Comerica Inc (CMA) 2002 Q2 法說會逐字稿

Good morning. I will be

your conference facilitator today. At this time,

I would like to welcome everyone to the Comerica

second quarter earnings call. All lines have been

placed on mute to prevent background noise. After the

speaker's remarks there will be a question and answer

period. Simply press * and then the number 1 on

your telephone keypad to ask a question. To withdraw,

press the pound. Our host is Beth Acton. You may

begin your conference.

Good morning and welcome to the second quarter

conference call. I'm Judy Love, senior vice president

of finance. I am here with Beth Acton, who

will review second quarter earnings for you. I would

like to mention in addition to our press release, we

have included slides at our website. The slides provide

information we will cover during the conference call.

For those who have access to the website, you may

want to reference the slides during review.

Before we get started, I would like to remind you

this conference call contains forward-looking statements.

You should be mindful of the risks and uncertainties

that can cause future results to vary from expectations.

I refer you to the safe harbor statement,

which is incorporated in other calls. I will turn

over to Beth.

Good morning.

This morning we reported second quarter net income

of $184 million for $1.03 per share. We included

pre-tax charge or 20 cents per share in response to

U.S. bank directive regarding Argentina. Excluding

this charge, net income for the quarter was 220 million

or $1.23 per share, increase on per share

basis of 3% over last quarter. The charge for Argentine

exposure was announced in May, up to $63 million,

based on risk at that time. Due to reduction in exposure

since that time, the charge is less than the maximum

amount originally anticipated.

Earnings assets were up 2% relative to the first

quarter. The decline of 21 basis points in the net

interest margin to 4.56% f 4.77% resulted in reduction

in net income to $531 million. The march was driven

by three items: increase this fully secured low rate

loans to title and escrow companies. Lower contributions

from interest rate risk management hedging equated

6 basis points. (inaudible) accrual loans equating

to 4 basis points. Due to the recent high level of

home refinancing activity, deposits from title and

escrow companies have increased, resulting in higher levels

of earnings credit. Consistent with industry practice,

when earnings credits cannot be utilized through customer

service expenses, loans are provided to companies at

low rates, fully secured by deposits.

Offsetting the impact of loans was reduction of $7

million in customer service fees in noninterest expenses.

We expect the volume of title and escrow loans to

remain high throughout the remainder of 2002.

Noninterest income rose to $222 million, up 7% from

last quarter and 5% over second quarter last year,

resulting primarily from strong commercial lending

fees. Market-related fees, combination of brokerage

fees were flat from last quarter and down $9 million

versus second quarter of 2001. Preliminary assets

under management and capital management totaled $31.5

billion, versus 33 billion at March 31 and 36.8 billion

at June 30, 2001. Bank own life insurance income

reflects $9 million of death benefits in the quarter.

Securities losses of 9 million included the write-off

of the argentine securities. Increase in foreign

exchange fees of 4 million accounted for the largest

portion of the increase in other noninterest income

of 6 million.

Noninterest spences at $348 million were flat, compared

to first quarter and efficiency ratio continued to

improve to 46%. Average loan growth was modest from

the first to second quarter, about $800 million.

Increase in the California market reflects higher

loan to title and escrow companies. Growth in the

middle market, national dealer, small business and

private banking loans in the quarter were offset partially

by reduction in large corporate borrowing. Compared

with the second quarter of last year, small business

and private banking loans were up 14% and 12% respectively.

Large corporate loans declined 19% over the same

period.

Nonperforming assets were down slightly $8 million

from last quarter to $659 million or 1.60% of loans

and other real estate. Five credits over $10 million

were added in the quarter. The largest new mpa is

16 million in the automotive industry. The concentration

of nonperforming assets is Michigan and national businesses

46%; California, 29%, international 21% and Texas

4%. Looking at industry concentrations of nonperforming

loans, entertainment represented 11%, automotive processors

8% and technology 6%. During the quarter, 3 nonperforming

totals totaling 60 million were sold at a loss of

2 million. In aggregate nonperforming loans have

been charged down to 75% of the original contractual

value.

Net charge-offs for the quarter were 59 million, similar

to last quarter and represented 57 basis points of

loans. 54% of the charge-offs were Michigan and

national businesses, 45% in California and 1% f

the international portfolio. In terms of line business,

large corporate loans accounted for 34% of charge-offs,

middle market 28% and technology and life science

represented 22%.

The reserve for loan office increased 74 million to

$744 million and now totals 1.81% of loans, up from

1.64% in the first quarter. Excluding 45 million

additional provision for argentine loan, the loan loss

reserve increased 29 million, representing 1.70% of

loans. 83%, 617 million, of the reserve is allocated

and 17% is unallocated, compared to 86% allocated

and 46% unallocated in the first quarter. Nonperforming

assets decreased 8 million to 659 million, despite

increase of 23 million related to Argentina. Nonperforming

assets are 160 basis points below other real estate.

We expect nonperforming assets to be in the range

of 150 to 180 basis points for the remainder of the

year. Net charge-offs were 59 million or 57 basis

points, virtually unchanged from the first quarter.

Charge-offs are expected to be

at high end of 50 to 60 basis point range.

Given the provision related to Argentina, I thought

I would update the portfolio. Our total exposure

is 150 million, down 26 million since our May announcement

and 104 million from year-end. The exposure consists

of 90 million of loans, 60 million of securities and

9 million of unfunded commitments. Our largest single

exposure is 18 million. During the second quarter,

three argentine loans were classified as nonperforming,

bringing total Argentina nonperforming loans to 24

million. These loans are in the process of being

restructured. We do not expect material losses at

this time. In addition, there are 4 million of Argentina

securities in nonperforming assets.

Given the recent questions about the effect of the

situation in Argentina on neighboring countries, I

thought I would update our strategy and present exposure

in Brazil. Our strategy is to focus on trade finance

and foreign direct investments of well rated U.S.

and international companies, which should perform relatively

well in an environment of currency evaluation. 74%

of exposure is trade related and 55% of our exposure

is the banks. Our exposure to Brazil was 675 million,

net of 76 million supported by entities outside of

the country. 521 million of loans, 103 million of

unfunded commitments and 51 million of securities.

Our largest single exposure is 40 million. The

average maturity of the portfolio is 1.5 years. We

are planning to reduce exposure over time. There

is only one loan in the amount of 5 million that is

non-performing.

Moving to the funding side of balance sheet, average

deposits were up 500 million or 1% f last quarter

and up 4% over last year's second quarter. The mix

of deposits change relative to first quarter, as growth

in title and escrow replaced 500 million of wholesale

out of market deposits. Small business deposits grew

200 million from last quarter and technology was up

100 million.

We used excess capital to purchase 1.4 million shares

during the second quarter, bringing total shares purchased

to 3 million. Remaining authority for stock buyback

is approximately 6 million shares. We continually

assess capital position with targeted tier one ratio

of 7%. At June 30, the preliminary tier 1 common

capital ratio was 7.5 percent, the same level as the

first quarter.

I would like to update our current economic outlook.

The recession watch index continues to indicate expansion

over the next 6 to 12 months. Average annual GEP

growth in calendar year 2002 is likely to be 3%.

This would enable the federal reserve to begin monitoring

before year end creating a rising interest rate environment

through 2003. The fed funds rate is likely to reach

4% by year end 2003. We continue to project light

vehicle sales for automatic sector to be 16.5 million

units, a strong year. Michigan's economy, adjusted

for inflation, expanded 7.4% in the first half, compared

to 2001. Real expansion will range between 4 and

5% for the year. Texas leading economic index points

to considerable acceleration over the balance of 2002

and throughout 2003, following the nine-month contraction

that happened from July of 2001 through March of

2002. Northern California economy continues to struggle.

In southern California, however, employment is strong

and media home prices are soaring. The current recoveries

continue to be slower than expected economic recovery,

a continued decline in the stock market and its impact

on consumer confidence, international stability, as

in the middle East or Latin America. Based on

projected economic scenario, which assumes accelerating

loan growth and improved market returns in the second

half of the year and subject to the risks outlined,

we expect earnings to be in the range of 470 to 485,

including the 20 cent Argentina charge this quarter.

Before I open up to questions, I will like to comment

a subject in the news. That is stock option accounting.

We are undertaking review of stock option accounting

and will share our position with you in the future.

With that, I will open it up to questions.

At this time, I would like

to remind everyone in order to ask a question, press

* 1 on your telephone keypad. Your first question

comes from the line of John McDonald, UBS Warburg.

Good morning, Beth. Couple

of quick questions. Terms of loan growth, floor plan

ending (inaudible), can you give us color on that?

Also, in terms of lease finance, seems like you had

sizable increase charge-off there, especially relative

to the size of the portfolio, could you comment on

how you are feeling about that portfolio?

On the dealer's

side of things we continue to make good progress with

large dealers across the nation and I think it just

continues to be a lot of the efforts we have put in

to date. So, there is a lot of focus on it. It

is very good business. We continue to be successful

there.

In the leasing side, we are watching, obviously all

of our portfolios carefully. On the leasing side,

I would say we are making sure that we are keeping

things under control there and there will be, as you

saw - if you look over the last several quarters,

some quarters had higher levels than others regarding

leasing. I think there is nothing fundamently we

are overly concerned about. We are monitoring the

rest of the portfolios. I don't see big issues.

This is Judy.

John, the largest portion of the lease off - and

you saw it a while back, relates to the tax and life

science portfolio and so that is in cleaning out of

items that were in there. It is not a part of the

other normal leasing portfolio. So, it is centered

there.

Okay. In terms of noninterest

income, you had a good increase in the bank on life

science. Can you give us color on that?

There were frankly

unexpected death proceeds basically from executives

that have had coverage. So, it was what I would

characterize as unusual. As I mentioned in the comments

that I made, we view it as incremental 9 million that

resulted there

Okay.

Our next question is from

the line of Jennifer Thompson, Putnam Lovell.

Good morning. Question, given

your guidance that you're basically reconfirming what

is your assumption for market growth? We have seen

pressure in the markets and it has been pressuring

markets on revenues?

From our vantage

point we would obviously have assumption around stabilization

where we are presently, not with any big assumption

about growth. It is also very dependent and more

so on loan growth and improvement in the economic overall

demand by our customers and loan growth. I think

our outlook for longer growth in the second half is

perhaps not as strong as we had expected earlier in

the year.

So, in that sense, I think we would be probably on

the low end of the range I gave you.

In terms of loan growth you

mean?

I think our

expectations for loan growth compared to a quarter

ago, are not as strong as we thought a few months ago.

Middle market seems to be especially

stronger than expected this quarter. Can you give

color on where you are seeing that, if anywhere specifically?

I think we continue

to find opportunities to pick up market share in this

environment. We are a lendor who are both positive

and sticking with our customers and continuing to pursue

business during these times. Also, if you look at

the middle market category, it includes the low rate

loans I mentioned earlier to title and escrow companies.

Those are housed in that number.

Okay. Great. Thank you.

Our next question comes from

the line of Ross Demmerle, Hilliard Lyons.

Good morning. The warning

in your press release regarding the charge-off for

Argentina or the incremental charge from really -

suggests that the bank regulators pushed you into that.

I am wondering if they hadn't done that whether or

not that charge may have been higher or lower? I

guess they are traditionally more conservative. I

might take the assumption is there could be recoveries

coming from that going forward. Secondly, I am wondering

if the regulators have had a chance to take a look

at your Brazilian exposure and whether or not there

could be a charge coming down the road from that based

on U.S. regulators taking a closer look at that?

First, related

to Argentina, what we have said is that we reported

the charge in response to a U.S. bank regulatory

directive. We have not indicated anything further

than that. I think in terms - think about Argentina,

we did put - we have 28 million in nonperforming assets,

up from 5 million in the first quarter. We are in

the process of working with those companies and getting

them restructured. We don't have expectations of

any material loss at this time.

In terms of the Brazil situation, I - the Federal

regulators review is not something we comment on

publicly. I mentioned to the group, we are monitoring

that exposure closely. A lot of the exposure is trade

related, about three quarters of it. About 55% is

to banks. It has a short average life of one and

a half years. We feel comfortable we can monitor

it closely and continue to work it down over time.

Okay. Thanks.

Our next question comes from

the line of Jeff Davis, Midwest Research.

Good morning. Beth, I am

sorry, I didn't get the details. With regards to

clarification, on the guidance 470 to 485, what is

the loan growth assumption for the second half of the

year? Secondly, the margin assumption?

Couple of comments.

On the loan growth, we do have expectation we will

see more growth than we have seen in the second quarter.

It is very difficult to predict what that is going

to be because of the economic recovery and how it's

impacting the business. We do have expectation inherent

in the guidance that there will be growth. It is

hard for me to tell you broadly. It is certainly

more than we saw in the second quarter. I think we

feel pretty good there is in the pipeline, there is

loan demand that will be coming on in the third quarter

and into the fourth. It will not be - I think our

expectation will not be as much as we thought perhaps

a quarter ago.

In terms of margin, if you look at the margin in the

second quarter, while it was down 21 basis points from

the first quarter, if you look at the second quarter

in the context of really the last 2 and a half years,

it looks pretty consistent with the kind of 450 to

460 kind of interest margins, net interest margin.

The rate of 477 in the first quarter was higher than

that and looks more of a positive,.

Right. I have a 13 delta

on the hedging impact. Is there anything in particular

going on in the swap book that caused that to shift?

I know we moved up a fair bit last quarter or 1Q

versus 4Q. Was there movement in the swap book?

The effect related

to the swap book on the margin was 6 basis points.

Okay. And then last question,

any preliminary results from the - that you could

share with us, reflected in the asset quality numbers

from the exam?

We are presently

awaiting those results. I can't comment.

Okay. Thank you.

Our next question is from

the line of Fred Cummings, McDonald Investments.

Good morning Beth and Judged.

It is surprising that in light of your forecast for

stable nonperforming assets and relatively stable charge-offs,

you all continue to build the loan loss reserve

even ex the Argentina increase. What is the rational

behind that?

I think if you

step back from it and look at how the year has developed

and where we stand in the year, I would say we did

see progress obviously in the second quarter in terms

of MPAs. They are down, especially excluding Argentina,

they are down from a domestic standpoint, further

than that. Having said that, though, there is a lot

of uncertainty still in the market and we chose, as

we have with our capital position, to err on the side

of being conservative. We talked about the capital

side, we targeted lower tier 1 ratios than we are maintaining.

We think it is a positive to be a little more

conservative. We had the opportunity because of the

uncertainty around how progress was going and perhaps

not at the pace we would like to see, to err on the

side of conservatism and put additional provision.

Okay. All right. And secondly,

with respect to the deposit growth slide, I am looking

at the Other category, it seems to be primarily the

retail piece of business. I don't know if you can

give us some sense for how you are doing with respect

to transaction account growth within the retail segment,

although small business might be included in retail

deposits. Can you give us some sense for what is

going on? What transaction account growth on the

retail side would demand interest bearing checking

now?

I will make

two comments. I agree with your comment on small

business. It is an integral part of our strategy

on that front. On the retail side of the business,

I would say we are growing at low single digits.

Okay. With the low single

digits linked, Beth or year over year?

Year over year.

Okay. Thank you.

Once again, I would like

to remind everyone in order to ask a question, please

press * 1 on your keypad. Your next question is

from the line of Roger Lister, Morgan Stanley Dean

Witter.

Take a look at trends on nonperformance.

Can you give us a (inaudible) in terms of

what is going out and what is coming in and how you

are doing in terms of sort of the recovery levels and

what is going on with commercial real estate values?

Let me take

the commercial real estate values to start with. Let

me comment on that because we have important position

in the commercial real estate area. We are obviously

keeping a close eye on the market. About close to

half of our total commercial mortgage and construction

portfolio is owner-occupied. It is very granular

portfolio, 81% have balances less than a million.

That is on the commercial mortgages and on the construction

portfolio. 42% have balances less than a million.

There is a lot of granularity. We do very little

spec lending and stay within Michigan, Texas and

California footprint.

If you look at the data on nonperforming on the commercial

real estate sector, as well as charge-offs, it has

been a positive story. If you look at nonperformers

over the last quarter to quarter and year over year,

they are essentially unchanged. And in terms

of charge-offs, there haven't been any. I think that

is a positive. Of the 50% of the construction loans

are residential related. There is not a concern about

issues related to office buildings and things going

on. I am sorry, the first part of the question was

-

Sort of the issue that flows

through the MPLs, why you are getting new nonperformers,

you are working the ones out. That is perhaps another

way of asking the question of how the economy is going?

You are accumulating problems or are you able to

work out problems in general in terms of middle-market

size?

We are seeing

signs of stabilization in credit quality, including

better credit migration trends. Obviously it is lower

MPAs. If you look at sheer numbers, we are seeing

it flat and coming down.

And maybe I can - the slight

fall-off on this. When you look at nonperformers

to what extent you look at the financial health of

the borrower and how do you think about - do you have

a sense of the proportion of your nonperformers that

are still current and paying as agreed, versus those

who are not paying and the extent of the companies

still paying, but you are worried about their financial

health, you put them on nonaccrual?

Yeah, I would

say a portion of nonperformers are currently paying

a small portion.

So most of them are actually

nonpaying, is the answer?

That is correct.

Thank you.

Our next question comes from

the line of Henry Dickson, Lehman Brothers.

Good morning, Beth. Couple

of follows. One is the (inaudible) program progressing?

Two, in the margin, it appears loan spreads narrowed

and I would like you to comment on that. And on the shared

national credit exam, most companies have been commenting

on at least how their end of it has been going. Generally

it has been with no surprise. So, just how you have

been affected would be of interest?

Okay. The

first one on activity, we are making good progress

in putting in the - what I will call the infrastructure

to maximize the potential from Con activity. That

includes information systems to training to knowledge

about products to incentives and how people are incented

to work on things outside their areas to bring the

total relationship and value to the customer. So,

I think we are making good progress

on Connectivity. There is a lot of enthusiasm about

it here.

In terms of margin, I think there are a lot of different

factors that go into analyzing the margin. It is

very difficult to characterize all the different pieces.

I guess I would put it in the context I mentioned

earlier, the margin we have in the second quarter is

probably pretty representative of more normalized,

if you will, kinds of margins. I think it will be

impacted in the second half because we do have expectations,

one of loan growth and two of continuing high levels

of loans to low - low-rate loans to title and escrow

companies.

The last is on our side of the shared national credit

review was fine. Can't comment on obviously the balance

of it. It went fine. The review, we don't have

concerns.

Okay. Just when do you think

we will start to see - or talking about the impact

of Connectivity in terms of results?

I think we should

begin to talk about that next year. We will have,

as I said, the systems in place, the training, and

the incentive plans aligned with those. I think next

year.

Thanks a lot.

Our next question comes from

the line of Jim Aga, Millennium Partners.

Actually this can (inaudible).

Two questions for you. Can you briefly discuss

how comfortable you are with the current reserve levels

mandated by ikirk? I guess at the end of the first

quarter, you had 5 million in MPAs and you did not

expect that to get worse. Basically it is five times

larger, 25 million. What is to say you will not have

to take another 50 million dollar reserve as other

banks have recently had reserve down to zero?

Couple of comments.

Related to Argentina, I think our expectation that

the nonperformers could rise further from here, perhaps

up to 40 or 50 million in total. If you put it in

context, if the balance of our Argentina exposure

became MPA, nonperforming asset, so the total amount

would be nonperforming. We would be adding the difference

between the 115 and 28, so 87 million to nonperforming,

for this example. If you add that to the current

nonperformers, we get to about 746 million dollar MPA.

That is about the same as our reserve, 744 million.

It would be up, even in the extreme, which we don't

think is our expectation. We would be 100% covered

by reserve. I think we feel overall, especially given

the addition to reserves in the second quarter, that

we feel comfortable.

We also have comfort, we believe we can work through

a lot of the issues we have in Argentina without suffering

a material loss. There will be a time value, but

in terms of ultimate loss, we think we are not as pessimistic

as it may sound.

Does that put a floor on reserve

for MPAs? I mean, could they go under 1%?

I think they

could. There are a lot of different factors that

would have to come together with the economic climate

and where we are in the cycle. There are a lot of

different cycles. Never say never.

Okay. Secondly, if you had

to handicap current loan growth outlook, it has tempered

twice in the last two quarters. Can you give us color

as to why the outlook changed slightly?

From a few months

ago to now? It is just the development of - I

think it is two things. One is that the business

recovery, while the GDP, the actual investment by

businesses has been slow to come back. I think it

will be. The second is there is a new element related

to the stock market, which has an impact on consumer

confidence and their spending habits and also in business

people's feeling, frankly, there is emotionalism around

capital investment. Both of those factors, not seeing

it materialize as much, and this extra, if you will,

overlay from the equity market effect is tempering

us a bit, to be cautiously optimistic, but cautious.

Okay. Thank you.

Our next comes from the line

of Denis Laplante, Fox-Pitt Kelton.

Good morning. On the Argentina

exposure, could you help us differentiate between the

performers that are nonperforming and not. Specifically,

are they getting multinational support and that is

what is being restructured?

Uh, I would

say generally the ones that are nonperforming have

some multi-national support. I think if you look

at our portfolio in general in Argentina, about over

80% of our exposure of the company that we do business

with have some foreign percentage of ownership. In

fact, about 50% of that exposure has foreign ownership

that extends beyond 50%. I think we have seen in

the pay down you saw from year-end, to the first quarter

to where we are now, we have seen evidence of multinational

parent stepping up and helping through the situation

and repaying and allowing exposures to come down.

So, we are seeing people come to the party.

Of remaining 90 million in

loans, how much is to financial institutions down in

Argentina?

A fair amount

of it.

Over 50%?

It is about.

It is about.

About half of that?

80, about half.

Those financial institutions

basically I assume are indigenous nonforeign institutions

or including institutions that are multinational owned,

as well?

If you actually

look at the banking situation in Argentina, many of

the banks that we do business with, almost all of them,

have some form of foreign ownership. It is a different

situation than Brazil, in the sense Brazil has a

strong indigenous strong baking system relative to

Argentina. In all of them, there is some form of

ownership outside the country.

I assume, if we are grading

this, looking at the exposures, I assume that exposures

to financial institutions with foreign ownership with

strong parents is roughly half. That would be the

stuff you do not expect to go MPA. The remaining

could go and might get restructured and is part of

the reason? Is that fair in breaking this down?

I think that

is fair. I think I mentioned earlier that we do

see a risk that MPAs could be higher, up to 50 million

dollar level. What the losses are is not clear at

this point. As I mentioned earlier, we are hopeful

through restructuring and other actions, that we will

not see material losses on the portfolio.

On the nonperformers, are you still

getting payments on any of them?

Yes.

And that is being applied to

the principle?

Correct.

Good. Small technicalities

and you may have talked about this. On the tax rate,

it looked lower. Did you talk about that? Could

you explain it?

I didn't talk

about it. It relates to the - we talked about incremental

9 million of bank owned life insurance. That is

what is driving the tax rate lower. It is tax-free

proceeds.

All tax-free proceeds. That

rate will go back up where it was?

Correct.

And related to the loan growth

discussions, having been in recently and talking to

Joe Buttigieg, talk being a pipeline, that was a

quarter ago. I am assuming the discussion about pipeline

you are talking about, you are looking for second half

growth in the core business. That part has not changed?

That has not

changed. We have expectation of growth in the second

half in the core business.

Thank you.

Once again, I would like

to remind everyone to ask a question please press *

1 on your telephone keypad. The next question is

from the line of Ken Puglisi, Sandler O'Neill and

Partners.

Could you comment on the outlook

for possible additional impairment charge on deferred

distribution cost? I was also wondering and may

have missed this, was there a gain or loss on the sale

of Opay and if so, how much was that?

We have not

closed that. That will be third-quarter transaction.

There will be 11 million dollar estimated gain on

that.

Thanks. And -

I am sorry.

Thank you. Sorry. If the net asset value related

to the shares deteriorates more than 13% from the

second quarter, then impairment would be 3 and a half

million dollars. For every 5 percentage point decline

from there, potential increment of 1.4 million dollars.

Obviously the market has gone down a fair amount

since June 30. We are not anywhere close at this

point in triggering an impairment.

Thank you very much.

Our next question comes from

the line of Michael Granger, KBW.

Good morning. Couple of questions.

Could you talk about the balances on in terms of

averages for second quarter versus first quarter on the

title and escrow loans, as well as deposits? And

second question is when you talk about the hedging

coming down, is that the same as the wind down in the

average balance sheet that says business loans income?

If it is, and even if it isn't, why did the hedging

go down from quarter to quarter?

The - yes,

a lot of the hedging related impacts are in that one

line item. There are also other hedges that we do

related to deposits and debt issuance that are all

been through it elsewhere in the income statement.

So, that is one comment I would make. That is

not the only place you will find it. Just, depending

on the swaps that are coming on and coming off during

the quarter, there can be timing, calendarization issues

and I think that is what we are talking about in the

[S-BGTD] quarter.

Okay. I guess I am not clear

on that.

Depending on

if you compare second quarter with first quarter and

look at hedges rolling off. There is hedge income

related to it and hedging being put on because of the

balance sheet in the next 12 months, what that pace

was in the second quarter was different from the pace

in the first quarter. Mean, there were more hedges

that rolled off in the second quarter, relative to

the first quarter.

the hedge income was less.

Okay. The balances on the

title escrow?

You asked for

both loans and deposits if you look at the quarter.

In the - this is loans for the title and escrow

business. There were about half billion dollars of

loans. These are average loans.

Which quarter?

First quarter.

More like a billion 1 in the second quarter. Up

600 million on average. These are average numbers.

On the deposit side, in the first quarter from title

escrow - this is all deposits 5.1 billion in the first

quarter and 5.6 billion in the second.

Okay. Can you just give us

a sense of the average yield on the loans?

That can vary

by customer. I will leave it they are low rates.

Okay. Thank you.

Your final question comes

from the line of Denis Laplante, Fox-Pitt Kelton.

Yes. One follow-up, related

to other income. That number was up, was there nonrecurring?

In the other

noninterest? Other noninterest income, no.

Went from 46 to 54?

Right. A big

portion is foreign related. Not trading but customer-

initiatated business. We earn margin on that business.

It is not us taking position and trading it. It

is driven by efforts by foreign exchange activity working

with the lending officers to do - it is connectivity

to do more business with customers in foreign exchange.

Thank you.

This concludes the question-

and-answer session. I would like to turn back over

to Ms. Beth Acton.

I want to thank

you all for listening today and for all your questions

and look forward to meeting those I haven't met yet.

Thank you very much.

Thank you for participating 00:59:07 in today's conference call. You may now disconnect.