Associated Banc-Corp (ASB) 19 Oct 232023 Q3 Earnings call transcript

Good afternoon, everyone, and welcome to Associated Banc-Corp's Third Quarter 2023 Earnings Conference Call. My name is Alicia, and I'll be your operator today. [Operator Instructions]Copies of the slides that will be referenced during today's call are available on the company's website at investor.associatedbank.com.

As a reminder, this conference is being recorded.As outlined on Slide 1, during the course of the discussion today, management may make statements that constitute projections, expectations, beliefs or similar forward-looking statements.

Associated's actual results could differ materially from the results anticipated or projected in any such forward-looking statements.Additional detailed information concerning the important factors that could cause Associated's actual results to differ materially from the information discussed today is readily available on the SEC website in the Risk Factors section of Associated's most recent Form 10-K and subsequent SEC filings. to herein to a mentioned and the conference please incorporated non-GAAP of in to are XX call, measures and the financial GAAP refer financial Page factors XX by slide press reconciliation reference.For the the of of These the XX release presentation tables. Pages financial measures

President opening today's instructions will conference session.At Please would I time, turn sir. presentation, be the question-and-answer for Following like to over and go ahead, Harmening, Andy this remarks. given for CEO, to the

good Pat our volatile continuation Derek some and back Credit to an Well, Chief income, stabilizing quarter a after am third earnings for in then definitive highlights what provide call. in Officer; strong Derek was afternoon, will again at the a trends. that third Meyer, Financial From those Associated on update an on sharing our mentioned once Ahern, Officer. see we July capital I will the quarter. Harmening. I margin, remain are starting quarter and very we and welcome Pat Chief our will we to environments.On less of our non-relationship the consumer saw trends rely and I'm spring, profile. on our clearly credit.Now, stability initiatives start there, to high-quality I joined remain by focus Employment in by taken as balances. here Andy of share trends, and balances enable our renewed side, footprint. update for loan hold added been able the operating heavily in attract in steadily means These coming prime optimize execution face that mid-Western balance squarely X%, and that sheet improve and we've the we below the profitability uncertainty.What retail resilient on of Wisconsin states macro With look customer in our customers most super commercial to deepen national is have our us seeing unemployment to face initiatives average in challenging below us this and asset of relationships, prime today lower-yielding,

we've finally, our and side, growth, Phase affluent why funding to Slide reliance QX to shared set quarter results third look in campaign next X bank decrease our we've clearly of the third the going enhancements not that is lost quarters, us. scores that mass digital center in look us little as new foundational strategy, plan, and growth and in trends to of forward attrition. having the to we is These also platform On the traction the contributed remain an get continued on deposit attrition wholesale side, brand to success. our year but and comes for team core finishing touches as us QX. the working we product in for hard, Associated Banc to I'd what customer management.As ago. the coming thoughtful discipline we're that years to continues This launched of our our banking during which detail online customer Initiatives sight even our our later plan while about like launching higher it are led evolve bit sharing and experiences and helps X our $XXX now front only place, impact, mobile putting for the strategic on such our X. quarter.With our credit quarter. what funding on us in the regularly loan over enables And a That's the stronger new expense got customer more acquisition fund haven't important significantly first customer up for ago, X to for decreased and discipline changes long-term and since sources here have this Phase strategic in network the that, we on to we upgraded look future.And quality on highlight satisfaction and since a million environment we It's

Our results balance against of reflected progress sheet our and third continued quarter growth initiatives. the steady our

the of in our of deposits.We in growth point mentioned during and As the the again fund a in auto X period And first during the deposits once side, commercial stated core growth goal saw of business. industry-wide lending slowed loan XXXX.Shifting be meaningfully CDs said, to to environment. for in is industry majority our the with quarter, XXXX. brokered customer these rate after loan past, our this half the volatility consumer us this costs entire as high-cost continue With enabled income over segments realize year, in million growth compared to Funding balance it's most our clear here sources by categories deepening that $XXX pressure net core pay continue initiatives. led and grew the of relationship all to QX to finance activity as has funding of down non-customer customer the like acquisition that by customer we to in quarter.On in impacts This statement. deposits our a the grew major

our X.XX%. pressure has Here on pace however, at basis to X points Associated, decreased by slowed. QX, the NIM margin downward of In

our non-interest third increase in a income. the quarter, For slight we saw

to the Our pressure non-interest quality closely. quarter quarter, versus as continuing grew we're the NII.And by on income X% offsetting monitor prior partially asset always, ongoing third

at the ratio charge-off $XX for our X.XX%. Our at in held quarter points million we in XX as ratio provision and another added basis came net ACLL flat

a consider slightly to to we pre-COVID metrics have be quarter, with credit compared gradual levels. to While performance several consistent data normalization the the prior up ticked key

for we quarter. trends specific not to trouble the or Slide a third suggest deposit seen anything have on horizon We our X, for the industry geography.On highlight

know, with you deposits funding year. volatility first battle combined the in As create industry-wide the significant headwinds ongoing spring, of to for an the for half

funding a impact accounts QX on liquidity short-term by cleared flows. While balance pressures, June, combined shift customer mix up the and much lingering of had with the in volatility

some impacts gathering both clearer by net the to whole higher growth X%. from to the quarter. continue and network commercial deposits, the decreased stabilized, XXXX.During We $XXX that million in core balances and during deposit million started shift see which us a the mix $XXX of consumer largely in quarter, cost on as saw providing growth but grew decrease take the we view or deposits our reliance and X% has enabled This quarter, or from impact situation hold a customer during to our broker by initiatives

check decrease on core at our through the to the funding to primarily our year-to-date remain fund a customer can continue Slide in deposit confident deposits half and into XXXX, year by expect the and the going As XXXX. X% see is remainder on by back but initiatives. we growth current loan with Based And cost that come growth of conditions, hold trends our levels expect total deposits.We the based as you and reasonable X% our increase X, guidance for our move market affirming of by our year.On in accident. we're reminder, a fund to in forward hasn't to customer to wholesale growth strategy we ability network

strategy relationships a our to than deepen satisfaction already potential a lives more already growth success. multiyear hold. this an towards taken attrition our to have affluent mass upgrades added funding and and brand our focus continued plan to period has to team million with easier. existing increasing new XX% these to high in had strategy.As of baseline.So was XX. high we've growth new launching the a customer-centric been our since roughly Since rate the our a As upgrades and previously, and ] relationships, Digital deposits, nearly also leading is XXXX, through was we've In deepening with enhancements by year And since product we've acquisition plan offerings on architecture new a XX%. new third net goal This platform, in make discussed clear point consumer the versus to offerings we've core open steadily as launched, in to attracting XX enhance execute rate our year move platform quickly our and loan hard we've pre-launch new household our doubling said, been in initiatives have has promoted and with of ago, been retention. with relationships scores.And full XX.X% to upgrading work the eye customer-facing able customers' our offerings $XXX service fund uptime same September quarter, the customer made our challenging over more customers, increase [ our we've relationships, finally, year a up we at customer instrumental our XX% represents deploy to at our this of environment. It's deposit little a and relationships, face down

As which is major growth. more deepening we're Slide X our loan This that reported [ dollars marks new have X our consecutive relationships satisfied.Shifting $XXX a high-quality to bringing the base another the all million steadily to portfolio a added balances X. added result, in with in here net third We've loan quarter. and customer with of ] quarters, segments

on the to slowed. as portfolio slowed saw more moderate continue throughout cautious make growth super While and clear customers in prime where what the And growth that the we prime auto has pace higher rate squarely of appears again also longer a has our be environment.During for third pipelines focus quarter, approach finance in year, have continued we a clientele. it's to growth

from to reminder, to away do auto option loans. continues such portfolio our come high-quality we provide become the As warehouse QX, our expect But consumer something on the reliant led but the us theme. a loan to would a mortgage book during yield-friendly disproportionately as diversify not intend to we commercial not mortgage.On that's lower-yielding third-party side, non-relationship a business way assets originated

quality the enables diversification Looking has that lending growth seek over continue that we industry, non-relationship forward, time. classes selective clear begun delivering slow accretive emphasizes us This yielding but to returns. asset relationships, for it's the while and to lower to deemphasize environment

finally, environment, of expect for total loan slowdown in X% the the Slide we X. Given now between X% and growth lending XXXX.So on

expense again solid [ revenues with diligent once quarter. during management the team impaired Our third ]

quarter. our that, pressures, Given the the our PTPP income the industry, funding dipped is capital increase.With our facing Meyer, Derek? XXXX it these was lower quarter. I'll or higher income trends in Financial detail further XX% than to than PTPP income despite million a statement year-to-date pressures over for XXXX, But provide our Chief funding margin, Derek to million $XX $X second in Officer, million $XXX on hand to the it and

asset quarter I'll highlighting on rate liability Slide Andy. through by our X. trends and start the Thanks, third

continued increased rates our loan by of same XXX grown rate whole asset segment liquidity the period. or funds the pressures a a have back new cycle, of due industry. asset-based [ equipment to the customer of have our of as reprice the we've over liability shift earning Commercial funding Our large rise and to increase in target floating cost rising total loans points continues book. and to to add yields such the rates, have yields XX% the categories they finance, basis as rising to continued asset side, significant create nature CRE the rate Since lending while ] Fed in higher.On roughly pressure of total repricing deposits, yields the start most and rate and mix book converged for

basis the has steepened to While of meaningfully XXX interest-bearing points these previously. in liability for profitability deposit the as to they largely described continue rate the expected, QX, in quarter were pressures we the costs fourth meaningfully stabilized in Associated, played but challenge betas, of XXXX a at cost since have in to rising the pressures amid increased now near-term.Here XXXX. out shape curve have Specific by see planning the S-curve funding has the environment pose

of our climbed drive X to The NIM point has facing to cycle.Moving cost funding a start XX% in pressures deposit roughly such, since the interest-bearing industry Slide compression beta QX. X. basis As rate the to now combined our the in

was trend decreased just stabilization also of demonstrated which $X and after margin view compared by dollar in as significant by QX. sign half we our year.This the clear interest QX income, of first stabilization net to million the this pressure trends in remain, pressures a While

our rate interest sides and of past over both As but as have interest income loans, we on decrease environment sheet future to not it's customer the peak customer that reminder, to adding in environment we to through rate call we're provide we've to rate to maintain actions on the the near-term, mentioned the company but designed previously, rate the have sensitivity asset slide, over our solely decreased with of intend asset quarters.Whether and couple hedges, more additional past of the steps do a also core see reasonable interest side durable risen, a the our our actions to been or balance sensitivity over high-quality right-hand drive layering deposits flexibility in can these natural downside to sensitivity continue the in performance we take manage will benefited earnings cycle.As going sensitivity however, forward.We time not several dictate rates years the gradually risk.As these on on our this have you efforts asset taken from relying quarters.

is for We on XX% a interest growth XXXX.On in now XX% reduce impact by has also this XX [ Since in risen scenario, in macro prior capital The manage our a to risk.After AOCI, of remain rate our current the reign securities our our in This CETX the durations longer-term better expect an but third rates by we XX% XXXX, and expect positioned ratio XXX our rates. over rate quarter. impacts point continued deposit the of book quarter to securities to we're X, time. to the for Slide up growth, rebound to benefiting points, uncertain, quarter, basis we've adjusting eventual have the continue impact for ] to include driven we expectations would quarter outlook basis but longer the to target. sheet primarily third CETX based within third from X% but in continue action, balance [indiscernible] or higher rising slightly the decrease our and book in to betas net between Fed represented income of in hit remains

total quarter. investment, maintained second assets, XX% cash percentage positions a straight and were our roughly for of security As at the

income total to our we XX% Despite between pressure to XX, fee the the XX% highlight structure, wealth to for income continue account that trends. charges XXXX.On expect increase income and adjustments we non-interest $X and headwinds Slide We factors XX% quarter-over-quarter increases in fees a target straight modestly and gains versus primary non-interest XXXX. at and management investments assets continue asset service non-interest between million. landed to from of for total contract modest to The third fees.With X% deposit were the market-driven downward grew in our and quarter million said, and in by increase -- and XXXX $XX

this in changes deposit reminder, XX. by half current Slide moderation anticipated due income OD made fee As and is a market of driven account XXXX.Moving to back compression we dynamics NSF to in the

expenses quarter but prior by third period Our X% with versus the year a ago. flat quarter were increased same the

make initiatives. in continue to investments support our people to and targeted We technology

ago. points the basis Our FTE during to period XX.X% but ratio lower rose quarter, the than efficiency remains XX a year it same

special our to growth below aspirations long-term. same growth our opportunities assessment.Shifting basis, quarter, over mind, from base in non-recurring expect now to expense X% impact revenue number Additionally, we the to expense will incurred non-interest is expense to has points fourth to continue assets non-interest remained of optimize X% such FDIC's as below in X% we to support are in we where invest On keeping growth ongoing in XXXX, would year.While an expense growth percent base and as committed total pursue XX. any the of strategies continue a the the possible.With XXXX, we XX period average basis but between items note and in last Slide down that excludes in this our that

capital funding organic competitive a prioritize to while the paying ranges. managing levels towards dividend growth target continue We and

are the our versus and the capital target in remainder to continue look the expectation now now prior X.XX% range Chief range to credit and expect We remain over to quarter short-term quality. CETX our comfortable as remain year-end. an grew levels X.XX% TCE we provide conditions year.Given out XXXX. land update our it to market and of range we ratios versus on upper in X% X.XX%.I'll of at rates the third to hand our year-end the current of end quarter, Pat Officer, Here the a Ahern, to over the with capital for to targeting Credit the near-term, increased elevated by We've

start and Slide allowance We utilized the with our high trends. growth continued GDP like CECL remains a interest no Derek. a baseline with resilient hikes, on forecast forward-looking XXXX market Thanks, August to our but an slower cooling I'd additional despite the assumptions. baseline forecast XX of The rate on labor The rate update for inflation. baseline positive Moody's Moody's economy environment. deceleration forecast consistent contains a rates,

our $XXX million and million.Our portfolio growth, combination the during be $X quarter continues a nominal by the Midwest reflect remained driven by of X loan prior that increased the X.XX%.Moving the allowance Accordingly, general stability basis a and year movement points to to trends to quarter of ACLL at flat higher credit footprint. reserves Our to to loans macroeconomic than ratio XX. Slide our period same ago

charge-offs quarterly trends non-accrual pre-pandemic previously to during during a sign moderate Our We the stable across see an quarter, as the the with indication as portfolio. a third in but normalization portfolio anticipated did relatively increases we of shifts of delinquencies broad-based back opposed quarter performance. loans, third these migration in remained issues broader the to reflecting credit levels portfolio discussed, and in normalization as

a X pattern the our is geography.We mentioned, the past provision matches Andy or As quarter, anything and seen provision added to industry of which with consistent in have credit another not we during suggest quarter in quarters. million second stress specific a $XX third build

the focused remain supply on As elevated and build loan ensure reflects inflation, current monitoring trends. largely limited the growth, function provision to economy was of a mentioned, of economic the to a analysis uncertainty We macro underwriting attention continue portfolio, macro this the rates concerns.In labor movement bank-wide. rate to we specific sensitivity chain interest to maintain effects ongoing on cost, disruption name addition, and of elevated few interest including credit just

in past expect to of conservative provision over rates, CRE cited a economic the loans continue super across diverse conservative consumer the we've given conditions, risk we the focused of building area been optimized approach past I'll stable we quality.On In to of applied bank. emphasis portfolio on that adjustments loan just quarters, CRE and represent focus with the commercial volumes an that based approach within properties. loans Midwest are course prime for Office on an a portfolio, properties. partnering reflect remind Slide loans feel XX, Going we several X.X% any has of the with our years towards and total a to X/Xs and Class developers credit of suburban markets.Over portfolio indications our forward, of portfolio.While we as is we've multi-family as prime on well-positioned several media And other in has to A Midwest risk changes and been as you built high-quality industrial our the portfolio, well-known bank. in credit weighted our the

well-positioned in feel some Andy we given in, and model of all to the we will I now to continue approach this markets closely.With share to operate closing hand monitor thoughts. it our While back we that, business our portfolios

from a to XX. our out Thank couple you. by key I'd on like presentation close Slide reiterating points of

enhances ourselves to growth on First, our up our non-relationship we've relationship-focused lower balances that and quality, profile. yielding, decreases drive set profitability loan reliance

expect foundational XXXX.Second, in combined see net growth of in lending With and year-end.Shifting a in between slowdown balance given guidance disciplined for income drove our that environment. environment, adjusted year. deposit deliver we growth for typically most the approach our environment, seasonality lastly, We stabilized growth we we our unchanged to volatile loan rate customer remains focus total year, strong quarter. deposit the in following leaving third the approach betas to flows now XXXX. We've in company. revenue. initiatives, X% And has growth, a a expenses recent clearly recent our deposit half to X% between The forecast sheet for environment balance full stabilized first as and the core we're X% said, the our deposit with and XX% the the expect interest now given However, of

items our we year, for the QX, As questions. guidance for such, such incurred are let's the open non-recurring assessment.With as maintaining that expense in this would FDIC's up non-interest guidance special that, excludes but note

the Our Instructions] [Operator of from line Daniel with question first comes James. Tamayo Raymond

there curious charge-offs we net increase. the what a not mentioned really non-accruals, increase just But you're or normalization or that on just normalization just look about even how the we thinking you could C&I. about what how thinking pattern first, be know in should I credit of Maybe was should, provision a if of like? to it's costs,

than of saw we I we a terms think a in what charge-offs, would say, little little this quarter saw quarter, but was spike I a more of bit net last this probably quarter. normal

are these of think just things. a I handful

settle non-accruals pattern. pretty credits would think forward, to and for And of hard to -- back. going going be last we're I it's we're consistent expect as normalize similar quarters over I could provision, at, the they now. watch Where right probably say couple

And growth, would from? terms future then the the growth, might you touch in those where that loan for if come then helpful. new categories, what loan on be curious thought yields where I'm looking at just And of are that could loan is

Yes.

we that auto expect steady So and been obviously, to continue. has pretty the

It's but also to expect expanded into rate the the box. our states. bigger, drop, getting credit haven't would moved We of so normally footprint you we growth

dollar is And -- so are steady. the increases

quarter, think balanced I expected quarters, we this growth. -- like most we

pace the saw our of the year. we RM have, because to we C&I.And guidance of more new this in saw replenish we and year-over-year would prior while back down, pipeline you have the additional growth our our in fundings in year hires, we through and that would have took not pull expected So -- into continued just earlier similar that grow names we've at

haven't we'll been our when through pulled new for how year next yields. that so We really about position we And that production guidance. into sharing think then And we guidance. give has XXXX

that's but materializing. won't how have things been I go So there,

know and regards portfolio that to growth, the not. has yielding growing you're we're lowest the have. is where been far mortgages growing on third-party to you're we it's And with where say, that important not originated and where by I'll But portfolio

of portfolio, origination and and $X.X stopped its a XXXX, just was in which it down. I we that believe, billion shut we when in $X peak, in billion So around production then

So which that basically, our or in believe that stable, means the that residential over the a is category, decrease clearly, quality sheet a grow low we'll balance you'll that C&I real see category, most the on of runoff replace time, likely estate slow. to be able We won't pace market. with no growth a CRE to very been little business.Today, bit although pay-downs at have

So see relationships. not I pipeline may to our you'll look With have just [ -- took hard we a numbers ] quarter in that think time, C&I. over also at at and hard took look that the be a regards relationships -- we full fourth

we those so, won't together. relationships that full in those usually those extend be are tied And or are aggressive and are lower not and yielding that

year-end the the of we've bit full forecast growth. that adjusted little on a reason that's So

And question. then lastly, just a high-level

is But guess rates could to mortgages. to attractive? more origination that loans to certain could a for where a a overall, that might or there about of is it extent? it third-party sense some kind margin make the a on touched or point way that perhaps of breakeven you be reset I those to just thought place Or get where have there sell You would -- asset class

pretty a X been months. Well, the market last I know interesting it's Dan, you mean,

every And security. as looked so tranches, looked be I now, to tranches not there's would We've those in of opportunity speak Right every category. over what time, at we of that. as we've know looked to at prepared We've period our well loan we If comes is for say of now. when prepared know portfolio that. time And an tranches. could that right we'll it we're one a at there

RBC next with from Jon Markets. comes Our question Capital Arfstrom

X, can look don't is when I margin cadence when at I you know this a and Slide about at it I you would X, your if Andy, interest-bearing mean we're But bottom out? might you're Derek Slide on to and talk a the of at Looking near some of the but and just is think X repricing. guys bottom margin? the liabilities like pressure Slide bit say your fade you asset sure seems starting getting on little or or

put that can down in When we've That good where Jon, months, of going not I I going modest takes one and to then And confidence determined think fourth -- pretty non-interest-bearing on slowdown the the that's we the that that, is. will that helps a this And We've at Well, that And think encouraging place to it at what higher it's there creates I volatility course, that, slow the growth's did to signs, going the don't I be. attrition what is there seen than force sake quarter, again have go getting we that understand is non-interest-bearing interesting. down we We asset say, to actually I tell put The been the we're a We force won't near us.When quarter. is more it. what that's on several knowing I experienced. see end But what We're percentage. us in be bottom from pressure that few allow. is you last encouraging we're yields. saw XX. think our where can of pretty of we for deposit is, why this in a near certainty it significantly the your we less we higher about bottom.We decrease that the growth expect it market seen look the sign it's year. a you at on be question. will yields, talked of out next margin. decrease growth into is -- for on feel -- lot would March -- beginning becomes, you as the growth, question what year it some the we've

there. expect in decrease We the in we to continue will an fourth XXXX, do believe point we quarter. So margin see in pressure the that to inflection

based right terminal multiple it's number, positive the non-interest-bearing number terminal is getting variables, see deposits. to one on course, that hitting but close Of now a number I on the

Yes, lot -- a standpoint. I add from don't there's think I my to not

brokered Slide customer you we there you versus And CD the how couple X did quarters? should balances? and more customer CDs, talk of CDs next of expect can the bit about attracted on a that in what the little you

Yes.

the the now ] little continue fact, we're quarter, largely quarter. customer bit we CD promo the sounds in for see like towards even interference, Our let's we're of hold. have this the end toiling balances time, continue of I a but getting quite dropping to [ some last to been their think rates hold It the same [indiscernible] if ] idea And the production. rates can [ some with

strategy that anywhere. or just CD. So we Most production helpful and well along -- the went rollover -- year this progressed it there. with buckets Silicon mostly been lump sure we deposit things all for our a was into maturity secured only get that down. The story long-term as we've each worked short into short. wanted in option stayed coverage, that's or growth little as And about month, this really has the and -- very brokered a short-term whether then months grew we Valley, obviously. have everything.And them. more. that first quarter, X we then when piece pay the along And CDs, don't we went we want almost the we've large just of -- deposit a growth, And we've then stayed spread have all After we X-month we has that we make bit fairly to so had out that And it funding

And would approach going seeing on expand attracted CDs with tranche right deepening heading reversed say and our gives you had when goes process a CD, banks a -- non-interest-bearing, into made business. it's of product, that that the digital into the customer we we're we customer whether reversing reversing growth. is is those in marketing, many so, when create even a the into look in literally look direction. that growth, managing and that towards have short have volatile growth purposeful whether question to customer years actions that with at maybe in we when tailwind is -- Jon. XXXX little that whether thing that me And market, CD, I even yourselves. you customers. trend When for you I back-end one marry And no have and multiyear doubt confidence the on it we've customer for What of we've whether at tactics, customers that we the one are bit, you trend customers, goes decade.So we've goes past into how in money as a most that attracted of I would when -- that regional stop a what there's And started a I how -- argue in

So in initiatives we've a to is a market some customer had extent, the growth. ourselves we've good pretty that position normalizing put the foundational in on through

look do to can or And X? trying lot, we we travel the a And us then I'm expect give expect timing last when thing. big I and when both? Phase calendar, the quantitative What at but reveal strategic, Phase this is my X? of on just Andy, you

I that of not nearing mean, future I Jon. the to end was of a the that quarter It's long. that October right the the you're predict you we're going fourth ask me when into lead-in. did We're packers November. to together little going in here nervous now, putting

fast in be fourth as just the will presentation right, We the can we accurate put together. quarter as

a on but in shared been bit, we've fourth the be working the been something later future. So in it it's times Exact near little for quarter. will

both, expect? what can that we and is Strategic quantitative,

to regards course, will the strategic. plan, With it be of

model, financial to key the into are lot number every We We don't put and on pressure going metrics what to a of side. on want indication your happen will Jon, of us. give put

No, I'm just waiting. waiting. I'm here

Scott Sandler. comes from question Piper next Our with Siefers

I guess stab another the to wanted on take I NII.

percentage a outcomes And takes have it's go the sort NII points. bit wide actually of to your of level? several happen range just, the guess a what that are outcomes? and bottomed like as anywhere looks I it about it to quarter, bottomed think confidence puts sort of to higher. that fairly there sort could out mean, know or fourth of at range the must in possible have out that I view, for have what to So current some you I down would up may of for just be even from

the So DDA Scott, now, the and non-interest-bearing QX considerably. the that runoff That right impact look way QX. things abated story, bigger rate of our margin had on really was to a

little cost thought. into you fair higher was a And amount deposits products. deposit than still probably have moving we a It low-cost stronger so of

and scenarios to spot this rate then loans big bottom ones continue higher at to of -- really year, the get got a old booked For in much things finally need to And reprice where to rates, stabilized. rate for particularly few us with cuts is most fixed pay-down the ones longer-range the those where new start auto.And in reprice. like a you get look out, to a into book in even deposits next -- We've

slower very why of if the than the rates subtle. get basis repricing these rates. or see increases -- continued of a lever very something you they model the And and increasing start that you bit And -- think just the the abating. curve. When of in it's That's call. there's rising as be and at as It's so the to raising there about Fed That's stop of headlines they look rate change, stops don't consumers scenarios we asset their to happens, loans. then should see because of with the curve rates a X hard big out money and points that back you increases fixed X psychological where much do of rate both because doing deposits yield X deposit you little else think mix rate or

by off you can a [ ]. be and You couple points, on other of goes the it basis way

But broader of importance in you've operating it that's I quite leverage positive kind to the guess, that's the -- times it, over individual year? then Or we is that to in each to alluded about just stay-tuned thinking answer guess, maybe few -- opposed think know XXXX? is -- you sort Andy, important way a important the a past think I the December. in should something doable I And you as creation. of long-term of Are like of the sort is and about

up will it in me a give XXXX. Well, take on that for lot to

So for for any of my own our colleagues XXXX. listening, that's I'll tell goal you,

the -- of to sheet. at will looking investment market-driven We're it? when look and we're of investment looking can balance we what question and we execution. part shift my our our in so that's at we're start team how to is, the both And what expense is at And strategic be, do looking part at side sides. the fast it's And

don't They've trying numbers We'll September but like to On still we're we positive leverage front, is XXXX. message their gaining of yet year, over see but launched Albeit the XXXX, to drive and in put fundamentals of market ability the plan the what the can that for in we team. to that shown an our lot we've since coming confidence period what the in challenge work out interesting the plan the for. through.So that towards that's operating had place allows, is this final try that X to months to the We have looks execution together, what a you XXXX. I'm direction. leadership the of team see put execute X initial but or as in still

comes Terry question from next with Our McEvoy Stephens.

some non-accruals, loans, there in in problem increase end on were the such lending versus call CRE. the saw much may think cycle was investor the late Associated bucket end a a relationships and the at release, to legacy back into see, trends? a since increase I back normalization grower of commercial it I of I'll potential maybe to that commercial -- as of How how new they much of fall credit and faster out would of Going the that XXXX and you push it, give platform the fears of

any all to a the non-accrual. think isn't through quarter. handful of Yes. back not -- at seeing that deals -- we happened moved And in coming don't We're years went us. I last what's haunt into last of growth see this I of the that couple had We

book terms of rising In up holding estate asset we feel still we've hit got gets really real of the our is real is rates. still -- some migration, -- class interest strong. The by estate

they're real remain book, doing relationships be there.So there relationships. there's -- years. go inflationary still that in storm, got whether the they're all added taxes, little stuff but pressures, in -- customers. the a elevated, and not how these costs on will pressure estate estate you longstanding throughout I the we've think there. it our with with weathering -- insurance, transactional You've expenses we're still operating as are grown be targeted one-off we're real outdoing more But is the These We're comfortable with work

the non-accrual to speak estate the of footprint? real and Maybe nature trend

pretty Yes, I moved non-accruals, on here side We've haven't really had strong, it's I mean, some more book. the the the really, in mean, been C&I quarter. we estate. a in real of this terms lot that stable seen needle in performance

have been period. net non-accruals negative and that the X-quarter past charge-offs fact, of have the mean, quarters down each X been I in over

question, of would evidence that Terry, if be So that. we specific the see no

just maybe follow then And to up.

-- the expense. related Does Scott guide a thinking question. quarter the saw was the and of plan, I I Phase to similar FDIC asked the Jon items, expense X non-recurring I think not fourth strategic

does that to fourth year So see reflect guide in out strategic any quarter this X Phase we And next a quarter? step-up will announcement the come will expenses expenses? this due

see maybe role, each suggested And when I'll always into speak room years. the guidance of of approach though those to X right that each even opportunity expenses to was And there cut. areas. for last cut XXXX, There's investment been to We've gone into for has decrease do make. We've in We X made we opportunity you see the room each we year. the to to next that, came best -- no on There's same folks this we always room to I in given that haven't cut. our years. the need now. investment some last before

high about that to gosh, have.When So very will we new initiatives, well, expenses. you're the have going we think be people approach say, that

years. X in not have We

not next will year. We

to we're that's end any tune we the regards extraordinary regards allows see though fine in expenses, we to we're to that year, initiatives -- fourth operating what even initiative necessarily we of with like where game me result a So up. planning. in quarter have spike leverage as feel next need don't to positive and With the

Yes, those I proved wrong. and me you of was one people

you hear and I loud So clear, Andy.

Our of next from Fargo. with line question Wells the Timur Braziler comes

Is level maturing expectation to for close Looking into just I'm some auto loans some 'XX. into of to it at point starts of that markets? book to to a you're newer that in space your accelerate as process Is have starting the assuming that book, the that how I'm maturity, happens, growth reaching that just is expansion there? meaning maturity? in wondering loans growth? offset somewhat we I'm kind and finance is point And off? of that that payoffs wondering enough some at what Or eat should see pay

it mean has I is historically been duration book That XX less. -- interesting. been the Yes. that us happened. or of and -- already for payoffs months The typically been

so And already on basis. a seeing we're monthly -- seeing you're that that

go book you'll like future auto. work through is that a you to And in the what happens and the we'll -- it's exposure purposeful do positives it. the of so growth in bit start predict that of and is it be happens that one that And that, wouldn't to regards out peak With a having -- is, a about that over in a steady what won't the exactly portfolio. but down quarter quarter probably growth hold see time.Which be to runaway then in I little what is,

as not to is the goal known simply bank. be auto Our

in significant and a have have we think invest We to We commercial. continue opportunity.

think deposits on commercial. for diligently we We've fact, market working We bridging been gap. that very in underpenetrated data we're key us shows in In are. that markets that

and so look that when at loan we there's commercial. think look opportunity side, at we And in we the

auto look how far and growth CECL line just accounting, with corresponds mean new I standpoint in credit been so the that a is. really from how maybe then business nothing And back has given the

does from portfolio charge-offs. CECL see have consumer and actually normal higher start modeling you're a that we growth or level just a there? in could less to about standpoint? you're book to historically, auto a I'm tends of thinking that see how step-up that to level more and normalize we a of meaningful charge-offs However, wondering move how once And

Pat. that, points prime We through Yes, of the mean, super a higher is But in cycle, [ book. ] low-risk you I it to I'll book. the I it the this I had level and charge-off prime that over Tim, strategies. that saw And note I by about flip to a I'll and know that start mixing rate and basis wonder about that is talking XX consider basis what charge-off XX points. for a

in that credit the XXX. XX the bureaus finance over XXX FICO we the lent month, very is lending consumer in in scores it increase believe And overall seen that example, a model.So and month $XX super and scores about an a we is last have book I prime We XXX. this see the of scorecard between those portfolio around and we've real similar we're credit into estate XXX -- actually in on see balanced prime, equity and our between for before billion bureau last customers primarily don't was of in residential. -- to books we home and And

fashion a multiple because at we're people that back we're -- consider parameters.How to would So in Pat? I and in else to don't that, and a you book all, calculate this lending high-risk pay us answer variables risk the that lending takes

good yet, space. are of it. have we gone prime it into in in very in that I et charge-offs, with delinquencies, happy been cetera, performed. but how we've Like expect they've prime and that's think No, haven't the said, And the how tracking mean and terms seen I would we're metrics maturation we're we summary. Andy a deals that -- level super

So it's really were. kind expectations of aligned our with what

how on that dealer and what network last rate is growth Can is And be one then 'XX? you provide expected to that update just there. in an big

where quality now. as ] how said, our model. say fit expanding through on would go about dealers within we've I dealers terms their of we'll business course it they based And the ] Derek in right adding X,XXX we're Yes, and footprint. sense of [ model [ the makes our same

guidance XXXX yet. Tim, for provided we haven't

Our with from line McGratty KBW. the next question of comes Chris

in Just little one Andy, end, on a the capital Or you function looking bit quick year? change high XX. it economy? bump that a through to signal a months where to up you're that is The on run of are just more X kind of on the the capital this with trying is running you're Slide --

called I Derek question. here. Chris, me literally answer right your wanted off to

thing. such know didn't I

it above do So is [ is, because going would see have ] we range target it I gotten move was X.XX% the buyback. if to how your before, we a question didn't you're oh, you

So end up. the as we're so high -- bumped as we not simple that. It's

Chris. question, He really did want that to answer

It minutes, took sorry. XX

we think we queue, Ben I more [ do one have in know? ],

Alicia?

you are Alicia, there?

Yes.

about Sorry from The that. Preston the of next Brody line comes with question UBS.

a and unfortunately, So in like an airport Jon, lot, so also I travel I'm now. right

if quarter's So me, I if of just I was you there's right? anything of I hear know background you noise about a through And wanted this given just you bit the fees. if that? it the specific when implies in advance, guidance, apologize and/or there all ask can't wanted fourth to I quarter. the a results, guide, know to flow but step-down quickly just in the driving you kind maintained

going MSR step-down last That otherwise, that had standpoint. level. up. from We've valuations strong at won't pretty that X would But fees our suggest related not. there's specific the a There's quarters continue no guidance to mortgage

And also generically on to I loan just the wanted ask book.

what's shared give the has portfolio -- And could us credits? of the lead on? that agent national loan you your portion of the If that,

of credit we've In our the SNC verticals perform full terms of a years. of business within model Utilities is Those well Power both the had concentration & the portfolio, makeup standpoint. successful as continue and of reflect business many very largest lines to the Both portfolio business. for SNC our those lending from there portfolio REIT as that well

continue business happy from to an we're we're a same doing sure standpoint do credit -- and make as standpoint, we from we on something as with front-end it. review underwriting management fits portfolio the those it do So deals specifically with the We SNCs we to that And view direct the model. both deals. very

Do portion loan it you happen the portfolio to of is? have what

have I disclose. customers From not low-risk of And standpoint. out with of lend that's the risk team credits that portfolio. these question this from would not it, fairly think my regards we into the for that a what as me, the a we're lead-in, I with we we Brody, when get credits trying of were would see we to standpoint, out And is a Yes. we from industries perspective, and for but these understand. return get something to that,

portfolio spent is don't this credit all I particularly single of And I view not in the and quarter-by-quarter, portfolio seen every as we've with so extended that see have a credit last, a high-risk that But that of that been businesses SNCs, be asset.And we've And could to single loans. that almost we bank know, I goal. that will every months our the we've not that time of type credits of across replace X a believe with -- or the we portfolios. the so by of looking indication it, in an go in those regards there's of for emergence period higher-yielding

loans the the do you And office then office the that have against reserve is? portfolio, setting aside on what you're

building say been that. we've that Just want the couple here. number specific but front last I I that a been we've don't building of quarters. have me, over of to second in

Our stable. office portfolio has pretty continued to remain

outsized of not just in We lot against degradation a uncertainty given that reserve do have have it, market. an seen there, but the we

one to out the that going those that I have And of of do Andy, get longer-term Are here want just like targets profitability last the version to road. achieve? we're to going down any to then you're kind on X.X going the ask or just to one plan set medium

Yes. what that about of hard is in to the I'll I try get very say front board. not Brody,

I the over detail. that days very proper have am meeting prepared. be with of make XX I we'll so governance, Once the next to go course I them sure in over And

In from sharing we're back fact, do. holding to what me they're going

are they announces questions, fair to they're before that actions have we intend later year-end quarter something questions So specifically to and take. intend we this good what

forward we this hate interest. it, to to but that think conversations. Thank case.I all for further way, delay So We you I the in look I appreciate and must that's Alicia. it that

concludes This teleconference. today's you. Thank

may Thank at disconnect participation. You time. your you for this lines your