Comerica (CMA) 19 Jan 222021 Q4 Earnings call transcript

Good day and thank you for standing by. Welcome to the Comerica's Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Darlene Persons, Director of Investor Relations. ahead. go Please

Financial Good Commercial XXXX Regina. will welcome Comerica's Executive Farmer; to our Officer, Chief Thank Chausse; Peter Melinda conference morning, Sefzik. call. quarter and Chief Curt CEO, earnings Chairman of call Jim Participating fourth Herzog; President, Credit our you, Director and and Officer, Bank, on be this

well of and release During our expectations. as Web presentation slides and The from provide additional this results Web presentation, details. Relations SEC's Investor we the the of will should our in forward-looking site, actual comerica.com. This materially risks be conference in are press be call contains section referring uncertainties site, the you cause on as vary statements, to that can that slides, which regard, to mindful available and

as and in that into Forward-looking any update our the Safe two, as are release factors statements. of SEC the actual to of filings no with which undertake differ. statements obligation Harbor date speak earnings the results we well to to call can this as only slide for statement Please refer forward-looking and cause today's this presentation incorporated

will turn begin slide over to the Curt, on who will call three. I Now,

joining our proud of year, the morning, everyone, and opportunities and I'm incredibly XXXX needs colleagues, communities. thank you provided of was commitment another the Good our extraordinary unique meet call. for which to and challenges our team. customers, of

We round customers, the $X PPP PPP pandemic, were and challenges our over to the accomplishments the persevere in while X,XXX a more for way. customers. continue We of achieving than billion second the them through through there lifeline were many loans, again service, loans of many supporting process. navigate high-level providing to funded along we the a of of and

have businesses a $X commitment pledge mostly demonstrate three-year to loans small we repaid, As the our Also, process. further over to billion these a to been through lend our to forgiveness XX% communities, of of year-end, made period.

of engagement providing values employee marks. our and strengths annual our respondents was survey conducted, among top XX% favorable Comerica's Our with out, stood

our the well addition, team colleagues, arrangement what flexibility to response colleagues a their of out benefits, of for time and as matters hybrid the split pandemic office XX% excellent. In listened many provides colleagues work members our who was our to to additional our as and maintaining while home. This We agreed rolled strategy. for our COVID-XX could between relationship-based our

and strengthening we our difference. environment, significant issues has well talent and and a colleagues, governance the and and inclusion, serving us communities. equity, history. throughout in We for can underscores Office to protecting strong council key for bring as for the Also, been a reports preserving of specifically diversity, meaningful and our best feel established the to we the directly company, dedication retain and customers tools office have and market, our impactful Recently, labor under that one the our social, the even are our me, umbrella. most ESG The Responsibility attract those we most environmental, our ESG in strength and which make which culture together to as tight defined to Corporate elements an

We risk we started the in measure corporate Best Most We a preliminary Forbs' to and to were levering have responsibility in our portfolio. by framework our to Companies, Once we analysis has commitment recently for addition, In Responsible of serve. commercial develop satisfaction climate XXXX again, high our in Employer provide recognized. lending areas and our experience America's listing included XXXX Newsweek's expertise Women. customer been

colleagues greater customers and Currently, the core modernizing our delivering empower operational services plays process our customers major a to we are our in the drive platforms of technology In addition, better. serve more than require. to our excellence in colleagues and ever, role

example, for systems. to the servicing customer leveraging has off commercial we our project For our customers, relationship upgrade customers digitization loan are to us. essential a to easier effectively with are teller refreshing our kicked throughout. of executing foundational focus critical and center do helping Also, history journeys reengineer Comerica have make business rich banking colleagues and tools platform, This and to our communities, it strategy. we banking to re-imagine is our and

Average highlights. deposits Turning produced to four a share, of to provides results, fund number per and future in excess slide providing financial solid businesses, of earnings loan a supported We liquidity performance growth. grew few our XXXX XX%, while significant record $X.XX.

total an released we average Credit quality result, billion, was a to assets all-time reserves. and high. $XX increased As excellent,

equity Our by we average generated over $X services, Relative excluding fund decline middle dividend, strong peers. among estate. large trends and as of of appreciation return per attractive five energy increased the well With share $XX. recovered a as dealer provides had commercial most constraints, throughout loan entertainment, market highest and our to our details. environmental areas, one book national a we Revenue Also, The specialty supply value market specifically to including than shareholder Slide of in services, due XX%, our further XXXX, we real leverage. several billion. total strong growth in was sector year, growth offset a PPP, the positive and in had reduced increased as finish. to the services

customer of year, to underwriting Credit generation. our a cost by record. challenged culture. broad-based, for by interest careful reflected operating a in was greater net compensation XX% with the tied a were conjunction performance excellent evidenced portfolio, new favorable metrics conservative a was higher as revenue increasing and ultra-low income rate environment, net non-interest Non-interest growth expenses and selection, to diverse While reflection income recoveries the

we summary, and X% As ROE a of shares; over ROA returned capital of X.X%. an of XX% $X.X through or strong generation, an to what common of strong result dividends total repurchase performance, in billion a of X.X and million shareholders the

generated We slide earnings outlined six. on of per Our fourth $X.XX quarter share. results are

and and grew nearly declined to PPP balances increased middle as cyclical Excluding $XXX $X Average led deposits seasonal $X over banking. the about corporate average mortgage factors. banker billion Also process loans progressed. PPP, billion. million $XXX forgiveness market by million over due declined

revenue increased an of exceptional XX fee technology in PPP, as we reserves. support and in was common revenue and reflected generating and million growth Excluding our result released people our yield. loan income. Also investments repurchased to and quality Credit maintain Expenses robust we activities. dividend shares attractive a

strong year. expect to economic metrics relatively We this remain

level. in Our XXXX. increase our believe Michigan primary Chief California, each Economist perform that over real should Texas GDP X% forecasts above markets We at or of and to

successfully future. turn And the about will stand detail. the review over the to more the now confident over Our Jim, and quarter customers the past call and today challenges I'll colleagues navigated have and more two stronger who in years,

Thanks, Curt, good and morning, everyone.

excluding middle decline was million in over mentioned, growth solid we was market, relative just in quarter. Curt up as seven, slide again long PPP several $XXX businesses. on The which had third once to general the loans, the to largest Turning average driver

In exception. million Partly we loan addition, large this Average corporate year seasonal in mortgage relative dealer XX%, nearly balances. pieces. loans the declines up offsetting growth increased have this national up over December drivers $X.X the growth on take December relative real in PPP average of to $XXX despite or This that to $XXX the million. end and now seen banker billion no we a the This same end reflected was period the loans helped loans. to November. $XXX was million in nearly Historically, estate. was and in moment strong in increased provide commercial saw million quarter, a major third drive detail essentially I'll decrease and $XXX

commodity Higher part We distributions M&A drivers. in corporate continue inventory and resulting general are of working to positive see market banking. levels prices increasing capital trends needs. are and rebuilding in or equity also middle dividends in

is related levels. in remain some some reflected historical included cases, mainly billion. headwinds commitment disruptions liquidity dealer national small rate to there the our excess about chain can extraordinarily increase of and in overall, run typical temper in are loan remained which growing and relative floorplan our services increase pipeline The in to optimistic customers loans, low $X volumes a borrowing. supply However, which But and that

We declined end of over seasonal a of one from at XXXX. of decreased the supply slowly cyclical refi will two as Loans resolved factors. as record up well after boom and the as slowly to pent the the rebuild as wind down expect issues are have result demand banker Mortgage levels inventory levels next years satisfied. reaching

is However, space this XX%. purchase was we has average remained activity real given Commercial that should downs. significant mix is in therefore our pay and than estate strong by while impacted fare industry the others of purchase related XX% better

basis the client the the four XX corporate points at average utilization $XXX middle our strong floors commitments in commitments including steady mortgage However, and rate The impact the decreased XX%. from million and rates other and banker. maturities basis and the points as Loan fourth pipeline loan by points portfolio portfolio. the as lower offset portfolio swap as eight yields increased quarter. market partly dynamics by in production held banking for whole with increased basis on a of loans as loan led such line and well mix loans, shift Loan PPP from remained

with an monetary details set nearly actions. all-time along again cost only X of of The continuing was $X.X growth basis we've our due securities This increasing X related and As seasonality, of markets accounts. total Slide derived basis points. deposits capital various average solid billion to from X our to low held on profitability, non-interest-bearing our funding portfolio. eight, with interest-bearing on slide three record fourth hit activity, a points, average steady quarters trends quarter shown seen at costs and deposits growth customers' the provides

size fourth We yields the rolling to slight excess the with rate continue XXX of total liquidity securities rates X With points, the quarter-over-quarter. resulting durations portfolio MBS portfolio. in declined our the average income securities some a XXX headwind securities deploy yield off in years had increasing This in the purchases risk to increase basis mitigated by and of of of basis X.XX%. about points. over quarter about of

asset deploying had to achieved from the In the swaps. and securities this reinvestment is can growing Our any part, helping added benefit be of on excess by yields pressure offset liquidity gradually maturing goal our This to a lower sensitivity measured opportunistically at pace. revenue has reduce book. prudently through

margin income point The XX due net had in points as excluding impact. a to PPP $XX billion, interest impact XX, declined to in excess interest $X income, basis decreased basis income, mainly increased which income PPP increase million. had liquidity, basis a net drop as $XX well X which Turning in slide point XX an decrease interest large million a

the in details, and as the income and a floors impact maturity mix such As dynamics on from aside portfolio. putting as loan swap loans the PPP loans rates decline stable, non-PPP was as growth other a as in shift the in income, far offset interest lower well

XX basis size extraordinarily gross on negative impact were had margin, mentioned, the the I portfolio of at that deposits heavily essentially $X yields, a million balances basis impact average of lower the added the nearly $X.X impact and on As offset the increase in XX in the weighed point the $XX of and points. Fed an with a at increase billion securities margin high billion

as as $X million remained far another is outlined As slide declines net of our excellent, on metrics XX; of loans. criticize quarter credit, well in including non-accrual as and which recoveries

million. economic some Our reduction allowance forecasts, losses a layered of for degree economic a credit with to $XX in of sustained loans. our competence Positive provision was resulted favorable growing portfolio and uncertainty in X.XX% credit migration, of although

times. X.X to increased assets non-performing of coverage However,

the and disruptions, our Deferred and with offset foreign increased Fiduciary is base outperform. We level and increased market virus, exchange During expenses the income the million from $X second income given and performance. million Derivative growth we Non-interest our chain record million has differentiator grew returning was billion labor derivatives. and $X comp, our energy almost business zero continue trust stress increased continued in potential and equity in XX. increased broad rate inflation. and to will $X $X with been interest activity on slide vigilant the cycles, omicron quarter. supply to relative quarter's from believe as remain performance trading third which a strong hedges, on constraints to credit outlined income we customers industry key

fees strong which quarter syndication an $X Following declined were lending million. third fees, high, commercial at all-time

government benefit waned. expected the card activity declined As state programs

are of However, income pleased receipt dividend Also in strong a for quarter. In was increases primarily very we commercial to of record year third fee decreased that productivity. the and in this by merchant capped income. due which annual the another total off quarter, the most with summary,

offset the this increase quarter. as non-interest occupancy. As seasonal in slide XX, which tech shown million labor well were short, insurance $XX and in included comp, staff on in as was expenses deferred higher income up the In and

salaries and as the $XX million. far benefits increased specifics, As

mentioned typically year-end severance costs of and as competitive as offset that Also, impact number incurred in technology we bonuses, following projects. mid-cycle ensure that expenses related a deferred of we in performance-based best our and and retention we additional do they quarter million labor completed insurance. partly As staff by increases, future lower labor $X as costs, increased talent work expected are fare to was the just This incentives, I we have at for tight related a very levels. market. needs elevated third the to comp

other and expenses closing and million, which related addition, in I activity, increases In the strong losses, disposition all well seasonally operational losses, see are of $X legal as as expenses. captured higher, can also loan year-end weight T&E, primarily to asset

position to are maintain our key combined XX.XX%. investing share estimate our capital growth Slide people, technology by X future in our strategy. in a on expense continue for management. we relationship CET resulted to Loan ratio as XX in an decrease growth provides to details with We which of discipline and banking our repurchases

loan CET X to our focus as targets. We capital closely monitor generation trends we continue XX% and on

addition, competitive have we dividend maintained In a yield.

shareholders. to use support As priority providing to while an our return always, and is growth, customers capital our our our attractive to drive

balance Before interest gradually that end with turn benefit models, fourth sheet. an the At outlook, provides over rates we of which rates forecast a XX% estimated the in year The model slide quarter, over annual we standard net months, million greater rising as to will assumes income. a slightly two. dynamic the XX rising interest rates and basis net overview or sensitivity be increase interest $XXX in XXX income of XX nonparallel rate to the rise points, the benefit

fourth deposit Our moved quarter, higher the in growth. extraordinary primarily asset to sensitivity due

And goal likely asset gradually over rates pace. as to we is our allow. Our rise, reduce time would as the sensitivity market conditions pick-up

remains However, alternative cases as the various sheet scenarios, all well-positioned rising our we for very see provided you in in balance have rates. asset-sensitive

Our on with XX challenges. change supply outlook labor chain XXXX a improvement rates and in is strong of gradual assumes for and interest slide and economy no

the in by continued to normalization a from We to of mortgage nearly refi the expect range, belief volumes a Increases average loan on decline growth loans. as for business businesses are in chain is the expected a supported basis be several digit and continued a outlook partly and lower in and national PPP supply slow mid-single PPP issues. This in robust every year-over-year offset a growth. decline rebound dealer of excluding banker result our economic due by pipeline, positive momentum ex

expect we in climb income, quarter, commercial the loans, net dealer. And billion to the far Putting remain XXXX with income lower modestly the relative be dollars be the to aside large PPP expect to partly related the stable will the future. quarter. is be positive rate loan floors deposits driven as growth first average a Due shift growth by to by we the repeated. near portfolio. offset to lower in do in As estate was and major driver the and elevated loan on believe is by middle seasonality corporate mix from interest average $XXX fourth far as competitive quarter benefit loan first real that market, expected and expected banker for in loans pressures will and mortgage as a be dynamics. yields offset lower not We to

by impacted two The days. in fewer first quarter be PPP lower income will

any For simplicity, changes. assume rate this Outlook does not

offs adding opportunity. points. we driver or a range quality the for to to as income Furthermore, end Therefore, basis interest charge rates XXXX. sensitive our However, are are portfolio rate are a Credit trend swaps previous in our remain expected begin the key XX highly to I net to expected rates in presents in XX of is additional lower to strong. to a increase movements. as larger-than-planned rise, slide, discussed That of normal securities

inflation the we labor muted, current to the the well issues modestly. path, of remain as allowance constraints, the expect Assuming impacts chain as continues on continue and economy supply declining ratio

highest non-interest strong very was far the income category. and nearly As record every on as XXXX in included performance

unlikely compensation. XXXX including derivative favorable and line CVA, income repeat items may are stimulus fees as levels Some to activity, headwind quarter. These related card related such weren't a be first in deferred the also in

brokerage. However, we several service charges, such expect and continued as solid customer-driven performance in deposit fee fiduciary, categories,

inflationary well market and the which expenses we continued this are as salaries, which single digits; as We includes development, impact expect number on and low in investment technology. efficiency, a to Also, as T&E, in of increase items product insurance. means focused line pressures driving such

expect headwinds We year. our expense by normal for be $X performance by note, offset these levels. the resetting partly Of million improve to to will compensation pension

be from compensation by in First performance other and and severance as in comp, such lower, quarter, offset expenses are elevated staff are levels quarter decline to advertising with comp, expected that items in costs. expected deferred stock annual insurance, and fourth the to more than legal, as seasonal the items declines such decline

We tax rate to expect be XX% discreet XX% the to items. excluding

monitor of indicated our as we slide, Finally, are the on I previous as CETX growth on target loan XX% trends. we focused

turn Curt. I'll the call Now, to

Thank you, Jim.

growth, a and honored strong shown we XXXX results. record pipeline. our well my in team. along opening with commitments, an hardworking was and Also, in good excellent in ratio I'm deposit returns. such Many and talented, loans, as momentum, committed, year, credit remarks, was resulting fee extraordinary up, produced and said steady, lines as produced efficiency I As increases income quality. we strong held and Revenue have work to business

building are we relationships. long-term experience, and expertise their With

and provides geographic emphasis was us evident which stream, including opportunities, on We this generation, more expansion presence. are Southeast our Also, significant our past revenue balanced with diversified footprint year. growth an unique the fee focused of on delivering a

products digital We on continue to ongoing in services, will make expenses manage carefully journey. invest we as progress and our our and

strong credit long-term continue disciplined and base These value. us key culture capital strengths well. for our Finally, shareholder creating to provide the serve foundation

now, time. we forward XXXX. well-positioned We you your to some in And we'll are take for move as happy Thank questions. be

first with come Chris [Operator Instructions] the McGratty from line of question KBW. Our will

Morning, Chris.

we question. the I on end seasonal, growth at you was of morning. the Thanks. the pipelines And end-of-period that than Thanks growth fourth is the I quarter the understand the can but loan could stronger to hoping good notably average. I'm outlook. loan speak year? for Hey, the start noticed

for Peter. a is fourth for it about think I through this period-end good a came with quarter we've years be history. does Chris, this compared second-half the jumping the bit say And although good Yes, levels. continues from little strong. The really it XXXX, closures but the I to quarter is had was the to just really exceptionally past. will of normally our pipeline good pre-pandemic feel off above down quarter good us, that was really in still year,

outlook, And so, the as we this good at year. we about stand said in in point feel we really where our

deposits purchases, the continuing the And of you times to the mentioned in in securities down your to a interested prepared upside, maybe to if the the take you a rate understanding curve? kind of to grow book layers couple futures surprise I'm pace follow-up, the are sensitivity. in remarks investment likelihood

Chris, that Jim; to Yes, morning. question, happy it's good and take

Morning.

a in of just could days. last a rate go. We've ways quite of You there different seen movement the bit know this what; number are couple

In may do where rates to take we portfolio. the pick our assume securities your in outlook, modest So, increases just go. as

to somewhat willing what step want assuming in it But on of are whether products, we'll we have. or that off terms do observed, $XXX to go as less it to per just potential to outlook that's We're in certainly, be increasing and maybe that we'll up, to step quarter. by with we do outlook. million, the something securities, baseline a slightly balance And the interchangeable actually an That see choose up, to choose got swaps than extent. rates again, that really sheet, cash be those have step take increasingly rate by average, may this been you them with higher. up with driven about will As we we've that

down and responding it So, the really comes environment it. to monitoring to

investment And then like which environment? manage you'd in the to of size is of there the a portfolio max this

highly goes might That's dependent. now a going what of in economy, observing of to balance in do what sheet short-term on There's we terms are on with the fed And the longer-term. right bit little and with flux be both its liquidity long-term.

for our call We going and short-term, seen, really it much will we're at is to How some or do to But that. of is we grow option have in indefinitely. a grow the ours room tremendous don't we amount to it. overall point, limit limit, based the to securities system think, to we off on see in that concern just of room hit a want so, make and remains there inappropriately And we because it's if on deposits hit there we observe of some the But the some the liquidity that capacity again, type of of not we to grow be put have and where swaps going. in that. terms book always

two So, market those instruments. be and liquidity again, overall interchangeable it'll And we'll monitor just conditions. between

taking questions. for thanks Great, the

with will come the John of line Evercore. Pancari Your from next question

Morning, John.

Morning.

you end On any any that change balances of the to you the growth saw see the in beginning year? in Did this borrowers? of your loans, represent given much to LIBOR-based commercial how period, of end-of-period of out of that SOFR growth, on loan again pull-forward of type commercial that the

Peter. John, it's Hey,

your to think there. question the I or is to SOFR causing I LIBOR necessarily the no. is, from in increase any changes short loan don't shift demand think answer

their and decisions and of that of LIBOR to navigating shift their use make sort separately. SOFR borrowing continuing I for is think the community to businesses,

Okay, all right, thank you.

Yes.

forward expected that we high regarding sensitivity, lower sensitivity, I'm your asset particularly get or, now questions magnitude you that certainty separately, around relatively way, fair I And maybe in some from have getting another amount regarding investors timing rate -- a -- just of the fed of can asset for hikes. your sensitivity pulling and then rationale of driving

that of So, lower if pulling in you given just rationale could forward sensitivity of that? walk through asset terms the your again driving or

John, it's should happy a hold see I I and interesting, see saying, hear that. some to talking and some and equally opinions in advantage to And Yes, I it's variety Jim, opinions. moving off, of "Why investors aren't say, of analysts, both you you faster?" I to me, do will And saying taking divided. this those are And

answer measured over we Our some and in methodical upon homerun terms shareholders and you that want extent opportunity to the that how costs of look to be obviously is you're short, costs hold hit we medium-term. higher carrying day, do To or rates this. for off imposing that there's that

of. we're something So, that's very cognitive

We also they and at any so black several swan events decade-plus, up, will last and the go that can rates with guarantee time years. that turn no know we've there's seen, from the over perpetually the on, last

because to move either, are not rates going we we're the methodically, move at to and could that are cognitive all very higher once so, but And we fact go higher. going of

So, consistent we're we sense. and a steady makes pretty at to measured your We've moving this, on progress again, moving but been think point. pace,

of sit wait either. the leaving are could take kind out-quarters sure We persistent of on homerun rise in rates. going and in sidelines not But what we to there a day some make some for to that the be advantage we're

consistent, making really So, and of about we road, measured good the being progress. feel in just middle the

you I you hikes give could traject I Thanks, on the if but us if just earlier, betas as will sorry And Got missed one this more, could get year? how just Thanks. it. your your ask through think these we Jim. thoughts

there. sensitivity of saw staying sensitivities a that the say rate when last the chance we or now. XX% have right liquidity at started to see it's think alternative And Yes, you fair going with during good on what those in consistent interest know, we beta actually, rate I have you That up. that slide. more be system pretty the below cycle would there's And rate we that

performance. replicate surprised be actually would I don't we that So, if

betas I we'll first few So, think the behaved hikes, well be from very will monitor for there. it and

Got it.

Jim. Thanks, great. Okay,

you. Thank

the next Your Poonawala question line from come Ebrahim Bank America. will of with of

Ebrahim. morning, Good

questions Good Midwest? any this around also supply versus don't if chains Texas you outlook big can how with some disruption loan ex you emerge is morning. of I wondering you're I from And growth. of any seeing across additional the sticking California that year do happening different guess much any was Two least just comment at versus there. One, easing that the COVID? on markets, depends growth from provided should we like have to Or feel there growth extent? disruption what

it's resolution way Ebrahim, we're chain that don't think the I'll around I second one first. another take Peter, outlook. expecting one our necessarily or supply on

much of that year. part But what on we indicators of the outlook communicating I think positive good I we're as regardless it's second you we don't going So, feel know to there the some are although about of on half you're chain, what's is seeing as in supply outlook. the particularly in

feels and in in really, of the great second year, of especially as the all markets good year, year, the half it go, three strong on and far markets, the quarter. all sort Texas had Michigan, really fourth really came As in California really

markets all think into I in think I of very are And each going 'XX. sentiment is well So, positioned positive, three customer those, the so…

guess I And just more it. Got follow-up one may strategic. be

As scale have, you competitive sizes. in doubled to recent of your of M&A have to have you that penetration. that of think the and market peer us could right, their tripled engage years, just in positioning, just a M&A and terms look through large appetite or them lot set, you disadvantages through When talk about your relative over gone asset increase size

of that? about you thinking are Just how all

us I'll Curt. really take changed question. has Nothing for changed. Nothing is that This has really there.

growth. really Our model has banking relationship built forever on and organic been

the we and for more entry look sort the some growing that right talent great We we had our think And and today opportunities needs we've feel to so it to I to expand to for continue And our manner. our we California. really example, And But very us technology, us so. and got we to to markets, it be in makes Texas along we've for into really in size, grow where we attractive the helps if the in very some But we've Southeast. possibly organically, Carolina have got or customer do very continue the speak, we're especially we've do expand past, we'll capabilities. fee in operating income, basis. franchise are to small North sense for nimble, right like a opportunities like of around organic think to enhance and are our not, and we've way, any an we'll tuck-in great opportunities markets us in strategic place will fast look for looked feel markets, opportunities got that just makes really in invested on scale, do meet we'll M&A patient activity

Got Curt. it, thanks

of Your line question Steven Alexopoulos comes next from the JP with Morgan.

Good morning, Steve.

on while is drawing their up still borrowers Steve. balances quarter, loan credit Elian holding down first deposit their question elevated on $XXX middle on draw lines million or market before general Good above cash? middle This on Anthony using they credit these growth, My market so, their for morning. you this see did lines

Anthony, it's Peter.

growth market maintaining they've I've part side both of latter your said seeing good in borrowings middle in borrowing seeing we're and on to in or liquidity. deposit your continues middle I pretty I think and we're past, think general second good to be still good the market access optimistic but growth statement The middle capital in there, got company and their market making the sure average

in quarters and of that. been seen we know be has we've seen shift wondering is and something strategy so all to this I are have now not of us So, there that kind going several far a

to occurring. be continue both So,

and data center last investments Okay, do you of slide follow-up investments? in made for invest new these you my to a you three, in some anything Are you're year the then outlined on targeting Thank or including technology similar as year you. modernization. expect this areas

more certainly I some emphasis see and instance, see there best those up sets, towards addition, our for you that Yes, already do I Anthony, ourselves where maybe making treasury, continue. my think technology more But we we see systems in higher speed, the customer backroom focused also on it's those as there. in our listed employees are more to in of a do too, investment see that the product, little the are efficient. We'll But to of for proportion trends bank shifting Jim. sure we'll the making go leading product in technology to as operations, we're But be want business. sure application script in mentioned the customer bit especially

products. probably of some see see into continue. that additional these you'll add leading again, customer shift edge some I But trends of So, kind digital would you'll same

Thank you.

the Your D.A. of from Gary next comes Tenner with question Davidson. line

morning, Gary. Good

temporary that decent I good forward pull through morning. would get off think Jim, of of at does in or the paid of kind kind loan your a corporate are average remarks, Thanks, mentioned quarter, to fourth the expected represent you be middle flat large in New balances, prepared quarter whether year-end Year? just that first early balances amount that market in

seasonality general called typical actually it's more just I Gary, of customers. say of our would

could a of be Now, you mentioned we they're types but the every piece it, year. those things of see things

the quarter, generally you if went first the as back as strong you years, fourth quarter. not think see I XX

capital So, it's a lot in got things, our of their quarter. models the needs funding and element and of business an of first customers overall inherent just needs really

a seasonality, really of just So, say. but would number overall I things,

greater quarter. fourth the Okay, than and the that's strength kind of usual in even with

right. That's

you is part maybe products from that? customers that any kind seeing that other of follow-up comments really, of technology. referencing Are of XXXX? digital different then any And around you Okay. were the of technology, of of flow payment adopting newer and around on kind we've going into terms a kind your just pull decent kind seen blockchain of banks the networks announcements on in And

I on short think really no, Blockchain of it. the answer Gary is Yes, the not part technology

Our interesting as focus, see when mentioned. on possible talk we're investments I be to things will watching really Jim digital and suspect for Blockchain what our as do we time, be the making around that, customers it about talking it's to about business. customer things we're experience and over so will but how with not unfold forth that easy is

might of add, that we early technology. payments I Gary, Peter, are though. adopters

Zelle not are there's we're real make that receiving the adopters were And with adopters we demand good but and industry. the positioned place, sure lot that leverage clients. had are capabilities our and of. So, for or to time to a for sending the our we've of of we platform. early one payments have success But in of yet taken customers in care And

Great, thank you.

Your will from the Wolfe come next question line Research. Bill of Carcache with

Bill. Hi,

interest traditional on to technology to interest something with customers can digital in it have your and your for expand investing the Do morning. that you in the level digital to you'd without for have high easier leverage Is with any your around tools a to through platforms you. channels getting Curt, need where good question make do footprint business in Hi, pursuing? point any to wanted you follow-up M&A? comments I on that

we much need and banking, that I with where the Yes, very and and help banking enable demanding some customers that a right and certainly lot expertise advisory digital bringing and business the business, to be consumer an commercial is wanting customers. our heavy think way the expertise is about enabled a about When still need model our of products credit both are technology, services conversations commercial and based focus based to relationship to we have client we're think of digitally overall expertise on place is to We that challenging in it that services in sort have need things of still let's pretty it's grow some institution. on application. revenue digital. of we driven heavily acquire was as line and model human to that to top it's capital talent million say but and bankers allows digital an management a large the of us the other we skill what and company, has treasury $XXX part our really But the and relationship; do side the support using you

For right markets we of industry doesn't New nationally on industries it operate are our Seattle, Boston, mortar in have having cetera. people example, many brick today. And et as Washington, does verticals, much right our Chicago, North D.C., expansion and be on places. into national the based the York, different as Carolina to And many

sustainable you you. regarding simply can the salaries That's Separately, parse comments is out much your very comp and us increase how I for helpful. Jim, to versus expenses, that in a think do the of performance expense the rise? increases you much growth to are level And outlook how digit rates is on related as wanted of even follow-up low inflationary? higher single Thank

where where part of for single employees. and be we a all we've next something we for good to to too, one think, a for talent things been just competition than low are the setting challenging competition forecasting here, for expense not inflation a years, major comp where and beyond so-called maintain, inflationary really higher, is to we year, morning, low wage comp, the tad Yes, keep since probably think in that the while see expenses, really is And low It we'll I that it's would a mentioned expense the really salaries single trends that performance I Yes, items. going don't do goes I us strange a will are earnings higher large line wage call. normal Bill. but things digits, tad that for fact the if last the for digits for single in performance the be but depend growth goes. had resetting we to not It's been digit probably you just benefits couple see and know, continue, XXXX. allows go XXXX. if inflation so actually as and

Got it. you. Thank

in could pronounced on as consensus there just we time to betas of are remain more last Lastly, Can be a your little variables seems happening runoff sheet following around you to low deposit bit beta if that? risk rate of as to saw but squeeze one, seems deposit that up sooner. hiking is thinking that cycle, balance the likely a commentary, frame about in pretty the one last are be I Fed how the this one you broad guys a bit

in I Fed much little they may spot. a unwind even an did see mind starting its the balance higher opportunity sheet it's more quicker because than than a from Keep last risk a as that time. the though

it take little a to stay will they even their But deposits it time unwind I that built back than were probably So, pre pandemic that do don't But the go in I know they do believe to shorter see likely a case unwind was as balance did higher if sheet. they going do if it's they level. to little up. they where entire balance this terms before to pandemic that were the worst going I X started. scenario a of years, X sheet they how they And

might to that back in going far. they're probably where get case, go liquidity the worst system not but you So, to quite started, we

combination meaning, spending, in of we've past, elevated is we addition, probably going probably pass do spending to to continue. staying sheet, it's likely which a fail, Fed really effect and fiscal In highly of and of monetary linked to the money activity at balance economy, the going some policy, level. what see PPP some the but and form did the fiscal seen multiplier it's in now that's

higher they So, stay not levels. what pre if than least to overall, were do deposits set I at pandemic

think. I might as see I risk as people that far see opportunity a unwind it quite an they and actually don't actually as don't as So, some it

helpful. Thank That's taking questions. my very you for

Welcome.

next line with to Capital question RBC of the Jon comes Your Arfstrom Markets.

Good morning, Jon.

maybe for seems provision Hey, us if on good morning, question how and do about to Maybe clean, everyone. that? you start the just for Melinda, with of credits want Jim very, us kind you like set the to get help but it's think a very can any that bar curious

going and levels the the we is we nice to we'll the start reserve had mentioned coverage portfolio Thanks seasonal comments, continue as we've see the unprecedented credit adding reserve growth, to metrics to expect thought sort level but the modestly is next in the our obviously, growth, to because ratio loan specific the at be couple is exercise what come expect for off do And we'll that Melinda. of ratio bit little each what really a his of be the to we'll And forecast economic last loan I going at time? little is? given reverse what see reserve they And point the go be What that the then we is start and that that accounting credit what very fact Jim a see some coverage Obviously, think a point, be performance this are trend positive. some question. through would continue level to like? a quarters. and some that that we'll see it'll over predict are quarter So, at looks said, of impossible general to this build, would Yes, to start which you'll year. decline little it's for down we bit, projecting bit that to

anything in terms of problem inflows, You're credits? of terms just not seeing really, in

The credit the very quality of to portfolio continues strong. be

least this are strong. All credit very point indicators, would at the to very, that at we remain of expect

handle But inflationary the This whatever of did, still us. and any high that level levels no reserve uncertainty again, comes of quarter wage very any qualitative we process on the segments because now and pressure, have some of omicron again, we give pressure, reserve right to portfolio just the at the signs use of would any however, et account us no, concern current cetera. material of for calculation that to

standard model, right? for that terms just the throughout you're it, ratable Thank is modeling, that year, Jim, just kind you so the of on XX, slide rate hikes hikes on of assuming that. understand the sensitivity four slide, in we

look right. XXX it would you be It's can bps That average. That's -- at that way. on

think as spaced. could XX evenly of it you bps for So, hikes

pull in if just if little and and you I us there deposit guidance anything it's it's so, us think NII there don't a bit in if XX% do is back rate you'd a on? gosh, If we current income, four from that million I said lower. at say, I so, guidance lower and that think deposit interest Jon? but net that's maybe you'd betas And the we the you another nervous, Is hikes, in beta? XXX makes will get we that, be pull anything Would back if think what, all case,

both rate the keep give towards was one I'll I'll take, one. The have enhanced is you very takeaway the the of deposits Yes, they one and really end the sensitivity fourth significant. the in mind put interest give potential year. by quarter you and to be

with the take to back will, closer as extent end sensitivity a think quarter. the saw what probably to in could up you a step we we those So, they third

just deposits go. see seasonal we'll where So, the

your little So a than year interest swaps we or net larger potential grow that that income. question put would at on the pull and to The to the some extent, have of ad takeaway. the of be securities the portfolio and the forward -- extent, to books, the Jon, from forward would within some we you think, least be actually first two, this the add pull more

So put, model. those wish are you and that a couple to one the one standard on layer as take can you

about bit last or thinking in of shift 'XX? mix grow overall sheet you balance Okay. the expect one, you it a size a QX. growth, in Is about talked and balance balance you do to are How little And sheet? deposits more sheet seasonality one just

been and have loans right deposits our deposits driving the obviously are these far deposits now. all balance than it's Well, less sheet, about

that's go. deposits So, be dependent. the highly it's where And question going really to a of

for sheet balance see first deposits money I to are to that Fed think But, money take things don't the primary time. it. there with here. are order some of affect like on rates go these then trail the in conversation, the that does know we'll I to sheet while balance and Fed two actions, the happen slip will be balance up but progressively will go start all because see Looks what market off we think as will rates will rates you to as sheet off up, the going a that's going rates hikes. slip One couple off deposits markets.

then they will strong fourth half than the will. level, first to if you'll matter change partway of of going a But in you're the deposits think Fed not come a be deposits quarter rather first quarter, And to would we sheet the the no as second the balance So, the maybe more much, down the quarter, the little seasonal strong. year, and see towards year, third going I say half see drop stay bit deposit a the it's moves through start what. to of

we to forward. sheet balance going is a concern not going funding So and it's think healthy a very be

Okay, Thank right. all you.

from next Wedbush Your comes question Securities. Winter of line Peter the with

morning. Good

morning, In would lowering sensitivity reduce I you've wanted consider talked the Good the capital. Curt. before CETX to wanted to some asset that past, target. about you the ask you of about

to just then, you and you loan lowering in So, the just of Maybe can better you're target capital lower just And lower near of secondly, target? need terms ballpark as consider before? thinking a buybacks? would about you capital you the how outlook what share growth, it XX% today for much

internal obviously of a discussion sensitivities and couple that I've is asset constituents out a the really overall with until the smooth that's some ratios, the years to means have be there that that bps But there. we the to question to little fill environment past target almost We their in of in board the But think preferred amount. same be and or of yet Yes, talked and views. room longer-term our would stack know discussion XXX determined. and targeted just really about one discussion capacity would CETX I status with. by necessarily capital bit the away the of lower we and of we that a for don't one

take we lower out. that do as more there interest has So, smoothed in CETX to that stream on mentioned the once past is that, but think come income potential, to we've

to us We to rate that's a the especially hasn't are going come. end the about be is But next meaning is income always yet. good, good be XX.XX%, really it feel capital I not growth we We're growth going several say loan hopeful. generation you if cautious to think about near-term very over I minus will rises. think the share loan In do more or XX an guarantee, very Yes, repurchase. up quarters. a net get We there's we a with in there. plus estimated consider the be of we where about And ending at near-term, ratio, to terms bps going to capital happened

both buyback. generation cautious to So, next share several And see we're forward. under saying XX% a a be going little be XX% little I you'll the over might growth the to loan And for headed we'll monitor on a environment us where going and little capital think continue to opposed over the as quarters.

great. and business? how you new growth been follow-up talk deposit strong And could middle lending has just wondering, differently one if quarters. then just last market just question, attract really coming doing about you're is customers, new That's few to much just anything I'm and maybe from

environment Peter it's from A new. necessarily Sefzik. lot customers, is know in that though model market, proving an anything we're disruption. that Peter, doing a in out is say new XX:XX it's itself middle do I of with think coming probably I'd and I Yes, don't our portion of

acquisitions You customers and from our we're of with have talent. banks in that seen reality both some benefiting and markets that is with

working of together well really, and coming kind things our those I Comerica. So, for favor out the all in proving really are think model that of and nicely

relationships rising relationship acquiring between From same of we're a relationship really that the deposit terms in terms a or I for which customers bank might and we've existing overall about the across beta of good is businesses. relationship, lines Peter I'm a split leverage there, growth. we in we standpoint, based some that that is say have pricing thing retail new some not customers add there hot even environment these maintaining done well, in standpoint, part we about. of our deposits, in would all either and key this we a to why chase you for three deposits of Peter, are mean based in These money, that are our reasons of pricing acquiring customers I job saying really talked The when business relationship performing tried deposits. of is from word that, not that see that do same it's probably is management other and wealth what rate

questions. the taking for Thanks it. Got

comes Moss of line next Riley the Steve with Your B. question Securities. from

Steve. morning, Good

morning. Good

on are basis following-up curious kind $XX.X that? in you have the floors, point XX around with the how points, those billion in sensitivity of rate XX Just money, give floors as to just some color basis

the they're monthly that, just of money, have can Yes, at rate Steve, subtract XX happy loans do $XX to Jim; are on that. the our We it's average an take in from most monthly you so LIBOR bps, far of billion floors of how LIBOR.

call So, a hanging XX it bps. around,

some in bit rate course, of of bps through bps dynamic to go of we environment. headwind well those being money. received floors. as terms XX mentioned see You'd is the a as But a the absolute floors coming of as going that's the the amount in be realized I on

to eventually think that that floor renders to likely I a out there equal the bit issue a of will LIBOR it understands this we're rates, extent the everyone the really moot issue since raises Fed of level getting. be floor

this think as Fed the is being moves expecting So, quarters. of challenge all the not a end that up at over challenge everyone's we may next if couple a

of you're of new then helpful. kind days these curious, we that's just in And terms purchase know to securities, okay, investment what Right, yields? terms just seeking money of in

risk. prepayment where of stability the going we capital quality to treatment, understand we're philosophy no characteristics, favorable our credit to stick buying Yes, high securities,

So, we're not we have. going to change from the philosophy

what are lot of really yielding, in week. terms a it's those last the changed In

So, what future the we'll brings. see

a the and day that at take take further were a or XXX. purchases that You much We in just up fourth week up we two. saw making a saw last ago, step just we saw quarter, step the in

it So, But the in quarters. certainly the and create nice months we're very for closely. monitoring us some coming to that got potential opportunities

much. very All you thank right,

remarks. for I'll and CEO hand the President over now back Farmer, Curt closing conference to

you We thank our really for to great a you in you our Have will interest And strong a employees word your each always, close XXXX. in by saying of performance again, a of to as day. thank for company.

all today's you for meeting. joining Thank

now may disconnect. You