Good morning. My name is TaShawn and I will be your conference operator today. At this time, I would like to welcome everyone to Fifth Third Bank’s Second Quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the call over to Sameer Gokhale, Head of Investor Relations, the floor is yours.

Thank you, TaShawn. Good morning and thank you all for joining us. Today, we'll be discussing our financial results for the second quarter of 2017. This discussion may contain certain forward-looking statements about Fifth Third pertaining to our financial condition, results of operations, plans and objectives. These statements involve risks and uncertainties that could cause results to differ materially from historical performance and these statements. We've identified some of these factors in our forward-looking cautionary statement at the end of our earnings release and in other materials, and we encourage you to review them. Fifth Third undertakes no obligation to and would not expect to update any such forward-looking statements after the date of this call. Additionally, reconciliations of non-GAAP financial measures we reference during today's conference call are included in our earnings release along with other information regarding the use of non-GAAP financial measures. A copy of our most recent quarterly earnings release can be accessed by the public in the Investor Relations section of our corporate website, www.53.com. This morning, I'm joined on our call by our President and CEO, Greg Carmichael; CFO, Tayfun Tuzun; Chief Operating Officer, Lars Anderson; Chief Risk Officer, Frank Forrest; and Treasurer, Jamie Leonard. Following prepared remarks by Greg and Tayfun, we will open the call up for questions. Let me turn the call over now to Greg for his comments.

Thanks Sameer, and thank all of you for joining us this morning. As you'll see in our results, we reported second quarter 2017 net income available to common shareholders of $344 million and earnings of $0.45 per share. our reported EPS includes negative $0.01 per share impact from the Visa total return swap. Our results for the quarter were very strong and reflected our continued focus on profitable revenue growth, expense management and credit discipline. Our ROTCE and ROA metrics improved both on a sequential and year-over-year basis as we made progress toward achieving our North Star objectives. We're also pleased that the Federal Reserve did not object to our capital plan. This will allow us to both increase our dividend and significantly increase capital distributions to our shareholders compared to last year. At approximately 120% of consensus earnings estimates, our expected payout ratio is one of the highest in the industry. I like to make a few observations about the operating environment. Given the political gridlock, the timing of potential changes to the regulatory environment remains uncertain and expectations for more fiscal stimulus have been tempered. On the other hand, the data on jobs growth is encouraging and we like other banks are benefiting from recent Fed rate hikes. A strong jobs outlook combined with modern inflation and healthy consumer spending also leads me to believe the yield curve will steepen as long-term interest rates begin to rise. However, the sustainability of the strong employment data and the prospect of higher interest rates will depend on whether we see acceleration in real GDP growth. We like many of you will like to gain more clarity to get a better directional read on a longer term outlook. We are operating under the assumption that economic growth in the near term…

Thanks Greg. Good morning and thank you for joining us. Let's begin with a financial summary on Slide 4 of the presentation. Greg mentioned, during the quarter our continued focus on disciplined expense management, the expansion of our net interest margin, stable credit quality and efficient capital management all reflected our commitment to driving improved financial performance. We achieved positive operating leverage both on a year-over-year and sequential basis during the quarter. We expect to achieve positive operating leverage again next quarter and for the full year. Overall, average loans were flat sequentially mostly as a result of continued exits from certain commercial exposures and the planned decline in our indirect auto loan balances. New origination levels were strong giving us an optimistic outlook for 2018 and beyond as the deliberate acts especially in C&I will be coming to an end this year. Average commercial loan balances were flat sequentially and down 2% year over year. Excluding the impact of the exits that Greg mentioned in his prepared remarks, average commercial loans were up 1% sequentially. The sequential decline in average C&I balances was partially offset by 2% growth in commercial real estate loans this quarter. Much of the quarterly average growth in construction loans came from drawdowns near the end of the first quarter. With the summer construction season in full swing, we would expect client utilization to remain strong. On the other hand payouts will continue into 2013, 2014 vintages as construction loans either sell or move to the permanent market. We are currently seeing increased pipelines in office and industrial as the demand for multi-family is moderating. We've kept a conservative risk profile in construction lending and will continue to be diligent in underwriting as we are at the later stages of this cycle. Expanding new production…

Thanks Tayfun. Before we start Q&A as a courtesy to others, we ask that you limit yourself to one question and a follow up and then return to the queue if you have additional question. We will do our best to answer as many questions as possible in the time we have this morning. During the question and answer period, lease provide your name and that of your firm to the operator. TaShawn, please open the call up for questions.

[Operator Instructions] Your first question does come from the line of Scott Siefers with Sandler O'Neill + Partners. Your line is open.

Tayfun, I was hoping you could just - obviously a lot of guidance I appreciate the transparency. As you look into the back half of the year, you suggested a rebound in corporate banking revenues off a softer 2Q due to capital markets. I’m wondering if you can maybe walk through some of your expectations for some of the other drivers that you see gets you to the updated guidance for the full year, just in fee income specifically.

Yes. So I’ll make some overall comments and then Lars probably can provide some color on corporate banking. In general, our expectation, when you look at the main parts of our fee revenues, mortgage, I think, it's going to be a fairly stable quarter in the third quarter. So we're expecting the current environment to continue, so there's nothing out of the extraordinary in terms of our expectations for mortgage. Wealth and asset management has been weighing up so stably, nicely growing for us. The deposit piece, we're seeing payments income growing into the second half of the year similarly. I don't have any out of the ordinary expectations with respect to any of the other fee income items. I just want to remind you that we obviously, the way, as we always do, we have the fourth quarter TRA payment that we are expecting from Vantiv. Turning over to the corporate banking side, clearly, we have a look at our pipeline and maybe Lars can provide some color on what we're seeing there.

Yes. So first of all, when you look at the overall corporate banking fees, I would point out, you may see in the appendix there that the core business lending fees were actually up nicely on a linked quarter basis and Scott that was reflective of the record production that we've had this quarter, the highest level that we've seen in -- over a year. Beyond that, obviously a lot of headwinds in the sales and trading and FICC business which you of course have seen across the industry. That's going to be largely driven by the yield curve, volatility in the overall market place in what we see and some of our FRM businesses. So that will impact that. The good news for us is that, is we've continued to strategically position ourselves to build out our advisory businesses, in particular in the investment banking, M&A and that's become a much bigger part of our overall, our overall corporate banking fee mix. So that's a real positive, because as I look towards the second half of the year, we're seeing activity level start to pick up, Scott, both at the larger transactional level and in our core middle market that look fairly promising. And I think that would help us to deliver some pretty attractive fee incomes. We're also continuing to add expertise and resources that align with a number of our industry verticals, which -- that too will be incremental I think to the growth of some of our corporate banking fees for the second half of the year and beyond.

And then finally just one kind of ticky tack question, either for you Tayfun or maybe Jamie. I think in the past, you guys have talked about securities yield in like the 305, 310 range for the full year. Any update on how you guys are thinking about?

Yeah. I still believe that we will be right in that range. We think the portfolio is well positioned and we're pleased with the results.

And your o next question comes from the line of Geoffrey Elliott with Autonomous Research.

Maybe starting with Vantiv, clearly there is potential for them to undertake a pretty significant transaction. I wondered if you could give some thoughts on how a big transaction by Vantiv would change, just your thoughts around continued ownership. And then second, any accounting impact from your percentage ownership dropping down?

Geoffrey, thanks for the question. This is Greg. At this point right now, since we’re just in early stage due diligence with Worldpay, we are not in a position to make any comments about that transaction or the impact or how we feel about that transaction to Fifth third. So more to come on that on our next earnings call once that transaction materializes or decided to do something different. At this point, we have no comment on that transaction.

And on the equity method accounting that you were alluding to, Geoff, there is a pretty low threshold for that. I think the ownership percentage would have to decline to low single digits before the accounting methodology would change.

Thank you. And then another one on non-interest income, I guess kind of taking a step back, if you look at the lines that make that up year-on-year, service charge is up 1%, wealth and asset management is up 2%, but pretty much everything else looks like it's down year-on-year. So how should we think about understanding that in the context of the growth initiatives that you're talking about?

Yeah, I think, the one comment that I will make because it is such a large item, corporate banking piece are a significant line item and there is fee income associated obviously with the nearly $4.5 billion of loans that we've exited over the last 18 months. So we need to take that into account when analyzing the year-over-year change in corporate banking. As we move forward and reach the end of the year, with those exits coming to an end, I would expect the momentum in corporate banking to actually move up. And also in capital markets, on page 11, we are listing a number of initiatives that directly impact being fee income growth in addition to other areas such as wholesale payments, insurance. So as we look forward into ’18 and ’19, there are some significant pick-ups in all of these areas with respect to fee income growth expectations.

And your next question comes from the line of Gerard Cassidy with RBC. Your line is open.

Greg, when you look at what the Treasury proposed about a month ago in changes for the banking industry, both legislatively and regulatorily, if you had to pick one or two that you think would best benefit Fifth Third, what would those choices be of some of the proposals they meant.

First of all, so I think on the, of course, the thing was very well done and 149 pages, [indiscernible] institutions and some of the things that they’re looking at and we’re all basically put together by input from the banks and I think LCR would be one that we want to look at, they’re looking at, if we can see some improvement on how that is calculated and how that’s viewed. I think that would be very positive. In addition to that, I think overall on the capital management, I mean, as we talked about, we’re strong from a capital perspective, our ability to put that capital and making it easier for us to do business, especially in the area of small business lending and some of the changes that the guidance would suggest, I think it would be make it easier for us to serve that sector. So those are the two areas that we like to see some progress made. And then obviously from a regulatory perspective overall, some of the activity with the [indiscernible], trying to get that a little more fluid and a little less complex in some of the redundancy that creates, the cost to create for banks would be another step forward I think and allowing us to better serve our customers.

Very good. And I apologize if you guys mentioned this on the call and I missed it, but when you -- when we look out, as you mention you're in a strong capital position, did well in CCAR, what's the long term dividend payout ratio you guys think you'll get comfortable with. Obviously, the Fed seems to have lifted that line in the sand at the 30% mark where you guys can go higher or how do you guys think about it?

First off, it really gets down to how we view our forward earnings opportunities and the amount of capital we have to deploy. As the CCAR data suggests, we’ve got forward an increased dividend of 2% this quarter, another 2% or $0.02 in the 9 months from now. So that's very strong. I would see that south or north of 30%, but with respect to putting a number on it right now, I don't want to do that, but I think if you look at the next -- the next 9, 12 months, I think we feel really good about our ability to increase our dividend and deploy capital for that line.

And your next question comes from the line of Ken Usdin with Jefferies. Your line is open.

Thanks again for that revenue slide on North Star. I wanted to ask you, you mentioned that you're not including the baseline in the expense initiatives, so just given the fact that you guys can or willing to articulate the revenue side of North Star, can you help us understand what was originally I think you guys said 150 million to come from the cost side and how you'd expect that to kind of project and manage the overall growth rate of expenses? Thanks.

Yes. Thanks, Ken. So when we started to play out our expectations last year, we mentioned that about 45% of the improvement will come from an uplift in our base performance and we still believe that is the case. And we clearly have a very strong business composition and we look to see better performance over the next two years. In terms of -- you are correct, in terms of the expenses, our expectation is roughly 20% of that money, of that amount that we identified. Obviously, we have started some of those initiatives and the ongoing improvement in our actual expenses and expense guidance reflects the results, whether it’s related to vendor re-negotiations, any work space management savings or even on just headcount efficiencies. I think we are moving on with some of those initiatives. As we look forward and we discussed this in some meetings last quarter with investors, we expect our base expenses, excluding North Star related investments to remain well managed. We will be entering our planning period here shortly in the next 90 days and our guidance to our businesses will be to maintain their expense base, the core expense base into next year, but we will see what the outcome will be and we will update all of you during the Investor Day, but we clearly expect ongoing efficiencies coming out of our business as we look forward.

Okay. So we'll look forward to that update. Then just one follow-up on the NIM, to clarify before, you’re 305, 310 on the securities book and what you're expecting for the full year on NIM, but can you just talk about just progression from here and the puts and takes given the June hike and then just the balancing act between deposit betas and asset repricing. Thanks.

Sure. This is Jamie. As you look ahead on the third quarter NIM, we do expect as Tayfun mentioned, a two basis point expansion from the second quarter 301 into the third quarter and that’s really driven by three basis points improvement from the June Fed move, net of the deposit betas, which is a 40% assumption and then 2 basis points of improvement from continued loan pricing discipline and the favorable loan mix shift you're seeing on the balance sheet and that's offset by 1 basis point erosion from day count and 2 basis points of a detriment from our funding actions, which you saw in part was the June holding company issuance. And so in our outlook, we do assume a December Fed move in, however as we said here today, that's looking less likely. The good news is it doesn't have that big an impact on our projections.

And your next question comes from the line of Erika Najarian with Bank of America. Your line is open.

Just a follow-up question on fees, I just want to make sure understanding the fee guidance correctly, so based upon which we’re growing full year fees adjusted on a 2% basis ex-mortgage, is that 2016 base, 2.1 billion.

That's correct.

Okay. And so if I think about the progression again, I mean my peers had sort of asked about this, but the progression is pretty significant on an implied basis so if 500 -- if the adjusted fee is in the first quarter with 484 and the second quarter is 516 and then you gave us guidance for 3Q that implies 526, that means that fourth quarter fees ex-mortgage would have to be over 600 million. And I'm wondering what I'm missing there or if I'm not missing anything, what's driving that significant progression upward.

Yes. So Erika, just another reminder that in the fourth quarter, as we’ve had for many years now, we have a 40 plus million dollar payments related to the Vantiv TRA agreement. So that’s clearly the small item that moves the fourth quarter fee income up. In addition to that, there are a couple of obviously pipeline related expectations in corporate banking. The timing of that is, we cannot necessarily plan for the timing. We are laying it out for the second quarter and that’s providing a lift and also, relative to the first quarter, which was weaker in corporate banking, I think the third and fourth quarter numbers look better. That's what’s driving the increase as we approach the end of this year.

Got it. And just as a follow-up question, just switching gears, as you pointed out during the call, the CET1 ratio of 10.7 seems very robust for your size and risk profile. And I'm wondering what your thoughts are over time what an appropriate, sustainable level of CET1 would be for your company?

I think that given the risk profile of our company, in the long term, the company can be operated with a capital ratio of 8.5% to 9%, but I think it's very early for us to guide to that, but if the regulatory environment continues to evolve in a direction it has been, we can see our capital ratios starting to move to a nine handle. And whether or not we can take it down below that would be a reach at this point, but somewhere around 9.5% is clearly a very good number that we can achieve without the significant change. Our CCAR filing has a 10% number as we exit the currency CCAR period. So there is some room for us to improve our leverage ratio from the current level.

And just squeezing one more in since Greg mentioned LCR as a binding constraint that you'd like to go away, given your robust LCR today, how much in freed liquidity could be deployed if LCR is not applicable to bank your size?

Yeah. This is Jamie. A couple of benefits from the -- if the LCR were to be eliminated, there are benefits besides the ability to deploy those excess securities into loans or other things, including the flexibility to rotate out of the lower yielding level one securities into level twos. That help would be 20, 25 basis points of yield enhancement. Right now, we're up about $10 billion of level ones and then that also generates a better convexity profile going forward. So the benefits aren't just the ability to deploy the excess capital or the excess liquidity. It's also what we currently hold could generate higher returns. Right now, in our LCR calculation, 122% at the end of the quarter, within that number, we have about 2.9 billion of level 2As above the cap. So at a minimum, that could be deployed. And then, the final benefit that we see from an LCR revision standpoint is that certain classes of deposits will certainly become more bankable and more valuable, such as financial sector deposits that have 100% outflow assumption and we believe that could alleviate some of the pricing pressure that we're seeing on commercial deposits today.

And your next question comes from the line of Ken Zerbe with Morgan Stanley. Your line is open.

I guess first question just in terms of slide 11 you have in terms of North Star, specifically the personal lending line, it's obviously the biggest contributor to the 299 million, but can you just remind us, maybe break it out a little bit more, I mean how much of that 74 comes from tech enhancements versus the higher net interest income from unsecured lending, which I would imagine would come at a bit more risk than the rest of your portfolio. Thanks.

First of all, let me answer the first part of your question. That's a combination of our own credit card growth, so pure net interest income and our GreenSky partnership where we continue to grow the portfolio. In addition to that, we also have expectations of an expanded offer for our own personal unsecured lines. In terms of the risk profile, Ken is, we, first of all, the GreenSky portion of that growth is coming at a super prime level. I mean, we're talking about 750, 760 type FICO scores. We’re monitoring that and it's behaving within our expectations. So we don't see a significantly increased risk profile, even in our under stressed conditions. Similarly, in our credit card portfolio, the focus is in footprints and this is retail customers who have a very positive credit risk profile. And the same approach would be used in our own personal unsecured lending. So our expectation is this growth is not going to alter the risk profile of our consumer lending.

Got it. Okay. And just sort of related credit question. On slide 19, you talk about your retail exposure. So thanks for the additional information there. But you do mention the 3.1 billion as being higher risk retail and I just want to kind of make sure we clarify, like how much of that is truly, truly higher risk? Are you seeing deterioration and I see you have anchor malls or mall anchors, regional malls, et cetera, and how do you differentiate the risk within that retail portfolio?

Hey, this is Frank. Good question. I would call it core retail, higher risk is probably not the right terminology. So think about it this way. As the slide shows, we’ve got just over 3.1 billion all in, in retail exposure floor that we manage. We manage the vast majority of that -- two thirds of that through our vertical, very closely 3% of our total loan book, it’s not substantial. When you look at the 1.9 billion on the slide, most of that is specialty retail. The remainder of that would be general retail. The vast majority of that is not to the clothing sector or to the electronics store sector that’s been most volatile, 3% of it’s the mall anchors, but really what’s more important to your question is that 98% of the specialty and general retail that you see there ,the 1.9 billion, they’re pass rated credits. There's only 2% of that portfolio that’s criticized. So we're not seeing deterioration. It’s performing better than our overall C&I book at this point. When you look at the balance, there's less than $1 billion in CRA, which gets a lot of attention, 769 million. Only a third of that is to regional malls, you know that over 80% are to AB property. So we feel very good overall and the REIT book is primarily very high grade exposure. We feel very good about the overall exposure we have to retail. So higher risk is really not the right term when the vast majority of this portfolio is [indiscernible] performing to our expectations.

And your next question comes from the line of John Pancari with Evercore. Your line is open.

On the commercial loan growth front, for the second quarter, aside from the exits that you flagged, it still appears that the underlying commercial growth trends were somewhat weaker and I know part of that could be some of the -- on the real estate side, some of the permanent financing market impact, but what other areas did you see any softness in the quarter and is it indicative of any demand factors on the commercial side? Thanks.

Speaking specifically, I think John to this quarter, we saw a pickup in activity frankly and it was across nearly all of our verticals with the exception of healthcare, which we've been managing very carefully over the last couple of years is, there's obviously a lot of uncertainty there to client selection and working carefully with that vertical. It’s been a high priority for us, but we've seen nice growth in a number of our verticals that I mentioned previously. Commercial real estate is really, that's actually been a source of some growth for us. I would not see that as a headwind. A lot of the growth that we've seen more recently over the past two quarters to our earlier point is later stage, the maturity of our construction portfolio, but we would expect that the growth rate of that would begin to reduce over a period of time. In fact, if you looked at it, commercial real estate on a year-over-year versus linked quarter, you would see that already beginning to play out. If you look across our core middle market franchise, we saw a pickup in activity level. In fact, we saw the highest production in our core middle market also this past quarter in over a year. Indiana, Florida, Tennessee, North Carolina is a perennial leader in the clubhouse there. So I'm feeling more optimistic about our ability to grow that core middle market franchise in commercial -- overall commercial portfolio. But it will certainly be influenced by the overall economic environment as we head into the second half of the year, but pipelines look promising. We're investing resources into it. We're expanding our capabilities and frankly I think that we're well positioned to grow that for a number of quarters to come.

John, I wouldn't describe our second quarter activity as weaker. I mean, we had -- it was strongest origination quarter since the first and second quarter.

John, the other thing I would add John is, if you excluded the strategic assets of 600 million and look at what we’ve done this year, we would be up 3% year-over-year in the commercial growth and that’s the focus of the organization is on the opportunity that we’re looking forward to, that the relationship we want to bank. I think we’re doing a pretty good job, especially in a very muted environment, we’re doing a pretty good job of building these relationships. We’re growing our commercial relationships, we’re growing our consumer households. That’s what this bank is focused on, the quality, return profile of our balance sheet and that’s been evidenced in the numbers we discussed today.

Okay. So that decline, the modest decline in end of period commercial balances on a linked quarter basis and the 3% year-over-year decline in commercial balances, that’s mainly all the, for the quarter, that’s mainly all the exits then?

Yes.

Yes. Like I said, 2% is for the full -- where we're at right now on the strategic assets. If that comes to an end John, at the end of this year, those strategic assets are done, we’ve accelerated those types of assets, I think the outcomes with respect to yield, with respect to credit quality we’ve got, demonstrate that was the right decision. Our thought around the indirect auto lending and what we’re seeing with used car prices and the volumes out there, we’re a year ahead of everybody else. We like what we’re doing in that sector. Once again, it’s about quality and being good for this cycle. So we feel really good about production and where we’re at for the remainder of this year, given the environment we’re operating in, the competitive nature of the quality relationships that we’re going to go after. So I’m very encouraged with what the team is producing.

And one last thing John that I would just kind of give is evidence of the growth of our quality portfolio with very careful client selection is, we continue to take market share in the investment banking face, for regional banks, we’ve done that throughout ’16 and this year. That's a key part of our relationship building, fine strategy, aligning that with where we want to grow, right risk appetite, right risk profile, right return profile.

And your next question comes from the line of Saul Martinez with UBS. Your line is open.

Wanted to ask about capital allocation strategy, you obviously have a ton of excess capital, especially in light of, Tayfun, your commentary about where you can operate ultimately. And so in, obviously you have Vantiv in your back pocket, but how do you think about capital allocation in the context of M&A, your M&A strategy? And once you get off of any sort of regulatory or CRA restrictions, how would you be thinking about potentially doing something from a, not only just degeneration businesses, but would depository institutions also be part or could they be part of this strategy?

So right now, our focus is building a strong bank with all the objectives that we've already stated as project. So that’s job one for this business right now that we’re focused on. We've been very, very thoughtful about how we deploy capital for strategic opportunities in the non-depository sector, non-banking sector such as our investments in the fin-tech space, wealth and asset management, insurance space. We’ll continue to do that and deploy capital smartly in those opportunities because it creates the opportunity for us to enhance our value proposition to our customers. That makes sense. With respect to doing a brick and mortar bank type of deal, that is right now not in front of us. It's not we're focused on. And the regulatory environment will play itself out and the environment at some point will probably be more conducive to doing these type of deals, but right now, it's not what we're focused on.

Just switching gears, very helpful color on Project North Star, the revenue growth plans. Can you just give us a sense so as to how much of the growth in the or the revenue figures for ’18 and ’19 are sort of fee based opportunities and how much of it is more balance sheet driven or NII. Could you give us a sense of sort of the parameters around that?

Hey, Saul. I’ll give it to Tayfun in a second, but we’ve communicated, it’s really a third, a third, a third of our North Star, 800 million. A third of it is expense, A third of it is balance sheet optimization and a third from fees. So in general, that’s how you should think about the numbers we’re putting forth and how we’ll achieve that 800 million improvement.

Yeah. I think, Saul, it’s, the one area in terms of balance sheet growth, given some direction with respect to GreenSky alone and that will move the balance sheet. The other balance sheet items are likely to come towards the end of 2018 and into 2019nine. And when we get together in December, in the Investor Day meeting, we will give you a better breakdown of fee versus net interest income.

Right. So if I look at -- if I think about the 112 and the 299 respectively, it sounds like it's really more fee generation that -- at least initially than sort of balance sheet and NII.

The goal is, yeah, I mean I think at the beginning, you'll see a higher fee income growth and NII growth will probably catch up to a certain extent in 2019.

And final just related question, in terms of, there was obviously a big swing 13 million to 112. Just the glide path, should we be thinking that’s later ’18 or earlier ’18 or any sense of just the glide path in terms of when that really starts to kick in and move the needle on your revenue growth.

Yeah. Many of these projects are longer term projects that start to provide the bottom line support. So it is going to be more back ended than front ended.

And your next question comes from the line of Christopher Marinac with FIG Partners. Your line is open.

Thanks. So just want to go back to the improvements on the portfolio and the quality of relationships, et cetera. Should we be seeing some loan pricing improvements the next couple of quarters or again going back to the North Star improvements that you outlined in terms of what it captured there?

Yeah. So I mean, first of all, I would tell you, we were pleased to see loan spreads actually widen on new production this quarter. We continue to stay very disciplined in terms of our pricing strategy and overall relationship strategy. I'm not sure that I would count on that type of expansion on a linked quarter basis throughout the balance of the year, but I do think it evidences our overall sales force’s commitment to building out relationships with a very disciplined credit pricing, but overall commitment to relationship pricing.

Yeah. I think, Chris, two factors that play a role there. One is the exit, especially the credit related exits that carry a higher coupon, so from a overall portfolio yield perspective, we are very pleased that we achieved what we achieved even after that and then the other one is the market continues to be very competitive. It’s difficult to be predictive about the widening of spreads.

Yes. So back to John’s question about loan growth in those first two quarters, if you think about that $900 million that came out, there was a large portion of that that we would define as leverage, higher coupon and yet in spite of that, we were able to execute in verticals and in areas where frankly we've been able to largely offset that.

And your final question comes from the line of Matt O'Connor with Deutsche Bank. Your line is open.

The expenses came in a lot lower than I think you were guiding to a few months ago, I think it's about maybe 25 million, which obviously annualizes a big number. And I'm just wondering is that realization of some of the efficiency savings a little bit sooner, is it some of the fee revenues coming in a little bit weaker, kind of general lumpiness, just help reconcile the expenses being much lower than what you thought a few months ago?

This is Greg, Matt. I think first off, we'd done a nice job of managing our personnel expenses and really focused on that. Also, the other areas of non-discretionary line items, we've been very myopic and really going out to what we see those opportunities. We put the pedal down, so to speak, on continued focus on vendor management, information technology and those areas. So we feel that most of that improvement really didn’t come from a production perspective, came really from our focus on improvement in expenses and the organization is well designed to go after these opportunities, we put a lot a focus on it and quite frankly some of it just matured quicker than we anticipated and which is encouraging, because a better execution and a better credibility to execute on these plays, so we're very proud of what we're seeing right now that’s mostly on just execution initiatives.

And there are no further questions over the phone at this time. I'll turn the call back over to Sameer Gokhale for closing remarks. Thank you, TaShawn and thank you all for your interest in Fifth Third Bank. If you have any follow-up questions, please contact the Investor Relations department and we will be happy to assist you.

And this concludes today's conference call. You may now disconnect.