KeyCorp (KEY) 21 Oct 202020 Q3 Earnings call transcript

Good morning and welcome to KeyCorp's Third Quarter 2020 Earnings Conference Call.

As a reminder, this conference is being recorded. I would now like to turn the conference over to the Chairman and CEO, Chris Gorman. Please go ahead.

Well thank you operator and good morning and welcome to KeyCorp's third quarter 2020 earnings conference call.

call Mark Don Officer. Midkiff, the Financial our for and Officer; our me today Kimble, are Chief Joining Chief Risk X on measures. statement is and Slide financial non-GAAP forward-looking disclosure our as It presentation of call. covers the materials comments, our our question-and-answer well and segment as now Slide X. to turning I'm

quarter saw you third press common share morning, we release As per this of our reported in earnings $X.XX.

X.X revenue up Revenue was our first in notable losses and nine double of for the from items. quarter in third the X% was billion and up the Our to from we added X ago net reported through year. impacted the generated the EPS prior reserve the Despite we by billion was months year challenging environment, that this of which more period. which year than period, pre-provision quarter credit ago

Laurel interest net loans consumer the strong environment, the elevated income and low of year. that Average were rate and reflect offset continues balance from made reflect mix. liquidity, Our line earlier consumer sheet Road performance in by draws in paydowns changes to mortgage

funding Over of our were Our ago business generated purchase and year from more last this than was of volume consumer XX% the billion more than from period, X% one quarter, mortgage half which quarter. X.X up mortgages. originations

run based current to will over we growth time. strong remain $XXX broader build mortgage discontinue clients. Road originated originate and quality business. to consumer Laurel decided loans high will with indirect strong show sustainable relationship us gains. to The platform, off X.X portfolio that continues engines an the be growth auto originating With relationships We expect opportunity In pipelines and both consumer Our to quarter, these share believe that approximately billion we Road and million. Road to over continued our third consumer Laurel of Laurel market digital for have with targeted provide loans. our continue

another consumer banking good and up quarter. ago income. solid stronger Investment cards We another the me had year reflecting to turn payments quarter had period, and increases. from our was mortgage Non-interest performance. let Now both will fee quarter, income we continue and expected his to consumer and strong in remarks. revenue service both well-positioned posted are discuss believe businesses. our We on grow accounts charges linked to deposit Don commercial than outlook

digital while growth, quality charge deck, Our on expenses have to the focus safe. our but we basis efficiency portfolio portfolios keeping focus these say were updated areas payments these offs will will are related improving true Don with just have costs and incentives, quarter to franchise. as for I quarter The our our is upon disclosure based group, our or quarter, peer of were reflected loan consistent with disclosures. the deferrals of book in Last lowest expectations. in performed his that comments, we XX in points. our better the public cover generally focus than also In commercial remained pandemic cycle. this level loan activity the well for our deferrals. areas. on expenses, particularly Net elevated this reflect our continuous quarter invest and as higher variable Through the the we teammates and efforts, continuing production Credit our cards costs as risk moderate clients remains profile related have improvement our throughout related our maintaining our associated our capabilities quality to across solid

expense clients than X% $XX X% loans. exceeded our subject by than commercial of third from loans As were XX, to XX. our businesses. This That's offs equates both terms to at June and forbearance quarter, the of less million. September down in consumer less X.X% of total provision charge In

losses of PPP loans. X.XX% at stands X.XX%, or end credit for period a percentage now allowance Our excluding as loans

same In shareholders. position our will foremost close targeted while good was capital unwavering to of Key, a to share, at one we our of to strengths. Finally, the I our can by end underlying $X.XXX where we and about can demonstrates being equity team we It with another and ratio upper strong second increased clients common In very paid range first in the common have restating maintained paid quarter. compete, we X% where this is starts X.X%, quarter, dedicated we amount per our the to our to stock which dividend for capital which the of that our third targeted win. commitment quarter and continuing their our tier X.X%. return September,

on of confident the return over am And long-term our to deliver our in environment manage return expenses, forward financial will ability the the capital. on our on focus through time a both digital. this And our strong to Credit: be of future, big the targets. value for a practices. strong and part I maintaining management all of cost: stakeholders. focusing and achieve risk continue while current investing lastly, for going Next, capital: investment continuing importantly,

Now, call let over results to Don? through of Don me go the quarter. to the the turn

now X. Thanks, I'm Slide Chris. on

reported also the I cover our many from presentation. in growth of including in businesses, discipline operations slide momentum my common items of our balance of reflected as continued the strong remaining will we risk continuing and income, this capital per Chris well and on across As net said, as sheet $X.XX income rest management. share. fee Results

year, investments to Road mentioned, of from student Laurel business. were loans and and now an is of heightened $X paydowns billion and mortgage increase draws rate to from The over Commercial performance generated turning importantly growth benefited PPP in in quarter, high from total loans on utilization residential we our originated the reflecting $XXX $X.X from quarter add from greater Consumer mortgage The X%, third Linked million areas commercial Chris average have Road the from loans. balances loan over $XXX results last consolidation our of and were loans both we drive of the year. expected to commercial XX% quality this below loans up made X, these loans. this billion the reflect consumer loans. the Slide earlier were strong year. growth continue continued consumer than line as the and driven loans So quarter portfolio. by average Laurel start of billion, down lines paydowns

by consumer Importantly, and manage remained XX on that with the performing we and basis have down to through the profile. the underwriting primarily the prior linked both year and XXXX, disciplined third on was lower deposit rates Slide in excuse from reflects growth, quarter this X, Total quarter, growth, lower points was the This average points broad driven not quarter. prior and came to interest X% and continue the clients. moderate would offset Growth commercial in time for up our business the base as credit payments deposits, points as does billion spending. well compared from me, longer-term decline credit ago related deposit consumer of or risk We quarter. to up committed by with year billion lag fourth walked impact increase perspective. from about to lower costs stimulus reflecting The period costs prior have totaled consumer of growth X deposit associated cycle well deposits to a decline the quality away XX% quarter $XX in X business we our our meet expect pricing. growth Continuing We remain interest interest commercial rates. to basis to from basis $XXX bearing and commercial the from the

total have to strong continue of our deposit with a for We accounting consumer base stable mix. deposit deposits over XX% core

Turning billion quarter. billion XXXX, to for third net the prior ago X, equivalent for to $XXX interest $X.XXX income was a compared taxable million year and Slide quarter $X the of

that The levels asset loan the lower schedule increase quarter. and net is of as banks understand of margin basis portfolio X.XX% XXXX. larger quarter same margin meaningfully negatively net than impacted one interest interest Both X impacted additional by and the strong primarily our our last margin. questions sheet in commercial benefited continued of details of by net levels provide that was million, third XX, prior other third points, is loan pressure fixed of liquidity. net basis our X.XX%. in balances. for swaps. securities. Slide with by in liquidity for received $XX quarter several balance on all margin we basis The our this in interest margin by significant Our deposit swap compared the X% to classes, Elevated of an for drivers expected decreased net Also, XX an future interest was maturities interest the income important Recently, appendix, point net points commercial impacted the to income the the interest of compression. Compared were a net by the lower interest the driven inflows. on we've liquidity about quarter, elevated balance the driven reduced interest loans On are growth to additional XXXX, and due maturities of sheet margin investment impact contributed interest our balances significant net period rate margin The margin. impacted to fixed of rate that rate only year all to it maturities the the income prior netting X by

percentage a that total slide our also assets of line level peers. is of We these with earning this combined as show in assets on

$XXX the Moving million the to service non-interest gains $X.XXX increase was quarter-over-quarter was the in quarter $XXX offset at in as comparison. to and compared in million. Slide cards increased increase non-interest million Compared partially The compared businesses largely quarter-over-quarter as well Higher as million. was elevated Total for to personnel million quarter to million year increase and for the activity to for investment employee income which mortgage costs in by ensure were and related the on our the costs, prepaid as prior increase second on and the another income accounts. quarter. last the lower banking the the charges The another continue prior loan and support given The period $XX decreased related to I’m $XX related state another $XX filing employee well origination. related the higher in turning driver now Cards business record grow of as second Compared Consumer million in deferred costs, XX. costs an and of year down of from $XX debt quarterly environment payments billion, to million last reflect consumer costs, quarter. the ago largest decrease quarter. second up million, the levels had deposit to healthcare, related income reported the $XX for business leveraged to quarter. expenses was quarter to higher quarter, primary we leases placement teammates. and and related come non-interest Non-interest $XX from benefit primarily XXX safety of strong personnel government quarter XXXX, $XXX year related the an solid non-interest income payments fees also from costs. fees for income million benefits, million. impacted which Though quarter merit on lower volatile expense, $XX income due related health payments of quarter. the million as programs. Slide ago down Compared lease year the increased XXXX, higher and expense the quarter, driver was million payments by a ago mortgage the prior primarily see fee-based our expense to of quarter $XX $X.XXX prior in increased origination had is billion period, third card year increases, operating to $XX of XXX These of was we income million The dollars had COVID-XX to was the quarter. record X,

XX. credit Overall solid. remains to on Slide quality Moving

loans. For were basis the average XX of net million charge-offs points or quarter, $XXX the

or by losses million quarter $XXX points credit loans $X.XX XX of $XX Non-performing the in basis charge quarter. for exceeded compared to provision were share. per loans period from net XX basis Our million million offs or year $XXX points or ago this

XX basis day XX in plus to day Additionally, quarter-over-quarter, decrease our X a XX declining delinquencies quarter-over-quarter. also and category dues actually improved the past point

customers. our continue requests monitor We level from the assistance to received of we

decreased the requests loan Over number for have past quarter, of dramatically. balances the for

than based and of outstanding XX, less subject both forbearance As were X% loans of than loans, consumer number accounts September of commercial less and on using X% balances. when for the

XX. Slide to Turning

our focus small continues total enhanced in represent these in percentage updated of to monitoring. a relationship These we to mentioned, balances. loan focused disclosure that environment. receiving greater Chris highlights subject As are Each our that active and certain areas portfolios be the reviews areas

consistent group Importantly, they expectations. a as continue with to perform our

Slide a our of shared to had to Conference. we deferrals peers Turning our recent at summary XX, compared Investor

level peer As was in second leading our deferral here, shown quarter. the

have we quarter. earlier, in dramatic during deferral the noted seen As levels reduction third the a

Now on to XX. Slide

dividend quarter, strong with was ratio common the and level. maintain This sufficient to $X.XXX of continue their the our upper which this needs us of our second with X.X%. capacity level paid XX range of second of the We to our a shareholders. customers X.X% third of points from common target capital Tier In our We provides third borrowing consistent that have the with continued share, ended X return quarter a We end support X.X%, believe and to to at quarter. we equity up basis per in places to our us capital. X% quarter

Importantly, quarters, we over four of share. [fourth the XX, our $X.XX Slide for beginning provided of quarter. above run have last $X.XX outlook XXXX, per well dividend the have fourth per share we current rate quarter] our earned the On with

low We grow. continue expect be single quarter. fourth reflecting to average into down loans the period loans Consumer lower imbalances should coming to digits

estimated that, PPP of $XX expect net single repayment income to costs, relatively to dependent expenses reflecting charge-off benefit is level are On the be we of a consumer year, Core in remain Non-interest reported We digits highly the income bottom finally, range digits point expected will this basis to interest remain all growth targets not decline the repayment The the XX expected to emerge low point stable Net call a instructions the shown achieve basis reflecting be deposits XX from will as for with relatively relatively we net Q&A strengthens, the lead is path Non-interest $XX now I'll offset to all should interest expect mortgage that ranges. banking our are incentives. over low back turn on related be be and the a to million. down quarter would and on targets. And to the million an variable of economy to [benefit of John? production within next to of margin, fourth quarter. us the of] in stable, in the placement operate the long-term expected that portion and the back our are by increase loans. single the of investment we target on fees. expected operator including call. basis, With slide, our of debt pandemic stable.

Sandler. of Thank Scott you. first, to [Operator And line Piper ahead. Instructions] with Siefers Please go go

everyone. Hi. morning, Good taking you question. Thank the for

more it to run long stop to run is going Let's those say, up? billion Don, I'm How on first $X.X auto so the maybe that'll Road But guys mortgage the importantly, wanted decision years for run-off example, and you just and that guess three to where strong do like originating know, imagining can off? net to origination For you ask you indirect I take outlooks? feel growth? generate via you’ve outrun or still less. got Laurel

the that of about average Scott, X.X portfolio years. life Sure, was

it in total So, take probably about X runs before off. fully it years will

those far a excited can loan now, in as we year so. thoughts as those see also can will the origination highlight each balances. of far we're about we capacity and bit the little as why and more consumer declines originations, exit as So, And rationale Chris the generate

than expect about indirect was you billion, book have ago fine. quality a just didn't year originate X really year, targeted the big years a a you scale, it's ago, than we've relationships, and have consumer Road we billion. of a that business, lot two both return Scott, it's to perspective, can't years know, the lot a have returns talked you from our generate grow From X would of continue those. and look Conversely, you to This as product. know, didn't plans, you relationship business. more So, single frankly, obviously, This about talked Laurel a perspective, X a we've mortgage know, kind generate at well obviously because will more we business. as we we we’ll

support to of use that we and your we to in our capital the do or stock really relationship question, buybacks do do. think think or whatever our premise So, whether on we outrun clients we it's think a We it can consumer are basis, for business? use capital. better other things, And our we can it

you. that. a of you separately, kind of Thank from, ability to a Thank – opportunities might appreciate applying infrastructure, now here, sort of challenging you know, I down then branch to same of pandemic, that, broader operate thinking of just of know, very a if sort know, years? [thanks something perfect. the the next top the curious you you the the] the Alright, coming footprint, how lessons of of you any on are out the cost lot we just level for about do worst to see environment much. couple question, stare without And revenue sort of as you side guys for sort learned

think the some Scott. trends that already pandemic We Sure, accelerated certainly were there.

know, Today, invested we you bought X,XXX texture, have when Niagara, we had some digital. in you We've give X,XXX. to heavily Just we First branches.

digital are of our you than up active. now customers – digitally XX% Our take know, more

But we January. look take know, replicate do in fast you as you fleet the we of that of the the footprints have other in in a think there of are and relatively a more we’ll and [throws] other we're some get And franchise. we think at and opportunity have of branches. density on where addition we to the think to is significant we're fundamental of actually things planning in our say physical mix changes, be final there'll in we branch that – change right can that parts a so, our and to and in areas growing And look kind how that we some thin at digital

Okay, Alright. perfect.

January you. tuned it. Well, Good. I’d Alright. So, appreciate stay thank until I’ll till then.

Our Zerbe go Morgan Ken with ahead. next from question Stanley. Please is

that of quarter. Don, to million $XX you fourth you mentioned expect million thanks. amortization the Hey, PPP accelerated $XX in

banks that of that far, think only that's I you're so of one actually I've heard at in. building the least,

most Has portal? fourth actually first they the it quarter up opened on are or question think quarter. the or the actually into terms goes are loans at of based I this in portal SBA? approving SBA or a mark looking the not not of whether forgiveness and And sort is

some No. We as as get funded actually assumptions banks prepayment. not aggressive were same opened. if But even of the the hearing more SBA several the actually requests to We've and recently, earlier using here see were through go customers or other started far that from type of the has too.

more is outlook. us up for what pick volumes still a activity levels basis see the our gives trickle, to it and of and but starting So, we're that's

the question know, on the deploy Okay, quickly I to And You I it that's Like, planning other where's the had, great. sheet? Do guys liquidity then, deploy? excess to do with going you it? can guess, into? Thanks. want you balance are do how what you

better sitting just Yeah. not cash. we uses been of looking at to kinds and it or use all that put in We've can than whether different of

investment a Our challenge credit portfolio and that don't want in conservative really area. venture fairly we into that to to keep right tend risk now is

in around returns agency we securities so, type similar points. that right the And basis of XXX would the are invest on

little we, do assess against longer we'll to that years assets would a basis, five I and asset overall will road, is see to continue starting down put that swaps on our started forward a to the risk and variable some – which dated aligned convert say that profile. with we a that strategy to so, trial say, some that that buy rate, into bit better if more. And lean

that near and us that. environment. And of because But will I we including more liquidity, to things this prudent just do see cash treasury levels in like that's so, we'll bills to doing for continue elevated consider term, feel we think

you. Alright, great. Thank

Thank you.

Najarian And next, Lynch. Please we'll with go Erika go ahead. to of Bank America Merrill

Hi, good morning.

Good morning.

morning. Good

you, for is question first Don. My

return investor that have about you think banks credit normalized a from, turned I to conversations thinking basis. on simply know,

quarter look And I’m I we bottom so net perhaps that that if you that terms us a versus income if you the think so, possibly know, to can like swing could So, in any the quarter of PPP there's exclude know, of Ken redeploy from you help of, I income as in million levels mentioned walk you XXXX? in news you the any environment? just because, know, terms you impact, give billion], how fourth what hedge PPP, progression rate versus, where to, $XX contribution know, your new you this obviously, high changes cash net of interest know, your know, could indirect assuming any quarterly about about of ex-PPP XXXX could of, in the and interest the you think loan think rate any wondering from portfolio could we run or in help growth is run-off income course, the not [$X.X you

investment as portfolio. peers we positioned And I look line with how would the as type that portfolio, of specifics will we're as we're far in that as that number compared some and continue would as far our to others, Slide asset parts highlight loan a that would mix You that on including think right, there you're the fixed we also of are say moving rate – XX swap classes, fixed time. as that rate on know, right that relative I we far more provide as swaps, the as assets. portfolio that say mature of at to XXXX in the say January. we'll over I

categories, consumer time commercial growth at some think that with or some out of point where margin in loan at today some into fairly bottom our other that whether we're seeing will liquidity close forward, at up look we something probably going it's back As redeployment time a of loan again. we over to having

and rollover by fixed would of impact classes rates the these so, sources. some those pressure And from of asset maturity on the utilization and liquidity of rate the the those the be offset

And that loans. of those PPP excuse that some or, in include outlook so, would of me, reinvestment prepayment

just and maybe Got follow this it. a And this Chris. one question, up for – is

XXXX, exceptional was an it year. in clearly know, You

XXXX As of sort for about announcement a and you about branches we are teased out and think thinking potential January. and infrastructure

you on efficiency if you KeyCorp the do – know, positive you back with leverage can track You think as operating get weigh headwinds think revenue opportunities, next year?

I do. I as do. of X% that. taken sort material And, and you out to our X% is will used to culture. know, part continuous to improvement, continue of and Erika, raw do year, we've Each that we invest

fundamental am and there's way done changes expenses. the trajectory our in to think I in manage both our also of banking ability earning the is and our confident streams some I

of completely say You a non-recurring, of and I that year-over-year cards. that but not people a down. that's we've do situation that energy, and I'm know, saying will attributable increase tamp kind this to prepaid to unique half have bunch that quarter we time, the is technology of invested

So, the question yes. to answer is your

you. Thank Great.

Thank you.

go of Deutsche ahead. Matt with we’ll Please O'Connor And line the next, go to Bank.

Good morning.

morning. Good

to think you years auto. big of a that I on mean exit I you've also in just indirect the growing, nicely, want pretty deal, it’s the not I here. portfolio of past but up the know, been just it's that a follow

First Niagara. from that think you the was additions got I one kind of of strategic

now, not know, let on you like, overall? months? marketplace the elaborate Or last, a six especially changed or wondering, a industry there's something just me three in at has lot in kind the of just loan know, the when, time of for just growth I'm the So, you timing

Road a Matt, start, consumer successfully, our loans being, platform. really So, was a now it XXXX, in and an for acquired was standing have we good bridge. and is real auto we the bridge, When Laurel we've indirect timing as Niagara didn't our a [mortgage] relevant. always and vis-à-vis It on good in we've do pretty from can the built it engine to where And First didn't it a the at notion the that returns, what elsewhere. focused we but scale targeted we portfolio, we're capital be we're we investing to relationship that look conjunction wanted just stayed true with achieve platform bank

Now, know, in what right in terms this the of the decision, is the automobile anything market isn't as you but now very market, drove changing hot.

that at because be of up not retail to macro year there. what drove The COVID-XX decision, shutdowns that's are a of thinks sales That's vehicles XX% X.X%. next out analysts’ value or Our driver due right now, used but is XX%. like the will fundamental up that

And into more relationship relationship mortgage How one-off? of then, Road? I on that of versus transform understand is a us product, but reminder product Laurel you’ve a just kind how a

Sure.

So this be going very professionals. on is a building focused frankly it's bank something excited digital about. healthcare that national We're we're and to

dentists And them. doctor on people and up XX% to a school then focused, will the us, digital. built there customers refinance of an Matt, as is, case a obviously the digital will cases, dental mostly really for open that in be dentists already can to consolidation that's doctors like something we've give loans, it now et who avenue to mortgage groups. application. because a take business lot buy And terms accounts, so, are That us business, their of loan independent the And opening all national with built Then do opportunity we of a large in home. most, cetera. doctors part that around opposed many complete in months, and We've of they're those from within where basis, six

to we've platform area other hoped a top a Road Laurel it's and Healthcare, – So, go you X doctors X beyond expand know, where go we achieved grown of GDP into is into [go X there's focus everything think one trillion trillion on XX, – potentially of could do as we been you is but It's healthcare. kind we it. of know, it as XX% lot. a And see the we that lot would then, dentists, or and trillion]. within

how about we're thinking that's So, it.

Thanks. Okay.

Gerard next, go [Operator Instructions] we’ll RBC. ahead. Cassidy Please with go And to

Don. Chris. Good morning, morning, Good

morning Good

Good morning

you're bring end that think the XXXX us the you your Federal buyback see change share with the bank’s at way where And temporarily not Can you the Can long programs know you capital to know, repurchases of been Fed the at I a surpass for stress share in because any share X.X%. or with repurchase the back does and it that you required to? by test capital least the guys pay the minimum ratio share Reserve fit. approve of down you as have of the the buy guidelines suspended got, you'd to you've a your – dividend stock optionality call latitude capital or year. where mentioned you thinking the longer us the on as the We to through of the like top-end ratio, do of kind plan

give some nines goes year down next a half thoughts ratio? could buyback this in ever do on, So the suspension the you bring one capital of consider option to could your if, you you high capital Dutch in big to time ratios know, us the into second at one

expect our to as long the say feel not and points that is to your Don, back as far the would today. buying this very ratios share good we shares. to continue position is capital increase where repurchases, as that as we we're capital Gerard, would about I

the XX up want direction as have dividend. clarity when for capital growth that continue so, the little we're on the back and and buy have customers, support shares far support a to clear consideration would as bit as basis and in organic highlighted to that's making far economy to as that that And we'd we points support better our the continue to be heading we the our where we the sure

the either us priorities share how and past. that with see share our do and perspective. that like a share XX done where those CECL and a potential just I over about a allow accounting or is of it we there's and feel large point consider available at we probably but about that we'll increase, manage consideration the with so, so impact overall above as adjustments the very from permit, believe allow we're would that ratios, program that buyback. more for the do in capital if proactively change good purchases repurchase there capital could One things we've would And impacts well, be time to market us count impact basis other will or it

credit, your a issues circling Key going mix be good. recession to credit had moment, the and to for I then, not case And with the change through look has in in the versus a the of government If of behaviors know at, a it's fiscal what you obviously, we management been was your the to implemented exclude, help this cycle. the investors that on guys been strikes downturn, to than today to obviously, have that's past different in seen you Very XXXX portfolio you've during is a prove in that of today this what really take it you borrowers? back programs goal and past people like seeing are what in

the that. some But coming really transaction and the to And where thoughts pivoted Yes. before is Maybe add would I'll last and strategy. say I crisis, might to ahead see this. relationship to more relationship. a this opposed go difference a was has the at Gerard, I would that was – the Key and and start, to look midstream it in the if this just oriented biggest you was have as Mark Chris portfolio in But take

an exposure had of and estate commercial cash some was we outsize and so, stream project developers real steady And the ongoing us. flow on as opposed more it to for

relationship to having the is that payback migration say I'd for so, us. a And strategy that huge

side, high to of as Chris, the as portfolio, consistent earlier, we’ve more that type transactions. approach on I following very talked and that? it's On we a don’t to relationship add we're what have really want and quality, trends, you know, continue to opposed consumer a similar very to would

No. that the business about of and position clients real so sat we financial It where have cases, could targeted What and was we have it capital estate. was have we I support was that like to revenues where evaluated real we business. a in the deep how we XX-year ourselves and would our this. indirect and And – project-level business that portfolio it money, After we went such the been disciplined third-party de-risking have some In we in we foregone prospects lost environment was it's down money, journey. relationship. and add, business, it estate. enough been crisis, didn't principally a was we ability It basically lost the our an

thing I The Gerard. other the capital of would just is, of remind everyone we for customers, raised our

onto that it's only it you're clients can for journey. long that balance our and sheet, of us our You serve sheet, XX% know, – exactly I and a something without unique balance on is think it's goes we necessarily right, putting but too been so, our it is that

Great, thank you.

Gerard. Thanks,

of Our Bill is from go Wolfe Please the next with ahead. question Research. line Carcache

off multiply Thanks the to chart Slide about for by hand way bottom that notional we like Thank looks of if so, thought side get in if process? hedging slide. morning, program into program. on $XXX headwind right wanted the we translate and headwind Is the this hedging right XX. the weighted on value of Is you. yield XXXX and million read average the million Chris the the would to the it and ask declining hedges Good run-off in disclosures the from Don. I balance right the sheet on the $XXX the that contribution hedging quarterly XXXX. And benefit

this we I of the have slots forward. assumes would that say going replacement that no

run is this So a book. just the off existing of

there. balance taking some on depending could we're or would impact. also see upon sheet some assume curve differences then, yield minimize that and to where it that moves other that no would reposition, And of so, how we the actions And mitigate

receiving so money a redeployed, of back you discuss in coming and some to if paydowns you is and give what you're differential loans portfolio rates, much just a sense how what's beyond book get yield know, environment front book, persists? can I little if dynamics, just rate hedging a the low run-off, you the book may, bit follow-up, And color maybe Maybe the just Understood. on as the would now us securities that off? between of know, and new back have

loan Sure the years roll-off to portfolio on that about can. life of portfolio we re-pricing. a use of as and average and has a for, our have would so that Generally proxy kind three an just

originations what a you the in that with are they portfolios, say tend the at of be commercial our would most overall new seeing to that our look I'd not If book C&I and of back and have LIBOR that overall fairly re-pricing portfolio. take consistent spreads based. on change for lot a

placed acceptance helpful forward. have will that general that doesn't have that going or lot been the a We risk have us that so, products, But has a of rule. be little for book a floors] seen bit of more from and on [some It re-pricing perspective.

a portfolios, If fixed rate fairly for us. mortgage, some residential you look it's portfolio the at new of

We production that that a are sheet the on that yield think as to a that is there balance kind on around so] seeing or [XXX of I residential. far for X% growth portfolio closer yield is overall current as portfolio. Current

bit So, current not rate, little but a significantly below average different.

looking is probably far point it's some to a what other on we're consumer about that or the what of of or existing a compared the the is book basis between As as Road side. student some loans categories, or gap XX whether legacy at so portfolio the equity categories, Laurel other home

– probably the we've a of X%, around that, portfolio, pace, shift average benefit well, that minimize replacement still as position, bearing For but of in fourth expecting of we our at excess a we're forward the too, there. basis far XXX slower the treasury as some going that some we yield excluding should see mind those offset cost to exposure the about seeing Keep of as core deposit to X by around the of we're points yields and adding as quarter or liquidity some to bills investment XXX X been a portfolio highlighted the for deposits a of points there. opportunities roll-off additional the so on interest basis basis the points in see decreased helping side, there for and and so,

It's additional for super all Thank the details. you helpful.

Thank you.

Ken ahead. to go Please go Jefferies. we’ll next, And Usdin with

Hey, dig thanks. was little more on you outlook loans. bit can Guys, for in a if I the wondering

the little the you any bit, see do change going detract mentioned forward to quarter a but see of the surprising declines continue to this what and not in and loans obviously, that from in So paydowns just you improvement terms et of will manufacturing loans? we to on the see start grow, stabilization? wanting forward just so might look to on outlook that a others activity potential inflection even on and broader side, are cetera, point Thanks. Some on inventory, your

morning. Good Chris. It’s Ken. Yes,

beginning we that utilization book, our be we crisis. look where the at question COVID-XX would thought It's of no frankly as the right below there's it below now. have C&I would So the is

as that I things and an I is C&I side. loan off few consume throw as up, down, as economy cash. can a inventory up ramps to state obvious, they driver think a One a mean, to the as lot ramps cash; economy – of there's rebuild, the the on ramps serve these the growth companies it

opportunity give well. us I as could think an that

you in that beginning the on, discussions, is going The you other quarter non-existent. were know, second the of M&A know, thing

discussions fourth starting in are really are you see people think the at we're the having look starting what are we and really it quarter, with – strategically. but to As our think people I customers day-out, day-in won't

you think Just and in are this they still clients week, that are might and down I hunkered they areas met starting with think strategically. would to really three be that

the C&I know, I will So, you be book see before like levers obviously, think greater I'd but utilization. to on transactional, some the even transactional,

I think those opportunities. are a couple

know, markets? a versus still you back that wondering the that banking, banking And mix fill in talk terms more in in like I to? normal you CRE Thank pipelines good of the side, has or bit you and on what if the of the a any corporate Okay. of have, little on pipeline about know investment that Like then, to follow-up public activity you could private for to just is could the if ahead, of kind been investment you.

Sure.

look we as kind solid. the describe which know, is M&A in business, business, was was strong pipelines which mentioned, The would So our non-existent, forward, I as as I basically, variable a quarter. of the second you real

backlogs lot Ken, and a were equal what Our away. going obviously, the in M&A they now, of crisis, went deals are to into

encouraging. that be to find I So,

between be this at million, don't quarter, we about up $XXX $XXX record, business the quarters I $XXX this you million know, pretty were don't $XXX pipelines believe fees, As is, in at continues we'll think be at had I and it'll be be real The million. quarter. obviously, $XXX million we’ll our I The before. fourth somewhere We've I certainly Ken. the commercial be in strong. rate million. solid. at estate mortgage think to we'll but environment, are look

Thanks, Chris.

with Pancari ahead. John a to Please go Evercore we'll go next, ISI. And

Good morning.

Good morning.

Good morning.

risk criticized migration on I assets. XX% we see if want quarter increase color this some your get incremental a of can in to with

Just migration the that your what drove at this increase give existing us types? And also to on then, what of little you can is in criticized and bit reflected that asset if granularity see loss want a in loan reserves? Thanks. point

XX, June of last XX, life Sure. reserve part can clarity CECL that I'll question as loss some first, migration. far established far that as loan under provide the keep for answer But losses. of and the type that and you're in of ahead the help now of and mind, as it's Mark go loan at September as we our looking then,

migration increase throughout criticized see losses classified and several quarters. is the you're and in And going assumption into there that next so, the embedded to

we're both first we and actually September it's XX our non-performing, so, time period. would that have September for those quarter were this of assumed into of criticized, at June [at all today, XX XX] XX. look If what and models than where June charge-offs we're baked at as And whether better classified,

been And reserves. of and would credit quality part so, June migration XX have we're Mark? actually what contemplated seeing better as than expected our

Yes.

that of areas migration. [Indiscernible]

on you're things what the same Yes. areas drivers in really the That the And in are disclosure. forecasted [indiscernible] the we done better focus would have migration. than seeing the

know, business so the the you consumer transportation, so drivers that discretionary, gas are really those – services, some So, consumer business, it's the see. oil is consumer we and

– if in confident you're like sounds you And All it know, where then, you on Okay. question reserve adequacy right, the of thanks. now. another the stands just credit,

continues charge-off would you the charge-offs? rise and provide for for beyond, the as that fourth under you quarter, quarter expect this if So, would to they those did

what's economic We've works, there's the it. how about really before is to One three outlook. and CECL the talked drivers

the given the that And actually guess in as corner But between saw will so, that December the that we will near-term I recovery I June the quarter the if as levels. as what than be far quarter September slower. we realized better assumption what in would the rate second as to election the outlook in And at summary. longer-term, hesitate reserve assumed to look XX, try as performance summary given and third clearly how well. But was environment around we're the that overall right economic was is or was sets, speculate to probably and have impact a would a what little of

levels unemployment XX recovery was slower a our So, have September a assumed. [and little remained in higher our what would GDP] bit level, little than we

overall slight maybe as a impact far negative as so, little there. And bit the generally

outlook. is so, first economic And

our about the the would of based models Second that CECL – that goes just used on outlook. that through be talked migration assume specific a economic the we as portfolio will for portfolio that loss are migration

production. that the as the million this normally, would a a production to imply expense that $XXX for highlighted on we a quarter so, the increase And And migration, or to that worse be need would see then, new the And loan decrease or would third last the call, you we million had quarter $XXX better either you in provision million perform if reserves. versus a loan $XX of quarter.

what the to compared would production. just we expected as loan elevated far normally that's as matching so, And have

to supplement models This quantitative do quarter, was produced. what have actually our would we did what

qualitative also we bump migration that so, and still now. given the million uncertainty to assessment up just between $XXX too reserves And that we sure model the recognizing about benefit quickly the and economic weren't to reserve right to the make we're facing our of that overlays added

had would to done provision And this have of prudent us so, for quarter. was think had we that that a lower thing we we do if not and level a seen

Don. All it. Thanks, Got helpful. very That's right.

ahead. from Our Fargo Please next with is Wells Mike go question Securities. Mayo

think charge-offs of build think that And third didn't? peak? reserves quarter in simple in when why just this you you when Hi, the did you And do peers quarter where guys do your terms, many points XX basis happens?

fairly sure weren't wanted building early, economic that to and the as say to reserve, modest we I far what and as it's the uncertainty than too taking also was credit Sure, as outlook. far make better migration the expected overall as on we do

the felt being peers Last we to as we little as was whether are appropriate to so, compared to adequate. that And do. quarter, a as we challenged reserves far low our were reserves. were And not or still

assessment And quarter. we show influenced this so want whether to to that declines as also not reserve or our

of decided in model and And also reserves. we that to and layer qualitative additional so on overlays, top some go

basis our Mike, as that I that so, for points middle And if and year, we offs the look at credit life start the probably again. allowance see what loan have, for a and And average we would our XX would of around losses, say would then three our some some at time, is and look charge you take years, X.XX%. it's off roughly to trail imply if total continuing probably would projections increases through next be peak [indiscernible] at would that

not double or but I like I be some would given mean, this, peak have have. the many XX know, or? XX, So or

little points, yes, the I up be probably bit we're from from Do it but that from would a bit and XX there, quarter. their basis doubling a go XX here. XX say next elevated would talking about not to little they

question. then and the tougher Okay,

to down loans the with guess impact commercial, are forbearance, significantly, on your that's you'll would of be start today, forbearance in consumer. X% because music the I at So, stop the that's and point, charge-offs If said what you and were X.X some revenues? X.X%

offs, charge are built I loans already we've as extra in mean, far forbearance. in those one As reserves for

look think I with we're basis Two, forbearance them that is work truly forbearance. at the appropriate and got customer delay understand sure make just this the an and that the there. to bridge we of We've isn't the and inevitable. on on automatically for so just not this a And granting commercial side, especially if we consideration interim a that's an

whether side, that have a we with customer on have strong. consumers And even consumer have loans base, capacity still forbearance. the the quite to residential without but of quality the that are credit taking or that happy those collateral for products, full underlying that home values though mortgage quality so, say equity in at the still that to eventually are still benefit repay we're forbearance, we I continue will it's would very a of the look

P&L And your mature. either as here]? a as offs share far those us significant [want to so, charge I thoughts wouldn't that as for impact see would as or Mark,

you same, know, Yeah, seeing sort what current come I'd do or the XX%, and exits say of – down. they higher. continue XX% really to off And we rolls of high also we're and rates,

So, seeing good performance.

can more, one under the competitors bank is Chris, appetite? mean the I acquisitions, pressure, pressure. squeeze acquisition, rather industry in environment, if under are And the the just I What's

and successful successfully integrate you So, to know, expect companies in investment been fact I boutiques niche acquire, able been banking those. to can think of those we've you that as businesses I'm to know, those. us acquiring at digital the we've look proud and you born and continue really integrate

In shareholders. our We of be bank for we that's the really think whole have strategy focus execute successful. the we think create terms everything we right of ours, Mike. to a acquisitions, to to is value need And strategy not

you. thank right, All

you. Thank

Please Our go with final question will from be Steve Alexopoulos JPMorgan. ahead.

of quarter, comment Good is prepaid you the level organic card going Janet quarter-over-quarter percentage and quarter, start to Steve. that what spending can on Of And prepaid from supporting is that the million also, of and morning. programs volumes transaction government excluding This card down Thanks. in the payment the activity is increase XXXX? winding state during activity? XX Lee card the on income in this

can. Sure,

majority increase linked mind in related As that far cards saw increase, to the I Keep the as is nominal a was the expense that card change earnings risk on so activity. front. would revenues was prepaid similar the is that related far quarter we as say the for and that and in percentage in also as a of payments the increase

quarter, far we're the we As would that that card, seen on say the on might card card, third to size but counts the have fairly – for both is card debit are average as maybe would higher. seeing that what levels activity debit I as in little a balances transaction be ticket far comparable and spend other as little lower a the credit and

thoughts there? Chris to And know, we're so, to getting normal. closer return any seeing I don’t

that aren't bit it third No. in Obviously, – a spend going changed the there's the quarter but traveling, people people eclipsed last year. has to mix third the restaurants, of quarter the aren't of actually

the deferral. exposed right, All up are follow your much rates? On seeing of billion and on loans categories, helpful. COVID-XX And my that's you which that is the deferral highest on how loans on industry is fee and deferral, X.X

Mark, do I I you say generally far any as would one don't those that, industries, is there have we're on in thoughts but section. higher a that seeing percentage know as, that

range been kind been the the are, rates referral low. in XX% you and of kind that know, One stands very very, out it's of has

helpful. that's Thank Alright, you.

you. Thank

Please with And Saul of Martinez ahead. we question from take will go line another UBS.

Thanks for squeezing of me in. follow-ups. A couple

just [payments] that, fourth and are know you and into the quarter of sort baked magnitude here increase, pretty prepaid elevated that Is quarter? fair guidance kind income the know all still you increase understand includes it seems of on Is level from it mentioned of canes is can from for help and us you come the correct card that your fourth of like majority payments. expenses? come the for what almost associated just income, you prepaid to First, that, say that

I would we down what compared expenses seen normal the say both have elevated, levels, the to third revenues the slightly from but quarter. remain in and

were slightly of And expenses. those so, outlook. there's things for drive different declined revenue and a areas seeing we levels of our some the And both would in activity number the

but doing and with weighted And you you $XX like it's replacements, earlier this, wanted I math currently six, if know, back blessed you stuff years want assuming years, on, Slide go that understand or I hedges, of of know, $XX million it. offset know, rolls to question sort can maturity the no, – the a just or that, no do imply I would can headwinds, you're over secondly, is help you what Got XX? to based of annually you you and to showing other million know, about that to in no quarter which know, clear the this to something NII is off million sort you the seven $XX from say, broadly XXX or on annually, $XXX of that swamp not, getting a will million, neighborhood Seems average just [indiscernible] protection million, X.X is I say correct, it. XXX But your mean, us that from on just is the you're completely of provide run-off that's, today, know, and off? math protection getting if close you headwind million kind the of

swaps, reduction also interest impact. light to that are rate the net is, that use interest from But commercial recalculate isn't far coming back [indiscernible] and in the look that points mind from in many peers, than all as variable. that have LIBOR these our I adjusted that XX% make of the keep the we're book we based to I'd swap that so think say, math, of so were math That's to hedge position is this that different right is relates probably if XX look seeing as you as we that I actual our net numbers would in income to go be loans item portfolio loan things too and and a margin have, keep that if it be we around overall our those benefit the far look Well corresponding there, [X with would plus basis far those to but we more sure really at in-line mind off. shift at just to at one correct. as we're that as percentage]. peers quarter, you our

And so, true one-line to not but looking look difficult that that the side, sheet overall side and only liability the at to impact, going asset just say it's is balance see impact what's forward. to on the have but at the is the item, the you move

That's much. helpful. super very Thank it. All Got right. you

Thank you.

the for any company And closing over with turn to call I'll comments. the that,

for you thank you today. of operator. our in we thank participating all Again, Well, call

If to you remarks. can XXX-XXX-XXXX. have Team them Thank This any direct you. Investor our follow-up questions, you our Relations concludes

today. participation. for does conference Ladies and for your Thank your you that gentlemen, conclude

You disconnect. now may