Huntington Bancshares Inc (HBAN) 2004 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Huntington Bancshares first quarter 2004 earnings conference call.

At this time, all participants are in a listen-only mode.

Later, we will conduct a question-and-answer session, and instructions will follow at that time.

If anyone should require assistance during the conference, please press star then zero on your touch-tone telephone.

As a reminder, this conference call is being recorded.

I would now like introduce your host for today's conference, Mr. Jay Gould, SVP - IR.

You may begin.

Thank you, Patty, and welcome, everyone, to today's conference call.

Before the formal remarks, as you know, we have some housekeeping items we usually take care of.

Copies of our slides that we will be reviewing today can be found on our web site, Huntington.com.

This call is also being recorded and will be available as a rebroadcast starting about an hour from the close of the call through the end of this month.

Please call the Investor Relations department at 614-480-5676 for more information on how to access the recordings or playback or if you have difficulty getting a copy of the slides.

Today's discussion, including the Q&A period, may contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995, and such statements are based on information and assumptions available at this time and are subject to change, risk, 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 the slides at the end of today's presentation as well as material filed with the SEC, including our most recent form 10-K and 8-K filings.

So, let's begin.

Turning to slide two, presenting during today's call will be Tom Hoaglin, Chairman, President, and CEO and Mike McMennamin, Vice Chairman and CFO.

Also present for the Q&A period with us today is Nicholas Stanutz, EVP and the head of dealer sales and Tim [Barber], SVP of credit risk management.

On slide three we note several aspects of the basis of today's presentation.

As always, we encourage you read this, but let me point out a couple of key disclosures.

First, this presentation contains GAAP financial measures and non-GAAP financial measures where we believe it helpful to understanding Huntington's results of operations or financial position.

Where non-GAAP financial measures are used, the comparable GAAP financial measures as well as the reconciliation to comparable GAAP financial measures can be found in the slide presentation or in the quarterly financial review supplement to today's earnings press release, which, again, can be found on our web site, Huntington.com.

Also, certain performance data we will review are shown on an annualized basis, and in the discussion of managed risked income, we do this on a fully taxable equivalent basis.

Further, we relate certain one-time revenue and expense items on an after-tax per share basis.

Many of you are familiar with the terms and their usage, but for those of you who are not, we have provided definitions and rationale for their usage on slide three.

Today's presentation is going to take about 30 minutes.

We want to get to your questions, as always, so let's get started.

Tom?

Thank you, Jay, and welcome, everyone.

Thanks for joining us.

Turning to slide four, I will begin with a review of significant first quarter events and highlights.

Mike will then follow with the usual in-depth review of the quarter's financial performance.

I will then wrap up the session with an update on our progress with the pending Unizan merger and close with an update on our outlook for 2004 performance.

Slide five reviews key events and highlights of the quarter.

An obvious highlight was our January-announced merger with Unizan Financial Corp..

We're moving ahead as expected and are very pleased with our progress to date.

More on this later.

Turning to first quarter financial performance highlights compared with the fourth quarter performance, first quarter earnings were 45 cents per common share, up from 40 cents per common share in the fourth quarter and 15% higher than the 39 cents per share a year ago.

Loan and lease growth was, again, very strong.

While reported average loans and leases increased only $96 million, or an annualized 2% from the fourth quarter, first quarter average total loans and leases were reduced by $932 million, reflecting the impact of the fourth and first quarter all-in-loan sales.

Adjusting for this impact, underlying total loan and lease growth would have been a very strong annualized 14% from the fourth quarter.

On the same adjusted basis, average auto loans would have increased an annualized 16% from the fourth quarter.

Residential mortgage and equity loan growth was also strong, up an annualized 28% and 22% respectively.

We also saw good growth in small business CNI and CRE loans, commercial real estate loans, as well as middle market commercial real estate loans.

Middle market CNI was down slightly as demand for corporate loans remained weak, but we were encouraged to see a late quarter pickup in these balances.

Late in the first quarter, we sold $868 million of auto loans.

Those of you familiar familiar with Huntington know that this is a continuation of a strategy begun last year to lower our overall credit risk exposure to auto financing.

At the end of 2002, our auto finance concentration was 33%, simply too high.

To lower this concentration, we've now sold auto loans in four of the last five quarters.

This quarter's sale brought the program to date total of $3 billion and resulted in a $9 million gain, which added three cents to earnings per share.

This sale lowered our auto finance exposure to 24% from 28% at the end of last year.

We like the auto finance business and continue to expect to generate strong levels of originations.

Therefore, it's important note that even when we do get to our 20% target, which we are approaching, future sales on a fairly regular basis will help manage this exposure.

You'll recall that the fourth quarter represented the first time in a number of quarters where core deposits, excluding retail CDs, declined.

We think some of this was attributable to funds flowing out to the equity markets, as well as lower deposit rates resulting from our decision in the third quarter to reduce the rates on non-maturity deposit accounts.

We're pleased that the first quarter results saw a reversal of this outflow, as average deposits increased modestly.

Our net interest margin was down six basis points to 3.36% from 3.42%.

Much of this decline reflects our success in lowering the overall risk of our loan portfolio through the generation of lower risk yet lower margin residential real estate secured loans.

It also reflects growth in lower margin investment securities.

We were also very pleased with our underlying credit quality trends, which give us encouragement about improved earning performance over the remainder of this year.

For example, while net charge-offs were 53 basis points of average loans, the underlying rate was lower in that this included eight basis points related to a one-time adjustment for losses on repossessed automobile loans.

Mike will detail this later.

Nonperforming assets showed a modest uptick, up $4.3 million with an MPA ratio of 43 basis points, still low.

Importantly, the inflow of new, nonperforming assets declined 29% from the fourth quarter level and was the lowest in three years.

We believe it's been common industry practice that the allowance for loan and lease losses includes a reserve for unfunded loan commitments, and this was our practice.

But during the quarter, we decided to reclassify this unfunded loan commitment component out of our loan loss reserve and report it as a separate liability on the balance sheet.

We believe this reflects the true nature of this reserve and is better financial disclosure.

It's important to understand that this is a reclassification.

There is no earnings impact, and the same total level of reserves still exists to absorb credit risk.

This is simply a matter of changing the unfunded loan commitment reserves balance sheet geography.

However, this balance sheet reclassification does lower our reported loan loss reserve and coverage ratios from what you are used to seeing.

Specifically, our loan loss reserve ratio at March 31, before this reclassification, was 1.55%, but 1.39% after the reclassification.

Similarly, our nonperforming asset coverage ratio at March 31, before the reclassification, was 357%, but 322% after the reclassification.

This quarter, on slide eight and on page six of our quarterly financial review package, we have shown our reserve ratios calculated both ways so you can see the historical impact.

Our reserve in coverage ratios continue to be strong.

Lastly, it's important to note our tangible common equity ratio increased to 6.95% from 6.79 at the end of last year.

In sum, we ended the quarter well-positioned for continuing our earnings momentum.

I'll comment more on our 2004 outlook later.

Before I turn this over to Mike, who will provide additional details, I want to say that we are very pleased to learn about an hour ago that Standard and Poors today removed us from credit watch and upgraded their outlook to stable.

Mike?

Thanks, Tom.

As shown on slide seven, reported or GAAP net income was $104.2 million or 45 cents per share.

There were three significant items impacting the quarter.

First was the $9 million pretax gain, roughly three cents a share, on the sale of $868 million of auto loans that Tom mentioned.

Second, we had $10.1 million of pretax, $6.6 million after-tax, or 3 cents a share, of mortgage servicing right, temporary impairment.

This follows $3.5 million pretax, or about a penny a share, mortgage servicing right, temporary impairment recovery in the fourth quarter.

You will recall that interest rates rose in the fourth quarter and then did an about-face and declined during the first quarter.

Third, there were investment security gains of $15.1 million pretax, $9.8 million after-tax or four cents a share.

We use investment securities as an on-balance sheet hedge against swings and mortgage servicing rights valuation changes.

As is our custom in these quarterly earnings calls, the remaining slides are the ones we typically use to review our financial performance.

Please note that additional slides are included in the appendix to give you more detailed information, should you find that helpful.

Slide eight is our typical highlights page.

Tom has already noted many of the items for the first quarter.

But you will note that near the bottom of the slide, we show the loan loss reserve ratio, both on the new basis, that is excluding the reserve for unfunded loan commitments, 1.39% at March 31, as well as the old basis, which includes the unfunded loan commitment reserve or 1.55% at March 31.

I'm going to be covering many of these items in detail later, so let's move on to the next slide.

Slide nine compares the income statement for the first quarter, the fourth quarter, and the year-ago quarter.

Net interest income declined $1.6 million from the fourth quarter, mostly reflecting the impact of the auto loan sales, but it did increase $20.9 million or 10% from the year-ago quarter.

Provision expense declined slightly from the fourth quarter and was down 30% from the year-ago quarter, reflecting the impact of the sold loans, improving credit quality, and the lower risk profile of our loan portfolio.

More discussion later.

Non-interest income declined $18.9 million, and Non-interest expense declined $31.8 million, with both measures continuing to be impacted by the runoff in operating leases.

The graphs on slide ten show the quarterly earnings trend in net income and earnings per share with the 2003 third quarter reflecting both income before and after the cumulative effect of the adoption of FIN 46.

Reported net income for the first quarter and earnings per common share increased 14% and 15% respectively from the year-ago quarter.

Slide 11 shows at first quarter, net interest income on a fully taxable equivalent basis increased 11% from the year-ago quarter, despite a declining net interest margin.

The right-hand side of this chart shows some of the factors that are influencing the net interest margin in recent quarters as well as -- as well as in coming quarters.

First, we have had growth in lower margin investment securities.

Average investment securities increased 13% from the fourth quarter and were 54% higher than a year ago.

This growth reflects the investment of some of the proceeds of the auto loan sales.

Second is a reminder that the runoff in our operating lease portfolio has a positive impact on the margin.

Over time, as new leases are recorded as direct financing leases, operating lease fee income declines, and direct financing lease interest income increases along with the net interest margin.

Third, the sale of auto loans has had a negative impact on our margin.

Fourth, lower deposit costs continue to benefit the net interest margin.

During the first quarter, the average rate on total core deposits was 1.53%, down 12 basis points from 165 in the fourth quarter.

The average rate on savings deposits, which represent just under 20% of total core deposits declined 28 basis points from 122 in the fourth quarter.

Lastly, the growth in lower risk, albeit lower margin loans, continues to negatively impact the net interest margin, although we believe the overall risk-weighted return is higher.

Our net interest margin has declined for many of the same reasons that margins have declined in the industry.

That is prepayment of fixed rate mother-in-law and other consumer loans, difficulty in reducing deposit rates as rapidly as market rates have declined, and et cetera.

More important, however, has been the significant shift in the composition of our balance sheet towards less risky, lower-yielding assets, both in the form of loans and securities.

For example, our investment securities portfolio has increased as a percentage of earning assets from 13% in the fourth quarter of 2002 to 19% during the first quarter.

Most of this increase is reinvestment of the auto loan sales proceeds.

In addition, within the loan portfolio itself, the mix has shifted from auto loans and leases to residential mortgages.

This shift in the composition of our assets to a less risky mix, which will result in a reduction in credit exposure, also has had the impact of reducing the net interest margin.

Let's turn to slide 12, which we added last quarter.

Slide 12 -- slide 12 illustrates this mix change since 2000 to the lower margin, lower risk credit.

It also makes it very clear that we measure our auto exposure as a sum of auto loans and leases, plus operating lease assets, plus any securitized auto loans.

This is a better representation of our exposure than just measuring auto loans and leases to the total loan and lease component.

As we have auto credit exposure in all three classes.

And while we've talked today about our auto loan exposure reduction from 33% at end of 2002 to 24% at the end of March, as shown at the bottom of this slide, it's equally important to notice how significantly the risk profile of our loan portfolio has been lowered elsewhere since the end of 2002.

Most notable has been the growth in very low risk residential real estate loans from 8% of the total loan portfolio to 12% at the end of March, and also in a similar fashion home equity loans increasing from 15 to 18%.

There's two key points that I made last quarter that I believe are worth repeating.

First, we do have a much less risky portfolio composition today, certainly, than we did just a couple of years ago.

Second, we have significantly improved our underwriting standards in both commercial and consumer portfolios.

This combination continues to bode well for loan charge-offs in the future.

Average loan and lease growth is highlighted on slide 13.

This shows that average total loans and leases increased an annualized 2% from the fourth quarter.

But as footnoted here, and as Tom indicated earlier, the underlying annualized growth rate was a very strong 14% after giving consideration to the impact of the fourth and first quarter auto loan sales.

Middle markets CNI loans declined at a 2% annualized rate, which is less than the 6% decline year-over-year.

However, as Tom noted earlier, we did see some growth late in the fourth quarter -- in the first quarter.

Commercial real estate loans increased at a 7% annualized rate, somewhat slower than the 10% annualized rate in the fourth quarter and also than the year-over-year growth.

Small business CNI and CRE loans, which are made through our retail delivery channels, grew at a 5% annualized rate during the quarter.

This was down from the 14% annualized growth rate in the fourth quarter and the 12% growth year-over-year.

Nevertheless, we continued to be very pleased with the increasing success of our small business bankers.

Auto loans declined at a 55% annualized rate, reflecting the impact of the billion auto loan sale late in the fourth quarter and to a lesser extent, the $868 million auto loan sale late in the first quarter.

Excluding the $932 million average impact on first quarter average loans, the underlying auto loan growth rate would have been 16%.

Auto direct financing leases averaged $2 billion in the first quarter, a 41% annualized growth rate.

Operating lease assets, classified as nonearning assets, continue to run off, with this portfolio declining 44% from $2.1 billion a year ago to $1.2 billion in the current quarter.

All auto leases originated since April of 2002 have been booked as direct financing leases.

When the two auto lease portfolios are combined, the total portfolio has been relatively flat in recent quarters.

Home equity loans and lines and residential mortgages, primarily ARM loans, continued their strong growth and were up 22 and 28% respectively an annualized basis from the fourth quarter.

Slide 14 provides a reconciliation of the impact of the fourth quarter and first quarter auto loan sales on the first quarter growth rate for auto loans as well as for total loans and leases.

Slide 15 shows that total core deposits, excluding CDs, increased an annualized 1% from the fourth quarter, reversing the net outflow experienced in the fourth quarter.

You may recall that we lowered the rates on our non-maturity deposits in the third quarter of last year.

We also believe that some of the fourth quarter reduction in total core deposits reflected the outflow of park money back into the stock market or other investments.

Compared with the year-ago quarter, total deposits excluding CDs were up 9%.

Growing core deposits continues to be a key strategic objective for Huntington.

Slide 16 reviews trends in Non-interest income.

As a result of operating lease accounting, which accounted for 39% of Non-interest income, total Non-interest income declined $18.9 million or 8% from the fourth quarter.

Excluding the decline in operating lease income, total Non-interest income was down $2.4 million or 2% from the fourth quarter.

The main drivers of this reduction were the negative impact of a $14 million decline in mortgage banking income, primarily reflecting a $10.1 million mortgage servicing rights temporary impairment during the first quarter compared with $3.5 million of mortgage servicing rights impairment recovery in the fourth quarter.

Also contributing to the decline in mortgage banking income was a 6% reduction in mortgage loan origination volume. $7.3 million decline in auto loan sale gains and a $3 million decline in service charges on deposit accounts due to lower consumer NSF and overdraft fees.

These increases were -- or these decreases were partially offset by a $13.8 million increase in investment security gains and a $6.2 million increase in other income, most notably higher investment banking income.

Also worthy of mention was a 6% increase in brokerage and insurance income from the fourth quarter, the second consecutive quarter of growth.

This reflected a 19% increase in investment product revenue, primarily driven by a 24% increase in annuity sales and a 16% increase in fees received from mutual fund sales.

Insurance income was down 24% from a strong fourth quarter performance.

Trust income was up 3%, primarily due to higher Huntington Fund fees, higher personal trust income, due to increased asset valuations and higher institutions trust fees, reflecting the increased mutual fund 12-B1 fees.

These increases were partially offset by a decline in corporate trust income from the fourth quarter seasonally high levels that included annual fee renewals.

Other service charges increased 3%, reflecting higher seasonal debit card fees, partially offset by lower ATM surcharge and interchange fees.

Slide 17 provides some additional color on our auto loan sales.

As indicated at the top of this slide, our objective is to lower the auto exposure to 20% of loans, leases and securitized loans over a period of time.

We have made very good progress toward this goal.

Auto exposure has been reduced from 33% at the end of 2002 to 24% at the end of March.

It should also be noted that the Unizan merger will reduce this percentage further by about two percentage points.

So we're very close to reaching our goals.

Once reached, we expect to ton sell a portion of the current production in order to manage our exposure to this sector.

But it's important to remember that there is a negative earnings implication of selling these loans as we no longer have the benefit of the spread income net of chargeoffs.

You may recall when we first outlined this sales strategy, we wanted to move our auto loan origination business more towards a mortgage banking type of model.

That would enable us to continue to leverage our first class auto finance business.

It originates high quality auto loans and leases, packages and sells the originazations, and then retains a servicing and related servicing income.

We are quickly approaching attainment of this business model.

Turning to investment banking, slide 18 outlines our mortgage servicing rights hedging strategy, which primarily is to utilize a securities portfolio as a hedge for MSR valuation changes.

Slide 19 details some statistics on our mortgage banking and servicing operations.

Mortgaging serviced for investors totalled $6.5 billion at the end of March, up 48% from a year ago, reflecting the strong demand for residential mortgage loans.

At the end of March, mortgage servicing rights were valued at 93 basis points, down from 111 points at the end of the fourth quarter.

At quarter-end, the MSR temporary valuation reserve totaled $16.3 million.

Any future increases in interest rates would permit us to recover up to the $16.3 million of this temporary impairment reserve.

For the quarter, $860 million of mortgages were originated, down 6% from $919 million in the fourth quarter.

Slide 20 details some trends in Non-interest expense.

The primary drivers of the $31.8 million reduction in NIE from the fourth quarter were the fourth quarter's $15.3 million loss on the sting extinguishment of some repurchased agreement debt as well as the $14.9 million decline in operating lease expense.

Looking at some of the other key items, $7.1 million decline in other expense as a fourth quarter included a residual value in insurance writedown as well as some seasonal expenses.

A $4.9 million decline in professional services, including a $1.1 million reduction in SEC investigation-related costs -- $700,000 in the first quarter versus $1.8 million in the fourth quarter.

Just as an aside, SEC investigation-related costs to-date have totaled $7.5 million.

These reductions were partially offset by a $5.9 million increase in personnel costs, primarily representing higher benefit expense and the annual FICA reset. $2.5 million increase in outside data processing and other services expense, reflecting seasonal costs and higher charge card processing expenses.

And $1.8 million increase in net occupancy costs due to seasonal factors, including heating and snow removal costs as well as lower rental income.

Let me review some of the recent credit trend highlights on slide 21.

We will cover these in more detail in just a minute.

The nonperforming asset ratio at quarter-end was 43 basis points.

While up slightly from 41 basis points the prior quarter, this is still very low and consistent with our current expectations for nonperforming assets remaining around the current level for the remainder of the year.

Net charge-offs totaled 53 basis points, down from 103 basis points in the fourth quarter, which was impacted by 50 basis points due to that quarter's sale of lower quality loans. 90-day plus delinquencies remain fairly steady.

Our loan loss reserve ratio and nonperforming asset coverage ratio declined slightly to 1.39% and 322% respectively.

Slide 22 shows a trend in nonperforming assets, and while the MPA ratio increased slightly to 43 basis points, last quarter's 41 basis points represented the lowest level we've seen in many years.

Let me provide a little more nonperforming asset detail on slide 23.

The ending balance increased $4.3 million from the end of last year.

While nonperforming assets increased slightly during the first quarter, I think it's noteworthy that the inflow of new nonperforming assets totalled only $22.7 million in the quarter, down 29% from the fourth quarter's level and represent the lowest quarterly inflow in over three years.

At the end of the quarter, our largest nonperforming asset was $4.2 million, and there were no other nonperforming assets exceeding $4 million.

I refer you slide 69 in the appendix for detail of our nonperforming assets by sector and by size.

Slide 24 shows the charge-off trends for the various portfolios over the five quarters.

The total CNI and commercial real estate net charge-off ratio was 32 basis points for the quarter.

This was down from the fourth quarter's 1.55% or 44 basis points excluding the 111 basis points effect of the fourth quarter sale of $99 million of lower quality loans.

Over the last several years, insurance policies were purchased by our dealer sales group to protect the company from the loss in the event a repossessed vehicle had physical damage.

Claims paid under these policies were recorded as a reduction of credit losses.

During the quarter, we determined that these insurance policies do not provide economic transfer of risk to permit this accounting treatment.

As a result, first quarter provision expense included a $4.7 million one-time cumulative charge related to auto, loan and lease charge-offs to correct this error.

This one-time adjustment resulted in higher reported net charge-offs than the underlying trend in credit quality would suggest.

Total consumer net charge-off ratio was 70 basis points, up from 61 basis points in the fourth quarter and would have been 55 basis points without the $4.7 million cumulative adjustment in auto loans and leases.

As reported first quarter, automobile net charge-offs totaled $13.4 million and represented an annual net charge-off ratio of 1.77% or $9.7 million.

This would have been an annualized 1.28% without this cumulative adjustment.

In a similar fashion, auto lease net charge-offs for the first quarter were $3.2 million or an annualized 64 basis points, but would have been $2.3 million or an annualized 45 basis points without this cumulative adjustment.

Like wise, total net charge-offs were 53 basis points as recorded -- as reported, but would have been 45 basis points without the 4.7 million cumulative adjustment.

Slides 25 and 6 show the trends in 30-day and 90-day delinquencies for commercial and consumer loans respectively.

As shown on slide 25, CNI 30-day plus delinquencies have been trending generally down to flat.

For commercial real estate loans, while the delinquency ratio moved up somewhat in the first quarter, this ratio remains at a relatively low level and was down from a year ago.

The right-hand graph shows that on a 90-day basis, commercial real estate and CNI delinquencies moved upwards slightly during the quarter, but remained at historically low levels.

Like slide 25, the next slide, slide 26 shows 30-plus days and 90-plus day delinquencies for consumer loans with the 30-plus day ratio continuing to decline and the 90-day ratio holding steady but down from a year ago.

The next two slides detailed two credit-related changes.

The first is a change in the balance sheet geography of our allowance for unfunded loan commitments as shown in slide 27.

Historically, our allowance for loan and lease losses included a component for unfunded loan commitments, which we do believe has been common industry practice.

At March 31, the allowance for unfunded loan commitments was $32 million.

Since this is a reserve against undrawn commitments versus funded loans, this reserve component was reclassified as a separate liability on the balance sheet during the first quarter.

This is consistent with our understanding of better disclosure practices.

This reclassification has been reflected in prior period balance sheets and reserve ratios.

The allowance for unfunded loan commitments is determined based on the expected loss derived from historical performance.

At the time a commitment is drawn down, the allowance for loan and lease losses will be increased as the loans are funded.

What's the impact of this reclassification of the allowance for unfunded loan commitments?

First, it has no impact on net income, equity, or the total amount of reserves supporting credit risk.

Second, this reclassification is just a balance sheet geography change.

However, the reclassification does reduce previously-reported reserve and coverage ratios.

The impact of this reduction over the last five quarters can be seen at the bottom of this slide.

The first two lines show reserve and MPA coverage ratios on a new basis -- that is excluding the unfunded loan commitment reserve, and this is the way we will be reporting these numbers going forward.

The next two lines show the same ratios including the unfunded loan commitment reserve, which is how the ratios have been previously reported.

It's important to stress that just because these ratios now appear lower, the same amount of total reserve coverage exists after this reclassification as did before.

Again, it simply changes where the reserves are reported on the balance sheet.

The second credit-related change, which is highlighted on slide 28, was to the methodology used to determine the economic reserve component of the allowance for loan and lease losses.

As you know, the allowance for loan and lease losses is determined utilizing a building block approach and consists of three distinct reserve components.

The first component represents transaction reserves.

This component is determined using expected historical loss performance.

Specifically, the probability of default and the loss in event of default are assigned based on specific characteristics and structure of each loan or loan portfolio.

Factors are applied on an individual loan basis for CNI and commercial real estate loans and on a portfolio basis for consumer loans.

The second component consists of specific reserves.

These represent credit-by-credit decisions for CNI and commercial real estate loans when it is determined that the related transaction reserve is insufficient to cover the estimated embedded losses on the specific loan.

The third reserve component is the economic reserve, which is designed to take into account losses due to the volatility caused by changes in the economic environment.

Beginning this quarter and as outlined in our 2003 10-K, this reserve component is now determined using a more quantitative and less judgmental methodology.

Specifically, four economic indicators have been determined to be statistically significant indicators of loss volatility.

These are the index of leading economic indicators -- the U.S. profits index, as published by the Department of Commerce;

The U.S. unemployment index, published byte bureau of labor statistics; and the current consumer confidence index, as published by the University of Michigan.

As a result of this building block methodology, all of the allowance for loan and lease losses is allocated to individual loan portfolios.

We do not have any unallocated reserves.

The full implementation of this methodology, beginning at the first of this year, has two implications.

First, the result is a more precise and quantitative determination of required reserves.

Second, this methodology may well lead to more quarter-to-quarter volatility in reserve levels.

The investment community frequently looks at the relationship between provision expense and net charge-offs to evaluate the quality of earnings.

If provision expense does not cover net charge-offs, and the reserve level is drawn down, conventional wisdom would suggest that provision expense has been understated with a negative connotation regarding the quality of earnings.

That concept, however, is too simplistic, as it does not incorporate changes in portfolio credit quality, portfolio mix, or the economic outlook.

Yet, any or all of these factors can have a significant impact on the level of the loan loss reserve at a given point in time.

Slide 29 recaps the trend in the loan loss reserve, which as previously noted, declined to 1.39% of loans and leases versus 1.42% at the end of the prior quarter.

The decline in the ratio reflected a reduction in specific reserves for CNI and commercial real estate loans and a decline in economic reserves, both related to improving credit quality and the outlook and the -- and the portfolio.

The $4.8 million decline in the reserve, which is shown on the last line in the table, reflects the impact of the first quarter auto loan sale.

Let me close with some brief comments regarding capital.

If you turn to slide 30, you will notice that our tangible equity to asset ratio as of March 31 was 6.95%, up from 6.79 at the end of last year.

This remains above our 6.5 to 6.75% level.

The decline from 7% a year ago primarily reflected the impact of adding back a billion dollars of securitized loans due to the adoption of FIN 46 and last year's third quarter, offset by the growth in retained earnings.

The upward trend over the last four quarters in our tangible equity to risk-weighted asset ratio, reflects the fact we've been putting on our books primarily low risk weighted assets, including home equity loans, residential mortgages, and investment securities.

This completes the financial review.

So, let me turn the meeting back over to Tom.

Thanks, Mike.

As I noted at the beginning of the call, I wanted to provide a brief update on our Unizan merger.

Slide 32 is a timeline showing key milestones achieved and anticipated.

We have completed all of our required regulatory filings and the S4 proxy was just recently finalized and is in the process of being mailed to Unizan shareholders for their consideration at the May 25 special shareholder meeting.

Subject to shareholder and regulatory approval, it is now our expectation that the merger will close in early July.

Our initial objective was for late in the second quarter, which is in line with our projected mid-year closing.

Systems conversions are targeted for late September.

Slide 33 provides a high level review of key strategic decisions we've made.

Up front, I think it's very important to note that this integration has been a team effort from every possible perspective with Unizan associates playing a key role in every decision.

We're working very well as a team and moving ahead on many issues in a quick and timely fashion, so as to minimize the impact of this merger on employees and customers.

So far, here with the key decisions -- Unizan will form the core of a newly created eastern Ohio region, consisting of 30 banking offices.

Roger Mann, President and CEO of Unizan, will be the regional president, and the entire management team has been named.

Ten banking offices have been identified for consolidation, eight from Unizan and two from Huntington.

We'll be closing Unizan's Zainesville operations center soon.

Out of 775 positions at Unizan, there will be a net reduction of 290.

All affected employees have already been notified.

We have decided to discontinue the consumer finance and aircraft lending activities but will retain the existing portfolios.

And we're very excited about their SBA lending expertise and capabilities and are looking forward to rolling this out within and outside our five-state banking office foot print.

Those are the key decisions to date.

Again, we're very pleased with the progress and very much on schedule to close this in a smooth and timely manner, pending Unizan shareholder and regulatory approvals.

Let me close with some comments about our 2004 outlook.

As shown on slide 35, last January we provided GAAP EPS guidance of $1.62 to $1.66 per share.

We noted that this guidance excluded any impact from one-time items such as loan sale gains as their timing and amounts were unknown.

However, we also noted that when such one-time amounts become known, they would be included in future guidance.

As such, we are adding five cents to guidance now that the first quarter results are known.

This increase reflects three cents for the first quarter auto loan sale gain and two additional cents for other improvements.

To this, we're adding another four cents of expected improvement over the remaining three quarters related to an improved credit quality outlook.

This is a direct reflection of the progress we've made in lowering the risk profile of our loan portfolios and projected improvement in the economic outlook.

As a result, our updated 2004 GAAP guidance is now $1.71 to $1.75 a share.

As before, this guidance excludes any impact from future auto loan sales.

These will be incorporated in future guidance once they are known, as well the impact from the Unizan merger once all approvals are attained.

This completes our prepared remarks.

Mike, Nick Stanutz , Tim, Jay, and I will be happy to take your questions.

Let me turn the meeting back over to the operator now, who will provide instructions on conducting the question-and-answer period.

Operator?

Thank you.

Ladies and gentlemen, if you have a question as at this time, please press the one key on your touch-tone telephone.

If your question has been answered or you wish to remove yourself from the queue, please press the pound key.

We will pause one moment.

Our first question comes from Charlie Ackerman of Sachs Moorehouse.

Hi, Charlie.

Hello?

He might have stepped away from the phone.

Our next question is from Matthew Clark of Deutsche Banc.

Hey, good afternoon.

Hi, Matt.

A few questions.

On the core deposits, how much of that -- you know, I guess it wasn't up as much as I had expected it to be.

What -- what are you seeing there in terms of competition and -- and the impact from the equity markets?

And what kind of promos you're doing?

Matt, this is Tom.

I would say it's difficult to know for certain what the impact of competition from the equity markets is.

Anecdotedly ,we believe that there is some.

It's hard to quantify what that is.

I think that deposit gathering is a very competitive business these days.

However, we really feel quite good about kind of reversing the downward experience we had in the fourth quarter, and we think we've got some good momentum here.

I think I'd also add, Matt, that the -- the primary vehicle for competition in the market has been and continues to be in the money market account area.

There's a lot of teaser rates out there in the marketplace right now, and that's -- that's the primary focus, seems to be, for most banks.

Okay.

Given the amount of risk you guys have taken out of the balance sheet, is there any expectation that -- where you could lower your targeted tangible capital ratio?

Well, as we've commented, I think a couple of quarters ago, we -- we did drop the -- the targeted ratio to 6.5 to 6.75%.

I think that's an ongoing evaluation and determination whether that's the appropriate level or not.

As the risk profile continues to come down, that's something we will continue to evaluate.

Okay.

And then I guess in the auto area, has there been any change in pricing and in production, given what rates have done, I guess more recently?

Matt, I will ask Nicholas Stanutz to respond to you.

Matt, we have seen, as our slides would show, I think slide 57, that our first quarter projection was off about 25% from the same quarter a year ago.

A little bit of that is reflective of some aggressive pricing that we are seeing from a couple of competitors in the marketplace and that we are choosing not to follow and to employ some real financial discipline.

So, we are -- we are happy with the quality of our portfolio, and if we can't get at the price we want it, we're willing to let it go to somebody else.

Okay.

Last one, if I may, just with the operating lease accounting, I guess will that take another three to four years to finally run off?

Matt, I don't think it will take that long.

It probably takes a couple more years.

As you can see, that portfolio is declining pretty rapidly and I think after another year or so you will be down to pretty much tag ins and that, but it will probably take three years for it to completely run off.

Okay, great.

Thank you.

Thank you, Matt.

Our next question comes from Todd Hagerman of Fox-Pitt.

Good afternoon, everyone.

Hi, Todd.

A couple of questions.

First, Mike, just -- or -- or Tom, on the -- on the outlook and -- and on the credit side of things, and Mike, you may is mentioned this in your comments, have you really changed the outlook just in terms of, you know, previous expectations for charge-off levels in the year?

And is most of the -- the benefit coming through on the -- the change in the reserve methodology?

Matt, there probably will be some benefit coming through on the change in the reserve methodology.

I don't think that -- that's not a significant part of the expected -- of the change in the outlook.

We're saying just the benefit of an improving economy on some of our -- some of our credits in the first quarter.

For example, we -- we reduced specific reserves that were set aside for certain individual CNI and commercial real estate credits.

If the economy continues to improve, we think that process will continue, you just won't need to have those reserves that have been set up.

Also, I think we are expecting a little bit lower charge-offs than -- than we would have been forecasting three months ago.

So, it's a combination of improvement in credit quality in the form of somewhat reduced charge-offs and the -- the need for less -- less reserves associated with some of these loans.

Todd, this is Tom.

Really, you look at just about all indicators -- charge-offs, level of nonperforming assets, delinquencies, strength of our loan loss reserve, and we really feel quite good on all fronts of credit quality.

Great.

Okay.

And if i could, a follow up.

And Mike, just to clarify your earlier comments with respect to kind of, you know, as you talked about the margin and, you know, the dynamic there being really a function of -- of shift in -- in your asset mix, could you just maybe clarify, you know, what we should expect from a balance sheet perspective as we think about, you know, your mortgage-related assets that have been growing?

And as you described that in the past as being more of a transition product, what we might expect on kind a go-forward basis?

Well, as you know, we -- we had -- have utilized the mortgage ARM products aggressively over the last two to three years.

We also are -- and we use those because there was general weakness in some -- in loan demand in some other areas.

As we continue to -- to work to sell down our auto exposure, as we have over the last year, we,essence, to the extent that the margins on the residential mortgage product look attractive to us, we're using that as a vehicle to offset some of the loan sales.

And you saw that, I think, in the first quarter, we had very strong growth in both residential mortgages as well as home equity loans that, in essence, are replacing some of the auto loans that we sold during the quarter.

So, as we've said, we're -- we're -- we've made a lot of progress in reducing this auto exposure.

We're start -- with the Unizan, we will be at 22% or approximately that at the end of -- when the Unizan merger goes through.

So, I think we have to make judgments as we go along in terms of how much the mortgage product we want.

Part of that is a function of what kind of loan demand there is and what kind of pricing there is in some of the other markets, CNI market being a good example.

So far we have yet to see any real strong demand coming from that market.

At some point that will start to materialize.

And that would affect our demand for mortgage -- willingness to put mortgage credit on the balance sheet.

This is Tom, we're not trying to build a bank that is first mortgage residential dominated.

But we were starting from a low base.

We really -- right after 9/11, when we began a greater emphasis on the ARM product, we really had a very small percentage of our loans that were tied up in first mortgage residential.

So, we did have room to grow without any undue concentration.

Okay.

That's helpful.

Thank you.

Thank you, Todd.

Our next question comes from Jack Micenko of Lehman Brothers.

Hi, guys.

Can you hear me?

Hi, Jack.

Hi.

A couple of questions.

First one -- is it correct to assume that most of the auto loan sales was out of current production?

It looks like maybe 200 million more of portfolio.

The only reason I am wondering that is because the margin, again, on sales margins come in again.

I know there's a lot of variables that go into that.

Is that a rule of thumb margin maybe that we can look at modeling going forward?

Well, I think that most of the loan sales certainly come from the current production that maybe lagged a month or two, but with the exception of a -- a short lag, most of it does come from the current production.

And you see the fact that the gain on that sale was just a little bit over 1% as a percentage of the loans sold.

That was down from some of the gains that we realized a little bit early -- in some of the earlier sales.

Okay.

On the unfunded commitment reserve rational, was there any -- was that just a decision to -- to -- to be more -- just more disclosure or is there an accounting initiative you see on the horizon that sort of stimulated your decision to do that?

No, there's not an accounting initiative that we're aware of on the horizon.

That's something we had been talking about.

A sense on the part of some of the accounts was that this was a little bit better disclosure and as such, we made a decision to buy and take the is he reserve into the two components.

Okay.

Great and last question.

I don't think that Unizan has reported.

Do you have a ballpark of what the sort of quarter-end balance is?

It doesn't have to be specific, but maybe a range on the discontinued loan categories there?

No comments at all, Jack, at this point in time with regard to Unizan.

Okay.

Thanks, guys.

Thank you.

Our next question comes from Chris [Junard] of Morgan Stanley.

Hi, thank you, guys.

And also thanks for the improved disclosure on the loan loss reserve.

I was wondering if you're going start disclosing what your unfunded loan commitments are since you're now disclosing the reserve for them?

We hadn't really given that an awful lot of thought.

Let us factor that into our thinking and we will give that some consideration.

Okay.

And just a second quick question, if I may.

You guys seem to be, as you mentioned, growing the loan portfolio -- the residential loan portfolio, and it seems like the securities portfolio somewhat to make up for the -- the shrinkage in the balance sheet when you sell auto loans.

Have you considered, you know, paying off the -- the long -- you know, the -- the wholesale debt portion of your -- of your funding instead?

And, you know, why have you decided to, you know, sort of keep the balance sheet -- sort of choose to maintain the balance sheet size?

It seems like, you know, the portion of your securities -- of your balance sheet that's becoming sort of a securities portfolio funded by wholesale borrowings seems to be increasing.

Well, the -- the -- the decision -- the primary decision that we've -- strategic decision we've focused on is the desire to reduce the -- the auto exposure down towards the 20% level.

Having said that, we're still very cognizant of the need to generate earnings increases, and we have initially replaced a lot of the auto loans that have been sold with either growth in other loan portfolios, residential mortgage, home equity as well as increases in the investment security portfolio.

We have not fully -- in the last sale, we did not fully redeploy the sale proceeds, we bought some investments, but in essence did pay down borrowing somewhat.

We sold $870 million, and as I recall we bought about $500 or $600 million.

I think future sales, we are considering just -- just that.

We do not want to have a balance sheet in essence that's been leveraged with investment securities and wholesale borrowings.

We are very cognizant of that.

But we also need to be cognizant of the need to generate earnings growth.

Great, thank you very much.

Once again, if you have a question, please press the one key on your touch-tone telephone.

Our next question comes from Ed Najarian of Merrill Lynch.

Good afternoon, guys.

Hi, Ed.

Hi.

Most of my questions is been answered.

I was wondering if you could give us any context on what you're thinking about in terms of deposit pricing these days?

For a while you had much higher than industry average deposit pricing.

That's come down.

It's probably a -- it's still a little bit higher than industry averages, but I -- I just really would be curious to hear your thought process in terms of pricing versus sort of the desire to grow deposits from here.

Well, in the perfect world, Ed, we'd love to grow deposits rapidly at -- at attractive pricing for us.

Your -- your perception is exactly right.

We did have higher deposit costs than did the industry.

We tried to pretty aggressively attack that in the second half of 2003, and I think you see, particularly with savings deposit rates, you see some of the results of that.

I think our deposit pricing is probably much, much more in line with the market now.

We do have to be cognizant from a pricing standpoint, in terms of our ability to be competitive in the marketplace, the fact that we do not have extremely large market share with the exception of perhaps Columbus and Grand Rapids and maybe Toledo.

In some of the other markets we have a relatively small market share and probably have to be a little bit more aggressive on pricing because of that and -- than some of our competitors.

I think the interesting question from the industry and from Huntington's standpoint will be as rates start to rise, as they inevitably will, how does the market respond to those rate increases when a large part of your deposits now are in the form of money market accounts, which, in essence are variable rate pricing?

So, how rapidly the market responds to the increase in rates will be very interesting to watch.

My sense is that the industry's desire to grow deposits and need to grow deposits will probably tie the increase in deposit rates a lot more closer to increases in market rates this cycle than we perhaps have over the last cycles.

Yeah, I can't say I disagree with that.

I think your spot on.

Maybe just to ask it a little bit different way, is there any progress that you can put your arms around or -- or kind of pass along to us that would make me believe you can get above average deposit growth in any of your markets without an above average pricing strategy, but more from a sales culture standpoint?

Well, yeah.

This is Tom.

We put, as you know a, lot of energy into -- instilling -- installing a disciplined sales process and lots of training, lots of incentives in place.

And we are seeing improved results in our banking offices.

Lots of focus out there on sales, on referrals, on cross sells.

So, we think we are getting better.

We don't think we have it licked yet, but we think we're getting better.

And we would say based upon at least the most recent numbers that we have, the FDIC data, that in most of our markets we are growing -- we have been growing more rapidly than our competition, and we don't believe that's been on the basis of price.

And as Mike has indicated, we've certainly taken steps to make sure that we're in line with the market.

We think our reduction in rates correspond nicely with our getting better at sales execution.

Okay.

Thanks.

Our next question comes from Anthony Lombardi of Delaware Investments.

Good afternoon, guys, how you doing?

Hi, Anthony.

A couple of questions.

On your -- on your methodology for -- for reserves, can you kind of quantify maybe a little bit more in terms of the three buckets that you eluded to, kind of base case what we should think about in terms of percentages in terms of each one of those buckets?

I don't have the schedule in front of me, but the -- the -- the transaction and the specific reserve categories together are -- let me get a schedule...

Are -- are about 27%.

I'm sorry, excuse me, let me state that differently.

If you look at the three buckets, combine the transaction and the specific reserves together, that represents about a little bit over 70% of the total reserve with a little bit less than 30% in the form of economic reserves.

Are there any, you know, set perimeters or constraints on how large those buckets can be?

No.

It's -- no, not really.

Okay.

And just on on your net interest margin drivers that you were talking about, obviously you've got a slightly different situation than the traditional bank.

You were facing some rising interest rate pressures given the, you know, refiguring of your balance sheet and what you're doing.

Can you talk a little bit more quantitatively about the drivers that you outlined in the presentation, you know, over the next 12 to 18 months in terms of, you know, what's -- what's more relevant to the net interest margin outlook than -- than another driver?

Well, let me first of all just talk very briefly about interest rates.

We -- we have been and continue to be very slightly liability-sensitive.

We never got into an asset-sensitive position.

We think that it rates went a couple of percent gradually over the next 12 months, that our net interest income would be down maybe half a percent, something along those lines.

It's a pretty nominal number.

The impact of auto loan sales, just as one example on our margin going forward as opposed to in the last 12 months, I think will be diminished significantly.

Because certainly the first couple of sales we sold higher coupon auto loans, and that had more -- the sale had more of a negative impact on our margin than I think the sales had, for example, in the first quarter or will have going forward.

So I think that will be a reduced impact.

We talked in a -- just a couple of minutes ago in response to Ed Najarian's question about the deposit rates.

I think the -- normally the banking industry benefits as rates rise from the deposit size because they tend to lag the pricing.

I think there will be a little bit less of that this time around.

I think we have -- we have accomplished most of the mix shift in terms of auto loans and investment securities and the other components of the loan portfolio.

I don't think that mix shift will have anyplace near as large an impact on our margin in coming quarters as it has had over the last year.

That has been a -- that's created an uphill battle for us in terms of margin over the last year, as we've sold these $3 billion of loans.

So, we feel pretty good about the margin from these levels.

We don't think the margin continues to move lower, I guess, is the way to phrase it.

We think that there's a bit of pressure on the margin because of some of the specific things that Huntington has been doing going forward versus the last 12 months.

In -- in the investment securities that you've been loading up on here in the short-term while you -- you -- you refigure the balance sheet, from a duration standpoint, you know, what -- what are you in the market here for?

Mostly variable rate.

Not entirely, but mostly variable rate or very short-term.

Okay.

Thanks a lot.

Thank you.

Our next question comes from Jeff Davis of First Tennessee.

Good afternoon.

Hi, Jeff.

Mike and Nick, to the extent -- and I believe someone referenced this earlier -- the gain on the sale of auto production has gone down over the last -- last year.

How -- to the extent we get in a rising rate environment, how does that -- how does your thought process change, if it at all, with regards to how you manage the flow that business?

To try to protect ourselves -- or to protect ourselves against rising rates, we put on a fair value hedge now with our -- with our production.

So if we originate -- I'll make the numbers up -- $150 million of loans this month, we'll put on a -- a fair value hedge against that $150 million production.

As rates -- if rates were to rise, we'll incur a gain on the sale -- when we subsequently sell those loans, we would incur a gain on the sale of those loans, and we might very well incur a loss on the sale -- I'm sorry.

We would incur a gain on the sale of the hedge in a rising rate environment.

We may very well incur a loss on the sale of loans as rates rise.

We look at the combination of those two.

As long as we're hedging this portfolio when we originate it, we should not be significantly impacted except with any possible time lags from a changing rate environment.

I also would point out that on the -- the weight in the fourth quarter, we put that fair value hedge on about the roughly $868 million of loans we sold in the first quarter, and that was a drag on the first quarter net interest margin, because, of course, in an upsloping yield curve, when you put a paid fix interest rate swap on as a hedge, you're incurring that cost for that hedge, for that rate protection.

Okay, so it's not netted against the $9 million here?

It -- that's has been netted against the $9 million.

Okay.

We would have taken a larger gain on that first quarter sale had we not hedged.

The rates came down after we put the hedge on.

We would have taken a larger gain -- we took a larger gain on the sale of the loans, which was offset bottom a loss on the hedge.

If we get into a rising rate environment, those two will flip around.

We will take a gain on the hedge and perhaps a loss on the loans.

Okay.

And so, Mike, from a run rate, is 100 bips sort of a reasonable floor on what that should produce?

Well, it -- it's a function -- I mean -- in a generic sense, you probably use a -- a pay fixed interest rate swap, something around a two-year life.

So you can look at the spread between the two-year swap rate and the LIBOR, and that -- that, in essence, gives you the cost of putting that hedge on.

Okay.

And then from a -- okay.

From a -- from a bigger picture is -- is auto last year as I calculated, I guess off operating earnings, produced about a 90 bip ROA, and I want to saw your target or Nick's target was 120 to 130 bips.

Is that a gap or likely to close this year?

Or am I totally off base on the numbers?

I frankly don't remember the numbers from last year.

I don't have them in my memory right now.

I would rather -- I will be happy to chat with you offline.

I just don't remember the numbers.

Okay, that's fine.

Thank you.

Our final question comes from Casey Ambreck of Millennium.

Thanks very much for taking the question.

I think it's been a pretty impressive how you guys have aggressively tried to work down the auto book.

Just a question on that, though.

I was traveling the first quarter, and I was hearing some -- I was hearing some thoughts that the whole industry's being very aggressive.

And I was just wondering what comfort you can give us -- give the Street that Huntington isn't being as aggressive like some of your competition in -- in -- you know, in auto production?

And then also in terms of the gain on sale from auto, how much of that should we expect going forward when you get down to 20%.

Let's ask Nicholas Stanutz to respond to you, Casey.

Great.

Thank you.

Casey, I think, again, as I said earlier, if you look at, you know, slide 57, which shows our production in credit quality, clearly if you follow the industry, the sales numbers have been up about 2%, '04 versus '03 first quarter.

Our production is down about 25%.

A big piece of that is the fact that we have not been willing to follow.

There are about three primary competitors a, couple regional, and one national player that have very attractive rates in the marketplace.

I mean numbers that wouldn't and don't work for us, and we've chosen not to follow the marketplace.

And I would say 75% of the market is not following the people who are chasing the market with low rates and therefore are getting the production.

So, I would say that, yes, we have some competitors who are very -- have been very aggressive, and I would expect maybe they will continue to be for a period of time.

But the majority of the market is not, and there really is a pretty good pricing discipline in the market for the majority of the competitors that we are competing with, day in and day out.

Okay.

And then kind of on the gain, you know, how would you think about that when you get the 20%?

Your question is what kind of gains might you expect once we get to 20%?

Exactly.

Well, it's hard to -- hard to say because the -- assuming we get to 20%, then the question is how -- if that auto loan and lease portfolio is growing at the same rate as the rest of our loan and lease portfolio, there will be no further sales.

So, it just depends on how much demand there is for auto credit or auto leasing volume at that point in time.

It's just hard to say how much we might have in -- how much we might need to put forth in sales in order to maintain that at the 20% ratio.

Okay.

I guess the only concern going forward is I guess when you get to 20%, you know, getting on the treadmill, just be -- I would be weary of that.

That's why I bring it up.

I'm not quite following you, Casey.

Well, if you put down three to four cents every quarter of gains and you annualize that and say maybe it's less than 12 cents, maybe 10 cents a year, and the market goes soft, but the Street hasn't baked us their numbers, it could, you know it could cause some stretching in other areas.

I think the Street probably has been fairly disciplined about not -- when any of the reports that we see, they do not include, they have not included, for better or worse, and you can argue this, they have not included any loan sale gains as part of when they look at our run rate earnings.

Great.

Thank you.

Thank you.

I'm not showing any further questions at this time.

Would you like to proceed with any further remarks?

Simply, Patty, we'd like to thank everybody for participating this quarter and we look forward to talking to you again 90 days from now.

Thank you.

Thank you.

Ladies and gentlemen, thank you for participating in today's conference.

This concludes the program.

You may all disconnect.

Everyone, have a great day!