Fifth Third Bancorp (FITB) 20 Apr 232023 Q1 Earnings call transcript

Good morning everyone. Welcome to Fifth Third’s First Quarter 2023 Earnings Call. This morning our President and CEO, Tim Spence and CFO, Jamie Leonard will provide an overview of our first quarter results and outlook.

Our Treasurer, Bryan Preston has also joined for the Q&A portion of the call. Please review the cautionary statements and our materials which can be found on our earnings release and presentation. regarding the use as GAAP about Third’s information and non-GAAP forward-looking contain Fifth to reconciliations results, performance. materials to of the measures statements These as well

Fifth of them. XXth as to only speak no obligation statements XXXX These and Third undertakes update April

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

let me to With it that, Tim. over turn

in Markets seen Thanks, section it has The that past today. been Chris. joining lost a deal narratives and for great us value. over And sector. broad used models good bank the you morning, describe the of on real trading term cross any volatility weeks such business a have has everyone. have banking to Thank fundamentals of six been regional descriptive

any crisis consistently now. was instability a higher, company at investor seriously, there longer our conferences. inside take with a environment sector been quarters these Third very the for our Fifth We’ve running no in for communicated and rate walls. in at four We’ve calls the for we expectation While many

As our remains our fortified, and is strong balance to the demonstrate our generate quarter well capacity strong. profitability sheet through first results cycle

to in We positive a reported of we the XX% driven noted by ago leverage generated operating in year earnings share increase increase per items Excluding nine revenue. release, points year-over-year compared the quarter. $X.XX, of XX% an

average end quantitative flat deposits period sequentially held industry and normal tightening and of quarter wide seasonal the we impact During pressures. the despite

ratios levels, assets NPLs during and quarter. coming Our guidance NPAs of at stage end with modestly charge-offs delinquency the our key net of XX credit metrics in decrease remained basis and points near remain the lows normalized historical range. criticized below early low

ethical innovative of most saw while one the granularity by businesses. list. also America’s companies deposit as world's of their The accomplished as only in by We nature the innovative most highlight being our world's this balanced FinTech quarter we and well one we one our companies. in recognized Moreover, strong Fast particular named U.S. strength, named of Fortune achieved were banks and two by on as Company March platform all Ethisphere outcomes most this franchise. the And of provide of month

the weekend, more alone, deposit in failure a Bank the March we than following month. consumer accelerated Silicon open we the accounts new household after of Valley typical commercial Similarly, our turmoil. In growth would

balances relationships Our payment major top by commercial the most and our management that leading regardless where deposit and of XX XX years. led age franchises to peer size. types, TM balance treasury commercial contribute business we services These average is utilize to relationships of rank strongly are nationally attached our commercial deposit today, XX% characteristics stability deposit our commercial in of the

FDIC total above deposits, insured presence the Our XX% by granular is consumer market flagship nearly offering quarter by markets with is of Annual consumer our our X%. serve. deposit and X% led the household strong above growth mass branch in consumer finished we banking southeast anchored markets momentum base and

the XX of During XXXX. ins to three and expect top of branches years, add the XX markets by additional we we the an five the our opened southeast in branches in quarter, end on past open

X. total on of above level deposit ended the the balances period All end quarter March said,

in for and through on to achieve returns quartile growth. forward am competition, economic Looking while the and confident increased do uncertainty we I all profitability cycle with Fifth deposit regulatory face change, stability, ability from Third’s headwinds potential a that same banks the the focus top

liquidity interest us managing discipline environment. long-term differentiated generate to rate risks range well of economic Our positions outcomes a and in

return environment, forward we’ll our of will quarter to office uncertain CRE, our in half be prove the and on provide of have core for particular low the consumer in implied results. XXXX concentration in CRE advantages. focus and on our them commercial deposit year in Jamie significant should elected XXXX our year. From a Considering profitability but credit evaluate and risk our with resuming guidance, second the to more second homeowners along information perspective, ahead for metrics we and the the well are [Ph] expectations full share repurchases and

certainly want shareholders. not and Last, our but employees to least, and thank communities hard XX,XXX our their and supporting dedication work I for customers,

the to thing commitment and our evidence. do Your is sure we day right purpose making living every

more over on to financial it our that, and I’ll With Jamie provide outlook. results details now hand to

Tim. you all joining of you, thank And Thank for us today.

the and quarter. market seasonally Average year during efficiency ago new to with Average commercial period adding Our quality while consumer. the the declined volatility quarter. relationships is core compared and and of modestly adjusted quarter, and loans net during results balances a first challenged both households the down and despite an XX% improvement We flat X%. a our six new deposit in of We deposits quarter guidance were total quarter. point were compared grew to in ratio quarter strong prior achieved the which line

year, Our management. and to sequentially. XX% disciplined nearly reflecting declined but interest income billion Net first of increased last core growth combined PPNR of expense diversification quarter with our XX% year, X% the compared over approximately grew year $X.XX revenue streams

portfolio despite day NII balance to while on to strong volatile continuing count expectations performance impacted position lower related and defensive shift our seasonally our in a we income prior the the the more disciplined impact environment, businesses. of market remain sheet sequential expenses in was quarter. headwinds, exceeded income invest Fee investment and the Our given our by

income. higher PPNR than fee was impacted expenses by the with associated expected

for points, impact date XX% includes basis NIM deposit bearing interest costs to six points XX a reflecting interest basis deposit through beta Our while points XXX basis quarter, first of increased the of bearing which cycle CDs. to the declined quarter, the

the X% and advisory offset year. to elimination a by credits income earnings due NSF fee Total driven bond which offset this fee banking deposit and ago commercial to consumer and revenue, in last partially from in service loan compared rates fees. the Growth corporate of year impact decline a syndication, and the market sales income, banking income commercial more adjusted increased income charges primarily fees non-interest -- mortgage in quarter than by of decline M&A fixed was by increased driven trading higher higher year

to the driven of franchise. periods. of increased acquisition to mortgage improvement and asset expense ago servicing dividend revenue fees in was compensation quarter, compared deferred The decay. Expense year the by elevated was X% impact second the lower in provide from XXXX in growth finance Adjusted expenses excluding non-interest the increased and growth quarter due the both non-qualified

the the income year throughout X% to ago bank, our the reflecting assessment, and were growth Excluding wage as combined communications discipline impacts technology quarter approximately FDIC compensation FinTech expenses higher automation and by our hike, the initiatives on fee and initiatives. expense, total with with focus platform higher minimum associated increased compared modernization offset

quarter, environment, quarter utilization at average increased XX%. muted period in demand. on the our X% growth market Compared corporate capital to year C&I sequentially portfolio PPP remains business consumer production balance revolver The ago optimizing commercial total regional our stable loans, this and banking by stable our and XX%. loans reflecting to in production in reflects on in led but bank increased sheet, with robust excluding and have combined portfolios. to and payoffs The commercial subdued both bank. was where was were returns last middle rate Commercial leases focus Moving C&I corporate down less and a the compared

checking relatively prior Average Average consumer rest total to quarter, and consistent management balances total loans our with modestly consumer a by wealth consumer the while of increase offset normal balances CDs in prior as demand stable. deposits. leases compared sequentially, the stable and was X% remained dividend balances by By first captions average quarter portfolio and declined to decline in increases were interest and quarter were finance compared segment, commercial asset deposits flat seasonality. led from the increased

quarter. the as deposits AJ grown were also for we have decline XX the compared in top banks of to end to shown compared total the Period flat a prior the X% since data. X% last June deposits and Feds Notably,

the attributes in to our We in be additional quality earnings some may franchise presentation of high deposit of relevant this environment. key have materials that included highlight our

up credit charge-off levels. The net low to two end XX normalized points XX levels. healthy as points to delinquencies four past early of well increased points year points remained sequentially to loan points stage basis sequentially, decreased range. remained of a points basis Credit, XX XXXX XX key ratio basis metrics four compared days mentioned, credit was at was ratio due of trends guidance Tim ratio basis The below remain and to NPA below ago. basis basis of our The the and Moving and our XX

which high on consumer granularity the our focused perspective, to we a on have XX% of From focus consumer, quality through a improved management loan of we are relationships. our credit lending homeowners, and have portfolios diversification In continually portfolio.

overall borrowers in peers. concentration have We nonprime the lowest also portfolio consumer among maintained our

we overall all CRE. closely commercial, inflation portfolio your continue the XX% higher have continue may loans. in watch portfolios, In CRE the leveraged cause stress maintained Across at exposures office commercial where concentration total closely portfolio and to and of monitor and lowest we loan rates to

represented a point basis billion delinquencies. loans, Office of of criticized loans X.X% X.X% with of total one of and just only $X.X ratio

declined While is outstanding the billion XXXX, $X today. XX% has leveraged than portfolio less now since and loan

deliver the balance strong, focused through We to have on sheet positioning our stable cycle. results

ACL. the Moving to

or this impact a change reserve TDR onetime of which a net reserve was the reduced adopting million, build $XX $XX accounting, increase million accounting million. the of of $XX the Our standard eliminating excluding quarter by

ACL one basis basis contributed change. the growth, Our $XX bill from loan which finance accounting reflected primarily the or increased The dividend point ratio loans of points million excluding sequentially, increase. notably five

scenarios rate our downside scenario allowance. each know, weightings scenario base the a to scenarios. from unemployment rate economic underlying the and we allowance and coverage XX% assumes incorporates macroeconomic scenario As of Moody's base XX% of the while maintained of X.X%. X% We our our to you when unemployment The evaluating peak downside Moody's upside reaches the incorporate

first to relatively X.XX%. stable in our Moving to at Capital, and ratio quarter, the quarter last compared CETX remained

our primarily dividends form CECL and by consumer and in in. impacts decline generation seven Our asset in capital strong from repurchases, position capital offset earnings returning a point the phase loans basis growth reflects weighted the the risk of of

quarter. AOCI XX% book sequentially, ago partially AOCI Our share by which value to Tangible position, the book per value XX%. increased excluding our impacted improves year grew X% compared tangible

our we which loan current total year outlook on X% X% the to economic outlook, reflects our expect growth cautious between full average Moving and environment.

increase year. of XXXX growth lending loans end our for to commercial to outlook in total quarter first environment mid-single a tempered the area the digits second half to incremental in year expect the low which through given modest the implies compared We from

utilization line to expect rates We remain stable.

mortgage. from be loan also as mostly in strong expect a be to decline modest and We offset will consumer growth a total finance increase auto by dividend

approximately production expect to $X.X business given the our market and secular billion continue loan in in the We tailwinds with share dividend gains. investments year the for combined

level the XXXX interest year expect of We the DDA the to or grow Within throughout end. remainder average our XX% bearing expect deposits, demand today with that, migration of deposits into consistent from deposits first throughout to be progress XXXX we declining from as strong we customer stable total acquisition to trends. by from products quarter mix continued with core XX%

For the we portfolios. to and average stable fairly balanced of with balances expect be second quarter sequentially X% between to total XXXX, commercial growth up loan consumer

to sequential on deposits to a up expect also average X% be We stable basis.

statement, to full expect X% income year to NII XX%. Shifting will increase the we

and to wake The guidance XX% going intensity assumes have shown given are our materials, compared to approximate of beta of expectation competition forward. noted, and Valley respect Therefore, terminal guidance deposit other range end NII industry upper of end we levels pressures our As our XX%. in the the providing deposit approximately of the Bank potential a as diverging lower Silicon beta a January under in banks pricing of intensified presentation betas of NII Signature an assumes XX%, wide deposit terminal failures. with

second in half to basis another midpoint NII points quarter, of our bearing basis the deposit XX and or points translates The of increasing so in the XX% beta interest year. a XX second outlook costs the with total

of also outlook and points rates previous migration the DDA continued and points hikes the the Our the XXX year. effects of rate hikes XX May, term assumes for considers basis then in and Fed holds lag remainder basis from short

year. hold a now we $XX dollars portfolio most Our that cash year balances and and securities billion that our billion decline couple excess guidance end, the between of for in closer to assumes

the the year NIM Assuming with we in continue to defensively sheet maintaining the position cash the for are assuming position be for by balance an year. range continued XXX of deposit the competition, elevated XXX to excess will intense we combined remainder

We I and the reflecting down expect approximately second quarter NII mentioned. to dynamics X% loan be sequentially cash deposit

share and stable success markets revenue to to and management our gross servicing partially adjusted be asset fees mortgage taking stronger revenue higher a remarketing non-interest continued talent and subdued in investments and revenue, resulting XXXX, earnings offset and TRA reflecting treasury to lease income this wealth expect other and rates reflecting equity in lower on and to private market up credit X% capabilities, We be management capital year. fees due by TM, income reduction

We expect revenue from in million our XXXX fourth to quarter million in XX TRA XX decline XXXX. to

up second to We the X% adjusted quarter compared be to first expect X% income non-interest to quarter.

debt be markets and to capital fee revenue. expect most generating continue slowdown strong in offset that will captions We a revenue across partially by

to X% to We continue year adjusted full expenses non-interest X% to up compared XXXX. be expect to

rate January was non-qualified compensation to into change The plans and businesses. XXXX in went dividend reduction grow can a mark-to-mark expense full the assessment investments outlook that year impact the X. impact FDIC incorporates on insurance on finance expenses, and which Our of effect the deferred provide

up acquisition, than the assessment Excluding X%. full dividend and to core be would less expect impacts, year our we NQDC XXXX expenses FDIC

year. guidance which growth expense digital the our technology reflects should in Our in double digits the result investment in low transformation, continued for

also in We expect area. digits the expenses to mid single marketing to increase high

severance guidance taken first also to quarter, in the environment. run from proactive the given operating on-going the expenses benefits which expense rate Our reduce the factors reflected actions recognized

to quarter second to non-interest compared expect quarter. expenses X% first We to adjusted decrease X% the

would growth X%, in to resulting of implies below guide ratio This in to the in XX% full total, X% revenue year. our X% PPNR range. growth year an adjusted the result full for efficiency XX% In

the compared and quarter second for We quarter, expect ratio to be XX% to to XX%. second increase quarter PPNR to XX% around first efficiency

in expect XX We be and XXXX second the quarter basis charge-offs year XX points full to to continue to net range.

of dividend including assuming loan production in million, the and the continued build changes scenarios. no Given period our approximately strong quarterly we to expected to ACL growth, a continue from finance expect economic underlying $XXX

risk communities, to to our In the generate value employees strong credit discipline, long-term delivering management, summary, believe with and well are for we we engine, cycle, and positioned through continue customers, sustainable PPNR growth strong to performance commitment shareholders.

turn me for the it Chris to up With to that, let over Q&A. open call

Thanks, Jamie.

you and open limit you time to the follow for up the ask Before yourself questions. start have the given and we Q&A, additional to we one question call this return if have we morning, please Q&A. up one that then Operator, queue

Please [Operator Scott Instructions] line Our first proceed. question comes from the of Siefers from Piper Sandler.

Thank Good Morning, you guys. question. for the taking

that or with customers generally of about commercial and mind? going all the of Let’s the talk you behave of sort about see, speaking talked openings what your reads institution during they’ll How has you’d typical with to forward, Tim, how amount same commercial much on sort whether higher keep in their primary diversify expect sort work Can would in permanently? account all early those happened turmoil. you than the

the for Thanks Scott. morning, question. Good good. so Yes,

know Just busy have here. day you a note a for everybody. We

So going crisp. to didn’t carry activity our Silicon fund that but opened, on delighted forward, accounts the the obviously digits has up regulation All forward Valley literally to keep hand We immediately to count see end answers. the the the and prepared quarter. try that you on, of that quarter. exception that to with the we’re end I of I think fingers, weekend that pretty of number single going of were two we the could one between the Jamie following see had soliloquy and to continue the and through the

activity level So the very I’m there. pleased with

terms significantly probably have The manage operational forward, in you But and between in saw stability. behavior In you Third and business. right. a an accounts add? account much behavior accounts, think terms experienced I I more versus reflected to behavior the the a anything to Jamie, the that in you think the the of is non-operational commercial contributed cash bifurcation we way think that going going as we’re the want very operational effect And in side, balances. account cash I prominent treasurer see period account corporate on that during of terms investment as of tool Fifth to

Scott, clients what the that quarter vehicle first we was best getting and were Yes, the money focused in to possible. also on saw

we almost portal when dollars the seasonally during last X year, were us And X market money down incremental for the billion a about billion into So in movement, challenged only billion. billion quarter a that commercial and were seasonally that more the the manage and moved year a quarter, were in we before down we quarter, we for them. with that dollars down we even

to to overcome the investment point, good been that moving were is quarter. optimal able very commercial the So we But solid news posted deposit Tim’s money headwind actually and vehicles. for a has us the to

on then not that maybe and the What the mixer inside And not sort thoughts that not bearing was you. your -- of gave the why on thank certainly additional Perfect, thinking mix. right the baseball you on Jamie, color and go What makes why that? lower, non-interest Why of in your number? total forward higher? deposits

Yes, moved year DDA to the to last This tightening core a five time down to cycle, eight forecasting deposit the we go XX% finish level. we’re at down points.

migration rebuild challenge to we now a Given ability do in lot treasury and you earnings balance strong will the treasury in time no the more given and business, rates enough has our management think DDA sell cut. it. that our higher can rate then that We with that migration. hold is, see And services to longer our XXX over management and confident credit DDA outlook feel result continued we’ll

at out NII of erosion. translates XX. that, XX to bottom it do But X% to than million So for more hopefully, XX we every

to head we still as get like ensure tremendous that we higher it’s, things while XX% into that. not impact, we that So, XXXX and want would

right. All you, Thank everyone. Perfect.

Thanks.

Our RBC from Cassidy of Markets. next question comes Gerard Capital proceed. the from line Please

Jamie. Tim. Hi, Hi,

Morning.

how particularly on is in the commercial real office. it touched you’ve strong and credit Jamie, the estate

look when you XXXX. or it’s think C&I portfolio the whether I guys loan I are scene scene seeing horizon leverage dramatically balances, know as in are on anything the not sensing guys at I CRE? pointed the is you there What you down from on portfolio your out, the

of on C&I, driver NPA the was that quarter. increase this Yes, the

I C&I were said, drove the Tim on most within points, and were on NPAs. continue services. basis we surface quarter XX be year certainly commercial point us, would But as that that professional entertainment it that basis with at fourth if in NPAs, a were be So at points we’re looking in And average. seven this look the back the at delinquency for levels XX where XX XXXX, restaurants, versus benign. the In we the And were average, to at today. well XX of up basis we’re the you as C&I at and sector

up rate or normalization. So while points that to we’re it when we’re still a run a more seven really comes so sequentially, of And it’s commercial basis below normal NPA. XX%

some it’s now, at us, really entertainment and for least normalization right it’s So of And these sectors. within professional services.

offset higher for economy, supply ability about chain or to the And that costs inventory creating carrying ultimately, scale input basis. on bank, to of production. are thing they’re an C&I, concerns in right I around terms going on-going if if the think the the one to And because resiliency manage you related clients drawing, to that headwinds your of matter costs, I is just add if dynamics that you on in

seeing and of really, with doing the out to And is businesses the manufacturing I resurgence it’s The example of hospitals care the are the now wrestling and good talking the profit nursing as discretionary cost been health. in cost attached where I businesses not cover the insurance companies the to really businesses a standoff. and spending. sense are an smaller when more clients So attached easier otherwise, manufacturing it’s the been get going to really and when for health larger example costs do I’m you you think having of a larger is extracting input time. – go increases we're a are the are labor The profits pass The a more ones in right well. have able higher that of not having for arm clients the increases more through difficult between of on that ones, to smaller concessions U.S.

interest scenarios, on betas Then, deposit outlook question, a a follow good. bullish the But the interest guys rates see the or stall Or you’ve quarter, obviously, it six more revenue as picks net something higher out got XXXX? up? those and a what frozen revenue Is scenario, you to up and on have actually it could two little give down if of two we where is do Fed to in the variables? one a had in then not get Jamie Can Funds five would you rate, quarter faster? Very first maybe bit. that view? And in what’s rates the you rate, half like cautionary but paint the us

say Yes, I that. would

NII income, interest deliver On down over months, operate of our if beta of guide. settled low that net quarters, expect couple side the would XXs industry of higher of next couple then the we and that and to that would end we in the the mid competitive would the dynamics positive

we’re out and the is We’re deposit range wildcard therefore insured and a range in clearly the of banks wider focused what guide, NII play why on beta retail how react. the we is competitive in we retail a the would that from driving, seeing competition are little just our cautious could the uncertainty given little though, therefore standpoint, what will deposit do of than with show guide betas normally the growth, more a as and

the had take year. the term, deposit near end betas double behaved perhaps would that retail been that that guide. end the of And of to which actually well us very the the low the in wildcard So is by

Fed as a and obviously, the some think created down beyond higher magnitude reaches an of We have certainly I level. the when the increases longer-term really shock saw progressing implications the it are the in quarter. rate comes rates calling five And think we’re get credit perspective, to you country. the that in I into across even It what what comes an range. a heats from XX% plus beta if would NII up, deposit long as productive unproductive beta as the be stay But to environment, March higher NII. continue competition could But XX% rates we the that those think dynamics be to and Madness. to

Very you. good. Thank

Our Ken next comes proceed. from Jefferies. of question from line the Usdin Please

Hey guys, good morning.

the swaps you as of way you mix built out, you about your Thanks. I change Jamie given know the in points would terms has downside, think just further that mix. the as you points channel book differently just about your, deposit talked think expect think changed protection how DDA and As and time, you over But how and as NIM. make all the that, the that? down rate have the to about that you’re the that to about running you growth environment any that trying the and the securities Obviously, just NIM well. and portfolio do about you mix does How balance sheet it protecting angle, the

nice about Yes, environment. XXXX, Obviously, positioned, kick for points increased a be entry in. very talked NII the in as we the swaps a swaps at the about with new length balance we’re sheet pleased how feel there’ll there. We’ve the downgrade especially is very good

may overall in We second be be stable. the as don’t there that out and flows, we should the but to level from relatively decline feel nature, dependent, of terms structure non-HQLA the reinvest quarter of ones have good the continue bit we a but the regulatory In that’ll positioning, ultimately about locked but bullet have. investment portfolio cash we’ll reposition a

of high which for to was think while bit X% it’s level. X% trimmed disciplined a to that loan maintain the ratio growth up, to more operating being to and going XXs guide be on a that I continuing is deposit why us, loan to in So very up credit

obviously of Got the about in how guiding are the banks terms that versus pricing? of of then it. the point with right now, lot got the work a ability deposit curve And Fed your and isn’t of does Fed with on then change deposit the does same direction your models when cuts timing repricing in

Yes, it’s occur. when I of that in general, actually mean, cuts it’s balance the a to nature going of be,

opportunity where not foreign you’re measured environment you’re If little in inflation under bit more gotten one get a time, to things where would the a Fed a are of beta the to the out. obviously, going there’s be beta, has the out. big to to some cuts little tight, is get that your have you’re going rapidly, this scenario, in pretty going cuts there still credit more on conditions from loosen Fed where and of some control, liquidity you’re having liquidity But an rate reversing beta still to a bit relatively have get aggressive more the challenging but event all

little a things a really how balance is to of it of be play bit going So out.

positioning as we particular, lot commercial sensitivity that the a so sure the down with that necessary. can of to appropriate spent in there We’ve amount of make stay price book we time reprice

$XX of up We’re index to billion deposits. about

well to a lot different those that cut they high, sure stay got we’re navigate positioned, we’ve we’re if that whether or make the actions So to they environments. taking through of flexibility

Understood, thank you.

of next Najarian Our from UBS. Erika question comes proceed. the line from Please

Hi, good morning.

Morning, Erica.

first but is My no you the And for of there’s anticipating yet, But nine quarter? you market liquidity the And endpoint And sort optimization? the and basis you more role we what coffee the from that and of I’m do coming on is this this the the wondering organically a how of regulatory potentially should Tim, think and stronger capital this of standards. question. institution how as question and repurchases, need something is tighter first Jamie, term, environment. potential medium XX about NPR over on about, generated quarter. think capital [Indiscernible] points share is capital than probably RWA for like an endpoint CTX,

Sure. Jamie Erica, then I’m and let going to follow. I’ll start that on one,

would term do quarter to the XX the with answer out medium king to continue that given would in question, from it some we a a growth ultimately second it I term of expect what to in buybacks, we not the capital guide, the dependent I and will be perspective, quarter. obviously would then your with I that for order AOCI even day, rules capital, because RWA pausing this So points not crisis. the second basis call the short come was generate, point because opt were on a regulations out if of change part your believe

you, decide AFS force works in we company regime of earnings the as capacity XX%, we perhaps AOCI it’s capital a by improve AFS included manageable the along and us; measures, for the think additional mark, we they it everybody in AOCI stated. necessary. either maturity capital believe But core eliminate, of the an the then the and year. into to should end I force don’t to be with just the item But would next by accretion deck that would levels held

that everybody will this to the balance X%. XXX. little short testing going X% have accrete get target a here We in we’re quarter. great. capital have our But, is next a to is term sheet hopefully in for more says clarity capital and level All environment, stress And

just And to add I thoughts. think two

for stability, And it run could to target uncertainty to year, in which we last you it start indicates us. testing when is do were level right? we we it did because just constraint hasn’t felt later. the been as opposed the were stress we we below it X%, we and Outlook, building at early capital clear the to reset do reason was think prudent having that about because concerned the with capital elect do we I the capital Our binding that the We to at like bank everybody

So will take consistent. is at regime would I been capital a for given time, the liquidity one positioning, the in of I some everybody have regulatory sort bake since that been in in give sector, the am the during been just discussion think I it And think has you the business point if policy broadly dataset that publishing assuming goes change tax And there’s on I caution pleased data more quarterly The one our far. than more in there’s any evolution Without adjust think tax, At I model. sector back FDIC regulation remarkably the change the models. in about and that into levels period. return least on XXXX.

liquidity, reasonable required capital, hold evolve, well. banks structure the the or of as funding, to to change to extent that more I think to that it’s or is model going more the So business more expect are to

thinking, NPR the comment process that or force known up in level terms the stocks, of regional it. regime for a know banks in a Got whether Tim what terms how resilient And And sort a to to very management Right. market forward period they’re -- season, sort capital? as being versus your can the what, be, to demand of into happening this what to know, eligible like that, cash It’s amazing right you of you how market when some about, regulatory don’t today? tighter in it’s sheet regulatory environment, how And resilience the of there’s we trying to just slow sort nothing balance to be we been of that, tends the valuing do we be versus follow for banks ACL liquidity greater concrete more what’s debt, higher the, balance timeline? for TLAC that mentioned well team is question And ratio. think rates.

doing right. the I of you way think those you that mean, the you each as manage is on proactively I something year, topics would have that answer started last

last earnings every after had period, market, lowest TLAC times. right. the result, in in And event in that four the phase were need the have a no we year, as incremental So call

think, are. the would to we market outlook, therefore As forward right, ACL today, coverage you the and banks, manage was And you’re an to were you which we capital carrying you a have well. uncertainty about reflect during good the did way yourself the certainly which for period when regional in more course certainly allowed of robust deliberate we a example, CRE I as that feel

we good the what even empirical data to see Madness, is non-operational good it’s the of I dictate regulation, all models, money, have that to for going different and out franchises. from and And no will operational the who that commercial franchises, March core banks here a through very right. and value deposit flow, we’re by-product think change operational coming there is retail have of in if our money this, as going commercial lastly,

is balance place our to well be rates are activity, you higher higher. management point, going sheet are more that that big or payment think there ability money make requirements stay the be to to requirements sides linked Thank and So want that a of the than otherwise, on the an going while liquidity we treasury at services, driver on going zero is to if to be because to is who does absolute you. some Fed both capital and basis, obviously

you. Thank

Please Wells line next Our proceed. the Mike from of Securities. comes from Mayo Fargo question

Hi.

count So Did be have the is correctly? you you back? ratcheting that are on potential growth? and expect? for in that for the interest second times? down but or the element are deposits tougher rates you some you One as into expenses, twofold. be you I stable of NII Or don’t becoming in to the that the from firm get bleed by think for growth consumer driver March for of well preparing the maybe quarter that will movement as cautious, and in is guidance of trend increase second quarter DDA or preserving are to you how So up loan your through second increased from quarter. you to then here rate really go and effect down terms So bearing. benefits NII you X% are the mix, is more wide maybe then And expect growth. the that’ll day why? a the offset That And Are into others of by loan full in guide the some infrastructure

Yes.

I So Mike, we to like the toe us, line. mean try to

right, going loan company note is the we was the X% growth year that us been matter no I more what the for for abundantly Feds on that are to feel and comes Part companies. of that question more prospect that top we tamp all guidance. no growth. and think an think but cautious loan of lowest about full it takes already I the more down We’re There’s than what I clear, they’re demand, decline

growth. been And cautious So during noted about terms pruning we you in be XX took which creates the designed severance invest don’t we attached and pretty that take out that to it think bucks I capacity the have through actions in more We expense given branch than of to the expenses, outlook. quarter; businesses as surgical just to had loan are the were capacity related we need to network, actions that it, the of to going the little believe southeast. rolled million we to continue

investments, to we I here. drives we self-funding have allocation, same think discipline the be because believe that in capital around discipline good and is And is it the which had, effort going

is strategic term basis we think, going on a So we return, in the not a intend or strategic the we’re going investments investments. those platform, to in are the don’t But to do not the making to in of investments we’re making franchise for we discretionary the going that our money be valuable generate spending too pause, near long-term. technology the outside southeast are to be

go things security you your guess And those all was do that. one last recognize losses talked could then you sorts you and interesting, It’d manageable. said, you or with could as And I and be sell ahead about, AFS. of

TLAC said that And ahead apart? if guess, how bank be and you last four set did been to uneconomic? you you go that the just and in the be much in have So do capacity. the would you’ve that for I had that quarters. you market need? You the more Would would that, only

requirement should through of AFS, not portfolio, based AOCI, Yes, of it the the was just improvement roll that all. implied down to clarify given XX% curve, XXXX we have on curve necessarily would about structure of bullet on would the the the the end comment forward significant about capital my be selling that a the at

in So X%, level to we of At the would the like year, portfolio. billion. the challenge. terms RWA about end But bank of the TLAC $X do be our the gap

do question you with what size our bank proceeds. would certainly and what a would is that then for change the the regulations the manageable, with So becomes, then

frankly, right now, about billion So erosion basis NIM forward cash on the biggest basis, billion that of points of costs because of look sitting on cash, driver which full excess the year we’re $XX excess a of XX as we XX is, NIM.

forced hold But billion X or we to liquidity to liquidity will we buying rules lend any an just would And the of obviously, prefer debt, YY their holding than a tighten, ones. Reg so cash level customers. were if in to then to higher if buffer, more issue we it be in have we more and

your just up become you what starts a And it the really to and, I When not of on distribution earnings it think and it the profile so the improve, and sets productive. proceeds. sheet with gross say would you what, be challenge a apart, what balance

it. haven’t we why that’s so done And

clear. That’s

TLAC, how obviously you much have have? Lastly, gap or $X issued billion for

any year, now. right We billion $XX this but long haven't term is issued debt total

That’s And is assets. billion. Bryan. about total is were Yes, that about of Mike of this gap X% X.X% $X assets, pre-COVID, at we

levels where were getting just before So back we to we’re COVID.

a requirement balance structure. historic us TLAC for relative not that just sheet is big So deal to our

All Thank Right. right. you.

Pancari question line John Please from comes Our of the from proceed. next Evercore.

morning. Good

John. morning, Good

the the amid to real Thanks. than in in your that there gave temporary Are impairment other the XX% on securities us of performance And update valuations stress any on commercial type or then, question seeing XXX backed securities Can I stress? you you portfolio? terms on of a Just book. there? risks mortgage maybe would to are securities, know you I detail an what book, estate the those stress the appreciate there securities give needed be and of commercial of pose

just Absolutely. guaranteed, Freddie, so Ginnie RMBS It’s CMBS to like it two into looks the is people Fannie, which need break many are Bryan and that components, you agency again, portfolio the so in. portfolio is effective that portfolio, invested

and, GSE and we a buy every perspective, billion the it issues monitor time underwriting portfolio. So portfolio, when from significant we from as all perspective, no only very on of rated. $X its an and stress billion, perspective, non-agency portfolio, is $XX And well credit guaranteed. a The which as that we AAA is super perform senior analysis as that from

Office to portfolio would assume properties in If we that would that scenario, that’s would a perspective structures. all when record weighted XX% have of across does portfolio. give loans. recent underlying get And from that portfolio we experience we’ve some would the values a stress dollar underlying our on heart the within To the that still about realize underlying XX% XX% the office that and color you on that decrease XX% we even The average that that our loss a first credit in properties loans enhancement. tests within on property we losses are We no loans, assume performed. of decrease,

the losses very and the we’d even would associated feel So on entire first we there be across significant this our this before on loan structure confident industry in dollar recognize portfolio. loss

is then much maybe timing of us the the at and all to of then the Got lastly, you, you impact the update core be of And separately. conversion, capitalized? can of it’s conversion the help you if systems conversion? was of on March how us wondering Thank the conversion expected your helpful. And expected can very the of cost I sizing just the Madness up it? the with status progression

Yes, the for question. Jamie. John Thanks it’s

good continue this thing, to saw you our a the because up this we deadlines year. getting for have did quarter, technology As continued we’re is cost accomplished. it And numbers, all track expense on in of we ramp things ultimately means in that

in have We across the platform as continued ledger the third nCino the in rollout going CD business. by platform new quarter, followed commercial well of as

accounting checking appropriate XXXX billing spend so TM far, here. has and it we’re and but the game, as point capitalize We on ATM this the core well total do about at associated so conversion, And good. the XXXX, follow with halfway the on deadlines because standards then really additional as through

of than be capitalized. to would what’s half reach part us core growth. I little that’s you of think a the spend cloud And from that think expense there, multiyear $XXX continue technology. period which million, see less in And much just over a could as invest driving as I

in quarter and year. for the You’re seeing the both first

Jamie very Got it. Thank helpful. you,

Stanley. from Gosalia Our next of line the question Manan comes Morgan Please from proceed.

of guess in color get as account in Hey, in and openings the why some good settles once you deposits give that shouldn’t conversations of us is, banks, the your new go more system to volatility clients the the underlying are morning. question to I grow could my I we some gives the back outcome? confidence So the have was longer that you in the seeing wondering year, into why deposits expect you on remainder what if they where these you just relationships? down. with

good Yes question.

the can continue stable which to in us those look to do folks have day So mean, pipeline believe Fifth had the places be we not a sales business of tend we’re for I work on nature. lot growth. of of had I they’re we sales little new handful or a good very embedded moved. banking we business, and of accelerated. And you who deposits of The that that the ended and getting payments management payroll first pipeline, back non-operational a because embedded in were bit months, some day up the And share they with operations to there don’t to principles sales inclusive took do been net relationships that in provides, needed be were to cases think beneficiary for accounts previously as that In kind go we on deposit treasury say technology other from the banks Third our like a sticky. and Manan generate were infrastructure been why a that the that processors. XX to were linked of to we as business. We on long And very to of opened

sustained So in that X% of of to on to coming generating primary that side the the led able like was range that by that. run now. faster growth the out big retail markets We’ve we’ve is X% were rate for been part first of I we’re is the X% growth the generate. growth the than We’ve sort southeast years think running year-over-year in that where breached We And quarter. several household X.X%.

there. significant very So

strong are we’ve branches the that, to southeast growth. addition really, really driving In in the added

a at in look overall, the it’s you side like deposits that production then same the And just really slide X% the grew investments. and for you XX% Florida think you talked novo a annualized business, the if those and South of of is the of markets memory the thing. southeast, plus in that year-over-year, the were of the if if Georgia quarter, over first and commercial Carolina, come and equation commercial XX%. quarter, the the maybe relationships about So include slides If year-over-year totality so XX% management quarter, the a we’ve terms they lot North fourth grew the deposits, sales store de the strong That to be but from nine. here Treasury I percentage in one driver, continues we Management, have treasury in serves, on to on are disclosure about linked

relationship then balance commercial and length XX And the that of tenure years. a average is weighted

end we And priced by Fed or that take other to that because not were are funds. bank we people in ratepayer, the that of ahead only we’re were June. assume think reasonable whether because zero have money because deposits a to talking it’s dollars I raises going Fed number we that in a about actions half parking it’s the of about is So the who billion all here, be in total a

of from alternative I stable proven little billion very been nature, are total. than gathering investments on a multiyear and that have dollars, deposit would funding very ability base, that a just to that in less sources, deposit a we support in their is have coming relative company economic are So activity growth the terms the believe half in to and

maybe And the follow is the look if they street. conservative slide But I Got a and at as is rest relative But then forecast maybe look slope look as beta it, as the period. to flattening the their on same. we I assumptions this the line, of of the look helpful. deposit XX, very to the response at it up, pretty into

more rate seen of we’ve So why same that there shouldn’t we recently? expect change the

I by the would really are guide that that And remarks midpoint at in is doubles prepared XX% continues deposits to low as the said we course be retail If end. view, beta. at driven Yes, to that base is of actually a then not the our very the of over year. our competitive, and our for the battle assumption our retail the be were happen, that beta that

and the So been on XX% And stops the management wealth hiking. as XX%. asset have the out and commercial flatten betas Fed will side, to running, betas those

And definitely several new deposit to standpoint, over the slide from acquisition. industry thus the we want as as we’ve our quarters. So see the would to reality flattening part Fed of is and what’s behave how lot the and as going uncertainty here the to assumed slide in to have far, can versus is continue done you have of on competition And well there’s defend a book next is so beta the that customer gets a that well XXX a but stops strong that effect. to

you. Thank it. Got

comes of Bank from Ebrahim question proceed. Please line Poonawala Our next a from America. of

morning. Good

Morning, Ebrahim.

Just two quick credit. follow one ups, on

mean unemployment or you Jamie, mentioned for us X% that to consumer just were think, Give allowance? your case, does a sensitivity base be about of the that XX% I X%. what sense X%, allowance if

assumptions XXX up go million would ACL all the every for is. assuming as other Yes, X% stay,

buybacks uncertainty Okay, around CTX helpful. there’s around going nine be sort and the back Tim, of you half few macro like, regulations, the Mac, return Should And at do visibility? a your And next year? and in for drifts follow just other to economy, higher back on the more until do least to proactive Matt, that capital. given quarters the anticipate Or the you? comments more we up of expect back quarter to quick

it could no and repurchases. guidance make we think a confident which if the and feel point the buybacks given business that I, by second run nine it imply environment Yes, provided, Ebrahim, feels June to resume fully at we in the out just that does I sure you we before five this to in settle both the at quarter, quarter, prudent nine time is I right, just Jamie would assume get XX. we

And the just on environment.

talked I up deep have be? back of the Do show first numbers visibility quarter, any maybe XX. begin of it how of just when about into last half metrics. on sort terms we things of to actually the in this you year shape deterioration, credit in think And cycle, better credit the just we could worsening see the

think it the period. back probably to this continue beginning half is next of the of year We is right the

not right thing relent are, of watch Flash and footprint, unseasonably all you came extended that’s restrictive, sticking view, of think what winter from just Fed other able without that rosier I up some under that things is we under the out the of that head are and a certainly are a are they at, spending the positive think time. operating indicators, and a had we rhetoric. why going fake part, in bit anticipated. belief inflation to of had was a by-product And good of on level the clients And my And variety Fed, had here, in from because going get in in the control you signaling to people I be weather of was they under ramp five have some our to little a been very hear than data the plus break. more indices that when period Again, saw IFM happens, point the best to the slowdown. that’s based you for

record XXX,XXX period come that’s Bank the the happy I’m two an Census light, Financial spending that southeast factories, to on on like most is which last of an last nice regional I moment on a view just am rebuilding invest Times right, factories on a And This footprint. there’s XXXX is than that own been in that the chains Midwest likely look did manufacturing all-time in you where XXX had return tied there’s manufacturing we in we’re added trillion you’ve of in very the to to XXXX, data this spending the and compared that’s jobs My XX% XXX billion have commitments. to were were were I is added out was more divergence the made, to more seen. recent at those billion the work year, Bureau that cycles. in and is be example to And $X all as year, intends commitments U.S., jobs U.S. our think like that stuff than there government and supply if capital in the here

infrastructure benefit and and that going the relates or a technology centers, city government’s on reliant reshoring have supply budget markets divergence domestic it to were challenges are that more be from professional to that to profound broader that and markets the deficits, going sort chain. more investment to are better And challenged So of there. than in going trend do or services there is as that materializes state just

be should where economy So than more on economic overall, regional I at focused think on as least think you data you about materialize. the losses may

That’s great color. Thanks.

line Janney Christopher Marinec the Our proceed. Please of final Scott. from comes Montgomery question from

skewing in where a is the this of ask ex way that want of conservative. to dividend about Tim, thinking question. to a it my growth the through? Is taking maybe fair growth kind very dividend way loan year for Thanks finance just positive loan

to Yes, of steady dynamics them. and Midwest loan benefit growth and production is where their material invent. And we which rolling solid Chris is on provide because bought the right in the continued of originated in legacy I really any of the production have the which you’re because we good where middle were see and portfolio dividend the part seeing market sell growth markets They around course this before linked two to non-elective the C&I portfolio Yes. are portfolio we out really areas production. core year a the is there the balances dental the finance then as are of primarily, in our been of healthcare manufacturing, in

it. is not… the rest off Got And rolling and

modest of decline. or in kind It’s receivable

Got I well. appreciate it? Very Thank you, it. Tim.

like now Chris would call remarks. to for turn over I Doll the to closing

follow you if contact disconnect Please for Molly. Third. interest the have call. in any questions. department IR up now Fifth everyone thanks you Thanks, Molly, can your the And

and does Thank for your This call. conclude ladies participation. you today’s gentlemen. you Thank

disconnect. now may You