Good day, and welcome to the KeyCorp's Second Quarter Earnings Results Conference Call. This call is being recorded. At this time, I would like to turn the call over to the Chairman and Chief Executive Officer, Ms. Beth Mooney. Ms. Mooney, please go ahead, ma'am.

Thank you, operator. Good morning, and welcome to KeyCorp's Second Quarter 2012 Earnings Conference Call. Joining me for today's presentation is Jeff Weeden, our Chief Financial Officer. And available for the Q&A portion of the call are the leaders of Key Corporate Bank and Key Community Bank, Chris Gorman and Bill Koehler. And also joining us for the Q&A discussion are our Treasurer, Joe Vayda; and our new Chief Risk Officer, Bill Hartmann. Slide 2 is our forward-looking disclosure statement. It covers our presentation materials and comments, as well as the question-and-answer segment of our call today. Slide 3 highlights the significant events in the second quarter. I'll start with our earnings announcement this morning. We reported second quarter net income from continuing operations, attributable to common shareholders, of $221 million or $0.23 per common share. This is an increase of 11% from the first quarter. Our second quarter results reflect another quarter of loan growth, continued improvement in credit quality and disciplined expense control. As Jeff will discuss in his remarks, our expenses this quarter included some costs related to our branch acquisition and our new efficiency initiative. The increase in loan balances was driven by the fifth consecutive quarter of growth in C&I loans and our successful spring home equity lending campaign. The improvement in credit quality was also noteworthy. Nonperforming assets declined for the 11th consecutive quarter and net charge-offs were down to 63 basis points, which is the lowest level since the fourth quarter of 2007. In order to maintain our momentum, especially in light of the weak recovery and the ongoing regulatory changes, we announced a number of new company-wide efficiency initiatives that I will discuss in a moment. These initiatives build on the success of our Keyvolution program and will improve our competitive position…

Thank you, Beth. Slide 8 provides a summary of the company's second quarter 2012 results from continuing operations. As we reported this morning, the company earned a net profit from continuing operations of $0.23 per common share in the second quarter compared to $0.21 in the first quarter of this year and $0.26 for the second quarter of 2011. Turning to Slide 9. Average total loans for the second quarter were relatively flat compared to the first quarter of this year. We continue to experience good growth in our C&I loans and also had growth in our branch-based home equity loans. Average balances of C&I loans increased during the second quarter compared to the first quarter of 2012 by approximately $500 million or 2.5% unannualized to $20.1 billion. And average balances of our Community Bank home equity loans increased approximately $200 million or 2% unannualized as a result of our very successful spring home equity borrowing campaign. Both of these loan categories also showed growth in period-end balances compared to March 31, 2012, increasing 3% and 4.9% respectively, unannualized. In addition, we saw a growth in total period-end loans of approximately $400 million, and this was after approximately $500 million reduction in our exit loan portfolio during the second quarter. The reduction in the exit loan portfolio was from normal amortization and the early termination of leverage leases. Continue to Slide 10. On the liability side of the balance sheet, our trend of improving deposit mix continued into the second quarter, where we experienced an increase in average balances of non-time deposits of approximately $2 billion or 4% unannualized. Contributing to this increase were the movement of certain funds previously invested in our Victory Money Market Mutual Fund that we discussed last quarter, and the movement of certain escrow balances…

[Operator Instructions] Let's begin with Steven Alexopoulos with JPMorgan. Steven A. Alexopoulos - JP Morgan Chase & Co, Research Division: Could you start by giving more color on the comments to rationalize the branch network, and maybe specifically address plans to close or sell branches?

Steven, this is Bill Koehler. We, in the face of the present environment, when we recognize the need to rationalize our branches, while also repositioning them in a way that allows us to provide the right convenience for our customers where they are. So as we think about rationalization, it takes 2 avenues. The first is looking for stranded branches, branches in markets where they're not contributing to density or the client experience we're trying to create. And in doing so, we see a number of opportunities throughout our entire footprint. We've already made or notified the OCC and some of our customers in 17 cases. The other is continuing to invest, in a very selective basis, in our priority markets to a much lower focus on de novos and much higher focus than we've done in the past on relocations and consolidations, again, to position our branches more closely to our customers. Steven A. Alexopoulos - JP Morgan Chase & Co, Research Division: Okay. Any high-level thoughts on what ultimate consolidation might look like for the branch network?

Overall, we are expecting over the next 18 months to take out as many as 5% of our branches. Steven A. Alexopoulos - JP Morgan Chase & Co, Research Division: Okay. And just one, maybe for Jeff, do you expect the magnitude of the pressure on loan yields we saw this quarter to continue going forward, and is this just a function of the competitive environment?

Yes. In terms of the overall pricing pressure on loans, I think it's just part of it is a remixing of the portfolio, so we continue to have some maturities that are coming off. And I think we have worked through a lot of that at this point in time. New volume yields have been relatively stable for the last 3 quarters. So, from that perspective, I didn't see a lot of overall change. I don't know if, Chris, if you want to make [ph] any comments on?

Sure. Steve, I completely agree with Jeff. While there's been, on the margin, a little bit of pressure over the last 18 months, it's basically holding in terms of structure and in terms of pricing. The other thing, of course, to keep in mind as you think about our business in the Corporate Bank, we are deriving about 54% of our revenues from non-interest income. So we actually feel pretty good about the competitive landscape right now.

I guess one last comment, Steve, I'd make is that the leverage lease impact hit the commercial loan overall yields. So, if we look at the -- from the margin analysis that was on Page 18, adding back $13 million worth of the hit that plays for writing off fees associated with the origination of those particular leases impacted the overall margin by about -- on commercial loans about 15 basis points. So, on an adjusted basis, we'd be closer to the 409 for the total portfolio versus the 394. But there is some, as a remixing, there was some overall downward movement even without that adjustment.

And we will go next to Steve Scinicariello with UBS.

Just a high-level question for you, Beth. I mean, first off, I thought the expense initiative announcement was excellent and that's definitely going to increase your future run rate. But on the other side of the equation, on the revenue side, I was just kind of curious, as you kind of look across the franchise broadly, where do you see kind of the biggest potential revenue opportunities, whether it's by business line or geographic? Just kind of interested on the revenue side for increased profitability, as well as the expense initiative that you announced.

Yes, Steve. A number of things that we're looking at, I mentioned that we continue to invest for growth. So we have several initiatives within the company, such as how we're positioning ourselves in healthcare, work that we're doing in our enterprise commercial payment space. We have done a number of things where we're enhancing product capabilities, adding to our sales force and creating programs that we believe will grow revenue over time. We're also looking at the inherent productivity of our sales force and our product mix within it. So that's another opportunity where we're going to spend a lot of time making sure we have the right people against the right products in the right market. So we still [ph] look generally across our geography and see an opportunity there as well. And then we continue to see momentum in our -- what we call our distinctive business model between the alignment of our Corporate Bank and our Community Bank, to really across a continuum of businesses from $25 million in sales up to $1.5 billion. We're offering more holistic products from lending, deposits, treasury management into the Capital Markets capability that we continue to win clients, be able to meet more holistic needs and increase our revenue through the alignment of those 2 businesses. So we have a variety of things where we are very optimistic about our initiatives in revenue.

Steve, I'd live to have, maybe, Chris talk about one of the other things because we talked about Berkadia and the arrangement we have, but that hits both on the cost side as well as some of the revenue capabilities that we have in the company.

Sure, Jeff. So Berkadia is an interesting transaction that basically touches sort of both sides of the equation, both revenue and expense. We have been, through our third-party commercial loan servicing operation, a large servicer of Moody's-rated deposits. Moody's rates about 65% of the CMBS market. The CMBS market at one point was close to $300 billion. We think this year it's going to be a $35 billion market. So, as we thought about our inability to bid on Moody's-rated CMBS projects, we entered into this JV, this agreement with Berkadia whereby we swapped deposits. So the net result of it was we basically were able to garner deposits on the tune of $610 million. And most importantly, it put us in a position to bid in the future on Moody's-related business. We've been fortunate enough to win some of that business. And then the other piece of it, Jeff, that you alluded to in your comments is the variability of the cost structure. So, by doing so, we were able to take out 80 positions, which was about 23% of the workforce, and variabilize our cost structure in the event that the CMBS market doesn't return to the previously high levels.

And we will go next to Craig Siegenthaler with Credit Suisse. Craig Siegenthaler - Crédit Suisse AG, Research Division: First, just on the efficiency ratio goal of 60% to 65% or 69% today. I'm wondering how much of that improvement are you expecting from credit quality? And then, are you expecting any spend that would offset the improvement from both credit quality and then your planned expense initiative of 150 to 200?

Well, there's some remaining on the credit quality. But you can see that in terms of what we have overall, on other real estate expense for example, this quarter is probably a good example. It was $7 million. The balances that are in other real estate have now come down dramatically, at $28 million at the end of the quarter. And I think the overall level of nonperforming loans continues to trend down. So, we are future prospects of having other real estate are going to go back to what I'd call a more normal level. You're always going to have some. You're always going to have some credit cost. The reserve for unfunded commitments was up this particular quarter and that will be a function of both migration of credit as well as the overall level of commitments that are outstanding. So, that becomes a little bit choppier and more challenging to predict on that. Well, we've already taken out a significant amount of cost associated with our workout area and have redeployed those individuals into other parts of the company. So there's some with credit, not a lot with credit. This is really getting at other areas of the company. If we think about -- we did a lot with Keyvolution with backroom consolidation. There's still more work that's being done on some of the consolidation efforts. And then we get into some of the occupancy costs. So as we go through and we have vacancy around the company, what we're doing is really restacking and eliminating some of our occupancy overall. If you think about every foot, on average, it is $28 to $30 a foot. If you can take out a million square feet across the company, that's a big run rate savings overall. Those are…

Craig, it does have to have revenue overall improvement. That's why we continue to make investments to grow the revenue and grow other parts of the company. So, we know we can't cut ourselves to prosperity, but we have to be leaner and we have to be more efficient.

And we will go next to Josh Levin with Citi.

So, your -- I wanted to ask more about the thought process behind these new cost savings initiatives and the branch rationalization. It sounds a bit more strategic than -- as more of a strategic decision than just cost-cutting. Was it just the low rate environment or are there other factors that sort of caused you to go ahead with these initiatives?

Josh, this is Beth Mooney. I'll go ahead and take that question. I think it is clear that we are, as an industry, operating in, what all of us would concur, I believe, is a challenging rate environment, extended low interest rate, low GDP, a cautious sentiment among American businesses and specifically in our client base, and then you add the increasing cost of regulation that is impacting us as well. And you put all those together and it is clear, as I said, that we needed to be purposeful and proactive in addressing our cost base and our plans for revenue in light of those industry economics. So yes, there is very much a strategic point of view that we are in an environment that should last for several years, call it a new normal, and that we should realign our business plans, strategies and expenses to reflect that environment. And then from there, we clearly need to be tactical in how we get there. So, we are in the process of planning, evaluating and creating implementation plans that will help us create that path to those savings. And as we think about a number of the initiatives, they are strategic. They are strategic in how we can also grow revenue deep in our client base and acquire clients. So it is a combination of both. But this environment, we believe, will be extended and requires us to respond and be more proactive in our plans.

So my follow-up question would be, given your view that there's this extended new normal period, it's going to be a tough period for banks. Would you consider shrinking the balance sheet, given this is going to last for a few years? Maybe returning capital to shareholders, and then, when the cycle ultimately does turn, then you can grow the balance sheet then? Is that part of your thought process also?

Josh, this is Jeff Weeden. We've already gone through a tremendous amount of balance sheet restructuring. So, if look at where we are today, at 86%, 87% loan-to-deposit ratio, we have been paying down our overall debt. So, we saw another $1.4 billion of debt maturities in the first quarter. We had $707 million of the trust preferreds that we retired deemed last week. That's all part and parcel to it. We've brought on the deposits from the upstate New York branch acquisition we completed also last Friday. It is a repositioning of the balance sheet. We've got a much more, what I'd call, a productive balance sheet. It's core-funded. And we're really set for overall growth there. Our capital ratios are already high. And, of course, returning capital is one of our targeted objectives here. But it's something that we work in conjunction with the regulators and go through the CCAR process. And we were pleased that we could return, or have authorization to return $344 million in common share repurchases, plus the increase in the dividend that took effect last quarter.

And we will go next to Matt O'Connor with Deutsche Bank.

If I could just follow up a bit on the timing of the cost savings. Beth, you'd said there'd be, I don't know if you said meaningful or material, progress this year. Just as we think about the 150 to 200 million coming in over the next 6 quarters or so, should it be relatively steady, front ended, back ended?

Matt, this is Jeff Weeden. So, we've spent a lot of time here in the last several quarters going through our expenses and setting forth initiatives. But these initiatives do take a period of time to fully implement. So, we've started on some of the things we're already doing. So if you talked about the Berkadia transaction, verbalizing some of our cost there. We have initiatives that are underway and they will continue to gain momentum. And I think you'll see most of that in 2013. There will be some savings here by the end of 2012. But I would frame it more in the $30 million to $50 million run rate.

And Matt, I would say one piece that I think is important, is that we will give, with this call each quarter, updates on specific initiatives and run rate savings. So we will be continuing to report out on this.

Okay. Yes, that would be helpful. And then, just as we put it all together on the expense side, I mean, let's hope revenue growth, but just holding revenue constant, will we see expenses decline on a net basis? I mean, you talked about some investments that still -- that you'll be making some reallocation of cost, but will expenses decline off of the 2Q level of $714 million?

Yes.

Okay. And then separately, on the net interest margin. I think you said it would be 3.2% in the back half of this year?

In the range of 3.20%. That's correct.

Okay. And does that include any of the leverage lease hits? Obviously, there's a hit to net interest income and then a gain in fees. But, would that include any of the early termination of the leases?

Matt, those are more choppy and difficult to predict. So, while we have opportunities that are out there, it does not. So, in other words, what we do is we will identify what those leverage lease items are, because I couldn't tell you specifically which ones may hit at this particular point in time. They are different in terms of how much they have in terms of capitalized origination costs against them.

And we will go next to Erika Penala with Bank of America Merrill Lynch.

My first question is on your, again, yet again, your efficiency target. If I look back at your presentation in terms of your targets in the first quarter and compare it to this quarter, the efficiency target hasn't changed. It was always 60% to 65%. I'm wondering if this cost initiative had always been something that you were planning to do over the next few years, but just haven't detailed to the Street, or whether there was some downgrading of the revenue outlook over the past 3 months?

Erica, this is Beth. We have been working, and part of what we said in our comments, that we have been working on plans for several quarters now. And I would tell you that this has been a culture of continuous improvement, and we recognized, as part of our target of 60% to 65%, that we would need to be more effective in our cost structure. So, it is not necessarily new thinking. We shared, this morning, our goals to make it clear how our path to 60% to 65% takes form and over what time, as part of giving clarity and more insight into what our thinking and planning has been.

Got it. That's clear. And just a follow-up question for Jeff. Thank you so much for giving us the volume of funding that's going to mature or reprice for the second half of the year. But could you give us a sense of what the rates are of the debt and the troughs and the CDs that are rolling off, and what your plan is for replacement from both a volume and a rate perspective?

Yes. So in terms of the TLGP debt that matured on June 15, the $1 billion was at approximately 1 month LIBOR plus 200 to 210 in that range. The trust preferreds we swapped back. So, the $707 million that we redeemed on June -- on July 12, I'm sorry. $139 million was at the 3-month LIBOR plus 79 on a swap basis. And the $568 million, which would have been the capital tens that we had out there, they had an 8% coupon, but we'd swap those back to, basically, 3-month LIBOR plus about 236, 240. And then on the CDs, I think we've covered that earlier. There's over a $1 billion of the CDs that are out there that mature in the third quarter better at about a 5.06%, 5.07% cost on them. But that's reflected in that overall $2.5 billion blended rate at 2.23%. And of course, on the asset side of the equation, we expect that we'll have continuing cash flows coming off of our investment portfolio. That's been running at about $1.5 billion a quarter or $500 million per month. And what's been coming off is around 3%, and the reinvestment rates are closer to 1.6% to 1.75%.

And we will go next to Paul Miller with FBR. Thomas LeTrent - FBR Capital Markets & Co., Research Division: This is actually Thomas LeTrent on behalf of Paul. Just a couple of questions from a modeling standpoint here. I know credit has been improving. I'm just trying to get a feel for where you guys feel comfortable from a reserves to loan standpoint going forward?

Okay. Well, all right, from a reserve-to-loan standpoint, of course, this is something we build up each and every quarter. And it's really going to be dictated by our forward look, also, of the portfolio and the embedded risk that's in that portfolio. And that has been with positive migration of credit. And again, I'll point you to the classified assets -- or criticized assets at the back of our investor that continues to show overall improvement, along with the nonperformers, et cetera. So it's trending down. Our coverage ratio, I think, on annualized second quarter charge-offs, were about 2.8x right now in that particular range. So, I think if we continue on this path and we get down to that 40 to 50 basis point, you're going to see reserves continue to come down some, but not necessarily as dramatic as what they have in the past as we get closer and closer to that 40 to 50 basis point net charge-off ratio. Thomas LeTrent - FBR Capital Markets & Co., Research Division: Okay, that's helpful. And one more question. I know the mix on the branch tier were largely core deposits, but do you guys happen to have the rate on those deposits available?

Yes. I think we'd just look -- we'd point you to our overall blended rate that we have in our portfolio and we've identified what that is in our slides. If you look at that, just probably around 10 basis points on transaction accounts blended. So there's a good mix of savings account and now accounts and money market accounts in that particular portfolio.

And we will go next to Ken Usdin with Jefferies. Bryan Batory - Jefferies & Company, Inc., Research Division: This is actually Bryan Batory from Ken's team. My first question is just on pre-provision net revenue. Jeff, last quarter, you had given a range of $290 to $330 million. And on a reported basis, you guys were kind of right in the middle there this quarter. Obviously, a lot of moving parts. But I was wondering if you could give an updated outlook just on where you expect the PPNR to run for the remainder of the year?

Well, Bryan, we really haven't changed our overall outlook for the remaining part of the year. Last quarter, we gave a range of $290 million to $330 million. I think that's a consistent range. A number of the things that we have under our initiatives are intended to show overall improvement in that as we get into 2013 and beyond. Bryan Batory - Jefferies & Company, Inc., Research Division: Okay. And one follow-up on credit. It looked like nonperforming inflows were up a little bit in the quarter. I know you guys spoke to the home equity reclass on the call. But was there anything else driving that increase quarter-over-quarter?

Bryan, this is Bill Hartmann. One of the things that we have seen happening is that there's a tremendous amount of liquidity that has been in the market. But it's looking at some of the opportunities in -- specifically, in real estate loans. We have had some performing but criticized loans where we've received some reverse inquiries from people who were willing to purchase those at relatively close to par. The accounting for that requires that, since there is a slight discount to our carrying value, that we actually move those into nonperforming in order to account for that discount -- that discount does flow through the net charge-offs, and then we could actually sell the assets. So, if you look at the detail that's listed on Page 26, you'll also see that the payments have risen as well, reflecting the cash that's flowing through that. And reflecting the fact that it's a near par discount, the absolute level of charge-offs has been going down. Bryan Batory - Jefferies & Company, Inc., Research Division: This Page 26 of the earnings release?

Of the earnings release.

And we will go next to Mike Turner with Compass Point. Michael Turner - Compass Point Research & Trading, LLC, Research Division: On the kind of -- following up to earlier, your average loan yield was around 426 this quarter, and keeping in mind, I know about probably 10 basis points or so of that is due to the lease termination. Where do you see that normalizing in this interest rate environment? Adjusting for mix and just the time of new lower-yielding loans flowing through the balance sheet?

The overall yield in -- the leverage leases impacted the commercial yield. So that's what I'll focus in on. Adjusted, that actually cost the commercial yields around 15 basis points in the current quarter. And again, I know that we have to look at overall mix and mix does have an impact, and so depending on how much is fixed-rate versus variable rate. But a large portion of our overall portfolio is variable rate and a large portion of that has already been repriced at this point in time. So there could be additional pressure in those overall yields and that's going to come from continuation of some repricing. But, for the most part, new credit has been holding very, very stable, I think, since the third quarter of last year when they had the debt crisis and the European banks also started pulling out of the market here.

The other thing I would say, Mike, if I would, we think the fact that our spreads have held relatively firm is a strong indication of our relationship strategy and it strengthened residents in the market, in addition to what Chris talked about earlier relating to our strong FEMIX [ph]. Michael Turner - Compass Point Research & Trading, LLC, Research Division: Okay. And then I guess, as a follow-up, it sounds like it's -- there doesn't sound like there will be a tremendous amount of pressure, is what I'm hearing, it -- to summit the margin. If I look out 2 years from now, and you get the benefit accruing from CD repricing, redemption and repayment of troughs, basically the benefit on the liability side and flow through the impact of lower rates on the asset side and then flow in the $150 million to $200 million in savings, does this, if the environment stays in this -- where it is today, which is what I think you and everybody is expecting, does that get you to the 60% to 65% efficiency ratio? Or if we stay in this environment as well as this growth, are there some other levers you've got to look at pulling?

Well, we're looking at the cost side more aggressively because we do expect that this rate environment will be here for an extended time period. So we're not looking for the margin to continue a steady upward climb to our long-term target of 3.5%. I think as you look at this particular environment, we have to look at the cost side. That's the lever that we're looking at. And then also looking at where we will be strategic in our overall investments as a company to grow other forms of revenue that we have. And that may be investing in certain new verticals, people, et cetera. But we will be making investments in the future. But, as we said earlier, we have to take costs out of the organization. Those are structural costs that we have to get at to get to that 65% efficiency based upon no change, if we had no change in revenue, but we're not forecasting no change in revenue. We're forecasting other forms of revenue that we will continue to grow in this company.

And Mike, I would just add it was a 2-year out sort of view to your question. As you sit here in this current environment, I think it is important to underscore that you've managed that which you could control and took some piece of our comments and what we're sharing of our expenses today is to underscore our [indiscernible] fair line of sight around what we can control. Michael Turner - Compass Point Research & Trading, LLC, Research Division: Okay. That's very helpful, that -- I mean, am I hearing that you think you can get there in this environment or that will be tough?

I think what we've laid out here is how we get down into our particular operating environment of 65, basically. I think it was said by a earlier caller. If you look at the 150 to 200, it will take 4% to 5% off of the efficiency ratio based on current revenues. Michael Turner - Compass Point Research & Trading, LLC, Research Division: Okay. And sorry, one more follow-up on a different topic. Just hearing from other banks on the state of, really, commercial borrowers and, really, demand, have you seen any change quarter-over-quarter reflecting back 3 months? I mean, is there a little more uncertainty, or just maybe you could characterize how your commercial borrowers are feeling right now?

Sure, Mike. It's Chris Gorman. I would say there is a greater level of hesitancy out there on the part of our commercial borrowers that we've seen over the past 6 weeks. And I will tell you that while the businesses are performing well, while they are delevered and have plenty of cash, they feel pretty good about their business. But they're concerned about macro issues. And those macro issues, depending on the day the rank order changes, but it's really kind of 3 issues. One is the fiscal cliff, the second is the election and the third is Europe. And we have seen a more cautious attitude on the macro side of things from our clients in the last 6 weeks or so. And we're out in the market a great deal, and I think that's pretty consistent.

And we will go next to Gerard Cassidy with RBC Capital Markets.

This is actually Jake Civiello on for Gerard. You mentioned that the early termination of leverage leases will accelerate the reduction in the exit portfolio. But does the reduction come entirely in the commercial lease financing category and is the decline fully reflected in the second quarter results?

Well, the decline that's reflected in the second quarter results are just those that had early payout along with normal amortization. So, I would -- there's both in the press release, as well as on Page 22 of our slides, that we have -- you'll see a breakout of that particular portfolio. It's down to about $3.4 billion at the end of June and we have a number of categories that are just going to have normal amortization associated with them. So without any acceleration due to early terminations of leverage leases, I would expect that we would see that continue to go down $200 million to $250 million per quarter and continue to amortize on out.

And Jake, those leverage leases that we bid on in our second quarter are in our exit loan portfolio under commercial lease financing.

Okay. Great. That's helpful. And just one other question. With respect to the branch rationalization focus, what percentage of all key branches are currently profitable? And how many of those branches reach their profitability targets?

Jake, this is Bill. A substantial amount of -- a very substantial amount of our branches on a store-level basis are profitable. We are focused, though, on the opportunity cost here for those that are less profitable. Where is our opportunity to take that same expense, redeploy it, either in that market or in a different market with different demographics, growth profile opportunity? How do we redeploy that same expense, in a way that is more impactful to our revenue and strategy in that market. So that's really how we are thinking about the rationalization effort.

[Operator Instructions] And we'll go next to Andrew Marquardt with Evercore Partners.

Just want to clarify on the question on PPNR, $290 million to $330 million range that you had before. It looks like this quarter, if you surpass some of the one-time specials, you're closer to the lower end of that. Are you saying that you're still expecting that, that range is achievable, and maybe moreso given the expense initiative, and then maybe can improve next year? How should we think about that?

Well, we think that range is definitely achievable because we had some of the leverage lease gains, but we also had additional expenses associated in the current quarter with the expense initiative, which was around $4 million to $5 million worth of our overall cost, as well as what we had for the branch acquisition in upstate New York, which was approximately $5 million. And then other real estate expense was higher also this quarter as we continue to liquidate out that particular portfolio. I think, as we look forward into 2013, we'll provide updated guidance as we get -- as we usually do in the first quarter of the year. So in January, we'd expect to give that as we continue to work through our overall expense plans going forward from this point.

And then just a clarification on the expense initiative, how should we think about it, relative to Keyvolution? Is this a continuation of Keyvolution? Is this -- is there a named one for this? You've done a good job if you go back -- way back, you had the PEG initiative. I mean, how do we think about this one?

Andrew, this is Beth. It does build on the success of our Keyvolution initiative. And some of these are a continuation of items that we did under Keyvolution. I think Jeff mentioned the consolidation of backroom operations. How do we look at sourcing, how do we look at occupancy? How do we look at demand management? How do we generally try and get more efficient and effective? So, when we stopped reporting on Keyvolution a year ago, we said it created a muscle memory in this company for a continuous improvement. So, we believe it is a continuation of Keyvolution in terms of capabilities and focus. It is not programmatic. We don't have a name for it. It is just a commitment to structurally reduce our costs through the levers that are available to us, on to become more effective and efficient and report out on those.

Just found this question on capital with the strong Basel III level, almost 11%. How do you think about deployment of capital and the priorities near medium term?

Our capital priorities continue to remain consistent and we have always said that we feel like the most important thing we need to do with our capital is continue to use it to support our organic growth opportunities that are within our franchise and for our clients. Second, we talk about dividends as a second priority for return of capital to shareholders. Third, an important recognition in another form of return of capital to shareholders would be share repurchase. And then fourth, make sure that we have adequate capital and appropriately deployed for opportunities for growth for the company.

And we will go next to Allen Charles [ph] with Schroders.

On the share repurchase, given where your stock price is, is there any notion of not spacing it out for the rest of the year and rather accelerating it over the next quarter or 2?

Allen, this is Jeff Weeden. We are following our plan that was submitted as part of our CCAR. And I think we've talked about that in prior calls and meetings. And that is that we will continue on this pattern that calls for the $344 million of share repurchases beginning in the second quarter, which we did, and continuing through the first quarter of 2013.

[Operator Instructions] We will go next to Nancy Bush with NAB Research, LLC.

Just a quick question. I mean, there's been so much talk about expense in the 60% to 65% targeted ratio, et cetera, et cetera. I guess I would ask this. Given that it's beginning to look like the new normal, maybe the forever new normal, I guess I would ask, is 60%, even if you can get down to the lower part of that ratio, good enough? I mean, I realize that you have special challenges due to sort of the far-flung nature of your branch network, et cetera. But are you going to feel a need to go beyond that if this stuff goes on?

Nancy, this is Beth. I would tell you that our target, and we have been consistent with this for some time, is that 60% to 65% range. And we have talked accurately about our far-flung nature of our branch network, but also the mix of our businesses will also help drive the efficiency ratio. So, we view this as an important for us to articulate our path to 60% to 65%. And I do think it is incumbent on all institutions and bank management teams to constantly reevaluate what is important and where is the right place for us to position our aspirations and our targets relative to our peers and our performance within the industry. So I think making steps to clarify our goal, how we are going to reach our goals, is important to know that we are constantly evaluating our business mix, our opportunities and what are our appropriate financial targets.

And we'll go to Matthew Kieding [ph] with Barclays.

I just had a question on your effective tax rate. It honestly fell, considering what we were forecasting, or I'm not sure what your expectations were, but at least in our model this quarter. And I was wondering if you could provide some forward-looking guidance on where do you think the effective tax rate will run?

Matthew, this is Jeff Weeden. What impacts it, and we put this in the financial highlights, or the highlights of the quarter on the first page of the press release. The fact that these leverage lease transactions, the gains that we recognized on them are nontaxable under our prior agreement that we entered into with the IRS several years back. So that's what's impacting the effective tax rate. If we have more of these transactions, it can have further impact on the overall effective tax rate. But what we try to do is use a GAAP basis, and if you look at it from a tax-equivalent perspective, the effective tax rate for the year, based upon what we have through the first 6 months of the year, would probably be in the range of about 25% to 26%.

At this time, I'd like to turn it back to our speakers for any additional or closing remarks.

Thank you, operator. And to all of you, thank you for taking time from your schedule to participate in our call today. If you have any follow-up questions, you can direct them to our Investor Relations team, Vern Patterson or Kelly Lammers. That number is (216) 689-3133. And that concludes our remarks for today. Thank you.

This does conclude today's conference. We thank you for your participation.