Comerica (CMA) 20 Oct 232023 Q3 Earnings call transcript

Hello, and welcome to the Comerica Third Quarter 2023 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Kelly Gage, Director of Investor Relations. Please go ahead, Kelly.

Thanks, Kevin. to Quarter welcome Call. Earnings and morning, Comerica's XXXX Third Conference Good Credit and on our Financial Farmer; Chief be call Officer, Melinda Chairman Herzog; Participating will Curt President, this Peter Banking Chief Officer, and CEO, Jim Officer, Sefzik. Chausse; Chief

we the presentation, to referring well Investor in SEC's details. website be provide press release Relations slides, and the our presentation as slides will our will website, section are additional this During which The available comerica.com. of on as

forward-looking contains be risks uncertainties results call This in should that expectations. and actual conference regard, you from statements, mindful that cause materially of and to the vary can

Forward-looking results statements as harbor well today's incorporated for earnings to date Curt in can I obligation to update call are this And speak any X, the materials filings over factors available measures. into differ. actual presentation forward-looking conference this on statement that to on reference in non-GAAP this presentation, in Also, the Slide refer the the these reconciliation that website which to safe of and statements. I'll With earnings is that turn as that, measures cause we the call of comerica.com. no as only SEC undertake Please call Farmer. regard, our our of to you direct will

customer us repay maturing average of targeted billion. execution in in customer our enabling per per Moderation reported Today, FHLB loans decline Well, demand net thank share. you, and to grew to strategy exceeding income moderation or good you deliver drove for third $XX optimization quarter we billion advances. in $X.XX and $XXX morning, our call. a $X everyone. joining Thank of deposit expectations, Successful balances, million share,

of financial another excited and Our following compelling net continued very to recoveries. focus we that we with exceeded initiatives. Small a consecutive our strong fee quality priority, lending advanced I'm X-year modest our remains $X remained business Complementing strategic X quarters commitment. charge-offs ahead our produced results, net other billion robust quarter of credit income goal and announce on

our With our submissions a value time. investments growth volunteer program in important this making publishing sector, further for relationships. Advancing finance place and noninterest underscore acquisition first serve. Wealth and supporting Management, communities community business and deepening Ameriprise while over products we for achieve income recognition Achievements talent, development position selective investments to we we such our will on partnership report, small believe us the as within become the our objectives talent our engine customer services

technology these our of leverage to as customers of product We applications. allow banking better modernizing to legacy future our business our Progress to run the for as agile sustainably initiatives to to support enhancements enable vision we balance trusted partner. the us X/X approach continue off-premise towards a platforms our over strength

Moving to Success drove the quarter, income for our back largest of exit the Slide with trends. reduction Average new migration. resulting bringing competitive results partially continued deposits Finance. $X.X a Outperformance an loan with of pricing average our deposit customer even expense X. very expected and despite noninterest pressures. in remained expectations offset Mortgage interest summary Banker on quality billion income impact and increase loans balances from deposits strategic Net $X.X higher-than-expected the billion. strong exceeded to winning of of Credit declined

taking expectations. year, managed the care and we customers balance as our generated of we essentially profitability our ratio estimated time loan earlier Despite to returns create this industry of the further CETX XX% above our activity capital abundant Finally, our disruptive profitability exceeding events position an and over sheet enhanced liquidity, XX.XX%, target. enhance while

the the I'll quarter more in through walk Now will detail. turn Jim, who to call over

and everyone. Kurt, good Thanks, morning,

X. Slide to Turning

to The exit of Banker the balances. decline. optimization to commitments expected, Finance contributed complete the shift Declines committed almost We progressing and General business. customers, Lower as is be actions equity to in substantially nonrelationship exit average we strategic of by this still average utilization largely in and half Our fund year-end. important but within remain Mortgage expect concentrated Middle reduction services to and in caused to loans of we and climb from our to strategically higher Market loan yields but quarter. The elevated reflecting rates commitment rising as estate the benefited construction softening balances, this as continued commercial environment. growth demand Ongoing portfolio pipeline to volume. origination utilization, third loan of industrial inflection projects an in continued multifamily saw we reduced in to nature manage funding rate floating loan and in real drive X.XX% commercial were

successful our HA balances new the increased customer generation. added deposit trends back deposits as demonstrates exceeding that X Average and we in on year. earlier and diversified X.X%, balances Slide deposit expectations

Corporate after March balances Banking more both fact, California Market line Middle early In experiencing quarter diversification the in with and closed in QX. our concentrated

Considering the quarters. in As X modest our lowest growth balance decline mix the interest-bearing expected, the noninterest-bearing last success with deposits impacted in deposits. with deposit was rate denominator more a winning at down reduction, that trended by decelerating in

accounts is now moderating, a believe of the XX%. strong to nimble targets costs to to we deposit We needs betas XXX lower enviable and able weeks, rate and our base, profitability operating percentage have customer a pricing of and in basis drove source we cost-effective And with environment, a enhance a so our funding With to In we points, an monitoring deposits, more deposit increased higher as view stable deposit attractive. are an our profile of in closely balance than our beta remain competition. mix peers. even been intend recent Industry even uninsured while market. to liquidity customer nature resulting approach our more continue relationship providing deposit the competitive combined cumulative when efforts advantage, with

quarter. our shown X, to maturities strategy our effective deposit funding As allowed strong us of absorb and liquidity wholesale growth on Slide all contractual this

excess further cash coming to utilize reduce wholesale continue the in to We to funding expect quarters.

With positioned to balances at quarter. and prioritize light paydowns, closing adjustment. with declined the needs Slide million negative to portfolio have $X.X unsecured capacity very securities high-return better mark-to-market ratio are X growth flexibility funding trend $XXX significant a maturities, billion manage loan-to-deposit XXXX. Our in on in Period-end remaining to and funding liquidity we continued maturities XX% our for and favorably,

Although to dynamic unrealized to estimated nominal AOCI. the project treasury improvement and rate larger end. we remaining income we anticipated next next and and securities maturities net have lengthen in X losses environment years the XXXX, projected years. over interest XX% the burn is sensitive quarter over Altogether, repayments a in securities the off scheduled are This maturities X benefit

position, any need is portfolio not to and should anticipate sell therefore, securities income. our losses liquidity we our impact do enhance pledged not since to However, unrealized

ago, a over as Overall, our remains unchanged security entire portfolio we and transparency stop our maintain for we flexibility. as strategy management sale, providing available reinvesting year and full

our monitor regulatory we future impact to consider strategy on security will We the to closely consider need for rules final the continue as compliance.

reduced Turning the may to move balances. to million interest lower point. believe funding outperformed Slide encouraged by lower balances pace we were inflection offset income benefits to X. as be pricing income million, of We and $XX $XXX the and we interest deposit wholesale decreased what expectations. soon decline Competitive an loan closer yields Net loan of but in net

remained our and the management effectively rates asset-neutral. strategic are of rate nominally sensitivity, With interest we impacted income,

balance intend strategy the and Slide favorably our with interest XX a current of our to as dynamics, portfolios, position on very average we rate Slide considering and strong exposure basis interest minimal successful XX. XX, shown swap to sheet points on maintain time. By over on of remains position gradual highlighted points As securities rates. decline balance composition while execution Credit XXX for us in strategically sheet our negative our basis insulated managing quality

$X net net charge-offs of observed of quarters consecutive million. we X Following modest recoveries,

technology migration greater exposure concentration and including estate, rates more with leveraged continued real and credit loans expected, inflationary with life As sciences. businesses commercial in elevated pressures, to relative and

improved While an declined prior total credit which quarter, the X.XX% declined. the to in contributed allowance when coupled nonaccruals million our loans. increase to to slightly the the Notably, for outlook forecast quarter uncertain, which loan also consecutive balances, of with inflows remained loans losses nonaccrual loan mix, economic sixth $XX lower for of and impacted from

further our million, I $XXX deferred expect was manageable. we quarter of offset noninterest of million on our closely in was XX, Consistent with remain income most and On XQ. record proven compensation, highest Slide to third monitor fully quarter continue credit our discipline, $X decline. the to migration income highest reduced following portfolio which expenses noninterest contributing second our in to

income revenue. loan fees risk efficiency curve the syndication environment in continues enhance and income, activity future capital by markets capital management income impacted more time. based pressuring received in offset annual profile but was hedging our on will derivative of noninterest the in portfolio. benefited overall the rate fees position and our Movement Growth prior negatively the Fiduciary the in rate quarter. vary increased to hedge over than revenue Softer

may risk in Expenses real vendor over critical an to that from the calibration a $XX large sale and sensitive that balance as was these Other were our on expenses, in modernization organization regulatory-related estate, we advancing $X offset due believe and returns profitability wealth from assessing technology expenses are fees Slide and rates the litigation increased efficient $X $X and some and that time. we of continue million. temporary credits pressures disruption benefited XX remain quarter management impacts growth. are managing terms Salaries and of million, driven initiatives. future investments first staff by from with increase deliver management by processing interest increased We consulting to and the strong trust certain million of for conversion. in to the to committed offset We we to up increased operational losses. augmentation, so of industry period million are and labor Outside benefits strategic platform opportunities

Slide target drove from further XX.XX%. position. and our [indiscernible] an capital our loan profitability lower Capital to CETX estimated generation above our XX highlights solid balances

of and on the quarter. losses losses impact quarter September XX we X.XX% swap the portfolios, in impact third Based ratio of from XX% common basis anticipate in underline our XXXX. negative securities end driving includes increased a our curve, rates Our reduction point Higher by the forward a equity a negative AOCI. unrealized tangible XXX in prior approximately more

is apply and to the Although mindful capital asset the to it we prudent regulations not our remain us based of to do favor evolve. management as feel conservative capital a approach changes size, proposed they on

XXXX expected selectivity a outlook economic to is quarter in average would XXXX Mortgage continue balances. be assumes full The and decade. strategic loan significant rate XX of growth which X%, project growth environment. in increased and year loan fourth annual on We is Our impact of Finance no Banker change exit the highest to for Slide our

back bringing customer of full the with deposit Our XX% success average expectations projected in balances. prior and year over new winning decline improved deposits

our cash exception from the exit to and in reduce the the deposits expect modestly remain flat of quarter. maturing With utilizing the we impact excess Banker Mortgage fourth relatively to deposits, Finance broker

Our does quarter but a upside benefit to from we seasonality, than if seasonal provide assume did not fourth see may patterns projected. that normal significant a more more outlook return

income of growing X% record deposit Competitive change quarter X% record loans interest to expect year over another net still We a in net reduction mix to are interest drive income. year's pricing, continued last fourth and in in a expected results. to X% XXXX, deposit X% decline modest

growth charge-offs has to over migration and quarter short-term asset sensitivity X quarters first forecast XXXX. dividends basis for XX Credit remain protect from they expected we continue, impact quality to Benefits negative exceeded to expectations annualized noncustomer strong, project through X% point be declining minimizing fourth remain and income and continued designed year our Noninterest of remained rates very maturing profitability to our Although we when year expected income is by advances. repay normal full expect we decline. full rates year-end, but the at manageable. rates We are XX below to as FHLB net of are the our to high from range. position

management Risk and reduce eventually swap income is our position. rates over time with expected to

and expected income, technology income approximately quarter FDIC higher increase pension expenses that are to expected is that are decline X%, repeat. to X% related largely risk investments in expected considering attributed projected in to quarter, selectivity. dynamics a higher are in pressures increase markets as and observe to For Fourth year-over-year expenses third to growth we Noninterest increased to to with by market gains the noninterest driven addition XXXX reduction XX% to X% expense management capital of X% quarter and to not modernization almost due X% expense. fourth

These the risk expense not we investments recognize in pressures funding new compliance. need to management and the are While the regulatory in offering are to we XXXX investments are for paradigm of addition in we further guidance, largely mindful enhance need industry. ongoing to the pressures as mitigate strategic selective concentrated

the balance This further earnings costs position is the work a base pension We with and regulatory change to excess higher unrealized we market which Share of are of modestly assumes opportunities to paused Prudent in target. capital rates reduction commensurate expected process of AOCI expense our XXXX our our performance. remains power. only and losses grow profitability clarity. largely no in determined evaluating Strong volatility our will be in objective keeping considering cost as the expense, by ongoing with priority than XXXX. subject to within further repurchases remain XX% expense management year-end

believe quarter to prepare out in we was In solid XXXX. for a liquidity, credit. and year as all, we look with income fee deposits, We the shape great finish are strong it and

back Now, turn the I'll call to Kurt.

Slide value proposition. differentiated Jim. you, our summarizes XX Thank

a colleagues tailored revenue model industry capabilities, relationship with blue-chip to base, customer enhancing peers. to strong business, our outperformed exemplified retail has loan historically our our product Complementing is to expertise, a our value-added our by wealth while meet customer regarded and set our deliver approach credit retention. bank commercial for our management As leading expertise and tenured highly needs

compelling. Our be deposit products consistent and retail deposits efforts and long funding and core expand more with a a payments, even to small operating this focus been new underway to source business on profile With a already base. expect market strength the we in additional commercial has

running leveraging Finally, to while organization we and an productivity committed offset and optimize taking to expense investments steps designed efficient we'll to pressures enhance be remain resources.

get especially disruption data has when again, we model past declines remarkable proud across once very I We're to for line what return the proved the just to relationship-based comment the a quarter think the this the industry in for company. significant Before HX questions, of growth, want was to industry. After we our see on our spring, resilient. the deposit shows

puts in is very liquidity at advances, remains us and in Our and great levels. fee We FHLB to continued ratio near loan-to-deposit income significant perform repaid record shape. a position. Credit our strong, favorable

we've During of customers, relationships exceeded borne taken time, still have this new care deposits, we and our disruptive profitability back added expectations. we've

confident number managing environment. We on As on risks, and shared through our history, ability challenges, strategy, and our in navigate almost calls our core I organic prior managed of throughout protecting to focused a our XXX-year we efficiency, positioning returns this growth. I'm have enhancing remain for

proud feel With the uncertain happy economic good take position. questions. landscape, and being just under your $XX now to billion delivered. about in very We're And assets, we'd morning. some this we to the operator, our appreciate time colleagues be I of performance Comerica's We

Jon first from Our Instructions] is Capital [Operator Arfstrom from coming question RBC Markets. today

of about for you the made question one just Quick you last on deposit comments growth.

the you're that kind what's you left of of back? Can extent of about to mentioned back and clients bringing are deposits. what and You bring coming adding extent the customer brought and and you these why back back talk it

John, this Peter. is

would clients, of lot bringing businesses. middle occurred our say the has probably out yes, a market back that in and I So

California, for of middle well. if and businesses. to So we're -- Services in sort other back couple to result. our has banking, But look Jim you this, corporate pre-FCB, that's pre-SAP as example, businesses that true mentioned of a levels in Environmental back those market

say, investments product. really making business performed business, really overall, well. deposits, be in people lot we're I granular our aggressive a market, I middle A So new think, business has attract middle would on of deposit there and deposits. growth, to banking market of We're small trying would small being where lot in

that the we've so And that's had. success

prospects customer our of base and March year I be through have lot this. to in continued and proven and all between have confidence we've think a the challenged has think And to on, while resilient name success. were gone our I the our as banks pretty April,

How rate deposits? kind this sensitive those are gathering? call relationship it, is Or of,

of little bit a I think it's both.

overall bit a But confidence we're so providing both. we is But of attracting I mean being you're rates it deposit the a talk occurred of here what interest-bearing in competitive bit little about of there's that it -- early with on today. datas think our some on. some seeing think I I certainly, that year. little we're

of we think liquidity. for our it customers easier make what their banks to on I be certainly to, need product that competitive to to some it's manage other rate But made doing investment interest the we've we're do environment. with

one Okay. Jim, for you.

still best done, -- kind sit today, -- answered interest down inflection you're the moderating betas your this talking if net what's way and You in is NII this company? on income margin. guess for the terms and we of the sequentially things Fed of down have But on about

is I there, out that I that respond Yes. right betas of uncertainty importantly, the commands but in growing Loan or is pricing be pathway to variable. do focus, in But a out the seen yield, our 'XX or some point that inflection John. more think spreads at a inflection would if We for variable. of and how is point the just of of accept that higher monetary there It's deposit be occur, we'll hit market certainly new remains more trough paradigm a lot that. again, policy, that deposit wider will it anticipate loan higher and on is a some there. a things, longer, do little degree uncertainty that's we will case. the feel funding a really there, lot lag, as say like Fed there Thanks, you if cuts slope base rate though QX. still do not base pricing in of point. bit becoming the stays on how even betas, it much volume, is what the terms the know, now, probably And is upward that in importantly, as And depends case from the line that's whether

circle a think a this of there. at from up be QX, point, the we out variables slope So lot trough and but I'll then just little say, there, to a likely of bit back is

America. from is question from of coming Next Bank Ebrahim Poonawala

baked swaps for we of you, the any so and looking like, the it at into if fully not rates Or outlook, When does sense, it And -- rate third the XX we JAK -- Maybe, around a the cuts first change? sensitivity. look going obviously, off as not. don't Slide at outlook, year. Jim, give expect at trajectory rate does and it new just incrementally, balance swaps looks added you you've about whether quarter, the get mix the from we protecting eventually look When against the into additional look swaps is thinking or not sheet next year level do or quarter worse? changes fourth just us you're this any into

of Yes, the Ebrahim, think the got I out cutting bit, you question. little gist but were a I

are a X X over interest-neutral swaps of quarters some how it starters coming We books also. the of number over have the to have is that relatively think forward quarters. do We we right next But on that mature the also I now. are next

to acquire And so maturing based starters on than need the and coming don't are we more on, I see amount swaps. a forward more of swaps. go forward out starters I and have any coming that think on

rates, I equation. really to how and a have monitor we're that But drop we'll respond, well on Now sheet they comfortable should occur. an prepared that noninterest-bearing sensitivity balance feel now, impact deposits the continue for in responds which for

buckets? tech. on loans I guess, called expect how Like the or some Maybe about within separate sort out evolve areas the when if see think unpack X that you the a can just if maybe question quality. prolonged, strike? could to exposure And gets you on and your X migration we of on that negative we leveraged do auto losses losses? CRE UAW those any And if impact And credit you

Jim some really really, thank credit you. Curt reiterate the Yes, we're of to really This overarching just proud quarter. what just Melinda. around up said, and is hold make I'll well. credit continues to both comments

do absolutely -- As projected in you increase that playing in out. real portfolio. did commercial have continue XX, see the is an right exactly we to criticized it's that that quarter a not this commercial can assets. of real we in lot we see of as came majority see would really how The normalization of book. We loss estate Slide criticized from content that our on now, estate And increase

we're predominantly heavily financing we with Just in of as as has The any very some that's, reminder, industrial. cost borrowers again, holding the is really of the it's expected very bit criticized how sponsors, segment concentrated well done Multifamily in industrial. industrial environment in don't up is low and assets given certain we're and really We a a seeing well. multifamily incredibly very loan strong migration. what where as just is construction And have rate just markets. to underwrite and oversupply

rent there out to some starting rent . concessions. is leveling a little see So and of bit

delinquencies, past no have portfolio. We no dues in this

stepping as performance, on are Our would are historical have to sponsors expected shortfall. their based up and covering them we they

the I commercial losses coming through to do see but cautionary. portfolio, So estate expect real not

reserve We a to build are continuing there.

ratio our concentration. is I is TLS, that we granular very quarter. X.XX but to X this think X see which market, coverage fall was was banking, points they're from business or It up there did charge-offs this quarter, very no nature. The middle quarter, in basis So last up

in not of would like XXX the seeing right the on any point be elevated because the where loss come very I'm environment of cumulative terms now would Levers one burden impact themes of interest possible be again, really of content would those from. and So rate as it borrowers. basis that

cycles many XXXX this have honestly, stressed $X billion been overall, Obviously, production would in got say, particular been resilient. very base. This Automotive for with loans. many, production, they are this I we've we've been on. in automotive decades, we've business from many and relatively customer about through pool

had really in XXXX tariff, the you have had haven't you but then we experienced You shortages chain and COVID, sector. disruption, this then chip losses supply

experience do there very, strong knows will the be but to goes closely. base have reserved, we very We're to a this. strike UAW the through and very watching a lot portfolio. how more The customer on, have longer of we're again, well this, very managing impact it we So that

hopefully, all happy questions, of up. So I hit follow your to but

that comprehensive. was No, .

Your from ISI. is Evercore Pancari John coming next from question

X% growth I it you higher versus know like Can modestly the Street -- for keep as out expense the indicated to you're commentary there help maybe about of could XXXX. Can a XXXX. modestly reasonable you're modeling X% year-over-year. On assume looks is mean? at growth objective the the growth you so or for is us looking to expense you what think pace higher What's initiatives maybe that reviewing. playing out

John, then I'll commentary. I'll this add in ask is Kurt. and start color some Jim to more

call First a backdrop of ROE you standpoint, as record are growth, the from really really aware, others board. the growth, company standpoint. from years our Revenue a liquidity, loan great performance and 'XX across of and were for all, maybe 'XX performance on just an

ratio. were range In do and ROE we maintain performed able low in the and that mid-XX% a fact, of to end all efficiency the at on XXXX very

I Jim As this period do funding really based as at transition and think as I did mentioned, I looking and in of that are my dynamics. and whole we lower sort of comments, NII think we're industry on the recalibration well in

component. a pension We maybe that anomalies not the have everyone -- And then not do have I'd second just that FDIC in certainly are XXXX say there has our is others numbers. thing impact the -- here some a

and expenses helping you the net lot just -- we the expenses as not we us, new X might management, we are the we've client been as the that years acquisition or you And said, said, that a We've be markets it 'XX some in investment Southeast But 'XX, treasury revenue things in here investment efficiently last lot -- a careful of just have small high business. markets, doing a company. and more in of as and factor modest new of growth over us on That appear. the on quite XXXX I investment managing expanded driving of in out, into are a payments, company. that growth growth management, believe committed as a of caution focus over want 'XX. of So rate been capital Colorado, in to focus when is managing a side, lot wealth for to

of got focus initiatives long and beyond of So those our right right at time now. that are are we lot get we in we've know and are we strike of a period levers balance, company right having on said sort our once those underway, of term proven want the and But manage going things keep I because the we have. our believe we we're we've to all and how in well, expenses that that, time to the over sort history what to we looking for

fourth quarter provide typically guidance at We our call. some

some of we think can will You expenses that? into some offset pressure that believe what to at what we initiatives help us I sort more add longer-term versus would -- are pressure. reduce go more details and you of is Jim, we point. near-term But really working on some

to but work to to think comments, going is I do make we're would think we And we done, I The work a only of that we're Curt's committed add I equation. thing I be progress a lot do getting either. and paradigm, it And new for we reemphasize significant -- profitability do one-and-done done. as don't recognize deal new there's a to XXXX, view

fund is necessary I cost that out can think to of some continue where to time for make sure we period the on the reduction probably investments. initiatives this going play we have to

we and how a going few that. to over we've done months, the we're to We to was know do committed occurred something have But last that's do, before. pivot to. we're So There recognize to that. adjust industry in the

be committed said. more at fully getting in time, to it and some sharing as later point we'll So Curt done,

capital And updated on need get I more to Okay. deployment. to to detail. can you I would ramp that the or specifically potential appreciate maybe thoughts your separately, talk comes deployment, to buybacks just when about you what I here. willing it capital want all up see then guess, to be for

things like the but uncertainties is take the may economy we do rates and share me for monetary in the a the to a watching uncertainty say rules secondary going $XXX uncertainty. interest we're something more that's factor and we with be than are up AOCI. did. below the repurchase. of that #X would I'd a geopolitical faster I this without so events capital But the is And of we whether whole $XXX note industry. see the uncertainty repurchase, I case it towards common economy say us on. would well We're also. policy really anything want That factor sight one step that the turn to the But that's of related industry I will even quarter say billion. as in there. changed in stronger in would the key to general of we're factor. where We have in did or do also else on catapult I expecting. John, prepared dividends be better would be billion Yes, terms in share line before

this a idea those very get back and prices the think I shares like buy share into returning assess we pause, feel very are to fantastic But XXXX. love would the year, to also. But attractive. attractive. price The So we uncertainty for We certainly, factors we'll capital of and buying is is do we're we buy shareholders. then at on these

to our that's first place managing and want John, economy grow secondly, been is last on perspective, sort you done while of a long-term on add our our equation. XXXX. capital sort loan I X And over we not loan I that job buybacks. want leveraging how a we've the as see Again RWA the do plays objective. down around out the the And years that portfolio, of growth the to company, based aware of get to We some we use opportunities would are and then X aspects as Jim, long-term always think grow. of of into our that's have or cautious course really good we we

it's be an sort But tool. important. do balancing And X will think we between important really of the so again,

from Alexopoulos JPMorgan. Steven question next The coming is from

to stepping to likely quarter. then want following back Jim, a see go first the do you and your in in NIM trajectory Maybe, bottom we bottom question to you [indiscernible], view, XQ same maybe XQ NII I John would from NIM there? down So said where the response than his

thanks the for question. Steve,

put there with not I'll results As of in income. the my doesn't always, NIM percentage business lumpiness our correlate we're [indiscernible], necessarily that that commercial out disclaimer model offer a

that I and down comment expect general to in percentage one say next quarter. do NIM purchase bring over So just funds I'll that improves I cash hesitant always on. to am the to

positive some see also. do it's we'll say think a way income there. And do general NIM that's net traction to for -- troughing trough think to I I we slightly in the fair very interest So see if

So eye picture. say, big to keep I but what an we'll would tend that, on that's

think we anyway. neutral know assuming to we given them the Jim, year you you the longer, cuts, NIM think rates comments Directionally And like the commenting quarter, I ALCO don't but you on you're actually Do if bought then, now of trend that fairly trends in in speaking, through favorably ask really how if there going positioning just you stay that the Fed I'm first assuming stays year? . for terms did, higher through the hold. no do

situation not is and in forward with case. put time longer, NIM. the but on saying big not growth, that depend an that are industry. longer for on, all variables do haven't That's I do base going that the on pricing, we what and does some an if It's think curve I But of spread been stay factors. those for potential we mentioned It's to early the loan in higher long economy have QT those to a continues, pressure loan our higher

pressures to So some but we say, continued higher for if see we it's believe. deposit really I will hard stay longer, do

[indiscernible] the pricing taking do side, on by overall obviously, full the of think doing we right sort that very into relationships been lending and successful on the have side, customers. our thing account

that of think discipline for a some pricing potentially to long XXXX. so by offset just in and growth I there's And chance us

Yes.

what have there mentioned proper relative like market our recover piece in I expect what earlier, our And we goes the pricing to of liquidity the Kurt. pricing of up. or right funds. feel to from the cost economy, I it of for it. can a But perhaps we is deposit in the and extent ask would thanks, I all less allows As we again, the that to of do pricing demand funding equation. cost mean to we'll see

I is in know But higher out noninterest-bearing just cash? for search right, one yield? customers to balances the levels, of I'm curious, move you seeing optimize still it factors again Or back which were down quarter. are spending and this

own the of spring, weeks. encouragement in I really true deposits August be of they're that's a do saying as But as me. say deposit disruption as really flat. deposits. of they same they we're corporate in a starting Stephen, We orange about since it to result. of the betas continue up squeezed one up that think that decline manage and not month was always that a recent September. also mentioned areas as need has to will can. amount slowed levels, essentially floor I'm certain is much And by seeing cash month actually in cash they've from it I their the If noninterest-bearing where businesses. think would to moderated I the every month the the slow run treasurers flat look hit I their at noninterest-bearing to to

the the seeing But of in a really trend there Yes, to noninterest-bearing and possible. do go? our we're little is decline. think bit that flattening could a case, friend more this Now be we out it's

past I a seen but we're little of it. well a I've this So probably in don't I lot -- more, see bit think occurring point the decline of at time, worst

all the this XX% If hear growth but we if expenses one one know we I look We expense quarter, why, in I But moderating comments at year-over-year. step are could XXXX. earnings around squeeze is if year-over-year, up XX%. were down out, final X% in. down revenue

year, heading just it a wait tough think is operating yield here direction. do just favorable Or there's next get you meaningful do leverage? guys in start there we are to other to about more a Or the you generating we pull approve levers to As the to sense environment, for pull you have earnings more could things. curve and least to more levers at to other need

things committed would Well, as short challenging term general, leverage. say, foremost, company, with are outlined that there believe more we that's capabilities, product treasury line all I bit always to X just cetera. delivering capital great the there. know. momentum on as in a But Stephen, One, for I things In reasons us positive you growth. to and you for it's markets, a expansion whether revenue the previously, management, And we've operating we we we are top just focused got first outlined and et

continue existing quarter markets call. very that We areas. wealth that that fourth also I to income and XXXX, in. guidance the drive Southern growth California of a but in us We we in believe management just many expansion for we more earnings operate we'll of fee and in do the out Southeast, in continue our lift will provide add had team will successful to our And loan at return a talent into adding just depth the

to going to right company, careful between in well are on So we're we've company. the management going be we're balance on be expense longer-term strike done as short-term the historically then investment sort the that of and we . And a focused revenue the focused and the side. and expenses, secondly, sort to there of

did delivering very leverage company when tilt, our objective, long our sort and but and for operating can't focused term. I positive on the of So leverage are for investors positive that it's equation promise operating sort we of

McGratty is Your question from coming from Chris KBW. next

you that are what you you I was you're about $XXX be us just guess been on to magnitude spent this tied -- to that, XX-year for also, Jim kind be within can what's to budget it it's or below billion Curt think how coming expense, the Like about year. and the a spent the guess, I of of XX% I the and needs big that. already in pension the remind How back compliant XXX? maybe grandfather you could then remind thinking on year to are thinking, for us expenses?

to and target, really significant policy on had Chris, buildup which to of Jim question address take sustainable billion closer situation billion we going We the getting a liquidity of a $XXX I'm beginning let in pension issue. was of I'll the stimulus maybe overall. that monetary $XXX of in we were with never sort thought because obviously the the buildup we the lot mark, and that deposits,

of moderated side down equation. that RWA So pulled has as the we've the on some

if very some organic you always $XX comfortable to $XXX are would now at our below We has billion $XXX time, And look which as us think, we it mark billion. focus right that billion mark. just growth, at get back take the been company, over a

be the of term. what has technology and happen. in time. of initiatives be probably So necessary XX% for sort it's we've make some us us million that of it we've sort for longer one But comply terms and sort be We're got Category are and is expenses But XX%, And pressure project time would important some of additional some a to terms applied for required to to support be that of we $XXX that sort infrastructure underway of regulatory positioned to in the that. over of what through expense would to compliance had a bank. X

I one I that growth. to the would were earlier, not as or made We focused just maybe that conference M&A had and just some sense the billion $XXX first around not. change years. of has sort sort landscape really the and for investor comments there, evaluate some $XXX deal came Getting we don't at along, of just any previously close can organic is for clear to at the anticipate foreseeable foremost, where equation. but think the I to nothing still are I We've strategic be we make M&A manage of level, billion for we time if in pressure term, we got think said us. -- least to next couple of whether of do us changed does we again, great It's longer today. on sort

do We in XX% We'll step below. the Chris, in plan repaying what take fourth a full mentioned Yes. that did more get on I effect you quarter. the further, of even the quarter. And quarter third debt we might

On and probably see another we well billion. So the the a in lending cash fourth $X like so basis, on $XXX coming below $X.X funds do more quarter purchase billion we average. down billion, are

$XXX I'll we towards comes billion it loan XXX. AOCI years start focused in that say back years complying with. subsection of impact that to the of in that couple said, back comfortable and you're as that. terms make have take as we're make a just might potentially of than what we're a of terms -- away more with We'll as And Curt Now only moving sure few on probably requirements from focused growth. we're expenses, we on But

bit until we lot So need working those little to focused a to pressures and $XXX things feel that the to of to requirements, that have on we're longer can of are be ready at expense the we don't jump have getting we in of on into terms it offset, entirely in but wait like them, will A one billion. point time. we this closer a we tail .

more pension favorite one rates in our specifically. great there, and bottle accounting of A through. rates are is of topics variables question, a but interest market to the lot one, general, terms one of key interest In the but pension performance

If bps to would credits we a we from in sensitivity a past proxy for have been that then. is But have would us that below what million There's suggest. that XX number I step the that are other good XX/XX. say there do have a come shows Every also and of year every we make of on. in obviously, [indiscernible], of in translates offsetting that that for variables up bps we you strike assumptions the so outperformed we change, importantly, amortized likely big back to go since sensitivity Most there actuarial are rate that. $XX to XX a our expense, about pretty XX liability assets

And so there. variables of we will lot perform that but a sensitivity, involved

clarity that's year. we're the we end more the approach on of as So something

helpful. really That's

and final of targeted, of guess, balance sheet. bonds I cash one the the terms Just one level in on

us see year. levels last the in bonds you the down reinvested assets Remind of maybe could ultimately haven't shrinking those earning or percentage that level You either to. an where absolute a as

debt depend to billion and the billion, on how going moving are would But billion. billion it as rules see $XX relate closer us close overall of the I to $XXX that's $XX requirements. we balance composition liquidity Yes, closer probably sheet, to towards securities, $XX just might to

. And go. next suggest not a So for we're at likely we be of couple ways what that years. the is have to might to least buying securities going

is coming from question from next Your Manan Stanley. Gosalia Morgan

you I haven't wanted added any mean, year. to follow I that on your swaps think I up noted you comments on this on AOCI. the books

points XX Given managing that another tenure about is risk this up How you here? basis quarter. the thinking are AOCI

we next point, over of the as we more okay next that really this years we feel based have for X category off the years where a we're at to over We're become and potentially Well, don't we with the on couple at a off importantly, manage like do the see burn to bank. burn it. anything synthetically

to at we shorten years. comfortable purchased do And be think time, we see time something comfortable feel do duration strategies the point are we we the towards or with closer as anything. that maybe synthetically, Category over don't at. of being, . we few we We're this the won't our so what consider that the compelled modifying with burn in whether X, with doing next we're to the where but for out move that securities, We

it. Got

clearly make this for in AOCI apply risk there? same and future volatility you AOCI to that quarters in saw sense XX-year changes the long end on curve. the figure then quarter the DVXX there's as to to the Does some So of out the use it

a good proxy. you a but that's movement . I a changes. future think little see proxy think pretty other, I bit or the way one good of rate Yes, can it's for

rate that -- years. environment. I next unrealized is impacted And it. XX% finally, the by losses the of couple then the you Got maybe think mentioned on How over pull-apart a just

the stands considers as XX% curve spot that just is. rates, curve not the Well, where but today, so it

for the curve. So have now, that spectrum . the entire of will on or that to off, this but the extent the contemplates entire impact curve down, an obviously burn shifts up

said, longer if [indiscernible] the sooner. bill-to and if will I [indiscernible] moves the be be as than higher than lower And moves the it curve bill-to will

That's bottom right. we on sensitivity XX that right. a on have do And the in Slide

would you what the So a one . way see other. XXX or bp can movement do

question UBS. is coming Next from today from Brody Preston

ask, the the just had in -- to out past. what kind think initiative it kind can total Up of remind happen did was I guess, give I I'm that if just I us you of kind what GEAR the wanted past. rate to of a took of, -- Could you you the you me what you run to like you expenses the or trying in remember know the reminder

detail that some I on. that focused in a would I go but also Europe say combination we of might you. Brady, not revenue that was just through with expenses, opportunities enhancement all back general, that

that of Some capabilities. around was

a of to was single place improve overall [indiscernible] Some it And cetera. environment. that not an was a we -- year in impact. efficiency. around very impact rate that pricing And at low was strategies, et point, it It what put just was,

applicability our and So mean, today, to expense an revenue as organization in if sort base as I bigger we're of of base company at terms our a well. overall looking you're

and estate, potentially go to count, of sort might try at we way associated we look kind sort more if head rates on at really of of share reductions for anything look revenue be spend And customers cetera. real focus into And expense so terms to careful minimize might we're driving really with, of about this forward, what et we'll going outlook that a technology and to thoughtful think as in get we have on XXXX. and that in vacancy areas, more you're things with a the

it. Got

you one you up cover do shortfalls multifamily service any like stepped the debt to ratio? mean shortfalls, said questions bit Okay. couple migration you you of to and that a kind say as ask wanted to about do sponsors a falling coverage the have -- mean Melinda. little when -- talked the are you properties but there, of multifamily I Melinda, the below

shortfall are and of in be behind space any XXX schedule, now the the but right biggest quarters. in terms increase the rate of majority environment. loans of being so so driver they've process last points the absorbing -- the is The rate because of could the are in leased the rising It kind they really a over basis of they're X, multifamily X floating up rate, of been

so coverage an debt that the And the a lease-up reserve service require interest could in during a we during be there construction phase into phase or are those shortfall as stabilization. going

new Are coming supply it. Got and maybe on come footprint these any any markets Like across there that exacerbate issues? mind to you any in particular? say, at might your of that look that there's

Yes.

at the real most market in seen reminder, low. impacted some being commercial has California, But migration the and migration, manageable in the challenge book California. loans I that this relatively is really and very of again, point most we've criticized think though, submarkets, the the most in California been then the still where estate migration are the Northern concentrated the Southern the

So watching we really, base, And colleagues know would that we're the those this. strong and again, base and consider how there I tenured customer sponsor really through manage closely. exceptionally to have

amount product feel a But more market, about set. about good our to really there. feel we good So has come and We there's really supply come. strategy multifamily the tremendous had to of

migration modest in I we'll of some expect that So portfolio. that to continue level see

Got it.

you point? I for small portfolio reserve a office this the to And you at have very is know happen on guys. portfolio the it's what Okay. Do

on have and as estate We whole asset do book don't reserve a it's ratio we for real have coverage the specifically but a classes, X.XX. the commercial

maturing. you've just swap up all reflected the forward anything And follow will wanted the walk The outpace 'XX Okay. question. kind Got you Jim, That's the it. I book. to that starting on coming said on swaps in that on swap of got that's up

It full. Absolutely. is

just one Okay. sure. last Great. to for I make just then wanted And you.

over I portion. -- floating smaller a not us looks but through what XX you origination that portion are rolling are versus the yields the are fixed the of months what the know rods of the Can walk true book, what current like right maturity kind off now? it's the and next portion, schedule swapped for For

small really part impact a our book, of it's don't see I having next yields relatively a big Yes, and year. on it

out long loans to the book about appendix, you I our in or surmise speaking on and years think somewhere average. X% maturities XX they fixed-rate pretty organically of have

might you for lot up million don't priced below We So current an $XXX up see of kind And repricing to loan use every are see come average. 'XX come a year. our yield. in they

on having some opportunity impact But see there. is -- is So than pricing But more there a a our yields fixed there rate bps next a of favorable little there's year. wouldn't couple impact. I loan bit of such with of

security have yielding any the point are lumpy at lower Do XX maturities in months? you that next and any

most a necessarily would bit next have what in treasuries to aren't of lumpy. have months, maturing We I normal, roll-off be XX I'll those some smooth We see we and MBSs over a do the quarters. say consider little but

redeploy higher much cash, we obviously earning we we're avoiding XXXX maturing to are funds. yields, that purchase So going benefit as into securities from in either

actually net certainly swaps in fixed favorable asset go be in a from from we the direction, you'll but fixed net-net, nice up next tiny repricing So a see will benefit . rate lift from bit will XXXX. the get securities, year, loans, benefit

coming from is Next Jefferies. from question Ken Usdin

want I book. on question a to the loan ask

out couple On like of like little just Tech you're there's time over got are of kind these that you getting mortgage any line banker under speak. the dieting, to not and Sciences a of equity basis, fund. a But & so smaller year, after this lines Life business

categories the much you taking ask you terms future of thinking a and you're Just look how harder to opportunities. terms of do what loan growth envision is of of in have any in that environmental that about wanted like at

have do got But we and Ken, quite down expectations managing basis. in our lines well into see our we're kind sheet. is the profitability this Yes, with don't think the balance We fourth good of business of and that a to continued I increased additional even we've drift pricing, do quarter sort I'm portfolio maybe in. candidly, in some that the of about and of probably first and really just that changes the businesses go-forward really to around quarter. quarter environment on any Peter. this feel the

but try as we a think we'll 'XX. I we other to outlook the suspect seen a looks year, next for few two others, little late, we before of be more But direction. into Some on what like quarter here businesses to are guidance more give impacted down go these start than of businesses get you've probably as another or that of kind loan creep

Overall, portfolio, the of and customers year in as the on good market bit. we pretty there into geography And that with to little into still our end get new business, pipelines general and It business middle depends the relatively. is we're banking, small business next. add trying space our add a

understand just And is built fourth all-in the work? like Great. is it. sure How explain then quarter my mechanically expenses, of modernization follow-up this that does number? the you XQ the just And the they the just Got on guide was kind write-back quarter? making that on the that can on -- how

us to that quarter. something driver expect could additional little be But The estate on big expenses. of modernization third low but a slide. to give you were fourth Kevin. digits closer don't million Yes, a That credit a credit net for $XX the because be expense by to the estate in an for of expenses millions. real modernization expenses that actually in noted was some quarter. We we a $XX We I saw the overall, net real offset may that were million quarter gain sale expect quarter single the would the of X modernization expenses, negative that the have or fourth

Right. it. Got Okay.

repeat you fourth built deferred comp the built fourth that off quarter aside to the quarter okay. the from So the is And expense then of that guidance -- XXX. -- don't guide the expect on

That's right. .

question Next Securities. today coming is from King Truist from Brandon

some Just are Or sheet see to about assets? balance growth stable? Are next things you putting looking thinking together, with we could the particularly earning pieces you incremental kind how of growth? keep year,

want recent But focused the liquidity funding very I'll start in months, on to Peter as off Brandon, stabilizing the and it's chime been base here. and base Jim. we've may in with got in of you XX%. We're spring know. a we would there. be We've actually a success of than we shape loan-to-deposit a the ratio lot thought in back better actually

that of through mix at start I recalibration. getting deposit think of right be We're the mix period right right businesses, getting there customers, mix there right balance type a it on we're at where yet, then loan we around with not in in point being getting growth was to loans a certainty right some be pace of now in growing XXXX a be of sheet But as of at we focused but point we to anticipate We're in the point the lines, getting do at we expect normal right period of again. terms some point now, to XXXX. be base, our going but whether recalibration, quite in And some XXXX still it pricing. more business growth. expect this some at more

might year. And navigate really I say, a always company add Jim said. say we're could environment. customer it economic a be of, as also I But have I of tougher go in well. It think will that I successfully. -- talked prepared We base credit. we're what Brandon, our seeing just we has a there's next a about lot Melinda just Yes. into as a risk, headline would to lot caution you lot mean, might

looks more So we for what fourth the But to growth loan next is se mean, we'll some next loans like into quarter as give be get get year. on demand when for loan year. per guidance probably think back that we to mentioned call we've determined. do i we'll

may geography. extent that environment, with what in looks yet are. that they again, it like And with that. we just where more I know challenging environment, by a business think the on interest don't geography by that like what business, to navigate look just rates depends And we'll we necessarily the to have enter also economic

term? Got And What think kind a it. Got maybe deposit it. are seasonality to And of flows? then close trends? your you how normal speak expectations near just you are could to you seasonality

last a a those not seasonal extent seasonality kind what or in that out It's one Brandon, back overall different loans in and of too, see years. be to amongst different the in typical liquidity waiting rate trends We're gone the of whether Yes, whether been liquidity economy. one couple We're normal patterns. seasonality a tough higher of interest business we The it really or has see deposits. dose. to of in and terms environment return environment, to units,

if So the in patterns it those typical we seen seen do be that past. to we've to remains back return

a small seasonality not outlook, As lot. of a I in assumed our very we have but may bit mentioned,

it potential patterns not. there. remains feels seasonality, return some to see just to . whether like in as do new other deposit we not we like for or So the many normal frankly, to be this upside old much back or paradigm seen But

Your question D.A. next coming is from Winter Peter from Davidson.

opportunities as And that go does initiatives? budgeting saves just the for through going expenses XX maybe you versus to already expense Or expense guidance? some outlook, that there's additional the process, back contemplate some

bit Peter, of it's a both.

We to have prudent. speak, slow hands, at looking and been so be sitting our more and growth expense haven't been on to opportunities to

planning things XXXX. are of process think about as sort still the in We process for some we other [indiscernible] have and that

again potentially to earnings have get we into fourth we'll share more call. as quarter So the

just then housekeeping. And one Okay.

curious is the to what Just loans? mortgage was balance . Just the off? banker end-of-period run left on much how

were Banker for bit million, Yes. we that Mortgage ending. know. the than at for little $XXX quarter, lower don't I a

[indiscernible] XXX. of minimal by a was end around hundred the million. that of we year. Period to Peter, the there, balances end the communicated be be But pretty we've couple expect might is

over We've to floor Please like the of Chairman ahead. Farmer. session. reached and I'd end Chief our Officer, Curt back President, turn the go to Executive question-and-answer

you how the our day. you proud of and all day. And I in delivering are performance say every company, I for Again, great thank for hope your very interest I'm you. always -- again our just our for have they proud customers of colleagues would Thank quarter. and I'm our a

does teleconference webcast. today's That you. conclude Thank and

You We this a may for wonderful have your line thank disconnect you and time, today. at participation day. your