Citizens Financial (CFG) 16 Oct 242024 Q3 Earnings call transcript

Good morning, everyone, and welcome to the Citizens Financial Group Third Quarter Earnings Conference Call. My name is Alan, and I'll be your operator today.

[Operator Instructions]

As a reminder, this event is being recorded.

Now I'll turn the call over to Kristin Silberberg, Executive Vice President, Investor Relations. begin. may you Kristin,

Good and Alan. joining you us. morning, you, thank everyone, for Thank

our Bruce also our and CFO, this of Consumer Chairman First, morning, McCree, Don CEO, provide Brendan Head will Head additional an Banking; and results. Banking, John provide Van to overview quarter of are third Commercial Coughlin, of here Woods, and Saun; color.

website. happy be presentation located Investor questions. Relations earnings to our be on we'll quarter After third referencing presentation, We will the take our

forward-looking which from of results your are include are risks will uncertainties that our Page to the for today cause and to comments Our X statements, review on outlined expectations. subject presentation. may materially differ These

the We measures, review it's also GAAP to non-GAAP reconciliations important so financial in the and presentation the X appendix. results reference of our on Page

will I over hand to that, with And Bruce.

Kristin, morning, Thanks, today. joining our for call Thanks good everyone. and

well continue loan stabilized progress initiatives, poised higher. our strategic good to uncertain capital, to and We funding made sheet across execute environment. profitability We've move has on and strong our liquidity, balance through our is an remains reserves and

an with update our initiatives. start me Let on

reached First, and up in assets billion. in from billion quarter. Bank QX, another $X.X management reached deposits, $X.X $X under delivered the We Private billion our terrific

California. be expect During entering momentum reached offices we and Francisco Southern QX Bay team breakeven new added banking September the Area, in in and to a private we We X in with quarter, cover XXXX. to and opened August bank the San profitable new good private

capital its to private continues well. demonstrate to our bank capacity commercial Next, serve

months. arrangements, and tables league in the loan quarter, we past leveraged we over the For #X sponsor the were remain #X XX for

capital to and our quality our We continue markets add talent to coverage teams.

in in had to upcoming as initiative sponsor We show profile Metro the deposits. the of key our and City X% look New growth X% continues raise We Marathon we York to York growth continue to market. forward a in New being households year-on-year brand growth. nice Our City

We've achieving details benefit million, a TOP benefit plus have X, of finalizing of run TOP rate XXXX. the on which of million $XXX should QX we're run $XXX end by executed well XX, rate and a

BSO continue quarter, the as to cost proceed use reduced liquidity in we pay Our CDs. and to planned. funding by $X to the down generated billion brokered continue actions like higher Noncore

We continue to medium-term in our exit CRE we're plan exposure. on to execute to reduce actions relationships, lending-only commercial focused and

OCI With X.X%. to for in sheet, our ratio XX.X%. respect We $XXX CETX stock balance puts is at quarter. our the at repurchased million us Adjusting during

XX.X%, billion. advances was well Home remained under Bank at and Federal Our our Loan spot low $X LDR

We to are not seeing much this coming start hopeful loan remain quarters. in up demand, but we pick should

a drag as well by which Our is job did and P&L to some commenced credit from QX. impacted good out Nonetheless, was in starting we fees expected. expenses the managing swaps, broadly performing July as pushed that forward as

Our QX quarter. to fees, leading positive NII operating guide the shows a nice in and rebound in leverage both

We to expect will to remain shares. broadly continue and we stable, repurchase credit

and a year of with NII higher build. sheet full of modestly we the will beginning most For guide volume hit the our ACL exception balance of impacting year,

and progression. NIM our on detail We have to show outlook, in continue strong we've appendix more the confidence to the in our to materials medium-term added

capacity broad strategy. to uncertainty our about of environment we in on and execute good but continue the Lots feel through remains, our to manage that

aspiration best Our super the positioned and strategy commercial have transformed premier bank-owned rests a the to private the regional on bank bank. consumer bank,

to to operating the will execute from you've that us. and expect with discipline We continue financial come

John. it over turn me to let that, With

Thanks, everyone. Bruce, and morning, good

strengthening represents Bruce fees earnings positive result quarter the discipline As in operating strong as of expense believe execution continued importantly, continued quarter prospectively. in leverage a tailwinds, third our and saw will mentioned, And we initiatives. trough third

healthy a with momentum in sheet to levels strong over which continue and continue positions drive well to help a execute medium XXXX us strong balance performance initiatives, our This We should on maintain liquidity strategic credit and excellent reserve. capital to the and term.

I'll it portfolio, reaching EPS $X.XX results, for for X is $X.XX Slides of a underlying start ROTCE being of Bank X. the towards We income to $XXX from run going generated breakeven fourth to earnings off, with in accretive million we third the will which referencing third net the tailwind progress mid-third quarter. X.X%. noncore The performance continue quarter, a includes of to and First, profitability quarter some strong Private financial creating of steadily This making overall and forward. the highlights expect quarter, and impact negative start

CETX Our $XXX capital executed quarter. removal, million the XX, for strong during buybacks in the adjusted X.X% or remained and opt-out with and stock we September position at at XX.X% AOCI

We maintained and a liquidity also profile. strong funding

Our is excess period-end and XXX% our XXX%, X pro in well XX.X%. is bank forma the large LCR which of requirement of category is LDR

prior the from increased the macroeconomic Our an lowered loan office reserve book driving of coverage quarter. improved XX.X% mix general is the ACL front X XX.X%, our ongoing and loss quarter, basis a shift, prior down which to ratio We outlook portfolio. expected points activity in given in from content X.XX% up

from ] basis is Now talk XX through primarily reflecting impact starting [ With assets. was time and impacts income down the X.XX%, NIM margin in slightly X.X% Slide hedge interest forward more I'll quarter. detail, interest-earning on Other third with our X. kicked the the points starting in lower linked results quarter to offsetting. net reflecting during respect lower NII largely down increase in the as to swaps largely were NIM, costs quarter,

X. Slide Moving to

capital quarter with results. were card wealth fees markets and Our linked seasonality solid and in X.X% down

M&A fees underwriting capital slowed Year-on-year, pushed given XX% led of very markets trends M&A XX%, deals seasonal and quarter, the our strong second advisory as capital On fourth some decreased deal markets the up quarter. by into were and a activity bond fees. fees heels however,

September. faster potential of cuts revenue down delayed in Fed their as pace a after was given rate hedging interest for hedging client plans, the Our slightly clients some eased aggressively rate the

given the hedging. in net we banking decline results of gains modestly MSR are was portfolio. the making Mortgage This by investment offset down adjustments securities in took fees of

from up sales growth given the Bank, were offset AUM was in somewhat slightly lower fees which activity. wealth Our transactional by Private

to are our where financial both continue management under approximately business billion. We teams as Bank wealth, branch-based well $XX adding we on wealth in Total our private activity advisory in assets in focus building out geographies. as our office Private now

quarter On Slide in X, initiatives. linked we continued which expenses, investment strategic were X.X% did a job on nice down our notwithstanding

will is pretax in Our XX run top rate rate program million $XXX more than $XXX target to planning deliver end And are XXXX. which by by to our end efficiencies of we the TOP run X year. benefit of launch the on the million target program,

We for you on will our earnings provide more next details call.

X% are loans as On Slide loans are XX. loan demand stable, linked optimization. and limited reflecting as quarter, broadly Period-end continued balance well average down sheet

billion core tune mortgage We continue about quarter. to growth up private bank in portfolio home $X equity. portfolio the in to the the with The the of and about from retail and run was $XXX million loan down noncore solid contributions

a Private period-end with the is million loans $X basis, $XXX On Bank up to making progress about billion. good

reflecting and lower of client loan the loans reflecting up were loans about down $XXX paydowns corporates returning Bank, exits in million, demand. Private credit-only driven mortgage debt issue in growth million, retail to equity, commercial by continuing home and markets, the generally lower were while $XXX about Excluding relationships

rundown. growth in very noncore are continue treasury do and Average $X.X environment. stable Slide tied to Next, primarily good This a a driven partially offset deposits. on XX, deposits and in deposits job we competitive XX attractive to with of dynamic down broadly by cost of Bank the on period-end by paydown X%, deposits deposits higher Private billion was

interest-bearing costs linked X Our quarter. up basis deposit were points

of CD will effectively flat to in total balances up that of the commenced linked However, off deposit X offset the Bank anticipate lower basis funds the stable. was quarter commercial. only with were were cycle. higher cost categories Fed cutting now migration while lower Private that total drop being has costs We by points, cost growth

Overall, very competitive in perform well environment. a our continues franchise deposit to

interest-bearing the a we the indicate cycle peer estimates Our beta with better upgrade than average. ended terminal deposit

deposits product across channels. XX% deposit roughly and mix stable our and of overall About deposits insured secured. Our our highly consumer XX% are of are deposits is franchise granular, diversified or

peak proceed classified of loans. basis on and reflecting A NPAs charge-offs primarily stable C&I. handful primarily we was the decline nonperforming reflecting Net criticized credits quarter, offset an we for auto. increase CRE impacts X increased estate real of Slide the resolved. get by office with general quarters in XX as commercial a Nonaccrual to linked in as to workout on been in near and are basis X loans workout XX% We XX. broadly seasonal The have points, Moving charge-offs several rose loans credit believe in actions loans points resolution of

on losses Slide credit to allowance Turning for the XX.

real coverage quarter, which and $XXX XX.X% commercial of $XXX retail, X the the macroeconomic up billion from our million auto office was the coverage, portfolio lower point and to the end general third prior quarter. an in loss reflecting runoff Our of portfolio The given the basis noncore a decline mix categories. from overall in at stands at million and secured down $X.X reserve and estate second quarter X.XX%, XX.X% outlook represents ratio improving originations of the content better loan is

you On page, general right the some driving office can of reserve level. the assumptions the key side see the of coverage

our expect current downturns. this we sector be represents reserve a we've beneficial that historical may much severe rate believe to continue be is cuts While worse margin, We in seen at than scenario challenged. to the

feel very strong. the So current is coverage we

general to XXXX, billion. this March the based million Additionally, since almost losses XX% the the rate in loss the an cumulative on When portfolio. balance reserve second these $X.X quarter have of XXXX $XXX add of you absorbed outstanding, losses we represents of cumulative office

work quarters, paydowns down XX down the the in about continued exposure Over we given I over XX, charge-offs at addition roughly general have to the September with months $X past just million portfolio billion to office, $X.X to the billion mentioned. last to $XXX X of the

and XX XX. to Slides Moving

We maintained balance have sheet excellent strength.

Our under to strong have AOCI quarter. CETX in X.X%. peers. ratio a which CETX our consistently adjust been ratio ratios prior Both TCE if CETX and the the regulatory removal current the of were XX.X% from to for with compares our proposal, you XX.X%, And average X% increased the is above opt-out

million capital and returned in shares, the third strong dividends, million a $XXX we quarter. in repurchased common position, our $XXX shareholders including Given total of to we

XX. Slide to Moving

is private a peers positioned built franchise. best bank bank to build regional among a strategy premier on and and our transformed Commercial aspiration Bank consumer that Our our wealth bank-owned

substantial a transformed bank with are continue revenue have deposit we York further and market share efficiently important growth well we set to costs First, metro managing potential strong positioned that the New is gaining consumer wealth in drive while market. to

banks. commercial have leading among super Next, the a bank we believe built we regional

We are focused high-growth and market on serving sponsors of middle companies economy. and the sectors

and capabilities advantage up. of the markets Our private when investments activity space coverage market capital over the well us positioned take capital to years in have picks

With row, we sits decidedly a the fears market client the that trailing Fed optimistic are to beginning commercial momentum middle quarter is book the tables, year which has report in finish subsiding, our runner a of more pleased positive, top basis. to XX-month of #X in us ease lead to the into the third for that good middle-market XXXX. see recession on strong we'll and a sponsor and markets the movement capital And business a holding our base position

report and gain the I'm to going to the Moving very that well Bank. momentum. is effort pleased to continues Private

increase in with attractive our top which $X.X adds Bay announced to now in of the We loans of continuing have already banking $X quarter the California, plans from opened billion billion we are and XX% addition about San billion Valley, have of Palm private recently add a team base to growing Beach we client and $X.X prior Francisco the deposits. noninterest-bearing. Boston. the Mill and Area, we've now and Also, grow. to are California, at offices roughly offices and new This is Southern a We in

adding You bolster see should opportunistically and banking to to our us expect talent capabilities. wealth

Notably, even in $XX.X by third quarter Bank million the breaking mid-quarter. revenue Private to rose XX% our

quarter fourth Private EPS on track contributing for meaningfully add and earnings in to are to the to start We next year. the Bank

guide Moving to rate for We the quarter. fourth in cut provide contemplates Slide of a XX basis November each outlook a and XX. point This December.

X.X% slightly Noninterest capital about book asset point paced dynamics reflecting single strength be activity. lower to by be private We given reflecting income and benefit runoff commercial X loans in offset of up mid- back book rates, bank Spot should up partially to yields. by should high a margin, expected markets. in sponsor the swaps and by interest net basis lower deposit to up expect seasonal digits primarily repricing, noncore be front driven X.X%, favorable improvement NII

Our are to year. expect the deal robust, strong we pipelines to a and see finish

to we Noninterest modest and about key achieve improvements X%, noncore continue other up leverage. benefit to across broadly improving positive expected loan to projected Net stable, to be categories. expect operating and should also ACL the from charge-offs be expense is We expect are while runoff mix.

broadly CETX expected updated on with million $XXX of I the attention be projects to to XXXX. which in range stable medium-term is the Our X.X% us called walk NIM about appendix ratio million to in slide X.XX% share in $XXX an your to repurchases. to be our

To solid wrap capital play and up, markets, expected. quarter card we and out credit strong largely dynamic in that as performance environment delivered continues a a in wealth results with to

as funding changes any a maintaining playing high reserve are liquidity level bring. prepare for We profile regulatory environment potential and long-term capital a strong challenges defense position, of the and and may a structural we more robust

also initiatives, which ability remain multiyear confident XX% our drive our performance to we term. offense target. hit the we Importantly, as improving XX% medium strategic are return unique in medium-term will over playing pursue We our to

With that, over back Bruce. I'll to hand

you, Alan, it let's Thank Q&A. Okay. up some for John. open

Piper Q&A begin call. we now come with will Our the [Operator line gentlemen, Sandler. Instructions] Ladies of Scott the from the portion question first will and of Siefers

or I with related to on questions takes so the can allow expansion the that margin to X medium-term upward. to you of and walk wanted into the points term, start we quarter? in sort puts a margin Slide immediate kind first, basis couple to start as of and of alluded fourth march walk Maybe XX of progression the for you through off the which both that

get And of I is about sort it importantly, and more are of journey the would benefits X.XX.But that all like cards year and course, equal rate-based the think or impact. points guess, and like time-based like else of basis swaps then, timing the we the as which to start so, the flows the that next looks programmatic, a wild of ebbs us of upward largely XX

guess, on if you we help I maybe the narrow the So the few quarters, could about next think please? as of sort moving parts cone

mean, about for I drivers say Thanks there, the we're fourth the off quarter. question, I sure. with think seeing. the when -- progression several of starting Yes, I'd X the think that drivers Scott. of you tailwinds

contribute I highlight points which noncore, basis quarter. about a would to off, X First continues

starting And point. so that's the

huge active front big sheet deposit more neutral, that become And the seeing cycle. to quarter the of than into of a play quarter the get -- book second the think into I forward. the I out fourth flip of the that's every And mean, deposit that's kind relates that trends broadly continues we're management, book sheet fixed fourth of driver fourth balance That's us a throughout going it's migration. a been to up had offer and really going maybe one asset time. been given migration past. to the the quarter, is around highlights headwind over quarter. declining out And be you also to negative repricing We've going that, as to back broadly And a significant late of for balance play slightly on that early tell on to that's been. I contributor. I'll will less in going what's quarter positive continue think transition third

color billion last John. $X the on But in Private jump me we X been well generate let very attractive here, billion continuing they've that, quarters. growing and range just on the Just to the have deposits, $X.X Bank in over

seasonally, consumer see terms in in fourth both benefiting quarter, we'll of deposits. that So an And and then that the positively mix. commercial demand in uptick typically, will be

part that equation. we're on counting of So the as

keep and asset just receipt forward. that are going Absolutely. playing And in -- the are a we mean, the asset tailwind trends on over big slightly been category, got I sensitive, we headwind I our think to think little more balance but mitigant swaps, you and noncore other be flip on that the talked a a to going are which -- those to about that based sensitivity And powerful. further. I sheet those to just have are mind we a are

they'll quarter. So the actually fourth contribute into

things one down also betas. of we're proactive is important being on so the doing And extremely

energy prior the the betas what portfolio, from deposit better all highly management of our We're being down things. learnings where can seen of taking you've on from consumer beta from Just and into side up and average deposit are all now cycles peer proactive our the we in the that what flipping than capability tell.

when of good deposits are the that, of really are the that And our But And to achieve all them you may and that add really on as on all confidence a with late we're trajectory. to gives XXX% side, the anyway. And consistent pouncing trends us how of the we're trends there beta majority very downgrade going X are that basis we're that transition -- this I most points. commercial about XQ early cycle. feeling that up, earlier, mentioned XQ

So that's the XQ.

I me similar question second are out the to was you're of think second the themes, there the but fourth XX%. And take right. quarter --

that 'XX similar. to such time-based, another, basis NIM points $XXX and of X% million the And neighborhood can benefit in million. get the of If related can tailwinds drivers fourth that's at of basis front it's The in. the and you get of really book. X-ish that in are the we you're the XQ, call really in very look there's back just book I'd that we XX it, growing really neighborhood to $XXX in baked We'll quarter at expect points, say the

X-year a rates up end from for going XXX securities next quarters, with feel rates. book year to focused back the scenarios, and kind X portfolio which We as of XX is that's basis more up longer quarter, very front range over every so points loan fixed to end as that where our end about that in over think XXX of that under rate the anywhere is on over you we driver of benefit turns when wide And good turns book about. a

we've something Our in at you still nearing got strategic we is and portfolio we the the we protection to middle up on. swap XXXX. think X% through And a end to add what of on of is lot with 'XX mind, Bank continue that all initiatives respect our of by Metro contribute. with end deposit downrate New the up, have largely when York Private intact Keep side

and So remain protected those you sensitive. and end it all give get net into of positive pretty well we factors slightly the other asset 'XX. as But us offset a

Yes, is well. fourth then that other the target as to to the lift and add one thing quarter would

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

you Was on to interest I guess your the from there just throw down And of Or something that positive what growth? help was then there, here? the out bigger we ago. is a loan and and month of cut coming all income bit thought should kind to drill too? little less a trends a than weaker expect kind net maybe said in head that

I'd are say we Yes. sensitive. asset slightly

that quarter, migration kind of But but be maybe may the more we bit I'd little expected. So a the say expected. deposit of XQ, trends low-cost little the in XX, during down than bit a they came we than trajectory

was got you average we it that there went almost is higher as the pull flip the lever, the neutral as quarter expected, a we were than point around more that we look of of terms basis And flipping where October But late the positive. a and the mentioned, think in but migration low-cost off are end at was early now really for I little migration that really we seeing to -- thinking. of XX so I to Fed trends bell to when slight the the September, quarter the

into so that's And really XQ. see you what going can

maybe And I'd think growth a thought. more in say, that, had as not loan we we we much quite nice then loan we I on Bank, volume, little anticipated too, the but as Private growth

continue will faster thought rebound timing. on we'd that's starting think come see pick particularly I that little that. side. sponsor bank. We We're on as utilization, rates up really a in down, to similarly to just the And commercial see line

quarter, should why slight in the think I kind the of we loans, noncore we guide on to comprehending again, that's see spot So even growth and have the fourth that come rundown. -- an should in outlook that's start our

how operating costs to we by medium quarter separately, [ think more XXX then kind about that's look frame X.X% could X%. And you leverage fourth term? if just leverage, revenues up So it, at up about income Okay. bigger to of but bps more fees. ] a guiding Obviously, operating driven you're be dollar-wise, of kind do like versus driver just

operating envision? Just leverage medium how much term thoughts on would you

But that leverage. $X.XX more interest I significant XXXX. think Yes. you provides talk I frame We'll I the more you time. at January margin in expect operating $X.XX and for I in for tailwinds significant leverage mean, in range mean terms think we'll back look that over reflating to of this about we we When come opportunity January. what a to in net and consistent operating have little

reflation The the about of the there's cost of impact thing goods is in that sold terms expenses. real no on best NIM

pretty So through. straight drops that much

over with and fees of in to come wealth the that exciting comments. the add payments But usually but be markets, there's expense positive business, growth leverage in Nonetheless, by we're we operating look when to continued couple those I XX quite developments you out some I think think side. doing clearly investments maybe things XX led payouts business of the in the capital going the be on period. Brendan, should could our some

way right is our we've to basis comment that cost other the I that the short-term we're with that through now mentioned One comp on guarantees the just the fixed team. Bank Private the remember base is on given working

grows, comp the the our of way revenue as earning through we're So kind guarantees.

because quarter in. straight leverage linked put incremental expenses we've where essentially all necessarily is operating that's So the positive revenue that without coming

right get their the top and it's further together. scale, on grow just we But time, fixed linkage right with way of then now, revenue will growth And work they'll through base. the the expense guarantee straight over that

Yes. Good point.

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

[indiscernible]. Bruce, growth it growth this seeing the in overall Is And in about that you clarity should the you if you -- Is quarter. here What bigger the inflection the type little cut? XXXX? drive confidence like look rate more bit in of on loan into you're loan a it is maybe just just around in could that demand dynamics fourth then your modest you can you -- the talked that catalyst? help And elaborate think see a election? growth of going as you maybe us at acceleration where expect the expect you could about or

Yes.

and I'm start, Don me But Let Brendan we're about here talk then to in pass quarter. any their fourth for segments their heroics to outlooks. going calling to and not and it

Private build our is So a think step-up We see it that in bit. starting the in things quarterly the pretty good. and pipeline we're meeting to said think, is, pretty guide derisked worth noting looking significant loan much the biggest from I Bank But I is growth. increase

I that continue. think So will

borrow. folks willing transact I there, And as come to rates down, think and are

But the the I equity we kind think to interest some by dam clients, amount really, it put broken with to realize work not of of where so conversations and privy in lots -- that -- has starting exits we're that's to the it's some Commercial a similar build. see money to Bank, private thing yet. it's in starting but of there's

maybe, let start flex trend But see a first me I Don so that and you continue could we'll to Brendan, up. think with pick up then second. And

Yes.

by leader see I strong late is the quarter, not private quarter. a in that in that pretty very think we're some seeing lines the space clubhouse utilization continuing fourth it, you it really business. and growth Bruce. nice build, the bump equity And where and that we're said just The us leveraged we It's seen to we've subscription saw into in doing. activity that's we're

have middle particularly with of really C&I that yet, down, coming C&I having rates going business better We haven't in core the downdrafts of that general more in companies of will it one we securities utilization, with it's public be investment result a capital the clients, 'XX, had market, confidence growth conversations refinancing said, in the we've working John seen remember, into core the has in kind markets. environment been but things loan the of level as lot in their economy a just businesses. get and our one to we're of of And activity is the stabilizing against more the been kind where

core levels. seen being our our we've So bit little on it's stuff But balance that's for and put lines. pressure fee good a sheet refinanced, been on asset

So -- we think of a behind lot that is us now.

So get 'XX. net to should growth core we'll see begin in book we the the grow as into

Brendan?

private hit banking. I'll quickly Yes, and then consumer on

a On of folks side, just would the net consumer I remind at is turning into the pace rundown on positive. non-core

$X.X ] consumer book [ and this million. billion in quarter, at to year, million time, $X.X we we're in now the running a and $XXX were billion, now last off we're the So $XXX

in future. So look mortgage and will that's is at and that growth And bit the slowing portfolios, seeing a the growth rundown -- equity. the linked quarter continue home decent when into we're we

a the pull as see But everybody rates as the we into little modest knows, to a mortgage country rates. originations expect And bit, X%-ish activity. back mortgage in is majority pickup of locked

years. we're And got a is see continue business grow. And so their space, the business a to or X where U.S. league for strength of been equity will main the footing and it real X as be national top product, in that record well very more and prime HELOC tables against incredibly last that's in consumers built homes confidence positioned. that believe that super up lever the our you'll the HELOC economy in for over gets originations I consumers in borrow the to We've

that So to continue. we expect

way the to now high modest The money loan collecting again year down, late should who we moving product has is in sidelined. that payments on see student other with have in see rates credit headwind coming refinance tailwind been a olds loan early XXs, restructuring federal student all And back rates that tailwind more their not value portfolio in student great -- the a debt. likely and that with government XX back coming

that we're So up. modestly year. as into pick next expecting we to get

Private we're a the little put we're a an cash of lot on home And cash they'll as Bank use credit now, it's transactions, growth base. the high rates feedback. facilitating customer seeing going customers really using or worth more very pull side credit. net business whether given Rates or business to temporarily back, sidelines, sitting bit comfortable on the more hearing of is net that and it's just the ultrahigh place and side, strong right an on On of pulling versus profile attractive investment same back resi story. should it's But be that whether

that strong good been we've should the And the focused well. here very really progression a dynamic everybody went We've we've on demand. day-to-day getting a as So rate banking decent to embedded knows, the of full market on up. also wallet operations do on deposit got very drive There's confidence amount of the side. the earning customer's

then dislodge from come needs they'll and we'll well. build a borrowing Now

rate side wallet year So into get the anticipate share gain that we natural environment. on there's supported earned a private that next banking sort we by will the be of getting as

third believe second on credit. believe Okay. NPAs quarter. stable also quarter. you delinquencies the quick year-over-year. auto this just pretty with you've look you Great. your one quarter in your you that? And sharply you about charge-offs then Can I confidence the on that here I as And Maybe that you peaking fourth were the talk confidence then indicated confidence a up know at are gives the what there, seen, broadly

beyond be the seasonality. So that would

that So I'm then thoughts and going interested reserve drove the on forward? what in

around arms think -- we to jump feel it's through there. yes, with got say well pass been will good we've I'd I'll workout 'XX, in known issue general 'XX. And for to Maybe reserves the around is going that then a We've has got that. And a very we'll that big us chunk be multi-quarter the XX%. we've heavy it's of wants that's it free. with through start, commenced our It fully us all that But and whoever office Yes. one in, is portfolio. managing

property with when working and to bit, But mutually around something timing charge-offs try recognize NPA If you to take it's when control. and certain we for go people terms might our best charge-off with up actions recognition a up there to a or to our a borrowers recognition. not come in decides satisfactory put got sale in outcomes. then moves of the of are have the borrower We've always

So CRE and charge-offs in this we CRE a low blip of on were NPAs. quarter, we end the had

consistent. that, problem we're population said having managing is But that the pretty loan

the take in so at And is of when board now loans and criticized commercial, the classified they've we pretty one X for across in things we comfort been quarters. stable look

delinquencies. I'll thing. if the big Don, CRE on any the see, to the that's Brendan, if anything So on you want and then, add color

I think Bruce. right, exactly that's

for as that teams X, last general out quarters, bit out of quarter, we've I book workout quarter. C&I playing have for blip for think to the much little out. pretty And the exactly X this the been zero a it's and happened seen, we as portfolio X, we X have several charge-off what, which things credit but was and was in a expected. in it's we'll to said, next literally our they office going the thought it just playing that years, through We surprises Bruce as in going charge-offs this quarters, play resolve had

worry focus those the and levels moves, what I class been on have So is I a don't fact lot the stable. NPA that about

a back is in lot There's in of The seeing other into thing general we're liquidity estate. office, real general marketplace. not the general in coming but area estate the real

the So disturbing and that that's something it's strategic that ability to nothing seeing book to broadly which in us I move matter credit book, overall our in at the to C&I an we're quite or a want is the do. from all, you is And know exposures accelerating standpoint. down overall healthy

Yes. in little there's portfolio are Consumer is that's and XX the we're making And XX in pre-COVID And normalized a of while between we're observing basis There's me that's any where takes. now. net points and charge-offs. nothing bit puts lose broadly sleep. we that and always

last strong on side very the -- seasonally we your a had in on One but would also a be value. And -- recovery used charge-off very of quarter question month auto, couple comments. was impacted, was low,

reversion mean. was quarter So a to just more much the this

though numbers, and up to takes in I even build to originating check. appropriate would mention XX state tough into in its delinquency to it's The published relatively other anymore, you're XX delinquency dynamic months a it not when read steady auto, vintage is for But curve to delinquency.

So and to when got lines zero delinquencies. expected you not benefit ultimate of our a that on bunch loss that the in flow their shut originations, of the off new you've along vintages new are normally origination has you're it pick number getting it's coming a issue that just other denominator progressing denominator

when So really and the performing exactly there's decompose portfolio. exactly expected nothing that that in to. whatsoever we've as you priced about as worried it we're it we auto It's all

from the UBS. of Your Erika with line come Najarian next question will

My is first for John. question you,

just would NII many are as On would for of accounting Slide us and your peso X% yourself then that billion terminated $XX.X billion XX 'XX. Could crystallized XQ the maybe notionals. those XXXX. of to indicate $XX follow-up, an lower and by update the just had ensure you cuts level? for XQ the received on swaps. you would getting those to -- the confirm notional duration that XQ you for a fixed a they mentioned for NIM both swaps give XX-Q, swap you How you for of would in Obviously, you be X% life rate and swaps and and And need the losses whether

I'll those. Yes. take

year over a as or the through of think yes, X when as I billion next happen the time during were cuts quarter, expectation May there period cuts. $X of third about was of of So have the receive-fixed We of of aggressive, pace short-dated pretty Fed -- recall, maturing curve X discounting many you 'XX. yield quarter as may to swaps the that was was second in rate

opportunistically against there X dated benefit really, that $X good that protection third And to the of reward we're what X in swaps do given first place. cover lock environment the that billion in was the that cuts we protection swaps an during chose and locked quarter benefit felt there to in and we were providing was the like through to short approximately or lower terminate the where lock and so downrate in we swaps that, are a to risk very rates only that contribution in May, was

Out the window. cuts are May. through fewer There

least we at did aspects it at protection. was of do, from impact to amortize swaps, through are of was on point, The May. they they intended move to those for remaining exactly accounting that this the So of that the what a round that the positive that trip life to create were and us over swaps

to the more So impact amortized a through lower case that that will than be the be, would be or held but impact were otherwise favorable again, a impact will have that swaps. we

And was the terminations. the of that point so

one. that's that So

And second consistent. rate I there's rate we environment asset-sensitive about cuts. mean that would a we environments still be of a would think [indiscernible] would say that I position. that. slightly And With the the question -- was X% range have that I

it given rate interest margin until mid-XXXX. net portfolio, the So 'XX is drop off of into doesn't range to a swap environments across stable begin

'XX, rate the level that So would window of well. XXX achieve be around forward would but environments that implies at by X% to I end below that as be the we getting to out able mean, the curve

Got twofold. it. follow-up is And my question

explain between the be received thinking you as the it fixed the swap, more I May amortize terminated the that impact? favorable would I rate through difference just think was could of that XXXX. I and SOFR First, impact

favorable So more on just And up. secondly, John, would wanted to follow maybe be. the what then some insight just give I treatment us

deposit that for assuming you I which for lot quarter? number you've next explained nail of are what I a well. think beta $X.XX expansion wanted down being that next in of sort over that there quarter, questions able achieve to NIM are just to of kind

Yes.

so when terminate basically forward you at the terminate you swap, based assumed time. upon curve the So the that's again,

And curve the so at that. forward

That's the it. difference got --

Okay. Yes.

get it. -- going to beta expansion highly this the yes. on quarter, around nearing into NIM end so quarter. up Got to by And the on And the to proactive be then of focus XX% deposit is the the fourth our

taking but just well and cost be XXX% the of learnings applying solid attractive really in years funds. over leading really highly all to at and deposit to able a proactive to continue we how stuff beta we're got as way, drive the consumer over of that in commercial many the all You've growth last the cycle being the

XQ. beta So that's deposit baked number the that's in in XX% about

it. so for straightforward much Appreciate Got the answer. Thanks it.

Morgan Gosalia Manan will Your come with next question Stanley. from line the of

does to your Fed we more how the a we into So Fed more further follow any as as spot easier as deposit rate deposit what beta that right? month rates that beta more cut you on the the or Fed get are that make get have deposit to wanted rates you it behind on I up specifics Do rate we're -- past forward? cycle, deposit drop traject get expect difficult cuts as now rate continue cut to are we us, question. to your going

you on and or using cuts think the after -- from X more in have Based forward come you what we're was you XX% X there, a that I nonfarm mean if you've after got to curve, a in SOFR based curve up we'll on be interest-bearing the of think X rate I apply cuts. on do ago. can XQ decline that that you a with deposit you in forward But nonfarm that Fed if if average would payrolls the XQ, math and basis. payrolls, XQ -- the kind week the beta net costs versus from curve the

what that question? the And second was question, part second of

series to does forward it us. cuts year the the get in into, we curve Does have it Fed cuts as continue it there's there? because to drop and deposit as of fewer rate that rates make of make question say, of Or -- we deposit part drop easier a front behind was get we just to into second the next middle The rates? harder

-- to so past cycle going are down about to continue betas to XX. the said the our down is that of ongoing we've I to can broadly, think cycle our was you longer way the the think I XX cycle more lowering that around approximate think but contribute deposit what costs, in to lasts, the

to going in years. coming that over that's we're the be the gradually cutting XX of will fourth the to by to XX proceed XX the and over cycle -- to the so around quarter, And it going migrate end

can And that gradual of improvement kind so think that about I way, you think. in

the the But which of mirror on the acceleration cycle that the think I towards was part up later Yes. in you there cycle, downside.

Yes, that's right. Exactly.

point the the securities book benefit. that Yes, the and there getting perfect. you spread the so? XXX maybe is then really And the to what loans back what I That's And Can apply XXX book, positioning about some over to. What on basis for due are securities or balances That's fixed room front to I of capital any helpful. think any just was talk from noted use should excess year rate to? next coming we here? you

I that Yes. will to use growing mean this good metric over that's time. think a be I

number -- of what that couple well. quarter being see securities I'd million over when it, contributor you as the up So in that's a resi when mortgage, mean, $XXX you a a to call you're quarterly over for say the and time, turns growth book see I the it, similar over call and around picking this going basis activity back the see in loan next years.

on book, back about apply front of years. next book, the When turns continue you over it talk those couple are that will itself over but contribute the and what is balances build to you the that would to

there And as room securities Is would from you do repositioning here? that? right. That's any to

that's at -- a repositioning. an securities in not we'll mean I and mean don't we I have we on the large we manage ongoing basis, our but single a -- look plans. actively portfolio

XX point on not expend Slide timing NIM, that have built-in the to the to need so need I just we ourselves that momentum is the something we of shift that also to capital of. to would NIM some And raise walk to and avail that

questions further queue. no have in you time, this at And

interest again, good today. a in Have dialing thanks for Great. Citizens. folks Well, We in support appreciate Okay. day. your and

gentlemen, and for Thank for participation. Ladies your call conference today. that concludes our you

disconnect. now may You