Comerica Earnings Call Nuggets: End of Period Balances and Securities Portfolio
End of Period Balances
John Pancari – Evercore Partners: Can you talk about the change in the end of period balances for the mortgage warehouse, how that trended in the quarter and then separately your outlook for that. In the near-term I know you expect that it could slow with refi but can you talk a little bit about the for next quarter where you think that could go?
Ralph W. Babb Jr. – Chairman and CEO, Comerica Incorporated and Comerica Bank: Lars do you want to?
Lars C. Anderson – VC, The Business Bank: Yes, I’d be glad to. Hey, John, we did see a bit of a spike at the end of the year and frankly you may recall in prior quarters we typically do see kind of a run up in those balances. The average increase for the quarter was up nearly $100 million and of course the end of the period was up around $373 million, but that frankly is not that unusual at the end of the quarter. So, that’s the kind of the first part of your questions. Second part, on go forward basis the mortgage banking industry expects a 19% decline in mortgage loan apps in 2013, so as Karen made a couple of her comments as we look at next year, it would not be unlikely to see some of those balances in the overall Mortgage Banking Finance portfolio moderate assuming that occurs potentially offsetting that could be purchase volumes that a residential real estate market continues to strengthen nationally. So, it’s a great business. We got a great stable of customers. We have clearly added market share. This year have very high cross-sells into that portfolio. So, we are committed to it on all, John.
John Pancari – Evercore Partners: And then can you talk a little bit about the growth you’re seeing in Middle Market? It was encouraging to see that that book grew in the quarter, and I know you’re talking about the strong increase you saw in line utilization and commitment, so I’m assuming that bodes well, but can you give us a little bit more color about what you’re seeing changing there that’s starting to drive some good growth?
Lars C. Anderson – VC, The Business Bank: Very good. So, I’m assuming that you are speaking about middle market in general and some of the pickup there. Obviously, our total Middle Market businesses were seeing some nice lift, but in the Middle Market general category again kind of similar to mortgage banking finance. We saw a nice peak at the end of the year over $300 million, but the overall portfolio of $100 million, which was really encouraging to see. We saw really increases in that largely across our portfolio. I think there was a lot of good activity that was that we saw in the fourth quarter. Some of it, John, that would have been I would characterize it as tax driven year-end activity levels maybe some transactions that accelerated into the fourth quarter, but in particular, this is an area that we are giving specific focus to. I think it’s an area that we can continue to grow at a nice steady rate as we head into 2013. We’ve made additional investments into our general Middle Market business and we would expect again, as Karen pointed out, assuming the economy gives us a little better growth that that’s an area that we can certainly continue to gain in a number of our markets. I’d point out that Texas has been a bit of a standout there in terms of growth, but we’re also seeing pickups in General Middle Market, not just in Northern California, but in Southern California we’ve seen pipelines grow and actually begun to see a little bit of growth there too. So that’s very encouraging. One last note I’d mention, and this is just in total commercial. You may have noticed that the Michigan market actually was up 1% in the linked quarters, so again, General Middle Market contributed to that.
Ken Zerbe – Morgan Stanley: First question, just on the securities portfolio, I noticed in this slide you had basically Slide 8, saying the duration is three years. If you go back just a quarter, your duration was 2.7 years. Can you just explain why the duration of your securities portfolio is increasing? I guess I would have thought it would be coming down given the excess liquidity you mentioned.
Karen L. Parkhill – VC and CFO: Sure, Ken. The average duration in a year – every quarter ranged between 2.7 and 3. So if you look further back in the year you’ll see it was around three in other quarters. What I can say is that we managed that portfolio and the reinvestments in our prepays trying to maximize all of our different parameters, including getting the highest yield, the lowest premium, and maintaining this highly liquid, highly rated portfolio. As we reinvest those prepays and try to get the highest yield possible, the duration can inch out a little bit, but again the entire year it’s been between 2.7 and three years.
Ken Zerbe – Morgan Stanley: Then just the other question I had, on expenses obviously your guidance was lower because you don’t have the restructuring cost. If you were to back out restructuring cost from 2012 and let’s call that core expenses, what would the guidance be for core expenses year-over-year?
Karen L. Parkhill – VC and CFO: So, actually for 2012, we had total restructuring expenses of $35 million. For 2013 we would expect you to take out that $35 million and then reduce expenses further based on the fact that we are maintaining continued tight expense control across lots of areas.
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