Welcome to the U.S. Bancorp's Second Quarter 2015 Earnings Conference Call. Following a review of the results by Richard Davis, Chairman, President, and Chief Executive Officer; and Kathy Rogers, U.S. Bancorp's Vice Chairman and Chief Financial Officer, there will be a formal question-and-answer session. This call will be recorded and available for replay beginning today approximately noon, Eastern Daylight Time through Wednesday, July 22 at 12 AM midnight, Eastern Daylight Time. I will now turn the conference call over to Sean O'Connor, Director of Investor Relations for U.S. Bancorp.

Thank you, Kalea, and good morning to everyone who has joined our call. Richard Davis, Kathy Rogers, Andy Cecere and Bill Parker are here with me today to review U.S. Bancorp's second quarter 2015 results and answer your questions. Richard and Kathy will be referencing a slide presentation during their prepared remarks. A copy of the slide presentation as well as our earnings release and supplemental analyst schedules are available on our website at usbank.com. I would like to remind you that any forward-looking statements made during today's call are subject to risk and uncertainty. Factors that could materially change our current forward-looking assumptions are described on page two of today's presentation, in our press release, and in our Form 10-K and subsequent reports on file with the SEC. I will now turn the call over to Richard. Richard K. Davis - Chairman, President & Chief Executive Officer: Thank you, Sean. Good morning everyone, and thank you for joining our call. I will begin with our review with U.S. Bank's results as a summary of the quarter's highlights are available on page three of the presentation. U.S. Bank reported net income of $1.5 billion for the second quarter of 2015, or a record $0.80 per diluted common share, a 2.6% increase year-over-year. Total average loans grew 4% year-over-year and 0.7% linked quarter, excluding student loans, which were reclassified to held for sale at the end of the first quarter. In addition, we continue to experience strong growth in total average deposits of 8.9% over the prior year and 2.6% linked quarter. Net new DDA account growth was especially strong this quarter, growing 4% annualized. Credit quality remains strong. Total net charge-offs decreased by 15.2% from the prior year and increased modestly from the previous quarter. The increase from the previous…

Your first question comes from the line of Jon Arfstrom of RBC Capital Markets. Richard K. Davis - Chairman, President & Chief Executive Officer: Hi, Jon. Kathy Ashcraft Rogers - Vice Chairman & Chief Financial Officer: Hey, Jon.

Just a question on your last comment, Richard, you used the term tighter on expense management. Does that mean you're a little less optimistic on the revenue outlook or is it just basically a similar approach? Has anything changed? Richard K. Davis - Chairman, President & Chief Executive Officer: Well, yeah, I'm actually more optimistic on the revenue for the second half because things have turned the corner and I think you'll see, with NIM flattening out, with loan growth now, as I'm committing to well, at the 1% or higher because I can see already see that for quarter three, and the knowledge that our mortgages business is – the balance sheet is growing again, I think we are feeling quite good about revenue. What I'm still waiting for is the interest rate impact that would occur if the Fed increases rates. So if they don't, we're going to continue to put – keep in place this FTE hold we've had now for, as Kathy said, a year-and-a-half. That's worth, by the way, thousands of FTE that we haven't added and therefore we haven't had to talk about reducing either. And then all the discretionary things that we continue to do to keep ourselves at the efficiency level you come to expect. So revenues actually got a nice trajectory in the second half. Expenses will come down as we watch our nickels and dimes, but I will tell you the cost of compliance has erased a lot of the benefits I would otherwise hope to have gotten a year-and-a-half ago when we started this as we've continued to add the compliance personnel, audit personnel, and not just in those areas but in the front line where we have that same compliance responsibility that's gone up substantially. But expenses we'll continue to watch, Jon, like I promised. And I've always said that if we have to be more draconian, we will, but the FTE hold and watching our vacancies and things has served us pretty well so far.

Okay. Good. And then I guess one of the items you singled out in growth was the corporate business, and that seems to have been driving the growth. Talk to us a little bit about what's going on there; is this large corporate driving it? Or is it broader based? Richard K. Davis - Chairman, President & Chief Executive Officer: Yeah, it's way broader based. So in fact, much as I like the 2.1% linked quarter in C&I, that's one of our lowest quarters in the last six quarters and I'm actually kind of satisfied with that because we're now getting competing growth from the retail consumer side, which is what we've been long waiting for and that's why, one of our reasons we can say that the margin will start to flatten out because the mix will start to be balanced. So commercial business, the bond markets are driving balance reductions, because people are driving to the bond market, and so to still get 2.1% linked quarter means we're doing real business for real customers that have other needs that aren't just M&A related. We also see that more opportunity for us in the fee business given our involvement in that M&A market on the capital market side, which we didn't have, as you know, a few years ago. So that's a kind of twofer for us; if we can't get it in loan growth, we'll get it in fees. Syndication loan market is really strong. If you notice, we were in the top four on the investment grade league table this quarter. It's our first time we've broken into the top four, so we're seeing that as a business for us that's starting to pay dividends that we invested in a few years ago. So C&I is strong.…

Okay. Good. Then you're saying you already have some visibility for a bit better growth in Q3? Okay. Richard K. Davis - Chairman, President & Chief Executive Officer: We do. And a lot of that is – or I wouldn't be so strong in predicating that for you.

Okay. Thank you. Richard K. Davis - Chairman, President & Chief Executive Officer: Yes.

Your next question comes from the line of Scott Siefers with Sandler O'Neill. Richard K. Davis - Chairman, President & Chief Executive Officer: Hi, Scott. Scott Siefers - Sandler O'Neill & Partners LP: Good Morning, guys. Let's see, Richard or Kathy, I was hoping you could add a little to your response on the expense side in Jon's question there a second ago. Richard, are you suggesting that we're kind of at a high watermark for expense? I believe you said expenses would come down. I guess I'm just curious without doing something more draconian, where are they going to come down from? And just as we look out in the third quarter, I guess, you have between the – I think there was a vender reimbursement and then the insurance recovery about a cumulative $35 million or so of headwind, so where does that come out of and what's sort of that near-term outlook on that cost side? Richard K. Davis - Chairman, President & Chief Executive Officer: Yeah. So I'm going to call it more flattish. It's going to be close to what you see now, if anything – it's not coming down, so let's put it that way. But I don't see any material increases either. What's happening here is the cost of compliance is at its high watermark. As you know, we are a part of that mortgage foreclosure activity that we've extended and that's going to continue to cost us and we will continue to add compliance and audit in virtually every part of the company. So that's in there. Things that will come down to offset those headwinds are continued discretionary expense control that we just never talk about here. I mean we don't have a name for it. We don't bring people to…

Your next question is from the line of John Pancari with Evercore ISI. Richard K. Davis - Chairman, President & Chief Executive Officer: Good morning, John. Kathy Ashcraft Rogers - Vice Chairman & Chief Financial Officer: Hey, John.

Good morning. Just on the margin. Wanted to see if you can give us a little bit of color on how you're thinking about the margin in coming quarters. Just given the competition on the loan front, could you still see similar mid-single digit compression over the next several quarters? Is that the best way to think about it? Kathy Ashcraft Rogers - Vice Chairman & Chief Financial Officer: John, I'm going to say I think we're starting to see the margin stabilize and I think that's coming from a couple of different reasons. As Richard mentioned earlier, we are starting to see a pickup in our loan growth on the retail side and that's going to help. As you recall, we've been calling out an impact of several basis points on a linked quarter basis related to the mix of our growth. So as retail starts to pick up, that's going to help us. Additionally, what we are seeing is that as loans and securities run off and we're replacing them with new, that spread between what's running off and coming on is starting to get a little closer together, so – or getting smaller. So that's going to help us as well. So I think, as I look out into the third quarter, I'm going to call that our net interest margin is going to be relatively stable.

Right. I guess, what I should – the way I should have asked it is how do you define relatively stable? Because I think you had alluded to some emerging stability in the past, but we still saw mid-single digit compression. So... Richard K. Davis - Chairman, President & Chief Executive Officer: Actually – okay, so, John, we actually never did say we're stable. We were super transparent and always said it would be 3 basis points to 5 basis points or 3 basis points to 6 basis points, and we did mention it by 1 basis point. So stable to us is give or take 1 basis point, maybe 2 basis points, either direction. But right now, we're forecasting this thing to be flat and we could be surprised. But we'll have a chance later in the quarter to update you guys. We tell you exactly what we see as soon as we see it, and we are extremely transparent and clear, so stable means stable.

Okay. Good. Good. All right. And then separately in terms of the deposit side, if you could just give us a little bit of color with what you are seeing there. I mean it was exceptionally strong and surpassed our estimates, particularly around some of the interest-bearing stuff? Kathy Ashcraft Rogers - Vice Chairman & Chief Financial Officer: Yeah. Hi, John, you're absolutely right. It was higher than we saw in quarter two and I will tell you it's just continued growth across all business lines. I can't call out any particular business that had higher growth than the other. We had – we just continue to see strong growth in our wholesale, our consumer and our trust businesses. Richard K. Davis - Chairman, President & Chief Executive Officer: It's a great problem, right? And we're not sending deposits out. We're also not rationalizing the number of branches we have. We're just rationalizing what we do in them. So that's probably keeping a lot of deposits, the core stuff. But we all know, in a few quarters or years, that's going to be the gas in the engine for making loans. And so we're going to be pleased with loan growth, deposit growth, even if we're not sure what we can do with it yet. And we'll continue to see that as a sign of more customers, net DDA was as high as it has been in years. We have a lot of new business coming in from our corporate trust, which you know, is a very important part of, 15% of our core deposit. So, it's a good news thing and as much as we are a little surprised ourselves, we're not going to do anything to send it back (28:12).

Okay. Then, Richard, my last thing I just wanted to ask you about was about your updated thoughts on capital deployment, particularly your view of M&A opportunities here as you're looking at opportunities to put your capital to work? Richard K. Davis - Chairman, President & Chief Executive Officer: Yeah. Sure. We've got this – we've indicated an interest in the GE Capital, or part of their portfolio and we are in the due diligence with that. So we will keep finding an interest in asset purchases. We're continuing to find payment portfolios that we look at. We like the merchant acquiring space where you've either seen us getting new partners in the domestic, or more even often, you've seen us do it in the international side where we can find a partner and extend into another country and kind of plug-and-play like we do with our payments platform. And then corporate trust, we just had our board meeting a couple weeks ago and we highlighted our European trust business, which is also fund servicing and corporate trust, and they are both quite robust. The market continues to be very receiving of a new player in us being there, and we see a lot of growth opportunities. And that can be both organic and M&A, John. So that's where you're going to see us. Not whole bank transactions – what you've seen in the last few years is what you'll see in the next couple. And I think that as the tail falls off of what I'll call the statute of limitations of inheriting somebody else's problems from the early years of the recession, as that falls off in a couple of years, we'll probably be back into the game of buying whole companies or looking at whole banks. But for now, that just doesn't suit our appetite.

All right. Thanks for taking the questions. Richard K. Davis - Chairman, President & Chief Executive Officer: Yeah. Thanks, John.

Your next question comes from the line of Paul Miller of FBR. Richard K. Davis - Chairman, President & Chief Executive Officer: Hey, Paul. Thomas LeTrent - FBR Capital Markets & Co.: Good morning, guys. This is actually Thomas on behalf of Paul. Richard, you talked a little bit about how you've been participating more in the jumbo market lately, I guess, in particular on pricing. What's giving you the confidence to take that leap? And obviously that's helped your consumer growth. Richard K. Davis - Chairman, President & Chief Executive Officer: Let's have Andy respond to that, he's got the mortgage business under his leadership.

Good morning, Thomas. You know it's about our customers. So our customers are choosing to go longer in terms of their mortgage product given the low rate and the fixed rate and the 30-year. So they're financing out of either what they have today or variable floating into longer jumbo. We want to serve our customers' needs so we're putting those in our books. They're not coming out as loss, they're just coming out a little thinner spread than what would be historic, but given our low cost of capital as well as our low funding costs, they're still profitable for us. Thomas LeTrent - FBR Capital Markets & Co.: Okay. Great. And then I guess one more question sort of on the loan growth, loan growth seems like it's picking up for you guys. Does that mean that more of the reinvestment of sort of the excess deposit growth which has been mentioned was very strong last quarter will go towards the loan side rather than securities? Or can we still expect some investment securities growth as well? Kathy Ashcraft Rogers - Vice Chairman & Chief Financial Officer: Yeah. I think at this point, what you'll see is, as loans start to increase, that will really help offset the deposit increase, so I think you'll see that. There might be some modest investment security just based on the balance sheet positioning and so forth, but it's really going to be used by deposits – or loans. The deposit growth will be used by loans. Thomas LeTrent - FBR Capital Markets & Co.: Okay. Great. Thank you, guys. Richard K. Davis - Chairman, President & Chief Executive Officer: Thanks, Thomas.

Your next question is from the line of Erika Najarian of Bank of America. Richard K. Davis - Chairman, President & Chief Executive Officer: Hey, Erika. Kathy Ashcraft Rogers - Vice Chairman & Chief Financial Officer: Hi, Erika.

Good morning. Richard, we asked your peers yesterday what they thought about deposit repricing as we hopefully enter a higher interest rate environment. One said that the deposit betas will be much higher because regulation has given us now classifications of good deposits and bad deposits, while your other peers seem to be more optimistic on deposit beta given that we're coming from zero. What's your view in terms of both the pace and magnitude of pass-through, if we do see the Fed raise rates this year? Richard K. Davis - Chairman, President & Chief Executive Officer: Yeah, my – I'll probably be right in the middle and that's not like me, I like to take a position. But I'll tell you my answer's just a little different. We – God, we all want this deposit beta to go up because we want that money to be used in some form of growth in the American economy. I mean it really is at record high levels and it's not sustainable. And it has nothing to do with the banks keeping them or losing them, it has everything to do with consumers and businesses using it. So my hope is that there is a early beta take when rates start to move up not because of rates being higher and the cost changing but because that informs the fact that people are now investing and consumers are consuming, so I'm all for that. I do think that marginal beta on companies has a lot to do with what kind of level of relationship they've created with their customers, whereby if people are double banking, triple banking, the core relationship stays with the bank that's established themselves as the core partner. And I also think customers that have established themselves as feeling that they were treated well during this period, especially corporate customers, and felt that the company protected their deposits here, let them stay on the balance sheet if necessary or work them into some money center alternative, I think we'll get credit for the way we handled that over the course of the more challenging times when deposits were less attractive. So I'm going to say the beta is going to be – I hope it's an early, a bit of an early and abrupt start because people are using it, and then I think that the marginal beta starts to determine the quality of banking relationships you have. And I have to remind you because of our corporate trust, we will have at least 15% of our core deposits are in a different category as much as they're contractual, and they don't have the ability to move at the vagaries of rates or even consumerism, so I think we'll have a slightly better beta no matter what, and probably better than you guys have modeled, given that that's a pretty substantial amount of money as we continue to grow corporate trust.

That's a great point. Richard K. Davis - Chairman, President & Chief Executive Officer: Yeah.

Thanks for highlighting that. And just, Kathy, as a follow up to Thomas' question, does that mean that your earning asset growth is going to now match your loan growth? Over the past several quarters, it's outpaced your loan growth. And I guess a follow up question to that is could you give us a sense on where you are towards the LCR standard for January 2016? Kathy Ashcraft Rogers - Vice Chairman & Chief Financial Officer: Well, let me start with the LCR first. And I will tell you that, at the end of last year, we had met that ratio. So we were fully compliant with LCR at the end of 2014. I will tell you one other aspect of our earning asset growth in addition to investment securities that's held for sale particularly around our mortgage environment, so I think that as you think about total earning asset growth, I think that it will more closely approximate loans going forward, but you'll have to take into account the held for sale activity as – depending on what the mortgage market does.

Got it. Thank you so much. Richard K. Davis - Chairman, President & Chief Executive Officer: Thanks, Erika.

Your next question is from the line of Bill Carcache of Nomura. Richard K. Davis - Chairman, President & Chief Executive Officer: Good morning, Bill.

Good morning. I had a follow-up question on cards. I've heard a lot of your comments on payments, particularly a lot of items affecting the fee income line, but I was hoping more – to focus a little bit more on the spread. And it looks like you've been seeing a pretty consistent reduction in year-over-year credit card loan growth over the last several quarters to most recently 1.3% this past quarter. That's a little bit slower relative to the rest of the industry. I was hoping you could just talk a little bit about what – give a little color around what's driving that and what you anticipate going forward. Richard K. Davis - Chairman, President & Chief Executive Officer: Let's have Andy give you a brief color on that.

Sure, Bill. On a quarterly basis, it's down principally due to seasonality, so that is not uncommon from quarter one to quarter two to be down; on a year-over-year basis, it's about 2%. Part of the factor that is impacting that is auto sales, and spend is up closer to 5%, 5.5%. People are paying down more of their balances with perhaps some of the excess they're getting from the fuel side of the equation, so we're seeing pay it down rates being higher, revolve rates being lower, even though sales are up.

Okay. That's helpful. And so just looking at the average loans on slide 15 that shows the year-over-year growth, so really we can tell from second quarter 2014 till now that growth rate has been downward. So as we look forward from here, would you expect that kind of similar trajectory or would that pick up a little bit? Kathy Ashcraft Rogers - Vice Chairman & Chief Financial Officer: Well, I think, on a linked quarter basis, we would start to think that we're – we do feel confident we'll be back into that 1% to 1.5% range.

Okay. And then my last question is more on kind of broadly the upcoming interchange rate reductions in Europe, in particular, the capping of debit and credit interchange at 20 basis points and 30 basis points respectively. Can you discuss whether Elavon offers pass-through or bundled pricing to its merchant partners in Europe? Just trying to kind of understand the extent to which you might be able to benefit from the upcoming interchange rate reductions in Europe.

I think for the most part, that interchange impact will not impact Elavon in Europe, so it will – our rate of revenue will not be impacted by that change.

Okay. Thank you very much.

Sure. Richard K. Davis - Chairman, President & Chief Executive Officer: Thanks, Bill.

Your next question comes from the line of Ken Usdin of Jefferies. Richard K. Davis - Chairman, President & Chief Executive Officer: Hi, Ken. Kathy Ashcraft Rogers - Vice Chairman & Chief Financial Officer: Hi, Ken.

Thanks. Good morning. Hi, guys. First question just on credit, it looks like you had a little lower recovery this quarter, which I would think would be expected at this point, most of the underlying metrics continue to look excellent in terms of delinquencies, NPAs, et cetera. How much room is there do you think just for charge-offs to still decline from here? I know reserve release is pretty much done, but it just looks like the underlying credit still looks quite good.

Yeah. This is Bill. I think the one area is still in the residential space, so there is still continued improvement there. It's already getting low so the dollars aren't going to be huge at this point. But as you pointed out, the rest of the movement comes through recoveries generally on the wholesale side. Those are sporadic, sometimes they're very strong in one quarter. This quarter, they were a little lighter. Further away we get from the downturn, the fewer of those higher recovery levels we'll have. So I'd say, in general, we're at a good spot and I see a little more improvement on residential mortgage.

Okay. Great. Got it. Thanks, Bill. And then secondly, just on – a question on the mortgage business, obviously, we had a pretty good second quarter and you had a big pump in originations. Just maybe just your general thoughts on the state of your – the housing market, the mortgage business and the outlook for production there? Kathy Ashcraft Rogers - Vice Chairman & Chief Financial Officer: Yes. So as you stated, we had a really good quarter from a year-over-year basis. We grew our app volume about 35%. As we look forward into quarter three, I do think that we'll probably see a decline in our refi balances. So I would expect as we look into quarter three, on a linked quarter basis, our application volumes will be probably down a little bit. I would say from a fee standpoint, we may be – our fee income might be modestly lower than what it is this quarter, but it's very early in the quarter. It's going to depend a lot on what we see in the rate – with the rate market and the appetite for purchases. So we'll give you a little bit of – more heads up on that as we go further into the quarter. Richard K. Davis - Chairman, President & Chief Executive Officer: Yeah, Ken. This is Richard. The applications up 34% in quarter two will show through in quarter three as bookings in some measure so quarter three has a lot to do with paying off quarter two. Quarter three, I think, will be a tale of interesting to watch because we will see what happens as rates start to move or the threat of rates start to move and more on the psychology of the consumer behavior. But I thought you'd…

Understood. Thanks a lot.

Your next question comes from the line of Chris Mutascio of KBW. Richard K. Davis - Chairman, President & Chief Executive Officer: Hey, Chris. Chris M. Mutascio - Keefe, Bruyette & Woods, Inc.: Hey, Richard. How are you? Richard K. Davis - Chairman, President & Chief Executive Officer: Good. Chris M. Mutascio - Keefe, Bruyette & Woods, Inc.: Kathy, how are you this morning? Kathy Ashcraft Rogers - Vice Chairman & Chief Financial Officer: Good. Chris M. Mutascio - Keefe, Bruyette & Woods, Inc.: Richard, I just want to – just, all of my questions I think have been answered, but I do want to just make sure I do a double-check on your thought process on expenses in third quarter. When you talk about flat, I know we've talked about a lot of this beating a dead horse earlier on the call, but the reported expenses of roughly $2.68 billion, it seems to me there is a couple things that you benefited from in the quarter whether it was insurance recovery or reimbursement from a business partnership. When you say flat, is it flat, are you thinking flattish with the reported number of $2.68 billion or should I gross that up for some of the benefits you had in the quarter? And if it is flat, are you thinking it is flat with the reported number, where do you get the offsets from? Is it lower marketing expenses? Is it lower professional services fees that could get you back to that level? Richard K. Davis - Chairman, President & Chief Executive Officer: Yeah, Chris. I'm really glad for the question because I didn't know it wasn't clear so thank you. It's not taking advantage of the one-time benefits. It's the core. Chris M. Mutascio - Keefe, Bruyette & Woods, Inc.: Okay. Richard K. Davis - Chairman, President & Chief Executive Officer: And so the things that we manage we're going to stick pretty flat to that but you won't get the benefits each quarter unless something comes out of nowhere that we're happy with. So on a reported basis, it will go up slightly. As it does though, it will go up less than it would have if we weren't continuing to put this kibosh on the cost of FTE and the cost of discretionary expenses like marketing and travel and entertainment. So, yeah, it's a good question. It will go up in the second half but it's not material and as much as we're not counting on the other benefits to accrue and if they do, we'll take them and celebrate that.

The other thing that I'd mention, Richard, is the normal seasonality to our tax amortization – our tax credit business, which again is reflected in our tax rate all year but goes up through the year just normal seasonality and that's probably $30 million to $40 million (43:04). Richard K. Davis - Chairman, President & Chief Executive Officer: (43:05) the second half. So as Andy is talking about the CDC and so we have expenses up above the line, but we get all the benefits on the taxes below. And if you look at one line item, that's a great reminder that that will be – you should isolate that and take a look at it. In prior years, it will be just the same as it's been in prior. Chris M. Mutascio - Keefe, Bruyette & Woods, Inc.: Right. So absent the tax issue, which I fully understand, it's more of a – it should gross up at least to some degree, second quarter expenses from a run rate perspective because of some of the benefits you had? Richard K. Davis - Chairman, President & Chief Executive Officer: That's correct. Kathy Ashcraft Rogers - Vice Chairman & Chief Financial Officer: That's right. Chris M. Mutascio - Keefe, Bruyette & Woods, Inc.: Okay. Richard K. Davis - Chairman, President & Chief Executive Officer: Exactly right. (43:33) Chris M. Mutascio - Keefe, Bruyette & Woods, Inc.: Thank you so much, Richard. Richard K. Davis - Chairman, President & Chief Executive Officer: Yeah. Perfect. Thanks, Chris.

Your next question comes from the line of Kevin Barker of Compass Point. Richard K. Davis - Chairman, President & Chief Executive Officer: Hey, Kevin. Kathy Ashcraft Rogers - Vice Chairman & Chief Financial Officer: Hey, Kevin. Kevin James Barker - Compass Point Research & Trading LLC: Hey. Good morning. I just wanted to follow up on some of the mortgage comments. Are you seeing an increasing amount of demand from consumers or at least incrementally regarding cash out refis or potentially a willingness to increase home equity lines in order to take advantage of higher equity and higher home prices? Richard K. Davis - Chairman, President & Chief Executive Officer: Definitely the latter, right? So as I said, home equity is up 4% and it's – people are doing mostly home improvement. When I was a young banker in California 30 years ago, we used to call it a PIP, a property improvement and we used to give credit back – half the credit to the equity or the line itself, because we thought they're improving the collateral as they went. We don't do that anymore but that was the old days when people really used their house to live in it and to keep it for a longer-term and not improve it to flip it. And I think we've got psychology where people are going to live in their houses now and own them as an asset to live in with the hope that they will have some increasing value, use it when they can but not to do it in order to flip it. Debt consolidation for the first time, Kevin, is starting to show up again in home equity, which I guess, it makes sense later in the cycle as people want to reset one more time, but they are much more prudent than they were before. And because the quality of loans we do, we don't do debt consolidation home equity for people who are desperate. They're simply being more efficient in the way they handle their cash flow. Andy might talk to...

Yeah. And somewhat consistent with what we are seeing in housing prices. The average line that we booked in the second quarter was up 7% versus a year ago, and the average balance of our home equity account is up over 10%. Richard K. Davis - Chairman, President & Chief Executive Officer: So they are using it. In terms of cash out purchase, not seeing any evidence of that that's materially different than prior quarters. Those with cash are putting it into the house, those without it are still taking the opportunity to refi most of it and some of it with government programs. Kevin James Barker - Compass Point Research & Trading LLC: You see that as a source of growth for you in particular, or the industry in general? Or do you feel like it's going to be something that's going to be lackluster for the next couple of years still? Richard K. Davis - Chairman, President & Chief Executive Officer: I don't know about the industry. I mean, were – I know this is an outlier for a lot of us. Two reasons. One is because we've been working first position second mortgages for a long, long time. It's been a product we've had for some reason hasn't been matched by most folks. And then I think I mentioned in my comments we also don't have that bubble that we're trying to out-run. If you look at our balance sheet, we don't have a history of being a huge home equity lender at a disparate level. So we don't have a lot to have to refi or rebook. So in this case, we're going to get the benefit of net growth from our activities and our product. So I think we'll be an outlier in a positive way.

I mean our origination volume on home equity which is primarily all out of our branches has grown substantially over the last few quarters. I mean, we look back a few years ago, we barely do $1 billion, and this past year, we did – or this past quarter, we did $2 billion. So... Richard K. Davis - Chairman, President & Chief Executive Officer: Yeah. It's really...

It has been a nice steady growth for us and the performance has always been good. So... Kevin James Barker - Compass Point Research & Trading LLC: Yes. You've definitely been an outlier. Thanks for taking my questions. Richard K. Davis - Chairman, President & Chief Executive Officer: Yeah. Thanks, Kevin.

Your next question comes from the line of Mike Mayo of CLSA. Richard K. Davis - Chairman, President & Chief Executive Officer: Good morning, Mike.

Hey. How are you doing? I got on the call a little late. Hopefully, this wasn't asked, I got the tail end of it. So your 22% annualized fee growth for the quarter, what is a more normal rate as we look ahead? I mean, strong fee quarter obviously, but 22% annualized, there is some items there, where would you guide us? Kathy Ashcraft Rogers - Vice Chairman & Chief Financial Officer: Yeah. Well, first of all... Richard K. Davis - Chairman, President & Chief Executive Officer: Well, first of all, the question was already asked, and it was a fantastic answer and I'm sorry, you missed it. But we'll be happy to repeat it for you, Mike. Actually, it wasn't asked, so we're happy to answer it. Kathy Ashcraft Rogers - Vice Chairman & Chief Financial Officer: Here's what I'd say, Mike. You have to remember, recall, for us, the second quarter is seasonally high because of our payment business and just some deposit service charges. So, I wouldn't think to annualize that quarter. I would look more at it on a year-over-year basis and I would say that we did see – we saw momentum in our payments businesses. I think that's going to continue. We had strong growth in our trust and investment management fees and I think that we would expect that to continue as well. So I would look at it a little bit more on a year-over-year basis and assume that we'll continue to add some momentum there.

And as far as acquisitions, where do you guys stand? The sale from GE or maybe bank acquisitions. Has your appetite changed? Richard K. Davis - Chairman, President & Chief Executive Officer: It hasn't changed and I did answer that one earlier. GE, we are in due diligence for one part of their portfolio – who knows? We don't have to have anything here to make it to tomorrow, so we'll just be prudent and take a look at it. We like – as I said earlier, we like acquisitions of payment companies, we like trust companies, we like overseas a lot because it seems to be an interesting market worth looking further out. Not interested in full bank transactions at this stage and what you have seen in the last few years is what you will see for the next couple.

And then lastly, my question, Richard Davis versus the 10-year. Maybe, Richard, you're winning the recent round. I'm not sure. But what's the check on you're feeling about the growth of the U.S. economy? Are we stepping out, or is it kind of same as it's been? Richard K. Davis - Chairman, President & Chief Executive Officer: Yeah. I think it's same as it has been, which is still slow but steady progress, right? So it's not going backwards. There's no inertia to jump it forward. My long philosophy is the minute it's known that rates are moving up whether they have to move or not, it starts to create a catalyst for people to take the action that they have heretofore been holding off on. And my hope is frankly that the consumer blinks first and starts consuming as they should and that incentivizes businesses to start investing and growing and that kind of cycle starts up again. So I'm still optimistic that we're making progress and everything's going in the right direction and I think I'm hopeful that the Fed sees it the same way and if they do, then rates start to move up. We benefit from the balance sheet being only half of our company's balance sheet, so we'll benefit just as much from the fee businesses as it relates to a stronger economy, so I'm optimistic.

Great. Thank you. Richard K. Davis - Chairman, President & Chief Executive Officer: Thanks, Mike.

Your next question comes from the line of Vivek Juneja of JPMorgan. Richard K. Davis - Chairman, President & Chief Executive Officer: Hi, Vivek. Kathy Ashcraft Rogers - Vice Chairman & Chief Financial Officer: Hi, Vivek.

Hi. Thanks. A couple of questions. You had very strong growth in auto loans, just wanted to understand if you could give me how much of that is prime versus non-prime?

It is all prime, Vivek. We started a little initiative about a year-and-a-half ago to pursue the subprime, but the volume and the opportunity there was not sufficient, so we're no – we're completely a prime shop.

Okay. So if that's the case, how is the yield on that retail loans staying flat quarter-over-quarter, Andy, because prime is seeing a lot more competition from what we're hearing from everybody?

Yeah. Leasing is strong, lending is more pressured; and the net of the two is flattish.

And does the leasing also show up in retail leasing? Or does that show up in the auto lending line?

Shows up in the leasing line.

Okay. Because that seems to have been down year-over-year and linked quarter.

Yeah. And I'm just talking about on an absolute basis, if we think about spreads and profitability, when we book that next lease that's still quite profitable. The next loan, prime auto loans is probably one of the most competitive dynamic – loan categories on the balance sheet today.

Yeah. Yeah. Because I can see the auto was up 5% linked quarter, that's a very strong number. Secondly, you'd – Kathy mentioned about trust and wealth management being up sharply. As I look at it, it's up $23 million year-over-year. Over half of that growth is in corporate trust fees. How much of that has come from that cleanup call stuff that The Wall Street Journal highlighted a few weeks ago?

The cleanup call is immaterial, Vivek. And it's actually in a different... Kathy Ashcraft Rogers - Vice Chairman & Chief Financial Officer: It's out of...

...in a different line. So it's not even that number at all. That is because our corporate trust business is doing well, we continue to be number one market share across all three categories: muni, corporate and structured; doing well both domestically as well as our small footprint in Europe which is growing. So that is just strong business growth and taking share.

Okay. Got it. Okay. Glad to hear that that's immaterial. I just sort of wondered why bother to do it then?

Well, it's part of the structured business and the way we – and the way the documents are compiled. So it's a normal process. Many banks do it. It's not unusual and it's – we've been doing it because it is part of the document.

Okay. All right. And lastly, you're obviously expanding on the investment banking side. I noticed that you even did a preferred stock deal where you were a co-lead underwriter. What point are you going to start breaking out IBCs from commercial products? Richard K. Davis - Chairman, President & Chief Executive Officer: We – it hasn't been material enough so we haven't, but given your question, we'll look into that. I mean if that's valuable to you all, given that we're continuing to make progress and our momentum has been really good here, we'll make that a to-do for ourselves. Kathy Ashcraft Rogers - Vice Chairman & Chief Financial Officer: Yeah, we will.

Great. Thank you. Richard K. Davis - Chairman, President & Chief Executive Officer: Yes. Thanks, Vivek.

Thanks.

All right.

Your next question comes from the line of Jack Micenko of SIG. Richard K. Davis - Chairman, President & Chief Executive Officer: Hi, Jack.

Hey. Good morning. Richard, in your prepared comments, you mentioned higher mortgage servicing regulatory expenses, it sounded incremental. Is that the correct interpretation, I guess? And then second, would these expenses be, I guess, sort of, one time to, sort of, ratchet up to a new standard? Or given your 70/30 purchase focus, is this sort of – could it be the new norm around servicing? Richard K. Davis - Chairman, President & Chief Executive Officer: Yeah. Good question. So it's not incremental, it's just longer than I wanted. So in my mind, I wanted this thing to be done and gone and the consent order continues. So kind of the rush to the end, right, to the finish line. So we're going to continue to spend probably between now and the end of the year at the levels you've seen. There's no relief on that at all. As it relates to the cost of servicing, though, it's an important decision each bank has to make. The cost of servicing is remarkably higher now than it ever was. And to take you back a couple of quarters, I think I reminded you all that that's one of the things it does is it inspires you to stay at a higher quality of customer. So if I have a customer at a FICO level that there's a risk that we may have some form of a modification before their mortgage is through its life, I'm probably not going to do it anymore because the cost of handling that customer in the modification period and phase is expensive and it's rife with compliance risk and mistakes. So I'm just going to go a little higher than that and make sure that all customers we bank, at least going in, are not likely to have any concerns so the servicing cost to the bank are standard operating servicing as customers pay as agreed. When you start getting into that lesser quality customer, the cost of servicing goes way up, and we've been feeling that because we've been dealing with all these issues we've had to go back and remedy, but we're not going to do it going forward. So it's at least the rest of this year, Jack, we're going to have those costs and then my hope is that they'll start seeing some relief into the future years as mortgage servicing. We are sticking with it. We love the business. We're going to stay in the top five as a mortgage originator and a mortgage servicer, but for now those costs are just longer than I had hoped and they're at least the rest of this year.

Okay. Great. And then as a follow-up, the student loan, the move, the re-class, does that get you out of student loans or is there more potentially to come as sort of a headwind to the top line growth numbers as you de-emphasize that business? Richard K. Davis - Chairman, President & Chief Executive Officer: No, it's all out. So we haven't sold it, it's still out looking – we're looking at the bids and things, so it's still held for sale because we don't have an answer, but with our intent is to get entirely out of both the government and the private student loan category and take that off of our things to worry about.

Okay. Great. Thank you very much. Richard K. Davis - Chairman, President & Chief Executive Officer: Yes.

There are no further audio questions. Richard K. Davis - Chairman, President & Chief Executive Officer: Great. Thank you, operator.

Thank you for listening to our second quarter results. And please call me this afternoon, if you have any follow-up questions. Richard K. Davis - Chairman, President & Chief Executive Officer: Thanks, everybody. Kathy Ashcraft Rogers - Vice Chairman & Chief Financial Officer: Thanks, guys.

Thank you, ladies and gentlemen. That does conclude today's conference call. You may now disconnect.