Q3 2024 First Horizon Corp Earnings Call

Good morning, all and thank you for joining us at the 1st Horizon third quarter 2024 earnings conference call.

Unknown Executive: Horizon 3rd call to 2024 earnings conference call.

Carly: My name is Carly, and I'll be the call coordinator for today.

Carly: If you'd like to register a question during the call, please press star full up by one on your telephone keypad, and remove yourself not lying to questioning it is star full of by two.

Carly: My name is Carly and I will be the cool coordinator today. If you'd like to register a question during the call, please press star for up by one on your telephone keypad and to remove yourself not allowing the questioning get it started followed by two. I'd not like to hand over to your host, Natalie Flanders, head of IR to begin. For Results.

Natalie Flanders: I'd now like to hand over to your host, Natalie Flanders, Head of IR, to begin. For us, yours.

Natalie Flanders: Thank you, Carly.

Brian Jordan: Good morning. Welcome to our third quarter 2024 results conference call. Thank you for joining us. Today our chairman, president and CEO, Brian Jordan, and chief financial officer, Hope Dmuchowski, will provide prepared remarks, after which we'll be happy to take your questions. We're also pleased to have our Chief Credit Officer, Thomas Hung, here to assist with questions as well. Our remarks today will reference our earnings presentation, which is available on our website at ir.firsthorizon.com.

Natalie Flanders: Thank you, Carly. Good morning. Welcome to our third quarter 2020 solar results conference call. Thank you for joining us.

Natalie Flanders: Today, our Chairman, President and CEO Brian Dorden and Chief Financial Officer, Hope Dmuchowski, will provide prepared remarks after which we'll be happy to take your questions.

Natalie Flanders: We're also pleased to have our Chief Credit Officer Thomas Hunt here to assist with questions as well.

Natalie Flanders: Our remarks today will reference our earnings presentation, which is available on our website at IR.versurizing.com

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

Natalie Flanders: As always, I need to remind you that we will make forward-looking statements that are subjects to risks and uncertainties.

Natalie Flanders: Therefore, we ask you to review the factors that may cause our results to differ from our expectations on page 2 of our presentation and in our SEC filings.

Natalie Flanders: Additionally, please be aware that our comments will refer to adjusted results, which exclude the intact of notable items.

Natalie Flanders: These are non-gap measures, so it's important for you to review the gap information in our earnings release and on page 3 of our presentation.

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

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

Brian Jordan: And with that, I'll turn things over to Brian. Thank you, Natalie. Good morning, everyone. Thank you for joining our call.

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

Brian Jordan: Before we get into the details of the quarter, I want to express our concern and support for those who were impacted by Hurricane Helene and milk. I mean, credit will be proud of our team. Our team prepared for and responded to the needs of our associates, clients, and communities. We were on the ground immediately providing food, water, fuel, and other essential supplies. In North Carolina, in Tennessee, all but one of our banking centers are back open, with mobile banking units on-site there to provide continuous banking services to our clients. Florida is in the early stages of recovery, but our banking centers fared well, and all are open at this time.

Brian Dorden: Before we get into the details of the quarter, I want to express our concern and support for those who were impacted by hurricane saline and milk. I'm incredibly proud of our team prepared for and responded to the needs of our associate's client and communities.

Brian Dorden: We were on the ground immediately providing food, water fuel and other essential supplies.

Brian Dorden: In North Carolina in Tennessee, all but one of our banking centers are back open.

Brian Dorden: With mobile banking units on site there provide continuous banking services to our clients.

Brian Dorden: Florida is in the early stages of recovery, but our banking centers fared well and all are open at this time.

Brian Jordan: We've also announced financial commitments to the restoration of these communities and will remain heavily engaged in the rebuilding process.

Brian Dorden: We've also announced financial commitments to the restoration of these communities and will remain heavily engaged in the rebuilding process.

Brian Jordan: On slide five, we've shared some of the financial highlights for the quarter. First Horizon delivered another strong quarter for our shareholders as we grew revenue, maintained expense discipline, improved credit coverage, and continued to generate capital. Our results is quarter reflect the strength of our diverse five business model and our continued focus on growing and deepening client relationships. We achieved an adjusted EPS of 42 cents per share, which was a six-cent increase from the prior quarter. Pre-provisioned net revenue increased 11 million dollars, improving our adjusted return on tangible common equity at 13.2 percent. We continue to deploy capital through share reports.

Brian Dorden: on SWATF.

Brian Dorden: We've shared some of the financial highlights for the quarter.

Brian Dorden: First rise and deliver to another strong quarter for our shareholders as we grew revenue, maintained expense discipline, improved credit coverage, and continue to generate capital.

Brian Dorden: A result is quarter reflect the strength of our diverse five business model and our continued focus on growing and deepening client relationships.

Brian Dorden: We had achieved an adjusted EPS 42 cents per share, which was a six-set increase from the prior quarter.

Brian Dorden: Pre-provision net revenue increased $11 million, and proving our adjusted return on tangible common equity to 13.2%.

Brian Jordan: purchases, buying back 75 million of stock in the third quarter, and over $440 million year-to-date. We ended the quarter with a Common Equity Tier 1 ratio of 11.2 percent. Our results continue to demonstrate the benefit of our discipline credit culture, as we are proud of the dedication of our bankers that our bankers display in serving our clients and communities throughout the Southeast. I believe we are well positioned to capitalize on our attractive footprint and opportunities to grow along with these markets.

Brian Dorden: We continue to deploy capital through share repurchases.

Brian Dorden: Find back 75 million of stock in a third quarter and over $440 million year to date.

Brian Dorden: We ended the quarter with a common equity tier 1 ratio of 11.2%.

Brian Dorden: Our results continue to demonstrate the benefit of our discipline credit culture. As we saw just 24 million or 15 basis points of net charge else's quarter.

Brian Dorden: I'm proud of the dedication of our bankers to display and serving our clients and communities throughout the Southeast.

Brian Dorden: I believe we are well positioned to capitalize on our attractive footprint and opportunities to grow along with these markets.

Brian Jordan: As we head in the next year, I remain incredibly optimistic that our franchise is fully equipped to navigate any economic environment we encounter, while continuing to enhance shareholder value.

Brian Dorden: As we head in the next year.

Brian Dorden: I remain incredibly optimistic that our franchise is fully equipped and navigate any economic environment we encounter while continuing to enhance sureholder value.

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

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

Hope Dmuchowski: Thank you, Brian.

Hope Dmuchowski: Good morning, everyone. On 5-6, you will find our adjusted financials and key performance metrics for the quarter. We generated an adjusted earnings per share of 42 cents, a 6 cents increase from the prior quarter. Pre-provisioned net revenue improved by 11 million from last quarter. Largely due to strong performance from our fixed income business, while our net interest income and adjusted expenses remained essentially flat. We continue to see solid credit performance from our portfolio, with net charge off the 15 basis points and 35 million of provision expense. ACL coverage increased modestly to 1.44 percent, including 8 million of qualitative reserves for potential losses related to Hurricane Helene.

Hope Dmuchowski: Thank you, Brian. Good morning, everyone. On five six, you will find our adjusted financial and key performance metrics for the quarter. We generated adjusted earnings per share of 42 cents, a six cents increase from prior quarter.

Hope Dmuchowski: Free Provision, Net Revenue, improved by 11 million from last quarter.

Hope Dmuchowski: largely due to strong performance from our fixed income business, while our net interest income and adjusted expenses remained essentially flat.

Hope Dmuchowski: We continue to see solid credit performance from our portfolio with net charge off the 15 basis points and 35 million of provision expense.

Hope Dmuchowski: ACL coverage increased modestly to 1.44 percent, including 8 million a qualitative reserve for potential losses related to hurricane healing.

Hope Dmuchowski: The improved revenue and lower reserve build drove an increase in our adjusted return on tangible common equity to 13.2 percent. Our CET-1 ratio increased to 11.2 percent, modestly above our 11 percent near-term target, driven by lower than expected risk-weighted assets due to a late in the quarter portfolio sale. On 5-7, we outline a couple of notable items in the quarter, which reduced results by 2 cents per share. Third quarter, pre-tax notable items include a $2 million credit to expenses that was true to the FDI special assessment accrual, a $15 million of visa derivative valuation expenses related to the escrow funding that occurred in September, and lastly, $2 million of restructuring expenses associated with the operational efficiencies we have continued to identify.

Hope Dmuchowski: The improved revenue and lower reserve build drove an increase in our adjusted return on tangible common equity to 13.2%.

Hope Dmuchowski: Our CET-1 ratio increased to 11.2%, modestly above our 11% near-term target, driven by lower than expected risk-wated assets due to a late-in-the-quarter portfolio sale.

Hope Dmuchowski: On 5-7th.

Hope Dmuchowski: We outlined a couple of notable items in the quarter, which reduced results by two sets per share. Third quarter, free-tax notable items include a $2 million credit to expenses that was screwed up to the FDI special assessment approval.

Hope Dmuchowski: A $15 million of these other derivatives valuation expenses related to the Esqueror funding that occurred in September And lastly, 2 million of restructuring expenses associated with the operational efficiencies we have continued to identify

Hope Dmuchowski: All of this totals an $11 million reduction to net income. On 5-8, you will see that NII of $631 million was relatively stable to the prior quarter, benefiting slightly from a higher day count. The net interest margin compressed seven basis points from last quarter to 3.31 percent, with better asset yields partially offsetting higher deposit costs. The increase in average deposit costs was driven by higher use of broker deposits, as well as acquisition costs on the 1 billion of new client groups. Lone Eels expanded three basis points from second quarter, benefiting from new and renewing floating rate spreads and repricing of fixed rate cash flows.

Hope Dmuchowski: All of this totals an 11 million dollar reduction to net income.

Hope Dmuchowski: On slide 8, you will see that NI of 631 million was relatively stable to the prior quarter, benefiting slightly from a higher-day count.

Hope Dmuchowski: The net interest margin can press 7 basis points from last quarter to 3.31%, with better asset yields partially offsetting higher deposit costs.

Hope Dmuchowski: The increase in average deposit cost was driven by higher use of broker deposit as well as acquisition cost on the 1 billion of new client growth.

Hope Dmuchowski: Low kneels expanded three bases points from second quarter benefiting from new and renewing floating rate spreads and repricing a fixed rate cash flow.

Hope Dmuchowski: As we move into the fourth quarter, we expect modest margin contraction due to the lag between the loan and deposit repricing. On slide nine, we take a closer look at our strong deposit group. Period and balances increased 3% with client acquisition driving almost 1 billion of growth. We are also pleased to see that non-interest bearing balances had continued to remain relatively stable over the last few quarters. The average rate paid on interest bearing deposits increased to 3.44% from the 3.35% spot rate we saw at the end of June. This was driven in part by the higher use of broker deposits, as seasonality in loan to mortgage companies drove a higher need for funding.

Hope Dmuchowski: As we move into the fourth quarter, we expect modest margin contraction due to the lag between the loan and deposit repricing.

Speaker Change: On FLY 9, we take a closer look at our strong deposit group.

Speaker Change: Period N balances increased 3% with quiet acquisition driving almost 1 billion of growth.

Speaker Change: We are also pleased to see that non-interest bearing balances have continued to remain relatively stable over the last few quarters.

Speaker Change: The average rate paid on interest bearing deposits increased to 3.44% from the 3.35% spot rate we saw at the end of June.

Speaker Change: This was driven in part by the higher use of Berber's deposits as seasonality in London mortgage companies drove a higher need for funding.

Hope Dmuchowski: The deposit costs are already beginning to improve, with the interest bearing spot rate declining to approximately 3.33% by the end of September, partially due to the 9 billion of deposits which are market indexed. Deposit rates had declined another 5 basis points in October, with a spot rate today of 3.28%. We will continue to make progress on repricing the deposit portfolio as we have approximately 18 billion of promotional deposits that are set to reprise over the remaining of the year, in addition to 1 billion of brokerage CDs that are maturing.

Speaker Change: The posit calls are already beginning to improve, but the interest-faring spot rate declining to approximately 3.33% by the end of September partially due to the 9 billion of the products which are market-indexed.

Speaker Change: The positive rates have declined another five basis points in October with a spot rate today of 3.28%.

Speaker Change: We will continue to make progress on re-pricing the deposit portfolio as we have approximately 18 billion of promotional deposits that are set to reprise over the year in addition to 1 billion of brokered CDs at a maturing.

Hope Dmuchowski: On slide 10, we have an overview of loans. The average loans were up 1% from the prior quarter, driven by seasonality in loans to mortgage companies. Period and loans declined 1% or 335 million from last quarter. This included an opportunistic sale of approximately 340 million as we exited the sponsored healthcare lending vertical. The portfolio consisted of approximately 20 relationships of higher leverage low past graded healthcare loans. We do not have the intent to sell any other loan portfolios in the foreseeable future. After a fund up as after a period of fund up in our commercial real estate portfolio, the balances in this portfolio have stabilized.

Speaker Change: On Flight 10 we have an overview of what it is.

Speaker Change: Average loans were up 1% in the prior quarter driven by seasonality and loans to mortgage companies.

Speaker Change: Period N1 declined 1% or 335 million from last quarter. This included an opportunistic sale of approximately 340 million as we exited the sponsored healthcare lending vertical.

Speaker Change: The portfolio consisted of approximately 20 relationships of higher leverage, low-pass-graded health care levels.

Speaker Change: We do not have the intent to sell any other local portfolios in the foreseeable future.

Speaker Change: After a fund-up, and after a period of fund-ups, in our commercial real estate portfolio, the balance isn't as portfolio has stabilized.

Hope Dmuchowski: As previously mentioned, loan yields are up 3 basis points from second quarter due to wider spreads and fixed cash flow repricing. As we move into the fourth quarter, loan yields are likely to decline as 56% of our loan portfolio is indexed to short-term rates.

Speaker Change: As previously mentioned, Lone Yield wrote three bases points from second quarter due to wider spread and fixed cash flow repricing.

Speaker Change: As we move into a fourth quarter, low meals are likely to decline as 56% of our loan portfolio is indexed to short-term rates.

Hope Dmuchowski: On slide 11, we highlight the increase in fee revenue we saw in the quarter. The income excluding the third compensation increased 11 million from the prior quarter. Average daily revenue in our fixed income business improved 22% to 593,000, driving a 7 million increase in fee income. July was a relatively muted month; however, as the market's confidence and rate cuts increased, we saw increasing momentum in the business in both August and September. Lastly, other non-interest income increased $5 million due to some non-occurring items, including securities and other gains, higher Federal Home Loan Bank dividends, and bully benefits.

Speaker Change: On Slide 11, we highlight the increase in fee revenue we saw in the quarter.

Speaker Change: See income, excluding deferred compensation, increased 11 million from the prior quarter.

Speaker Change: Average daily revenue in our fixed income business improved 22% to 593,000, driving a 7 million increase in fee income.

Speaker Change: July was a relatively muted month, however, as the market's competence and rate cuts increased, we saw increasing momentum in the business in both August and September.

Speaker Change: Lastly, other non-interest income increased $5 million due to some non-recurring items, including securities and other gains, higher federal home loan banks, dividends, and boli benefits.

Hope Dmuchowski: On July 12, we showed that excluding deferred compensation, adjusted expenses decreased by $1 million. Personnel excluding deferred comp was down $1 million from prior quarter, as a reduction in incentives and commissions offset the impact of a higher day count on salary expense and elevated medical expense. The $2 million reduction to incentives included the continued step down in retention awards that took place at the end of the second quarter and outweigh the incremental incentives associated with the higher fixed income production. We are constantly evaluating options to improve operational efficiency. This quarter, we implemented two items that impacted headcount.

Speaker Change: On slide 12, we show that excluding the first compensation, adjusted expenses decreased by 1 million.

Speaker Change: Personal excluding the third comp with down 1 million from prior quarter, as a reduction in incentives and commissions offset the impact of a higher-day count on salary expense and elevated medical expense.

Speaker Change: The two million reduction to incentives included the continued step down and retention award that took place at the end of the second quarter and outweigh the incremental incentives associated with the higher fixed income production.

Speaker Change: We are constantly evaluating options to approve operational efficiency.

Hope Dmuchowski: First, we optimized the retail staffing model across our footprint to more efficiently serve our clients. We also recently outsourced our property management functions, which lowered headcount and salary expense, but will be offset by some incremental occupancy costs. We expect this to make our building support more efficient while providing a better experience for our clients and associates. Moving down to occupancy and equipment, there was a 2 million increase driven by our new property management engagement, as well as incremental software maintenance and appreciation from our strategic initiatives. Offsetting the increase is a 2 million reduction to outside services, driven by lower advisory services as certain strategic initiatives enter the production phase.

Speaker Change: This quarter we implemented two items that impacted headcount. First, we optimized the retail staffing model across our footprint to more efficiently serve our clients.

Speaker Change: We also recently outsourced our property management functions, which lowered head count as salary spent, but will be offset by some incremental occupancy costs.

Speaker Change: We expect this to make our building support more efficient while providing a better experience for clients and associates.

Speaker Change: Moving down to occupancy and equipment, there was a two million increase driven by our new property management as well as incremental software maintenance and appreciation from our strategic initiatives.

Speaker Change: All setting the increase is a 2 million reduction to outside services, driven by lower advisory services as certain strategic initiatives enter the production space.

Hope Dmuchowski: Our cover credit on slide 13, which continues to perform very well, net charge off decreased by 10 million to 24 million, or 15 basis points of average loans. Loan loss provision was 35 million this quarter, increasing ACL coverage to 1.44%. The 11 million of reserve bills included 8 million of qualitative reserves related to Hurricane Helene, as well as the impact of continued grade migration, which was partially offset by improved economic scenarios. Non-performing loans increased 4 million, with an increase in CNI slightly exceeding declines in consumer and commercial real estate. We remain optimistic that our clients can navigate to a soft landing at 63% of commercial MPLs are still current on their payment.

Speaker Change: I'll cover credit on slide 13 which continues to perform very well.

Speaker Change: Net Charge Off Decreased by 10 million to 24 million or 15 basis points of average loans.

Speaker Change: Hello lost revision was 35 million this quarter, increasing ACL coverage to 1.44%.

Speaker Change: The 11 million of reserve bills include 8 million of qualitative reserves related to hurricane halene, as well as the impact of continued grade migration, which was partially offset by improved economic scenarios.

Speaker Change: Not performing allowance increased 4 million, with an increase in CNI, slightly exceeding decline in consumer and commercial real estate.

Speaker Change: We remain optimistic that our clients can navigate to a soft landing at 63% of commercial MPLs are still current on their payment.

Hope Dmuchowski: Overall, we are very pleased with the continued strength of our portfolio through a high rate environment and expect to see continual improvement if rates do continue to decline.

Speaker Change: Overall, we are very pleased with the continued strength of our portfolio through a high rate environment and expect to see continual improvement if rates do continue to decline.

Hope Dmuchowski: On slide 15, we'll talk through our outlook for the remainder of the year. What we have laid out here is consistent with the guidance we gave last quarter, though we are now focusing more on total revenue versus the individual components. We believe total revenue will be flat to up 2% year-over-year, with the composition driven by what the Fed chooses to do over the next couple of months. Our counter cyclical businesses are a natural hedge against our asset sensitivity. If we see incremental declines in interest rates, those businesses' revenues will offset that incremental NII pressure. Turning to expenses, our guidance remains unchanged as we remain committed to continuing to identify efficiencies to help offset our investments.

Speaker Change: On slide 15, we'll talk through our outlook for the remainder of the year. What we have laid out here is consistent with the guidance we gave last quarter, though we are now focusing more on total revenue versus the individual components.

Speaker Change: We believe total revenue will be flat to up to percent year over year with the composition driven by what the fed chooses to do over the next couple of months.

Speaker Change: Our counter cyclical businesses are a natural hedge against our assets sensitivity. If we see incremental declines and interest rates, those businesses revenues will offset that incremental NI-I pressure.

Speaker Change: Turning to expenses, our guidance remains unchanged as we remain committed to continuing to identify efficiencies to help offset our investments.

Hope Dmuchowski: For net charge-offs, you can see that we are trending favorably to our guidance, but we have left the range unchanged until we have more information on the potential for losses that could arise from the recent weather events in our footprint. Lastly, we continue to target an 11% CET-1 ratio near-term.

Speaker Change: For a net charge off, you can see that we are trending favorably to our guidance, but we have left the range unchanged until we have more information on the potential for losses that could arrive from the recent weather events in our footprint.

Speaker Change: We continue to target in 11% CET-1 ratio near-term.

Hope Dmuchowski: I'll wrap up as you turn to Slide 16. I am proud of all the progress we have made as a company so far this year. We are focused on improving profitability while making the strategic enhancements needed to set us up for success as we continue to grow the franchise. As a leadership team, we remain extremely optimistic about the future of First Horizon and are excited to continue delivering value to our shareholders and a premier banking experience for our clients.

Speaker Change: I'll wrap up as you turn the slide 16.

Speaker Change: I am proud of all the progress we have made as the company so far this year. We are focused on improving profitability while making the strategic enhancements needed to set us up for success as we continue to grow the franchise.

Speaker Change: As a leadership team, we remain extremely optimistic about the future of first horizon and are excited to continue delivering value to our shareholders and a premier banking experience for our clients. Now I'll give it back to Brian.

Brian Jordan: Now, I'll give it back to Brian. Thank you, Hope. Many of you have heard me say that our goal is to stack one good quarter on top of the next. This quarter added momentum to that track record and puts us one step closer to achieving our longer-term return goals. As an organization, we are intently focused on execution. We aim to improve revenue through client growth and retention while maintaining expense discipline through operational excellence. We will continue to align capital and resources with the greatest business opportunities while enhancing our technology capabilities to deliver exceptional client experience.

Brian Dorden: Thank you, Hope.

Brian Dorden: Many of you have heard me say that our goal is to stack one good quarter on top of the next.

Brian Dorden: This corridor added momentum to that track record and puts us one step closer to achieving our longer-term return goals.

Brian Dorden: As an organization, we are intently focused on execution, we aim to improve revenue through client growth and retention while maintaining expense discipline through operational excellence.

Brian Dorden: We will continue to align capital and resources with the greatest business opportunity.

Brian Dorden: While enhancing our technology capabilities to deliver exceptional client experience.

Brian Jordan: I will remain confident that our diversified business model, including our well-established counter-cyclical businesses, will allow us to continue to deliver strong shareholder value over the remainder of 2024 and end the next year. Our associates' dedication combined with our attractive footprint and extraordinary client base positions us to build an unparalleled banking franchise in the Southeast.

Brian Dorden: Our remain confident that our diverse fried business model, including our well-established counter-cyclical businesses.

Brian Dorden: Well, allow us to continue to deliver strong shareholder by over the remainder of 2024 and end the next year.

Brian Dorden: Our Associate's dedication.

Brian Dorden: Combined with our attractive footprint and extraordinary client-based positions us to build an unparalleled banking franchise in the South East.

Brian Jordan: Thank you to our associates for all that you do for our clients, communities, and for each other.

Carly: Carly, we can now open it up for questions. Thank you, Brian.

Carly: If you would like to ask a question, it's star-filled by one on your telephone keypad, and to move yourself that line of questioning, it will be star-filled by two.

Speaker Change: Thank you Brian. If you would like to ask a question, it's staff followed by one on your telephone keypad and to move yourself that line of questioning it will be staff followed by two. Our first question comes from Eva Hembuna Wala, Bank of America. Eva Hembuna Wala is not open.

Ibrahim Binawala: Our first question comes from Ibrahim Binawala, Bank of America. Ibrahim, your line is now open.

Ibrahim Binawala: Okay, good morning. I guess maybe Brian hoped, but before it makes sense, in terms of talking about total revenue versus NII fees given the counter-cyclicality of your businesses, but just talk to us. I guess the question is in the very near term. And I think I hope you mentioned some margin compression over the next quarter or two.

Speaker Change: See you good morning.

Speaker Change: I guess we'll be Brian Hope but before it makes sense.

Speaker Change: In terms of talking about total revenues versus NRIF, he's given the concept of cyclicality of your businesses. But this talk to us, I give the question here, at least in the very near term.

Speaker Change: and I hope you mentioned some margin compression over the next quarter or two.

Hope Dmuchowski: Will impact, NII, when we look at the 16th in business, the 47 million in fees, this quarter, is it as good as it gets in terms of the upper bound on this or what's like we've seen a fair amount of bond bookry structuring that banks, rates, rate got cut, or if they're another leg higher to go on additional rate outlooks, certainty would love for you to address that.

Speaker Change: Will Impact NRI.

Speaker Change: When we look at the 16th of business, the 47 million MPs, this quarter, is it as good as it gets in terms of the upper bound on this or what's like we've seen a fair amount of one book researching that banks, rates, rate got, rates got cut or if there's another leg higher to go on additional rate outlook certain day, would love for you to address that.

Hope Dmuchowski: Good morning, Ebrahim. This is Hope, happy to answer that question. I mentioned in my comments that we saw a very muted July, so we absolutely think we see some upside if we continue to see rates decline, as September and August were much stronger than July. And we've seen strong momentum ending the quarter. The one thing you mentioned was where people still buying. We had a conversation with our business the other day. If rates go down another 75 basis points this year, they've already talked to some clients that lost things that earlier this year that are late last year that are thinking about restructuring again.

Hope Dmuchowski: Good morning, Abraham. This is Hope happy to answer that question.

Hope Dmuchowski: I mentioned in my comments that we saw a very muted July , so we absolutely think we see some upside if we continue to see rates decline as September and August were much stronger than July , and we've seen strong momentum ending the quarter, but one thing you mentioned was, you know, we're people still buying, we had a conversation with our business the other day, if rates go down another 75 basis points this year, they've already talked to some clients that locked...

Speaker Change: Thanks for watching, and I hope you enjoyed this video, and I'll see you in the next video.

Hope Dmuchowski: And so I do think they'll be continued momentum in a decreasing rate environment. Understood, and just the other question was around the loan to deposit ratio. I think you call out the decline from 97 to 94 parties and by some of the actions you took during the quarter.

Speaker Change: and just the other question was around the loan to the positive issue. I think you call out the decline from 1997 to 94 or part of it is in some of the actions you could do in the quarter.

Hope Dmuchowski: I know we talked about this in the past. Just remind us, when we look at the 94 loan to deposit ratio, is there a certain level to which you're managing to, and as a result, is that kind of making a little bit more cautious in terms of how quickly you want to do that? Do you think deposit pricing lower? We continue to monitor a loan to deposit ratio, but we also monitor our loans plus securities to deposit ratio. We run a much smaller security portfolio than most of our peers. And our belief is that, as much as we can use deposits to help our clients, that's where we want to put it first.

Speaker Change: i

Speaker Change: We continue to monitor a loan to deposit ratio, but we also monitor our loans plus securities to deposit ratio. We run a much smaller security portfolio than most of our peers. And our belief is that as much as we can use deposits to help our clients, that's where we want to put it first. As we move forward, we continue to see loan to deposit ratio does tend to change as we have to fund up mortgage warehouse. You'll see we did put additional brokerage on. [inaudible]

Hope Dmuchowski: As we move forward, we continue to see loan to deposit ratio does tend to change as we have to fund up mortgage warehouse. You'll see we did put additional brokerage on. We're comfortable generally with where it's at in the near term, but of course we want to continue to work it down over time. I would say it's not the biggest piece of our competitive pricing. What we're trying to do is defend our home front. We want to make sure that clients that are with us are staying with us. And so I would say, you know, the need of bank absolutely comes in at a higher rate.

Speaker Change: We're comfortable generally with where it's at in a near term, but of course we want to continue to work it down over time.

Speaker Change: I would say it's not the biggest piece of our competitive pricing. What we're trying to do is defend our homefront. We want to make sure that clients that are with us are staying with us. And so I would say, you know, the need of bank absolutely comes in at a higher rate, but it's really the backslip in the current clients that are being made offers by other banks that are out there looking for the same deposit groups that we're looking for. And to retain them in order to continue to have deposit growth quarter over quarter does come in a little bit higher but premium. [inaudible]

Hope Dmuchowski: But it's really the backflow in the current clients that are being made offers by other banks that are out there looking for the same deposit growth that we're looking for. And to retain them in order to continue to have deposit growth quarter to quarter does come in a little bit higher premium.

Hope Dmuchowski: Abraham, I'll add, we look at our deposit activity and deposit pricing largely through the customer acquisition lens. We don't think about it in a significant way around loan to deposit ratio. So, while that is important over time, we look at growing customer relationships. And you'll know that we grew customer deposits about 3% during the course of this quarter, about a billion dollars or so on the customer side. And we want to continue to grow in what are very attractive footprints with high quality customer relationships. We're pricing attractively versus wholesale funds, and we're pricing attractively to getting market share.

Brian: Hey, Braim. I'll add, we look at our deposit activity and the deposit price in largely through the customer acquisition land.

Brian: We don't think about it in a significant way around loan to the positive ratio. So while that is important over time, we look at growing customer relationships, and you'll note that we grew customer deposits by 3% during the course of this quarter by a billion dollars or so on the customer side.

Brian: and we want to continue to grow in what are very attractive footprints with high-quality customer relationships.

Brian: We're pricing attractively versus wholesale funds and we're pricing an attractively to gaining market share. So while the two are somewhat related, we spend more time focusing on how we grow our customer relationships, particularly in our retail, private client and high net business.

Hope Dmuchowski: So while the two are somewhat related, we spend more time focusing on how do we grow our customer relationships, particularly in our retail private client and high net worth business.

Unknown Executive: Thank you.

Unknown Executive: Thank you very much.

Brian: Thank you very much.

Michael Rose: Our next question comes from Michael Rose of Raymond James.

Speaker Change: Thank you.

Speaker Change: Thank you very much, and next question comes from Michael Rose of Raymond James. Michael, your line is not open.

Michael Rose: Michael, your line is not open. Good morning, everyone. Thanks for taking my questions. I hope I just wanted to dig into your comments on the margin a little bit. A little bit more pressure in the fourth quarter is just given the mismatch of timing that your reference. But as we think about the margin into next year with some of the tailwinds, as you mentioned on the deposit side, some additional repricing opportunities. I think the slide I mentioned a chunk of deposits that were eligible for repricing 18, going to promotional clients' deposits that are eligible for repricing in the fourth quarter.

Michael Rose: Hey, good morning, everyone. Thanks for taking my questions. I hope I just wanted to dig into your comments on the on the marginal a little bit. Certain understand a little bit more pressure in the in the fourth quarter is just given the mismatch of timing that your reference. But as we think about the margin into next year was some of the tailwinds as you mentioned on the deposit side some additional repricing opportunities. I think the slide I mentioned. And that. Yeah.

Michael Rose: A chunk of deposits that was eligible for repricing 18-dying a commercial.

Michael Rose: Are we at a point where the fourth quarter, do you think, is the inflection point for the NEM, and we can move higher despite your rate sensitivity, or is the expectation that it's going to be a push and pull each quarter, and we shouldn't expect the margin to really move. At least open the next couple quarters. Thanks.

Michael Rose: Klein's the father of the eligible food pricing in the fourth quarter.

Michael Rose: Are we at a point where the fourth quarter do you think is the inflection point for the NEM and we can move?

Michael Rose: and we can move higher despite your rate sensitivity or is...

Michael Rose: The expectation that it's going to be a push and pull each quarter and we shouldn't expect the margin to really move at least up the next.

Hope Dmuchowski: Michael, thank you for the question. I would say it's probably going to be more of a push and pull quarter to quarter. It really depends on how quickly we do the rate cuts. We see back-to-back rate cuts in November, and then we see some stabilization. Our margin can stabilize, but we continue to see months after months or quarter after quarter repricing down. As I mentioned in my comment, our loans are going to, 59% of our loans are going to repriced down their deposits. We're going to have to work through that as they come off promotions and new to banks.

Michael Rose: Couple quarters. Thanks.

Speaker Change: Michael, thank you for the question. I would say it's probably going to be more of a push in full quarter to quarter. It really depends on how quickly we do the rate cuts. We see back to back rate cuts in November , December , and then we see some stabilization. Our margin can stabilize, but we can continue to see months after months or quarter after quarter repricing down. As I mentioned in my comment, our loans are going to, 59% of our loans are going to reprise down, our deposits. We're going to have to work through that as they come off promotions and new to banks. We're going to have to work through that as they come off.

Hope Dmuchowski: So I don't think it will necessarily be a steady trajectory one way or the other based on the current forward curve in 2025, but we are doing everything we can to put things in place to make sure that we can take a lot of asset sensitivity off of the table as we see a very uncertain rate cut environment. For example, we just shortened our new to bank promos that you see: a 90-day guarantee, a 45-day guarantee, and that allows a little bit more flexible flexibility quicker. We are less asset sensitive currently because of that deposit repricing.

Speaker Change: So I don't think it will necessarily be as first steady trajectory one way or the other based on the current forward curve in 2025, but we are doing everything we can to put things in place to make sure that we can take some of that assent sensitivity off of the table if we see a very uncertain rate cut environment. For example, we just shortened our new debate promo that you see a 90 day guarantee to 45 days guarantee and that allows a little bit more flexible flexibility. We are less active sensitive currently because of that deposit repricing. It's just maybe the last quarter to quarter, especially depending on how late in a quarter we get the loan repricing for we get the deposit side.

Brian Jordan: It's just maybe the lag quarter to quarter, especially depending on how late in a quarter we get the loan repricing before we can get the deposit side. One of the key variables, Michael, is hope said the pacing of rate cuts. As she properly noted, the more significant rate cuts are, the more impact you will see on that interest income, but the more offset you will see in our fixed income business, et cetera. That's why we focused on the total revenue, where we think we're significantly more balanced and less sensitive to interest rate cycles than it might appear if you focus on one line item or the other.

Speaker Change: One of the key variables, Michael, is Hope said the pacing of rate cuts, and as she properly noted, the more significant rate cuts are, the more impact you will see on that interest income, but the more offset you'll see in our fixed income business, etc. And that's why we focused on the total revenue where we think we're significantly more balanced and less sensitive to interest rate cycles.

Speaker Change: and then it might appear if you focus on one line of the line item or the other. But we do believe that we've got the balance sheet positioned in such a way that we can manage through interest rate volatility and we will adapt to whatever pace the FOMC sets for moving rates in the rest of this year and in the 2025.

Brian Jordan: But we do believe that we've got the balance sheet positioned in such a way that we can manage through interest rate volatility. And we will adapt to whatever pace the FOMC sets for moving rights and the rest of this year and in the 2025.

Michael Rose: Certain to understand that, maybe just as a follow-up, and I know the rate backdrop is difficult to project, and I know it's early for next year, but is the plan or the expectation that you can grow kind of adjusted PPMR year over year, and are you planning at this point for positive operating numbers? And I ask that because I certainly understand you pull some levers on the cost savings front, but we're hearing more and more banks looking at higher bankers.

Speaker Change: I certainly understand that. Maybe just as a follow-up, and I know the great backdrop is difficult to project, and I know it's early for next year, but is the plan or the expectation that you can grow kind of adjusted PPMR year over year, and are you planning at this point for positive operating numbers? And I asked that because I certainly understand you pull some levers on the cost savings front, but we're hearing more and more banks looking at higher bankers. I assume that would be some of your expectations to drive some balance here. We grow, but just wanted to just initially, you know, if you had any comments on how we should kind of think about that. Thanks.

Michael Rose: As soon as some of your expectations drive some balance sheet growth, but just wanted to just initially, if you had any comments on how we should be a kind of think about that. Thanks.

Speaker Change: Yeah, we'll provide a little more guidance and the remainder of this quarter or outlook for next year. But I sit here today, I expect that we will drive positive Dmr next year and we're still working through the various line items. But I do think you will see us growing after Dmr in 2020.

Speaker Change: Alright, I'll set back thanks for taking my questions.

Speaker Change: Thank you.

Speaker Change: Thank you very much. Our next question comes from Drone Armstrong of RBC Capital. Drone your line is now open.

Speaker Change: Hey, thanks for morning.

Speaker Change: Morning John

Speaker Change: Um...

Drone Armstrong: but Brian, one for you. Give me a few thoughts on long-growth expectations. We'll click you guys, reference and see our restability.

Drone Armstrong: and I was a bit weaker, but talk about what you're seeing, you know, how much of this is self-imposed and what kind of an outlook you have for growth.

Brian: Yeah, I would say very little of what we're seeing is self-imposed. We're not limiting the size of the balance sheet. There's one caveat to that that I will come back to in a second. The low growth in the marketplace is somewhat muted at this point. It is not picked up. I couldn't tell you how to weight the parts but I suspect some part of it is what happens in the elections that are coming up in the next month.

Brian: It's partly weighted on what the Fed is going to do with interest rates and in particular when deals start to look better financially.

Brian: and then just overall are we going to have a soft land in or something else. And I'm somewhat optimistic that we get through the next 90 days. We'll have greater clarity, maybe on all three of those.

Brian: And if we do, I think there's some pent-up long demand, at least we hear that in our customer conversations.

Brian: The market place is still somewhat muted and it's still very, very competitive at this point.

Brian: I mentioned the one exception, there are a few places where we have taken some participations where we had been in participations for a period of time, we had not broadened or deepened the relationship as we thought we might and we've used the opportunity to exit out of some of that but other than that we're looking to grow with our client base, we're looking to grow and lean in when customers are ready to make investment.

Speaker Change: Okay, let's fair enough on that. So maybe a little more optimism potentially. I know that.

Speaker Change: Well, a lot of hedging there, but it feels like you're still somewhat optimistic on growth. I didn't mean to hedge as much as I meant to convey uncertainty about what's going to happen.

Speaker Change: I hope follow-up on Fickton come. Are you willing to share what the 80 hours look like in August and September? How big of a step up that was? I think that would help us with maybe a run rate.

Speaker Change: John, I actually don't have that in front of me.

Speaker Change: August and September were generally pretty equal as I recall, but the end of September following the rate cuts was a significant uptick, and right before the rate takes were kind of quiet. I would say that months were not particularly different, but the weeks hold a much different story. Nobody really wanted to buy anything right before the rate cut, not the rate cut. We finished the quarter really strong, and I think we'll see that same type of momentum as there's uncertainty about rate cuts in the coming two months.

Speaker Change: John, the 10 year of the rate curve has moved around a good bit of people's expectations for the economy has changed. I've given you the last two weeks.

Speaker Change: If you look at the first week of October we're a little over a million one last week, we're a little over 500,000 so two weeks does not make a trend and it moves around based on what interest rates and sentiment in the market are doing.

Speaker Change: On the whole, we were, you know, a little over five, I think we're five sixty-three for this quarter and just passed and our outlook is to be slightly better for that than the remainder of the year and you have to keep in mind as you will know that at some point the markets tend to shut down as you get into the back part of the year. So we're optimistic on activity for the remainder of this year. [inaudible]

Speaker Change: Yep, okay, that's helpful. Thank you very much.

Speaker Change: Yeah.

Speaker Change: Thank you very much. As a reminder, if you would like to ask the question, please press staff, or look by one on your telephone keypad, and to remove yourself that line of questioning, it will be staff followed by two. Our next question comes from Jared Show of Bulkley's Capital. Jared, your line is not open.

Speaker Change: Thank you for joining everybody.

Speaker Change: for the job.

Jared Show: And maybe just go back on to the deposit side, the 18 billion that you referenced that's coming to in fourth quarter. Could you give us an update on the pricing of those deposits down where you expect to see that moving to and also is there a term change in that promotion?

Speaker Change: Here at the end of your question, we have changed the terms as recently as last week as we continue to look at how to bring down rates, it is really a sensitivity analysis of how sensitive our clients to how quickly the rates are falling.

Speaker Change: and so we did just roll out the end of last week new rates, as I mentioned earlier only guaranteed for 45 days versus a prior 90, our money market is currently at 425, that compares to 505 last quarter when you asked me on the earnings call. Our retention offer is now 3.5%. And so what we've been walking it back ahead of the rate cut and after, and we have quite a few scenarios for how that might walk back depending on the rate cuts we see in Q4. Thank you very much for your time.

Speaker Change: I'd December Wakecut is really hard for us to make much headway with deposits and so no, no November Wakecut will have the most meaningful impact on how much we can walk it back.

Speaker Change: Okay, thanks, and then, as we look at the deposit composition, what's the appetite for additional broker from here? I heard your commentary that you built that up in anticipation of the mortgage business. Should we expect to see broker be a bigger part of the overall deposit mix or are we near the top?

Speaker Change: Jared or goal is always use Client Money first and burn for seconds, but let's start with that being our goal the more we can bring and retain Client Money the less perfect we need.

Speaker Change: For us, it's always kind of a match funding for mortgage warehouse. We saw mortgage warehouse on average of about 400 million last quarter, which I'll know is.

Speaker Change: Again, past year, typically, Q3 comes down and we actually saw it come up with some of the rate cuts and we saw a re-fi activity actually increase 5% quarter over quarter. So as we think about that, it's really going to be more about mortgage warehouse and how much we continue to have balances there in the short run. But yes, our goal is to always try to get out of a quarter over quarter when we can, whether we see decreasing mortgage warehouse balances or increasing clients.

Speaker Change: But I am comfortable where it's at where well below our peer groups, the last couple quarters like some hair and hair growth reverses there.

Speaker Change: Thanks, and I just finally, for me, I know you're, you're guiding us more towards total revenue versus NII versus fees, but, you know, with the expectation, how should we think about the, the dynamic between, you know, continued margin pressure, but potentially some balance she growth, you know, are we, are we at a trough for NII? Bye.

Speaker Change: here, or trying to engage, or what the year, what the exit of NIIs for 24.

Speaker Change: For 2024, I don't see much of a change from our prior guidance and you look at the new revenue guidance we gave. It is in line of both revenue and I just already got a little low end of one high end on the other.

Speaker Change: for us, not just for Q4, going into next year, as we think about N.I.I. the big.

Speaker Change: and the thing.

Speaker Change: Unknown for us is how much mortgage are we going to see? It's our highest yielding asset, and so we did see a large read by when it moved from a 22% to a historical 30 or 40 or 50% we've been seeing that would help NII significantly. So as we talk about countercyclicals, FHN financial is in the income line with the majority of mortgage warehouse and mortgage is in the NII line. So that also is, as we talk about embedded hedges, we do have an embedded hedge with hopefully low growth is going into 2020. It's going to be 25% involved with those businesses. Thank you very much.

Speaker Change: Thank you. Our next question comes from Samu Vagga of UBS. Samu, your line is now open.

Speaker Change: Yeah, this is Brian. We're looking to really grow across the entire deposit base. We have had very active in growing our non-inspiring deposits. They've been stable.

Speaker Change: which is sort of follows along with what we articulated earlier in the year which is you get to a core level as a percentage it drops a little bit but that's because we grew non-interest bearing.

Speaker Change: But we're looking to grow customer relationship and growing core checking accounts, non-interpreying low-cost deposits is an important part of that. So we have had a number of efforts across our entire franchise to grow.

Speaker Change: Those deposits and we will continue to lean in and look to grow client customer relationships.

Speaker Change: on the commercial and the consumer set.

Speaker Change: i

Speaker Change: yeah

Speaker Change: I don't have the weighted average of where they're at currently.

Speaker Change: from the...

Speaker Change: Wait.

Speaker Change: But we don't have a large wall of them in any time in the next three years that they've kind of been aesthetically out into our balance sheet over the last two, two and a half years. What I'll say though is we expect a lot of them to get pre-paid.

Speaker Change: being fixed for five, six, seven years, whatever they have left at a six, seven percent, if we really see rates get cut, a hundred, two hundred percent, that is one of the items that I mentioned earlier that we could see a large amount of grief eye in the arm space for what we have on our balance sheet today.

Speaker Change: If I remember correctly, you know, I looked at the Nalikosier memories these numbers better than I do but you can use as a proxy. I think our consumer loan portfolio yielded in the 5.8% or so range may be a little higher in the third quarter and that's largely driven by arms. So that's a proxy for that number.

Speaker Change: I'm great.

Speaker Change: and thank you very much, I appreciate it.

Speaker Change: Thank you very much. As another reminder, if you would like to ask a question, please press star for a by one Liotela Fankipad and to remove yourself from that line of questioning, it is star for a by two. Our next question comes from Chris McGrassy of KDW. Chris your line of thought open.

Chris McGrassy: Good morning. I hope I did a question or Brian on the PP&R 25 being above 24. Does that guess a couple of questions? Maybe a comment between is that more of a revenue comment or an expense control given your steps? Secondarily, does that currently factor in the forward curve right now? Thanks.

Chris McGrassy: Yes, yes, I'm new.

Speaker Change: So if I break that, yes, down, we, we.

Speaker Change: We can prognosticate about race who's probably most efficient always use a perk for curves, so that's sort of our point of reference.

Speaker Change: Thanks for your spending and flux.

Speaker Change: And we're always focused on growing revenue, we're always focused on controlling expenses.

Speaker Change: I think we have a number of catalysts that we are working to leverage.

Speaker Change: that are really, really important in terms of our ability, not only of driving TPNR in 2025, but creating long-term shareholder value, essentially taking our returns a little over 13% on tangible common equity back north of 15 plus percent. And those initiatives that were focused on are really the logical follow-on of...

Speaker Change: of the work that associated with the merger of vehicles that didn't get done during the integration period. So we see a number of opportunities once we get the systems investments made at a very tactical level to grow revenue to deepen relationships, to drive additional loan growth and to control our costs, centralizing further centralizing process as things as that nature.

Speaker Change: So I'll circle back around to yes we think it's going to be across all of the levers that you mentioned.

Speaker Change: Okay, that's really helpful. Thanks, Brian . And then maybe on regulation, your target of a whole 11% on CET-1, you're slightly above it. I would expect you're saying you're going to continue with the buyback, but just any changes, you know, for the medium term that you might be contemplating now that Bob has been a little bit watered down. And also maybe a comment, Brian , about, you know, where you are on the investment for 100 billion. Thanks.

Speaker Change: Yeah, yeah, we are.

Speaker Change: We look at Capitol and then...

Speaker Change: Clearly, our board is involved in any discussions about BIPAC and authorization. We feel like we have sufficient authorization to get us through the fourth quarter. We will talk to the board in the early part of 2020, five about further authorization.

Speaker Change: We don't see any short-term catalysts to bring the C.T.1 ratio below 11 percent. What we said is we're looking at the economy and how things play out and I would get circle back in some ways to what I said earlier that customers have uncertainty about soft land in and interest rates.

Speaker Change: and the election process.

Speaker Change: The clarity they give will also be clarifying us and the more certain we get about.

Speaker Change: Good to see you.

Speaker Change: Strengthen and Improvement and Credit Performance, and things like that, the more comfortable we get as we approach a soft landing.

Speaker Change: To bring that ratio down, we do think it's that...

Speaker Change: The CT1 ratio is above where we need it through the cycle.

Speaker Change: We will look at that probably sometime in the early part of 2025, before we really start to assess it and I'm in a meaningful white.

Speaker Change: The second part of that is regulatory hurdles, particularly around becoming an LF-100 billion.

Speaker Change: We are building a fair amount of work and making investments in the near term to prepare for crossing that threshold as we look at it. We think we've got a number of years to do that work and we will further those calls in over time and build those capabilities at infrastructure, but given the markets that we're in, given the...

Speaker Change: and the strong client relationships that we have, we do believe that leaning forward and growing the balance sheet is an important part of it and it's not a matter of if we hit the $100 billion threshold is really a matter of win.

Speaker Change: and that we are going to build the proper Tory.

Speaker Change: Great, thank you very much.

Speaker Change: Sure, thanks.

Speaker Change: Thank you very much.

Speaker Change: Our next question comes from Timmer, Brazil, of World Swap, Timmer, your line is now open.

Speaker Change: Hi, good morning. Maybe you won for hope just following up on some of your comments relating to mortgage outlook for next year. I guess what's the rate of our immunity to look like for mortgage to get back to some of the type of performance that may be you were applying on the outside.

Speaker Change: Our overall belief is that we have to be at a 7-6% mortgage rate.

Speaker Change: How that will play out is a little bit uncertain. This last 50 basis point cut barely touched mortgage rates as the board as the curve became less inverted and actually you know, had it steepened curve for a little while there.

Speaker Change: Okay, um...

Speaker Change: And then maybe just on the revenue guide, it implies a pretty wide range of outcomes in the fourth quarter. I'm just wondering, where the greater variability is, is it on the NII side, is it on the C side, and then maybe more specifically on C, you call that some of the other Cs this quarter is being one time in the nature. Can maybe give us a starting run rate for four Q, kind of X, one of those one time feeds.

Speaker Change: What I would say is start with, we did not intend to change our range. It really comes down to rounding. We would have had to say like point, you know, instead of flat, what are that point three three? The intent is not at all to change our revenue range for two, four or four the year.

Speaker Change: It is there's probably more upside on the income and more downside on NII. It's the forward current play that we really see 75 basis points of cuts in two successive months and I will be on the lower side and being able to pick up. If we don't see any cuts and I'm going to come in better and I think the income would look similar to this quarter. [inaudible]

Speaker Change: It's really hard to handicap whether when the current forward curves is 75 basis points that most of the market doesn't believe we'll get more than 25.

Speaker Change: Okay, and then just the one timers, this quarter for fees, is that the full increase in the other line.

Speaker Change: Also, the other items that always bounces around, Bolly is something that just comes when it comes and you don't know. So we often have to comment on Bolly since we do run a portfolio of that moving quarter to quarter. I can't really predict what's going to happen next quarter. Obviously you can figure out the dividends paying up a quarter of the more that we're borrowing the more we get those dividends. I don't expect it to be materially up or down, if I'm honest. It tends to go about in a $5 million range quarter to quarter. [inaudible]

Speaker Change: Great, and if I can speak one more question in, so the comment on commercial real estate that the funding schedule has kind of stabilized out, I'm just wondering as we do get rate cuts as paydown start to accelerate, is there any way you can quantify maybe what historical paydowns have looked like, what they've looked like more recently and what type of headwind that might be the broader long growth?

Speaker Change: Please, you're talking about paydowns on MPLs.

Speaker Change: and just commercial reals. No, no, T-hours on commercial reals.

Speaker Change: Okay, sorry I thought you were talking about the ones that we mentioned that were in non-performing that were still paying. Yeah, I think this is Thomas on here. I think that's going to be a little hot with <expletive> right now because for us, a lot of testimonial real estate is went heavier on the construction slide than probably a lot of out years. And so in terms of paydown, it'll really come down to the other tone financing market. How much appetite there is to that tone take up financing? That's what we'll really try. The level of paydown that we see. Thank you.

Speaker Change: and

Speaker Change: Okay, thank you.

Speaker Change: Thank you very much. Our next question comes from Christopher Maranik.

Speaker Change: of J. Montgomery School. Christopher, your line is not open.

Christopher Maranik: Thanks for morning. I had a follow-up credit question as it relates to the shared national credit exam this year. Is there anything that could fall out on that in terms of either, you know, inflows of NPAs are more importantly charge off as we move into Q4 and Q1?

Speaker Change: Yeah, hi, this is Thomas Hong again. I don't expect so, you know, overall, <expletive> , national credits. It runs a little on the 8 billion forests overall. And if you look at kind of the relative performance of our snick books or our C&I books, the metrics are all generally about the same in line that's not really a material difference in terms of classified assets, NPLs, or year-to-date net charge offs. And that's so my expectation is that that next should continue to perform about the same as the overall book. We haven't really seen a variance.

Speaker Change: Thank you for that and hope just a quick one for you. I know you broke out a lot of information on the other expense numbers this morning. There's anything in there for operational losses or customer fraud. Things that I've made sure that would stand out.

Hope Dmuchowski: There's nothing that stands out now as I said it was a bunch of small items that added up to $5 million.

Hope Dmuchowski: We did not have significant fraud change for a recorder or any loan to one time gains on any sales of property or things like that.

Speaker Change: Okay, great, thank you very much.

Speaker Change: Thank you, Bruce.

Speaker Change: Thank you very much. We currently have no further questions, but I'd like to hand that Brian Jordan to you for any closing remarks.

Brian Jordan: Thank you, Carly. Thank you all for joining our call this morning. We appreciate your time and your interest. Please follow up with any additional questions that you may have. Hope everyone has a great day.

Brian Jordan: Thank you for watching!

Unknown Executive: Thank you so much for watching this video.

Brian Jordan: Thank you for watching!