BBT
#Yes, <UNK>.
When we went through the process, you go through and you really evaluate your risk in the Company, you run your stress models.
The CCAR 2015, we actually used up over 100% of our capital, so our capital ratios came down a little bit.
So when we did CCAR 2016, we wanted to make sure our capital ratios stayed above 10% in tangible common Tier 1 which is really what we're targeting.
You will see us slowly accrete, even with the repurchase and dividend increase, a little bit more capital over this next four quarters, probably around 20 basis points or so, which is exactly was we planned for.
If you look at our asset in total in 2016 versus 2015, it's basically 5% higher.
I know we did an extra acquisition and all that, but the actual asset we came in with, came in a little bit higher overall if you don't count the acquisitions.
In our slide, we show you GAAP margin and we show you core margin.
We feel very good that core margin has stabilized.
Most of our assets for the most part have repriced.
With a flatter curve, you're seeing a little bit pressure on some longer assets like security investments there, but we're also still bringing down our deposit costs a little bit.
You saw those come down a couple basis points.
We feel pretty good that core margin will be pretty stable for the foreseeable future.
On the GAAP side, it's basically the difference is purchase accounting.
And you're going to see, if we did no other acquisition whatsoever, GAAP will converge to core over several years.
There will be a trajectory down over time.
I wouldn't say it's going to be steep, but just by definition, it's got to come in and collapse, if don't do any more acquisitions.
Our earning assets are a little bit flat on a linked quarter basis because when we purchased, closed Nat Penn, we pre-bought their securities and sold their security portfolio, so we were a little bit big in the second quarter.
So our securities will right-size this quarter, be around $46 billion, $47 billion in total, so that will come down a little bit.
That will be more than offset in the loan growth side.
You actually get a positive mix change there because you're getting higher yielding assets on the loan side, versus what you're giving up on the security side.
<UNK>, we've not projected on exact time frame, and the reason is because there is no exact time frame.
The fact is, we're going to stay focused on expense management and improving our profitability, and hopefully resulting in improvement in our relative stock price, until it's done.
And people pushed me in a corner.
It's longer than 90 days and less than five years, and that's about as close as I can give you.
I'm not going to try to nail it any closer than that.
I just want our shareholders to understand we are not going to do M&A until we feel good about executing on what we already have invested in.
Recall, we bought $35 billion worth of assets over the last year and-a-half.
We've got plenty of work to do to rationalize that, and get the returns for our shareholders.
So I think that's where we are.
I think that's where we're going to be.
And it's just really that simple.
Yes, <UNK>.
I appreciate it.
It's confusing.
If you recall back to the first quarter, the deferred comp pieces, in the first quarter of every year there's always a piece that goes into net interest income.
That was $15 million.
That only happens once a year, and it's basically a result of the investments done in mutual funds.
So that really balances it out, so it's $15 million in that, then the $55 million and $40 million all balance out.
As far as the insurance business goes, when you bring that in, net-net day one, just their efficiency cost versus the bank is just a little bit higher overall.
But <UNK> and his team are working really hard, and achieving cost saves and synergies.
I don't know if you want to comment.
So on the investment portfolio, you are correct in that the agency securities we've been buying, we've been buying at premiums.
We are very disciplined to try to have a handle of 1.02 or less if at all possible.
We did actually have an advantage.
If you go back to crisis, we got a lot of non-agency securities back then, at discounts.
So we, overall, if you go back quarter after quarter, we've been relatively balanced where the premiums on the higher quality agencies have been offset by the non-agency securities.
This quarter, with the big drop in interest rates, we actually saw a slight benefit, and the guys that were at a discount, the non-agency guys, were prepaying faster, and we were accreting more.
That's that duration adjustment that you saw come you through.
So we actually had a slight benefit in the security yields.
As far as mortgage banking income goes, is that what your other question.
Servicing valuations.
Our servicing valuations really haven't improved.
It's within a couple basis points of what it's been of late.
On a go-forward basis, pricing has expanded.
And as pricing expands, and rates continue to fall, you might see an increase on a prospective basis in valuations.
But right now, you look at our historical numbers, and what we reported, we're pretty much status quo.
The cost saves that we announced was a total of $60 million.
My guess is we're probably a quarter of the way through, probably $10 million or $15 million right now.
I would say a lot-some of it would be in 2Q numbers.
Whenever you announce an acquisition, you don't want it to happen, but people just start looking for other opportunities, and we saw some attrition out of National Penn as it got closer and closer to close.
So you saw some of those cost saves come through a little early.
You did.
And the reason is because when we made the comment last quarter, we were assuming certain projections with regard to the denominator, revenue level, and the revenue level because of the economy's just a little bit softer.
So it just makes it a little bit harder to get to that maybe 57%, 58% level.
I'm hedging a bit, to be honest, because revenues come in strong, we might hit that.
I'm mostly trying to say that this is not that kind of precision ratio that you can project with absolute certainty.
So I'm not saying anything in terms of taking away from our commitment to expenses.
We hit our expense number for the second quarter.
We will be able to do exactly what we say conceptually with regard to expenses for the next several quarters.
And the ratios will pop around, based on what happens to the revenue.
From a general point of view, <UNK>, the receptivity we've had in Philly has been fantastic.
We're a top 10 US bank, and we have very, very good capabilities to help medium size, larger businesses.
And the people there, frankly, like us.
We are very well received in terms of our culture and our style of doing business, and so the receptivity has been very strong.
And keep in mind that with National Penn and Susquehanna, while they have good relationships with a lot of the players in that market, they haven't had the capacity to be able to meet a lot of their needs.
The hardest part in those relationships is developing trust with the leaders of the companies, the CEO and the CFO.
We have that kind of trust and relationship built up for years and years and years through our people out there and all of our people are in place.
Now all we have to do is lever those trusting relationships with our additional capacity.
So early feedback from our people is frankly very, very positive.
<UNK>, I think Pennsylvania obviously is a major growth for us.
But so far as growing tangentially, we're not focused on trying to grow really around our footprint.
The only exception that I would say is, we're now in Ohio, technically through Cincinnati.
We'll certainly spring forward through our corporate banking efforts up into all of the major markets in Ohio.
Frankly, we've been working on that for a while anyway.
As you know, our corporate banking initiative is a national platform anyway.
You're probably talking specifically about retail, and we do not expect any retail movement outside of the existing defined footprint, for a period of time.
We've got a lot of work to do in all the areas we're in, and that's where we will stay focused.
Well, I think digital transformation ---+ that's an insightful question.
As digital transformation continues to occur, there will be the possibility of expanding beyond your footprint, obviously not through branches, but through pure social media and other techniques, with regard to expanding digitally.
That's why, <UNK>, we ---+ last year, we named one of our new executive management members as our Chief Digital Officer.
He's assembled his team.
He's aggressively working on what is our strategy, with regard to expanding digital within our quote, unquote geographical footprint, but much broader than that.
That will be a much broader footprint initiative.
<UNK>, it's good to hear from you.
And obviously I just heard that announcement this morning, as you did.
But I really agree with where they're coming from.
I think that businesses in general, and the banking industry in particular, are doing an injustice, frankly, to the market at large, and to our own shareholders, in terms of trying to be that specific in terms of projecting quarter to quarter.
It just makes no sense.
It's the way it's always been, and so we've kind of fallen into that trap.
As you heard me say over the last year or so, I've been trying to dislodge us from talking about efficiency ratios and things like that, because of exactly what Jamie and them are talking about.
So we will definitely follow along with that momentum.
Yes, I can foresee us not giving guidance.
I really ---+ frankly what I'd like to say to our shareholders is that my pledge to you is that we are going to work really hard to provide a good long-term, growing, steady, less volatile total shareholder return, that will be top-tier type of performance.
That's about as far as I think we ought to give.
And then they measure us over time.
If they like what we do, they buy more stock.
If they don't, they sell.
I think that folks like you that are well respected in the industry can help, and I think the major banks, I'm glad that Jamie's on board, I think if all the major banks would start moving in that direction, I think you would see it move very quickly.
Thank you, Levi, and thanks to everyone for joining us today.
This concludes our call.
If you have further questions, please don't hesitate to contact Investor Relations.
Thank you, and I hope you have a good day.
