Oct 23, 2012
Executives
M. List Underwood - Director of Investor Relations O.
B. Grayson Hall - Vice Chairman, Chief Executive Officer, President, Chief Executive Officer of Regions Bank, President of Regions Bank and Director of Regions Bank David J.
Turner - Chief Financial Officer, Senior Executive Vice President, Member of the Executive Council, President of Central Region, Chief Financial Officer of Regions Bank and Senior Executive Vice President of Regions Bank Barbara Godin - Chief Credit Officer, Executive Vice President and Head of Credit Operations - Regions Bank
Analysts
John G. Pancari - Evercore Partners Inc., Research Division Ryan M.
Nash - Goldman Sachs Group Inc., Research Division Leanne Erika Penala - BofA Merrill Lynch, Research Division Matthew D. O'Connor - Deutsche Bank AG, Research Division Kenneth M.
Usdin - Jefferies & Company, Inc., Research Division Matthew H. Burnell - Wells Fargo Securities, LLC, Research Division Christopher M.
Mutascio - Stifel, Nicolaus & Co., Inc., Research Division Gerard S. Cassidy - RBC Capital Markets, LLC, Research Division Marty Mosby - Guggenheim Securities, LLC, Research Division Jennifer H.
Demba - SunTrust Robinson Humphrey, Inc., Research Division Gregory W. Ketron - UBS Investment Bank, Research Division Gaston F.
Ceron - Morningstar Inc., Research Division
Operator
Good morning, and welcome to the Regions Financial Corporation's Quarterly Earnings Call. My name is Paula, and I'll be your operator for today's call.
[Operator Instructions] I will now turn the call over to Mr. List Underwood to begin.
M. List Underwood
Thank you, operator, and good morning, everyone. We appreciate your participation on our call this morning.
Our presenters today are our President and Chief Executive Officer, Grayson Hall; and our Chief Financial Officer, David Turner. Also here and available to answer questions are Matt Lusco, our Chief Risk Officer; and Barb Godin, our Chief Credit Officer.
As part of our earnings call, we will be referencing a slide presentation that is available under the Investor Relations section of regions.com. With that said, let me remind you that, in this call, we may make forward-looking statements which reflect our current views with respect to future events and financial performance.
Forward-looking statements are not based on historical information, but rather, are related to future operations, strategies, financial results or other developments. Those statements are based on general assumptions and are subject to various risks, uncertainties and other factors that may cause actual results to differ materially from the views, beliefs and projections expressed in such statements.
Additional information regarding these factors can be found on our forward-looking statement that is located in the appendix of the presentation. Now that that's covered, let me turn it over to Grayson.
O. B. Grayson Hall
Thank you, List, and welcome, everyone. We appreciate your interest in Regions and appreciate you taking the time to participate in our third quarter 2012 earnings conference call.
Regions performed well in the third quarter, growing both fee-based revenue and bottom line profits as we continued to successfully execute our business plans and realize continued asset quality improvement. Earnings per share from continuing operations was $0.22 per diluted share.
Our third quarter performance builds on a solid first half of 2012 and reflects the positive change underway at Regions, a change that is better positioning us for long-term outperformance and change that is enabling us to prudently and profitably grow our business and expand our customer base despite a sluggish and uneven operating environment. To accomplish this, Regions has been and continues to be focused on diversifying and building our revenue sources, streamlining our processes to better serve our customers, improving our productivity and efficiency and providing new technology that supports our customers' ever-changing needs, ensuring superior risk management and further strengthening our balance sheet.
Turning to third quarter results, you can see earlier evidence of the progress that we're making. Fee income posted strong growth during the third quarter, driven by record mortgage banking revenues.
Mortgage continue to benefit from HARP 2 refinancing, and total refinancings improved 15% from the second quarter. Through HARP 2, we have refinanced $1.2 billion of home mortgages through the end of September.
Notably, approximately 50% of the applications were for customers new to Regions mortgage. Total loan production increased 2% linked-quarter, fueled by mortgage and indirect auto.
Loans outstanding were down 1% as customers continued to deleverage and political economic uncertainty weighs on demand. However, commercial and industrial loan growth remain healthy, helping to somewhat offset the favorable decline in Investor Real Estate portfolio.
We continue to improve our funding mix, growing our low-cost deposits while reducing our higher-rate time deposits, and there is further opportunity for improvement in deposit cost and funding mix. Let me also point out that according to the FDIC deposit data recently released, we have maintained our top 5 market share position in Alabama, Arkansas, Florida, Louisiana, Mississippi and in Tennessee.
In the third quarter, our net interest margin declined sequentially, partially due to a prolonged low-interest rate environment. David Turner will provide more details in just a moment.
The Federal Reserve's QE3 program announced mid-September calls for purchases of large quantities of mortgage-backed securities for an indefinite period, driving down reinvestment yields and putting greater, longer-lasting pressure on yields than we previously assumed. While the third quarter decline in our net interest margin was disappointed -- disappointing, we are hopeful that we'll be able to hold it and our net interest income reasonably steady over the next several quarters, while improving funding costs, partially offsetting these pressures.
Keep in mind that our low loan-to-deposit ratio provides considerable opportunity to add profitable loans to our balance sheet once customers have greater confidence in the economic and political outlook and are more willing to borrow. Let's move on to expenses.
As discussed previously, expense control remains a top priority at Regions, and we are focused daily on identifying opportunities to improve our productivity and cost structure while providing products and services that our customers want and deserve. To that end, in the third quarter, we continued the implementation of new technology in our branches that will not only lower operating costs, but will improve cross-sell capabilities and enhance the overall customer experience in Regions' branches.
During the quarter, we also completed the conversion of our credit card portfolio to Regions systems, introducing a new suite of card offerings and launched a new card advertising campaign. Although these actions resulted in elevated third quarter expenses, we are confident that they will provide attractive long-term returns.
Currently, only about 14% of our customers has a Regions credit card. Over time, we believe we can increase penetration rates to more than 20%.
Importantly, we delivered another quarter of asset quality improvement, allowing us to invest more of our time and resources in developing and executing profitable growth strategies. Simply put, Regions is transitioning to growth, prudent and profitable growth.
While current low interest rates, sub-par economic growth and political uncertainty are creating headwinds, we are making solid progress, executing our business plans and building a foundation that is better positioning Regions for long-term outperformance. Before I turn the call over to David, let me briefly note that earlier today, we announced that, assuming market conditions are favorable, we do expect to consider issuing preferred stock in the near future.
David will elaborate a bit more later. However, we're limited in terms of what we can discuss at this time in this meeting.
Let me turn the call over to David, who will discuss the third quarter's financial details. Afterwards, I'll come back and make a few closing comments before taking questions.
David?
David J. Turner
Thank you, Grayson, and good morning, everyone. I want to begin on Slide 3 with a quick snapshot of our third quarter 2012 financial results.
We reported net income available to common shareholders from continuing operations of $312 million or $0.22 per diluted share. Pretax pre-provision income from continuing operations, or PPI, was $481 million.
Net interest income was $817 million, and the resulting net interest margin was 3.08%. Non-interest revenues increased 5% on a linked-quarter basis, and total revenue increased $5 million linked quarter.
Non-interest expenses were up 3% and, from a credit standpoint, net charge-offs were steady linked quarter, while the total loan loss provision was $33 million. Let's get into some of the details, starting with the balance sheet.
Overall balance sheet trends this quarter were driven by continued growth in our commercial and industrial portfolio, as well as indirect auto. However, this growth was offset by declines in investor real estate and owner-occupied commercial real estate.
As a result, average loans for the third quarter were down $973 million or 1% linked quarter. Average balances were impacted by a decline of $623 million or 6% in the Investor Real Estate portfolio.
At quarter end, investor real estate stood at $8.7 billion, down $3.2 billion from 1 year ago. This portfolio now comprises only 12% of our total loan portfolio compared to 15% a year ago.
We expect this portfolio to continue to decline, however, at a moderate pace over the next several quarters. Our owner-occupied commercial real estate portfolio, which is comprised primarily of community banking and small business and which tends to exhibit the same behavioral trends as consumers, declined this quarter, largely due to deleveraging.
Linked quarter, we experienced an average loan decline of $338 million or 3%. Although price competition has increased, a majority of the decline was related to payoffs, prepayments and scheduled paydowns.
However, as noted, commercial and industrial loan demand remained solid in the third quarter, driven by our integrated approach to specialized lending, where our local bankers work with experienced, specialized lenders to meet customer needs. Total production for this portfolio was a solid $9.7 billion.
During the quarter, we transferred $185 million of remaining loans related to the Morgan Keegan sale off of our balance sheet. Excluding these loans, commercial and industrial loans on an ending basis grew $570 million or 2.2% linked quarter.
Pipelines remain solid and are slightly above the same level at this time last year as our clients fund capital expenditures, working capital needs and, increasingly, M&A activity. Line utilization on commercial and industrial loans was up 60 basis points to 43.9%, and commitments have increased 12% over the last year.
Our consumer services portfolio, which makes up 39% of our total loan portfolio, remained steady this quarter despite consumer deleveraging and our continued strategy to sell fixed-rate conforming mortgages. As I will discuss in a minute, these sales led to a material increase in mortgage income this quarter.
Declines in our home equity portfolio continue as customers take advantage of opportunities to refinance. However, this quarter, we launched a new home equity loan product to attract a new set of customers that will increase our overall home equity production.
And moving on to credit card, as Grayson mentioned, during the quarter, we successfully converted the servicing of our Regions branded credit card portfolio. It's important to note that we are focused on expanding our relationships with our current customers now that we can better control their experience with us.
Although overall credit card balances are down due to consumer deleveraging, year-to-date production has increased 44% compared to the same period in 2011. Indirect auto experienced a record quarter of production since we re-entered the business in the second quarter of 2011.
The loan production in this portfolio increased 10% over the last quarter, and average loan balances increased 6.3%. Currently, we have over 1,700 dealers in our network and plan to have over 2,000 by year end, all within our existing footprint.
In total, consumer loan production increased 7% linked quarter, totaling $3 billion in the third quarter. Total loan yields were down 11 basis points linked quarter to 4.18% due to the prolonged low-rate environment and increasing pricing competition, primarily within our middle market segment.
Moving on to deposits, as shown on Slide 5, deposit mix and cost continued to improve in the third quarter. Average low-cost deposits increased $385 million from last quarter and $4.3 billion from 1 year ago.
Average time deposits fell to just 16% of total deposits, down from 22% a year ago, as a result of our continued success in repricing these deposits and growing low-cost deposits. This positive repricing and mix shift resulted in deposit costs declining to 28 basis points for the quarter, down 4 basis points from second quarter and 18 basis points from 1 year ago.
And we expect to drive additional improvement in deposit cost. We have approximately $3 billion of CDs that are scheduled to mature in the fourth quarter that carry an average interest rate of 2.1%.
Looking ahead to 2013, we currently have $7.2 billion of CDs that will mature. Of that, $4.9 billion mature in the first half with an average rate of 1.69% and $2.3 billion in the second half with an average rate of 0.66%.
Now this compares to our current average going-on rates for new CDs of approximately 20 basis points. Further, our overall total funding cost improved to 56 basis points, a decrease of 4 basis points linked quarter and 19 basis points year-over-year.
Now let's turn to net interest income on Slide 6. Net interest income on a fully taxable equivalent basis was $830 million, down 2% or $20 million linked quarter.
The resulting net interest margin was 3.08%, down 8 basis points from second quarter's 3.16%. As a reminder, last quarter included approximately 3 basis points of temporary lift resulting from a larger-than-normal volume of full payoffs of interest and principal on non-accruing loans.
Overall, prepayments and reinvestment of maturities of higher-rate fixed loans and investments contributed approximately 6 basis points of net interest margin compression and $16 million of net interest income pressure quarter-over-quarter. Of course, an offset to mortgage prepayments is the positive impact associated with mortgage non-interest revenue, which I will discuss in further detail shortly.
Also, the low-rate environment increases the unrealized profits associated with our investment portfolio. For QE3, the Federal Reserve has sustained and recently intensified its efforts to keep interest rates low.
As a result, interest rates on long-term fixed-rate mortgages are at record lows, as are yields in agency mortgage-backed securities. Therefore, it will be challenging to grow net interest income and net interest margin materially if the current economic conditions persist.
However, we continue to see opportunities to protect the margin by further reducing deposit costs, which will help to support a relatively stable margin into 2013. As Grayson alluded to earlier, assuming market conditions are favorable, we expect to consider issuing preferred stock in the near future.
If commenced, the proceeds from this issuance will be used for general corporate purposes, which may include redeeming certain trust preferred securities. At this time, we are not able to make any additional comments regarding this potential issuance.
Now let's turn to non-interest revenue on Slide 7. Third quarter non-interest revenue was up 5% linked quarter.
Mortgage banking revenue reached a record high in the quarter, driven by refinances and new home purchases, aided by the government's HARP 2 program. Approximately 63% of mortgage loans were refinances, and 37% were new home purchases, and 21% of total loans were HARP 2 related.
Earlier in the year, we established a goal to reach $1 billion in HARP 2 related loan production, and as of the end of this quarter, we reached $1.2 billion, exceeding our original goal by over $200 million. As a result, mortgage revenue totaled $106 million, up 18% over second quarter and more than 50% over the prior year.
Mortgage loan production of approximately $2.2 billion during the third quarter reflects an 8% increase from $2.1 billion in the second quarter. We've been able to increase market share by providing customers access to local market -- mortgage bankers and increased capacity through 2 new HARP loan production facilities.
Let's move on to expenses on Slide 8. Non-interest expenses totaled $869 million, an increase of 3% linked quarter.
During the quarter, credit-related expenses increased $12 million, primarily attributable to quarter-over-quarter fluctuations and net gains realized on held-for-sale property. Specifically, last quarter, credit-related expenses benefited from net gains of $26 million as compared to $17 million of gains in the third quarter.
Also, other real estate expenses increased $3 million linked quarter. In addition, marketing expenses were elevated this quarter due to the credit card conversion.
Salaries and benefits were also up 4% linked quarter, partially related to an increase in incentives associated with record mortgage production and an increase in long-term incentives. Looking ahead, we continue to expect overall 2012 expenses from continuing operations to be down from the 2011 level, excluding the 2011 goodwill impairment, as a result of our continued and disciplined focus on cost control.
Let's look at our credit metrics on Slide 9. We continued to make progress with respect to asset quality in the third quarter as several credit metrics improved, including criticized loans, nonperforming loans and net charge-offs.
Net charge-offs were down 1% linked quarter and exceeded the loan loss provision by $229 million, resulting in a total loan loss provision of $33 million. Inflows of nonperforming loans increased to $463 million from $315 million linked quarter, but are down 39% from last year.
As increase is primarily driven by the seasonality of our credit process, it does not impact our overall expectations for continued gradual improvement in credit metrics. During the quarter, we had one customer loan for $40 million that transferred into nonperforming loans and was subsequently resolved prior to September 30.
Additionally, there were approximately $30 million of letters of credit that funded at quarter end, resulting in nonperforming loans. We currently estimate that we have approximately $300 million to $400 million of potential problem commercial and investor real estate loans which could migrate into nonperforming status in the fourth quarter.
Nonperforming loans, excluding loans held for sale, decreased $31 million or 2% linked quarter. Held-for-sale loans decreased $68 million or 34% linked quarter, and the other real estate owned decreased $17 million or 8%.
As a result, total nonperforming assets decreased $116 million or 5% linked quarter, but were down 35% from the prior year. Notably, Business Services' criticized and classified loans, one of the best and earliest indicators of asset quality improvement, continued to decline, with criticized loans down 6% or $305 million from the second quarter, and down $2.2 billion or 30% from last year.
Our coverage ratios remained solid. At quarter end, our loan loss allowance to nonperforming loans stood at 109% or 1.1x.
Meanwhile, our loan loss allowance to loans was 2.74% at the end of the third quarter. Based on what we know today, we expect continued improvement in asset quality going forward.
Let's take a look at capital and liquidity on Slide 10. Our capital position remains strong as our estimated Tier 1 ratio at the end of the quarter stood at 11.5% and our estimated Tier 1 common ratio increased 50 basis points to 10.5%.
Tangible book value reached $7.02 per share in the third quarter, up from $6.69 in the second quarter, which is an increase of 5% linked quarter. We're all waiting to receive additional feedback regarding the proposed Basel III NPRs.
However, based on our interpretation of the NPRs, we estimate our pro forma Basel III Tier 1 common ratio will be approximately 8.7%. Now the NPR comment period has ended and changes could result, which could differ materially from capital ratios that we've estimated.
Liquidity at both the bank and the holding company remains solid, with a loan-to-deposit ratio of 79%. And lastly, based on our interpretation, we are well positioned with respect to the liquidity coverage ratio.
So in closing, this quarter's results reflect our ongoing efforts to focus on what we can control. We increased loan production by 2% over the last quarter.
We achieved record mortgage revenues, asset quality improvement, and we continue to focus on providing our customers with new and innovative products and services that help them succeed financially. And with that, I'll turn it back over to Grayson for his closing remarks.
O. B. Grayson Hall
Thank you, David. Regions is entering the final quarter of 2012 with a solid foundation for growth, a foundation that we are strengthening each and every quarter.
We are diversifying and improving our business mix to help maximize our growth opportunities, as well as identifying and building profitable revenue streams that have the potential to expand throughout the current economic cycle. We are focused on improving our productivity and efficiency, including controlling our day-to-day expenses, undertaking initiatives to streamline operations and investing in technology that enhances delivery and productivity.
We're working hard to understand customers' needs and offer advice, guidance, and the best products and services will help them make better financial decisions. We believe we can create the kind of shared value our communities need to thrive by offering competitive products that are delivered in a transparent and trustworthy manner.
And finally, we remain disciplined in our risk management, committed to growth that is both prudent and profitable. While our work isn't complete, I am confident the business plans we're executing will lead to ultimate outperformance for Regions and reward our stakeholders over the long term.
Operator, with that, we're now ready to take questions.
Operator
[Operator Instructions] Your first question comes from John Pancari of Evercore Partners.
John G. Pancari - Evercore Partners Inc., Research Division
A little bit more about your margin outlook here. I knew you indicated that you expect a relatively stable outlook, but can you help us quantify your expectations, just given the compression we saw on the loan yield and the securities yield this quarter?
Just curious how that may interpret into continued compression further out.
David J. Turner
Yes, John. This is David.
We -- just to make sure we level set, as I mentioned in my prepared comments, we were at 3.16% in the last quarter, second quarter. We had guided to 3.13% being kind of the normal recurring margin for that quarter given that we had 3 points of favorable interest reversals.
From that, we had indicated we would be relatively stable. Obviously, QE3 came in, in the latter part of the quarter, which put pressure on rates, in particular the reinvestments that we have in our mortgage-backed securities portfolio.
We are doing a couple things. I mentioned the amount of deposits that we have maturing in the fourth quarter and the improvement in our diversification of our investment portfolio.
So when you look at some of the things we're doing in the investment portfolio, changing that risk profile, moving new investments into new issue CMBS and corporate bonds, we think that, that will serve to offset some of the downward pressure we see in the reinvestment rates. So with that, we believe we can guide to a stable margin from where we are today.
And we say relatively stable. You can look at where we are today and give us a point or 2 either way, but we think those would be relatively stable in the fourth quarter and into 2013.
John G. Pancari - Evercore Partners Inc., Research Division
All right. And then secondly, back to credit.
I know you indicated the potential movement of $300 million to $400 million of investor real estate onto NPL status for the quarter. Can you give us a little bit more color on what you're seeing there?
What types of loans are these and what changed during the quarter to highlight these?
O. B. Grayson Hall
Be glad to. When you look at the guidance we've given after the second quarter, we thought the migration to nonperforming status would be in the $300 million to $400 million range.
If you look at what happened in the quarter and you look at sort of our loan portfolio today, and in particular the distressed loans in our portfolio, we've really gotten our portfolio down to the point that, even though we've gotten very granular, there still is the opportunity for just a handful of credits to move that number from one quarter to another. If you look at our overall credit trends, we continue to be favorably encouraged.
Most of our trends have a very favorable direction to them. And if you look at the composition of those loans, we continue to believe that for the fourth quarter, we'll be back in that $300 million to $400 million range.
In addition, as David had indicated earlier, if you look, there are a few credits that were late in the quarter making that transition, but early in this quarter, leaving that status. We've still continued to be encouraged by the level of resolutions that we're seeing.
And I think that as we move forward, we still remain confident that the quality of our loan assets is improving. And I'll ask Barb Godin, our Chief Credit Officer, to add some color to that.
Barbara Godin
And the only other thing I would say, John, beyond what Grayson said is, I would remind everyone that typically our third quarter is our seasonal quarter. And for the last couple of quarters, as you'll note -- the last couple of years, I'm sorry, is you'll note our third quarter typically goes up, followed by a better fourth quarter.
I would anticipate that seasonal pattern continuing again. As we look through the numbers and what we saw coming in, there is nothing that really stood out.
I would also note that 53% of our nonperforming loans in total are now current containing as agreed on the Business Services side, an improvement from the 46% we saw last quarter. So again, there's nothing of major note that we saw or nothing that was disturbing that we saw coming in.
As we did point out, there were a couple of large items that moved that number this quarter, and again, we hope to -- even the letters of credit, have those resolved as we move into the fourth quarter.
O. B. Grayson Hall
Like we've said before, there's going to be some unevenness in our numbers from quarter-to-quarter, but from our perspective, no change in our direction. Our direction is still moving in the same direction it has been for the past several quarters.
John G. Pancari - Evercore Partners Inc., Research Division
I don't know. So no impact on charge-offs or provision as a result of this move that you're expecting?
O. B. Grayson Hall
No. I mean, in fact, we look at our portfolio today, the composition of our past portfolio, our prime portfolio continues to improve, as well as Barb mentioned, the composition of our nonperforming part of our portfolio.
Like she just said, 52% of it is paying as agreed. We feel like we've got it appropriately reserved.
And while our level of nonperforming loans are high relative to our peer group, so we think that our charge-offs will stay elevated for some period of time, but our allowance is sufficient to cover that, and we continue to keep a higher allowance.
Operator
Your next question comes from Ryan Nash of Goldman Sachs.
Ryan M. Nash - Goldman Sachs Group Inc., Research Division
Just a follow-up to John's question on the margin. Can you give us a sense of how much premium amortization there is left in the portfolio?
And I believe, David, you commented that you are hopeful to keep NII flat. But if you look, you're seeing loan yields compressed.
We only saw 1 month of QE in the quarter. So do you think you can actually grow the loan portfolio over the next few quarters to offset margin pressure?
David J. Turner
Your first answer is, we have about $1 billion in premium amortization and booked premium at the end of the quarter. And in terms of loan growth, we obviously are working hard, but want to be prudent with regards to the loans we've put on.
We want to make sure we're being paid for the risk we take. And demand is challenged, especially in the small business and commercial middle market.
That being said, we are continuing to have an increase in production, a nice increase this quarter-over-quarter, and we believe that the investor real estate, which ran off about $700 million this past quarter, starts to moderate, declining but at a moderate pace. We did have $200 million, I think I had mentioned that $185 million in my prepared comments, of loans that we have as part of the previously established agreement with -- in the Morgan Keegan transaction, to sell those.
So that's $200 million that you won't see coming out in the future quarters. So we will continue to work to grow loans, which would help us stabilize and increase our net interest income.
O. B. Grayson Hall
I think, if I could just add to that real quick, is that when you look at our loan production, we continue to be very confident in our ability to produce loans outstanding. To David's, if you sort of walk through our different lines of business, we're seeing good, strong growth in commercial and industrial, and indirect auto and in mortgage.
But we've made a few decisions that certainly are impacting our net out -- our net loans outstanding at the end of the quarter. And that is, number one, we're not holding a lot of our mortgage production.
Most of our mortgage production, we're releasing that into the secondary market. And if you look at our commercial real estate, as David said, it was -- industrial/commercial real estate was down approximately $700 million for the quarter and we released $185 million as part of the Morgan Keegan-Raymond James transaction.
And net-net, that was the decline in our loan portfolio. And so we continue to be encouraged by production.
As deleveraging by customers starts to slow down, I think we can start to see some decent growth out of our portfolio.
Ryan M. Nash - Goldman Sachs Group Inc., Research Division
Okay. And this is a question for both, I guess, for both Grayson and David.
Just when you think about performance, we obviously saw a top line pressure from declining margins and we did see expenses increase now. I know you noted that expenses will be down year-over-year, and it makes sense that you are trying to invest for growth in the future.
But can you talk about some of the things that you're doing internally to control expenses? And as you look out, assuming we don't see a huge change in the revenue and growth environment, at what point do you start to take a hard look at expenses, particularly on the branch side, and start to take out some significant costs?
O. B. Grayson Hall
Well, I think that -- we've had a focus on expenses for quite some time, and expenses were up third quarter versus second quarter. As David mentioned earlier, part of that increase in expenses, obviously, was our credit card portfolio conversion.
We spent quite a bit of money there, not only on the conversion itself, but on the advertising of that, in communication with our customers, and as well as increased staffing to accommodate the telephone calls and the support of those customers as they went through that transition. But when you look at expenses overall, we continue to drive down total staffing in the company, become more efficient.
We've been heavy investors in technology. We've implemented quite a few new technology projects in the last few months that have really improved our efficiency, but at the same time, improved our service level.
If you look over the last 4 years, we've probably consolidated our branch franchise more than any of our peer group and continue to look at ways to extract efficiency out of our branches. I think you should anticipate that we'll continue to have a strong focus on expense management.
That being said, there still are times when we're going to spend to grow. We've got opportunities to grow our business.
And as our business managers and market managers come to the table with ideas where we can spend some money to grow this organization in a prudent and thoughtful manner, we're going to take advantage of those opportunities, but you should anticipate core expenses will continue to incrementally decline over time.
David J. Turner
And I was going to add to that. I did want to point out that, you'd mentioned expenses were up, revenue was up as well.
And expenses, we pointed out a couple of things shouldn't be recurring. I would tell you that we're in the middle of budget season, as is everybody else.
There is not a meeting that we don't go to where we talk about expenses at the end of the day. And as every expense that we incur, that we continue to challenge ourselves on that spend.
We do want to make sure that we're making investments for the future, though, and we will continue to do that as, Grayson mentioned. So you haven't heard of a named expense initiative from us; you will not, because it's something we do each and every day.
And we'll give you more guidance in terms of what we think expenses for 2013 will look like on the next call.
Ryan M. Nash - Goldman Sachs Group Inc., Research Division
Just as maybe a quick follow-up, how much core expense are you actually taking out versus how much are you reinvesting in technology and growth for the future?
David J. Turner
Well, just different projects have different -- I don't have a number, a consolidated number, in terms of how much savings we have that we've reinvested. We really don't look at it that way.
We look at making investments that are prudent, that pay themselves back in a reasonable period of time and also help our -- from a customer service standpoint. So we can get back to you and get a more definitive answer on that, Ryan.
Operator
Your next question comes from Erika Penala of Bank of America Merrill Lynch.
Leanne Erika Penala - BofA Merrill Lynch, Research Division
I just wanted to follow up on some of the questions with regard to the NPL trends, and I wanted to make sure we were taking away the right thing. Of the $463 million in growth NPL additions this quarter, David, am I interpreting it right that $40 billion -- or $40 million of that was subsequently resolved after the quarter?
David J. Turner
Erika, it was resolved within the quarter. What we did is we believed that, had those not been resolved by September 30, they would have been an NPL.
So we thought the right thing to do was to show that gross migration. So it's not in NPL because the loans are gone, but we showed it transferring in gross and then we have it resolved.
When you look at our supplement, you'll see it coming -- you can't -- it's embedded in the resolutions, but in and out in the same quarter.
O. B. Grayson Hall
But the $463 million is a gross migration and the $40 million was netted out of total NPLs.
Leanne Erika Penala - BofA Merrill Lynch, Research Division
I see. And, Barb, could you explain to us what is unique about your market or your loan portfolio that you typically have a seasonal increase in NPLs in the third quarters?
Barbara Godin
Certainly, Erika. What we do is we continue to credit service our loans throughout the year.
But again, as we look at the spring, when everyone files their taxes, we sit down and we have that much harder look with the audited tax returns from our customers and have those conversations with them, as well as getting updated appraisals. And just by those sheer conversations, if we hear anything in those discussions from our customers that leads us to believe that we may not get paid back our full principal and interest completely over the time horizon, we will then go ahead and make that determination to put it into nonperforming loans.
And we have a large book that actually comes due for servicing in that same timeframe.
Leanne Erika Penala - BofA Merrill Lynch, Research Division
Got it. And just one follow-up question, one more follow-up, if I may.
David, on the liability side, could you remind us what the opportunity is in both the size and the rate of the TruPS that you could potentially redeem and whether or not that rate is hedged out? Additionally, given that -- our fixed income team, for example, thinks that you can issue 5 year senior much more cheaply than where your long-term debt is costing you right now.
Could you give us a sense of whether or not your trajectory for a stable margin includes some liability levers that you could pull off in the wholesale side beyond the trust preferred?
David J. Turner
Sure. I'll tell you, our guidance does not include all the liability management initiatives that we are considering at this point.
Specifically, to the trust preferreds, we do have 2 issues. One is a $500 million issue that is at 6 5/8, and then there's a $345 million issue that's at 8 7/8, and we continue to look at those, as we do our long-term debt and subordinated debt in the bank, to evaluate all the liability and capital management strategies that are at our disposal.
So we will continue to do that and all of that has not been factored into the guidance that I gave you.
Operator
Your next question comes from Matthew O'Connor of Deutsche Bank.
Matthew D. O'Connor - Deutsche Bank AG, Research Division
One more NIM question here. The $1 billion premium that you have in the securities book, obviously that's a high number, but you're amortizing a lot of that each quarter.
Can you give us a sense of what the amortization is and maybe what it was this quarter versus what it was last quarter or a year ago?
David J. Turner
We had amortization in the third quarter of approximately $75 million, and that was up from about $69.5 million in the second quarter.
Matthew D. O'Connor - Deutsche Bank AG, Research Division
Okay. So you're obviously amortizing at a fairly high rate there.
Just separately, the service fees, I know they bounced nicely quarter-to quarter, but I think last quarter had some one-time adjustments and you had been looking for the fees to bounce back a little bit more. Is that just lower NSF or overdraft usage or anything else going on there?
David J. Turner
We do expect that run rate to get back to, next quarter, where we are -- where we were in the first quarter. We did have some adjustments in the third quarter, approximately $11 million, that we believe will not recur in the fourth quarter.
And so you can think of it, Matt, in terms of a run rate, being more consistent with the first quarter.
Matthew D. O'Connor - Deutsche Bank AG, Research Division
Okay. Can you tell us what those adjustments were and maybe why they were not done last quarter when you had some other adjustments?
David J. Turner
That $11 million was just adjusting the estimate of the reserve that we booked in the second quarter. We got a better number in the third quarter and made the adjustment when we became aware of it.
Operator
Your next question comes from Ken Usdin of Jefferies.
Kenneth M. Usdin - Jefferies & Company, Inc., Research Division
I wanted to ask a question about just the earning asset trajectory. So the next couple of quarters, you've got $3 billion in CDs coming off and then $5 billion in the first quarter, so a significant amount of the balance sheet that's got the opportunity to reprice very near term.
Can you tell us about just how you're planning on either retaining the CDs or should we continue to expect the overall size of the earning asset base to continue to shrink as it has the last couple of quarters as you've been doing this positive remixing on the deposit side?
O. B. Grayson Hall
Well, let me -- Ken, we've been executing a pretty aggressive deposit repricing strategy for a number of quarters now. We continue to be confident in that strategy.
The results are apparent in our numbers. We still believe there's opportunity to continue to price down our overall deposit costs, but more importantly, we continue to be pleased with the mix shift that we're seeing.
Time deposits are now down to 16% of our total deposit portfolio. And we do believe we've still got opportunity to continue to drive down that total cost of that book of business.
We've been seeing retention of the time deposits that mature sort of in about the 70% range. We haven't seen that change over time.
It's stayed fairly consistent through this strategy, and we would anticipate it continuing. That being said, a lot of those dollars that leave the time deposit category appear to be landing in other products to some degree with inside the bank.
And so while we've reduced our reliance on time deposits considerably, our overall deposits have only compressed moderately. And so -- and we continue to, as we said earlier, to have a very healthy loan-to-deposit ratio this quarter of 79%.
So at this juncture, we plan on continuing to execute this same deposit strategy and incrementally improve that deposit funding over time. On the earning asset side, we continue to have more of our earning assets and securities than we'd prefer.
We're looking for opportunities to lend. We're finding traction in certain areas.
As David mentioned, our pipelines look strong. On the commercial side of our house, the third quarter is always a seasonally low quarter for that activity, but our pipelines are probably about as strong as we've seen them in a long time.
That being said, like you've heard on a number of these earnings conference calls, customers seem a little hesitant the last month or so, to borrow, to invest, but we anticipate, like we normally see, a pretty strong surge in the fourth quarter, and we anticipate that. But we are monitoring sort of the conviction and confidence of our customers as we move forward.
Kenneth M. Usdin - Jefferies & Company, Inc., Research Division
Okay, Grayson. And then to just follow up on just the securities portfolio side, to your point about the portfolio being bigger than you'd like, it's continued to grow as an offset to the shrinking loan portfolio.
So maybe, David, can you talk us through kind of your -- what's rolling off the book and what you're finding, what you're investing in incrementally, as the securities portfolio has continued to grow, to kind of fill this gap?
David J. Turner
Yes. We have just normal cash flow coming off the portfolio, $500 million a month, I think I've mentioned that before, that we have to put back to work.
Some of that's gone into mortgage-backeds, but the rates on those are so low, we're looking for alternatives. Those alternatives include new issue CMBS, as well as corporate securities.
You can see where we are today in our portfolio, being about $2.5 billion in those 2. That will grow and that will be a place where we put some of our cash flow that we have.
We obviously -- our preference is to deploy that in the loan books, but we want to make sure that we're growing the loans prudently and being paid for the risk we take. We're encouraged by our pipelines on the loan side.
We're encouraged by the conversion that we finished with credit card. There are a lot of positives that we have that are adding to help us offset this low-growth, low-demand environment that we have for loans.
But we also will look to liability management, as we discussed earlier, and find the most prudent use of our cash flow.
Kenneth M. Usdin - Jefferies & Company, Inc., Research Division
Great. And one, just quick one for you, David, on the expense side.
You mentioned in the press release there's a whole bunch of line items that had -- that looked like they were just above trend, whether it was that long-term incentive comp and a couple of the card conversion, et cetera. Can you just give us a kind of a directional help in terms of how many of those things or can you quantify the things that were either one-time or above trend this quarter in terms of what expenses should look like next quarter?
David J. Turner
I can on the conversion. The conversion cost us roughly, in that line item you're referring to, in the $8 million range that shouldn't be there.
The long-term incentive is the amortization of the grant that was made in the second quarter. So that amortization, obviously, is there through the award period.
But that's the answer on the conversion piece.
Operator
Your next question comes from Matt Burnell of Wells Fargo Securities.
Matthew H. Burnell - Wells Fargo Securities, LLC, Research Division
David, a question for you. You've mentioned a couple of times the opportunities that you're seeing to deploy cash flow out of the portfolio into new issue CMBS and corporate securities.
Just curious as to where you're thinking those yields can be put on for your portfolio relative to the MBS opportunities that you're seeing.
David J. Turner
Yes, I think if you're looking at MBS today, you're looking at a 1.25 range. We think in the -- when we're talking about corporates, we're talking about the AAA tranche, a pretty safe tranche that's somewhere in the 1.5 to 2.5 range.
Matthew H. Burnell - Wells Fargo Securities, LLC, Research Division
Okay. And then a question on HARP, if I can.
You mentioned that about 1/2 of your year-to-date originations in the HARP program have come from outside your own portfolio. Could you provide a little color as to where those mortgages were sitting previous to your refinancing them?
O. B. Grayson Hall
Yes, I'll give you a little bit of color. So we mentioned we did about $2.2 billion in total mortgage production last quarter, this quarter.
21% of that would've been HARP II production, and down just a little bit from last quarter. Last quarter would have been about 22% So we're only down about 1% from where we're at.
What we're finding is that, that production is really coming to us, both our customers and someone who had their original mortgage with someone else, and 50% of those to date have been from another competitor. I think if you look at the market share data for mortgages, without calling names, most of the mortgages are held by a handful of institutions in this country, much larger institutions, and that's where the vast majority of it's coming from.
All of our mortgage office, mortgage bankers, are out in our local markets. And obviously, most of our production is coming from those states that we have the most dominant share in, which is Florida, Alabama, Tennessee, Mississippi, Louisiana and Arkansas.
So that's where the bulk of the majority of our production will come through. But the mortgage business is a very concentrated business in this country, and the vast majority of the mortgages are held by 4 or 5 players.
Matthew H. Burnell - Wells Fargo Securities, LLC, Research Division
And then if I can, a final question for you, David. I know you mentioned that you're considering issuing preferred stock.
Is that something you would think about filling the entire 150 basis points of Tier 1 qualifying preferred, basically all at once? If I estimate that, that would be around $1.4 billion of preferred stock based on your Tier 1 risk-weighted assets of $91 billion.
David J. Turner
Yes, I want to be careful about mentioning any particular size based on our release earlier. But suffice it to say, you can see what our Tier 1, non-common Tier 1, is made up today, our trust preferred securities.
I think it'd be prudent to have more noncommon Tier 1 instruments in there at an appropriate amount. And so preferred stock, obviously, can fill that.
How that's done and how much and how many times is something that we have to address in time. And I don't want to talk specifically about how much we might have at any point in time.
Operator
Your next question comes from Chris Mutascio of Stifel, Nicolaus.
Christopher M. Mutascio - Stifel, Nicolaus & Co., Inc., Research Division
David, you had mentioned on the preferred offering, I really don't know what you can say about it, but that it could go to potentially redeeming trust preferreds. Can I look at that as a dollar-for-dollar transaction, that the preferreds we raised may be dollar for dollar with the TruPS that we may redeem?
David J. Turner
Again, I want to be careful how much I say. I think I pointed out that we have 2 issues, the $500 million at the 6 5/8, the $500 million at 6 5/8 and $345 million at 8 7/8.
So it's $845 million in total, and we have not and don't want to discuss what we would be doing with each or any of those issues that are outstanding.
Christopher M. Mutascio - Stifel, Nicolaus & Co., Inc., Research Division
Okay, I was trying to figure out if the potential benefit on the margin from the TruPs redemptions or possible TruPS redemption will be offset by the higher preferred dividend, but I guess we'll have to wait to see what type of preferred is offered.
Operator
Your next question comes from Gerard Cassidy of RBC.
Gerard S. Cassidy - RBC Capital Markets, LLC, Research Division
Can you guys give us a little more color on the $300 million to $400 million of potentially new commercial real estate mortgages? I know you gave us some color, but are they primarily in Florida or are they in Georgia or are they hotel loans or investment-owned properties?
Can you give us some background on them?
O. B. Grayson Hall
The $300 million to $400 million is what we are estimating that will migrate to a nonperforming status during the fourth quarter. That's our estimate of what we anticipate for the fourth quarter.
And the mix of that migration, I think you could look at the mix that we're reporting today for the third quarter, and we think that, that mix stays fairly consistent throughout. And again, with the large percentage of that being in the investor commercial real estate space.
Barb, would you like to add to that?
Barbara Godin
You're exactly right. What we are seeing is investor real estate is coming down, generally, each quarter in terms of the migration of that book continues to shrink.
So the C&I book is staying relatively flat. We're seeing the consumer book staying relatively flat.
And again, that's why we feel good about positioning that our potential problem loans for the quarter will be between $300 million and $400 million next quarter. The other comment I'd make is on the second quarter as well.
Go back 1 quarter and look at the $315 million that did come in. I think we mentioned on that last investor call, everything that could've gone right during the quarter went right during the quarter.
So everything we had hoped would move in the right direction did. And what we saw in the third quarter, obviously, it's more of a normalized quarter, where certain things didn't happen in the third quarter but will happen now in the fourth quarter.
Gerard S. Cassidy - RBC Capital Markets, LLC, Research Division
Some of the banks, the OCC regulated banks, have had to set aside higher nonperforming assets and charge-offs for these Chapter 7 loans that they're referring to. I know you guys obviously didn't have to do that, but do you have an estimate that if the non-OCC banks are required to do this, what your number might be in terms of increase in nonperforming assets and net charge-offs due to the change by the regulators?
Barbara Godin
Gerard, we're currently looking at that right now, sizing it up. At this point, we don't see it as being a material number for us.
Remember again that we have a very active consumer assistance program and that program has been in place for a while. And what we have done on that program is when a customer goes through that program, we typically charge the loan down to value at that time and put the loan on non-accrual and TDR if necessary.
So again, we will be coming out in the fourth quarter with any numbers associated with the change to the guidance. But at this point, as I said, we don't see this being a material number.
Gerard S. Cassidy - RBC Capital Markets, LLC, Research Division
Okay. And then finally, your capital is obviously quite strong, especially under the Basel III NPR methodology that may be the final methodology.
Last year, of course, in CCAR, you came out and repaid TARP. Should we expect that you would apply to return some capital to shareholders, whether in the form of an increased dividend or buybacks in this year's CCAR?
O. B. Grayson Hall
Well, I think that you -- if you look at Basel III and where our numbers are at, those instruments are based on the composition of our balance sheet today, without us taking any actions in terms of business models and products that we offer. So I think that Basel III number obviously over time will be different as we change our business model to -- in reaction to Basel III, depending on how that is finalized.
But I think as you look at our capital position, we continue to strengthen our capital position every quarter. We'll be submitting the 2013 CCAR stress test, if you will, here in not too many months away.
And we have any number of items under consideration. But I think it'd be premature on this call to disclose our thoughts on that.
But clearly, we're making a pre-assessment at this time on exactly what should be included in that submission. And given our capital position, we are going to be very thoughtful in that regard.
Operator
Your next question comes from Marty Mosby of Guggenheim.
Marty Mosby - Guggenheim Securities, LLC, Research Division
I wanted to circle back and, David, just get a little more precision around the credit card expenses and the unusual one-time impact in this quarter and how quick that could maybe run off. I wanted to make sure we're including both the marketing, as well as the conversion costs.
If you look at the marketing number, it's up about $7 million this quarter; outside services is up about $5 million. Maybe there's some -- you were mentioning $8 million of conversion costs.
Can you put all that together and then how quickly does that, whatever the number is, run down in the future?
David J. Turner
Yes, Marty. I think if you -- that was the message I was trying to send is if you take the $8 million out of the run rate in terms of being a one-timer, and I think you're going to get pretty close to what the run rate -- the remainder is on the run rate there.
Marty Mosby - Guggenheim Securities, LLC, Research Division
And that'll roll off in the next quarter?
David J. Turner
That's correct. It won't to be there in the fourth quarter.
Marty Mosby - Guggenheim Securities, LLC, Research Division
Okay. And then I was just curious, as we've talked earlier this year about the debt rating and going back to investment-grade and how that was going up again to help you attract some of your traditional customers back in on the deposit side.
Have you begun to see some of that benefit? And is that what's spilling over even into the C&I loan growth that you're beginning to see now?
David J. Turner
Yes, Marty...
O. B. Grayson Hall
Let me. Clearly, Marty, we've seen benefit as our credit ratings have improved, in particular, on the commercial side of our business, on both loans and deposits, and quite frankly, on overall relationship and ability to attract and retain those relationships.
And so overall, it's been a net positive. How you quantify that is somewhat elusive, but anecdotally, I think it's been a very positive story.
Marty Mosby - Guggenheim Securities, LLC, Research Division
And then, David, one last question. If you look at the loan yield compression, in kind of seems like you went from first quarter to second quarter, you got some of those payoffs and prepayments that helped keep the yield on loans higher.
So if you kind of smooth between the first to the third quarter and then kind of look at where it started to decline back in the fourth quarter, your loan yields are going down 5 to 6 basis points per quarter. And then on the flip side, if you look at your deposit costs, they've been going down probably 4 to 5 basis points per quarter.
So in a sense of kind of holding margin flat going forward, if you bring in some of the other kind of funding costs in programs that you're talking about, you're almost matching deposit costs and loan yield compression on a quarterly basis, except for just an anomaly that occurred last quarter?
David J. Turner
Yes, I think if you look at last quarter, we had mentioned we had on the loan side about 5 points in our loan yields that were due to the interest reversals that we spoke about earlier. So if you take our about 3.29% in that quarter and reduce that 5 points, you're at -- I'm sorry, 4.29%, and reduce that 5 points to 4.24%, you can kind of see that now, little smoother to the 4.18% that we have today.
The mix of our loan portfolio is a big driver. We're encouraged, again, by our pipelines that we see.
We're encouraged by, while about pricing is under pressure, we still see a favorable spread out there that we can get. Our credit ratings helping us to get into places that we hadn't before, helps.
Looking at things like credit card, which obviously give you a better yield. And having that conversion done, we expect the opportunities to grow there.
So there is going to be continued pressure on loan yields, but we think we can offset those with the improvement in deposit costs. You can run the numbers.
Based on the $3 billion of deposits that are maturing in the fourth quarter, at 2.1%, is a pretty significant buffer to the headwind that we're facing on the low-rate environment.
Operator
Your next question comes from Jennifer Demba of SunTrust Robinson Humphrey.
Jennifer H. Demba - SunTrust Robinson Humphrey, Inc., Research Division
You mentioned in your monologue that there was some pricing competition increase, particularly on the middle-market side. Just wondering if you could give some color on what you're seeing in commercial loan pricing right now, up and down the spectrum.
O. B. Grayson Hall
Yes, we've got -- we're using quite a bit of analytics on pricing. I would tell you that, in the upper end of the middle-market space, large commercial space, we've seen obviously increased competition, and you've probably seen pricing moderate over the last few quarters, but it's been fairly stable.
I think that it's down a little bit from the peak of a few quarters ago, but certainly at or above historical trends on commercial/industrial lending. In investor commercial real estate space, spreads there are still much higher than historical averages.
And so while there's a lot of competition and there is pricing pressure, we still see pricing holding up fairly well. As you get down into the business and community banking, the smaller credits, there's more pricing competition there.
There's a few different players in that market, and we are seeing that part of the segment come under a little more pressure, and pricing has moderated lower, trended lower in the last couple of quarters in that particular part of the segment. Not a lot of demand in that segment and so a lot of competitors and few borrowers, so you're seeing a little more pressure there.
Operator
Your next question comes from Greg Ketron of UBS.
Gregory W. Ketron - UBS Investment Bank, Research Division
You had mentioned, I think, on prior calls and prior guidance or outlooks that, in the longer term, normalized loan loss reserves maybe kind of settle in a 1.50% to 2% range and net charge-offs maybe somewhere around 75 basis points. In looking at the last couple of quarters, if you project out these loan loss reserve levels, you could be approaching that kind of 1.75% to 2% range, maybe in the middle of next year, realizing that the reserve releases will slow down.
And if that -- one, I guess, the first question would be, in terms of the longer-term view of the reserve, the charge-offs assessed still intact. And then the second part would be, if that's the case, there's obviously some earnings that will need to be replaced.
And maybe what are the things that you're looking at Regions in terms of the business strategy to try to fill that void that may be created by the provision expense going up?
David J. Turner
Yes, Greg, this is David. We do believe, based on what we know today, and obviously there's some accounting rules that are being proposed on the allowance, but let's use today's rules, we still believe in that 1.5% and 2% as a reasonable range.
And I know that's kind of wide, but that's the best we can do at this juncture. We know where our charge-offs have been elevated.
We said they would be elevated, but we have those reserved for. If you think about the 75 basis points of charge-offs, that's a through-the-cycle charge-off rate.
That means you would expect that there are some periods of time where that's lower. And if you look at the type of credit that's going on the books today for us, it's pretty clean, it's pretty good, which is why our provision is where it is.
The provision is taking care of the new stuff that we have or any diminution in the credit quality of what's on the books. And we're seeing that stabilize over the last several quarters, which is why we can provide where we are.
The charge-offs are separate. And again, we already had those reserved for and, as they come through, we take care of them.
So what you need to look at in terms of estimating provision is look at our credit quality, whether it be in terms of criticized and classifieds. I mentioned that in my prepared comments as being one of the best and first places one could look as to how your credit quality is trending.
And criticized and classifieds continues to come down for us, which tells us what our -- informs us as to what our future provisioning and reserves will be. So don't put the 75 basis points in as the low watermark.
That's a through-the-cycle number.
Gregory W. Ketron - UBS Investment Bank, Research Division
Okay, very helpful. So really, as you look out and think about how things may evolve, and I know it's early, but think about charge-offs being potentially below that 75 basis point level longer term?
David J. Turner
At some point, you would expect that to be the case. To be able to articulate a 75 through the cycle, that means they have to be below that at some point.
Operator
Your next question comes from Gaston Ceron of MorningStar Equity Research.
Gaston F. Ceron - Morningstar Inc., Research Division
Yes, I just had a quick follow-up on that last question that -- a couple of minutes ago on the commercial loan space question. Indeed, it seems like you guys and other banks have seen -- have been seeing some nice growth in C&I.
Again, following up on that last question, does it feel like, as things stand now in the competitive space, are the other banks in the space, do you think, are they -- as they chase the segment, are we at a stage where they're compromising loan quality for market share? Or would you say the competition is still pretty rational, if you will?
O. B. Grayson Hall
I would say that, from our perspective, we still see the competition as being very rational. Not that you don't get the anecdotal comment from time to time, but I would say that our general perspective is the competition is rational, but everybody's out looking for business.
And so we run into competition in both customers' and prospects' offices, and we all are after -- after the business and competing for it. But we're not seeing -- we aren't seeing -- you aren't seeing a big change in underwriting structure.
You are seeing competitive pricing. Clearly, pricing is part of the underwriting, but at this point in time, we just aren't seeing a lot of anomalies in that regard.
Operator
That concludes today's final question. I will now turn the call back over to Mr.
Hall for any closing remarks.
O. B. Grayson Hall
Well, just let me close and say thank you for your time and your interest in Regions Financial, and we look forward to meeting with you next quarter. Thank you.
Operator
This concludes today's conference call. You may now disconnect.