Q3 2024 US Bancorp Earnings Call

Okay.

Operator: Hello, and welcome to the US Bancorp third quarter 2024 earnings conference call. Following a review of the results, there will be a formal question-and-answer session. If you would like to ask a question, please press star and then one on your telephone keypad. If you wish to withdraw your question, please press star and then one again.

Speaker Change: Hello, and welcome to the U S Bancorp third quarter 'twenty 'twenty four earnings conference call. Following a review of the results there will be a formal question and answer session. If you would like to ask a question. Please press star and then one on your telephone keypad. If you wish to withdraw your question. Please press Star and then one.

Operator: This call will be recorded and be available for replay beginning today at approximately 10 a.m. Central time.

Speaker Change: Again this call will be recorded and be available for replay beginning today at approximately 10, a M. Central time I will now turn the conference call over to George Anderson, Senior Vice President and director of Investor Relations for U S Bancorp.

George Andersen: I will now turn the conference call over to George Anderson, Senior Vice President and Director of Industrial Relations for US Bancorp. Thank you, Ellie, and good morning, everyone. Today, I'm joined by our Chairman and CEO Andy Cecere, CAO Terry Dolan, President Gunjan Kedia, and CFO John Stern. Together with their prepared remarks, Andy and John will be referencing a slide presentation. A copy of the presentation, our earnings release, and supplemental analyst schedules can be found on our website at usbanc.com.

George Anderson: Thank you Ali and good morning, everyone today, I'm joined by our Chairman and CEO, Andy So Sherry C E O Terry Dolan, President <unk>, <unk> and CFO, Jon Stern together with their prepared remarks, Andy and John will be referencing a slide presentation, a copy of the presentation our earnings release and <unk>.

George Anderson: Supplemental analyst schedules can be found on our website at U S Bank Dot com.

George Andersen: Please note that any forward-looking statement made during today's call is subject to risk and uncertainty. Factors that could materially change our current forward-looking assumptions are described on page two of today's presentation, our press release, and in reports on file with the SEC.

George Anderson: Please note that any forward looking statements made during today's call are subject to risk and uncertainty factors that could materially change. Our current forward looking assumptions are described on page two of today's presentation. Our press release and reports on file with the SEC.

George Andersen: Following our initial prepared remarks, Andy, Terry, Gunjan, and John will take any questions that you have.

George Anderson: Following our initial prepared remarks, Andy Terry and.

Andy: John will take any questions that you have I will now turn the call over to Andy. Thanks, George Good morning, everyone and thank you for joining our call I'll begin on slide three in the third quarter, we reported diluted earnings per share of $1 three and generated total net revenue of $6 $9 billion.

Andy Cecere: I will now turn the call over to Andy. Thanks, George. Good morning, everyone. Thank you for joining our call. I'll begin on slide three. In the third quarter, we reported diluted earnings per share of $1.3 and generated total net revenue of $6.9 billion. The quarter was highlighted by strong growth and net interest income, good momentum across several fee business initiatives, and continued expense discipline, which supported modest positive offering leverage on an adjusted basis compared with the third quarter of last year. A return on tangible common equity was 17.9% this quarter. Turning to slide four, revenue growth on a link quarter basis was driven by improved spread income for more favorable low mix, continued fixed asset repricing, proactive and disciplined liability management, as well as strategic actions taken on our investment securities portfolio.

Andy: Quarter was highlighted by strong growth in net interest income good momentum across several key business initiatives and continued expense discipline, which supported modest positive operating leverage on an adjusted basis compared with the third quarter of last year. Our return on tangible common equity was 17, 9% this quarter.

Andy: Turning to slide four revenue growth on a linked quarter basis was driven by improved spread income for more favorable loan mix continues fixed asset repricing proactive and disciplined liability management as well as strategic actions taken on our investment securities portfolio.

Andy Cecere: John will provide more detail in these actions in his prepared remarks. On the upper right-hand side of the slide, you will see that non-performing assets, the net charge-off ratio, and late-state still-inquency metrics were all relatively stable compared with the second quarter levels. At September 30, our Common Equity Tier One capital ratio was 10.5%. An increase of 20 basis points from last quarter, driven by continued earnings accretion. Our tangible book value per share increased to $24.71, a 6.7% improvement link quarter and an 18.5% higher than last year. Slide five provides key performance metrics. This quarter, our return on average assets increased to 1.03%; the efficiency ratio improved to 60.2%.

Speaker Change: John will provide more detail on these actions in his prepared remarks.

Speaker Change: On the upper right hand side of this slide you will see that nonperforming assets. The net charge off ratio in late stage delinquency metrics were all relatively stable compared with the second quarter levels.

Speaker Change: At September 30th our common equity tier one capital ratio was 10.5% an increase of 20 basis points from last quarter driven by continued earnings accretion.

Speaker Change: Our tangible book value per share increased to $24.71, a six 7% improvement linked quarter, and an 18, 5% higher than last year.

Speaker Change: Slide five provides key performance metrics.

This quarter, our return on average assets increased to 1.03% the efficiency ratio improved to 62% and net interest margin expanded seven basis points to 274%.

Andy Cecere: Net interest margin expanded seven basis points to 2.74%. Turning to slide six, we continue to see good momentum across many of our free businesses. This quarter, we achieved year-over-year double-digit growth in both commercial and investment products revenue, driven by underlying capital markets activity and wallet share gains across our targeted industry vertical. Additionally, we also saw a good year-over-year growth in trust and investment measurement, payment services, mortgage banking, and treasury management fee revenues as we benefited from a combination of improved underlying market conditions, deepening client relationships, and expanded product set and expanded distribution channels.

Speaker Change: Turning to slide six we continue to see good momentum across many of our fee businesses. This quarter, we achieved year over year double digit growth in both commercial and investment products revenue driven by underlying capital markets activity and wallet share gains across our targeted industry verticals.

Additionally, we also saw good year over year growth in trust and investment management payment services mortgage banking and Treasury management fee revenues as we benefited from a combination of improved underlying market conditions deepening client relationships and expanded product set and expanded distribution channels. Let me now turn the call over to John will provide more detail on the quarter.

John Stern: I mean, I'll turn to call for a general for right more detail on the quarter as well as for looking guidance. Thanks, Andy. We turn to slide seven. I'll start with a balance sheet summary followed by a discussion of the third quarter. This quarter total average deposit decreased 1.0% on a link quarter basis to $509 billion as we continued to prioritize relationship-based deposits and maintained our pricing discipline. Average loans totaled to $374 billion, a modest decrease of 0.2% on a link quarter basis. Industry loan growth remains muted, and the decline we saw this quarter was driven by slightly lower commercial balances given continued headwinds from capital markets-related pay downs and continued relatively low utilization rates.

Speaker Change: As well as forward looking guidance.

John Andy: Thanks, Andy if you turn to slide seven I'll start with a balance sheet summary, followed by a discussion of third quarter earnings trends.

John Andy: This quarter total average deposits decreased 1.0% on a linked quarter basis to $509 billion as we continued to prioritize relationship based deposits and maintained our pricing discipline.

John Andy: Average loans totaled $374 billion, a modest decrease of <unk>, 2% on a linked quarter basis indoor.

John Andy: Industry loan growth remains muted and the decline we saw this quarter was driven by slightly lower commercial balances given continued headwinds from capital markets related pay downs and continued relatively low utilization rates.

John Stern: Within retail, higher credit card loan balances and improved revolver rates drove more favorable loan mix and margins, as Andy mentioned this quarter. We opportunistically restructured a portion of our investment portfolio to enhance our net interest income growth trajectory and a further strength in our capital and liquidity profiles. At September 30th, the ending balance on our investment portfolio declined slightly to $167 billion, with an average yield for the quarter of 3.20%. Slide eight highlights our credit quality performance. As a quality metrics continued to develop in line with our expectations and reflected ongoing macro economic stability. This quarter, we saw a slight reduction in our exposure to the commercial real estate office portfolio, which remained appropriately reserved at 10.8%.

John Andy: Within retail higher credit card loan balances and improved revolver rates drove more favorable loan mix and margins.

Speaker Change: As Andy mentioned this quarter, we opportunistically restructured a portion of our investment portfolio to enhance our net interest income growth trajectory and to further strengthen our capital and liquidity profiles.

Speaker Change: At September 30th the ending balance on our investment portfolio declined slightly to 167 billion with an average yield for the quarter of $3 two zero percent.

Speaker Change: Slide eight highlights our credit quality performance.

Speaker Change: Asset quality metrics continued to develop in line with our expectations and reflected ongoing macroeconomic stability. This quarter, we saw a slight reduction in our exposure to commercial real estate office portfolio, which remained appropriately reserved at 10, 8%.

John Stern: Late stage delinquencies and non-performing asset metrics were relatively flat on a link quarter basis, and the ratio of non-performing assets to loans and other real estate was unchanged at 0.49% link quarter versus 0.35% year over year. Our net charge-off ratio of 0.60% increased two basis points from a second quarter level of 0.58%, in line with our expectations. At September 30th, our allowance for credit losses totaled $7.9 billion, or 2.1% of period and loans. We expect our fourth quarter net charge-off ratio to remain relatively stable compared with a third quarter level. In the near term, we expect changes to the loan loss reserve to be driven primarily by loan balance growth and mix.

Speaker Change: Late stage delinquencies and nonperforming asset metrics were relatively flat on a linked quarter basis, and the ratio of nonperforming assets to loans and other real estate was unchanged at 0.49% linked quarter versus 0.35% year over year.

Speaker Change: Our net charge off ratio of 0.60% increased two basis points from a second quarter level of 0.58% in line with our expectations.

Speaker Change: At September 30, our allowance for credit losses totaled $7 9 billion or two 1% of period end loans.

Speaker Change: We expect our fourth quarter net charge off ratio to remain relatively stable compared with the third quarter level in the near term, we expect changes to the loan loss reserve to be driven primarily by loan balance growth and mix.

John Stern: Slide nine provides a more detailed earning summary. In the third quarter, we reported a $1.3 per diluted share, which included $119 million of net losses, or $189 million after tax, on sales and securities rebalancing actions within our investment portfolio. These actions were largely offset by tax favorability in the quarter, primarily due to settlements and various tax jurisdictions. Turning to slide 10, net interest income on a taxable equivalent basis told approximately $4.17 billion, an increase of 2.8% link quarter. Our net interest margin increased 7 basis points to 2.74%. Both net interest income and net interest margin growth as quarter benefited from a combination of earning asset repricing and mix, further supported by higher card revolve rates, investment portfolio actions, and discipline deposit pricing.

Speaker Change: Slide nine provides a more detailed earnings summary.

Speaker Change: In the third quarter, we reported a $1 three per diluted share, which included a $119 million of net losses.

Speaker Change: Or $189 million after tax on sales and securities rebalancing actions within our investment portfolio. These actions were largely offset by tax favorability in the quarter, primarily due to settlements in various tax jurisdictions.

Speaker Change: Turning to slide 10.

Speaker Change: Net interest income on a taxable equivalent basis totaled approximately $4 $1 7 billion.

An increase of two 8% linked quarter, our net interest margin increased seven basis points to 274%.

Speaker Change: Both net interest income and net interest margin growth this quarter benefited from a combination of earning asset repricing and mix further supported by higher card revolve rates investment portfolio actions and disciplined deposit pricing slide.

Speaker Change: Slide 11 highlights trends in noninterest income.

Speaker Change: Noninterest income totaled $2 7 billion.

And as mentioned included $119 million of net security losses related to rebalancing activity within our investment portfolio.

John Stern: Importantly, year over year, we saw good growth across our core business offerings, including trust and investment management, commercial products, mortgage banking, and investment products. As a reminder, last quarter's mortgage banking fees included an approximately $30 million gain on sale of mortgage servicing rights. Service charges decreased 6.2% link quarter, partly reflecting the impact of exiting our ATM cash provisioning business. The exit is now fully reflected in our run rate for the third quarter of 2024. Turning to slide 12, non-interest expense for the quarter totaled $4.2 billion, which was relatively flat to the prior quarter and 1.0% lower than a year ago as adjusted.

Speaker Change: <unk> year over year, we saw good growth across our core business offerings, including trust and investment management commercial products mortgage banking and investment products.

Speaker Change: As a reminder, last quarter's mortgage banking fees included an approximately $30 million gain on sale of mortgage servicing rights.

Speaker Change: Service charges decreased six 2% linked quarter, partly reflecting the impact of exiting our ATM cash provisioning business. The exit is now fully reflected in our run rate for the third quarter of 2024.

Speaker Change: Turning to slide 12, noninterest expense for the quarter totaled $4 $2 billion, which was relatively flat to the prior quarter and 1.0% lower than a year ago as adjusted.

John Stern: The link quarter increase of $16 million or 0.4% was driven by a higher compensation and employee benefit expense, primarily due to higher performance-based incentives. On a year-over-year basis, the $42 million decrease, as adjusted, was driven by prudent expense management initiatives and the identification of operational efficiencies across the company. Turning to slide 13, our common equity tier 1 ratio of 10.5% as of September 30th increased 20 basis points from the second quarter. Looking ahead, we intend to balance our continued capital accretion of 20 to 25 basis points per quarter with capital distributions, starting with a modest cherry purchase in the near term.

Speaker Change: The linked quarter increase of $16 million or 0.4% was driven by higher compensation and employee benefit expense, primarily due to higher performance based incentives.

Speaker Change: On a year over year basis, the $42 million decrease as adjusted was driven by prudent expense management initiatives and the identification of operational efficiencies across the company.

Speaker Change: Turning to slide 13, our common equity tier one ratio of 10, 5% as of September 30 increased 20 basis points from the second quarter.

Speaker Change: Looking ahead, we intend to balance our continued capital accretion of 20 to 25 basis points per quarter with capital distributions, starting with a modest share repurchase in the near term.

John Stern: I will now provide forward-looking guidance on slide 14. We expect net interest income for the fourth quarter on an FTE basis to be relatively stable to this quarter's $4.17 billion. This guidance is reflective of our current expectation for more modest loan growth and continued QT impacts on deposits. Full year 2024 net interest income on an FTE basis is expected to come in at the higher end of our $16.1 to $16.4 billion range. For the full year, we still expect mid-single-digit growth in total non-interest income as adjusted, but likely at the lower end of the range.

Speaker Change: I will now provide forward looking guidance on slide 14, we expect net interest income for the fourth quarter on an FTE basis to be relatively stable to this quarter's $4 $1 7 billion.

Speaker Change: This guidance is reflective of our current expectation for more modest loan growth and continued qt impacts on deposits.

Speaker Change: Full year 2024, net interest income on an FTE basis is expected to come in at the higher end of our 16, 1% to $16 $4 billion range.

Speaker Change: For the full year, we still expect mid single digit growth in total noninterest income as adjusted but likely at the lower end of the range.

John Stern: We expect full-year non-interest expense as adjusted to be $16.8 billion.

Speaker Change: We expect full year noninterest expense as adjusted to be $16 8 billion I'll now hand, it back to Andy for closing remarks, Thanks, John third quarter results showcase the resiliency of our unique and differentiated business model, which featured solid topline revenue growth supported by healthy linked quarter margin <unk>.

Andy Cecere: I'll now hand it back to Andy for closing remarks. Thanks, John. Third quarter results showcase the resiliency of our unique and differentiated business model, which featured solid top line revenue growth, supported by healthy link quarter margin expansion, as well as continued year-over-year income momentum and steady expense discipline. This quarter reported modest operating leverage, excluding net securities losses in prior year notable items, and consistent with our message at Investor Day. We expect to deliver expanding positive operating leverage in the fourth quarter that will continue into 2025. As recent industry headwinds become tailwinds and we realize the benefits of our now run rate investment spend on industry leading digital capabilities, integrated payment solutions, and continued technology modernization.

Speaker Change: Spansion as well as continued year over year income momentum and steady expense discipline.

Speaker Change: This quarter, we reported modest operating leverage excluding net securities losses in prior year notable items and consistent with our message at Investor Day, we expect to deliver expanding positive operating leverage in the fourth quarter that will continue into 2025.

Speaker Change: As recent industry headwinds become tailwind and we realize the benefits of our now run rate investment spend on.

Speaker Change: An industry, leading digital capabilities integrated payment solutions and continued technology modernization. It will be the combination of our scale, our interconnected business model and our deep and talented management team that will allow us to capitalize on the many objectives and targets at this important inflection point in our story.

Andy Cecere: It will be the combination of our scale, our interconnected business model, and our deep and talented management team that will allow us to capitalize on the many objectives and targets at this important inflection point in our story.

Andy Cecere: As always, let me close by thanking our over 70,000 employees for their everyday commitment to our clients, communities, and shareholders.

Speaker Change: As always let me close by thanking our over 70000 employees for their everyday commitment to our clients communities and shareholders. We will now open the call for Q&A.

Operator: We'll now open the call for Q&A. Thank you. At this time, as a reminder, if you would like to ask a question, please press star and then number one on your telephone keypad.

Speaker Change: At this time as a reminder, if you would like to ask a question. Please press star and then number one on your telephone keypad. Our first question comes from Scott Cyphers from Piper Sandler Your line is now open.

Scott Siphers: Our first question comes from Scott Siphers from Piper Sandler.

Scott Siphers: Your line is now open. Morning, everyone. Thanks for taking the question.

Scott Cyphers: Good morning, everyone. Thanks for taking the risk on good morning.

John Stern: Good morning. John, I guess I wanted to start with NII, so at least relative to what I had anticipated looked like it came in better than you might have thought, even as recently as a month or so ago at the investor day.

Speaker Change: Okay John.

Scott Cyphers: And I guess I wanted to start with NII, so at least relative to what I had anticipated and it looked like it came in better than you might have thought even as recently as a month or so ago at the Investor Day I guess in simple terms can you walk through what in your mind ended up coming in better than you might have anticipated.

John Stern: I guess in simple terms, can you walk through what, in your mind, ended up coming in better than you might have anticipated? Sure, Scott. Good morning. So, a couple of factors I would say there. First, I think the remixing of our portfolio; we continue to see strength in our credit card and the revolver rate, as we discussed in our opening comments. It's great to see that business as we've been growing at 8% year-over-year on the loan side of things. You know, our fixed asset repricing continues, and then the other factor I would just say is that on the, you know, what we didn't know was the Fed was going to cut 50 basis points, and we had the ability to really price on our deposits.

Speaker Change: Sure Scott and good morning.

Speaker Change: So a couple of factors I would say their first I think the remixing of our portfolio. We continue to see strength in our credit card and the revolve rate as we discussed in our in our opening comments.

Speaker Change: It's great to see that business as we've been growing at 8% year over year.

Speaker Change: On the on the loan side of things.

Speaker Change: Fixed asset repricing continues and then the other factor I would just say is that on the what we didn't know it was the fed was going to cut 50 basis points and we have the ability to really price our deposits and so I think the combination of all those things really helped us power and to get and see nice momentum here in the third quarter.

Scott Siphers: And so I think the combination of all those things really helped us power and see nice momentum here in the third quarter. Okay.

Scott Siphers: All right, perfect.

Speaker Change: Okay, Alright, perfect and then if I could switch gears to <unk>.

Scott Siphers: And then, if I could switch gears to these for just a second, just wanted to cut about the sort of the implied fourth quarter number. So even if we get to the lower end of the full year fee guide, I guess that sort of implies that fourth quarter fees would get back up near sort of 282.9 billion dollar level that might be more typical of one of your seasonally stronger. Sure, our quarter is like, you know, typically I think of you all doing best in the second quarter.

Speaker Change: Fees for just a second just wanted to.

Speaker Change: Chat about the sort of the implied fourth quarter number.

Speaker Change: Even if we get to the lower end of the full year fee guide I guess that sort of implies that fourth quarter fees would get back up near sort of a 282 $9 billion level that might be.

More typical of one of your seasonally stronger quarters like typically I think of you all do invest in the second quarter, maybe if you could just sort of walk through the main puts and takes and where you would see sort of a reacceleration in momentum into the fourth quarter. Please.

John Stern: Maybe you could just sort of walk through the main puts and takes and where you would see sort of a re-acceleration and in momentum into the fourth quarter, please. Sure. So I think we, you know, I think it's just in a number of different things. And as we discussed in our opening comments, you know, the core business components are performing quite well. We had strong growth in trust, you know, 6% commercial products was over a double digits at 12. Mortgage had a nice year of year growth at 8%. You know, and we payments while it came in at 3% or so. You know, this quarter we do have expectations of growth in those particular businesses in the fourth quarter.

Speaker Change: Sure. So I think we.

Speaker Change: It is just a number of different things and as we as we discussed in our opening comments the core business.

Speaker Change: Components are performing quite well, we had strong growth in trust.

Speaker Change: 6% commercial products was over double digits at 12 mortgage had a nice year over year growth at 8%.

Speaker Change: And we expect.

Speaker Change: Payments, while it came in at 3% or so this quarter, we do have expectations of growth in those particular businesses in the fourth quarter. So all of that kind of leads into.

Scott Siphers: So all that kind of leads into, you know, some momentum there from a fee standpoint side would, of course, have some headwinds there that we've talked about, you know, like in our ATM, exiting our ATM business, some of the prepaid card metrics, and some of the other things like that in the payments. But, you know, buy it all; in all that, that's what gets us and gives us confidence in our mid-single-digit growth on the piece side of things. Perfect. Okay, good. Thank you very much.

Some momentum there from a fee standpoint side of course have some headwinds there that we've talked about like in our ATM exiting our ATM business some of the prepaid card metrics and some of the other things like that and the payments but.

Speaker Change: All in all that's what gets us and gives us confidence in our in our our our mid single digit growth on the fee side of things.

Speaker Change: Perfect. Okay. Thank you very much.

Scott Siphers: Thanks, Scott.

Scott Cyphers: Thanks Scott.

John Pancari: Your next question comes from John Pancari from Evercore ISI. Your line is now on.

Speaker Change: Your next question comes from Jonathan Carey from Evercore ISI. Your line is now open.

John Pancari: Morning. I know you cited the partial securities repositioning in the quarter. I want to give us a little bit more color on what you restructured in the quarter. And the side advertising of that in the yield, and then do you expect further actions on that front? And would further actions already be factored into your NII expectations? Thanks.

Speaker Change: Morning.

Speaker Change: Turning.

Jonathan Carey: I know you cited the partial securities repositioning in the quarter I Wonder if you could give us a little bit more color on what you.

Jonathan Carey: The restructured in the quarter and the sizing of that in the yield and then do you expect further actions on that front.

Jonathan Carey: Would further actions already be factored into your NII expectations.

John Stern: Sure. Thanks, John. So, you know, in terms of the securities repositioning, we did take action, you know, on what 119 million of losses. There was, in total, about, you know, 10 billion in total of, of, of notional that was transacted. But, you know, importantly, for you all, I mean, we consider that more or less a two-year payback is kind of how we're thinking about it. I would call the impact of the quarter maybe around 10 million or so. So, there's probably a little bit more pickup in the fourth quarter related to it. And as I think about, you know, in the future, we don't have any other, you know, of these sorts of things contemplated in our guidance or anything like that.

Speaker Change: Sure. Thanks, John So in terms of the securities repositioning we did take action on.

Jonathan Carey: <unk>.

Jonathan Carey: What $119 million of losses. There was in total there is about $10 billion in total of of of notional that was transacted, but.

Jonathan Carey: Accordingly for you all I mean, it's we consider that more or less a two year payback is kind of how we're thinking about it I would call the impact to the quarter, maybe around $10 million or so so theres, probably a little bit more pickup in the fourth quarter related to it and as I think about.

Jonathan Carey: In the future we don't have any other.

Jonathan Carey: Of these sorts of things.

Jonathan Carey: Contemplated in our in our guidance or anything like that it's just this was an opportunity that came up with as we saw interest rates fall quite a bit we were able to take advantage of that and we feel good about the transaction.

John Stern: It's just this was an opportunity that came up with, you know, as we saw interest rates fall quite a bit. We were able to take advantage of that, and we feel good about the transaction. You know, we're constantly looking at these things, but we don't have anything contemplated at this particular point in time. Okay.

Jonathan Carey: We're constantly looking at these things, but we don't have anything contemplated at this particular point in time.

John Pancari: All right. Thank you. And then separately, on the expense, you put up some pretty good pods of operating leverage. This is quarter and implied that fourth quarter, you'll see that as well. And I believe at the investor day, you express confidence and continued positive operating leverage.

Speaker Change: Okay, Alright, Thank you and then separately on the expense side, you put up some pretty good positive operating leverage.

Speaker Change: This quarter end.

Speaker Change: You implied that fourth quarter, Youll see that as well and I believe at the Investor Day, you expressed confidence in continued positive operating leverage as you look at 2025 could you maybe help us.

Andy Cecere: As you look at 2025, can you maybe help us get a sense of the magnitude of that operating leverage that you think is reasonable as you enter 2025 and longer term? I believe the streets looking at about 150 to 200 basis points operating leverage next year. One of the getting your thoughts on that as we look at your return profile in the coming years. Thanks, John.

Get a sense of the magnitude of that operating leverage that you think is reasonable as you enter 2025 and longer term I believe the streets looking at about 150 to 200 basis points operating leverage next year wanted to get your thoughts on that as we look at your return profile.

Speaker Change: Coming years.

Andy Cecere: This is Andy. So you, as you saw, we reported positive operating leverage of approximately 30 basis points in Q3 here. The guidance that John provided would indicate that our expectation for positive operating leverage in the fourth quarter of 24 will be north of 1%, and we would expect it to continue to expand from there into 2025. So building a bond that 1% plus percent into 25 exactly where we'll get will give more guidance as we get the forward looking guidance that we think about 25 across the categories. Great. Very helpful. Andy, thank you.

Speaker Change: Thanks, Jon This is Andy so as you as you saw we reported positive operating leverage approximately 30 basis points in Q3 here the guidance that John provided would indicate that our.

Speaker Change: And expectation for positive operating leverage in the fourth quarter of 24 will be north of 1% and we would expect it to continue to expand from there into 2025. So building upon that one plus percent into 25, exactly where we will get we will give more guidance as we get the forward looking guidance, if we think about 25% across the categories.

Speaker Change: Great very helpful. Andy Thank you.

Betsy Graseck: Is that your next question comes from Betsy Grayseck from Morgan Stanley. Your line is now. Oh, hey, good morning. Yeah, just to one follow up on that is in the guidance for four Q you indicated, you know, expenses at, you know, till the 16.8 billion. And I know in the past, you had been saying 16.8 or less. So is there, is there anything we should take away from that very ever so slight guidance?

Andy: You bet.

Speaker Change: Your next question comes from Betsy <unk> from Morgan Stanley. Your line is now open.

Speaker Change: Oh, Hey, good morning.

Speaker Change: Yes, just two.

Speaker Change: One follow up on that is in the guidance for <unk> you indicated expenses.

Speaker Change: Tilda is $16 8 billion and I know in the past you had been saying 16 or lat.

Speaker Change: Is there is there anything we should take away from that very ever so slight guidance change.

John Stern: Hey, Betsy, it's John. So I think it's just reflective of we're in the third; we're complete with the third quarter; we're at the fourth quarter right now. We have a very good line of sight into what our expense base will be. And so we were just being more precise with that particular number. In addition, you know, we saw good growth in our net interest income. And so, you know, it's kind of the expense was coupled in part with the net interest income you recall when we shifted our discussion points on that. And since we're at the higher end of our range, we feel like 16 point is the appropriate expense side of things this quarter.

Speaker Change: Hey, Betsy it's John So I think it's just reflective of where in the third.

John Andy: Complete with the third quarter were at the fourth quarter right now we have a very good line of sight into what our expense base will be and so we're just being more precise with that particular number. In addition, we saw good growth in our net interest income and so.

John Andy: The expense was coupled in part with the net interest income you'll recall, we shifted our discussion points on that and since we're at the higher end of our range. We feel like 16 point is an appropriate expense.

Speaker Change: Of things this quarter got it okay. That's helpful and then on the rate discussion earlier.

John Stern: Got it. Okay. Now that's helpful. And then on the rate discussion earlier, you know, you got the surprise 50, which you're able to pass through on to the depositor site. So, as we're thinking about the next several quarters here, does NIM expand further as rates continue to come down? Or is there a catch up on the asset side that we should be skewing to? Yeah, I think broadly speaking, rate cuts are a positive thing for us in the sense that we're able, we have a deposit base that's conducive really to cuts. We have the ability, as you know, we have 50% of our deposit bases and institutional; 50% is retail.

Speaker Change: Surprise 50.

Speaker Change: Which.

Speaker Change: Able to pass through onto.

Speaker Change: There's a positive side so as we're thinking about the next several quarters here.

Speaker Change: The NIM expand further as rates continue to cutback come down or is there a catch up on the asset side that we should be.

Speaker Change: It's skewing too.

Speaker Change: Yes, I think broadly speaking.

Speaker Change: Rate cuts are a positive thing for us in the sense that we're able we have a deposit base.

Speaker Change: Conducive really 222 cuts we are have the ability as you know we have 50.

Speaker Change: 50% of our deposit bases in institutional.

Speaker Change: 50% is retail we're able to cut institutional rates fairly quickly and so the beta for this particular juncture was around that I'll call. It 30% area for this particular cut and we expect that to continue to migrate closer to or up to just north of 50% as we kind of get.

John Stern: We're able to cut institutional rates fairly quickly. And so, you know, the beta for this particular juncture was around that, you know, I'll call it 30% area for this particular cut. And we expect that to continue to migrate closer to, you know, or up to just north of 50% as we kind of get through the cycle and that sort of thing. And so that's going to be helpful. And I think the other thing is, over time, as the cuts happen, then that implies a more upward sloping curve, which should help us in our trajectory going forward as well.

Speaker Change: Through the cycle and that sort of thing and so that's going to be helpful. And I think the other thing is over time as the cuts happen then that implies a more upward sloping curve, which should help us in our trajectory going forward as well. So those are the two pieces that I would I would point to.

John Stern: So those are the two pieces that I would point to. Right. And the 30% and 50% that's on total IB deposits or total deposits, which you know, total IB total interest bearing deposits. Yeah. Super. Thanks so much.

Speaker Change: Right and the 30% and 50% that's on total IV deposits our total deposits.

Speaker Change: Total IV total interest bearing deposits yep yep Super Thanks, so much.

John Stern: You bet.

Speaker Change: You bet.

Erica Najarian: You're next. Your next question comes from Erica Najarian from UBS. Your lines now open.

Speaker Change: Your next your next question comes from Erika Najarian from UBS. Your line is now open.

Erica Najarian: Hi. Good morning. Just a few follow-up questions. First on John's previous question. Sorry, Erica. Can you just, we're having a hard time hearing you? Can you hear me better now? Yeah. That's better. Thank you. Okay. Sorry about that. Just wanted to follow up on John's question. You mentioned 10 billion of notional was sold. Could you so that we can understand the impact for a fourth quarter.

Erika Najarian: And good morning, just a few follow up questions.

Erika Najarian: First on Jon's previous question.

Speaker Change: Sorry, Erica can you just.

Speaker Change: We're having a hard time hearing you can you hear me better now.

Erika Najarian: Yeah, that's better thank you, okay, sorry about that.

Speaker Change: Just wanted to follow up on John's question, You mentioned 10 billion of notional was sold could you. So that we can understand the impact for fourth quarter could you tell us.

John Stern: Could you tell us what the average yield was of what was sold and what you invested in? And just a follow-up to Betsy's line of questioning. You said that you, you know, you saw a 30% beta, and the terminal would be north of 50. As we think about the fourth quarter, is it a sort of a smooth glide path, you know, to that 50? Do you expect it to significantly accelerate from that 30% initial beta? Sure.

Speaker Change: What the average yield wise of what was sold and what you invested in and just a follow up to Betsy's line of questioning you said that you you saw 30% data and determine all would be north of 50, as we think about the fourth quarter is it is sort of a smooth glide path.

Speaker Change: Hi.

Speaker Change: <unk>.

Speaker Change: <unk> two to <unk> 50, do you expect it to significantly accelerate from that 30% initial data.

John Stern: So maybe I'll just take those in pieces. The first one on the on the securities book. You know, I think it was just an opportunity there to remix and a couple different things. And it was really there to improve our liquidity profile as well as, you know, some lower yielding securities that have seasoned to reposition those. So it was just a number of different securities. So it's hard to just summarize it one thing. But I would just say on the beta side of things, you know, 30% or so terminal beta. I think that just is a gradual increase as we look forward.

Speaker Change: Sure so.

Speaker Change: Maybe I'll just take those in pieces. The first one on the on the Securities book I think it was just an opportunity there too to remix and a couple of different things in it it was really there to improve our liquidity profile as well as.

Speaker Change: <unk>.

Speaker Change: Some lower yielding securities that have season to reposition those so it is just a number of different securities. So it's hard to summarize it in one thing, but I would just say.

Speaker Change: On the beta side of things.

Speaker Change: 30% or so terminal beta I think that just is a gradual increase as we look forward and and the reason for that is on the institutional side youre going to get that benefit on each cut on the retail side youre going to get that benefit kind of as I mentioned in the past kind of an arc to the retail pricing sort of thing and so as Cds reprice.

John Stern: And the reason for that is, you know, on the institutional side, you're going to get that benefit on each cut. On the retail side, you're going to get that benefit. So it's kind of, as I mentioned in the past, kind of an arc to the retail pricing sort of thing. And so, as CDs repriced and as the money market rates come down on retail, that's going to be kind of that glide path into the 50% terminal that I spoke to earlier. And John, all of that, all that you said, which is spot on, is all baked into your flat or stable, not interesting, and projection for cuter.

Speaker Change: As the money market rates come down on retail that's going to be kind of that glide path into the 50% terminal that I spoke to earlier.

John Andy: And John all of that all of you said, which is spot on is all baked into your flat or stable net interest income projection for Q quarter Thats exactly right yes.

John Stern: That's exactly right. Yup. Got it.

Andy Cecere: And my second question is for you, Andy, and this is sort of a broader question. You know, you hosted a very comprehensive Investor Day, and I think the investor reception, at least as it followed through to the stock, was probably less than desired. And as I think about the feedback from investors, I'm wondering if you could sort of readdress this on this call. You know, you seem to turn into a firm, and you have showed us positive operating leverage. Maybe some, you know, quick notes on 25. You know, the comments on the southeast expansion were also hit on as, you know, a potential negative.

Speaker Change: Got it.

My second question is for you Andy and this is sort of a broader question.

Speaker Change: Uh huh.

Speaker Change: Hosted a very comprehensive investor day, and I think the investor reception at least as it followed through to the stock was probably.

Less than desired and as I think about the feedback from investors I'm wondering if you could sort of readdress. This on this call.

Speaker Change: You seem determined and you have showed us positive operating leverage maybe.

Speaker Change: Quick notes on 25.

Speaker Change: Comment on the southeast expansion.

Speaker Change: It was also.

Speaker Change: Head on as a potential negative and the third would be.

Andy Cecere: And the third would be, you know, you're now in a place where you're building capital; loan growth hasn't yet come back. You know, what would allow you to be a little bit more aggressive, more quickly on the, on acting on that side. So I think we're going to have about 5 billion authority. So I'll take them in pieces, Erica. So, first of all, I thought the team did a terrific job articulating the strategy and Investor Day. And part of that strategy was the inflection point discussion. We talked about which is controlled expenses, delivering on operating leverage and strong or revenue growth, given the inner connectedness of the businesses.

Speaker Change: You are now in a place where you're building capital loan growth Hasnt yet come back.

Speaker Change: What would.

Speaker Change: What would allow you to be a little bit more aggressive more quickly.

Speaker Change: Acting on that $5 billion.

Speaker Change: Authority.

Speaker Change: So I'll take them in pieces, Eric So first of all I thought the team did a terrific job articulating our strategy in Investor day, and part of that strategy was the inflection point discussion, we talked about which is controlled expenses.

Speaker Change: Delivering on operating leverage and stronger revenue growth given the interconnectedness of the businesses and we're hitting on all of those and I think part of what the analyst community and Investor community wants as examples and execution in this quarter started that execution and as I said on operating leverage we expect that to expand in the fourth quarter.

Andy Cecere: And we're hitting on all those. And I think part of what the analyst community and investor community wants is examples and execution. And this quarter started that execution. And as I said, on operating leverage, we expect that to expand into fourth quarter and into 25. So we're going to deliver on that.

Speaker Change: Then to 25, so we're going to deliver on that secondly, with regards to the M&A environment.

Gunjan Kedia: Secondly, with regard to the M&A environment, you know, given this environment, large bank M&A is just not a priority for us. That's not something we're focused on. Well, we are focused on is organic growth and the components that Dungeon talked about.

Speaker Change: Given this environment large bank M&A is just not a priority for us that's not something we're focused on what we are focused on is organic growth and the components that Glenn talked about and I'm going to ask her to just highlight some of those key aspects of that right now.

Gunjan Kedia: And I'm going to ask her to just highlight some of those key aspects of that right now. Good morning, Erica. As we shared in during the investor day, we do have very meaningful organic growth opportunities in our portfolio. And as Andy said, our attention is very much on executing against those priorities, deepening our client relationships, enhancing our product interconnectivity, and broadening our reach. We are very focused on delivering meaningful positive operating leverage and the execution that goes with it. We have optimized our distribution via investments in our digital capabilities in our Southeast expansion is very much focused on our partnerships and our digital capabilities.

Speaker Change: Good morning Erika.

Erika Najarian: As we shared during.

Erika Najarian: During the Investor day, we do have very meaningful organic growth opportunities in our portfolio and as Andy said on attention is very much on executing against those priorities deepening our client relationships enhancing our product interconnectivity and broadening our reach.

Erika Najarian: B the job very focused on delivering meaningful positive operating leverage and the execution that goes with it and we have optimized the distribution via investments in our digital capabilities in our southeast expansion is very much focused on our partnerships and additional.

Erika Najarian: Capabilities.

Gunjan Kedia: Thank you. Thanks, dungeon.

Speaker Change: Thanks, Tien Tsin and then finally on your last question with regard to capital Eric as you know.

Andy Cecere: And then finally, in your last questions, regard to capital, Erica. You know, we, as we talked about in this John articulated comments, we would expect to go to some level of modest buybacks here shortly. And then we would expect to build upon that once we have more clarity on Basel III and some of the capital rules. And then, and then long growth as you talked about as a key factor as well. But given all that, we would still expect to be at our capital targets even under the cat too when we cross that threshold, which again, as a reminder, we talked about is not expected until 2027.

Speaker Change: We as we talked about and as John articulated in his comments, we would expect to go into some level of modest buybacks here. Shortly and then we would expect to build upon that once we have more clarity on Basel III and some of the capital rules and then loan growth as you talked about as a key factor as well, but given all that we would still expect to be.

Speaker Change: At our capital targets, even under the Caf II, when we cross that threshold, which again as a reminder, we talked about is not expected until 2027.

Andy Cecere: I guess just to follow up on that, the Basel III shouldn't impact you that much, right? And everybody's already had already put in the impact of AOCI actually more immediately than whatever phase in Basel III.

Speaker Change: I guess just to follow up on that.

Speaker Change:

Speaker Change: Basel III.

Impact you that much right either that and.

Speaker Change: As I had already.

Speaker Change: Put in the impact of a OCI actually more immediately than whatever phased in Basel III and game has I guess I'm wondering you know as a regional bank are you do you think it's just a.

Andy Cecere: I guess I'm wondering, you know, as a regional bank, are you, you know, do you think it's just a prudent constituent in terms of not wanting to be aggressive ahead of, you know, a new set of revisions, or, you know, are you also considering the ratings agencies? Just sort of wondering, you know, what the completely understand that you're about to buy back in the first quarter, but I think that it's probably, you know, an important component of long-only investors starting to, you know, increase their position in US bank. Yeah, all those constituencies you talked about are factors in our thinking, you know, long growth, the final capital rules, the rating agencies; those are off-factors, but we're very confident in our accretion ability. You just saw this quarter, 20 basis points; we've articulated 20 to 25.

Speaker Change: Just a prudent constituent in terms of not wanting to be aggressive ahead of.

Speaker Change: A new set of revisions.

Speaker Change: Are there are you also considering with the ratings agencies just sort of wondering.

Speaker Change: What the.

Speaker Change: Completely understand that youre about to buyback in the first quarter, but I think that is probably an important component of our long.

Speaker Change: A long only investors starting to.

Speaker Change: Increased our position in U S Bank.

Speaker Change: All of those constituencies you talked about are factors in our thinking loan growth.

Speaker Change: The final capital rules the rating agencies those are all factors, but we're very confident in our accretion ability as you saw this quarter 20 basis points, we've articulated $20 to 25%, we're very comfortable with our capital position and we're very comfortable with the ability to start to buyback and distribute as well as accrete.

Andy Cecere: We're very comfortable with our capital position, and we're very comfortable with the ability to start to buy back and distribute, as well as create the level of which will continue to determine and judge over time, given all those factors you talked about. Thank you, Andy. You better; I'll see you.

Speaker Change: The level of which we will continue to determine and judge over time, given all those factors you talked about.

Speaker Change: Thank you Andy.

Speaker Change: You bet, Eric <unk> CFO.

Mike Mayo: Your next question comes from Mike Mayo, from Wells Fargo Securities; your line is now open. Marty, Mike. Hi, first of all, egg morning, first of clean-up question.

Speaker Change: Your next question comes from Mike Mayo from Wells Fargo Securities. Your line is now open.

Mike Mayo: Good morning, Mike Hi, Ed.

Mike Mayo: Hey, good morning, first a clean up question. So are you interested in buying a bank in the southeast because that got a lot of play just following up to the prior question.

Andy Cecere: So, are you interested in buying a bank in the Southeast? Because that got a lot of play just falling up to the prior question. No, not even a small bank. Mike, the environment right now is just not conducive. There's too much uncertainty for M&A, and I don't want to focus all our efforts on that when we have so much opportunity on the organic growth front. So, in this role, what you do is prioritize against the opportunity set that you have in front of you, and our organic growth opportunities are far more important and much more tangible to us right now.

Mike Mayo: No.

Not even a small bank.

Speaker Change: Mike the environment right now is just not conducive theres too much uncertainty for M&A and I don't want to focus all our efforts on that when we have so much opportunity on the organic growth front. So.

Speaker Change: In this role what you do is prioritize against the opportunity set that you have in front of you and our organic growth opportunities are far more.

Speaker Change: Important Jim.

Much more tangible to US right now and as you know Mike the M&A environment is just so uncertain right now that would not be a good place to focus our efforts.

Andy Cecere: And as you know, Mike, the M&A environment is just so uncertain right now; that would not be a good place to focus your efforts.

Mike Mayo: Okay, so my main question here goes back to the often leveraged, which is how much of this is expensive versus revenues? And on the expense side, you know, your investments the last three, five more years. It's all in the run rate, as you said at Investor Day. And, you know, how much benefit do you get from being a scale player? Because some smaller banks say they can just buy a lot of these things off the shelf and compete with the likes of U.S. Bankrupt. So, that's the expense question.

Mike Mayo: Okay. So my main question here it goes back to the operating leverage which is yes.

Mike Mayo: How much of this is <unk> expenses versus revenues and on the expense side. Now you are investments in the last three five more years. It's all in the run rate as you said at Investor Day.

Speaker Change: Much benefit you get from being a scale player because some smaller banks say they can just buy a lot of these things off the shelf.

Speaker Change: Pete with the likes of U S. Bancorp's. So thats. The expense question and then the revenue question is at <unk>. I know you are leading go to market strategy kind of what stage of that go to market strategy and are we seeing the results now or do we expect to see more of that in the results ahead. Thanks.

Andy Cecere: And then the revenue question is a gungeon. I know you're leading the go-to-market strategy. Kind of what stage does that go-to-market strategy go in? Are we seeing the results now, or do we expect to see more of those results ahead? Thanks. So, Mike, I'll start an original add-on. I think to answer your question, I would think about it on both components. I think it's going to be both increased revenue growth and managed expenses. So, as we talked about, we were flatish this time. We might have some modest increases. We go into next year, but we're not going to have expenses growing above revenue levels.

Speaker Change: So Mike I'll start and then <unk> will add on I think to answer your question I would think about it on both components. So I think it is going to be both increased revenue growth and managed expenses. So as we talked about we were flattish at this time, we might have some modest increase as we go into next year, but we're not going to have expenses growing above revenue levels and I would expect growing revenue and those.

Gunjan Kedia: And I would expect growing revenue and those jobs widening from the expense-revenue differential. The revenue will be driven by the activities the gungeons focused on in the letter comment. Good morning, Mike.

Speaker Change: Jaws widening from the expense revenue differential the revenue will be driven by the activities that <unk> focused on and I'll, let her comment good morning, Mike.

Gunjan Kedia: The go-to-market is in its third and final year of our transformation. So, we're beginning to see the results in some of the areas like the consumer deposit. We built out a lot of capabilities to manage deposit pricing. We benefited from that in this downgrade cycle. We're seeing a lot of momentum with our multi-serve clients and deepening our relationships on the institutional side. And we saw that with the capital markets growth over this quarter. So, the impact of a good scaled business model is delivering good positive operating leverage, including expense management. So, this is what we would continue to focus on from an organic growth standpoint.

Speaker Change: The go to market is in its third and final year of five transformation. Since we are beginning to see the results from some of the areas like the consumer deposit you have built out a lot of capabilities to manage.

Speaker Change: Deposit pricing, we benefited from that in this downgrade cycle, we are seeing a lot of momentum with our multi serve clients and deepening relationships on the institutional side, we saw that the capital markets group over this quarter.

Speaker Change: So the impact of a good scaled business model is delivering good positive operating leverage including expense management. So this is what we would continue to focus on from an organic growth standpoint.

Mike Mayo: All right. Thank you. Thanks, Mike.

Speaker Change: Alright, thank you.

Mike Mayo: Thanks, Mike.

Gerard Cassidy: Your next question comes from Gerard Cassidy, from RBC Capital Markets; your line is now open. Morning, Gerard. Hi, Andy. Hi, John. John, on the deposits, on the deposit pricing, can you share with us the loan to deposit ratios for the industry? In yourselves or not as high as in previous cycles? Do you think that can give you added flexibility in lowering the cost aside from, obviously, you talked about the institutional deposits that are essentially, I think, index priced, so they come down quickly. But in the other deposit classes, do you think you're going to have some leverage to lower those rates because the loan-to-deposit ratios not at 90% or something like that?

Speaker Change: Yes.

Speaker Change: Your next question comes from Gerard Cassidy from RBC capital markets. Your line is now open.

Speaker Change: Morning Gerard.

Gerard Cassidy: Hi, Andy Hi, John.

Gerard Cassidy: John on the deposits.

Gerard Cassidy: Pricing.

Gerard Cassidy: Can you share with us.

Speaker Change: The loan to deposit ratios for the industry and yourselves are not as high as in previous cycles. Do you think that can give you added flexibility and lowering the costs. Aside from obviously you talked about the institutional deposits et cetera.

Speaker Change: Essentially I think index priced so they come down quickly, but in the other deposit classes do you think youre going to have some leverage to lower those rates because.

Speaker Change: The loan to deposit ratio is not at 90% or something like that.

John Stern: Sure, Gerard. So I would say that we don't target necessarily loan-to-deposit ratios. You know, what we look at is holistically just overall serving of our clients, making sure we have the right mix of deposits and loans. And you know, loan growth is obviously going to be a driver or not of deposits, and when they're at this quarter, loans were flat down just slightly. And so we took this opportunity to bring down some deposits that were at a higher cost side, and you saw that in the results here. And so if that continues, I would have continued to expect that.

Gerard Cassidy: Sure Gerard So I would say that we don't target necessarily loan to deposit ratios.

Gerard Cassidy: What we look at it as Holistically, just overall serving of our clients, making sure. We have the right mix of deposits and loans and loan growth is obviously going to be.

Gerard Cassidy: Driver or not of deposits and where they are at this quarter loans were flat to down just slightly and so we took this opportunity to too.

Gerard Cassidy: To bring down some deposits that were at a higher cost side and you saw that in the results here and so if that continues I would continue to expect that Conversely, if loan growth continues to take take up we're going to be.

John Stern: Conversely, if loan growth continues to take up, we're going to be making sure that we have the deposit base to suffice that. You know, the other thing we always try to manage around that is our liquidity needs, as well as interest rate risk profile as well. So it's kind of more of a holistic nature as it relates to that. Very good.

Gerard Cassidy: Making sure that we have the deposit base two to suffice that the other thing we always try to manage around that is our liquidity needs as well as interest rate risk profile as well. So it's kind of more of a holistic nature as it relates to that.

Very good and then.

Gunjan Kedia: And then for Andy or Gunjin, on the organic growth strategy, some of your peers and the bigger banks in particular have embarked upon a branch build-out across the country. Even, you know, one super or two regional banks have done this as well. Can you share with us as part of your organic strategy? How do you guys view new branches into maybe newer territories combined with your ongoing digital reach out that, of course, you have? Good morning, Gerard. Maybe I'll start here. So first, the branches are very critical to our business strategy. We see deep client relationships anchored around the branch.

Speaker Change: For India Dungeon on the organic growth strategy. Some of your peers the bigger banks in particular have embarked upon a branch build out across the country even.

Speaker Change: Super.

Speaker Change: Regional banks have done this as well.

Speaker Change: Can you share with us as part of your organic strategy. How do you guys view, new branches and some maybe newer territories combined with your ongoing digital reach out but of course you have.

Speaker Change: Good morning, Jay maybe Alex <unk> P M.

Speaker Change: The branches are very critical to our business strategy VC deep client relationships anchored around the branch it really drives brand recognition and we are very steady and investing in our branch network.

Gunjan Kedia: It really drives brand recognition. And we are very steady in investing in our branch network. Our strategy focus is to create density in the highest growth areas within a current footprint rather than use branches to expand out of our footprint. And the reason for that is that we have built some very good strong digital capabilities that allow us to deliver our services nationally. And we are combining that with our very strong partnerships with other partners that have brand recognition and client reach in areas where we don't have. It's a powerful combination. It's a capital lightweight of expanding into other markets.

Speaker Change: Strategy focus is to create density in the highest growth areas within our current footprint rather than use branches to expand out of our footprint and the reason for that is that we have built some very good strong digital capabilities that allow us to deliver services nationally.

Speaker Change: And we are combining that with very strong partnerships with other partners that have brand recognition and client reach in areas, where we don't have it's a powerful combination it's a capital light fee of expanding into other markets second is our national businesses from the.

Gunjan Kedia: Second is our national businesses from the institutional side. There we are actually going client centers and areas where we are not to expand our reach. So you'll see us continue to invest in our branch network, both inside, digitally enabling them, but within our current footprint. Very good. Thank you. Thanks, Gerard.

Institutional side, there, we had actually a growing client centers in areas, where we are not too to expand our reach so youll see us continue to invest in our branch network, both inside digitally enabling them.

Speaker Change: But within our current footprint.

Very good thank you.

Speaker Change: Thanks Jerry.

Vivek Juneja: Your next question comes from Vivek Juneja from JP Morgan. Your lines now open. Hi. Thanks for taking my questions. I just want to understand on payments and delve a little bit into that. You talked last quarter about corporate payments will be lapping this quarter because you're tough. Comps with your trucking related fees last year, but we didn't really see the benefit of that lap in this quarter. So anything there that has caused it to be delayed, now have we seen really much in payment pickup in terms of year and year fee growth.

Speaker Change: Your next question comes from Vivek <unk> from Jpmorgan. Your line is now open.

Speaker Change: Hi, Thanks for taking my questions just wanted to understand.

Speaker Change: Payments and delve a little bit into that you talked last quarter about.

Speaker Change: Payments will be lapping this quarter, because you had tough.

Speaker Change: Comps with Dr trucking.

Speaker Change: Trucking.

Speaker Change: Related to fees last year, but we didn't really see the benefit of that lapping this quarter so anything.

Speaker Change: There that has that has caused it to be delayed nor have we seen early merchant payments pickup in terms of year on year fee growth.

Vivek Juneja: So any color on what's going on and why the delay, and what gives you confidence that it'll actually materialize in the coming quarters. Sure. So, Vivek, I would start by saying I think there was still a little aftermath here on the freight side in the third quarter, but we expect that to completely lap here in the fourth quarter. And then we do see corporate spend being stronger. We saw some nice momentum at the end of the third quarter and into the fourth quarter. And that's what's really giving us the confidence that that that will grow from the level that you saw in this quarter's results from a corporate payments perspective.

Speaker Change: So any color on what's going on and why the delay and what gives you confidence that it will actually materialize in the.

Speaker Change: Coming quarters.

Speaker Change: Sure so.

Speaker Change: Vivek.

Speaker Change: I'd start by saying I think there is still a little aftermath here on the freight side in the third quarter, but we expect that to completely lap here in the fourth quarter and then we do see corporate spend being stronger we saw some nice momentum at the end of the third quarter and into the fourth quarter, and that's where it's really given us the confidence that that that will grow.

Speaker Change: The level that you saw in this this quarter's results from our corporate payments perspective.

Gunjan Kedia: Maybe John, I'll add good morning, Vivek. Just a little point on the long-term expectation for payments. You know, where payments is in the mix with the client relationship. It creates really sticky, enduring relationships. We do see good core growth in many of the categories of payments. They are partially offset by some unique items. Freight is one of them, which was very disrupted post-COVID and just is beginning to normalize, and there are some others as well. So the long term confidence question that you asked is we look at the client value and we look at the core dynamics, and you see that continue to improve over time.

Speaker Change: Maybe John I'll add good morning, <unk>, just a little point on the long term expectation for payments.

John Andy: Payments is in the mix with the client relationship it creates really sticky enduring relationships.

John Andy: We do see good growth in many of the categories of payments, Dr. Partially offset by some unique items.

John Andy: <unk> is one of them, which was very disrupted post COVID-19 and just is beginning to normalize and then some others as well. So the long term confidence question that you asked as we look at the client value and we look at the core dynamics and Youll see that continue to improve all the time.

Gunjan Kedia: Thanks for that.

Thanks for that I have another follow up for John John I guess.

John Stern: I have another follow up for John. John, I just want to be a comment earlier in response to your question. Just pick my interest. You said expenses were up because net interest income was up. Is there incentive comp tied to net and growing net interest income? Is there something else that would drive expenses up when you get net interest income up? That's not really any color on that. Yeah, but no, there's no linkage. What I was getting at is we're in the fourth quarter. We have a very good line of sight in what our expense level.

Speaker Change: Your comment earlier in response to a question just piqued my interest you said expenses were up because net interest income was up as their incentive comp tied to 11 growing net interest income or is there something else that will drive expenses up when you look at net interest income up that's not really.

Any color on that yes.

Speaker Change: Yes.

Speaker Change: There is no linkage.

Speaker Change: What I was getting at is where in the <unk>.

Speaker Change: In the fourth quarter, we have a very good line of sight on what our expense level. So we're just being more precise really with it.

John Stern: So we're just being more precise, really, with it. I was comparing that to our net interest income that has gone up higher and is in the higher end of our range. I was just making a comparison. There's no linkage from a compensation perspective in that sense. So we're just being more precise. is the short answer.

Speaker Change: Comparing that to our net interest income.

Speaker Change: That had has gone up higher and is in the higher end of our range I was just making a comparison there is no linkage from a compensation perspective in that sense. So we're just being more precise is the short answer.

Ibrahim Poonawala: Okay, thank you. Your next question comes from Ibrahim Punuala from Bank of America. Your line is now. I guess one question may be first on fees, and I appreciate you're not talking about 25 right now, but just talk to us in terms of the linkage of the fee momentum accelerating from the Smith single digits into next year. And how much of that is dependent on loan growth picking up, or how much of that can happen where even if loan growth or loan demand is fairly muted in the first half. We see better fee rates than having a momentum being a differentiator for US B.

Speaker Change: Okay. Thank you.

Speaker Change: Your next question comes from Ebrahim <unk> from Bank of America. Your line is now.

Speaker Change: Good morning, good morning, good morning.

Speaker Change: Hey, Andy.

Speaker Change: I guess one question, maybe first on fees and I appreciate you're not talking about 25, right now, but just talk to us in terms of the linkage of the fee momentum accelerating from this mid single digits into next here.

Speaker Change: And how much of that is dependent on loan growth picking up or how much of that can happen with.

Speaker Change: Even if loan growth or loan demand is fairly muted in the first half.

Speaker Change: Better fee revenue momentum being a differentiator for USB.

John Stern: Sure, you know, from a, you know, from investor day we talked about, you know, mid single digits being in terms of our range from financial metric performance. And I think, you know, what you saw this quarter is a good example of that particular look at commercial products, you know, which has benefited, of course, from loan growth being done and more in the capital market space. We see that benefit in our businesses, but we've also grown and provide have new products, new capabilities in that space. Mortgage is continuing to see nice growth as that has gone the service charges, you know, as we'll start to laugh the ATM exiting business as we think about that starting in 2025. Corporate trust continues to be just a very strong growth rates and that that is tied in part to the market.

Speaker Change: Sure.

Speaker Change: From Investor Day, we talked about.

Speaker Change: Mid single digits being in terms of our our range from a financial metric performance and I think.

Speaker Change: What you saw this this quarter is a good example that particularly look at commercial products.

Speaker Change: Which has benefited of course from loan growth.

Speaker Change: Being done more in the in the capital market space, we see that benefit in our businesses, but we've also grown and provide have new products new capabilities in that space.

Speaker Change: <unk> is continuing to see nice growth as that has gone.

Speaker Change: The service charges.

Speaker Change: As we will start to lap the ATM exiting business as we think about that starting in 2025 corporate trust continues to be just a very strong growth rates and that is tied in part to the markets of course, and so as that continues to develop we have good momentum there and Ghansham just talked about the payments.

Gunjan Kedia: It's of course, and so is that continues to develop what we have good momentum there in and going to just talked about the payments side of the house. And so I think all those things put together really gives us a lot of confidence in terms of that mid single digit growth that we think of it from on the medium term standpoint. Ibrahim, I will just add that we do have a very beautifully diversified fee mix, so right now we are seeing a lot of growth in capital markets and to some extent that's impacting loan growth, but our capital markets businesses are very strong. Otherwise, too, well to seeing a very good year because the stock markets are very strong. Investment services businesses benefit from that, and then as the rate environment changes, we would expect mortgage to have sort of momentum.

Side of the house and so I think all of those things put together it really gives us a lot of confidence in terms of that mid single digit growth that we think of it from a medium term standpoint.

Speaker Change: <unk> would just add that we do have a very beautiful diversified fee mix right. Now we are seeing a lot of growth in capital markets and to some extent that so.

Speaker Change: That's impacting loan growth, but our capital markets business is a very strong other ways to bell casino very Goodyear because the stock markets are very strong the investment services businesses benefit from that and then as the rate environment.

Speaker Change: Changes, we would expect mortgage to have set of momentum. So really as you go into the next year. It isn't any one thing, but it's the diversified mix because they play off of each other depending on different macroeconomic environments.

John Stern: So really, as we go into the next year, it isn't any one thing, but it's the diversified mix because they play off of each other depending on different macroeconomic environments. That's helpful, and I guess one follow-up, John. When I look at the seven basis points name expansion, I think you mentioned a 10 million dollar lift from the bond book restructuring. That's probably a basis point. Should we expect this seven basis point expansion as getting better as we move forward with a couple more eight cuts this year, the back book repressing? Like, how should we think about the cadence of the name from your ex, any kind of bond restructuring actions? And is it conceivable that we could be at a 2% name in the back half of next year?

Speaker Change: That's helpful and I guess, one follow up John when I look at the <unk>.

Speaker Change: Seven basis points NIM expansion 19, you mentioned $10 million lift from the bond book restructuring, that's probably a basis point should we expect the 70 basis point expansion as getting better as you move forward with a couple more rate cuts. This year. The back book repricing like how should we think about the cadence of the NIM from you.

Speaker Change: Ex any kind of.

Speaker Change: One restructuring actions and is it conceivable that we could be at a 2% NIM in the back half of next year.

John Stern: Sure, so maybe just to go off of a couple of those points, you know, from an interest income standpoint in the fourth quarter we expect to have relative stability, and that's just thinking about, you know, our earning assets are going to be relatively flat, we expect, and our asset repricing and liability repricing are going to be largely offsetting. So that's kind of how we think about the stability component in the fourth quarter. Beyond that, all the positive momentum that I've talked about in terms of continuing remixing in terms of our assets into higher returned parts of the portfolio, our ability to reprice on deposits, as I mentioned on the institutional side, and then ultimately on the retail side.

Speaker Change: Sure so.

Speaker Change: Maybe just to go off of a couple of those points from net interest income standpoint in the fourth quarter, we expect to have relative stability and that's just thinking about our earning assets are going to be relatively flat, we expect and our asset repricing and liability pre pricing are going to be largely offsetting so that's kind of how we think about the <unk>.

Speaker Change: <unk> component.

Speaker Change: In the fourth quarter beyond that all of the positive momentum that I've talked about in terms of.

Speaker Change: Continuing remixing in terms of our assets into higher return.

Speaker Change: Parts of the portfolio, our ability to reprice on deposits as I mentioned on the institutional side and then ultimately on the retail side and then our deposit rotation as you have observed is slowing down and for all intents and purposes complete and so that that's all conducive to growth and continued expansion.

John Stern: And then our deposit rotation is, as you have observed, slowing down and the fall, intense and purposes complete, and so that that's all conducive to growth and continued expansion. I can't put a time frame on when exactly 3% occurs, but that's a good level to think about, and it's obviously embedded within our medium term guidance that we provided to you during Investor Day.

Speaker Change: Can't put a timeframe on when exactly 3% occurs but that's a good level to think about and it's obviously, it's embedded within our medium term guide.

Speaker Change: So we provided to you during Investor day.

Andy Cecere: And one last one, I guess maybe Andy, I think you mentioned, and you mentioned this on the holiday on the 20s, 27 crossing of the cat becoming a cat to bank, is that in any which way, a constraint as you think about pursuing loan growth? Like, is there any reason to believe US B's disadvantage on pursuing loan growth next year because you're kind of, you have an eye on the $700 billion asset number, just address that if you don't mind. No, there's no constraint on our loan growth; that the loan growth activity right now is more a function of demand and consistent with the market overall, and the H.A.

Speaker Change: And one last one I guess, maybe Andy I think you mentioned and you mentioned this on the Investor day on the 2027 and crossing of becoming a cat to bank is that in any of which we are constrained as you think about pushing loan growth language.

Speaker Change: Is there any reason to believe usb's disadvantage on pushing loan growth next year. Because you are kind of you have an eye on the $700 billion asset number just against that if you don't mind.

Speaker Change: No. There is no there is no constraint in our loan growth that the loan growth.

Speaker Change: Activity right now is more a function of demand and consistent with the market overall in the H eight data that you are seeing and we have no constraints on loan growth and again as a reminder, Abraham.

Andy Cecere: data that you're seeing, and we have no constraints on loan growth, and again as a reminder, Ebrahim, the way it works is you are at that $700 billion for four quarters on average, so when we think about 27, that's four quarters of impact, so we have no constraints on our assets or our balance sheet. And we would expect that our growth will be in line with the industry, so I mean so. Which is GDP, GDP, not people. Yep, exactly. But all right, yeah, thank you so much. Thank you.

Speaker Change: The way. It works is you are at that $700 billion for four quarters on average so when we think about 'twenty seven.

Speaker Change: That's four quarters of impact so we have no constraints on our assets for our balance sheet and we would expect that our growth will be in line with the industry.

Speaker Change: History, which is GDP GDP plus yes exactly.

Speaker Change: But all very clear. Thank you so much thank.

Speaker Change: Thank you.

Matt O'connor: Very next question comes from Matt O'Connor from Deutsche Bank. Your line is now open.

Speaker Change: Your next question comes from Matt O'connor from Deutsche Bank.

Speaker Change: <unk> is now open.

Gunjan Kedia: Marty, Matt. Good morning. I think you guys announced that you're looking for a new payment head and we're looking externally, and we're just wondering if you could update us on if there's any updates on that. And then I guess, you know, what type of question are you looking for, and is it to kind of continue to strive that you've had, or potentially we evaluate from areas. I think there's the general view that maybe you could do more with payment, you know, what the revenue pool author is overall, and that you kind of underpunch a little bit.

Speaker Change: Good morning, Matt.

Good morning.

Matt O'connor: You guys announced that you were looking for a new payments had.

Matt O'connor: And we're looking externally and was just wondering if you can update us on if there's any updates on that and then I guess what type of person are you looking for and is it to kind of continue the strategy that you had or potentially evaluate some areas I think there's a general view that well.

Matt O'connor: Maybe you could do more with payments given what the revenue coauthors overall.

Gunjan Kedia: So I don't know if you would agree with that, but what's the thought in terms of what you're looking for in a new leadership? Thank you.

Matt O'connor: Under punching a little bit.

Matt O'connor: I agree with that but what's the thought in terms of what you're looking for the leadership okay.

Gunjan Kedia: Matt, good morning. It's Gungin. And we are indeed excited to be out in the market looking for new leadership for payments. We have a lot of interest in our franchise. It's unique. It's different. It's very important for us. And we do have big aspirations for not just a standalone sort of payments franchise, but how much it embeds and integrates with the everyday lives of our customers. So, with that, we are looking for someone who is talented from a payments perspective, but culturally embraces this concept of an interconnected set of solutions for our client base. And that's what we are looking for.

Speaker Change: Matt Good morning, it's <unk> and.

Speaker Change: We are indeed.

Speaker Change #100: Cited to be out in the market looking for new leadership for payments, we have a lot of interest in our franchise. It's unique it's different it's very important for us and we do have big aspirations solar not just a standalone sort of payments franchise, but how much it embeds and integrate with the everyday lives of our.

Speaker Change #100: Customers. So with that we are looking for someone who is.

Speaker Change #100: Talented from a payments perspective, but culturally embraces this concept of <unk>.

Speaker Change #100: Interconnected set of solutions.

Speaker Change #100: For our client base and.

Speaker Change #100: And that's what we're looking for and I was just.

Gunjan Kedia: And, as just to reiterate what we shared, we have a long transition time. Very grateful that Salish has given us enough time to plan a very smooth and careful transition.

Speaker Change #100: Just to reiterate what we shed.

Speaker Change #100: We have a long transition time very grateful that.

Speaker Change #100: <unk> given us.

Speaker Change #100: Enough time to plan, a very smooth <unk> transition.

Gunjan Kedia: I mean, just from a strategic point of view, and this is really trying to lead you one way or the other, but are you set on kind of the long-term strategic path that you have in payments, or are you open to potentially fairly decentralized changes one way or the other? Again, not really reading questions, but it seems like it might be an opportunity to take a fresh look and look for some opportunity that maybe you haven't before. Thank you, Matt. You know, we have deep conviction around the strategy and the path that we are on today.

Speaker Change #101: And then I guess just from a strategic point of view and this is what I'm trying to lead you one way or the other but like are you set on kind of the long term strategic profit you havent payments or are you open to potentially.

Speaker Change #101: Fairly decent size changes.

Speaker Change #101: One way or the other again not really a leading question, but it seems like it might be an opportunity to take a fresh look and.

Speaker Change #101: Look for some opportunities that maybe you haven't before.

Speaker Change #102: Thank you, Matt we have deep conviction around the strategy and the path that we're on today when you meet clients and you see the impact of.

Gunjan Kedia: When you meet clients and you see the impact of the payments products sets on the relationships we have, you sort of build that conviction. So the question that we are focused on is, how do you execute perhaps differently? How do you accelerate the execution? How do you take current with the digital capabilities? And all of the strategies that we shared with you on Investor Day are really focused on accelerating the how rather than sort of rethinking our strategy where we do have a lot of conviction that payments becomes the center point of how people manage their day-to-day lives.

Speaker Change #103: The statements product sets on the relationships, we have you sort of build that conviction. So the question that we are focused on is how do you execute perhaps differently. How do you accelerate the execution. How do you stay current with the digital capabilities in all of the strategies that we shared with you on investor.

Speaker Change #103: <unk> really focused on accelerating the how rather than sort of rethinking our strategy, but we do have a lot of conviction that payments becomes the center point of.

Speaker Change #103: How people manage their day to day lives and it needs to be embedded in every product.

Gunjan Kedia: And it needs to be embedded in every product, every, every relationship that we have.

Speaker Change #103: <unk>.

Speaker Change #103: Every relationship that we have.

Gunjan Kedia: Okay, that's helpful.

Speaker Change #104: Okay. That's helpful. Thank you.

Gunjan Kedia: Thank you.

Matt O'connor: Thanks, Matt.

Thanks, Matt.

Speaker Change #104: Okay.

Operator: Again, if you'd like to ask a question, press star and the number one on your telephone keypad.

Speaker Change #105: Again, if you'd like to ask a question press star and the number one on your telephone keypad.

Mike Mayo: Your next question comes from Mike Mayo from Wells Fargo Securities.

Speaker Change #106: Our next question comes from Mike Mayo from Wells Fargo Securities. Your line is now open.

Andy Cecere: Your line is now. I just want to ask my earlier question related to the benefits of scale and specifically AI. Do you look to be AI leader or close follower, or do you think you can get those tools off the shelf and you'll just wait and see in the context of the benefits of scale. Again, after your years of investing. Yeah, Mike. So, you know, we, as you know, we do have scale. We invest $2.5 billion a year in technology and technology initiatives. We did a great job with the digital capabilities. We highlighted those at Investor Day and we're following that same model with an AI with the AI initiatives, which is the center of excellence and then the business lines surrounding them in terms of use cases.

Just starting off my earlier question related to the benefits of scale and specifically AI as you looked at the AI leader a close follower or do you think you can get.

Speaker Change #107: Those tools off the shelf and you know this.

Speaker Change #107: On a wait and see.

Speaker Change #107: Contactor.

Speaker Change #108: The benefits of scale get after your years of investing.

Mike Mayo: Yes, Mike so.

Speaker Change #109: As you know we do have scale, we invest $2 5 billion a year in technology and technology initiatives, we did a great job with the digital capabilities. We highlighted those at Investor Day, and we're following that same model with an AI with the AI initiatives, which is a center of excellence and then the business line surrounding them in terms of use cases, as we talked about we have a number of use cases underway.

Andy Cecere: As we talked about, we have a number of use cases underway. I would say, you know, a traditional AI we've been doing for a while; generative AI is in the early innings, and what is important is we have a structure, expertise, leadership, and technology to deliver on it, but it is early innings.

Speaker Change #109: I would say traditional AI, we've been doing it for a while generative AI is in the early innings and what is important is we have a structure expertise leadership and technology to deliver on it but it is early innings.

Operator: Okay.

Speaker Change #110: Okay, and just one cleanup from Investor day as it relates to the digital strategy Havent going through state farm.

Andy Cecere: And just one clean up from Investor Day, it relates to the digital strategy. I mean, going through state form, it's just. Just one more time and spent the whole day with management in New York City and more information always better, but the idea of going out of market where you don't have so much branches and going through state form with the digital strategy. It's just.

Speaker Change #110: Just one more autonomy and spent a whole day with management in New York City in.

Speaker Change #110: More information is always better, but the idea of going out of market, where you don't have so much franchise and going through state farm with the digital strategy. It's just.

Andy Cecere: Are there other examples of bags or non-banks that have succeeded with that sort of approach? It's just we've heard a lot of those stories over the last 20 years, and they haven't always played out, so eventually you have to build more branches than you expected or something. So again, that's a little bit of clean up from Investor Day.

Speaker Change #111: Are there other examples of banks or non non banks that have succeeded with that sort of approach is just we've heard a lot of those stories over the last 20 years and they haven't always played out. So eventually you have to.

Speaker Change #110: Build more branches than you are.

Speaker Change #110: Than you expected or something so again thats, just a little bit of cleanup from Investor day, So I'm going to start with.

Gunjan Kedia: So, yeah, I'm going to start with the strategy. Yeah, I think I think for the strategy to work, I think you have to have a couple of key components. One is the digital capabilities to allow it to work with the other partner. The second is a partner who has the need from a banking products standpoint for their customer base. And then alignment in terms of how that gets done. And I think both with State Farm and certainly with Edward Jones, those pieces are in place and we've seen good results on that. So opening it up core banking products, checking accounts, savings accounts outside of our market through that partnership.

Speaker Change #110: Our strategy.

Speaker Change #110: I think I think for this strategy to work I think you have to have a couple of key components. One is that as digital capabilities to allow us to work with the with the other partner. The second is a partner who has the need from a banking product standpoint for their customer base and then alignment in terms of how that gets done and I think both with state farm and certainly.

Speaker Change #110: With Edward Jones, those pieces are in place and we've seen good results on that so hoping it up core banking product checking accounts savings accounts outside of our market through that partnership we have strong conviction and we believe we will be successful because of those attributes draconian what would you add.

Gunjan Kedia: We have strong conviction on and we believe it will be successful because of those attributes. Good, you want what you have. Andy, I would add, Mike, that you know we have been in this partnership business for some time now. We have a very strong franchise called Elon, which is a white label credit card provider to other banks. So it does take a unique skill set to make these partnerships work, and many of these partnerships are restricted in terms of the number of products you're providing. So, to your point, they might come a time when you think about expanding.

Would add Mike.

Speaker Change #112: We have been in this partnership business for some time now we have a very strong franchise <unk>, which is a white label credit card provider to other banks. So it does take unique.

Speaker Change #112: A unique skill set to make these partnerships work and.

Speaker Change #112: Many of these partnerships are restricted in terms of the number of products. We are providing so to your point there might come a time when you think about expanding for example, Charlotte was the market, where we organically expanded and we are building out.

Gunjan Kedia: For example, Charlotte was a market where we organically expanded, and we're building out branches there. But for core product sets and having put in place both the digital and the operational capabilities. to fulfill servicing needs for people outside. We've become very good at it, so we are expanding it now with Edward Jones. And as Andy said, you know, good early successes and good momentum as a starting point to get your name and your grant in areas that we're not in today.

Speaker Change #112: Conscious there.

Speaker Change #112: But first core product sets and having put in place both the digital and operational capabilities.

Speaker Change #112: To fulfill servicing needs for people outside we've become very good at it. So we are expanding it now with Edward Jones.

Speaker Change #112:

Speaker Change #112: And as Andy said, good early successes and good momentum as a as a starting point to get to your knee menu brand in areas that we are not in today.

Gunjan Kedia: Thank you. Thanks, bye.

Speaker Change #112: Thank you.

Speaker Change #113: Thanks, Mike.

Yes.

Operator: There are no further questions at this time.

Speaker Change #114: There are no further questions at this time, Mr. Anderson I will turn the call back over to you.

George Andersen: Mr. Andersen, I turn the call back over to you. Thank you, and thanks to everyone who joined our call this morning. Please contact the Investor Relations department if you have any follow-up questions.

George Anderson: Thank you and thanks to everyone who joined our call. This morning. Please contact the Investor Relations Department. If you have any follow up questions. You may now disconnect the call.

Operator: Ellie, you may now disconnect the call. Thank you.

Operator: This concludes today's conference call. You may now disconnect. Thank you.

George Anderson: Thank you. This concludes today's conference call you may now disconnect.

George Anderson: [music].