Wells Fargo & Company (WFC) 15 Oct 192019 Q3 Earnings call transcript

Good morning. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Wells Fargo Third Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator

like of the may Investor conference. now John begin over Campbell, Director Relations. to would call turn to the I Sir, you

you, quarter Allen being Parker; for our CFO, call Thank where Thank is will recorded. Interim answer and morning, discuss your Shrewsberry call This third our President, our and today you and CEO John Good Regina. results joining everyone. questions.

our today's today supplement and release results earnings SEC are to like uncertainties. the supplement. on Before statements we call may release you Form our at the and containing third I risks and make from actual quarterly quarterly like you subject to cause that site get to Web Factors differ our that remind in quarter also to expectations available that earnings filings our X-K are including would forward-looking I'd that started, wellsfargo.com. filed during caution may materially detailed are we

non-GAAP release, including be found measures any supplement also SEC in filings, site. Information referenced, our Web in can of earnings the our the a those to available quarterly measures, in about financial and measures GAAP on reconciliation

Allen I the turn call over will to now Parker.

for John. quarter joining Thank and our for everyone, Good of you, results. today's discussion morning, us thanks third

other primary and customers. ago, years, scores Our loan discuss, were three fundamentals strong. earnings consumer that but items deposit outset from in second year experience in included will our our a continued demonstrated underlying business in increases customer a both checking That among growth number and and branch the John quarter I'll balances highest from over by, the Shrewsberry things, of significant was that note at strength

meeting great as next our the Charlie that of President. forward an I join to more deal he right as convinced me we Wells CEO week CEO role, combination top company's position on successful a and has regulators, priorities, our Wells the savvy, time the over months. for as Interim our continued to include of opportunity Counsel. the continuing As look and as and you to Charlie he our on honor serve the and forward, made seamless this and focusing role on members, of company Scharf to Charlie, that to our ability return move in company's with I'm I a will spend It's been all working his Fargo the our even to for transition business and which and last as during know, CEO, customers I've and responsibilities President had an proud progress expectations experience, new with I my future. my time am six General Fargo transformation. important leadership team assumes

the few examples third just In the progress. provide Technology, Let our a of me most in Wealth quarter and leadership, important of area we Management. made Services, recent during hires Merchant

assumed We members Advisors, new was team Fargo reporting our In further supporting Consumer leader new branches ongoing help will and of customers Mack. single the our a to leaders significantly Kowach, addition, who Banking, named Community created serve as will Banking, better us role having dedicated because transformation. Head that role believe our Mary in we this our the recently of a head to roles customers. most within that we David Wells

emerging and in customer new years. Consumer last experience. and the is formed Group that together also This innovation Banking, in for bring ongoing reality companies that Wells over Consumer Customer into new focused number XX. technologies the Fargo's on and the technology, who adding leadership climate the broader was portfolio the Strategy augmented investing give in Enterprise time Fargo one our third of the the from companies, on Accelerator during Startup commitment across exploring a Excellence two announcements through of total made new group us And risk. several is Wells the of two The and now insight quarter. Consumer will, other We led under focused within Andy functions important demonstrated and we company program area Rowe, to Segments by change

This We on also enable should complete payments new which Digital next longer operational our efficiencies by drive to technology announced designed providing pilot, first cross-border operating Fargo booked windows plans year, distributed to of real-time running is internal to Cash, transfers ledger Wells us platform. and processing. technology

this information with they the the With agreement, we data Control Plaid-supported a share our through sharing Plaid, Fargo's agreement have leading Wells a on Finally, control or ability will apps, turn off with to data customers platform. greater over data announced exchange account Tower. bank including

six thank during to to transition. our morning our during the want members for comments Counsel his as by conclude committee, senior period I and and General all team leadership strong of members months. my I of particular, their leaders, In Doug last operating Interim thanking this this want thoughtful other efforts, dedication, perseverance our the Edwards and our for

to our focus enabled last of us, substantial six of team the Fargo Wells are continue on progress but the to have a our transform toward working goals unwavering members to us We customers over lot has work of tirelessly also serving months. ahead our make

combined extraordinary collective improvements company further the a the am and stakeholders. well-positioned Fargo will result our strings all work with shareholders our to to Wells and to that commitment franchise, when achieve that is Looking leadership in confident our forward, other new benefit hard I our of

more John detail. will now financial discuss our in results

per Trust predominantly PCI we everyone. morning slide the third residential impacted two. to that $X.X the was We EPS. retail sale of number of sales accrual $XXX previously Thank which that losses, a quarter from you, disclosed of accruals by our $X.XX Allen, litigation gain had highlight million variety from other matters, billion in million a billion practices discrete and and for of had $XXX $X.XX reflecting per We We billion results, mortgage tax a $X.X of Pick-a-Pay operating and our good not matters including loans. in gains of items We Institutional litigation had a had for significant deductible and EPS the sales contributed which Retirement PCI, share reduced share. $X.X business, of

rights margins. from mortgage adjustments had adjustments in We mortgage million prepayment of under by development. our our software driven predominantly and valuation mortgage $XXX impairment $XXX million reevaluation a rate in in valuation capitalized an servicing higher software declining resulted These despite of higher had estimates quarter banking on production We revenue increase the originations second MSRs. reflecting

million had reserve quarter. reserve We million compared modest build last $XX the also release a with $XXX

Preferred time approximately our of diluted preferred result million, stock redemption reduced $X.XX purchase starting partial by which the dividends per acquisition. This partially these $XX in quarter. Stock, the the recorded quarterly of share fourth as redeemed Series discount EPS shares we will a reduce Wachovia the of accounting Finally, on by our at K of elimination amount

Allen our three, we business continue results with activity. on the While we third to quarter slide items, have customer financial summarized in these positive and were by highlight as impacted momentum strong

reviewed an $XXX sale business, of was Trust in by and third results income We’ve decline billion quarter a of of by on four. with the increase the interest Compared with page driven income. non-interest our $X largely offset stable XXXX, Institutional revenue million year-over-year our in some Retirement of net

accruals. of operating higher a by $X.X billion losses $X.X litigation increased billion ago, expenses driven year higher from reflecting Our

historic rate remains build lows compared Our had in the net reserve XX ago. basis $XX charge-off the year a quarter at $XXX million We million a near points. third reserve with release

year outstanding we common levels X% strong sheet the from shares a to as five six. by capital maintained highlighting dividend reduced balance our so increased be even page page we turn We most I drivers stock ago. on will call, will the quarterly common by XX% throughout of and

non-tax-deductible billion tax XX.X%, predominantly excluding impact Our tax accrual. currently litigation treatment for of quarter third the be effective in discrete the rate approximately the the rate increased income discrete income reflecting to net a related of the $X.X to effective We items. of tax quarter, million, fourth XX.X% unanticipated discrete expense expect $XXX to any income the

in estate, we $XX.X junior years. of loans from three up growth from real in card, loans credit loans mortgage, year mortgage, over lien $XX.X even a first Period-end page or This quarter billion ago Turning loans year a year. consumer growth loans from C&I, first auto nearly $X.X with quarter. and ago other billion linked credit time a commercial total second by declines both loans and and average to sold the as revolving and billion the moved was increased had offset the $X.X increased average We and partially seven, grew to in billion held-for-sale past in were we year-over-year loans. installment

stable based in starting and corporate was as in linked by C&I linked the C&I quarter banking I in in nine. will highlight real in the Commercial up loans growth offset were growth and portfolio. on loans. CLOs leased form loans broad page were investment purchases investment drivers the commercial loan and loans of declines growth loans estate in credit the largely billion $X with financing of quarter

from floor These the in commercial commercial finance and credit and in liquidity, estate increases construction seasonally with mortgage loans real market increased were leases finance declines real partially in $X.X Commercial lower quarter and and banking lending $XXX equipment middle billion lower activity, banking million driven direct commercial by discipline. in declined dealer and in driven plan the growth from finance. second government financing offset by quarter, capital declines distribution by large continued commercial increased estate Leased commercial institutional reflecting estate real second loans. both loans market and refinancing higher ticket

increased page loans on show $X we second XX, As billion the consumer from quarter.

loan $X.X driven as quarter over originations $XX.X cleanup to investment securitizations. pre-XXXX of of The of exercising service and result billion by our for increased card of This the loans due growth $X as first purchase well calls terminate portfolio the $XXX by outpaces of Junior from mortgage quarter XX prior sales downs from billion a of billion held billion increased as were $X.X $XXX as primarily was loans down million partially loans. second seasonality. Credit to lien downs continue offset mortgage pay new the mortgage loans PCI originations. pay million

auto with billion $X.X Our grow second to from quarter. up the balances continued portfolio

Originations billion. increased X% to $X.X

have regaining share maintaining market discipline. while been successfully We our credit

times. growth made including improvements process resulted that transformational changes business response of in credit decision have share we the have the faster in market Our reflects benefit the

a wholesale to both well Average deposits quarter. as promotional deposits Turning from from year with as growth average increased which X% ago to increased rates deposits continue offers. page deposits retail second the quarter from the and banking second $XX.X benefit on banking billion XX, in and

basis average lowest cost linked deposit from second quarter point increased of X since quarter the the increase of basis Our XXXX. fourth points quarter, XX the

The pricing increase the in campaign retail we new from second promotional deposits mix lower terms also deposit quarter for conditions. rates by was so to increase in response The by that was shifts. continued impacted market driven deposit unfavorable begun

second business estate On up management banking business. and yield from higher cash yielding X% savings Consumer provide of billion which on details quarter. retail year driven X% slowed commercial deposits high from in and quarter deposits clients page the liquid in second and driven seasonal middle deposits investment we ago the in as increased alternatives quarter. $X.X growth XX, the and in by real higher during from small $XX.X our the banking as were the deposits deposits grew period-end including reallocation growth billion banking Wealth quarter CDs. and market as grew from Wholesale banking well second by business growth a

offset due payoffs. consecutive $X.X These declines. income declined from quarter higher million $XXX as impact in quarter mortgage a interest escrow million $X.X from deposits, well the environment of by by amortization deposits the grew driven primarily billion the the Treasury $XXX Mortgage partially second costs sheet of balance the billion to increases to of reduction Net were second higher second corporate lower higher reflecting pre-payments. quarter premium MBS interest as rate re-pricing due

amortization MBS to a to fourth the in We currently but continue quarter slower premium at pace. increase expect

from day income variable We benefit balance positive and were ineffectiveness partially in of hedge interest also favorable had offset additional mix growth of lower by declines the the and accounting quarter. smaller net income impact and sheet These one results.

can you have the this and volatile been the rates on As curve chart page, flattened significantly year. yield see past has the over on

in X% with Net was months ago. down first XXXX, same of interest compared the down a and nine year income X% in quarter third the periods the

expect compared income last full-year the month, we to approximately net As currently X% decline interest for with XXXX. we stated

pricing interest factors net spreads, of always, a influenced level rates yield slope number and by will of of loan income the growth, As be the including curve. the

institutional Turning retirement the million XX, to income page our quarter non-interest the second for and $XXX driven business. increased the of trust gain sale by from

other fees the asset million, in advisory offset $X as our fees fees of fees, retail base of our investment banking quarter highlight Trust and in business fees me a down business. Let and few IRT investment linked trust the sale by were the a of trends. decline asset management and brokerage investment and was growth result

and we from incurred assets client longer months, While administer to us period. transition this we will to fees for during no business, investment XX continue fee and the recognize trust this buyer costs for will we pay certain up a

a servicing billion level offsetting on and originations currently We primarily estimates. ended this million $XX in million to second net to fee loan was Mortgage third due originations activities. decline unclosed in the expect interest reflecting with and Mortgage driven third to on higher quarter. declined refis million the a from pipeline XX% This quarter gains we to recognized non-interest with at volumes $XXX the second decline sales third refi lower by quarter. from quarter billion quarter was million revenue income. the mortgage $X to valuation was in the of with higher the rate second increasing banking Partially due increased MSRs $XX remain adjustments similar in rates a the $XXX the in and our from originations quarter income $XXX other increase consistent quarter originations quarter prepayment fourth

to by comp in loan venture plan of held in We offset capacity to our are neutral. third due retail the Residential higher from and affiliated mortgage the margin results unrealized increased realized equity net largely gains lower driven $XXX totaled quarter private had equity sale investment originations billion securities quarter primarily correspondent by partnerships. These third and for from basis P&L and these in on points million were gains channels, which capital deferred partially gains the with constraints. production margins XXX and originations $XX both

losses, on both accruals. due to litigation largely page expenses second higher increased primarily XX, to Turning quarter and from operating expenses ago, year the a reflecting

explain day start the losses. change expense deferred compensation by expense. primarily by in increase expense billion a staffing drivers partially from driven and on driven higher benefits $X.X offset by the comp page one we reflected billion To higher a quarter the will in The operating severance in additional Expenses XX. second $X.X increased mix in and salaries increase lower quarter,

and lower of in predominantly by occupancy expense $XXX expense higher million reflecting as expense, partially increases due investment well FDIC to expense. as increased business equipment management Infrastructure expense. higher These as the lower promotion, impairment were well software, capitalized our T&E wealth as offset advertising and

show XX, As by operating higher driven $X.X of increased $X.X billion ago, we page billion year on expenses from losses. a

operating achieved the which previously and our $XX As $XXX data $XXX first million This we've technology neutral expenses losses of P&L investments approximately operational areas. year. also comp deferred risk billion to exceeded annual regulatory including have excludes expense expense, efficiency as risk be excludes the and and at billion, and is our excess management expect total we've months well end currently as have offset and compliance largely range. in the which and expectations We other in discussed, $XX is million $XX through to top of the nine target of XXXX

by to Business declined quarter, our litigation billion accruals. community banking driven starting Turning page reflecting segments on second losses $X.X operating higher from XX, the higher primarily earnings

banking community our we page metrics. On provide XX,

year We in quarter grew ago, Primary year-over-year mobile have a the the XX.X from third customers. customers million including digital consumer on eighth up active active growth quarter checking customers consecutive X% in basis. for a X%

the in transformative experience. levels have scores been highest an members we've capabilities. training scores survey about change more September. reached provide for enhanced and in better quarters digital team three continued and these our experience our customer customers The consecutive five customer making reflects coaching focus improvement years increased in Branch our We've than in our for branches a educating including to increased leading on industry their

customer year this third XX, first teller from nine ago months a year, in branches reflecting migration slide channels. continued X% digital On branches the We've the to consolidated XX including ATM declined quarter. transactions in XXX of and

purchase usage the purchase with a year-over-year growth consecutive X% from both quarter ago. to X% card volume. We strong least eighth credit of achieving at and up up card volume purchase year ago from debit a was debit X% credit year in continue volume card and have This card

volume as quarter wholesale declined and we a see expanded evidenced large XX, this quarter, as metrics our and loans page market payments indications. earnings commercial We're year-to-date the provide environment. banking spend you card ACH the interest investment in record commitments the to share linked processor a particularly share market Turning both interest highest grew impact for in the the and we month grew can high-grade the and We're million banking had $XXX on rate commensurate by for net by and also leader rally We second from treasuries. our payment higher year-over-year the fourth fueled by market on of and industry unfunded September a the basis. industry We've that lower with business in by the commercial in key income third driven reflecting strong of lower driven lending quarter record we being issuances. with

enough they trust sale today, the and business. to continue interest and common from identify customers continue to qualified related investment institutional to the Wealth commercial rate their trade the changes. retirement are on see performance quarter, cautious, our earnings the second issues gain to million general, driven We'll no while workers. $XXX demand business management monitor by uncertainty hire and most our concern ability our widespread closely, moderate but customers increased and of In

to continue third the quarter. declining have charge-off XX basis we rate XX, strong with to net in Turning credit our to points page results

in and card and Credit down portfolios we've second scores. year Propel our to were launch quarter. of income, position we've as strong loan the generating payment relatively from last charge-offs with a from and as while originations, and generate our American in de-value, recovery account third they efforts grown of due growth, been our the auto net in year, net credit seasonality, thoughtful consistent stable commercial consumer Card real originations XX%. quarter a net All increased charge-offs while ago even to our discipline FICO to have were in the been estate maintaining including new We're growth by Express

million from in $XXX strong. declined basis in loans credit XX were of consumer lowest lower portfolio Non-accrual monitor second and quality remains level Non-accrual loans, indicators over loans XX portfolios. points the our non-accruals commercial for with both the closely quarter years. total weakness commercial signs and of We their

credit their asset in third two of broad-based internal are our XX% improvement levels grades classes. loan Our balances declined strongest and with at XXXX all criticized since years across quarter commercial have

currently a of that beginning We adoption the at of in estimate next $X.X be year reduction impact the the billion. CECL our will of of allowance approximately

their incremental loans or reflects the for that expected maturities half have over consumer maturities. allowance Just of indeterminate exceeding contractual commercial the the for decrease longer reduction short expected loans given

portfolio's smaller versus depend Also, we the As and during key our reserving a to residential adoption, industry consumer increase of The expected on cycles, affect economic last card loans, well model's lifetime credit allowance collateral to the the in a conditions composition current have assumptions. the the ultimate The peers down remainder as methodology under reduction loss loans. credit predominantly value of experiences bank which credit as mortgage the our and anticipate volatility than will refinements in value impact at cycle. our written loan our large which credit CECL have portfolio approach. time the portfolio, our quality of a recovery size below we reminder, on will incurred adoption other related as were significantly and the reduces approach of any CECL more of the

common phased-in, XX% up to driven Turning shareholders billion $X repurchases XX, dividends share we quarter. and capital, decreased ratio, returned net in billion last by on XX.X% was stock through $X page This fully quarter. CETX from the third returning to the to

to plan to gross use our our similar second-half reminder, repurchase management approximately most of conditions in plan subject recent the capacity last year, and market XX% to a discretion As of the capital is XXXX. under

our in that financial continue underlying items summary, a had customer of we strong results, growth the strengths credit and performance, returns. Wells increased well fundamentals, including significant In and quarter to and success. loans Fargo franchise impacted continued transform number we business that optimistic our to third deposits, will efforts of higher activity, had strong capital our fundamental for position I'm us while

Allen questions. take I your will And and now

[Operator America. from Instructions] of Our Bank Najarian Erika question the come of line will first with

morning. Good

some the good the quite Morning, been what as talked growth think for curve, morning. a momentum it's Hi, in that outlook curve and you forward telling forward and the about us, about we is volatile the side obviously on of lending.

the XXXX, about about think momentum, for expectations in forward the how NII plus of we decline curve NII that think decline sort X% should given As we XXXX?

deposit seems to Yes, various digits Fed include funds probably we, 'XX, area. and XXX down well, to but gets it's X/XX area in it but the say, Maybe under be the where assumptions XX/XX from us there's of a income. the deposits run -- pardon still we which thinking the of forward but would seem year capture interest it. of let's that net a into in of versus about low-to-mid of to decline a number scenarios Fed single XXX pricing, still with a suggesting, of Fed much and as in XXX not funds with curve, to then implied forward, versus 'XX scenarios, just in loans That and this if area, the funds the about, me, XX-year XXX, pricing, in complicated, year and XXX range go a XX-year rates market variety loan things things, what suggests the lot going a in it that what because happens is the

John, questions question, of had And how needs be that there going that to CEO. your second mentioned my forward. we're sort much yourself, And it. investor further they're base you and gauge investment is new again, And Charlie, you you catch-up as of where let's but a how you because relative investments gap spent to innovation, how think those lot from dollars peers, and think is investments are as getting played exceeded to say, should investments your Got significant versus on can't can't for you about there risk think The trying the compliance you've those out in about we data about investment that obviously the speak in, a speak from compliance for data, risk and spend here? expectations. you

and we've a I conduct et what view is think spent the that opportunities further risk arrives, and lot doesn't forward. get cetera, enable focus compliance where formulate when probably strategic money of of side, and so stand going then that been control innovation. things on One we've businesses review thing we enough that Yes, Charlie does time where the we'll of a really all the a are, including on a side of investing complete cetera, the and risk our review -- how et

technology we money and down example, spend impact customer data, So, for road. the in the has huge

mutual So, together the he an arrives or Charlie at a there's that benefit then right with we present more from But controlled that of a necessarily, be there's all do and not running lot either after time. will work conclusions environment.

Got it, thank you.

Sandler with line of come Your from Scott the will next Siefers question O'Neill.

morning, guys. taking question. Thanks the Good for

Scott. Hi,

be had it still that coming like? something of costs guide, a do pretty of take on I Charlie at costs and he question costs with give XXXX, could along downdraft XXXX, on take in XQ, now then sort till maybe moment thinking is him could guess to you I just a and just in on you sort suggested just down if know looks in the John, on look we expense wait costs, implies then look meaningful in if of puts cost you XXXX a reiterated a go how you're or complete things, outlook coming bring the the takes the and of and comes into what of discretion previously And the quarter? at lines costs that sort flat sort through follow-up board, I the

that, to should in Yes, think the him have so an is I onto half, on second which input how and money we're you we the the of allow future. composition answered spending wait

you does math a as expense. sources require pointed imply how step forecasted biggest right And that, and think that’s works, though, that's it other some labor-related does we're fees it the of that down. QX and the For how out, professional But now. are I

particularly sale sort perfect, on MSR don't could expect quarter? thank mortgage, Maybe noise? this Okay, nice fourth you if we you sort comment And that that get uptick quarter, of moving the said And to the then should correctly. a with gain you. I same trending I see the parts where quarter's we on margins should be originations just the mortgage quarter. this that heard this above if into separately around revenues Hopefully, had given see, overall, at stay just or what level saw of think on you we you

it's sale up Yes, so been just, is, full points, and it, what the recently, think on where which basis side, we XXX hard say in tick neighborhood do be big it'll it's a was the on to call origination welcome. it of quarter gain the but was

MSR. that On expect the we’ve so servicing are hedge third We we side, that there in recall and got environment, carry a in flatter quarter. the the a -- is We think in wouldn't to well be curve quarter. I treasuries the holding the for to revaluation fourth any

steeper and gets neutral it's when the works either it in curve a environment, us Sometimes, curve flatter. us against or sometimes for works

we of in So we shouldn't earn valuation the as items much on have saw the QX. probably hedge but wouldn't type we

the Okay, for very terrific. all right, color. Thank much you

Yes.

the from Autonomous comes question next Your with Research. John line of McDonald

Hi, John.

to good ask deposits about pricing. -- Hi, John, deposit morning. wanted Hey,

flat you With on if just takes of kind quarter puts from costs deposit think this fourth up some stay rates rise could increases NIM of NIM we slowing, down, this versus for to and might had be where guys quarter quarter down the and of kind the yields end have the quarter? you for deposit the seen for to and maybe loan just the this cost max here, cost assuming paying deposit the trying

that, deposit kind quarter in Fed my -- the deposit described so the rates on costs to terms deposit began ease. in works there us it side that that was of and that down in is fourth layered the costs Yes, expectation before of to got deposits burning is less reflecting rising. be what the cheaper of still the if down to cost asset still side, higher go aren't against move if said even you on the room so Having will continue out

we have as not makes vigilant working as But that it deposits low rate against for So still be rising in leverage to keep to we customers declining even the can us environment. serve. there's if we a as and they're sense businesses as costs

in and terms than guys, and just what guys, versus quarter quarter maybe worse you experienced what's bad this of a on good third, NIM fourth And what's percentage? better

imagining Well, little having higher I a bit MBS we're of think level premium amortization.

possible, items. the bit on with be net some on probably benefit, more room are will wholesale a the is of beta those more those pricing. little that bigger working time wholesale there as could terms the for to make in banking, higher that run is The pricing, I'd that to activity quarter. depends, we Working of a of side a reduce So, customers benefit. with be fourth of in promotional say that and deposit burnout divestiture It as us quickly the consumer sure probably

expenses. and on more the guys, one Okay, follow-up

Sure.

of your of you're stay that for Is other some there building stay? time, lot accurate inflation your then get some are the regulators, them are to what more and are of efficient a temporary, elements think best-in-class satisfying keep us that get regulators that you to and helping and expenses and parts best-in-class satisfy it you like and permanent, will over and and obviously might helping it

Yes, I efficient. taking think much and a best-in-class real opportunity point, there's for, it it's good a then making more for

was that environment through and we should there it is roll consolidation we cost lot just control a of is from last forward, would I to we're and maybe and building the process efficient. as and more a both perspective think quarter, we company exists be whole one process be the reengineering, the for -- delivery mentioned for today, the control overseeing things as opportunity there's that that a cost it to simplified an of be and of more expected risk the company

and processes think a multiple process risk of the day it manual from requirement from that some perspective. the is automated that to -- upside we an operational fewer process, and that from best-in-class to is we we've determine converting compliance achieved of manual processes, just of Some where converting but all we that from is

Okay, thanks.

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

how so follow-up five of for or with Hey, close of what and four-ish, out? help just and thanks. keeping NII down happens you further side, XX NII potential that get the talk can even asset you kind for towards the permutations balance grow I the Thanks. if next constraints you fours much John, gets to on their you're anything, what minus expect how cap, versus the got year X might you year us how through so there're gets I have environment, so -- Hey, you the this rate then, of and to sheet know as starting at you year, one the maybe kind XX holds many but

customers, really loan mean forecast being plenty within in as we that growth, in of range asset part, I think and cap the into assets that pull terms some or for some horizon, our play in impact have balance don't the of hard of relevant don't that institutional because then, take coming work other that are are the there in perspective. before and expectations deposit wholesale deposits and customer consumers and of funding terms business a us wouldn't can we we've I levers from use, sheet we our about of those that that there some of talked of as real of

and in interest be single-digits getting you the of rate for consistent of versus with deposits So, I paths rates growth probably a XXXX. how a what to for different but different that mid loans for would is placeholder percentage low proxy low the outcomes, I to might range unfolds, down reasonable in for a XXXX about reasonable how earlier XXXX income mentioned could single-digit terms forecast a guess and be thinking net

you Estill just past are about Thanks, on how expense John. deck, spoke and the us side, as the help that fee get well in how just a out coming it, out, was got and thanks, you did can Understood, we [ph], got the in thinking follow-up we understand you you've then as IRT about year and of nets this revenue trajectory? terms

Estill supplement bigger $XXX a I starting what you a not that at with there, and -- to of on it. back of our I the revenue probably page the so banking have bit from the it oversimplify in the couple brokerage in fees, and but areas well, in revenue actually million item this in revenue of see Yes, similarly out we of process think a exactly in shows little it's per approximate quarter P&L, and commercial to we the experience. both shows the dollars coming you'll terms have others in as in quarter, of IRT, least too order expect the it, up think own expense, line was and investment the expenses it a it fourth mostly quarter, mortgage but

and and for finished because to able talked we still expenses we So recovering our that for will ended won't and adjustment, be about we out those rate, when show because reconciliation things. of Actually, QX. to and both a expenses, it -- our the minor be won't Estill run provide where really we're people a are won't there be impact impact it to will in up QX IRT them, be call we'll expenses sure XXXX we

you, thank John. Understood,

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

Hi, John.

in good loan Good there, I Thanks. estate see Staying runoff get that just thoughts the you're you your quarter some declines to topic, morning. portfolios pretty the another want saw still lack this some again or real area one updated commercial guess? on growth, of words to and growth the expect that's

quarters this bit again quarter. we shrunk a little and growth So then a we small had with couple

I it, think understand up I really come will where as As is quarter, our which actually loans. in commitments third are through That for one the construction funded market financing

competitors there's than non-bank non-bank bank There's cycle competitors, more competitors. behavior. of there are late lots

way, risk we areas and maintain and grow comfortable behavior really have by to order it's pricing our and until pick you, until on frankly, where, late from their help customers capital away put what reward, have our the we're it. one so work loans to those weakest own credit cycle to very have it quality, opportunities end in and loan but to I our which interesting refinanced we really the And the of getting up for your terms books, spots so also cycle wouldn't is turns best do meaningfully look still to we and with them also

to already me take be water could going them. market I either prudently customers our in wrong, be of like but it's best So what while that advantage offers refinance to treading or feels the it deals were

But I don't as outsized an growth. see area it for

a little investment Okay, drove color And in you your pretty side, quarter, what the that's if can in little the us give thoughts jump give Thanks. bit you helpful. separately us of fee on then that could if gains the there? equity and outlook a a on saw good just

couple great from be is things portfolios. that, drive both to a equity a Sure. one time it's that private realizing venture and There's

into cycle been the teams at high that's have for in the point been selling a our so, we've And now. that while where and

kind question, So strong it with and a we're then harvest high. in things still be that to respect environment to work because will reflect they'll I to to the second accommodating market it that of is part of little a be that harder capital putting asset an good. are prices today and bit to for of is them continue It's expect it expect financing as what I and is if private your so

a public, mark recognize companies to we a causes us deal change there's still one gain time said write we that have period ends been of up our private it's of a up owning but accounting shares gains up, even the haven't had always a The to ago position, other that affiliate to true we where for those contributes causing in us which or a so liquidated unrealized goes raise year subsequent capital if is they recognize position. thing to in is that we and our our though

that's contributing, one contribute that the been here will a even it's that more can benefit some So volatility year. though last way only be for to because

it. got you. Thank Okay,

of comes O'Connor Matt Deutsche Your with the from Bank. next question line

Hi Matt.

Good morning.

things bigger is your everyone's deposits mix, much earning, seems hurts somewhere in know, some there's card still you. as there's trading book, to that should also also I that get both as about a could and reasonable don't much like you're and And like So your not trying percent like just XXXs, that but as smaller you as trying you, peers some couple in it it NIM bottom that to some, some right, seems securities does and just help the you like overpaying. the over throw then, NIM of you compare to book sense have a like I'm assets you're a your think of to when where credit the

XXXX NIM for or is again like just keeping there's XXXs set that around, NII of for a thinking the you of, about some? some rates that for normal is So backdrop, the your are that kind based on things in like in thoughts the this NIM in curve still what and you four

mean unfold. that we do what's agree not we're and while going probably isn't to on that something I So be or is or were to our replicated. are not side. things forecasting them the Pick-a-Pay have income they some but level. that contributing the likely currently off special horizon either to asset of loans The liability it's to over we hit far where to that quite of I today sale interest

yielding So the much loan on mean I fully that's there them off. affecting periods, rolling high comparison is that I through once the more already. think that out, It's I That's runs it's don't side. think and

to don't horizon. don't course, net way side, liability them. are that that go mention place were dollars more in I they we other in of think our but A as but and lot into benefit, thinking promotional were will manage so be rates, We're and because interest we that, the get and On that that's of much XXX things forecast deposits on a we helpful. did up burning some down we there of the income, about if quite things in are to

but quarter broadly caring net Okay, speaking, XXX about, helpful. normal exiting and you amortization. I be interest than at premium bond we to or is specifically then was thinking you're fourth just know, obviously And that kind is going like higher income, as absorbing of think

the XXX, What is So You bond don't we increased quarter? what's said all but at that. level right to the premium of want they run rate? amortizationthis the run

MBS second quarter. we for under up think be was it'll quarter fourth it the and it's $XXX and Yes, million little bit million the in a the for quarter, just for just $XXX under

So third been quarter. about $XXX million the through year-to-date it's

Okay. they think And as zero then now, to just this, rates going some where ongoing last or go we still exiting there's amount are this be just stay in just question all does that to assuming quarter? the about fourth year,

the with context still for ongoing XX I some we prepayments. and stay be year this of there'll in mortgage if assume amount, rates velocity

was about going we're out third and as quarter in. the mentioned coming me at right this of our big our heard You XX% in refis that production, own is pipeline now it

whole even months lot And mortgages, for moneyness ago. money quarters know, take stock a are mortgages the to few than in their of is more in refi the today the of the who may agency work for but you people quarters so, system, through that way a outstanding or -- the there

to don't abate I think that's quickly. So going

here greedy thing. squeeze And I be other just Okay. could and in one

a headcount point some You've you one give amount? that the controls about about that dollar make regulation Is dollar or update areas talked versus we three provide and maybe can us spending if could you. there talk on Thank can't in increase, a the or can compliance at that amount you estimates you I did ago. increase related two you think increased years

appears in it line front only everywhere. a because don't I variety for appears the in the crisp Yes, It line, it appears areas. second a in appears have technology, and in it of answer appears you

do but how get we high together picture try at forward we it about to put going historically, looks think a about we what like it only think what a look of think time. to over for what of back not McDonald's it, and comparison efficient like we the how John we'll watermark I folks versus think question about

matching I talk that and from finish story this reasonable expense-wise, should and work as our the are team. think people about we detail be think we that's understand to as Charlie do next expectation a that unfolds, we that I what with able steps

Okay, thank you.

Yes.

Your of Raymond James. next question comes from the line Long David with

Hi, David.

David. Hi,

morning, everyone. Good

rolling have what reinvestment for securities portfolio, your yield you the you yield? then what off type at at looking Looking and do securities this of are book quarter,

in is and the general what think agency it's we're about course off, rolling I bulk of whether Yes, has basis reinvesting XX depends points been it down on of purchases. MBS, which from our

purchases some average, and and a X%. a just different QX of We other but also high from our were has been been things, debentures, X% yield I have what's some coupon have treasuries and not threes yield terribly on has North been products we perspective structured think than perspective from a rolling and agency off in

probably that So, in on basis MBS agency down, XX we're gosh, to to points a want basis. reinvestment rate in plus say XX I particular,

may What question to know be the the relates it the I as Q, to future potential second then be XX? seems I And most the losses and have September here your you the it. and number? of litigation give number you the got rising Okay, have in Do in in course. in that -- number

until file couple -- of refined the keep weeks. happen No, we will being which the it'll Q, number in will keep a

the for we that everything for day. So be until include know the up latest, will which lookout on that

taking my it. Got you Thank questions. for

bet. You

next with comes question Vivek the line JPMorgan. Juneja from of Your

Hi, Vivek.

Hi. if just to. a question Hi, me John. could start with that either respond you I thought let

all a they Times came the that after reported So now? of being closed, color on of issue third Were of this close what's there was some was up were is charged coming an were discovered, even it in quarter issue that actually you we overarching the middle York you can this, and the that when involved? up number on timeline this customers, why the of give accounts New about fees

is that give you what to there's we I further Vivek, thank any really can that situation. for this at information regard you I with say that would question, guess point, the not

We been with give with a determine looked to to we're back have point what appeared we've information ought agencies conducting to closure obviously to I And in regard our in in was changes all arena. the frankly coming it I we're really conclusions our we've trying taking then, wish hard. we're closely regulatory that of we're point but of happened. to this the closely you ourselves important, all to it's regard, still could and working at whether most the trying article very which way any what about to be in information, it's New response been at at terms since in We're where what any regulators. information and in been would for in we and and the engaged be an said some that but more Times. our that at ever forthcoming that perhaps effort the make gone very at determine with been veracity progress, we've York now premature look happened, me account

when else? cetera say the you in yourselves of process You account et how as mean conducting works, or just closures whole it something

that's of there call close into situations for their carefully going of to call through because people past. very voluntarily, considerations ourselves process handled closures where situations variety we've a or where the to go a that branch, reasons, legal respect considerations ought way be and are in the changes, they that have a all and conclusion make institution in we're with are to center at they and to account are accounts is complicated financial whole to those done, that the we as any, there the how the regulatory coming looking if into and Yes, also any accounts whether there closed or and walk

that offering for which you've is Are amount higher offerings? of the seen rate several John, it? promotional have yield cuts John. retail mentioned just separate rates players what that their other stopping with Completely reducing deposits. you're completely done question you you the the about by you Are

terms. be some rates always that and activities the should reflect of of terms there So level market promotional competing both we're in conditions in

so we for I of a a time, of people think terms, not rate was up lower might rates like felt lot have of previously in with initial and the are that rising a overpaying like it expectation necessary environment. longer period they shortening

competitive -- quarter, off pricing, we've market-by-market it terms, learn. make there's but we've the some in third always amount sure and test eased we're be eased on that of So off and it just of on firm, your we've will to like to some there

All may. I last, right. One if

us You this outstanding. financials to past given that number in loans you is what the non-depository have Could quarter? the give

not looking having I move it's that much handy. I'm around course changed of see. me the the Yes, Let's during that. know. you the don't at We'll I'm think There here. the a papers the I on during quarter. but with category don't course in follow-up of quarter, meaningful wasn't

thanks. Okay,

line the Morningstar. from Compton comes question next of with Eric Your

Hi, Eric.

Good for morning. Thanks taking question. my

maybe question What taking that? higher driving you dropping? that, that have item, that Any meet color progress you related perhaps more the my curious expenses more guidance those around the from is or why might to that what's be spending and So line helping of if in-house? more risk to on some of of was some that's on first is activities you of that be percentage might the and causing expect areas full-year I one you professional fees made just comment compliance be color and if any other your

question. good Yes, that's a

some So definitely it is of

well contractors, firms or talking represents some as as one both it able isn't been labor other; as where we've high. which or we've giant that's particularly getting of technology taken too been where we're where amount we've type changing having consulting in about haven't in-house. people it been hire by to pivot category a as it's augmentation labor still way a The we indicative of frankly as It expertise necessary. staff augmentation, the quickly been, hiring

a contract. there's workforce area that firms, all portion that in like on is our think of I

down, efficient So category substantially level current too roll of what's about of in operating efficient quarter based going high is doubt the forecast shift on like, and rolled there's state and body still fourth It's it in no the what work, think that and and what's high, current we the coming the on but that's a sources with as off be a will to the more rolled on. on a just lot looks be forward that list in. still of there's

out in but the the question. the that's get and just on, in will of any current it, helpful, don't light Is and Q, if see your of to curious this, there's and now the behind $XXX we down? to I quarter going this to you we comment end number jump the operating jump million the Okay, start then and start sense? you one it legal back that getting any just much, on when guess, this? color or had and to more do tunnel around, the to starting the losses, the billion there? we're estimate, scenes, just at the I estimate, want a high-end last if the reserve comes reserve the Should Just what's legal in appreciate the that the understanding estimates color sense get come $X.X towards we're that now more on reserve charge legal going but official too charge trend

really the As of you preface can't provide anything on this. question color in way to we with your

SEC and that As provide you with any don't have or update the DOJ beyond have ongoing and our what previously items to when any to our are with we that's and do don't said know, disclosed SEC our as in reserves began of applicable litigation disclose, in what so. investigations quarter we'll information portion to we course of to last regard in XX-Q, DOJ other we we and we discussions the more remarks particular information really XXXX, our the prepared and

you XX? Absolutely, said you meant XXXX

nothing sorry. There is XXXX. I'm Yes, from

Nothing from XXXX, thankfully.

the taking it. appreciate Thanks I And Okay. for questions.

while And non-bank as the $XXX financials. next number the exposure, for back, the Sure. September one to billion is of is total coming exposure XX

question from with of come will Martinez line Saul next the UBS. Your

for thanks question. my guys, Good Hey, morning. taking

I'm John, from like is and purchase get to to like taking but So the the I hate X% the quarter with fourth little I is element either beat at costs seems reported terms credit for mix NII, the headwind and to to should of less missing literally selling sheet on moderate or a to bit dead do or and a a maybe little the something, declines $X.X pronounced NII headwind in The $XX if first-half, but feel little because everything in premium, impaired and like that PCI It the guidance in pretty balance a start peak billion still I you're roughly the from basis of feel quarter decline you fourth horse bit implies even better what guess a outlook than it piece that, the NII NII even pretty versus that basis. the re-pricing seems to quarter just reduce billion to is out in versus lot it suggest starting decline NIM the about still you it degradation, there. a less least and third fall on deposit sequential bit a to said of next incremental substantial quarter.

terms missing that So of pronounced it the on in yield? the really and rate end, the the I cuts, I lower guess long is is am asset impact what of that just impact

asset probably described. types you of bit down. think little I numbers to fully that gets not the about being Well, of re-pricing side being talked the reflecting sort you costs the lower, a deposit that's at it We and higher,

Okay.

close. Very

would for the basis? quarter reported or X% but be range is Okay, fourth guess on right, the that right the math a math so I in is XX the billion

That's right.

just to I wanted clear. right. be all Okay,

and all of wanted operational addressed on the about I in blocking that lot it, where maybe risk remediating those. the a a get really and and cost update you're process it when does regardless give controls where consent of you and us they Allen on, if So that identifying seems looking of it, order lift there's in in processes structure just on and were remediating terms the bit like before are you the stand know, I you and you there just but at controls, tackling appropriate on what Fed sensing Can and of and risks different you the do at a ask apologize meaningful a past like that feel you way? attack to you need topic feel and you can little a to late you was like any

Thanks. Yes.

say conversation that start with the with them our out and John, engagement on constant course me that on mean supervisory number information, constructive can been fronts. with it has a Let our we're but regulators of turn dialogue I'll to our regulators and confidential are very of in I I

forward. team our made their public they to of to several Wells which the of that Charlie I decisively going made their made I until the well entire continue year expectations Fargo act over In satisfy that As and up know in to regulators the to in everybody trying with accepted expectations, meet disappointment with express and we months, progress as recalls, criticism, we efforts clear, which regulators regard will six assertively the earlier must re-coupled we've that last statements the the course time. to response

management enabling down a to expectations. their to continue the that the ways We're in road, issues from responding we but it's in good basis of additional raised say fair of the constant are consent the getting think progress more Fed we're integrated the a and the I of Fed transforming regard that day audit that on at and terms order, With our in to and risk course work make comprehensive feedback risk implemented we're that's to we a a doing organization and same and we've manage independent risk working and fundamentally way would management I constantly much describe and as enhancing consistent, throughout the enhance new at every risk, same the us the do is amount have substantial to how we time frontline to designed framework, -- time, function.

to multiple of the better all obviously alluded past. excellence into we before, the this also issues we're ensure they the kinds occurrence and issues that operational as throughout of layers of had review John as the goal we that emerge, prevent can to in emphasizing of is and visibility company. So the And

process business deliver in there focus biggest to is Our effort try to greater consistency. on an management

to we're and the our work what So I expectations John I deal They're of to do about some guess of of appropriately hard the as to in and great highest of timely able working committed over standards that that's it to There complete to very high, a manner financial talk I'll to going we're is will meet the and up to impacts. say, just turn We're forward. work we'll professionalism but regulators. be a the completing that important and work. durability confident

Yes.

through to programs in the so, out, is these and feedback, efficiency embarked it all biggest hundreds that have enabling risk, to and your taking money before last which some is years, which where being then And but order of compliance, technology, from response we've getting the gone at of part question, of this began unnecessary consent including on costs all regulatory this time so governance process, right the programs activity-by-activity second place for this and Fed push we've said few we've about had that same the perspective, reinvested. the an operational other in got

in re-engineer. perspective, management investor just we areas, the to our many status consistent. different easier It are automate, ways, that risk we as and some uncover have and Fargo more to less the an experience. there in other path, down I both the from regulatory from we improves that and big processes inventory call, it's mentioned do to then has there expensive is opportunity for get fixing customer this at go to opportunity currently member overall we chin So, the a do to that It's operate simplification Wells it's as quo earlier bar is and Wells that and credit our we a easier important much massive control. fact excellent It's once team think I everything the about compress a internally business the huge compliance, we that on the and and Fargo we experience, individual way like to operational this believe perspective is and governance process to opportunity deliver, being know because risk, are that

Now have today done down to that from the doing necessary team different is things the strategic review complete but with there a with sat way that. the done doing in today, how starting company that's are an extraordinary but may about is improve the we has set Charlie, remediation it business modernizing the opportunity or my look and after efficiency perspective

Great. helpful. you. Thank That's really

line of Morgan the Graseck will come Stanley. Betsy question with final Your from

Hi, Betsy.

I morning. questions, quarter, there the was mean that good are one I in pre just on that. MSR that know good and quick Hi, realized guys I Two pays revaluation, estimating you really some

And if wanted else? movement to Or, was that? wondering on just just your pop just it would I violent that there a but understanding to up expect, going was it in So not is opinion your get back something a expected? onetime more it's

we move -- Yes. bigger basis their it Well, of customer to the was refinance -- that in we estimate at we response we I are it know a captured was in am how happens but the -- I it's cohort following am what and about this think given is that, could to they of expected, the pace, the for type always never have we moneyness so estimate that way and faster a what valuation been say a it adjustment. happening and again, happen than reluctant

some know then know What saw feel highlighted auto Is of finish, results this sense really linked I this auto and you the I on that rate back you think like of is you think sizing that rebalancing up. the you this the restructuring restructuring business? quarter? it's that keep you am the just a with you and originations of run Okay, to foreseeable that a lending that of X% that side, it, now trying post start was of future? we the business quarter strong reconfiguration, is to auto Do of book can the - get business? the don't can I for get

about value about that us are, they if sense there it stays is for still consumer credit where the grow liked reward, further. if is and to opportunity my so car that stay Yes, is we risk where an used if

gotten -- we rationale so and as far credit with non-prime little in the that same the including more too do I over really begin to of on the previously in business we category, have by that next sense tiers, upper the So bit that mentioned, is the course ran doing at the is more -- quarters. in growth my will least probably the we of couple and

but I think I of easing as there do. more is into this that are aberrant, it, to think We don't and uptick

Okay, thanks.

Yes.

your close call. our our questions call for joining third by of all for me and thanking quarter conference you Let

you and regards would As thank I members their team all also always, dedication, all. Take hard to our to like for work, enthusiasm. Best care.

Ladies joining. and gentlemen, all this Thank today's you for concludes conference.

disconnect. You may now