U.S. Bancorp (USB) 25 Jan 232022 Q4 Earnings call transcript

Welcome to the U.S. Bancorp Fourth Quarter 2022 Earnings Conference Call.

Following a review of the results, there will be a formal question-and-answer session. [Operator Instructions] This call will be recorded and available for replay beginning today at approximately 11:00 A.M. Central Time.

the and over for Director turn Senior George U.S. now President Vice of will conference to call Andersen, I Investor Relations Bancorp.

are Terry Dolan, Thank With Vice Chair President good and Financial our Chief Andy Officer. Chief today and and you, Chairman, Cecere, Officer; morning Executive and our Brad me everyone.

are Andy website release will of prepared be usbank.com. as presentation During and the slide analyst as a our remarks, well their earnings available referencing and Terry our at supplemental schedules copy on presentation. A

I risk Form that of in subsequent during two file are would XX-K, and change any forward-looking with today's call assumptions to remind our page like you Factors today's materially statements presentation, are and could forward-looking on on made subject reports SEC. that in current to our our described the release, uncertainty. press

Following questions remarks, any Terry that will you their take Andy prepared and have.

I to Andy. will the over now call turn

thank slide call. morning our you everyone joining George. Thanks three. and Good for on begin I'll

we completed This Union December the on MUFG quarter, Xst. acquisition of Bank

per results, balance to Terry on included quarter, after items provide notable In the was for adjusting charges, integration notable Union reported these related activity. $X.XX or diluted acquisition. of Bank month complex we items. quarter share one a sheet This that details optimization merger and the fourth will $X.XX more

operating we positive was the full X.X%, we for our Importantly, delivered Tier of equity for expected close ended XXX the legacy year just operations above which and points at common ratio of U.S. with year. X basis a level Bancorp deal leverage

driven income normalize are and although by growth as quality credit to income as metrics interest positive provision expected. remains for growth Credit adjusted items pre-tax year-over-year was strong, notable Strong operating starting leverage. net

Union End-of-period reported sheet and of for as income reflecting assets and other Slide the metrics. performance well certain as four the optimization results totaled acquisition company actions. end-of-period Bank billion, balance balances and $XXX details statement are adjusted

performance key highlights ratios. five Slide

a adjusted each X.X%, tangible common of assets a XX.X%, on items. equity return delivered notable return we return quarter, XX.X%, as of and for average of of This on equity a average common

slide our Bank to to percent our company. Union the and meaningful of and Union enables business communities. balances, scale acquisition customers milestone double-digit for significant that increases to better serve Turning completion marked in deposit six. adds a loan The With Bank our us

market business Union contributes offerings and potential about considerable robust across the under-penetrated wealth we're Bank a leading payments attractive a and capabilities deepen including Union small our and banking existing business California and in base. consumer market, product demographically share by set, consumer loyal and to but overlaying digital management, relationships excited consumer

banking commitment evolving many stronger, this in In environment. more a rapidly our competitive ways, deal regional organization creating underscores to a

is One support growth which more transaction loan of Bank's deposit high attractive this continued the Union consumer will cost franchise, aspects low margins. and quality, of

now call Let who to provide Terry, on me the more turn will quarter. detail over the

Andy. Thanks,

If share acquisition. $X.XX X, slide the to earnings related items we share for Andy as per mentioned, diluted after for you to quarter or of notable turn adjusting $X.XX the reported per

reduced earnings the that acquired to Notable expense share and to and sheet merger elements provision acquisition balance per taken -- loans the three of and to actions optimization, to sheet. related items costs, Bank $X.XX comprised Union of by impacts are related optimize on primary related integration balance

closing from transaction approval transaction, into regulatory for approval of related to company manage obtaining through of the balance on in interest impact the to future its on several loss During and capital interest net the rate rate the the growth. position the to $XXX on we impact sheet, volatility million actions rate the a for hedges the capital manage pre-tax optimize Subsequent one-time levels taken entered company fourth and the a to regulatory quarter, volatility recognized December. related basis date

rates interest of terminated recognized nearly long-term basis at and earnings increased closing, before the through time through points. swaps the During rate basis balance the sheet recorded offset that accounting. were approximately purchase largely points XX The frame, XX marks interest rate into losses interest declining time the

company and on repositioning costs, services of loans merger expenses. included balance charges deal the and related its investment employee sheet impact that investments. million by incurred optimized equity professional non-interest selling addition, certain integration we $XX and In of certain portfolio the expenses, specific related Within its closing primarily

an reflects enabled by and a a acquisition profitable for the balance impacted legacy billion us incurred returns. indirect of $X loans. more also to the $XXX to the loss credit provision the losses, million securitization net of Again, $XXX charge optimize for We initial approximately million of to of auto effectively growth sheet and related which million moves provision $XXX these position

Slide $X.XX a representing of which net the more summary. $XXX to share. was non-interest $XXX included million income our and $XX month, consolidated detailed in million company, for X provides Bank, per results Union revenue, of income million of million earnings operating $XX contributed diluted of one expenses,

X, $XX sales balance end on loans basis by of of core from reduction balances optimization billion, billion of partly net $XX including acquired growth actions, Union included accounting to and a ending slide On a and Union linked-quarter billion adjustments, loan increased purchase loan loan loans balances in related period Bank. offset which XX.X% sheet securitizations. to $XXX of Bank contributed

to End-of-period which this actions of and composition. result XX.X% end-of-period On we decline deposit to a taken as billion deposits a billion quarter. $XXX sources. core optimize lower-cost balances on the $XX balance contributed linked-quarter slightly basis deposits, the deal Slide by a deposit funding XX basis, driven our of provides acquisition, saw increased

quarter The Union linked sheet from offset were XX. optimization actions. $XXX securities slide Bank of grew addition by X.X% billion. portfolio The balance to to investment Turning securities

revenue income. included Bank, XX highlights of net totaled Adjusted primarily $X.X quarter, Union trends. net in $XXX the revenue Slide which representing contribution interest billion million from fourth revenue

expansion, rates. pricing partially and net by borrowing benefited grew For by legacy were linked-quarter a which margin higher Bancorp, driven rising growth earning X.X% costs. deposit XX.X% interest interest interest basis short-term net asset US offset year-over-year on and income from strong and Results

Non-interest and mortgage revenue, revenue lower Year-over-year, lower income, the driven compared banking for by product revenue. declined stronger third as X.X% by quarter payment to commercial legacy service company, adjusted the seasonally offset trust from services non-interest legacy reduced revenue by lower investment charges, stronger and payment and and servicing lower revenue driven refinancing activity X.X% declined mortgage management income by adjusted offset banking fees.

due was Turning non-interest to $X.X intangible slide the in core Adjusted billion million $XXX fourth $XX of expense including totaled intangibles Included of XX. from established the million in approximately Bank. at amortization quarter, deposit Union time to the acquisition. expenses

to technology amortization. and higher largely a Legacy non-interest increased tax services, basis linked-quarter driven as expenses compensation-related higher professional expense, marketing, credit related as on expenses X.X% by well adjusted, as

balance continuing optimization shows XX trends. million of activities, the the third $XXX After net total reflected X.XX% charge-offs X.XX% totaled quarter Slide impacts average We net sheet $XXX in quality which million. acquisition credit credit of loans, from quarter, reported losses. the charge-offs normalization for or and the up of adjusting for

credit million ago, Non-performing September basis, X.XX% real total. reported quality. reflecting strong assets a at legacy X.XX% bank a non-performing the ratio X.XX% for to December combined contributed increased assets loans of the to with compared slightly, a XX, year was estate and the XX, Bank continued other Union at On $XXX while and

an related our provision and provision $XXX of acquisition sheet optimization million to initial The impacted the million $X.XX related acquisition and to included losses of activities. provision the for which provision sheet activities. a million credit $XXX $XXX balance includes by was balance billion, This optimization

allowance December incorporation $X.X period-end Union or of portfolio. which totaled the Bank economic as uncertainty billion credit the losses The reflects for of of X.XX% XXst increased loans, and

our of common drivers linked-quarter capital the highlights XX Slide Tier equity position. X

of basis marks, credit As the impact the to our balance other optimization risk-weighted increase addition CETX sheet as with purchase of of was for impacts MUFG by in Union related points as that intangible equity losses, of issued an shares XXX rate to assets partially X.X%. Bank. interest increase included of initial These and actions, to the provision assets an impacts well part increase price December the XXst, capital of as goodwill Acquisition the credit were and ratio offset Union Bank. in reflected

financial share to to X% X% current than of estimated. strategic intact are is is the our transaction. Earnings expected provides The in accretion remain XX financial certain be higher deal metrics and expectations to attractive. originally very merits which of XXXX, per related now and Slide the

initially interest rate the X.X tangible longer share earn-back per is our value the on than at dilution our years. estimated estimate at slightly period our book of to due original significant rates than close, estimated estimate our higher two While marks versus rising interest of only years original is impact

changes of credit our by to announcement XX Credit credit to quality, time the marks lower due economic composition a offset value of in comparison deterioration. provides and from portfolio marks fair are Slide closing. and partially favorable net

debt, core are intangible and core net rate quickly that but to announcement rate to inclusive of of securities than marks, expect estimated, in value environment. loans, increased deposit interest also of higher deposits at originally sales, through rates, back a Interest lower-cost anticipated earnings. reflecting than The the higher we higher higher accrete is due

XXXX starting will the which is slide quarter on year and I with guidance. full XXXX forward-looking guidance, first provide quarter now XX, provided first

and We expect interest is $XXX average fourth first level. than higher margin the and five XX million that earning assets billion to the net points of in quarter basis the between quarter $XXX

expected during of Total revenue purchase to in be to $X.X billion, intangible inclusive non-interest $X.X as core be to approximately of the Bank. amortization to quarter. million of of $X.X of adjusted billion, related million billion including $XXX expense a range $X.X billion is Total in $XXX Union is estimated accretion approximately range accounting deposit the to

to for rate between integration and merger tax $XXX as Our million taxable-equivalent quarter. XX% the charges basis. income is a expected anticipate XX% million be to $XXX on approximately adjusted We of and

full will provide guidance for year. I now the

non-interest inclusive the $XXX in assets of to the year is to adjusted net expected intangible million billion $XX.X accretion. between between to $XXX expected billion, Total to $XX full of be amortization of For approximately are as quarter $XX the Union range billion of billion fourth the with of to interest of billion expected be to inclusive XXXX, the $XXX million XX core of margin accounting average related of is with expansion basis million to purchase Total points expense be in range compared $XX five year of $XXX Bank. $XXX revenue deposit billion, in earning to for to XXXX. range

as basis XX%. on to Our equivalent adjusted rate taxable will estimated a full income XX% approximately be year tax

We expect and million in billion have of to integration XXXX. to charges $XXX merger $X

back for remarks. I closing will now it hand Andy to

the deepens business and We this our creating Bank a operating adjusted commitment on economic strong of and an the supported growth adds accomplished basis. Union year, Bank Coast. acquisition including West to our significant PPNR opportunities positive customers lot across the and for past serving by scale leverage Terry. Thanks, completion a to Union legacy communities

a for incorporating approach and applications, which us conversion, continue to quickly more to of to a still and systems lift-and-shift target Memorial meaningful We and a we any is uncertainty, allows are cost Day preparing weekend capture tremendous mitigates economic scenario. risk our There synergies. geopolitical amount

I will and the well believe we of we team business, strength of a our perform the great balance sheet have. strong because

economic in is our during our downturns, disciplined the business due part and As previous risk proven credit model to standards recession large and underwriting infrastructure. we've cycle ready resilient robust management through

predominantly commercial prime, investment clients prime, commitments. and book leverage is are grade, consumer Our little very generally we our and lending have super

focused lines deliver and and the allocation high on capital growth, high opportunities objectives. are prudent to We on our to products served best of strategic margin sheet balance return, business of prudent

us customers, communities allow Our leading growth strategy our shareholders, and on is for generate performance. which focused value to creating industry

the by including newest close thank me Bank. colleagues Union employees across to company, you Let our XX,XXX from our saying

and for Bank open and all commitment for up now choice of constituents dedication special the call US Q&A. make Your the are we what serve. the We'll destination

we We Siefers go [Operator begin Instructions] Scott with question-and-answer session. Piper Please will go now the to Sandler. And can first ahead.

Scott. morning Good

Scott. Hi,

for Maybe a question you.

balance could what at the for and look will management like capital sheet hoping you. level, you top Just was speak to

growth, keep So on there? But under you're or sales help you assets. or there thought to still billion will additional any $XXX in under securitizations limiting be

Just the there X Tier thought on that to would great, know would on be we're on repurchase, But to either back guess, with thoughts category of until those of please. see any I get hold happens? move just sort up, looming off the then, common And pause target. to equity longer what any be I than we

Terry in. is Scott, I'll will This and add Andy start.

were optimization We first So company. the all, sheet the talked we – was about, categories in balance box growth of allow we profitable the we're reasons returning. those the It as was to related took of one of of went through, growth. within the positioned some that limiting manage we as not and for also the to returns that that credit actions securitized assets well Terry we

allowing way a all grow to are profitable us the in in those future. So

the a securitizations, XXXX, they into not And Cat balance about earliest to As what nominal we the category in further nature. II threshold material cross we would and before, until and that of the time. expect we add? have new that's would any talked at you sheet very actions be in end if not Terry, at of optimization the

I for No, balance we're ready significant from we spent Yeah. sheet of to expect end able lot But adopt would And the there's II as any forward. a We to again positioning be go no real here. cap. we just the reiterate, by optimization real wouldn't of Category balance sheet growth XXXX. time

for thoughts mark, your would it's now, sort then just thoughts? And well? on to curious of of a crush on know, I as pause be sort still so but repurchase Wonderful. we're

Scott. Yeah,

So expect we've in continue said we that, that. as to

spot, about starting good about are X.X% CETX. a We

that to it expect X% XXXX continue by up creep end to to that year, or above and to from continue next at of accrete We particular point. move the up and

looks the are I happening Basel have regulators make to things, an II it to and particular is sorts assessment at be do there core nicely in certainly, CETX, really of from are have different But perspective. throughout of X%, landscape that to get will that our Category one and about I the at all create the But to upon going out above once the a in we'll things what looking think think we'll point III to of based terms we having as regulatory XXXX. mean, things. you those it's So like. time

Appreciate the right. All you. all Wonderful. thought. Thank

Thanks, Scott.

Najarian UBS. Erika ahead. Next, we to go go with Please can

Good Hi. morning.

Good morning.

the for you Day on the relates Memorial question you thank of that as it first to cost expected the slides. all weekend cadence My synergies And the is gave detail your us conversion. on

for is question, and clarification first systems then weekend year little like? until synergy full synergies, acceleration And expect we is cost XXXX? So XX% the what as a Day cadence very that synergies cost Do converge? target capture an in that cost the in Memorial

cost of Yeah, And of expectation year the $XXX just that million Erika, to synergies, our of XX% see next is question. in great that we'll confirm, XXXX. about

kick synergies And a from those Memorial the to start to cadence in system Day with subsequent so standpoint, of will the that cost conversion, vast conversion. really majority

much that half of first more of second XX% the year. in half during smaller So the of the the year significant

it. Got

of So so words, the in above anticipate exit XX%? – other we should an rate by well XQ XXXX

end have Yes. we the that the By such to in of get XXX%. the get we to cost the we will achieved fourth position vast the XXXX, by good time we the quarter, incorporated of be synergies a to will have time majority

is Got it. on outlook. And question the follow-up economic my

legacy charge-offs like unemployment Bank are in U.S. what your that us the based outlook. lot the -- here. the in remind seems being Bank terms U.S. could And a you as we for anticipating on mild it of a are GDP from outlook, recession anticipate and thinking, peers trend you If is captured reserves legacy how of would

bit. GDP thought is that unemployment of half I are base our Yes, we is the reserve, that in that mild thinking and ticks or probably year either a When case say probably would with process. expectations up that about flat second sort the and there consistent recession a down the relatively is of are our a

to reserving that through bit little would past, base When sort a of perspective, up downside bit that a from different at the a recession. little scenario, we're a all said more scenarios And we in way so go I from we've potential weighted say a towards the the severe five as conservative. end looking we reserving process, case

normalize expectation at you From We a our some about kind the But baseline fourth probably see until moving points. We'll that, to XXXX. that of throughout will charge-off basis basis perspective, perspective, of and the the don't both was quarter of give using see kind in the delinquencies up. that year. pre-pandemic our XX into charge-offs to XX sometime points continue

Got you. it. Thank

Erika. Thanks

Securities. ahead. can next, with go Mayo to go Fargo And Wells Please Mike we

Good Mike. morning

I good just Hey to Hi. morning. clarify. wanted

So, you over leverage basis your made points. operating in XXXX XXX positive

of you back points. the know, sure if don't the operating I I'm between, getting all-in XXX And correct. back I'm not positive what somewhere numbers, in into basis to numbers, If leverage if XXX year-over-year that's do get? you you

the why basis the XX increasing five guide? And such billion. billion That's is margin That's a the in And points versus versus quarter? fourth big in an revenue the why still a variance improvement more others. $XX of to bit $XX

in. of a on and add then Terry start couple I'll things will

very your sort questions. the about the me increasing backwards and $XX deposits brings in that consumer margin lot, Bank And a points. a because deposits XX So, billion principally of talked stable low-cost driving of on up environment that five on. of to of is The that Union in basis. Mike, on low-cost, value in this let that principally margin go is valuable basis We reflected quarterly that's

XXX a achieve XXXX points operating hearing bit leverage positive of basis background. did -- We in of little

we're Mike, Can line? mute Thanks. you background. getting Hey little a your

did But achieve to continued XXXX. as have expect points merger-related leverage positive is achieve leverage XXXX. would basis it well. positive to in XXX charges We operating the of going We XXXX operating into in

at would on And core looking you add? a basis. Terry, it I'm So what

Yes.

in net and things in clearly, of are margin that to a to interest accelerate the through there, betas to Union five Bank the margin, related Just kind and coming net of expect see points lift maybe basis XX from rest maybe kind like going XXXX. that back on, of bit flattish or to coming interest But we increase deposit moderate expansion year. to then the

direction. Bancorp for going long trend a And like a cost to that It follow-up, time. looks a you're producer back as in been had low look, U.S.

still get is So But in I in synergies. Union it had that's why and X%. like have higher, expected acquisition? accretion brought it, change no from expected performing synergies X% you no still the change the to sounds better, Bank you the

And Andy, five-or-so turning you separate now positive in drag from that, is a the versus last tech the December years. cycle big then mentioned investment that being

If you could elaborate that? you. on Thank

And Terry Mike. of are XXXX. fully in savings, Sure, as XX% million you're still cost in XXXX, $XXX we XXX% went through, implemented projecting, right,

provided Importantly, have guidance we in revenue the we provided, synergies. that not any

conversion think integration revenue So process. without particularly after to there be which synergies, we and are it's some going the

tech. spend We are the on past heavy

that. You're part platform right, company the this we're three benefit very is in a the more or technology and we've to to shift of benefits last of made gain the the of in of transaction low years a and And to line starting flat leveraging over way. investments our four allow to us cost lift the

So that we benefit is synergies driving about. through talk that the

Thank you.

Mike. Thanks

go to go we'll now Please ISI. with And ahead. Evercore John Pancari

Good John. morning

Hi John.

Good morning.

are and the you you other indicated metrics, I seeing just know starting finance obviously? side they some to and in income or moving -- prime? you're super most more. on beyond players normalization low if consumer are classes charge-offs can to you in cohorts you asset Is We're are income a or delinquencies. classes? credit So that hearing prime just the want of what Thanks. it I but elaborate non-prime on some seeing see the into card the from seeing the normalization what that normalization the asset impacting And In also bit and see normalization?

Terry. mean -- is this I Yeah. I

more reminder, terms an upper you're your from space. really seeing so it be particular perspective, address maybe bands lower in as all on tick the portfolios. first we're time. the prime, where that we're at bands And underwriting of extent to up, in of it's to opposed focus maybe consumer starting To we super this as the in seeing on would prime So to and question in card our point a right; credit probably the delinquencies it

down with down; from credit as just the again, that other are That too. about portfolios one much we And as that's revolving a when And credit with But starting respect more savings to people they're you coming on that card as perspective, think continue their cards. more of the normalize, unsecured talked of natural a significant. are we is and at the look the things But that is portfolio, to yet. not kind would or savings progression things fairly consumer I it's we coming expect excess seeing.

revenue Okay. how consumer and Thanks. guess behavior payments this for out that I look your as and considering your Thanks. your And revenue how Terry, dynamics? impact the through well, macro macro the in and card your processing you then as that's related, helpful. assumptions year, does revenue does expectations development merchant

Yeah.

The you spend a revenues, year-over-year payments is XX% basis, above saw, is the pre-COVID well still plus card above. X%. levels. On So we're

a expect the the start for Terry but continues in continued level bit savings as of into the to still behavior spend categories little we spend are strong. So moderating more change. of And we go moderate But would shifting reasons consumer bit. that expect probably spend, The a rest forward again, the to mentioned. but as go to be growth nature strong and we starts normalize and XXXX

end or revenue of anticipate has our would And particular kind a starts prepaid is that in XXXX, the about XXXX, is revenue expectation been I that things we thing kind bit talked a is the Relative primarily single that we've and is that business card because And which digits terms our one think for revenue, will that, and high to kind moderate. of that the when at of prepaid credit processing card business. year-over-year of we to up sales that's adding, that comparisons. look a in strengthen drag, we of Yeah. merchant John,

that's – And to digits, recover then think on double that's travel particular digits. entertainment in nicely we see that continuing that payment corporate to we're be to and continue not high the certainly going very business, reasonably if low strong, And single card space.

revenue the trends for XXXX. good pretty about feel we So payment

it. Great. Thank Terry. Appreciate you,

Yep.

Next, Bank ahead. Please America. to we Poonawala with go Ebrahim go of

morning. Hey, good

Ebrahim. morning, Good

just I follow one want to up credit. on

So consumer. you about talked

maybe you're certain book, is either perspective or beginning any which around book, softening within just don't slide, talking – CRE CRE you Looking loans. California if office to markets, about CRE sharing of in at the your XX% if the the see mind

some a tied think, that Yeah. I The think that, to is particular when it space. on if CRE return-to-office had watch perspective, of I happening. of behaviors that And is a the from really office much But moderating are going longer-term have that a high maybe certainly kind over will, of we really probably or a the level, greatest probably that's up just end probably at extent. you We're to sort well to mean, at we to is patterns. sort just valuations, this look credit to from areas I And focus at structural it going point. continues have time. to perspective pretty adjustment portfolio, core CRE perform as

I partnerships. mentioned And separate slide, you tech about think just about When your around you the some payments. it. Got question one in and investments of guess,

like business? us from give growth secular a standpoint, share competitive of market us around and you're areas sense – positioning partnership Just this that of this like remind in how you about for just outlook USB, see thinking

Yeah.

look we've lot our as of growth forward. we of to us partnership's component for important As of card the made have then to being tech-led led the merchant and area categories. a activity, principal and be the you investments side, growth processing for that the mentioned, on an a continues investments And in strength point tech-led

over made those few years. two doing and are partnerships on it's and we've to the areas, well merchant investments past the on partly So card, due tech-led

do acquisitions kind the in-house, within just bolt-on see And build strategy of this that or more is you to there business?

miscellaneous investments the their company of and made our you as that M&A look software edges. for -- to Many like of the bolt-ons or We've developed and used think added add our do to little platforms Bento you with internal said of that activities business. continue we forward. that investments the we've allow the we different are to around I a capabilities as has integration that Atellic for run both well, allow know, as capabilities acquisitions And some we'll

Good. Thank you.

Sure.

go Please can we Gerard RBC. go with ahead. to And Cassidy

Gerard. Morning

Gerard. Morning

loans they for mean types sales? acquired. profiles? the of color And deal. balance some that -- Terry, Question off where you congratulations -- in decided the meet credits details the the give on know hi Can your closing what Andy, optimization you, but some was Hi were to on us were of I certain you of of those didn't they chose on credit driver sell I sheet would guys profile, Terry, the why credit that

thought portfolios Yes. margins we across Maybe able when growth balance profit sheet and going balance were we ourselves improve looking at really that starting returns be position the a things the or about to profile. sheet about to optimization, for point, thinking to the and the optimize as and forward profitability is repositioning various then risk

related we maybe lending that a a -- made that et will. if a had cetera, at number looking of from looked made we how ended were taking lot a acquiring, they Union originated, up club or up we different risk that that you risk there sense. perspective, we So, end And time deal. loans through planned credit thought areas couple a profile that focused that it's of of decision and portfolios And that is originally something Bank when that channel, we on. the we care acquired upfront of kind over the to we had we profile, at looked was the when of run off that a at One

real in kind concentration to portfolios a to bit. area was that estate down some able bring that in other selling we their particular of up The commercial be order ended

looking ended indirect lower-margin the portfolio. U.S. And billion then side. loan about on of areas was auto more securitized up We particular We other Bank optimization associated at portfolio. $X the with that

in returns space we of that associated kind our maybe up ended things business the that lower other where of corporate across C&I with looking the it, optimize could then that. just And at book and relationships we is had

the focus of And to quarter. respect with And that balance speak, of the allowed to areas primary those during off, so we optimization. sheet were so some run the to

an Last Union coming on vast the up of some $XX securities, sheet thing say that that from it et billion interest did ended is HTM about where I would about the maybe portfolio think -- perspective, selling from of kind that Bank. rate to majority area other But optimization. we really perspective, the of that And balance side was investment was cetera. risk we

loans, -- where any too XYZ the corporate was the the as that there to well? as maybe total company and and were shared down Terry, take you much there Bank you had Union in relationships, guys decided an to meaning exposure

Yes. Exactly.

risk specific of perspective, was So, strategy. customers, hold maybe a to a from at yes, levels concentrations part with or looking that respect the

gave quality, And as the the just XX numbers. versus show and from pull the credit should legacy a XX you optimization, I million the number XXXX then give basis your If it at core number reported to the slide And that including be gear good. ourselves of looks now implemented in points. the obviously like is on breakout basis ratio we the points, follow-up, fully us your Union bps you around charge-offs, net will Is good net Bank charge-off the us Union XX, for slides. your us on XX $XXX guys Very into level the business? out you that very detail

Yeah.

Let me clarify.

you having to to charge you about sheet that is speak. two then on you that XX appropriate, charge-off it's points to to to securitization under so make day on a if basis an one, XX up basis then you there's that recapture have loans So do you off have core; have talked that And assessment. that what a basis, that, off articulated. to on was that core I But the And charged CECL, components balance believe you points basis. have reported end they

kind to associated CECL. there was day $XXX that those effect related about million of to one And of charge-offs with --

XX% reported basis, on the use when points and that's basis. forward, components. And I million kind about XX start $XXX point, charge-offs. So we there's worth think But going a a the core of core as would really on basis three of about XX%

clearing I for you that up. appreciate Thank it.

Yeah.

go Graseck we next, go with ahead. Morgan can And to Stanley. Betsy Please

morning. good Hi,

Hi, Betsy.

the clear. to from and super deck Hi I and And effort end make really straightforward. congratulations the all my is too. simple it appreciate

you got think XXXX? should go per the about a reserving follow-up do bit had. the a discussion day, said, the couple the for through as marks, we do we had had to questions add about fair you value XXXX CECL just and we Because the me, So rules. you we also the talk as you've to of Could on level little to just like how into

here? Does move that? inch there reserve a in just Thanks. you which should would scenario how out ratio it about stabilize does Is think it we down? actually from So Could higher? frame

we mean, obviously, large, -- portfolio, XXXX, of a uncertainty based terms changing in up I that, is I metric and things think But feel points is as good little by might think basis economic we a ends about how mix XXXX might a about year. Yeah. probably case, different speak. it of of XXX and pretty how good the impacted is that think base lot I the think it change. upon to that, a down we our throughout the with bit. as But It inch that so comfortable by

I I sheet. balance bit the XXXX, growth than on when growth versus then rate a the I Okay. at the other to think question slower a we're of I have at seeing it's XXXX used addressed XQ USB. know guide this you look But before. one And

could growth I during you phase second maybe and understand, is down on and should this the ticky-tackies you XXXX. should have anticipate? that CDI of the accounting And the a don't mind, just we this purchase that maybe expect XXXX couple we and how or then integration So should accelerate growth steps up, the into is and if level half rate that a moderated help us of

Sure. Betsy, Andy. is this

exceptional think well the commercial as So on CRE. growth loan I first, led categories, by had XXXX across as many growth rate,

So more would is that what see normalizing. we

and bit fact It rates across the categories. was other quarter. full which average quarter. activity by in impacted see that, the the most in a are of took rest first we demand, the And of fourth fourth You're quarter, I optimization in is a But the growth starting of driver balances and think loan is a fourth that some the XXXX. the principal quarter partial moderating in quarter that quarter down to is the function the

growing in we XXXX. So what a than it's less but still saw

is your kind the And I think the over it was deposit core maybe that about it's would then, Betsy, probably way that, will second the approach. it recognition sort period. It down, sum-of-the-years probably question, time, of which a – intangible assuming related around to of step will it good is a over XX-year of about just income a amortize into of digit and modeling way

how think for thing we I know or it's mean same should And PAA, PAA, about that? I but change… different, PAA

Yeah.

to and things. sorts And tied, it all prepayments will obviously, life loans. the of by the being that's end of So impacted up

at that looking you it is half mortgage portfolio in shorter and their corporate of acquired, half end it about we is up If residential of term.

looking four, faster five a also average end. probably you if the accrete six an front to four sort time that frame, ended up years, then that years, bit on of little probably, will at course, of life So of

Okay. for that. Thank you

Yep. Betsy. Thanks,

go with Please go next, Vivek And we'll ahead. JPMorgan. to Juneja

Good morning, Vivek.

that or sort recovery, can couple give questions. the fact Hi. Congratulations. just crossover of that value book going of color what's Good you'd also back to of the that there the Is that morning. that? earnings, just help so back simply underneath A that's come is tangible quickly, you on and recover The something driver quickly? else any it key

the Yeah. It's with see marks that underlying principally company. accretion the and respect going to earnings the Union effect Bank, we're the of to

Okay.

because So the accretion that that you loans the asked, – say, mortgages. the question Betsy – heard current half are accretion just the purchase I

part accretion So that pre-purchase going slowly? is of longer? accounting guess, it So will stay is over come I for that take more high to – that down,

kind the just it's No, to X% X% – levels Yeah. on think is of really – we're really it I accretion the expecting that

The UB side?

Yeah.

Yeah.

it. Got Okay.

UB, the all yours? I you billion. or the other pretty ones. decline of is optimization of which some that $XX had sheet types couple think of sizable, Is Deposits, deposits? it A balance in it And Okay. little it's

standpoint, things. Yeah. whether we dollar deposits a kind euro would deposit at regulatory or of went It's ended couple made brokerage-type very We had We a great a higher-cost kind We getting when be question. a deposits, up looking From ended to conscious LCR after decision through, that that. on ratios. of focus a kind that at reposition looking you things. deposits, those the optimization approval of sorts of about up of different think we

point came And On that, those customers, billion Bank transitionary. over the over there's I Union that thing $X will kind were worth their out is more to to that those about of bank back time, transition $X one that of, would the billion deposits side, as migrate. investment global

of early to half XXXX. So, I that other the the quarter, fourth migrated about that probably migrate would half of in and expect in

with ended are up to kind at deposit and those things the flows. we respect of looking deposit But

Union So, low-cost deposits it then deposits high-cost was that over coming out of the are -- some really looking or effect. at trading Bank low-cost Bank deposits for and Union for

about come year? And you the quickly Category number end -- think that the II, down how as be expect going the OCI what do was in So, the can better of at to so that you where we shape? to

Yes.

So, OCI about is is end the portfolio the at duration little of year $X of the and over billion, the a X%.

from you So, that, here. take that's look can that if assuming a move obviously, at kind don't rates of

HTM. perspective is fixed an investment into about XXs. also of some up pay XX%, kind swaps high XX% that portfolio We've from positioning get in the Our to effect that entered

we're able if with flexibility as if rates position like or pretty a come rates down, well. deal feel up be some we good to to in move there -- bit we a have So,

in So, spot. a like we feel good pretty we're

All you. right. Thank

Please O'Connor And with we next, can go ahead. go Bank. Deutsche to Matt

X% else even the if more, point And at to move of expected a capital, you talk build X% the higher. get have there build reserves and doesn't or the you starting focus by and can much. Good you quickly how macro that I that higher about capital then But the morning. everyone of also, obviously, is realize than is on Can that to year? is worse around to the of capital pace end X.X% the the from

So, I kind earnings could you. of aren't preferreds that assets without bit levers as pull is to exit little a you you Thank can such that guess painful the that need other issuing much? what if of like question you or kind hitting more, some

on obviously, I very balance Matt, precious. perspective, we're capital going And optimization to returns. from sheet Yes, mean, profitability, a focused be is

perspective from in want sure resources that growth right we So, spots. an asset to are the make dedicating we our

end The the pace lower of the across we first cost probably quarter conversion. of of merger-related not year more XXXX, the will seen of be a earlier going be little system have costs of little synergies, a fairly Obviously, from will in X.X% through the X% it's by the because going because timing ratable to and growth to above is we incurring the simply four part quarters. bit and simply the

towards that probably a hopefully, more end. gives is weighted So, But of pace kind perspective. bit back the Matt, little some the you

five severe that a kind of at reserve view, we from point of back look of into I'd different is which different Again, approaches, feel one consideration. we at scenarios. come like take We a a lot recession. of We look the

We would of in spot reserving could good X.X%, see X%, feel view. from like and unemployment move a a we be around pretty we up to point still

that's level So, at other if higher, up getting it we'll focus a sheet optimization balance ends -- being it activity. if on ends up then to have

very much. Thank you Okay.

Matt. Thanks,

Matt. Thanks,

Please And Jefferies. go with we'll Usdin go ahead. to Ken

Ken. morning, Good

guys. morning Good

question, think the how wanted us for just to and the the your we just what about underlying terms in on and costs deposit -- year. follow assumptions outlook this quarter from of do projects, if to just how just from First core and the of for just fourth I you walk business impacts is through NII? first that the just ask Can NII betas trajectory underlying

Yeah.

So expansion. obviously, going as earning driven to asset is that well income have be the margin net interest in the we by as here growth

then basis little a quarter margin flat, Union that -- XX place bit. margin the first expect points effect maybe our again, just We in of to is up Union -- Bank. is of full reasonably take And quarter reasonably there, because five the moderates modeling to expansion the from that

going betas From are to a clearly, of deposit accelerate. point deposit view,

the opportunities at of the mind look portfolio. But those that's interest we optimize net the and see on, of of the and income, Union interest the the why of to reason think in net the quarter. or kind expansion bringing I year. second Bank value keep associated terms to we'll margin in half you'll is continue -- see that The -- deposits with we're again, this that in moderation first deposit effect in

And for using is you period CDI few we you the as the for of impact. one deal a accretion the Can look Thanks. this that XXXX? both does terms around us that run what type accounting like, of on remind Okay. then purchase or the follow-up you're just rate keep change like amortization just past in and years,

million in and again, XXXX, to purchase be we CDI that, expect the million. think to accounting I $XXX to million $XXX Well, $XXX about the accretion be

you use pretty think As steps and year’s of time. sum the close will off. down you if amortizing modeling on will it I up assumption I over think I get think a perspective digits, to that XX-year from I mentioned CDI, a But earlier, how it end

really is to tied corporate be assets. is about half it mortgage purchase and The to asset because half shorter-lived of is it et accounting of and the going and lives cetera, commercial,

down little sort similar you time weighted. of frame, think about four into a probably more fashion, accretes that five-year I front-end and to can a it think

Okay. Got it. Thank Terry. you,

Yeah.

Chris And ahead. next, we can Kotowski with to go Oppenheimer. Please go

Hi Chris.

Hi. Good morning.

get helpful and the XX.X take questions. billion bit end what of I the I of $X.X to guidance look full is slide and Ken's on kind the that Following the range If I Mike get. guidance. of XX range very on day revenue year, year $X.X billion at and midpoint weight the full up I a lower to actually your I

the like what the you growth is it tag-ins income that that? guess, rising which do lot or see wondering, what driving fee And So growth the in of a that back a percent of of is just saying. than rates, or half the of banks or I couple are is implies benefits growth, I'm year, loan underlying again, better

with effect we a more tailwind example, little year. do you think to associated rates basis, what into I year as kind play. on of an bit a should opposed again, come see this year of see the experienced interest full rising as revenue, Fee next kind Well, of a legacy we

the that So are timing then cost I just synergies get into able And of coming play. to of being on I those think expense think side. kind that

mid were that from mathematically, see just as add, Yeah. the And going it's a you And XXX maybe to in end number bit the high XXX earning that asset range probably or versus net there That's the XXX you it's to little right. talking the growth one. low I'd quarters. of about up of towards in going a early then you're margin end XXX. And it, interest to and

same Yeah. analysis do at if side, on you're the non-interest Well, the interesting because high I expense it's that. of the end

year. the growth implies of of earnings nice through in pre-provision the it So kind course

So anyway, but – that's for it me.

All right.

Thanks, Chris.

Securities. our will with And queue come last question Fargo Wells in Mayo Mike from

Hey, Mike.

going today? it AOCI, I'm where here, as to it of is now just $XX was remember And – billion? billion, it's $X

is overall year come down $XX to AOCI the from and billion at end the of expect at it there.

lower a At level today, Mike.

that are Can give just the payoffs color Thanks. both more drag you the but where on X then, or like this payback? year multi-years. side stock, at But the rough spending And leverage bit? your last leverage. spending not you've the from the you most you out been and less Andy, just and and XX that, now cycle briefly, said more. and little you you that us And less addressed Because you're maybe of the It's that when on you you've comments in it investment where and sounds a or look is it and in crossing a years is you invested operating side in the pull and today? expect back December the operating based a you X, payback on lens been you're comment coming December made can line reiterated

Mike. Thanks, Yes.

I think fair representation. that's a

levels our couple million that $X.X grew – from were the last CapEx billion. about – run And the pure years. we has to billion, rate So to $X.X $XXX on growth for $XXX spend in been million of

expect not to expense to would CapEx. you So related continued see increase additional

defensive to Importantly, also spend XX% migrated offensive. we that XX% about from

services So capabilities, products like is reaching and customers, forth. the on so and digital activities spend

a with that is giving level on that through to plus expense set we're all the all the what's the investments a projecting you. coming side. revenue why return base, So is the numbers overlaying that Union right we're from so side on customer a Bank on now, of That, coupled

you. Thank Okay.

Thanks, Mike.

we'll do Please ahead. We And to with McDonald have go one more go Research. Autonomous for John time question.

Good morning, John.

Good morning, guys. Hey.

Just quick a couple of follow-ups.

rate here, So would the bit up repositioning of leave you the where in How it describe little interest balance you asset-sensitive, positioning? a Terry, ending where neutral, and merger fairly does now? terms sheet you're

basis of about up would asset we I on, neutral. say XX sort in probably points that, a of Bank sensitivity environment. US it Bank XX When add Yeah. fairly legacy is shock Union adds

quick. year, on you Bancorp. Maybe the income some on then puts on year the fee income, What those said are the real this you fees Okay. legacy just front? fee some grow fee helpers takes income? that What more are on can and And this helpers U.S. tailwinds

Well, components, of you kind if payments continues I at just the revenue look strong. reasonably different think the to Yes. be

I of expectation the is starts XXXX because terms comes think the that we investment of But implemented a May. back bit deposit market dissipate. changes we pricing some That in to a income. in little service in charges, saw drag

of of So, the think probably especially it combination has on revenue. biggest a mortgage drag, basis. ones be been significant That will is I just one kind a a year-over-year banking things. pretty But of

that into that started be see we go quarter, little would in bit linked-quarter actually expect to we to the as up, inflection stronger fourth we point revenue a with And come XXXX. starting and

clarification. the last it. Okay, then got And

this the you'd said went even year. you if reserves, X.X% ratio X%, on And be think good for X.X%, I pretty looks okay? unemployment to

a of part through our kind already unemployment lot and process. average of go We into process. think weighted scenarios consideration different incorporated that into is we we as Again, of X.X% downside that and take Yes. X%, reserving

how going ends all. but if at So, is what happening, all severe it economic up the one -- again, upon depend recession is, there is to

there's parts. think lot of I moving just a So,

it. you. Got Thank

And at now continue. Andersen. will this time. I to it we further turn questions Please back have no George

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