comerica (cma) earnings report: q3 2015 conference call ... · the following comerica conference...
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CompanyName:ComericaIncCompanyTicker:CMASector:FinancialIndustry:Banking
EventDescription:Q32015EarningsCallMarketCapasofEventDate:7.39BPriceasofEventDate:42.035
©2014TheStreet,Inc.Al l R ightsReserved Page1of25
Comerica(CMA)EarningsReport:Q32015ConferenceCallTranscriptThefollowingComericaconferencecalltookplaceonOctober16,2015,08:00AMET.Thisisatranscriptofthatearningscall:
CompanyPart icipants
DarlenePersons;Comerica;DirectorofInvestorRelationsRalphBabb;Comerica;ChairmanKarenParkhill;Comerica;ViceChairmanandChiefFinancialOfficerPeteGuilfoile;Comerica;ChiefCreditOfficerPatFaubion;Comerica;ExecutiveVicePresidentoftheBusinessBankCurtFarmer;Comerica;President
OtherPart icipants
ScottSiefers;SandlerO 'Neill;AnalystErikaNajarian;BankofAmerica;AnalystKenZerbe;MorganStanley;AnalystJohnPancari;EvercoreISI;AnalystKenUsdin;Jefferies;AnalystDaveRochester;DeutscheBank;AnalystTerryMcEvoy;Stephens;AnalystBobRamsey;FBR;AnalystBrettRabatin;PiperJaffray;AnalystBrianClark;Keefe,Bruyette&Woods;AnalystDavidDarst;Guggenheim;AnalystDavidEads;UBS;AnalystJohnMoran;MacquarieCapital;AnalystStevenAlexopoulos;JPMorgan;AnalystGaryTenner;DADavidson;AnalystJeffreyElliott;AutonomousResearch;Analyst
MANAGEMENTDISCUSSIONSECTION
Operator :
Goodmorning.Mynameis[Brent]andIwillbeyourconferenceoperatortoday.Atthistime,IwouldliketowelcomeeveryonetotheComericathirdquarter2015earningsconferencecall.
(OperatorInstructions).
I'dnowliketoturnthecallovertoDarlenePersons,DirectorofInvestorRelations.Pleasegoahead.
DarlenePersons (DirectorofInvestorRelations):
Thankyou,[Brent].GoodmorningandelcometoComerica'sthirdquarter2015earningsconferencecall.
ParticipatingonthiscallwillbeourChairman,RalphBabb;President,CurtFarmer;ViceChairmanand
CompanyName:ComericaIncCompanyTicker:CMASector:FinancialIndustry:Banking
EventDescription:Q32015EarningsCallMarketCapasofEventDate:7.39BPriceasofEventDate:42.035
©2014TheStreet,Inc.Al l R ightsReserved Page2of25
ChiefFinancialOfficer,KarenParkhill;ChiefCreditOfficer,PeteGuilfoile;andExecutiveVicePresidentoftheBusinessBank,PatFaubion.
AcopyofourpressreleaseandpresentationslidesareavailableontheSEC'sWebsite,aswellasintheInvestorRelationssectionofourWebsite,Comerica.com.Aswereviewourthirdquarterresults,wewillbereferringtotheslides,whichprovideadditionaldetailsonourearnings.Beforewegetstarted,Iwouldliketoremindyouthatthisconferencecallcontainsforward-lookingstatementsandinthatregard,youshouldbemindfuloftherisksanduncertaintiesthatcouldcauseactualresultstovarymateriallyfromexpectations.Forward-lookingstatementsspeakonlyasofthedateofthispresentationandweundertakenoobligationtoupdateanyforward-lookingstatements.IreferyoutotheSafeHarborstatementcontainedinthereleaseissuedtoday,aswellasslide2ofthispresentation,whichIincorporateintothiscall,aswellasthefilingswiththeSECforfactorsthatmaycauseactualresultstodiffer.
Also,thisconferencecallwillreferencenon-GAAPmeasuresandinthatregard,Iwoulddirectyoutothereconciliationofthesemeasureswithinthispresentation.
NowI'llturnthecallovertoRalphwhowillbeginonslide3.
RalphBabb(Chairman):
Goodmorning.
Ourthirdquarterresultsdemonstratethebenefitsofourgeographicandbusinesslinediversity.Ourtrustedadvisorapproachtorelationshipbankingcontinuestomakeapositivedifference.
Today,wereportedthirdquarter2015netincomeof$136millioncomparedto$135millionforthesecondquarterand$154millionforthethirdquarterof2014.Earningsperdilutedsharewere$0.74forthethirdquarterof2015comparedto$0.73forthesecondquarterand$0.82forthethirdquarter2014.Turningtoslide4andhighlightsfromourthirdquarterresults,averageloanswereup$1.8billion,or4%comparedtoayearago.
Averageloansincreased$139millionto$49billioncomparedtothesecondquarterwithincreasesintechnologyandlifesciencesandcommercialrealestateoffsetbydecreasesincorporatebankingduetoourcontinuedpricingandstructurediscipline,aswellasseasonalityingeneralmiddlemarketandtheexpectedrun-offinenergy.Averagedepositsgrew$4billionor7%comparedtoayearago.Relativetothesecondquarter,averageddepositsincreased$1.7billionor3%to$59.1billiondrivenbyincreasesinnearlyeverybusinesslineledbygeneralmiddlemarket,technologyandlifesciencesandcorporatebanking.Infurthercomparingourthirdquarterresultstothesecondquarter,netinterestincomeremainedstable,increasing$1millionto$422million,whilethenetinterestmargindeclinedmainlyasaresultofhavinghigherbalancesattheFed.
Creditqualityoverallcontinuedtobestrong.At19basispoints,netcharge-offsremainwellbelowthehistoricalnormallevelandgrosscharge-offsdeclinedinthequarter.Theprovisionforcreditlossesdecreasedto$26million.Thismarksthefourthconsecutivequarterthatwehaveprudentlyincreasedourreservesforenergy,aresultofincreasingcriticizedloansandsustainedlowenergyprices.Netcharge-offstiedtoourenergy-relatedexposurecontinuedtobelowandwehadnocharge-offsintheenergybusinessline.
Whilenegativecreditmigrationisanticipated,anylossesareexpectedtobemanageable.Wecontinuetofeelcomfortablewithourenergyportfolio.Non-interestincomewasup$3millionto$264million,includingincreasedcardfees,anareawearefocusedoncontinuingtogrow,aswellasgrowthinseveralothercategories.Thiswaspartiallyoffsetbydecreasesininvestmentbankingfeesandfiduciaryincome
CompanyName:ComericaIncCompanyTicker:CMASector:FinancialIndustry:Banking
EventDescription:Q32015EarningsCallMarketCapasofEventDate:7.39BPriceasofEventDate:42.035
©2014TheStreet,Inc.Al l R ightsReserved Page3of25
duetodepressedmarketconditions.Non-interestexpensesincreased$25millionto$461million,primarilyreflectinga$3millionnetreleaseoflitigationreservesinthethirdquartercomparedtoanetreleaseof$30millioninthesecondquarter.
Wecontinuedtotightlymanageexpenseswhilefacedwithrisingtechnologyandregulatorycosts.Ourcapitalpositionissolid.Stockrepurchasesunderourequityrepurchaseprogram,combinedwithdividends,returned$96million,or71%ofearningstoshareholdersinthethirdquarter.Turningtoslide5andalookatourprimarymarkets,ourmostrecenteconomicindexeshavetrackeddatathroughJulyineachofourprimarymarkets.OurTexasindexcontinuestoseelighterdeclines.Drillingrigcountdecreasedandunemploymentinsuranceclaimsincreased.Weexpectthedragfromlowoilpricestocontinueinto2016.However,itisimportanttonotethattheTexaseconomyisverydiverse.
AverageloansanddepositsinTexaswereeachdownabout2%comparedtothesecondquarter,bothimpactedbydeclinesingeneralmiddlemarketandenergy.OurCaliforniaindexshowedasmalldecline,thefirstsinceMarch.Stateexportsweakened;however,thelabormarketcomponentsoftheindexareshowingstrengthandweexpectthattocontinuethroughtheremainderoftheyear.Wesawbroad-basedaverageloananddepositgrowthinCalifornia.Loanswereup$360millionormorethan2%anddepositswereupover$1billion,or6%,withgrowthinalmosteverybusinessline.OurMichiganindexincreasedagainfueledbytheautoindustryasautoproductioncontinuedtoclimb.
Infact,autosalesonanannualizedbasisrosetoa10-yearhighof$18.2millioninSeptember.LowgasolinepricescontinuetobeaplusforMichigan'seconomy.AverageloansinMichiganweredownslightlywhileaveragedepositswereup1%duetoseasonalityingeneralmiddlemarket.Inclosing,webelieveourgeographicfootprintiswell-situatedandourrelationshipbankingstrategycandrivegrowthinloans,depositsandfeeincome.Weremainfocusedonthelongterm.Ourconservativeconsistentapproachtobanking,includingcreditmanagement,investmentstrategyandcapitallevels,haspositioneduswellforthefuture.NowIwillturnthecallovertoKaren.
KarenParkhill(ViceChairmanandChiefFinancialOfficer):
Thankyou,Ralph.Goodmorning.Turningtoslide6,thirdquarteraverageloansincreased$139millionoverthesecondquarter.Technologyandlifescienceswasthelargestcontributortoloangrowthwitha$367millionincrease,drivenalmostentirelybyequityfundserviceswhereweprovidecapitalcallorsubscriptionlinestoventurecapitalandprivateequityfirms.Loansinourcommercialrealestatebusinesslineincreased$124million,primarilyrelatedtomulti-family.
Mortgagebankerloanswereup$47million,reflectingourcontinuedmarketsharegains,aswellasrefinancevolumesandapickupinhomesales.Becausemortgagebankeroutstandingstendtomoveupanddownwiththehomebuyingseason,weexpectadeclineinfallandwinterandinfact,wesawthattrendinperiod-endbalances.Inaddition,wehadmodestaverageloangrowthinseveralotherbusinesslinessuchasentertainment,privatebanking,retailbankingandsmallbusiness.Partiallyoffsettingthisgrowth,corporatebankingloansdeclined$231millioninthequarterasweremaindisciplineinthishighlycompetitiveenvironment.
Asexpected,loansingeneralmiddlemarketdeclined$214millioninconjunctionwiththetypicalsummerslowdown.Andloansinourenergylineofbusinessdeclined$86millionfromcontinuedpaydowns.Averagedealerloansdecreased$26million.Infact,eachsuccessivemonthinthequarterdeclinedasourcustomersworkeddowntheirinventorypriortoreceivingnewmodels.Thedeclinewassomewhatlessthanexpectedasmanufacturershavecontinuedtomeetthestrongdemand,alongwiththefactthatwe'vebeenexpandingrelationships.Period-endloansdeclined$799millionto$48.9billion.Thisdeclineincludedadecreaseinmortgagebankerfinance,reflectingthedeclineoffthesummerpeak.
CompanyName:ComericaIncCompanyTicker:CMASector:FinancialIndustry:Banking
EventDescription:Q32015EarningsCallMarketCapasofEventDate:7.39BPriceasofEventDate:42.035
©2014TheStreet,Inc.Al l R ightsReserved Page4of25
Inaddition,wesawdecreasesingeneralmiddlemarket,corporatebanking,nationaldealerservicesandenergyforthesamereasonsIjustdescribed.Increasesintechnologyandlifesciencesandcommercialrealestatepartiallyoffsetthedecline.Totalloancommitmentsdecreased$464millionwithdeclinesingeneralmiddlemarketandcorporatebankingasweremaindisciplinedonpricingandstructure,aswellasmortgagebankerduetotheexpirationoftemporaryincreasesinconjunctionwithseasonality.Energycommitmentsalsodeclined.Technologyandlifesciences,nationaldealerandcommercialrealestatecommitmentsgrew.Utilizationdecreasedto50%attheendofthethirdquarterfrom51%attheendofthesecondquarter.
Importantly,ourpipelineincreased.Ourloanyieldsdecreased3basispointsinthethirdquarterasshownintheyellowdiamond.Thebenefitfroma1basispointincreasein30-dayLIBORandthefavorableimpactfromhigheryieldsonloansrelatedtoenergywasmorethanoffsetbylowerloanfeesduetodecreasedloanactivitywiththesummerslowdownandadeclineinportfoliospreadsasaresultofgrowthinhigh-quality,loweryieldingloans.Turningtoslide--todepositsonslide7.Averagedepositsincreased$1.7billioninthethirdquarter,drivenbya$1.3billionincreaseinnon-interest-bearingdeposits.Virtuallyeverybusinesslinepostedgrowthledbygeneralmiddlemarket,technologyandlifesciencesandcorporatebanking.Period-enddepositsincreased$508millionto$58.8billion.Wecontinuetoprudentlymanagedepositpricingwhileremainingat14basispoints.Slide8showsoursecuritiesportfolioincreasedaswecontinuetopositionourselvesforcompliancewiththenewliquiditycoverageratio,orLCR.WetappedthemarketinJulyissuing$350millioninsubordinateddebtandanadditional$175millioninseniorbankdebt.Bothofwhichweswappedtofloating.
Weinvestedaportionoftheproceeds,$350million,inacombinationoffive-yeartreasuriesandGinnieMaeCMOs.Thisstrategyallowedustominimizeanyimpacttobothearningsandourasset-sensitiveposition.Asyouknow,wearerequiredtohaveanLCRof90%byJanuary1,2016and100%byJanuary1,2017.Asofquarter-end,ourestimatedLCRratiomeetsthatfullyphased-in2017requirement,reflectingourloananddepositmovementinadditiontothedebtissuance.AnyfuturefundingneedsforLCRpurposeswilldependonourbalancesheetmovementandstrategiesovertime.ShouldweneedtoaddHQLA,wecontinuetohaveseveralfundingoptions,includingourfederalhomeloanbanklineofcredit,brokereddepositsandthepublicdebtmarkets.Wecontinuetocarefullymanagethesecuritiesportfolio,maintaininganestimateddurationunderfouryears.
Inthecurrentrateenvironment,weexpectcontinuedminorpressureontheaveragesecuritiesyield,asyoucanseeintheyellowdiamondsontheslide.Turningtoslide9,netinterestincomeincreased$1millioninthethirdquarter.Oneadditionaldayinthequarterandloangrowthwerepartlyoffsetbylowerloanyields,whichIdiscussedearlier.IncreasedexpensefromthedebtissuancewasmostlyoffsetbyhighersecuritiesanddepositsattheFed.Ournetinterestmargindecreased11basispointswithmorethanhalfofthatdeclineduetohigherbalancesattheFed.Comparedtothirdquarterof2014,netinterestincomeincreased$8millionlargelyduetoloangrowth.
Wecontinuetobewell-positionedtobenefitwhenratesrise.Ourstandardassetliabilitycaseshowsthata200basispointincreaseinratesoveraone-yearperiodequivalentto100basispointsonaveragewouldresultinanincreasetonetinterestincomeofabout$220million.Wealsoshareintheappendixseveralalternativeassumptionstoourstandardcasewithchangestothepaceofdepositdecline,loangrowthandraterises.Andinallcases,weremainwell-positionedforrisingrates.Turningtoslide10,ouroverallcreditpictureremainssolid.Netcharge-offswere19basispoints,or$23million,derivedmainlyfromtechnologyandlifesciencesandenergy-relatedloans.
Overall,netcharge-offsremainwellbelowwhatishistoricallynormalforus.Grosscharge-offdeclinedslightlywhilerecoveriesweredownprimarilyduetotiming.Ourcriticizedloansgrew$537millionto$2.9billion,orabout6%oftotalloans,whichiswellbelowourhistoricalaverage.Theincreasewasdrivenby
CompanyName:ComericaIncCompanyTicker:CMASector:FinancialIndustry:Banking
EventDescription:Q32015EarningsCallMarketCapasofEventDate:7.39BPriceasofEventDate:42.035
©2014TheStreet,Inc.Al l R ightsReserved Page5of25
a$480millionincreaseincriticizedloansrelatedtoenergy.Inflowstonon-accrualdeclinedfromthesecondquarterandwere$69million,ofwhich$25millionwereenergy-related.Totalnon-accrualloanswerestableatonly73basispointstototalloans.Specifictoenergy,thefallredeterminationprocesshasjustbegunforourE&Pcustomers,whichcomprise69%ofourenergybusinessline.Withcontinuedlowenergypricesandreductioninrigcount,weexpectsomepressureonaborrowingbasis.However,wedonotexpectwidespreadissuestoariseasourborrowersoverallcontinuetoactprudentlyinthislowpriceenvironment.
Infact,utilizationinourenergylineofbusinessremainedflatat48%atquarter-end.Asanticipated,wecontinuetoseenegativemigrationintheenergybook,whichhasresultedinanincreaseincriticizedloans.However,non-accrualloansandcharge-offshaveremainedlow.Asofquarter-end,approximately27%,or$1.1billionoftheloansrelatedtoenergywereconsideredcriticized.However,thisincludesonly$126millionofnon-accrualsequivalentto3%ofenergyloansandisuponly$7millionfromthesecondquarter.Wehadnocharge-offsinourenergybusinesslinesandmodestcharge-offsinenergy-relatedloans.
Andasexpected,loanscontinuetodeclinewithourenergybusinesslinedown$66millionandenergy-relateddownover$100milliontoabout$615millionatquarter-end.The$26millionprovisionforourtotalportfolioreflectedcharge-offs,aswellasslightlyhigherreserves.Reservesfortechnologyandlifesciencesloansincreasedduetomodestlyhighercharge-offsandwenotonlyaddedtoourenergyreserveduetoanincreaseincriticizedloans,butwealsocontinuetomaintainahealthyqualitativereserve.
Itisimportanttonotethatwhilewehavecontinuedtoincreasethereservesforenergy,webelievethatthecharge-offswillremainmanageable.Insummary,ourconsistent,robustmethodologyresultedina$2millionincreasetotheallowanceforcreditlossesto$670million.Andthecoverageofournon-performingloansremainsverystrongat1.7times.Slide11outlinesnon-interestincome,whichincreased$3millionto$264million.Cardfeesincreased$3millionduetohigherrevenuefrommerchantprocessingservicesandinterchange.Wealsohadgrowthinforeignexchangeandbrokeragefees.
Thiswaspartiallyoffsetbydeclinesininvestmentbankingfeesandfiduciaryincome,whichwereimpactedbythepoormarketenvironment.Wealsohadseveralitemsthataredifficulttopredict.Specifically,a$4millionbenefitfromhedgesonrecentlyissueddebt,a$3millionincreaseincustomerwarrant-relatedincomeanda$5milliondecreaseindeferredcompensation,whichisoffsetinnon-interestexpense.Asareminder,theyear-over-yearviewofbothnon-interestincomeandnon-interestexpenseisnotdirectlycomparable.Eachquarterthisyearreflectsanaccountingpresentationthatreportsgrossrevenuesandexpensesratherthannetrevenueforourcardprogram.
Turningtoslide12,non-interestexpensesincreased$25million.Thisincludeda$3millionlegalreservereleaseinthethirdquartercomparedtothe$30millionreleasewerecordedinthesecondquarter,resultingina$27millionswing.Absentthechangeinlegalreserves,expensesdeclined$2million,mainlyduetoitemsthataretoughtoforecast,includingadecreaseindeferredcomp,aforfeitureofexecutivestockawardsandlowerstaffinsurance.Asexpected,occupancyexpenseswereseasonallyhigherandsoftwareandtechnology-relatedcontractlaborincreased.
Movingtoslide13andcapitalmanagement.Asthechartindicates,wecontinuetoreturnexcesscapitaltoourshareholdersinameaningfulwaywithapayoutof71%ofthirdquarterearnings.Inthethirdquarter,werepurchased1.2millionsharesfor$59millionundertheequityrepurchaseprogram.Asyoumightrecall,theFederalReservescenarioandthestresstestsincorporatedagradualincreaseininterestratesovertheforecastperiodstartinginthesecondquarterof2015.Whilearaterisehasyettooccur,youcanexpectthatanymaterialincreaseinthepaceofourequityrepurchaseswillbelinkedtoournetincomeperformance,whichshouldimprovewithrisinginterestratesovertime.
CompanyName:ComericaIncCompanyTicker:CMASector:FinancialIndustry:Banking
EventDescription:Q32015EarningsCallMarketCapasofEventDate:7.39BPriceasofEventDate:42.035
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Turningtoslide14,ouroutlookforfull-year2015comparedtofull-year2014hasnotchangedfromwhatweoutlinedatthebeginningoftheyearandreiteratedonourcallinJuly.Ourexpectationsforthefourthquarterrelativetothethirdquartershownonthisslidearebasedonacontinuationofthecurrenteconomicandinterestrateenvironment.Startingwithloans,weexpectaveragebalancestoberelativelystablewithaseasonaldecreaseinmortgagebankerandcontinueddeclineinenergyoffsetbygrowthinotherbusinesses.
Weexpectournetinterestincometoalsoberelativelystable.Thepositiveeffectsfromassetgrowthandathirdquarterdebtmaturityshouldapproximatelyoffsetthecontinuedpressurefromthelowrateenvironmentonloanandsecurityyields.Withcontinuedstrongoverallcreditquality,weexpecttheprovisiontoremainlow,similartowhatwesawinthethirdquarter.Asfarastheenergyportfolio,weexpectcontinuednegativecreditmigration,continuedrun-offinbalancesandaverymanageablelevelofnon-accrualandcharge-offs.Overall,weexpectnon-interestincometoincreaseslightly.
Weexpectcontinuedgrowthincardfeesandshouldmarketsimprove,returnofgrowthinfiduciaryandinvestmentbankingfees.Thirdquarterlevelsofwarrantincome,hedgingeffectivenessanddeferredcomp,allofwhicharedifficulttopredict,arenotexpectedtoberepeated.Non-interestexpensesareexpectedtobemoderatelyhigherduetoseasonallyhigherstaffbenefits,outsideprocessing,marketing,occupancy,technology-relatedandconsultingexpenses.Alsolitigationreserverelease,deferredcompandstockforfeiturelevelsbenefitedthethirdquarterandaredifficulttopredict;thereforearenotexpectedtoberepeated.Wecontinuetoremainfocusedoncontrollingexpenseswhereverpossible.
Inclosing,wearepleasedwiththecontinuedloanandrobustdepositgrowth,aswellasincreasedrevenue.Overall,ourcreditqualityremainsstrong.Weremainfocusedonthelongtermandweexpectthatasratesriseourrevenuepicturelooksevenbrighter.Asalways,webelieveourrelationshipbankingstrategy,combinedwithadiversegeographicfootprint,willcontinuetoassistusinbuildinglong-termshareholdervalue.Now,operator,wewouldliketoopenupthecallforquestions.
QUESTIONS&ANSWERS
Operator :
(OperatorInstructions).ScottSiefers,SandlerO 'Neill.
Scott Siefers (Analyst-SandlerO 'Neill):
Firstquestionmaybeonenergy.Expecttohearabunchofthem,Iguess.Sothemigrationintonon-accrualandcertainlywithnocharge-offshasallbeenvery,verygood.Ijustwonder,nowthatenergypriceshaveatleastkindofstabilized,doesthatgiveyouguysanyconfidencethatthisverylowmigrationlevelfromcriticizedintononaccrualcancontinuetostayverylow,orisitstilljustthedurationofsoftnessinenergypricesthatwilldrivetheultimatemigrationperformance?
RalphBabb(Chairman):
Pete,whydon'tyoutakethat.Pat,youcanchimeinaswell.
PeteGuilf oile (ChiefCreditOfficer):
Sure.Ithinkthesamepatternthatwehaveseenoverthepastquarterwillcontinue.Weareseeingsomemigrationintheportfoliostill,butwearenotseeingalotofmigrationtonon-accrualandwehaven'tseenalotofcharge-offs.That'sbeenconsistentwithwhatourexpectationhasbeenrightfromthebeginninganditisexactlywhatweareseeing.Weareseeingalotofthesecreditsgetresolvedbeforetheygotonon-accrual.Infact,wecontinuetogetlargepayoffsofsubstandardcreditsandwejustgotoneIthinkaweekortwoago,soweareencouragedbythat.Wethinkthat'sgoingtocontinueandI
CompanyName:ComericaIncCompanyTicker:CMASector:FinancialIndustry:Banking
EventDescription:Q32015EarningsCallMarketCapasofEventDate:7.39BPriceasofEventDate:42.035
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don'tseeanyreasonwhyitwouldchangewithenergypriceswheretheyaretoday.
RalphBabb(Chairman):
Pat,anythingyouwouldadd?
PatFaubion (ExecutiveVicePresidentoftheBusinessBank):
TheonlythingIwouldaddtothat,Scott,somethingthat'sreallyhelpedusisthat97%ofourportfolioissecuredandwehaveusedthesameengineersforyearsandyearsandthatisholdingupverywell.Soourborrowersarereallybehavingresponsiblyatthistimeinthemarket.
Scott Siefers (Analyst-SandlerO 'Neill):
That'sperfectcolor.Thankyouverymuch.AndthenifIcanswitchgearsreallyquickly,Karen,alotofmovementwithinthebalancesheetbetweensomeofyourguys'issuancesandthenjustthestrongdepositgrowthandeverything.CanyoumaybejustsortofencapsulatehowmuchofthemovementandIguesstheresultingpressureonthemarginwasmaybetransitoryasfundswerejustsortofwaitingtobefullydeployedortimingwithinthequarter?Whatwasthenatureofsomeofthosemoves?Inotherwords,couldweexpectmaybesomereliefonthemargineventhoughtherewillstillbenetdownwardpressure?Howdoyouseethosethingsplayingoffoneanother?
KarenParkhill(ViceChairmanandChiefFinancialOfficer):
Sure,Scott.Ifyouaretalkingaboutthenetinterestratemargin,ouractualrateNIM,obviously,thebiggestimpactonthatwastheincreasedbalancesattheFed,which,onaperiod-endbasis,weredrivenbyincreaseddepositsanddecreasedloans.Andsothatcanmove,sothebalancesthatwehavewiththeFedcanclearlymoveonaperiod-endbasis.TheimpactontheNIMfromasecuritiesyieldandaloanyieldperspective;securitiesyieldscontinuetobeimpactedbytheloweryieldingonourpre-payreinvestmentandthefactthatwehaveaddedtreasuriestoourportfolio.Theloanyieldhasbouncedaroundalittlebitoverthelastseveralquartersupanddownandreallydoesdependonthemovementthatwehaveinourportfoliosdependingontherelativeloanyieldandtheareathatisgrowingordeclining.SotheoverallimpactonNIMismostimpactedbybalancesattheFed,whichyoupointedoutandlittleimpactfromsecuritiesyieldandthenhopefullycontinuedsomewhatstableimpactfromloanyield.
Scott Siefers (Analyst-SandlerO 'Neill):
Okay.That'sperfect.Thankyouguysverymuch.
Operator :
ErikaNajarian,BankofAmerica.
ErikaNajarian (Analyst-BankofAmerica):
I'msorrytore-askthequestionagain,butintermsofyouroutlookforflatprovisionforthefourthquarter,willyourfallredeterminationprocessbecompletelydoneandcapturedinthatfourth-quarterresult?
RalphBabb(Chairman):
Pete.
PeteGuilf oile (ChiefCreditOfficer):
Yes,itwill,Erika.Weexpectthatwewillbethroughtheredeterminationprocessreallybytheendof
CompanyName:ComericaIncCompanyTicker:CMASector:FinancialIndustry:Banking
EventDescription:Q32015EarningsCallMarketCapasofEventDate:7.39BPriceasofEventDate:42.035
©2014TheStreet,Inc.Al l R ightsReserved Page8of25
November.
ErikaNajarian (Analyst-BankofAmerica):
Gotit.AndKaren,justasafollow-uptothelastquestion,couldyougiveusalittlebitofasenseintermsofyourdecisiontreewithregardstokeepingthecashattheFedversusextendingdurationtoprotectthemargin?Givenyourcommentsthatyouarealreadycompliantwiththe2017standardforLCR,IamwonderingwhatyourthoughtswereintermsofdeployingthatintoHQLAmoreaggressively,orareyouwaitingtoseehowmuchofthisdepositgrowthstickswithyou?
KarenParkhill(ViceChairmanandChiefFinancialOfficer):
Anymoremovementintosecuritieswouldobviouslydampentheupsidethatwewouldhaveasratesriseandwecontinuetoremainverymindfulofthefactthat,asratesrise,wewillhaveamarktomarketonoursecuritiesportfolio,whichcanimpactourtangiblecapital.Sowewillcontinuetowatchtheenvironmentandbefluid,butweremainmindfulofthefactthatinvestorsarefocusedonourassetsensitivityupside.
ErikaNajarian (Analyst-BankofAmerica):
Gotit.Andjustonefinalonefromme,Ralph.Givenyourcommentsthatsomeofthisenergypressureisgoingtopersistintonextyearandthemarketseemstobelessoptimisticaboutthetrajectoryoftheshortendofthecurvenextyear,I'mwonderinghowyouarethinkingaboutsortoftheincaseofemergencybreakglassplanfornextyear.Aretherefurtherexpensestopotentiallyimprovetheefficiencyratioinlightofamoredifficultrevenuebackdrop?Anysortofthoughtsonhowyouarethinkingabout2016astheenvironmentseemstobegettingalittlebitlessfriendly,especiallyforamodellikeyoursthat'ssotetheredtotheshortendofthecurve?
RalphBabb(Chairman):
Well,weareconstantlylookingatthat,asyoumayrememberfrompreviouscallsandwehavebeenveryfocusedonexpensesandalsogrowingrelationships.AndIthinkthegrowingrelationships,especiallyinthefootprintthatwehave,isthelargestopportunityforusmovingforward.Wewillcontinuetolookatexpensesaswealwayshave,butthatinitselfisonethatwillnotoffsetbyitselftheexpensesweneedgoingforward,especiallyontheregulatoryandthecomplianceside.Sogrowingthebusinessaswenormallywouldandfocusonisprobablynumberonetoday.
ErikaNajarian (Analyst-BankofAmerica):
Okay.Thankyou.
Operator :
KenZerbe,MorganStanley.
KenZerbe (Analyst-MorganStanley):
Maybeaquestionontheprovisionexpenseoratleasthowyouarethinkingaboutitasitrelatestoenergy.Tryingtotieyourcommentsthatyouaregoingtoseefurthercreditmigrationintheenergyportfolioandknowingthatyoudohavetomathematicallyholdhigherreservesagainstloansthatseedeteriorationintheriskratings,isitfairtoassumethatweshouldbeexpectingagainfurtherreservebuildintheenergybook,butthentokeepyourprovisionaslowasyouareguidingittobesortofinthatmid-$20millionrange,thatyouareactuallyrelyingonfurthercreditimprovementsinotherareas?
RalphBabb(Chairman):
CompanyName:ComericaIncCompanyTicker:CMASector:FinancialIndustry:Banking
EventDescription:Q32015EarningsCallMarketCapasofEventDate:7.39BPriceasofEventDate:42.035
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Pete,doyouwanttotakethat?
PeteGuilf oile (ChiefCreditOfficer):
Yes,Ken,wearestartingoffthequarterwithahealthyqualitativereserveandthatreserveisinplacebecausewearelookingatthefallredeterminationprocessandweareexpectingsomemigrationtocomeoutofthatwithenergypricesbeingalittlebitlowerthanwheretheywereinthespring.Wearealsoexpecting,withrigcountswheretheyare,thatfewerborrowerswillreporthigherenergyreservesandthatcouldputalittlebitofpressureonborrowingbases.Soweareexpectingsomemigration,butwethinkourqualitativereservethatwehavewillbe--willsufficetocoverthatmigration.
KenZerbe (Analyst-MorganStanley):
Gotit.Soit'salmostjustmovingfromonebuckettothenextratherthanincreasingthetotalbucket?
PeteGuilf oile (ChiefCreditOfficer):
Wearetryingtostayaheadofit.
KenZerbe (Analyst-MorganStanley):
Understood.Thattotallymakessense.Andthenjustmoreofagenericquestion,youtalkaboutyourenergycustomers.Obviously,Iknowyouknowthem,youknowthecredits.Helpmereconcile--I'mgoingtosayroughly$3billionofyour--whichisthevastmajorityofyourenergyloans--aresharednationalcredit.Howmanyofthoseenergycompanieslikeareyoutheprimarybankfor,thatyouhavethecorerelationshipforversus,Idon'tknow,someonelikeWellsFargo,orsomeoneelsethathasthecorerelationship?
RalphBabb(Chairman):
Pat.
PatFaubion (ExecutiveVicePresidentoftheBusinessBank):
Wearetheagentforlessthan20%ofourenergyportfolio,butwedohaveadirectrelationshipwitheverysingleclientinthebookandmany,manytimesthatisamulti,multi-yearrelationship.
KenZerbe (Analyst-MorganStanley):
Okay,great.Allright,thankyouverymuch.
Operator :
JohnPancari,EvercoreISI.
JohnPancari(Analyst-EvercoreISI):
Regardingtheprettysteepincreaseintheenergycriticizedloans,whatwasthemaincomponentofthedriver?WasitE&Poroilservice?
RalphBabb(Chairman):
Pete.
PeteGuilf oile (ChiefCreditOfficer):
Yes,Ithinktheenergyservicessegmentofthebusinesshasbeenthemostimpacted.Butbearinmind
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theenergyservicessegmentismuchsmallerthantheE&P,soIwouldsaytheybothwereafactorthisquarter.Thisquarter,wemovedsomecreditstocriticizedsimplybecauseoftheexpectationthatenergypricesaregoingtoremainlowforanextendedperiodoftime.Andsoiftherewasanyoperationalweaknessatall,wemovedthesecreditstospecialmention.AndthethingthatIwouldsayaboutthatisisthatourfeelingsaboutthesecreditshasn'tchanged.Mostofthesecreditshaveverystrongbalancesheets.Wearewell-secured.Wedon'texpecttheriskoflosstoincreaseasaresultofusmovingthesecredits.Wejustdidn'tfeellikewecouldjustifykeepingthempastcreditsgivenhowlongenergypriceshavebeenwheretheyare.
JohnPancari(Analyst-EvercoreISI):
Okay,allright.AndthenIguesssomeofthequantificationswouldhelpalittlebitmore--forexample,whatwasthesizeoftheadditiontoyourenergyloanlossreserveinthethirdquarter?
KarenParkhill(ViceChairmanandChiefFinancialOfficer):
Wedon'tgiveoutthatspecificinformation,butwhatIwouldsayisthatwehaveincreasedourreservestoenergyeveryquarterforthepastfourquarterssincethepricestartedtomovedown.Andwehavementionedthatwemaintainahealthyqualitativereserve.Andatthesametime,Ithinkit'simportanttorealize,duringthatsametimeframe,thatourenergybalanceshavealsodeclined.
JohnPancari(Analyst-EvercoreISI):
Okay.Andonthatfront,Karen,canyouhelpuswithhowtothinkabouttheincrementaldeclineinenergyloanbalancesoverthenextseveralquartersevenifoilpricesstaywheretheyare?
KarenParkhill(ViceChairmanandChiefFinancialOfficer):
That'sdifficulttopredictexactly,but,intheappendixofthedeck,wedogivequarter-by-quartermovementinourenergyportfolioandyoucanseethelastdecline,whatitdidonbalances.
RalphBabb(Chairman):
Pat,youcancommentonthat?
PatFaubion (ExecutiveVicePresidentoftheBusinessBank):
Yes,wedoexpectreductionsasaresultoftheupcomingredetermination,butwe'vealsobeenadvisedfromourclientsofabout$215millionincommitmentstoday,whichwouldtranslateto$125millioninoutstandingsthatweexpecttoconfirmpay-offsonbaseduponmergersorsalesthatarehappeningwithintheindustry.
JohnPancari(Analyst-EvercoreISI):
Okay.Andthen,lastly,IknowyouindicatedthatthefallredeterminationsshouldbeoverbyNovember,butwhat'salsohappeninginthewinteristheSNCexam,whichisnowpartlysemiannual,Iguess,forlargebanks.Willyoubepartofthat?
PatFaubion (ExecutiveVicePresidentoftheBusinessBank):
Well,wearealwaysapartofitbecauseweareinvolvedintheSharedNationalCredit,soallthesamecreditsarebeingexamined.OurSNCexamwillnotbeuntilspringofnextyear,butweareinvolvedinthecreditsthatwillbeexaminedinthefallandwedon'texpectanyimpactfromthat.Ourregulatorsarelookingatourenergybookallthetime.Infact,theylookedatitjustrecentlyandIthinkweareallonthesamepageastowheretheriskratingshouldbeontheportfolio.SoIamnotanticipatinganyissues
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comingoutoftheSNCexam.
JohnPancari(Analyst-EvercoreISI):
Okay.Allright.Thankyou.
Operator :
KenUsdin,Jefferies.
KenUsdin (Analyst-Jefferies):
Aquestionjustonnon-energyandjustregularloangrowth.Canyoujusttalktousalittlebitaboutthestateofaffairsinnon-energyTexas?Andalso,Inoticedthatjustthekindofnon-energymiddlemarketsincorporatebankingalsolookliketheydeclined.Sojustsomeflavorintermsofjustunderlyingborrowerdemandandwhat'sgoingonatthecoreinTexasplease.
RalphBabb(Chairman):
Curt,doyouwanttotalkaboutoverallandPat,youcantalkinTexas?
CurtFarmer (President):
Yes,whatIwouldsayfromanoverallperspective,wecontinuetobenefit.WhileweareseeingsomeimpactfromenergymorebroadlyinTexasthatPatcanspeakto,wecontinuetobenefitfromadiversegeographicfootprint.AndasRalphmentionedinhisopeningcomments,theCaliforniamarketcontinuestoperformwellforusreallyacrossavarietyofourcorebusinesses,aswellasourspecializedbusinessesonboththeloananddepositsideoftheequation.AndwearestartingtoseesomeniceimprovementintheoverallMichiganeconomytiedtotheautoindustry,thelowergasprices,butjustingeneralimprovementinunemployment,realestatevalues,etcetera,intheMichiganmarket.Sowefeellikewestillhavegrowthopportunitiesinbothofthosemarkets,whichishelpingtooffsetsomeofwhatwehopeisatleastanear-termimpactinTexas.ButIwouldalsosaythat,fromalonger-termperspective,wecontinuetobeverybullishontheTexaseconomyatlarge.
RalphBabb(Chairman):
Pat,doyouhaveanythingtoaddtothat?
PatFaubion (ExecutiveVicePresidentoftheBusinessBank):
IwouldjustaddfurtherthatTexasissurrenderingitsleadgrowthwithinourCompanytoCaliforniaandwearereallypleasedtoseewhatCaliforniahascontributed.ButalsoMichiganhascomeonverystrongandmanygoodthingsaregoingoninMichigan,includinginDetroit.TheTexaseconomyhasadirectimpactofabout15%fromoilandgas,butthehangover,sotospeak,isaffectingquiteabitofourbusinessesandasnoted,ourbalancesaredowninTexasabout2%forthequarterandIthinkthebestindicatorforthatisoureconomicactivityindex,butitshows9straightmonthlydeclines.Soitisjustconfirmedbythegeneraleconomy.
KenUsdin (Analyst-Jefferies):
Understood.And,Karen,afollow-up.Canyouhelpusunderstandontheexpensesidewhatwasthemagnitudeofthosenon-repeatablebenefitsthatyouhadinthethirdquarterandcanyoualsohelpusunderstandwhattheseasonalstepupmightlooklikeinthefourthfromallthelinesthatyoumentioned?
KarenParkhill(ViceChairmanandChiefFinancialOfficer):
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Yes,sooutlinedonourexpenseslide,thelevelsofexpensesthatmaynotberepeatedwouldbethehedgeineffectiveness,thewarrant-relatedincomeandthedeferredcomp.Inadditiontothat,asweoutlined,justforthequarter-over-quarteroutlook,thatwedoexpectincreasesinseveralothercategories.Staffinsuranceissomethingthattypicallyrisesinthefourthquarter,occupancyexpenses,marketingspaces,consultingexpenses.Wearecontinuingtoinvestintechnology,sotechnology-relatedexpenses,etcetera
KenUsdin (Analyst-Jefferies):
Okay,soisitfairtosaythatkindoflikethehelpersthisquarterwereabout10andthenyougetanother10ontopofthat?
KarenParkhill(ViceChairmanandChiefFinancialOfficer):
Weexpectourexpensestomoderatelyincreasequarter-over-quarterandinmoderate,youcanassumesortofmid-singledigitlevels.
KenUsdin (Analyst-Jefferies):
Okay.Understood.Thanks,Karen.
Operator :
DaveRochester,DeutscheBank.
DaveRochester (Analyst-DeutscheBank):
Justhadabiggerpicturequestiononcredit.Justtryingtofigureouthowcriticizedloansincreasedbyover$500million,butthereserveonlyincreasedbymaybeafewmillion.Canyoujusttalkaboutwhatyourtypicalreserveisonspecialmentionorsubstandardloans?AndIrealizeNPAswerestable;it'sjustthatI'veheardsomeprettylargereservepercentagesouttherethatsomebanksassigntocriticizedassets.
RalphBabb(Chairman):
Pete.
PeteGuilf oile (ChiefCreditOfficer):
Wedon'tdisclosespecificallyourreservesonparticularcredits,butbearinmindthatourreservescomeintwodifferentforms.Oneisthe[decided]reserves,whichareveryspecifictoournon-accrualloansandthentheotherwouldbeourstandardreserves,whicharewhatweassigngenerallytodifferentcategoriesofspecialmentionandsubstandardcredits.Sowedidhavemigrationintheportfolio,butthemakeupofthatmigrationmakesadifferenceonwhatourreservesaregoingtobe.Forinstance,ourE&PcreditsaremuchbettersecuredthansomeofourotherC&IloansandsowemightnothavethesameamountofreservesassignedtothoseE&Pcreditsaswewouldsayourenergyservicescreditsthataremigrating.Soit'sdifficulttoexactlyequatemigrationtotheamountofreservesthatwehave.
DaveRochester (Analyst-DeutscheBank):
Gotyou.Thanksforthat.Andthenyoumentionedyouarejuststartingtheredeterminationprocess.Justwonderinghowmuchyou'vedoneatthispoint.Andthenwe'veheardotherbankswithenergyexposuretalkaboutpricedeckscomingdownsomewhereinthehighsinglestomid-teenstypeofrangeforthefallredeterminations.Isthatwhatyouguysareseeingaswellintermsofmagnitude?
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PeteGuilf oile (ChiefCreditOfficer):
Yes,Ithinkwewouldbeconsistentwiththat.Weareabout15%to20%ofthewaythroughtheprocessrightnowandsofar,wearenotseeinganythingunusual.Wearenotseeinganywidespreaddeficiencies.Verysimilartowhatwesawinthespring.Wouldn'tbesurprisedifweseemorecollateraldeficienciesthisfallthanwhatwesawinthespringbecause,frankly,wedidn'tseealotinthespring.Butsofar,it'sgoingwell.
DaveRochester (Analyst-DeutscheBank):
Andhowmuchhavelinescomeinjustonaverageforthecreditsyou'veexaminedsofar?
PeteGuilf oile (ChiefCreditOfficer):
Doyoumeanhowmuchborrowingbaseshaveshrunk?
DaveRochester (Analyst-DeutscheBank):
Yes,exactly.
PeteGuilf oile (ChiefCreditOfficer):
I'malmosthesitanttogeneralizefromwhatwe'veseensofar,butweactuallyhaveseenafairnumberofcredits--theirborrowingbasesactuallyincreaseandourloantovaluesdecreaseandwe'veseenjustaboutasmanyofthose--seenasmanyloantovaluesdecreaseaswehaveseenincrease.Butit'sstillearlyandI'mnotnecessarilysurethat'sgoingtoholdthroughthewholeprocess.Itwouldbegreatifitdid,butI'mnotsureifitwill.
DaveRochester (Analyst-DeutscheBank):
AndthenIknowlastquarteryousaidyouwerestillkindofgoingthroughthere-riskratingfortheserviceportfolio.Isthatsegmentdoneatthispointandwhendoyoutypically--whenwillyoulookatthatagain?
PeteGuilf oile (ChiefCreditOfficer):
Yes,wearelookingatitallthetime.It'sacontinuousprocess.We'vebeenthroughtheportfolioprobablytwoorthreetimes.
DaveRochester (Analyst-DeutscheBank):
Okay.Gotyou.Allright,great.Thanks,guys.
Operator :
TerryMcEvoy,Stephens.
T erryMcEvoy(Analyst-Stephens):
Justasmallquestion.Itlookslikerecoveriesinenergyhappenedinthethirdquarter.Netcharge-offsthroughthefirsttwoquarterswere$10millioninenergyandthenitfellyear-to-dateto$3million.Couldyoujusttalkaboutanyrecoveriesandwhatwasbehindthat?
PeteGuilf oile (ChiefCreditOfficer):
Wedidn'thaveanysubstantialrecoveriesinenergythisquarter.Wejusthadlowercharge-offs.Wedidn't
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haveanycharge-offsinthelineofbusinesswhatsoeverandwehadjustahandfulofenergy-relatedcharge-offs,sowewereencouragedbythat.
T erryMcEvoy(Analyst-Stephens):
Okay.AndthenjustonMichiganandmiddle-marketlending,doyouexpecttoseeorareyoustartingtoseeapickupfromthetypicalslowdownyouseeinthatmarketduringthesummermonths?
PatFaubion (ExecutiveVicePresidentoftheBusinessBank):
Yes,youarecorrect,Terry.Wedoseeadipinthesummer,butwealsoseearesurgeinthefourthquarterandwedoexpecttoseethat.
T erryMcEvoy(Analyst-Stephens):
That'sgreat.Thankyou.
Operator :
BobRamsey,FBR.
BobRamsey(Analyst-FBR):
AlotofmyquestionshavebeenansweredandIhatetobelaborenergy,butoutofcuriosity,whydon'tyoualldisclosewhattheenergyreserveis?
KarenParkhill(ViceChairmanandChiefFinancialOfficer):
Bob,wefirmlybelievethattheallowanceistheretocoveranyandalllosses.Andsowethinkitmightbemisleadingtogivespecificsaroundanyoneportfolioandthat'sthekeyreason.
BobRamsey(Analyst-FBR):
Okay.Iknowyouallsaidthatmostofthenetcharge-offsthisquartercamefromtechnologyandlifesciences,aswellasenergy,butIwasjustwonderingifyoucouldtellmewhatthedollaramountofnetcharge-offswasontheenergybookthisquarter.
PeteGuilf oile (ChiefCreditOfficer):
Yes,Icould.
KarenParkhill(ViceChairmanandChiefFinancialOfficer):
Itcamefromtheenergy-related,nottheenergy(multiplespeakers).
BobRamsey(Analyst-FBR):
Energy-related,okay,yes.Andmaybewhileyoudigthatnumberup,Iwillaskaswell,Iknowyouhighlighted27%oftheenergybookiscriticizedtoday.Canyoujustremindmehowthatcomparestothepeakinthelastcycle?
KarenParkhill(ViceChairmanandChiefFinancialOfficer):
Idon'tknowifwehavethepeakcriticizedinthelastcycleoffhand.Wecanansweryourquestionforenergy-relatedcharge-offs.
PeteGuilf oile (ChiefCreditOfficer):
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Yes,ourenergy-relatedcharge-offs--sorryforthedelay--wasabout$9millionforthequarter.
BobRamsey(Analyst-FBR):
Great.Ifyoudon'thavetheexactcriticizenumbered,doyouhaveanysenseoranysortofoutlookastowhetheryouexpectthisenergycycletobesimilarintermsofwherethingspeakorwhetheryouthinkthetrajectorylooksbetterorworse?
PeteGuilf oile (ChiefCreditOfficer):
Iwouldexpectwearegoingtoseecontinuedmigration,butIthinkit'sgoingtobeataslowerpace.Weareseeingsomewhatofabifurcationintheportfolio.Therearecertaincreditsthatjustarenotmigratingatallprimarilybecausetheyhavejustsuchstrongbalancesheetsand/ortheyaremoregasweightedthanoilweighted.Idon'texpecttoseethosecreditsmigrate.Alotofthehigherlevered,moreoilycreditshavealreadymigrated,soyouarenotgoingtoseeanyofthat.SoIthinkwewillseemoremigration,butIthinkitwillbeataslowerpace.
BobRamsey(Analyst-FBR):
Great.Andthenlastquestion,shiftinggearstocapital,itlookslikethepaceofsharerepurchasesissortofrunningbelowwhatifIsimplytookyourCCARauthorizationanddivideditby5quarterswouldcomeouttobe.Iknowyouallsaidthepaceofbuybacksislinkedtoperformanceandwillbehigherinahigherrateenvironment.ButIamjustcurious,isitnotstillyourintenttofullyexecuteonthatCCARauthorizationbeforeitexpiresregardlessofwhathappenstoratesandperformance?
KarenParkhill(ViceChairmanandChiefFinancialOfficer):
SointhestresstestscenariosthatwerelaidoutbytheFed,theydidhaveadecentsizedinterestrateincreaseoverthenine-quarterforecast,whichstartedinthesecondquarterof2015andwentonthrough2016.Obviously,asratesrisemeaningfully,thatcanhaveagoodimpactonourbottomlineandsoyoucanexpectthatoursharerepurchaseprogramgoingforwardwillbetiedtobothourstrongcapitallevelsandtoournetincomeperformanceandsowewillwaitandsee.
BobRamsey(Analyst-FBR):
Okay.ButoverthehorizonofthisCCARauthorization,ifratesdonotmoveduringthisauthorizationperiod,wouldyoustillcompletetheexistingauthorizationorwouldyouscaleitback?
KarenParkhill(ViceChairmanandChiefFinancialOfficer):
Honestly,itdependsonearnings,Bob.Earningscanbeimpactedbymanythings,butinterestratesareoneofthebiggestdriversofgrowthinearnings.
BobRamsey(Analyst-FBR):
Okay.Allright,thankyou.
Operator :
BrettRabatin,PiperJaffray.
Brett Rabatin (Analyst-PiperJaffray):
IwantedtomakesureIunderstoodguidance,justthinkingabouttheoutlookforthefourthquarterintermsofaverageloans.Kindofgiventhemortgagebankerisseasonallylowerandcontinueddeclineinenergyandmaybethinkingaboutthepipelinebeinglower,canyoumaybetalkabouttheaverage
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balancebeingflattish,orrelativelystableIguessisthetermyouuse,inthefourthquarterkindofversusintheperiodbeenquiteabitlowerthanaveragein3Q?
KarenParkhill(ViceChairmanandChiefFinancialOfficer):
Yes,so,Brett,Iwouldsaythatimportanttoknowthatourpipelinedidincreaseattheendofthisquartergoingintothefourthquarter,sothatisgoodsignsforourotherlinesofbusiness.Wedidnotethatweexpectcontinueddeclinesinenergy;we'vetalkedaboutthat.Onmortgagebankerfinance,wealsoexpectseasonaldeclines.Theamountofthosedeclinesaredifficulttopredict.Youcanseeinourappendixthefactthatwe'vegotquarter-over-quartermovementinourmortgagebankerbusinessandinthelastcoupleofyears,wehaveseenseasonaldeclines,sometimesaslargeas$500million,butagainverydifficulttoexactlypredict.
Brett Rabatin (Analyst-PiperJaffray):
Okay.AndthenjustwantedtomakesureIwasunderstanding--youareobviouslyverymindfulofhigherinterestratesandtheeffectonthesecuritiesportfolio.Karen,whatisyourassumptionforinterestratesnextyearasyouthinkaboutmanagingthebalancesheet?
KarenParkhill(ViceChairmanandChiefFinancialOfficer):
Thatisanybody'sguess.Whenwethinkaboutmanagingthebalancesheetonsecurities,wecontinuetohavepre-paysonoursecuritiesportfoliothatrangeinthe240to250yieldareaandwearefocusedonreinvestingthosepre-paysasbestwecanatyieldsatoraboveourcurrentportfolioyields.Butverydifficulttosaywherethoseyieldswillbenextyear.
Brett Rabatin (Analyst-PiperJaffray):
Okay.Great.Thankyouforthecolor.
Operator :
BrianClark,Keefe,Bruyette&Woods.
BrianClark(Analyst-Keefe,Bruyette&Woods):
SoIwanttokindoffollowuponthediscussionaboutthepipelineandIguessyouroutlook.Thinkingabout--it'sbeenawhilesincewe'veseencommitmentsonutilizationratesdropandobviously,there'salotofenergy-relatedissuesthereandmaybeeven,likeyousaid,someoftheseasonalitythatyouseeinmortgagebankerfinance.IguessI'mjustthinkingabouttheguidanceagainaboutperiod-endloansbeingdownalmost$800millioninthethirdquarter,butaveragesexpectedtobeflat.SoIguessmyfirstquestionisisthatpartiallybecauseyouthinkthatthedealerfloorplan,whichusuallyhasagoodfourthquarter,isthatexpectedtocomeinandhelptogrowbalancesinthecoreC&Ibookforthefourthquarter?That'smyfirstquestion.
KarenParkhill(ViceChairmanandChiefFinancialOfficer):
Yes,theanswertothatisyes.Ourdealerfloorplanobviouslydoeshaveseasonality,didseesomedeclinesinthethirdquarterandwedoexpectittocomebackabitfromthosedeclines.
CurtFarmer (President):
Imightjustsaythat,acrossthemarket,wedofeelgoodaboutthepipelineinsortofgeneralmiddlemarketandsomeofoursmallerbusinesses,smallbusiness,privatebankingandevenretail,whichwedon'ttalkalotabout,butHELOClending,consumerlendingandsotherearesomeotherareasthat,
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beyondthedecline,thatweareexpectinginenergyandmortgagebankerfinancethatIthinkwillbecontributorsinadditiontothenormalseasonalityindealerfinancialservices.
BrianClark(Analyst-Keefe,Bruyette&Woods):
Thanksforthat,Curt.IguessmaybeIcanfollowuponthatwithyou.ItseemedlikeeveninJPMorgan'sbusinessbank,theirmiddle-marketlineofbusinesswasdowninthethirdquarter.Itwasdownforyouguys$364million.Iguesswhatareyouseeingthatmakesyoufeelgoodaboutthefourthquarterandthatlineofbusinesssinceit'sabouta30-yeartotalloanportfolio?
RalphBabb(Chairman):
Pat,doyouwanttoaddtothat?
PatFaubion (ExecutiveVicePresidentoftheBusinessBank):
Sure.Ourmiddle-marketbusinessishistoricallydowninthethirdquarter.We'velookedatitforthelast15to18yearsanditisaveryrepeatabletrendanditdoesbouncebackinthefourthquarter.Howwefeelgoodaboutthatisaswelookatthepipelineandwemanagethatineverymarketandwhatwearehearingisthatwewouldexpectnewcredits,newclients,aswellasincreasestosomeexistingrelationships.
BrianClark(Analyst-Keefe,Bruyette&Woods):
Okay,thankyouforthat.Andjustonelastonefromme.Pete,Idon'tthinkyougaveitthisquarteryet.Ithinkyougaveittouslastquarter.Iguesswiththeoilandgasorenergy-related,the$1.1billionincriticized,isthemakeupsimilartotheE&Pandoilfieldservicesintheoutstandings,orcanyougiveusanideaofhowthat$1.1billionisspreadacrossthosecustomers?
PeteGuilf oile (ChiefCreditOfficer):
Yes,thesegmentthat'sbeenmostaffectedhasbeenenergyservices.Wearealittleover40%criticizedthere.E&Pisabout27%.Midstreamnotbeenverymuchaffectedatall.It'saround10%to12%,somewherearoundthere.
BrianClark(Analyst-Keefe,Bruyette&Woods):
Thankyouverymuch.
Operator :
DavidDarst,Guggenheim.
DavidDarst (Analyst-Guggenheim):
Ijustwanttoaskaquestiononthetechnologyandlifesciencesbusiness.Thatportfoliohashadthelargestdollarvolumeofgrowthoverthepastyearandisnowaboutthesamesizeasenergy.Wherecouldtherelativesizeofthatportfoliobeandthenisanyofthegrowthyouseealso(inaudible)thehigherlossesyou'veseenthisyear?
RalphBabb(Chairman):
Pat,doyouwantto--?
PatFaubion (ExecutiveVicePresidentoftheBusinessBank):
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Themajorityofthegrowththatwesawinourtechnologyandlifesciencesbusinesswasinourequityfundservicesgroupwhereweprovidecapitalcallandsubscriptionlinestoventurecapitalandprivateequityandtypicallythosearethelessriskypartofthetechnologyandlifescienceportfolio.
DavidDarst (Analyst-Guggenheim):
Soisthereanythingyouwouldattributethehigherlossratetothisyear?
RalphBabb(Chairman):
Pete?
PeteGuilf oile (ChiefCreditOfficer):
Yes,David,thisisPeteGuilfoile.It'snotunusualforustoseeelevatedcharge-offsinTLS.Theyhavebeenupforthelastcoupleofquarters.Theyareabovewherewewouldliketoseethem,frankly,butwe'renotseeinganysystemicissuesthere.Wearenotseeinganypatternstothecharge-offs.Ireallydon'tthinkwearegoingtoseefurtherdeteriorationintheportfoliobutwefeltitmadesensetoincreaseourreservesandwearewatchingitcarefullybutwedon'texpectthatdeteriorationtocontinueinsubsequentquarters.
DavidDarst (Analyst-Guggenheim):
Okay,great.Andthen,Karen,justonequickquestionontheheadcountincreasethisquarter.Isthatrelatedtosomeofthetechnologyprojectsyou'vegotinplace,orarethosefront-linesales?
KarenParkhill(ViceChairmanandChiefFinancialOfficer):
Itisrelatedtomostlythetechnologyprojects.Onthefrontlineweareveryfocusedonallocatingourresourcestoourgreatestgrowthopportunitiesbutnotnecessarilyaddingintheheadcount.
DavidDarst (Analyst-Guggenheim):
Okay,great.Thankyou.
Operator :
DavidEads,UBS.
DavidEads (Analyst-UBS):
Maybefollowinguponthetechquestionyoujustgot,couldyougivealittlebitofcoloronhowyouguysthinkaboutprotectionandwhatmakesyoucomfortablewiththeexposuresinthatportfolio,Iguessparticularlyonthemoreriskyside,ifyouweretohaveamoresustained--troubleshitthetechmarket?
PeteGuilf oile (ChiefCreditOfficer):
Yes,there'sanumberofthings,David.We'vebeeninthebusinessalongtime,soexperienceisprobablythemostimportantthing.Wehaverelationshipswithanumberofventurecapitalfirmsthatwe'vebeenthroughupsanddownsinthecyclesmanytimesbefore,soweunderstandhowtheyreactindownturns.Wehaveanumberofdifferentbusinesseswithinthetechnologyandlifesciencegroup,soit'smuchmorediversifiedthanyoumightthink.Evenwithinthetechnologysector,wehaveafairamountofdiversification,notjustbyindustry,butbygeographyandbyinvestorgrouptoo.SoIwouldsaythemainthingswewouldpointtoareourexperience,thepartnersthatwedobusinesswith,weareveryselectiveandthenthediversificationofthebook.
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RalphBabb(Chairman):
Yes.
DavidEads (Analyst-UBS):
Great,thanks.Justquicklyonenergy,aquestion--canyougiveusanycolor--Iknowyouguyshavenotwantedtogiveanykindofnumbersaroundthereserve--buttherelativesizeofthequantitativeandqualitativereservesandanykindoftrend--ifwe'veseenmeaningfulshiftsfromqualitativeintoquantitativeoverthepastcouplequarters?
KarenParkhill(ViceChairmanandChiefFinancialOfficer):
Sowedon'tgiverelativesizeseither,butwedomaintainahealthyqualitativereserveaswelookforward.
DavidEads (Analyst-UBS):
Okay.
PeteGuilf oile (ChiefCreditOfficer):
Icanjusttellyou,David,wesizeourqualitativereservebasedoneventsthatwethinkhavealreadyoccurredandourriskratingshavenotadjustedtoyet.Sowethinkthatthemigrationthatwearegoingtoseethisquarterasaresultofredeterminationprocessesareeventsthathavealreadyoccurred.Sowefeelcomfortablesettingupaqualitativereservetocoverthataspectofthemigration.
DavidEads (Analyst-UBS):
Allright.Thanks.
Operator :
JohnMoran,MacquarieCapital.
JohnMoran (Analyst-MacquarieCapital):
Justacouplequickfollow-ups.The$125millioninoutstandingsthatareexpectedtopaydownoutoftheenergybook,wouldthatallhitin4Qoristhatkindof4Qandtheninto2016?
PatFaubion (ExecutiveVicePresidentoftheBusinessBank):
Tothebestofmyrecollection,John,thoseshouldhappeninthefourthquarter.Thatnumberisbaseduponinformationthatborrowershaveadviseduson.Sothoseopportunitiesarealreadyinprocess.
JohnMoran (Analyst-MacquarieCapital):
Gotit.Okay,thanks.Andthenmaybejustafollow-uponTexasgenerally.Evenex-energy,generalmiddlemarketsortofdown,areyouguysexperiencingthat?AndcertainlyitseemslikedifferentMSAsareexperiencingthisslowdownindifferentways.Soifyoucouldgiveusalittlebitofcolorintermsofkindofwhatyouareseeinggoingonbymarket.AndthenIknowyoufeelgoodaboutthepipelineingeneral,butifyouhadanycommentaryaroundthepipelineasrelatedspecificallytoTexas.
RalphBabb(Chairman):
Curt,doyouwanttotakethatone?
CompanyName:ComericaIncCompanyTicker:CMASector:FinancialIndustry:Banking
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CurtFarmer (President):
Yes,IwillmakeacouplecommentsaboutTexasoverall.Whilethereisageneralimpactfromtheenergyslowdownstatewide,itdefinitelyisbeingfeltmoreintheHoustonmarket,sortofprimary,probablySanAntoniosecondary.ButifyoulookattheNorthTexasmarket,Dallas-FortWorth,itisamorediverseeconomy,lessenergy-dependent.WearenotseeingwhatIwouldcallbroadimpactasofyetinthatpartofthesector.Butmoreimpactisstartingtocreepin.Energy,energy-relatedcertainly(inaudible)justmorebroadly.Probablysomelonger-termimpactonhomevalues,realestatevalues,etcetera,forexample,intheHoustonmarket.Butit'sahugestate,sothere'salotofdiversityfromaneconomicstandpoint.
RalphBabb(Chairman):
AndMichigan,asyouweretalkingaboutearlier,withtheautoindustryrebounding,there'sarealstrengthstartinginmomentumthere.
CurtFarmer (President):
Yes,aswellasthebroadspreadgrowthweareseeinginCaliforniaastheeconomycontinuestochugalong.
RalphBabb(Chairman):
Andthevariousspecializedbusinessesthatwehavethatareuniqueaswell.Pat,doyouwanttoaddanythingtothat?
PatFaubion (ExecutiveVicePresidentoftheBusinessBank):
Well,justasitrelatestoTexas,competitionfornon-energyandnon-energyservicesclientsisprettyfierce.Peoplearenottryingtoexpandtheirbookforthatandtheyhaveredirectedtheirmarketingactivitiestowardsnon-energycompanies.Sothat'salsoimpactingourgrowthinTexas.
JohnMoran (Analyst-MacquarieCapital):
Okay,that'shelpful.Andthenjustoneotherquickfollow-uponthecriticizedenergy.AndKaren,Idon'tknowifitwas--wearenotsureifwehavethis,orwearenotgoingtodiscloseitatthispoint--butsomebodyhadaskedwheretheypeakedlastcycleandIwaswonderingifyoutrackedthatdown?
PeteGuilf oile (ChiefCreditOfficer):
Yes,wepeakedatthehigh20%soverallintermsoftheentireenergybook.Bearinmindthatwedidnothaveenergy-relatedinthatnumberbackinthelastcycle.Sowejuststartedreportingenergy-relatedinthiscycle.Also,thedurationofthatcyclewasshorter,soit'snotsurprisingthatourcriticizedlevelsarealittlebithigherthistimearoundforthosetworeasons.
RalphBabb(Chairman):
Pat,doyouhaveanythingtoadd?
PatFaubion (ExecutiveVicePresidentoftheBusinessBank):
Ithinkwe'veadjustedthewaythatweexamineourbook.Weexamineitmorecriticallytodaybaseduponcashflowasopposedtoanasset-basedbook.Thecomplexionoftheportfoliohasonlygottenbettersincethelastcycle.Itremainssecured,butwearefocusingmoresuccinctlyondepressedcashflowthistimearound.
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JohnMoran (Analyst-MacquarieCapital):
Gotit.Thanksverymuchfortakingthequestions,guys.
Operator :
StevenAlexopoulos,JPMorgan.
StevenAlexopoulos (Analyst-JPMorgan):
Justacoupleoffollow-ups,nosurprise,Iguess,onenergy.Ralph,whenIlookattheenergycriticized,youwereup$329millionlastquarter.Thisquarter,youareup$537million.LastquarterwasseeminglyimpactedbytheSNCexam,borrowingbaseresets.I'mtryingtogetmyheadaroundwhatthecatalystwasthisquarterthatwesawabiggerincreaseincriticizedthisquarterversuslastquarter.
RalphBabb(Chairman):
Pete.
PeteGuilf oile (ChiefCreditOfficer):
AsIstatedbefore,wejustdecidedtotaketheapproachthat,giventhatenergypriceshavebeendownforanextendedperiodoftime,thatwehadanumberofcreditsthatwerekindofinthatlowpasscategory.Wejustmovedthemtocriticizedthinkingthatwearenotgoingtoseeaturnaroundinenergypricesandifanyofourcreditsareseeinganykindofoperationalweakness,wedecidedthatwereallycouldn'tjustifycallingthempastcredits.But,again,Idon'tfeelanyworseaboutthosecredits.Idon'tthinkwehaveabigriskofloss.Mostofthosecreditshaveverystrongbalancesheetsandmostofthosecreditsthatwemovedthisquarterstillarevery,verywell-secured.Soweactuallydon'tfeelanydifferentlyabouttheenergybooktodaythanwefeltoneortwoquartersago.
StevenAlexopoulos (Analyst-JPMorgan):
Okay,soyouessentiallychangedyourforecastforoilprices,essentially?
PeteGuilf oile (ChiefCreditOfficer):
No,it'snotbasedonreallyaforecast,Steve,asmuchasitisthat,ifyouareseeingsomeoperationalweaknessandyoureallydon'texpectthatoperational--there'sanimpetusforthatoperationalweaknesstoturnaroundintheshortterm,whichnowwereallydon't,wejustdecidedthatweshouldmovethemtospecialmention.
StevenAlexopoulos (Analyst-JPMorgan):
Okay.Andintermsofnotneedingtoputincrementalreservesoratleastanysizemagnitude,wereyoualreadyreservingatthenewratinglevel?I'mjusttryingtorectifyalackofprovisioninthequarter.
PeteGuilf oile (ChiefCreditOfficer):
Yes,sowehavealwayshadaqualitativereserveandwehavetriedtostayaheadofthisthewholeway.Andsoyouarerightthatthatqualitativereservewasavailableforsomeoftheriskratingchangesthatwemade.
StevenAlexopoulos (Analyst-JPMorgan):
Okay.
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KarenParkhill(ViceChairmanandChiefFinancialOfficer):
Andwedidincreaseourreservesforenergyinthequarter,Steve.
StevenAlexopoulos (Analyst-JPMorgan):
Okay.Justafinalone.Sofromabigpictureview,withroughlyathirdoftheenergybooknowcriticized,seeminglyabovethepriorpeak,whatgivesyouconfidencethatlossesaregoingtoremainmanageable?Andbymanageable,doyoumeanthroughearnings?Whatexactlydoyoumeanbythat?
PeteGuilf oile (ChiefCreditOfficer):
Well,bearinmindthatthebulkofthemigrationhasbeeninE&PandthevastmajorityofthoseE&Pcreditsremainextremelywell-secured.Eventheonesthatarehighlylevered,mostofthedebtisbelowusandsoourpositioninthosecreditsremainsolideventhoughtheriskofdefaultmightbehigher.Theconcernwouldprobablybemorearoundourenergyservicesbook,butourenergyservicesbookisonly15%oftheportfolio.It'snot50%oftheportfolioandthat'sbydesign.
Partofourstrategyistolimitthesizeofourenergyservicesbook.Andanotherthing,wefeelreallygoodaboutourstrategyaroundenergyservices.Inadditiontolimitingthesizeofit,wehavereallyfocusedoncompanieswithstrongbalancesheets,strongliquidity.Andthenanotherimportantconsiderationthereisjustdiversification.WeliketoseecompaniesthatarenotoverlydependentondrillingactivityandIthinkbecauseofthestrategythatwehaveandthesizeoftheenergyservicesportfolio,wefeelthatourlossesintheenergybookaregoingtobemanageableforthatreason.
RalphBabb(Chairman):
Pete,youmightjustreemphasizethatwelendatapercentageofprovenreserves.
PeteGuilf oile (ChiefCreditOfficer):
Correct.Wehaveaveryconservativeapproach,asdomostbanksinthisspace,onwhatwearelendingagainstintermsofreserves.Wearediscountingthemheavily.Weareriskingthem.We'rereallyfocusedononlytheprovedreservesandthenwearetakingaprettybighaircutbeforeweapplytheadvancerate.Forthatreason,alotofthesecreditsarebeingresolvedbeforetheygotonon-accrualbecausemanyofthecreditsthatneedliquiditycanactuallyselltheirassetsandgenerateliquiditybecauseouradvancerateagainstthemismuchlowerthanwhattheycanrealizeinasale.Andthat'swhyyouareseeingalotofthesecreditsthatarespecialmentionandsubstandardnotmigratingtonon-accrualorcharge-off.
StevenAlexopoulos (Analyst-JPMorgan):
Maybejustonefinalone.Isyourviewthatlossesremainmanageabletiedtoanexpectationthatoilpricesrecoverfromhere?IrememberLarsmaybe18monthsagoorsosayingifoilwasbelow$60,itwasproblematicandnowweare$47.Doyouneedtoseearecoveryfor$4718monthsfromnow?Arelossesmanageableinthatscenario?
PeteGuilf oile (ChiefCreditOfficer):
Yes,Ithinktheywouldstillbemanageableevenattoday'sprices.What'shappenedoverthelastseveralquartershasbeengreattosee.Weseeourcustomersreducingtheircoststructure.Theyarerightsizingtheirbalancesheets.Theyhavehedgingthathasallowedthemtobridgethemselvestoapointwheretheycanbecomeprofitableatlowerenergyprices.AndIdon'tknowwhatthemagicnumberis,butIfeellikethemajorityofourborrowerswillbeabletoadjusttopriceswheretheyaretoday.
CompanyName:ComericaIncCompanyTicker:CMASector:FinancialIndustry:Banking
EventDescription:Q32015EarningsCallMarketCapasofEventDate:7.39BPriceasofEventDate:42.035
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StevenAlexopoulos (Analyst-JPMorgan):
Okay.Thanksfortakingthequestions.
Operator :
GaryTenner,DADavidson.
GaryT enner (Analyst-DADavidson):
Justhadonefollow-upenergyquestion.Iwonderaswestartlookingat2016ifyoucouldgiveusasenseofhowyourE&Pcustomersarehedged,whatpercentageoftheirprojectedproductionishedgedandwhatkindofpricelevels.
PeteGuilf oile (ChiefCreditOfficer):
Gary,weupdateourhedgingstatisticsbasedontheredeterminationprocessandsoweareonlyabout15%,20%throughthatprocess.SothenumberIamabouttogiveyouisnotterriblydifferentthanthenumberIgaveyoulastquarter.But,rightnow,59%ofourborrowershave50%ormoreoftheirPVPhedgedforayearormoreandabout35%ofourborrowershave50%ormoreoftheirPVPhedgedfortwoyearsormore,whichisverysimilartowherewewerelastquarter;it'sverysimilartowhereweweretwoquartersago.
GaryT enner (Analyst-DADavidson):
Okay,butonlyveryearlyintheredeterminationprocess?
PeteGuilf oile (ChiefCreditOfficer):
Correct.
GaryT enner (Analyst-DADavidson):
Allright.Thankyou.
Operator :
JeffreyElliott,AutonomousResearch.
Jef f reyElliott (Analyst-AutonomousResearch):
You'vesaidafewtimesyoukindofseeenergyasmanageable.Couldyougiveabitmorethinkingonwhatyoumeanbymanageable?
PeteGuilf oile (ChiefCreditOfficer):
Well,Ithinkmanageablemeansthatwearenotgoingtoseeanythingoutoftheordinary,thatwefeellikeourreservesaremorethanadequatetocoveranythingthatcomesup,Iguess.
RalphBabb(Chairman):
Pat,youmaywanttoaddtothis--thisisbasedonwehaveateamthathas30yearsofexperience.We'veseentheupsanddownsandwe'vetalkedaboutvariouswaysthatthesecreditsaremanaged,whichisuniquetotheportfolioandtheparticularsegment.Pat,doyouwanttoaddtothat?
PatFaubion (ExecutiveVicePresidentoftheBusinessBank):
CompanyName:ComericaIncCompanyTicker:CMASector:FinancialIndustry:Banking
EventDescription:Q32015EarningsCallMarketCapasofEventDate:7.39BPriceasofEventDate:42.035
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Well,justtoreinforcethefactthatwe'vebeeninthebusinessforover--approximately30years.We'vehadthesamemanagerforthat30-yearperiod.Ourengineershavebeenworkingwithusforalong,longperiodoftime.EnergyisaveryimportantbusinesstoComerica.It'sanimportantbusinesstoTexasandanimportantbusinesstotheUnitedStates.Andourcreditpolicieshavebeenadjustedovertimetohelpmanagethroughcyclesandthat'sexactlywhatweareexperiencingtoday.
Jef f reyElliott (Analyst-AutonomousResearch):
Andthenjusttofollowup,you'vetalkedaboutratesasbeinganimportantfactorindeterminingearningsandsooninthinkingaboutthebuyback.Wouldyourankcreditequallywithrates,higherthanrates,lowerratesintermsofswingfactorsforearningsandabilitytocompletethefullbuybackthatwasapprovedunderCCAR?
RalphBabb(Chairman):
Karen,doyouwanttotakethat?
KarenParkhill(ViceChairmanandChiefFinancialOfficer):
Sure.Obviously,creditisanimportantpieceofwhatwedo.Intermsofanoutlookfornextyear,wearenotgivingthatyet.Wewillgiveitaswetypicallydoonourfourth-quarterearningscall.Wearestillinourplanningprocess,butforprovisionatleastforthenextquarter,weexpectittobesimilartowhatwehadinthethirdquarter.Sowearefeelingcomfortableontheimpactthatitcouldhaveonearningsthroughtherestofthisyear.
Jef f reyElliott (Analyst-AutonomousResearch):
Great.Thankyouverymuch.
Operator :
Ladiesandgentlemen,wehavenofurtherquestionsinqueueatthistime.I'dliketoturnthecallbackovertoMr.RalphBabb,ChairmanandCEO.
RalphBabb(Chairman):
ThankyouandthankyouallforbeingwithusthismorningandyourinterestinComerica.Weappreciateitandhopeyouallhaveagreatday.Thankyou.
Operator :
Thankyou.Thisconcludestoday'sconferencecall.Youmaynowdisconnect.
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