earning assets?

Yes, that would be correct. I mean that’s right.

Second question, just on fee income. There are always a couple of moving parts and especially this quarter with insurance side. So, can you just give us an update on how much that’s influencing the fee guide here in terms of the seasonality, the loss of the absence of the sold revenues, and what you’re looking for in that part of the business looking ahead?

This is Chris Henson, I’d be happy to do that. It is a bit confusing. Last time I mentioned we would be up about 3.3%; we did not at that time have approval to move forward with American Coastal. So that happened subsequent to that guidance. In fact what happened, what you should look forward to in the third quarter is you would see fee income insurance decline in the 13%, 14% range, about 10% of that would be attributed to the loss of American Coastal, the balance would be seasonal. And then from there, you should see fourth-quarter numbers moving up in the 7.5% to 8.5% range to finish off the year. So, the overall revenue loss due to American Coastal in 2015 would be in the $90 million to $92 million range. Seasonality will introduce just a bit more of it into the picture going forward.

Kelly, can you really give us some thoughts on your outlook? Obviously, you have two successful deals here, particularly the Susquehanna deal which is a good size win. What is your view on M&A for next year, especially in light of the fact that some of your bigger competitors seem to be getting their internal systems up to a level that I think is acceptable to regulators to allow them to start to do bigger deals in the second half of next year and into ‘17? So, maybe give us how you see the landscape developing over the next 12 to 18 months?

Gerard, we’ve said for some time now that of course our M&A strategy is a supplement to our organic growth strategy and it remains so. I consistently say we would like to do 5% to 10% of our asset size in good quality acquisitions; we did that this year with Bank of Kentucky and Susquehanna. That’s about $10 billion to $20 billion in a year, and I feel confident we will be in that same category range for next year. There are a number of institutions in the $5 billion to $20 billion range that I think are considering their strategic opportunities and may present some availabilities. While there may be other competitors out there, that's not something I have spent a lot of time worrying about. The partners that we talk to are ones that we’ve known a long time and our cultures are very similar, our strategies are similar. There is a very high probability that this will be what we like to do.

As a follow-up, Daryl, any commentary on -- you’ve obviously converted to a single general ledger. I know Bank of Kentucky was a small deal; Susquehanna will be a better test for you folks on the integration. Is there a possibility you could get better expense savings because of better execution due to the newer systems you have?

I would say that the newer systems could give us some expense savings down the road. We’re still trying to get all the general ledger connected to the SAP system; there are other pieces we’re adding on in this year and next year.

So, Gerard, the way this works, it won’t be specifically around acquisitions. The efficiencies in the systems, when you put all the technical aspects together, they have disparate systems and when you’re drawing information it becomes much more seamless and efficient. It’s not specific to acquisitions, but it doesn’t mean when you do an acquisition, you are more efficient. But as Daryl said, we’ll continue to peel that out.

Regarding margin outlook, I know you have indicated core margin will be stable in the third quarter. That implies that Susquehanna has no real benefit to the margin despite having a somewhat higher margin, I guess. Is that the case or are there any other factors impacting that?

When we bring Susquehanna in, we’re going to mark-to-market the balance sheet, so their loans and deposits come over to our company. Our best guess is core remains stable, and once interest rates start to rise, our core should expand. We do get GAAP accretion on purchase accounting with Susquehanna; that’s in the neighborhood of 8 to 12 basis points over two quarters.

Right, okay. But the core doesn’t benefit much?

Not until the Fed starts raising rates.

And separately, also on Susquehanna, can you just give us your updated thoughts on the plans for the Hann auto lease subsidiary? I know that was kind of on the table, but what will you do with it? And then secondly, could you talk about revenue enhancement opportunities, not that we’re out here trying to model that, but it seems like given their product breadth versus what BB&T brings, that there could be an opportunity to drive upside to that 3% accretion from the revenue side?

We’re working closely with our partners at Susquehanna to evaluate how we integrate that platform and how we think about it going forward. We’re fairly large in the sales finance business, so we believe this merger gives us an excellent opportunity in the Northeast and Pennsylvania and New Jersey markets. We are still evaluating our appetite for the leasing component and will finalize those plans soon after the purchase.

John, just one point. They have a really good start retail strategy. We won’t change that dramatically. The two big areas are going to be huge opportunities to enhance our corporate sector, where we have a broader range of products and larger size for those larger deals that they couldn’t do, and others as well.

We have opportunities in insurance and wealth. They had a retail insurance franchise, and we will convert that over in early fall. We will look to acquire our way in and around their footprint. Additionally, they have a business called Stratton Management for asset management, which we believe will enhance our serving capital business. We think there is a lot of opportunity to provide more distribution.

Question for you about the insurance fees and just the guidance moving forward there specifically with the American Coastal and AmRisc. If I understand the guidance correctly, is that a net negative to overall insurance revenues by about $60 million a year?

It’s actually going to be a bit more than that; I can explain. We had two businesses, one being American Coastal and then AmRisc, which is a faster-growing business where we own a little less than half but have control. Given we have control, we already have consolidated 100% of their numbers into ours. So, you won’t see a move up at the top line from AmRisc, but you will see a reduction in controlling interest, which means we will report more profitability out of that business. So, don’t expect to see any improvement or increase in revenues from AmRisc, although it is a higher margin business and critical to our long-term enterprise.

Remember that the whole business is gone, so it’s not just revenue that correlates, it’s expenses and earnings as well. In the short term, it may be slightly dilutive, but over the next couple of years, we think it will turn from being slightly dilutive to being accretive.

To sum it all up, it will be dilutive by about a penny initially, followed by relatively flat performance, and then growing thereafter. AmRisc is directly tied to the second largest wholesaler in the country, making it critical long-term.

And one other question about the capital deployment timeline; are there any changes to that, or are you still expecting to start implementing the buyback in Q3, or would there be changes still with the potential announcement of incremental M&A?

As we have said consistently, our strategy for capital deployment involves organic growth, dividends, M&A, and then adjusted buybacks. We did have requests approved for about $820 million of buyback and/or alternative uses of capital in our CCAR plan. We have recently received board approval for 50 million shares. While we consider our buyback options on a day-to-day basis based on projected opportunities, we will make those decisions as opportunities arise.

So the implication there would be if you’re not buying back stock aggressively towards that $820 million in Q3, then the likelihood of M&A is probably higher. Is that a fair assessment?

That would be a reasonable deduction.

I’ve got a question on the expense side. Could you provide a bit more context on the 7% increase in personnel expense year-on-year, just how we reconcile that with the overall decline in average employees over the period?

The expenses were up due to higher production incentives, especially in mortgage, Grandbridge, and investment banking. We also had higher costs in our healthcare and pension plans. While we added FTEs due to recent acquisitions, I’d look at that metric more closely linked quarter than year-over-year.

On the Federal Home Loan Bank borrowing extinguishment, does that eliminate all your Federal Home Loan Bank borrowings? Is there potential for you to lower borrowing costs any further?

We still have a little over $2 billion of long-term Federal Home Loan Bank advances that have an average cost of over 4.5%. Right now the plan is to keep those on the books unless we find other opportunities to offset them.

And then on the competitiveness of lending, some of your competitors have mentioned that the middle market commercial is overbanked. Can you add some context to this at BB&T?

We define middle market as companies with revenues up to about $500 million. We see highly competitive conditions, especially in the lower end of the middle market as more leverage-driven restrictions push market focus there, with a resilient performance by our end to maintain spreads.

Hi, I want to confirm the 3% accretion from Susquehanna includes some revenue enhancement, right?

I would say it’s really driven more by cost savings. We do have fee income increasing over a five-year time period, but the initial accretion is primarily due to cost savings.

The efficiency ratio has spiked linked quarter significantly. Can you walk through why that’s happened and what the plan is moving forward?

We have been consistent with managing our efficiency ratio, even as overall expenses have elevated from systems, risk management investments, and pre-investments regarding M&A activity. We believe this metric will slowly come down as we progress through next year.

And in regard to acquisitions versus buybacks, it sounds like you are ready to pursue further deals immediately. Should we expect that to possibly delay buyback execution?

Our approval is based on how we generate capital across the year, but we have considerable flexibility in the current quarter to execute buybacks if we choose to.

Daryl, could you discuss the purchase accounting accretion in 2016? When does it peak, and what is the expected run-off as the year progresses?

For Susquehanna, we will have approximately under $600 million of accretable purchase accounting income over the life of the assets. It will peak early on and taper off towards the end of this five-year window.

Thanks, and then as a follow-up, service charges are down 2.5% year-over-year. How much of that is due to consumer behavior versus any specific actions taken internally? Do you anticipate any improvements in that area?

Consumer behavior is largely influencing this, as clients have more access to information technologically. With higher deposit balances, clients are carrying larger balances, which leads to lower fees.

We’ve had some mix of commentary on economic outlook recently. Can you share your outlook, particularly regarding the Southeast?

I see real GDP growth in the range of 2% to 2.5%, with little risk of downside. I anticipate growth in the Southeast will be slightly above the national average—maybe closer to 3.5%.

What is your outlook for the mortgage business? Are we at the last wave of purchase activity?

I think it will be steady to slightly up. The refinance market might decline, but we're seeing improvements in new home purchases and construction, so I believe steady growth is in store.

Thank you, Tracy. And thanks again everybody for joining us today. If you have further questions, feel free to contact Tamera or myself in Investor Relations. Thank you, and we hope you have a great day.