Q2 2024 First Horizon Corp Earnings Call

Speaker Change: Good afternoon all, thank you for joining us for the First Horizon Second Quarter 2024 Earnings Conference Call.

Carly: My name is Carly, and I'll be coordinating your call today. During the presentation, you can register a question by pressing a star followed by one on your telephone keypad.

Carly: My name is Carly, and I'll be coordinating your call today. During the presentation, you can register a question by pressing *staff, followed by one on your telephone keypad. To remove yourself from that line of questioning, please press staff, followed by two on your telephone keypad.

Carly: My name is Carly and I'll be coordinating your call today. During the presentation, you can register a question by pressing star followed by one on your telephone keypad. To remove yourself from that line of questioning, please press star followed by two on your telephone keypad. I'll now hand over to Natalie Flanders, Head of Investor Relations, to begin.

Carly: To remove yourself from that line of questioning, please press star followed by two on your telephone keypad. I'll now hand over to Natalie Flanders, Head of Investor Relations, to begin. Thank you, Carly. Good morning.

Natalie Flanders: I'll now handle it to Natalie Flanders, ahead of Investor Relations, to begin.

Natalie Flanders: Thank you, Carly.

Natalie Flanders: Welcome to our second quarter 2024 results conference call. Thank you for joining us. Today, our Chairman, President, and CEO, Brian Jordan, and Chief Financial Officer, Hope Dmuchowski, will provide prepared remarks, after which we'll be happy to take your questions. We're also pleased to have our Chief Credit Officer Susan Springfield and our Deputy Chief Credit Officer Thomas Hung here to take questions with you as well. Our remarks today will reference our earnings presentation, which is available on our website at ir.firsthorizon.com.

Natalie Flanders: Good morning. Welcome to our second quarter of 2024 results conference call. Thank you for joining us. Today, our chairman, president, and CEO, Ryan Jordan, and Chief Financial Officer, Hope Dmuchowski, will provide prepared remarks, after which we'll be happy to take your questions. We're also pleased to have our Chief Credit Officer, Susan Springfield, and our Deputy Chief Credit Officer, Thomas Hung, here to do questions with you as well. Our March today, we'll reference our earnings presentation, which is available on our website at ir.firsthorizon.com.

Natalie Flanders: Thank you, Carly. Good morning. Welcome to our second quarter 2024 results conference call. Thank you for joining us. Today, our Chairman, President, and CEO , Brian Jordan, and Chief Financial Officer, Hope Dmuchowski, will provide prepared remarks, after which we'll be happy to take your questions.

Speaker Change: We're also pleased to have our Chief Credit Officer, Susan Springfield, and our Deputy Chief Credit Officer, Thomas Hung, here to do questions with you as well.

Speaker Change: Our remarks today will reference our earnings presentation, which is available on our website at ir.firsthorizon.com.

Natalie Flanders: As always, I need to remind you that we will make forward-looking statements. That are subjects to risks and uncertainties. Therefore, we ask you to review the factors that may cause our results to differ from our expectations on page two of our presentation and in our SEC filing. Additionally, please be aware that our comments will refer to adjusted results, which exclude the impact of notable items. These are non-GAAP measures, so it's important for you to review the GAAP information in our earnings release and on page three of our presentation.

Natalie Flanders: As always, I need to remind you that we will make forward-looking statements that are subject to risks and uncertainty. Therefore, we ask you to review the factors that may cause our results to differ from our expectations on page two of our presentation and in our SEC filings. Additionally, please be aware that our comments will refer to adjusted results, which exclude the impact of notable items. These are non-GAAP measures, so it's important for you to review the GAAP information in our earnings release and on page three of our presentation. And last but not least, our comments reflect our current views, and you should understand that we are not obligated to update them. And with that, I'll turn things over to Brian. Thank you, Natalie.

Speaker Change: As always, I need to remind you that we will make forward-looking statements that are subject to risks and uncertainties. Therefore, we ask you to review the factors that may cause our results to differ from our expectations on page 2 of our presentation and in our SEC filings.

Speaker Change: Additionally, please be aware that our comments will refer to adjusted results, which exclude the impact of notable items. These are non-GAAP measures, so it's important for you to review the GAAP information in our earnings release and on page three of our presentation.

Natalie Flanders: And last but not least, our comments reflect our current views, and you should understand that we are not obligated to update them.

Speaker Change: And last but not least, our comments reflect our current views and you should understand that we are not obligated to update them. And with that, I'll turn things over to Brian .

Brian Jordan: And with that, I'll turn things over to Brian.

Brian Jordan: Thank you, Natalie.

Brian Jordan: Good morning, everyone, and thank you for joining our call. I'm pleased with the results we achieved in another solid quarter. We continue to demonstrate our ability to produce consistent returns for our shareholders while also providing unparalleled service to our clients. As I look back at the last couple of months, there has been a significant uptick in the competitive landscape, especially in the promotional deposit office. As banks compete for growth against the backdrop of a higher-for-longer interest rate environment and a shrinking deposit base,

Brian Jordan: Good morning, everyone, and thank you for joining our call. I'm pleased with the results we achieved in another solid quarter. We continue to demonstrate our ability to produce consistent return for our shareholders, while also providing unparalleled service to our clients.

Brian: Thank you, Natalie. Good morning, everyone, and thank you for joining our call.

Brian: I'm pleased with the results we achieved in another solid quarter. We continue to demonstrate our ability to produce consistent returns for our shareholders while also providing unparalleled service to our clients.

Brian Jordan: As I look back at the last couple of months, there has been a significant uptick in the competitive landscape. This is a strategic, especially promotional deposit officer, as banks compete for growth against the backdrop of a higher-for-longer interest rate environment and a shrinking deposit base.

Speaker Change: As I look back at the last couple of months, there has been a significant uptick in the competitive landscape, especially promotional deposit officers.

Speaker Change: As banks compete for growth against the backdrop of a higher-for-longer interest rate environment and a shrinking deposit base.

Brian Jordan: I'll start on slide five, where we have shared some of the financial highlights for the quarter. We delivered adjusted EPS of $0.36 per share, which was a one-cent increase from the prior quarter, with pre-provision net revenue increasing by $1 million. Adjusted return on tangible common equity improved to 12 percent, driven by the benefit of returning excess capital to shareholders. We repurchased $212 million of stock in the second quarter, and over $365 million year-to-date, ending the quarter with an 11 percent tangible common equity tier 1 ratio. We intend to continue to stack one good quarter on top of the next.

Brian Jordan: I'll start on slide five, where we have shared some of the financial highlights for the quarter. We delivered adjusted EPS of $0.36 per share, which was a one cent increase from the prior quarter, with pre-provision net revenue increasing by $1 million.

Speaker Change: I'll start on slide 5, where we have shared some of the financial highlights for the quarter.

Speaker Change: We delivered adjusted EPS of $0.36 per share, which was a $0.01 increase from the prior quarter, with pre-provision net revenue increasing by $1 million.

Brian Jordan: Adjusted return on tangible common equity improved to 12% driven by the benefit of returning excess capital to shareholders. We repurchased $212 million of stock in the second quarter and over $365 million year to date, ending the quarter with an 11% tangible common equity tier one ratio, or, excuse me, a 11% common equity tier one ratio. We intend to continue to stack one good quarter on top of the next. We accomplished that this quarter through modest improvement in net interest income and traditional banking fees, while simultaneously managing the expense base and maintaining strong credit performance. I remain incredibly optimistic that First Horizon will continue to deliver strong results quarter after quarter while serving our customers and communities just as we have for the past 160 years.

Speaker Change: Adjusted return on tangible common equity improved to 12%, driven by the benefit of returning excess capital to shareholders.

Speaker Change: We repurchased $212 million of stock in the second quarter and over $365 million year-to-date, ending the quarter with an 11% common equity Tier 1 ratio.

Speaker Change: We intend to continue to stack one good quarter on top of the next.

Brian Jordan: We accomplished that this quarter through modest improvement to net interest income and traditional banking fees, while simultaneously managing the expense base and maintaining strong credit performance.

Speaker Change: We accomplished that this quarter through modest improvement to net interest income and traditional banking fees, while simultaneously managing the expense base and maintaining strong credit performance.

Brian Jordan: I remain incredibly optimistic that First Horizon will continue to deliver strong results quarter after quarter, while serving our customers and communities just as we have for over the past 160 years. We have an attractive footprint, a competitive product set, and a strong credit culture that will allow us to profitably navigate whatever scenarios we encounter over the second half of the year.

Speaker Change: I remain incredibly optimistic that First Horizon will continue to deliver strong results quarter after quarter while serving our customers and communities just as we have for over the past 160 years.

Hope Dmuchowski: We have an attractive footprint, a competitive product set, and a strong credit culture that will allow us to profitably navigate whatever scenarios we encounter over the second half of the year. With that, I'll hand the call over to Hope to run through our financial results in more detail. Hope? Thank you, Brian. Good morning, everybody.

Speaker Change: We have an attractive footprint, a competitive product set, and strong credit culture that will allow us to profitably navigate whatever scenarios we encounter over the second half of the year.

Hope Dmuchowski: With that, I'll hand the call over to Hope to run through our financial results in more detail.

Speaker Change: With that, I'll hand the call over to Hope to run through our financial results in more detail.

Hope Dmuchowski: Hope. Thank you, Brian.

Hope Dmuchowski: On slide six, you will find our adjusted financials and key performance metrics for the quarter. We generated adjusted earnings per share of $0.36, up a penny from the prior quarter. Pre-provisioned net revenue was stable to the prior quarter as net interest income and traditional banking fees offset the moderation in the fixed income business. Credit performance continues to be within our expectations, with net charge-off at 22 basis points and a slight increase in the ACL coverage ratio to 1.41%.

Hope Dmuchowski: Good morning, everybody. On 5.6, you will find our adjusted financials and key performance metrics for the quarter. We generated adjusted earnings for share of 36 cents of a penny from the prior quarter. Pre-provision net revenue was stable to the prior quarter as net interest income and traditional banking fees offset the moderation and the fixed income business. Credit performance continues to be with inner expectations, with net charge of 22 basis points and a slight increase in ACL coverage ratio to 1.5%. We achieved our near-term target of 11% CET won this quarter and part by returning 212 million of capital to shareholders through share repurchases.

Hope: Thank you, Brian . Good morning, everybody.

Hope: On slide 6, you will find our adjusted financials and key performance metrics for the quarter.

Hope: We generated adjusted earnings per share of $0.36, up a penny from the prior quarter.

Hope: Pre-provisioned net revenue was stable to the prior quarter as net interest income and traditional banking fees offset the moderation in the fixed income business.

Hope: Credit performance continues to be within our expectations, with net charge-offs of 22 basis points and a slight increase in ACL coverage ratio to 1.41%.

Hope Dmuchowski: We achieved our near-term target of 11% CET1 this quarter in part by returning $212 million of capital to shareholders through share repurchase. This return of excess capital drove improvement and adjusted return on tangible common equity to 12%.

Hope: We achieved our near-term target of 11% CET1 this quarter in part by returning $212 million of capital to shareholders through share repurchases.

Hope Dmuchowski: This return of excess capital drove improvement and adjusted return on tangible common equity to 12%. On 5.8, you will see that NII increased 5.5 million as the margin slightly expanded by 1 basis point from the prior quarter to 3.38%. The loan portfolio continues to be a tailwind to both NII and margin. Average loans are up 1.4% from the prior quarter. Roughly 2.3% of that growth is in loans to mortgage companies, which is our highest yielding loan portfolio. Loan yields also continue to improve, up 6 basis points from first quarter, benefiting from new and renewing floating rate spreads and repricing of fixed rate cash flows.

Hope: This return of excess capital drove improvement in adjusted return on tangible common equity to 12%.

Hope Dmuchowski: On slide 8, you will see that NII increased by 5 million as the margin slightly expanded by one basis point from the prior quarter to 3.38%. The loan portfolio continues to be a tailwind to both NII and March. Average loans are up 1.4% from the prior quarter. Roughly two-thirds of that growth is in loans to mortgage companies, which is our highest yielding loan portfolio. Loan yields also continue to improve, up six basis points from the first quarter, benefiting from new and renewing floating rate spreads and repricing of fixed rate cash flow. However, funding costs partially offset that benefit on the asset side.

Hope: On slide 8, you will see that NII increased by 5 million as the margin slightly expanded by one basis point from the prior quarter to 3.38%.

Hope: The loan portfolio continues to be a tailwind to both NII and margin.

Hope: Average loans are up 1.4% from the prior quarter.

Hope: Roughly two-thirds of that growth is in loans to mortgage companies, which is our highest-yielding loan portfolio.

Hope: Loan yields also continue to improve, up six basis points from first quarter, benefiting from new and renewing floating rate spreads and repricing of fixed rate cash flows.

Hope Dmuchowski: Funding makes partially offset that benefit on the asset side. Non-interest sparing balances were down on average, but encouragingly, those balances have been relatively stable since March. Deposit costs increase 2 basis points as late cycle mixtures continues within the interest sparing portfolio. We dive further into the pockets on slide 9. Seasonality and continued contraction the money supply drove a 1% reduction in balances in line with the industry's H8 data. Despite this, we have been successful retaining our clients with a 95% retention versus the prior year. We have seen stabilization in non-interest sparing balances for the first time in several quarters, which is illustrated with both average and period balances totaling 16.3 billion.

Hope: Funding makes partially offset that benefit on the asset side.

Hope Dmuchowski: Non-interest-bearing balances were down on average, but encouragingly, those balances have been relatively stable since March. Deposit costs increased two basis points as late cycle mix shift continues within the interest-bearing portfolio. We dive further into the deposits on slide 9. Seasonality and continued contraction in the money supply drove a 1% reduction in balances in line with the industry's H8 data.

Hope: Non-interest bearing balances were down on average, but encouragingly, those balances have been relatively stable since March.

Hope: Deposit costs increased two basis points as late cycle mix shift continues within the interest bearing portfolio.

Hope: We dive further into the posits on slide 9.

Hope: Seasonality and continued contraction in the money supply drove a 1% reduction in balances in line with the industry's H-8 data. Despite this, we have been successful in retaining our clients with a 95% retention versus the prior year.

Hope Dmuchowski: Despite this, we have been successful in retaining our clients with a 95% retention versus the prior year. We have seen stabilization in non-interest-bearing balances for the first time in several quarters, which is illustrated by both average and period end balances totaling $16.3 billion. The average rate paid on interest-bearing deposits increased two basis points to 3.3%.

Hope: We have seen stabilization in non-interest bearing balances for the first time in several quarters, which is illustrated with both average and period end balances totaling $16.3 billion.

Hope Dmuchowski: The average rate paid on interest sparing deposits increased 2 basis points to 3.3%. During the quarter, over 1 billion of balances migrated from lower cost base rate accounts into higher rate retention offers, which increased the spot rate to approximately 3.35%, up 7 basis points from the end of first quarter. On 510, you will see that the period and loans are up 1 billion, or 2%, from the prior quarter. The Spring Home dying season drove an increase in consumer real estate, as we continue to focus on balance cheap production around the medical doctor program. Seasonality impacted loans to mortgage companies as well, but we also benefited from competitive disruption in this industry, opening or increasing lines for more than 50 clients.

Hope: The average rate paid on interest bearing deposits increased two basis points to 3.3%.

Hope Dmuchowski: During the quarter, over $1 billion of balances were migrated from lower-cost, base-rate accounts into higher-rate retention offers, which increased the spot rate to approximately 3.35%, up seven basis points from the end of the first quarter. On 510, you will see that the period end loans were up $1 billion or 2% from the prior quarter. The spring home buying season drove an increase in consumer real estate as we continue to focus on balance sheet production around the medical doctor program.

Hope: During the quarter, over $1 billion of balances migrated from lower-cost, base-rate accounts into higher-rate retention offers.

Hope: which increased the spot rate to approximately 3.35% up seven basis points from the end of first quarter.

Hope: On slide 10.

Speaker Change: You will see that the period end loans were up $1 billion or 2% from the prior quarter. The spring home buying season drove an increase in consumer real estate as we continue to focus on balance sheet production around the medical doctor program.

Hope Dmuchowski: Seasonality impacted loans to mortgage companies as well, but we also benefited from competitive disruption in this industry, opening or increasing lines for more than 50 clients. CRE loans also continue to rise, though the pace of that is expected to slow in the coming quarters. As previously mentioned, loan yields were up six basis points from the first quarter due to wider spreads and fixed cash flow repricing. Spreads on new loans increased 42 basis points year over year.

Speaker Change: Seasonality impacted loans to mortgage companies as well, but we also benefited from competitive disruption in this industry, opening or increasing lines for more than 50 clients.

Hope Dmuchowski: CRE loans also continued to fund up, though the pace of that is expected to slow in the coming quarters. As previously mentioned, low yield for up to six phases points from first quarter due to wider spreads and six cash flow repricings. Spreads on new loans increased 42 basis points year over year. We continue to expect fixed rate loan cash flows to provide opportunity over the next year, with a roll off yield of approximately 4.6% on 4 billion of cash flows. On 511, you can see that the growth in our banking fees helped offset the anticipated moderation within our fixed income business.

Speaker Change: CRE loans also continue to fund up, though the pace of that is expected to slow in the coming quarters.

Speaker Change: As previously mentioned, loan yields were up six basis points from first quarter due to wider spreads and fixed cash flow repricing.

Speaker Change: Spreads on new loans increased 42 basis points year over year.

Hope Dmuchowski: We continue to expect fixed-rate loan cash flows to provide opportunity over the next year, with a roll-off yield of approximately 4.6% on $4 billion of cash flow. On slide 11, you can see that the growth in our banking fees helped offset the anticipated moderation within our fixed income. C income, excluding deferred compensation, decreased $3 million from the first quarter.

Speaker Change: We continue to expect fixed-rate loan cash flows to provide opportunity over the next year, with a roll-off yield of approximately 4.6% on $4 billion of cash flows.

Speaker Change: On slide 11, you can see that the growth in our banking fees helped offset the anticipated moderation within our fixed income business.

Hope Dmuchowski: C income, excluding deferred compensation, decreased 3 million from first quarter. Average daily revenue in our fixed income business stepped down to 488K, resulting in a 12 million decrease to fee income. The moderation in this quarter was driven by reduction in the market's rate cut expectations and lower portfolio restructuring activity. After a rate cut, we expect the rest of the year to be similar to this quarter. Mortgage fees increased 2 million due to home buying seasonality. Service charges, card, and digital fees are both of 1.1 million each due to seasonal volume trends that tend to be higher in the second quarter.

Speaker Change: C income, excluding deferred compensation, decreased $3 million from first quarter.

Hope Dmuchowski: Average daily revenue in our fixed income business stepped down to $488K, resulting in a $12 million decrease to fee income. The moderation this quarter was driven by a reduction in the market's rate cut expectations and lower portfolio restructuring activity. Absent a rate cut, we expect the rest of the year to be similar to this quarter. Mortgage fees increased $2 million due to home buying seasonality.

Speaker Change: Average daily revenue in our fixed income business stepped down to $488K, resulting in a $12 million decrease to fee income.

Speaker Change: The moderation this quarter was driven by a reduction in the market's rate cut expectation and lower portfolio restructuring activity.

Speaker Change: Absent a rate cut, we expect the rest of the year to be similar to this quarter.

Speaker Change: Mortgage fees increased $2 million due to home buying seasonality.

Hope Dmuchowski: Service charges, card, and digital fees are both up 1.1 million each due to seasonal volume trends that tend to be higher in the second quarter. We saw a $2 million increase in brokerage, trust, and insurance fees, as the second quarter includes incremental fees for tax filing services within our trust department, and our wealth management fees benefited this quarter from a higher market index. Lastly, Other non-interest income increased $3 million, mostly due to incremental swap fees and a gain from a tax credit investment.

Speaker Change: Service charges, card, and digital fees are both up $1.1 million each.

Speaker Change: Due to seasonal volume trends, that tend to be higher in second quarter.

Hope Dmuchowski: We saw a 2 million increase in brokerage, trust, and insurance fees. A second quarter includes incremental fees for tax filing services within our trust department. And our wealth management fees benefited this quarter from a higher market index. Lastly, other non-interest income increased 3 million, mostly due to incremental swap fees and again from a tax credit investment. On slide 12, we show that excluding deferred compensation, adjusted expenses increased less than $1 million. Personnel, excluding deferred comp, was down 11 million from last quarter, mostly due to a reduction in incentives and commissions. The 9 million reduction to the incentives was driven by lower fixed income revenue in a step down in retention awards.

Speaker Change: We saw a $2 million increase in brokerage, trust, and insurance fees as second quarter includes incremental fees for tax filing services within our trust department, and our wealth management fees benefited this quarter from a higher market index. Lastly,

Speaker Change: Other non-interest income increased $3 million, mostly due to incremental swap fees and a gain from a tax credit investment.

Hope Dmuchowski: On slide 12, we show that excluding deferred compensation, adjusted expenses increased less than $1 million; personnel excluding deferred comp was down 11 million from last quarter, mostly due to reduction incentives and commission. The $9 million reduction to the incentives was driven by lower fixed income revenue and a step down in retention awards. Offsetting the personal decrease was a reinvestment into outside services, which increased $10 million from last quarter related to marketing for the new checking account campaigns and third-party services for strategic investments.

Speaker Change: On slide 12, we show that excluding deferred compensation, adjusted expenses increased less than $1 million.

Speaker Change: Personnel, excluding deferred comp, was down $11 million from last quarter, mostly due to reduction in incentives and commissions.

Speaker Change: The $9 million reduction to the incentives was driven by lower fixed income revenue and a step down in retention awards.

Hope Dmuchowski: Offsetting the personal decrease was a reinvestment in two outside services, which increased 10 million from last quarter related to marketing for the new checking account campaigns and third-party services for strategic investments. As we have shared before, we still expect expenses related to our technology investments to moderately increase over the remainder of the year. And we plan to offset those costs by continuing to identify and implement operational issues. of efficiencies, which will allow us to keep the expense base flat to down in the back half of the year.

Speaker Change: Offsetting the personal decrease was a reinvestment into outside services.

Speaker Change: which increased $10 million from last quarter related to marketing for the new checking account campaigns and third-party services for strategic investments.

Hope Dmuchowski: As we have shared before, we still expect expenses related to our technology investments to moderately increase over the remainder of the year, and we plan to offset those costs by continuing to identify and implement operational efficiency, which will allow us to keep the expense base flat to down in the back half of the year. Credit continues to perform very well, as you can see on slide 13. Net charge-offs decreased by $6 million to $34 million, or 22 basis points of average loans.

Speaker Change: As we have shared before, we still expect expenses related to our technology investments to moderately increase over the remainder of the year, and we plan to offset those costs by continuing to identify and implement operational efficiencies.

Speaker Change: which will allow us to keep the expense base flat to down in the back half of the year.

Hope Dmuchowski: Credit continues to perform very well, as you can see on slide 13. Net charge-off decreased by $6 million to $34 million, or $22 basis points of average loans. Non-performing loans increased $69 million, with declines in CNI offset by an increase in theory. Though MPLs have increased, clients are still managing through the higher rate environment, with approximately 50% of commercial MPLs still current on their payments. Loan loss provision was $55 million this quarter, increasing ACL coverage slightly to 1.41%. Coverage on the CRE portfolio increased from 1.26% in the first quarter to 1.51%, largely driven by the office sector.

Speaker Change: Credit continues to perform very well, as you can see on slide 13.

Speaker Change: Net charge-offs decreased by 6 million to 34 million or 22 basis points of average loans.

Hope Dmuchowski: Non-performing loans increased $69 million, with declines in C&I offset by an increase in CRE. Though MPLs have increased, clients are still managing through the higher rate environment, with approximately 50% of commercial MPLs still current on their payments. Loan loss provision was $55 million this quarter, increasing ACL coverage slightly to 1.41%.

Speaker Change: Non-performing loans increased $69 million with declines in C&I offset by an increase in CRE.

Speaker Change: Though MPLs have increased, clients are still managing through the higher rate environment, with approximately 50% of commercial MPLs still current on their payments.

Speaker Change: Loan loss provision was $55 million this quarter, increasing ACL coverage slightly to 1.41 percent.

Hope Dmuchowski: Coverage on the CRE portfolio increased from 1.26% in the first quarter to 1.51%, largely driven by the office sector. Overall, we are pleased with how our balance sheet has performed in this cycle and continue to believe credit feels very manageable. On slide 15, we've revisited our NII 2024 outlook. At the end of last quarter, we guided to the lower end of our previous range.

Speaker Change: Coverage on the CRE portfolio increased from 1.26% in first quarter to 1.51%, largely driven by the office sector.

Hope Dmuchowski: Overall, we are pleased with how our balance sheet has performed in this cycle and continue to believe credit feels very manageable.

Speaker Change: Overall, we are pleased with how our balance sheet has performed in this cycle and continue to believe credit feels very manageable.

Hope Dmuchowski: On slide 15, we've revisited our NII-2024 outlook. At the end of last quarter, we guided to the lower end of our previous range. However, due to mixed shift and increased deposit competition that we saw late in the quarter, we are updating our expectations for net interest income to flat to down 2%. We are assuming a relatively flat balance sheet in the back half of the year as we continue to remain disciplined on loan pricing and client selection. The higher-for-longer environment, in addition to heightened competition from new entrants into our markets, has pressured funding mix and deposit costs more than anticipated.

Speaker Change: On slide 15, we've revisited our NII 2024 Outlook.

Speaker Change: At the end of last quarter, we guided to the lower end of our previous range. However, due to mid-shift and increased deposit competition that we saw late in the quarter, we are updating our expectations for net interest income

Hope Dmuchowski: However, due to the mixed shift and increased deposit competition that we saw late in the quarter, we are updating our expectations for net interest income range to flat to down 2%. We are assuming a relatively flat balance sheet in the back half of the year as we continue to remain disciplined on loan pricing and client selection. The hire-for-longer environment, in addition to heightened competition from new entrants into our markets, has pressured funding mix and deposit costs more than anticipated.

Speaker Change: [inaudible]

Speaker Change: The hire-for-longer environment, in addition to heightened competition from new entrants into our markets, has pressured funding mix and deposit costs more than anticipated.

Hope Dmuchowski: As I previously mentioned, we are pleased to see stability in our non-intersparing deposits for the first time in several quarters. However, we continue to see more mixed shift than expected within the interest-bearing portfolio. During the quarter, over 1 billion of balances migrated from lower cost, base rate accounts into higher rate retention offers. Our average base rate account yields approximately 50 basis points, while our retention offer is roughly 4%. All other guidance remains unchanged, and we will continue to seek efficiencies to help offset revenue pressures and improve shareholders' return. Lastly, you can see that we've achieved our near-term CET1 target of 11%. We plan to maintain CET1 around that 11% level, and we can reassess moving towards our longer-term target of 10 to 10.5% as we gain more certainty around the macroeconomic and regulatory environment.

Hope Dmuchowski: As I previously mentioned, we are pleased to see stability in our non-interest-bearing deposits for the first time in several quarters. However, we've continued to see more mix shift than expected within the interest-bearing portfolio. During the quarter, over $1 billion of balances were migrated from lower-cost, base-rate accounts into higher-rate retention offers.

Speaker Change: As I previously mentioned, we are pleased to see stability in our non-interest bearing deposits for the first time in several quarters.

Speaker Change: However, we've continued to see more mixed ship than expected within the interest-bearing portfolio.

Speaker Change: During the quarter, over $1 billion of balance is migrated from lower-cost, base-rate accounts into higher-rate retention offers.

Hope Dmuchowski: Our average base rate account yields approximately 50 basis points, while our retention offer is roughly 4%. All other guidance remains unchanged, and we will continue to seek efficiencies to help offset revenue pressures and improve shareholders' returns. Lastly, you can see that we've achieved our near-term CET1 target of 11%. We plan to maintain CET1 around that 11% level, and we can reassess moving towards our longer-term target of 10 to 10.5% as we gain more certainty around the macroeconomic and regulatory environment. As you turn to slide 16, I'll give you my closing thoughts.

Speaker Change: Our average base rate account yields approximately 50 basis points, while our retention offer is roughly 4%.

Speaker Change: All other guidance remains unchanged, and we will continue to seek efficiencies to help offset revenue pressures and improve shareholders' returns.

Speaker Change: Lastly, you can see that we've achieved our near-term CET-1 target of 11%.

Speaker Change: We plan to maintain CET1 around that 11% level, and we can reassess moving towards our longer-term target of 10 to 10.5% as we gain more certainty around the macroeconomic and regulatory environment.

Hope Dmuchowski: As you turn to 5.16, I'll give my closing thoughts. I'm extremely proud of the work that our company has accomplished in the first half of this year. The macroeconomic outlook for 2024 has changed significantly in the last six months. While there were previous expectations heading into the year of four or more rate cuts, now we are looking at 1 to 2. But despite all the changes around us, we continue to grow earnings per share quarter after quarter. I believe that the experience and knowledge of our bankers, our teams and our leaders give First Horizon the flexibility to efficiently and effectively navigate any economic cycle.

Speaker Change: As you turn to slide 16, I'll give my closing thoughts.

Brian Jordan: I'm extremely proud of the work that our company has accomplished in the first half of this year. The macroeconomic outlook for 2024 has changed significantly in the last six months. While there were previous expectations heading into the year of four or more rate cuts, now we are looking at one to two. But despite all the changes around us, we continue to grow earnings per share quarter after quarter.

Speaker Change: I am extremely proud of the work that our company has accomplished in the first half of this year.

Speaker Change: The macroeconomic outlook for 2024 has changed significantly in the last six months.

Speaker Change: While there were previous expectations heading into the year of four or more rate cuts, now we are looking at one to two.

Speaker Change: But despite all the changes around us, we continue to grow earnings per share quarter after quarter.

Brian Jordan: I believe that the experience and knowledge of our bankers, our teams, and our leaders give First Horizon the flexibility to efficiently and effectively navigate any economic cycle. As we advance to the second half of the year, we continue to expect strong performance from our diversified business. We will continue to identify operational to Counter Headwinds and Reverse. We will also remain diligent in managing our capital, our balance sheet, and our credit performance in order to deliver attractive returns near term and into the future. Now, I'll give it back to Brian.

Speaker Change: I believe that the experience and knowledge of our bankers, our teams, and our leaders give First Horizon the flexibility to efficiently and effectively navigate any economic cycle.

Hope Dmuchowski: As we advance the second half of the year, we continue to expect strong performance from our diversified business model. We will continue to identify operational efficiencies to counter head wins and revenue. We will also remain diligent on managing our capital, our balance sheet, and our credit performance in order to deliver attractive returns near term and into the future.

Speaker Change: As we advance to the second half of the year, we continue to expect strong performance from our diversified business model.

Speaker Change: We will continue to identify operational efficiencies.

Speaker Change: to Counter Headwinds and Revenue.

Speaker Change: We will also remain diligent on managing our capital, our balance sheet, and our credit performance in order to deliver attractive returns near term and into the future. Now I'll give it back to Brian .

Brian Jordan: Now, I'll give it back to Brian.

Brian Jordan: Thank you, Hope. I echo Hope's sentiments. We have demonstrated our ability to execute and change in economic and competitive environments. We know how to pull the necessary levers in order to operate profitably. I have complete confidence in our ability to continue doing so over the back half of 24 and beyond. I firmly believe that one of First Horizon's greatest attributes is our Southeastern footprint and our established client base. While that attracts some of the greatest competition, our main confident that we have the associates, the client relationships, and the dedication of maintaining an unparalleled banking franchise in the South.

Brian Jordan: Thank you, Hope. I echo Hope's sentiments. We have demonstrated our ability to execute in changing economic and competitive environments. We know how to pull the necessary levers in order to operate profitably. I have complete confidence in our ability to continue doing so over the back half of 24 and beyond.

Brian: Thank you, Hope.

Brian: I echo Hope's sentiments.

Brian: We have demonstrated our ability to execute in changing economic and competitive environments. We know how to pull the necessary levers in order to operate profitably.

Brian: I have complete confidence in our ability to continue doing so over the back half of 24 and beyond.

Brian Jordan: I firmly believe that one of First Horizon's greatest attributes is our southeastern footprint and our established client base. While that attracts some of the greatest competition, I remain confident that we have the associates, the client relationships, and the dedication to maintaining an unparalleled banking franchise in the South. As always, I'm grateful for the great work of our associates in serving their customers and their community. In particular, our thoughts are with those in Houston impacted by Hurricane Beryl and the thousands, tens of thousands, hundreds of thousands that dealt for a long period without power.

Brian: I firmly believe that one of First Horizon's greatest attributes is our southeastern footprint and our established client base.

Brian: While that attracts some of the greatest competition, I remain confident that we have the associates, the client relationships, and the dedication to maintaining an unparalleled banking franchise in the South.

Brian Jordan: As always, I'm grateful for the great work of our associates in serving their customers and their communities.

Brian: As always, I'm grateful for the great work of our associates in serving their customers and their communities.

Brian Jordan: In particular, our thoughts are with those that used and impacted by Hurricane Barrel and the thousands, dozens of thousands, hundreds of thousands that dealt for a long period without power. We remain committed to supporting our associates, clients, and the greater community as they recover.

Speaker Change: In particular, our thoughts are with those in Houston impacted by Hurricane Beryl and the thousands, tens of thousands, hundreds of thousands that dealt for a long period without power.

Carly: We remain committed to supporting our associates, clients, and the greater community as they recover. Carly, we can now open it up for questions. Thank you very much, Brian. If you'd like to ask a question, please press star followed by 1 on your telephone keypad. If you'd like to remove yourself from the question queue, please press star followed by 2.

Speaker Change: We remain committed to supporting our associates, clients, and the greater community as they recover. Parley, we can now open it up for questions.

Carly: Farley, we can now open it up for questions. Thank you very much. Let's ask a question.

Carly: Please press star followed by one on a telephone keypad. If you'd like to remove yourself from that question, please press star followed by two.

Parley: Thank you very much, Brian . If you'd like to ask a question, please press star followed by one on your telephone keypad. If you'd like to remove yourself from that question queue, please press star followed by two.

Parley: Hope Flanders, Hope Dmuchowski Hope Flanders, Hope Dmuchowski

Unknown Attendee: The first question comes from Ibrahim Pumwala. Ibrahim, your line is now open. Ibrahim, can we check that your line is not locally meted?

Carly: Our first question comes from Ebrahim Poonawala. Ebrahim, your line is now open. Can we check that your line is not locally muted?

Speaker Change: Our first question comes from Ebrahim Poonawala. Ebrahim, your line is now open.

John Armstrong: It appears that we can't connect to Ibrahim, so we'll move on to the next question. Next question comes from John Armstrong of RBT Cups and Markets. John, your line is now open. Hey, thanks. Good morning. Good morning, John. Hey, good morning.

Carly: It appears that we can't connect to Ebrahim, so we'll move on to the next question. The next question comes from John Armstrong, of RBC Capsule Markets. John, your line is now open. Hey, thanks. Good morning. Morning, John. Hey, good morning. Can you talk a little bit more about the deposit pricing competition? You're saying you flagged late in the quarter.

Speaker Change: It appears that we can't connect to Ebrahim, so we'll move on to the next question.

Speaker Change: Next question comes from John Armstrong of RBC Capital Markets. John , your line is now open.

John Armstrong: Hey, thanks. Good morning.

Brian Jordan: Can you talk a little bit more about the deposit pricing competition you're seeing. You flagged late in the quarter, and what do you see, and give us some examples of that, and what do you think changes or eases that environment? Yeah, I'll start and then hope to pick up from there. It's interesting to see the impact it had on our balance sheet. There have been an increasing number of deposit offers that are specials across our footprint. We saw from large, medium, and small competitors. And it had the effect of driving a higher cost in our existing customer base.

John Armstrong: Morning, John .

John Armstrong: Hey, good morning. Can you talk a little bit more about the deposit pricing competition you're seeing? You flagged late in the quarter, and what are you seeing? Give us some examples of that, and what do you think changes or eases that environment?

Brian Jordan: And you know, what are you seeing? Give us some examples of that. And what do you think changes or eases that environment?

Brian Jordan: Yeah, I'll start and then Hope can pick up from there. It's interesting to see the impact it had on our balance sheet. There have been an increasing number of deposit offers that are specials across our footprint. We saw them from large, medium, and small competitors.

John Armstrong: Yeah, I'll start and then Hope pick up from there. It's interesting to see the impact it had on our balance sheet. There have been...

Hope: an increasing number of deposit offers that are specials across our footprint. We saw

Brian Jordan: It had the effect of driving higher costs for our existing customer base. The number of customers who came in with an offer from somebody else at a higher rate, and then our need to match or come close to matching that rate, picked up over the last month or so of the quarter. There was north of probably a billion, billion and a half dollars of that occurring in the back half of the second quarter, the third month of the quarter.

Speaker Change: from large and medium and and small competitors.

Hope: and it had the effect of driving a higher cost in our existing customer base.

Hope Dmuchowski: The number of customers who came in with an offer from somebody else at a higher rate, and then our need to match or come close to matching that rate, picked up over the last month or so of the quarter. There was north of probably a billion and a half dollars of that occurring in the back half of the second quarter, third month of the quarter. If you looked at deposit costs early in the quarter, our aggregate cost of deposit dropped early in the quarter, was flatish in May, and then really accelerated in the June timeframe. The proximate cost is this competitive environment, which in the most narrow sense we had to match the competitive offer to maintain and defend customer relationships.

Hope: The number of customers who came in.

Hope: With offer from somebody else at a higher rate and and then our need to match or come close to matching that rate Picked up over the last month or so of the quarter

Hope: There was, you know, north of probably a billion, billion and a half dollars of that occurring in the back half of the second quarter, third month of the quarter.

Brian Jordan: If you looked at deposit costs early in the quarter, our aggregate cost of deposits dropped early in the quarter, was flattish in May, and then really accelerated in the June time frame, and the proximate cause is this competitive environment, which, in the most narrow sense, we had to match the competitive offer to maintain and defend customer relationships. Dawn, I'll add to what Brian said. You asked about the offers. We have a very competitive offer from a marketing perspective, from kind of a new entrance to the southeast with a 530 guarantee through year-end, and that's been aggressively marketed and walked into most of our branches. And many of our employees here have been kind enough to enter office mail for me when they've gotten home.

Hope: If you looked at deposit costs early in the quarter, our aggregate cost of deposits dropped early in the quarter, was flattish in May, and then really accelerated in the June timeframe. And the proximate cause is this competitive environment which

Hope: In the most narrow sense, we had to match the competitive offer to maintain and defend customer relationships.

Hope Dmuchowski: Jon Arfstrom, Brian, you asked about the offers. We had a very competitive offer from a marketing perspective from a new entrance to the southeast of a 530 guarantee through year end, and that's been aggressively marketed. Walked into most of our branches, and many of our employees here have been kind enough to enter office mail with me with a gut and their houses. And so that we saw kind of mid-quarter of Brian mentioned that competitive environment, going into the quarter we expected to rate cut this quarter, highly intended to rate cut. Everyone had pulled back from their promotional rates; the rate guarantees that we were seeing was really three months. We were at a three month rate guarantee, and as the forward curve moved to a really late in Q3 expectation for the first rate cut.

Hope: Don, I'll ask what Brian is...

Don: You asked about the offers. We have a very competitive offer from a marketing perspective, from kind of a new entrance to the southeast of a 530.

Speaker Change: Guarantee through year-end.

Brian: And that's been aggressively marketed, walked into most of our branches, and many of our employees here have been kind enough to enter office mail to me when they've gotten at their houses. And so, we saw kind of mid-quarter, as Brian mentioned, that competitive environment.

Hope Dmuchowski: And so we saw kind of a competitive environment, as Brian mentioned, that competitive environment. Going into the quarter, we expected a rate cut this quarter, a highly-anticipated rate cut, so everyone had pulled back from their promotional rates. The rate guarantees that we were seeing were really three months. We were at a three-month rate guarantee, and as the forward curve moved to a really late Q3 expectation for the first rate cut, we saw the offers, the marketing, and the digital marketing from competitors significantly increase for the longer term and higher rate in the second half of the quarter.

Brian: Going into the quarter, we expected a rate cut this quarter, or highly anticipated a rate cut, so everyone had pulled back from their promotional rates. The rate guarantees that we were seeing was really three months. We were at a three-month rate guarantee, and as the forward curve moved to a really late

Hope Dmuchowski: We saw the offers, the marketing, the digital marketing from competitors significantly increased the longer term and higher rate in the second half of the quarter.

Brian: in Q3 expectation for the first rate cut. We saw the offers, the marketing, the digital marketing from competitors significantly increased for longer term and higher rate in the second half of the quarter.

Hope Dmuchowski: If, if we don't get a cut hope, you expect this kind of pressure to persist and I guess, you know, to kind of clean this up, you know, talk a little bit about, you know, the higher end of the lower end of the NII guide and trying to what gets you to the higher end of the lower end. Thank you. John, I do think that we don't get a cut in Q3 or this year. The further out that cut yet, the more competitive this environment stays as the money supply continues to shrink out of the economy.

Speaker Change: Okay if

Hope Dmuchowski: If we don't get a cut, Hope, do you expect this kind of pressure to persist? And I guess, you know, to kind of clean this up, you know, talk a little bit about the higher end of the lower end of the NII guide and kind of what gets you to the higher end or lower end.

Speaker Change: If we don't get a cut, Hope, do you expect this kind of pressure to persist? And I guess, you know, to kind of clean this up, you know, talk a little bit about, you know, the higher end or the lower end of the NII guide and kind of what gets you to the higher end or lower end. Thank you.

Hope Dmuchowski: John, I do think that if we don't get a cut in Q3 or this year, the further out that cut gets, the more competitive this environment stays as the money supply continues to shrink out of the economy. I am hopeful that with that first cut, we'll start to see some comeback. But as I mentioned, one of the major rate offers that our clients are bringing in, it is a guarantee through year end.

Hope: John , I do think that if we don't get a cut in Q3 or this year, the further out that cut gets, the more competitive this environment stays as the money supply continues to shrink out of the economy.

Hope Dmuchowski: I, I'm hopeful that with that first cut, we'll start to see some come back, but as I mentioned, one of the major rate offers that our clients are bringing in, it is a guarantee through year end. So even we were to see a rate cut in September, if there's still an offer out there that is valid through December at a five-party rate. But hopeful that that will start to subside with the first rate cut, hopefully a second one, you know, not too far behind that. As far as the guidance, absolutely a rate cut, we hope will offset the deposit pressure, but we are as expensive.

Hope: I am hopeful that with that first cut we'll start to see some come back, but as I mentioned, one of the major rate offers that our clients are bringing in, it is a guarantee through year end. So even if we were to see a rate cut in September , there's still an offer out there that is valid through December at a 530 rate.

Hope Dmuchowski: So even if we were to see a rate cut in September, there's still an offer out there that is valid through December at a 530 rate. But I'm hopeful that that will start to subside with the first rate cut and hopefully a second one, not too far behind that.

Hope: But hopeful that that will start to subside with the first rate cut and hopefully a second one, you know, not too far behind that.

Brian Jordan: As far as the guidance is concerned, absolutely. A rate cut, we hope, will offset the deposit pressure, but we are asset sensitive. And so the earlier that we get the cut in the year, the more that in the year, we'll be able to kind of see the deposit costs come down to match the loan side repricing. But the loan, you know, 58% of our loan will reprice in the month, and we'll have to work that deposit cost back.

Speaker Change: As far as the guidance, absolutely a rate cut we hope will offset the deposit pressure, but we are asset sensitive, and so the earlier that we get the cut in the year, the more that in year we'll be able to kind of see the deposit cost come down to match the loan side repricing, but the loan, you know, 58% of our loan will reprice, you know, in the month, and we'll have to work that deposit cost back.

Hope Dmuchowski: And so a, the earlier that we get the cut in the year, the more that in year, we'll be able to kind of see that how the cost comes down to match the loan side, repricing, but the loan, you know, 58% of our loan, we'll repurchase, you know, for them in the month, and we'll have to work that upon the cost back. We'll be a little bit of lag as we walk that upon the pricing back as well as promos that come off, you know, three months, six month rate offers.

Brian Jordan: There'll be a little bit of lag as we walk that deposit pricing back, as well as promos that come off, you know, three month, six month rate offers. John, I think it's, It's largely a gut call at this point as to what happens.

Hope: There'll be a little bit of lag as we walk that deposit pricing back, as well as promos that come off, you know, three-month, six-month rate offers.

Hope Dmuchowski: John, I think it's largely a gut call at this point what happens. I think it really depends on what happens with loan demand, how the Fed normalizes his balance sheet, most importantly, and particularly what impact that has on deposits across the industry. The deposit market is still very tight, and I don't think a cut or two is likely to change that very much in the short term. I don't think it makes it very much different if rates stay are, but I think it's going to be a competitive environment because the Fed is going through this normalization process.

John Armstrong: John , I think it's...

John Armstrong: It's largely a gut call at this point what happens. I think it really depends on what happens with loan demand, how the Fed normalizes its balance sheet most importantly, and particularly what impact that has on deposits across the industry.

Brian Jordan: I think it really depends on what happens with loan demand, and, most importantly, how the Fed normalizes its balance sheet, and particularly what impact that has on deposits across the industry. The deposit market is still very tight, and I don't think a cut or two is likely to change that very much in the short term. I don't think it makes it very much different if rates stay higher, but I think it's going to be a competitive environment because the Fed is going through this normalization process, and that's going to keep deposit costs probably on the whole, more competitive than we might have thought, you know, three months ago, two months ago. Okay. All right. Thank you very much.

John Armstrong: The deposit market is still very tight.

John Armstrong: I don't think a cut or two is likely to change that very much in the short term. I don't think it makes it very much different if rates stay higher, but I think it's going to be a competitive environment because the Fed is going through this normalization process.

John Armstrong: And that's going to keep the deposit cost probably on the whole. More more competitive than we might have thought three months ago, two months ago. Yeah, okay, all right, thank you very much for pushing it. Thank you. Thanks so much.

John Armstrong: and that's going to keep deposit costs probably on the whole.

John Armstrong: More competitive than we might have thought, you know, three months ago, two months ago.

Unknown Attendee: I appreciate it. Thank you. Thank you so much.

Speaker Change: Yeah. Okay. All right. Thank you very much. Appreciate it.

Unknown Attendee: Our next question comes from Michael Rose of Raymond James. Michael, your line is now open. Hey, good morning, everyone.

Speaker Change: Thank you.

Michael Rose: Our next question comes from Michael Rose of Raymond James. Michael, your line is not open. Hey, good morning everyone. Thanks for taking my questions.

Speaker Change: Thank you so much. Our next question comes from Michael Rose of Raymond James.

Speaker Change: My call, your line is now open.

Unknown Attendee: Thanks for taking my question. Just if I use the midpoint of the guidance, you guys are looking at negative operating leverage this year. I know it may be a little too early to kind of count or talk about 2025, but, you know, do you think positive or return to positive operating leverage next year is in the cards? And kind of what are the factors, you know, rates, improvement in fixed income, you know, and momentum and fees, stuff like that, that would kind of get you there? I assume, you know, a little bit more balance sheet growth as well. Thanks.

Michael Rose: Just to find you used to make one of the guidance, you know, you guys are looking at negative operating Lebris this year. I know it may be a little too early to kind of count. I talk about 20, 25, but you know, do you think positive return to positive operating Lebris next year is in the cards and kind of what are the factors, you know, rates, improvement, fixed income, you know, in momentum and fees, stuff like that that would kind of get you there soon, you know, a little bit more balance, she grows. As well.

Michael Edward Rose: Hey, good morning, everyone. Thanks for taking my questions.

Michael Edward Rose: Just if I use the midpoint of the guidance, you know, you guys are looking at negative operating leverage this year. I know it may be a little too early to

Speaker Change: kind of count or talk about 2025. But, you know, do you think positive or return to positive operating leverage next year is in the cards? And kind of what are the factors, you know, rates?

Speaker Change: Improvement in fixed income, you know, and momentum and fees, stuff like that, that would kind of get you there, assume, you know, a little bit more balance sheet growth as well. Thanks.

Michael Rose: Thanks.

Unknown Attendee: Michael, our goal is always to start with the intent as we put together a budget to have positive operating leverage to manage our efficiency ratio year over year. And so at this point, it's really hard to say what's going to happen with 2024. In the rate cut environment right now, the forward curve has two this year and three to four next year. We went into this year thinking four to six, and we might end up one to two.

Hope Dmuchowski: Michael, our goal is always to start with the intent as we put together a budget to have positive operating rates for leverage. To manage our efficiency ratio year over year, and so at this point, it's really hard to say what's going to happen with 20, 24. The rate cut environment right now, the forward curve has two this year and three to four next year. We went into this year thinking four to six, and we might end up one to two. So I expect 20, 25. We will work hard and we will send a budget that has positive operating leverage.

Speaker Change: Michael, our goal is always to start with the intent as we put together a budget to have a positive offering leverage.

Speaker Change: to manage our efficiency ratio year over year. And so at this point, it's really hard to say what's going to happen with 2024. The rate cut environment right now, the forward curve, has two this year and three to four next year.

Brian Jordan: So I expect 2025; we will work hard, and we will set a budget that has positive operating leverage, but I think that there's going to be a lot of uncertainty going through 2025 on deposit costs as well as money supply. We still have an inverted curve, so our counter cyclicals, specifically our capital markets fixed income fees, need to see that curve steepen, and that'll be a huge help for us. We can see that start to flatten out and steepen at the end of next year. Okay, great.

Speaker Change: We went into this year thinking four to six, and we might end up one to two, so I expect 2025 we will work hard and we will set a budget that has positive operating leverage, but think that there's going to be a lot of uncertainty going through 2025 on deposit costs as well as money supply.

Hope Dmuchowski: But think that there's going to be a lot of uncertainty going through 20, 25 on the positive costs, well as money supply. We still, you know, have an inverted curve; our counter cyclical, specifically our capital market fixing companies need to see that curve steepens, and that will be a huge help for us. We can see that start to flatten out steepen at the end of next year.

Speaker Change: We still, you know, have an inverted curve, so our counter-cyclicals, specifically our capital market fixed income fees, needs to see that curve steepen, and that'll be a huge help for us. We can see that start to flatten out, steepen at the end of next year.

Unknown Attendee: Maybe just as a follow-up, we do think about, you know, hopefully a better growth environment. For you, you've clearly benefited from some, you know, a little bit of momentum in mortgage warehouse just as rates have come down. You know, a little bit, and we're back to a normal seasonal market. But you know, CNI loan utilization is still relatively low. You've had some fund raising and multifamily and construction, things like that.

Brian Jordan: Okay, great. Maybe just as a follow up, as we do think about, you know, hopefully a better growth environment, you know, for you, you've clearly benefited from some, you know, a little bit, and we're back to a normal seasonal market. But, you know, the CNI loan utilization is still relatively low. You've had to fund up and multiply family and construction things like that. Just, Brian, can you discuss kind of the demand outlook and what you're hearing from your customers? Is it going to take a couple of rate cuts to see that utilization move up and see some better long growth.

Speaker Change: Okay, great. Maybe just as a follow up is we do think about, you know, hopefully a better growth environment.

Speaker Change: for you. You've clearly benefited from some, you know, a little bit of momentum in mortgage warehouse just as rates have come down.

Brian Jordan: Just Brian, can you discuss kind of the demand outlook and what you're hearing from your customers? Is it going to take a couple rate cuts to see that utilization move up and see some better loan growth? Thanks. Yeah, particularly.

Speaker Change: C&I loan utilization is still relatively low, you've had some fund ups in multi-family and construction, things like that.

Speaker Change: Just, Brian , can you discuss kind of the demand outlook and what you're hearing from your customers? Is it going to take a couple rate cuts to see that utilization move up and see some better loan growth? Thanks.

Brian Jordan: Thanks.

Brian Jordan: Yeah, particularly, some back up to the first question in a macro sense to the extent that the Fed is reducing rate. We think, on the whole, that will help our counter-cyclical businesses. And as Hope said, philosophically, we start with always trying to drive positive operating levers. And we have these counter-cyclical businesses. In particular, I think our mortgage businesses will be helped as rates set. And the yield curve reset, and the yield curve starts to normalize. Particularly, if, if and when it starts to drive refinancing activity, which is likely to curve, the curve is shorting comes down and adjust alarms become more affordable.

Brian Jordan: So back up to the first question, in a macro sense, to the extent that the Fed is reducing rates, we think, on the whole, that will help our counter-cyclical businesses. And, as Hope said, philosophically, we start by always trying to drive positive operating leverage, and we have these counter-cyclical businesses. In particular, I think our mortgage businesses will be helped as rates set and the yield curve resets, and the yield curve starts to normalize, particularly if and when it starts to drive refinancing activity, which is likely to occur as the short end comes down and adjustable arms become more affordable. I think as we ended the quarter, something like 18, 19, or 20% of mortgage warehouse lending activity was actually refinanced. The rest was purchased with money a mortgage.

Brian: Yeah, particularly...

Brian: So back up to the first question.

Speaker Change: In a macro sense, to the extent that the Fed is reducing rates, we think on the whole that will help our counter-cyclical businesses.

Hope: And as Hope said, philosophically, we start with always trying to drive positive operating leverage.

Hope: And we have these counter-cyclical businesses. In particular, I think our mortgage businesses will be helped as rates set and the yield curve reset and the yield curve starts to normalize, particularly

Hope: If and when it starts to drive refinancing activity, which is likely to occur as the short end comes down and adjustable arms become.

Brian Jordan: I think as we ended the quarter, something like 18, 19, 20% of mortgage warehouse lending activity was actually the revenue refinance. The rest was purchased money mortgage. That tends to be more balanced over time. So, to that point, I think you can see a significant pickup in mortgage warehouse lending. And I'll likely that you'll see a pickup in mortgage lending as the rate curve begins to normalize. Broadly speaking, loan demand is more tepid than we would have thought at this point in the cycle. People are generally cautious about investing. I think the, you know, the twin mountains of change out there.

Hope: I think as we ended the quarter, something like 18, 19, 20% of mortgage warehouse

Hope: Lending activity was actually refinanced. The rest was purchased money mortgage

Brian Jordan: That tends to be more balanced over time. To that point, I think you could see a significant pickup in mortgage warehouse lending. I think, in all likelihood, you'll see a pickup in mortgage lending as the rate curve begins to normalize. Broadly speaking, loan demand is more tepid than we would have thought at this point in the cycle. People are generally cautious about investing.

Hope: That tends to be more balanced over time. So to that point, I think you can see a significant pickup in mortgage warehouse lending, and I think in all likelihood, you'll see a pickup in mortgage lending as the rate curve begins to normalize.

Hope: Broadly speaking,

Hope: Loan demand is more tepid.

Hope: then we would have thought at this point in the cycle. People are generally cautious about investing. I think the twin

Brian Jordan: I think the twin mountains of change out there, what the Fed is going to do, and what's going to happen in the presidential and congressional elections, and what that means in terms of economic policy, because there is a lot of divergence between where our two presidential candidates stand. So at the end of the day, people are a little more tepid, but I think as rates begin to fall, I think people will become more optimistic both on a consumer level, particularly in the mortgage space, as well as in the commercial lending space. Thanks, I appreciate you taking the time to answer my questions.

Brian Jordan: What is the fig on doing? What's going to happen in the presidential and congressional elections? And what does that mean? In terms of economic policy, because there is a lot of divergence between where our two presidential candidates are. So at the end of the day, people are a little more tepid. But I think as rates begin to fall, I think people will become more optimistic, both on a consumer level, particularly in the mortgage space, as well as in the commercial lending spaces. Thanks. I appreciate that you are taking my question.

Hope: mountains of change out there. What is the Fed going to do and what's going to happen in the in the presidential and congressional elections and what does that mean?

Hope: in terms of economic policy because they

Hope: There is a lot of divergence between where our two presidential candidates are. So at the end of the day, people are a little more tepid, but I think as rates begin to fall, I think people will become more optimistic, both on a consumer level, particularly in the mortgage space.

Hope: as well as in the commercial lending spaces.

Unknown Attendee: Sure. Thank you.

Speaker Change: Thanks, I appreciate you taking my questions.

Stephen Alexopoulos: Our next question comes from Stephen Alexopoulos of JP Morgan. Steve, in your line. Good morning. Hi, good morning.

Speaker Change: Sure.

Unknown Attendee: Sure. Thank you. Our next question comes from Steven Alexopoulos of J.P. Morgan. Steve, in your line of fire, good morning. Hi, good morning.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Steven Alexopoulos of J.P. Morgan.

Unknown Attendee: This is Anthony Elian on first. I'm following up on the question on loan growth from Michael. So your updated NII outlook assumes a relatively flat balance sheet in the back half of the year. Do you just talk about the drivers of the slowdown in loan growth you expect following a pretty solid quarter you saw in the second quarter? I know you mentioned CRE fund-ups. Hi Anthony, this is Hope.

Anthony Olyan: This is Anthony Olyan on First Eve. Just to follow up on the question on Longroth from Michael. So you're updated and I outlook as soon as a relatively flat balance sheet in the back half of the year. Do you just talk about the drivers of the slowdown in Longroth? You expect following a pretty solid quarter you saw on the second quarter. I know you mentioned CRE fund ups were slowing.

Speaker Change: Steve, your line is now open.

Speaker Change: Hi, good morning. This is Anthony Elian on First Eve.

Speaker Change: Just to follow up on the question on Long Road from Michael

Speaker Change: So your updated NII Outlook assumes a relatively flat balance sheet in the back half of the year.

Speaker Change: Do you just talk about the drivers of the slowdown in long growth you expect following a pretty solid core you saw in...

Hope Dmuchowski: One thing that we've got that you need to look at is the seasonality of mortgage warehouse. So about two-thirds of the, or half the increase, a little bit more, quarter over quarter on average is mortgage warehouse, which seasonally increases in Q2 and Q3 during the home buying season and then kind of significantly tails off in Q4 and Q1. As a part of that, it is just the normal increase we have in loan growth.

Hope Dmuchowski: Hi, Anthony. This is one thing that we've got that you need to look at is the seasonality of mortgage warehouse. So about two thirds of the half the increase a little bit more quarter over quarter on average is mortgage warehouse, which seasonally increases in two quarters. There's two in quarter three in during the home bank season and then kind of significantly tails off in Q4 and Q1. And the part of that is just the normal increase we have in Longroth. We are reaching the end of, or near the end of the large fund ups we had in Longroth.

Speaker Change: Hi Anthony, this is Hope. One thing that we've got that you need to look at is the seasonality of mortgage warehouse. So about two-thirds of the, or half the increase, a little bit more, quarter over quarter on average is mortgage warehouse, which seasonally increases in two-thirds.

Anthony Albert Elian: Q4 and Q1.

Speaker Change: As a part of that is just the normal increase we have in loan growth. We are reaching the end of or near the end of the large fund ups we had from loans we originated the last two years in the pro CRE market. We're not really seeing a whole lot of originations in CRE as we continue, so we're kind of going to tread water in the back half of the year as we see paydowns, cash flows come in with what new lending will be.

Hope Dmuchowski: We are reaching the end of or near the end of the large fund-ups we had from loans we originated the last two years in the pro CRE market. We're not really seeing a whole lot of originations in CRE as we continue. So we're kind of going to tread water in the back half of the year as we see paydowns and cash flows come in with what new lending will be. Anthony, this is Susan. I... Hey, Anthony, let me add a couple of things.

Hope Dmuchowski: We originally in the last two years in the pro-create market. We're not really seeing a whole lot of originations in CRE as we continue. So we're kind of going to tread water in the back half of the year as we see paydown cash flows come in with what new lending will be.

Brian Jordan: Anthony, this is the season. I do think as we go into 2025, and I know Michael's question earlier about it, if there's a better growth environment, if you get some rate cuts and the outlooks are better, I do think some of our specifically see an eye client who may have put capital projects on the back burner. We'll move those back to the front burner, and you'll see some opportunities with clients who may want to reengage in some lending activity, and we stand ready to to work with those clients, assuming they meet our risk profile. Thank you.

Brian Jordan: I do think as we go in, though, into 2025, And I know Michael's question earlier about if there's a better growth environment. If you get Page PAGE of NUMPAGES www.verbalink.com, Capital Projects on the back burner. We'll move those back to the front burner.

Susan: Anthony, this is Susan, I...

Susan: Hey Anthony, let me add a couple of things. I do think as we as we go in though into 2025

Speaker Change: and I know Michael's question earlier about if there's a better growth environment if you get some rate cuts and the outlooks are better I do think some of our specifically C&I clients who may have put

Speaker Change: Capital Projects on the back burner. We'll move those back to the front burner and you'll see some opportunities with...

Brian Jordan: And you'll see some opportunities with clients who may want to re-engage in some lending activity, and we stand ready to work with those clients, as long as they meet our risk profile. Thank you. And then, my follow-up.

Speaker Change: with clients who may want to re-engage in some lending activity, and we stand ready to work with those clients, assuming they meet our risk profile.

Hope Dmuchowski: Can you provide more color on the increase in outside services, an attribute in the press release tied to deposit marketing campaigns and Third-Party Services for Strategic Investments. I guess, how much of the $10 million increase you saw sequentially? WikiVidi.com. Marketing is a seasonal spend that, you know, at year end and going into the new year, marketing tends not to be very effective, especially with checking accounts.

Unknown Attendee: And then my follow up.

Unknown Attendee: Can you provide more color on the increase in outside services? Are you tribute in the press release? We don't break it down by property type, but there is a decree; coverage is outlined overall in the materials that were provided. Okay, sounds good. That sounds familiar. Thanks for all the color. Thank you.

Speaker Change: Thank you. And then my follow-up, can you provide more color on the increase in outside services attributed in the press release? This is tied to deposit marketing campaigns and third-party services for strategic investments. I guess how much of the $10 million increase you saw sequentially is sticky versus one-time in nature? Thank you.

Speaker Change: Marketing is a seasonal spend. At year-end and going into the new year, marketing tends not to be very effective, especially with checking accounts.

Hope Dmuchowski: It just doesn't tend to be a seasonal time where we see a lot of movement between banks. And so Q2 and Q3 are typically when we see more effective direct marketing to clients. And so I think, you know, I wouldn't say sticky as in year over year, as there is some seasonality there.

Speaker Change: It just doesn't tend to be a seasonal time where we see a lot of movement between banks. And so Q2 and Q3 are typically where we see more effective direct-to-client marketing.

Speaker Change: And so I think, you know, I wouldn't say sticky as in year over year, as there is some seasonality there. We did mention in multiple previous calls that our technology investments were a little slower to get started at the end of last year and this year when

Speaker Change: [inaudible]

Hope Dmuchowski: We did mention in multiple previous calls that our technology investments were a little slower to get started at the end of last year and this year than we had originally anticipated. So I think that the technology spend is kind of, you know, hitting its run right now, and marketing being seasonal throughout the year, typical in past years as well. If you look back to last year's earnings, you'll see the same type of seasonality increase in marketing in Q2 and towards the end of Q3. Thank you, Anthony. The next question comes from Ebrahim Poonawala. Oh, thank America. Ebrahim, your line is now open. Thank you and good morning.

Speaker Change: Thank you.

Anthony Albert Elian: Thank you, Anthony.

Speaker Change: Next question comes from Ebrahim Poonawala.

Ebrahim Huseini Poonawala: of Bank of America. Ebrahim, your line is now open.

Unknown Attendee: I guess maybe the first question is that around Brian and Hope on fixed income. I think you said $40 million seems like a good run rate for the back half, from what I can recall just in prior cycles, rate cuts. It is counter-cyclical.

Ebrahim Huseini Poonawala: Thank you and good morning. I guess maybe first question is around Brian and Hope. On fixed income, I think you said the $40 million seems like a good run rate for the back half.

Speaker Change: from what I can recall, just in prior cycles, rate cuts.

Brian Jordan: You should see a lot more bond book restructurings at your clients, etc. So I would assume that if the September rate cut outlook forms up, and the steepening of the yield curve should push that to pretty strong levels. That is my understanding. So am I missing something here, or are you just being conservative when you talk about the cap markets? Yeah, I'll point you to a very pretty graph that Natalie put in the appendix. It sort of shows fed funds and what it does to average daily revenue. Your instincts are right.

Speaker Change: It is counter-cyclical, you should see a lot more bond book restructurings at your clients, etc. So I would assume that if the September rate cut outlook firms up, and the steepening of the yield curve should push

Speaker Change: that to pretty strong levels would be my understanding. So am I missing something there? Or are you just being conservative when you talk about the cap markets outlook?

Speaker Change: Yeah, I'll point you to, there's a very pretty graph that Natalie put in the appendix that sort of shows Fed Funds and what it does to average daily revenues.

Brian Jordan: To the extent that rates are moving down, you're likely to see an impact on average daily revenue being up. What we've talked about there is a more steady environment. We're not making any broad assumptions about the Fed making significant rate cuts, basically following the forward curve. But on the whole, if the Fed is more aggressive in moving rates down, it's likely to be better than we've talked about for our fixed income business. I got it.

Speaker Change: Your instincts are right, to the extent that rates are moving down.

Speaker Change: You're likely to see an impact on average daily revenue being up. What we've talked about there is a more steady environment. We're not making any broad assumptions about the Fed making significant rate cuts.

Speaker Change: Hope Flanders, Hope Dmuchowski

Brian Jordan: And I guess the other side of the other counter-cyclical business around mortgage warehouse. If we get Fed cuts but mortgage rates remain around 7%, is that enough, based on what you're hearing from your mortgage warehouse clients, to trigger activity and pick up imbalances? Or is there a level of rates on the mortgage front that needs to...

Speaker Change: Got it. And I guess the other side of the other counter-cyclical business around mortgage warehouse.

Speaker Change: If we get Fed cuts, but mortgage rates remain around 7%, is that enough based on what you're hearing from your mortgage warehouse clients to trigger activity and pick up imbalances? Or is there a level of rates on the mortgage front that needs to...

Brian Jordan: occur to get that business sort of momentum going. Yeah, I think you've got to see mortgage rates drop more significantly to see any real pickup and refinance activity. I think you'll still continue to see a steady flow of purchase activity, but I think to see anything meaningful in terms of refinance activity, you're going to see rates drop more than that. We have had an opportunity to pick up a little bit of share by increasing lines, and we think that that will help maintain some stability and balances there, and we're optimistic that that's a business that's going to pick up nicely as the rate I got it.

Speaker Change: occur to get that business sort of momentum going.

Speaker Change: Yeah, I think you've got to see mortgage rates drop more significantly to see any real pickup and refinance activity.

Speaker Change: I think you'll still continue to see.

Speaker Change: A steady flow of purchase.

Speaker Change: activity, but I think to see anything meaningful in terms of refinance activity, you're going to see rates drop more than that.

Speaker Change: We have had an opportunity to pick up a little bit of share by increasing lines.

Speaker Change: and we think that that will help maintain some stability and balances there and we're optimistic that that's a business that's going to pick up nicely as the rate environment does normalize and get a normally shaped yield curve.

Brian Jordan: And one last question, if I may. What you're mentioning about deposit pricing sounds a lot more, I think, circumspect relative to what I've heard from the banks so far this earnings season. So one, I think the minus is the low deposit ratio that you're managing to, which is causing First Horizon to be a lot more active in bringing in deposits or retaining deposits. And, And yeah, and am I overeating

Speaker Change: Got it. And one last question, if I may.

Speaker Change: You're mentioning on deposit pricing sounds a lot more, I think, circumspect relative to what I've heard from the banks so far this earnings season.

Speaker Change: So one, I think the minus is the load-to-deposit ratio that you're managing, two, which is causing First Horizon to be a lot more active in bringing in deposits or retaining deposits, and

Brian Jordan: Because what we're hearing from most banks is some cooling in deposit pricing, things repricing lower from three, six, nine months ago. So just want to make sure I'm not missing anything. Yeah, I think I have a couple of thoughts. One is we are attentive to our loan to deposit ratio, but that's not driving the deposit pricing strategy as much as it is protecting and defending existing customer relationships. So we're thinking about it from the relationship side of things.

Speaker Change: and yeah and am I over eating it because what we're hearing from most banks is some cooling in deposit pricing things repricing lower from three six nine months ago so just want to make sure I'm not missing anything

Speaker Change: Yeah, I think a couple of thoughts. One is we are attentive to our loan to deposit ratio, but that's not...

Speaker Change: driving the deposit pricing strategy as much as it is protecting, defending existing customer relationships. So we're thinking about it from.

Brian Jordan: And that's what's driving the activity. If you look underneath the covers, I quoted some numbers about existing customer relationships that we up-priced; we also had a significant balance of customers where we were able to move the rate back. It's just, on the whole, because of competitive dynamics in certain sectors. We saw a net aggregate increase in deposit costs, but it was really driven by our desire to defend customer relationships.

Speaker Change: from a relationship side of things.

Speaker Change: and that's what's driving the activity. If you look underneath the covers, I quoted some numbers about existing customer relationships that we up-priced. We also had a significant balance.

Speaker Change: of customers where we were able to move the rate back. It's just on the whole.

Speaker Change: because of competitive dynamics in certain sectors.

Speaker Change: We saw a net aggregate increase in deposit costs, but it was really driven by our desire to defend customer relationship.

Brian Jordan: Clearly, as I said, we will pay attention to our loan to deposit ratio, but we think we have the flexibility in our balance sheet to support it attractively. Attractively priced, well-structured credit, and through any cycle. So it's not really constraining our ability in the near term, not to say that that won't change, but in the near term, we feel like we're well-positioned to fund customer relationships that make sense for our balance sheet. Ebrahim, there are two things I'll add to that.

Speaker Change: Clearly, as I said, we will pay attention to our loan-to-deposit ratio, but we think we have the flexibility in our balance sheet to support attractively, it's easy for me to say.

Speaker Change: Attractively priced, well-structured credit, and through any cycle, so it's not really constraining our ability in the near term, not to say that that won't change, but in the near term we feel like we're well positioned to fund customer relationships that make sense for our balance sheet.

Hope Dmuchowski: We are a Southeast regional bank, and I think everyone, with the exception of one that's been released, is a national bank, but most everybody is coming, talking about the Southeast being their target for growth, and so we are competing differently than the national banks. When you look at multiple of our competitors, and they talk about their growth opportunities, they're talking about the Southeast. They're announcing new branches and hiring new teams, and so I think the Southeast allows us to grow more than the average on loans, but it's also become more competitive in both the loan and deposit sizes as more banks are trying to increase their footprint or enter here.

Abraham: Ebrahim, there's two things I'll add to that. We are a Southeast regional bank, and I think everyone, with the exception of one that's released, is a national bank, but most everybody is coming, talking about the Southeast being their target for growth.

Speaker Change: Hope Flanders, Hope Dmuchowski

Speaker Change: When you look at multiple of our competitors and they talk about their growth opportunities, they're talking about the southeast, they're announcing new branches.

Speaker Change: They're announcing hiring new teams, and so I think the Southeast allows us to grow more than the average on loans, but it's also become more competitive in both the loan and deposit side as more banks are trying to increase their footprint or enter here.

Hope Dmuchowski: The second, on the loan to deposit ratio, as mortgage warehouse funds increase in Q2 and Q3, we always see that drift upward. As I've mentioned before, we may have to go deeper into brokered or wholesale during that time, but being a 300 basis point yielding asset, I'm okay with that match funding and that loan to deposit ratio going up during the two quarters of their heightened line increases. 300 basis point spread. Good catch, Brian.

Speaker Change: The second, on the loan-to-deposit ratio, as mortgage warehouse funds up in Q2 and Q3, we always see that drift up. As I've mentioned before, we may have to go deeper into brokered or wholesale during that time, but being a 300 basis point yielding asset, I'm okay with that match funding and that loan-to-deposit ratio going up during the two quarters of their heightened line increase.

Speaker Change: 300 basis points spread. Sorry, 300 basis points spread. Good catch, Brian .

Brian Jordan: All right. Thanks a lot for taking my question. Thanks, Ebrahim. Our next question comes from Chris McGratty of KBW. Chris, your line is not working.

Brian: All good. Thanks a lot for taking my questions.

Brian: Thanks, Ebrahim.

Speaker Change: Our next question comes from Chris McGratty of KBW.

Unknown Attendee: Oh, great. Good morning. I hope you give me a ride.

Hope Dmuchowski: In terms of the spot margin, do you have that as of June 30? I'm trying to think about exit exit velocity as you go into next year with what you're doing with the deposit. We didn't have the spot margin, but we do have on slide nine the spot rate for the quarter, which was 3.35. 335 for June.

Christopher Edward McGratty: Chris, your line is not working. Okay, morning.

Christopher Edward McGratty: Good morning. In terms of the spot margin, do you have that as of June 30th? I'm trying to think about exit velocity as you go into next year with what you're doing with the deposits.

Speaker Change: We didn't have spot margin, but we do have on slide 9 the spot rate for the quarter, which was 3.35.

Unknown Attendee: Okay. Yeah. Great. And that's on slide nine.

Speaker Change: 335 for June. Okay. Yeah. Great.

Unknown Attendee: Great. I must have missed that. Thank you. And then, Brian, on capital, you're at the 11. You talked about, you know, clarity on regulation and clarity on the economy being the keys to going down to 10, 10 and a half. Do you think it's a possibility that you could have that clarity in the back half of the year? Is that probably a 20, 25?

Brian: Great. I must have missed that. Thank you. And then, Brian , on capital, you're at the 11. You talked about, you know, clarity on regulation and clarity on the economy being the keys to going down to 10, 10 and a half.

Speaker Change: Do you think it's a possibility that you could have that clarity in the back half of the year, or is that probably a 2025 event?

Brian Jordan: to take down the Capitol. Yeah, I still think it's a 2025 question. We're not planning on changing our thinking about that in the near term. We want to see the path of rates and what the economy is doing. And, like everybody else, we're hopeful that the Fed will create a soft landing for the economy. But we're prepared for something different than that. And until we see greater clarity, we don't plan to reevaluate that. That's perfect.

Brian: to take down the capital ratios.

Brian: Yeah, I still think it's a 20-25 question.

Speaker Change: We're not planning on changing our thinking about that in the near term. We want to see the path of rates and what the economy is doing.

Speaker Change: And as most everybody, we're hopeful that the Fed creates a soft landing for the economy, but we're prepared for something different than that, and until we see greater clarity, we don't plan to reevaluate that.

Speaker Change: That's perfect. Thank you.

Unknown Attendee: Our next question comes from Casey Haire of Jefferies. Casey, your line is now open. Great, thanks. Good morning, everyone.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Casey Haire of Jefferies. Casey, your line is now open.

Unknown Attendee: Morning. Follow up on NII. Any thoughts to using some of the capital towards a bond book restructure and improving the yield there? I know it's a small asset for you, but just wondering some updated thoughts there. Yeah, this is Brian Casey. The short answer is probably not.

Casey Haire: Great, thanks. Good morning, everyone. I want to follow up on NII. Any thoughts to using some of the capital towards a bond book restructure and improving the yield there? I know it's a small asset for you, but just wondering some updated thoughts there.

Brian Jordan: In our view, the restructuring of the bond portfolio really creates a lot of friction and doesn't really create anything other than a difference in the timing of earnings. That discount or AOCI mark is going to creep back into earnings or capital over time. It's unlikely that that's something that we evaluate just simply because it creates friction that doesn't create any economic value over time.

Casey Haire: Yeah, this is Brian Casey, the...

Speaker Change: The short answer is probably not.

Speaker Change: In our view, the restructuring of the bond portfolio really creates a lot of friction and doesn't really create anything other than a difference in the timing of earnings.

Speaker Change: or AOCI Mark is going to creep back to earnings.

Speaker Change: or Capital Overtime, and so.

Speaker Change: It's unlikely that that's something that we evaluate just simply because it creates friction that doesn't create a lot of economic, it doesn't create any economic value over time.

Brian Jordan: Gotcha. Okay. And then just just switching to credit quality. The NPL migration sounds like it was driven by CRA wanting to give any color on Product or Geography and What Structures. Yeah. Hey, Casey. This is Tom Hung.

Speaker Change: Gotcha okay and then just just switching to credit quality the MPL migration sounds like it was driven by CRA was wondering if you have any color on a product or geography and what's driving that

Unknown Attendee: It was predominantly driven by our pre-portfolio, in particular our office. What I would point to, though, is I think the performance is within the range of our expectations. I don't think there was anything that was surprising to us.

Speaker Change: Yeah, hey Casey, this is Tom Hung. It was predominantly driven by our Cree portfolio in particular office.

Speaker Change: What I would point to, though, is, you know, I think the performance is, you know, within the range of our expectations. I don't think there was anything that was surprising to us. This is really kind of just driven more by the higher for longer environment we're in, as well as macroeconomic.

Unknown Attendee: This is really just driven more by the longer environment we're in, as well as the macroeconomic environment. What I would point to is, within our Office Cree portfolio, we continue to believe we have strong client selection, and I think that'll certainly prove itself out in the long run. Just to give you some high-level information, 90% of our office portfolio, by square footage, is nine stories or less, and so I think that speaks to the profile of our office portfolio.

Speaker Change: Environment, what I would point to is

Speaker Change: You know, within our OfficeCree portfolio, we continue to, you know, believe we have strong client selection, and I think that'll certainly prove itself out in the long run.

Speaker Change: You know, just to kind of give you some high-level information.

Speaker Change: 90% of our office portfolio by square footage is nine stories or less. And so I think that speaks to kind of the profile of our office portfolio. In fact, we only have eight buildings out of 10 plus stories. And so I believe we're with the right

Unknown Attendee: In fact, we only have eight buildings out of 10-plus stories, and so I believe we're with the right projects, the right borrowers, and the right portions of office to have a good long-term outcome. Thank you. Thank you so much.

Speaker Change: Projects, the right borrowers, and the right portions of office to have a good long-term outcome.

Speaker Change: Thank you.

Unknown Attendee: Our next question comes from Ben Gerlinger of Citigroup. Ben, your line is now open. Good morning.

Speaker Change: Thank you so much. Our next question comes from Ben Gerlinger of Citigroup.

Spen: Spen, your line is now open.

Unknown Attendee: I was curious if we could talk a little bit about share purchase activity. I know that the CET-1, the 10, 10.5 is probably the outcome for the banks next year. Having a pretty good month so far. I was kind of curious how you guys think about the math and buyback, kind of taking into consideration too that that's a relative evaluation, but then also a... The total, the math, is a little bit different because it's Dr. Donov.

Speaker Change: Bon Appetit!

Benjamin Tyson Gerlinger: Good morning. I was curious if we could talk a little bit about share purchase activity. I know that the CET-1, the 10-10.5 is probably next year outcome.

Speaker Change: [inaudible]

Brian Jordan: I was just kind of curious, if you do continue to buy back, could we theoretically see another reauthorization this calendar year because you've used more than half a record? So I'm just kind of curious about your thoughts on overall share purchase activity. Yeah, the buyback activity. We are thoughtful about price and relative value and our expectations of long-term values. We think that even with the significant improvement in stock prices across the industry over the last few weeks, we think we're still at a relative discount, and opportunistically, we will continue to use capital to repurchase shares.

Speaker Change: That's a relative evaluation, but then also a total, the math is a little bit different because the stocks are down. I was just kind of curious if you do continue to buy back, could we theoretically see...

Speaker Change: Another reauthorization, this calendar year, because you've used more than half of ResEd, so I'm just kind of curious your thoughts on overall share purchase activity.

Speaker Change: Yeah, the buyback activity, we are thoughtful about price and relative value and

Speaker Change: At our expectations of long-term values, we think that even with the significant improvement in stock prices across the industry over the last few weeks,

Speaker Change: We think we're still at a relative discount and opportunistically we will continue to use capital to repurchase shares.

Brian Jordan: I don't know how to evaluate as we sit here today whether we would reauthorize a buyback this year or next. That's a board decision. We have plenty of capacity under the authorization that we have. It expires in January of this coming year, 2025.

Speaker Change: I don't know how to evaluate as we sit here today about whether we would reauthorize a buyback this year or next. That's a board decision. We have plenty of capacity under the authorization that we have that expires in January .

Brian Jordan: And so we will evaluate that as appropriate. But we do think maintaining excess capital when we can return it to shareholders through a buyback is probably more appropriate to put it in the hands of our shareholders. And so we will continue to be opportunistic. We'll look at relative valuations, and we'll make decisions later on about whether we need to increase our authorization.

Speaker Change: of this coming year, 2025. And so we will evaluate that as appropriate. But we do think...

Speaker Change: Maintaining Excess Capital

Speaker Change: When we can return it to shareholders through a buyback is probably...

Speaker Change: It's more appropriate that we put it in the hands of our shareholders. And so we will continue to be opportunistic. We'll look at relative valuations and we'll make decisions later on about whether we need to increase our authorization or not.

Hope Dmuchowski: That's helpful. And then the hope I know you said, expenses, your prepared remarks, I think you said flat to down in the second half of this year. It's kind of curious. There's always leverage you can pull, especially with a pretty sized company. I'm just kind of curious about how you get down relative to class.

Speaker Change: Got it. That's helpful. And then the HOPE, I know you said expenses, you know, prepare the marks. I think you said flat to down in the second half of this year. It's kind of curious.

Speaker Change: There's always leverage in coal, especially with the pretty sizable franchise that you guys have, but is that pushing anything out into 2025 that could be done today? I'm just kind of curious on how you get down relative to class.

Hope Dmuchowski: Yeah, Ben, good question. We do expect it to be flat to down in the second half of the year. Part of that is in the, you know, as we've spoken about before, our bond business, our FHA financial business, had a really good Q1, and we had a high revenue quarter and a high expense quarter. We expect that to come back down. We've had the TD retention, the first step down in the back half of this year; we think we've hit the stride of our technology investments.

Speaker Change: Ben, good question. We do expect to be flat to down in the second half of the year.

Speaker Change: Part of that is, you know, as we've spoken about before, our bond business, our FHS Financial, had a really good Q1, and we had a high revenue quarter and a high expense quarter, and we expect that to come back down. We've had the TD retention the first step down in the back half of this year, and we think we've hit the stride of our technology investments, and so we are

Speaker Change: Looking at operational efficiencies, we have in our adjustments a restructuring cost as we

Hope Dmuchowski: And so we are looking at operational efficiencies. We have in our adjustments a restructuring cost as we continue to look at ways to reduce our costs with a low growth environment. How much headcount do you need? Were you previously spending money with third parties that you don't need anymore?

Speaker Change: Look at ways to reduce our costs with a low-growth environment. How much headcount do you need? Were you previously spending money with third parties that you don't need to anymore? The environment has significantly shifted over the last year, and we're looking at every opportunity we can to be as efficient as we can and make sure that we have the... Brian and I have talked about it before. We're very focused on our efficiency ratio and not letting that grow over time.

Hope Dmuchowski: The environment has significantly shifted over the last year, and we're looking at every opportunity we can to be as efficient as we can and make sure that we have the, you know, Brian and I have talked about before; we're very focused on our efficiency ratio and not letting that grow over time. Okay, that's helpful. But there's another being pushed that I'm just trying to think about the hill to climb next year. It's not like you're, [inaudible] Okay, thank you.

Speaker Change: Okay, that's helpful. But there's another being pushed that, so I'm just trying to think about the hill to climb next year. It's not like you're intentionally kind of making it a little bit bigger by managing for that, correct?

Speaker Change: Correct.

Unknown Attendee: Thank you. Thank you, Ben. As a reminder, if you'd like to ask a question, please press star followed by one on your telephone keypad. To remove yourself from that question queue, please press star followed by two.

Speaker Change: Okay, thank you.

Speaker Change: Thank you.

Speaker Change #100: Thank you, Ben. As a reminder, if you'd like to ask a question, please press star followed by one on your telephone keypad. To remove yourself from that question queue, please press star followed by two. Our next question comes from Samuel Varga of EBS.

Unknown Attendee: Our next question comes from Samuel Varga of EBS. Samuel E. Ehrlein is now open. Hey, good morning. Good morning. I wanted to just go back to the NII guide for one second.

Speaker Change #101: Samuel E. Ehrlein is now open.

Samuel Varga: Hey, good morning.

Samuel Varga: Good morning.

Hope Dmuchowski: You assume a slightest balance sheet, and obviously, with the long growth year to date, you're kind of, close to the middle of the guide, you said, and obviously, seasonality and the LMC vertical aren't going to help for the second half of the year. So I'm just trying to ask, is there any sort of mixed-shift assumption within that flash balance sheet, or should we think that loans and securities and cash are all sort of staying relatively stable for the second half of the year?

Samuel Varga: I wanted to just go back to the NII guide for one second. You assume a slightest balance sheet, and obviously with the long growth year to date, you're kind of...

Samuel Varga: Close to the middle of the of the guide you said and obviously seasonality and the the LMC vertical isn't going to help for the second half of the year so I'm just trying to ask

Speaker Change #103: Is there any sort of mixed-shift assumption within that flash balance sheet, or should we think that loans and securities and cash are all sort of staying relatively set for the second half of the year?

Hope Dmuchowski: Sam, thanks for the question. You know, when you change your guidance, you run a whole set of scenarios to hopefully only change it once in a year. And so the answer is zero, the flat to down 2% takes into account all of the things that could happen, an increasing deposit cost, a flat balance sheet, a slightly up, slightly down balance sheet.

Sam: Sam, thanks for the question.

Speaker Change #105: When you change your guidance, you run a whole set of scenarios to hopefully only change it once in the year, and so the answer is the zero, the flat to down 2% takes into account all of the things that could happen, an increasing deposit cost, a flat balance sheet, a slightly up, slightly down balance sheet, and we feel that whatever's going to happen in the back half of the year, we will hit the new guidance between flat and down.

Hope Dmuchowski: And we feel that whatever's going to happen in the back half of the year, we will hit the new guidance between flat and down 2%. Okay, understood. And then just on the deposit side, thinking about late this year, probably 2025 on the sort of non-interest-bearing front, I wanted to get a sense for, I guess, where you would expect that growth to return from. Is it the retail franchise? Is it the commercial franchise? And what would have to happen for your commercial clients to actually increase the dollars they hold in those NIB accounts? I think the answer is both.

Speaker Change #106: Okay, understood. Thank you. And then just on the deposit side, thinking about late this year, probably 2025 on the sort of the non-interest bearing front, I wanted to get a sense for, I guess, where would you expect that growth to return from? Is it the retail franchise? Is it the commercial franchise? And what would have to happen for your

Speaker Change #107: Commercial Clients to actually increase the dollars they hold in those NIB accounts.

Hope Dmuchowski: We've gotten front-footed on a checking account marketing campaign. We haven't done that in years, really, since the MOE, and we saw a lot of success in the second quarter, and so we hope that that will continue, and we'll see stabilization in the non-interest-bearing. I'll also mention, as we look at that, there is a small amount of non-interest-bearing but also interest-bearing when we talk about commercial clients. We've talked a lot about our technology investments.

Speaker Change #108: I think the answer is both. We've gotten front-footed on a checking account marketing campaign. We haven't done that in years, really, since the MOE.

Speaker Change #109: and we saw a lot of success in the second quarter and so we hope that that will continue and we'll see stabilization in the non-interest bearing.

Speaker Change #110: I'll also mention, as we look at that, there is a small amount of non-interest-bearing but also interest-bearing when we talk about the commercial client. We've talked a lot about our technology investments. One of the biggest investments we're making is converting and upgrading our treasury management system. And on the back half of that...

Hope Dmuchowski: One of the biggest investments we're making is converting and upgrading our treasury management system, and on the back half of that, we expect to complete that conversion in Q3 and some into Q4. We do expect that we'll be able to attract and retain clients in deep relationships and attract new clients with our new and improved treasury management system. Yeah, I think the opportunities for growth exist on both sides. And in a Fed shrinking its balance sheet world, that money is ultimately coming out of customer accounts too. And if you look at customer accounts, they've been declining over the last several months and really going back a year or so.

Speaker Change #110: We expect to complete that conversion in Q3 and some into Q4. We do expect that we'll be able to attract and retain clients and deepen relations and attract new clients with our new and improved treasury management system.

Speaker Change #111: Yeah, I think the opportunities for growth exist on both sides.

Speaker Change #112: Feds shrinking its balance sheet world that money is ultimately coming out of customer accounts, too and if you look at customer accounts, they've been declining over the last several months and

Brian Jordan: But we think there are opportunities, as Hope said, to grow both on the consumer side; we've got a checking offer that is showing very good signs early in the process. We think the completion of the Treasury integration effort will be very significant in terms of our ability to continue to grow and to market that product. So we're optimistic on both sides. And as we've said a number of times, we're in a very attractive place. It's competitive, but it's a very attractive footprint. And we think that gives us plenty of opportunity to invest in some of these higher growth markets where we are. In many cases, smaller shares.

Speaker Change #112: really going back a year or so. But we think there are opportunities, as Hope said, to grow both on the consumer side, we've got a checking offer that is showing very good signs early in the process.

Hope: We think the completion of the Treasury integration effort will be very significant.

Hope: in terms of our ability to continue to grow and to market that product. So we're optimistic on both sides and

Hope: As we've said a number of times, we're in a very attractive footprint. It's competitive, but it's a very attractive footprint, and we think that gives us plenty of opportunity to invest in some of these higher growth markets where we have

Hope: In many cases, smaller shares, and so we're optimistic about our ability to invest and grow across this 12-state footprint.

Speaker Change #113: Got it. Thanks for all the call. I appreciate it.

Brian Jordan: And so we're optimistic about our ability to invest and grow across this 12-state footprint. Got it. Thanks for all the calls. I appreciate it. Thank you. Our next question comes from Christopher Marinac of Jannie Montgomery Scott. Christopher, your line is now open. Thanks. Good morning.

Speaker Change #114: Thank you.

Christopher William Marinac: Our next question comes from Christopher Marinac of Janney Montgomery Scott.

Unknown Attendee: I had a question for you on the, I had a question on the CRE reserves and was curious if there's flexibility there now that those rose in the quarter, and given that the lease renewals are very limited, as you had outlined in the slide. So your question is, if there's, can you repeat the question, Chris? Is there flexibility on your reserve? Can your reserve for CRE grow less than we just saw just because you've got limited renewals and sort of address what you needed to this last quarter? I do believe that, especially as rates have continued to... Transcripts provided by Transcription Outsourcing, LLC, on Commercial Real Estate, and actually C&I. Everybody.

Speaker Change #115: Christopher, your line is now open.

Christopher William Marinac: Thanks, good morning. Susan, I had a question for you on the CRE reserves and was curious if there's flexibility there now that those rose in the quarter and given that the lease renewals are very limited as you had outlined in the slides.

Susan: So your question is if there's, can you

Speaker Change #117: Is there flexibility on your reserve? Can your reserve for CRE grow less than we just saw just because you've got limited renewals and sort of address what you needed to this last quarter?

Speaker Change #120: Yeah, I do believe that, especially as rates and rates of continued

Speaker Change #119: Well, they've been stable. If they come down, we're going to see, I think, a good bit of relief.

Unknown Attendee: And so we will see some healing there. I also think that we've been very proactive. And on the conservative side, as we think about grading, and we've done that for. Transcript by Transcription Outsourcing, LLC. If things moderate, I absolutely think there could be.

Speaker Change #118: on Commercial Real Estate, and actually C&I, everybody. And so we will see some healing there. I also think that we've been very proactive.

Speaker Change #118: And on the conservative side, as we think about grading, and we've done that for

Speaker Change #118: for really the duration. And so as we've built some reserves over time, I believe we're adequately reserved at this time. At this time we don't expect to build and are there opportunities to release? If things moderate, I absolutely think there could be.

Unknown Attendee: Great, thanks for that. And then I just had a question for Hope as it pertains to the technology spend. I know you mentioned that it was sort of slow on the pace, but as it accelerates, is it going to be treasury management things like you mentioned, or will it be other initiatives back towards the core at the bank? Early on, we have a three-year plan. And early on, a lot of it was kind of what we're calling "run the bank."

Hope: Great, thanks for that. And then just had a question for Hope as it pertains to the technology spend. I know you mentioned that it was sort of slow on the pace, but as it accelerates, is it gonna be treasury management things like you mentioned, or will it be other initiatives back towards the core at the bank?

Hope Dmuchowski: It's end-of-life systems like Treasury Management and GL, things that we had put on pause following the MOE integration and following the 15-month dating and courting we had that didn't end up working out. Now, as we're trying to get most of that run the bank is getting through, we are doing more change in the bank, more client-facing in the back half of our three-year investment strategy. And next year, we'll be talking about, you know, this year, we're talking about the big two, which are GL and Treasury Management. And next year, we'll share with you some of the big ones we're doing as well. Great. Thanks very much, Hope. I appreciate the time. Thank you, Chris.

Hope: Early on, we have a three-year plan, and early on, a lot of it was kind of what we're calling run the bank. It's end-of-life systems like Treasury Management and GL, things that we had put on pause.

Speaker Change #124: Following the MOE integration and following...

Speaker Change #121: The 15-month dating and courting we had that didn't end up working out. Now, as we're trying to get most of that from the bank is getting through, we are doing more change the bank, more client-facing in the back half of our three-year investment strategy. Next year, we'll be talking about, this year we're talking about the big two, which are GL, Treasury Management, and next year we'll share with you some of the big ones we're doing as well.

Speaker Change #121: Great. Thanks very much, Hope. Appreciate the time.

Hope Dmuchowski: As a final reminder, if you'd like to ask a question, please press star followed by one on your telephone keypad now. Our next question comes from Gerard Shaw of Barclays. Chair, your line is now open. Hi, this is John Rowe. I'm on behalf of Jared.

Christopher Edward McGratty: Thanks, Chris.

Speaker Change #122: As a final reminder, if you'd like to ask a question, please press star followed by one on your telephone keypad now.

Speaker Change #122: Our next question comes from Gerard Shaw of Barclays.

Speaker Change #122: Jarrett, your line is now open.

Unknown Attendee: I guess just if we could get a little more color on migration in the NPLs and the office portfolio, what what portion of the increase in NPLs was from offices in particular, and has there been any differentiation across geographies just on overall performance within the office portfolio? Hey, John. This is Tom Hamm.

Speaker Change #122: Hi, this is John Rowe. I'm for Jared.

John Rowe: I guess just if we could get a little more color on the migration into NTLs and the office portfolio, I guess what what portion of the increase

John Rowe: NPLs was from office in particular. And has there been any differentiation across geographies just on overall performance within the office portfolio?

Unknown Attendee: A large portion of the NPL increase is driven by office space, but I think that's probably not surprising. But you know, as I mentioned, I believe it's within the range of expectations that we had, based on what we based on the information we have about kind of the broad environment and the rate environment that we're in. I would reiterate that I believe we continue to show good underwriting and client selection. And so even as we're going into these deals, we certainly always stress test the portfolio for potential rises in interest rates, inflation, change in vacancy rates, and so on.

John Rowe: Hey John , this is Tom Hamm.

Tom Hamm: A large portion of the NPL increase is driven by office. I think that's probably not surprising. But, you know, as I mentioned, I believe it's within

Speaker Change #126: The range of expectations that we had based on the information we have about the broad environment and the rate environment that we're in.

Speaker Change #126: I would reiterate that I believe we continue to show good underwriting and client selection. And so even as we're going into these deals, we certainly did always stress test the portfolio for potential rises in interest rates.

Unknown Attendee: And so, you know, I think what you're seeing overall is just obviously, as rates are higher, the cushion is smaller. And so we wanted to make sure we're always appropriately, if not conservatively, grading our portfolio, and hence why you see some negative grade migration. Hey, John, I'll add a few things to what Tom said. This is Susan.

Speaker Change #126: [inaudible]

Speaker Change #126: has been smaller, and so we wanted to make sure we're always appropriately, if not conservatively, grading our portfolio, and hence why you see some negative grade migration.

Unknown Attendee: You're seeing this just in articles that are coming out from others and from commercial real estate databases. Some of the geographies that have seen some weakness in the southeast around office buildings would be Atlanta and Raleigh. So a couple of areas in our, some, a little bit in some of the Texas cities. So, but again, these are more, at this point, we still think of these as kind of project by project and not indicative of an issue necessarily with a specific geography.

Susan: Hey John , I'll add a few things to what Tom said. This is Susan. You're seeing this just in articles that are coming out from others and from just commercial real estate databases.

Speaker Change #127: So a couple of areas in our, some, a little bit in.

Speaker Change #128: in some of the Texas cities. So, but again, these are more, at this point, we still think of these as kind of project by project.

Speaker Change #128: and not indicative of an issue necessarily with a specific geography. And to reiterate what Tom said, we've been...

Unknown Attendee: And to reiterate what Tom said, we've been. Transcription by Rev.com Page of is significant, and so even with some drops in appraised values that we've seen as we've reappraised properties, either because they've been downgraded or there's a credit event, maturity, we've not seen a lot of lost content there, but it's something we continue to evaluate on a line-by-line basis.

Tom: Conservative in commercial real estate underwriting for many many years and so the upfront equity that we require across all types of commercial real estate projects is

Tom: It's significant, and so even with some drops in appraised values that we've seen as we've reappraised,

Unknown Attendee: Yeah, we do watch it closely. And I would just add that in our traditional office portfolio, based on the information we currently have, we're looking at an average stabilized LTV of about 60% on our office book. So that still is a pretty significant amount of cushion for any software.

Tom: Yeah, we do watch it closely, and I would just add that in our traditional office portfolio based on the information we currently have, we're looking at an average stabilized LTV of about 60% on our office book, so that still is a pretty significant amount of cushion for any softness.

Unknown Attendee: John, the other thing I'll reiterate is what we said before, we reiterate our charge-off guidance. So MPLs are up this quarter. 50% of them are current on payments, and we still stand behind our charge-off guidance for the full year. Okay, great. That's all really good color. And then, I guess just on the reserve, it sounded like CRE reserves expanded mostly due to office. Just can you put a number on what the office reserve is and what the rest of the CRE portfolio reserve is at? We don't break it down by property type, but the creek coverage is outlined overall in the materials that were provided.

Tom: John , the other thing I'll reiterate is what we said before is we reiterate our charge-off guidance. So, MPLs are up this quarter. 50% of them are current on payments, and we still stand behind our charge-off guidance for the full year.

Speaker Change #130: Okay, great. That's all really good color.

Speaker Change #131: On the reserve, it sounded like TRE reserves expanded mostly due to office. Can you put a number on what the office reserve is and what the rest of the TRE portfolio reserve is at?

Speaker Change #132: We don't break it down by property type, but the Cree coverage is outlined overall in the materials that were provided.

Unknown Attendee: Okay, sounds good. That's all for me. Thanks for all the coverage. Thank you. We currently have no further questions, so I'll hand it back to Brian Jordan, CEO, for closing remarks. Thank you, Carly. Thank you everyone for joining our call. We appreciate your time and attention. Please let us know if you have any further questions or need additional information. Again, thank you, and have a great day. This concludes today's call. Thank you to everyone for joining us. You may now disconnect your lines.

Speaker Change #132: Okay, sounds good. That's all for me. Thanks for all the comments.

Brian Jordan: We currently have no further questions, so I'll hand back to Brian Jordan to hear your closing remarks. Thank you, Carly. Thank you, everyone, for joining our call. We appreciate your time and attention. Please let us know if you have any further questions or need additional information.

Speaker Change #132: We currently have no further questions, so I'll hand back to Brian Jordan, CEO , for closing remarks.

Brian Jordan: Thank you, Carly. Thank you, everyone, for joining our call. We appreciate your time and attention. Please let us know if you have any further questions or need additional information. Again, thank you, and have a great day.

Carly: Again, thank you, and have a great day.

Carly: This concludes today's course. Thank you to everyone for joining. You may have these connection lines.

Speaker Change #134: This concludes today's call. Thank you to everyone for joining. You may now disconnect your lines.