KeyCorp (KEY) 21 Jan 212020 Q4 Earnings call transcript

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

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

Thank you, John, and good morning, and welcome to KeyCorp's fourth 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 morning and record revenue reported KEY This earnings. I and we contextual get quarter, details a share of the before to couple comments. But the into want of broader to proud downturn. navigate the team the and very way of am continues I economic pandemic related our talent and and and capabilities dedication, combined investments Their our communities our serve to our company, our digital the with continue well. clients, shareholders we call executed XXXX, Throughout successfully what our dual I mandate. mean I continuing that real position humanitarian pandemic, economic responding By which to is growth a to the both KEY while crisis, for and success. and

steps clients ensure and served. to teammates well and countless are safe our our that have We both taken

of through XXXX, In amounting Additionally, in we we to first XX,XXX Protection provided the $X Paycheck round than originated billions our credit the Program. loans, to clients. billion dollars more of

our fact, the speak. are In we as clients currently Protection through Program Paycheck round we of second the assisting

provided part we Community communities, small affordable renewable financing. lending home and our of dollars our National This Benefits housing, lending plan, support transformative included and low- philanthropy, of moderate-income in business communities. in and As to energy billions

both the X. to everything a commitment our in the turning we at Our thank XXXX want back inclusion kept serve. our also of to across Slide for challenge and in finally, that am social in justice, And teammates do. to advance now our all I center performance to up includes economic programs to growth the we fourth interest record the communities quarter, way every I clients from Getting point the rising Fee record both our revenue for increase basis in income. also the income interest for and in prior was prior the a fee X% year quarter quarter ago year, and the achieved and with double income; quarter eight almost digits interest Net period. of an net net up level income we margin. the

We company, fee continue and that from have we both growth. balance drove across sheet our benefit income investments to made which

touch areas. specific three me Let on

with First, volume funded Consumer in fourth loans. quarter, Mortgage; achieved billion in $X.X the record we

year, XX% consumer the mortgages. fee one in prior the mortgage originations balance as billion, increase Approximately both originations were XXX% were For This growth purchased of $X.X drove our as half year last full from our up year. sheet a income. well

continue grow Our take pipelines remained to strong, share. expect we and to both and

loan The enhance broad fees, area for enjoyed in particular generated second area year XXXX targeted and a talent $XXX including platform, we invested and acquisitions This as banking areas represents the investment million made healthcare we'll which syndications. based fourth highlight quarter, in record technology. where in an record is investment M&A, In we We is and growth have across to with banking. strength debt a was our and capabilities, the quarter. fees. placement such

Our growth the believe continue for strong. engine investment pipelines this will banking us in business a to remained future. We be

to products, we consumer be for value-added engines We and for launch This franchise expanding the broadly year, an March, offering loans. growth our with investments have will will the our in other that consumer both to will relationship-based include broader, build to continues across high over opportunity company. deposits, that At nationally. healthcare Road additional consumer area our our we relationships segment, Laurel loans Laurel Laurel of professionals. lending more services. digital with originate business. billion Road us our the is Road in third quality broaden and healthcare provide clients digital made serving $X.X Last mortgage believe launch Road Laurel originated The bank and Road, continue digital to Laurel end

they elevated; to foundation. incentives, were higher quarter and production philanthropic funding were this severance of expenses related elevated our the due Our

related COVID card digital Don come will this elevated also his down remained investing be cover talent, of prepaid while quarter. our the the This expenses we concurrently in in will again associated costs remarks, XXXX, capabilities. year, and and Additionally, to pace but we with branch expect closures. accelerating expenses outlook in also

expect We the year. closures XX to over our of branches place representing of the of X% Most taking in half consolidate these network. first

by Our our as move more activity to also It's decisions channels. driven continues by digital robust client behavior, are toward analytics. informed

client are within limited expect of percentage of as facility. a two high located attrition, branches the We impacted KEY miles another

reducing expenses cycle to range. our net Credit basis business profitability. grow of targeted quality overall improving charge-off this Importantly, retail remained our the strong with XX operating points continue we and over expect within while to quarter

nonperforming loans million $XX quarter. by this Additionally almost declined

We to well our maintaining continue risk positioning and moderate perform the support cycle. profile, our clients the business to concurrently will while through company

our The our loss position targeted company capital capital the among basis quarter, range is have XX increased X X.X%. best have to our in Finally, X.X%, the is maintained to today, absorbing common which we that different points Tier In equity above group. to of capital X% KEY loss strong while fourth affirmed of with peer tests stress continuing our to shareholders. our ratio our recent a results rates return and

priorities, to against new course, Board supporting of up our and repurchases. to over allows next us of of authorized execute three repurchase growth, share our $XXX of share to organic million week Last paying the program dividends, positioning strategic quarters. capital Directors Our each continue a

support were in and first risk our year, our a practices. share. able dividend businesses, the strong We approved $X.XXX to also In of challenging our while the maintaining invest grow common stock clients despite last closing, of our quarter we environment

model, strategy. dedicated in and by the strength of focus executing our our confident business was our success team, future. Our KEY's am driven our relentless on I

our of to outlook to addition will continue coming over positioned for now provide I our and the quarter Don Don? commitments. We to deliver to it all succeed will on turn year. are on our in who details

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

for net year ago quarter record operations $X.XX strong with XX% was from common continuing of prior said average the the on over the items in quarter points quarter. Return and from a slide equity basis the tangible over XX%, my income on up third other quarter presentation. Chris the As XXX this period. per cover prior from share, from up later I XX% will it for us, was very common

loans Slide commercial loans X% were PPP $XXX originated business. and over both growth from billion performance quarter strong Turning of growth Total consumer million quarter to increase continued reflect the billion Road Chris loans from by loans. Laurel mentioned, fourth X. loans. loans this the $X.X $XXX the an the average billion, of of full benefited year, Consumer from of in from XX% over driven last $X.X and Laurel Commercial Road as year, XXXX. from the for and from year consumer our mortgage full up up

in to commercial average in the levels environment. We balances results utilization we've mortgage as the loan reduction The total portfolio. are to year small quarter Line for were downs quarter, to loans draws, to in also Linked and high generated balances heightened pay made investments pre-pandemic bringing PPP reflecting in a from rates quality at strong levels importantly initial of the related forgiveness. another the the loan $X.X these record down given loans the liquidity well the as X% consumer the drive add our $X.X billion billion. continue areas

compared our deposits. from disciplined that was consumer profile. performing interest-bearing down commercial walked to of remain remained six with Importantly, decline. our quarter. not manage of million moderate credit does expected the third totaled with on based as $XX commercial business exceeding and committed our linked from well underwriting We slide growth X.X% $XXX cycle consumer by and points nine broad longer-term for the meet reflected the deposits quarter XX to period we and continued from X; deposit to we average offset increase in growth The well through away the decline basis basis perspective. year have risk have or ago balances. credit Growth guidance of by XX% XXXX business from and XXXX, The a the and prior both costs our up the dollars quarter year came as the Continuing this growth fourth was clients. quarter point quality up higher from time driven Total million prior

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

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

income to the XX lower the quarter margin net the significant fourth interest rate deposits the driven that by the higher inflows. the prior We income interest net interest XXXX year last liquidity impacted our the compared in were for period balance margin of X.XX% from due by X.XX% year the net interest balance larger income sheet the The interest and in growth sheet interest period. and to Both prior same net benefited ago X.XX% compared quarter. for paid prior saw improved Compared net meaningfully net to income from quarter, basis margin average to significant margin due reduced was increase are increased basis Our million fees on quarter-over-quarter the the strong deposit declined loan interest-bearing points. both $XX and largely net eight the interest cost bearing from quarter. forgiveness. increase deposit and and PPP by points net in The the to interest margin

million of offset recognition negative the had additional five of partially loans were point continued basis Forgiveness on $XX this a fee liquidity by accelerated about These elevated the levels margin. which PPP quarter. impact

$XX Foundation. noninterest Total servicing increased X, quarter, to million the higher The million by also fourth and XX. driven period, to a XXXX to was and once year of the which mortgage in prior increase up million driver support million $XX quarterly all-time turning million for Compared quarter. consumer of had of $XXX year COVID-XX driver Marketing quarter, up prior now the $XX incentives; XX, million period. syndication compared higher million also prepaid expense million quarter Slide to our quarter increase loan income increase related the most noninterest investment Year-over-year Stronger fees XXXX. originations price, related third quarter Compared which $XXX for million period, third from our the $XX increased production I'm compared year fees the with Commercial $XX quarter. and the health million $XX to other was in $XX million. of quarter drove $XXX fourth higher $XXX the and to driven The $XX again year had Cards quarter stock-based additional prepaid ago the incentives $XXX placement for this banking of for quarter. largest Charitable the a to fees. increased we year, reached is were also fees which million a due This primary from quarter. $XXX me, $XX increased record the the quarter, billion the million. the expense fee-based payments the ago $XX prior from the compensation our excuse in quarter Compared billion in the year $XXX and highs the record for was recorded strong from up hit debt related largely $X.XXX $XXX $XX for activity, quarter. by a and safety personnel Noninterest million. share ensure this expense up by teammates. increase last income million fees, the to government primarily higher Slide M&A activity incurred contribution costs. income related investment to Slide total fee income production and from ago expense Moving record costs related of were million of higher as mortgage production Record programs. noninterest was businesses well of million, fourth higher The $X was to severance record to of million. million banking, related million. prior was higher our in business up payments was also expenses The as severance, state drove costs mortgage $X.XXX noninterest card

Turning remained XX, to overall credit strong. Slide quality

XX basis average For guidance the fourth loans or of quarter, $XXX slightly below net charge-offs million range. points our were

overall XX prior and metrics $XXX migration Our million were credit $XXX points or economy, loans and credit loan loans indicators CECL This from the our outlook compared for basis Nonperforming of million. million quarter on the under XX production. basis period in quarter. or points to this continued losses as based was the strong determined as provision $XX was our leading well methodology and credit for

Additionally, day XX flat. quarter-over-quarter our level the we category of remained basis with monitor XX We've continued assistance of delinquencies requests point XX while plus to a day to relatively nine decrease, from actually improved customers. received the

of has requests loan the Over the past forbearance for number quarter decreased dramatically.

December XX, late a forbearance One about less million, X.X% a December, peak more loans terms $X.X our billion, As than of this of mentioned were $XXX of as observation of down in quarter. the in test subject And results with balances. profile showed through recent earlier Recession. were outstanding to a equating been KEY's Great the reinforce Chris results KEY past commitments different the we results the published. several years and that most have stress we risk company are making the a better over from

to and times company managing this. we Our company the stress outperform credit achieve losses We've over positioned been from have the last were to the decade challenging peer the during believe leading. test

that to These a relationship Turning areas greater the active in this are to monitoring. that balances. certain of receiving continues updated highlights disclosure small XX; areas focus represent total Each be and enhanced portfolios and our environment. these slide to reviews focus subject loan percentage we

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

KEY's Slide X.X%. This our common XX a the capacity an is X% customers This to target X.X% in position strength. and of Tier to equity X our to quarter above XX; return needs their us capital area borrowing Now ratio third sufficient of place We with the quarter. to and range shareholders. our continue support remains provides capital with up from on ended of X.X%, fourth points basis the

of Last and outlook. and that stress loan reflects to expectation quarters. recent quarter capital. also first million Importantly, share loans of definitions little and expect are Average of we business. range operating reflects consumer both I bias and to slide performance leverage bottom relatively three although next the approved are test Directors repurchase dividend mortgage of XXXX would the range. this Guidance next our and PPP, will They continued support up stable, our at a strong profile in loss week, point, round credit our the our our slide. highlight year. Board on $X.XXX in XX, This absorbing this positive provided full common year of at Laurel consumer our the to builds On the XXXX authorization $XXX provide results XXXX approved we per of for a from for expected deliver in share. this our participation the downward portfolio Road growth This be our new

will to We we our expect be from continue should benefit low-cost deposits Net digit up base. relatively stable. to single deposit be income low and interest

our income low excess related of continued benefit liquidity ongoing of Our reflecting and by up PPP from loan offset fees core income in interest the Noninterest higher of deployment businesses. digit net impact most forgiveness our single to rates. some of should the low be growth fee-based will

digit range. the XXXX single low As be in in Chris down should expense mentioned, noninterest somewhere

continue efforts accelerated We closures. improvement branch to will continuous and benefit from our

We our in stay forefront and at digital to offerings. to also of the continue talent invest to plan

net is loan tax should for on point range, credit basis quality; XX be points. consistent XX% XX GAAP range the of rate around our average our the the be for through-the-cycle charge-off in XX to Moving to with year. to basis XX And guidance should our which

year. the also course assumed the some variability of Our guidance over

personnel reflect employee will expense benefit count, quarter lower increase First a driven normal and costs. seasonality heightened day an including in by

shown Finally targets. of bottom slide long-term the at our

deliver As expect operating XXXX. we Chris leverage positive for said, to

with to despite efforts team recognizing deliver support and and strong quarter continue to our of our the and profile We clients Chris moderate environment. the our risk for I'll also challenging efficiency overall returns. over improve and the both the close results maintain year started, to where our time

of our as positioned Q&A I'd well the are John? the the portion back into the our commitments call of We stakeholders. turn to to we plan for over With on deliver for call. operator head XXXX like instructions that, and to all to

first Piper Siefers Our Scott question with of the Sandler. Instructions] from line [Operator comes

for sustain digit Thank on the But it out but ended year year. being like question. Good. of terms Whereas that sort item the was I little or it's feel of your out? grow drove to these upload total on infer I'm year, you was just could guide last do can other than less would planning guess or single in from curious, nuance hoping more level that year, that banking of thoughts taking you kind playing it provide level How see I you a we can the you Morning, revenues it there? drivers guys. stuff within banking. just of. maybe it. I for end outlook M&A, maybe see upon investment It the you up this this thoughts investment line on do more terrific the think in just And traditional how think you a traditional annual of this I

Sure, Well, thanks the Scott. for question.

step to a back Just second. for

unique invest investments. is Our and for at been it cultural from corporate a long significant growing unique get our a And we've and made franchise. hard you Scott, we've integrated among collaborate It's of a really and bunch investment of a coordinate bank know, to It's done it And peers. perspective. both all time. our as --

growth past investments that business made But you healthcare, technology any the as X%. in in and variability. think year, about look about back within over rate and annual a we've had we years, it's of there's If step five always the at compound

year I down think we slightly, from we're you X%. if think one at present, were look down I XXXX, like year, to And last so, we've where had

business. no that There's clearly just within lot said question we a there for backdrop kind giving it's us, not as it's that relationship forward. Having control. are that I'm business. that, a a variables transaction our the are So as And look of of

We continue to it. grow

today strong. pipelines Our are

Our debt, from in business lot our grade the shape. pipelines that a people our lift business. of What's through good pandemic, had core interesting huge whereas really are about to not is investment a is

Our syndications, related business surge and was really cases, by in driven, some a M&A in big syndication. Scott,

trajectory business So in of and the to we feel about good the continue invest will it.

included And are further you thank fourth there fourth XXXX care if of there I severance sort question the guidance those in quarter? all any of I those Will the take then, expenses. million guide? know did $XX ticky-tacky had of Or guess Terrific, costs the And be the more charges? are quarter. full you in in a of any, you. in year in

We would would severance any in have the going forward some into We the XXXX. the of definitely year. throughout that have of expect not quarters to the size each

be So in would on assuming of reflected guidance, the but not that. recurring level significant that charges normal any top

Our of line next with Research. Wolfe from the comes question Carcache Bill

Good year I although interest ask of until indexed lower rate was there of wanted you. The relative loan end loan short loan your the during XX% quarters morning. were last about reserve Thank some KEY's to exited in yields yields, we about complex. book believe have trajectory loan guys of I you overall of stability cycle. is yields the the to reserve.

And happened but so a for lot there's guys, well. as banks of dynamic it's repriced for some that you already, still just not other but

dynamics cycle about are there downward anything simply general, is different this cycle this to to work discuss expect loan So And, in those you you persist play time? to out that in And whether I can guess differently through leads any reserve offset you you yields to to pressure this expect going as headwinds? those well? in

the perspective enter that things couple the book swaps commercial a there. that Sure, a loan matched of into portion up a in significant mind the sheet from balance are that we book. loan One; against keep on

over the talked of does to going so the rates. couple some of fixed last And forward. convert we've over about impact And swaps quarters those those it of

those so as you very see coming on pressure modest And yields swaps will rollover. some from that

we've as the the seeing also also consumer On book; compared we're wider the quality seeing the been on compared rate historically. credit to originations. down far was we where than improved for but current to originations originations consumer environment we're are seeing little rates existing And what those margins new as coming book, a new the

help the forward. that, excess year repricing some will so maybe we the of of this time, that, our I so will there help of And the quarter, some going that realized start reinvest then time absorb offset fourth and pressure that including deposit to in levers over also over book would We and full say other But just liquidity can still be and that we that have also, to we as position. well. benefit think

Got how and PPP of you. last the trends and And expect to X.X Maybe it. super about to how loan PPP, can contribution my talk NII Maybe just how color to this should any extend yields contributed quarter? and along you to largely going loan PPP on That's Thanks question. similar do benefits from Don. here? to And long much XXXX, helpful. XXXX? lines, of to yields we the or that's the Thank last are X.X they rest that

the was and mentioned about overall added accelerated we've as $XX fourth in points billion And margin that $X.X as forgiven clearly the loans far PPP that and so we six about briefly great. so quarter, quarter basis income of million fee roughly of or about so so That's added for up. just that and the that the becomes had

wave mentioned, had as $X about $X.X of billion at first billion forgiveness PPP I of that If had this you look issuance loans, about of we quarter. we that,

to of that be puts forgiven. so about about billion. We $X.X And billion initial would that $X XX% expect

come first you'll expect would would in the the example, quarter. $X And about so year, see that, the a rest of for billion of say that throughout I we forgiveness

about of kind little to expect the helpful quarter. be originations And wave less see pace. what still of we will that's in a that second of to we've But quarter. PPP show for $X.X that. than continues billion in next a And The the seen so that fourth would

directly that first over billion. the of start of will offset of And quarter we so And expecting with the forgiveness the decline balances probably originations. that $X be would by end some be we that new from

that as think far perspective so just is the I there. as And helpful

wave to both acceleration accretion income that fee fee the income that you fee XXXX. We $XXX forgiveness normal if as the far the far $X look from loans of fee as million would As expect component or the so both income of from first normal about also the income those number million as of would coming accretion of billion it of at the for up was around be forgiveness. plus for the the to that and impact $XXX

have a credits And little the lift a on from of year-over-year those from that, so we of through bit top as from with basis the new of coming a income well. and we wave that, the yields PPP and on loan benefit that have would realization fee program X

the XX, end So the It spill doesn't by majority, over vast realized. into should XXXX. be of

would of first clearly addressed wave will the majority I XXXX. be the vast say that in

see of over some well. to next We wave will this probably hang continued into as XXXX

both that so realized XXXX. be lift in that XXXX And from I that and we're would getting incremental will say

Ken is Jefferies. Usdin Next from question with

morning. thanks. Hey, Good Hey, Don.

point. Just up a that last follow on

what all So NII through that guidance just ran of your for is year? this inside you on PPP

That's correct. Yes.

how earlier the much portfolio an business Laurel it can as the this on how on Got can your off you the for auto I the And and then some of just parts secondly reconfirm much us heard Okay. can moving it. loans. point think you to in just offset the about just do the more consumer and run side? Road as year, grow plan mortgage

Ken. Sure,

loans aggregate And from billion that from loans $X Road. to As loans and consumer in far both coming really consumer about grow outlook assume relatively for mortgage stable XXXX. would from growth total that Laurel and residential as XXXX

Laurel would $X.X fourth billion as just Just million the that to $XXX in of put at from the that that in continuing pace category. type far as dollar in from range had perspective, quarter, originations origination we Road of be almost XXXX

the as in we're mortgage full the for far that overall we seeing what stages, half for maybe mind that branch billion even in purchase in keep that, to side mortgage quarter, think but year, of about throughout we and can increasing But our refinance. as platform actually and $X.X that network as fourth there, On was early hearing seeing rolling residential strong despite that in stable show out XXXX. at originations the industry, money, that billion we're the the our growth $X.X the and of opposed to of residential

over far we loan so to the be residential adding as And a in $X as continue billion side. still think that a there And mortgage the quarter new growth originations will to show there. that's opportunities

so those areas are those outlook foundation the total two we And of kind for consumer how loans. growths stable in of relatively get that at to can specifically

up Got a expenses. follow it. on then And just

overall whether or cadence it, than you're of just Given is traject you the terms the plan just to investment but severance related year, flat, Thanks. banking how for not reduce branches any benefits that expense to the to in I'm cadence plan given be some ending if lower That and of you wondering get over have the time? variability Is the type you're there the way stuff, thing? to starting? like in understand the of expense of

from where were a in expect the I it and up challenge. in from some the We considerably to would the some of being fourth in component they the going really into incentive growth, on our tend numbers up some bit so highlight quarter. as origination valuation as bit by down far expense we Great a number was we would have a of is far that to little say question. And first expenses have a but which drivers seeing our benefit negatively quarter, we revenue challenge costs year. last and outlook variable I think market that's look quarter, of a as adjustments adjustment as the little corresponding you've here, our seasonality in to impacted we what it but of probably our hit were a also those the as In last year, revenue first had would compensation.

far And just down as that opposed to year. we'll leverage what have digit, so think single the first a to position low stable. down as we be restate operating for our positive we positive so X% for leverage as quarter want in operating saying that, the X%, to are full and And out it's expense generate to

as the And funding strategic that's initiatives we're our so part of well. after making investments as

to Next, go Saul we'll Martinez with UBS.

Hey, good morning.

So dynamics just the understand make back on a interest the net wanted to income. I through just sure mechanics PPP little, up

the incremental, I -- guess, there's $XX an on million. So

pretty you you of the waves said I which And first So top PPP. that, on billion. was on then think round, $X.X modest of second the overlay

in five obviously, a lift I million be to something that of and quarter? talking XXXX seems So how second sort XXXX talking? are the square If like from Are years Are of the if $XX a number. modest much help an just get mean, away we fee might more and year, second were neighborhood dots recognizing versus tailwind that is lower, then year kind fully a you could that full we these adding the the on year of from connect round PPP. It broadly we of the that and full a like round? rates incremental you full

Saul. Sure,

will be say wave billion of full the impact wave billion that quarter. probably the loans. far in first the around related As to talked $X.X that of somewhere the that PPP second we that as about year $X I average would next

and the little If at yield. loans tends the north both X% a stated you type of to coupon the of fee it of those something on look be income, realization

through year. up those pick on points the over your XXX basis So balances

something sit lift kind compared from having to $XX in at somewhere that the looking million year you're for full a to just of So probably around cash.

incremental $XX the about broadly, then of XXX. we just PPP the million versus XX XXXX from So XXXX think should being XXX of more sort that versus tailwind plus

way that of in a looking Is $XX So million? of fair at neighborhood the it? something

Well, we $XXX for the would in is had million what say XXXX. fee that I income,

about wave, For and origination of million first new loans, that. on first then billion would average, that of be top $X $XXX that's of the for roughly for this wave the volume

a we'll million ballpark. so lift say of a $XX would be year-over-year And actually see

guidance And in obviously. Yes. is embedded that your

our in guidance. embedded That's is That correct. Yes.

that those figure, hedge is embedded how the headwind much XXXX? that in off I offs because a guidance. hedges are, the much other incremental headwind way? How And of goes that you your Do roll the presume in and also have -- roll is the how of of

dollar the the impact in but that The in it don't reflected have as XXXX is for I there, outlook. embedded as far headwind is the guidance. amount direct

Do offhand swaps? you quarter how much from the you know benefit this got hedge

to benefit, when that because swaps, is of reluctant is say am hedging the part our know I From it true what you strategy.

And those $X previous so cash cash about the down the flows. me flow million us excuse about interest Swap as far $XX as for which add is quarter. was the about million swaps income net $X from to

to with go we'll Next, Gerard RBC. Cassidy

you your at share with loans, And Good at Chris. reserving. allowance XXX morning, convert Don. based Good excluding to you start the basis when of you us loan losses, had the peers of -- can you you're all points. slides, Don, about look your currently, the for and like when on over at morning, the look the year to CECL PPP

reserves XXX are points. basis I think your about

think could they to? further get this As we out, were where the Do do reserve back you in to you levels down the XXXX; year could they pandemic? before of get think look of January maybe end what

that that. would But economic of the know will I we three say that the timing outlook. don't under into don't absolute over as we the could I outlook CECL impact but trends one the think predict to see shift are I direction. provision time. I would our go XXXX, know expands where in how pieces economic

as continues that's what for it quarter losses a And projected been look we at so with would trend our there. each has we Credit that better. any credit us. have to assuming predicted see a migration, get won't positive stable take impact are, And what

allowing compared is to for on million in few to loan a the the I've $XXX call be production; times provision and then $XX is third last And piece And in the couple the reductions to that quarters that quarter range. mentioned normal. so million each for that's provision would

million if the And change, would below consistent economic guidance with about expectations, off the year, outlook and would which and a is so imply. charge million $XXX on that what about that for if expense quarter the provision average, doesn't migration $XX imply and be would per

we time down and migration like ratio see credit have. if quickly, would more continue that we outperform expect opportunity allowance so see some come to that come see could the we And to down to over have

a this announcement Obviously, vaccines and the time. shares insights. summer by over coming US Chris, those Pfizer And, a as hopefully KEY are summer the included in widespread hear the more year, or stock real picture. to have had good from the positioned the your are the economy bigger since bigger -- The in November run strong you recovery question Very for benefit really peers to here.

your your shaping you risks next we night, is home you about? things think over what numbers investment as up and out When pretty, at the pointed banking blockbuster. are look quarter fourth you you the XX And are as out, you down good And go shaping for were months? the pretty peers go good. Since that so and elevator, up everything

Hey, Gerard.

I our cyber. industry, risk is for one entire the number think

particular And think industry, the breach the I of trust significant to the a company. we're in there business. was or extent any in

risk, that I of I cadre a whole think on, one are we number risk. competitors. another think is the two think I that's The to that number focus need all just

about think you you able of lot some companies of If clients. those a think been do, in the have new and garnering what about fintechs to of terms

values. that risk, you are I think strategic areas think well the key in of think of degradation But where ones obvious see sort think positioned about I kind and fortunately, a significant we is could asset travel tactically here. And we're more I entertainment. the

do will because come as the that's, back, think lot with that think I vaccine you a that. has out, I to point think I

you one think focus on. need I hospitality that to is industry

The is office. both other out and strategy them couple as and areas retail we've of know you been by

an those to a areas close need industry, on. think keep as that are we eye I

tactical, down starting are about. kind those of to So sort strategic what think of I with

from Our America Lynch. Erika Najarian Bank with question of next Merrill is

question income My or peers one Chris. loan give in could for maybe for trending on a half of outlook; securities commercial you guidance? what core ex-PPP the how first a particularly level this surprising wondering It XXXX. And on us another lot do Don, Yes. sorry the what income have year. throughout like next Embedded second on optimistic growth in within of you market question. But cash sense, level investment I'm that loans, the I'm see the recovery, growth of outlook. your quite you been expect appointment Hi. seems of your interest year net if interest net is for your

our at would for outlook far assumptions billion. in by as And some the as Sure, runoff. And sitting some of that faster income of available over we're on portfolio there the quarter, about our the investment $XX and outlook for have that increased for had of was would we the through current than our continuing about we've pace the In interest core billion to redeploy would, or $X that reinvestment. core we fourth T-bills a investing pace in think I either net billion reinvestment. continue to in $X through that be type currently throughout same year us loan cash growth and

that there. assumption so And would that core be the we have

on a Just was this invested X.XX%. roughly billion average we that yield the about for $X that reinvestment component quarter, the

that rate. those strategy would would five as runoff securities be, them swapping years down but from over of what down to securities back say, the far level So so then fixed road, the some rate investing certain floating convert and reflected as in the

that forward. on be Chris, commercial a would growth? loan to continue expectation our going So kind strategy of

couple consumers of And will be that well continue I outlier that. we're Erika, to positioned area Don for Sure, mentioned, a loan growth growth, things, as an so all for think first us. of an

think we you We're there. actually about by not growing a good franchise. estate; very, the if on real that's very And strategy. area, balance sheet have commercial Next debt

customers we $XX our with real probably billion think in I estate our book. year, last targeted placed

is looking we below pre-pandemic. we're even now at seen at or As it relates growth to C&I; if haven't yet utilization, it Erika,

what equipment, property, people. very I our is make people in sign, seen investing in quarter, numbers is haven't are moves. seen the But and we people saw strategic and think you to plant We in have banking a investment fourth investing in good starting

having business. their And we'll behind with utilization I going business? think really, with what in and we're in to discussions are too increase with an people great thinking of am the clients so those see us election are So line now rollout grow our see they people the And do strategic vaccine to prospects. and I optimistic start we'll that to invest their our

as is the think inventory. an you people other be actually of inflation line that about think The for would helpful I a don't bit long if of started investing year. And had we scenario, back in going obviously the thing if utilization and that's half unrealistic

on just one question And follow-up expenses, it. Got Don.

off is million. guidance base of the Your of $X,XXX GAAP

That's correct. Yes.

John from Our Pancari is Evercore. next with question

color as guidance. and the liquidity well Good on morning. of the reinvestment the Appreciate you gave impact NII your as

know in just if help see margin the us in to think can bit coming and PPP a you next of that of to you trend of want there's But benefit. little here Just also could quarters. about a can trajectory terms quarters. color in us if how the see the the Thanks. I net interest want how to coming I give

Good.

because either creating also just as far or change to margin, of pressure it's the challenging the the predict As is timing flows some there. deposit of

that growing something so implies of quarter, where is our margin it come that our overall in quarter-to-quarter on down low below of slightly the say from having will I impacted slightly PPP a as And like with equity And single would will that deposits forgiveness based said, the position. the fourth and assumption you the so digit from be also changes XXX. timing that the

you of then risks see Thanks. I non-bank. and backyard; deals banks clearly That to all you've separately, the on get know M&A that the you can think flagged right. Okay, And helps. thoughts intensifying updated as that some both your Chris, some seen coming want certainly years. bank We've your in in move on competition just interest, And about. one there and

and So that also on basically to whole M&A Thanks. thoughts then from perspective, on want bank get non-bank front. the your

comment focused go scale, my was relates out for the and the some consolidation our with We But to targeted or we're to generate Well, to and as respect intensity question. acquisitions specifically on execute fintechs. your to of it to for have we And successful. whole really not of about value organically. Thanks think competitors be grow your thinking Sure. really question, we bank way need best everything is We all. non-bank. really at us think

that, and each a out day have we of value. seriously said very every obviously, being We create having know company. take So and responsibility there the we to go public

that into a born Road, to Road key that As it to helped relates Securities, being both and able them only done Laurel KEY years grown. into many business, over really think to was about our integrate integrating most think Crest recently, entrepreneurial digital our proud but we've non-banks; business. Brothers, of about -- firms and job not we've I and successfully buy of Laurel I helped able been company Pacific have actually I'm really Cain the And growth

in targeted think I buying us with continue see our you'll serve us targeted help to really keeping scale, go our out So that focus niche client can these around businesses basis.

in What you helpful. emphasize non-banks? areas would of of terms That's businesses the

We -- are let's million turbocharged analytics X.X I probably businesses look probably that that bought at look verticals are look in. if the that think also Those bought think really the our at would we've I we'd clients. kind existing you I think We of really done. businesses. focused. we digital boutiques we're And think at, and/ businesses what

Our with next JPMorgan. question Steve is Alexopoulos from

Hi. Janet Alexopoulos. for This Lee on Steve is

a first about to their question Is and in accounts XX% my your from acquisitions this function any still new on assumption this your holding client guiding on or is your PPP? does bake XXXX. going to up customer even more some growth deposits So deposits; cash of after here successful in

say would I all fronts. it's on

assuming that a with retail there so that there we accounts quarters for relationship making lot we in around operating is account a we are of continued sure on strong the expanded have a that focus And growth three Throughout customers. primary have One have last basis. full increased and household growth our have as we operating customer on base, well. commercial depository/ retail efforts the shown

It good last saw we deposit the our were like of assumptions would customers. be the will helpful. also into originated, a with deposited And that reflect proceeds as year PPP were accounts portion loans so those those

each from expect quarter the each quarter lift recent this flows underestimated where round estimate would probably balances. they then And to year, we also we so stimulus, think where some most through. deposit deposit And that. And just I actually be. see of come our to And add will we tried

so we'll And we're that build to there think continued continue have have as well. and assuming why customers growth liquidity those positions. to continue that's the And essentially I

a Don, very we from of successful named and service only would we that thing there. commercial our lift business very and well And the consumer worth I perspective to we're have That also clients with primary both $XXX strategic generates very, and clients real grown primacy commercial we are focused third-party loan deposits. servicing billion a around is getting our that has where are very add a business on commercial lot estate. of

XXXX That's surprising increase helpful. remain And to that residential I XXXX. was stable positively to to potentially mortgage versus overall originations hear in expect you

is are are it income, digits, you that into go the like single fee to you income to consumer do be that that of items single down And offsetting does line fit are see how the the where bigger guidance up drop? income your other stable going digits? overall going low like going fee is on it to -- line So mortgage or saying like

of of that extremely especially the sale levels far in this impact quarter look expect more yes, Yes, for high that we would as to slightly as, reflecting gain the on experienced, item XXXX, of down line the third come year. we

in there. down come quarter ongoing the would expect that to fourth saw see pressure we So and

up, would even maybe expect volumes stable pressure be we to So see the to origination would there. some though

expect good would low good item XXXX. see As the And coming category we especially expect management then reflecting between would on our there. placement to see again some to under growth debt grow expect do doing XXXX. there item and investment but strategy. were fee commercial we're see categories fees, say would categories to And far line good We a trusted a as had the activity impact for throughout income and that though just of for the banking third second we've those we expect portion and line charge investment from we that in would service pressure even and retail growth account and a growth in We from overall expect quarter of investment brokerage/ services that other of growth rates. to what record year

we've to deliver and results expecting team, as business. good got that in also. which add bankers XXXX we're so got well, to throughout a area pipeline And good that help a We've those will

And to Securities. with Wedbush go we'll Peter Winter

for And line you it today? sensitivity I what's up morning. on every Good do follow is And utilization. loans? X% kind just it want can to think of increase Thanks. go? the where commercial to Where

this is we down really the frankly, we've to on This go. is an going that where pandemic; been So, through Chris. think pin area challenged it's to

book about think And on drawing there XX% their is back right at now, where below been pre-pandemic. you we those about catalysts, little paying on draws. our of a bit which and I Peter in cash. If then clients C&I is a would think the lines, our sitting have people We're one, real are lot

So they'll arguably, their of some they start cash their lines. to burn down have utilize before to

have there's And That's plenty cash I is in first slack thing. global positions. that elevated the chains. now the So of there's of the they -- plenty second supply mentioned thing

so really long, aren't investing and And se, people inventory. on per going

growth. things happen. what The get two you real think add of to economic those, Don, you'd that? is those to need So biggest both would driver I obviously, of to

implies roughly in on balances that the those which XX%, show just I $XX that's, perspective, that as would outstanding X% mean, that I right. $XX by far about growth to at And X%. No, put in lines the And us, that think if on that's would billion. increase for so billion as

that's helpful. as a digit well. of on Is outlook then it, on basis right? XXXX just net one question GAAP just low single And The Got interest income. that's that

repeat that, sorry, I'm please.

number. Sure, the base, I a that's The fee income XXXX outlook, am sorry. GAAP

a XXXX the we adjustment. $XX tax of but usually would would million me, it's FTE number $XX our adjustment FTE a base million basis a year-over-year runs year, quarter there, guess for a start is a year I a and see rate assuming have The that to we much excuse isn't the GAAP on change about for but change, to

questions the for closing it queue, any no back further I'll with company comments. in And turn to

in you thank for we call participating Again, John. Thanks, our today.

have you direct team. our remarks. follow questions, Thank They If in you up XXX-XXX-XXXX. be at to concludes reached you for can this and our any can interest your them Investor Relations KEY

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

You may now disconnect.