SVB Financial (SIVBQ) 25 Oct 182018 Q3 Earnings call transcript

Welcome to the SVB Financial Group Third Quarter 2018 Earnings Call. My name is Ellen, and I will be your operator for today's call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. [Operator Instructions] Please note that this conference is being recorded. the to turn of O'Leary, now Relations. Investor will call Meghan over Head I

begin. may You

Ellen, you, today. us you, Thank thank and everyone, for joining

President for about Becker; are Our be joined financial Greg CFO, members will CEO, Beck, of other Dan management results and and here Q&A. third our our talk by quarter the XXXX to and

may making release current made differ in and website at our earnings section Relations of call, you encourage release Our We forward-looking to call. our this We'll materially. is which forward-looking be to Investor actual disclaimer statements during available equally this applies results dealing on the the information, statements svb.com. in review with earnings

including of include may discussion may measures, some SEC financial be references found addition, in measures. and our release. to those earnings reconciliation in our our GAAP non-GAAP In measures, filings to Information about

to call, to that, the will the turn including expect We approximately Q&A, with And an I Becker. over hour. call last Greg

and joining everyone, Meghan, Thank for us you, thanks, today.

quarter net Our and across earnings $X.XX of was strong million. per share We performance with the business. continued of delivered third $XXX income outstanding one an

by capital income increased X% to related venture and million. average $XXX.X by Our billion, related and were quarter strong from had million equity and exceptional X% warrants gains fee driven loans VC the grew second from to net by by balance $XX compared client client A to by totaling increased on healthy total we results warrants interest liquidity, income few quality. funds stable $XX.X million, X% sheet, income $XXX third to core credit core highlights investments, robust the X% average $XXX quarter, investments to increased fee and gains billion,

are an sheet for return year We we quarter an of on outstanding raising was and on in was truly efficiency balance our growth. ratio revenue also our XXXX and outstanding outperformance, our outlook of again Based full XX%. It year-to-date. delivered XX.X% a equity

and VCs putting has year XXXX already $XX the capital of XXXX U.S. XXXX equity is global our XX% raising $XX our of expansion preliminary already equity dramatic raised and and over strong year overall. near introducing shows to private of excess a highs. ex-environment $XX.X we’re strong pace trend exceeded growth investment major equity to clients addition, QX, on ago, billion, X,XXX on of XXXX, of in trillion. In fund a year. the of all of has year performance the which levels contributor our the fund year-to-date, high dry to and At levels, healthy record capital, a outlook In raising been sustained. fifth significant for have with $X.X liquidity private than available funds levels The strong and the the exceed and a industry most remains private of time are sidelines raising been power an consecutive venture The a Venture more healthy. approaching dry reached were investments capital there high has is markets lot in U.S. billion. increase powder marks relatively and record and to

this since year-to-date best While third has been and science the two overall improvements The life for market XXXX. notable particularly to strength, companies far over tech regained IPOs among XXXX numbering some of IPOs number so year. is the last the not have IPOs this has one shown of their IPOs year. already strong IPO quarter tech has IPO surpassed

strength to in companies. across is broader capital as business evidenced This number ability strong venture the has side, markets still stage and tech in impacted being is increased, the available of to later our IPOs but by private liquidity our momentum the On the equity execute consistently. private

with reached strong one than time ever very the and win commercial more period the end quarters highs both team third of equity new client delivered growth added rate core all deposits basis. quarter. strongest X,XXX and a remains in for Private clients Our and average on loans

growing billion at Our sciences months. and rate is an XX% funds on twelve team client in generated has of past annualized loans life the growth $XX

past growth bank in XX% private to increased is people. at marketing quarter Our team annualized and for investments has delivering every that infrastructure, loan rate a and rate thanks the year,

and China booming expand venture is opened innovation our tech its in new momentum home business. September, and also balance community which In seeing growing that And in joint May, new a business office office we international some and is pace opened companies. Frankfurt Shenzhen, a there. and of team biggest our to at sheet a revenues been Our generating rapid and we continue to have China's

with will hiring an and Finally, long-term. beyond retaining and our in far despite in that challenges. the clients of strategy a our product growth, believe this perspective, ways competition non-banks industry continue from continues and be Even our client partner be prospering competition still SVB in a support clients, From because extends markets and holistic to best the holds the to sheet pricing our from thriving the the balance markets, technology go banks the on people. community lending. winning innovation the focus liquidity part in press to and current on pressure market to continues we particularly lending, We for success choice

a demonstrated for SVB takes but in over platform, given people will our in liquidity what it The the that do years is on place it that to challenge. and our long-term. culture, be abundant a do where have markets to we’ll values markets, we in another We succeed focus matures our remains want the way

continue loan create so As for stage to a to rounds funding called mega later companies that technology headwinds hire growth.

to we to our liquidity there. get have sheet Although attracting our is and for nevertheless attention products but what on may cost it options balance our client and levers them clients balance deposits, paying exceptional, the are we to sheet

rising long-term, of deposits our anxiety we relatively economies and over a interest While and rise. all market will volatility about slowing as increase macro U.S. rates the fight rates, between a From tariff the low ongoing are expect global China costs perspective, concern. remain it to potentially growing the

to funding of the in growth, addition be likely first developments feel In a to our exit fear starts impacts to in negative private broader these that. effect clients if – public of the on would meaningful the potential impact stage market way late or the the

and to respond challenges investors building As companies delivering long-term growth. accelerate grow innovation future efficiently to fast growth to our to we these anticipate be partner to organization insights to and best can the challenges, an scale clients remain the that critical we and their committed over and and their and connections solutions,

Our we end investment employee ongoing environment enablement and the part will are initiatives initiatives level this move meaningful as this to continue end make to elevated into to investments enhance positive expect the of current as XXXX. of leveraged improvements we future in in We client experience, growth, process

we change. not rate no assumptions invest. to XXXX. performance now include our time our on Given of to the and to And I’d market strong this our to see share preliminary like profitability believe is based plus today like about is does I'd future the we subject outlook there's for opportunities and changes stress better impact ahead, the outlook

in in without XXXX healthy economy, the amazing income in you. that's long-term. I'll the and put single to clients teens, to our high employees the markets future growth well average for digits, doing innovative outlook, optimistic we'd are Beck. XXXX rise you high of fee that call the this growth mid teens in dedicated in growth mid pleased with We in teens, of the result. expect we're interest income mid and net the clients the If quarter and Dan consistent our now Thank and net position CFO, success convinced and results I We're increases. our the forward our and in see sum loan growth core strong curve, unique low incredibly average interest XXs, And rates growth now growth to our again rate can to To growth including were expecting consistent see XXXX from offs up, benefit talented income see net deposit the future. and SVB’s to we're remain well our with the in expense teens. place the non-interest we're so our preliminary a about innovation in and over together and proud as doing us a turn year-to-date charge center

Thank you, afternoon Greg, everyone. and good

positive a Our strength excellent market conditions. in core quarterly of following included and business quarter highlights. The the was performance our result continued

fees; fourth gains and fee loan compensation by billion solid to related due strong funds venture bank. primarily investments; equity loans as income by and income capital salaries balance balance performance. stable or as and strong sciences outstanding sheet; wages increased related call and our underlying and quality private interest third, to credit and due life core growth growth securities; fifth, growth, higher capital higher off-balance mostly six, strong and to yields from lines average X.X% First, incentive well with net million, on $X.X primarily driven sheet, to investment client second, trends; Starting fixed the $XX.X client private our growth higher income from investment healthy warrants with continued higher expenses in

than year-to-date. growth to outlook high increasing the performance are due teens XXs year XXXX to We full for from loan low average better our the our expected

Average our at at total growth by or investment X.X%. to declined due an all offerings, primarily funds expect by billion $X.X period a segments. the sheet and in science by life deposits We particularly grew end billion was Average off-balance client is This sheet of $XXX.X grew X.X% on-balance about healthy end talked Total Greg deposits client basis, average clients slightly as range. however, XX.X% portfolio by reflecting $X.X activity funding or of environment to IPO continued secondary for billion or acquisition. this and funds our as On billion, clients well as come million. growth across $XXX funds. $X.X low driven increase client success to

remains total to strong DDA accounts of mix Our XX%. at deposit

from somewhat the approximately their quarter. strategy by million flows of was deposit on addition, off-balance customers moving deposits size interest accounts This the based new $XXX we sheet our accounts. into deposit offset In generation of deposit generated bearing for

outlook we expect to low come of XXXX year low growth teens, the range. outlook at deposit in terms our of end In of full the our

X.X% by growth net loan to to increased the rates on income $XXX.X the yields. interest statement, to higher and investment and income due impact loan million of Turning

full of X loan end loan range expect our drove in of growth decrease The an prepayment in in Overall, loan higher by primarily loan low income $XX.X come to towards increase million rates basis year outlook was Higher For the $X.X $XXX.X we interest of mid-XXs. and fees. yields the decreased decrease points, million a X.XX%. due interest to million. to the XXXX, balances

loan Lower higher expense banking million Deposit points. by our to points. still timing this, due continuation borrowings interest fixed funding basis as flat of LIBOR pricing experienced $XXX.X for points of to in investment XX by loan income a the In on in in million. increase at accounts. portfolio, competition costs bearing rates we an an increased interest balances deposit flows. higher portfolio. yields $X.X to yields to low low and $X.X increased based basis loan short-term Total very income X X and Interest prior Excluding our million, the higher increased beta basis by remains growth XX% primarily fund environment reinvestment particular and orders higher drove from at market increase a than technology of in funding

two, Our of costs rate margin pricing. loan margin during to: due prior quarter; short-term slower to one, net growth three, pressure borrowings competitive saw lower points the prepayment by interest to basis reflects in primarily what increased increased pace quarters a we than on increase, loan due income; a this X.XX%, and funding fee with X

NIM X.XX% We year of near midpoint X.XX%. to year the our to expect full the of end range outlook

Now, to with remained which trends. quality, credit underlying move I'll solid stable

previously in loans. billion, loan Our portion provision specific non-accrual charge $X.X reflects a not offs end for $XX.X for second compared growth the were net for million credit $XX.X new for our that quarter. of reserves was reserves reserved to period losses and of amount million This

in points saw in decrease to non-performing specific outlook offset, loans. reserves, basis the our capital full the our in growth we related well credit to regard loan expect basis credit to of continued remain million XX XX $XX.X XX expect to of levels equity points outlook range as charge-off towards an outlook, the of loan remain XX points of credit our of range net to basis private due our profile of and as year As a we our lines With ratio we basis ratio lower bottom primarily of middle to reserves non-performing related points. to decrease in call large strong portfolio to

increase warrants related driven were to our activity venture non-interest and years I'll Equity positive by volatility, GAAP from one This an realization may venture and driven million, million million was as of investment well subject during quarter. from composed income, investments and the million of gains increases noninterest best turn interests from of exit prior non-controlling prior related investments the non-controlling change. the $XX.X by underscore quarter, by funding gains gains $XXX.X Non-GAAP and interests fluctuations, and and primarily acquisition million are component income, in our round and from were warrants. to to million, at gains investments. be history. updates. net capital thanks a Now, market $XX.X like including of and healthy core warrants from unrealized is actual I restrictions income gains trends as our in from Market our gains were income valuation which from capital related fund fee investments factors compared strong Net quarter. in primarily sales capital exceptionally of income capital to the want losses to venture our and the related related on to market and $XXX.X $XX.X are non-interest markets. variety venture IPO valuation was $XXX.X warrants lock-ups. Valuations securities non-interest net significant gains a of subject related

XXXX. this Although on we we'd of that revenue, than category don't related to say XXXX market an annual it's to gains outlook provide more important expect be tempered

higher of income core to fee. and higher primarily fee fund by $XXX.X fees on increased to related by to rates $X.X client balances our for This X% exit investment in driven investment million Moving the environments client increase and to an growth million. funding clients. due Core healthy was

full the an million based for the result to to of quarter. we mid million to $X.X improved expectation a of expect growth the full year salaries increase funds, of XXs incentive towards than top the higher compensation and forecast from to low-teens $XXX.X were our thirties are investment well performance at expect this result second related outlook to the decrease to as of increases our incentives year. employees. to outlook by of core based low mid-teens come $XXX.X compensation Non-interest retention initiatives better related and million of range. for $X and that the year year CCAR increase end as in our services investments as higher on for raising we of related in key a As incentive client range income bottom and in the quarter. spread fee from of expense our the wages million for second write-off in performance professional and raising million increase $XX.X full $X.X was to These primarily reflects in the This performance costs expense the compared wages, the an hiring and the related related to in million growth a offset XXXX and that ongoing salaries are expense, primarily Primarily

– accelerating by performance, result further As to related we strong project current higher our raise given in growth said other quarters, prior may in would which outlook we look our costs. investments, projected

pointed in As of are and investments long-term forward. our our out, part strategy going Greg people growth our continued

XX% and no of this there's commit time ratio on Given we XX%, strong a of to our return with to an investment. better equity level current performance of efficiency believe

compares of higher which XX.X%. This saw Turning the quarter, in from XX.X% based to benefited second we higher to benefits. tax share tax effective compensation rate taxes,

year For of the expect our outlook full range. the XXXX, in of middle we to be

very remained ratios Moving to capital. increased across our Capital the liquidity capital and board. and strong

outstanding on Tier bank quarter X and to year. increased delivered another ratio we're to closing, XX leverage by X.XX%. Our another very points way we basis our strong In

our a lower ample rates, our interest from For business benefit and client continued of and of to higher taxes, liquidity the from updrafts the continues exits and economy. strong availability for now

we growth delivering of move high optimal the liquidity capital year the we remain look quarter and and to ahead with maintaining success quality final into on As in stable position to credit long-term. and the XXXX, ourselves further quality focused for

We to continue invest sight our growth people in through without of operating long-term for and the losing need systems and efficiency. scale

and clients. value As adding strong always, planning, execution, we our prioritize long-term to

the operator I'll now the in growth you change market will We sustained for the significant believe ask negative no healthy Thank future our up overall. there’s to position and to XXXX. focus environment consistent Q&A. and us Assuming open execution

you. Thank

will Ken Stanley. [Operator Instructions] Our Zerbe session. question-and-answer with from now the is begin first We question Morgan

guys. evening good Great,

Hey, Ken.

Hi, Ken.

you start $X you and they just I want was end by, off, went through the short to you the loan term billion about I walk Can of How short-term mean, borrowings of couple deposit XX% an just mentions ratio? increased sort it balance of looks deposits so on up there us into like sheet, basis. does because much period a see how have to fit call let's I your on Thanks. borrowings short-term use the liquidity. borrowing

use take. that I'll Dan. Ken, management. short-term Yeah, for liquidity just is It We

what particular some then term additional end short on higher get close So there some that a loan the in off we're security. will of deposit doing using movement and in we quarter a and growth gap towards deposits roll quarter. just pay the we and is as basis had funding investment to the And that down the

any not basis. feature a term by a expectations funding short to matter. that's of That's long-term just close a So regular on

costs impact your meaningful quarter? any on in have funding NIM Gotcha. the your And did that or

point quarter, for call about an P&L. that terms in it about impact that of on X $X the – was had the impact million NIM basis let's that's Yeah,

Got interest. guess I could little to affect we mean, that to is competitive Are just a then area it, banks question, you seeing mid-sized how that seem it that understood, Hopefully, be hear bit those okay. line of share? about and about business? your call those business a does can get us a is? And tell you take How into second lot the just I capital landscape growing of trying entrants possible the competitors? new other sort

part for is a as Mike Yeah, said this Ken, been lending a and add a in a the It's do time. quite well. business of It’s been our do but U.S., we it it call markets time. well. has key growth for want and of in us. it EMEA Greg to good also in business for as long Asia the period the and UK We've the long this across We might capital global on basis a key to

given people We biggest credit potential growth the focus have quality, is the I quite but strong, for else and have anybody our We and the platform on business. something more and given isn't it a just in of loans competitors the clearly see size this than platform while. And think incredibly new.

to for to market platform, feel competition see in a this. exceptionally And we being do that about our compete in not the it's team the So us, we of able market. our but yeah, surprise again strength and good because

Gotcha.

lot actually the been in given the balance like if position. deposits it about capital onto might near one perfect a or talk that would potentially guys question, something see bringing I different and you your term Can some about growing you Okay, you Is thinking approach your we how’s sheet, of in way? then just just of off-balance could. changed? sheet There your discussion a just last has

it’s start. Dan. I'll Ken,

continuing how keep and hasn't where bank changed. to balance a on need extent clients the money more clients new that criteria pricing to is new the we're the bringing that on to certain that the strategy look So We're sheet. into this

these something $X.X on approximate about interest a been bring numbers, to able So are bearing year-to-date to through basis, that billion strategy we've deposits. and of in close

feature And basis. in sheet – we graduate, continues have clients $XXX larger million to which called a able number progress. $XXX about feature is you go balances so on that bring those and for closer the been offering, of they of the of what quarter, a strategy means it's the this to something off-balance that million, net to there the some good franchise. ultimately Now we've about but unique that saw as and I And to a think then

we those through and to extent bring rate we balance off-balance of proceed options. this environment, the other offer As to have options we want sheet clients some on

strategy nothing So, that's good has showing – our progress. changed and in at least we're

All very right, much. thank you

question next from Deer with O'Neill. The Sandler Aaron is

Hi, good afternoon everybody.

Hi, Aaron.

any the give lift weighed guess the yields there the we Is I see return into as that shouldn't in I lower quarter help reason that loan head here? the understand prepayments to a we the normalization on would quarter. fourth

happen to fees. with Hey, Aaron, hard going prepayment those it's Dan. It's what's predict to

So client again that's just the activity. based on

something it’s quarter going So, into about consider, strong to have activity. I did We client the what's say take a and happen. to second to all that's hard think it's but

slight – their rewarding a looking increase loans average for the guess the Okay. little guidance support outlook employees absolutely but income. better And and fee notwithstanding for in at hard your I work, I

other be a range. that tends the Your toward qualifier items end of now guidance have lower the to

So, I materially not better here. outlook guess better, materially seeing I'm

behind in the what’s the higher this guidance? generally quarter, that expense incentive the had So increase comp for higher you kind warranted past of

this based say Greg. I'd – investment. So a start. broad is Aaron, It's I'll

a people. about of And new when a people we've it, year. it's seen people this perspective, So added you've I think lot from

have. actually also but to that and up side. the growth we in have of relationship of the some additional And catch that both ones the We balance some have the is the in growth across sales the that the the more it's people of support banking side, and with year that's add in some cases platform part to in is and support we

future. is again, the think about, other part The to for building

we've added people far our XX so this operations. global example So an in year be would

look in and we're for long-term because build like where there is mean I mean three are When other growth we you at hiring EMEA expect the that. those businesses today So to of Germany. China operations, the I when and business global in ahead markets, in and

plus the it in but fact digitally from point numbers perspective end. your onboarding, understand as citing end such to as in are been strong isn't processes more I at past, our enhancing the as loan the So client that scalable technology the our building absolute an growth the it has we're looking maybe platforms from

are all those build really to things we scalability the to now time those absolutely for long-term helping So right and investments. make think is

Okay, that's Thanks my great. taking for questions.

next from with question is The Alexopoulos Steven Morgan. JP

Hi, everybody.

Steve. Hi,

Steve. Hi,

On if expect outlook the in I at look we expenses this would fee rate, initial for growth look XXXX, loan for you're at year, income and so I expense outlook, loans. cutting XX% outlook now and you're mid-teens. assuming XX% XXXX, core low NII on which the Then for

revenue still you're to revenue components. You're reducing get mid-teens on outlook year? growth don't both looking a mid-teens for outlook given for me. expenses, surprising for What expense I looking it. bit it same which you're have next why was explains the They the

going start to Dan – Yeah, I on Steve, this will let I'll pile I'm and let time. Greg. it's

and people that existing that of also truly Again, the looking level overall our the we efficiency in got now, look you a invest right at look to people said, our growth that making more we said, right so, et When EPS, our look again, actually now is time step across XX example support investments, is you right global. platform. the at performance I And overall and our to again, the when look we've you just ratio, – support at as for is making it's And standpoint cetera, take at in are at sure from now to the back. guess ROE; was it right you I have future. that building as money our but clients, it people I

So think that. about

We we have carryover those effect to into add that people XXXX. in XXXX, as – goes we have a

– So in plus technologies. big of the other part other investments a again and the systems it that's

million in we around and are our our we budget for In investments. example our in year. next $XX an So so game would be for plan have forth, projects

across higher and believe number a say critical infrastructure to much invest really We in I the time up thing. last is across just platform and going We’re XXXX. one the to now the

more just In talent. is there's of a is thing. my addition competition factor. said a one to I seeing the I lot for companies There guess said, are same what And other

and the And more to you talent people those so positions, both are actually critical the market up. as top to you in of people need you you what retain different commands have. or different add and the attract in Both roles, going market, what

And so together creating combine teens mid you all that's things growth. of expense those the what's

right Are add I think to Sure. Dan don't could times pace that Is of investment? that, said when basically where you but of you had level we know a – saying that’s about anything a couple the if afford ROE to at now onto the time. what accelerate you like is basically you're saying?

is the ratio. it's income say would efficiency factors. the It I is level It all all of the across things. It contribution. ROE. It's is

then and to it completely direction. got Okay, switch

ever sheet. the in we funds, don't was total growth So billion client of the if $X.X I billion of I was quarter at surprised borrowings, does only on-balance look yet to billion funding, we've move wouldn't attract as $X.X $X.X that average competitive through seen talk sheet example. that? on-balance need you the more Is so for product Can not off. think you

for to activity So, don't Steve, what onto dynamic The out coming it’s that's seeing that is fundraising at a clients bringing Dan. are They're larger-sized a because our there. that's the that dollar larger platform Those play we're initially larger sense beta it's on-balance necessarily lot is the bank. from the at associated a interest rate with high make those Those us accounts. a market dollars bring considering offering has perspective. to very come of

have on-balance clients the sitting on $X.X said least though sheet coming a at I bring in the price. competitive so into high see they balance at net those generally off-balance. we bank, So Like $XXX million able as strategy, the far, been dollar to skew billion sheet we

So we're making progress.

of it's that deposits think large funding those off-balance that sheet. of we're getting of the are size larger the that because I rounds activity a lot driving

Got you.

for my taking questions. Thanks great. Okay,

Jaffray. is with The Rabatin question Brett from Piper next

Hey, good afternoon everyone.

Brett. Hi,

the And – I to little sure bit yields when guess competition just Greg understood end to like the up on around us that in was that that's late is relative year? was your maybe moving competition average I going would continued Do nicer be as was ask just keep loan a feel quarter I curious, the loan pricing continues just guess LIBOR make LIBOR give started I - factor. yield than higher? falling quarter. the in of a quite you specifically a your to you rates act wanted commentary seeing around period Can to you're then for I it earlier how color increase to move. want and the to just

there's about there. And three questions underneath Yeah.

Sorry about that.

That’s okay.

the So overall competition. is just on question first the

And and competition in a quarter there kind other wasn't was would out an to earnings there third in and so say makes growth. banks listened we've from of calls there it sense I like lot the increase of

lower happening a you I you after say, We've going aggressive slight outlook solve is first be that to the usually I'd are obviously the other that do uptick Again, there what honest that? that growth. seen how and so – saw say they institutions try in in would again you from the pricing they be And third thing several lowering that's anemic go possibly pricing. to very, side you years, for the And where as that people You to growth to continue, on be That's competitive goes. was probably right. if perspective. quarter. generally but there the And you for struggling as see last start growth, a can pricing from was

you and And been of out, bring continue our does though we a do So the that's play other value approach to unique compared focus more have we to them. how anybody to continue to companies we clients growth premium it and but than the have approach a our institutions think that that on out figuring is high value and table. can that's very we’ll I many else. way going And I I how is would believe What what add especially again over believe we're we the probably cycles I something I've see. to historically tell years platform get here to the through because

to I'll anyone So, Mike Dan either see or add on wants if Marc that. or

there thing only in a is deploy. the to amount significant I continues I of banks think that add need they to be would the that liquidities

really pressures no have a as that raised the there out of of that a And the that. dry on too deploy. they're lot lot deploying. been fund are what There's debt additionally from we up see And powder of lot so non-banks so they that trying to have funds there's side, let well is large a been on been

loan the that continued on to yields. all some of that So, adds a up pressure

assume maybe if than just second Okay. And a is the in quarter your the bit even loan part end move the towards quarter, I around nicer if average, the quite were LIBOR would the stronger. of right then yields competition

of it call that third side quarter in at about that worth second impact to point still LIBOR little to those third the the we're the loan your resets of the bit margin to come waiting on time. cost for quarter flattening obviously of LIBOR, on look through, Yeah, a expansion let’s the if a in quarter. because versus takes get But basis I three points rate

to the that'll extent So, that that quarter. least pick up, fourth at to the starts in help

Okay, all color. I the appreciate

of Poonawala from is Bank question from next Ebrahim The America.

guys. afternoon Good

out. Just talk the could got hard seen you over you we and have down talked gets it's about of given more will how you to environment few expenses backdrop the to months equity to macro we've terms flexibility what see about Like to worse? much last the how six but just downside the quickly given you weeks, some be, if Greg, environment know wise do can investment in with the the can question talk markets dial what on in you expenses

Yeah.

scalable today that in some couple, couple part. continue there's the certainly things point to it we that. of could going question see a pedal done have their where down. sense believe more rates months Part is beyond could How investing for to at to, that tailwinds on it manual that benefits we the that future the we now investments inefficiently that preparing the and operations think scale so that we still to our making of operation it by to makes that too it too a the have back I the believe have scalable change are – still certainly to scale are I we down. for the in at the to the operations. really and things invest to future. a we're Clearly, many really related We again, XX Steve’s that we are biggest extent. right to So that create fast probably the now, some when But in about thing. put it said will to are our we next, And in XX we're as and many make sure goal That's

that's the I comment think expenses. when to that, biggest me, So overarching about

XX, to do temporary? of think why is months, believe the is But through happen continue did thinking even of long we're a downturn? those in think slow how we and about to How going a wanted part again XX, opportunities other is the we deterioration are that's be and lot downs, now see have if not is what's need expect to ahead the that again, to if XX make we're Because XX really some because to a we and debate could us. here slow Obviously, we I still about that's invest we what time what beyond, investments. months thinking in that we is if the XXXX We seen we're to. we see going could you've growth. and again, Now, headcount even

about growth capital? over to outlook sort XX in capital you if if that just talk to capital Dan, year. ROE around not a amount High-single lead of months That's XX% to how for your growth you switching guidance what deposit a next helpful. implies sheet of does sure And with And think build. digits growth, fair of balance can deploying next it your terms to Greg the year, options If that other call I'm or let's asset correct. be build out comes

surplus, talking about at organic want can continue for Based on we'd is been it, to the strong we've the and Ebrahim, buyback a have obviously we that an sense. growth or first it, we options utilize still point a ROE. at have we capital have, to extent continue that do. either could capital would organic of perspective obviously the But with at position from that makes a But to dividends options. this have least the and the grow our strong, perspective. we ROE generating use capital that capital at looking the and a to do a we're Organic think returns strong thing capital from we that we view we're way growth to

points, sensitivity, I quarter? last can. $XXX end still the NII hold group third Rate and true Understood, one of XXX basis is in one, the upside at that million if

Yeah, so a is positions on five static interest million it's a balance to look to at pretax the as math. today. same of roughly income. important just or a the it's around that's on million points $XX roughly note – But sheet, basis net takes XX that the for $XX pretax

So, that is holding up. asset sensitivity

questions. my taking for thanks Understood,

with from The Wells Shaw Jared is next question Fargo.

afternoon. good Hi,

or assume borrowings terms where on earlier? balance stay the that stable on in back reverts guidance. it to of in of discussion back securities liquidity circling the were NIM will we maybe cash Does Just and here that sheet and that blend

percentage largely play that's stable. to expectations. mix we the built eighties, in thing that of is deposits, low money how high markets a out that we've assuming the the a It's and relatively talked where to of will seventies DDAs remains that those in about We've DDA range from to being the total deposits

been then or at still any And are when period balance that the off we end the is – Okay. they borrowing, what look of in those already paid so sheet?

some though. And paying started those – we're yes, Yeah, to still they have pay we're down. outstanding down. There's

thanks. Okay,

just on the could accruals fully for rate incentive run this the the performance the be is year? point? accruals, from expenses looking there of So for at incentive still at finally, the the Or upside a in baked then rest

guidance always into the can in upside for where things numbers. But expectations are There be performance. the for stand our baked better that's

is to The the other compensation for important quarter. incentive thing mention I on think this just

of roughly to compensation gains. We incentive the related $X about have additional million warrant

think to take just I So, that's consideration. something into

levels allowance change call looking methodology change capital that applying Okay, is the at or you've thanks. is just And existing in the a that seen the portfolio? just through finally, in the performance that then lines to the methodology

be methodology. see and change Hi, It's It's is continued capital this Cadieux in lending. really a of growth is what a the it application function the by is no our driven lower to you and call latter. the continuing Marc risk methodology

you. Thank

with is from McGratty question Chris KBW. next The

Good question. afternoon. the Thanks for

believe you Just year come high-single I and teens. way I year want started the back your to apologize. expenses. with Last making digits the mid- you're on to

there next to mid-teens won't won’t suggest if you anything that I Given revenues there the any think might drift is other outperform considerations the or to started, on maybe about that XX year? correlation XX are

beginning the will Let high-single this. back we to started me of add the sure start and kind I'm digits. you year, talked take about on Dan of out I’ll just when

which was said, we could we You but performance, did. we we some remember baked for outperform, that in have

opportunity The – overall investments other part more do we in that business. this to the also said take may make is we

what a decision take out, reform started to Reg it, play up believe expenses is makes of think when out, and and in guidance to driven to on of when it or tax our investment by investment is Rolling back reform play you we overall we right, things performance. out, started into XXXX effectively we believe why those tailwinds and out, expenses all so still we when play sense. started we conscious started still the really will, winded rates level of that's saw XXXX really which part we we saw, when these that And the saw in play out, said, to made again we about

earlier beyond. the and So when think about thinking high-single with of digits period, year beginning XXXX versus I delta biggest two the that's this about starting the about

Okay.

clear. to I'm sure Just make

about perhaps So way line relative starting it? teens, outperform that I that upward hearing the on to was delta presume guide. the with much as this not right, you the right is we're think high you that XX as top bias number. that year from the to I'm if the to again, But today, that

our of based this in maxed ROE the two-thirds compensation about prior a that's expected group talked It's there. top at calls is that's And we've structured. to on peer other out, performance on the an but bias, about peers. on is much as relative basis, again some not we're on Definitely one-third incentive how so again the of

you outperformed but we a way, the if baked would guidance yes, see meaningful some in uptick, gave of it's you in already. So a lot

it the in Okay. rate. client color. one And just I sneak could investment if you. great Thank fee That’s more

basis be the I think it thinking topping talked out XX about, given of of kind you still the range. about point how last quarter, curve? should rate that Greg, we Is

points think we're have Dan, and for point. about additional talked every that quarter XX hikes. We've opportunities from I we And this getting with low up basis it's rate to the perspective. about XXs XX basis probably continued Well, we'd get into another

I room to think continued So we grow there. have

that's Dan, that rates, wouldn't, don't you because in with not right? guide guide And the

That is not.

Okay. Thank you.

next The Securities. with JMP question from York is Christopher

thanks guys, Hey questions. for my taking

lot a expense we So this year. on focus non-interest

non-interest maybe much this then expense curious quantify also and this if I'm quarter in So you investment could how year? is

some looking in a perfectly. and of buckets of go all and enablement we're in down it our Yes, this at about we're things. about it the what into say, is when more to hard of technology and first those and part doing at looking Dan think I look I I'll detail. When people, all, Greg. it's But break high think doing system I level the employee at will and of then start onboarding what about is it,

at I I'm looking the $XX from less $XX year can't our because next it you from actually And it isolate looking million year, investment. quarter, looking so similar at say but level for if any standpoint for But is given a range. anywhere you're high to numbers that probably and would for probably year You're million higher. a at perfectly. the again, this it's little not sizable partially And bit is exactly it's in

it's to provide to this so Yes, but is look competition was on touched I another precise then of to it kind of difficult talent XX I want framing that And way. no, question number at just guess XX kind it. for on, a maybe helpful,

how make you client ability when about unique your in competitors, try engagement – relationship? to had, client actual know very to significant replicate a to maybe attrition learn higher how evaluate the we that think the advantage, maybe hard maybe the – platform, business. key evaluating to a client a that connections the I'm your So did the to with Is – client risk replicate. is curious But is clients versus employee group

client number our we're and manager service Number service how one, look, levels how relationship and the Yes, the platform what how platform. our have, number competitive enjoy one. times time the that client we lot a spent and visiting two, they operate are if here's about we, a teams, of tough. we entire I they across with clients them them broad responsive, They the look lending and enjoy, how experience at money, based it's get we when

to of the because the do institution the higher to they life partnering understands the know they part really part the market that need is platform, Because organization part bottom of run. sciences from know the levels with quite not memory and platform their a just whatever, they're the realize of business them. it, of good for to the actually hasn't to sure a and and they was that top of that long same may is get that make times lot time. they as be appreciate to tough isn't who going last so side they could over change sense isn't want sideways appreciate be they're Now to business the when in the institution But technology And more or it been there starting a back. still at people as it over things

really clearly clients part that's platform of. So has strong. that's a they to incredibly it's platform, whole because those working cover to described enjoy it's want what are are is with But our what deliver And goal to I individuals you, be important, us what bases. just that all really we individuals the our

conceivable funding last participated maybe I partnership some color. previous great your the of one Stripe, given thought That's in with Yes. And rounds business. areas then that have of you

contributing that course of this or equity any have you company a in last do have funding As been would round? results? So in result Stripe's the warrants

filings that is ones Yes. on companies. we that in where but so individual or in Greg. notified of We something actually our they're our warrants put that because don't would many something our so their clearly don't or it we had if part positions, in, about comment be on the of have would numbers, This And, in is we different companies. are is, comment one unless whoever investments it

makes guys. That sense. Sure. Thanks

with The next D.A. is question Tenner Gary from Davidson.

good Thanks, afternoon.

Gary. Hi,

had the those a customers want private equity/venture to are to grow between new regarding imbalances, that been large just on sheets. continuing it's continue to loans, P/E growing a line the question it there's capital I what's to add dry that as sheet balance funding you business of powder capital rounds the balance ask lot of so venture balance because just versus finding the

of pace credit been And new investment to So it's seeing relatively of clients. continues a We're facilities existing in as Marc. from that reflected both. of greater utilization as I'll start. the strong. Others may function those of be to want utilization add. We're on It's a investment a clients. combination bringing activity,

So things. several a of it's combination different

my rest of all I Thank The had. questions right. All were you. answered. That's

Great. Thanks.

The with next Tyler question is from Stafford Stephens.

one back the go want time. Hey, good just more to I afternoon guys. to expenses

mid-teens comes how to clear impact better you year rate pickup the be the growth. mid-teens think the that growth? hikes that expense expense next the just would revenue revenue solely remind I'm relative from than but on expense us in pressure I expected, can might future therefore If

Yes. Tyler.

on on increase, the that us increases rate in that that rate compensation especially be of on it to our considering part a on out and benefit – process the makes include basis. sense going is a to So a for of pressure of go-forward there, liquidity, go some basis the

as balances, part income we what well as for a so do folks of of part interest performance So have as do income plan. obviously that overall plans, as our fee loan for their

increases So incentive could compensation. rate future drive higher

Okay. Dan. Thanks

leverage going strategy Just to the again. deposit

given guidance dollar But still is wasn't I strategy. we’re guess leverage the the single-digit little by growth implied at deposit I deposit guess bit early all next robust. obviously a – the guidance stronger little high stand net surprised looking it clearly So the that year, the the of from

overall it any outlook, wondering of that lower raising or just outlook environment capital on kind significant, So that's or that goes guess, just raising as in that slow of I'm the you're to deterioration the is assuming environment? kind there's would capital underpinning steady that down pressure if I or

capital steady from a go it's Yes, taking and what's things is at what the as the current looking happening raising environment on generation what outlook balance deposit we're fund perspective. conditions into Dan, sheet and is doing are consideration, those

consistent And today. talked as making we deposit earlier. really are about our good strategies with that's I So progress initiative with the

Descheneaux. This Mike is

As you client strong. extremely continue funds overall see, the be to

a off there. we of $XX Obviously You sheet. here where billion growth the in saw balance that almost QX on in had was lot it

put So appropriate product into direct it really sheets. comes on the down the we balance how to can clients and

mixed challenge, kind a goes it's a what So sourcing, of it's is a off. goes not what of on which a question and

So client some mix. talking if we we of then about But overall is a growth nonetheless the it funds maybe the in different outlook. had a seen bit start might little deterioration

dollar deposit Does the assume seen digits high of sheet what decline you've single growth a growth net versus not on-balance XXXX? in XXXX

No. It assumes growth in XXXX. in deposits

deposit high guess dollar deposit Yes. net I’m seen right. And XXXX the the digits growth from single if in growth thinking about you've that absolute be down I of would

is right? that So

Yes. On a year-over-year basis, yes.

if then can. one me for okay. I Yes, last And just

the or Can capital capital means? the sheet to actually here. through just Or back you deployment of the leverage going guys given balance dividends come actual profitability outlook? leverage Just pace leverage expecting with the buybacks other base growth or you're would

to saying buyback going extent capital from the an options what extent can’t point capital when that have rate, we strong measure to that or a were particular we're can surplus we for in ROE, we'll Yes, deploy that strong To order. the at with perspective start we and can our like that again, as to to do organic to we continue the a continue our generate a do a is capital we no that. dividend at that's builds consider the

Okay, guys. Thanks right.

Evercore. next The from Pancari John with is question

Good afternoon.

John. Hi,

like, just that wise you do terms sheet larger a deposits, I then you hear graduating between off-balance and view going the to that Back higher some to balances versus cost How sheet we're letting at differential them the the bring in beta of the wanted balance sheet, makes to to looking of trade the than of carry meet. worth that strategies you some of sheet ones it that some that going pricing to the you’re the other the said now off-balance funds on what's versus to off-balance after go? it there

Yes, for the point balances, call we in some that, thing are the of still it where is clients relationships. clients right depending look the, size upon the size as there have at and this doing let's those overall again just basis XX of rates XXX range, to we

lot that on-balance those this sense sheet. So those for to at a rate, rate especially economic environment us makes in it keep of

what in a opportunities. additional continue where account and so where to from Fed are or to higher we're depending upon to increase, we that that the sheet an And understand rates from treasury funds good invest As perspective, our can that's way sitting willing go expand and do a we'll perspective. look rates at off-balance investment

and clients, on future again, off-balance again, the the billion will to net based on it a we've today $X.X market. can that us ton money the of in open balance So, rates bring sheet bring In sheet to on-balance and sitting of sense we side. from added million increase, about as aperture a what some makes $XXX continue them basis to the as for of on size

if revenue as you separately expense side the on play what the then And flexibility expenses expect? Okay. the – picture doesn't is out your

Greg, This is John.

So fair amount is a there flexibility. of

there's compensation, things. a laundry whole in we're headcount You've have investments got growth, have incentive of list making you projects, you the

the of So – that's one answer part we flexibility the but yes, that's equation. is, have only

continue chair now at that that scalability because with at, invest. sitting we that levels we're we to the that we will want future. going be looks we right to at to make it the What pull ball look those of to point part to would say, equation what right believe to and back and believe is is what future on? to time, performance way the do But of the be does create upon investments, do right depends in down? just part this the that what like other want crystal like now And the invest slow that is it the time expect we The growth we I we in and is believe in now

So that's the, main that's the thought process.

And XX you know would that one hike? than point then coming Alright, the thanks on you the would've yield yield remind of in loan I the Is capital have expect Or Xs. you increase you've on separately may lines the loan nine fees indicated and us books? are PE the said VCs loan higher yield that? thing then Xs basis for out And would the the next the be been the side, was press it where and on that the around in can Greg. up last points, recoveries. I of yield side, mid be release basis call loan ex the amount you low of believe

the first Dan I'll in the part So part. and may chime with take second

private services a has little come come rates So it up equity for as bit have up.

And the narrowed the from XX. And has XX bit PE closer spread VC would be historical a so points mid-Xs average. basis to to between the and XX

take of your the flat as that a this with LIBOR And environment. a look then nine John we points question basis add to at quarter

LIBOR cost we in that three So extent that us environment we increasing quarter have to basis points. this an – the would

the QX. would add couple the steeping can a looks points environment at LIBOR basis that to a back there. least of that extent QX kind we look we to environment got like At of that that LIBOR you like So

we talked of that's what it about level XX% the a basis past talking probably through because that's that we're on of where the the the we've seeing. of just for come But do about XX the again, go-forward We've in right loan every in overall points, still being yield? and to to in It's like range. what in cycle. are we terms we So basis expect XX% range XX% closer to feel been

that's Okay, that competition, XX point disparity, the percentage impact? more the around

Yes.

you. it. got thank Okay, Alright,

Yes.

with Securities. Chiaverini Wedbush next is David The from question

in me Thanks for Hi. squeezing here.

have a I So question on market share.

But in doing, share market you're enjoyed based believe investment business in on So I'm growth still outstanding, has do the same been clear. winning the you past? the the you're that's of curious, all level that you've

standpoint number Yes, at absolutely. this not it, is, I that is there's the share, they Greg. or questions. two The client, a market is there's think they And answer, from share. One are are as That’s one client? to look is market about

the that have we in we of do have in so we do way we're card? percentage And the other second in market services? what products of strong. have What share, wallet What we what that the is our then And and and The increasing overall do market share do FX? sense is fee-based have credit growing. is

And things So growth. the to expect drive we driving continue have that of those to then all you growth. the three are

XX how that. XXX. my on-balance missed you client question on on earlier, rate off-balance I the sheet, is just receiving mentioned did Great. for what funds. Maybe sheet? state or You next is And the yield sheet it to off-balance but they're investment Thanks

so to in are much those closer the the products several there are all but Yes, off-balance there, sheet market sitting all rates.

on XX said Yes average points. the is always basis that we

say average yield. points on basis at across the so XX the take, and subtract products whatever can market all you look And that's and is

actually So it attractive a market very rate. is

very Thanks much.

Yes.

Becker there like question. with final And for to our I'd call the Greg to closing turn back comments.

thanks. Great,

Megan that hope So team. that hosting And and more we time before we the live on be tune from an want ago. information everyone I December is be Day going to everyone was The just into webcast. But last can people we'll get to to over event I we're to that. remind going out X. X.X close, Investor years The did actually

headed are, deeper as not time where was little So but it go a dive company. we thought we a the in to importantly more just business where bit we're of a

tune in So if that can. for you

balance of have out and about pleased obviously, quarter, strong XXXX of just of the could many it's not for so that or outlook results until up all do if annual one call, this be many, right basis. be if spot, part there's run, could about. that's one And up, an into basis far the in quarterly caution believe as the certainly So excited a in in long and in of to market we're you for we're the but the see market I the but a to times Obviously, a even even to kind economy, what just said long-term, market, be lot the in quarter, and volatility you It's on the pick in the wrap the if right? is going year. innovation you I we concern there's have one really

put great And So again who employees doing are what are and of our phenomenal and clients our just who we our who us that so proud of do. and want I them. just innovating do investors to team their and such to amazing job so thank a incredible in things also, ways trust

So thanks and take great care. everybody. Have a day

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