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Executives

Tamera Gjesdal - Senior Vice President of Investor Relations

Kelly S. King - Chairman, Chief Executive Officer, President, Member of Executive & Risk Management Committee, Chairman of Branch Banking & Trust Company and Chief Executive Officer of Branch Banking & Trust Company

Clarke R. Starnes - Senior Executive Vice President and Chief Risk Officer

Daryl N. Bible - Chief Financial Officer and Senior Executive Vice President

Analysts

Craig Siegenthaler - Crédit Suisse AG, Research Division

Leanne Erika Penala - BofA Merrill Lynch, Research Division

Catherine Mealor - Keefe, Bruyette, & Woods, Inc., Research Division

John G. Pancari - Evercore Partners Inc., Research Division

Gerard S. Cassidy - RBC Capital Markets, LLC, Research Division

Kenneth M. Usdin - Jefferies & Company, Inc., Research Division

Gregory W. Ketron - UBS Investment Bank, Research Division

Michael Rose - Raymond James & Associates, Inc., Research Division

Brian Foran - Nomura Securities Co. Ltd., Research Division

Jessica Ribner - FBR Capital Markets & Co., Research Division

Jonathan Feldman - Nomura Securities Co. Ltd., Research Division

Christopher W. Marinac - FIG Partners, LLC, Research Division

Matthew H. Burnell - Wells Fargo Securities, LLC, Research Division

BB&T (BBT) Q1 2012 Earnings Call April 19, 2012 8:00 AM ET

Operator

Greetings, ladies and gentlemen, and welcome to the BB&T Corporation First Quarter 2012 Earnings Conference Call on April 19, 2012. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Tamera Gjesdal, Senior Vice President of Investor Relations for BB&T Corporation. Thank you. You may begin, Tamera.

Tamera Gjesdal

Thank you, Jenny, and good morning, everyone, and thanks to all of our listeners for joining us today. This call is being broadcast on the Internet from our website at bbt.com. We have with us today Kelly King, our Chairman and Chief Executive Officer; Daryl Bible, our Chief Financial Officer; and Clarke Starnes, our Chief Risk Officer, who will review the results for the first quarter of 2012, as well as provide their thoughts about next quarter. We will be referencing a slide presentation during our remarks today. A copy of this presentation, as well as our earnings release and supplemental financial information are available on the BB&T website. After Kelly, Daryl and Clarke have made their remarks, we will pause to have Jenny come back on the line and explain how you may participate in the Q&A session.

Before we begin, let me remind you, BB&T does not provide public earnings predictions or forecast. However, there may be statements made during the course of this call that express management's intentions, beliefs or expectations. BB&T's actual results may differ materially from those contemplated by these forward-looking statements. Additional information concerning these factors that could cause actual results to be materially different is contained on Slide 2 of our presentation and in the company's SEC filings.

Our presentation includes certain non-GAAP disclosures. Please refer to Page 2 and the appendix of our presentation for the appropriate reconciliations to GAAP. And now I’ll turn the call over to Kelly.

Kelly S. King

Thank you, Tamera. Good morning, everybody, and thank you for joining us. So overall, we had a very strong first quarter. In fact, it's really the best quarter since before the economic crisis based on stronger revenues, lower expenses and really a positive outlook going forward.

Taking a look at earnings, we had net income totaling $431 million, up 91.6% versus the first quarter of '11. EPS was $0.61, up 91% versus the first quarter, and it was an annualized 44% versus the fourth quarter of '11. Revenues were strong, so our adjusted net revenues totaled $2.4 billion, which was up 19.2% versus the fourth quarter of '11. Now net interest income was down about 4%, but that's due to a difference in day -- less days in this quarter. We had record mortgage banking income. Mortgage volumes are really, really good. In fact, our production was $8.3 billion. I'm very pleased to report that our insurance revenue on a same-store basis was up 6.5%, which is real encouraging because insurance has finally started turning up, at least, [indiscernible] several years of soft market. It's clearly beginning to firm up, so that's very good news for us.

In the lending area, average loan growth was 6.4% on held for investment versus the fourth quarter. But if you exclude ADC covered and other acquired loans, it was up 9.9% versus the fourth quarter. That's really especially good, given that we have some normal seasonality during the first quarter. And I would point out that the loan growth was led by C&I, mortgage, direct retail and Sales Finance. Had another strong deposit quarter, with non-interest-bearing deposits up $957 million or 15.3% versus the fourth, and total deposits increased $2.7 billion or 8.8% versus the fourth. We had some really, I think, positive capital actions, following the very strong results we had in the stress test or the CCAR. And as you recall, as a result of that, we were able to increase our dividend by 25% to $0.20 a quarter. And then we had some very friendly shareholder transactions in the acquisitions of Crump and BankAtlantic.

And on the credit quality front, another really good quarter. NPAs decreased $194 million or 7.9% versus the fourth. Foreclosed real estate decreased another significant to $158 million or 29.5% and delinquent loans decreased $307 million or 23%. They're really beginning to get to real almost like all-time lows. So Clarke will give you more color on that as we go forward.

If you're following along on the slide deck, please go to Slide #4. We did have a couple of unusual items. In the tax-related area, we had $42 million adjustment in our after-tax write-downs of investments on affordable housing partnerships, and we had $8 million in other tax adjustments. So that was a total of $50 million after tax, which had a $0.07 diluted impact on EPS. Daryl will give you more color because it also affected our tax rate.

We're glad that we're planning this quarter to sell our last of our leverage leases. So since we knew about what that price was going to be, we went ahead and took a mark on that, which is about $10 million after tax, that was $0.01. And we did have some merger-related charges from BankAtlantic and the restructuring charges from our reconceptualization project, which totaled about $7 million after tax, and that was about $0.01. And then we had a small amount of security losses, which was about another $0.01 after tax on an EPS basis. So a few items there.

If you turn with me to Page 5, I want to give you little detail with regard to the loan growth area. Very pleased that our C&I growth was up 9%, first to fourth. We're really beginning to see continued building of strong performance in Corporate Banking. In fact, if -- a little detail on Corporate Banking. So our volume of corporate loan transactions from the first to the first of last year was up 43%. Total loan commitments are up 41%, and I'm very pleased about the fact that new money commitments are up over 100%. So that strategy is really beginning to work for us.

Our Texas operation is really doing extremely well because, as you know, that's a huge market and it's growing really fast. But to give you a sense of where we are on that, when we acquired Colonial, we started out with about $800 million in deposits. That's now up to about $1.5 billion. We started out with 0 in loans and loans are up to about $1.2 billion now. So our Texas operation is doing well. And really, Florida and Alabama are really beginning to come on strong too, where we had a substantial pickup in market deposits from Alabama. So what we think is happening in the marketplace is the market is growing slowly, but we are really seeing market share movement. When I talk to our relationship managers, they tell me that about 88% of their production is what they call takeaway or market share movement from other competitors. Our brand value is at an all-time high, and so we're being well received in the marketplace and we're working hard, and so I think that's really beginning to get a lot of traction in the C&I area.

In the CRE area, if you recall, that's been a runoff portfolio for us. Part of that, we wanted to run off and part of it, we very much want to grow. But it's slowing now. So the decline, as you can see, is down 6%, first to fourth. The good news is that, that is a future opportunity because while we clearly have been very, very conservative on ADC, we want to grow our CRE, particularly income-producing properties, and we're getting some traction in that area. So I think that's an opportunity. When the math flips on that, we'll begin to see our production exceeding run-off.

Our Sales Finance area had another strong quarter, up by 11.4%. Mortgage had a very strong quarter, up 20.2%. Other lending subsidiaries requires a little explanation. It's only at 1.9%, but that's a -- because of larger seasonal decline in our insurance premium finance business, that's -- happens every year. But to give you a little more color on the other lending businesses, equipment finance, for example, is up 36%. Grandbridge, which is commercial mortgage, is up 30%. Sheffield, which is our small ticket consumer and business finance operation, is up 13%. So that whole group of other lending businesses are doing extremely well. Our direct retail business is really doing a really good job now, so at 15.2%. That's largely because of first lien home equity financing. It’s driven significantly by our wealth strategy and our small business strategy. So we think that is not only good quality paper, but it's good relationship paper and has really good legs going forward.

I do want to stress that while we feel very good about these loan numbers, we continue to be conservative and on our long-term strategy with regard to the types of credits we're booking, we're still focused on diversification. We told you 3.5 years ago, we're about diversifying our portfolio. We're about growing it. But we're about keeping high-quality. We’re keeping our granularity very, very fine. We're keeping our focus on diversification. So for example, we know that in the industry during this quarter, there was a lot of competitors that were doing a lot of leverage loans, which we don't do, a lot of asset-backed structured finance loans, which we don't do. So we could have a lot faster growth, to be honest with you, if we wanted to, but we'd rather have somewhat slower growth and higher quality and better overall risk diversification. So while our numbers are strong, you may compare it to some others, and you may see some classes of categories of loans where they have grown faster, and that's a conscious decision on our part.

Very pleased that our end-of-quarter loan pipelines are strong, and so we feel good about that as we head into Q2. So we would suggest to you that our expected range for the quarter would be 5% to 7% annualized, and that does exclude the $2 billion or so coming in from BankAtlantic and is contingent on the economy, contingent to do well, which we think it will, but there's certainly some risk factors out there.

If you follow along on Page 6, we had another strong quarter for deposit growth. Deposits really are just doing really well. Frankly, there’s just a lot of money still flooding into the banking system, which is not necessarily a good thing from the economy point of view, but we're doing a good job as well. For our non-interest-bearing deposits, are up 15.3%. Interest checking is up 5.1%. Money market savings, up 7.9%. TDs are up 8.1% even though we've really been squeezing the cost down. So our total deposits are up 8.8%.

If you look at the graph on that page, you'll see that over the last year, we've reduced our cost from 0.82% to 0.49%, but we feel really good about that. So if you think about going forward, we would expect similar account deposit growth into second quarter and some continued decline in lower deposit costs because we still have a little ways to go on that.

If you turn with me to Page 7, I want to give you some good news, a little detail with regard to the stress test, the CCAR process. We're very pleased that if you exclude announced capital issuances, BB&T had the strongest capital Tier 1 common under the stress scenarios of the traditional banks. And if you recall, this is a really tough stress conditions. And of course, we got no objection in terms of raising our dividend that I mentioned before. If you look at that bottom graph, you'll see that under the stress scenarios, we had the lowest loan loss rate among the traditional banks, and we think that really affirms our effectiveness of our diversification strategies, which we knew based on our own numbers, but it's also now based on the Fed’s numbers.

If you look at Page 8, you'll see a little more color. So if you look at the results, we had the lowest commercial loss rate amongst traditional banks under stress. And then on -- we had the second lowest first lien mortgage loss rates among traditional banks. So we basically -- we're first in most of the categories, second in first lien mortgage rates. So all of that put together, we think, just validates our long-term consistent and conservative lending culture and we just suggest that, that should convey to you that we've been doing what we've been doing a long time, and we will keep doing it in the future. So we think you can expect a predictable, solid, conservative underwriting culture at BB&T as a foundation for a strong marketing effort that gives you the best combination of quality and growth.

So I'd say, overall, we had a great quarter, very positive about the future based on our strong fundamentals and some very specific and great opportunities that we have. So we're very excited about the first quarter and looking forward to the second. So let me turn it to Clarke now, and let him give you some more color in the credit area.

Clarke R. Starnes

Thank you, Kelly, and good morning, everyone. I'm very pleased to report another quarter of improved credit trends consistent with our previous guidance. In particular, we are successfully executing our strategy to aggressively liquidate foreclosed real estate. This is having a very positive impact on reducing nonperforming assets and related credit costs.

If you'll follow with me on Slide 9, you can see that total NPAs were down 7.9% on a linked-quarter basis. This is consistent with the 5% to 10% guidance we gave last quarter, and represents the eighth consecutive quarter with lower NPAs. In fact, total NPAs have declined approximately $1.6 billion or 41.6% over the last 12 months to the lowest level in more than 3 years.

Another highlight of the quarter was a significant reduction in our early-stage credit metrics. TDRs were down 8.5%, 30- to 89-day delinquencies down 23.1% and 90 days still accruing, down 22.3%. This performance is well in excess of the seasonal improvement we would typically expect to see in the first quarter. We also experienced solid performance in our key commercial credit quality numbers with lower watch list, performing TDRs, delinquencies, NPLs and OREO. Given these positive results and our continued focus on improving asset quality, we are reiterating our guidance for a 5% to 10% reduction in NPAs for Q2. Certainly, that assumes the economy doesn't deteriorate significantly.

If you’ll look at Slide 10, we continue to make significant progress in reducing foreclosed real estate balances. This quarter, we saw a decrease of $158 million or 29.5% compared to Q4. And since the first quarter of last year, foreclosed real estate is down $833 million or 68.8%. We do have an intense focus on minimizing inflows, which were down 32% compared to last quarter. We think this is important because of the length of time it takes to move assets through the foreclosure process. So I'm very pleased we've reduced these inflows while also reducing net charge-offs.

We also continue to work very hard to sell existing foreclosed properties with Q1 sales activity of approximately $182 million. And in addition, we have approximately $100 million in sales pipeline going into Q2. As we said last quarter, this aggressive focus in OREO will also substantially reduce the run rate of our foreclosed property expense in 2012. In fact, our foreclosed property expense was $92 million in Q1 versus $346 million in Q4, down 73.4%. And if you exclude the $220 million liquidity mark in Q4 related to the land assets, the expenses were still down 27%, so we're starting to see that reduction in expenses as we had predicted. So we expect foreclosed property expenses for Q2 maybe at a similar level to somewhat lower and trending downward in the second half of the year as properties are liquidated.

So turn to Slide 11, you'll note that our charge-offs, excluding covered assets for the quarter were 1.28%, down from 1.46% last quarter and consistent with our previous guidance, and Q1 losses were at the lowest level in 3 years. But we expect total charge-off, excluding covered assets, to be approximately 1.25% in the second quarter, maybe a little lower and to trend lower thereafter.

Due to the improved credit trends, we did reduce our allowance for credit losses by approximately $64 million in Q1 versus the $121 million in Q4. Reserve coverage remains very strong at 1.11x nonperforming loans. So continued improvement in our credit performance trends and the benefit to Kelly's point of our asset diversification efforts will likely allow for future reductions in our reserves and credit-related expenses as we move forward. So in summary, we're very pleased with the solid pace of credit improvement this quarter. Given the successful execution of our NPA reduction strategies, we're well positioned to benefit from lower levels of NPAs and related credit cost.

So with that, let me turn it over to Daryl for his comments on the quarter.

Daryl N. Bible

Thank you, Clarke, and good morning, everyone. I'm going to take the next few minutes to discuss net interest margin, fee income, noninterest expense, capital and our segment reporting.

Continuing on Slide 12, net interest margin for the quarter came in strong at 3.93%. It was down 9 basis points from the fourth quarter, and well within the guidance we provided you. The decrease was attributable to the runoff of our covered asset portfolio. The margin continues to benefit from lower deposit costs, specifically interest-bearing deposits, which decreased 7 basis points to 49 basis points for the quarter, positive funding mix changes and lower nonperforming assets compared to last quarter. Net interest income was essentially flat from the last quarter, adjusting for one less day.

With regard to margin outlook, we expect a decline to 3.85% range in the second quarter due to continued runoff in the covered asset portfolio. However, core interest margin is expected to continue to be stable as pressure from the rate environment is more than offset by lower deposit costs, primarily in the CD portfolio, lower long-term debt costs and positive funding mix. As you can see on the graph on Slide 12, we remain asset-sensitive in our position for rising rates. Finally, the duration of the securities portfolio at the end of the quarter was 3.8 years, up slightly from the fourth quarter.

Turning to Slide 13, our fee income ratio for the first quarter increased to 41% from 38.4% in the fourth quarter. The increase was related to improved insurance performance, larger gains sold in mortgage banking, net gain on mortgage servicing rights, improved market conditions and investment banking and brokerage fees. The change in FDIC loss share income was mostly due to the provision offset and the cumulative impact of cash flow reassessments. The balance for accretable yield decreased to $1.4 billion from $1.8 billion last quarter. The decline in other noninterest income resulted in a $42 million write-down on investments in affordable housing and a $27 million lower venture capital investment income.

During the first quarter, we reevaluated our process for estimating the carrying value of investments in affordable housing partnerships, which resulted in a $42 million pretax charge. This charge is mainly a change in the timing of income recognition. We have $1.2 billion of these investments and expect to receive more than $1.6 billion in future tax benefits. The amount of future tax credits and other benefits did not change. As part of the changes made, we also adjusted how certain tax credits were recognized. This change offset the tax benefit associated with the $42 million pretax charge. This one-time expense will not reoccur. We expect the fee income ratio to continue to improve in the second quarter as Crump is included in our results.

Looking on Slide 14, our efficiency ratio improved to 52% compared to 53.5% last quarter. Positive operating leverage drove this improvement. We also expect to have positive operating leverage for the full year 2012. Personnel expense increased $51 million or 30.2% annualized versus the fourth quarter. This relates primarily to higher payroll taxes, pension expense and post-employment benefit expense. Payroll taxes are up seasonally and the increase in post-employment benefit expenses are offset by higher noninterest income. FTEs were down $589 million in the quarter due to the expense optimization and continued branch rationalization. As expected, foreclosed property expense decreased $254 million due to more write-downs and losses taken in the fourth quarter. We expect foreclosed property expense to continue to decline throughout 2012. Professional services expense decreased $14 million due to lower legal fees related to the improving credit environment. We expect $40 million to $50 million in merger-related charges in the second quarter due to acquisitions of Crump and BankAtlantic. Additionally, the Crump acquisition in the second quarter will increase our efficiency ratio about 1%.

Finally, the tax rate for the first quarter was 29.8%. If you exclude the tax effect of the adjustments to the housing partnership investments as I mentioned earlier and certain other tax adjustments, the state -- the tax rate was in line with our expectations at approximately 25%. Beginning in the second quarter, we expect the tax rate to normalize and be in the mid-20% range for the remainder of the year.

Turning to Slide 15, our capital ratios continue to be among the strongest in the industry. Tier 1 common increased to 10%; Tier 1 capital, 12.7%. Our internal capital generation continues to provide significant financial flexibility for capital deployment in the following order: organic growth, dividends and strategic opportunities. We are very pleased to raise the second quarter dividend 25% to $0.20 after banking regulators did not object to our proposed capital actions in 2012. We are deploying capital in the second quarter with the Crump acquisition and pending acquisition of BankAtlantic. Compared to a share buyback, these acquisitions are more accretive to earnings, provide a growing asset to our shareholders and we believe a more effective use of our capital. Finally, our current estimated Tier 1 common under Basel III improved to 9.2%. We believe this will meet our capital requirements once the U.S. capital rules are published.

Turning to Slide 16 to segment reporting, let me take a few moments to give you a few highlights. Community bank net income totaled $105 million, up $54 million versus linked-quarter. The main drivers include loan growth, lower foreclosed property costs and strong non-interest-bearing deposit growth. The loan loss provision increased $137 million linked-quarter due to updates in the loss factors for C&I and direct retail loans, which were partially offset by reductions in commercial real estate. We are seeing great opportunities in newer markets in Florida, Alabama and Texas, and seeing evidence that Florida markets are stabilizing. Finally, we experienced solid growth in several payment categories such as merchant services, which was up 16%.

Turning to Slide 17, Residential Mortgage net income was up significantly in the fourth quarter and totaled $128 million. The main drivers included an increase in the gain on sale due to increased obligation volume and wider spreads. Lower provision expense also resulted from improving credit trends and updates to loss factors. Year-over-year portfolio growth increased substantially with loan service for others growing 8.4%.

Turning to Slide 18. Dealer Financial Services achieved record first quarter loan production in both prime and non-prime auto lending. Net income for this segment totaled $57 million, with Regional Acceptance achieving net interest income due to higher margins. Additionally, provision expense declined as a result of lower charge-offs and delinquent accounts. Regional Acceptance losses remained very low and our prime auto losses were also low at 23 basis points. We continue to open new offices in strong growth markets, and are increasing our focus on floor plan financing.

On Slide 19, Specialized Lending experienced solid growth with net income of $53 million. As a reminder, this segment typically experiences some seasonal declines in the first quarter. Higher net interest income was driven by exceptional growth in Sheffield Financial, Mortgage Warehouse Lending and equipment finance.

Moving on to Slide 20. Insurance Services generated $23 million in net income. Increased revenue was broad-based in almost all insurance businesses. However, the increase in seasonal personnel expenses and provisions for insurance reserves more than offset the increased revenue. Earlier this month, we closed the acquisition of the Crump Group. This acquisition adds approximately $300 million in annual revenues and doubles BB&T's insurance wholesale division. We continue to anticipate future strong organic revenue growth in our insurance businesses.

Turning to Slide 21. Financial Services generated $63 million in net income, primarily driven in Corporate Banking and Wealth Management. They had loan growth of 59% and 33%, respectively. Investments in Wealth and Corporate Banking revenue producers drove higher noninterest expense for the quarter. Finally, we continue to see opportunities in large corporate and special lending segments such as energy lending.

With that, let me turn it back over to Kelly for closing remarks and Q&A.

Kelly S. King

Thank you, Daryl. So in summary, we continue to invest in businesses that can drive revenue. We have underlying fundamentals that are very strong in loan and deposit growth and fee income, and I would particularly point out insurance are exceptionally strong. We're successfully executing on our diversification in risk management, risk mitigation strategies, and we are continuing to focus on reconceptualizing our businesses to drive revenue and expense optimization. We believe we still provide the best value proposition in our markets, and so we're optimistic about our performance for 2012. I would point out that this is our 140th year, our birthday at BB&T. And notwithstanding that tremendous heritage, we still believe our best days are ahead.

So Tamera, I'll turn it back to you for questions.

Tamera Gjesdal

Thank you, Kelly. [Operator Instructions] And now I'll ask Jenny to come back on the line and explain how to submit your question.

Question-and-Answer Session

Operator

[Operator Instructions] And we will go first to Craig Siegenthaler with Crédit Suisse.

Craig Siegenthaler - Crédit Suisse AG, Research Division

Just looking here at Slide 18 on the auto dealer finance segment, I just have a few questions. First, just wondering what's the size of this portfolio and what's the mix of prime versus non-prime. And then when you think about where growth's been coming from, is it really gain in existing market share in your footprint? Is it expansion in Texas and Alabama? Or is it stronger aggregate industry trends?

Daryl N. Bible

Craig, the size of the portfolio is approximately $10 billion. About $2.5 billion is in Regional Acceptance, which is mainly the sub-prime business and the other 3/4, $7.5 billion, is in our prime.

Clarke R. Starnes

And I would say, Greg, particularly on the prime side, a lot of our growth has been opportunities to expand particularly with the Colonial acquisition in Texas and Alabama and more presence in Florida and then just good, solid growth in our existing legacy offices. So for us, it's not been a change of strategy. We're just better penetrating, we think.

Craig Siegenthaler - Crédit Suisse AG, Research Division

Got it. And then I appreciate the overall loan guidance of 5% to 7% on the average balance. But when you think about just the C&I segment, growth here was down a little bit from a very strong fourth quarter. So it was up 18% in the fourth quarter, down 2% in the first quarter on a quarter-over-quarter annualized basis. When you think about 2Q and really 2012, are we really kind of targeting the midpoint of that range due to seasonal lumpiness to somewhere around 10%?

Kelly S. King

I think what we're saying here is we have a number of businesses that are really, really doing very, very well. And so what you saw in the first quarter is kind of interesting, was it? We had a bumper closing towards the end of the fourth quarter. You often get that for tax reasons and recharging the people's balance sheet. And then, I think, we told you on the first quarter call that there was a little lull in the first -- kind of first 45 days, and then things started building in the pipeline again as we headed into the end of first into the fourth. So we think that based on the momentum of our pipeline that we see today, we're comfortable with our 5% to 7% type of range. There's certainly some possibility to be on the high side of that based on everything that we see. But we're being a little cautious, to be honest, because we don't think the economy is growing that fast. I know some people may have given different feedback on that. But when we talk to businesses, it's like this. Big businesses are generally doing well. Small to medium-sized businesses, in many cases, are still struggling. So the overall economy is growing about 2%. So keep in mind that we are not doing a lot of these loans that a lot of other companies are doing. These leveraged loans and these structured loans, we're just not doing. And so growing 5% to 7% in a 2% kind of GDP environment, we think, is really strong.

Daryl N. Bible

And Kelly, I would chime in, Craig, that our commitments were actually up 8% for the linked-quarter on the C&I side and our pipeline's up 15%, as Kelly said. And we feel really good about that, that will pull through to a higher average in the second. We did have a little bit of paydown on our mortgage warehouse business right at the end of the quarter, which is reported in our C&I segment. That's already rebounding there. So we feel very good that we can be in that 5% to 7% range that Kelly said, without participating in those riskier segments.

Operator

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

Leanne Erika Penala - BofA Merrill Lynch, Research Division

I wanted to ask about the core margin trends. Daryl, correct me if I'm wrong, but if I'm backing out the accretion, I'm getting to a core margin of around 3.45% for this quarter versus about 3.53% last quarter. Is that about in the ballpark?

Daryl N. Bible

Yes, I think if you back out all the purchase accounting entries, I think it's in the mid-40s. And if you adjust for that margin, core margin was basically down just a basis point or 2 on a quarter-over-quarter basis. I think that's correct.

Leanne Erika Penala - BofA Merrill Lynch, Research Division

Got it. And so in terms of looking further out in terms of reaching your goal for a core margin of 3.7% to 3.8%, does that 3.7% to 3.8% number, do you get there by being able to rightsize more of your funding costs? Or do you need help from short-term rates to get to 3.7%, 3.8%?

Daryl N. Bible

Yes. I'd say, Erika, right now, when we talked about long-term margin guidance, we're around 3.7%. I think we also talked about if the rate environment stays where it is for a protracted period of time, that puts pressure on the 3.7%. So I would say right now, where I sit with the rate environment, our core margin will probably stabilize between 3.7% and 3.6%, and not the 3.8% handle.

Kelly S. King

And Erika, this is Kelly. Keep in mind that we do have, as you pointed out, some more downside on the funding cost. So if rates stay really low, which we don't think they will, but if they do, then you've got even more downside opportunity on the funding side. And the good news is we're just finally beginning to see a little firming on corporate pricing. It's a little too early to call it a trend, but our people told us earlier this week they are seeing some firming. So there's some opportunity for it to stabilize a little better than you might think.

Operator

And moving on, we have a question from Catherine Mealor with KBW.

Catherine Mealor - Keefe, Bruyette, & Woods, Inc., Research Division

How should we think about a normalized level of mortgage revenues going forward? And maybe a question for that is what percentage of originations were refinances versus purchases?

Kelly S. King

I think the refinance in the fourth quarter was really high. I'm trying to remember the number, but it’s improved substantially in the first quarter. I think the refi was about 55%, Daryl, is that about right?

Daryl N. Bible

Yes, on a month-by-month basis, the January refinance was in the mid-70s. And by the March, our refinance activity dropped to the high 50s. So we actually had a lot more purchase activity towards the end of the first quarter.

Kelly S. King

So Catherine, to be honest with you, it's kind of challenging right now to give you a really firm projection because you've got 2 things going on. You've got -- with rates so low and right now, they're extremely low, refinances are very strong. But we've clearly seen in the last 6 months a substantial shift towards purchasing, which is really encouraging. And I drive around and talk to our producers, and they tell me that there's been a substantial shift towards purchasing. So clearly, confidence is coming back. People are beginning to buy houses. They're beginning to have -- therefore, purchase mortgages. And so if you think of it going forward, if rates stay really low and if this consumer confidence stays high, you could expect volume similar to what we saw in the first quarter. If on the other hand, rates pop up, I don't think that would speak to purchases because I don't think that really drives purchases. Our rate is so low, if it goes up 50 basis points, it’s not going to affect purchases. It would if they were refinancing. So we would probably project for the next 2 or 3 quarters, something lower than the first quarter, but it's hard to say we'd be substantially lower than that.

Daryl N. Bible

Yes, the only thing I would add to that, too, Catherine, is if you look at the gain on sale, the spreads that we achieved in the first quarter, they're at 168 basis points. Last year, our spreads averaged 102. So you can see, as Kelly said, the low-rate environment. Everything kind of went in our direction, and we're able to achieve really high margins on the funds that we originated and sold off.

Kelly S. King

And the only other point I'd just give you, just as a data point, is that our April production level is at a similar level to the first quarter level. So this is right up to date, I can tell you, it's running at about the same level.

Operator

And we will hear next from John Pancari with Evercore Partners.

John G. Pancari - Evercore Partners Inc., Research Division

Can you talk a little bit about the decline in the C&I loan from an end-of-period basis that we saw linked-quarter this quarter? Is that a slowing in the large corporate or syndicated?

Clarke R. Starnes

John, this is Clarke. What that primarily was, we had because of the very strong mortgage refi market in our correspondent channel, we had some over lines that had funded up and actually, they -- the investors finally called up and this cleared out toward the end of the quarter, and now those are kind of funding right back up. So it was really unusual phenomena related to our commercial warehouse business. Our core corporate and commercial lending was not down.

John G. Pancari - Evercore Partners Inc., Research Division

Okay, good. And can you just give us an idea of the magnitude of that swing in the mortgage lines?

Clarke R. Starnes

It was about $200 million.

John G. Pancari - Evercore Partners Inc., Research Division

Okay, all right. And then lastly on loan growth, can you talk a little bit more about the magnitude and the pace of the remaining runoff in real estate-related loans and just so we can kind of get an idea of the timing when we see an inflection in those balances?

Clarke R. Starnes

It's hard to fully predict. But to Kelly's point, I think you would see continued rate of runoff at a similar level in the ADC portfolio, which is now in the period down to about $1.8 billion. That will continue to run off, I think, incrementally. We believe, however, the trajectory of decline in the CRE other portfolio is close to bottoming out, so you ought to start -- we're almost at the inflection point, and I think you'll start seeing some incremental growth as we get later in the year and as we go into 2013.

Operator

And moving on, we have a question from Gerard Cassidy with RBC.

Gerard S. Cassidy - RBC Capital Markets, LLC, Research Division

Two questions, a follow-up. On the commercial real estate mortgage, what's causing the decline? Are you guys asking some customers not to come back? Or are some of your customers being picked off by competitors who are more aggressive than you? Or are you just not really looking for the new business?

Kelly S. King

Gerard, I'd say it's -- we're certainly not having any being picked off. What we have is basically clients that have had real challenges in the marketplace understandably. In some cases, they've gone out of business. In some cases, their volumes are just really low. And frankly, we're not looking for any new, and so we are focusing on our risk diversification strategy. We could be doing more of that, but we're very intent about executing on what we've said about our diversification strategy. So we don't have any real energy in trying to do ADC, and that's coming down. And so in terms of other commercial, we are aggressively looking for IPP, but we're not looking for some of the kinds of, again, super high-rise, office buildings and hotels and that kind of thing that maybe some other people are doing.

Gerard S. Cassidy - RBC Capital Markets, LLC, Research Division

I see. And then as a follow-up, Kelly, could you give us your view on what you're seeing on the acquisition market in terms of -- for depositories? Clearly, you guys have been successful in doing this in the past. And are there any parts of the -- your franchise that you really are focused on that over time, you may want to look more aggressively in?

Kelly S. King

So Gerard, our strategy on M&A is basically the same as it's been really for the last 3 years. We're first looking to try to build out more density in our existing footprint. So the areas that I would emphasize there would be in the broader D.C. Maryland area. We could certainly use some more density there. Depending on the markets, parts of Florida, for example, obviously, BankAtlantic does a lot for us in the Greater Miami area, taking us from #14 to #6. We could certainly -- we'd like to have some more density in the Great Atlanta area, but there's not much availability there. Over time, you can expect to see us try to do fill-in in the, obviously, the emerging Texas market for us. So that's where our -- that's clearly where our primary focus is. But to be honest, there's just not a lot of activity out there now. People are still, it seems, very much in a waiting stage. I think a lot of banks that may have decided to do a strategic combination at some point, they simply just want to get through the completeness of the cycle. In some cases, I think they want to see their prices go back up to what they think they might get to. And so there's a lot of -- there just is a lot of waiting out there going on. So we think, as we've said in the past, we'll continue to look very aggressively at all of the opportunities that make sense for us strategically. But we remain disciplined with regard to not taking any material asset risk and making sure it's a good shareholder-friendly transaction.

Operator

And we will go next to Ken Usdin with Jefferies.

Kenneth M. Usdin - Jefferies & Company, Inc., Research Division

I was wondering if you can just talk a little bit about the -- more about the insurance business, 8% year-over-year growth is probably the best growth rate we've seen in a while. I know you mentioned premiums, but can you just talk about how much of it is premiums versus new and retained business, whether Crump is seeing that as well on their side? And then if you could just remind us how much Crump adds in revenues in the second quarter.

Kelly S. King

Yes, so -- you start -- you well pointed out with the baseline of retention, we do a fantastic job. I think the latest number on retention is something like 97%. So we always have a really high retention factor because we focus the most on our existing clients and doing a really good high-quality job. So in the basic, what I call small to medium-sized retail, that business is not changing too much today other than we're keeping really good high retentions. Where you see real movement is in wholesale and in large corporate retail. We actually started seeing about 6 months ago movement in wholesale. Remember, we're in wholesale and retail, so we get to see it as it moves through the pipe. So we started seeing firming up in prices about 6 months ago in wholesale. It's now showing up in McGriff, which is our large corporate retail, beginning to show up in BB&T Insurance, which is a small medium-sized ticket retail, and so it's kind of across the board. And it's really been fairly recent in the retail side. In fact, I literally just met with our 3 top executives from Crump yesterday and I’ll make a segue point. They are extraordinarily impressive folks, extremely well trained and great diversification of experiences. They really add dramatically to our level of executive expertise in the whole insurance area. They affirmed to me yesterday that they're seeing the very same thing in the PC area. Life rates tend to be more stable. That's one of the things we like about that. Recall that life has a better margin. Life tends to run about a 30% margin, where PC runs about a 10% to 12% margin. But they all -- they said on the PC side and the life side that they were looking for -- and our people said this too, on the traditional BB&T, that looking forward, they're looking to high-single digit premium increases over the next period of time. So we've clearly seen that change. We've been waiting for years for it and it seems to be really growing.

Daryl N. Bible

As far as the revenue for the second quarter, I would probably put in about $75 million additional revenue for '12.

Kelly S. King

That's right. That total is about $300 million on an annualized basis, so that increases our revenue from about $1 billion to $1.3 billion.

Kenneth M. Usdin - Jefferies & Company, Inc., Research Division

Okay. And my second question, Daryl, if you can just walk us through again the way the accretion works as we move past for the rest of the year. Previously, you guys had talked about the FDIC component, the return going down by about $100 million in 2012. Can you just confirm that and also kind of give us a trail for how the top line impact of the purchase accounting should also trail as we look ahead?

Daryl N. Bible

Sure, Ken. So we are pleasantly surprised this quarter. If you look at the net impact on purchase accounting, it was relatively flat on a linked-quarter basis. I would say on a net basis for the next 2 to 3 quarters, I would expect maybe a $10 million to $20 million net decline on a consecutive-quarter basis. As far as on net interest income, I would say estimate, after we run these cash flows every quarter, but it's approximately another $10 million to $15 million decline in net interest income for the next couple of quarters and then maybe accelerating to $20 million to $30 million when you get down to the fourth quarter.

Operator

And we will hear next from Greg Ketron with UBS.

Gregory W. Ketron - UBS Investment Bank, Research Division

Kelly, kind of a bigger picture question. You guys obviously have been very successful in picking up market share in areas like commercial lending, noninterest-bearing deposits. Maybe if we get some color on where you're seeing that market share pick up from, what kind of strategy you might be executing on within your footprint to gain this kind of market share.

Kelly S. King

It's a -- it's really, frankly, a matter of us continuing to execute very well on our community banking strategy, which we've been doing for 20-plus years. We believe it really does create the best value proposition in the market. We define value as a function of quality relative to price. All of the feedback we get from clients and from outside statistical research is that our quality is significantly better than our major competitors’. But we're kind of doing what we do, which is consistently out there in the market delivering that value proposition. And frankly, our market is in a pretty substantial state of disruption. I mean, you have P&C, RBC, you have Wells, Wachovia. All of that is literally just unfolding as we speak. We have some other competitors who have balance sheet challenges. And so we're kind of steady-state in the marketplace while others are having lots of challenges. Now frankly, lots of those challenges for some of them will go away, they’ll settle down. But for right now, it's a wind of opportunity for us, and we're working really hard to take advantage of it.

Gregory W. Ketron - UBS Investment Bank, Research Division

Okay, great. And then Daryl, on the net interest margin, as you look in the back half of this year, maybe going into 2013, you have a lot of TruPS that you potentially can call. If you can give us some color on the potential margin impact there, maybe the sequence and how that may play out. And also, if you look at CD repricing, it looks like there may be some additional opportunities there and what kind of impact that may have in terms of helping margins stabilize or actually improve?

Daryl N. Bible

Sure, Greg. As far as the TruPS would play out, I would probably expect the calling of all of our TruPS towards the back part of this year. Probably in the fourth quarter is what I would expect from that perspective. As far as our deposit cost, as Kelly said earlier, we were down 7 basis points on a linked-quarter basis. We’d probably expect our deposit cost to end the year to about 40 basis points by the end of 2012. From a long-term debt perspective, we'll get a little bit of relief this year, with long-term debt starts coming down, but I think the bulk of that benefit will come in 2013.

Operator

And moving on, we have a question from Michael Rose with Raymond James.

Michael Rose - Raymond James & Associates, Inc., Research Division

I just had a question on the loan pipelines. Can you give a little more context and color in where the number was at the end of the quarter versus the end of last quarter?

Clarke R. Starnes

Michael, this is Clarke. As I said earlier, our pipeline numbers are up about 15% on a linked-quarter basis, so from the end of December to the end of March. So again, we feel really good about that and then commitments were up as well. Our utilization is about flat, so we believe with some improved utilization at some point in the future and as those pipelines pull through, that's going to keep driving the growth.

Kelly S. King

Yes, and one of the things, Michael, that happened with regard to larger corporate is that because bond rates have been so low, a number of corporates went out of the banks and into the bond market. You know that ebbs and flows, and we think that was more temporary than permanent, and so as -- if that subsides, as we expect, that'll be a lift in and of itself relative to those typical financings coming back into the banks.

Michael Rose - Raymond James & Associates, Inc., Research Division

Okay, that's helpful. And then Clarke, secondarily, as I look at your kind of changing portfolio mix and widening geographical mix, can you talk about kind of normalized credit trends once we get into a, obviously, a more normalized environment?

Clarke R. Starnes

Absolutely. I mean, one thing, just to remind everyone, our nonperforming assets are down 42% over the last year. So I think we're very pleased about that and what we ought to expect is the rate of trajectory and improvement from here on out to be more incremental as we move toward a more normalized level. We've kind of said before what we're trying to do in our asset diversification plan is to build a target portfolio of mix that has maybe expected losses, we're guessing in the 60 to 80 basis points range on a long-term basis with lower volatility around that mean. And so that's what we're trying to accomplish. Obviously, we're not quite there yet on the loss or the NPA side. But so my view is it'll be more incremental from here than the sharp rate of trajectory we saw over the last 12 months.

Operator

And we will hear next from Brian Foran with Nomura.

Brian Foran - Nomura Securities Co. Ltd., Research Division

I guess as we model out the capital builds, one of the things that beat what I had this quarter was the RWAs, especially as we start migrating to Basel III, so -- and I’ve lost the number now. I think it was down $1.5 billion Basel III RWAs. Is that just kind of a onetime, some kind of asset running off? Or is there further ability to have the RWAs flat to down even as the loans grow?

Daryl N. Bible

Yes, Brian. So what I can tell you is as we benefited from the OCI change, it was also a benefit from that perspective. So it's a combination of risk-weighted assets plus OCI from that perspective. From a capital perspective, I think our Basel III Tier 1 common is definitely well above where we think we need it to be once the new U.S. rules come out. The acquisitions that closed this quarter should take approximately 70 to 80 basis points out of Tier 1 common this quarter, but we expect to build that back relatively fast over the next couple of quarters.

Brian Foran - Nomura Securities Co. Ltd., Research Division

And then on the Residential Mortgage loan growth, can you just remind us how we should think about the -- or how you're thinking about the economics of growing that portfolio as opposed to a gain on sale? I mean, on the one hand, you've got a lot of deposits to put to work. On the other hand, gain on sales really high right now. And also just remind us, is this still more like 15-year and higher net worth mortgages that you're retaining? Or what kind of mortgages are driving that?

Daryl N. Bible

Yes, Brian, right now, we are keeping a 10- and 15-year mortgages. As Clarke and Kelly said, as our CRE stops running off and starts to build back, we will stop retaining those mortgages and sort of start selling those out probably towards the end of this year. We will probably still be able to still grow the balance sheet with that change and it’s still the 5% to 7% range though. We're just changing buckets, which also will help margin because the CRE will have wider credit spreads than the Residential Mortgages coming on our book.

Operator

And moving on, we have a question from Paul Miller with FBR Capital Markets.

Jessica Ribner - FBR Capital Markets & Co., Research Division

This is Jessica Ribner for Paul. Only just have 2 quick questions. Looking at your core NIM guidance, does that include rate hikes?

Daryl N. Bible

I think, Jessica, right now, we are with the Fed in that we don't think rates are going to rise through '14. We think it may happen sooner than that, but we are not counting on that. So yes, I would say that our margin would be in the 3.70% to 3.60% area. If rates rise, that would benefit us since we are positioned for rising rates, but that's probably going to be the next couple of years.

Jessica Ribner - FBR Capital Markets & Co., Research Division

Okay, so that's not factored in. Okay, and one more if you'll allow it. Are you seeing much HARP-related flow in the mortgage bank?

Clarke R. Starnes

Jessica, this is Clarke. We are participating in HARP 2 for our own book only. So we did have some benefit in the first quarter. About 30% of our retail refis were HARP-related, and about 8% of our total production, including correspondent. But we haven't decided to participate in the open access program for other's book. So HARP would not be a big story for us in the second -- in the first quarter.

Operator

And we'll move on to our question from Jonathan Feldman with Nomura Securities.

Jonathan Feldman - Nomura Securities Co. Ltd., Research Division

I was just wondering if you could talk a little bit more about the BankAtlantic transaction, your current thoughts on it and what you're seeing in terms of deposit trends since announcing the transaction.

Kelly S. King

So Jonathan, the transaction is moving very, very well. The markets down there are, I would say, net, improving. The retail franchise there is very stable. When we travel down there, which I did just a couple of weeks ago and meet with our FCLs and talk to our tellers and relationship bankers, they are extremely positive. When we ask them how the clients feel, they're extremely excited, very positive. And clearly, the merger is being viewed by the clients and the employees as a very positive factor. So it's going very well. The feedback I get is that deposits are relatively flat, but what has happened is, it has improved the mix. Some of the CDs have gone down, but transaction accounts have gone up. And so we're seeing some upwards shift in terms of momentum. Frankly, a lot of -- they tell me a lot of clients that had left are coming back over concerns they had before. And so really, every bit of feedback we get out of the franchise is very, very positive.

Jonathan Feldman - Nomura Securities Co. Ltd., Research Division

And one other follow-up question related to that. In terms of -- again, in terms of the transaction, are you seeing any trends in terms of commercial real estate to the extent that some of the -- they were an underwriter for commercial real estate loans?

Kelly S. King

You're talking about specifically, Jon, with regard to BankAtlantic portfolio?

Jonathan Feldman - Nomura Securities Co. Ltd., Research Division

No, BankAtlantic, but also in Florida more generally, I mean sort of commentary from your own experience as well as there, what you think of that market, what you're seeing?

Kelly S. King

Yes, well, I'd say, generally, in the aggregate, I would say the real estate market in Florida is stabilized and improving. For example, if you go to the Gulf Coast, clearly, prices have firmed up and beginning to go up. Activity is substantially up. If you go to Miami where, as you recall, there was a huge glut, something like 28,000 condo units on the market. There's been a major surge of Latin America investors coming in, and the latest report I saw was that there's a -- it’s a 90% -- 93% occupancy. So all of that is because they turned the condos into rental properties. So there are 3 projects in Miami on -- getting ready to come out of the ground. So I'm sure you could probably find some spots of Florida that still have some issues. But overall, I'd call it stabilized to improving.

Jonathan Feldman - Nomura Securities Co. Ltd., Research Division

Got it. And then the last question really quickly, there was a question from another individual on the call about your TruPS. What's your current intention around the TruPS at BankAtlantic, what you're assuming in terms of retiring or not retiring them?

Daryl N. Bible

Yes, what I can tell you is once we close the BankAtlantic transaction, our plan is to call the TruPS at the soonest possible time. If you look at all the TruPS that they have, the vast majority are callable immediately. I think there's 2 or 3 that might be callable later in the year. But our plan is just to treat them just like our TruPS to call them as soon as we are able to.

Operator

And moving on, we have a question from Christopher Marinac with FIG Partners.

Christopher W. Marinac - FIG Partners, LLC, Research Division

Kelly, I just wanted to dovetail your earlier comments on M&A. Is there a scenario where beyond Crump and the BankAtlantic now that nothing occurs the next 9 to 12 months and it's purely organic?

Kelly S. King

Well, Chris, you know there's always a scenario, but I think that's a little too conservative to say nothing happens. But on the other hand, I think the spirit of what you're saying is probably more right. I don't see much -- anything big happening. And I don't know there's little happening. So I'd probably say nothing, but I wouldn't be encouraging to see a lot of activity. And I'm not overly concerned about that. I mean we've got such a phenomenal opportunity on organic and if something comes along, small and it really fits us strategically, is well priced, we'd take a look at it. But we're really kind of are laser-focused on organic growth now and just kind of waiting out this whole merger thing ’til the metrics begin to work.

Christopher W. Marinac - FIG Partners, LLC, Research Division

Okay. And then my follow-up is just about the general economy. What's the risk in your mind that we are at a significantly slower pace of economic growth in 2 or 3 quarters compared to what you just experienced this last?

Kelly S. King

I tell you, I may differ some than some of these politicians and some people that want to wish and hope. But I think that the way it looks is large corporations are doing well because remember, a lot of them are focused on international. And China's doing well, 8% or 9% growth, so a lot have been participating in that, in India and so forth. The large corporates are doing very well on the bottom line, especially because they're doing a lot of restructurings in the process. The feedback I get though is when you talk to small medium-size businesses, they're not losing money, they're growing very slowly. They'll say to me, is they'll say, "Look, my business is kind of okay, but it's mostly because I'm really controlling my costs. But I am so scared about what's coming out of Washington. There's so much uncertainty. There's so much lack of positive leadership. I don't know what's happening in insurance. I don't know what’s happening on taxes. The regulators are killing me. I'm just not be -- I'm willing to invest until I see some things change out of Washington." So I think that is a wet blanket, and so my personal projection is that it's going to be a slow growth, not a double-dip or anything, but a slow growth, 2% kind of growth, maybe 2.5% for the rest of this year. If you begin to see some indications of positive leadership out of Washington, I think you'll begin to head into the end of the year and the first part of the year with a nice head of steam because there's a lot of pent-up demand.

Operator

And our next question comes from Matt Burnell with Wells Fargo Securities.

Matthew H. Burnell - Wells Fargo Securities, LLC, Research Division

Maybe a couple of question, quick questions for Clarke. Clarke, are you seeing in terms of the conversations that your loan officers are having with, particularly with corporate customers, a better level of conversion of initial conversations or a better conversion of the pipeline that you all have talked about over the last quarter versus the second half of last year?

Clarke R. Starnes

Yes, I would say what you described is accurate, lots of competition, lots of conversations going on, so it's highly competitive. But I think we're focused on our target profiles and we're engaging. We are seeing more of that engagement ultimately come into the financing or the project that we're looking at.

Matthew H. Burnell - Wells Fargo Securities, LLC, Research Division

Okay, and maybe on a related subject, several banks that have reported already this quarter have talked about pricing getting a little bit more competitive. I was intrigued by your comment that you thought that pricing was getting a little bit firmer in maybe in the last month or so. Are you seeing any changes -- if the pricing is getting better or at least stabilizing, are you seeing any degradation in terms of the structures that you're being asked to look at or BB&T's being asked to look at?

Clarke R. Starnes

Great question, Matt. I would say let me qualify what we said about pricing. Overall, in the corporate space, the pricing is leveling to a degree, I would say, and is still acceptable given the risk return trade-off. However, in the most desired spots, for example, funded credits or lower risk, tax-exempt-type highly rated credit, those are extremely competitive. And unfortunately, some of those spreads or pricing is moving and drifting back toward historical norms, so -- and we are seeing, if you want to reach out there and get the yield, there are some softening around structures and covenants, and we're just not choosing to play there or we're not -- or if you want to go to the leverage market and some of those things to get the yields. So I'd say if you want to keep it within our risk profile, it's still very, very competitive, but still acceptable.

Operator

And there are no more questions in the queue at this time. Mr. King, would you like to make some closing remarks?

Kelly S. King

Yes, just a quick closing remark. Thanks, everybody for joining us today. We appreciate it. Again, it was a strong quarter. Looking forward, we are optimistic. We have some really unique opportunities. We have a lot of diversification on our revenue stream. We have a lot of new markets that are under-penetrated, and we have a really well-developed execution strategy around our value proposition. So while we're a little bit cautious about the economy, we're very optimistic about our particular opportunities and look forward to a good quarter and a good remaining part of the year. I hope everybody has a great day.

Tamera Gjesdal

Thanks, everyone, for your questions. And if you have any follow-ups, please call us in the Investor Relations Department. Thank you.

Operator

And again, that does conclude today's call. We thank you for your participation.

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