Regions Financial Corp (RF) 2002 Q3 法說會逐字稿

Good afternoon.

My name is Sherette.

I am your conference facilitator.

I would like to welcome everyone to the AmSouth Bancorporation third quarter earnings conference 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.

If you would like to ask a question during this time, simply press star and the number 1 on the telephone key pad.

If you would like to withdraw your question, press star and the number 2 on the telephone key pad.

As a reminder this call is recorded.

Thank you.

You may begin your conference.

Good afternoon.

This is List Underwood.

We appreciate your participation today given that this is one of the busiest earnings days I can remember.

The presentation today discusses our business outlook and includes forward-looking statements.

The statements include description of management's plans, objectives or goals for future operations, products or services, forecasts of financial or other performance measures and statements about AmSouth's general outlook for economic and business conditions.

We also may make other forward-looking statements in the question and answer period following management's discussion.

The forward-looking statements are subject to a number of risks and uncertainties and results may differ materially from those discussed today.

Information on the risk factors that could cause actual results to differ are available from the earnings press release that was released today form 10-Q for June 30th, 2002 and form 10-K for the year ended December 31st, 2001.

Forward-looking statements are effective only as of the day they are made and AmSouth assumes no obligation to update information concerning its expectations.

Dowd?

Thanks, List.

And joining with us today is our Chief Financial Officer, Sloan Gibson.

Let me turn now to the results of the quarter.

Today AmSouth reported third quarter diluted earnings per share of 43 cents on net income of 156 million.

That represents 16.2% increase over the third quarter 2001 earnings per share.

Return on equity for the quarter was [8].2% within our long-term goal of 20-22% and the efficiency ratio improved to a record low of 49.5%.

In spite of a difficult environment AmSouth continues to meet or exceed expectations each quarter without losing sight of our long-term goal of sustainable quality earnings growth.

Interest revenues, diligence expense control and improving credit quality were the keys to our performance during the third quarter.

The quarter's performance reflects our focus on the execution of our six strategic initiatives and the success of our sales management process.

However, the results also reflect some of the challenges that we face in today's economy namely the margin compression and slower than expected loan and non-interest revenue growth.

A combination of market forces as well as actions taken with an emphasis on longer term performance were the drivers of the margin compression.

In addition market conditions resulted in declines in two key categories of non-interest revenues, trust and investment services.

Let's look for just a few minutes of some of the financial highlights for the quarter.

Non-interest revenues grew $7.2 million on a quarter basis, the key drivers being service charges on deposit accounts and mortgage income.

On the balance sheet, the key highlights were continued strong growth and consumer loans and deposits.

Average loans grew $176 million or 3% annualized compared to the second quarter.

Consumer loans were, again, the leading growth area.

Average deposits were up 7.4% or $470 million versus the previous quarter.

On a length quarter basis, low cost deposits increased by $103 million and time deposits grew by $168 million.

Continued emphasis on sales of consumer checking and business relationship plus our signature small business relationship product helped produce solid low cost deposit growth for the seventh consecutive quarter.

Special promotional rates and sales initiatives plus a new money market deposit product were the key drivers of growth in money market and certificate of deposit balances.

Expenses decreased nearly $10 million compared to the quarter and down 4.8% from the same period last year.

Continued improvement and credit quality was another highlight for the quarter.

Net charge-offs to average loans were 10 basis points lower at .66% and the nonperforming assets ratio declined by 2 basis points to .72%.

This compares to a charge-off rate of 1.11% third quarter of last year and a nonperforming assets ratio of .82%.

Finally, we received the results of the shared national credits exam during the quarter and there were no unexpected nonaccruals, downgrades or charge-offs.

Among other highlights for the quarter, in August, AmSouth was recognized in B to B Magazine's sixth annual survey of the top 100 business-to-business websites.

AmSouth tied for 18th place overall and ranked fourth among financial services companies.

Rankings were based on websites quality of content, ease of navigation, design and ability to conduct transactional business online.

This recognition reflects our commitment to provide our business customers with web-based tools to conveniently manage their finances when, where and how they choose.

AmSouth was also recognized in the smart money column in the "Wall Street Journal" on Sunday September 15th, we were one of five companies selected from a screen of more than 8,000 stocks that required companies to have a dividend yield greater than the five-year treasury below the S&P 500, positive earnings growth in 2001 and a consensus estimate that predicted earnings per share growth for this calendar year 2002.

Let me turn it over to Sloan now to discuss this quarter in more detail.

Thank you.

Diluted earnings per share were 43 cents on net income of $156 million.

That represents a 16.2% increase in earnings per share compared to the third quarter of 2001.

Adjusting prior year earnings for the impact of good will amortization earnings were 43 cents vs. 39 cents a year ago or 10.3% higher.

Return on equity was 20.2% and return on assets 1.6%.

Efficiency ratio continued to improve declining below 50% in the first time in our company's history, 49.5%.

During the third quarter we repurchased 3.5 million shares of AmSouth stock.

Interest income for the quarter was $307 million, a decrease of 11.3% annualized going forward.

The decline was the result of compression in the net interest margin of 25 basis points to a level of 4.36%.

Several reasons for the decline in the margin.

Some of the factors in what led us to signal a low interest margin last year in the earnings call was the number of days in the quarter, runoff of a $400 million interest rate swap position and the expected $300 million decline in loan balances in our conduits .

These three factors combine for 10 basis points worth of the decline.

Another factor was the more aggressive stance on deposit pricing particularly for time deposits.

This led to greater growth in the higher cost categories and caused 6.5 basis points in the decline.

We also experienced loan yields during the third quarter from several sources.

First the result of tighter underwriting and the decline in going on loan yields given the continuing mix shift from fixed rate loans to variable rate loans.

This contributed combined 5 basis points in the decline.

At the same time slower than expected loan growth created surplus funding, which in light of the current interest rate environment was held in overnight funds and other very short term liquid investments.

This excess liquidity cost us 2 basis points.

The sharp decline in intermediate term interest rates accelerated prepayments on loans and investment securities which caused another 3.5 basis points of decline.

At the same time our interest rate sensitivity modeling shows we continue to be neutrally positioned.

The income is positively impacted .8% over a twelve month period.

Even in our most severe stress test scenario, assuming a 10 percent deposit outflow and immediate .100 rise in short-term rates and corresponding rise in deposit rates, the interest negatively impacted .4%.

Furthermore in a shot down 50 basis point scenario that interest income is negatively impacted .8%.

To summarize the action we took during the third quarter while we did not optimize short-term results did preserve our long term neutral interest rate risk position and strengthen our sources of core funding in anticipation of future loan growth.

Average earning assets were $543 million higher during the third quarter. 6.3% increase annualized.

Average loans on the balance sheet for the third quarter were $25.9 billion an increase of $176 million or 3% annualized versus the second quarter.

Consumer loans excluding residential mortgages grew $286 million of 10.8% annualized.

Average residential mortgages declined $41 million compared to the second quarter due to the impact of a $300 million residential mortgage securitization that was done at the end of the second quarter which securitizes the loans in the investment portfolio.

Excluding the impact of the securitization average mortgage loans would have been $260 million higher compared to the second quarter.

Total commercial loans were $79 million lower.

Total loans at the end of the third quarter were $26.3 million, an increase of $634 million versus the second quarter ending balance.

This is obviously a favorable factor as we head into the fourth quarter in terms of average loan growth.

Among other interest earning assets, the investment portfolio increased $143 million on average due to the $343 million mortgage loan securitization.

Short-term running assets increased by $224 million compared to the second quarter reflecting growth in deposits, the average balance of excess liquidity invested in short-term assets reached $829 million over the course of the month of September.

Home equity products continue to be a core consumer product continues to be a core product that leads to better cross sale and stronger relationships over time.

Throughout the first three quarters, the cross sale penetration of our new home equity line customers averaged six products per household.

Trends in the quality of new home originations were strong again and today the average loan to value on new home equity production is approximately 78% and the median FICA score 78.

Average dealer loans grew $89 million compared to the second quarter.

On a managed basis, dealer loans declined $30 million.

This is the sixth quarter out of the last eighth quarter during which managed dealer loans have declined.

Similar to home equity, the credit quality transferred new dealer originations has continued to improve.

The median FICA score for indirect originations was 736.

On a managed basis average loans in the third quarter were $29.2 billion, a decrease of $234 million compared to the second quarter.

This was due primarily to the second quarter mortgage securitization and declining balances in the conduits.

At the end of the third quarter loans were $2.9 billion, a reduction of approximately $300 million compared to the second quarter.

On the funding side of the balance sheet total deposits increased $470 million compared to the second quarter.

Average low cost deposits grew $103 million during the quarter or 2.5% linked annualized.

This was driven by an increase in non-interest-bearing and money market deposits.

Deposits increased $40 million during the quarter, while interest checking and savings deposits declined.

Money markets were higher due to our offering of new money market deposit product and trust accounts.

This averaged $200 million during the quarter.

Total time deposits grew $368 million during the quarter all of which represents funds from core customers.

New house hold growth continues to be a driver of deposit growth.

We added more than 14,000 net new consumer checking households since last year's 3rd quarter, while business banking house holds were up 9.4% over the same period.

Turning now to credit quality.

Nonperforming assets for the quarter were $188.7 million down about $800,000 compared to the second quarter.

Ratio of nonperforming assets was .72% down two basis points from the previous quarter.

No non-performing loan sales in the third quarter.

Our on loss reserve coverage for non-performing loans improved to 251%.

We continue to expect nonperforming assets to fluctuate around this level.

Charge-offs were down $6.1 million to $42.9 million compared to the second quarter.

That represents .66% of loans compared to .76% in the second quarter.

Provision expense was $51.4 million which was down $1.2 million from the second quarter and exceeded net charge-offs by $8.5 million.

The reserve to net loans was 1.45%.

In the third quarter commercial charge-offs were $13.1 million which included $6 million for shared national credits.

Commercial charge-offs were down $9.5 million compared to the second quarter.

We received the results of the annual shared national credit exam during the quarter and there were no unexpected downgrades nor accruals or charge-offs.

Consumer charge-offs were 96 basis points for the quarter. 4 basis points vs. the second quarter and 3 basis points lower than last year's third quarter.

Indirect charge-offs were 110 basis points, 5 basis points higher than the second quarter.

While home equity charge-offs increased 7 basis points to .50 percent.

We continue to see general stability in the consumer portfolio.

We expect to see the economy strengthen and realize benefits from the tighter underwriting standards and in the consumer portfolio.

Finally during the third quarter the syndicated loan portfolio remained relatively flat at $579 million or approximately 2% of managed loans and near the targeted level of $400-500 million.

Turning now to non-interest revenues.

Non-interest revenues increased $7.2 million or 15.9% on an annualized basis.

Service charges on deposit products up $10.1 million over the second quarter.

This increase primarily reflects a change last quarter making charges consistent for electronic and paper-based payments and aligning our practices closer with industry standards.

Mortgage income increased 2.6 million for the quarter.

Partially off-setting the growth in these areas were declines in trusting and common investment services income.

The declines were primarily the result of continued poor market conditions and slower annuity sales.

In addition, the decline in trust revenue was further exacerbated by the decision last year to outsource our record keeping function of the employee benefits business.

The move resulted in lower trust revenues, there also was a corresponding decrease in expenses.

Other revenues were lower on a link quarter basis.

Looking at non-interest expenses.

The efficiency ratio was 49.5%.

A linked quarter decline of 137 basis points from the second quarter reflects our focus on expense control in a difficult business environment.

Non-interest expenses for the third quarter were $9.8 million lower compared to the second quarter which led to lower personnel costs, communication expenses and other lower non-interest expenses.

Included in the non-interest categories a $3 million benefit from a sale of a credit derivative written off during the second quarter.

Looking ahead we expect a non-interest margin to decline further to 4.10-4.20%.

This reflects several factors.

First of all we expect at least $1 billion in surplus liquidity on average over the course of the fourth quarter.

A continuing mixshift on the loan side toward variable rate loans as well as the deposit side toward more fixed-rate time deposits to account for a 5 basis impact.

The full effect of the interest rate swap 3 basis points.

No further interest rate swaps scheduled to run off in the fourth quarter, just the full quarter effect of the runoff in the third quarter.

Lower loans in the conduits, 3 basis points and lastly we expect to see the current level of relatively high prepayment activity to continue for four basis points.

We expect credit quality indicators to fluctuate in a narrow range around the results from the last several quarters.

Non-interest revenue and well contained expense control contribute to earnings growth.

Finally back in April we provided earnings guidance for the year in the range of $1.63-$1.68.

Today we continue to be comfortable with the top end of that range which matches the current consensus.

That concludes my remarks.

Thank you, Sloan.

As you've just heard AmSouth produced solid earnings in spite of the slower than expected economic growth during the third quarter.

While we will continue to face challenges for the remainder the year as a result of this soft economy, we believe AmSouth is well-positioned to take advantage of growth opportunities in the future.

As part of our strategy to position AmSouth for growth, we spent a tremendous amount of time in the last several months identifying areas of our business to leverage strengths to create new growth opportunities while at the same time operating our business more efficiently and maintaining high levels of customer service.

Let me share a few examples with you.

The management group summer referral campaign finished up in early September.

It resulted in just over 3200 new business referrals.

Half of those referrals have resulted in meetings with perspective clients with obviously others to follow.

The program has resulted so far in 500 new private client relationships representing sales of trust and investment management services as well as the mortgage, home equity lines and deposit products.

The campaign has produced more than 400 million in new business for the wealth management portfolios including nearly 350 million of trust assets which should have about $2 million in annual fee revenue going forward.

Since at the end of the campaign more referrals have continued to come in bringing the overall total to just over 4,000.

Working the 4,000-plus referrals to build new relationships will be an ongoing process to result in new business wins for time to come.

One of the keys to the program was the knowledge gained by our other lines of business about how to identify and meet the wealth management needs of all of our customers.

Best practices that were learned will continue to be applied to gain new business for wealth management from our other lines of business personnel.

We've ramped up our efforts in commercial banking consistent with our goal to produce sustainable earnings with less volatility will focus on the growth rate of earnings contribution up to the levels more consistent with our company's overall growth rates while at the same time producing business with strong credit quality.

During the second quarter we told you about commercial banking campaign that targeted new relationships and new revenue growth opportunities.

Each commercial middle market relationship manager and team leader has a goal to make at least 150 sales calls with prospects this year.

The goal for the sales campaign has been raised two times already this year and the results now stand at $17 million in annualized revenue from new customers.

Through the third quarter were well on base to exceed that goal that has been set.

One of the drivers of commercial banking revenue growth is treasury management.

We're adding 400 new customers per month to AmSouth's i-treasury.

A web-based treasury management tool for our business customers.

Today our treasury management which includes commercial deposit services contributes just over $80 million in annual revenues.

Today every area of commercial banking including commercial middle market, commercial real estate, treasury management and leasing is developing or executing plans that will contribute to the rampup in commercial bankings contribution.

Our branch expansion plans continue to progress during the quarter.

Through the third quarter we've opened twelve new branches including eight of those being in Florida. 13 additional new branches are scheduled to open during the fourth quarter bringing the total or 2002 to 25.

Our pipeline of new sites is strong and we expect to add a minimum of 30 new branches in 2003 with the vast majority of those in the high growth Florida markets.

We're optimistic about the opportunities that we see ahead in wealth management, commercial banking and in our branch expansion program but also recognize that we face the challenges of a sluggish economy and uncertainty about when economic growth will pick up.

We continue to manage this company toward a lower risk profile that produces sustainable earnings growth.

As you've seen from the steps we've taken may not optimize short-term results but we believe we are better positioned for future performance because of these actions.

Our combination of talented people and fast-growing markets with a focus on fundamentals and relentless execution by our people positions us to respond quickly to market opportunities and achieve our long-term strategic goals.

That would conclude our remarks.

Operator, we can open it up for questions.

At this time, I would like to remind everyone in order to asked a question, please press star and the number one on the telephone key pad.

We'll pause for a moment to compile the Q&A roster.

Your first question comes from Jason Goldberg of Lehman Brothers.

Thank you.

Good afternoon.

I wondering if you can give us color, how you get next quarter's margins.

Next year's numbers could be difficult given where you start out the year.

Just in terms of how you manage the balance sheet in this difficult environment and what we can expect in 2003.

Well, Jason, as you think about 2003, our expectation now is that we would begin the year with at least $1 billion in surplus liquidity sitting on the balance sheet.

Clearly that has an diverse impact on net interest margin but as that gets deployed at pick your own number, say 300 basis points, that obviously has a material impact on the run rate.

When will run growth pick up?

That's a question that you've got an answer that's just good as our answer.

We are encouraged as we look ahead at the fourth quarter, we start the quarter with $400 million in loans higher than what our third quarter average was and we have expectations for good growth during the quarter and residential mortgages and equity lending and those categories could reasonably be expected to provide growth on into 2003 as well.

The whole name of the game for us in this environment is to do everything we reasonably can do to deliver our numbers in the current period without jeopardizing future performance.

That's the tightrope we continue to try to walk.

Super.

If you could, give us more color in terms of the commercial real estate pipelines.

Have you seen any building in terms of your outlook there.

You are hearing your customers getting more willingness to borrow or continue to be muted.

Those categories combined have been down $70-80 million which is by far the smallest declines we've seen over the last six, 7, eight quarters.

The pipelines as well we hear from the field have been building and in as good shape as they have been for quite some time.

We can't point to growth on the balance sheet yet, but we're encouraged also as the syndicated runoff in the syndicated portfolio gets closer to closer to conclusion that what production we are seeing would be seen as net deposit growth.

Jason, as you know, in this rate environment even on that commercial real estate with the vast majority of ours being construction oriented we continue to see every time we get excited about new business hitting the books we are also seeing loans on the books to take permanent financing earlier than they would and therefore, you're not seeing on the balance sheet the productivity that's going on.

As soon as that going to permanent slows down in a permanent cycle we think it will be more evident to the productivity that the group is producing.

Our real estate is up 7% this year over last year.

Again as Dowd points out, that shuffle in the balance sheet doesn't fail us.

Makes sense.

Thank you.

Your next question from Jeff Davis of Midwest Research.

Good afternoon.

Follow on to Jason's question.

More color on the margin.

If I heard you right, 410-420 coming for the fourth quarter.

What do you know as the world exists today, what does the margin look like in the first quarter, do we continue to erode or hit an inflection point during the fourth quarter and it stabilizes in that range and if so what's the key consideration in finding the inflection point?

I certainly wouldn't expect if there is decline in the first quarter, I would not expect it to be anything like what we are seeing linked with the fourth quarter.

But a lot of this hinges on the strength of loan growth.

Quite frankly it also hinges on how strong the deposit growth is.

We could pull back on the deposit growth numbers and have a net interest margin going into 2003 that is an awful lot stronger.

We just don't think that makes sense.

It has more to do, some of the things like the swap runoff that affected us in the second half of this year aren't there in the first.

At the end of the day what we need to see more than anything else is acceleration in loan growth.

And this is not sufficient to cause this inflection.

It won't be enough to absorb the surplus liquidity.

We may see a turn in net interest income without a return in net interest margin.

As far as we are concerned, that's fine.

With regards to spread revenue we should expect to see it down by a similar magnitude as we saw between 2Q and 3Q?

We would not see it that much at this stage.

Okay.

While that margin compression is the result of higher level surplus liquidity which has no net interest income.

Net interest revenues TE was down about 11 million late quarter.

We expect something under 10, if I hear you right between 3Q and 4Q and as the world exists today 4Q ought to be flattish and possibly up.

That's a fair characterization.

Very good, thank you.

Next question from Sam Caldwell from SunTrust Robinson Humphrey.

I had a question on deposits.

I notice a lot of deposits came from foreign time deposits and also CDs over $100,000.

Could you comment on that and is that a trend you expect to continue?

Be glad to.

Every bit of that time deposit growth is coming from core customers.

All of the foreign time that you see there, 100% of it, every nickel is in our corporate management product for commercial customers.

All of the time deposit growth including the above $100,000 is also core customer business.

Absolutely no wholesale funding money there at all.

Okay.

I had one other question.

Specifically, on the increase service charges, do you guys, I'm assuming that the way I understood that is you expect that to continue, that level going forward, could you comment a little bit more on that?

Sure.

We do think that level this quarter is a reasonable expectation for run rate.

Basically what that represents the growth is we have over the last couple of quarters gone through a transition where we now treat our electronic debits the same way as we treat our checks from an overdraft charge-off standpoint.

That combined with the growth we've been seeing, checking account house holds and the good growth in treasury management revenues is what would explain the increase and a good run rate expectation.

Good.

Got it.

Next question comes from Ed Nigerian of Merrill Lynch.

Good afternoon.

Just to come back to the $10 million growth on the service charges.

If I understand you correctly, that was mostly caused by the change in terms of treating electronic debits on an overdraft basis.

If the answer to that is, yes, that's fine.

If you could outline again consumer loan losses in terms of both home equity and dealer in direct in terms of the loss ratios in the third quarter and you indicated rose from the second quarter, if you could outline that again and lastly in terms of non-CD deposits transaction deposit growth, seems like your growth rates have lagged including this quarter and I wonder if you could give us in terms of why.

First of all on the service charge question, the majority of the increase is associated with that change.

Secondly in the charge-offs, dealer charge-offs were 110 basis points up 5 basis points from the second quarter.

The second quarter is the seasonal low period for us.

It's down from 139 basis points in last year's third quarter.

I might note there that what we are seeing is a lower level of incidence of loss.

Less frequency of loss.

When we have a loss, it's a larger dollar amount and a direct reflection of the weakness in the used car market.

Home equity was at a basis points up 7 basis points from a second quarter and up from 34 basis points from a year ago.

As we look at that portfolio, we think we are at or near the top in terms of the charge-off rates there.

The quality of the originations going into that portfolio in the last 18 months or so would argue strongly in favor of a decline as we see more of that part of the portfolio.

Last question on low cost deposit growth, we've been disappointed in that category as well for the past two quarters.

Second and third quarter are typically weaker quarters for us for low cost deposit growth.

What we've seen the last couple of quarters has been a little weaker.

I think some of what we may be seeing in second and third quarter is the greater emphasis that we've placed on time deposit growth and the fact that some of the low cost categories may be moving into more attractive rates in the time deposit category.

You recall the last call we talked about the fact that the middle of May we started placing greater emphasis on turning the trend in time deposit runoff which we've been successful in doing and reported a little bit of growth this particular quarter.

I think that probably affected the growth numbers just a little bit.

Thank you.

Year-over-year, we are up 5-6% so we are pleased with the year-over-year but late quarter trends, we need to be doing better.

Okay.

Thanks.

Next question comes from Charlie Earnest.

Hey, guys.

Charlie, we think you're earnest, too.

On the conduit, can you talk about runoff over the next 4-6 quarters and then when does that portfolio actually become zero.

Thanks.

We're at a little under $2.9 billion at the end of the third quarter.

By the end of next year you could see that number down around $2 billion.

The runoff, the bulk of the runoff is occurring in the residential mortgage part of the conduit which is $1.5 billion today.The indirect portion has gotten small, it's under $300 million now and the commercial piece will continue to decline, although at a lower rate.

If we are, I believe $16 million now in terms of net interest contribution.

That sounds about right.

Are we looking at getting down to around the $10 million mark when you are at a $2 billion run rate?

At the end of next year.

You know all other things being equal, that's a fair assumption.

Part of what's happening here is the loan production that we see today winds up getting booked on the balance sheet.

So the income impact really gets offset by net interest income from on balance assets compared to the off balance sheet assets.

It has a disproportionate effect on interest margin because you could have $100 million decline in the conduit and a $100 million increase on the balance sheet.

If the yields are the same, there's no net interest impact but a significant net interest margin impact because you increase the size of the balance sheet for the same amount of income.

Sloan, could you also comment on the commercial charge-off decline, the absolute balance, it seems they were down pretty significantly on a link quarter basis.

We were pleased to see the result that we saw this quarter on the commercial side, as I mentioned. 6 million of the total roughly $13 million in charge-offs were from the shared national credit.

Most of the other half of that was coming from the small business portfolio.

So we we pleased to see that.

And hopeful that that would reflect the trend as we go quarter by quarter.

Thanks, a lot.

Operator: Next question comes from Sunny Ewe from Maverick Capital.

Hi.

I just want to classify on the electronic charges on deposit.

How was it accounted for in second quarter?

Same way.

To the extent there were changes that took place.

This wasn't a reclassification of income, it was a change in the business practice that took place that produced an increase in income.

It wasn't an accounting change.

To the extent there was any of that occurring it showed up in service charge incomes as well.

Okay.

Thank you.

Next question from Casey Ambrich of Millennium.

Thank you for taking the phone call.

I understand it is a difficult market right now.

Previously your guidance has tried to be plus 12% EPS growth, and is that more of a long-term goal or how should we look at that?

We said ever since we laid those goals out we felt the 12-15% and 20%-22% were long-term goals.

Clearly there are going to be periods of time where it's not realistic to expect earnings at that kind of level.

Clearly to deliver a 12% earnings in this environment, we are not that far below it, 10.3 for goodwill amortization, clearly to deliver that in this environment requires us to go on the risk curve beyond what we feel is appropriate.

They are long-term and we still work to engineer our long-term strategic plans to deliver that kind of earnings per share growth.

Thanks, very much.

At this time there are no further questions.

Any closing remarks?

Operator, if there are no further questions, we would thank everyone for joining us today and appreciate it and we stand adjourned.

Thank you for participating in the AmSouth Bancorporation third quarter earnings call.

You may now disconnect.