Q2 2024 Synovus Financial Corp Earnings Call

Good morning and welcome to the Synovus Second Quarter 2024 Earnings School.

Operator: Earning School. All participants will be in listen-only mode.

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Specialist by pressing star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone.

Operator: To withdraw your question, please press star then 2. Please note this event is being recorded. I will now turn the call over to Jennifer Demba, Head of Investor Relations. Jennifer, please go ahead.

To withdraw your question please press star then two. Please note this event is being recorded. I will now turn the call over to Jennifer Demba, Head of Investors Relations. Jennifer, please go ahead.

Operator: Please note this event is being recorded.

Jennifer Demba: I will now turn the cool over to Jennifer Demba, head of Investors Relations. Jennifer, please go ahead.

Jennifer Haskew Demba: Thank you and good morning. During today's call, we will reference the slides and press release that are available in the investor relations section of our website, synovus.com. Kevin Blair, Chairman, President, and Chief Executive Officer, will begin the call. He will be followed by Jamie Gregory, Chief Financial Officer, and we will be available to answer your questions at the end of the call. Our comments include forward-looking statements. These statements are subject to risks and uncertainties, and the actual results could vary materially. We list these factors that might cause results to differ materially in our press release and in our SEC filings, which are available on our website.

Kevin Blair: Thank you and good morning. During today's call, we will reference the slides and press release that are available within the Investor Relations section of our website, synovus.com. Chairman, President and Chief Executive Officer will begin the call.

Jennifer Haskew Demba: Thank you and good morning. During today's call, we will reference the slides and press release that are available within the investor relations section of our website, synovus.com.

Speaker Change: Kevin Blair, Chairman, President, and Chief Executive Officer will begin the call. He will be followed by Jamie Gregory, Chief Financial Officer, and we will be available to answer your questions at the end of the call.

Kevin Blair: He will be followed by Jamie Gregory, Chief Financial Officer, and we will be available to answer your questions at the end of the call. Our comments include forward-looking statements. These statements are subject to risks and uncertainties, and the actual results could vary materially. We list these factors that might cause results to differ materially in our press release and in our SEC filings, which are available on our website.

Speaker Change: Our comments include forward-looking statements.

Speaker Change: These statements are subject to risks and uncertainties, and the actual results could vary materially. We list these factors that might cause results to differ materially in our press release and in our SEC filings, which are available on our website.

Kevin Blair: We do not assume any obligation to update any forward-looking statements because of new information, early developments, or other lives, except as maybe required by law. During the call, we will reference non-GAAP financial measures related to the company's performance. You may see the reconciliation of these measures in the appendix to our presentation.

Jennifer Haskew Demba: We do not assume any obligation to update any forward-looking statements because of new information, early developments, or otherwise, except as may be required by law. During the call, we will reference non-GAAP financial measures related to the company's performance. You can see the reconciliation of these measures in the appendix to our presentation. Now, Kevin Blair will provide an overview of the quarter. Thank you, Jennifer.

Speaker Change: We do not assume any obligation to update any forward-looking statements because of new information, early developments, or otherwise, except as may be required by law. During the call, we will reference non-GAAP financial measures related to the company's performance. You may see the reconciliation of these measures in the appendix to our presentation.

Kevin Blair: And now, Kevin Blair will provide an overview of the quarter. Thank you, Jennifer. Good morning, everyone, and thank you for joining us for our second quarter 2024 earnings call. So, now is reported a loss of 16 cents in the second quarter of 2024, which included a previously announced $257 million loss from the recent securities repositioning that was executed as a result of the capital benefits derived from our risk-weighted asset optimization exercise. However, adjusted earnings per share were $1.16 cents compared to 79 cents in the first quarter, while adjusted pre-provision net revenue rose 20% from the prior quarter to 262 million dollars.

Speaker Change: And now, Kevin Blair will provide an overview of the quarter.

Kevin S. Blair: Good morning, everyone, and thank you for joining us for our second quarter 2024 earnings call. Synovus reported a loss of $0.16 in the second quarter of 2024, which included a previously announced $257 million loss from the recent securities repositioning that was executed as a result of the capital benefits derived from our risk-weighted asset optimization exercise. However, adjusted earnings per share were $1.16 compared to $0.79 in the first quarter, while adjusted pre-provisioned net revenue rose 20% from the prior quarter to $262 million.

Kevin S. Blair: Thank you, Jennifer. Good morning, everyone, and thank you for joining us for our second quarter 2024 earnings call.

Kevin S. Blair: Synovus reported a loss of $0.16 in the second quarter of 2024, which included a previously announced $257 million loss from the recent securities repositioning that was executed as a result of the capital benefits derived from our risk-weighted asset optimization exercise.

Kevin S. Blair: However, adjusted earnings per share were $1.16 compared to $0.79 in the first quarter, while adjusted pre-provisioned net revenue rose 20% from the prior quarter to $262 million.

Kevin Blair: Adjusted revenue and earnings inflected higher in the second quarter; net interest income increased 4% from the prior quarter on 16 basis points of sequential mimic expansion. Also, adjusted non-interest revenue jumped 9% sequentially, while adjusted non-interest expense declined 5%. Moreover, our net charge-offs and non-performing loans declined meaningfully this quarter, and our liquidity and capital positions remain as strong as they've been in several years. Our success and positive momentum are a direct result of the work of our talented team members. We are also making progress and key initiatives, and in further strengthening our value proposition for our clients.

Kevin S. Blair: Adjusted revenue and earnings inflected higher in the second quarter. Net interest income increased 4% from the prior quarter on 16 basis points of sequential MIM expansion. Also, adjusted non-interest revenue jumped 9% sequentially, while adjusted non-interest expense declined 5%. Moreover, our net charge-offs and non-performing loans declined meaningfully this quarter, and our liquidity and capital positions remain as strong as they've been in several years. Our success and positive momentum are a direct result of the work of our talented team members.

Kevin S. Blair: Adjusted Revenue and Earnings inflected higher in the second quarter. Net Interest Income increased 4% from the prior quarter on 16 basis points of sequential MIM expansion. Also, Adjusted Non-Interest Revenue jumped 9% sequentially, while Adjusted Non-Interest Expense declined 5%.

Kevin S. Blair: Moreover, our net charge-offs and non-performing loans declined meaningfully this quarter, and our liquidity and capital positions remain as strong as they've been in several years.

Speaker Change: Our success and positive momentum are a direct result of the work of our talented team members.

Kevin S. Blair: We are also making progress on key initiatives and further strengthening our value proposition for our clients. We continue to attract talent in the expansion of our commercial and wealth lines of business. Our retail analytics platform has translated into a better client experience and is delivering a 60% increase in new revenue resulting from the insights and leads generated.

Speaker Change: We are also making progress in key initiatives and further strengthening our value proposition for our clients.

Kevin Blair: We continue to attract talent in the expansion of our commercial and wealth lines of business. Our retail analytics platform has translated into a better client experience and is delivering a 60% increase in new revenue resulting from the insights and leads generated. Our focus on the business owner well strategy is delivering a 52% conversion rate on qualified referrals. Our growth in the current pipelines remains robust in treasury and payment solutions. Our efforts to reduce fraud and operating losses have proven fruitful, with year to day expenses down 11%. And lastly, we saw significant improvement in credit costs this quarter.

Speaker Change: We continue to attract talent in the expansion of our commercial and wealth lines of business. Our retail analytics platform has translated into a better client experience and is delivering 60% increase in new revenue resulting from the insights and leads generated.

Kevin S. Blair: Our focus on the business owner wealth strategy is delivering a 52% conversion rate on qualified referrals. Our growth in the current pipelines remains robust in treasury and payment solutions. Our efforts to reduce fraud and operating losses have proven fruitful, with year-to-date expenses down 11%.

Speaker Change: Our focus on the business owner wealth strategy is delivering a 52% conversion rate on qualified referrals.

Speaker Change: Our growth and the current pipelines remain robust in treasury and payment solutions.

Speaker Change: Our efforts to reduce fraud and operating losses have proven fruitful with year-to-date expenses down 11%. And lastly, we saw significant improvement in credit costs this quarter. In fact, our community bank line of business ended the quarter and year-to-date in a net recovery position.

Kevin S. Blair: And lastly, we saw significant improvement in credit costs this quarter. In fact, our community bank line of business ended the quarter and year-to-date in a net recovery position. So our progress is broad-based and truly a team effort.

Kevin S. Blair: In fact, our community bank line of business ended the quarter and year to date in a net recovery position. So our progress is broad-based and truly a team effort. In addition, as we've discussed in recent quarters, our focus remains firmly on execution, while reducing uncertainty and performance associated with the net interest margin and credit cost. The second quarter results reflect our progress towards these goals.

Kevin S. Blair: In addition, as we've discussed in recent quarters, our focus remains firmly on execution while reducing uncertainty and performance associated with interest margin and credit cost. The second quarter results reflect our progress towards these goals. Now, let's turn to slide three for the highlights.

Speaker Change: So our progress is broad-based and truly a team effort.

Speaker Change: In addition, as we've discussed in recent quarters, our focus remains firmly on execution while reducing uncertainty and performance associated with an interest margin and credit cost. The second quarter results reflect our progress towards these goals. Now let's turn to slide three for the highlights.

Kevin Blair: Now let's turn to slide three for the highlights. As previously noted, net interest income increased 4% health and consistent loan growth in the middle market, CIB, and specialty commercial units, but pay off activity and senior housing and national accounts, as well as lower CNI utilization and draw the overall decline in outstanding for the quarter. Court deposits declined slightly in the second quarter, driven by a drop in non interest-bearing deposits, all set by growth and time deposits. Furthermore, we reduced broker deposits for the fourth consecutive quarter. Our team remains highly focused on accelerating core funding generation through sales activities and product expansion. Adjusted non interest revenue increased 9% from the prior quarter.

Kevin S. Blair: As previously noted, net interest income increased 4%. However, healthy and consistent loan growth in the middle market, CIB, and specialty commercial units, but payoff activity in senior housing and national accounts, as well as lower C&I utilization, drove the overall decline in outstandings for the quarter. Core deposits declined slightly in the second quarter, driven by a drop in non-interest-bearing deposits, offset by growth in time deposits.

Speaker Change: As previously noted, net interest income increased 4%.

Speaker Change: Healthy and consistent loan growth in the middle market, CIB, and specialty commercial units, but payoff activity in senior housing and national accounts, as well as lower C&I utilization, drove the overall decline in outstandings for the quarter.

Speaker Change: Core deposits declined slightly in the second quarter, driven by a drop in non-interest-bearing deposits, offset by growth in time deposits.

Kevin S. Blair: Furthermore, we've reduced broker deposits for the fourth consecutive quarter. Our team remains highly focused on accelerating core funding generation through sales activities and product expansion. Adjusted non-interest revenue increased 9% from the prior quarter, primarily from significant growth in capital markets income.

Speaker Change: Furthermore, we've reduced broker deposits for the fourth consecutive quarter. Our team remains highly focused on accelerating core funding generation through sales activities and product expansion.

Kevin Blair: Primarily from significant growth in capital markets, it's income on a year-of-your basis. There was strong growth and commercial sponsorship income from the expansion of card sponsorship business, as well as our partnership with Green Sky Capital Markets and treasury and payment solutions fees, also contributed to healthy year of year growth. Adjusted non interest expense was down 5% sequentially and relatively flat on a year of your basis. Our 2023 cost initiatives, as well as ongoing diligence, have led to a modest core operating expense.

Speaker Change: Adjusted non-interest revenue increased 9% from the prior quarter, primarily from significant growth in capital markets income. On a year-over-year basis, there was strong growth in commercial sponsorship income from the expansion of card sponsorship business, as well as our partnership with Green Sky.

Kevin S. Blair: On a year-over-year basis, there was strong growth in commercial sponsorship income from the expansion of card sponsorship business, as well as our partnership with Green Sky. Capital Markets, Treasury, and Payment Solutions fees also contributed to healthy year-over-year growth. Adjusted non-interest expense was down 5% sequentially and relatively flat on a year-over-year basis.

Speaker Change: Capital Markets and Treasury and Payment Solutions fees also contributed to healthy year-over-year growth.

Speaker Change: Adjusted non-interest expense was down 5% sequentially and relatively flat on a year-over-year basis.

Kevin S. Blair: Our 2023 cost initiatives, as well as ongoing diligence, have led to a modest core operating expense growth from a year ago while maintaining a level of strategic investments that position Synovus well from a competitive standpoint in order to drive long-term shareholder value. On the asset quality front, net charge-offs of 32 basis points were 9 basis points lower than the first quarter levels, while non-performing loans declined by 22 basis points. Lastly, we further bolstered our common equity tier one ratio in the second quarter through solid earnings accretion and balance sheet management while still completing about $91 million of opportunistic share repurchases.

Speaker Change: Our 2023 cost initiatives, as well as ongoing diligence, have led to a modest core operating expense growth from a year ago, while maintaining a level of strategic investments that position Synovus well from a competitive standpoint in order to drive long-term shareholder value.

Kevin Blair: In the last few months, growth from a year ago, while maintaining a level of strategic investments that positions Synovus well from a competitive standpoint in order to drive long term shareholder value. On the asset quality fraud, net charge also 32 basis points were 9 basis points lower than the first quarter levels, while non-performing loans declined by 22 basis points. Lastly, we further bolstered our common equity tier 1 ratio in the second quarter through solid earnings accretion and balance sheet management, while still completing about $91 million of opportunistic share repurchases.

Speaker Change: On the asset quality front, net charge-offs of 32 basis points were 9 basis points lower than the first quarter levels, while non-performing loans declined by 22 basis points.

Speaker Change: Lastly, we further bolstered our common equity tier one ratio in the second quarter through solid earnings accretion and balance sheet management while still completing about $91 million of opportunistic share repurchases.

Kevin Blair: Common equity tier 1 levels are the highest and over 8 years at 10.62%, and currently set modestly above our state at range of 10 to 10.5%.

Kevin S. Blair: Common Equity Tier 1 levels are the highest in over 8 years at 10.62% and currently set modestly above our stated range of 10 to 10.5%. Now I'll turn it over to Jamie to cover the second quarter results in greater detail.

Speaker Change: Common Equity Tier 1 levels are the highest in over 8 years at 10.62% and currently set modestly above our stated range of 10 to 10.5%. Now I'll turn it over to Jamie to cover the second quarter results in greater detail. Jamie?

Andrew Jamie Gregory: Thank you, Kevin. Moving to slide four, period end loans were down $216 million from the prior quarter. Loan production actually rose significantly from the first quarter, but was offset by payoffs, paydowns, and continued portfolio rationalization, as well as lower utilization from our larger corporate and specialty line clients. We continue to maintain pricing discipline, as evidenced by loan spreads on new production, which remain elevated relative to the prior year. Consistent with our focus on core client relationships.

Jamie Gregory: Now I'll turn it over to Jamie to cover the second quarter results in greater detail. Thank you, Kevin. Moving to slide 4, period and loans were down $216 million from the prior quarter. Loan production actually rose significantly from the first quarter, but was all set by payoffs, pay downs, and continued portfolio rationalization, as well as lower utilization from our larger corporate and specially aligned clients. We continued to maintain pricing discipline, as evidenced by loan spreads on new production, which remain elevated relative to the prior year. Consistent with our focus on core client relationships, despite utilization headlands, growth in middle market commercial, CIB and specially lines was $157 million or 5% annualized during the second quarter.

Jamie: Thank you, Kevin.

Jamie: Moving to slide four, period end loans were down $216 million from the prior quarter.

Jamie: Loan production actually rose significantly from the first quarter, but was offset by payoffs, paydowns, and continued portfolio rationalization, as well as lower utilization from our larger corporate and specialty line clients.

Jamie: We continue to maintain pricing discipline as evidenced by loan spreads on new production, which remain elevated relative to the prior year.

Andrew Jamie Gregory: Despite utilization headwinds, growth in middle market commercial, CIB, and specialty lines was $157 million, or 5% annualized, during the second quarter. During the first half of 2024, we produced 8% annualized growth in these core commercial businesses, which we believe should continue throughout the remainder of the year. Senior housing loans declined $196 million from the prior quarter.

Jamie: Consistent with our focus on core client relationships, despite utilization headwinds, growth in middle market commercial, CIB, and specialty lines was $157 million, or 5% annualized during the second quarter.

Jamie Gregory: During the first half of 2024, we produced 8% annualized growth in these core commercial business lines, which we believe should continue throughout the remainder of the year. Senior housing loans declined $196 million from the prior quarter. There has been increased strength in the markets, as evidenced by higher levels of transaction and refinancing activity over the last few quarters. That said, we anticipate more stable senior housing balances throughout the remainder of 2024.

Jamie: During the first half of 2024, we produced 8% annualized growth in these core commercial business lines, which we believe should continue throughout the remainder of the year.

Jamie: Senior housing loans declined $196 million from the prior quarter.

Andrew Jamie Gregory: There has been increased strength in the markets, as evidenced by higher levels of transaction and refinancing activity over the last few quarters. That said, we anticipate more stable senior housing balances throughout the remainder of 2020. We also continue to strategically reduce our non-relationship lending within our national accounts portfolio, as well as our third-party consumer loans.

Jamie: There has been increased strength in the markets, as evidenced by higher levels of transaction and refinancing activity over the last few quarters. That said, we anticipate more stable senior housing balances throughout the remainder of 2024.

Andrew Jamie Gregory: We also continue to strategically reduce our non-relationship lending within our National Accounts portfolio, as well as our third-party consumer loans. Further positioning our balance sheet for core client growth. These balances were down $223 million in the second quarter. In the second half of this year, third-party consumer loans should continue to decline and estimated $60 million per quarter, while national account balances should be more stable. We estimate we should see stable to higher total loans in the second half of 2024, with continued growth in our key commercial segments.

Jamie: We also continue to strategically reduce our non-relationship lending within our national accounts portfolio, as well as our third-party consumer loans, further positioning our balance sheet for core client growth.

Andrew Jamie Gregory: Further positioning our balance sheet for core clients, these balances were down $223 million in the second quarter. In the second half of this year, third-party consumer loans should continue to decline by an estimated $60 million per quarter, while national account balances should be more stable. We estimate we should see stable to higher total loans in the second half of 2024 with continued growth in our key commercial sectors. Turning to slide 5, period end core deposit balances were relatively flat on a linked quarter basis. Somewhat more stable mixed shifts within the quarter. Non-interest-bearing deposit balances were down $387 million from the prior quarter.

Jamie: These balances were down $223 million in the second quarter.

Jamie: In the second half of this year, third-party consumer loans should continue to decline, an estimated $60 million per quarter, while national account balances should be more stable.

Jamie: We estimate we should see stable to higher total loans in the second half of 2024, with continued growth in our key commercial segments.

Jamie Gregory: Turning to slide 5, period N core deposit balances were relatively flat on a link quarter basis, with somewhat more stable mixed shifts within the quarter.

Jamie: Turning to slide 5, period-end core deposit balances were relatively flat on a linked quarter basis, with somewhat more stable mixed shifts within the quarter.

Jamie Gregory: Non-intersparing deposit balances were down $387 million from the prior quarter. However, average balances were more stable in the second quarter relative to the first quarter. We still see some further pressure on non-intersparing deposits, though the trends continue to suggest notable slowing in the pace of decline in those balances.

Jamie: Non-interest bearing deposit balances were down $387 million from the prior quarter. However, average balances were more stable in the second quarter relative to the first quarter.

Andrew Jamie Gregory: However, average balances were more stable in the second quarter relative to the first. We still see some further pressure on non-interest-bearing deposits, though the trends continue to suggest a notable slowing in the pace of decline in those balances. Finally, broker deposits declined $317 million, or 6%, from the first quarter, which was the fourth consecutive quarter of contraction. Deposit costs were stable in the second quarter, up just one basis point from the prior quarter.

Jamie: We still see some further pressure on non-interest bearing deposits, though the trends continue to suggest notable slowing in the pace of decline in those balances.

Jamie Gregory: Finally, broker deposits declined $317 million, or 6% from the first quarter, which was the fourth consecutive quarter of contraction. The deposit calls were stable in the second quarter, up just one basis point from the prior quarter. This equates to a cycle today total deposit cost beta of approximately 49%, which was unchanged compared to the first quarter.

Jamie: Finally, broker deposits declined $317 million, or 6%, from the first quarter, which was the fourth consecutive quarter of contraction.

Jamie: Deposit costs were stable in the second quarter, up just one basis point from the prior quarter. This equates to a cycle-to-date total deposit cost beta of approximately 49 percent, which was unchanged compared to the first quarter.

Andrew Jamie Gregory: This equates to a cycle-to-date total advisory cost beta of approximately 49%, which was unchanged compared to the first quarter. As we look at the back half of the year, we expect deposit calls to remain relatively stable and are looking for broad-based deposit growth across our business sector, which should be supported by seasonal tailwinds into the end of the year. Moving the slide, sir.

Jamie Gregory: As we look at the back half of the year, we expect deposit calls to remain relatively stable and are looking for broad-based deposit growth across our business segments, which should be supported by seasonal tailwinds into the end of the year.

Jamie: As we look at the back half of the year, we expect deposit calls to remain relatively stable and are looking for broad-based deposit growth across our business segments, which should be supported by seasonal tailwinds into the end of the year.

Jamie Gregory: Moving to slide 6, net interest income was $435 million in the second quarter, which was an increase of 4% from the first quarter. The second quarter benefited from various drivers, including improving loan yields, the residual impact of first quarter hedge majorities, and the securities repositioning in May. As we alluded to in the first quarter, we also witnessed relative stabilization in the deposit calls to mixed trends, which resulted in a much more modest headwind to interest expense.

Andrew Jamie Gregory: Net interest income was $435 million in the second quarter, which was an increase of 4% from the first quarter. The second quarter benefited from various dropouts. Including improving loan yields, the residual impact of first quarter hedge maturities, and the securities repositioning in May. As we alluded to in the first quarter, we also witnessed relative stabilization in deposit costs and mixed, which resulted in a much more modest headwind to interest expense. As we translate that to the March,

Jamie: Moving to slide 6. Net interest income was $435 million in the second quarter, which was an increase of 4% from the first quarter.

Jamie: The second quarter benefitted from various drivers, including improving loan yields, the residual impact of first quarter hedge maturities, and the securities repositioning in May.

Jamie: As we alluded to in the first quarter, we also witnessed relative stabilization in deposit costs and mixed trends, which resulted in a much more modest headwind to interest expense.

Jamie Gregory: As we translate that to the margin, now an expanded 16 basis points sequentially to 3.2%. This was primarily driven by the same factors, which supported net interest income, along with a one-time positive impact from our securities held the maturity reclassification, which served to reduce earning assets. As we look forward to the third and fourth quarters of 2024, we continue to expect net interest margin expansion, driven by fixed rate, asset repricing, and fourth quarter hedge 30s, as well as a full quarter impact of the securities repositioning, which was completed in May.

Andrew Jamie Gregory: NEM expanded 16 basis points sequentially to 3.2%. This was primarily driven by the same factors which supported net interest investment, along with a one-time positive impact from our Securities Held to Maturity reclassification, which served to reduce earnings. As we look forward to the third and fourth quarters of 2024, we continue to expect net interest margin expansion. Driven by fixed rate asset repricing and fourth quarter hedge maturity, as well as a full quarter impact of the securities repositioning which was completed in May.

Jamie: As we translate that to the margin, NEM expanded 16 basis points sequentially to 3.2%.

Jamie: This was primarily driven by the same factors which supported net interest income, along with the one-time positive impact from our securities held to maturity reclassification, which served to reduce earning assets.

Jamie: As we look forward to the third and fourth quarters of 2024, we continue to expect net interest margin expansion, driven by fixed rate asset repricing and fourth quarter hedge maturities, as well as a full quarter impact of the securities repositioning, which was completed in May.

Jamie Gregory: Kevin will provide further detail on our guidance momentarily, which is based on an FOMC rate cut of 25 basis points in December.

Andrew Jamie Gregory: Kevin will provide further detail on our guidance, which is based on an FOMC rate cut of $25,000. Slide 7 shows total reported non-interest revenue was impacted by the $257 million securities loss related to our securities repositioning in the second quarter. However, adjusted non-interest revenue was $127 million, which is a 9% jump from the previous quarter. Adjusted and honest revenue was up $17 million or 15% year over year.

Jamie: Kevin will provide further detail on our guidance momentarily, which is based on an FOMC rate cut of 25 basis points in December .

Jamie Gregory: Flight 7 shows total reported non-insert revenue was impacted by the $257 million securities walls related to our securities repositioning in the second quarter. However, adjusted non-insert revenue was $127 million, which is a 9% jump from the previous quarter. Adjusted non-insert revenue was up $17 million, or 15% year-over-year. The majority of the sequential growth was attributable to higher capital market fees, which surged 128% from the first quarter, and are expected to remain elevated in the second half of the year. The growth was driven by syndication, finance, ranger fees, and debt capital markets income. Also, commercial analysis, treasury and payments, solutions fees increased 4%, while core wealth management income increased 2%, outside of an expected decline in repo income due to client asset allocation changes.

Kevin S. Blair: Slide 7 shows total reported non-interest revenue was impacted by the $257 million securities loss related to our securities repositioning in the second quarter.

Kevin S. Blair: However, adjusted non-interest revenue was $127 million, which is a 9% jump from the previous quarter.

Speaker Change: Adjusted and Honest Revenue was up $17 million or 15% year-over-year.

Andrew Jamie Gregory: The majority of the sequential growth was attributable to higher capital markets, which surged 128% from the first quarter and are expected to remain elevated in the second half. The growth was driven by syndication, finance, arranger fees, and the debt capital market. Also, commercial analysis, treasury, and payment solutions fees increased 4%, while core wealth management income increased 2% outside of an expected decline in repo income due to client asset allocation. When looking at the year-ago quarter, core banking fees increased 4 percent, supported by growth in treasury and payment, while capital markets fees increased 59%, and commercial sponsorship income jumped $180,000. We continue to invest in core non-interest revenue streams that deepen client relationships and provide further healthy fee growth in areas such as treasury and payment solutions, capital markets, and wealth management. Living to Expel

Speaker Change: The majority of the sequential growth was attributable to higher capital markets fees, which surged 128% from the first quarter and are expected to remain elevated in the second half of the year.

Kevin S. Blair: The growth was driven by syndication, finance, arranger fees, and capital markets income.

Kevin S. Blair: Also, Commercial Analysis Treasury and Payments Solutions Fees increased 4% while Core Wealth Management Income increased 2% outside of an expected decline in repo income due to client asset allocation changes.

Jamie Gregory: When looking at the year-ago quarter, core banking fees increased 4%, supported by growth in treasury and payment solutions, while capital markets fees increased 59%, and commercial sponsorship income jumped 188%.

Kevin S. Blair: When looking at the year-ago quarter, core banking fees increased 4 percent, supported by growth in treasury and payment solutions, while capital markets fees increased 59 percent and commercial sponsorship income jumped 188 percent.

Jamie Gregory: We continue to invest in core non-insert revenue streams that deepen client relationships and provide further healthy fee growth in areas such as treasury and payment solutions, capital markets, and wealth management.

Kevin S. Blair: We continue to invest in core non-interest revenue streams that deepen client relationships and provide further healthy fee growth in areas such as treasury and payment solutions, capital markets, and wealth management.

Jamie Gregory: Moving to expense. Slide 8 highlights our operating cost discipline. Reported and adjusted non-interest expense were both $302 million. Adjusted non-interest expense declined 5% from the first quarter and was flat compared to the year-ago quarter. Employment expense fell 4% from the first quarter. Largely due to seasonality, partially offset by a full quarter impact of the 2024 merit increases and higher employee incentives. Turning to other expenses, FDIC premiums declined as a result of the $13 million FDIC special assessment that was accrued in the first quarter and a partial special assessment reversal of $4 million in the second quarter.

Andrew Jamie Gregory: Slide 8 highlights our operating costs. Supported and adjusted non-interest expense were both $302 million. Adjusted non-interest expense declined 5% from the first quarter and was flat compared to the year-ago quarter. Employment expenses fell 4% from the first, largely due to seasonality, partially offset by a full quarter impact of the 2024 Meriden and Higher Employee Incentive. Turning to other expenses, FDIC premiums declined as a result of the $13 million FDIC special assessment that was accrued in the first and a partial special assessment reversal of $4 million in the second. Legal expenses increased from the prior quarter, primarily due to expenses associated with previously resolved problems.

Speaker Change: Moving to expanse.

Speaker Change: Slide 8 highlights our Operating Costs Discipline.

Speaker Change: Reported and adjusted non-interest expense were both $302 million. Adjusted non-interest expense declined 5% from the first quarter and was flat compared to the year-ago quarter.

Speaker Change: Employment expense fell 4% from the first quarter, largely due to seasonality partially offset by a full quarter impact of the 2024 merit increases and higher employee incentives.

Speaker Change: Turning to other expenses, FDIC premiums declined as a result of the $13 million FDIC special assessment that was accrued in the first quarter and a partial special assessment reversal of $4 million in the second quarter.

Jamie Gregory: Legal expenses increased from the prior quarter, primarily due to expenses associated with previously resolved problem loans. Employment expense declined 1% year-over-year, benefited by our 7% year-over-year decline in headcount. Occupancy and equipment expense increased 8% as a result of ongoing technology investments, as well as increased property expense.

Speaker Change: Legal expenses increased from the prior quarter, primarily due to expenses associated with previously resolved problem loans.

Andrew Jamie Gregory: Employment Expense Decline 1% Year, benefited by our 7% year-over-year decline and had occupancy and equipment expense increased 8% as a result of ongoing technology investment, as well as increased property. Importantly, we will remain proactive with disciplined expense management in this growth-constrained environment. Moving to slides 9 and 10, on credit quality, provision for credit losses declined 51% from the first quarter to $26 million.

Speaker Change: Employment expense declined 1% year-over-year, benefited by our 7% year-over-year decline in headcount.

Speaker Change: Occupancy and equipment expense increased 8% as a result of ongoing technology investments as well as increased property expense.

Jamie Gregory: Importantly, we will remain proactive with disciplined expense management and disc growth constrained environment.

Speaker Change: Importantly, we will remain proactive with disciplined expense management in this growth-constrained environment.

Jamie Gregory: Moving to slide 9 and 10 on credit quality. Provisioned for credit losses declined 51% from the first quarter to $26 million. Our allowance for credit losses ended the second quarter at $538 million, or 1.25%, which is relatively unchanged from the first quarter. quarter. Net charge also in the second quarter were $34 million, or 32 basis points compared to 41 basis points in the first quarter and 38 basis points in the fourth quarter. Non-performing loans declined 27%, and are now 0.59% of loans, down from 0.81% in the first quarter.

Andrew Jamie Gregory: Our allowance for credit losses ended the second quarter at $538 million, or 1.25%, which is relatively unchanged from the first. Net charge-offs in the second quarter were $34 million, or 32 basis points, compared to 41 basis points in the first quarter and 38 basis points. Non-performing loans declined 27% and are now 0.59% of loans, down from 0.81% primarily from the resolution of a previously charged-off credit and slower impact. The criticized and classified credit ratio declined slightly to 3.7% and remains at a very manageable level.

Speaker Change: Moving to slides 9 and 10 on credit quality.

Speaker Change: Provision for credit losses declined 51% from the first quarter to $26 million.

Speaker Change: Our allowance for credit losses ended the second quarter at $538 million, or 1.25%, which is relatively unchanged from the first quarter.

Speaker Change: Net chargeoffs in the second quarter were $34 million, or 32 basis points, compared to 41 basis points in the first quarter and 38 basis points in the fourth quarter.

Speaker Change: Non-performing loans declined 27% and are now 0.59% of loans, down from 0.81% in the first quarter.

Jamie Gregory: Primarily from the resolution of a previously charged-off credit and slower inflows. The criticizing classified credit ratio declined slightly to 3.7% and remains at very manageable levels.

Speaker Change: Primarily from the resolution of a previously charged off credit and slower inflows.

Speaker Change: The credit size and classified credit ratio declined slightly to 3.7% and remains at very manageable levels.

Jamie Gregory: We have a high degree of confidence in the strength and quality of our loan portfolio, and we will continue to reduce our non-relationship credits and manage the portfolio with a heightened level of diligence in this more uncertain macroeconomic environment.

Andrew Jamie Gregory: We have a high degree of confidence in the strength and quality of our loans, and we will continue to reduce our non-relationship credits and manage the portfolio with a heightened level of... More Uncertain Macroeconomics. As seen on slide 11, our capital position continued to build in the second quarter, with the preliminary Common Equity Tier 1 Ratio reaching 10.62%.

Speaker Change: We have a high degree of confidence in the strength and quality of our loan portfolio, and we will continue to reduce our non-relationship credits and manage the portfolio with a heightened level of diligence in this more uncertain macroeconomic environment.

Jamie Gregory: As seen on slide 11, our capital position continued to build in the second quarter, with the preliminary common equity tier 1 ratio reaching 10.62%, and total risk-based capital now at 13.59%. A strong quarter of core earnings, coupled with the completion of our previously announced risk-weighted asset optimization exercise, helped to support over 80 basis points of capital accretion within the quarter.

Speaker Change: As seen on slide 11, our capital position continued to build in the second quarter, with the Preliminary Common Equity Tier 1 ratio reaching 10.62%, and total risk-based capital now at 13.59%.

Andrew Jamie Gregory: In total, risk-based capital now at $13.59, a strong quarter of core earnings, coupled with the completion of our previously announced risk-weighted asset optimization exercise, helped to support over 80 basis points of capital accretion. And against that, we completed the anticipated available-for-sale security position, and we executed approximately $91 million in shares. These actions serve to diligently deploy our capital while still ending the quarter near the top end of our More details on the securities repositioning can be found in the appendix of our presentation.

Speaker Change: A strong quarter of core earnings, coupled with the completion of our previously announced risk-weighted asset optimization exercise, help to support over 80 basis points of capital accretion within the quarter.

Jamie Gregory: Against that, we completed the anticipated available-for-sale securities repositioning, and we executed approximately $91 million in sharey persons. These actions served to diligently deploy our capital, while still ending the quarter near the top end of our targeted CET-1 range. More details on the securities repositioning can be found in the appendix of our presentation deck.

Speaker Change: Against that, we completed the anticipated available-for-sale security depositioning, and we executed approximately $91 million in sharing purchases.

Speaker Change: These actions serve to diligently deploy our capital while still ending the quarter near the top end of our targeted CET1 range.

Speaker Change: More details on the securities repositioning can be found in the appendix of our presentation deck.

Jamie Gregory: We look to the remainder of the year. We will maintain a disciplined approach to capital management, which balances the uncertain economic environment with prudently managing near the top end of our 10-10 and a half percent CET-1 range. As a reminder, our focus remains on prioritizing the deployment of our balance sheet and capital position for core client growth. However, we expect to complement that with sharey purchases to effectively manage within our capital management framework.

Andrew Jamie Gregory: Looking to the remainder of the year, we will maintain a disciplined approach to capital, which balances the uncertain economic environment with prudently managing near the top end of our 10 to 10.5 billion dollar economy. As a reminder, our focus remains on prioritizing the deployment of our balance sheet and capital. However, we expect to complement that with Sherry purchases to effectively manage within our capital. I'll now turn it back to Kevin to discuss our 2024. Thank you, Jamie.

Speaker Change: We look to the remainder of the year. We will maintain a disciplined approach to capital management.

Speaker Change: which balances the uncertain economic environment with prudently managing near the top end of our 10 to 10.5% DT1 range.

Speaker Change: As a reminder, our focus remains on prioritizing the deployment of our balance sheet and capital position for core client growth. However, we expect to complement that with sharing purchases to effectively manage within our capital management framework.

Kevin Blair: I'll now turn it back to Kevin to discuss our 2024 guidance. Thank you, Jamie. I'll continue with our updated guidance for the remainder of 2024. Based on the first half results in our existing pipelines, period in loan growth is expected to be 0-2% in 2024. Growth should be supported by continued success in middle market, corporate and investment banking, and specialty lines. Year-to-date headwinds with senior housing and national accounts syndicated lending are expected to subside, but broader commercial real estate payoff activities should increase in the second half of the year. Our forecast for core deposits now supports growth within the 2-4% range, aided by seasonal tailwinds as the year progresses and new core funding growth initiatives.

Kevin S. Blair: I'll continue with our updated guidance for the remainder of 2024. Based on the first half results and our existing pipelines, period end loan growth is expected to be zero to 2% in 2024. Growth should be supported by continued success in middle market, corporate, and investment banking, and specialty lines.

Speaker Change: I'll now turn it back to Kevin to discuss our 2024 guidance.

Kevin S. Blair: Thank you, Jamie. I'll continue with our updated guidance for the remainder of 2024.

Kevin S. Blair: Based on the first half results and our existing pipelines, period end loan growth is expected to be 0 to 2% in 2024. Growth should be supported by continued success in middle market, corporate and investment banking, and specialty lines.

Kevin S. Blair: Year-to-date headwinds with senior housing and national account syndicated lending are expected to subside, but broader commercial real estate payoff activity should increase in the second half of the year. Our forecast for core deposits now supports growth within the 2-4% range aided by seasonal tailwinds as the year progresses and new core funding growth initiatives. Stable deposit costs should result in a peak total deposit cost beta for this cycle near current levels of approximately 49%. Our outlook now points to adjusted revenue growth in the negative three to zero percent range.

Kevin S. Blair: Year-to-date headwinds with senior housing and national accounts syndicated lending are expected to subside, but broader commercial real estate payoff activity should increase in the second half of the year.

Kevin S. Blair: Our forecast for core deposits now supports growth within the 2-4% range aided by seasonal tailwinds as the year progresses and new core funding growth initiatives.

Kevin Blair: Stable deposit calls should result in a peak total deposit calls made up for this cycle near current levels of approximately 49%. Our outlook now points to adjusted revenue growth in the negative 3-0% range. Importantly, our adjusted revenue guidance now assumes there is a 1-25 basis point rate cut in December 2024 compared to our prior assumption of stable rates, as well as the realization of our robust capital markets pipeline in the second half of 24. We expect more net interest income improvement in the second half of this year as deposit costability combined with fixed rate asset repricing, our hedge maturities, and the full impact of the securities repositioning benefit our net interest margin.

Kevin S. Blair: Stable deposit costs should result in a peak total deposit cost beta for this cycle near current levels of approximately 49%.

Kevin S. Blair: Our outlook now points to adjusted revenue growth in the negative 3 to 0 percent range.

Kevin S. Blair: Importantly, our adjusted revenue guidance now assumes there is one 25 basis point rate cut in December 2024 compared to our prior assumption of stable rates, as well as the realization of our robust capital markets pipeline in the second half of 2024. We expect more net interest income improvement in the second half of this year as deposit cost stability combined with fixed rate asset repricing, our hedge maturities, and the full impact of the securities repositioning benefit our net interest margin. Adjusted non-interest revenue is now forecasted to grow in the mid-single-digit percentage range this year versus our previous guidance of low to mid-single-digit growth. The previously mentioned capital markets fee pipeline remains strong.

Kevin S. Blair: Importantly, our adjusted revenue guidance now assumes there is one 25 basis point rate cut in December 2024 compared to our prior assumption of stable rates, as well as the realization of our robust capital markets pipeline in the second half of 2024.

Kevin S. Blair: We expect more net interest income improvement in the second half of this year as deposit cost stability combined with fixed rate asset repricing, our hedge maturities, and the full impact of the securities repositioning benefit, our net interest margin.

Kevin Blair: Adjust that non interest revenue is now forecasted to grow in the mid single digit percentage range this year versus our previous guidance of low to mid single digit growth. The previously mentioned capital markets fee pipeline remains strong. We continued to execute on core growth and treasury and payment solutions, and the green sky forward flow program continues to build commercial sponsorship fees. We remain very focused on discipline, expense control, excluding the FDIC special assessments. We anticipate our adjusted non interest expense will be up one to 3% this year. This modest increase in expense guidance is due to incremental expenses and infrastructure spend investments, legal costs primarily associated with resolved credits, and higher team member incentives.

Kevin S. Blair: Adjusted non-interest revenue is now forecasted to grow in the mid-single-digit percentage range this year versus our previous guidance of low to mid-single-digit growth.

Kevin S. Blair: We continue to execute on core growth and treasury and payment solutions, and the Green Sky Forward Flow program continues to build commercial sponsorship fees. We remain very focused on disciplined expense control, excluding the FDIC special assessments.

Kevin S. Blair: The previously mentioned capital markets fee pipeline remains strong, we continue to execute on core growth in treasury and payment solutions, and the Green Sky Forward Flow Program continues to build commercial sponsorship fees.

Kevin S. Blair: We remain very focused on discipline expense control. Excluding the FDIC special assessments, we anticipate our adjusted non-interest expense will be up 1-3% this year.

Kevin S. Blair: We anticipate our adjusted non-interest expense will be up 1 to 3 percent this year. This modest increase in expense guidance is due to incremental expenses and infrastructure spend and investments, legal costs primarily associated with resolved credits, and higher team member incentives. We continue to closely monitor and manage our loan portfolio for any credit deterioration or systemic themes across industry and market. Given current credit migration trends, assuming a relatively stable economic environment and considering the impact of certain large individual losses in late 2023 and early 2024, we expect net charge-offs to be flat to down in the second half of this year, compared to 36 basis points in the first half of 2024. Moving to the tax rate, our current forecast points to an approximately 21% level as compared to 21 to 22% previously. Finally, our common equity tier one ratio is above our targeted range of 10 to 10.5%.

Kevin S. Blair: This modest increase in expense guidance is due to incremental expenses and infrastructure spend and investments, legal costs primarily associated with resolved credits, and higher team member incentives.

Kevin Blair: We continue to closely monitor and manage our loan portfolio for any credit deterioration or systemic themes across industry and markets. Given current credit migration trends, assuming a relatively stable economic environment and considering the impact of certain large individual losses in late 2023 and early 2024, we expect net charge-offs to be flat to down in the second half of this year compared to 36 basis points in the first half of 2024. Moving to the tax rate, our current forecast points to an approximately 21% level as compared to 21 to 22% previously. Finally, our common equity tier one ratio is above our target range of 10 to 10.5%.

Kevin S. Blair: We continue to closely monitor and manage our loan portfolio for any credit deterioration or systemic themes across industry and markets.

Kevin S. Blair: Given current credit migration trends, assuming a relatively stable economic environment, and considering the impact of certain large individual losses in late 2023 and early 2024, we expect net charge-offs to be flat to down in the second half of this year, compared to 36 basis points in the first half of 2024.

Kevin S. Blair: Moving to the tax rate, our current forecast points to an approximately 21 percent level, as compared to 21 to 22 percent previously.

Kevin S. Blair: Finally, our common equity Tier 1 ratio is above our targeted range of 10 to 10.5%. Therefore, we will remain opportunistic with share repurchases to manage overall capital levels at or near the top end of this range.

Kevin Blair: Therefore, we will remain opportunistic with share repurchases to manage overall capital levels at or near the top end of this range.

Kevin S. Blair: Therefore, we will remain opportunistic with share repurchases to manage overall capital levels at or near the top end of this range. Prudent capital management remains our top priority to ensure we have a strong and liquid balance sheet, which is prioritized towards serving the growth needs of our clients, regardless of the economic environment. And now, Operator, this concludes our prepared remarks. Let's open the call for questions. Thank you very much. We will now begin the question and answer section. To ask a question, you may press star then one on your touch-tone phone.

Kevin Blair: Prudent capital management remains our top priority to ensure we have a strong and liquid balance sheet, which is prioritized towards serving the growth needs of our clients, regardless of the economic environment.

Speaker Change: Prudent capital management remains our top priority to ensure we have a strong and liquid balance sheet which is prioritized towards serving the growth needs of our clients, regardless of the economic environment. And now, Operator, this concludes our prepared remarks. Let's open the call for questions.

Operator: And now operator, this concludes our prepared remarks. Let's open the call for questions. Thank you very much. We will now begin the question and answer section. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. In the interest of time, please limit yourself to one question and one follow-up.

Operator: If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. In the interest of time, please limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble our roster. The first question is from the line of Ebrahim Poonawala, with Bank of America. Ebrahim, your line is now open. Please go ahead.

Speaker Change: Thank you very much.

Speaker Change: Thank you very much. We will now begin the question and answer section. To ask a question, you may press star then 1 on your touch tone phone.

Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. In the interest of time, please limit yourselves to one question and one follow-up. At this time, we will pause momentarily to assemble our roster.

Operator: At this time, I will pose momentarily to assemble our roster.

Ibrahim Hunawala: The first question is from the line of Ibrahim Hunawala with Bank of America, Ibrahim. Your line is now open. Please go ahead.

Speaker Change: Transcribed by https://otter.ai

Ebrahim Huseini Poonawala: The first question is from the line of Ebrahim Poonawala.

Speaker Change: With Bank of America, Ebrahim, your line is now open, please go ahead.

Ibrahim Hunawala: Thank you.

Ebrahim Huseini Poonawala: Thank you. Good morning. Good morning.

Ibrahim Hunawala: Good morning.

Ebrahim Huseini Poonawala: Yes, just around the comments on net interest margin expansion in the back half. If you could unpack that in terms of the drivers of margin expansion, obviously, the full quarter impacts on the bond book restructuring should help. But beyond that, just remind us in terms of the back book repricing and how NII evolves in the face of potential for rate cuts starting in September. Maybe if you could start there. Thanks, Ebrahim.

Ebrahim Huseini Poonawala: I guess just around the comments on net interest margin expansion in the back half.

Ebrahim Huseini Poonawala: Thank you. Good morning.

Ebrahim Huseini Poonawala: Good morning. Maybe I guess just around the comments on net interest margin expansion in the back half.

Jamie Gregory: If you could unpack that in terms of the drivers of margin expansion, obviously the full quarter impact on the one book restructuring should help. Thanks, Ebrahim. You know, when you look at the margin and the trajectory in the second half of the year, there are a few different moving parts. First, as you mentioned, the securities repositioning, we experienced about half of that benefit in the second quarter, and we'll experience another, the other half in the here in the third quarter. And so that's a tailwind to the margin this quarter. There is, as you know, a little bit of fixed rate asset reprivation.

Speaker Change: If you could unpack that in terms of the drivers of margin expansion, obviously the full quarter impact from the bond book restructuring should help.

Speaker Change: But beyond that, just remind us in terms of the back book repricing and how NII evolves in the face of potential for rate cuts starting in September , maybe if you could start there.

Andrew Jamie Gregory: You know, when you look at the margin in the trajectory for the second half of the year, there are a few different moving parts. First, as you mentioned, the security repositioning. We experienced about half of that benefit in the second quarter, and we'll experience another, the other half, here in the third quarter. And so that's a tailwind to the margin this quarter. There is, as you know, a little bit of fixed rate asset repricing as well in the third quarter, which is positive. But then there's a headwind due to average DDA balances. You can see that in the appendix.

Speaker Change: Thanks, Ebrahim. You know, when you look at the margin and the trajectory in the second half of the year, there are a few different moving parts.

Speaker Change: First, as you mentioned, the securities repositioning, we experienced about half of that benefit in the second quarter, and we'll experience the other half here in the third quarter. And so that's a tailwind to the margin.

Speaker Change: This quarter.

Jamie Gregory: We're facing as well in the third quarter; that's a positive. But then there's a headwind due to average DDA balances. You can see that in the appendix, we put average balances and end-of-period balances. And there will be a decline in average balance is just given the second quarter where that landed. And so that'll be a headwind to the margin and third quarter. But we expect margin expansion in the third quarter; we expect margin expansion again in the fourth quarter. And we expect to end the year. At or approaching a 330 margin, given with the assumption of a rate cut in December.

Speaker Change: There is, as you know, a little bit of fixed rate asset repricing as well in the third quarter that's a positive.

Speaker Change: But then there's a headwind due to average DDA balances. You can see that in the appendix. We put average balances and end-of-period balances, and there will be a decline.

Andrew Jamie Gregory: We put average balances and end-of-period balances in, and there will be a decline in average balances just given the second quarter where that landed. And so that'll be a headwind to the margin in the third quarter. But we expect margin expansion in the third quarter. We expect margin expansion again in the fourth quarter. And we expect to end the year at or approaching a 330 margin, given on the assumption of a rate cut in December. And just incrementally, if we get a series of rate cuts, Jamie, is that a drag on the name, at least in the short term? It is, it is.

Speaker Change: average balance is just given the second quarter where that landed and so that'll be a headwind to the margin in third quarter but we expect margin expansion in the third quarter we expect margin expansion again in the fourth quarter and we expect to end the year at or approaching a 330 margin given with the assumption of a rate cut in December.

Ibrahim Hunawala: Understood.

Jamie Gregory: And just incrementally, if you get a series of rate cuts, Jamie, is that a drag to the name, at least short term? It does, it does. So, for our guidance, we used the Fed dot plot from June.

Speaker Change: Understood. And just incrementally, if we get a series of rate cuts, Jamie, is that a drag to the name, at least short term?

Andrew Jamie Gregory: So for our guidance, we used the Fed's dot plot from June. But if you were to pivot to a September rate cut, which is more consistent with the forward curve today, there would be pressure on the margin in the month of September and October. And so let me just kind of unpack that a little bit, because this is an important question as we head into an easing cycle. In the period of time leading up to the ease, there is NEM pressure, which is minor, due to short rates declining in the expectation of an ease.

Jamie: It does. It does. So for our guidance, we used the Fed dot plot from June .

Jamie Gregory: But if you were to pivot to a September rate cut, which is more consistent with the Ford curve today, there would be pressure on the margin in the month of September and October. And so let me just kind of unpack that a little bit because this is an important question as we head into an easing cycle. In the period of time leading up to the ease, there is no pressure, which is minor due to short rates declining in the expectation of an ease. And so asset yields will decline. And there's really not an offsetting benefit to funding calls.

Speaker Change: But if you were to pivot to a September rate cut, which is more consistent with the forward curve today,

Jamie: There would be pressure on the margin in the months of September and October . And so, let me just kind of unpack that a little bit because this is an important question as we head into an easing cycle.

Jamie: In the period of time leading up to the ease, there is NIM pressure, which is minor, due to short rates declining in the expectation of an ease. And so asset yields will decline, and there's really not an offsetting benefit to funding costs.

Andrew Jamie Gregory: Then, once the ease happens, the margin will be pressured further as the majority of floating rate loans reprised down. Now, the full impact of the ease will flow through on the loans almost immediately, as the majority of our floating rate loans are one month rates or shorter. But that will be partially mitigated by the 13% of floating-rate loans that are hedged. And then when you're post easing, then you will start to see the benefit of reduced liability calls. And so, you have the asset reprising, but then the reduced deposit calls, reduced funding calls will come through.

Andrew Jamie Gregory: And so asset yields will decline, and there's really not an offsetting benefit to funding calls. Then, once the ease happens, the margin will be pressured further as the majority of floating rate loans reprice down. The full impact of the ease will flow through on the loans almost immediately as the majority of our floating rate loans are one-month rates or shorter.

Jamie: Then, once the ease happens, the margin will be pressured further as the majority of floating rate loans reprice down. The full impact of the ease will flow through on the loans almost immediately as the majority of our floating rate loans are one-month rates or shorter.

Andrew Jamie Gregory: But that will be partially mitigated by the 13% of floating loans that are HED. And then, you know, when you're post-easing, then you will start to see the benefit of reduced liability costs. And so you have the asset repricing, but then the reduced deposit costs, and reduced funding costs will come through, and we believe that that will neutralize the reduction in asset yields over the course of one to two months. And so, to be more specific around that, if you were to just compare a September and December ease, the forward curve relative to the Fed dot plot, which is a December ease, there's about a five to $7 million I mean, the NII impact between those two scenarios, and it's split between the second and the third quarter. I mean, the third and the fourth quarter, because it's September and October. That's extremely helpful.

Jamie: But that will be partially mitigated by the 13% of floatary loans that are hedged.

Jamie: And then, you know, when you're post-easing...

Jamie: Then you will start to see the benefit of reduced liability costs.

Jamie: And so, you have the asset repricing, but then the reduced deposit costs, reduced funding costs will come through, and we believe that that will neutralize the reduction in asset yields over the course of one to two months.

Jamie Gregory: And we believe that that will neutralize the reduction in asset yields over the course of one to two months.

Jamie Gregory: And so, to be more specific around that, if you were to just compare a September and December ease, the Ford curve relative to the Fed dot plot, which is a December ease, there's about a $5 to $7 million margin, I mean, a NII impact between those two scenarios, and a split between the second and the third quarter, I mean, the third and the fourth quarter because it's a September and October impact.

Jamie: And so, kind of to be more specific around that, if you were to just compare a September and December ease, the forward curve, relative to the Fed dot plot, which is a December ease,

Speaker Change: There's about a $5 to $7 million margin, I mean NII impact, between those two scenarios. And it's split between the second and the third quarter, I mean the third and the fourth quarter because it's a September and October impact.

Jamie Gregory: That's extremely helpful. And just the only other follow-up, Jamie, you mentioned stable deposit costs, second half, one, if you don't mind, give us an update on the pricing sort of competition in your market. You know, the positive pricing is playing out like we said in April. As we look at the outlook from here, we expect stable deposit calls through the remainder of the year. We feel good about our positioning here. We feel good about our production pipelines pricing. What we've seen in the marketplace is not necessarily an increase in competition, but we've seen more coalescing around rates and less volatility.

Ebrahim Huseini Poonawala: And just the only other follow-up, Jamie, you mentioned stable deposit costs, second half. One, if you don't mind, give us an update on the pricing sort of competition in your market. We had a peer of yours talk about intensity picking up, so I would love any color there.

Speaker Change: That's extremely helpful. And just the only other follow-up, Jamie.

Jamie: You mentioned stable deposit costs, second half.

Speaker Change: One, if you don't mind, give us an update on the pricing sort of competition in your markets. We had a peer of yours talk about intensity picking up, so we would love any color there.

Andrew Jamie Gregory: You know, deposit pricing is playing out like we said in April. As we look at the outlook from here, we expect stable deposit calls through the remainder of the year. We feel good about our positioning here.

Jamie: You know...

Jamie: The deposit pricing is playing out like we said in April . As we look at the outlook from here, we expect stable deposit calls through the remainder of the year.

Speaker Change: We feel good about our positioning here. We feel good about our production, pipelines, pricing. What we've seen in the marketplace...

Speaker Change: is not necessarily an increase in competition, but we've seen more coalescing around rates and less volatility between highs and lows. And it feels to us, like on the promotional rates.

Jamie Gregory: And the field to us, like on the promotional rate, that there's a concentration around, you know, if you look at CDs, a concentration around 5%, and you're not seeing a lot of the outliers that we were seeing early in the year; there were much higher. And it appears that the banking industry, it appears everybody is preparing for an easing cycle by shortening the duration, which is appropriate. And that's, you've seen that with us as well, where we have two thirds of our CD. We'll mature in six months. And so I feel like the industry is preparing for easing; the industry is shortening the duration of time deposits and kind of coalescing around market rate.

Andrew Jamie Gregory: We feel good about our production pipelines and pricing. What we've seen in the marketplace is not necessarily an increase in competition, but we've seen more coalescing around rates and less volatility between highs and lows. And it feels to us, like on the promotional rates, that there's a concentration around, you know, if you look at CDs, a concentration around 5%. And you're not seeing a lot of the outliers that we were seeing earlier in the year that were much higher.

Speaker Change: That there's a concentration around, you know, if you look at CDs, a concentration around 5%, and you're not seeing a lot of the outliers that we were seeing earlier in the year that were much higher.

Speaker Change: And it appears that the banking industry, it appears everybody is preparing for an easing cycle by shortening the duration, which is appropriate. And you've seen that with us as well, where we have two-thirds of our CDs that will mature in six months.

Andrew Jamie Gregory: And it appears that the banking industry, it appears everybody is preparing for an easing cycle by shortening the duration of the loans, which is appropriate. And that's, you've seen that with us as well, where we have two-thirds of our CDs that will mature in six months. And so I feel like the industry is preparing for easing. The industry is shortening the duration of time deposits and kind of coalescing around market rates. So it feels competitive but stable to us.

Speaker Change: And so, I feel like the industry is preparing for easing, the industry is shorting the duration of time deposits, and kind of coalescing around market rates.

Kevin S. Blair: So it feels competitive but stable to us.

Ebrahim Huseini Poonawala: And Ibrahim, just to put a data point behind Jamie's comments, our production rates for the quarter were 377, and we achieved kind of peak rates back in the fourth quarter of 23 at 382. So we've seen stable production yields quarter on quarter and actually a reduction versus where we ended last year. Extremely helpful. Thank you for taking the time.

Kevin Blair: And Ibrahim, just to put a data point behind Jamie's comments, our production rates for the quarter were 377. And we achieved kind of peak rates back in the fourth quarter of 23 at 382. So we've seen stable production yields quarter on quarter and actually a reduction versus where we end it last year. Excuse me.

Speaker Change: Competitive but stable to us. And Ebrahim, just to put a data point behind Jamie's comments, our production rates for the quarter were $3.77.

Ebrahim Huseini Poonawala: and we achieved kind of peak rates back in the fourth quarter of 23 at 382. So we've seen stable production yields quarter-on-quarter and actually a reduction versus where we ended last year.

Ibrahim Hunawala: Thank you for being with us.

Speaker Change: Extremely helpful. Thank you for taking my questions.

Ibrahim Hunawala: Thank you.

Operator: Thank you. Our next question is from Steven Alexopoulos with J.P. Morgan. Steven, your line is now open. Please go ahead. Good morning, everyone.

Stephen Alexopoulos: Our next question is from Stephen Alexopoulis with JP Morgan. Stephen, your line is now open. Please go ahead. Hi, good morning, everyone.

Speaker Change: Thank you. Our next question is from Stephen Alexopoulos with J.P. Morgan. Stephen, your line is now open. Please go ahead.

Stephen Alexopoulos: Good morning, Stephen. I want to start on the long road, the headwinds. Maybe could you, could you help us better understand what left in terms of the remaining headwind from rationalization efforts.

Steven A. Alexopoulos: Good morning, Steven. I want to start with, I want to start on, Long Road Head, Baby. Can you help us better understand what's left in terms of the remaining headwind from rationalization efforts? And then, Kevin, I thought you said that the creep payoffs would increase in the back half of the year. Maybe you could quantify that for us. And how far away do you think we are from when these cumulative headwinds are really behind the cut?

Steven A. Alexopoulos: Hi, good morning everyone.

Steven A. Alexopoulos: I want to start on the long road to headwinds.

Steven A. Alexopoulos: Maybe could you help us better understand what's left in terms of the remaining headwind from rationalization efforts?

Stephen Alexopoulos: And then Kevin, I thought you said that the creep payoffs would increase at the back after the year. Maybe could quantify that for us. And how far away do you think we are to what these cumulative headwinds are really behind the company in that strategic growth and other areas of growth for CNN start becoming the total low growth? Yes, Stephen. It's a great question because I think, to your point, when you assess the growth of loan outstanding, there's multiple components. And we've talked a lot about our ability to grow, predicated on increasing production. But, as you mentioned, there's a couple of things that are driving outstanding lower in the current environment.

Steven A. Alexopoulos: And then Kevin, I thought you said that.

Kevin S. Blair: The creep payoffs would increase in the back half of the year, maybe you could quantify that for us. And how far away do you think we are to where these cumulative headwinds are really behind the company and that strategic growth and other areas of growth we're seeing start becoming the total low growth?

Steven A. Alexopoulos: and that, you know, strategic growth and other areas of growth we're seeing start to become the total. Yeah, Steven, it's a great question because I think they're to your point. When you assess the growth of loan outstandings, there are multiple components. And we've talked a lot about our ability to grow predicated on increasing production. But, as you mentioned, there are a couple things that are driving outstanding levels lower in the current environment. First and foremost, we've been rationalizing some of our portfolios that either we think have lower returns or have a lower funding profile. And that specifically is senior housing, third-party consumer, and our National accounts. Thank you.

Speaker Change: Yes, Steven, it's a great question because I think they're, to your point, when you assess the growth of loan outstandings, there's multiple components, and we've talked a lot about our ability to grow predicated on increasing production, but as you mentioned, there's a couple things that are driving outstandings lower in the current environment. First and foremost,

Kevin Blair: First and foremost, we've been rationalizing some of our portfolios that either we think have lower returns or have a lower funding profile. And that specifically is senior housing; third party consumer are national account.

Kevin S. Blair: And when you look at those portfolios, we've run off about $2.3 billion in the last 12 months in those portfolios. That has reduced their total percentage of outstandings from 18% to 13%. And that's largely been accomplished. And so as we look forward, for senior housing national accounts, those balances will stay roughly flat.

Kevin Blair: Thank you. And when you look at those portfolios, and we've run off about $2.3 billion in the last 12 months in those portfolios, that has reduced their total percentage of outstanding from 18% to 13%. And that's largely been accomplished. And so, as we look forward for senior housing national accounts, those balances will stay roughly flat. And when you look at third party consumer, those are going to continue to decline just because we're not putting on a lot of new production. So I would say that the headwinds around rationalization and any loan sales, which, as you recall, we did the MOB sale, the medical office sale last year, that's largely done.

Speaker Change: National Accounts. Thank you. And when you look at those portfolios, and we've run off about $2.3 billion in the last 12 months in those portfolios.

Speaker Change: That has reduced their total percentage of outstandings from 18% to 13%.

Speaker Change: And that's largely been accomplished. And so as we look forward.

Speaker Change: for Senior Housing National Accounts, those balances will stay roughly flat.

Kevin S. Blair: And when you look at third-party consumers, those are going to continue to decline just because we're not putting on a lot of new production. So I would say that the headwinds around rationalization and any loan sales, which, as you recall, we did the MOB sale, the medical office sale last year, that that's largely done. So as you look into the future, our production levels are actually increasing. When you look at this quarter alone, we're at $1.3 billion in funded production, that was up 37% quarter on quarter and almost back to the levels we saw back in 2023.

Speaker Change: And when you look at third-party consumer, those are going to continue to decline just because we're not putting on a lot of new production. So I would say that the headwinds around rationalization and any loan sales, which as you recall, we did the MOB sale, the medical office sale last year, that's largely done.

Kevin Blair: So as you look into the future, our production levels are actually increasing. When you look at this quarter alone, we are at $1.3 billion in funded production. That was up 37% quarter-on-quarter. And almost back to the levels we saw back in 2023. So production is picking up. Our pipelines are up 8% quarter on quarter. So then the other question mark is to pay off and pay down activity. This quarter, as Jamie referenced, the pay off activity occurred more on the CNI side. It was the national accounts and senior housing. And we saw about $250 million of lower utilization on CNI.

Speaker Change: So as you look into the future, our production levels are actually increasing. When you look at this quarter alone, we are at $1.3 billion in funded production. That was up 37% quarter-on-quarter and almost back to the levels we saw back in 2023.

Kevin S. Blair: So production is picking up; our pipelines are up 8% quarter on quarter. So the other question mark is the payoff and pay down activity. This quarter, Jamie referenced the payoff activity occurred more on the CNI side; it was the national accounts and senior housing. And we saw about $250 million of lower utilization on CNI. From a CRE perspective, we don't expect the payoffs to really pick up this quarter, but rather in the fourth quarter. And that's just based on some of the maturities that we have.

Speaker Change: So production is picking up. Our pipelines are up 8% quarter on quarter.

Speaker Change: So then the other question mark is the payoff and pay down activity.

Kevin Blair: From a CRE perspective, we don't expect the payoffs to really pick up this quarter, but rather in the fourth quarter. And that's just based on some of the maturities that we have. To put it in context, we had about $570 million of pay off and pay down activity this quarter. That number could get us high to $900 million. So we're talking about $400 million-ish increase in pay off activity. And those are the headwinds. Now, again, that's predicated on some of the renewals.

Speaker Change: C&I. From a CRE perspective, we don't expect the payoffs to really pick up this quarter, but rather in the fourth quarter, and that's just based on some of the maturities that we have. To put it in context,

Kevin S. Blair: And to put it in context, we had about $3 or $570 million of payoff and pay down activity this quarter. That number could get as high as eight to 900 million. So we're talking about a $400 million-ish increase in payoff activity. And those are the headwinds.

Speaker Change: We had about $570 million of payoff and pay down activity this quarter.

Speaker Change: That number could get as high as $800 to $900 million, so we're talking about a $400 million-ish increase in payoff activity.

Kevin S. Blair: Now, again, that's predicated on some of the renewals. As we look into 2025, as we've shared in the past, we think a lot of those headwinds are completely abated, and we return to more of a normalized growth rate pending what the underlying economic environment looks like. That's terrific color.

Speaker Change: And those are the headwinds. Now, again, that's predicated on some of the renewals. As we look into 2025, as we've shared in the past, we think a lot of those headwinds are completely abated and we return to more of a normalized growth rate pending what the underlying economic environment looks like.

Stephen Alexopoulos: As we look into 2025, as we've shared in the past, we think a lot of those headwinds are completely abated, and we return to more of a normalized growth rate, pending what the underlying economic environment looks like. Okay, that's terrific color.

Stephen Alexopoulos: Maybe just for my follow-up question, thank you for that. In terms of the non-interest bearing deposits, right, there was a bit of excitement last quarter. When you guys talked about seeing, you know, a trough, maybe it's the ability of February, March, April, and then this quarter, the period of non-interest bearing came down quite a bit again. Could you walk us through what you ended up seeing there? It seems like they trended a bit down. Yeah, we had a good start to the quarter, and we saw some declines as the quarter progressed, and it was really relegated to our commercial operating accounts.

Steven A. Alexopoulos: That would be just for my follow-up question. In terms of the non-interest bearing deposits, right, there was a bit of excitement last quarter when you guys talked about seeing, you know, a trough maybe, a stability in February, March, April. And then this quarter, the period of non-interest bearing deposits came down quite a bit again. Did you walk us through what you ended up seeing there?

Speaker Change: Okay, that's terrific color.

Speaker Change: Maybe just for my follow-up question, thank you for that. In terms of the non-interest-bearing deposits, right, there was a bit of excitement last quarter when you guys talked about seeing, you know, a trough maybe and stability in February , March, April . And then this quarter, the period of non-interest-bearing came down quite a bit again.

Kevin S. Blair: Like they trended a bit. Yeah, it's you know, we had a good start to the quarter, and we saw some declines as the quarter progressed, and it was really relegated to our commercial operating accounts. And when you look at the average balance there, we're still running about 20% higher than the average balances were prior to the pandemic, so it still suggests that there's some sort of excess cash sitting on our commercial client balance sheets.

Speaker Change: Could you walk us through what you ended up seeing there? Because it seems like they trended a bit down.

Speaker Change: Yeah, it's, you know, we had a good start to the quarter and we saw some declines as the, as the quarter progressed, and it was really relegated to our commercial operating accounts.

Kevin Blair: And when you look at the average balance there, we're still running about 20% higher than what the average balances were prior to the pandemic. So, it still suggests that there's some sort of excess cash sitting on our commercial client balance sheets, and they're using it as maybe correlated to the reduction. And utilization, we continue to see our commercial clients use cash as rates decline, as we achieve kind of pre-pandemic levels, which we're getting closer to that. We think that diminishment will continue to decline, and ultimately the production and some augmentation that we're starting to see will offset that.

Speaker Change: When you look at the average balance there, we're still running about 20% higher than what the average balances were prior to the pandemic. So it still suggests that there's some sort of excess cash sitting on our commercial client balance sheets.

Kevin S. Blair: And they're using it as maybe correlated to the reduction in utilization; we continue to see our commercial clients use cash, as rates decline, as we achieve kind of pre-pandemic levels, which we're getting closer to that, we think that diminishment will continue to decline. And ultimately, the production and some augmentation that we're starting to see will offset that. So, I still expect to see some DDA remixing in the second half of the year, but the pace at which it's diminishing continues to decline.

Speaker Change: And they're using it. As maybe correlated to the reduction in utilization, we continue to see our commercial clients use cash.

Speaker Change: As rates decline, as we achieve kind of pre-pandemic levels, which we're getting closer to that, we think that diminishment will continue to decline. And ultimately, the production and some augmentation that we're starting to see will offset that.

Kevin Blair: So, still expect to see some DDA remixing in the second half of the year, but the pace at which it's diminishing continues to decline.

Speaker Change: Still expect to see some DDA remixing in the second half of the year, but the pace at which it's diminishing continues to decline.

Steven A. Alexopoulos: And Steven, one thing I would add to that is when you break it down, we have to Kevin's point on commercial, we've seen stability in retail DDA since the beginning of the year. Commercial, like a smaller commercial client, that is down, but it's only down slightly. And so, I feel like the stability is increasing, but it's going up market as we go through this. And so, that's what we're seeing, and one thing that helps us believe that it'll diminish in the second half of the year as well. Got it. Terrific. Thanks for taking my questions.

Andrew Jamie Gregory: And Steven, one thing I would add to that is, you know, when you break it down, we have, to Kevin's point on commercial, we've seen stability in retail DDA since the beginning of the year. Commercial, like the smaller commercial clients, that is down, but it's only down slightly. And so it's, I feel like the stability is increasing, but it's going up market as we go through this. And so that's what we're seeing. And we believe, you know, one thing that helps us believe that it'll diminish in the second half of the year as well. Terrific. Thanks for taking my questions.

Speaker Change: And Steven, one thing I would add to that is...

Steven A. Alexopoulos: You know, when you break it down, we have, to Kevin's point on commercial, we've seen stability in retail DDA since the beginning of the year.

Speaker Change: Commercial, like the smaller commercial clients.

Speaker Change: That is down, but it's only down slightly. And so it's, I feel like the stability is increasing, but it's going up market as we go through this. And so that's what we're seeing. And we, you know, one thing that helps us believe that it'll diminish in the second half of the year as well.

Speaker Change: Got it.

Stephen Alexopoulos: Thank you.

Speaker Change: Terrific. Thanks for taking my questions.

Jared Shaw: Our next question is from Jared Shaw with Barclays Capital. Jared, your line is now open. Please go ahead.

Operator: Thank you. Our next question is from Jared Shaw with Barclays Capital. Jared, your line is now open. Please go ahead. Good morning, everybody.

Speaker Change: Thank you.

Speaker Change: Our next question from Jared Shaw with Barclays Capital. Jared, your line is now open. Please go ahead.

Jared Shaw: Good morning, everybody. Maybe just quickly just following up on the margin of discussion, and you mentioned that we have half the benefit of the securities reposition. What was the what's the spot yield on the securities book at the end of the quarter going into going into third quarter? Jared, I don't have that handy. I mean, we were, you know, we're at 304 for the quarter itself. It's about a 40 basic point impact just due to the repositioning. But I don't have the spot yield at quarter end. Okay. That's fine.

Jared David Wesley Shaw: One. Maybe just quickly, just following up on the margin discussion, and you mentioned that we have half the benefit of the securities repositioning. What's the spot yield on the securities book at the end of the quarter going into the third quarter? Um, Jared, I don't have that handy.

Jared David Wesley Shaw: Good morning, everybody.

Jared David Wesley Shaw: Quickly just following up on the margin discussion, you mentioned that we have half the benefit of the securities repositioning, what's the spot yield on the securities book at the end of the quarter going into third quarter?

Andrew Jamie Gregory: I mean, we were, you know, we're at 304 for the quarter itself. It's about a 40 basic point impact just due to the repositioning, but I don't I don't have the spot yield at quarter end. Okay, okay, that's fine. And then looking at that credit, if you could give. Transcription by https://otter.ai, Model Assumptions, driving that, and

Speaker Change: Jared, I don't have that handy and we were, you know, we're at 304 for the quarter itself. It's about a 40 basic point impact just due to the repositioning. But I don't have the spot yield at quarter end.

Jared Shaw: And then looking at that credit, if you could give, you know, just a little more discussion around that, you know, it's great seeing sort of the confidence there in the longer, the bigger trends when you look at the driver of the lower ACL.

Speaker Change: Okay, okay, that's fine. And then, looking at credit, if you could give...

Speaker Change: You know, just a little more discussion around that. You know, it's great seeing sort of the confidence there and the longer, the bigger trends. When you look at the driver of the lower ACL, is that really loan level performance that you're

Andrew Jamie Gregory: Is that really loan level performance that you're feeling more comfortable with, or was there some change to the broader macro model assumptions driving that? And then. and you know, should we assume that, you know, we're sort of stable here at these levels, given the broader economic outlook.

Speaker Change: feeling more comfortable with, or was there some change to the broader macro model assumptions driving that? And then, you know, should we assume that

Jared David Wesley Shaw: Should we should assume that? We're sort of stable here at these levels, given the broader economic outlook. Yeah, Jared. It's Jamie again.

Speaker Change: We're sort of stable here at these levels, given the broader economic outlook.

Andrew Jamie Gregory: And by the way, there was 332 in June for Securities Yield. The allowance, when you look at that, the change quarter-on-quarter, it really was the macro drivers. You can see the waterfall in the appendix of the change.

Andrew Jamie Gregory: Yeah, Jared, this is Jamie again, and by the way, there was 332 in June for the security yield. The allowance, when you look at that, the change, court on court, it really was the macro job. You can see the waterfall and the appendix of the change. You know, forward looking, we feel good about the level where we are right now. And when you look at the components of the allowance, court on court, the performance in CRE continues to be very strong. And the allowance loan ratio for the quarter, life loan law assessment was down in CRE, you know, off a little bit in C&I.

Speaker Change: Yeah, Jared, this is Jamie again, and by the way, there was 332 in June for the securities yield. The allowance, when you look at that, the change quarter-on-quarter, it really was due to the macro drivers. You can see the waterfall in the appendix of the change.

Andrew Jamie Gregory: You know, forward-looking, we feel good about the level where we are right now. When you look at the components of the allowance quarter-on-quarter, the performance in CRE continues to be very strong. And the allowance-to-loan ratio for the quarter, the life-to-loan loss estimate was down in CRE, and it was up a little bit in CNI. So you see a little bit of shifts within the portfolios, but altogether, we would expect stability from here, given the economic outlook, as we continue to look at, you know, how the portfolio migrates going into the second half of the year.

Speaker Change: You know, forward-looking, we feel good about the level where we are right now. When you look at the components of the allowance, quarter-on-quarter,

Speaker Change: The performance in CRE continues to be very strong.

Speaker Change: And the allowance and loan ratio for the quarter, life and loan loss estimate was down in CRE and it was up a little bit in CNI. So you see a little bit of...

Jamie Gregory: So you see a little bit of shift within the portfolios, but all together, we would expect stability from here, given the economic outlook, as we continue to look at, you know, how the portfolio migrates going into the second half of the year.

Speaker Change: shifts within the portfolios.

Speaker Change: But altogether, we would expect stability from here, given the economic outlook.

Speaker Change: As we continue to look at how the portfolio migrates going into the second half of the year. I think, Jared, just to your broader question on credit, I think it was a solid quarter on all fronts. When you look at the data, net charge offs down 9 basis points, NPLs declined 22 basis points.

Andrew Jamie Gregory: I think, Jared, just to your broader question on credit, I think it was a solid quarter on all fronts. When you look at the data, net charge-offs declined 9 basis points, NPLs declined 22 basis points, and our FDMs declined $93 million. We only had $62 million of NPL inflows, and to Jamie's point, only a million of that was in CRE.

Kevin Blair: I think, Jared, just, you know, to your broader question on credit. I think it was a solid quarter on all fronts. When you look at the data, net charge all down nine basis points, NPLs decline, 22 basis points, our FDMs decline, $93 million. We only had $62 million of NPL inflows, and the Jamie's point, only a million of that was in CRE. And when you talk about the ACL, yet came down a bit, but our coverage to NPLs increased back to 210%. So all in all, I think it was a storyline that was broad-based, and as we've been talking about, as we look at the data and the underlying credit metrics, we're not seeing any additional deterioration.

Speaker Change: Our FDMs declined $93 million. We only had $62 million of NPL inflows, and to Jamie's point, only a million of that was in CRE.

Kevin S. Blair: And when you talk about the ACL, it came down a bit, but our coverage to NPLs increased back to 210 percent. So all in all, I think it was a storyline that was broad-based, and as we've been talking about, as we look at the data and the underlying credit metrics, we're not seeing any additional deterioration. In many ways, we're starting to see some improvement in some of the metrics, and so as we look into the next couple quarters, that's why we feel very comfortable about guiding flat to down in overall charge-offs. Our next question is from Manan Gosalia. With Morgan Stanley, Manan, your line is now open. Hi, good morning.

Jamie: And when you talk about the ACL, it came down a bit, but our coverage to NPLs increased back to...

Jamie: [inaudible]

Speaker Change: All in all, I think it was a storyline that was broad-based, and as we've been talking about, as we look at the data and the underlying credit metrics, we're not seeing any additional deterioration. In many ways, we're starting to see some improvement in some of the metrics, and so as we look into the next couple quarters, that's why we feel very comfortable about guiding flat to down in overall charge-offs.

Jared David Wesley Shaw: And in many ways, we're starting to see some improvement in some of the metrics. And so, as we look into the next couple of quarters, that's why we feel very comfortable about guiding flat to down in overall charge-offs. Great.

Jared Shaw: Thanks very much for the color.

Speaker Change: Great, thanks very much for the color.

Manan Gosalia: Our next question from Manan Guzalia. With Morgan Spanley, Manan, your line is now open.

Speaker Change: Our next question from Manan Gosalia.

Manan Gosalia: With Morgan Stanley , Manan, your line is now open.

Manan Gosalia: Hi, good morning. I wanted to ask on the expenses front. Can you expand a little bit on the drivers of the higher expense guide? And the number implies, I think, about a $315 million or so of expenses accord in the back off. So how do you think about that as a jumping-off point into 2025?

Operator: I wanted to ask on the expenses front, can you expand a little bit on the drivers of the higher expense guide? And the number implies, I think, about $315 million or so of expenses, according to the back half. So how do you think about that as a jumping off point into 2025? Thanks for the question, Manan.

Manan Gosalia: Hi, good morning.

Manan Gosalia: I wanted to ask on the expenses front, can you expand a little bit on the drivers of the higher expense guide? And the number implies, I think, about $315 million or so of expenses, according to the back half. So how do you think about that as a jumping off point into 2025?

Jamie Gregory: Thanks for the question, Manan. I would just start and say the baseline for the second quarter. I would use 306 million, which is just the expenses, excluding the FDFC reversal. And we are expecting the third quarter to be in the $310 million area, so not the $315 you mentioned. We expect that to be driven by increased personnel costs, and that's largely a day count issue. We do have some infrastructure projects spend; some of that's fraud detection, fraud prevention, pricing analytics, and then there are just simply some other inflationary impacts. And so it's about a 1% increase from the second quarter, getting to the $310 area, and we expect that to hold in the fourth quarter as well.

Manan Gosalia: You know, I would just start and say the baseline for the second quarter, I would use $306 million, which is adjusted expenses excluding the FDIC reversal. And we are expecting the third quarter to be in the $310 million area, so not the $315 you mentioned. We expect that to be driven by increased personnel costs, and that's largely a day count issue. We do have some infrastructure project spend, some of that is fraud detection, fraud prevention, pricing analytics, and then there are just some other inflationary impacts. And so it's about a 1% increase from the second quarter getting to the $310 area, and we expect that to hold in the fourth quarter as well.

Speaker Change: Thanks for the question, Manan. You know, I would just start and say the baseline for the second quarter, I would use $306 million, which is adjusted expenses excluding the FDIC reversal.

Speaker Change: And we are expecting the third quarter to be in the $310 million area, so not the $315 million you mentioned.

Speaker Change: We expect that to be driven by increased personnel costs, and that's largely a day count issue.

Speaker Change: We do have some infrastructure project spend, some of that's fraud detection, fraud prevention, pricing analytics.

Speaker Change: And then there are just simply some other inflationary impacts. And so it's about a 1% increase from the second quarter getting to the $3.10 area and we expect that to hold in the fourth quarter as well.

Andrew Jamie Gregory: And that's a good run rate for 2025. As we look at 2025, we do think that the expense rate will be a little more normalized. We will give an update on 2025 more at the end of the year. But, you know, we do expect expenses to be more normalized in 2025. And so, you know, 2024 benefited from a lot of the efforts that we did in 2023 with Synovus Ford. In the second half of the year of 2023, we had a lot of efficiency efforts that were very successful in reducing cost, improving efficiency, and reducing headcount. And those who benefitted this year.

Speaker Change: Got it. And that's a good run rate for 2025.

Speaker Change: As we look at 2025, we do think that expense rate will be a little more normalized. We will give an update on 2025 more at the end of the year.

Speaker Change: You know, we do expect expenses to be...

Speaker Change: More Normalized in 2025. And so, you know, 2024 benefited from a lot of the efforts we did in 2023 with Synovus Ford.

Speaker Change: In the second half of the year, in 2023, we had a lot of efficiency efforts that were very successful in reducing cost, improving efficiency, reducing headcount, and those benefited this year. I mean, when you think about the full year, 2024,

Andrew Jamie Gregory: I mean, when you think about the full year 2024, we're talking about up 2% if you use the midpoint of the guide, you know, excluding FDIC. And there are some large drivers in there of expense increases. We have about a 1% impact of simply merit, about a 1% impact of the consolidation of QualPay, and about a 1% impact of credit-related expenses. That's from the first half of the year. And with all of that, and every other inflationary impact, we're still guiding to a 2%, you know, 1 to 3% number. That feels pretty good.

Speaker Change: We're talking about up 2% if you do use the midpoint of the guide Rel, you know excluding FDIC

Speaker Change: And there are some large drivers in there of expense increases. We have about a 1% impact of simply of merit. About a 1% impact of the consolidation of QualPay. About a 1% impact of credit-related expenses from the first half of the year.

Manan Gosalia: But we do expect 2025 to likely be higher than that. Got it. I appreciate the color.

Speaker Change: And with all of that and every other inflationary impact, we're still guiding to a two percent, you know, one to three percent number. That feels pretty good. But we do expect 2025 to likely be higher, higher than that.

Andrew Jamie Gregory: And then separately on capital, your target CT1 is 10% to 10.5%. You're slightly above that. I think you're saying you want to manage to the higher end. What keeps you at the higher end of that 10% to 10.5% target? Is it the current uncertainty in the economy? Is it credit? What would drive you to move to the lower end or even below that 10% number? In isolation, we would drive to be there today.

Speaker Change: I appreciate the color. And then maybe separately on capital, your target CT1 is 10 to 10 and a half percent. You're slightly above that. I think you're saying you wanna manage to the higher end. What keeps you at the higher end of that 10 to 10 and a half percent target?

Speaker Change: Is it current uncertainty in the economy, is it credit, what would drive you to move to the lower end or even below that 10% number?

Andrew Jamie Gregory: It's just when you look at capital management, stress testing, and scenario analysis, that there's nothing quantitative that would drive you to the levels where we are now, or even to 10 to 10 and a half. You would actually likely run below that when we think about capital deterioration and severe adverse scenarios. But we believe it's prudent to operate with higher capital than the models would suggest because, just given one, there is uncertainty in the environment. But again, that wouldn't point you to the levels where we are today and, two, where peers are.

Speaker Change: In isolation, we would drive to be there today. It's just, when you look at capital management, stress testing, scenario analysis,

Speaker Change: That there's nothing quantitative that would drive you to the levels where we are now or even to ten to ten and a half You would actually likely run below that when we think about capital deterioration and severe adverse scenario

Speaker Change: But we believe it's prudent to operate with higher capital than the models would suggest.

Speaker Change: Just given, one, there is uncertainty in the environment.

Speaker Change: But again, that wouldn't point you to the levels where we are today.

Speaker Change: where peers are. And so if we've seen, one thing we've seen over the past few years

Speaker Change: In economic uncertainty and market uncertainty, we do believe that relative capital ratios to peers in uncertain times can lead to higher betas, and we think it's prudent to stay closer to peer levels.

Andrew Jamie Gregory: And so if we've seen, one thing we've seen over the past few years in economic uncertainty and market uncertainty, we do believe that relative capital ratios to peers in uncertain times can lead to higher betas, and we think it's prudent to stay closer to peer levels. And so while it's not quantitative, it's not due to uncertainty in the income statement, or it's not due to uncertainty in the balance sheet, we do think it's prudent to run at these higher levels in the current environment. Great, thank you.

Speaker Change: While it's not quantitative, it's not due to uncertainty in the income statement, it's not due to uncertainty in the balance sheet, we do think it's prudent to run at these higher levels in the current environment.

Speaker Change: Great, thank you.

Operator: Thank you. Our next question is from Brandon King with Truist Securities. Brandon, your line is now open. Hey, good morning. Good morning, Brandon.

Speaker Change: Thank you. Our next question is from Brandon King with Truist Securities. Brandon, your line is now open.

Brandon Thomas King: Hey, good morning.

Brandon Thomas King: Morning. Good morning. So capital markets were pretty strong in the quarter. And Jamie, you mentioned how you expected to stay elevated going forward, I guess, the rest of the year. So does that mean we'll still see, I guess, close to that 15 million run rate back half of the year? We do expect to see that continue. However, I would just qualify it by saying it is uncertain how it will play out quarter to quarter.

Brandon: Good morning Brandon. So capital markets was pretty strong in the quarter and Jamie you mentioned how you expected to stay elevated going forward I guess for the rest of the year. So does that mean we'll still see, I guess close to that $15 million run rate in the back half of the year?

Andrew Jamie Gregory: So I feel more confident in the total number in the second half of the year than being able to say it's a stable number quarter to quarter because, with our client base, with the uncertainty of the economy, with the uncertainty of the election, we do believe that it's likely that there are deals that will wait until the fourth quarter, and so that could back-end load the capital market's fee revenue. So again, we feel good about the total number.

Jamie: We do expect to see that continue. However, I would just qualify it with it is uncertain how it will play out quarter to quarter. So I feel more confident in the total number in the second half of the year than being able to say it's a stable number quarter to quarter because

Jamie: with our client base, with the uncertainty, with the economy, with the uncertainty, with the election.

Jamie: We do believe that it's likely that there are deals that will wait until the fourth quarter.

Brandon Thomas King: And so that could back-end load the capital market's fee revenue. So again, we feel good about the total number, just not certain how much will come through in Q3 and how much will come through in Q4. And Brandon, to add to the reason we feel comfortable with that, you know, as Jamie mentioned, we've been investing in

Andrew Jamie Gregory: I'm just not certain how much will come through in Q3 and how much will come through in Q4. And Brandon, to add to the reason we feel comfortable with that, you know, as Jamie mentioned, we've been investing in some of the capital market solutions for some time. And if I look back several years, I would say 80% of our revenue in capital markets came from the derivative side. But if I look at this quarter as a standalone basis, only 25% of the revenue came from derivatives. Almost 30% of the funds came from syndications and lead arranger fees.

Brandon Thomas King: Some of the capital market solutions for some time and I look back several years I would say 80% of our revenue and capital markets came from the derivative side I look at this quarter as a standalone basis only 25% of the revenue came from derivatives

Kevin S. Blair: We had almost a quarter of the revenue from DCM fees, a little over 10% in FX, and 10% in SBA. So it is so broad-based that it gives us the opportunity that we're not over-reliant on one particular area, and that's what gives us confidence that we'll be able to continue with this new kind of high water run rate. Okay, and that was actually my follow-up question, if you thought this was kind of a base to grow off of in 2025.

Brandon Thomas King: Almost 30% came from syndications and lead arranger fees. We had almost a quarter of the revenue from DCM fees.

Brandon Thomas King: A little over 10% in FX, 10% in SBA, so it is so broad-based that it gives us the opportunity that we're not over-reliant on one particular area, and that's what gives us confidence that we'll be able to continue with this new kind of high water run rate.

Speaker Change: Okay, and that was actually my follow-up question is if you thought this was kind of a base to grow off of in 2025 and beyond.

Brandon Thomas King: Yeah, I think this is and think about this: when we start to see loan production pick up again, the derivative income will pick up with it. So I think there's not only a run rate here, but there's a lot of growth that could come off this base. Okay, that's helpful.

Speaker Change: Yeah, I think, and think about this, when we start to see loan production pick up again, the derivative income will pick up with it. So I think there's not only a run rate here, but there's a lot of growth that could come off this base.

Brandon Thomas King: And then lastly, expectations around the broker deposit runoff. You had a decline in the quarter. Just how are you expecting that to trend in the back half of the year? You know, if we look at the back half of the year, we would expect to see that stable to declining. We saw some decent declines in the first half of the year, but I think we'll look to see how loan growth progresses in the second half of the year to really see how broker deposits will play out. But we probably would say stable to down. Okay. Thanks.

Speaker Change: Okay, that's helpful. And then lastly, expectations around deposit, broker-deposit runoff. You had a decline in the quarter. Just how are you expecting that to trend in the back half of this year?

Speaker Change: You know, as we look at the back half of the year, we would expect to see that stable to declining. We saw some decent declines in the first half of the year, but I think it's...

Speaker Change: We'll look to see how loan growth progresses in the second half of the year to really see how broker deposits will play out.

Speaker Change: We probably would say stable to down.

Speaker Change: OK. Thanks. Take my questions.

Speaker Change: Our next question is from Timur Braziler with Wells Fargo. Timur, your line is now open, please go ahead.

Operator: Our next question is from Timur Braziler. With Wells Fargo, Timur, your line is now open, please go ahead. Hi, good morning.

Timur Felixovich Braziler: Unknown Speaker 1-1-1, I guess I was a little bit surprised that the top end of the revenue guide was maybe guided down a little bit following the strong NII quarter and the momentum you're seeing on the P side. I guess maybe you could just talk us through some of the dynamics that could still net us to that kind of low end at that negative 3%, or maybe you have greater confidence given some of the results and expectations for the second half of the year, that revenue is going to be more or less flat for the year.

Timur Felixovich Braziler: Hi, good morning.

Timur Felixovich Braziler: and Timur.

Speaker Change: I guess. I wasn't...

Timur Felixovich Braziler: I guess I was a little bit surprised that the revenue guide, the top end of the revenue guide was

Timur Felixovich Braziler: Maybe guide it down a little bit following the strong NII quarter and the momentum you're seeing on the P side. I guess maybe just talk us through some of the dynamics that could still net us to that kind of low end at that negative 3% or maybe you have greater confidence given some of the results and expectations for the second half of the year that revenue is going to be more or less flat for the year.

Timur Felixovich Braziler: As we look at the second half of the year, the upside drivers to our guidance would be largely loan growth. And so you think about we took 1% off the top on loan growth, and that helped lead to the reduction of the top end on revenue growth. But when we look at the rest of the year, the high end of our revenue guide would be, one, a flat rate scenario, which would be accretive; two, it would be continued strength in fee revenue that outpaces the mid-single digits where we've given guidance, which is a possibility.

Speaker Change: As we look at the second half of the year...

Speaker Change: The upside drivers to our guidance would be largely loan growth. And so you think about we took 1% off the top on loan growth, and that helped lead to the reduction of the top end on revenue growth.

Speaker Change: But when we look at the rest of the year...

Speaker Change: The high end of our revenue guide would be, one, it could be a flat rate scenario, which would be accretive. Two, it would be continued strength and fee revenue that outpaces the mid-single digits where we've given guidance.

Timur Felixovich Braziler: Three, it would be increased loan growth. As Kevin mentioned, the assumptions in our guide include declines in CRE, and that is not something that we've seen year to date. It's not something that we expect to see necessarily in the third quarter, and so that could be a tailwind as well. And so I guess I would point to loan balances being one of the bigger drivers of the high end of the range in NII for the second half of the year. If you think about the lower end of the range...

Speaker Change: which is a possibility. Three, it would be increased loan growth. As Kevin mentioned,

Kevin S. Blair: The assumptions in our guide include declines in CRE, and that is not something that we've seen here to date. It's not something that we expect to see necessarily in the third quarter. And so that could be a tailwind as well. And so I guess I would point to loan balances.

Kevin S. Blair: being one of the bigger drivers to the high end of the range in NII for the second half of the year. If you think about the lower end of the range,

Andrew Jamie Gregory: I would say it would be in fee revenue; it could be deals getting pushed out and pushed into 2025, even though we don't expect that in fee revenue. But it would also be if there was more aggressive easing than what we have now, which is the December ease. But as I mentioned earlier, we think that if you just add a September ease, that's only a $5 to $7 million impact on NII in the second half of the year. Okay, great.

Kevin S. Blair: I would say it would be in fee revenue, it could be deals getting pushed out and pushed into 2025, even though we don't expect that in fee revenue.

Kevin S. Blair: But it would also be if there's more aggressive easing than what we have in there, which is the December ease, but as I mentioned earlier, we think that if you just had a September ease, that's only a $5 to $7 million impact to NII in the second half of the year.

Timur Felixovich Braziler: And as a follow-up, maybe you could just talk us through the strategy of reclassifying your available for sale bonds into health and maturity during the quarter, especially the longer duration bonds that were moved to HTM, kind of locking in that AOCI. Can you just maybe talk through the rationale and that change at this point in the rate cycle? Yeah, understood. The rationale was, first, that these were securities that were unlikely to ever be sold. Because they're longer in duration, they were deeper underwater.

Speaker Change: Okay, great.

Speaker Change: As a follow-up, maybe can you just talk us through the strategy of reclassifying?

Speaker Change: You're available for sale bonds into health and maturity during the quarter, especially it being longer duration bonds that were moved to HTM, kind of locking in that AOCI. Can you just maybe talk through the rationale and that change at this point in the rate cycle?

Andrew Jamie Gregory: And so the marks were large enough that it was unlikely there'd be a scenario where we would ever sell these securities. Second, as you know, we do not look at tangible common equity ratios as far as a risk management tool we use.

Speaker Change: Yeah. Understood. The rationale was...

Speaker Change: First, that these are securities that were unlikely to ever be sold. Because they're longer duration, they were deeper underwater, and so the marks were large enough that it was unlikely there'd be a scenario where we would ever sell these securities.

Speaker Change: Second.

Speaker Change: As you know, we do not.

Speaker Change: look at tangible common equity ratios as far as a risk management tool. We use regulatory capital ratios, we use NII volatility, things like that that kind of get to what people use tangible common equity for.

Andrew Jamie Gregory: We use regulatory capital ratios, we use NII volatility, things like that, that kind of get to what people use tangible common equity for the ratio of the AOCI impact of that. But we have seen the press and the street use tangible common equity volatility and AOCI frequently when they're comparing banks. And we thought it was prudent to take a little bit of that volatility off the table. When we moved them to held to maturity, there was approximately $700 million in unrealized losses associated with that portion of the securities portfolio.

Speaker Change: The ratio, the AOCI impact of that.

Speaker Change: But we have seen the press and the street use.

Speaker Change: Tangible Common Equity Volatility and AOCI.

Speaker Change: frequently when they're comparing banks. And we thought it was prudent to take a little bit of that volatility off the table. When we moved them to held to maturity, there was approximately $700 million in unrealized losses associated with that portion of the securities portfolio. And moving that

Andrew Jamie Gregory: And moving that to held to maturity reduced tangible common equity volatility of 100 basis points a rate move down from 75 basis points to around 50 basis points. And so we just think it's prudent to reduce the volatility in that ratio. The same thing can be said for CT1, including AOCI, even though we're not held to that standard.

Speaker Change: to help the maturity.

Speaker Change: Reduced Tangible Common Equity volatility of a 100 basis point rate move down from 75 basis points to around 50 basis points. And so, we just think it's prudent to reduce the volatility in that ratio. Same thing can be said for CET1 including AOCI, even though we're not held to that standard.

Speaker Change: And so, that was the general thought, that there was very little opportunity cost. These were not securities that we were likely to ever trade, and it would just reduce the volatility in TCE, as well as CT1, including AOCI.

Speaker Change: Thanks for that, Collin.

Andrew Jamie Gregory: And so that was the general thought, that there was very little opportunity cost. These were not securities that we were likely to ever trade, and it would just reduce the volatility in TCE as well as CT1, including AOCI. Our next question is from Michael Rose with Raymond James. Michael, your line is now open. Please go ahead. Hey, thanks for taking my questions. Just a few quick ones. Michael, are you there?

Speaker Change: Our next question is from Michael Rose with Raymond James. Michael, your line is now open, please go ahead.

Operator: Operator, why don't you let us... Our next question is from... Sorry. I was going to say, why don't you move on to the next caller and bring Michael back into the queue. Yeah. So, our next question is from Catherine Mieler with KBW. Catherine, your line is now open. Please go ahead. Thanks. Good morning.

Michael Edward Rose: Hey, thanks for taking my questions. Just a few quick.

Speaker Change: Michael, are you there?

Speaker Change: Our next question is from...

Speaker Change: Sorry.

Speaker Change: I was going to say, why don't you move on to the next caller and bring Michael back into the queue.

Speaker Change: Yeah, so our next question is from Catherine Mieler with KBW. Catherine, your line is now open. Please go ahead.

Catherine Mieler: I just wanted to follow up on the fee income discussion. And can you just kind of help us think broadly, not just about capital markets, but broadly about maybe the run rate that you're expecting in fees in the back half of the year? If we, if we're kind of, if we're trying to look around your mid single-digit growth range, then it would imply that your kind of core fee run rate is going back to around the first quarter level, which, you know, is a big pullback from what we saw this past quarter. And so just trying to think about, are you being conservative there?

Catherine Mieler: Thanks, good morning. I just wanted to follow back up on the fee income discussion and can you just kind of help us just broadly, not just capital markets, but broadly think about

Catherine Mieler: maybe the run rate that you're expecting in fees in the back half of the year. If we're trying to look around your mid-single-digit growth range, then it would imply that your kind of core fee run rate is going back to around the first quarter level, which

Kevin S. Blair: Or is there actually a case to be made that we could see closer to high single-digit growth? Calendars, we look at fee revenue growth, the mid single-digit range, you're right, is a little bit higher than the first quarter, but we expect the third quarter, again, the timing of the capital markets piece is the uncertainty. But in the second half of the year, we would expect to see similar fee revenue as what you've kind of seen, at or close to what you saw in the second quarter. Okay, so that does make the case that the revenue growth will be much higher than your data, which is great. Okay.

Speaker Change: You know, it's a big pullback from what we saw this past quarter. And so just trying to think about Are you being conservative there or is there actually a case to be made that we could see closer to high single-digit growth here?

Speaker Change: As we look at fee revenue growth, the mid-segment data range, you're right, is a little bit higher than the first quarter, but we expect

Speaker Change: The third quarter, again, the timing of the capital markets piece is the uncertainty. But in the second half of the year, we would expect to see similar fee revenue as what you've kind of seen, you know, at or close to what you saw in the second quarter.

Speaker Change: Okay, so that does make the case that the income growth

Kevin S. Blair: And then as you think about next year, what kind of longer-term growth rate and fees would you expect just given some of the momentum you're seeing in capital markets? I mean, I think if Catherine gets back to what we were saying earlier, obviously not giving her 25 guidance, but what we've been trying to build is a foundation around some of these core fee income revenue sources that will generate sustainable growth. And to your point, when you look at fee income this past quarter, it was up 15% year over year.

Speaker Change: will be much higher than your guidance.

Speaker Change: which is great. Okay. And then as you think about next year, what kind of longer term growth rate and fees do you, you know, would you expect just given some of the momentum you're seeing in capital markets?

Speaker Change: I mean, I think if Catherine gets back to what we were saying earlier, obviously not giving 25 guidance, but what we've been trying to build is a foundation around some of these

Speaker Change: Core Fee Income Revenue Sources That Will Generate Sustainable Growth and To your point when you look at fee income this past quarter It was up 15% year over year and that was a function of many different areas not just capital markets although capital markets

Kevin S. Blair: And that was a function of many different areas, not just capital markets, although capital markets had strong growth; we were up in core fees by about 4%. And that's largely a function of our treasury and payment solutions area. We've been growing at about 14% year over year and analyzing fee income.

Speaker Change: We were up in core fees about 4%, and that's largely a function of our treasury and payment solutions area. We've been growing at about 14% year-over-year in analyzed fee income.

Kevin S. Blair: We've also had growth in some of our other fee categories, like credit cards and other fee income. Remind you, there was a big headwind going into this year in wealth management. We had both repo revenue down, and that was a product that we were selling to a large municipality that no longer was using that solution.

Speaker Change: We've also had growth in some of our other fee categories like credit cards and other fee income.

Speaker Change: Remind you, there was a big headwind going into this year in wealth management. We had both...

Speaker Change: Repo Revenue Down, and that was a product that we were selling to a large municipality that no longer was using that solution, and that was providing just a $4 million, it's a total of $4 million headwind for the quarter, and we divested of our money management firm Global, and that was about $2.3 million. So when you think about our results today, you add in those headwinds along with a change in our underlying consumer account structure that minimizes insufficient funds, which also has a headwind. When you look out to 25, you're not going to have those. You're not going to have a headwind with NSF fees. You're not going to have repo headwinds. Global will be fully off the books, and there will be no comparability.

Kevin S. Blair: And that was providing just a $4 million headwind for the quarter, and we divested of our money management firm, Global, and that was about $2.3 million. So when you think about our results today, you add those headwinds along with a change in our underlying consumer account structure that minimizes insufficient funds, which also has a headwind. When you look out to 2025, you're not going to have those. You're not going to have a headwind with NSF fees. You're not going to have repo headwinds. Global will be fully off the books, and there'll be no comparability.

Catherine Mieler: So when we continue to have the performance in core banking fees, capital markets, and we get some of the growth in wealth again, I think you could see a growth rate that is, great, super helpful. And if I just get these for one more follow-up, just the other line, that's been about 18 million in the past couple of quarters. Is there anything kind of special that you see in that? Or do you think that's also a good run rate for the back half of the year?

Speaker Change: Thank you.

Speaker Change: Great, super helpful. And if I just scan feed for one more follow-up, just the other line that's been about $18 million in the past couple of quarters, is there anything kind of one time that you see in that, or do you think that's also a good run rate for the back half of the year?

Kevin S. Blair: There were some one-time benefits from some Oreo properties where we took some fee income from that, so that was elevated a little bit this past quarter, so I think that other revenue will come down a little bit and may be made up in some other categories. Great. Thank you for all the color.

Speaker Change: There were some one-time benefits from some Oreo properties where we took some fee income from that, so that was elevated a little bit this past quarter, so I think other will come down a little bit and may be made up in some other categories.

Speaker Change: Okay, great. Thank you for all the color.

Operator: Thank you. Our next question is from Michael Rose with Raymond James. Michael, your line is now open. Please go ahead.

Speaker Change: Thank you.

Speaker Change #100: Our next question is from Michael Rose with Raymond James. Michael, your line is now open. Please go ahead.

Michael Edward Rose: Okay, can you guys hear me now? Yeah. All right, perfect. Catherine actually just asked my question.

Michael Edward Rose: Okay, can you guys hear me now?

Operator: But just maybe one on the, I know it's minor, but you did have an inflection in criticizing and classifying. Can you just talk about broadly, you know, what that's composed of by category? And if you're starting to see migration, maybe more into CNI-type credits, where I think we're seeing an increased number of bankruptcies versus, you know, some of the earlier migration, and I assume office space, and I know you talked about transportation in the past, things like that. Are you seeing a broadening or shifting of any sort of migration there? Thanks. Yeah, hey Michael, it's Bob.

Michael Edward Rose: Yeah, and Michael.

Michael Edward Rose: All right, perfect. Catherine actually just asked my question, but just maybe one on the, I know it's minor, but you did have an inflection in criticize and classified. Can you just talk about broadly, you know, what that's composed of by category? And if you're starting to see migration,

Michael Edward Rose: maybe more into C&I type credits where I think we're seeing an increased number of bankruptcies versus, you know, some of the earlier migration and I assume office and I know you talked about transportation in the past, things like that. Are you seeing a broadening or shifting of any sort of migration there? Thanks.

Robert Warren Derrick: I just took a couple of comments on that. But the inflection was really on our past due ratio. We had a past due credit that settled and resolved and came off the list the first week of July.

Michael Edward Rose: Yeah, hang back a little, Bob. I just took a couple of comments on that, but...

Speaker Change #101: The inflection was really on our past-due ratio.

Speaker Change #102: A past due credit that settled and resolved and came off the list the first week of July , so that cleared. So that's the bulk of a spike in past dues. In terms of criticized and classified, we were relatively stable overall, around 3.7%.

Speaker Change #102: you know, again, that's that's a little bit of a moving target as you think about loans moving in and out of your watch list in and out of

Robert Warren Derrick: So that cleared. So that's the bulk of a spike in past dues. In terms of criticize and classify, we were relatively stable overall, around 3.7%. So, you know, again, that's a little bit of a moving target, as you think about loans moving in and out of your watch list, in and out of the criticized category. So there can be some volatility in that.

Speaker Change #102: Criticized Categories.

Speaker Change #102: There can be some volatility in that, but the general thought from our perspective is that the portfolio is accurately rated, the migration that was...

Speaker Change #102: Negative is still, you know, maybe, perhaps slightly negative bias, but I would say it's showing signs of stability. That gives us a lot of comfort in terms of our guidance. And then to your point,

Robert Warren Derrick: But the general thought from our perspective is that the portfolio is accurately rated, and the migration that was negative is still, you know, maybe perhaps slightly negative bias, but I would say it's showing signs of stability that gives us a lot of comfort in terms of our guidance. And then, to your point, as it relates to C&I and CRE. There's no question that we've seen the C&I stress come through, again, within our expectations, but the C&I stress comes through, which is a function, quite frankly, of just rates being this high for longer and the general inflation pressures on some of these leveraged corporate credits. From my perspective, the good news is that that list of challenges continues to get smaller. You couple that with, to your point around CRE, we haven't seen the defaults there.

Speaker Change #102: As it relates to C&I and CRE, you know, it...

Speaker Change #102: There's no question that we've seen the C&I stress come through, again, within our expectations, but the C&I stress come through, which is a function, quite frankly, of just rates being this high for longer and the general inflation pressures on some of these leveraged corporate credits.

Speaker Change #102: For my perspective, the good news is that that list of challenges continues to get smaller.

Speaker Change #103: And you couple that with, to your point around CRE, we haven't seen the defaults there. You know, we certainly have had one or two here or there, and we expect that over time. But quite frankly, to date, it's held up fairly well, to Kevin's point earlier.

Robert Warren Derrick: We certainly have had one or two here or there, and we expect that over time, but quite frankly, to date, it's held up fairly well, to Kevin's point earlier. And then, finally, our senior housing portfolio, which gave us some dings and scratches earlier on. You know, those macro figures in that industry continue to improve. Occupancy's better, rents are better, and labor costs have stabilized to some degree as well

Speaker Change #104: And then finally, our senior housing portfolio, which gave us, you know, some dings and scratches earlier on. You know, those macro...

Kevin S. Blair: figures in that industry continue to improve.

Kevin S. Blair: Occupancy is better, rents are better.

Robert Warren Derrick: So we kind of do all that calculus, and we come up with a feeling pretty good about where we are and feel pretty confident in guiding to flat to slightly down in charge-offs and feel pretty good about the position of the portfolio. The risk is, you know, the unknowns in C&I and if rates stay higher for longer, but it looks like that risk may potentially be beginning to come off the table as well. So we're getting a little more optimistic. That's a great color, Bob.

Kevin S. Blair: labor costs have stabilized to some degree as well. So we kind of do all that calculus and we come up and feel pretty good about where we are and feel pretty confident in guiding to, you know, flat to slightly down in charge offs and feel pretty good about the position of the portfolio.

Kevin S. Blair: The risk is, you know, the unknowns in C&I, and if rates stay higher for longer, but it looks like that risk potentially may be beginning to come off the table as well, so we're getting a little more optimistic.

Michael Edward Rose: And maybe just to follow up, and your last point kind of leads into it, is, you know, if we do get a couple rate cuts, I would assume that it is probably too early to call kind of a peak and criticize classified MPAs, things like that. But you could definitely make the case, I would think, right, that we would have peaked with a few, you know, rate cuts, barring the economy, you know, not getting really any worse. Is that fair?

Speaker Change #105: That's great color Bob and maybe maybe just to follow up and that your last point kind of leads into it is you know if we do get a couple rate cuts I would assume that you know probably too early to call kind of a peak and

Speaker Change #106: You know, criticize classified MPAs, things like that, but you could definitely make the case, I would think, right, that we would have peaked with a few, you know, rate cuts barring the economy, you know, not getting really any worse. Is that fair?

Robert Warren Derrick: Yeah, I think that's generally fair, Michael. I would, you know, a little bit of caution there would be, while criticized classified, that's a billion and a half dollars, right? So you know, it takes a fair amount to kind of move that number when you get into NPLs.

Bob: Yeah, I think that's generally fair, Michael. I would, you know, a little bit of caution there would be, you know, while criticized, classified, that's a billion and a half dollars, right? So, you know, it takes a fair amount to kind of move that number, you get into NPLs.

Michael Edward Rose: And we're sitting at 59 basis points.

Michael Edward Rose: Today, you know, there's some chunky credits in there. So you could have a quarter where it

Michael Edward Rose: moves up or moves down. Obviously, last quarter we had a big NPL that we spoke about on this call.

Robert Warren Derrick: And we're sitting at 59 basis points. Today, you know, there are some chunky credits in there. So you could have a quarter where it moves up or moves down.

Michael Edward Rose: You know we're back down to levels that we feel pretty good about and we quite frankly look ahead and don't see

Michael Edward Rose: You know, those chunks, as I mentioned, being quite as big, so that gives us some comfort. But you could still have some movement there. But the general trend line, we think, particularly to your point, as rates come down, should be, you know, positive for us.

Speaker Change #108: Perfect. I appreciate all the color. Thanks.

Robert Warren Derrick: Obviously, last quarter, we had a big NPL that we spoke about on this call. So, you know, we're back down to levels that we feel pretty good about. And we, quite frankly, look ahead and don't see those chunks, as I mentioned, being quite as big. So that gives us some comfort, but you could still have some movement there.

Speaker Change #108: Thank you, Michael. Thanks, Mark.

Speaker Change #109: Our next question is from Christopher Marinac with Janine Montgomery Scott. Christopher, your line is now open, please go ahead.

Robert Warren Derrick: But the general trend line, we think, particularly as to your point, as rates come down, should should be, you know, positive for us. Perfect. I appreciate all the color.

Christopher William Marinac: Thanks very much. Bob, just to continue your answer from the last question, do you see restructurings and CRE as possible solutions, or is it a little early for those? I'm just curious about other ways to see further progress on the criticized number.

Bob: Yeah, good morning, Chris. Thanks for the question. Yeah, I do. I mean, we certainly, as we've said before, I mean, our intention is to work with our clients.

Bob: you know, on coming up with solutions, if it needs to be restructured, then we certainly want to...

Bob: work towards a mutually agreeable structure. So I think that's, in a broad sense, certainly one of the tools in the toolbox. We will do that. We've done that. It's not an extend and pretend or whatever the...

Bob: [inaudible]

Bob: You know, Chris, we have one office loan on non-accrual today, so I mean, you know, we've got a few that are challenged and that are rated, certainly, and one or two that we're working through modifications on, and again, that'll give us some chunkiness in our

Bob: FDM Categories, etc., but for the most part, I think you're dealing with a handful of credits and we feel good about being able to work through them. But I do think it's a little early to say that's a play.

Chris: Okay, great. Thank you for that. And then the charge-off guidance has been very consistent for quite a while. I'm just curious if you see any risk to that as we, you know, head into, you know, the next few quarters, next year, etc.

Bob: You know, Chris, we spend a lot of time forecasting. I feel good about our forecast. I think we're

Chris: We're not, you know, there's a lot of calculus that goes into being comfortable to tell you that we think charge-offs will be, you know, flat to slightly down. So, you know, we feel good about that. And again, the reasons why, as we spoke about before, the list of corporate credits.

Chris: continues to get smaller, senior housing continues to improve, although we've still got one or two we're working through, but the macros are good there, and commercial real estate, to your earlier point, you know, continues to hold up well and probably

Chris: You know, comes out over a longer period of time, and you do all that math, add it all up, that kind of equals where we think we'll be and why we're comfortable with that type of guidance. The risk to that is you don't know what you don't know.

Chris: If rates stay up longer, and particularly in C&I.

Chris: You know, you could continue to see some pockets of stress, but I think they're isolated. I don't think they're in any particular industry. Just the general stress of higher rates being higher for longer could, you know, certainly could give you a surprise or two, but we feel pretty good about where we are right now.

Chris: Great Bob, thank you again for the background, much appreciated.

Michael Edward Rose: Thanks. Thank you, Mark. Thank you, Mark. Our next question is from Christopher Marinac with Jenny Montgomery Scott. Christopher, your line is now open. Please go ahead. Thanks very much.

Chris: Thanks, Chris.

Speaker Change #112: Our next question is from Samuel Varga with UBS. Samuel, your line is now open. Please go ahead.

Operator: Bob, just to continue your answer from the last question, do you see restructurings and CRE as possible solutions, or is it a little early for those? I'm just curious about other ways to see further progress on the criticized numbers. Yeah, good morning, Chris. Thanks for the question. Yeah, I do.

Speaker Change #113: Sam, are you there?

Speaker Change #116: www.synovusfinancial.com

Speaker Change #116: Alright Ezra, I don't think Samuel's there.

Christopher William Marinac: I mean, we certainly, as we've said before, our intention is to work with our clients to come up with solutions. If it needs to be restructured, then we certainly want to work towards a mutually agreeable structure. So I think that's, you know, in a broad sense, certainly one of the tools in the toolbox. We will. We will do that. We've done that.

Speaker Change #115: Oh, yeah. Yep.

Robert Warren Derrick: It's not a extend and pretend or whatever the, you know, common phrases you hear are, right from our perspective, it's let's come up with the right solution that I think it's a little early to your point, probably to make any kind of prediction on, on that specifically, as it relates to office, you know, we have, You know, Chris, we have one office loan on non-accrual today, so, I mean, you know, we've got a few that are challenged and that are rated, certainly, and one or two that we're working through modifications on, and, again, that'll give us some chunkiness in our, you know, FDM categories, et cetera. You know, for the most part, I think you're dealing with a handful of credits, and we feel good about being able to work through them. But I do think it's a little early to say that's a play.

Speaker Change #113: Samuel, your line is now open. Please go ahead.

Samuel Varga: Are you able to hear me now?

Christopher William Marinac: Okay, great. Thank you for that. And then the charge-off guidance has been very consistent for quite a while. I'm just curious if you see any risk to that as we head into the next few quarters, next year, etc. You know, Chris, we spend a lot of time forecasting. I feel good about our forecast. I think we're, you know, we're not, there's a lot of calculus that goes into being comfortable to tell you that we think charge-offs will be, you know, flat to slightly down.

Christopher William Marinac: So, you know, we feel good about that. And again, the reasons why. As we spoke about before, the list of corporate credits continues to get smaller. Senior housing continues to improve, although we've still got one or two we're working through. But the macros are good there.

Robert Warren Derrick: And commercial real estate, to your earlier point, continues to hold up well and probably, you know, comes out over a longer period of time. You do all that math, add it all up, and that kind of equals where we think we'll be and why we're comfortable with that type of guidance. The risk to that is you don't know what you don't know. And if rates stay up longer, and particularly in C&I, you could continue to see some pockets of stress. But I think they're isolated.

Samuel Varga: Yes, I can hear you.

Samuel Varga: Oh, perfect. Awesome. I'm sorry. I'm not sure what happened there. So I just wanted to circle back on the theme and go specifically to MAST.

Samuel Varga: It's been a long road for the project, and I wanted to get an update from you just about the strategic direction. You know, should we be still thinking about math as a revenue?

Samuel Varga: sort of meaningful revenue driver, or is it, you know, has it become a client acquisition tool? And that's how we should frame that for the story moving forward.

Christopher William Marinac: I don't think they're in any particular industry. Just the general stress of higher rates being higher for longer could, you know, certainly give you a surprise or two. But we feel pretty good about where we are right now. Great Bob, thank you again for the background. It is much appreciated. Our next question is from Samuel Varga with UBS. Samuel, your line is now open. Please go ahead. Pam, are you there? I don't think Samuel's there.

Samuel Varga: Yes, Samuel, I think it's still a meaningful revenue opportunity. What we've done over the last, really, six months.

Samuel Varga: is we've taken a step back, you know, we had...

Samuel Varga: Users on the platform, we had a very active pipeline.

Samuel Varga: And what we try to evaluate is, are our products that we're offering through the solution of the class that will allow us to continue to expand and have a scalable product?

Samuel Varga: And so we kind of took a step back and we're rebuilding some of the underlying functionality and capabilities within MAST.

Samuel Varga: We also are positioning it not as to as many clients and prospects, so we had 46 names in the pipeline. We're going to try to onboard far fewer and focus on larger clients and not just focus on the ISV segment, but also the ISO segment.

Samuel Varga: And so you'll hear more in the coming quarters as we relaunch the product with maybe a more surgical view of who the target audience is, but we still think it's going to be a viable solution.

Samuel Varga: That will not only allow us to generate fee income, but will also generate core deposits. So we'll talk more about it, but we're back kind of in the basement working on the products and solutions, and we'll be back out in the market later this year.

Operator: Oh, yeah. Yep. Samuel, your line is now open. Please go ahead.

Operator: Are you able to hear me now? Yes, I can hear you. Oh, perfect. Awesome. I'm sorry.

Samuel Varga: And let me jump back in on the fee revenue, and Katherine, you asked the question about the run rate for the second half of the year, and I said flat to the second quarter. I meant, I mean, flat to the second quarter. It's flat to the first half of the year.

Samuel Varga: I'm not sure what happened there. So I just wanted to circle back on the theme and go specifically to math. It's been a long road for the project, and I wanted to get an update from you just about the strategic direction. Should we still be thinking about math as a revenue, sort of meaningful revenue driver?

Kevin S. Blair: But we're back, kind of, in the basement, working on the products and solutions. And we'll be back out in the market later this year, and let me jump back in on the fee revenue. And Catherine, you asked the question about the run rate for the second half of the year. And I said flat to the second quarter. I meant, I mean, flat to the second quarter; it's flat to the first half.

Kevin S. Blair: Or has it become a client acquisition tool, and that's how we should frame that for the story moving forward? Yeah, Samuel. I think it's still a meaningful revenue opportunity. What we've done over the last, really, six months is we've taken a step back, you know, we had users on the platform, we had a very active pipeline, and what we tried to evaluate is are our products that we're offering through the solution of the class that will allow us to continue to expand and have a scalable product?

Kevin S. Blair: And so we've kind of taken a step back, and we're rebuilding some of the underlying functionality and capabilities within MAST. We also are positioning it, not as to many, but to many clients and prospects. So we had 46 names in the pipeline; we're going to, you know, try to onboard far fewer and focus on larger clients, and not just focus on the ISV segment, but also the ISO segment. And so you'll hear more in the coming quarters, as we relaunch the product, with maybe a more surgical view of who the target audience is, but we still think it's going to be a viable solution that will not only So we'll talk more about that later.

Andrew Jamie Gregory: And then just a quick follow up on capital. I guess you mentioned that, obviously, buybacks are firmly on the table. As there were this past quarter, could you just share your thought process around the tradeoff between doing more buybacks versus perhaps another smaller restructuring on the bond portfolio? When you look at further restructuring on the bond portfolio, the payback just gets longer and longer. The first one we did had about a three-year payback, and the second one had about a five-year payback. And it's just not that attractive to us at that duration when you get beyond there.

Speaker Change #117: And then just a quick follow-up around capital. I guess you mentioned that obviously buybacks are firmly on the table as they were this past quarter. Could you just share your thought process around the trade-off between doing more buybacks versus perhaps another smaller restructure on the bond portfolio?

Speaker Change #118: Well, when you look at further restructuring to the bond portfolio, the payback just gets longer and longer. The first one we did was about a three-year payback, and the second one was about a five-year payback. And it's just not that attractive to us at that duration when you get beyond there.

Samuel Varga: The one we just did was attractive just because of the capital generated from the risk-weighted asset optimization efforts. And so it's unlikely that we will do another repositioning of the securities portfolio. And we're very comfortable with capital ratios where they are. They're near our target at the high end of their range of $10.00 to $10.50. But you should expect to see us continue doing what we've done in the past, which is prioritize client growth, be ready for client growth when it comes, and grow the balance sheet. And, you know, if we're sitting here with excess capital, you should expect to see us use share repurchases to balance it out. Got it. Thanks for all the color.

Speaker Change #118: The one we just did was attractive just because of the capital generated from the risk-weighted asset optimization efforts.

Speaker Change #118: And so, it's unlikely that we will do another repositioning of the securities portfolio. And, you know, we're very comfortable with capital ratios where they are, you know, they're near our target of the high end of the range of 10 to 10.5.

Speaker Change #118: But you should expect to see us continue doing what we've done in the past, which is prioritize client growth, be ready for client growth when it comes, and grow the balance sheet. And, you know, if we're sitting here with excess capital, you should see us use share repurchases to balance it out.

Speaker Change #119: Thanks for all the color, appreciate it.

Andrew Jamie Gregory: I appreciate it. Thank you very much. This concludes our Q&A session. I would like to turn the conference back over to Mr. Kevin Blair for any closing remarks. Thank you.

Speaker Change #120: Thank you very much. This concludes our Q&A session. I would like to turn the conference back over to Mr. Kevin Blair for any closing remarks.

Kevin S. Blair: As we close out today's call, I'd like to thank you all for your attendance and your continued interest in Synovus. I'd also like to thank and recognize all of our team members who are listening in today. Our financial results that we presented this morning are a direct result of what you do daily to serve our clients and differentiate us from our competitors. During the second quarter, we did continue to receive national recognition for our work environment and service excellence. We earned a great place to work certification for the fourth year in a row. Additionally, our family office won two awards from the Family Wealth Report.

Kevin S. Blair: Thank you. As we close out today's call, I'd like to thank you all for your attendance and your continued interest in Synovus.

Speaker Change #121: I'd also like to thank and recognize all of our team members who are listening in today. Our financial results that we presented this morning are a direct result of what you do daily to serve our clients and differentiate us from our competitors.

Speaker Change #121: During the second quarter, we did continue to receive national recognition for our work environment and service excellence. We earned a Great Place to Work certification for the fourth year in a row. Our family office won two awards from the Family Wealth Report. Our Customer Care Center and team members were awarded several Best of the Best awards by Customer Contact Week.

Kevin S. Blair: Our Customer Care Center and team members were awarded several best of the best awards by Customer Contact Week. I am proud of our teams and the recognition of their efforts and the impact it has on delivering on our purpose to help people achieve their full potential. As we look forward to 2024 and we approach 2025, I am confident that we will sustain our momentum and see key improvements in our financial performance. This confidence is driven by the following facts. Our net interest margin and our net interest income dropped in the first quarter, with deposit prices peaking and future NEM expansion fully supported by our actions.

Speaker Change #121: I am proud of our teams and the recognition of their efforts and the impact it has on delivering on our purpose to help people achieve their full potential.

Speaker Change #121: As we look forward in 2024 and we approach 2025, I am confident that we will sustain our momentum and seek key improvement in our financial performance.

Speaker Change #121: This confidence is driven by the following facts. Our net interest margin and our net interest income dropped in the first quarter, with deposit prices peaking and future NEM expansion fully supported by our actions.

Kevin S. Blair: Our credit costs and our credit outlook have improved. Our fee income has hit a new high-water mark due to the broad-based success and execution. Expenses have been well-contained with flat year-over-year growth, and with an adjusted efficiency ratio of 53% this quarter, we continue to outperform our peers. In addition, our efforts to optimize the balance sheet to better position us for growth are largely complete. The benefits derived from risk-weighted optimization efforts allowed us in the second quarter to restructure the bond portfolio, which increased yields by roughly 50 basis points.

Speaker Change #121: Our credit cost and our credit outlook have improved. Our fee income has hit a new high-water mark due to the broad-based success and execution.

Speaker Change #121: Expenses have been well contained with flat year-over-year growth and with an adjusted efficiency ratio of 53% this quarter we continue to outperform our peers.

Speaker Change #121: In addition, our efforts to optimize the balance sheet to better position us for growth are largely complete. The benefits derived from risk-weighted optimization efforts allowed us in the second quarter to restructure the bond portfolio, which increased yields by roughly 50 basis points.

Kevin S. Blair: Our loan portfolio optimization efforts around third-party, medical office, national syndications, and senior housing have resulted in a reduction of $2.3 billion in outstandings over the last 12 months, reducing the percentage of loans in these categories from 18 to 13 percent.

Speaker Change #121: Our loan portfolio optimization efforts around third-party, medical office, national syndications, and senior housing have resulted in a reduction of $2.3 billion in outstandings over the last 12 months, reducing the percentage of loans in these categories from 18 to 13 percent.

Kevin S. Blair: Our capital levels are at eight-year highs, and these strong levels provide for additional flexibility and fuel for future growth. And lastly, we remain well-situated in a great footprint. Whatever the economic forecast is for the foreseeable future, we have the opportunity for relative outperformance. Look no further than the recently released Atlanta Fed research titled, Poised for More Growth, the Southeastern Economy is Outperforming the U.S.

Speaker Change #121: Our capital levels are eight-year highs.

Speaker Change #121: And these strong levels provide for additional flexibility and fuel for future growth. And lastly, we remain well situated in a great footprint. Whatever the economic forecast is for the foreseeable future, we have the opportunity for relative outperformance.

Speaker Change #122: Look no further than the recently released Atlanta Fed research titled Poised for More Growth, the Southeastern Economy is Outperforming the U.S.

Kevin S. Blair: So, yes, I'm optimistic about our future and our ability to drive meaningful and sustainable growth and improve profitability. And I look forward to future earnings calls to provide updates on our progress. In the meantime, we look forward to seeing many of our investors at upcoming meetings and scheduled conferences. So for now, Ezra, that concludes our second quarter 2024 earnings call. Thank you very much, everyone, for joining us. This concludes today's call. You may now disconnect your line.

Speaker Change #122: So, yes, I'm optimistic about our future and our ability to drive meaningful and sustainable growth and improve profitability, and I look forward to future earnings calls to provide updates on our progress. In the meantime, we look forward to seeing many of our investors in upcoming meetings and scheduled conferences.

Andrew Jamie Gregory: Services.

Operator: So for now, Ezra, that concludes our second quarter 2024 earnings call. Thank you very much, everyone, for joining. This concludes today's call.

Speaker Change #122: So, for now, Ezra, that concludes our second quarter 2024 earnings call.

Ezra: Thank you very much everyone for joining. This concludes today's call. You may now disconnect your lines.

Operator: You may now disconnect your lines.