Fifth Third Bancorp (FITB) 19 Oct 232023 Q3 Earnings call transcript

Good morning. My name is Rob, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Fifth Third Bancorp Third Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. of Head Doll, Instructions] Chris Investor Relations. [Operator

begin may your conference. You

provide Fifth Quarter President quarter XXXX Good Leonard, CEO, morning, Call. results Third to Welcome will Jimmy CFO, our everyone. and Earnings outlook. our Third's This Spence; and overview an of Tim third and morning,

earnings update information Our Preston to our as regarding Third's found review well statements Please and XXXX no the Credit the use them. statements on only and and of to Fifth Fifth Officer, October also of be non-GAAP Schroeck, as the and release call. measures Treasurer, us of reconciliations and performance. with materials about our speak the which undertakes These Bryan and materials, as GAAP in can joined statements XX, These results the Third forward-looking obligation Chief contain Greg Q&A presentation. portion cautionary

by Following call With for questions. the the Jimmy, to prepared open me over remarks we will up it Tim. let Tim that, and turn

We Chris, how they not benign is by good rather Thanks, and perform or challenging environments believe morning, ones. focus how that they why by That navigate distinguish in themselves, banks great we everyone. and order. why am return are facing. It's pleased in stability, I the key growth remain and that that also our resilient metrics all banks on so profitability despite profitability headwinds that market-related

supported a a fee strong which and fee management. $X.XX on of assets tangible Earlier year our more return reflecting on diverse wealth share results than ex X.XX%. today, management, and increased AOCI per growth ago and we adjusted income PPNR markets sequentially investments peers streams $X.XX XX generated the of and our outcomes. in credit favorable nearly capital impact We points from a excluding We earnings equity $X.XX or basis range compared of to by treasury swap, quarter, strong of generated common return XX%, reported Visa an

ago growth we managed management year down fintech among Third our also continuous less generated adjusted than a wage, quarter, lowest In years, Fifth platforms rate X.X%. expense the efficiency minimum investing is an the to X% branches, XX%. third ratio Expense compared have to total increased employee process expenses for of is companies. and noninterest equivalent despite in X below and technology quarter program. peers Our more building acquiring growth we at and this by last a modernizing March new head Since year, full-time raising count not our the

ago decline sheet. Turning generated X% year for deposit versus a to the industry. average balance X% the compared the quarter We to growth

households multiyear in New remains X%, base. relationship Consumer continuation growth strong. led by growth grew of a Southeast, our growth more than the X%

New of customer year-to-date In the opportunity third base. for our years remain unique and basis. largest losses a middle branches. the Chase. we Fifth record are addition top This replicable that acquisition just first the not strategies one maintained multiyear through open branches overall branch, nearly metro our on of time per we We markets. new have model the market of reached These XX Southeast, easily investments area in Third operational XX next-gen customer to Banking, market competitors. in single maintained opening where understand AI-driven include byproduct Midwest, of to to the our annual our They rank market added of year deposits, year's locational position behind X our intend ahead or #X branches release X a be service we improved XXXX, of metro our in our MSAs. In the by products FDIC focused Thanks XX% to like removed approximately or are are original Southeast every innovative the which XX year, quartile at JPMorgan are approaching summary share deposit-oriented to area share gains share provides in target Momentum quarter markets. market of relationships will last and by in gains continue XX% strategies

metrics stage key Charge-offs points were July improved expectations credit quarter. increased with remained X The nonperforming during forecast. line strong and in both macroeconomic delinquencies in to changes our ACL sequentially. the Our slight given assets basis early Moody's

progress framework. Turning We and liquidity to the changes regulatory capital. adapt early goal to significant in made against expected to our

$XXX liquidity efforts X LCR and focused enabled end sources achieve us billion August at throughout Our and with total to September. compliance the to full the the Category of both bank quarter in end

Total progress on made significant During initiative. X% we the compared prior quarter. optimization declined our RWA quarter, RWA also the to

Our growing loans sentiment raised be we quarter, dividend during economy, strong power to the of XX the soft over has by return in our end CETX a of complete and exercise the next more so respect strong figures to while of capital can the points spending quarter, should while created reflecting X%. basis we earnings year. We landing. With also market employment remains our quarterly shifted by favor on and aggregate fourth

signals be the given aggregates. disguised to concerning continue cautious We more beneath

spectrum of for was levels. in high every Google the landing the most, during jobs. job maintains and Anecdotally, payroll average the not balances working a of is end quarter example, recent month soft pre-COVID if headline while growth all, searches Real now byproduct people this deposit of was part-time the time the For the most May last lower numbers below strong, weekly earnings consumer XXXX. more were slipped

and another. say our turn employees to support I customers, thank over, care do our want everything Before you to for you I strengthen take to one our it communities of

Your of that outperform why deliver Third ever Third's Fifth more and details will that, as our am one outlook. in provide the recently I efforts third through quarter as ability financial all results Fifth confident on our Jamie companies, Time best and cycle for to as improve recognized to are lives stakeholders. With world's the and Magazine why innovations

us joining you today. all for of Thank you, Tim, and thanks

quarter Our market despite results strong the again once third were headwinds.

while bank and our levels regulations business the efficiently. sequentially. pending X% $X.XX capital expense of We interest ratio billion achieved our very streams. Net continued the strengthen throughout approximately diversification below ongoing ahead also adjusted decreased reflecting of resilience and fee income and of We XX%, discipline an managing efficiency liquidity continue revenue to our

Our given defensive and NII the uncertain and and continued proactive results positioning environments. economic NIM reflect regulatory our

Our decrease was short-term point driven on of This origination to primarily capital which service of investments, billion. billion primarily represent $X our by deposit volumes. markets average basis noninterest XX increased and billion mortgage by held an compared primary growth to decline. Adjusted $X end-of-period cash our the in level $XX driven driver increased increased charge increased in cash the X% Fed basis by on an revenue basis lower year and partially offset NIM a quarter, income ago the revenue, at

revenue to quarter, strong capital a distinction offset in and the expense in has for a ago across volatile produce expenses increased key compensation Our continued just market discipline Third year occupancy compared Fifth X% expense the become company. by noninterest ability to reflecting peers. Adjusted compared partially to markets benefits, many technology growth and

optimization Moving X% to average loans C&I balance Total softening RWA X% due balances to sheet. decreased and decreased the our sequentially. portfolio demand and Average sequentially customer efforts. leases and

was grow X%, X% commitments basis, cautious muted lease As total efforts consumer utilization unused decreased originations, middle the balances Consequently, quarter. market to period-end their given offset respect and certain plans. to slowdown with The the prior commitments. On in decline Tim clients increased to our intentional by X%, exit commitments share and the corporate sequential decreased market. X% quarter, respectively, and balances portfolio respectively. commitments remain production continue lower returning middle our X% CRE and residential from Also, finance. to mortgage commitments our to X% and in partially indirect Average decreased compared optimization to increased auto compared rate capital last we the while rate commercial unused due trend environment, average loan commercial highlights mentioned, corporate a and banking. in This growth of growth of banking total while dividend X% total unused revolver XX% sequentially overall in partially due

a the highlighted both Balances due denominator and DDAs several the increased and sequentially focus as environment. the increases balances relationship by were increased skewed have the demand to a quarters. in interest-bearing XX% partially relative of on strong XX% Average net interest growth new offset in this Commercial, decline given quarter decline transactors. XX% deposits conservative balances in card industry. quarter, our reflecting X% checking from in increased prior Consumer deposits year just percent core X% in as for which risk deposit were was to quarter Our and X% have seen the obviously shift are The quarter. CDs products Tim for compared total culture we ago to mix the for in this to the that deposits growth compared to our X-point primarily

we the fourth added than more since result, core deposits quarter XXXX. $X in most of during a quarter, billion the As the

the continued Additionally, increased signs and segment, By commercial investment of deposits DDA to consumer and deceleration declined increased in marked the smallest X% decline sequentially, DDA onset hiking asset the reflecting clients' dollar cycle. since quarter the migration X%, and management alternative X% average balances this and rate of show deposits while deposits options. wealth

be and regional of not a a best, achieved balance one at if peers. quarter new XX% to result to ratio the As our best, success the of and core positioning adding should deposit which sheet our we compared loan deposits, of end,

achieved also full at Category quarter end. X We XXX% at compliance LCR

to Moving credit.

to or X delinquencies basis compared Fifth decreased quarter expected, As just compared loans stage fully record the XX reflecting resilient. basis Tim remained ratio had increased been credits, net past of charge-off Third. Nonperforming for low mentioned, prior to X XX as which Early loans credit decreased reserved. The due, points points we basis prior while the days X% has of X%. quarter, a XX points

management our have This improved and second granularity lowest NPLs inflows through a since portfolios we and focus the relationships. commercial high-quality generating the XXXX. quarter the overall loan credit diversification of quarter perspective, From on maintaining of marked an of continually

relative of have many by our have which years. maintained COVID, standards is balance the segment pressures we have of homeowners, policies. underwriting during but total the focused lending many on maintained we limited we for CRE loans less sheet. In know, stability overall our conservative As to In lowest improved and peers to underwriting you which as a impacted percent inflationary growth concentration of a Commercial, tightened Consumer,

have very is CRE remain same sequentially our delinquent office behaved. And and exposures. and loans nonperforming true criticized well the for all within Our that, improved

criticized improved just basis XXX sequentially. total which of X.X% office office points For CRE, represented instance, loans

X have and charge-offs. we Additionally, delinquencies X

by this so We quarter. peers their decreased quality exposure office office reported who without are balances significantly have loan also X% credit These any far metrics book loan sales. the better in than

it watch and has will environment. strong, to quality be overall continue credit closely to Fifth We the on remained While believe given Third we in office the very nevertheless limited. the portfolio impact continue

shared Our portfolio multiyear very national nonperforming period. lower consistently portfolio overall a perspective, than credit net charge-offs credit from criticized strong quality a and remains with commercial assets, also loans the across

credit resilience highlights risk culture. our Our proactive

closely to and cause are in strike all the entire exposures we stress very the the from continue where exposures manufacturing where monitor as We labor may higher inflation think the auto fallout sector, our throughout portfolio ongoing as well manageable. rates

Moving to the ACL.

X.XX% the case period ratio $X reserves economic Our million, increased worse lower overall by end coverage of the as was a basis base decreased slightly X to but offset loans points impact outlook. sequentially

compared and evaluating macroeconomic the ACL to XX% upside and we slightly base our assume scenario downside to As prior a worse We the know, each you and XX% quarter. scenario scenarios. incorporate weightings base rate quarter the used maintained for the downside allowance. to the third Moody's when scenarios scenario average of Moody's our Both unemployment the

Moving to capital.

the ratio ending sequentially XX points at CETX increased quarter Our X.X%. basis

capital RWA through Our capital position our generation, of combined impact our build earnings with strong to quickly our the reflects ability diet.

Our AOCI, compared value ago per increased year book excluding share, to the XX% tangible quarter.

in expect in by approximately accreting current plays assuming end approximately securities to unrealized X/X improvement our out. of of continue loss by into back our XXXX the and XXXX, equity position resulting the losses We curve XX% forward

capital accreting CETX our at initiative RWA to given above share and that We ratio our of Looking capital optimization continued build forward, accelerated XX%. an pace such expect buybacks. year deferment ends this our anticipate we

outlook. our current to Moving

and X%. We expect to our higher outlook The loan thresholds balances throughout down bank diet considering sequentially fourth as return quarter economic quickly cautious more responding to X% overall we loans decline average quarter loans our with down X% reflects the one environments. risk-adjusted economic are and RWA combined X% of with consumer total to the commercial regulatory

with households the average on deposits and be increase commercial deposits along primary sequential expect a add to X% to investments in the benefit relationships, that, basis. our Within We expect up to to due we multiyear slightly from franchise core seasonality.

of for While into interest to remain rate to core specifically DDA longer the for mix the modest benefits. Shifting relatively expect we statement. those to income we in migration fourth expect environment, quarter, given stable products higher from seasonal continue to interest-bearing a deposits DDA the

quarter dynamics I expect down be approximately X% fourth due sheet mentioned. the to X% to We balance continued impacts the to NII sequentially of

Our a includes NII and hikes cumulative guidance quarter. assumes beta, no XX% excludes additional DDAs CDs rate and fourth by the of which

we given our wholesale for interest-bearing cumulative funding, points fourth to to have that the basis a XX This pricing be XX%. in replacement other deposits brokered translates Excluding continues considerations, using been XX beta increasing total the expectation to outlook deposit costs as quarter.

stable that balances remain Our through our securities portfolio relatively assumes guidance year-end.

by to equivalents $XX our year-end. stable of loan in byproduct outlook balances, and expect and closer to we cash combined a growth, deposit cash hold billion securities As our with strong

trends, to a the of the lower keep Fifth including to of year, regulatory will more deposit Category X Given which stringent the we loan anticipation liquidity core position continue LCR. compliant to Third in with our full end move requirements, ratio balance these in expect through strong remaining

quarter to third the to expect fourth to X% quarter. adjusted compared noninterest increase We X% income

should expect driven environments. growing on most that across focus revenues by multiyear perform We a of fee diverse economic our remain different resilient portfolio well captions in to businesses

revenue We the $XX $XX compared million fourth quarter in quarter TRA XXXX. of of expect fourth to million

compared to quarter noninterest fourth expect quarter. to We the up adjusted be third expenses stable X% to

fourth expect Fifth quarter $XXX assessment, respect to here. quality, excludes normalize currently basis be do credit We expect special XX gradually the points. from we million charge-offs FDIC guidance we to for to estimate Our net pending to which at XX Third. With

that be point believe annual profile to basis continue charge-offs in cycle, range the credit We are the the XX through bank. will risk XX the given of to

sheet changes from reserve be dividend million, Given carries for which level change to $XX expect assuming in Q&A. to over open requirements finance higher the strong X%. In to and our scenarios. to we commitment generate positioned are summary, continuing of to This call value quarter Chris the $XXX up performance we around for our disciplined around let economic to through we up the significant the underlying quarter, know, ACL in turn fourth with risk the believe shareholders. With regulatory proactive reduced credit loan long-term production delivering in of Moody's balance cycle, the fourth the our well while you the outlook, million stable no management management, to it that, meet me proposed for as a considers

Thanks, Jamie.

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

line [Operator the Sandler. Instructions] And your from first of Scott from question Siefers Piper comes

level know many a you But and it could just more you on astonishing Jamie, little quarter. I was high third even to maybe a the thoughts of kind was it. very hoping liquidity number. I in on bringing so expand your to your a certain you're in deposits get trying achieved

as commentary guess look provided thinking of helpful, thoughts though the curious just just I the expectations please. But in some you additional throughout or what would additional there. the any forward was. deposit So be quarter to

biggest growth look Thanks, consumer our this household the quarter. to on deposit a were [indiscernible] recommendation question. And growth. the one and numbers bit our quarter X%, drivers was Scott, typical instead that bringing bell quarter households, deposit of a up growth while success Really, take or transitioning were second on up the third to of our for you deposit customer engine that Victory out when coming the March very growth. We really deposits in on back, the but X% the certainly translated of we sacrificed strong little X% from household of

while almost the we Midwest. the within did was XX% consumer. within of And during growth that deposit was markets, of XX% commercial, so the Southeast growth billion. that XX% XX% in have And was quarter the in Consumer, was of About $X.X growth

level. And book the Third given growth the high of at performing retail Commercial just the an in the XX% deposit was banking at surprisingly growth. was corporate the again, side, franchise commercial growth Fifth banking. on extremely About So within is growth the corporate high

targeting, So We came in at get actually time, let's of full were LCR XXX%. the we LCR, at north XXX%.

the than and diet the deposit we expected. that did of we end hidden getting we that banking sense banking are is corporate RWA dissecting results. makes also book, book So sort definitely wallet helped that of better were initially within growth. quarter drive of when one did And benefits It better But better. really of share the corporate that as the

very the lower we growth a in strong growth on a albeit quarter. us side, bit the little Again, continued at So in up the fourth quarter. overall, rate still but expect fourth a for quarter, deposit bit

gears then been your guess might I well. you curious remarks, some It's use looking And to thinking world. classification levels, second. on the same at portfolio helpful. least about HCM But of I just more But little sort real just as token, hesitant you're The how very in not terms optically, all could would thoughts. That's by than you hear if any a of for if updated switch a come the securities help have others. heavier guys I to updated that. just thoughts out out guess

risk. you you rate in between are we in that's economic this it asset, Whenever really have to rates. risk and that's whether fixed you break with or at If loan real higher portfolio, world world economic that the down regulatory in the looking have a HTM real how world, really the AFS,

do sheet so, environment and changes. to you gives real We better liability sheet, And to managing going reposition given Others in the balance X%. total sheet when have flexibility are management and elected shrinking. this how at the balance in look you in balance interest-bearing is strong We're is But opportunity grow we relative measures peers, to world results, to results, our to any our to AFS, X% approach can the securities are that the hold us year, continue as we'll it totality. well. our the of very NII performing NII

comes the philosophy line fair balance We're the value. prudent a to of But has putting So value is per have that and the in believe share. item into capital. that flexibility flexibility the off from simply insensitive not on world. The sheet how because real still our value we it and single of to challenge paying face is looks tangible that book the

In out terms the rate, of our ASC as on the happen to to regulatory burn currently evaluate regimes, externally, and to into significant, rules the XX%, we looking forward new as all of not XX% static of it's is rate, the the down the portfolio really presentation risk, you're going written, have our perhaps burn that portfolio down and burn details is structured. of down play you has that during the at capital transition that the given assuming the one you in communicated that whether something continue we've because

we you in unlike that CETX on portfolios X%. be minimums to AOCI, would points north continue sufficient perspective. over fully still be CETX manageable on going XXXX a our phased-in third that capital be capital fact, maintaining we is a And basis of able the a regulatory We from to risk, that's and in have above for should accrete We the those going X% be quarter regulatory the CETX world. capital at extension is are level When in is XXX this environment. to when defined know would impact maturities convexity about is have portfolio CETX instruments we know residential down. And and impact well that to why we get regulatory rates model reach to pay mortgage-backed, with that of very

But the fall. feel in the that one that capital. good at roll everything value about have time, the tangible with same erosion. challenges that the positioned, we mark how just in environment regulatory down book we're ultimately, this the we on So per It's share, you and AFS is rates of how will should curve

think with environment. we how report of pleased you much I would accretion, be very book all value in that would tangible

value value the if I if years. the is opportunity, other on want to X buying the Scott, be thing. last the fact that on XX% put then is at given per you the And for a weighing business that down us look is which we book said, burn I the the investors to the way the way mean, just but mark Jamie the you in stock, look managing pretty best current what to do options and is other believe is it rates, recognizing believe AOCI a for accretion unique point on outlook just it. share intangible at next have

That's perfect. Yes, I agree. All right.

Jamie, and Tim you So both. thank

And the from your Najarian next of from line Erika question UBS. comes

quarter, this PPNR look? happened first -- Not balance securities CMBS. sheet that the is explain one could to portfolio you. XX% the is for point, and I if metrics what and the And also given I just portfolio the your but belabor did guess, earlier in Jamie, your all think great look forward metrics you

well, where investors happened that that that know as convexity that -- portfolio was in think was expected AOCI in something the much wider? not there the unique quarter -- negative much this I you

on XX CMBS the and bps you in mortgage. spreads about about quarter, increased cash AOCI the we in about vanilla XX about points, duration walk you pretty $X.X We how look look AFS, XX-year X moved of quarter $XXX and a about about was It Level in at XX% billion because million to $XXX the really. that quarter work everything the short had if at widen X X-year securities in excess floaters. basis for the cash of portfolio the million. put is where then When us bps happened worsened the to flows in Not and move the treasury

portfolio. of movement on you about add So all million, for up the the AOCI the when DVXX you that with investment to the it $XX quarter gets

expectations with during moving how least it quarter. our with so the rates line was And in were at

you, Tim. follow-up question And was for my

of call loan it think beginning return powerful next said growth very the could confidence of the that a statement in to terms was in you you I year.

I are Tim, your first on date basis demand similar ratios us all, of a peers think still points, and are that you the what CETX could marks several if in confirm dieting. Could you AOCI similar sense talking have of, of about was AOCI give one that balancing second, low the And continue Jamie. still wants from approach you hand, market other, capital we CETX? to the on for to how corporates And transitional build financing. you we're hearing as on

So right in that's there there's lot a but the question, Erica.

a here. a to -- the we underlying it the I or change, have have operations. think So principle how make normal in that change we tried change we in consistent company. for it at to things and One, few confront be And how you is need you return better behind to get of can you quickly do here mode so a that it's if operate

both the equivalently, were we been building in LCR think the have compliant year. about Jamie be So we proactive about in I fact September and diet. very through that talked manage we liquidity. Cat-X RWA we have August to And aggressive how this tried

quarter So X% reduction. we one was target, about our additional to dieting have hit go a to which of RWA

the loan portfolio to we're achieve the next over need If have refocus achieved look from And course the prudently to year. we'll say, sequentially growing of on able sheet. quarter. I should think order in in balance the we just the expecting to we growing what you there, at fourth be Prudently, what

have being of level helpful of this generating a points of look demand both profitability capital reports is they're CET right high while now, We're loan We is core a if to then peer it sector. quite as profitability the and relates obviously at which to the benefit of very quarter, build here, basis X the across point. at fund measures But growth. And you right? XX-plus excellent. all the able tepid, have don't We

in to well We have the which of our of of relationships in their provide, in the in to generate fortunate we've middle-market investment portfolios we've relationships of little and hire that all-time Southeast multiyear and we been are a the in growth. of over we the our very market in building record have still have the bankers perform ahead made diet seasoning past the who continue coverage some probably XX% that both bit added markets, new idiosyncratic few terms middle benefits course the the terms year-to-date, behind company And have expanding are in lost years. here the sustained dividend form been pace. And

So that provide the capital catalyst tepid in we -- the in then where can things little statement are and a really the environment the an next in return to is that be form those generation. to that more capacity raw aggregate of bit demand that to able year. growth support

question, quarter then, of your the CETX finished on for components Erika, And us other the at X.X%.

about RWA, basis from the about investment rules points. Excluding the then of X% which RWA XX X.X%. portfolio, the be to AOCI, pending that X% be And would number would bloat is

a then is would of to very we level. strong. the at be we look talked as company the earnings about, X.X power So But

portfolio. or the reach to in by the The fully We accrete we the burn will of passage continue AOCI to level. capital defer the buybacks. be XX% time so that continue investment the of structure time, given down and We'll phased-in the with

is very we So time feel the this that for company. a manageable line

In fact, higher. lot should cushion rates even go of have a

comes your Gerard And from next RBC. Cassidy line from the of question

Can about comments yesterday your seeing cross being some cross noticed I opening rates? Fed and and better it But is businesses? growing Fed and Is cautious? to share talk to growth the is too you that lot wins short-term they're to your currents Is you what of more commercial to to back the for money customers committing inflation numbers. or a you cautious. is do number corporate you a that most going coming yourself become GDP cautious Tim, and the before a economic interest being think optimistic X.X% it puts you probably more increasing when real It's point for for their there What the and halting take quarter, your real third of are with think in out waiting Atlanta borrowing really currents. the them customers, start cross GDP do quarter. calling us high. they the third

question, That's Gerard. great a

So I it's point. think, less to honestly, your uncertainty, right?

of So you here. a lot variables underway have

have the government mentioned, You sectors in economy the of up now, be that wouldn't immense growth Fed certain and spending otherwise as is right rates, of an economic you there. you amount propping which have

the prices, affordability home in markets, You have in growing where still and sort even of at or home unusual both even high we low. the have some times all-time rates market, stable housing an slightly is

anything we I just, need in than get happens. variables of think, some more to of it's those else, And what right, terms fixed, see

then So and stops Fed cut. if raising introduces a the rates

think would helpful. that I be

guarded the monitoring think new I here. And I pipeline. and get and shortly of to consumer here. the the retired call I see programs BXB is we feedback the consumer destinations We and last Because they're delaying have on consumer for what CapEx little dollars of development a either between starting to disparities people and gradual continue are went the hear interesting better to head from cash or high-end $X.X spending. I that and hotel economic on then being driving or mass more the levels activity activity point, lot had investments government looks the looks where underlying bit what think seeing I like adjusting large people liquidity the to of spending was a accounts the to of think much out properties high-end the seeing as just opportunity project properties have as chance larger focused. out what coming see in staffing take They're are have economic various cater that in soften. one to little floor we government the asking And with bit relates side consumers stimulus side. terms well, come the again, whereas sense slowdown economic the to a to footprint in are X it like before to the I and do the dozen for an income. our states areas spend businesses time market the the the them of in of clients the that data either to essentially that hotels, not trillion to disposable is of get a of a about about out more for hear

to robust. So the plant when days. over going XXX on, a There's time about state has but or recently a contacted to otherwise either from to ago moved from potential opportunity XX days the lot given of new award relocation or as discussion in yes, a XXX decision as for is still pipeline a months initially headquarter they're a

the So on to we're grind can headed of sit see on for the as you a the here activity economic sidelines sense down direction economy. what just people better get and wait

us, financial what second, tell is today? And into through, made, it to a back thinking can than And better us and case managed the And numbers prefinancial a than know what if you're it's net and they balance from today the and underwriting, then credit, of they quite if sort maybe through the look went you ratio, showed you prepared just just tying then but you Jamie, also Jamie, credit perspective very insightful. don't are sheet I your I cycle, share economic on bit this with strong because it you is remarks. that customers, was charge-off guess higher Very the -- the is crisis, pandemic can crisis? comments better Greg some you of

It's great Greg. It's question. a

disciplined, been we in have all well-diversified think several product, about have the it's geographically a portfolio. for been we or our our disciplined around think fundamental very by very of concentration We've past So right? the I underwriting right? very I years. through-the-cycle above, very

one we're or the trending result, other. seeing way a not As

management, around So been that. So we've ongoing proactive. We're right? been disciplined around ahead portfolio We've out just disciplined arise. they of issues when are getting we

basis we we've the testing XXX forward-looking stress minimize. issues of get the are term To we We yield curve. earlier, and seen throughout -- this cycles. ahead extent of we yield the ahead And identified points out

the then to have of right, cycles. to them through to bring ability these help also solutions our We clients, some

of as all be XXX same points board, And book. the were in that across it banks portfolio our basis real C&I weren't very so when estate we're were some as that in thing We lower rates other diverse. the our through and aggressive seeing portfolio, commercial

the staying fundamentals, those the to both underwriting, on and of sticking fundamental, staying portfolio. it's disciplined, top front-end then So on selection client

comes Bank question from next Ebrahim of the line Poonawala of from Your America.

talk Gerard's to I us significant on you first can drive credit over credit. where CECL recession you of ability a in few next deterioration of you of Tim, that if just And credit could just there's we of much say year change up your time. the and quarters One, to next question just maybe, hit half model visibility following ahead how could quality. macro comments have guess of the into the deterioration to concern kind maybe that's on can add unlikely. still the a some about Jamie, safely that capture do

So chat. good morning it's to Ebrahim, good

I a think comments. couple of

first seeing is that credit appendix. an the NPAs about just point, for we're you the have So way it's forward we a script we're talked to nice through suggest We on what it anything formation that the And down are right? think the that is going I an actually roll year basis. assembly into fairly good that, delinquency thing quarter. slides, Consumer the moment side, example, manage half narrowly like would in toward in on delinquencies the are early-stage And that The line. to that to indicate we your the the and trend about half, which as fourth likely headed continue deterioration rates we sequentially, of down the look not is would delinquency have in visibility the the first like. at

be in year, worried assume in too there as the is management think and case idea can the the a investments, anything look you to apply bullish to to again, the to bit and buckets otherwise, human said, just -- to you at how a see about. With so manage the using numbers, and payroll next or going X company, base just a the about on lens be expenses we market we of of strategic there it. that mean maybe the little continues and what soft landing then I here. with XX-plus dealing XX you're the early isn't So we're that

worked So is participation Labor jobs working, people they because they're cover that means not up, getting stable. are but enough their And job hours job to more able or force expenses. they were is that earning base have jobs the participation working the were are working down enough flat. money to be that at you job hours What average two and is unemployment flat.

declining headline and would portfolios people when two declining between loan real that income built standing dollars. student really real just lot still country that Housing I So at are the people thing now. look fact struggling the from the that are in then very forbearance having credit is up numbers the is indicators recent are incomes, only suggest. more you early those inflation is would and there was across buffer the is that had there stimulus most And prints. somebody on delinquency Well, jobs the high think, at a work than and loans who be to still a stimulus suffering back because X.X%, that the are

you provide the good right worried materially, way at and exposure any And where we X market the front total right estate metrics much credit capital renters our areas exposure superior commercial XX% feel estate, look peers have weren't now selective, relative homeowners. grow very real lower on to than most is others. anybody again, there subprime more our consumer would portfolio is the relative say then I of book I to of the of And because our to commercial is to information real I the able subprime, which else's. are trying that no reflected exposure of to because be level think where, virtually about we're and little consumers in is that we in who now on when in So lowest

smaller So both it's better and performing.

data, And level. renters in still balance below in back pre-COVID to levels XX% pre-COVID is terms above the FICOs is how still deposit the balance Tim's to are and what consumer levels. consumer we But actually is doing sub-XXX our and are point, see average of pre-COVID

in from be of can we a bring But averages your use Tim credit near what contracting balance the second on on in bit our have well XXXX. GDP part misleading terms certainly from from a the little question, Moody's sheet. And as ACL the outcomes an positioned So we're credit perspective of perspective said, almost may X. scenarios

that why the increased of both quarter, In the reduction in up picks was well the that erosion had reason loan the just XXX certainly So in with we that. profits and had points. forecast. the commitment as or part basis balance the and slight primary modeling of It's from XXX unemployment optimization basis GDP as and reason erosion this corporate you ACL unused our coverage efforts benefits offset from reductions points the RWA a to

as That's just helpful. question. a And separate

Southeast? through In the in Midwest are cut Southeast. higher observing you don't Clearly, terms within for your of if look differences lot of and rates get pricing, year in as branches versus geographies, any we longer, you're next deposit a opening

the different there. to market. relative home assume So strategy a you have I

deposit localized your or lag differences? in outperform a Or national us nature? give markets meaningfully of is in where certain pricing it the side? sense pricing any pricing on And Just view, -- is could still competition, in essentially now

Excellent question. it then over turn I'll start to Bryan. and

out the excluding In terms of pricing, expected played with total up total deposit cost as and XX%. beta quarter ticking to our deposits, brokered from deposit

we the We expect to hit or two that ago. quarter XX% a about beta talked

want for geography, is do scenario. the expected. to But that? where of the as been guides pricing So of most touch to terms out bank's this hire Bryan, up we've each had And longer on in playing you coming beta at think we I are

you think bigger what of players right markets you're And where the have is absolutely. lower Jamie. may or a liquidity a specific periods it's may have a general, players that national is impact Yes, what in we're combination now. Thanks, seeing dominant need. -- is In of I that local and time just seeing it the

a you're share little what gives around that then as is that little as a the you bit do little ultimately, to moving bit. And realize so March well And people an just start rotate more tends in But to bit and be competition start perspective. we've to to a since market, seen people of from is deposit aggressive seeing react. opportunity a

the geographic differences, some that you to that. be willing over nontraditional and take to definitely so They focused can -- of But geographic Your to absolutely are rotate but a most the on general, see opportunity to rate-sensitive you it are have to some of ones national time. customers markets. tends most tend in tend use differences those some provider, advantage still

the comes question of next from your line Jefferies. And Ken from Usdin

for I NII the think first next fourth of be quarter that for season would bottom the in the you likely be dollars. will bottom year the quarter and conference the the NIM guys said

to today, wondering, if that the foots NII anything still terms given thinking we and gave guide of Just be . getting you to that that bottoming? about should in

how the The much NII first excess The drive to have be that quarter whether quarter, fourth trough. solely what from performance. will it's deposit count cash going the the first is is or NIM day by quarter driven the strong we

to it's So we'll of see, quarters. but be X one going those

rate And repricing. you'll to then benefit get get peak once how about as the rates loan a that understand forward, fixed think do you we

year clear the from us benefit moves. through any securities book side, loan can able you offset we to understand be able that I deposit think pricing? as how next being to just you lagging the much side might walk into to on how But it's get see

is consumer rate fixed repricing the where book, The benefit most in resides. of particular,

billion look at higher than And to rates it. points we'll we $X how of are XXX book back as have consumer XXXX, XXX about you front If basis loan rates. book payoffs model

on But take effect. XXXX, the will with, type year's in-year you're happen basis. end repricing. the Obviously, so you for if just course from at of security of half run $XXX during million looking annualized benefit of $XXX maturities rate that one billion cash about million and call so that $X an flows take that, coupled with And you tailwind it, up in

about you're If I loans Have The different capital have update. banks securities? there and thought you of that about any anything some done one looks swaps could variable anything slide like pretty approaching adding one. juice. of 'XX based just and to different swap talks is have add been little just versus 'XX the or slide you ask Or in last Is the rate securities XXXX process protect portfolios terms intact other incrementally? -- how both a swap that

to at this attention we're point. market nothing We've paying Obviously, incremental opportunities. and evaluating the done

But rates I lower have positioned. because to and for that are are lockout Jamie think hedge opportunities think our if there us we continue to constantly us well out on as in, we're higher we market and the, now an more mentioned, the than structure come relatively now to right our keeps that keeping defined to portfolio the of eye anything improve figuring is going ultimately our those positioning. maturities

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

I guess this goes deed good unpunished. goes in the no of category

looks operating that way at next positive getting there second another shot XX%. saying the and you improve it positives when is I ratio maybe first mentioned which capital, helps diet year, think I And NII. Do the NII of like is any cost think efficiency negative, not me, give Your to correct leverage? certainly until of and can has you And quarter. but RWA from bottoming a the negatives,

to up higher. going beta XX%. It's in cumulative still but the line, have You going

year. new opening a You're branches XX

the On can you RWA more. will maybe other the your hand, end lean into balance and sheet

really tailwind deposit the increase part the relative to choose since deposits, the March, the cash, beta. could is put so DDA the smallest work, excess mentioned beta the You to which you to asset of

positive about year? that your Is So get leverage? think do of a that? you next improve much How you too stretch? Can operating does efficiency

will but we XXXX. as our results power operating leverage a hit RWA diet said, be Mike, I do as want. is difficult that which which XXXX. not in But we good points, on deliver the will everything can, be will you I'm a think makes With it positive to the right in challenge in we it think all environment sure answer think I I is the dependent,

possibly work on The hustle, front. can old going we're we as hard that saying to invented is so Cincinnati as

'XX. X Did delinquencies, have on the XQ correctly, inflows office And hear since the Commercial, NPA have I you lowest just you credit side. charge-offs. you to clarification X office

to economy lower XX the asked is I good. saying Is XX you're already, through grinding cycle. know it's the And doesn't reiterated look You that correct? basis been points but

you you're think you credit just -- wrong So do point? mean say be well. at things don't could that's like I if maybe so insensitive is economically you go this

Until But you little word, got part there, question more to made a last was I a going then the to say in complicated. you yes. the

. want If to. . you

XX very and those the we last about feel of credit years. good the over portfolio of work All correct, the all we've on facts done are

any In We down it that it going Greg be winners economically industry, and of well we're that's that running. are selection loan now client being no, very lowest are not insensitive, positioned, we where several been believe over losers, is very referenced. stretching but diligent and past to to and fact just we we've and right several comes within that and there of years loan that for growth the over growth benefit the getting part the guides the we probably were had the past terms years

stability priorities to profitability growth. and so our ahead of And back of

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

you likely inflows areas were -- remain more what's terms guess, pressure? your or credit quarter in since side. NPA the seeing maybe migration point? to everybody risk the are ratings at side? is on that of talk this do the the Is And could everything suspects that terms it think of know internal of that? sustainability the of that of new the mentioned excluding you large C&I 'XX, charged-off the some the the you low driver and on the I it in CRE inflows the and of What lowest second about Just risk items, you I are

I of product a little earlier, CRE stress on our driving. Not of have here not trends. And industry portfolio. that driving have we geographic There's we we have not that's an side, don't sit we're or any not we it, as that's from today. little said as NPA portfolio, in watching not delinquency standpoint. seeing. very numbers We're woods great mean side, doesn't the yet. there's It's but the we're Clearly, that out It on question. the so CRE

basis yield some gets ahead curve. Yes, of still we've the point the to think again, we're rate portfolio why clients. that points our increase It's we're the it of on on how will so pressure I XXX XXX stressing the through portfolio. got But back And diverse basis flow top to is.

stuff. So we get that out ahead of

And bit a all could but it spot. a sure, so great I given in little up go we're think cross-currents, the

been Our outstanding. client selection has

through think cycle. disciplined cycle, underwriting very Our I us fundamental the through this gets

about today. I feel are And we where even bit, goes it's good up so And controllable. little if it very a

the And then loans criticized total know this have versus X-parter. secondly, you in kind quarter you -- of are a last. mentioned down I Do

expect And size the is Shared over And is National on going side, the loans, decline? portfolio? XX% of have magnitude you ratio a of reduce portfolio you're National Credit do that touch. then of of mean, the maybe Credit what past think year the the that You down the also the criticized for I that Shared I book? that to

reduced that you're right. X% We XX%, about about that I diving year-end. earlier, would is about now that expect it by -- decline probably to to and the reduced year-to-date, we portfolio the So Jamie number continue given talked between

the metric than that portfolio Our the portfolio. on every than portfolio SNC better rest performs of

the Delinquencies asset standpoint. less. So from a NPAs than rest are X% see it's less under criticized are the of we in book.

is portfolio it of some the the of portfolio. performing our So commercial strongest --

loans XXX office that were I points. just a basis The little Cris it's John, what overall, were up declined bit. referenced crit Jamie.

Morgan the Gosalia And Stanley. line Manan your comes of question next from

the wanted you how does trajectory that. and the guess I RWA on of manage it into follow diet move up the to rates. I annual impact

outlook peel lean into we well? it there? So we [indiscernible] to the you year, cause moving you into and growth? from low to seeing rate Does would the or impact impact X%. back? X% And down credit, get that here, maybe you as as loans what could would just the look cause Is up will outlook manage Or on how what what you're that next

it's where bit you in on loans, just modest and on asset Yes, you the some additional about a it's a relative the more some has feel of more rates tell but we that might impact see Bryan. spreads opportunity how may classes, better we composition auto. outlook I in about of or little consumer think would

doesn't almost outlook big obviously. really see a a production down it And be environment, And that's impact perspective. the just credit the not implication commercial to rate, the no probably given floating in earning our biggest whether comes portfolio feel deploying. or to really going on we adequate to from what overall floating for have macro, You're capital going higher rate a rate us portfolio that primarily mortgage is how is about we're returns we're and

And think you bit then cash a I perspective, seems before. from guided it cash before? is build like in just $XX little what a or the so you said targeting more you to was were had about than billion

it I the preparation get moved the driving What's in can hold cash Or change? billion. to sense is Is of think to that X.X% volatility you has you're target it also cash, now just securities? Is LCR? for it makes $XX more rates? over just

excess investment environment, an to hold fact at allocation outpaced view We as deposit expectations. It mostly to rates, opposed doing it as growth certainly adding in asset that want to these And this portfolio. cash the anything, cash the was referenced. we as you

point, be able that bring at sounds or bring volatility might like down? $XX you so. it rate It to you'd So in X to next months might not But that as down. able billion the be be improves, some

sheet that unrealized buffers. your losses, AFS or you say whether you would One, an elevated to in fund of those the is losses reasons. to balance couple have I due Yes, do liquidity HTM, our have a

our that should -- sheet in us the level over duration that going both to down. years measured as quarters of shrinking we those are frees reinvest terms also time matures, allow to things certainly just shorter more coming above come non-HQLA allocation down, in to and an cash sheet. maintain so in the while or those be than up will of And XXX%, It's also the cash losses Xs shrink

say, now a sensitive, last So just more asset make versus, does then, equal year? you clarification things all as that

year, neutral to little pretty up at least versus We're a whereas liability year the lines disclosure ago, right in sensitive now, neutral how that asset showing last today, probably sensitive. we're a

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

speaking, generally the a about mentioned is is I you quarters? several little criticized do classified number band going rising to see and bit credit But know Or you in more a questions. than be previous and certain the within that? next them

NPA, portfolio, above our I the we're we XX-plus months, delinquency ongoing seeing now all have from would in rerated the and steady last based XX what portfolio. percent the of say on and the

that on So steady. based if reunderwriting, all or will, of expecting underwriting you I'm

And provisions reserve more think equal. being if and went year, more than drive obviously you build that higher just things would all it fair? Is obviously next that

Yes. Sure.

for this information Thanks all the morning. background Great. it. We and appreciate

closing And remarks. will session. call I over turn the back now end we question-and-answer Chris to reached our some have Doll the of for final

can Thanks, thanks, else, your you in contact everyone and if for you Fifth the department interest disconnect Please Rob, Third. IR the now have Rob, follow-up line. any questions.

for This conference Thank your participation. today's you call. concludes

disconnect. now may You