KeyCorp (KEY) 19 Jan 232022 Q4 Earnings call transcript

Good morning, and welcome to KeyCorp’s Fourth Quarter 2022 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 for joining us for KeyCorp’s fourth quarter 2022 earnings conference call.

call Khayat, Don our the Financial our on Clark Officer; Chief me today Kimble, are Chief Joining Strategy Officer. retirement, Midkiff, Officer. planned and Don’s Clark the assume Upon CFO also Mark our Risk Chief will role;

disclosure On slide find well materials financial will X, as presentation the It our comments of and our on covers call. our measures. and non-GAAP statement you forward-looking as question-and-answer segment

earnings moving slide common X. of reported $XXX to we per million now I’m share. morning, $X.XX or This

of provision charge-offs models million credit credit losses, or Our a economic net $XXX results our additional to for for which exceeded more cautious our outlook. by $X.XX credit included a losses, adjusting allowance million $XXX reflect provision share. The builds

businesses. with consumer new Our have added clients In younger we results segment. continued and our in reflect business, households growth our both being fastest-growing our commercial consumer

add also relationships. to Our commercial continued and business expand has

third interest loan clients. to retail step-up In up costs our rates X% XXXX, for were deposits. stable quarter. capital we the low-cost in the XX% our balances. reflecting of Deposit raised record escrow of in was income the quarter, supported level by quarter, continued Net a deposits higher from a end continued growth late At of the in deposit fourth with and move nearly relationship-based

of In deposits our accounts. are businesses, over our commercial XX% from core operating

on- execution both quarter continue to we with the off-balance add as Our offer loan prior X% and the increased average best from balances sheet relationships and solutions.

the of and originated significant loan investments we providers loans over we expanded households increased over to the care XXXX, our health year continue and care Road we continued business. member Laurel holiday, by $X.X made Road payment including business, with relationships sector. to have billion last Despite our XX%. We benefit Laurel in student from our grow In health

new refinance and held and and acquisition Additionally, XX,XXX individual nurses, Since new completed for has GradFin our with consultations nearly loan consultations prequalified Key. forgiveness. capabilities we offering These to prospects, acquisition, products added are to GradFin. all public service the expanded of credential

Our capital fees the fee-based from broader prior fee of meaningfully NSF quarter reflecting up banking the quarter, placement debt the $XX reflect and our trends. changes activity OD million from slowdown to year in in the and impact were fourth structure. but ago capital businesses continued the down markets Investment markets period,

is equity market new The virtually price continues and in market engaged M&A issue to the nonexistent discovery. be

Our pipelines remain solid, M&A. particularly in

rates by pull-through However, continue uncertainty. impacted market the adversely to be

record In strong points. basis capital clients, on a continued long-term XX% more our moving raised loans percentage average we to charge-offs a billion this Credit XX%. have above with XX XXXX, balance quarter, quality We remained see $XXX for activity of well balance sheet sheet. net of was also to of of our our as retained on our average which of

loans again near this historically quarter Nonperforming delinquencies, remained declined and levels. criticized and low all classified loans

will continue clients while business our all We to positions well which cycles. through profile, Company maintaining the moderate risk to perform our support

the including shareholders, clients with capital Our common return X% stock sufficient a strength, to to dividend capacity support in our a capital fourth our remains us increase providing quarter. and in our

Before and turn outlook and priorities our for Don, call thoughts some I on beyond. I want to over share the XXXX to

on execute will our First, model we continue to strategy. business and differentiated

markets on in verticals. and focus targeted fastest-growing our our presence will We industry expanding

market are we As uniquely various to support positioned clients conditions. through we demonstrated again in XXXX,

balance continue our we benefit to positioning. interest from sheet Secondly, rate will and

rate have perspective. deliberate very manner a been risk our which longer-term have with in interest the managed in We intentional and we

income we have and our $X.X were and swaps treasuries providing benefit years existing Although would and net rates, billion. at benefit, reprice. have our two we current the reprice swaps interest mature today’s interest short-term If we is significant to less short-term positioning over of next upside treasuries an as annualized

charge-off now our Thirdly, years which are we using of derisking Despite in quarter, X perspective, strong XXXX outperform X credit loans put loss outlook and while reserve portfolio, CECL the positioning spent Company represents our to credit this quality. loan our business We’ve decade through our To now our our reserve levels. above maintain last will our the coverage. our of this nonperforming cycle. metrics, strong level almost the net we built X/X roughly day delinquencies is prepandemic

by will create continue capacity in reducing investments to business make Finally, to we targeted our expenses.

has accelerating cost area ongoing of been early will we takeout an our focus, Although management be expense XXXX. plans in

technology, effectiveness. company, efficiency leverage automation will we areas and including our to where cost We redundancy, improvement opportunities process can reduce improve pursue across enhance and

represent acceleration of targets year The in reduction will plans approximately relative level. X% two XXXX a full our of ways. XXXX cost us our Our reduction benefit expense to

cannot scale to This grow investing we if are not to capacity our give targeted strategy, First, will points the drive we investing. continue of differentiation. us in

full hold our continue With to XXXX of outlook which ability our our expenses inflationary relatively stable long-term be future. year invest the and benefit to compared to to of accomplishment our this in commitment am and would a for I our expect our significant plans, in to reduction cost results, create all stakeholders. year our value given we pressures confident

to and Don I’ll quarter it that, for XXXX With more turn Don? results our over details provide the the outlook. to on

I’m on slide now Chris. Thanks, X.

operations continuing from share, For $X.XX from per quarter down prior income $X.XX fourth the quarter, was common year. last from net and $X.XX the down

build net additional as loss a reflecting in Our charge-offs economic excess share of outlook. cautious loan results more $X.XX continue provision included to we per our reserves, of

our is management despite XX time in resilient the on delivered last marking business years. model year, disciplined expense we For ongoing the inflationary differentiated full leverage to positive focus and and environment. operating This our a testament ninth the

year Average as X% real XX% from loans and the from the X. client franchise. year for deepen were quarter, loans estate increased our and relationships $XXX.X loans up in to Turning and commercial driven add ago ago up prior balances. or continue by slide the billion growth industrial period to commercial quarter we Commercial the XX% across and quarter from

the XXXX, X% the of were commercial ago consumer reflecting Road. loans consumer to grew loans consumer year Relative increased quarter Laurel Compared in up third loans and growth period, XX%, mortgage X%. with and

commercial reflect in growth higher continues to strength verticals industry and the utilization. line our Our targeted

business just which from for care health continues under $X from to consumer Approximately originations, Our targeted came estate fourth were of billion real originations benefit quarter. the residential one-third our professionals.

due up totaled balances commercial from and compared to on we deposits or X% X. Year-over-year, Continuing to billion period Average XXXX, X% focus the $X.X slide of down on maintaining higher prior and from fourth relationship spending our deposit increase in quarter to seasonality the deposits. business. year in quarter retail the The deposits driven deposit balances in reflects balances. billion balances quarter, of $XXX.X movement and non-operating our declined interest the ago rate-sensitive the quarter. inflationary declines saw Consumer for of and by prior commercial the

deposit increased points since interest our quarter prior XXXX. was March cumulative beta XX basis Fed Interest-bearing the the began raising and from costs deposit XX% rates in of

to continue as our in with escrow strength our deposit strong competitive of balances approximately base a core We XX% view and deposits. consumer

operating our In commercial addition, over XX% deposits were accounts. from of core

and $X.X the was equivalent net the X. ago fourth quarter. $X.X slide period billion in compared billion for $X.X billion the income in Taxable to quarter to year prior interest Turning

for margin quarter the was period the to same quarter. X.XX% in interest X.XX% and fourth prior compared last the for net X.XX% Our year

from net interest net funding net higher earning Year-over-year, margin interest-bearing and interest Quarter-over-quarter, interest rates. and deposit income net impacted and mix. benefited asset margin income were change balances by higher costs the and interest negatively a higher interest the in

to customer interest behavior. conditions the and higher in quarter, market and experienced net commercial interest-bearing expected up. we a than Market net from picked lower-than-expected changing noninterest-bearing we This deposit in migration beta, margin. and deposits income Later more increased rates interest resulted the

our XX% Our the range, peaking beta mid- below deposit cumulative XXXX well historic high has levels. in for outlook our to

feedback net liability short-term opportunities appendix information Included on our shareholders, secured. position. on we on treasury and interest future included maturities also income asset our detail our swaps in the our Based additional of have interest is rate the from and

intentional in long-term perspective. As manage with been have Chris interest his risk a remarks, the way mentioned we rate we very in

provided has over next treasuries benefit, our short-term Although significant near-term have years two we swaps position and mature less reprice. as our the upside and

net drive this the is next our believe years. We differentiator. interest margin true expect We net a higher our few and over to interest income this both,

fees, gains in from X. for the Noninterest million $XXX to million the $XXX ago primarily million the XXXX decline and of to and in year income slide investment was other with decline the a placement along Moving year debt $XX for a million reduction $XXX compared in XXXX in fourth noninterest $XXX ago of income, market-related quarter quarter. period The period. quarter from income fourth in third the banking million reflects

OD NSF $XX Additionally, million down service consumer to implemented $XX as well due structure September we income changes our charges as in deposits lower lower that were mortgage million. in on

million up down derivatives an majority on these declines $XX million. reflecting offsetting Partially $XX income the charge the new deposit terms. to due income, once increase to decline, fee million, NSF corporate was of for again higher $XX accounts our income. the quarter, in declined noninterest prior Service Relative accounted services OD

increased corporate prior benefit banking Additionally, in decreased Investment adjustment fees quarter. services income the from $XX primarily $X driven an million, million. evaluation

quarter. expense ago down now billion, XX. up $XX quarter period million on year I’m for to and in noninterest the last the from Total slide $X.XX $XX was million

we saw teammates. digital, reflect expenses operating the across expense. most declines items, in business non-personnel analytics Our our Compared our lease including professional ongoing services to quarter, and line ago fees and year and investments

were pension temporary quarter, Also, to employee prior by $XX slower of $XX Personnel loan higher the deferred the increased a non-personnel increased, and nature. year costs million, most were increase. a Personnel higher in expense drove reflecting costs Higher professional expense period, the incentive and noninterest expense fees expense the from flat reflecting lower originations. benefits, Compared which salaries remained fourth is also offset up in charge quarter. stock-based in settlement to compensation. million. reflecting of some lower Other quarter, compared ago

slide on Moving to remains Overall strong. credit XX. quality

points $XXX loans, remain the loans, basis near or a points levels. fourth the XX prior quarter, quarter. on from net million decline of which $X million quarter this were basis Nonperforming historical period $XX low For or were average million end of charge-offs XX loans

a net $XXX quarter, excess set. The our which Our charge-offs increases provision cautious reflecting by provision losses, model-driven credit for for $XXX million. credit the for allowance losses assumption was million exceeded more fourth

the consensus with start we Moody’s modeling, CECL scenario. our For

This outlook reductions Despite points. our marked XX consensus well charge-offs levels. allowance, to loss estimates XX in our reflected meaningful the below remains of which basis to a in slowdown in economy of of basis the increases the XX levels both home net points in through-the-cycle quarter, XX prices, our for the allowance impacted and XXXX

capacity sufficient equity slide X% support common with on within to return X quarter and ratio and to shareholders. range Now borrowing This our to targeted capital needs with Tier of continue of the their our to customers fourth X.X%, provides XX. to X.X%. We ended our us to

of: dividends. share to continue approved finally, our $X.XXX quarter, our in growth organic which per our second, our a consistent repurchasing fourth of the common capital will places In quarter, shares. at manage priorities our first, Directors now increase, capital We Board X% business; supporting dividend and paying with per

repurchase third $XXX Our quarter authorization any the We of in XXXX. current quarter. share the of through is place complete fourth share million repurchases not in did

is slide On is XXXX year guidance to full full outlook. XX our relative year XXXX our results. The

in result guidance of midpoints operating in leverage Importantly, the using of another positive would ranges our year XXXX.

will expect flat between up average loans be X% deposits and to will We X%, and X%. down average be

growth up be in between interest Net X% and to interest average reflecting loan higher X%, rates. balances income expected and is

a our based customer behavior are funds the first will is and rate the quarter. expectations in prospectively. our fluid guidance quarter in starting rate environment peaking These assuming at the impact the pricing with forward fourth and competitive interest X% decline Fed outlook to for assumptions, along continue curve, to Our on very and

implementation year. to the least income is last our fee OD NSF for structure new of the down capital activity, year half to and X% markets of expected Noninterest be challenging X%, the at continued first reflecting

investments ongoing make the expense of benefit Chris relatively takeout we with noninterest in expect cost his opportunities to remarks, in along stable described that the with will business. our We be

of credit and For XX will strong quality XX to remain in to the well we to XX charge-offs basis-point range expect points. be XX the year, basis through-the-cycle range, below net the

guidance GAAP Our our XX%. approximately rate for to XX% is tax

slide which long-term bottom the our remain at our shown unchanged. are Finally, targets, of

will drive targets We moderate profile our and expect these risk and on by progress to productivity maintaining to which continue improving our efficiency, make returns.

Overall, in long-term a deliver finish it We quarter targets. another to year for Key. and our of to a solid successful our remain on was each good very grow ability confident and

on instructions the the operator turn over now call. I’ll call that, to Q&A portion the Operator? for the With back of

go [Operator Pancari from from Please Your line ahead. Thank comes John of Evercore. Instructions] you. first question the

in a that of surprised could I pressures a you on well, pressure. to how step to rates know what more cost just why feel was what your that quarter. And amount the up detail little saw you step-up around you also attributed you the And you. related see late pressure greater-than-expected Thanks. deposit what trying not us around and but there? given in think then, you get a mentioned on higher-than-expected through. you as you what fourth outlook magnitude deposit falling areas the said surprise And a maybe I that just if give do wonder saw deposit the and rates, products that, -- to that a

December, started in quarter as far the products. some as rates. see many far as conditions of to and start the as November, we We market pattern pick far migration late And to up John. deposits as as can, late saw and and rates Sure different a the

Our the cost to into money time had expectation some incremental our deposits higher were the what of -- as the accounts. more than quarter rates assumptions coming on but migrating as money far which deposits, was were towards drift customers market up a deposit market deposit continuing

a at the would what have than from accounts noninterest-bearing a pace We also faster we expected saw in quarter. late shift away

of impact coming reflected is down interest compared end to we And so quarter of in current going for would expected and have driving those both even the our forward. the had the also what of outlook net quarter into an income

have offer I don’t want forward to going Clark, thoughts what you you? as the And trends as far any if deposit rates as up know betas far as and and

of as which ending And we bit the just and Don. we pressure a get your side, XX% That’s bit little mentioned, of side and more of unexpected, be around did where on would interest-bearing. the John, consumer a the back. a which saw than of and commercial than bit better come that’s that we’ve -- not would Thanks, that’s been seasonality, of the little we rotation would Don we sort high-XXs see, Sure. a historically, kind little mid-XXs. seen noninterest-bearing ratio to A little noninterest-bearing question, that have through could out more we’ve expect year, a to balance been

money bit we again, for through, And In a than said, XXs, as in and markets high little and rates, in, expect Don stable, be the the more of that mid terms we’d we’ve movement to to CDs of year Don factored said that for high-XXs than as but to products year. sort his coming again, CDs remarks. ratio the betas expected, prepared noninterest-bearing

as first it year, cumulative is the of lot our it’s end would commercial of places private as really to excess banking expected the were hard the of John, Chris. And on to the A got was side. wouldn’t it ever interesting. in it really model. It’s like the area. that A behavior accelerated. We we lot deposits have beta for three Customer quarters as been X%. have low

been So, And increases think of it’s been of the This interesting. steepest out history. sort I in conventional the window. the of some has the are curves rate Fed’s

in Okay. and Thanks. that investments you’re helps. you I focusing need up And ratcheting the Chris, on areas. then, investment certain for mentioned know

what on terms necessitated changed elsewhere? areas that costs if to pullback color you’re greater So, of investing in that Thanks. there I can additional us see you in give want in the

Yes.

year our a on focusing about And going was as having was XX% talked invest Day were when point really both investment, by focus Investor our that been we cease marketing we I markets, to take XXXX the with out consumers lot a And continue making growth by going of success we products there to regard. that we’ve So, we’re in we’re and growing our and and continuation at a costs. we’re it’s really John, not making. customers, of the to ago, to younger

The XX% about hiring our bankers. under think Admittedly, and have XXXX. last we unique these by tapered we platforms we we are population about market increasing talked economy. And talked it the off a frankly, very coming by the year, people Also, we was the obviously downturn We to -- will back environment talked successfully of be overheated. half the in bring also, in -- banker that think about will We onto year. the we recruit be saw good platform forward. going and leveraged,

investments where made public members Road Laurel grew buying expanding around And being we’ve having to to grow to XX,XXX continued This line made we lastly, XXX,XXX. a we’ve Laurel a the to product is and of a and invest forgiveness. it our GradFin, then Road, there, that year, service we were in lot was successfully XX% by leader from we commitment nurses full loan going

the well. going income-based also to We’re forgiveness get as gain into

So, those are the three areas.

wasn’t really new migrate we’ve critical cloud the of digital. the in continuation a continuing and things business to It’s areas of And to investing so, including like it the investments around made much. investments so in

clarify that to that’s best it No, of you, Don. helps for it. appreciate And Chris. me. Okay, And luck that. I

you so Thank much.

next of from ahead. Your Please question go comes the from Gosalia Stanley. Morgan Manan line

some your Can reserve us you color your well quarter? below To point, the your guide for long-term give this targets. on is ‘XX build NCO more

And ratio or expect I what changed conservative? could environment here, I guess, you factors drive stabilize that reserve And that being should higher? to be that necessitated lot reserve there ratio reserve in guess, So, macro is the the the we build? more a this from

Sure, Manan.

for First the we that And reserve. right. build in of credit metrics, thank fact we you’re good really did, have Despite question. you all, the your fact,

recession at the to the quarter back slowing. clearly we a third of fourth increased step from We believe the perspective, the has a of probability of the kind look second, And quarter is macro last year. think so, for you economy of if kind

Our case, there mild the a that recession. by way, base be is will

really drivers the of There’s three reserve. CECL

described, macro for view, is The first just the I driver us. is the which which

is loan second have growth. The we loan obviously some growth, and

The our all. third That driving is idiosyncratic at portfolio, reserve really risks, build is not specific credit. specific

to two-thirds quarter, you. by So, just of X.X%. third the From we for GDP X%. sort life we look to fourth to it from, homes around at going thought it we looked we the models, a Unemployment X.X%, X.X% going look kind will bring to peak about by we now of when of index, X.X%. as declining things significantly, in at thought X.X%. we our third quarter third it, say, we decline were from at in price like fourth was would the quarter, it In peak it think as But up quarter, home the at the modeled

significant fairly So of quarter-over-quarter change X.X%.

from bring our book. our billion to booking That’s of kind example, scores mortgages. about about memory, or It’s of XX% the Now for those some say, on it we, XXX portfolio, number. of back are, loan to such have $XX -- FICO

We your worried are our above. using macro are book. share our drive also our mortgages drivers mortgage for for just as I’m about But that as the Does I question? And XXX not build. the we example which answer texture say models, have reserve forward-looking, because XX% that we you or an And that are CECL why of this impact. significant

you managing much you the for then, Has were And that and just putting so with changed? longer. in any the hedges changed out really you on, Yes. how you’re the you’re round rates additional go books? that if keeping that managing NIM or thinking on through camp of has how XXXX. as Thanks Fed the higher on the could color. Earlier NIM swaps about just That’s helpful. And for the

sure. Well,

time that that we that. this it now, would roll-off swaps set basically in far of As continue replace we’re right have our is to continuing evaluate as we we’re assumption point managing to just at that how

the rollover think with of to I start risk challenge just this that outlook. we pull is some yield lock is the that and inverted all curve do in have to you when trigger

in embedded that future. the something take but of now, not it’s optionality right that of continue base our any we’ve care have to that so, And as we’ll into assumptions, to

from next ahead. Bank of comes America. question go the Ebrahim from line Please Your Poonawala of

wanted to credit. just up follow guess I on

consumer talked to book look just about So, at the Like where the you the delinquencies the C&I, mean, portfolios And impact you slide about rates, think lending we both and commercial CRE When about start small. talked on XX the where talk provide you we case. us and mild C&I the and higher? leverage to CRE, when But content? I is as recession book lost FICOs. on moving higher idiosyncratic book, risks, relatively your the from the demand cooling expect the about is within base the you do

Well, thanks Sure. question. Ebrahim, for the

for place you’re it’s loan you focus. closely. verticals, where has our that a is of So, we which, the you to into where at us it where our X there’s you started right, leverage focus by exactly leverage. you about focused only very industry And recession have pretty obviously, leverage there’s declining entire watch if high a and in We the mild right EBITDA, and any go But book, place think you about turnover. finance, X.X% and and way, have

good you bubbled about imagine, modeling Nothing to it But very we’re up can as portfolio. feel very, regularly. that surface. We the has

is books, closely. rebuilt estate -- which but is real our loans an it The not area look appropriate at next business that lot not estate a on we around real only that that we estate our you completely really real estate. And is What real paper. think also a of mentioned, we’ve done is distribute with we area put I business we’ve

bit the than a have, little of companies, a life cetera. CMBS business et market, FHA, the it’s lot So, of Freddie, different Fannie, our competitors a

of So, distribute we lot a risk.

asset the on affordable multifamily within on, and housing. but broadest sense And We’re certain classes its focused we’re -- specifically certain in asset foremost, first on also on that focused classes. very multifamily

closely. those watching We’re

the are rent the still uptakes are firm. holding far, good. -- rents Rent So

we The it. portfolios. really that portfolio. little and fortunately, have There’s portfolio very So two closely, look about feel we that good we actually of very at

space $XXX in multi-tenant central down business expenses forward. cutting Right are we’re because that very those real C we’re rid think that’s office buildings class but occupancy reality now, Key watching buildings. any first million, the of costs B or whether to closely getting business, is going other I And risk The is a it’s and districts. and

that So, we’re watching closely.

about where a area is an other retail $X close keep area billion of in we we eye. exposure where The And only is have retail.

that’s of So, how portfolio we’re where are kind can it. delta as at between rolls and they’re about debt thinking you this we where as over. modeling continually And borrowing their the look we imagine,

I And or loans. in some there derisking take big some mark-to-market terms having that it. these think Got credit you get mentioned without out in that you’re charge? market being of credits to of the of for able to actively a of What’s these

really a hasn’t There hasn’t yet. there -- been movement lot of been

think a example people price some think endure are equity, office, in pain lot how of frankly, before on you discovery. that B fresh to, I have are there’s to to cetera. in I class my of M&A to the I of are if going have like how people people still the et in equity, just and C environment, Obviously, think impaired take people more meeting a kind there’s restructure, of bring but minds

risk a And in Fed lot QT, like of Do high-XXs downside beta beta next kind a quarters? that us the sense nudging of wondering, think plus guidance. enough? is you level higher. comfort it. question, bit their with on to your I’m Just Like, of NII. do more a banks over just one Don, are fund’s conservative that few you for Got just the up a of mid world sets give expectations think X% you

as were rates increase and say kind I’m closer of XX%. we already. well. seeing are keep of would at best-in-class in offer Most go and I for up mentioned ask our first We as thoughts in is some on, this have rate earlier think beta our I’ll to over peers Clark we we and cost that of in go you’re ahead beta that chime focus to few cumulative I that, the down. both But quarters really shifted thorough pay as continue mind ahead to dividends side. priority XX% what the consumer where that confidence see cycle us deposit Chris fact commercial going. a the I seeing on do we why And assumptions and to for to keeping and more deposit scrub our is that our And did primacy, we and have as as will far overall the deposit think

you would add there? Clark, anything

Yes.

The for I other us it’s just would is point new deposit less that acquisition. add about

always from new We’re little going from a But just allow to new what to is year product deposits of product, relationships. clients and lot pricing. managing flexibility us looking bit this that and acquire a at we’re clients more on

beta is Ebrahim, the share I only this of of you agree and uncharted I the with thing And sort I that trajectory we’re the with said, everything Don with though, that Clark would battle add, territory. thing our will while really Key. pleased serve lose the because them at win we’re deposit the and keep it’s important very beta -- battle we to clients going and here lose our win the and the deposit not betas, we war deposit that

ahead. next Your JP of from question Please from Morgan. Steven line go comes Alexopoulos the

outlook. loan that look outlook? I credit I a such period appears a some much it loan I in where don’t If that sluggish and the whatnot? basis. period-end or average loans know the you’re end not maybe wanted on on XXXX, growth ended for looking XXXX why Can start give on tightening and box at color you to confirm you’re if

misleading. can balances far a Steve, Don. little as this the sometimes And period-end outlook, the as be is

commercial. the quarter a coming is billion, range, look is at total just from look $XXX.X loans range at fourth guidance really million and $XXX for -- So, all our the if you of take our average in midpoint that of

outlook of what pulled our with so growth allowance And back this influenced some also in change loan the determine we’ve on economic that or was, our also outlook.

are throughout relatively Steve, down see, originations flat home equity consumer trade of is there year. continue to to that also next flat and continue on the residential expectation have what is see our other consumer some that we’ll You balances loan balances our And mortgage that we’ll categories.

growth incremental modest it’s of appropriate from have. it outlook but is here, so, the the we given economic very backdrop we think And

Got it.

card, reserve then, those specific assumptions helpful. was consumer the did in Don, seen consumer a build would would these thought cetera, why on if I you Okay. know well. the smaller, economic not home the risk, build, et changed they’re of change not have unemployment if idiosyncratic that’s an and reserve reserve in And equity, materially increase we have up in categories? direct some a I go rate, as but

talked about home of down biggest also were price larger GDP the Chris One coming things the index. that the and this were moves

is And would others. credits than of residential have increase a the larger seen so, some the estate backed what you having real

factor in our portfolios criticized also other not those I classified levels the the higher showing position very point at categories in levels increased some seeing and we’re And why that’s not still because those are reserves seeing risk think our you’re in this migration time. that benign. You of delinquency of

Got it.

Okay. in. I squeeze Thanks. more If one could

Is Thanks. is this at Just or the mid And the high you range you assumption? NII guidance guidance, the for to mid the beta, to what X%. but is assuming by range? looking that’s it up are end noninterest-bearing high-XX% of mix ‘XX? of deposit underlying said X% I know what

Yes. Steve, it’s Clark.

the high question is roughly the year noninterest-bearing the mid to for XX%, beta then So, it’s of high, sort high-XXs for area the the to is XX-ish, XX mid on -- percentage year. and

Okay.

great. taking Okay, Thanks flat? for pretty my questions. staying So,

fourth, for little seasonality, on average. was a XX% the just [Indiscernible] in bit lower

next question Cassidy of go RBC. from comes Please ahead. line Your Gerard from the

the for buybacks? in remarks the missed think stock Maybe but it, that I you have your any Don, XXXX? the if I share mentioned for quarter. what’s gave completed your Chris outlook wasn’t fourth or what’s there repurchases in outlook in you comments Don, stock may repurchases

assuming be meaningful repurchases. stock Gerard, there’s any we’re that going not to

sheet and we our is supporting and balance shares our which of repurchasing look look don’t modeling. our us out second our there a As just at at lot based I current see clients our priority, on we dividend, paying

was similar that that how the with us with of Key of where I then, quarter. on borrowings what Very and essentially gone the your noticed good. release, flat have lot they mix thinking that talked and and deposits than your share they’re with in more margin why sheet was you been had have deposit Obviously, And about those and went short-term on we you saw you’re going much others borrowings went Can a peers of the the much the expensive, included using you difference How course, press comments the in up up. average long-term deposit and in your your funding. balance -- borrowings the have betas up?

is growth funding, half as as the the second of deposit especially seen growth. far the exceeded what Gerard, the year we’ve throughout that loan

FHLB using help far issuances loan outlook were needs. our I suggest would other we building continuation as outlook funding that some pace so, say the same the growth to our at and the other as sources. address And wouldn’t that deposit funding and

well still forward. type and range, that we growth we’re say, to XX% wouldn’t And traditionally, of we’re in with fine I expect so, would that. we at But same a to rate that. see term, XX% loan-to-deposit look going below near the would But ratio

capacity to continue And so, of source needed. plenty funding as that to we’ve leverage got

And Don, you. good. good luck future in your endeavors. Thank Very

appreciate Gerard. Thanks, I it.

Please of Sandler. from question Scott line Siefers the Your Piper ahead. next go from comes

of is mean kind way look just repricing But or be ‘XX first What think NII would quarter is would I to and appendix, very of put to sort off more when but of meaningfully with to if alluded easy here about fourth Don, how it, maybe kick to NII repricing helpful. curious it there’s just of I of you sort and say, accelerate reference. we numbers regard if quarter quarter could benefits guys And was wondering start the looking you the trajectory then hey, frame numbers, through wonder there way ‘XX? Not an of the that, the trough easy like you in? to how or ‘XX that? which for specific frame if there’s I billion I of first something here? vocally versus, another time like $X.X an walk say, those a around which see hear in

over I Good. be one turn will here that quick forward. going around. to a deal Clark with but because I is won’t to And Clark offer couple be And it comments, the to of that’s

example, want for Keep highlight, baton that and though, So, thing is you pass Scott, I go One the a in from take perspective. look, the will as to of we in quarter ‘XX. first things ahead from mentioned impact Day the are the count-related $XX some to that seasonal. million issues the that there quarter where mind, quarter the to relative about fourth more is cost are quarter fourth quarter. first first

fee the loan to see quarter, first of side. the from some refinance typically the on activity fourth also We quarter income given drop

growth of there. quarter and point interest been a has see our both, the swaps as income taking would and would as we interest low first net far Clark expect lot And so, strategies traditionally see look being at to from the a for treasury. And spending and margin net time the

you there far don’t why as insights? as Clark, other from it take So

Sure.

try to your to Scott. address question directly, Just

really, to think of the the majority come is value going ‘XX. I in

is $XX what’s billion If in billion It’s that billion. $XX off billion. coming to ‘XX, and treasuries about you think about number $X more and $X.X swaps in like

So the shared, we’ve think the run just again, that a think swaps you’d third say, all which billion treasuries $X of about taking ratio. pricing and of see to billion of about that of remind benefit and kind of I again, in two-thirds, ‘XX is, of I’d $XX exit rate. them, almost you, one-third spot number kind

three to that you’d pulling two-third that starting that So, maybe ‘XX. and of end then of of the as of beginnings value in through steepness the ‘XX in again, the majority some through or of by quarters that NIM come more see

I does behaved. I’m it of quarter, Thank behave? the one billion think or billion way number the a last move curiosity, in surprised -- versus regardless in that plus What a a of things $X.X at Perfect. the of held the Is billion take well little $X guess changes I that you. $X.X sturdy to another? just way Okay. estimate number sort really has you pretty way saying curve were And of kind of how given out all the kind almost

than the a there the moved we point. end significantly rates in two-year saw biggest impact movement lot Yes. is the say the I’d more of what longer the two-year end was And curve.

best Okay. all And All you very Thank right. wishes. much. Perfect. Don,

Thanks so much.

of Please next Wells Fargo. Mayo Mike comes go from ahead. line from the Your question

You from the conditions during topic the company lending And side both lot wholesale the capital tougher not market guys and a is are the see financing one lending capital season market to a are this tougher. conditions whereas side. earnings that much

In lending So, converge? or firming any Are the you not? when do the markets is in will these capital up in think other pricing more difficult seeing you much markets? than the words, pricing

Mike, I And depends the is. on it it it what when say So, the is, answer depends. depends, customer strata of kind

of disconnect kind not companies quality fund I there that expect. really Where think investment-grade we one or you bank people don’t are seen And of XX% inputs, different a whether -- multiple swap there’s And can seen to the customers. hedging, So it, our of loans we’ve there a people I the cetera. putting think think, a don’t looking disconnect, and on, adjustments don’t There’s at would goes the I is bunch middle-market away, one those in finance. et that are are adjustment there’s immediate. haven’t

recently to times, change on markets, a coming that’s headwind. Okay. up? your at Do outlook you that general And a just nice capital tailwind expect

Sure.

of things I year to for about get doing about think -- into over whether the ultimately, middle experience My talking it market is major look, it going time, talking I and debt readjust you’re takes repriced acquisitions. strategic people a people bank or literally So expectations. you’re their think, kind takes

And eight we’re think it a start clear think in part into still start be things those aware say, half But the will or this of kind Mike, months pent-up -- ago. the is six half to how be eventually the have nine remember and big was this. what -- -- going capital will of buyer I price in repriced. the will it’s discovery, acutely through out as of of the been and of year, in second the will converge. so, the go that’s anyone I obviously financing year. I But to people -- But challenging people to challenging because going business half or think way, second be worth, the easily six markets or months by I think first And backlog to first is

line from go Usdin Please the next Jefferies. Your of Ken question comes from ahead.

Hey. well compares just quarters? wishes for to the Don, come Good super XX% that have I is just to back that morning. Don, XX%, XX% through as from cumulative, me. beta And the and clarify, three best interest-bearing

Absolutely yes.

that comparison that talking of are even heard the many continues calls peers then, think that Okay, just the so so some come question to up cool. And I just I -- guess, in low-XXs we’ve far. is mid-XXs,

kind products that that go deeper within gives just and, I type confidence of you you and much step into can the guess, assumptions just relative So, one to peers? businesses pricing better Thanks. of

Sure. it’s Ken, Clark.

given versus and that rates kind much pick what them have and what to new much saw motion up. dollar are So, requires book. part, that comfortably. that those we higher significant think, new where marginal of higher book the in ‘XX business for what us, more cost we avoiding, of the is to bring is I’ll we where to Again, or price in of we’re in in And quarter offer little manage larger account noninterest-bearing, accounts be transition new different the at interest-bearing or necessarily can new repricing to in about that looking different a Key from fourth deposits large we’re funds in less the the

at The would right that only we’re thing Ken, I other is cumulative. add, now, XX%

close most think I XX%. to are our of peers

And XX%, them to same going high-XXs. so, as the us it’s thing to by going

peers. change So, than probably the just point a we’re is starting better this forward that at incremental consistent. from It’s point fairly

point, have interest-bearing your lower It the the Yes. costs in seem the that. betas to That fourth deposit to does -- be to get incremental XX% sense. like have to that to than makes square be though to quarter

far only in as think cumulative, probably got but and you’d go still rates going a we XXXX, engineer it the basis-point reverse increase I forward As lines but far as because math, up. back not a as XX can

Okay.

can outlook, quick your Just Thanks one. Laurel there? one you us Road give updated guys. origination thoughts

Sure, Ken.

challenge. a been that’s Laurel things. federal loan Road, origination a challenged from has the challenged. three holiday, student by payment outlook One perspective, So obviously, is really straight been It’s

had the is wanting student think, is rates, to forgiveness, think the challenge there sidelines I that which The that’s a on preserve the several third around stay some times. extended been discussion I interest rising loan next optionality. borrowers the challenge. just And has we’ve obviously, are all debt to

Having we were billion last But a are of bigger that create even a trying we affinity year, refinance bank. to of impressed originate able said to I that, all loans. Ken, is digital was $X.X national picture,

I the all, come raw of back issues there’s originations those of being that around for all a talked a done now refinance build clarity advantageously. they’ll first what of meantime, affinity we’ve right when bank national and of priced is able the So material digital And there’s just that back, products bunch will come has doctors, suite to products be full in a this suite nurses. But you’ll for about. whole

do. We’re getting that we on business the cross-sell XX% a

there is So, there’s a But to that challenged, been what trying term. be continue the they’ll lot question no challenged and to do have near very originations in we’re broader.

And really qualified around time kind be uniquely service advising their advise is to on leader we’re is forgiveness on full of Any public bought obviously, going where This business them see GradFin they’re we discussion this income-based to that. that people, of we’ll bring we loan in a forward lot in because interesting a you’re going as and repayments. customers.

question? answer does your So, that

Chris. you, Thank It does.

Ken. Sure,

Your question Please the from from Bank. of Matt ahead. O’Connor Deutsche next comes go line

$X.X from about, coming yield that rates billion, obviously But yield in, rate shorter a what concerned should might but it, missed staying high? from curves part said, parts the as I we of term. term are think as be of we we I about longer think about I fixed of rates realize watch, most which part short we curve the longer you the assets if but of variety what Sorry kind And because your the think rolling? there

and the looking to to Matt, curve, a that. billion, would in to as the it’s those we’re swaps Yes. we position be far X-year do where extend as a really that’s $X.X X- into when

And so, that the yield it portion is of curve. in

pass-through curve around over little normal We we bond as CMO assets of end that, and the more look our at quarter there. to do we tend type billion as portfolio. a and over tend XX-year structures a somewhere pass-through And have roll far there. our the shorter $X investment Beyond also strategy five-year like to

line D.A. Your Winter Please next the from from Davidson. ahead. go question Peter of comes

the being wondering the Chris, capital could I color the I to year. heard give more X%. in down the of half moving in just if comments ‘XX second parts to for was on X% markets about income the the you some fee

Sure.

The few in areas and do a pickup where areas our Don, cards area. there’s So, headwinds. we’ve trust. where in We’ll get will and takes? is We’ll payments. investment areas get some some the where there’s and few banking pickup want then get a cover we got to pickup some we’ll you puts other in pickup get

impact our of And quarter be as think program down year we’ll category. we and there to rate X%. will how million Sure. now The There’s less rate with customers. strong year-over-year just far as volatility, blended this we OD first as see swaps X% largest this will suggest what ‘XX would such also that think because for $XX that have implementation outlook get for the to that right you interest less to had income And that services fee. another that in That’s down derivatives, corporate that. we’ve decline impact category. a opportunity for for that the us quarter to we in was service the compared about We of charges mentioned ‘XX be our full the deposit NSF

above? is securities loan-to-deposit at support that loan growth? then, Is use And you’re to to you those and don’t to flows go Got ratio it. that going continue kind I’m secondly, XX%. assuming let now a cash to certain there the want of help level And

think our XX% that. XX%. capital a but typically, for and we’ve efficient that’s national we very is and -- available long that been balance where the target level, markets We funding time at source that supports up been between is since still access and to It’s we sheet

me. was -- of The part remind question the I apologize, Peter, second

Sure.

flows... cash securities using Just

portfolio you relative there, think treasuries we’re we whether good look liquidity the good that’s for basis, and indifferent we later size source we at longer new that size. is $XX the we’ve us. a about and liquidity billion, position. That I on that $X about run ‘XX off the management apologize. core over And roll a that start can a billion needs let the that that of whether portfolio, short-term funding securities. some term, got We What in for liquidity talked good our short-term if of that very really overall throughout. rest can into fund probably we’ve given it’s a but lot to of or be that’s of replaces think mature But a

XX% would that as thing the of was takes that, other the I billion sheet. for to the Historically, in balance $XX put number example, our which we quarter, the raised, capital and that that balance add sheet on XX%. Peter, the on is you we about puts has that think fourth been

want in we’re all dislocation that the the in put with them markets, able So, capital on balance sheet. our and to manner structure things a we

these -- to won’t As to will opposed markets start back way XX%. it that deviating basically percent kind XX-type their capital work out as of

I pretty that’s of little over half think So or just said, that -- I so. short a the term different a wrinkle year as next is bit a

Don, years. of And you it’s best Thanks. it. with luck been these a working Got and pleasure over

Thanks Peter. Right so much. back you, at

no there to for further turn it I’ll at you closing are And remarks. questions. this any time, back

for you thank in and call. our operator, you, thank participating Well, conference

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