Fifth Third Bancorp (FITB) 21 Jan 212020 Q4 Earnings call transcript

Ladies and gentlemen, thank you for standing by. And welcome to the Fifth Third Bancorp Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. now today, hand Investor Chris would to conference Relations. I speaker your Doll, Instructions] like the to over [Operator Director of Please go ahead.

information measures, as us. Tim measures, materials, quarter CEO, performance. this and contain of to update Good you Please of earnings review statements pertaining non-GAAP our Melissa. Carmichael; Greg release and not and to statements XXXX. well of or about along be as results Leonard; date our Officer, Today, Credit and reconciliations found Chief cautionary joining to Fifth our We and call. our financial fourth you, materials discussing CFO, can use we'll Jamie forward-looking This Third's Richard to presentation. any expect the Thank Spence; obligation guidance Stein. for with the These the non-GAAP be which statements such morning, morning forward-looking the for thank undertake President, I'm no after by would joined in

prepared the call-up we by for will open Greg Following questions. and Jamie, remarks

– the turn his Greg to his comments. now for me call over Let for

record and the in revenue, an and fee We records asset We healthy. of which Thanks, operating today, efficiency both near XX%, for prior year our per you businesses. brought highlights ratio generated thank and all staying us several reported We producing environment challenging strong XXXX, joining to morning. management generated had we share. including our lows. pandemic. hope record $X.X We on remains stable financial income net the billion and year. delivered adjusted year you're compared or commercial well XXXX a decade the We and was for net maintained pre-provision I full all by in despite Chris, wealth this of adjusted Earlier a $X.XX expense the discipline, adjusted results revenue. below

Chicago of success and markets. household with to our We X% consumer in Southeast also generate peer-leading outsized growth continue key

doubling the our we XX.X% reserves, the ROTCE adjusted AOCI tangible generated year for return generated full in nearly an on excluding quarter. XX.X% While and fourth common equity, of

we with during COVID-XX pandemic, branches closely discussed. PPP to navigated importantly, keeping support our working open we as programs, XX% challenging our that customers business, program, previously for have times through while have and them Just outreach of relief these hardship other the efforts the successfully

Our were We had XX winning employees. and efforts Also, recognized pandemic the an CX communities crisis. the to honor those a customer superior Award customers, have the middle externally. banks on our for third-party response retail experience the a top-performing we delivering bank U.S. enduring independent Greenwich by our as based our and among COVID-XX been largest commitment for reflecting market

Additionally, generate stakeholders. value bank carbon to year, just announced week, during all our inaugural we we that operations. we ESG this to for efforts achieve the neutrality sustainable our Report published the highlighting our became And first regional in

million. the quarter. to of net income reported Turning $XXX We fourth

shown Our reported our from of negative a on release. items page $X.XX the EPS include impact X

through you financial earnings credit to Excluding disciplined per minute. more management, in a share. our results detail these to priorities risk our were strategic on drive continue just fourth approach walk execution will quarterly the items, $X.XX quarter key adjusted financial strong and Jamie in Focused performance.

profitability. bank As businesses, less the by improve decisive investing while as recently divesting property areas in profitability and casualty insurance, profitable our efficiencies taken long-term we growth we and including announced, still drive of to such operations, action have and streamlining the of

finalized the HXC, For which we investment care health strengthens recently advisory acquisition capabilities. of our banking strategic example, and

loss including adjusted growth. the return reported sequentially solid performance. fourth reflecting results, strong non-bank to and acquisitions assess, All provision fee We in our select quarter, credit for and operating continue in to were strategic metrics investments improve improved the

cash expect in our X% NIM, impacts, XXXX. despite excludes positive interest headwinds. points We Net excess X sequentially. continue operating Underlying PPP momentum loan which in portfolio increased results sequentially and to income increased a basis

to XXXX beyond, have and actions several hedge taken the differentiated in to the years. over and expect performance portfolio investment peers relative reflecting generate We past we NIM

quality charge-offs credit XX outlook. reflecting declined to quarters. remains credit and credit and economic compared credit and discipline our the points basis Our stable solid, recent losses net both with Also, for assets criticized results improved sequentially of allowance our

lower in to of and generating asset cushion retail, are benefit fee-based to our Many management. of are impact and continue commercial, We wealth diversification of resilience helping the and businesses strong businesses from rates. fee-based our that results

further and robust of strength. quarter, improved our indicative this Our liquidity levels capital balance sheet

levels capital our suspension sheet for temporary dynamics, consecutive balance and strong have earnings a regulatory of quarters, of Fed's power, three buybacks. as increased the Our result

With our quarter. of sheet the and the first the improved the up Fed in balance significantly we and execute we to in proactive partial diversification December, Through share announced fee intend by million strong $XXX have built to a stable repurchases in revenue. relief management,

cycle while done have all solid demonstrating discipline consistent We our maintaining through culture of and our performance. the to expense commitment and this

the to target the us economy soundly target improves. X.X%, lower at will -- company remains we levels. Our target significantly appropriate as continues that the performance capital we confidence give our at Though operate financial and capital continue to can CETX safely evaluate

The quarter. quarter, around in highest strength the ago commercial are from was our in XX% loan year and third the loan from XXXX levels but XX% pipelines. in was up We production quarter the over was seeing fourth our also production continued down

We more by recent in line are encouraged decline and utilization. production payoffs trends, sequential improvement the X% another almost all offset all and the in elevated was regions Strong by than verticals.

balances our in quarter pipeline the institutions, C&I improve of was a strong again estate continued markets. a Southeast hospitality strengthened pipelines PPP during and first pre-COVID in real market expect first for continue Based to corporate partially the including banking, the Commercial improvement levels. period-end financial stable throughout sluggishness and solar by on pipeline retail, energy. improvement we sigma our In footprint in quarter offset loans. loan well on diversified to pipeline [ph] this with middle January, impact of be well-below healthcare, Our excluding basis weeks and strength industrials, currently trends utilization three the

over I continue and reiterate generate to I it further will to Jamie which our Before enable outlook, discuss us strategic to shareholder value. our want turn long-term to to results priorities,

a Our in several expenses four share key strategic leveraging priorities not approach have and geographies, over years transformation, to include digital expanding client and and the and selection. profitability, organic changed on accelerate growth past market technology maintaining disciplined key driving

our see level We strong probability returns value for will appropriate highest financial driving generate long-term shareholders. of prioritization put focus the we where for on the areas and and

be to investing while challenging strength lending, continued thank sheet through and end, expense management the like the Foundation. $XX three-year remaining for made each to Third Fifth diversified support continues will for and committed of our a all. $X.X other of environment employees. Fifth commitment strength, and very donating, focus proud times. Through we on have and doing a equality, these the risen once and inclusion revenues the customers again occasion to this as our XXXX disciplined to us to way serve you contribution pledge source and to communities, I'm equity million Third our our including this customers I'd we billion balance a in to beyond. well Our navigate continually

discuss sustainable cycle to it that I'll We principles. our our value and through shareholders over to remain to continue regional top-performing turn generate for results the execution, and as continue bank. will outlook. Jamie relative financial discipline focused long-term and With to our improving our reflect performance we quarter committed results Our our anticipate current a fourth that,

thanks and for quarter. today. our you all Greg, of housekeeping item joining us before the One quick you, Thank financial for discussing results

are going adjusting they help metrics accounting As largely We accretion this ratio. or purchase amortization to you'll disclosures given income. an impact assess for see offset on no in intangible materials, hope our earnings our more will that have simplify easily forward and financial our pre-tax certain immaterial longer we

momentum results. mark the several the return of should impacted close quarter. related swap, this delivered million end strong in related a turning process to and XXXX remains results fourth $XX to as including a business actions total $XX positive our of quarter HSA million Greg Visa charge the ended by Reported performance. Now and and our financial negative were after-tax with items notable by sale to acquisition mentioned; after-tax We disposition our

reviewing expense $X our we closures We after-tax from are as Greg discussed, in announced charitable XX recorded efficiencies. after-tax after-tax million equality. addition to charge And the to also This These on $XX branch our we real branches last recognized for April our COVID-related non-branch expenses. promote racial rigor million network we estate recorded we be of part Furthermore a quarter. contribution also will includes related branches efficiency to strategies. and in seven as $XX a million associated normal with closing impairments

a onetime item favorable had taxes of related state $XX we to Lastly, million.

for basis of able generate the generated XXXX the Despite In we nearly one-month efficiency level. last in an terms were of quarter. financial the XX%. PPNR quarter XXX months, We of point adjusted over the to LIBOR XX the fourth above an decline ratio highlights

in XX% in and reflected adjusted increase a performance operating Our expenses. X% in NII, a X% a increase increase fees adjusted

Drilling was increase XX despite franchise. improvements, our regulatory X.XX% hedges point PPNR adjusted yields, million cash strong PPP in results adjusted adjusted our long-duration which a continued during sheet on of sequential additional basis into we strength deposit benefits X% of total X income tangible reported AOCI performance. common the return an combined return produced in metrics excluding the our NII including equity of from continued the credit We as quarter. well improvement with $XX the income. an The as both related in balance points strong saw our and Given of the and basis ROA and loan capital XX.X% by supported reflected deep-in-the-money statement flow growing

investment portfolio NII of and prepayment securities to incremental one the strategy million amortization fourth Our invest basis increased only bullet points end. quarter. of in included $X X.X%. cash invested bullet was and portfolio locked-out benefits X flows. $XX the in XX% securities our our investment and Approximately penalties reflecting our Net from sequentially results in locked-out of at to in in portfolio flows yield still favorable quarter the million portfolio the cash And premium

core X points. basis side, On by interest-bearing reduced another costs our the deposit we liability

we provided to basis favorable debt Reported quarter. mentioned, fourth higher quarter NIM a also our cost the stable third core CD deposits versus reflecting points. X and X to point average the and maturities I third of basis NIM the compared the the securities was portfolio by was improvement income that impact the NIM, strong For PPP quarter, The pressure. only non-interest of NII offset points excess resilience achieved. relative to to revenue and non-interest continues cash X.XX%. X% Underlying have another income cash again, generating the to our Once excluding in PPP X highlight the quarter third levels the rate-driven we diversification cushion income levels. increased improved Total had income basis quarter. to fee

revenue, generated Excluding items, increased XX%. the sequentially banking by the driven business. notable year-over-year We record non-interest double-digits and increased which strength across income most of commercial

sequentially income in $XX challenged the mortgage banking venture $XX unchanged We of a our fee compression. TRA as XXXX due million declined in environment. revenue production rate lock a MSR also million gains $XX during gains million decay from capital decline servicing of retail in $X this million decision reflecting sequentially generated of funds. million our million remain margin investments $XXX expect recorded our by driven and in income $XX XXXX. to and as headwind of retain several fintech in impact continued million to and investments in $XX line from fees direct a were will we well These quarter; Top volumes;

impacts the largest strong expense other offset to growth security compensation, were with we deliver quarter within have related we mortgage improvement much expenses. a growth did to driven is results than the in and Non-interest also non-interest but associated deferred not performance of capacity in gains relative January. seen the expenses X% contributor The pressures, was lesser income. Adjusted non-qualified expected mark-to-market the fees. expenses due third we increased extent December While meaningful to compensation and revenue-linked business fees the albeit by to up excluding in performance-based

balance with quarter the loan end-of-period so and CRE far loans consumer for the to balances XXXX currently Average are declined XX%. in the relative X% in half the sequentially January sheet. reflect ranges. year continued quarter. flat rates, the first utilization unchanged to both modest stable only Moving forecasting as Commercial We Total improves. X% increase balances approximately to decreased expect were loans fourth a of sequentially lower remain another line X% rates and the average of revolver in with half in declining of with economy our to are the to second Line X%. utilization balances commercial guidance which utilization previous

before, we our particularly vulnerable high-quality lower commercial the we and have current environment is on economic sector and supports focus discussed to As real that believe estate our borrowers. of the exposure strategy

more We Average driven the sequentially as than $X Act our currently total government-guaranteed provide our this than card. NII two provision. not information took return additional partially loans These purchasing in related by consumer are CRE of in credit at by be other risk-adjusted held-for-sale continued to have billion to more growth investment exposures declines in liquidity December provided We loans alternatives. for the a quarter. XXXX, action home increased they auto CARES presentation residential excess more current of to attractive years. end to deploying in under the our These X% by one and mortgages improve expected our in are the in for offset equity our portfolio loans trajectory approximately held consumer portfolio portfolio forbearance

portfolio prior the the securities compelling quarter lack opportunities. roughly reflecting decreased combined X% the to of downs of $XX impact pay with Our compared of reinvestment billion

unattractive current continues portfolio to at investing support patience current for NII environment investment in in allowing rates. the Our the positioning long-term

securities Given XXXX, of growth for risk strong we half an the believe in are do the long-duration not potential second providing return appropriate economic trade-off.

our result, to expect a we portfolio term. not As near the in do grow investment

help within quarter the end securities the billion. from and remained should tool portfolio portfolio the $X gains focused quarter us cash other on rate to anticipation headwinds. our strong year securities in several compared actions the past unrealized to investments $XX hedging prior includes quarter. rate of hedge lower years and which give Also increased growing over a and deliberate billion, at Our billion structuring of the to $X.X a at flow cash Average a the $XX advantage to effective as very interest-bearing the ago the continue mitigate billion environment short-term

In in outside record cash helped third deposits quarter, excess consumer months. by PPP addition XX% increase five nine increased despite to of X% deposit basis points. to compared past a in headwinds deposit which down CD the drive the growth costs loan reduction significant the growth over Core interest-bearing core the reflects balances

declined assets XX macroeconomic improvements basis approach remained basis and optimization declined to ratio or to and selection Moving the be million solid X% with market. on Nonperforming points. Also $XX our industrial NPA to environment. balance sequentially. quality in criticized resulting points credit of and Charge-offs X appreciable reflecting XX with well-behaved credit. assets underwriting continues basis Overall points client sheet energy, disciplined our XX% at the middle declining improved

decline commercial. with $XXX million to declined resulted and solid the portfolio and $XX charge-offs Given with our provision balances net to loan the a benefit million the loan. in consumer points macroeconomic level and The low credit improvements in lower combined coverage reserve results the net the outlook, eight basis in X.XX% end-of-period of of in leases both allowance loans improvement

decline our factors. balances due of $XXX the the in credit profile to Approximately to million economic of Our the period-end was levels. criticized result attributable commercial of the and risk decline and of is asset several improved remainder ACL lower outlook reflected the improved X/X NPA loan with release the lower both which was

macroeconomic information known and of all reflects XX. as December reserve our CECL, under required is As credit quality

be reserves credit reserve economy, point, there or sustained improvement could the meaningful not losses unreasonable given here predicting we in extent growth tick even and uncertainty in the While to the from broader up. this the significant it's are that down both if come expectations and loan forecasting our not releases economy at would

of higher case X.X% XXXX end assumes at GDP macroeconomic to levels unemployment an X.X% end XXXX until below the ending remains base scenario Our XXXX; X.X% the by rate than XXXX. of current the declining and

scenario Conversely December, impact a in XX% base the our but fourth Importantly, would quarter weighting administration. of build. remaining million from scenario end with the would with the probability loan in $XXX the X.XX%. result and change our currently to stimulus our associated did MB the passed by million the at new of base XX% scenario of applying upside not billion and approximately incorporate to XXX% rates impacts proposed generally scenarios. downside our incorporates a downside the release We the estimate $XXX favorable ratio additional reserve. XXX% a result of base relief a fiscal Applying is not Inclusive to to $XXX the in million to discount package consistent ACL does as portfolio, $XXX

reserve, virtually excluding the billion be ACL with no credit approximately PPP Additionally loans associated $X the in would X.XX%.

to Moving capital.

remained quarter. strong the capital during Our

ended target ratio at of quarter to of X.X% billion CETX capital. stated the approximately our XX.X%, amounts $X.X Our above excess which

from Directors our As our a XXX to $X.X remaining program, by we million outstanding. in authorized shares of capacity billion share representing current million shares reminder purchase XX have of XX% or our Board XXXX

As And Greg plan the in the permit in in to net under for coverage. income of share shares Federal assuming should framework, change execute would approximately repurchase mentioned, no banks buyback first have billion total million our $X quarter. reserve to the around during current to repurchases test $XXX to we Reserve capacity XXXX XXXX we continue

outlook. current our to Moving

earnings the both We calls. full for and year detailed previous consistent provided the with first guidance fourth have quarter quarter

line in commercial Average expect PPP to half balances XXXX, We basis, single-digits an the both with balances XXXX the end-of-period by consumer loan end of utilization of range. low headwinds to to $X from benefit are in added second of loans XXXX declines single-digits forgiveness year high consumer year and full full the of commercial expected loans billion and our in XXXX be average increase the while at total reflecting forecast the mid on mid the stable offset XXXX compared and decline should to to XXXX. originations the of range PPP new of

expect loan X% auto mortgage loans, approximately increase in residential X% growth and average partially For the C&I to CRE. to portfolio, portfolio strength consumer continued in X% balances quarter, in other by the sequentially, the first we in and total relative stability a decline reflecting offset

X% of loan first securities quarter portfolios, NII Given fourth rate X% approximately from around margin next hedge liquidity. with to the deployment be expectations in the the structural our no our excess to decline quarter, and reflective our we X% also decline expect protection for of around and the combined assuming outlook, underlying to relative year the

We X% increase to X% which headwind part would includes income which growth, expense business our to approximately of million in the If the for expect from impact be X% non-interest in for a X% of revenue, XXXX. as exits X% foregone with our XXXX, savings income impact, annual to fee in lower expectations includes our program. not TRA associated TRA $XX

which not the the For to in which tax increase lighter revenue mid X% revenue. significantly to year-over-year, offset partially expect lack mortgage we first is a revenue seasonal income, the preparation wealth decline XX% is by from impacts, first fees as stronger seasonal such non-interest in and quarter, sequentially single-digits reflecting TRA the uptick fees other of quarter and

revenue We $XX syndication in stronger to also improve results million $XX expect the businesses. relative in the and first quarter loan fourth line lease quarter our to and top mortgage to million anticipate

loan our fee sales and reduction by markets. We growth the the partially accelerate in expenses, offset expense expense the investments our expect adjusted expansion of consumer the XXXX both our in force strong expenses to associated X% our quarter and associated year program, full fourth continued branch with but driven approximately transformation XXXX purchased by and relative decline non-interest expenses servicing impacts to portfolio growth, digital with to

associated compensation our expect we sequential us, always the of Compared businesses by is actions, from seasonal be sheet positive impacted excluding expenses quarter operating XXXX, year-over-year be reported a seasonal our the and for continued are our fourth quarter. items We and to timing expenses with of adjusted As first awards taxes. first quarter total the our items, expense payroll X% second to down our XXXX the fee-based case the total flat. On to approximately X% are reflecting to basis our growing success proactive half to balance management. leverage currently first quarter expect expenses expected in generate of expenses,

charge-offs We lower and would In the in in cycle. our expect demonstrate net to the results XXXX XX that to points of be end quarter to full expect XXXX and of over were proposed point summary, fourth to year XX total through achieving If have we outperformance basis the stimulus made strong the the range. few range. past continue progress the be passes towards our we years basis at goal

this to Q&A. call We client performance to long-term disciplined on turn Chris same rely we us horizon, continue that, a open let gives selection, conservative focus me will and as navigate up confidence a principles; it the underwriting, With for which to on over environment. the

Thanks Jamie.

question Before the questions. Q&A, as we morning. queue that questions. for many courtesy as answer yourself please limit you we this to the have others, best we questions and follow-up, We'll possible have allotted the a as in do call start the and one our if ask open you time to then Melissa, additional returning to

Thank Your first Sandler. comes line of you. Scott [Operator from from Piper Siefers the question Instructions]

open. is line Your

Good morning taking Thanks guys. my question. for

Scott. Hi,

require a robust the acceleration more of some guess, later to about rebound C&I curious from how maybe who the in around I the I in color me commentary seem you're in as on think just outlook. the potential I your to more just you of in I'm had the It thinking C&I stands C&I X% it contrast second bit say in seems the in to but would or utilization guess, midyear a peers sort for about characterize outlook normalizes economy as ask so? constructive, half. I line just, of year. Near I wanted the a term, increase for

Scott. Hey, This is Greg.

at by were albeit that the over the fourth quarter XXXX. seen growth quarter end the say, of up I'd third we all, we've of First pipeline we down where were encouraged slightly significantly from

of really our across and our all progress regions verticals. -- we're there. So It's across it's pretty broad-based seeing out

we Obviously, into encouraged we're by there. forth, of recovery. in lot go the so stimulus, the the vaccines strength a as going there's digital seeing unknowns and XXXX, we're So

are, it's to what so but hard liquidity now. right gauge a of expectations there's lot a And the out thing there for us

we're get right back swing numbers know, those we the end get vaccines the don't second day of optimistic of in already. we've look anything Tim you but have the to might we're So if encouraged that and But now just being the distributed that stronger. full at if economy pipelines half by appropriately conservative, year the I that seen the add?

No, I think, that's absolutely right.

As we're you continued in particularly fairly in with the several significant the saw production years. healthcare where we over the of fourth said, course and pleased past think, that the renewable strategic technology middle I the quarter like bank market the strength has verticals pickup made investments in energy, the and industry

then I within impacts. know for Thank that you. include And Okay. guidance full conservatively year, don't just you your Perfect. guys the the PPP

half of ebb through? are curious see those that expected While that is forgiveness you expecting to they half to sort flowing do a extent and the Just how most of, first however do event, first or how flow? come to through that you the as from the be,

Yes. Scott, it's Jamie.

total million For accelerated in $XX included $XX expect XXXX million $XXX about fees, quarter. total $XXX that's We've million to NII, And forgiven. only about about NII accelerated -- be in compares forgiveness forgiveness less million includes which in that in perspective. Perhaps the a our XX% a got fourth expect which we bit about than XXXX, better we with of now of be first in or line forgiveness we'll right million fees. PPP in the outlook, originations we fees XXXX which $XXX from quarter forgiveness than to little in

from expect forgiven be that in to horizon it approach as forgiven. the borrowers originations fees model XX-month as it third to make XXXX payments majority out, of have or we the quarter so we the And of the needing time

PPP given rate So $X bit half round XXXX the accelerated of a the will that And have the about the the to more year year term expect be we of loans. billion fees. accrue in we then on a then five in as at prepared remarks, originations right expect we lower mentioned now to back those and just little

X.X% yield the about we fees. expect So forgiveness a any of to prior

much. you Thank all right. All very Perfect.

Your next Usdin question comes Ken from from the of Jefferies. line

is line Your open.

quarter, Jamie, reiterate hear comments the your core morning, Thanks. I up could excluding can growth fee terms you to first color this that TRA. Hey. I but into and Good for that core you just mortgage -- to some more what that drive growth your give side of X% guys. in expect you on equation? about mortgage just year X% heard how the fits

Sure.

think momentum We fee successful then in XXXX consumer will the past several coming the the very market years of we to in lead offerings XXXX a I grow the investments of the side. some off And businesses. capital over in X% did should households on the made bear fruit XXXX.

and digits single-digit the growth commercial XXXX, business; and low I growth single-digit management include does processing; management capital in banking, mid-single So growth consumer mortgage. and deposit fees, when wealth categories in then which expect you line card up and asset treasury for high fee in the and markets

it. Got

a made earlier some even about point that you with So strong it the guess I mortgage. -- was of capacity year given

you time? less see pulling mortgage mortgage of still production that MSR little year. Thanks. grow the do you see because Just on side? Is think or this more the can just color You maybe drag through, over a

MSR from the mortgage for held environment then from in of balances capacity in the And residential show And do us. challenging. our was and quarter, constraints in this Yes. fourth headwind decision and investment. for perspective expect up retail $XXX that servicing there capacity in there portfolio from the there, close quarter the were constraints is we see million to an Those behind certainly our be On you'll will loans first production. the mortgage to

achievable expect We very to growth for low the I for half is And abate second single-digit in of XXXX. XXXX, number a all-in that us. think the

Jamie. Okay. a Understood. lot, Thanks

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

Your line is open.

Good morning.

Hi, Peter.

then I secondarily, just you much restrictions about existing you're the you thinking about buyback? the if to in ask capacity just wanted share buybacks, lift Fed the if you to can, were left go capital capital. on the do And have returns? share what's And how How could left? over if

question, Yes. Peter. program. the Thanks for approved share $XXX we million In XXXX, repurchase

shares have that We program. left XX under million

$X.X from guide about for at XXXX test look billion. you Right and Fed trailing call it So net should XX-month $X billion of on you capacity now generate income continue assume our the you earnings we've their additional no excess we if billion releases. the at And loan at you performance look had. about reserve capital $X.X basis our that XX/XX/XXXX, the of end with spot assuming of even have a

window the billion think, the Fed for -- I to So so open should that everything I or is $X think XXXX level. triangulates

And you guys lowered That's gives get was of December December, confidence to these off the the coming net especially deferral, from an Okay. additional -- don't there XX. XX nothing charge-off we some What guidance assuming looming, stimulus loans towards think is it like, that, I helpful. with package? then, you

question. for Richard. Yes. Thanks it's Hey, the

management I think the really comes we in perspective, the down to from confidence it our risk have a activity management. portfolio underwriting and have we the

normal We them lower rates to see XXXX. than lower normal. continue consumer in saw We than loss

super prime. impact that through our concentrated and portfolio is continue We stimulus rolls of XXXX, Remember, the expect in to in as prime the portfolio.

close We XXX. a weighted to have FICO average of

we've the XXs. do going there We standpoint. -- our group. expect We've in to down, in happening to seen commercial. low at-risk the a high that's deck. potential seen So we an migration assets confidence in the losses what's of function the up from see resolutions workout in be criticized just positive some bit tick a from little commercial into We mentioned. as XXs, But highlighted normal Jamie activity industries And come

what across more where sectors, number a lot we confidence see And of the restabilization have see portfolio, so, we performance range. we in that given just, a in

Thanks great. very much. That’s

question next of McEvoy from Stephens. Your from line comes Terry the

line is Your open.

with Maybe morning. now chief guess, question Good the by who, we'll Fifth Jamie and at a start Hi. Third. washer for call I bottle cook

as government-guaranteed mortgages purchase a to on on as about clear in kind purchases So for of you guess I quarter, that think there had cash. you well like opportunities thoughts the sheet the my the and question there loans hold fourth Jamie. next are holding on the to decision question, just the the more as months? loans Pretty securities balance XX your

the we the pool was Yes. back In on came to in forbearance of $XXX we own our what repurchased And that that's quarter, that Mae XXXX. half Ginnie about well third tune and essentially our it the pool sheet. million purchased In of servicers' retail the $X.X balance we billion, $XXX the did taking production sheet. and putting a as to fourth as the of quarter, on

a I are And lot mortgage incredibly returns work on of the residential now portfolio to we attractive. done it. think, we've improve think for the

have forward, going mortgage growth just the be and like enough. to risk in the in residential given other we've convexity think I you see that loan I'd done categories,

to a quarter So think trade that's better to buying we purchases deployment able expect and was versus than far cash security just our now. or X% that in mortgage-backed was certainly But, of are so a X% the return to securities. excess it sub-X% probably We ROA, first why back were transaction, I we on that again, execute get right think, the the all of to selling production. nice

just Thank then drifted lower, some construction? those mortgage there. increase hoping looking you. follow-up, the behind curious, in allowance; were get commercial and Other was and as at higher commercial insight up categories two to I'm CECL you. the what And quarter-over-quarter just was Thank I a

continued Yes. and and they're a of asset longer real when It's a estate, terms in in tail arise tail to be That's Look, Richard, that commercial has migration. negative longer going resolved. we've again. seen when an problems portfolio a just class

go saw that in criticized sector. we So assets up

that don't because qualitative we of some retail, of And fully time in so, reflect that subsectors, adjustments, hospitality and models terms like we these are impacting recovery. the -- variables that, plus the of the some believe

adjustments real higher And so, qualitative the estate quarter. for in asset ACL drove and commercial the that migration the some given just trends

again. Thanks Great.

Ken Your comes the Zerbe Morgan line next of from from question Stanley.

Your line is open.

Thanks. Great. Hi.

does First that in PPP the X% -- question, NII just in your just guidance, terms accelerated want expectation the the make sure fee down question, include or of that whether to I XXXX, of income?

Yes. Thanks for question. the

guide. our $X do PPP the include of we So in XXXX billion additional

our that. yield today, of demand NII improve, on the situation. down question year. a the anchor guidance because do curve And can uptick the commercial the Xth about in It's curve. much implied trajectory the a back We of also A the we the small guess, could X%, we frankly, line not utilization, assume help. on point think through to that borrower-customer would I guide half call January do just of higher I first steepening benefit forward there's

And we'll do significantly So, steepen perhaps better have would the a there. opportunity to curve bit should little then cash. we deploy excess

loan we've conservative Third, sit two And from because or we up perspective, billion production be here but as billion as XXXX $X be so production -- first from today in mentioned, submitted we then demand to and borrower originations that's XXXX over down in X% there'll buildups. the number with And as regard but production commercial through inventory finally, from $X to CapEx we're we're assuming Greg and apps commercial XX% days. expecting so the PPP, or about better higher still loan just a XXXX and of perhaps perhaps levels. a expectation

of a assumes outlook our economy. to not So, improvement, XXXX but type returning

it. Got

think target totally economy X.X% CET-X make gets you on And I that currently us Okay. just good fully Third to better. I reconsider my better dimension mentioned the would economy which understand the of where as Tier second just Can run comment is you Fifth and the Greg for that kind is a question your assume let's X? like a level like CE that you help

the target. to we prior So, X% of the up had in some were challenges cropping environment that a

risk it in of test we logical the balance think So, balance sheet has profile does When a we step run in I range. economy the for half be could that hope we a should as stress our XXXX next us. improve X.X% X% believe X% the to is back our sheet

stress Our buffer is capital X%. currently

for is But perspective target lower targeting Fed's that much we'll the guess for X.X% than unfolds. I evaluate year economy us see I that. So we're the and this think as how we

All Thank right. you.

from of from line Research. Carcache Wolfe comes Bill question next the Your

Your is open. line

headwinds a and but system. pressure of Thank you the similar come Third, your expect saw for Fifth and cycle across the but rate last end you. to not the book banking the persist was throughout morning. yields short portfolio We of re-pricing strip just loan to back is half variable Good I loan mix further maybe believe strip this contrast as to curve, in well? loan dynamic still come re-pricing cycle? what's just cycle on you with some different there's this Would compare could about to Maybe through. yet if speak that yields to and the about

we we levels factor new portfolio good the bps and from roughly yields the in are Right guide. our that given points first instruments, consumer C&I XX I yields No, a portfolio. saw But it it's basis a XX the think more production we maybe now side is And that's floating of current yields. nature are and the the below fourth quarter observation in just production in rate to five in nature quarter NIM line are experiencing seeing which below on portfolio fixed phenomenon.

headwind is And a our so certainly NII that in outlook.

guys sorry missed of the Understood. some I negative seems like that led And On there. benefits hoping ask but agency light MBS in that to it But we've some I steepening have some QE I color discuss the the to would around about could separately dynamics wanted give of new on curve. the you seen? which that if side, seem the if see of this, was you opportunities to rates the temper treasuries steeper you could some money security of turn of over curve spreads

the divergence and Yes, a I think seeing in practice banks. we're across it's a great question

that. or what the we points would the rate to tightened improvement your work of so points point that not the or basis over progress steepening. even to or in time either entry like more to point Our put entry our in environment more the defined is to is XX view points basis order or net to see compelling. of XX in improvement widening lot before have But excess points to to XX the is through A steepening on in spread us banks of would that basis curve credit liquidity that terms need spreads

by in quarter in $X in you our couple first over if in the fact of even of $X math quarter bought you picked carry that for months of lost or the third period every you time. value fourth In the up

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news So, for investment very we are the the well-positioned in us portfolio. is good

the $X quarter luxury are is cash have billion a flows how of We about we're Portfolio time. it. modeling

are -- we the appropriate think afford risk when and being the just we'll return patient we can be we move think getting to So, patient we environment. in

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

from comes from the question of Erika next Bank of Your line Najarian America.

open. is line Your

buyback mentioned its a correct? is extends But that quarter, Hi, that beyond capacity good clarification the year. first you question the morning. in the test Jamie, billion imply first Fed question. My $X for would income

to first and Fed Yes. certainly $XXX million additional the then in allowing to us are quarter subject any repurchases do the so.

could capacity the income So, not if number are you one, that your if two, what summer? plans after I to, this And subject income quarter? grow first to lift where participation they restriction, restriction guess were that number DFAST for

of X.X%, part I'll $X.X -- the we first Right of take of capital. one. the excess billion against our now, second the So target question have the because, that's easier

to take $X.X would the economy improvement, until So, billion our shows us down significant target.

a less would fair bit to The use. So than I number a that. income think little that's deliver test

to it's a that opt now, prior in, the given And for binding funny we have we've is essentially team and tests of we April the Capital us own Buffer to X.X% participating. frankly, as they COVID in adopt team even discussed December deserves stress nothing at gained CCAR be we the or in until six constraint their X.X% internal should terms right decide. our Xth arrest at X% the In of this during our following by versus officially the capital Stress like because, our target there's results pandemic. Fed's did tests, But feel SCB, those

not had if opt I for now, would think to decide I So, decide today, in. to I

just trying to peak, quantification And think, ex we is XXXX? points on are cycle. this in as second outlook spike my to it. the square for Should that reserve Got your XX of to charge-off of XX basis question be X.XX% a the PPP. with or you expecting that delayed the I'm net just

Yes.

the XX to the grow points guide us, quarter, point at first XX in the to And you range this to the the some the elongating out. stimulus peak, XX expect basis pushed for XX and when get XX during charge-offs to range XX though for interesting the look are we actually expect additional So, year. certainly point be it's cycle. we basis those to your losses to be the But even of

think to guide cycle better a coming down, ultimately peak we keeps the to better the which why I continue and of is number.

peak us. the now, think I right be XX XX will for to So

Got you. Thank it.

Your next question comes Pancari from ISI. from the line John of Evercore

open. is line Your

morning. Good

-- of can you terms of your us the on thoughts your both thoughts where well M&A in just as as give thoughts on the there capital and back given you the what updated in side? and bank excess, capital potential stand terms topic, non-bank On to on opportunities your Thanks. are

it is Greg. often Good you imagine. this I get question. as might John,

care health HXC think off, as really we vertical. first of evidenced We're our changed haven't M&A opportunities of focused that our I non-bank supports position. really our recent acquisition our on by not-for-profit part

providing our making payments out about hobby wasn't the looking and couldn't really whether capability. energies the scale. capital wealth our asset capability, and are be right are and getting casualty our as business of markets we're really then where we that it our businesses products for sure more fee-based it's such That's in spending both we our and that our So for get and we to That service talked capabilities we're additive our really about now property returns management, business.

So not bank agenda last assess opportunities situation. today, focus. our we fee years on And would proposition our going is on now. focus to grow be on not been it's a in those that's our attractive five focused as And enhance But From businesses. value we've business that's the an to move the to those always, continue perspective, our and M&A mainly. right

Our focus business to M&A, non-bank just discussed. adds is on that we the

front, that management. front, on non-bank then, I you mentioned know on And the Greg. and wealth asset Thanks,

interested that would Just also side wealth, management is but interested areas to expressed asset you well? interest be in you've know confirm, the both is -- be in I institutional as it that you'd an in?

Street like focused much asset -- pretty where not side. side, pretty Partners we the wealth on business. wealth the side That's No, the in pretty that's We're our no Carolina. and institutional management acquisitions much I now on like of right focus made the North Franklin said the

ask question. Got if Okay. it. can one more helpful. That's just I And

terms concentration the securities to have the within book of portfolio, an a get underlying underlying the an in just terms of CMBS. wanted of I there's there an what -- seeing CRE wanted updated there securities up. I you. on just securities you're get update credit holding you the there in evolving? performance is how terms update any of on In the if know Thank stress

CMBS the of single high Yes. the AAA-rated top we're rates in billion tranches, of $X.X we invest delinquency about mid that at and We're super holding well. the the repayment XX%. to so digits, non-agency only enhancement approaching senior is now it's invested And The stack. up are but in credit right

book. So concerned we're exposure in non-agency not the the credit about

it. Got

Okay, you. great. Thank

Thank you.

comes of the from Wells Mayo Fargo Mike next Securities. Your from line question

Your line open. is

Hi.

Hi Mike.

and the guys Is think of and year, you so for a in kind for whole. of kind kind half half of year operating second of of negative first I the you're fair the I leverage a guiding the said? summary leverage heard in positive year, flattish as the operating what you that, correctly of

Yeah.

Okay.

markets landscape, from saying your are in but that like really use markets, is, first, you large to on kind spending. to in I'm question their that a credit businesses opening the lot the of some are of moving of of market others cross-sell, digital up And are into the the branches branch money, opportunities are lot area. a have middle trying So banks some sure, spend others there's cards to strategic your

more that "Hey, mean, Is it So much and this about the think you we as yet? X, impact are kind say any Z?" major of in the nothing, to do or over Y about years? five is a worried banking do wars about need markets. How your relates I to money the spend to seeing on, next competitive you Are and you that? you strategic threat it

question defer to him start. me And is let going it also. This this because is Mike, I'm a great Greg. Tim, for to

about, expense the run investments investments. to basis down on think make year, continue strategic an you we we still as If making, expect next we're to the

fintech Our our as opportunities grow capabilities our acquisitions how added far such transformation, you've to in as have last a our changed our our our discussed plays as on focused digital ago. our fee-based that strategies over-and-over to we're businesses add deliver feeding I services. to not business is this which heard and business customers, being organic our to products years to And five moment and the to just that business the

market. on competitive. markets, continue that very to in So strong X%, We're we're at Chicago we're the our seen going growth that. focus leader Southeast The growth we've a in to household

like those investments. we So

extremely comfortable ability We have us So compete. we continue allows think to grow place in to be structure very we're our And investment to competitive. our today our on franchise.

So we change we're not think to to greatest continue opportunities the shareholders. that. going We're our for value going creates to that feed the

me add, Let side. Tim let from his

that in pay to a cases of regulatory imbalanced We some that it competition Mike is isolate arbitraging, we who always mean, institutions In closely. way creates I are are the are something competition. they given lot our wouldn't No. that financial in into the just that a particular at fintech And markets. I traditional, think apparatus watch Yeah. the to companies. folks, attention building moment the new I

of share, most on impact or domicile deposit which otherwise, that that continued Because course is years have on the being point make you important sometimes on we period-to-period over the measure three Greg or the numbers best a in you made sustained think deposits big our one, to people or share. of you I highest view even four see basis. is FDIC headquarter banking basis markets we use pricing a as market the primary the past the decisions me to gain product the have on on density relationships, a a

the that seen to core we growth consumer across that the franchise and us So give see out business growth the middle on things Southeast Chicago markets ability confidence we like and Greg our continue particular are in of franchise the relationship our the as to have the strong market household focused strong the to mentioned, in side of compete. continue in

I for And low or, the you're X% from household what the growth that's year to over think a growth is it, past rate say think over what so making an because X% -- depressed household timeframe? -- environment, what the interesting way so you timeframe? about household

household it X% the if year. in our growth prior you quite have would the to range, past to growth in It's at over look Yeah. years, But were X% steadily. been X%

And both the growth franchise strongest So stronger when Chicago among Chicago, stand-alone the ever Third market in have the the we the we've actually our by than Fifth on some post-MB basis. definitely in you've seen rates acceleration, been in a Southeast. seen for and far build-out driven were

All right. Thank you.

the Saul from line Your UBS. comes of next from question Martinez

Your line is open.

charge-off your question. Hey. your reserve with seems wanted guidance. to questions. Good like Erika's are taking just I inconsistent and Thanks morning. me, for completely my It follow-up on to comments ratios

five basis doesn't government points be the is And life guess midpoint weighted that even the rates cycle you're from times XX going are the Your that NCO -- from credit suggesting and average of emerging. here. really of I NCO consider the fall of are cycle your played about effectively role seem that to at at has reserves prevented it your five peak the does superhero remaining to would And not your that and years. even

that to quarters? be adjustments to pretty coming conservatively. see you weighting relative charge-offs, because probability conclusion that qualitative that, And level just going ample be me in help releases pretty to coming you're can would levels or your likely your should be reserve an the So -- you've me the the making your gap in we to of seem on, bridge scenarios significant would it's -- pretty reserve thinking downside you're

to fact allocation really included very ACL a good the to than and hypothetical and why certainly the Yeah. based the two prepared so the we is obviously scenario, modeling we scenario happen. don't on base It's that answer is question, include does in frankly that own of remarks, a a was the that and is that downside information. scenario the our everybody one, Moody's outlook; down expect the comes XX% that conservative more have It a scenario would to that's

very than So, this nature by in an higher reserve ACL our would that expectations its environment. delivers be losses for

higher XXXX? in factoring to model charge-offs what in you're your that is than are So, net guiding

and is -- Well, modeling for the us your a three-year over rates three-year and guide our over the back reverts loss remaining calculation XX then it whereas historical reserve our next to is the months. a reasonable supportable period, years internal

scenarios that So, are you different that have can differences used. in given the

I it is just this, you're like don't want that, the two but this to is belabor times just like a peak that's yes. saying disconnect more weighter. if Right, to hard is It and reserve degree. five that seems to your that part there the seems

Yes.

being I continues equal, all and your if to down come should to outlook think reserve will down. improve things come the question, the other

get given see prudently the remain and to like Our with months positioned point we'd and three and economy conservatively unfolds the through environment this vaccine to how uncertainty turnaround. in efficacy is, six we and positioned the another

definitely I important. think that's

Yes, right.

That's really just to... important, Jamie,

good a have. It's to problem Yes. Yes.

sorry. So, go ahead,

Yes.

This It's the No. is conversation. Greg.

out. business. on want the are economy wait this we we forefront that's conservative out, We over the couple quarters of plays conversation, a next are With about the how -- how taking do see how vaccine our of and obviously think approach. the But we to

right. You're exactly

I part latter would. expect releases our to go we've at this things you If if what for we are, of in significant modeled what as we the look reserve play out versus as got they there's think year upside expectations

Okay.

of see on it And expenses in Just glide from $X.X your expenses, right as path? a midpoint that away. of it thinking with seasonal be And the think should XQ. XQ quarter would we and seem below fair Would to that how your just head XXXX? about like is way as of year the get factoring here. guess of even rate into on expenses, going first range quick billion -- expense But, billion based you the you're question glide we through I'm additional as most path these quarter XQ filter -- like do at with you in I a there you make by say initiatives run full you the be follow-up I the some about quarter sure mean as fourth that could there expenses to $X.X getting

in haven't we I prepared when XXXX. a lean then yes, We benefit But see it to But model items the the discussed billion the given X% And X% occur now, Yes. savings million being a XXXX quarter. have you not million rate you that the that It's observation. we the quarter automation good the process XXXX obviously fourth than then quarter sooner a in for that seasonal might in due we're $X.X do the extent to than revenue and expenses run to ranges have time higher. of is $XXX expecting our and to horizon be fairly first for initiatives you typically to could higher out, run and And in some would additional If in assume remarks. rate better then up other good pay projections. the growth revenue to the exactly $XXX are right, in improvement fourth the outlook, off our right. ends the

it, okay. much. Got Thank very you

the RBC. Your question from next line Gerard comes from of Cassidy

open. is line Your

morning, morning, Jamie. Good Greg. Good

morning. Good

Gerard. Hey,

us? guys' But view that should this had it's it of know Coming for on issue more is back do made put we into behind the when Clearly to in Do XXXX COVID I loan this is that whole basis ultimately, once higher there year. loan loss that loan whole I at reserve CECL you point go. part you don't tumultuous you when second X, you it's of if your know was we've your was on was CECL at it's about or volatile? -- XXX reserve end your a the good your year? loss a but think XXXX, and I think when volatile, less reserving, very loss And Clearly points. now today. for loan loss peers, look a it January a reserves, it look think then, place terms you take

I'll these take questions.

second I think the answer Greg one. can

Okay.

get one, to And basis of is current should if it's that when we and several terms right XXX to of the that as get time the going there, we in was one In take level, to in to our the XXXX at day -- measured lot be levels exit were as XXX well thinking it levels out as now ever to order the or XQ and than outlook a outlook crisis quarters, higher have points. And that to significantly the you couple modeling than be economic this have in to you back essentially would would of day will an with because we next going least that corporate looking to hard longer at a we're back lot coming spent works of this leverage ever years. return going might the they should in. way debt

years. CECL. the across ultimately - of longer is probably you end guess take a the reserves plays our all next the years if when favorable think that of industry a And time. take and probably to not was we of the probably XQ are as because over bias number now levels outlook be we day of at Or is I'd say out over because the from debt outlook two economic where XXXX at I to would adopted you if as your the said two that the for X? period So corporate as

Got it.

reserves. I methodology you now the In with terms dealing of of into adjustments release obviously and swings absolutely the a to going huge, it's given right then also saw environment huge mean we're volatility yes. that necessary this CECL stress

in for that one models tuned pandemic. been modeled the are new These no have this a models. On

uncertainty So right there's that front bears a burdens in to lot of models qualitative adjustments to these now. the us of

for So us. and more makes them it volatile does definitely

industry evening you including No a go very here in the the you. well. doubt. When Third is for the elevator Greg is down for outlook question the bigger banking picture positioned Fifth

bank is real you fantastic. shape since we going do that that worry What right election been the risks from stock own go the to that as as Pfizer your are as you elevator it economy year you you has at stock prices this about announcement Assuming when hopefully price the but see well as the all the will know everything out what recovers night? think down after

First off good question.

competitive success we're with that in long-term made our and I in. to The that we've aligned the markets are be of positioned growth business. I our well we're think think investments expectations

that how So I we're oversight regulatory when watch good these is same players fintech come what the competing The that not about we're we is, under really forward always feel challenge today. look they so there's there the system a and get so doing we're could kind of payment threat with forth If access capital and to so expectations create rails banking forth behavior. that for as stress But some pools us us making the I'm profit concerned some under that creating our the our themselves, regulatory players edge far entities around fintech that we're as and investments we really I'm framework in the aren't for It's investments are that there customer snooping very comfortable fintech out stress same that some watching. of about. maybe with. shifting those

the that's most probably up night. keeps So that me at thing

do against our we've right looks have digital that's other that think all open I we've done investments like we To our eyes what competing sure nontraditional end we really ourselves. things as digital against some and bank of created these keep why to just and been on that other it the made bank in players. far a banks As making significant capabilities

lending All service to threats. online to well capabilities. are with our huge positioned online of deal we've those And production of investments products made we're sure capabilities available type our make digital - in

Marinac from Scott. comes the question Montgomery Christopher last from of line Your Janney

just acquisitions necessary Thanks. fintech you Do as your of of these good future, answer to off a see a leveraging want to companies? last Greg be just do in customer Gerard. you the item or

then our it's strategy I or been a Once fintech either partner back partner whether of into build. gets it once again again we've think opportunities. acquirer buy

us get us partnerships can't we that through to the us market. to If the type And do how watched how those And respect the buy quick growth get or a on to how long always way capabilities and it it. capability that and or with we'd we from to with term. mindset that's you've strategic our to we're technology do already perspective relationship. capabilities. allow It's build gain like we that can't numerous fits if build offer if lot direction already over looks address to to fintechs And last the proper that what a to like been our So focus to out going a want the offer do we those we it's handle there. we're to that And of going you opportunity there. decade can are fintech into how with capabilities really respect watch

Great. all this for the and thanks morning. Thanks much, very information

Thanks.

further back you. We Mr. to the Doll have this time. no turn questions at I over call

Thank thank and for you in Third. you Fifth all Melissa your interest

any the assist and have questions department be follow-up we If please will you contact to you. IR happy

Ladies concludes for and Thank today's participating. this you conference gentlemen, call.

may now You disconnect.