Q3 2023 Western Alliance Bancorp Earnings Call

October 20, 2023

Yes.

Speaker 1: Good day, everyone. Welcome to Western Alliance Bank Corporation's third quarter 2023 earnings call. You may also view the presentation today via webcast through the company's website at www.westernalliancebankcorporation.com. I'd now like to turn the call over to Miles Ponderlich, director of investor relations and corporate development. Please go ahead.

Good day, everyone and welcome to Western Alliance Bank Corporation third quarter 2023 earnings call.

You May also view the presentation today via webcast through the Companys website at Www Dot Western Alliance Bank Corporation Dot com.

I'd like to turn the call over to miles director of Investor Relations and corporate development. Please go ahead.

Thank you and welcome to Western Alliance third quarter 2023 conference call. Our speakers today are Ken Vecchione, President and Chief Executive Officer, Dale Gibbons, Chief Financial Officer, and Tim Bruckner, Our Chief Credit Officer will join for Q&A before I hand, the call over to Ken. Please note that today's presentation contains forward looking statements, which are subject to risks.

Speaker 2: Thank you and welcome to Western Alliance Bank's third quarter 2023 conference call. Our speakers today are Ken Vecchione, President and Chief Executive Officer, Dale Gibbons, Chief Financial Officer, and Tim Bruckner, our Chief Prat Officer, will join for Q&A. Before I hand the call over to Ken, please note that today's presentation contains forward-looking statements which are subject to risks, uncertainties, and assumptions. Except as required by law, the company does not undertake any obligation to update any forward-looking statement.

Uncertainty assumption.

As required by law the company does not undertake any obligation to update any forward looking statements for a more complete discussion of the risks and uncertainties that could cause actual results to differ materially from any forward looking statements. Please refer to the company's SEC filings, including the form 8-K filed yesterday, which are available on the company's website now for opening remarks, I'd like to turn the call Paul over to Canada.

Speaker 2: For more complete discussion of the risks and uncertainties that could cause actual results of different material for any forward-looking statements, please refer to the company's SEC filings, including the form AK filed yesterday, which are available on the company's website. Now for opening remarks, I'd like to turn the call all over to Ken.

Thank you miles good morning, everyone I'll make some brief comments about our third quarter 2020 through results and then I'll turn the call over to Dan one year ago on our Q3 2022 call. We discussed our plans to temporary balance sheet growth to bolster capital and liquidity in order to reinforce our.

Speaker 2: Thank you, Miles. Good morning, everyone. I'll make some brief comments about our third quarter 2023 results. And then I'll turn the call over to

Speaker 2: One year ago, on our Q3 2022 call, we discussed our plans to temper balance sheet growth to bolster capital and liquidity in order to reinforce our financial foundation and position the bank to navigate to a volatile rate environment.

<unk> Foundation and position the bank to navigate through a volatile rate environment.

Speaker 2: The events of the spring caused by duration mismatch at several regional banks validated the importance of our strategy and accelerated its implementation through surgical balance sheet repositioning.

Advent of the spring caused by duration mismatch at several regional banks validated the importance of our strategy and accelerate its implementation to surgical balance sheet repositioning the recalibration of our business model to enhance overall liquidity and deposit granularity is designed to make the balance sheet unassailable.

Speaker 2: The recalibration of our business model to enhance overall liquidity and deposit granularity is designed to make the balance sheet unassailable in the event of another significant market disruption.

In the event of another significant market disruption.

As a result, our CET one capital has grown from eight 7% a year ago to 10, 6% today, our <unk> loan to deposit ratio has improved from 94% to 91% to provide enhanced protection to depositors and cement the stability of our deposit base insured and collateralized.

Speaker 2: As a result, our CEP-1 capital has grown from 8.7% a year ago to 10.6% today. Our HFI loan-to-deposit ratio has improved from 94% to 91%.

Speaker 2: to provide enhanced protection to the positives and cement the stability of our deposit base. Ensured and collateralized deposits have risen from 47% at year end to 82%.

Positive have risen from 47% at year end to 82% in order to fortify our liquidity position, we have materially increased our cash and investment securities and now have $3 2 billion of high quality liquid asset treasuries, having established strong capital liquidity and deposit Grand.

Speaker 2: In order to fortify our liquidity position, we have materially increased our cash and investment securities and now have $3.2 billion of high-quality liquid asset treasure.

Speaker 2: Having established strong capital, liquidity and deposit granularity, a 30 foundation has been laid to deliver earnings improvement going forward. Over the last several quarters, we have a prioritize stabilizing and growing deposits, as well as optimizing the liability structure by paying down bar.

Larry a sturdy foundation has been laid to deliver earnings improvement going forward over the last several quarters, we have prioritized stabilizing and growing deposits as well as optimizing the liability structure by paying down borrowings. This has led to net interest margin growing from our second quarter trough as we have some.

Speaker 2: This has led to net interest margin growing from our second quarter trough as we have sustained improvement in our fund-reached structure. Lord, our adjusted efficiency and produced above peer return on average assets and return on average tangible common equity. Over the next one to two quarters, we will complete the optimization of our funding structure and be well positioned to employ excess core deposits into loan growth. In the third quarter, western lines profitability, strong liquidity generation.

Stained improvement in our funding structure lowered our adjusted efficiency and produced above peer return on average assets and return on average tangible common equity over the next one to two quarters, we will complete the optimization of our funding structure and be well positioned to buoy excess core deposits and the loan growth in the <unk>.

Third quarter Western lines profitability strong liquidity generation and stable asset quality are proof points to the dexterity, although our diversified business model.

Speaker 2: stable asset quality or proof points to the dexterity of our diversified business model.

Unknown Executive: Good day, everyone. Welcome to Western Alliance Bancorp operations third quarter 2023 earnings call. You may also view the presentation today by a webcast through the company's website at www.westinaliancebancorporacen.com.

Speaker 2: Before handing the call over to Dale, I want to the highlight the drivers of our strong deposit growth in Q3. Core commercial clients, both new and existing, were the primary sources contributing to $3.1 billion of growth. Morgan's warehouse and HOA push growth upward, and the regional network posted a second consecutive corner of vigorous deposit.

Before handing the call over to Dale I wanted to highlight the drivers of our strong deposit growth in Q3 core commercial clients, both new and existing with a primary sources contributing to $3 1 billion.

Miles Pondelik: On our last term, the call over to Miles Pondelik, Director of Investor Relations and Corporate Development. Please go ahead. Thank you.

Mortgage warehouse and HOA push growth upward and the regional network posted a second consecutive quarter of vigorous deposit contributions.

Unknown Executive: Welcome to Western Alliance Bancorp, third quarter 2023 conference call.

Speaker 2: Overall, the positive cost increased 27 basis points, though overall cost of interest bearing liabilities pressed, five basis points, 2.8%. In Q3, as we utilize deposits to pay down higher cost borrowings, which Dale will comment on later. The liquidity came in radically over the quarter to push down our average borrowings. Core commercial deposits cost a marginal 4.04% including cost of earning credit.

Overall deposit cost increased 27 basis points. So overall cost of interest bearing liabilities compressed five basis points to 8% in Q3, as we utilize deposits to pay down higher cost borrowings, which Dale will comment on later liquor.

Miles Pondelik: Our speakers today are Ken Beckion, President and Chief Executive Officer, Dale Gibbons, Chief Financial Officer, and Tim Bruckner, our Chief Proud Officer, which joined for Q&A. Before I hand the call over to Ken, please note that today's presentation contains four looking statements which are subject to risks, uncertainties and assumptions, except as required by law, the company does not undertake any obligation to update any four looking statements. For more complete discussion of the risks and uncertainties that could cause actual results with different materially for any four looking statements, please refer to the company's SEC filing, including the four May K file yesterday.

Liquidity came in ratably over the quarter to push down our average borrowings core commercial deposits cost marginal four 4%, including cost of earnings credit rates cultivating multi product customer relationships remains critical.

Speaker 2: cultivating multi-product customer relationships remains critical for solidifying and growing client relations.

We're solidifying and growing client relationships, which has held in the mid 80% range in recent quarters, our digital consumer channels, a source of liquidity uncorrelated with our core commercial business lines generated approximately $800 million this quarter at attractive rates relative to the <unk>.

Speaker 2: which has held in the mid 80% range in recent quarters. Our digital consumer channel, a source of liquidity uncorrelated with our core commercial business.

Ken Vecchione: Thank you, Miles. Good morning, everyone. I'll make some brief comments about our third quarter 2023 results, and then I'll turn the call over to Dale. One year ago, on our Q3 2022 call, we discussed our plans to temper a balance sheet growth to bolster capital and liquidity in order to reinforce our financial foundation and position the banks to navigate to a volatile rate. The events of the spring caused by duration mismatch at several regional banks validated the importance of our strategy and accelerated its implementation through surgical balance sheet repositioning the retail operation of our business model to enhance overall liquidity and the positive granularity is designed to make the balance sheet unassailable in the event of another significant market disruption.

Speaker 2: Generated approximately $800 million in score, out of track of rates relative to the marginal cost of repaid borrowings. In short, I feel confident in the vitality of our deposit franchise and how it sets up for future success. Now, they'll be able to take you through our financial.

Fuel cost have repaid borrowings in short I feel confident in the vitality of our deposit franchise and how it sets up for future success now Dan will take you through our financial performance.

Speaker 3: Thanks again. For the quarter, Western Alliance generated net income of $217 million DPS with $1.97 in pre-provisioned net revenue of $299.

Thanks, Ken for the quarter Western Alliance generated net income of $217 million EPS of $1 97, and pre provision net revenue of $290 million net.

Speaker 3: Nettlement to May 3rd, 37 million during the quarter to 587 from Bavila-Word repricing of earning assets, as well as reduction in higher cost borrowers.

Net interest income increased $37 million during the quarter to 587 from favorable repricing of earning assets as well as the reduction in higher cost borrowings.

Speaker 3: Non-interesting them increased 10 million to 129 million, which included approximately six and a half million of non-returring pre-tax items, such as spare value adjust.

Noninterest income increased $10 million to $129 million, which included approximately six 5 million of nonrecurring pre tax items, such as fair value adjustments <unk> was moderately impacted by rising mortgage rates and treasury yields with mortgage banking revenue declining 7 million to $79 million as lock volume fell 5% quarter over.

Ken Vecchione: As a result, our C-11 capital has grown from 8.7% a year ago to 10.6% today. Our HFI loan to deposit ratio has improved from 94% to 91%. To provide enhanced protection to depositors and cement the stability of our deposit base, insured and collateralized deposits have risen from 47% at year end to 82%. In order to fortify our liquidity position, we have materially increased our cash and investment securities and now have $3.2 billion of high-quality liquid asset treasuries.

Speaker 3: Maribow was moderately impacted by rising mortgage rates and treasury yields with worries making revenue to declining $7 million to $79 million, as lot volume fell 5% quarter-over-quarter. And production margins compressed slightly to 38 base.

Quarter and production margins compressed slightly to 38 basis points.

Speaker 3: Non-interested expense growth was primarily driven by higher deposit costs and software licensing and appreciation expense.

Noninterest expense growth was primarily driven by higher deposit costs and software licensing and depreciation expenses deposit cost of $128 million and demonstrated our deposit share gains from new customers and previous clients returning funds to the right.

Speaker 3: of 128 million demonstrated our deposits here at Gaines from new customer and previous clients returning funds to the right.

Ken Vecchione: Having established strong capital, liquidity and deposit granularity, a sturdy foundation has been laid to deliver earnings improvement going forward. Over the last several quarters, we have prioritized stabilizing and growing deposits as well as optimizing the liability structure by paying down borrowing. This has led to net interest margin growing from our second quarter trough, as we have sustained improvement in our fund-reached structure, lowered our adjusted efficiency and produced above peer return on average assets and return on average tangible common equity. Over the next one to quarters, we will complete the optimization of our funding structure and be well-positioned to employ excess quarter deposits in the loan growth.

Provision expense was $12 million due to stable asset quality and loan growth concentrated with low loss categories.

Speaker 3: Provisioning expenses 12 million do the stable active quality and low growth concentrated or low loss category.

Speaker 3: Prevision modeling remains conservative given the weighting of the Moody's Contextivats Fort Pass and invariably averse scenarios which, in aggregate, implies an 80% probability of recession.

Jason modeling remains conservative given the weighting of the Moody's consensus forecast and severely adverse scenarios, which in aggregate implies an 80% probability of recession.

Speaker 3: Lastly, our tax rate rose because of discrete non-indeguctible items in the quarter. We expect our tax rate to fall back to between 20 and 21% or in forward.

Lastly, our tax rate rose because of discrete nondeductible items in the quarter, we expect our tax rate to fall back to between 20 and 21% going forward.

Overall, we made substantial progress in increasing on balance sheet liquidity with investments in cash, 19% higher quarter over quarter, mostly from adding more high quality liquid assets.

Speaker 3: Overall, we made some chance of progress in increasing on balance heat liquidity with investments in cash 19% higher quarter-o-quarter, mostly for adding more high quality liquid

Speaker 3: Positure gains and balance heat remixing, alpha push, wholesale barways.

Deposit share gains and balance sheet Remixing also pushed wholesale borrowings lower.

Ken Vecchione: In the third quarter, western line profitability, strong liquidity generation and stable asset quality are proof points to the dexterity of our diversified business model. Before handing the call over to Dale, I want to highlight the drivers of our strong deposit growth in 23, core commercial clients both new and existing with a primary sources contributing to $3.1 billion of growth, mortgage warehouse and HOA push growth upward and the regional network posted a second consecutive corner of vigorous deposit contributions.

Speaker 3: Adds and cash equivalent loans alone total 3.5 billion up from 2.2 billion last quarter. Their strong deposit grows in capital levels. We elected to reclassify 1.3 billion of non-homeric home health or sale loans back to health or investment, or as organic loan growth has flowed.

Cash and cash equivalents alone totaled $3 5 billion.

$2 2 billion last quarter with our strong deposit growth and capital levels, we are likely to reclassify $1 3 billion of non <unk> held for sale loans back to held for investment.

Organic loan growth has slowed.

Speaker 3: These transferred loans are short duration, low credit risk assets, which we believe are better served generating interesting income for the bank going forward.

Transferred loans are short duration low credit risk assets, which we believe are better served generating interest income from the bank going forward.

Speaker 3: Remaining loans help the self-insist entirely of a Marihome residential inventory to be sold to the GSEs and have an average duration of only about two weeks.

The remaining loans held for sale consists entirely of a miracle residential inventory to be sold to the GSE and have an average duration of only about two weeks.

Ken Vecchione: Overall, deposit growth increased 27 basis points, the overall cost of interest bearing liability. Quality is compressed 5 basis points 2.8% in Q3 as we utilize deposits to pay down higher cost borrowings which Dale will comment on later. The liquidity came in radically over the quarter to push down our average borrowings. Core commercial deposits cost a marginal 4.04% including cost of earning credit rates, cultivating multi-product customer relationships remains critical for solidifying and growing client relations.

Speaker 3: including 1.3 billion of loans transferred to health.

<unk>, one 3 billion of loans transferred to held for sale.

Speaker 3: transferred from Helper Shale, long-held for investment rose 1.6 billion to 4.4 billion. As Ken mentioned, deposits increased 3.2 billion to 54 billion, high quarter-end. Or in servicing the right increase in parking to the higher rate environment, instead of 1.2 billion on September 30.

Transferred from held for sale loans held for investment Rose one six.

$6 billion to $4 $49 4 billion as Ken mentioned deposits increased $3 2 billion to 54 billion at quarter end mortgage servicing rights increased in part due to the higher rate environment and stood at $1 2 billion on September 30.

Total borrowings declined by $820 million at $9 6 billion at quarter end, but average borrowings declined nearly 6 billion quarter over quarter, primarily from the repayment of federal home loan bank borrowings and private equity lines obtained for March earlier this year.

Speaker 3: Total borrowing is declined by 820 million to 9.6 billion in quarter end, but average borrowing is declined nearly 6 billion quarter over quarter, primarily from the repayment of federal home load bank borrowings and private equity lines obtained from March earlier this year.

Ken Vecchione: Which is held in the mid 80% range in recent quarters. Our digital consumer channel, a source of liquidity uncorrelated with our core commercial business flights, generated approximately 800 million dollars this quarter at attractive rates relative to the marginal cost of repaid borrowings.

Speaker 3: Organic and helpful investment loans through 240 million, primarily from C&I and centered around mortgage warehouse, MSR financing and corporate finance, the smaller contributions for a regional bank.

Organic held for investment loans grew $240 million primarily from C&I.

C&I and centered around mortgage warehouse MSR financing and corporate finance with smaller contributions for our regional banking.

Ken Vecchione: In short, I feel confident in the vitality of our deposit franchise and how it sets up for future success.

Speaker 3: HFI Hunt Construction and Land Loan Broat, 241 million, derived mostly from lot banking loans, reclassified from health or sales status.

<unk> hundred construction and land loan growth 341 million derived mostly from lot banking loans reclassified from held for sale status.

Dale Gibbons: Now Dale will take you through our financial performance. Thanks again. For the quarter, Western Alliance generated net income with $217 million DPS of $1.97 in pre-provision net revenue of $290 million. Net interest income increased 37 million during the quarter to 587 from available repricing of earning assets as well as reduction in higher cost borrowings. Net interest income increased 10 million to 129 million which included approximately 6.5 million of non-returring pre-tax items such as fair value adjustments.

Speaker 3: Given the national under supply of homes, we still view the macro backdrop for this product favorably, despite the elevated grain environment.

Given the national under supply of homes, we still view the macro backdrop with this product favorably despite the elevated rate environment.

Speaker 3: Total deposit growth of 3.2 billion resulted primarily from an increase in border deposits and also reflects reduction in hostile broker deposits of over 400 billion.

Total deposit growth of $3 2 billion resulted primarily from an increase in core deposits and also reflects a reduction in wholesale broker deposits of over $400 million.

Speaker 3: Port-au-pods approach was fueled by 1.3 billion and non-interest-bearing DDA growth led by mortgage warehouse and 1.6 billion in savings and money market growth. Non-interest-bearing DDA comprise a third of our total deposits that would so approximately 40% have no cash payment to earnings prices.

Core deposit growth was fueled by $1 3 billion and noninterest bearing DDA growth led by mortgage warehouse and $1 $6 billion in savings and money market growth.

Dale Gibbons: Emerald home was moderately impacted by rising mortgage rates and treasury yields with worries making revenue declining 7 million to 79 million as loss volume fell 5% quarter over quarter in production margins compressed slightly to 38 basis points. Non-interest expense growth was primarily driven by higher deposit costs and software licensing and appreciation expenses. The cost of 128 million demonstrated our deposits here gains from new customer and previous clients returning funds to the right.

Noninterest bearing DDA comprise a third of our total deposits of which approximately 40% have no cash payments of earnings credits.

Speaker 3: Court of today deposit growth has surpassed 3 billion. So semi annual seasonality and work to warehouse deposits and tax and insurance escrow funds will pull this number down as payments are made this quarter.

Quarter to date deposit growth has surpassed $3 billion.

Semi annual seasonality in mortgage warehouse deposits and tax and insurance escrow funds will pull this number down as payments are made this quarter.

Speaker 3: Turning now to get into drivers, people repricing in a higher rate environment increase the yield on early aspects. Optimization of the liability structure by growing the posses to pay down more to short-term borrowings led to a lower cost to funding the liability fund.

Turning now.

Net interest drivers.

Hey, Bro repricing at a higher rate environment increased the yield on earning assets optimization of our liability structure by growing deposits to pay down short term borrowings led to a lower cost of funding.

Dale Gibbons: Provision expense was 12 million due to stable asset quality and low growth concentrated and low loss categories. Provision modeling remains conservative given the waiting of the movie's consensus forecast and severely adverse scenarios which in aggregate implies an 80% probability of recession.

Dale Gibbons: Provision modeling remains conservative given the waiting of the movie's consensus forecast and severely adverse scenarios which in aggregate implies an 80% probability of recession. Lastly, our tax rate rose because of discrete non-indeguctible items in the quarter. We expect our tax rate to fall back to between 20 and 21% or more. Overall, we made substantial progress in increasing on-balance equity with investments in cash 19% higher quarter over quarter, mostly for adding more high quality liquid assets.

A lot of liability funding.

Speaker 3: Security's portfolio grew 1 billion to 11.4 billion as we prioritize adding H2LA to the balance sheet. The oil on total investments expanded 15 basis points to 491. 1.8 billion insecurities yielding 477 are also expected to be sure by year end within another 2 billion yielding 498, Group 2.4 billion in zero gives up from the

The securities portfolio grew $1 billion to $11 4 billion as we prioritize adding <unk> to the balance sheet.

Yield on total investments expanded 15 basis points to 491.

Dale Gibbons: Lastly, our tax rate rose because of discrete non-indeguctible items in the quarter. We expect our tax rate to fall back to between 20 and 21% or more. Overall, we made substantial progress in increasing on-balance equity with investments in cash 19% higher quarter over quarter, mostly for adding more high quality liquid assets. The positive share gains in balance remixing also pushed wholesale borrowings lower. As in cash equivalents alone total 3.5 billion per 2.2 billion last quarter.

$1 8 billion in securities yielding 477 are also expected to mature by year end with another $2 billion, yielding 498 maturing in 2024.

So really <unk> loans increased 25 basis points to 673% with a quarter end spot rate of $6 99.

Speaker 3: Similarly, age of by loans increased 25 basis points to 6.73% with a quarter-man spot rate of 6.99. In a higher for longer rate environment, we expect to benefit from favorable asset pricing tailwinds. Total fixed-to-guarante low-maturedies are expected to average 2.4 billion per quarter for the first three-quarters of 2024.

Dale Gibbons: The positive share gains in balance remixing also pushed wholesale borrowings lower. As in cash equivalents alone total 3.5 billion per 2.2 billion last quarter. With our strong deposit growth and capital levels, we elected to reclassify 1.3 billion of non-America home, health or sale loans, back to home for investment or as organic loan growth has flowed. These transferred loans are short duration, low credit risk assets, which we believe are better served generating interesting income for the bank going forward.

Higher for longer rate environment, we expect to benefit from favorable exit pricing tailwind.

Fixed and variable LOE maturities are expected to average $2 4 billion per quarter for the first three quarters of 2024.

Dale Gibbons: With our strong deposit growth and capital levels, we elected to reclassify 1.3 billion of non-America home, health or sale loans, back to home for investment or as organic loan growth has flowed. These transferred loans are short duration, low credit risk assets, which we believe are better served generating interesting income for the bank going forward. As Ken mentioned, deposits increased 3.2 billion to 54 billion by quarter end. We're in servicing the right increase in part due to the higher rate of environment instead of 1.2 billion on September 30th.

Our strategy to right size the liability funding structure through increased savings and money market accounts resulted in a 41 basis point increase in the cost of interest bearing deposits. Importantly, this enables a $5 9 billion reduction in average short term borrowings at 14% of interest bearing liabilities, which resulted in a five basis point reduction in the overall.

Speaker 3: Our strategy to right side the liability funding structure to increase savings in money market accounts resulted in a 41 basis point increase in the cost of interest bearing the cost.

Speaker 3: importantly, this enabled a 5.9 billion reduction in average short-term barring to 14% of interest-perring liabilities, which resulted in a five- base of poor reduction in the overall cost of interest-perring liabilities to 2.8% in the third quarter.

Cost of interest bearing liabilities to two 8% in the third quarter.

Speaker 3: As noted on our last earnings call, we believe that interest income and that interest margin reached a cycle trough in the second quarter. That interest income grew nearly 7 percent despite a modest interaction and an average earning assets. And as the margin expanded 25 basis points quarter of a quarter to 367.

As noted on our last earnings call. We believe net interest income and net interest margin reached a cycle trough in the second quarter net interest income grew nearly 7% despite a modest contraction in average earning assets.

And the margin expanded 25 basis points quarter over quarter to $3 67.

Dale Gibbons: As Ken mentioned, deposits increased 3.2 billion to 54 billion by quarter end. We're in servicing the right increase in part due to the higher rate of environment instead of 1.2 billion on September 30th. Total borrowings declined by 820 million to 9.6 billion in quarter end, but average borrowings declined nearly 6 billion quarter over quarter, primarily from the repayment of federal home load bank borrowings in private equity lines obtained from March earlier this year.

Considering the impact of future rate changes our rate risk profile, it's modestly asset sensitive.

Speaker 3: Considering the impact of future rate changes, our rate risk profile is modestly at the center.

Speaker 3: Our plus 100 Wacers Point rate shock analysis on a static balance sheet indicates that interesting film is expected to lift approximately 4% and decrease the similar amount on a minus 100 base points shock.

Our plus 100 basis point rate shock analysis on a static balance sheet indicate net interest income is expected to lift approximately 4%.

Dale Gibbons: Total borrowings declined by 820 million to 9.6 billion in quarter end, but average borrowings declined nearly 6 billion quarter over quarter, primarily from the repayment of federal home load bank borrowings in private equity lines obtained from March earlier this year. Organic helpful investment loans through 240 million, primarily from C&I and centered around mortgage warehouse and with our financing and corporate finance, the smaller contributions for regional banking. HFI construction and land loan growth, 241 million, derived mostly from lot banking loans reclassified from health or sales status.

And decrease a similar amount on a minus 100 basis points shop.

Speaker 3: However, considering a more comprehensive review of interest rate risk, we projected 2.2% increase in earnings at risk from a 100 basis point negative shock on a static balance sheet, which is inclusive estimated declines in ECR-related deposit costs. Additionally, in a lower rate environment, mortgage banking acts as a shock absorber to our asset sensitive balance sheet from increased reponant activity and gain on sale margin expansion.

However, considering a more comprehensive review of interest rate risk, we projected two 2% increase in earnings at risk.

Dale Gibbons: Organic helpful investment loans through 240 million, primarily from C&I and centered around mortgage warehouse and with our financing and corporate finance, the smaller contributions for regional banking. HFI construction and land loan growth, 241 million, derived mostly from lot banking loans reclassified from health or sales status. Given the national under supply of homes, we still view the macro backdrop for this product favorably despite the elevated rate environment. Total deposit growth of 3.2 billion resulted primarily from an increase in order deposits and also reflects reduction and also broker deposits of over 400 billion.

100 basis point negative shock on a static balance sheet, which is inclusive of estimated declines in ECR related deposit costs.

Additionally, at a lower rate environment mortgage banking acts as a shock absorber to our asset sensitive balance sheet from increased refinance activity and gain on sale margin expansion.

Dale Gibbons: Given the national under supply of homes, we still view the macro backdrop for this product favorably despite the elevated rate environment. Total deposit growth of 3.2 billion resulted primarily from an increase in order deposits and also reflects reduction and also broker deposits of over 400 billion. Quarter deposit growth was fueled by 1.3 billion and not interest bearing DDA growth led by mortgage warehouse and 1.6 billion in savings and money market growth. Non-interest bearing DDA comprise a third of our total deposits, at which approximately 40% have no cash payment to earnings credits.

Our efficiency ratio of 58, 8% was 170 basis points higher than in Q2.

Speaker 3: Our efficiency ratio of 58.8% was 170 basis points higher than into Q2. So our just to the efficiency ratio, excluding the impact of BCRs, still 50 basis points to 50%. As workers' warehouse average balance is with BCRs increased 2.4 billion to 11 billion in the third quarter.

Our adjusted efficiency ratio, excluding the impact of ECR is 50 basis points to 50% as mortgage warehouse average balances with <unk> increased $2 4 billion to $11 billion in the third quarter.

Dale Gibbons: Quarter deposit growth was fueled by 1.3 billion and not interest bearing DDA growth led by mortgage warehouse and 1.6 billion in savings and money market growth. Non-interest bearing DDA comprise a third of our total deposits, at which approximately 40% have no cash payment to earnings credits.

Speaker 3: Lower compensation expense results from normal seasonal factors and mitigated higher software licensing and data processing costs. We still view a minute to upper 40 percent efficiency ratio as indicative of the right medium term level of investments to fund new business initiatives and the ongoing evolution of our risk management frameworks.

Lower compensation expense, resulting from normal seasonal factors and mitigated it mitigated higher software licensing and data processing costs, you still view mid to upper 40% efficiency ratio as indicative of the right medium term level of investments to fund new business initiatives and the ongoing evolution of our risk management framework.

Dale Gibbons: Quarter today deposit growth has surpassed 3 billion, so semi annual seasonality and work to warehouse deposits and tax and insurance escrow funds will pull this number down as payments are made in this quarter. Turning now to debt interest drivers, payroll repricing in a higher rate environment increased the yield on earning assets. Optimization of the liability structure by growing deposits to pay down more to short-term borrowings led to a lower cost of funding.

Mark.

Pre provision net revenue was $290 million for the quarter solid profitability was maintained in Q3 with a stable return on average assets of $1 two 4% on a larger balance sheet return on average tangible common equity of 17, 3% was modestly below our Q2 level as our COO.

Speaker 3: Preprevision revenue was $290 million credit for solid profitability was maintained in Q3 with a stable return on average assets of 1.24% on a large of balance sheet. Return on average tangible common equity of 17.3% was modestly below our Q2 level as our capital level prime.

Capital level time.

Speaker 3: Our proactive credit mitigation strategy has been effective thus far in normalizing and in normalizing credit environment. At the quality of stable NQ3 is the aggregate net increase in a special mention of loans to possibly assets was only 9 million. Notably, non-forming assets declined 22 million to 245 million, or the 35 basis points of total assets.

Dale Gibbons: The securities portfolio grew 1 billion to 11.4 billion as we prioritized adding H2LA to the balance sheet. The yield on total investments expanded 15 basis points to 491. 1.8 billion in securities yielding 477 are also expected to be sure by year end, within another 2 billion, yielding 498, ensuring in 2024. Similarly, H&B loans increased 25 basis points to 6.73% with a quarter-man spot rate of 6.99. In a higher for longer rate environment, we expect to benefit from favorable asset pricing tailwinds.

Our proactive credit mitigation strategy has been effective thus far are normalizing and credit and normalizing credit environment asset quality was stable in Q3 as the aggregate net increase in special mentioned loans classified assets was only $9 million, notably nonperforming assets declined 22 million to $245 million for the 35.

Basis points of total assets.

Speaker 3: Quarterly, net loan charge costs were 8 million, for seven basis points of average loans, compared to 7.4 billion or six basis points in the second quarter.

Quarterly net loan charge offs were 8 million or seven basis points of average loans compared to $7 4 million or six basis points in the second quarter.

Speaker 3: You to grow in low to low category. So, you can judge the stable asset quality led to a smaller provision expense.

Due to growth in low to no loss categories in conjunction with stable asset quality led to a smaller provision expense even in a normalized credit environment. Our total funded ACL increased $6 million from the prior quarter to $327 million as <unk> growth occurred almost entirely a near zero op categories, most prominently and more.

Dale Gibbons: Total fixed sugar and low maturity are expected to average 2.4 billion per quarter for the first 3.4 of 2024. Our strategy to right side the liability funding structure through increased savings and money market accounts resulted in a 41 basis point increase in the cost of interest bearing the cost. Constance. Importantly, this enabled a 5.9 billion reduction in average short-term borrowings to 14% of interest-burying liabilities, which resulted in a five-basis point reduction in the overall cost of interest-burying liabilities to 2.8% in the third quarter.

Speaker 3: even in a normalizing credit environment. Our total funded ACL increased six million from the prior quarters to $327 million, and they took five growth occurred almost entirely in near zero loss categories, most prominently in mortgage warehouse.

<unk> warehouse.

Dale Gibbons: Constance. Importantly, this enabled a 5.9 billion reduction in average short-term borrowings to 14% of interest-burying liabilities, which resulted in a five-basis point reduction in the overall cost of interest-burying liabilities to 2.8% in the third quarter. This expanded 25 basis points quarter of a quarter to 367. Considering the impact of future rate changes, our rate risk profile is modestly at that sensitive. Our plus 100 basis point rate shock analysis on a static balance sheet indicates that interest income is expected to lift approximately 4% and decrease the similar amount on a minus 100 basis points shop.

Speaker 3: As a reminder, even after repainting two credit-linked nodes, 22% of our low portfolio was still protected with any losses incurred to be covered by a third party.

As a reminder, even after repaying two credit linked notes, 22% of our loan portfolio was still protected with any losses incurred to be covered by a third party.

The total loan ACL to funded loans ticked down two basis points to 74 basis points, but did increased 13 basis points to 154% of nonperforming loans.

Speaker 3: total on HCL for funded loans, take down two basis points to 74 basis points, and get increased 13 basis points to 154% of non-performing loans.

Speaker 3: If you are allowed to appropriate, especially when considering the material portion of loans covered by first-loss credit protection from credit-linked notes and low-lawless categories. Additionally, a sizable portion of our loan growth has been concentrated in loans and low-loss products. Our loan portfolio was diversified across three seconds with almost a quarter of it, either credit protected, government guaranteed or cash-seguared. And over half of the portfolio is either insured or resistant to economic volatility.

We view, our allowance is appropriate, especially when considering the material portion of loans covered by personalized credit protection from credit linked notes and low loan loss categories. Additionally, a sizeable portion of our loan growth has been concentrated in.

Dale Gibbons: This expanded 25 basis points quarter of a quarter to 367. Considering the impact of future rate changes, our rate risk profile is modestly at that sensitive. Our plus 100 basis point rate shock analysis on a static balance sheet indicates that interest income is expected to lift approximately 4% and decrease the similar amount on a minus 100 basis points shop. However, considering a more comprehensive review of interest rate risk, we projected 2.2% increase in earnings at risk from a 100 basis point negative shock on a static balance sheet, which is inclusive estimated declines in ECR-related deposit costs.

Low to no loss products, our loan portfolio is diversified across groups segments with almost a quarter, but either credit protected government guaranteed or cash secured and over half of the portfolio is either insured are resistant to economic volatility.

Speaker 3: adjusted for these factors, that ACL ratio rises to 1.34% of lung.

If adjusted for these factors, our ACL ratio rises to 134% of loans.

Dale Gibbons: However, considering a more comprehensive review of interest rate risk, we projected 2.2% increase in earnings at risk from a 100 basis point negative shock on a static balance sheet, which is inclusive estimated declines in ECR-related deposit costs.

Speaker 3: A strong organic capital growth lifted the CET-1 ratio to 10.6% rate rate 8% when adjusted for AOCI and tax-affected, unrealized, healthy, matured, security smart.

Our strong organic capital growth lifted the CET one ratio to 10, 6% rate for eight 8% when adjusted for LCI and tax effected unrealized held to maturity securities marks.

Speaker 3: 10s will common equity to total assets decreased approximately 20 basis points from Q2 to the 6.8% as the balance sheet expanded modestly while capital growth was curtailed by our higher AOC I mark. Given the 45 basis point rise in the five year treasury during the quarter, AOC I reached use 10s will common equity by 732 million.

Our tangible common equity to total assets decreased approximately 20 basis points from Q2 to six 8% as the balance sheet expanded modestly while capital growth was curtailed by our higher OCI Mark.

Dale Gibbons: Additionally, in a lower rate environment, organ banking acts as a shock absorber to our asset sensitive balance sheet from increased reponant activity and gain on sale, orange and expansion. Our efficiency ratio of 58.8% was 170 basis points higher than in Q2, so our adjusted efficiency ratio, excluding the impact of BCRs, still 50 basis points to 50%. As workers' warehouse average balance is with BCR's increased 2.4 billion to 11 billion in the third quarter.

The 45 basis point rise in the five year treasury during the quarter <unk> tangible common equity by $732 million.

Inclusive of our quarterly cash dividend payment of 36 <unk> per share our tangible book value per share increased 57 in the quarter to $43 66.

Speaker 3: Inclusive of our quarterly cash dividend payment of 36% per share, our TANs will book value per share in $3.57 in the quarter to $43.66.

Dale Gibbons: Lower compensation expense results from normal seasonal factors and mitigated higher software licensing and data processing costs. We still view amidst upper 40% efficiency ratio as indicative of the right median term level of investments to fund new business initiatives and the ongoing evolution of our risk management framework. Pre-provision net revenue was 290 million credit for solid profitability was maintained in Q3 with a stable return on average assets at 1.24% on a large balance sheet.

The quarter over quarter increase resulted from our earnings outpacing industry wide headwinds stemming from rising rates.

Speaker 3: The quarter of a quarter increase resulted from our earnings outpacing industry-wide AOTI headwinds, getting from rising rates. From now on...

I'll now turn the call back to Ken.

Dale Gibbons: We still view amidst upper 40% efficiency ratio as indicative of the right median term level of investments to fund new business initiatives and the ongoing evolution of our risk management framework. Pre-provision net revenue was 290 million credit for solid profitability was maintained in Q3 with a stable return on average assets at 1.24% on a large balance sheet. Return on average tangible common equity of 17.3% was modestly below our Q2 level as our capital level time.

Thanks, Bill our guidance for the rest of 2023.

Speaker 2: Thanks, Phil. Our guide for the rest of 2023.

Continues to be informed by the strategies and priorities laid out in our prior earnings call. So as we look forward to Q4.

Speaker 2: continues to be informed by the strategies and priorities laid out in our prior earnings poll.

Speaker 2: You can expect loans and core deposits are expected to be fairly flat, the several hundred million dollars higher in Q4. That deposit growth will be impacted by normal Q4 seasonal reductions in mortgage-wrapped deposits or set by growth in the regional divisions and in the digital consumer chat. Deposit should still outpace loan growth. Going into 2024, we expect loan and deposit growth to return to our prior guide.

You can expect loans and core deposits are expected to be fairly flat several hundred million dollars higher than Q4 net deposit growth will be impacted by normal Q4 seasonal reductions in mortgage warehouse deposits offset by growth in the regional divisions and the digital consumer channels.

Dale Gibbons: Return on average tangible common equity of 17.3% was modestly below our Q2 level as our capital level time. Our proactive credit mitigation strategy has been affected by the best power in normalizing credit environment. At the quality of stable in Q3 is the aggregate net increase in special mention loans to possibly assets was only 9 million. Notably, non-forming assets declined 22 million to 245 million for the 35 basis points of total assets.

Dale Gibbons: Our proactive credit mitigation strategy has been affected by the best power in normalizing credit environment. At the quality of stable in Q3 is the aggregate net increase in special mention loans to possibly assets was only 9 million. Notably, non-forming assets declined 22 million to 245 million for the 35 basis points of total assets. Quarterly, net loan charts were 8 million for 7 basis points of average loans compared to 7.4 billion or 6 basis points in the second quarter.

Posit should still outpace loan growth going into 2024, we expect loan and deposit growth to return to our prior guidance regarding capital, having close to 40 basis points of our medium term <unk> target of 11%. We forecast continued although more gradual progress towards this goal.

Speaker 2: Regarding capital, having closed the 40 basis points of our medium term, TEP-1 target of 11%, we forecast continued, although more gradual progress towards this goal, which we remain on track to achieve in 2024. That it was margin should remain in line with our Q3 level in a range of 360 to 3.7, supported by asset pricing tailwind, and additional, if more temporary borrowing, repayment, opportunity.

Which we remain on track to achieve in 2024 net interest margin should remain in line with our Q3 level and a range of $3 60 to three 7% supported by asset pricing tailwind and additional if more temporary borrowing repayment opportunities.

Dale Gibbons: Quarterly, net loan charts were 8 million for 7 basis points of average loans compared to 7.4 billion or 6 basis points in the second quarter. Due to growth in low to no-loss categories in conjunction with stable asset quality led to a smaller provision expense even in a normalizing credit environment. Our total fund at ACL increased 6 million from the prior quarter to 327 million and data by growth occurred almost entirely in near zero-loss categories most prominently in mortgage warehouse.

Dale Gibbons: Due to growth in low to no-loss categories in conjunction with stable asset quality led to a smaller provision expense even in a normalizing credit environment. Our total fund at ACL increased 6 million from the prior quarter to 327 million and data by growth occurred almost entirely in near zero-loss categories most prominently in mortgage warehouse. As a reminder, even after repaying two credit linked notes, 22% of our low portfolio was still protected with any losses incurred to be covered by a third party.

Speaker 2: Our adjusted efficiency ratio, which excludes the impact of the positive course, should remain consistent with the three level levels. Regarding operating PPR, we expect Q4 to be generally consistent with Q3, excluding the one-time item's node, and acknowledging that mortgage banking revenue will be influenced by the impact of the rate environment on mortgage canons.

Our adjusted efficiency ratio, which excludes the impact of deposit costs should remain remain consistent III <unk> III levels regarding operating <unk>, we expect Q4 to be generally consistent with Q3, excluding the onetime items noted and acknowledging that mortgage banking revenue will be influenced by the impact of the rate.

Dale Gibbons: As a reminder, even after repaying two credit linked notes, 22% of our low portfolio was still protected with any losses incurred to be covered by a third party. The total on ATL for funded loans took down two basis points to 74 basis points, and did increase 13 basis points to 154% of non-performing loans. If you are allowances appropriate, especially when considering the material portion of loans covered by first-loss credit protection from credit-linked notes and low-loss categories.

Environment on mortgage gain on sale.

Speaker 2: As the quality remains manageable, projects continue to be supported by sponsors based on our conservative underwriting and low advance rates. Credit losses are still expected to be five to 15 basis points through this economic cycle. At this time, Dale, Tim and I are happy to take your calls. A question?

Asset quality remains manageable projects continue to be supported by sponsors based on our conservative underwriting and low advance rates credit losses are still expected to be 5% to 15 basis points through this economic cycle.

Dale Gibbons: The total on ATL for funded loans took down two basis points to 74 basis points, and did increase 13 basis points to 154% of non-performing loans. If you are allowances appropriate, especially when considering the material portion of loans covered by first-loss credit protection from credit-linked notes and low-loss categories. Additionally, a sizable portion of our loan growth has been concentrated in low-loss and low-loss products. Our loan portfolio is diversified across bridge segments with almost a quarter of it either credit protected, government guaranteed or cash secured, and over half of the portfolio is either insured or resistant to economic volatility.

At this time del Tim and I are happy to take your calls a question sorry.

Speaker 1: Thank you. If you'd like to ask a question, please press star followed by one on your telephone keypads now. If you'd like to withdraw your question, please press star followed by two. From parent to ask a question, please ensure your line is muted locally. As a reminder, that star followed by one on your telephone keypad now.

Thank you if you'd like to ask a question. Please press star followed by one on your telephone keypad now if you'd like to withdraw your question. Please press star followed by two.

Dale Gibbons: Additionally, a sizable portion of our loan growth has been concentrated in low-loss and low-loss products. Our loan portfolio is diversified across bridge segments with almost a quarter of it either credit protected, government guaranteed or cash secured, and over half of the portfolio is either insured or resistant to economic volatility. If adjusted for these factors, that ACL ratio rises to 1.34% of loans. Our strong organic capital growth lifted the CET-1 ratio of the 10.6% rate rate of 8% when adjusted for AOCI and tax-effective unrealized health and maturity securities marks.

To ask a question. Please ensure your line is muted locally as a reminder, that star followed by one on your telephone keypad now.

Speaker 1: Our first question comes from Casey Hair of Jeffree's Casey, Your Line is Open, Please Go ahead.

Our first question comes from Casey Haire of Jefferies. Casey. Your line is open. Please go ahead.

Dale Gibbons: If adjusted for these factors, that ACL ratio rises to 1.34% of loans. Our strong organic capital growth lifted the CET-1 ratio of the 10.6% rate rate of 8% when adjusted for AOCI and tax-effective unrealized health and maturity securities marks. Our tensable common equity to total assets decreased approximately 20 basis points from Q2 to 6.8% as the balance sheet expanded modestly while capital growth was curtailed by our higher AOCI mark. Given the 45 basis point rise in the five-year treasury during the quarter, AOCI reduced tensable common equity by 732 million.

Yeah, great. Thanks, good morning, everyone.

Speaker 2: Yeah, great. Thanks. Good morning, everyone. Maybe first question on the NIM. Can you just walk us through this morning? Just walk us through, I guess, what the NIM guide presumes in the way of borrowing. Obviously, the positive growth very strong, a quarter to date. I think Ken, you mentioned you do expect that to pay down. And so just, that would bring the borrowings, which were up. Okay.

Maybe first question on the <unk>.

NIM can you just walk us through this morning.

Just walk us through.

I guess, what the NIM guide presumes in the way of borrowings, obviously deposit growth very strong quarter to date.

Dale Gibbons: Our tensable common equity to total assets decreased approximately 20 basis points from Q2 to 6.8% as the balance sheet expanded modestly while capital growth was curtailed by our higher AOCI mark. Given the 45 basis point rise in the five-year treasury during the quarter, AOCI reduced tensable common equity by 732 million. Inclusive of our quarterly cash dividend payment of 36% per share, our tensable book value per share increased 57 cents in the quarter to $43.66. The quarter of a quarter increase resulted from our earnings out pasting industry-wide AOCI headwinds getting from rising rates.

I think Ken you mentioned, you do expect that to pay down and so just that would bring the borrowings which were up.

Pretty significantly period end versus the average in two and three Q I'm, just wondering where that would end up.

Speaker 4: pretty significantly period N versus the average in 3Q. I'm just wondering where that would be.

Fourth quarter here.

Yes, so we have some seasonality within within deposit categories.

Speaker 3: Yeah, so we have some seasonality within deposit categories that affect...

Dale Gibbons: Inclusive of our quarterly cash dividend payment of 36% per share, our tensable book value per share increased 57 cents in the quarter to $43.66. The quarter of a quarter increase resulted from our earnings out pasting industry-wide AOCI headwinds getting from rising rates.

This number but.

Speaker 3: number but the direction of borrowings is going to continue to be down.

The direction of borrowings is going to continue to be down. So we paid off several of our more expensive funding sources that we.

Speaker 3: So we paid off several of our more expensive funding sources that we had achieved or acquired laid in the first quarter. And there's a little bit left, I expect we're going to pay down that amount as well.

It achieved or acquired.

Late in the first quarter and there is a little bit left I expect for the pay down that amount as well.

Ken Vecchione: I'm now throwing a call back to Ken. Thanks, Dale. Our guide for the rest of 2023 continues to be informed by the strategies and priorities laid out in our prior earnings poll. So as we look forward to Q4, you can expect loans and core deposits are expected to be fairly flat, the several hundred million dollars higher in Q4. That deposit growth will be impacted by normal Q4 seasonal reductions in mortgage whereout deposits are set by growth in the regional divisions and the digital consumer chat. Deposit should still outpace loan growth.

Speaker 3: So we should continue to see kind of improvement there, where you see we are in terms of reasonably balanced on target for a loan to project growth this quarter. I think you should see some kind of modest improvement in ending balances as well. And I think the average balance should improve somewhat as well, but not as it really is in the third quarter.

So we should continue to see kind of improvement there where you see we are in terms of reasonably balanced.

On target for a loan to deposit growth this quarter.

You should see some kind of modest improvement in ending balances as well as I think the average balances should improve somewhat as well, but not to the degree they did in the third quarter over the second case.

Speaker 2: Okay, as you've seen, we took down our short term borrowings by 817 million, but any time we have any excess liquidity floating around, we use it to pay down borrowing. So average borrowing is to client $6 billion in the quarter, and that help bring down our lower fundee.

As you've seen we took down our short term borrowings by $817 million, but anytime we have any excess liquidity floating around we use it to pay down borrowings. So the average borrowings declined $6 billion in the quarter and that helped bring down our lower funding rate.

Ken Vecchione: Going into 2024, we expect loan and deposit growth to return to our prior guidance. Regarding capital, having closed the 40 basis points of our medium-term TEP-1 target of 11%. We forecast continued, although more gradual progress towards this goal, which we remain on track to achieve in 2024. That it was margin should remain in line with our Q3 level in a range of 360 to 3.7, supported by asset pricing tailwind and additional, if more temporary borrowing, repayment opportunities.

Okay, Great and just wanted to follow up on your comments on the.

Speaker 4: Okay, great. And just, Dale, I wanted to follow up on your comments on the fix rate asset repricing benefit in the first three quarters of 24. I think you said 2.4 billion per quarter. Can you give us a sense of where, like what the blended yield is on that? And...

Fixed rate asset repricing benefit in the first three quarters.

24.

I think you said $2 4 billion per quarter can you give us a sense of where like what the blended yield is on that and.

Speaker 4: what that can repress to, just trying to quantify what the repressing benefit of.

What that can reprice to just trying to quantify what the repricing benefit could be.

So.

Speaker 3: So in terms of what they're repricing to be.

Ken Vecchione: Our adjusted efficiency ratio, which excludes the impact of deposit costs, should remain within the three level levels. Regarding operating PPRR, we expect Q4 to be generally consistent with Q3, excluding the one-time items noted and acknowledging that mortgage banking revenue will be influenced by the impact of the rate environment on mortgage gain on sale. As the quality remains manageable, projects continue to be supported by sponsors based on our conservative underwriting and low advance rates. Credit losses are still expected to be 5 to 15 basis points through this economic cycle.

In terms of what the repricing could be.

Got it.

These these are coming off that.

Speaker 3: You know, these are coming off at something in the kind of around the higher seven.

Something in the kind of around the higher sevens.

Speaker 2: and you know, race today have spreads of, you know, really not less than...

Rates today have spread.

Really not less than 300 basis points.

Speaker 3: 350 from there and so if you maybe don't have another rate increase in there, so I would take that on top of silver Today, so you know something is the lower eight

$3 50 from there and so I think maybe you don't have another rate increase in there. So I would take that unproper sulfur today, so something in the in the lower <unk>.

Okay.

Seven over $7 billion of loans in the first three quarters with 100 bps lift.

Speaker 4: 7 over 7 billion of loans in the first three quarters with 100 bit left.

Unknown Executive: At this time, Dale, Tim and I are happy to take your calls. Thank you. If you'd like to ask a question, please press star followed by one on your telephone keypads now. If you'd like to withdraw your question, please press star followed by two. Compared to ask a question, please ensure your line is unmuted locally. As a reminder, that star followed by one on your telephone keypad now.

Approximately.

Okay.

Speaker 4: Okay. All right, just last one for me on the expenses. You know, obviously that was the one thing that kind of surprised negatively this quarter on the deposit cost.

Just last one for me.

On the expenses.

Obviously that was the one thing that kind of surprised negatively this quarter on the deposit cost so.

Speaker 4: If so, I have EC in the deposit.

So I have.

The deposit.

Casey Haire: Our first question comes from Casey Haire of Jeffrey's Casey. Your line is open. Please go ahead. Yeah, great. Thanks. Good morning, everyone.

With ECR, the DDA with ECR up 15%.

Speaker 4: with ECR, the DDA with ECR up 15%.

Speaker 4: but the deposit costs were up 40%. So I'm just trying to like, why the disconnect, you know, what's the, what was the, is there a different pricing dynamic today than there was historically? Just trying to understand that.

But the deposit costs were up 40%. So I'm just trying to like what why the disconnect.

Ken Vecchione: Maybe first question on the NEM. Can you just walk us through morning? Just walk us through, I guess, what the NEM guide presumes in the way of borrowings. Obviously, you deposit growth very strong quarter to date. I think Ken, you mentioned you do expect that to pay down. And so just that would bring the borrowings, which were up. Pretty significantly period and versus the average in three kill, just wondering where that would end up in the fourth quarter here.

What was the other.

There are different pricing dynamic today than there was historically just trying to understand that.

Well.

Speaker 3: Well, we had higher balances and higher rates. And I think the average balance was elevated. The average balance is up 28% during the quarter. So it wasn't, it was a silly approach to differently.

We had higher balances and higher rates and I think the average balance was.

With elevated the average balances up 28% during the quarter. So it wasn't it.

Let me approach it differently.

Speaker 3: In terms of the spread that these clients receive, there's virtually no change.

In terms of the spreads that these clients receive theres virtually no change.

Okay.

Speaker 4: Okay, so all right, so we don't have the average balances. Just a period end was up 15%, the averages was up higher. And then. And then. And then we'll go back to the. Okay as well.

So alright.

Ken Vecchione: Yeah, so we have some seasonality within within deposit categories that affects this number, but is that the direction of borrowings is going to continue to be down. So we paid off several of our more expensive funding sources that we achieved or acquired late in the first quarter. And there's a little bit left. I expect we'll pay down that amount as well. So we should continue to see kind of improvement there, where you see we are in terms of reasonably balanced on target for along the deposit growth is quarter.

Don't have the average balances at period end was up 15% the averages was up higher and then 28.

I don't know scuttle back as well.

Yes.

Okay, great. Thank you.

Okay. Thank you. Our next question comes from Steven Alexopoulos of Jpmorgan. Steven Your line is open. Please proceed.

Speaker 1: Thank you. Our next question comes from Stephen Alexa Pullis of JP Morgan, Stephen, you'll on his open please proceed.

Hi, everybody.

I wanted to start.

Speaker 2: So, want to start recording, getting back to the 500 million per quarter long-road target, the 2 billion deposit growth in 2024. Once you guys get to the mid 80 percent low into deposit ratio target, what's more likely that you guys dial up the long-road expectation at that point or that you dial down the deposit.

Getting back to the $500 million per quarter loan growth target of $2 billion deposit growth in 2024. Once you guys get to the mid 80% loan to deposit ratio target.

Ken Vecchione: I think you should see some kind of modest improvement in any balances as well. And I think average balances should improve somewhat as well, but not as it really is in the third quarter over the second. Okay, so you know, as you've seen, we took down our short term borrowings by 817 million, but anytime we have any excess liquidity floating around, we use it to pay down borrowing. So average borrowing is declined $6 billion in the quarter, and that help bring down our lower funding rate. Okay, great.

What's more likely that you guys dialed up the loan growth expectation at that point or that you dialed down the deposit growth.

You'll see it on the asset side Youll see that that will be the lever that will be used.

Speaker 2: You'll see it on the asset side. You'll see that that will be the remember that'll be used.

Okay. So you think you can keep the $2 billion deposit target intact, and then dial up expectations for asset growth.

Speaker 2: So they can keep the 2 billion deposit target intact and then dial up expectations for Ascrow.

Dale Gibbons: And just Dale, wanted to follow up on your comments on the fixed rate asset repricing benefit in the first three quarters of 24. I think you said 2.4 billion per quarter. Can you give us a sense of where like what the blended yield is on that and what that can repriced to just trying to quantify what the repricing benefit could be. So I mean in terms of what they're repricing could be, you know, these, these are coming off it, you know, something in the kind of around the higher sevens, and you know, rates today have spread of, you know, really not less than 300 basis points, 350 from there.

Dale Gibbons: And just Dale, wanted to follow up on your comments on the fixed rate asset repricing benefit in the first three quarters of 24. I think you said 2.4 billion per quarter.

Yes. This is Ken.

Speaker 2: Yeah, this is Ken. I think so. I think so many investments that we've made and a number of our.

So I think some of the investments that we've made.

A number of our.

Deposit centric business lines will continue to propel deposits forward along the guide that we gave.

Speaker 2: The deposit centric business lines will continue to propel deposits forward along the guide that we gave.

Dale Gibbons: Can you give us a sense of where like what the blended yield is on that and what that can repriced to just trying to quantify what the repricing benefit could be. So I mean in terms of what they're repricing could be, you know, these, these are coming off it, you know, something in the kind of around the higher sevens, and you know, rates today have spread of, you know, really not less than 300 basis points, 350 from there.

Speaker 3: And as we calibrate to a mid-80s, long-to-deposit ratio, we'll then turn off the long growth machine. We've proven here over time that we can generate...

And as we.

Recalibrate to a mid eighties loan to deposit ratio. We will then turn off the loan growth machine. We have proven here over time that we can generate.

Speaker 2: sound thoughtful, reasonable, long growth with very little, after-quality growth.

Sound thoughtful reasonable loan growth.

With very little.

Asset quality problems.

Got it Okay, and then going back to Casey's question on expenses, excluding the ECR related deposit costs, which flowed through so if we put those side. How are you guys thinking about expense growth over the next year.

Speaker 5: And then go back to Casey's question on expenses. Excluding these, you are related deposit costs, which flow through so if we put those aside, how are you guys thinking about expense growth over the next?

Dale Gibbons: And so maybe you don't have another rate increase in there. So I would take that on top of sober today. So, you know, something in the lower eight. Okay, so 7 over 7 billion of loans in the first three quarters with 100 bit left. Yeah, you know, approximately.

Alright so.

Speaker 2: All right, so running from Q3 to Q4 expenses absent the deposits cost will be relatively flat.

Running.

From Q3 to Q4.

Expenses absent.

The deposit cost will be relatively flat.

Okay.

Dale Gibbons: Okay, all right, just last one for me on the expenses, you know, obviously that was the one thing that kind of surprised negatively this quarter on the deposit cost. So if, so I have EC the deposit with ECR, the DDA with ECR up 15%, but the deposit costs were up 40%. So I'm just trying to, like, why the disconnect, you know, what's, what was the other, is there a different pricing dynamic today than there was historically just trying to understand that.

Speaker 2: And as we enter into 2024, there will be marginal expense growth and that marginal expense growth will be predicated on continuing to invest.

And as we enter into 2024, there will be marginal expense growth and that marginal expense growth will be predicated on continuing to invest in new products, New services, new business lines, continuing to build out our risk.

Speaker 2: in new products, new services, new business lines, continuing to build out our risk management framework. The hallmark of what's aligned has been this continuous investment through all cycles to kind of grow the business for future quarters and years. And so as long as the risk return and the investment returns are there, we'll continue to do that.

Management framework, the hallmark of Western lines has been this continuous investment through all cycles to kind of grow the business for future quarters and years and so as long as the risk return in the investment returns are there we'll continue to do that.

Dale Gibbons: So I'm just trying to, like, why the disconnect, you know, what's, what was the other, is there a different pricing dynamic today than there was historically just trying to understand that. Well, we had higher balances and higher rates, and I think the average balance was elevated, the average balance is up 28% during the quarter. So it wasn't, it's going to be approaching differently. In terms of the spread that these clients receive, there's virtually no change.

Dale Gibbons: Well, we had higher balances and higher rates, and I think the average balance was elevated, the average balance is up 28% during the quarter. So it wasn't, it's going to be approaching differently. In terms of the spread that these clients receive, there's virtually no change. Okay, so, so all right, so we don't have the average balances, just a period end was up 15%, the averages was up higher, and then, and then, as well. Yeah, okay, great, thank you.

Got it from an efficiency ratio perspective are you thinking that we will have improvement through 2024 or that will keep about.

Speaker 5: from an efficiency ratio perspective are you thinking that we'll have improvement through 2024 or that will keep about where you end in the fourth quarter?

You ended the fourth quarter.

Unknown Executive: Okay, thank you.

Yes, I'd say about where we landed in the fourth quarter.

Speaker 2: Back to your first question, as we probably exit the second order and we achieve our loan to deposit ratio, we'll be able to step on the accelerator of loan growth and that will generate higher interest income, which should provide the denominator of that equation to grow at a faster pace. But right now, if you're modeling, I would say keeping consistent with Q4.

Back to Europe and to your first question as we.

Dale Gibbons: Okay, so, so all right, so we don't have the average balances, just a period end was up 15%, the averages was up higher, and then, and then, as well. Yeah, okay, great, thank you. Okay, thank you.

Probably exit the second quarter, and we achieve our loan to deposit ratio will be able to step on the accelerator of loan growth and that will generate higher interest income which should provide.

The denominator of that equation to grow at a faster pace, but right now if you're modeling I would say keep it consistent with Q4.

Steven Alexopoulos: Our next question comes from Steven Alexa pullus of JP Morgan Steven, you're on his open, please proceed. Hi, everybody. I want to start recording, getting back to the 500 million per quarter long road target, the two billion deposit growth in 2024. Once you guys get to the mid 80% loan to deposit ratio target, what's more likely that you guys dial up the long road expectation at that point, or that you dial down the deposit growth?

Right, but it sounds like revenue set to accelerate here with.

Speaker 5: but it sounds like revenue set to accelerate here with

The margin be more stable like you said more loan growth coming in next year, but we should think youre going to spend more of that.

Speaker 5: margin be more stable like you said more long growth coming in next year but we should think you're gonna spend more of that

Steven Alexopoulos: You'll see it on the asset side, you'll see that that will be the, the lever that will be used. Okay, so you think you can keep the two billion deposit target intact and then dial up expectations for asset growth? Yeah, this is kind of, I think so, I think so many investments that we've made and a number of our deposit centric business lines will continue to propel deposits forward along the guide that we gave. And as we, we calibrate to a mid 80s loan to deposit ratio, we'll then turn off the loan growth machine.

Speaker 5: at least at this structure, right? Because it seems like the setup is an efficiency ratio improvement next year. But you're saying at least at this point, don't expect that.

At least at this juncture right because it seems like the setup is efficiency ratio improvement next year, but you are saying at least at this point don't expect that.

Well I think it is set up that way, but it's a little bit deferred in terms of when that takes place because of the reasons, Ken talking about that we're going to be sluggish on having the loan growth early kind of matched to 85% of the deposit growth as we continue to pull that number so the LDR number down for a couple of more quarters.

Speaker 2: Well, I think it is set up that way, but it's a little bit deferred in terms of when that takes place because of the reasons Ken's talking about that we're going to be sluggish on having the loan growth really kind of matched 85% of the deposit growth as we continue to pull that number. It's a VLDR number down for a couple more quarters.

Okay.

Got it okay. Thanks for taking my questions.

Thanks, Steve.

Speaker 1: Our next question comes from Chris McGrattie of KBW Chris, your line is open, please go ahead.

Our next question comes from Chris Mcgratty of <unk>, Chris. Your line is open. Please go ahead.

Speaker 3: Great, thanks. Deel and Ken, I want to go about that one a little bit different. You're already at your, you're going to be at your 11% target within a couple quarters, if not one to two quarters.

Okay, great. Thanks.

Dale and Ken I want to go about that one a little bit different.

You're already at your Youre going to be at your 11% target within a couple of quarters, if not one to two quarters.

Steven Alexopoulos: And as we, we calibrate to a mid 80s loan to deposit ratio, we'll then turn off the loan growth machine. We've proven here over time that we can generate sound thoughtful, reasonable loan growth with very little asset quality problems. Got it, okay, and then go back to Casey's question on expenses, excluding these, the are related deposit costs which flow through. So if we put those aside, how are you guys thinking about expense growth over the next year?

<unk>.

I can't I'm, not sure I'm prepared assets, but like when you would be thinking about a share buyback at some point next year, given the capital capital accumulation and your stock price.

Speaker 6: What do you, I can't, not sure I'm prepared to ask this, but like, wouldn't you be thinking about a share buyback at some point next year, given the capital commueration and your stock price?

Steven Alexopoulos: We've proven here over time that we can generate sound thoughtful, reasonable loan growth with very little asset quality problems. Got it, okay, and then go back to Casey's question on expenses, excluding these, the are related deposit costs which flow through. So if we put those aside, how are you guys thinking about expense growth over the next year? All right, so running from Q3 to Q4 expenses, absent the deposits cost will be relatively flat.

Yes, I think Thats a fair question to ask.

Speaker 2: Yeah, I think that's a fair question to ask. I think there are a couple of things that will inform our decision.

I think there are a couple of things that will inform our decision.

Speaker 2: One, as we continue to grow, and we continue to get closer and closer to the 100 billion threshold, we have to take into account the AOCI charge that will be applied against it. And so we want to continue to grow our C-T-1 ratio, really 11% is the target, it's not the goal, and we expect to grow through that, all right? That's one. And number two,

One as we continue to grow and we continue to get closer and closer to the 100 billion threshold, we have to take into account the LCI charge that will be applied against it and so we want to continue to grow our CET one ratio really 11%. It's a target it's not the goal and we expect to grow.

Steven Alexopoulos: All right, so running from Q3 to Q4 expenses, absent the deposits cost will be relatively flat. Okay, and as we enter into 2024, there will be a module expense growth and that module expense growth will be predicated on continuing to invest in new products, new services, new business lines, continuing to build out our risk management framework. The hallmark of Western Alliance has been this continuous investment through all cycles to kind of grow the business for future quarters and years and so as long as the risk return and the investment returns are there, we'll continue to do that.

Through that alright, that's one and number two.

Speaker 2: You'll see the C-T1 ratio moderate in the back half of the year in terms of growth, because we'll probably step on the accelerator for long growth once we achieve our loan

You'll see the CET one ratio moderate in the back half of the year in terms of growth because it will probably step on the accelerator.

Steven Alexopoulos: Okay, and as we enter into 2024, there will be a module expense growth and that module expense growth will be predicated on continuing to invest in new products, new services, new business lines, continuing to build out our risk management framework. The hallmark of Western Alliance has been this continuous investment through all cycles to kind of grow the business for future quarters and years and so as long as the risk return and the investment returns are there, we'll continue to do that.

For loan growth once we achieve our loan to deposit ratio.

And one of the reasons our ratio of his clients. So quickly is because we have we have really curtailed our risk weighted asset increases and that will pick up again as loan growth reaccelerate.

Speaker 3: One of the reasons our race of his time so quickly is because we have really curtailed our risk-weighted acid increases and that will pick up again as long growth rate color.

I mean I just.

Speaker 2: I mean, we, I just, you know, with a number of sake, we've improved our CET-1 ratio 190 basis points. Since we went on this risk-weighted-afted diet, it really paid a lot more attention to that. And we slowed our won't growth, and with our organic earnings, we're able to move that number rather quickly from a year ago, which was 8.7 percent to where we are now at 10 point.

With a number of sake, we've improved our CET one ratio of 190 basis points. Since we went on this risk weighted asset diet. It really paid a lot more attention to that and we slowed our loan growth with our organic earnings where you're able to move that number rather quickly from a year ago.

Steven Alexopoulos: From an efficiency ratio perspective, are you thinking that we'll have improvement through 2024 or that we'll keep about where you end in the fourth quarter? Yeah, I'd say a dollar we landed in the fourth quarter. Back to your first question, as we probably exit the second quarter and we achieve our loan to deposit ratio, we'll be able to step on the accelerator of long growth and that will generate higher interest income, which should provide the denominator of that equation to grow at a faster pace.

Which was eight 7% to where we are now at 10, 6%.

Speaker 6: That makes sense. It feels like there's a combination of maybe both that could be considered in the back half of the year. The OCI Mark narrows and you get through your targets. It feels like a little bit of both. Okay.

Okay that makes sense. It feels like there is a combination of maybe bolt that could be considered in the back half of the year the OCI Mark narrows.

And you get through your targets it feels like there's a little bit of both okay.

Speaker 6: And then maybe a bigger picture question.

Okay.

And then maybe a bigger picture question.

Hey, Chris.

<unk> sorry.

Speaker 3: I was just going to say, even if we're higher for longer on rates, you know, we will see that AOC I marked fine simply because, you know, the duration of the portfolio, you know, with under five years it's going to continue to come down.

I'm just going to say, even if were higher for longer on rates, we will see that <unk> marked decline simply because.

Steven Alexopoulos: But right now, if you're modeling, I would say keeping consistent with Q4. Right, but it sounds like revenue is set to accelerate here with the margin being more stable, like you said, more long growth coming in next year, but we should think you're going to spend more of that, at least at this structure. Because it seems like the setup is an efficiency ratio improvement next year, but you're saying at least at this point don't expect that.

The duration of the portfolio.

Under five years, it's been a it's going to continue to come down.

Speaker 2: I've got Chris, just a bit higher, I've said to you in the rest of the vote on the line. You know, we're looking to build a very strong foundational balance.

Chris just I would say.

Same to you and the rest of the folks on the line.

We're looking to build a very strong foundational balance sheet here and not be <unk>.

Speaker 2: right and not be sucked into any of the problems that you saw in the first quarter with a number of banks having their duration mismatched. And we just want to never go through that again or if we have to have it out of a minimal effect on us. And that's where our intent is to continue to raise capital levels and also to build our looks.

<unk> to any of the problems that you saw in the first quarter with a number of banks, having their duration mismatch and we just want to never go through that again or if we have to have a minimal effect on us and thats, where our intent is to continue to raise capital levels and also to build our liquidity.

Steven Alexopoulos: Well, I think it is set up that way, but it's a little bit deferred in terms of when that takes place because of the reasons Ken's talking about that we're going to be sluggish on having the loan growth really kind of matched 85% of the deposit growth as we continue to pull that number so the LDR number down for a couple more quarters. Got it. Okay, thanks for taking my questions.

Speaker 7: Great, maybe this won't follow up. I think you've talked about a mid teens, are we, you know, through the cycle? I guess, updated thoughts on that, given a higher fall under.

Great and maybe just one follow up.

Unknown Executive: Thanks.

Steven Alexopoulos: Thanks.

I think you've talked about a mid teens Roe.

Through the cycle.

Updated thoughts on that given given higher for longer.

Chris Mcgratty: Our next question comes from Chris McGratty of KBW. Chris, your line is open. Please go ahead. Great. Thanks.

Well I think there is.

Speaker 6: Well, I think there's, you know, so as our loan deposit ratio, you know, continues to show kind of what, you know, kind of where we're headed. We are going to have more high quality liquid assets. You know, I think we can over time our expense ratio can fall, you know, into the 40s on an adjusted basis. And so I think high teens work for us, kind of, you know, intermediate to longer term.

So as as our loan to deposit ratio continues to show kind of kind of where we're headed we are getting out more high quality liquid assets.

Ken Vecchione: Dale and Ken, I want to go about that one a little bit different. The you're already at your, you're going to be at your 11% target within a couple quarters. It's not one to two quarters. I can't not sure I'm prepared to ask this, but like, wouldn't you be thinking about a share by back at some point next year, given the capital capital accumulation and your stock price? Yeah, I think that's a fair question to ask.

Chris Mcgratty: Dale and Ken, I want to go about that one a little bit different. The you're already at your, you're going to be at your 11% target within a couple quarters. It's not one to two quarters. I can't not sure I'm prepared to ask this, but like, wouldn't you be thinking about a share by back at some point next year, given the capital capital accumulation and your stock price? Yeah, I think that's a fair question to ask.

I think we can over time, our expense ratio can fall into the <unk> on an adjusted basis, and so I think high teens.

Works for us kind of intermediate to longer term.

High teens, okay. Thanks.

Ken Vecchione: I think there are a couple of things that will inform our decision. One, as we continue to grow, and we continue to get closer and closer to the 100 billion threshold, we have to take into account the AOCI charge that will be applied against it. And so we want to continue to grow our C-T-1 ratio really 11% is the target. It's not the goal and we expect to grow through that. All right, that's one.

Chris Mcgratty: I think there are a couple of things that will inform our decision. One, as we continue to grow, and we continue to get closer and closer to the 100 billion threshold, we have to take into account the AOCI charge that will be applied against it. And so we want to continue to grow our C-T-1 ratio really 11% is the target. It's not the goal and we expect to grow through that.

Yes.

Speaker 1: Thank you. Our next question comes from Bernard von Gisinski of Deutsche Bank Bernard. Your line is open. Please go ahead.

Thank you. Our next question comes from Bernard <unk> of Deutsche Bank. Your line is open. Please go ahead.

Yeah.

Speaker 8: is high good morning. So just from the positive cost, maybe I can ask you a little differently. But when you think of how you're ECR-related deposit growth based on your guidance,

Yes, hi, good morning.

So just wanted deposit costs, maybe I can ask it a little.

Differently.

But when you think of how Youre ECR related deposit growth based on your guidance.

Chris Mcgratty: All right, that's one. And number two, you'll see the C-T-1 ratio moderate in the back half of the year in terms of growth because we'll probably step on the accelerator for long growth once we achieve our loans and fathers. Racial. And one of the reasons our ratio has climbed so quickly is because we have really curtailed our risk-weighted acid increases, and that will pick up again as long growth reaccelerates. Now, I mean, we, I just, you know, with a number of sake, we've improved our C.E.K.1 ratio 190 basis points, since we went on this risk-weighted acid diet and really paid a lot more attention to that. And we slowed our long growth, and with our organic earnings, we're able to move that number route quickly from a year ago, which was 8.7 percent to where we are now at 10.6 percent.

Speaker 8: expectations could go for 2024. If rates are steady from here throughout 2024 versus if we do see rate cuts in the second half of 24, how would you think the deposit costs could migrate under those two different way paths?

Expectations could go for 2024, if rates are steady from here throughout 2024.

Ken Vecchione: And number two, you'll see the C-T-1 ratio moderate in the back half of the year in terms of growth because we'll probably step on the accelerator for long growth once we achieve our loans and fathers. Racial. And one of the reasons our ratio has climbed so quickly is because we have really curtailed our risk-weighted acid increases, and that will pick up again as long growth reaccelerates. Now, I mean, we, I just, you know, with a number of sake, we've improved our C.E.K.1 ratio 190 basis points, since we went on this risk-weighted acid diet and really paid a lot more attention to that. And we slowed our long growth, and with our organic earnings, we're able to move that number route quickly from a year ago, which was 8.7 percent to where we are now at 10.6 percent.

Chris Mcgratty: Okay, that makes sense. It feels like there's a combination of maybe both that could be considered in the back half of the year, the OCI Mark Narrows, and you get through your targets. It feels like a little bit of both. Okay.

Versus if we do see rate cuts in the second half of 'twenty four how would you think the deposit costs could migrate under those two different.

Chris Mcgratty: Okay, that's fair.

Ray paths.

Speaker 3: Well, ECRs are going to have a very high beta. They have on the way up and we expect them to have a high beta on the way down. And so if we get rate cuts, we'll be able to, I think we'll be able to push those down kind of almost in lock step. In addition, some of these have ECRs that are effective fed funds plus some number of base points.

ECR is youre going to have a very high beta they have on the way up and we expect them to have a high beta on the way down and so if we get rate cuts will be able to we'll be I think we'll be able to push those down kind of almost in lockstep. In addition, some of these are have PCR that are effective fed funds plus plus some.

Some number of basis points and part of the reason why I think pressure really came on the industry overall.

Speaker 3: And part of the reason why I think pressure really came on the industry overall on deposits is because of the competition from the bond market. So as...

On deposits is because of the competition from the bond market. So as people are comfortable that that the <unk> is done with what whatever rate increases, but going to contemplate.

Speaker 3: people are comfortable that the FOMC is done with whatever rate increases they're going to contemplate.

Ken Vecchione: Okay, that makes sense. It feels like there's a combination of maybe both that could be considered in the back half of the year, the OCI Mark Narrows, and you get through your targets. It feels like a little bit of both. Okay. Okay, that's fair.

Speaker 3: I do think that that's going to relax some of the pressure on the costs, you know, for the industry kind of writ large. And I think that they give us an opportunity to tweak some of those adjustment figures that we might have on some of those ECR.

I do think that thats going to relax some of the pressure on deposit costs for the industry kind of writ large and I think that may give us an opportunity to tweak some of those adjusted figures that we might have on some of those ECR.

Ken Vecchione: And then maybe a bigger picture question. Yeah, that's good. No, I'm keep going. I'm sorry. Sorry. I was just going to say, even if we're higher for longer on rates, you know, we will see that OCI Mark declined simply because, you know, the duration of the portfolio with, you know, under five years it's going to continue to come down. I just hope that I'd say to you and the rest of the folks on the line, you know, we're looking to build a very strong, foundational balance here, all right, and not be sucked into any of the problems that you saw in the first quarter with a number of banks having their duration mismatched.

Speaker 2: Yeah, downcage is the rate size and I'd also add, you know, for us, we expect another 25 basis points in Q.

Dedicated the right size and I'd also add.

For us we expect another 25 basis points in Q Q4, with several concept towards the back end of next year. So.

Speaker 2: you for with several cuts that took the back end of next year. So, you know, the positive cost will rise and fall along with those rate cuts. But if you're talking about total dollars, also keep in mind, if we exceed our guide, which we have in the last two quarters, you'll see the volume aspect.

The cost will rise and fall along with those rate cuts, but if youre talking about total dollars also keep in mind, if we exceed our guide, which we have in the last two quarters, you will see the volume aspect.

Speaker 2: take hold and you'll see dollar-wise the ECR is rise. So it's going to be a little bit of a rate-bomb mix as we go forward.

Coal and Youll see dollar wise, the ECR rise so it's going to be a little bit of a rate volume mix as we go forward.

In addition words, what Ken was alluding to earlier in terms of these deposit initiatives, we have but we think that we have some of these will grow more quickly than what our warehouse deposits, which is kind of heavy ECR dependent have done and that would give us a broader distribution and more diversification on our funding structure.

Speaker 3: You know, in addition, what's, you know, what kind of was looking to earlier in terms of these positive initiatives we have, but we think that we have some of these will grow more quickly than what our warehouse deposits, which is kind of heavy, ECR dependent, have done. And that would give us a broader distribution and more diversification on our funding structure.

Ken Vecchione: And we just want to never go through that again, or if we have to have it out of a minimal effect on us, and that's where our intent is to continue to raise capital levels and also to build all liquidity.

Speaker 8: Great, and I appreciate that color. Maybe just on Office CRE, I know your credit's been really good, but if I look at the 3Q exposure, I believe it increased from 2.3 billion and 2Q to 2.6 billion, just wondering any color you could provide on the increase and if there is any loan sale.

Great and I appreciate that color, maybe just on office CRE I know your credit has been really good but.

Ken Vecchione: Great. And maybe this won't follow up. I think you've talked about the mid teens, are we, you know, through the cycle, I guess, updated thoughts on that given higher for longer. Well, I think there's, you know, so as our loans to deposit ratio, you know, continues to show kind of what, you know, kind of where we're headed, we are going to have more high quality liquid assets. You know, I think we can over time our expense ratio can fall, you know, into the 40s on an adjusted basis. And so I think high teens work for us, kind of, you know, intermediate to longer term. Thank you. Okay.

Ken Vecchione: Great.

Unknown Executive: Thanks.

Ken Vecchione: And maybe this won't follow up. I think you've talked about the mid teens, are we, you know, through the cycle, I guess, updated thoughts on that given higher for longer. Well, I think there's, you know, so as our loans to deposit ratio, you know, continues to show kind of what, you know, kind of where we're headed, we are going to have more high quality liquid assets. You know, I think we can over time our expense ratio can fall, you know, into the 40s on an adjusted basis. And so I think high teens work for us, kind of, you know, intermediate to longer term.

Unknown Executive: Thank you.

If I look at the <unk>.

<unk> exposure I believe it increased.

$2 2 billion in <unk> to $2 6 billion just wondering any color you can provide on the increase and if theres any.

Unknown Executive: Okay.

Loan sales.

Tom.

Speaker 3: Yeah, I can't block that. I can take that. Any increase would have been in flight balance increases. You have a fund up of tenant improvements. It'd be good news money with sign leads. We didn't increase. Greg ???.

Yes, Hi, Tim Bruckner here I can take that.

Unknown Executive: Thanks.

Any increase would have been.

In flight balance increases.

Unknown Executive: Thank you.

Fund up of.

Tenant improvements it would be good news money with signed leases we didn't increase.

New exposure in office.

Speaker 2: Yeah, I'll just say over as long as you brought that up. Remember, 89% of our office portfolio sits in suburban locations, only 3% sits in central business districts, about 7% sits in Midtown. And our office book represents new construction or new vintage class A in core submoct.

Just say as long as you brought that up remember, 89% of our office portfolio sits in suburban locations only 3% sits in central business districts about 7% sits in Midtown and.

Bernard Gizycki: Thank you. Our next question comes from Bernard von Gissiski of Deutsche Bank. Bernard, your line is open. Please go ahead. Yes, hi. Good morning.

Bernard Gizycki: Our next question comes from Bernard von Gissiski of Deutsche Bank. Bernard, your line is open. Please go ahead. Yes, hi. Good morning.

Dale Gibbons: So just from deposit costs, maybe I can ask you a little differently, but, you know, when you think of how your ECR-related deposit growth based on your guidance, expectations could go for 2024, if rates, you know, are steady from here throughout 2024, versus if, you know, we do see rate cuts in the second half of 24. How would you think the deposit costs could migrate under those two different rate paths? Well, ECRs are going to have a very high beta.

Bernard Gizycki: So just from deposit costs, maybe I can ask you a little differently, but, you know, when you think of how your ECR-related deposit growth based on your guidance, expectations could go for 2024, if rates, you know, are steady from here throughout 2024, versus if, you know, we do see rate cuts in the second half of 24. How would you think the deposit costs could migrate under those two different rate paths? Well, ECRs are going to have a very high beta.

Our office book represents new construction or new vintage class a in core Submarkets. So again, we go with experienced sponsors proven track records in adding value and repositioning our LTV there is about 60%.

Speaker 2: So again, we go with experienced sponsors, proven track records in adding value and repositioning. Our LED there is about 60%.

Great. Thanks for taking my questions.

Okay.

Speaker 1: Thank you. Our next question comes from Brandon King of Truest Securities. Brandon, your line is open. Please proceed.

Thank you. Our next question comes from Brandon King of True Securities Brandon. Your line is open. Please proceed.

Dale Gibbons: They have on the way up, and we expect them to have a high beta on the way down. And so, if we get rate cuts, we'll be able to, I think we'll be able to push those down, kind of almost in the last step. In addition, some of these have ECRs that are effective fed funds, plus some, you know, a number of base points. And part of the reason why I think pressure really came on the industry overall on Pondepos, is because of the competition from the bond market.

Bernard Gizycki: They have on the way up, and we expect them to have a high beta on the way down. And so, if we get rate cuts, we'll be able to, I think we'll be able to push those down, kind of almost in the last step. In addition, some of these have ECRs that are effective fed funds, plus some, you know, a number of base points. And part of the reason why I think pressure really came on the industry overall on Pondepos, is because of the competition from the bond market.

Hey, good morning.

Speaker 9: So I wanted to follow up on the, I wanted to follow up on the top of ECR deposits and just to confirm, are you speaking in that composition of BDA, the BDA based ECR deposits? Are you speaking at till March higher over the course of next year?

So I wanted to follow up on the I wanted to follow up on the topic of ECR deposit and just to confirm are you expecting that composition of DDA DDA.

Deposits are used like NATO March higher.

Over the course of next year.

Sure.

Speaker 3: Well, I think the that position of DDA funds in this elevated rate of firement is quite challenging. So I mean, the DDA that we had, increase in the third quarter was kind of overwhelmingly a mortgage warehouse. So, and I think that, you know.

Well I think I think the acquisition of DDA funds.

And this elevated rate environment is quite challenging so I mean, the DVA that we had increase in the third quarter was kind of overwhelmingly.

Dale Gibbons: So as people are comfortable that the FOMC is done with whatever rate increases they're going to contemplate, I do think that that's going to relax some of the pressure on the cost, you know, for the industry kind of writ large. And I think that they give us an opportunity to tweak some of those adjustment figures that we might have on some of those ECRs. Yeah, downcage is the rate size, and I'd also add, you know, for us, we expect another 25 basis points in Q4 with several concepts towards the back end of next year.

Bernard Gizycki: So as people are comfortable that the FOMC is done with whatever rate increases they're going to contemplate, I do think that that's going to relax some of the pressure on the cost, you know, for the industry kind of writ large. And I think that they give us an opportunity to tweak some of those adjustment figures that we might have on some of those ECRs. Yeah, downcage is the rate size, and I'd also add, you know, for us, we expect another 25 basis points in Q4 with several concepts towards the back end of next year.

Our mortgage warehouse, so and I think that.

Straight flat out DVA.

Speaker 3: straight plot out DDA. We have had success in the regions during the quarter as well, in some degree. But I think most of the deposits we're going to be getting are going to be in either you know, inspiring checking your money market account.

Had success at knowing the regions during the quarter as well to some degree but.

I think most of most of the deposits, we're going to be getting are going to be in either.

Just bearing checking your money market accounts.

Speaker 9: Okay, got it, makes sense. And then I wanted to talk about the shift from the health facility loans to health investment, and particularly the lot banking loans, because you walk through the original thought process of getting those health facilities and then elaborate more on the decision that brings those back into health for better.

Okay got it it makes sense.

And then I wanted to talk about the shift from the held for sale loans to held for investment and particularly the lot banking loans.

Dale Gibbons: So, you know, the positive cost will rise and fall along with those rate cuts. But if you're talking about total dollars, also keep in mind, if we exceed our guide, which we have in the last two quarters, you'll see the volume aspect. Take home, and you'll see dollar-wise, the ECRs rise. So it's going to be a little bit of a rate volume mix as we go forward. You know, in addition, what, you know, what I was looking to earlier in terms of these positive initiatives we have, but we think that we have some of these will grow more quickly than what our warehouse deposits, which is kind of heavy ECR dependent have done. And that would give us a broader distribution and more diversification on our funding structure.

Bernard Gizycki: So, you know, the positive cost will rise and fall along with those rate cuts. But if you're talking about total dollars, also keep in mind, if we exceed our guide, which we have in the last two quarters, you'll see the volume aspect. Take home, and you'll see dollar-wise, the ECRs rise. So it's going to be a little bit of a rate volume mix as we go forward. You know, in addition, what, you know, what I was looking to earlier in terms of these positive initiatives we have, but we think that we have some of these will grow more quickly than what our warehouse deposits, which is kind of heavy ECR dependent have done. And that would give us a broader distribution and more diversification on our funding structure. Great, and I appreciate that color.

Could you walk us through you know the original thought process.

Bernard Gizycki: Great, and I appreciate that color.

Designated as held for sale and then elaborate more on the decision to bring those back as held for investment.

Yes, let me take that so this was a liquidity decision right. So in Q2, we grew our total deposits by about $3 5 billion here. This quarter, we grew a little over $3 $2 billion also want to emphasize we pay down broker deposits by 441 million.

Speaker 2: Yeah, let me take that. So this looks over liquidity decision, right? So in Q2, we grew our total deposits of about $3.5 billion. Here, this corner, we grew a little over $3.2 billion. Also, want to emphasize, we pay down broker deposits by $441 million. So otherwise, we would have grown it by $3.7 billion. And back.

So otherwise we would have grown by $3 7 billion.

And.

Back.

Speaker 2: From Q1, we put some loans into HFS in order to be ready to create additional pools of liquidity, which aren't needed.

From Q1, we put some loans into HFF in order to be ready to create.

Dale Gibbons: Maybe just on office CRE, I know your credit's been really good, but if I look at the 3Q exposure, I believe it increased from 2.3 billion and 2Q to 2.6 billion, just wondering any color you could provide on the increase. And if there's any loan sales. I can, I can, I can, I can, I can, I can, I can take that any any increase would have been in flight balance increases. You know, fund up of tenant improvements.

Additional pools of liquidity, which which aren't needed.

Speaker 2: And so we move these loans from HFS back into HFI. And regarding your lot-thanking question that you alluded to there, you know.

So we moved these loans from Hff's back into HSI and regarding your lot banking question that you alluded to there.

<unk>.

Speaker 2: you know generally are a lot banking programs are all scheduled to builders and really the builders cannot afford to lose

Generally our lot banking programs are on schedule with the builders and really the builders cannot afford to lose any of this inventory and lose control of their forced sale demand. So again. This is a mark. This is a segment of loans category that we like a great deal and has a very good.

Speaker 2: any of this inventory and lose control of their 4-stale demand. So again, this is a mock, this is a segment of loans.

Speaker 2: category that we like a great deal and had a very good risk reward Attribute to it and we've never since we've been doing it here at the bank suffered a loss on

Dale Gibbons: It'd be good news money with sign leases. We didn't increase new exposure in office. Yeah, I'll just say over as long as you brought that up, remember 89% of our office portfolio sits in suburban locations, only 3% sits in central business districts, about 7% sits in midtown. And our office book represents new construction or new vintage class A in core submarkets. So again, we go with experienced sponsors, proven track records, in adding value and repositioning. Our LED there is about 60%.

The risk reward attributes to it and we've never since we've been doing it here at the bank suffered a loss on that.

Bernard Gizycki: Great, thanks for taking my questions.

Unknown Executive: Thanks.

Got it.

Speaker 9: Got it. The folder head, thanks for taking questions.

That's all I had thanks for taking my questions.

Thank you.

Unknown Executive: Thank you.

Thank you. Our next question is from Ebrahim <unk> of Bank of America Ebrahim. Your line is open. Please go ahead.

Speaker 1: Thank you. Our next question is from Ibrahim Hunawala or Bank of America Ibrahim Yalaniz open. Please go ahead.

Hey, good morning.

Just maybe.

Speaker 10: Just maybe when we think about the $2 billion per quarter deposit outlook for next year per quarter, just talk to us the source of that deposit growth where that's coming at. And what is your assumption around the rate at which these deposits are coming on? Is it meaningfully below so far, just some color around how we should think about that and just how that's probably going to impact your NII name outlook until the rate is cut. Thanks.

When you think about the $2 billion quarter deposits.

Look for next year per quarter, just talk to us the source of that deposit growth that's coming in.

Unknown Executive: Great, thanks for taking my questions. Thanks. Thank you.

What is your assumption that underneath that because these deposits are coming or is it meaningfully below so far just some.

Brandon King: Our next question comes from Brandon King of Truest Securities. Brandon, your line is open. Please proceed.

I'll, let alone how we should think about that and just how that's going to impact your NII and NIM outlook until they get caught.

Brandon King: Hey, good morning. So I wanted to follow up on the, I wanted to follow up on the topic of ECR deposits and just to confirm, are you expecting that composition of DDA's, the DDA based ECR deposits? Are you expecting that to march higher over the course of next year? Well, I think the that position of DDA funds in this elevated rate of environment is quite challenging. So I mean, the DDA that we had increase in the third quarter was kind of overwhelmingly a mortgage warehouse.

So I'll take the first half of that and toss it over to Dale for the second half.

Speaker 2: So I'll take the first half of that and talk to it over to Dale for the second half. But regarding where is the source of the positive strength coming from?

Regarding where is the source of the positive trends coming from.

Speaker 2: Next year, I think you'll see, personal, you'll see it from some of our traditional lines. H&W will have, is projected to have a good year next year. Warehouse, lending slash, no finance.

Next year, I think Youll see first of all Youll see if amongst some of our traditional lines HOA. We'll have is projected to have a good year next year warehouse lending slashed note financing generally is traditionally strong Europe year Chris.

Speaker 2: Generally is traditionally strong year at year. The critical item there is what happens in the mortgage industry. That could accelerate a little bit more. It's great pullback and we'll see a little bit more deposit growth there. But into next year, we are looking for a number of our newer business lines.

Critical item there is what happens in the mortgage industry that it could accelerate a little bit more if rates pull back and we will see a little bit more deposit growth there but into next year.

Brandon King: So, and I think that, you know, straight flat out DDA, we have had success in knowing the regions during the quarter as well to some degree. But yeah, and I think most of the deposits we're going to be getting are going to be in either, you know, interest bearing checking your money market accounts. Okay, that makes sense.

We are looking for a number of our newer business lines to contribute.

Speaker 2: to contribute in greater sums than they previously have. Namely, our settlement service business, our business escrow services business, and our corporate trust.

In greater sums than they previously have namely our settlement service business, our business escrow services business and our corporate Trust business those three should have Bob <unk>.

Speaker 2: Those three should have a above growth rate of two prior years history here and should really contribute. But I'll also say that the regions, you know, this is the second quarter in a row. Other regions that have had very solid growth and what we like most about the regions is a little more granular.

Dale Gibbons: And then I wanted to talk about, you know, the shift from the health facility loans to hope for investment and particularly the lot banking loans, because you walk us through, you know, the original thought process of, you know, getting those health for sale and then elaborate more on the decision that we know is back as a helpful investment. Yeah, let me take that. So this was a liquidity decision, right? So in Q2, we grew our total deposits by about three and a half billion dollars here.

Ken Vecchione: And then I wanted to talk about, you know, the shift from the health facility loans to hope for investment and particularly the lot banking loans, because you walk us through, you know, the original thought process of, you know, getting those health for sale and then elaborate more on the decision that we know is back as a helpful investment. Yeah, let me take that. So this was a liquidity decision, right? So in Q2, we grew our total deposits by about three and a half billion dollars here.

Right.

To prior Years' history here and should really contribute but I'll also say that the regions.

This is the second quarter in a row. Other regions have there has to have had very solid growth in what we like most about the regions, it's a little more granular.

Speaker 2: Okay, not a big and chunky as some of the other parts of our business.

Hey.

Big and chunky as some of the other parts of our business and last but not least we've had tremendous success with our consumer our digital consumer platform and that has really exceeded any of our wildest imagination in terms of the numbers. We had initially forecasted for it and that too will continue throughout 2000.

Speaker 3: And last but not least, we've had tremendous success with our consumer or digital consumer platform. And that has really exceeded any of our wildest imaginations in terms of the numbers we initially forecasted for it. And that too will continue throughout 2024. So the large requirements of the pricing that we're getting for new business ranges from the threes, and that's really in the region.

Dale Gibbons: This corner, we grew a little over 3.2 billion dollars. Also want to emphasize, we pay down broker deposit by 441 million. So otherwise, we would have grown it by 3.7 billion dollars. And, you know, back from Q1, we put some loans into HFS in order to be ready to create additional pools of liquidity, which aren't needed. And so we move these loans from HFS back into HFI. And, you know, regarding your lot banking question that you alluded to there, you know, you know, generally are a lot banking programs are all on schedule with the builders.

Ken Vecchione: This corner, we grew a little over 3.2 billion dollars. Also want to emphasize, we pay down broker deposit by 441 million. So otherwise, we would have grown it by 3.7 billion dollars. And, you know, back from Q1, we put some loans into HFS in order to be ready to create additional pools of liquidity, which aren't needed. And so we move these loans from HFS back into HFI. And, you know, regarding your lot banking question that you alluded to there, you know, you know, generally are a lot banking programs are all on schedule with the builders.

24 larger ponderous of the of the pricing that we're getting for new business ranges from the threes and Thats really in the regions to the fives and that includes some of the things I talked about mortgage warehouse and as.

Speaker 3: to the files and that includes some things that talk about where to work at the warehouse and some of these other channels.

Some of these other channels.

Speaker 3: I think we're going to be kind of in the middle there and we waited average, cut something with, you know, in the course. And I think that's probably a good target for 2020.

I think we're going to be kind of in the middle of their weighted average something with in the quarters and I think thats, probably a good target for 2024.

Speaker 10: God that's helpful and maybe the day, sorry if I missed it just in terms of your outlook and given just where mortgage rates were, I get percent, how are you thinking about

Got it that's helpful and maybe again I'm sorry, if I missed it just in terms of your outlook.

And really the builders cannot afford to lose any of this inventory and lose control of their for sale demand. So again, this is a mock. This is a segment of loans category that we like. Great deal. And it has a very good risk reward attribute to it. And we've never since we've been doing it here at the bank suffered a loss on that. Got it. The photo head. Thanks for taking a question. Thank you.

Ken Vecchione: And really the builders cannot afford to lose any of this inventory and lose control of their for sale demand. So again, this is a mock. This is a segment of loans category that we like. Great deal. And it has a very good risk reward attribute to it. And we've never since we've been doing it here at the bank suffered a loss on that. Got it. The photo head. Thanks for taking a question. Thank you.

<unk> just spent mortgage rates at 8% how are you thinking about.

Speaker 10: what origination, gain on sale fees could look like in the absence of any rate relief.

What <unk> nation gain on sale fees can look like could look like.

In the absence of any need to lease.

Speaker 2: Yeah, thanks. I'll take that one. As we look forward, Q3 to Q4, mortgage servicing income should be sustained quarter to quarter, maybe even a slight growth as our MSR balance is growth. In Q4, you know, you generally have a seasonal fall with

Yeah, Thanks, I'll take that one as.

As we look forward Q3 to Q4.

Mortgage servicing income should be sustained quarter to quarter, maybe even a slight growth as our MSR balances grow.

In Q4, you generally have a seasonal off with.

Ibrahim Poonawala: Our next question is from Ibrahim Hunawala of Bank of America. Ibrahim Yalana's open. Please go ahead. Take good morning. Just maybe when you think about the $2 billion per quarter deposit outlook for next year per quarter, just talk to us the source of that deposit growth way that's coming at. And what is your assumption around the rate at which these deposit are coming or is it meaningfully below so for just some color around how to how we should think about that and just how that's probably going to impact your N I name outlook until they get cut. Thanks.

That happens I think it may be a little more acute.

Speaker 2: that happens, I think it may be a little more cute with the higher rates that we see here, presently. I'm going to be a little more cute with the higher rates that we see here, presently.

The higher rates that we see here.

<unk>.

Got it thank you.

Yeah.

Thanks.

Speaker 1: Thank you, our next question comes from Matthew Clark of Piper Sandler. Matthew, your line is open. Please go ahead.

Thank you. Our next question comes from Matthew Clark of Piper Sandler Matthew Your line is open. Please go ahead.

Hey, Thank you Jim.

Speaker 11: Hey, thank you. Just a few questions around credit or maybe one or two here. Just the reduction in special mention, not a cruise. Can you speak to how these credits were resolved? Did most of them cure or did you push them out of the bank just trying to get a sense for the work out process?

A few questions around credit or maybe one or two here.

Just.

Ken Vecchione: So I'll take the first half of that and talk about the Dale for the second half. But regarding where is the source of the positive strength coming from? Next year, I think you'll see, personally, you'll see if a month, some of our traditional lines, H.O.A, will have is projected to have a good year next year, Warehouse, Lending Flash, Node Financing, generally is traditionally strong year-to-year. The critical item there is what happens in the mortgage industry that it could accelerate a little bit more.

The reduction in special mentioned non accruals can you speak to how.

These credits were resolved most.

Most of them cure or did you push them out of the bank just trying to get a sense for the workout process.

Sure Tim Bruckner again.

Speaker 12: Tim Brockner again. So...

So.

Specs I'm going to take the nonaccrual nonperforming first about half of the improvement.

Speaker 12: I'm going to take the non-accrual non-performing first. About half of the improvement in that area is payout or paydown. Okay. The other half would be upgrade to performing categories.

In that areas payout or pay down okay.

Ken Vecchione: It's a great pullback and we'll see a little bit more deposit growth there. But into next year, we are looking for a number of our newer business lines to contribute in greater sums than they previously have. Namely, our settlement service business, our business escrow services business, and our corporate trust business. Those three should have a above growth rate to prior years history here and should really contribute. But I'll also say that the regions, you know, this is the second quarter in a row.

The other half would be upgrade to performing categories with regard to special mention.

Speaker 12: With regard to special mention, we face our credit culture on early.

Our credit culture on early elevation, and so we use that cash.

Speaker 12: elevation and so we use that category very much as a transition on category. So as we signaled on the prior calls we completed deep work full-er review we move assets

Category very much as a transition on categories. So as we signaled on our prior calls we completed a deep portfolio of review, we move assets into that category and then we press for <unk>.

Speaker 12: into that category and then we press for speedy resolution. So with respect to the movements in and out, those are dictated then by our strategy, which generally involves required remargin in this.

Speedy resolution so.

With respect to the movements in and out those are dictated that.

By our strategy, which generally.

Ken Vecchione: The regions that have had very solid growth and what we like most about the regions is a little more granular, okay. It's not big and chunky as some of the other parts of our business. And last but not least, we've had tremendous success with our consumer, our digital consumer platform. And that has really exceeded any of our wildest imaginations in terms of the numbers we initially forecasted for it. And that too will continue throughout 2024.

<unk> required re margin.

And this in this environment.

Speaker 11: Okay, and then the other one from your own expenses. Can you speak to the investment you may still need to make to become or be considered a hundred plus billion dollar bank as soon as you get treated like one beforehand by the regulators?

Okay and then the other one for me around expenses can you speak to the investments you may still need to make to become or be considered a $100 plus billion dollars bank, assuming you get treated like one beforehand by the regulators.

Yes, I think the second part of that question is right on which is most bank in our size category will start to be treated like a $100 billion bank well.

Speaker 2: Yeah, I think the second part of that question is right on.

Ken Vecchione: So the large requirements of the pricing that we're getting for new business ranges from the three. And that's really in the regions to the five. And that includes, you know, some of the things that talk about where it mortgage warehouse and and as, you know, the big and some of these other channels. I think we're going to be kind of in the middle there. And we waited average something with, you know, in the course. And I think that's probably a good target for 2024. God, that's helpful.

Speaker 2: Most banks in our five categories will start to be treated like a $100 billion bank well before you get there and you've got to build that framework in advance and you know that framework is Again to look at feel a little more sophisticated around capital stress testing around liquidity stress testing and the framework that kind of balls around that as we get

Well before you get there and you got to build that framework.

In advance and.

That framework is against the look and feel a little more sophisticated around capital stress testing around liquidity.

<unk> testing.

And the framework that kind of evolves around that as we get.

Speaker 2: bigger we'll have to make more investments into reporting that the law to your bank is over 100 billion will have.

Bigger, we'll have to make more investments into reporting.

Dale Gibbons: And maybe the day, sorry, if I missed it just in terms of your outlook and given just where mortgage rates are, I mean, it percent. How are you thinking about what origination gain on sale fees can look could look like in the absence of any rate relief? Yeah, thanks. I'll take that one. As we look forward, Q3 to Q4, mortgage servicing income should be sustained quarter to quarter, maybe even a slight growth as our MSR balances grow. In Q4, you know, you generally have a seasonal fall with that happens. I think it may be a little more suit with the higher rates that we see here, presently. Thank you.

That the larger banks over $100 billion will opt to do.

Speaker 2: But we believe that starting it early and kind of building it into the run rate, if something's going to be caught that you're going to have to have to continue with the, with the not only the development but the reporting and the management and the monitoring. We're trying to build it in now and kind of build out towards that.

But we believe that starting in early and kind of building it into the run rate. Because then there's going to be cost that youre going to have to have to continue with the with the not only the development, but the reporting and the management and the monitoring we're trying to build it in now and kind of build out towards that.

Okay. Thanks again.

Okay.

Our next question comes from Gary Tenner of D. A Davidson Gary Your line is open. Please go ahead.

Speaker 1: Our next question comes from Gary Tenor of DA Davidson. Gary, your line is open. Please go ahead.

Thanks, Good morning.

Speaker 3: Thanks, good morning. A couple of questions. In terms of the ECR deposits, give you the average.

Couple of questions.

In terms of the ECR.

Deposits can you give us the average.

Speaker 6: for that in the quarter, versus the 17.1 quarter end.

For that in the quarter versus the $17 one.

Quarter end.

Matthew Clark: Our next question comes from Matthew Clarke or Piper Sandler. Matthew, credit, or maybe one or two here. Just the reduction in special mention, none of crules. Can you speak to how these credits were resolved? Did most of them cure or or did you push them out of the bank just trying to get a sense for the workout process? Tim Bruckner again.

We can get back to you on that one.

Speaker 7: Thank you. And then in terms of your comments on kind of 2024 expenses and kind of marginal growth, is that inclusive of the FDIC special assessment that kicks in on the first quarter?

Okay. Thank.

Thank you.

And then in terms of your comments on kind of 2020 for expenses.

I didn't kind of marginal growth is that inclusive of the FDIC special assessment and catch them in the first quarter.

Speaker 3: Or should we think about it as a more top note? Well, it's a good core growth. Well, the special assessment, we're considering the special assessment which has been defined in terms of exactly how it's gonna come out. I mean, I think it could be revised. Yeah, it excludes that. We think that's just really kind of a little of the line. And I think that's how the street will treat it.

Or should we think about it they are on top of <unk>.

Core growth with especially with that.

We're considering the special assessment, which it hasnt been defined yet in terms of exactly how it's going to come out I mean, I think it could be revised.

Timothy Bruckner: So I'm going to take the non-accrual non-performing first. About half of the improvement in that area is payout or paydown. Okay. The other half would be upgrade to performing categories. With regard to special mention, we base our credit culture on early elevation. And so we're going to use that category very much as a transition on categories. So as we signaled on the prior calls, we complete a deep or full-er review. We move assets into that category and then we press for speedy resolution. So with respect to the movements in and out, those are dictated then by our strategy, which generally involves required remarking. In this, in this environment. Okay.

Yes.

That excludes that we think thats, just really kind of below the line and I think thats, how the street will treat it.

Okay, and then last question in terms of kind of when you're kind of rolling through the fourth quarter outlook.

Speaker 3: Okay, and then last question, in terms of, kind of when you were kind of rolling through the fourth quarter outlook, and you mentioned that charge-offs, if I heard you correctly, you kind of also suggested that charge-offs through the economic cycle in the five to 15 basis point range beyond just the fourth quarter. Did I hear that correctly?

You mentioned net charge offs.

If I heard you correctly you kind of also suggested net charge offs through the economic cycle in the five to 15 basis point range.

Beyond just the fourth quarter did I hear that correctly.

That's correct.

Alright, thank you.

Thanks, Greg.

Our next question comes from Andrew <unk> of Stephens Andrew Your line is open. Please proceed.

Speaker 1: Our next question comes from Andrew Terrell of Stevens, Andrew, Yolanda Zopin. Please proceed.

Thanks, Good morning.

Speaker 13: uh... thank you for mornin um... just one quick one for me i want to ask on page eleven of the presentation that the earnings and risk disclosure the provide uh... in the down one hundred scenario that the up to point two percent for for earnings there

Just one quick one for me I wanted to ask on page 11 of the presentation that the earnings at risk disclosure.

Timothy Bruckner: And then the other one from your own expenses. Can you speak to the investment you may still need to make to become or be considered a hundred plus billion dollar bank as soon as you get treated like one beforehand by the regulators. Yeah, I think the second part of that question is right on, which is most banks in our science category will start to be treated like a hundred billion dollar bank well before you get there and you've got to build that framework in advance.

Can you provide and the down 100 scenario the up two 2% for earnings there.

Speaker 13: Can you talk about just your comfortability with that level? Is that where you would like the company to elistically be at or any changes you'd like to make to that position? And then can you also talk about what the underlying mortgage assumptions are in the down 100 scenario? From a gain on sale margin and volume perspective?

Can you talk about just your comfort ability with that level is that where you would like the company to holistically be add or any changes you'd like to make to that position and then can you also talk about what the underlying mortgage assumptions are in the down 100 scenario from a gain on sale margin and volume perspective.

Timothy Bruckner: And, you know, that framework is, again, to look at feel a little more sophisticated around capital stress testing around liquidity, stress testing, and the framework that kind of falls around that as we get bigger, we'll have to make more investments into reporting that the water banks over a hundred billion will have to do. But we believe that starting it early and kind of building it into the run rate is then there's going to be cost that you're going to have to have to continue with the with the not only development but the reporting and the management and the monitoring. We're trying to build it in now and kind of build out towards that. Okay, thanks again.

Yeah.

Speaker 3: So they're not dramatically different. We do think margins would increase. I mean, look at kind of what happened during, you know, going into the pandemic where margins basically tripled during that period of time. You know, we're comfortable with this. You know, in terms of, you know, kind of a decline and that we're a little bit better off, a little tighter on net and just income, but.

So.

They're not dramatically different we do think margins would increase that means if you look at kind of what happened during <unk>.

Going into the pandemic, where margins basically tripled.

During that period of time.

We're comfortable with this.

In terms of kind of a decline in that were a little bit better off being a little tighter on net interest income, but but is stronger in terms of expenses related to those <unk>.

Speaker 3: stronger in terms of expenses related to those ETRs, as well as a Marahome Revative.

As well as a mirror home revenue a 100 basis point decline is not enough to gen up a meaningful refinance business, but we do think it would help on the purchase side.

Speaker 3: A 100 basis point decline is not enough.

Speaker 3: to gen out a meaningful refinance business. But we do think it would help on the purchase side.

Speaker 3: in terms of what we'd be seeing on volume. And if we, if we went down 200 basis points, we really think that that's going to open a window for a fair amount of refinancing that's been done over the last year, as well as have something close enough that you'll get more refinance activity on a cash out basis, you know, somebody moving from a 4% you know, to a 6%.

In terms of what we'd be seeing on volume and if we if we went down 200 basis points, we really think that that's going to open a window for a fair amount of refinancing thats been done over let's say the past year as well as have something close to that that you'll get more refinance activity on a cash out basis somebody moving.

Gary Tenner: Our next question comes from Gary tenor of DA Davidson Gary your line is open please go ahead. Thanks, good morning. A couple of questions in terms of the UCR deposits give you the average for that in the quarter versus the 17.1 quarter end.

4% to six rather than all the way up to something in the mid to higher <unk>.

Speaker 3: rather than all the way up to something in the mid to higher sevens.

Okay. Thanks for taking the question.

Yeah.

Thanks.

Thank you. Our next question comes from Tim The Brasilia.

Speaker 1: Thank you. Our next question comes from Timur, Resiler of Wells Fargo, Timur, Yolana's Open. Please go ahead.

Gary Tenner: We'll get back to you on that one. Okay, thank you. And then in terms of your comments on kind of 2024 expenses and kind of marginal growth, is that inclusive of the FDIC special assessment kicks in the first quarter? Of course, should we think about it? Well, we're considering the special assessment which has been defined in terms of exactly how it's going to come out. I mean, I think it could be revised.

His father Timur. Your line is open. Please go ahead.

Hi, good morning.

Speaker 14: One more on ECR for me. I guess as you look at fourth quarter specifically, how much of that DDA growth is expected to stick around. And then should we see a commender reduction in ECR during the fourth quarter if DDA balances do go down?

One more on ECR for me I guess as you look at fourth quarter, specifically, how much of that DDA growth is expected to stick around and then should we see a commensurate reduction in ECR.

During the fourth quarter DDA balances do go down.

Yes.

I mean.

The volatility in deposits in Q4 is around the mortgage warehouse business, which carries most of the ECR credits and as that volume drops you should see a corresponding decline in the <unk> in the operating expense line.

Speaker 2: The volatility in deposits in Q4s around the mortgage warehouse business, which carries most of the ECR credits. And as that volume drops, you should see a corresponding decline in the ECRs in the operating.

Gary Tenner: Yeah, we're good. It excludes that. We think that's just really kind of below the line and I think that's how the street will treat it. Okay, and then last question, in terms of, Ken, when you were kind of rolling through the fourth quarter outlook, and you mentioned that charge-offs, if I heard you correctly, you kind of also suggested net charge-offs through the economic cycle in the five to 15 basis point range, beyond just the fourth quarter. Did I hear that correctly? That's correct. All right, thank you. Thank you.

Yeah.

Okay.

Speaker 14: Okay, and I guess just given the seasonality in the warehouse business, how likely is that...

I guess, just given the seasonality in the warehouse business.

How likely is that.

How likely is it that that $1 $3 billion of DDA growth that some third quarter, how much of that actually rolls off with that seasonality next quarter.

Speaker 14: How likely is it that that 1.3 billion of BDA growth that's on third quarter? How much of that actually rolls off with that seasonality next quarter?

I think there are two things going on so the growth that we had in the third quarter was a baseline improvement, which I think that has has has legs and same hour. The decline we're going to see in the fourth quarter is from.

Speaker 3: I think there are two things going on. So the growth that we had in the third quarter was a baseline improvement, which I think that has length and same power. In decline, we're gonna see in the fourth quarter is from taxes and insurance escrow funds explicitly.

Andrew Terrell: Our next question comes from Andrew Terrell of Stevens, Andrew, Yolani Zopoulos, please proceed. Thanks, good morning. Just one quick one for me. I wanted to ask on page 11 of the presentation, the earnings and risk disclosure that you provide. In the down 100 scenario, the up 2.2% for earnings there. Can you talk about just your comfortability with that level? Is that where you would like the company to elistically be at or any changes you'd like to make to that position?

Taxes and insurance escrow funds explicitly.

Speaker 15: So while that will come down in the fourth quarter, we expect to retain the higher deposit levels kind of moving forward into 2024. So we should see a more pronounced rebound coming into the Q1 than the decline that we see into four.??

So while that that will come down in the fourth quarter, we expect to retain the higher deposit levels kind of moving forward into into 2024. So we should see a more pronounced rebound coming into the queue into Q1 and the decline that we see in Q4.

Andrew Terrell: And then can you also talk about what the underlying mortgage assumptions are in the down 100 scenario from, again, on sale margin and volume perspective? So, they're not dramatically different. We do think margins would increase. I mean, to look at kind of what happened during the way into the pandemic where margins basically triple during that period of time. You know, we're comfortable with this, you know, in terms of, you know, kind of a decline in that we're a little bit better off, a little tighter on net interest income, but stronger in terms of expenses related to those ECRs, as well as a mirror home revenue.

Okay got it and then last quarter.

Okay. That's understood. Thank you and then.

Speaker 14: Okay, that's understood. Thank you. And then...

<unk>.

Speaker 14: Last quarter you had made a point to mention that the borrowing that are being paid down are quite expensive. I think the number was silver plus 200. I'm just wondering with the remaining borrowing left, what some of the higher cost borrowings that we should continue to see coming down over the next couple of quarters, how much of that expensive borrowing is still left on balance sheet?

Last quarter, you had made a point to mention that the borrowings that were being paid down are quite expensive I think the number of a sofa plus 200 and I'm just wondering with the with the remaining borrowings left what's some of the higher cost borrowings that we should continue to see coming down over the next couple of quarters, how much of that expensive borrowings are still.

Left on balance sheet.

Yes.

Speaker 15: Yeah, as a quarter ran, we still had a half a billion that is an S plus two. I expect that will be paid off this quarter and there's also a little bit of an average balanced benefit because not all of the payoffs that were done in the third quarter, they were, I'll call it radically over the quarter. And so some of that benefit is not recognized in the third quarter.

Quarter end, we still had a half a billion dollars that is at plus two.

Andrew Terrell: A 100 basis point decline is not enough to gen out a meaningful refinance business, but we do think it would help on the purchase side in terms of what we'd be seeing on volume. And if we if we would down 200 basis points, we really think that that's going to open a window for a fair amount of refinancing that's been done over the past year, as well as have something close enough that you'll get more refinance activity on a cash out basis. You know, somebody moving from four percent, you know, to a six rather than all the way up to something in the mid to higher sevens. Okay. Thanks for taking the question. Thanks. Thank you.

That will be paid off this quarter and there is also a little bit of an average balanced benefit because not all of the payoffs that were done in the third quarter.

I'll call it ratably over the quarter and so some of that benefit is not recognized in the third quarter.

That helps support and then lastly.

Okay.

Speaker 14: Okay. And then lastly for me, just on the mention of HQLA and tying that back into the $100 billion threshold, I know you've been growing HQLA now for a couple of quarters, but is any of that build in relation to that $100 billion threshold? And I guess what's the remixing of the bond book look like with additional HQLA purchases and how punitive might that be in this rate environment?

And then lastly for me.

Just on the mention of HLA and tying that back into the $100 billion threshold I know you've been growing each can really now for a couple of quarters, but is any of that build in relation to that $100 billion threshold and I guess.

What's the Remixing of the bond book look like with additional H jewelry purchases and how punitive might that would be in this rate environment.

Andrew Terrell: Our next question comes from a team, the Brazilian of Wells Fargo team of Yolanda's open. Please go ahead. Hi, good morning. One more on the ECR for me. I guess as you look at fourth quarters, specifically how much of that DDA growth is expected to stick around. And then should we see a commender reduction in ECR during the fourth quarter if DDA balances do it out. Yeah, I mean, the volatility and deposits in Q4s around the mortgage warehouse business, which carries most of the ECR credits.

Yeah.

Speaker 3: Well, I think it is all related and there is maybe a gentle slope in terms of H2LA looking for kind of a hundred billion dollar number over time, which probably we're not close to.

Well I think it is all related and there is maybe a gentle slope in terms of <unk> looking for kind of the $100 billion number over time, which obviously, we're not closed yet.

Speaker 3: But I think that's part of it. I think part of it is as well as as we pull down the loan to deposit ratio, you know Those funds are going to be invested in something, you know with higher levels of liquidity Like we talked about so so it is you know, it I don't want to appear that's not a big step variable here It's it's going to be but a gentle climb into higher levels of high quality liquid assets over the next couple of years

But I think thats part of it I think part of it is as well as we pulled down the loan to deposit ratio.

Those funds are going to be invested in something with higher levels of liquidity by some talked about so.

I don't want to say up here, that's not a big step variable here, it's going to be a gentle climb into higher levels of high quality liquid assets over the next couple of years.

Andrew Terrell: And as that volume drops, you should see a corresponding decline in the ECRs in the operating, and I guess just given the seasonality in the warehouse business, how likely is that that, you know, 1.3 billion of BDA growth that's on third quarter? How much of that actually rolls off with that seasonality next quarter? I think there's two things going on. So the growth that we had in the third quarter was, a baseline improvement, which I think that has had life and same power.

Great. Thank you for the questions.

Thanks.

Our next question comes from David <unk> of Wedbush Securities. David Your line is open. Please go ahead.

Speaker 1: Our next question comes from David Kiabarini of WEDF Security. David, your line is open. Please go ahead.

Speaker 5: Hi, thanks. I had a follow up on the rate sensitivity. So in an environment where the Fed does pivot and we see 100 basis points of rate cuts, I see NII down 4%, but clearly on the ECR side, we should see some cuts there as well or declines there. How should we think about the PPR impact of 100 basis point cut in rates?

Hi, Thanks.

Follow up on the rate sensitivity, so in an environment, where the fed does pivot and we see 100 basis points of rate cuts I see NII down 4%, but clearly on the ECR side, we should see some some cuts there as well or the clients there.

Andrew Terrell: The decline we're going to see in the fourth quarter is from, you know, taxes and insurance, escrow funds explicitly. So while that will come down in the fourth quarter, we expect to retain the higher deposit levels kind of moving forward into into 2024. So we should see a more pronounced rebound coming into the queue. In the queue one and the decline that we see in before. And then last quarter.

How should we think about the P. PNR impact of 100 basis point cut in rates.

Speaker 3: If you go to PPR, that's really going to be your earnings at risk. So you're going to see, you know, the lower levels of expenses like you identify, but you're also going to see higher levels of revenue from a marital mortgage operation. And so on an EAR basis, this really is, you know, we're really talking about a kind of a PPRR kind of framework, and that would pick up.

Well if you go to PNR, that's really going to be your earnings at risk, So youre going to see.

Lower levels of expenses like you'd like to identify it but youre also going to see higher levels of revenue from <unk>.

The mortgage operation and so on a basis this really is.

Talking about a kind of a <unk> kind of framework and that would pick up.

Speaker 3: That is thanks for that. And then shifting over to a follow up on credit quality. You mentioned about the roughly 2.5 billion of quarterly CR re-maturedies next year. How can you talk about the health of your borrowers and their ability to withstand higher rates as these loans mature and repress higher?

Got it thanks for that and then shifting over to a follow up on credit quality, you mentioned about the roughly $2 5 billion of quarterly CRE maturities next year.

Andrew Terrell: Okay, that's understood. Thank you. And then last quarter, you had made a point to mention that the borrowings are being paid down are quite expensive. I think the number was so for plus 200. I'm just wondering with the remaining borrowings left. What's some of the higher cost borrowings that we should continue to see coming down over the next couple of quarters? How much of that expensive borrowings are still left on the sheet?

Can you talk about the health of your borrowers and their ability to withstand higher rates as these loans mature and reprice higher.

Sure.

Speaker 12: I'm sure so, I think.

So first I think.

Speaker 12: That discussion was in the context of the investment. Well, it was 2.4 million, but it was a total loan. That total loan's not just CRE. So our CRE is entirely floating rate one. I think that's important. And.

That discussion was in the context of the investment portfolio was $2 4 billion, but it was up total loans total loans not not just CRE. So our CRA CRE is entirely.

Andrew Terrell: Yeah, as a quarter ran, we still have a half a billion that is an S plus two. I expect that will be paid off this quarter. And there's also a little bit of an average balance benefit because not all of the payoffs that were done in the third quarter. Or, you know, they were, I'll call it radically over the quarter. And so some of that benefit is not recognized in the third quarter. And then lastly from. Okay.

Floating rate one I think that's important and.

And is.

Speaker 12: and is entirely for the not central business district. So when we underwrite an office, we underwrite suburban office.

Entirely.

Not central business district, so when we when we underwrite an office we.

We underwrite suburban office and so we've already dealt with the.

Speaker 12: And so we've already dealt with the role, so to speak, because the interest rates have already come off, and we've already made the grading decisions, and then we've already executed our strategy. And at this point, over 75% of that portfolio, we've either affirmed this structure that exists, or we've re-structured and re-margin' in the present spiral.

The role so to speak because the interest rates have already come up and we've already.

Andrew Terrell: And then lastly for me, just on the mention of HQLA and tying that back into the hundred billion dollar threshold. I know you've been growing HQLA now for a couple of quarters. But is any of that build in relation to that hundred billion dollar threshold? And I guess what's the remixing of the bond book look like with additional HQLA purchases and how punitive might that be in this rate environment? Well, I think it's all related and there is maybe a gentle slope in terms of HQLA looking for kind of a hundred billion dollar number over time, which probably we're not close to.

Hey.

The grading decisions and then we've already executed our strategy and at this point over 75% of that portfolio.

We've either affirmed the structure that exists or we restructured and re margin in the present environment.

Great. Thanks very much.

Thanks.

Our next question comes from David Smith of Autonomous David Your line is open. Please proceed.

Speaker 1: Our next question comes from David Smith of Autonomous, David, Your Line is Open. Please proceed.

Andrew Terrell: But but I think that's part of it. I think part of it is as well as as we pull down the loan deposit ratio, you know, those funds are going to be invested in something, you know, with higher levels of liquidity. Like we talked about so so it is, you know, it I don't want to appear that it's not a big step variable here. It's going to be but a gentle climb into higher levels of high quality liquid assets over the next couple of years. Great. Thank you for the question. Thank you.

Thank you.

So.

Speaker 16: Within the deposit outlook for the fourth quarter, can you give us some more details on what's embedded about the mortgage warehouse decline? If we take the region of the deposit growth of one and a half billion and 0.8 billion digital consumer this past quarter, that would imply something like a two billion reduction or so in mortgage warehouse. Does that sound reasonable?

Within the deposit outlook for the fourth quarter can you give us some more details on what's embedded about the mortgage warehouse decline if we take the regional deposit growth of one 5 billion in <unk>.

0.8 billion digital consumer this this past quarter that would imply something like a $2 billion reduction or so in mortgage warehouse, but does that sound reasonable.

Yes that sounds very reasonable so that's what's going to happen in mortgage warehouse and then you would have.

Speaker 2: Yeah, that sounds very reasonable. So that's what's going to happen in the mortgage warehouse. And then you would have the digital consumer platform, the regions, and some of the specialty lines picking up that flat to kind of get us back.

The digital consumer platform the regions and some of the specialty lines.

David Chiaverini: Our next question comes from David Chiaverini of What Those Securities David, Jelana Zopun, please go ahead. Hi, thanks. I had a follow-up on the rate sensitivity. So, in an environment where the Fed does pivot and we see 100 basis points of rate cuts, I see NII, you know, down 4%, but clearly on the ECR side we should see, you know, some cuts there as well or the clients there. How should we think about the PPR impact of 100 basis point cut in rates?

Picking up that flat to kind of get us back to even.

Speaker 2: Just to all say this is kind of important. Right. And strategic change with our warehouse lending business over the last year or so, where we used to have more P and I accounts, which saw a lot more volatility month to month. We moved more to tax and insurance accounts, right? Same clients, different liquidity deposits. And so you don't see the big swings month to month, but you do get them towards the middle of the year and towards the end of the year, when they drop down and then have to rebuild up.

Just I'll say this is kind of important and strategic change with our with our warehouse lending business over the last year or so where we used to have more P&I accounts, which saw a lot more volatility month to month, we move more to tax and insurance accounts.

Same clients different liquidity composite deposit and so you don't see the big swings month to month, but you do get all.

The middle of the year and towards the end of the year when they dropdown and then have to rebuild up.

David Chiaverini: Well, if you go to PPR, that's really going to be your earnings at risk. So, you're going to see, you know, the lower levels of expenses like you identified, but you're also going to see higher levels of revenue from a marital mortgage operation. And so, on an EAR basis, this really is, you know, we're really talking about a kind of a PPR kind of framework. And that would pick up.

Speaker 2: So by these vows as build up, they'll build up starting on December 1st, they're about this year and they'll build up for the next six months going out into 2024. So this should have a little more stability. That's just a change that we made.

Quasi balances build out they'll build up starting in December 1st Thereabouts, This year and they'll build up for the next six months going out into 2024. So this should have a little more stability. That's just a change that we made here.

Thank you and given how much of the ECR balances are in mortgage warehouse.

Speaker 16: Thank you. And given how much of the ECR balances are in mortgage warehouse.

David Chiaverini: That is thanks for that.

Speaker 16: You know, is it possible that we could see the positive costs down quarter on quarter in the fourth quarter? Or is that going to happen too late in the quarter?

Is it possible that we could see.

Timothy Bruckner: And then shifting over to a follow-up on credit quality. You mentioned about the roughly 2.5 billion of quarterly CR rematurities next year. How can you talk about the health of your borrowers and their ability to withstand higher rates as these loans mature and repress higher? Sure. So, first, I think that discussion was in the context of the investment portfolio. Well, it was 2.4 billion, but it was a total loans, not just CRE.

Deposit costs down quarter on quarter in the fourth quarter or is that going to happened too late in the quarter.

Speaker 12: No, I think you can see it down in Q4. Absolutely.

No I think you can see it down in Q4.

Absolutely.

And.

Just thinking about the.

Speaker 16: Just thinking about the the name guide of 3.6 to 3.7 against 3.67 in the third quarter, you've got to tailwinds of the fixed loan repricing, you've got some more borrowing paid out.

The NIM guide of three six to $3 seven against 367 in the third quarter you have got the tailwind of the fixed loan repricing, you've got some more borrowing pay down.

Seems like.

Speaker 16: more tailwinds. I just I'm wonder if you could break up some more of the headwinds you see there. They're going to stop it from from elevating higher than 3.7.

More tailwind I just wonder if you could break out some more of the headwinds you see there theyre going to stop it from from elevating higher than $3 seven.

Timothy Bruckner: So, our CRE is entirely floating rate one. I think that's important. And is entirely for the not central business district. So, when we underwrite an office, we underwrite suburban office. And so, we've already dealt with the role, so to speak, because the interest rates have already come up, and we've already made the grading decisions, and then we've already executed our strategy. And at this point, over 75% of that portfolio, we've either affirmed this structure that exists, or we've re-structured and re-margined in the present firewall.

Timothy Bruckner: Great.

David Chiaverini: Thanks very much.

Yes. So you also saw that we had an increase in our cash position at quarter end relative to the last quarter and the average balance for the quarter and so that is going to consume.

Speaker 3: Yeah, so you also saw that we had an increase in our cast position at quarter and relative to the last quarter and the average balance for the quarter. And so that is going to consume some of that otherwise opportunity to have a higher yield higher spread.

Some of that otherwise opportunity to have a higher yield higher spreads.

Speaker 16: And lastly, on capital, are you saying you think CET-1 ratio could decline in absolute terms as you step up loan growth in the second half next year or you'll just continue to grow more, more slowly?

And lastly on capital are you, saying you think CET one ratio could decline in absolute terms as you step up loan growth in the second half next year or you'll just continue to grow more more slowly.

No.

Speaker 2: You know, we don't expect it to climb, as I said, the target will level up a cent, and then we'll push through that target. We just expect it to grow at a slower pace. Once we cross...

We don't expected Klein as I said the targets of 11% and then we'll push through that target. We just expect it to grow at a slower pace.

Once we cross over across through 11%.

David Chiaverini: Our next question comes from David Smith of Autonomous. David, Yolanda's open. Please proceed. Thank you. So, within the deposit outlook for the fourth quarter, can you give us some more details on what's embedded about the mortgage warehouse decline? If we take the region of the deposit growth of one and a half billion and 0.8 billion digital consumer this past quarter, that would imply something like a 2 billion reduction or so in mortgage warehouse.

Are there any more inorganic levers you can pull here after like the CL and.

Speaker 16: Are there any more inorganic levers you can pull here after the CLN repayment? There is basically going to be a function of earnings and asset growth from here.

Repayments or is it basically can be a function of earnings and asset growth from here.

It's going to be a function of earnings and continuing to watch our risk weighted assets and making sure we optimize that quarter to quarter.

Speaker 2: It's given a function of earnings and continuing to watch our risk-weighted assets and making sure we optimize that quarter to quarter.

Alright, thank you.

Thank you.

Speaker 1: Thank you, our next question is from Brody Preston of UBS Brody, Your line is open, please go ahead.

Thank you. Our next question is from Brody Preston of UBS Brody. Your line is open. Please go ahead.

David Chiaverini: Does that sound reasonable? Yeah, that sounds very reasonable. So, that's what's going to happen in mortgage warehouse, and then you would have the digital consumer platform, the regions, and some of the specialty lines picking up that flat to kind of get us back, of the Eve.

Okay.

Hi, everyone how are you.

Goodness.

Yes.

Yeah.

Speaker 17: I want to just to follow up. Make sure I was following the warehouse comments very correctly and trying to piece it together from last quarter. So I think we were...

How long is it.

The follow up.

Following the warehouse commentary correctly, and just trying to piece it together from last quarter. So I think we were.

David Chiaverini: Just so I'll say this is kind of important. And strategic change with our warehouse lending business over the last year or so, where we used to have more P&I accounts, which saw a lot more volatility month to month. We moved more to tax and insurance accounts, right? Same clients, different liquidity deposits. And so you don't see the big swings month to month, but you do get on towards the middle of the year and towards the end of the year when they drop down and then have to rebuild up.

You're up $3 billion.

Speaker 17: You're up three billion in July . They're in the last conference call and it looks like you ended up 1.6 billion. And-

In July during the last conference call and it looks like you ended.

<unk> up $1 6 billion.

<unk>.

Speaker 17: So this quarter and so it came down at the end of the quarter and then we're expecting another another two billion of potential runoff from there in the fourth quarter. This is on the on a seasonal kind of low point and I've fallen that map correctly, Jill.

But this quarter and so it came down at the end of the quarter and then where do you expect and then another $2 billion of potential run off from there in the fourth quarter. This is on a seasonal low point and I follow on that math correctly Bill.

David Chiaverini: So by these vows as build up, they'll build up starting on December 1st, they're about this year, and they'll build up for the next six months going out into 2024. So this should have a little more stability.

Speaker 3: So as I said was alluding to earlier, we have the funds, extra funds from a mortgage warehouse client are bifurcated into two pieces. One is access and insurance. That's the one that we think is more attractive because it's a little more stable profile. And the other was principal and interest. Principal and interest is on a monthly cycle, both funds build up and then somewhere around the 20th, 24th of the month, they get spun out to the government sponsored enterprise.

So so as Ken was alluding to earlier.

We have the.

The fund's escrow funds from our mortgage warehouse client are bifurcated into two pieces. One is accident insurance. That's the one that we think is more attractive because it's a little more stable profile and the other was the principal and interest or principal and interest is on a monthly cycle funds buildup and then.

David Chiaverini: That's just a change that we made here. Thank you. And given how much of the ECR balances are in mortgage warehouse, you know, is it possible that we could see deposit costs down quarter on quarter in the fourth quarter? Or is that going to happen too late in the quarter? No, I think you can see a down in Q4. Absolutely. And just thinking about the NIM guide of 3.6 to 3.7 against 3.67 in the third quarter, you've got to tailwinds of the fixed loan repricing, you've got some more borrowing paydown, things like more tailwinds.

Somewhere around the 24th of the month again, they get spun out too.

The government sponsored enterprises, the other ones buildup for six months im even longer than that.

Speaker 3: The other ones, you know, build up for six months, something's longer than that. And then their pace is the casting authority. So the long...

And then they are paid to the taxing authority so.

<unk> of our portfolio comes from California, and Southern California taxes, I think they are doing like November or something like this and so youre going to see that our debt. So what you saw earlier was really just normal cyclical behavior and so in the.

Speaker 3: County Claudia patch 4 Corn

Speaker 3: and so California taxes, I think you're doing like November or something like this. And so you're gonna see that from that. So what you saw earlier was really just normal typical behavior.

Speaker 3: And so in the middle of the month, you're gonna have a higher number of principles. And so in the middle of the month, you're gonna have a higher number of principles.

The middle of the month Youre going to have a higher number in principal and interest that then comes back down so even though that number came down from where it was maybe in mid July to the end of September the actual balance trended absolutely still positive growing during that particular time, we are just hitting a high point on the monthly.

David Chiaverini: I just, I wonder if you could break out some more of the headwinds you see there. They're going to stop it from elevating higher than 3.7. Yeah, so you also saw that we had an increase in our cash position at quarter and relative to the last quarter in the average balance for the quarter. And so that that is going to consume, you know, some of that otherwise opportunity to have a higher yield higher spread.

Speaker 15: that then comes back down. So even though that number came down from where it was maybe in mid July to the end of September , the actual balance trend is actually still positive growing during that particular time. We're just hitting an eye point on the monthly sign wave that you get on P and I payment.

Find ways that you can get on on P&I payments.

Speaker 3: So that trend looks strong because of the balance from quarter end to quarter end looks good. What we're saying is the balance from quarter end to quarter end for the fourth quarter is gonna be down. Not because of P and I, which looks good, but because of P and I, and not because of client impairment, just simply because that's the cycle in terms of how those functions.

So that that trend looks strong because of the balance from quarter end to quarter end looks good but we are saying is the balance from quarter end to quarter end for the fourth quarter, it's going to be down not because of P&I, which looks good but because of P&I and not because of client impairment just simply because that's the that's the cycle.

David Chiaverini: And lastly, on capital, are you saying you think CET-1 ratio could decline in absolute terms as you step up loan growth in the second half next year or you'll just continue to grow more, more slowly? You know, we don't expect it to climb, as I said, the target is 11%, and then we'll push through that target. We just expected to grow at a slower pace once we cross over across through 11%.

In terms of how those funds are distributed.

Speaker 17: Got it. Okay, I appreciate the clarification. And then I want to just ask on the spot, lone yields. I think from remember in the slide correctly it was 6.99 on the spot rate for the yield which

Got it okay I appreciate the clarification.

And then I wanted to just ask on the spot loan yields.

David Chiaverini: Are there any more inorganic levers you can pull here after like the CLN repayment? There is basically going to be a function of earnings and asset growth from here. It's going to be a function of earnings and continuing to watch our risk-weighted assets and making sure we optimize that on quarter to quarter. All right, thank you.

I think if I remember in the slide correctly it was $6 99.

On on the spot rate.

For the yield which.

Speaker 17: I guess I wanted to relate that to the residential portfolio to kind of get towards that spot yield. It implies that you have to get more expansion from that residential yield. And so I actually would be thinking about residential loan yields going forward.

I guess I wanted to relate that to the residential.

Brody Preston: Thank you.

Portfolio to kind of get towards that spot yield.

Implies that you have to get more expansion in that residential yield and so how should we be thinking about residential loan yields going forward.

Well I don't think residential loan yields are going to move much I mean, the CPR on that stuff today are 5%.

Speaker 3: Well, I don't think residential owners are going to move much. I mean, you know, the CPR's on that stuff today or are 5%, you know, kind of about the lowest, you know, anyone's ever seen. And so, and so that's just kind of gently bleeding off.

Brody Preston: Our next question is from Brody Preston of UBS Brody, your line is open, please go ahead. Hey everyone, how are you? Good morning. I want to just follow up. Nature, I was following the warehouse comments very correctly and trying to piece it together from last quarter, so I think we were You're up three billion in July. They're in the last conference call, and it looks like you ended up 1.6 billion for this quarter.

The lowest anyone's ever seen.

And so and so that's just kind of generally leading off.

Speaker 3: You know, that said, this is kind of the point on why we mentioned, hey, we have, you know, that's when I have $2.4 billion of loans, you know, rolling off, repricing every quarter. And so that can come up now. A small piece of that is going to be residential, but the rest of it as well. So if you say the residential, and those loans, you know, are, are, again, are coming in, you know, the something that begins with an eight. I mean, they're, you know, they're basically, you know,

That said this was kind of the point on why we mentioned Hey, we have got two and a half $2 4 billion of loans.

<unk> rolling off repricing every quarter and so that could come up now a small piece of that is gonna be residents, but the rest of it as well. So if you take the residential and those loans are again are coming in that's something that begins with an H I mean, they're basically.

Speaker 6: Look so for today, add three to three and a half of that. So those run off and are being replaced at kind of notably higher rates. And even the variable rate ones are being replaced at higher spread because maybe it's certainly in the economy and you have still here in relative, you know, tightness. So. Yes. Yeah.

So for today at three to three and a half of that so those run off and are being replaced it was kind of notably higher rates than even the variable rate loans are being replaced at higher spreads because maybe uncertainty in the economy and you guys still hear relative tightness.

Brody Preston: And so it came down at the end of the quarter. And then we're expecting another two billion of potential runoff from there in the fourth quarter. This is on a seasonal kind of low point. And I've fallen that map correctly, Dale. So, so I think was alluding to earlier, you know, what we have, there's the funds, extra funds from a mortgage warehouse client are bifurcated into two pieces. One is access and insurance.

Yes, Yes can you did you hear down to answer protein.

Yeah. It does it just cut out there for a minute.

Speaker 18: Yeah, it just cut out there for a minute. Now, I guess it makes sense. It's just that the loan yields jumped up a bit this quarter on the Rezzy book, and that's kind of caught me by surprise. Jimmy five?

No I guess that makes sense it just like the.

The loan yields jumped up a bit this quarter on the resi book.

Brody Preston: That's the one that we think is more attractive because it's a little more stable profile. And the other was principal and interest. Well, principal and interest is on a monthly cycle, the funds build up and then somewhere around the 20th, 24th of the month, they get spun out to the government sponsored enterprises. The other ones, you know, build up for six months, some even longer than that. And then their pace is the taxing authority.

It kind of caught me by surprise.

Well, we did some modest dispositions of residential loan.

So like.

Okay.

Speaker 1: The latest Board?ure usual with with Brody that

With with Brodie that.

Brody Preston: So the requirements of our portfolio comes from, you know, California. And so California taxes, I think you're doing like November or something like this. And so you're going to see that come down. So what you saw earlier was really just normal, typical behavior. And so in the middle of the month, you're going to have a higher number and principal and interest that then comes back down. So even though that number came down from where it was maybe in mid July to the end of September, the actual balance trend is actually still positive growing during that particular time.

Okay.

Speaker 1: Sorry, our final question of today comes from John Arstrom of RBC Capital Markets. John , your line is open. Please go ahead.

Im sorry, our final question today comes from John Armstrong of RBC Capital markets. John Your line is open. Please go ahead.

Alright. Thanks.

Speaker 19: Great, thanks. We're gonna get out of the weeds here for a second.

We're going to get out of the weeds here for a second.

Speaker 19: Are you signaling flat EPS for the fourth quarter? Just when I look at the guidance on slide 19, is that what you're signaling?

Are you signaling flat EPS for the fourth quarter, just when I look at the guidance on slide 19 is that what you're signaling.

Yes, so we're signaling.

Speaker 2: Yeah, so we're, we're signaling a flat PPR with some sensitivity to the gain on sale from the mortgage business.

Flat key PNR with.

Some sensitivity to the gain on sale on the mortgage business, depending on this backup on rates that youre seeing here, that's what we're signaling.

Brody Preston: So I'm just hitting an eye point on the monthly sign way that you get on on P and I payments. So that that trend looks strong because of the balance from quarter end to quarter end looks good. What we're saying is the balance from quarter end to quarter end for the fourth quarter is going to be down, not because of P and I, which looks good, but because of P and I and not because of client impairment, just simply because that's the cycle in terms of how those funds are distributed. Got it. Okay.

Speaker 2: depending on the backup on rates that you're seeing here. That's what we're seeing.

Brody Preston: I appreciate the clarification.

Okay.

Speaker 19: Okay, so that's difficult for us to model, but you're saying TPNR, excluding that, it's gonna be relatively stable. Okay. Yeah.

Okay. Okay. So that's difficult for us to model, but youre, saying.

PNR, excluding that it's going to be relatively stable.

Yes, I think Thats answer yes, Ken.

Yes, okay. Okay.

Speaker 19: Yep, okay, okay. And then what's your level of confidence in long growth returning in early 24, you know, Dale mentioned the organic long growth has slowed, but what's your level of confidence in getting that greater than 500 million a quarter back in the run rate?

And then what's your level of confidence some loan growth returning in early 'twenty four.

Brody Preston: And then I want to just to ask on the spot loan yields. I think if I remember in the slide correctly, it was 699 on the spot rate for the yield, which I guess I wanted to relate that to the residential portfolio to kind of get towards that spot yield. It implies that you have to get more expansion in that residential yield.

Dale mentioned, the organic loan growth has slowed but what's your level of confidence in getting that greater than $500 million of quarterback.

And the run rate.

Speaker 2: Yeah, if you're talking about getting it back, say starting in Q3 or towards the end of Q2, I'm confident about that. Yeah.

Yeah, So youre talking about getting it back.

Starting in Q3 of towards the end of Q2, I am confident about that.

Yeah.

We have enough channel okay.

Speaker 2: know to bring in that long growth. I will thank

To bring in that loan growth I will say.

Brody Preston: And so how should we think about residential loan yields going forward? Well, I don't think residential loan yields are going to move much. I mean, you know, there's the CPR from that stuff today or are 5%. You know, kind of about the lowest anyone's ever seen. And so, and so that's just kind of gently leading off. You know, that said, this is kind of the point on why we mentioned, hey, we have, you know, that's going to have $2.4 billion of loans, you know, rolling off repricing every quarter.

Speaker 2: So it's not long growth for long growth sake. If we don't like the credit, we're not lending.

Subject to macroeconomic events right subject to the economy, and what we and what we see so it's not loan growth loan growth sake, if we don't like the credit we're not lending against it but.

Speaker 2: But everything being equal, we have a high degree of confidence in this company to grow loans and access to 500 million and loan growth will follow the deposit growth that we've laid out.

Anything being equal.

A high degree of confidence in this company to grow loans in excess of $500 million and loan growth will follow the deposit growth that we've laid out.

Right.

Okay.

Brody Preston: And so that could come up now. A small piece of that is going to be residential, but the rest of it as well. So if you say the residential in those loans, you know, are begin are coming in, you know, the something that begins with an eight. I mean, there are, you know, they're basically, you know, look so for today, add three to three and a half of that. So those run off and are being replaced that we're kind of notably higher rates.

Speaker 19: How about as you look to 24? I mean, it seems like you have a couple of quarters left, maybe one or two left to do what you need to do on funding.

How about as you look to 'twenty four I mean, it seems like you have a couple of quarters left maybe one or two left to do what you need to do on funding.

I'm, assuming that means that the margin starts, especially as the fed is done.

Speaker 19: I'm assuming that means that the margin starts, especially if the set is done. I'm assuming that means the margin starts to lift in early 24, which means PPR also starts to lift in early 24, is that, am I looking at that the right way?

Assuming that means the margin starts to lift and early 'twenty four.

Which means <unk> also starts to lift in early 'twenty four is that am I looking at that the right way.

Brody Preston: And even the variable rate ones are being replaced at higher spread because of, you know, maybe uncertainty in the economy. And you're still here, and we're going to, you know, tighten it. Yeah, you know, can you, did you hear Dale Bancorp, Brody? Yeah, I just cut out there for a minute.

Speaker 2: So for us, we've got a rate increase.

So for us.

We've got a rate increase.

In December which will carry into the first two quarters of 'twenty four at the end of the second quarter.

Speaker 2: in December , which will carry into the first two quarters of 24. At the end of the second quarter, we have three rate decreases modeled in there to the back end of the year. So you're going to keep that in mind.

Brody Preston: Now, I guess it makes sense, it's just that the, the, the, the loan yields jumped up a bit this quarter on the Rezzy book and that's kind of caught, caught me by surprise. Well, we did some money. I don't know if we've lost audio with, with Brody there.

We have three rate decreases modeled in there to the back end of the year. So you got to keep that in mind.

But as we think about 2024.

Speaker 2: But as we think about 2024,

Speaker 2: As I said with deposits following the $2 billion guide and loans growing at a moderate pace, which is that 500 million, we see sort of the dexterity and agility of the national business line framework and the regional growth gives us confidence in that balance sheet construction going forward. So that's sort of what we're seeing along with stable asset quality as we go into really, mobility and solidarity between New Australia and theury.

As I said with deposits following the $2 billion guide at loans growing at a moderate pace, which is not $500 million.

We see sort of the dexterity and agility of the National business line framework in the regional growth gives us confidence in that balance sheet construction.

Jon Arfstrom: Okay. Sorry, our final question of today comes from Jon Arfstrom of RBC Capital Markets. Jon, your line is open. Please go ahead. Great. Thanks. We're going to get out of the weeds here for a second. Are you signaling flat EPS for the fourth quarter? Just when I look at the guidance on slide 19, is that what you're signaling? Yeah, so we're, we're signaling flat PPRR with some sensitivity to the gain on sale from the mortgage business, depending on the backup on rates that you're seeing here. That's what we're signaling. Okay. So that, that's difficult for us to model, but you're saying PPRR, excluding that, it's going to be relatively stable. Okay. Yeah, I think that's a better answer. Ken, what? Yep. Okay.

Going forward, so that's sort of what we're what we're seeing along with stable asset quality as we go into 2024.

Speaker 19: Yeah, I'm just, I'm looking at the $8 consensus number. And it feels to me like it's good. It puts you at five times earnings, but your stock is down 8%. And I'm just, I'm just curious if I'm missing anything. When I think through your kind of medium term to longer term outlook.

Yeah, I'm I'm, just I'm looking at the eight dollar consensus number and it feels to me like it's good. It puts you at five times earnings, but your stock is down 8% and I'm just I'm just curious if I'm missing anything when I when I think through your kind of medium term to longer term outlook.

Speaker 2: I'm also surprised that the stock is down 8%. We were very pleased with this quarter and relative to other banks that have reported. I thought we did fairly well. And.

I'm also surprised that the stock is down 8%. We were very pleased with this quarter and relative to other banks that have reported.

But we did fairly well.

And.

Yeah.

Speaker 2: You know, we're not ready to give full 24 guidance, but I think you can take what we said directionally correct and model from there.

We're not ready to give all 24 guidance, but.

I think you can take what we said Directionally correct.

Model from there.

Jon Arfstrom: And then what's your level of confidence in loan growth, returning in early 24, you know, Dale mentioned the organic loan growth has slowed, but what's your level of confidence in getting that greater than 500 million a quarter back in the run rate? Yeah, if you're talking about getting it back, say starting in Q3 or towards the end of Q2, I'm confident about that. Yeah. We have enough channels of God, you know, to bring in that loan growth.

Alright, great books for me anyway.

Speaker 19: All right, eight bucks for me anyway. All right, thank you. See you in November .

Alright, Thank you see in November .

Okay. Thanks, John .

Speaker 1: Ladies and gentlemen, this is all the time we have questions for. So hand back over to Ken Vecconi of the team for any closing remarks.

Ladies and gentlemen, this is all the time, we have questions. So I'll hand back over to Ken. Thank you need the kony.

The teams for any closing remarks.

Yes. Thank you all for your questions and your participation and we look forward to the Q4 earnings call. Thanks again.

Speaker 2: Yeah, thank you all for your questions and your participation. And we look forward to the Q4 earnings call. And again,

Okay.

Ladies and gentlemen. This concludes today's call. Thank you for joining you may now disconnect your lines.

Speaker 20: Ladies and gentlemen, this concludes today's call. Thanks for joining me on this Connectual Line.

Jon Arfstrom: I will say, subject to macroeconomic events, right? Subject to the economy and what we see. So it's not loan growth for loan growth sake. If we don't like the credit, we're not lending against it, but everything being equal, we have a high degree of confidence in this company to grow loans and access to 500 million and loan growth will follow the deposit growth that we've laid out. Right. Okay.

Jon Arfstrom: How about as you look to 24? I mean, it seems like you have a couple of quarters left, maybe one or two left to do what you need to do on funding. I'm assuming that means that the margin starts to, especially if the Fed is done, I'm assuming that means the margin starts to lift in early 24, which means PPNR also starts to lift in early 24, is that, am I looking at that the right way?

Jon Arfstrom: So for us, we've got a rate increase in December, which we'll carry into the first two quarters of 24. At the end of the second quarter, we have three rate decreases modeled in there to the back end of the year. So you've got to keep that in mind. But as we think about 2024. As I said with deposits following the $2 billion guide and loans growing at a moderate pace, which is that 500 million.

Jon Arfstrom: We see sort of the dexterity and agility of the national business line framework and the regional growth is of confidence in that balance sheet construction going forward. So that's sort of what we're what we're seeing along with stable asset quality. As we go into 2024.

Jon Arfstrom: Yeah, I'm just I'm looking at the $8 consensus number and it feels to me like it's good. It puts you at five times earnings, but your stock is down 8% and I'm just I'm just curious if I'm missing anything when I when I think through your kind of medium term to longer term outlook. I'm also surprised that the stock is down 8%. We were very pleased with this quarter and relative to other banks that have reported.

Jon Arfstrom: I thought we did fairly well. And you know, we're not ready to give full 24 guidance, but I think you can take what we said directionally correct and model from there. All right, eight bucks from me anyway. All right. Thank you. See you November. Okay, thanks John.

Ken Vecchione: Ladies and gentlemen, this is all the time we have questions for so hand back over to Ken Vekin the colony of the team for any closing remarks. Yeah, thank you all for your questions and your participation. And we look forward to the Q4 earnings call and again.

Unknown Executive: Ladies and gentlemen, this concludes today's call. Thanks for joining me on this connection line.

Q3 2023 Western Alliance Bancorp Earnings Call

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