Q3 2024 Western Alliance Bancorp Earnings Call

Hello everyone, thank you for standing by. The Western Alliance Bank Corporation Q3 2021 earnings call will be beginning shortly. Thank you for your patience.

Unknown Executive: 3204 earnings call will be beginning shortly. Thank you for your patience.

Emily: Hello everyone and a warm welcome to the Western Alliance Bancorporation Q3 2024 earnings call. My name is Emily, and I'll be coordinating your call today. After the presentation, there will be the opportunity to ask any questions, which you can do so by pressing star from the number one on your telephone keypad.

Emily: Hello everyone and a warm welcome to the Western Alliance Bancor Operation Q3 2020-24 earnings call. My name is Emily and I'll be cause and 18-year call today. After the presentation there will be the opportunity to ask any questions, so as you can do so by pressing star from the By the Number 1 on your telephone keypad. Oh now turn the call over to our host. While with Pondelik, head of investor relations, please go ahead, Miles.

Miles Pondelik: I will now turn the call over to our host. While it was Pondelik, head of investor relations, please go ahead, Miles.

Ken Dekeoni: Thank you, and welcome to Western Alliance Banc's third quarter 2024 conference call.

Miles Pondelik: Thank you and welcome to Western Life. Thanks third quarter 2024 conference call. Our speakers today are Ken Dekeoni, president chief executive officer, and Dale Gibbons chief financial officer and Tim Brookner, our chief banking officer for regional banking, which we're doing for Q&A.

Ken Dekeoni: Our speakers today are Ken Dekeoni, President Chief Executive Officer, and Dale Githin, Chief Financial Officer, and Tim Bruckner, our Chief Banking Officer for Regional Banking, which we're doing for Q&A. Before I hand the call over to Ken, please note that today's presentation contains forward-looking statements, which are subject to risks and circumstances. That's, as required by law, the company is not undertaking any obligation to update you forward-looking statements.

Miles Pondelik: Before I hand the call over to Ken, please note that today's presentation contains four looking statements, which are subject to risks and certain keeping assumptions. That does require by law that companies do not undertake any obligation to update the four looking statements. For more police discussion of the risks and maternities, that could cause actual results different materially from any four looking statements. Please refer to the company's SEC filings, including the form AK filed yesterday, which are available on the company's website. Now for opening remarks, I'd like to turn the call over to Ken Vecchione. Thank you.

Ken Dekeoni: For more please discussion of the risk and attorneys that could cause extra results differently for an any forward-looking statement.

Ken Dekeoni: Please refer to the company's SEC filing, including the Form AK filed yesterday, which are available on the company's website.

Ken Dekeoni: Now, for opening remarks, I'd like to turn the call over to Ken Dekeoni. Good morning. As always, I'll make some brief comments about our third quarter earnings before turning the call over to Dale.

Ken Beck-Yoni: Good morning, as always, I'll make some brief comments about a third quarter earnings before turning the call over to Dale, who will review our financial results and more details. After I discuss our outlook for the remainder of 2024, Tim Brockner.

Dale Githin: Who will review our financial results and more details.

Ken Dekeoni: After I discuss our outlook for the remainder of 2024, Tim Bruckner will join us for Q&A. Western Alliance delivered solid third quarter results and earned the Dale 80 per share. These results demonstrated the bank's ability to sustain diversified loan and deposit momentum, as well as grow earnings during a changing rate environment. We produce healthy deposit growth of $1.8 billion or 11% annualized, and HFI loan growth of $916 billion for 7% annualized.

Ken Beck-Yoni: will join us for Q&A.

Ken Beck-Yoni: I work in the line to deliver solid third quarter results and earn the $0.80 per share. These results demonstrated the bank's ability to sustain the versified loan and the possible momentum, as well as grow earnings during a changing rate environment. We produce healthy deposit growth of $1.8 billion or 11% annualized, and HFI loan growth of $916 billion for 7% annualized.

Ken Dekeoni: Despite for understanding, overall for credit for overall credit in the economy. Our national diversified credit origination and deposit platforms uniquely positioned us to sustain strong deposit growth, and then deploy this liquidity to attract this commercial loans where we can provide deep segment and product expertise. During a transitional period for the rate cycle that began in Q3, net interest income grew 25% annualized due to higher average earning efforts. Then if your margin compresses two basis points because of lower yields on variable rate loans. Continued interest rate cuts will enable Western Alliance to realize significant funding cost savings in both interest bearing and ECR-related deposits growing forward.

Ken Beck-Yoni: The Spite Flutters Demand, overall for credit for overall credit in the economy.

Ken Beck-Yoni: Our National diversified credit origination and deposit platforms uniquely positioned us to sustain strong deposit growth and then deploy this liquidity into attractive commercial loans where we can provide deep segment and product expertise.

Ken Beck-Yoni: During a transitional period for the rate cycle that began in Q3, net interest income group 25% annualized due to higher average earning efforts.

Ken Beck-Yoni: And it's his margin, compressed two basis points because of lower yields on variable rate loans.

Ken Beck-Yoni: Continued interest rate cuts will enable personal lines to realize and disliked funding, cost savings and both interest bearing and ECR related to positive going forward. We anticipate a more meaningful benefit from lower rates and Q4 from a full quarter impact of lower rates.

Ken Dekeoni: We anticipate a more meaningful benefit from lower rates in Q4 from a full quarter impact of lower rate. Q3 results for modestly impacted by $4 billion of mortgage warehouse deposit growth driven by elevated mortgage refinance volumes, validating our operational excellence as we continue to win market share following several competitors we're creating from the market.

Ken Beck-Yoni: Q3 results were modestly impacted by $4 billion of mortgage warehouse deposit growth driven by elevated mortgage refinance volumes, validating our operational excellence as we continue to win market share following several competitors we're creating from the market.

Ken Dekeoni: After the money center banks, what's online is now the largest bank operating in the space. This access deposit growth somewhat impacted Q3 earnings on elevated deposit costs, but these deposits have helped cement core customer relationships, which will continue to drive strong risk adjusted loan volume and spreading cost. Typical seasonal declines in mortgage warehouse deposit balances are poised to push Q4 ECR-related deposit costs materially lower. Not interest income increased $11 million or 10% quarter of a quarter, but this growth was tempered by declining mortgage banking income.

Ken Beck-Yoni: After the money center banks, what's online is now the largest bank operating in the space.

Ken Beck-Yoni: The success deposit growth somewhat impacted Q3 earnings on elevated deposit costs, but these deposits have health cement core customer relationships, which will continue to drive strong risk adjusted loan volume and spreading cost.

Ken Beck-Yoni: Typical seasonal declines in mortgage warehouse deposit balances are poised to push Q4 ECR related deposit costs materially lower.

Ken Beck-Yoni: That interest income increased to $11 million, or 10% quarter, but this growth was tempered by the decline in mortgage banking income.

Ken Dekeoni: Our franchise remains poised to significantly benefit from a resumption of stronger mortgage volume. Pre-provision that revenue grew marginally from Q2, while tangible book value per share climb 19% year over year. Lastly, asset quality remains stable as non-performing assets to total assets declined six basis points to 45 basis points. That charge also 20 basis points landed with our street guidance range.

Ken Beck-Yoni: Our franchise remains poised to significantly benefit from a resumption of stronger mortgage volume.

Ken Beck-Yoni: Pre-provision that revenue grew marginally from Q2, while tangible book value per share client 19% year over year. Lastly, ask the quality remains stable as non-performing assets to total assets decline six basis points to 45 basis points.

Ken Beck-Yoni: That charge also 20 basis points landed with our street guidance range.

Dale Githin: Dale will now take you through the results of more detail. Thanks again. During the quarter, Western Alliance generated pre-provision at revenue of 286 million, net income of 200, and earnings per share of a dollar rating. Net interest income increased 40 million from Q2 to 697 million, including nearly 25% annualized growth because of higher average earning asset balances driven by loan growth. Non-nutrition income of $126 million was $11 million in quarter of a quarter from higher service charges and loan fees benefiting from commercial banking fees and a new bank on life insurance policy, which, along with securities gains, helped mitigate lower mortgage banking income.

Speaker Change: Dale will now take you through the results at more detail.

Speaker Change: A thanks then during the quarter Western Alliance generated pre-provision at revenue of 286 million net income of 200 and earnings per share of a dollar a day net interest income increased 40 million from Q2 to 697 million, including nearly 25 percent annualized growth because of higher average rate asset balances driven by loan growth.

Speaker Change: Now, I'm interested in 1026 million, and I was 11 million quarters of four of the fire service charges and loan fees, benefiting from commercial banking fees and a new bank owned life insurance policy, which along with securities gains helped mitigate lower mortgage banking income.

Dale Githin: Securities gains were taken as we sold to collateral health for a large bankruptcy deposit as it went into distribution. More recent production was 21% from Q2 to 10% year over year. Well, in service and revenue was negatively impacted by pre-payment speeds accelerated due to the decline rate environment, which caused a negative change in the MSR fair value met up hedging of 15 million. Now, I'm interested to spend with the quarter was 537 million deposit costs of 28 million from the quarter of a quarter increase is strong demand in mortgage warehouse. And aggregate net interest income growth exceeded deposit growth by 6 million this quarter.

Speaker Change: Securities for taking as we sold to collateral health for a large bankruptcy deposit as it went into distribution.

Speaker Change: Mortgage loan production was 21% from Q2 and 10% year-over-year. Loan service in revenue was negatively impacted by pre-payment speeds accelerating due to the declining rate environment, which caused a negative change in the MSR fair value, net up hedging, of 15 million.

Speaker Change: Now, I'm interested to spend with the quarter was 537 million, deposit costs of $280 million for the quarter over quarter increases, strong demand and mortgage warehouse. And I forget that interest income growth exceeded deposit growth by 6 million this quarter.

Dale Githin: It is important to emphasize the recent 40-50 basis point reduction in the 10 funds target rate occurred less than two weeks before the end of Q3. Consequently, rate reduction actions for ECR-related deposits were also back loaded. Seasonal lot flows in mortgage warehouse from Q4 tax and insurance payments and a full quarter impact of lower rates, because confident Q3 will prove to be the high watermark in ECR related deposit costs for this rate cycle. Ordinary expense of 34 million resulted from sustained loan growth and 27 million of net charge-offs. The balance heat remained at approximately 80 billion. This solid loaned deposit growth brought set by securities and cash to planning 2.4 billion quarter over quarter.

Speaker Change: It is important to emphasize the recent 50 basis point reduction in the Fed Fund's target rate occurred less than two weeks before the end of Q3. Consequently, great reduction actions for ECR related deposits were also back loaded.

Speaker Change: Seasonal Hot Flows in Morty Warehouse from Q4 Taxon Insurance Payments and a full quarter impact of lower rates, because confident Q3 will prove to be the high watermark and easily are related to positive costs for this rate cycle.

Speaker Change: For this we've been to 34 million resulted from sustained loan growth and 27 million of net charge ops.

Speaker Change: The balance sheet remained in approximately 80 billion, the solid loaner deposit growth brought set by securities and cash to planning 2.4 billion corridor over quarter, and in further 2.6 billion reduction in period and borrowings.

Dale Githin: And for the 2.6 billion reduction in period and borrow. Lawrence, a large distribution of Bancorp Seat Automate funds, drove a nodal supply and a jurist banking deposit, which allowed us to sell the collateralizing securities. Long-tailed for investment grew 960 million to over 53 billion, while the deposits grew 1.8 billion to 68 billion at court rent. Changeable value per share continues its expansion in the rising 6.5% court roll recorder to 51.98 and was aided by a large improvement in our AOC eye position. Long growth of 960 million resulted from large contributions to regional banking, as well as mortgage warehouse and MSR lending.

Speaker Change: A large distribution of bankruptcy settlement funds drove a notable supply and jurist banking deposit which allowed us to sell the collateralizing securities.

Speaker Change: Long-Teld for Investment Group, 960 million to over 53 billion while the cost of screw 1.8 billion to 68 billion at quarter end.

Speaker Change: Changer will buy a per share to continue its expansion in the right thing six and a half percent core role recorder to 51.98 and was aided by a large improvement in our AOC eye position.

Speaker Change: Lone Growth of 960 million resulted from large contributions to regional banking as well as mortgage warehouse at MSR lending. We continue to diversify the Lone Portfolio, which is shown by CNI Lone, storing over $4 billion year over year, and now accounting for 42% of the health or investment loan portfolio can around the 37% when year ago.

Dale Githin: We continue to diversify the loan portfolio, as shown by CNI loans storing over $4 billion year over year and now accounting for 42% of the health or investment loan portfolio compared to 37% a year ago. At the same time, we lower the overall allocation for commercial real estate investor and CLD category is from 29% to 27%. The positive growth of 1.8 billion was generated from seasonal inflows and mortgage warehouse, which grew 4.1 billion, while our consumer additional channel increased 1.3 billion and continued to add more granular deposits uncorrelated with our commercial banking business lines. Homers Association deposits also post-tube growth in the seasonally stock recorder.

Speaker Change: At the same time, we lower the overall allocation for commercial real estate investor and CLD categories from 29% to 27%.

Speaker Change: The positive growth of 1.8 billion was generated from seasonal inflows in mortgage warehouse, which grew 4.1 billion while our consumer digital channel increased 1.3 billion and continued to add more granular deposits uncorrelated with our commercial banking business bonds.

Speaker Change: Homer's Association of Pods is also posted throughout the seasonally soccer quarter. As mentioned before, juris-banking pods is decreased to 0.7 billion. Overall, quarter pods of growth was 2 billion as we've honestly reduced wholesale broker deposits by approximately 200 million.

Dale Githin: As mentioned before, juris-banking deposits decreased to .7 billion. Over all quarter positive growth was 2 billion as we've honestly reduced wholesale broker deposits by approximately 200 million. Turning to our net interest drivers, the yield on total securities increased 2 basis points to 4.89%. Our liquidity position remains solid as unencumbered high quality liquid assets were 64% of securities and cash, while securities and cash were 24% of total assets. HFI loan yields decreased 14 basis points to 6.65 due to asset repricing for so-for-type loans in advance of the Fed's rate decision. The cost of interest bearing deposits was 3 basis points higher as a result of 1.3 billion of quarterly deposit growth in our consumer digital channel.

Speaker Change: Turning to our net interest drivers, the yield on total securities, increased two bases points to 4.89%. Our liquidity position remains solid, its unencombed high quality liquid assets were 64% of security can cash, while security can cash for 24% of total assets.

Speaker Change: HFILONEL's D3S 14 basis points to 6.65 to asset repricing for so-for-type loans in advance of the Fed's rate decision.

Speaker Change: The cost of entering deposits was three basis points higher as a result of 1.3 billion of quarterly deposit growth in our consumer digital channel.

Dale Githin: The total cost of funds to find 12 basis points to 2.67% due to the deposit makes shifting toward nine interest bearing and a smaller proportion of earning assets funded by borrowings. If you compare the difference between the period and spot rates in average rates for the quarter, you'll see that the difference is wider for interest-bearing deposits compared to HFI loans. In other words, we are seeing funding cost PL1's emerge outside of just ECR-related funding. In aggregate, net interest income may increase 40 million from higher average running assets balances and loan growth. Net interest margin compressed 2 basis points from 2 to 2 to 3.61, which would have been flat, but for the new volume policy, as 800 million remaining assets were deployed for this purpose.

Speaker Change: The total cost of funds to climb 12 basis points to 2.67% due to the deposit makes shifting toward non-introspecting and a smaller proportion of earning assets funded by borrowings.

Speaker Change: If you compare the difference between the period and spot rates in average rates of the quarter, you'll see that the difference is wider for interspering deposits compared to HFI loans. In other words, nearest to the Fundacostia ones emerge outside of just ECR related funding.

Speaker Change: and aggregate, and on that interest we seem to have made 3,000,000 from higher average running asset balances and loan growth. That interest margin from price to the basis points from Q2 to 3.61 with what have been flat, but for the new volume policy, as 800 million of earning assets were deployed for this purpose.

Dale Githin: Regarding interest rate sensitivity, what sort of lines is liability sensitive on an earnings-at-risk basis? With a dynamic balance sheet, a minus 100 basis point rate ramp analysis indicates pre-tax interest sensitive earnings should increase 1.5%. In this scenario, the expected negative impact on net interest income would be more than offset by expected reductions in ECR-related deposit costs, as well as the pick-up in mortgage banking income that a lower rate environment should increase. All right, adjusted efficiency ratio for the quarter was 53%. Honestly, higher operating expense growth compared to the resident growth growth, the 120 basis point increase from last quarter.

Speaker Change: Vecchione.

Speaker Change: Regarding interest rate sensitivity, most of the lines is liability sensitive on an earnings at risk basis.

Speaker Change: With a dynamic balance sheet, a minus 100 basis point rate ramp analysis indicates pre-tax interest sensitive earnings should increase 1.5%. In this scenario, the expected negative impact on net interest income would be more than offset by expected reductions in ECR-related deposit costs, as well as a pickup and mortgage banking income that a lower rate environment should unleash. In this scenario, the expected negative impact on net interest income would more than offset by expected reductions in ECR-related deposit costs.

Speaker Change: All right, adjusted efficiency ratio for the quarter was 53%, honestly, higher operating expense growth compared to the resident growth from the 120 basis point increase in last quarter.

Dale Githin: Excluding the impact of the FDIC special assessment rebate in Q2, this ratio would have remained flat quarter over quarter. As the quality continues to remain relatively stable in Q2, criticized assets rose 60 million, as special mention loans declined 30 million. Well, classified assets increased 90 million. Chris, I guess that's are of only 33 million from a year ago. We expect a total Chris criticized asset pool to remain relatively stable. Non performing assets is a percentage of total assets to climb to six basis points to 45 due to payoffs and sales. Our non performing assets consist primarily of CRE office loans, which is unsurprising given the environment characterized by still elevated interest rates and lower office loans.

Speaker Change: Excluding the impact of the FDIC Special Assessment Re-Bate in Q2, the solution would have remained flat for the role recorder.

Speaker Change: As the quality continues for a main relative to the stable. In Q2, criticize assets rose 60 million as special mention loans to clients 30 million while classified assets increase 90 million.

Speaker Change: Chris I-Fath, that's her up only 33 million from a year ago.

Speaker Change: We expect a total of three criticized asset pools remain relatively stable, non-performing assets as a percentage of total assets to climb the six basis points to 45 due to pay off and sales.

Speaker Change: Our non-performing assets consists primarily of CRA office loans which is unsurprising given the environment characterized by still elevated interest rates and lower office property valuations.

Dale Githin: Proper evaluations. Orderly net loan charge-off for 26.6 million or 20 basis points of average loans. Provision expense of 34 million added reserves in concert with loan growth, in addition to replenishing that charge offs. Our ACL for funded loans rose 5 million from the prior quarter to 357. The total loan ACL of the funded loan ratio of 74 basis points was unchanged and covers 113% of non-performing loans. Slide 14 shows the updated ACL law that we have regularly provided to add more context behind our allowance methodology relative to peers. Our ACL list from 74 basis points to 1.31 percent, but incorporating the effect of credit link notes, which have provided a pool of prepaid insurance money to us to cover charge off as well as loan to no loss loans like equity fund resources or low LTV and high five go resident, our residential portfolio and mortgage warehouse loans compared to the 50 to 250 billion asset peer banks.

Speaker Change: Order the net loan charge off for 26.6 million or 20 basis points of average loans.

Speaker Change: Provision expense to 34 million added reserves in concertless loan growth, and addition to replenishing their tarotops.

Speaker Change: Our ACL for funded loans rose 5 million from the prior quarter to 757 million.

Speaker Change: The total loan ACL is a fundamental ratio of 74 basis points was unchanged, and covers 113% of non-performing loans.

Speaker Change: Slide 14 shows the updated ACL lock that we have regularly provided to add more context behind our allowance methodology relative to peers.

Speaker Change: are ACL lists from 74 basis points to 1.31% by incorporating the effective credit link notes which have provided a pool of pre-paid insurance money to us to cover charge outs.

Speaker Change: as well as loads and no lost loans, like equity fund resources, or low LTV and high phycho resident are a residential portfolio, and mortgage warehouse loans.

Dale Githin: We benefit from a greater seal and support, as well as a greater percentage of loans and low to no loss categories. Our CET1 ratio increased approximately 20 basis points to 11.2 percent. Our tangible common equity to total assets ratio moved up approximately 50 basis points from Q2 to 7.2 percent, as our all other comprehensive income loss position recovered substantially due to a lower rate environment. Given the conversation about Basel III ending capital, I also mentioned that our CET1 ratio including AOCI and our loss reserve is 11.1 percent, which is 50 basis points above the second quarter adjusted CET1 ratio of 10.6 percent and ranks in the top quartile of our asset class peers.

Speaker Change: Comparator of the 50 to 250 billion asset pair banks, we've benefited from a greater seal and support as well as greater percentage of loans and loan to no lost categories.

Speaker Change: Our CET-1 ratio increase approximately 20 basis points to 11.2%.

Speaker Change: are tangible common equity to total assets ratio moved up approximately 50 basis points from Q2 to 7.2 percent as their all other comprehensive income loss position recovered substantially due to a lower rate environment.

Speaker Change: Given the conversation about BASIL-3 Engineering Capital, I also mentioned that our C2-1 ratio in including AOCI and our loss reserve is 11.1%, which is 50 basis points above the...

Speaker Change: 2nd quarter adjusted TE21 ratio of 10.6% and ranks in the top four tile of our asset class peers.

Dale Githin: Finally, tangible book value per share increased $2.19 quarter quarter to 51.98 for earnings growth, and our negative AOCI position improving by almost 1.3. Our consistent upward trajectory and tangible book value per share is outpaced peers by 10 fold since the end of 2013. Even when incorporating Q3 data for peers, which is not yet available, well relative performance will still be willing excess of their TBB growth.

Speaker Change: Finally, chance will book value per share and $3, $2.19 for over quarter to 51.98 from earnings growth and our negative AOC acquisition, improving by almost one-third.

Speaker Change: are consistent, upper trajectory, and tangible but value per share is outpaced fears by tenfold since the end of 2013. Even when incorporating Q3 data for peers which is not yet available, while relative performance will still be one of the next sets of their TVB growth.

Dale Githin: I will turn the call back to you. Thanks, Dale.

Ken Dekeoni: Following our Q3 results, we update our 2024 and Q4 guidance as follows. We expect long growth of approximately 1.25 billion next quarter to be achieved in a safe, sound, and thoughtful manner. Our current 78% HFI loan-to-positive ratio provides ample flexibility to selectively originate attractive loans. The positives are expected to template early decline, $2 billion in Q4 due to typical seasonal outflows of property tax and insurance payments in mortgage warehouse and active management of our deposit mix to maximize deposit betas and lower the cost of interest bearing and ECR related deposit costs.

Speaker Change: I'll now turn the call back to him.

Speaker Change: Thanks Dale. Following our Q3 results, we update our 2024 and Q4 guidance as follows.

Speaker Change: We expect loan growth of approximately 1.25 billion next quarter to be achieved in a safe sound and thoughtful manner. Our current 78% HFI loan to the positive ratio provides ample flexibility to select the way you originate attractive loans.

Speaker Change: The positives are expected to temporarily decline $2 billion in Q4 due to typical seasonal outflows of property tax and insurance payments in mortgage warehouse and active management of our deposit mix to maximize the deposit data and lower the cost of interest bearing in ECR related deposit costs.

Ken Dekeoni: Turning to capital, we reiterate that our CT1 ratio will remain at 11% as the loan growth continues. Then interest income is expected to decline approximately 3% next quarter due to market-tied variable loans reprising slightly ahead of funding costs. This dynamic is a function of the transitional period to a lower rate environment that got underway Q3. However, ECR-related deposit costs are expected to significantly decline by approximately 25% quarter over quarter in Q4. And that will take a decline in debt interest income. We expect debt interest margin incorporating ECR costs to have bottomed in Q3 and to experience continued expansion into future periods.

Speaker Change: Turning to capital, we reiterate that our C&T1 ratio will remain at 11% as long growth continues.

Speaker Change: and Andrew Zincum is expected to decline approximately 3% next quarter due to market-tied, variable, long-to-reprasing, slightly ahead of funding costs.

Speaker Change: This dynamic is a function of the transitional period to a lower rate environment that got underway in Q3. However, ECR related to the pilot costs are expected.

Speaker Change: to significantly decline by approximately 25% quarter of a quarter of a quarter in Q4. And I'll taste, eat the client, and that to Zincon. We expect that into its margin to cooperating ECR costs to have bottomed in Q3, and to experience continued expansion into future periods.

Ken Dekeoni: Noninterest income should increase around 8-12% next quarter from traction and cultivating commercial banking fee opportunities and firming mortgage banking income. Noninterest expense should decline between 5% and 9%, mostly from the expected drop in ECR-related deposit costs given the pivot in the rate environment and the typical Q4 seasonal factors previously discussed. As the quality remains in line with our expectations, we expect steady net charge-offs in Q4 in the 20 basis point area, which implies full year 2024 net charge-offs should be no greater than 20 basis points. We believe this will still rank among the best of our peers.

Speaker Change: Non-Extres income should increase around 8 to 12% next quarter from traction and cultivating commercial banking, fiat opportunities and firming mortgage banking income.

Speaker Change: Nonenture expenses should decline between 5% and 9% mostly from the expected drop in ECR related deposit costs given the pivot in the rate environment and the typical Q4 seasonal factors previously discussed.

Speaker Change: After quality remains in line with our expectations, we expect steady net charge drops. Thank you for in the 20 basis point area, which implies fully year of 2024 net charge-off should be no greater than 20 basis.

Ken Dekeoni: Lastly, the effective tax rate for full year 2024 is now estimated to fall between 20 and 22%.

Speaker Change: We believe this will still rank among the best of our peers. Lastly, the effective tax rate for full year 2024 is now estimated to fall between 20% and 22%.

Ken Dekeoni: At this time, Dale, Tim, and I look forward to answering your questions. Thank you.

Speaker Change: and I look forward to answering your questions.

Unknown Executive: As a reminder, if you would like to ask a question today, please do so now by pressing star followed by the number one on your telephone keypad. If you change your mind or you feel like your question has already been answered, you can press star and then two to remove yourself from the key.

Speaker Change: Thank you. As your reminder, if you would like to ask a question today, please do be so now by pressing star followed by the number one on your telephone keypad.

Speaker Change: If you change your mind, or you feel like your question has already been answered, you can press star and then tell you to remove yourself from the key.

Ibrahim Poonwara: I'll fast question today comes from the line of Ibrahim Poonwara with Bank of America. Please have a hand. Good morning. First question around deposits trying to understand. I'm assuming you were aware of the seasonality last quarter when you raised the deposit guidance for the years. I'm just trying to understand if you can give us a color on the settlement, that impact and how pronounced is the seasonality versus just some of these chunkier outflows. And.

Speaker Change: Our first question today comes from the line of ebra hympoenwala with Bank of America. Please go ahead.

Speaker Change: Take good morning.

Speaker Change: So, first question around deposits.

Speaker Change: and trying to understand what we've been trying to understand.

Speaker Change: I'm assuming you were aware of the seasonality last quarter when you raised the deposit guidance for the year. From just to understand it can give us a little color on the settlement, that impact. And how pronounced is the seasonality versus just some of these chunkier outflows.

Ken Dekeoni: Are there more such deposits that could leave the bank, that could have some meaningful impact on near-term NIH trajectories if we can address NIH both in terms of larger outflows and then how impactful is the full key seasonality because I'm not sure it was that prevalent in fourth quarter of last year. Thanks. Yeah, thank you. I think you confused the two things. So let me straighten that out. Number one in Q3. We did see a very large settlement out of our Jurist banking group. That was a little bit earlier than our expectations. We had expected it to happen in into 2025; the settlement moved up earlier.

Speaker Change: Are there more such deposits that could leave the bank that could have some meaningful impact on near-term NIH ejection? If you can address NIH, both in terms of larger outflows and then how impactful is the foe key seasonality? Because I'm not sure it was that prevalent in the fourth quarter of last year.

Speaker Change: Yeah, thank you. I think you've confused a few things, so let me...

Speaker Change: The statement out. Number one in two, three, we did see a very large settlement.

Speaker Change: Out of our jurist banking group, that was a little bit earlier than our expectations. We had expected it to happen in to 2025, the settlement moved up earlier. Always hard to forecast when those things are going to be dependent on the plot system and it depends on lawyers agreeing to what the settlement terms are.

Ken Dekeoni: Always hard to forecast when those things are going to be dependent on the plot system, and it depends on lawyers agreeing to what the settlement terms are. So that came out and so absent that we would have grown deposits in Q3 by $5 billion. So we actually grew deposits. Two billion, we paid down $200 million of Broderick deposits, and that got us to the net growth of $1.8 billion. In Q4, that's when you'll see the seasonal decline of the warehouse lending group, which we always have in terms of deposits flowing out for escrow insurance and PNI payments that happen at the end of the year.

Speaker Change: So that came out, and so absent that, we would have grown the deposits in Q3 by $5 billion. So we actually grew deposits 2 billion, we paid down $200 million a broker's deposits, and that got us to the net growth of $1.8 billion.

Speaker Change: In Q4, that's when you'll see the seasonal decline.

Speaker Change: of Warehouse Learning Group, which we always have in terms of the positive slowing out for escrow insurance and P&I payments that happen at the end of the year. And that's why we've said that outflow will push to force the positive levels down to billion dollars.

Dale Githin: And that's why we've said that outflow will push Q4's deposit levels down to billion dollars. However, our balance sheet deposit growth or our balance sheet growth all in as you move forward into 2025 certainly for deposits remains unchanged, which is we expect to have $2 billion per quarter on average, $2 billion per quarter of deposit growth. We have a good line of sight into that. We've got clarity into that because of the number of home grown deposit platforms that we have built over the years, starting with our granddaddy, which is the HOA business. Also, our warehouse lending group has a very strong deposit business, and we added business escrow services in the last two years, settlement services, sometimes known as jurors banking, and our consumer digital platform as well, and also corporate trust.

Speaker Change: However, our balance sheet, deposit growth, or our balance sheet growth all in as you move forward into 2025, certainly for deposits, remains unchanged.

Speaker Change: which is you'll re-expect to have $2 billion per quarter on average $2 billion per quarter of the deposit growth.

Speaker Change: We have a good line of sight into that, we've got clarity into that because of the number of homes grown, the positive platforms that we have built over the years.

Speaker Change: Starting with our granddaddy, which is the HOA business.

Speaker Change: Also, our warehouse lending group has a very strong deposit business.

Speaker Change: and we added business escrow services in the last two years, settlement services, sometimes known as Jero Spanking and our consumer digital platform as well and also corporate trust. So these are all homegrown deposit businesses that a couple years ago really never existed inside of our bank and now are beginning to perform admirable. In addition, we've got a good deposit growth that comes from our commercial lines of business and we'll see you in the next video.

Ken Dekeoni: These are all home grown deposit businesses that a couple years ago really never existed inside of our bank and now are beginning to perform admirably. In addition, we've got good deposit growth that comes from our commercial lines of business, or previously known as the regional business. So that's sort of the deposits, and while just on balance sheet, I'll just say, and we also expect as we move forward into 2025 to see deposit on loan growth average of billion dollars or so per quarter, and we're running a very much lower deposit loan to deposit ratio. So if we have the opportunity to put on, as we say, good, safe, and thoughtful loan growth, we have the liquidity to do that, and we could increase our loan growth throughout the year.

Speaker Change: or previously known as our as the regional business.

Speaker Change: So, that's sort of the deposits and, well, just on balance sheet, I'll just say, and we also expect as we move forward into 2025 to see the deposit on loan growth average of billion dollars or so per quarter, and we're running a very much lower deposit.

Speaker Change: Loan to Deposit Ratio. So, if we have the opportunity to put on, as we say, good safe and thoughtful loan growth, we have the liquidity to do that, and we could increase our loan growth throughout the year. Dale, some of these businesses report to you. You want to add any comments? Yeah, I think that's pretty fulsome, Ken. Maybe in addition. Yeah, so we see that we have the liquidity that we need to be able to proceed. Thank you.

Dale Githin: Yeah, some of these businesses report to you. You don't want to add any comments?

Ken Dekeoni: Yeah, I think that's pretty fulsome, Ken, but it may be an addition. Yeah, so we see that we have the liquidity that we need to be able to proceed, and as such, pushing up our loan to deposit ratio into the 80s from below 80s, presently on an HFI basis, we should be able to do that. And there isn't anything like this either game on the balance sheet sell. I mean, this was our largest depositor in the whole bank. And so there isn't, there isn't maybe follow through, you know, coming in Q4, Q1 or whatever. Yeah, Abraham, I think we might have got one of the last pieces of your question.

Speaker Change: and it sucks, you know, pushing up our loan to deposit ratio into the 80s from below 80s, principally on an H5 basis.

Speaker Change: We should be able to do that and there isn't anything like this, Abraham, on the balance sheet cell. I mean, this was our largest depositor in the whole bank.

Speaker Change: and so there isn't maybe follow through coming in Q4 or Q1 or whatever. I think we might have else that one of the last pieces of your question. Do I hear correctly sort of directionally what's going to happen with net interest income? Was that one of your questions as well?

Ken Dekeoni: You asked, did I hear correctly, sort of directly what's going to happen with net interest income? Was that one of your questions as well? It was going to be my follow-up for you. Please, I think you've given the guidance. Just talk to us how that goes, NII plus ECR deposits cost, with or without rate cuts. Well, I kind of feel like I asked your question for you. I might as well answer it. All right. So, as we look forward. First, our race is for two more cuts this year, November and December, and then we have four scheduled for next year at the end of each quarter, the way we forecast it.

Speaker Change: It was going to be my follow-up, so yes, please I think you've given the guidance to talk to us how that goes and I'm plus easier deposit course, weight of it out rate cuts.

Speaker Change: I kind of feel like that's your question for you, I might as well answer it all right. So as we look forward.

Speaker Change: Let's do a look forward, first R.

Speaker Change: are raised in for two more cousins here, November and December, and then we have four scheduled for next year at the end of each quarter, the way we forecast it.

Ken Dekeoni: All right. So what you'll see overall, when you look at our balance sheet, inclusive of deposit costs, we are a liability sensitive. So our adjusted net interest margin, net interest margin, less deposit cost, will rise into four and will continue to rise through 2025. And net interest income, less deposit costs, those dollars will continue to rise steadily in Q4 and then as you roll forward into 2025. For the obvious reasons, deposit costs are declining. The balance sheet growth is going to still be robust, and you'll get some volume pick up for the net interest income, less deposit cost growing throughout 2025 from 2024.

Speaker Change: All right, so what you'll see overall when you look at our balance sheet, inclusive of the positive cost, we are a life-pildesensitive. So our adjusted net interest margin, that net interest margin, what's the positive cost?

Speaker Change: Will Rise in Q4 and will continue to rise through 2020-25 and that interesting come less the positive course.

Speaker Change: Okay, those towers.

Speaker Change: will continue to rise steadily in 24 and then as you roll forward into 2025. For the office reasons, deposit costs are declining, okay? So how the balance you grow is going to still remain robust and you'll get some volume pick up.

Speaker Change: for the net interest income, let's deposit costs growing throughout 2025 from 2024. I actually, Q424 should be higher than Q324 as well if I wasn't clear enough on that.

Ken Dekeoni: And actually, Q4, 24 should be higher than Q3, 2024 as well, if I wasn't clear enough on that. Okay. Already clear.

Unknown Executive: I let John asked you whether or not you can earn nine bucks plus next year. Thanks for taking my questions.

Speaker Change: Okay?

Speaker Change: Okay, all right, we have let John ask you whether or not you can own 9 bucks plus next year. Thanks for taking my questions.

Chris McGressy: Our next question comes from Chris McGressy with KBWA. Chris, please go ahead. Hey, good morning. Dale, I wonder if you could help or can on the, on the outlook for non interest income for the fourth quarter.

Speaker Change: Our next question comes from Chris McGressy with KPW. Chris please go ahead.

Chris McGressy: Thank you, Marty. Dale, I wonder if you could help or can on the outlook for non-interesting income. For the fourth quarter, I know this quarter had a MSR adjustment, but maybe unpack the eight to 12 percent growth and feed for Q4 because some of the line items moved around a little bit.

Dale Githin: I know this quarter had a MSR adjustment, but maybe unpack the 8 to 12% growth and fees for Q4 because some of the line items moved around a little bit. Yeah, so I mean, the MSR piece, you know, I mean, a lot of that was really related to the turn in rate. So we saw, we saw a 50% increase in constant prepayment rates on our mortgage book, just if the initiation of kind of lower mortgage rates, which is something to a significantly kind of, you know, backtrack presently. We don't see that happening again, but maybe there was a little more pent-up behavior than we thought.

Speaker Change: Yeah, so I mean, the MSRP is, you know, I mean, a lot of that was really related to the turn and rate, so we saw.

Speaker Change: We saw 50% increase in cluster pre-payment rates on our mortgage book just at the initiation of kind of lower mortgage rates, which is just some significant area, kind of backtrack, presently. You know, we don't see that happening again, but maybe there was a little more pent-epic behavior than we thought and you know, and so...

Dale Githin: And, you know, and so the result of that is the value of that asset fell more than what the gain would have on what we put against it to hold the valuation constant.

Speaker Change: The result of that is the value of that assets fell more than what the gain would have on the, on what we put against it to hold the valuation to the constant.

Dale Githin: And then going forward, so we talked about a couple of things. So one of them is, you know, we did a bully transaction. That's going to continue; that's, you know, and that will, those new revenues will be consistent there. You can see what we have in terms of, you know, trying to service charges. You know, it was up from the second quarter; we think that that number is also consistent. We had some securities gains. We do have some other collateralized deposits, not nearly of the magnitude that we talked about with the one that, you know, that would end to distribution in the third quarter.

Speaker Change: and then going forward.

Speaker Change: So we talked about a couple of things, so one of them is, we did a Bowley Transaction. That's going to continue and that those new revenues will be consistent there.

Speaker Change: you can see what we have in terms of kind of service charges.

Speaker Change: You know, it was up from the second quarter. We think that that number is also consistent. We had some securities gains. We do have some other collateralized deposits, not nearly of the magnitude that we talked about with the one that, you know, that within the distribution in the third quarter. So I think we're probably going to have some more security gains too, as we saw off the collateral related to those. All of that really actually improves our liquidity because when you have a collateralized deposit, you really can't do anything else with it. As these things, as we're able to move that and substitute different deposit situations for that. It gives us an opportunity to really push into, you know, higher return assets than what it's in presently.

Dale Githin: So I think we're probably going to have some more security gains, too, as we saw off the collateral related to those. All of that really actually improves our liquidity because when you have a collateralized deposit, you really can't do anything else with it.

Dale Githin: As these things, as we're able to move that and substitute different deposit situations for that, it gives us an opportunity to really push into, you know, higher return assets than what it's in front. Okay, and then just, I guess I followed the security gains you mentioned. Is that in the guide? And I guess it was similar magnitude? It would be in the guide for a smaller magnitude than what we had in the third quarter. Okay.

Speaker Change: so

Speaker Change: Okay, and then just I guess I followed the security gains you mentioned. Is that in the guide and I guess it was similar I'm adding to

Speaker Change: It would be in the guide for a smaller magnitude than what we had in the third quarter.

Speaker Change: Our next question comes from Jared Schull with Barclays. Jared, please go ahead.

Ken Dekeoni: Hi, good morning. Yeah, maybe looking at the loan growth that you'd reference especially on the CNI side, where are you seeing opportunities for that? And maybe if you just give us a little bit of early look at 25 in terms of sort of the pipelines and the expectation for sustainability of that growth. Yeah, so, so as I said, this quarter, we grew 900 million dollars. That's about 7% annualized to total loans of about 53.3 billion. It really came from three or four segments of our portfolio. The regional group all all in about 300 million warehouse lending grew almost 400 million.

Speaker Change: Tag Good Morning.

Jared Schull: Looking at the loan growth that you had referenced especially on the CNI side, where are you seeing opportunities for that? And maybe if you just give us a little bit of early look at 25 in terms of sort of the pipelines and the expectation for the sustainability of that growth.

Speaker Change: Yeah, so as I said, this corner, we grew $900 million, that's about 7% annualized to total loans of about $53.3 billion. It really came from three or four segments of our portfolio. The regional group grew all in about $300 million, warehouse lending grew almost $400 million. Some leverage finance and some resource financing, we could combine those together. We grew another $300 million, so it was almost $33.3, almost $34.3 that got us to nearly $1 billion of loan growth for this quarter. So as we look going forward, we see a couple of areas that give us comments.

Ken Dekeoni: Some leverage finance and some resource financing. We combined those together, grew another 300 million. So it was almost 3333, almost or 343 that got us to nearly a billion dollars of loan growth for this quarter. So as we look going forward, we see a couple of areas that give us confidence to continue to restate and reiterate the guide of a billion in quarterly loan growth. First, are no financing MSR lending west of warehouse lending group businesses are showing good pipelines. And we like this type of financing because they're generally shorter duration loans, good risk-reward. And they also allow us to evaluate credit decisions and collateral on a continuous basis, which goes to, you know, our allowance for loan loss reserves, and it goes to our lower credit losses that we have.

Speaker Change: The End.

Speaker Change: to continue to restate and reiterate the guide of a billion in quarterly loan growth. First, our note financing MSR lending.

Speaker Change: West Warehouse Learning Group businesses are showing good pipelines and we like this type of financing because they're generally shorter duration loans, good risk reward. And they also allow us to evaluate credit decisions and collateral on a continuous basis, which goes to our allowance for loan loss reserves. And it goes to our lower credit losses that we have, but this is good collateral, but also we've never taken a loss in any of those categories since we've been in these businesses.

Ken Dekeoni: But this is good collateral, but also we've never taken a loss at any of those categories since we've been in these businesses. Then I would say lot banking, resource financing, and our regional commercial lending provides the additional value or added value growing our loans, but also provide loan growth that comes along with more treasury management fee income and also allows us to gather a local cost operating accounts. And so that's another area that we like. Overall, if you look at our performance a year to date, we really have focused more on the CNI side, and you see our total growth for the year has been on CNI, and we've downplayed construction lending and development.

Speaker Change: Then I would say, Lot-Banking, Resort Financing, and our Regional Commercial Lending provides the...

Speaker Change: Additional value are added value growing our loans, but also provide loan growth that comes along with more treasury management to see and come, and also allows us to gather a loan cost operating accounts.

Speaker Change: And so, that's another area that we like.

Speaker Change: Overall, if you look at our performance a year to date, we really have focused more on the CNI side and you see our total growth for the year has been on CNI and we've downplayed construction lending and development and we've also kept our CR-E on our occupied flat as well and that has been grown.

Ken Dekeoni: And we've also kept our CRE on our occupied flat as well, and that has been grown, and we've also taken down our residential loans, which have carry a lower yield to it. So we'll have some opportunity to put some new loans on the books to have them come in at a higher yield.

Speaker Change: I've been also taking down our residential loans which have carry a lower yield to it. So we'll have some opportunity to put some new loans on the books.

Unknown Executive: So I hope that kind of gives you a sense of how we're thinking about the 2025 and what we're doing to prepare for. Okay, that's good, thanks.

Speaker Change: to have him come in at a higher yield. So I hope that kind of gives you a sense of how we're thinking about 2020-25 and what we're doing to prepare for it.

Unknown Executive: And then this is my follow-up. You know, looking at capital with the 11% sort of, you know, I won't call a target, but you know, calling out 11% were above that. Should we expect you to continue to grow CET-1 from this 11-2? Or would there be other capital management alternatives that you'd utilize here? Yeah. Yeah, my understanding question. So for our forecasting for 2025, we are assuming CET-1 stays at or above 11% and stays there modestly above 11% because you know, we think there's going to be, or there could be, more long growth coming our way than the billion dollars per quarter.

Speaker Change: Okay, that's good. Thanks. And then this is my follow up. You know, looking at capital with the 11% sort of, you know, I won't call it target, but, you know, calling out 11% were above that should re-expect.

Speaker Change: You to continue to grow CET1 from this 11-2 or with their be other capital management alternatives that you'd.

Speaker Change: If you utilize here.

Speaker Change: Yeah.

Speaker Change: Yeah, I have my understanding question. So, um, for...

Speaker Change: Our forecasting for 2025, we are assuming CET-1 stays at or above 11% and stays there modestly, above, at or above 11% because you know we think there's going to be or there could be more long growth coming our way than the billion dollars per quarter. And we want to have that

Unknown Executive: And we want to have that CET-1 drive powder to support that. And that's sort of our going-in program. In addition, as we get bigger, okay, I know we're 80 billion in our total assets. Came down a little bit from Q2 to Q3. But as we get bigger, and we get closer to the category of four bank comparisons, which we do today. We look at other measurements of where adjusted CET-1 is. That CET-1, less the AOCI, plus the allowance for loan loss reserves. And we want to target being in that upper quartile that Dale discussed in his prepared remarks.

Speaker Change: C-E-T-1, Drive Powder, to support that.

Speaker Change: and that's sort of our going in program.

Speaker Change: In addition, as we get bigger, okay, I know we're 80 billion in our total assets came down a little bit from Q2 to Q3, but as we get bigger and we get closer to the category of four bank comparisons, which we do today, we look at other measurements of where adjusted CET1 is, that's CET1, less the AOCI, plus the allowance for the on-laws reserves. And we want to target being in that upper quartile that Dale discussed and is prepared remarks. And so we're looking at that as well as a way to guide us as we continue to grow.

Unknown Executive: And so we're looking at that as well as a way to guide us as we continue to grow.

Matthew Clark: Our next question comes from Matthew Clark with Piper Sandler. Matthew, please go ahead. Hey, good morning, everyone. Thank you. First question around the ECR related costs, given the volume and rate dynamic going forward and assuming either your rate assumptions that you laid out earlier or the forward curve.

Speaker Change: Our next question comes from Matthew Clark with Piper Sandler.

Speaker Change: Marky, please go ahead.

Matthew Clark: Hey, good morning, everyone. Thank you. First question around the ECR related costs, given the volume and rate dynamic going forward and assuming either your rate assumptions that you laid out earlier or the forward curve, what is the good range of expectations for...

Dale Githin: What is the good range of expectations for customer service cost dollars in 2025? The reason why it's been increasing is really related to it's become skewed more toward the mortgage warehouse, which has about 100% beta. And so we expect that to unwind in a similar fashion as it came in. Hence, you know, Ken's comment that we believe we're going to see, you know, a 25% reduction in these ECR costs in the fourth quarter relative to the third quarter. And that should continue as we go into next year. Again, you know, so we've had a scenario whereby our HOA deposits have consistently risen year-to-year out.

Speaker Change: The reason why it's been increasing is really related to, it's become skewed more toward the mortgage warehouse, which has about a hundred percent beta. And so we expect that to unwind in a similar fashion as it came in.

Speaker Change: Hence, you know, can't comment that we believe we're going to see, you know, a 25% reduction.

Speaker Change: and these ECR costs in the fourth quarter, relative to the third quarter, and that should continue as we go into next year.

Speaker Change: Again, you know, so we've had a scenario whereby our HOA respondents have consistently risen year to year and year out. We expect that to continue while the growth in our mortgage warehouse is going to be tempered. We're going to see an outflow from early related to insurance payments that are made in the fourth quarter, and that's going to pull the total deposit number down. But it's also going to be an area of less focus for us kind of going forward in terms of growth. So in other words, we're going to have an opportunity to be able to lower those costs, you know, kind of in lockstep to FOMC action, and in fact in other in some cases above above 100%.

Dale Githin: We expect that to continue while the growth in our mortgage warehouse is going to be tempered. You're going to see an outflow primarily related to insurance payments that are made in the fourth quarter. And that's what's going to pull this vulnerable closet number down.

Dale Githin: But it's also going to be an area of less focus for us, kind of going forward in terms of growth. So, in other words, we're going to have an opportunity to be able to lower those costs, you know, kind of in lockstep to FOMC action. And in fact, it's in other cases above, above under. And to answer, because you asked the dollar question, Dale gave you a percentage answer, but, you know, that 25-ish percent for Q4 is about a 40 million dollar decline 50 million, sorry, I'm sorry, my bad, 50 million dollar decline from Q2 to Q3, right?

Speaker Change: And to answer, because you asked the dollar question, Dale Gibbons gave you a percentage answer, but you know that 25-ish percent for Q4 is about a 40-million-dollar decline, 50-million, I'm sorry, I'm sorry, my bad, 50-million dollars declined from Q2 to Q3.

Dale Githin: Just remember, Q2 to Q3, looks like Q3, looks like Q3 to Q4. I have to say about 50 million dollars, and remember, you got that 50 basis point bank that came out of Q3, so don't model that as a 50 million per quarter, but model it as race coming down in a very methodical way.

Speaker Change: All right, just remember Q2 to Q3, a Q3 to Q4, I was going to say about $50 million and remember you got that 50 basis point bang that came out of Q3 so don't model that as a 50 million per quarter, but not all of that's great to coming down in a very methodical way.

Dale Githin: Okay, so it sounds like it's more rate-driven, not volume-driven. Kind of, okay, got it.

Speaker Change: Okay, so it sounds like it's more of a ray-driven, not volume driven, kind of, okay, got it.

Dale Githin: Okay, and then just on the, your, kind of a blended question around loan yields. I know, SOFA came down ahead of the Fed cuts, and I'm sure that hurt a little bit. It also looked like your loan fees came down to 15 basis points from 24, tips in the prior quarter, and they had been running around that level for a few quarters. Because it's just what happened there, and then how do we think about the overall name in the near term? Yeah, I think the low fee number is really, I mean, you should go with the kind of the current run rate that we had in that period, in terms of, in terms of the name. I mean, we, you know, we mentioned in our, in our slide that, you know, that on a net interest income basis alone, we're expecting to see a contraction.

Speaker Change: Okay, and then just on me, you're...

Speaker Change: Kind of a blended question around long yields.

Speaker Change: I know so for a came down ahead of the Fed cuts, and I'm sure that hurt a little bit. It also looked like your loan fees came down to 15 basis points from 24 bips in the prior quarter, and they had been running around that level for a few quarters, because just what happened there, and then how do we think about the overall name in the near term?

Speaker Change: but

Speaker Change: I think the low-peas number is really, I mean you should go with the current run rate that we had in that period in terms of the NIM. I mean we mentioned in our slide that on a net interest income basis alone we're expecting to see a contraction.

Dale Githin: In the, you know, in the, in the fourth quarter, but that will be more than made up for. So as Kim talked about earlier, we're looking for, you know, a combined name, including the ECRs, which, you know, as we expect that the low, you know, the watermark was actually in the third quarter of 2024, and will increase in each successive supporter through next year.

Speaker Change: in the fourth quarter, but that will be more than made up for. So, as Kim talked about earlier, we're looking for, you know, a combined name, including the ECRs, which, you know, as we've expected the low.

Bernard von Gesheke: The next question, a line of Bernard von Gesheke with Deutsche Bank, then I'll please go ahead. Hey guys, good morning. Just on mortgage, you know, you previously obviously guided to 3Q, been frequently weaker with the loan production volumes were up nicely versus 2Q, while the gain on sale margins declined, and obviously called up the negative NSOM mark. Could you just talk to the puts and takes on how high demand that we need to pick up to see a pick up in the sale margin. You know, that is something that is a little difficult to handicap to be, to be very honest with you. You know, coming into the quarter, mortgage rates at the end of Q2 were up around 7.

Speaker Change: The next question, Commissioner Line of Bernard Vongiziki with Deutsche Bank.

Speaker Change: Don't not please go ahead.

Speaker Change: Hey guys, good morning. Just on mortgage, you know, you're previously obviously guided to 3Q, being seasonally weaker with the loan production volumes were up nicely, versus 2Q, while the gain of sale margins declined. And I was actually called up a negative NSR mark. Could you just talk to the puts and take on how high demand maybe needs to pick up to see a pickup in red gain of sale margins?

Speaker Change: That is something that is a little difficult to handicap to be very honest with you. You know, coming into the quarter mortgage rates at the end of Q2, we're up around 7.

Dale Githin: Right. And they declined during the quarter to about, you know, 605, and today they're in the 650 area. And so for us, so for us to handicap that, that's been a little bit of a struggle. It's based on consumer behavior, of course, and it's also based on consumer timing. IE, if you know there are a couple of the rate cuts coming at you, would you go out today and buy a home when you know rates are coming. And so what we say in the mortgage business is, at least what we have been saying, is people love their mortgage rate; they hate their home.

Speaker Change: Bye!

Speaker Change: and they declined during the quarter to about 605 and today they're in the 650 area.

Speaker Change: So for us to handicap that, that's been a little bit of a struggle. It's based on consumer behavior of course, and it's also based on consumer timing, i.e., if you know there are a couple of the rate cuts coming at you, would you go out today and buy a home when you know rates are coming? And so what we say in the mortgage business is at least what we have been saying is people love their mortgage rates, they hate their home.

Dale Githin: And now we're trying to see if people want to find a new home and just rent their mortgage rate and then re-fi as they go forward.

Dale Githin: Okay. And then just as we think about maybe mortgage more broadly and just the dynamics, like you mentioned, with mortgage rates coming down closer to six and then backing up, you know, what really gets mortgage for you guys. I think in the past you said maybe like the three, four rate cuts kind of help and, you know, maybe a low six percent is really what's meaningful. To increase production, but just kind of want to get your thoughts like, you know, maybe the six and a half hopefully comes down again, but, you know, it is based on some of the po forward of the rate cut expectation.

Speaker Change: Okay, and then just let me think about maybe Morgan, more broadly.

Speaker Change: and just the dynamic, like you mentioned, with more of your coming down closer to six and then back in love.

Speaker Change: Um...

Speaker Change: You know, what really gets mortgage for you guys? I think in the past, you've said maybe like the three, four rate cuts kind of help and, you know, maybe a low six percent is really what's meaningful to increase production. But just kind of want to get your thoughts like, you know, maybe the six and a half hopefully comes down again, but, you know, it is based on some of the pro forward of the rate cut expectation. So just want to get your thoughts on maybe a mortgage rate level that. You think the production volumes kind of pick up and revenues fall off.

Dale Githin: So just want to get your thoughts on maybe a mortgage rate level that you think the production volumes kind of pick up and revenues follow. Yeah, I think if you start beginning to see a repeat of the early part of Q3 where rates coming down into the low sixes, that begins to pick up the volume. You then begin to gather some speed once you break the six area. The six area is the equivalent of those that remember the four minute breaking the four minute mile. Okay, and once you break that four minute mile of under six and have a five handle to begin with, then we really think if the sweet spot is somewhere in that five 50 to five 75, that's, you know, record that that's great opportunities for us.

Speaker Change: You know, I think if you start beginning to see a repeat of the early part of Q3 where race coming down into the low sixes, that begins to pick up the volume. You then begin to gather some speed once you break the six barrier, the six barrier is the equivalent of those that remember the four minute, breaking the four minute mile, okay? And once you break that four minute mile of under six and have a five handled to begin with, [inaudible]

Speaker Change: Then we really think if the sweet spot is somewhere in that 550 to 575, that's, you know, record, that's great opportunities for us, okay? And that's sort of how we think. So we need to break the sixth area and then, at the drops into that 550 area, that's what we think there's a lot more volume coming our way.

Tim Arfstrom: Okay, and that's sort of how we think, so we need to break the six area, and then as it drops into that five 50 area, that's when we think there's a lot more volume coming our way. I might say a more tempered rate decline we actually think works in our favor, and that is if these fall really, really subtly, I think it's going to, you know, maybe have almost, almost a rush of refinance that may not last as much. And so if all the processing costs to get that done, and so if that you were to dissipate a little bit and Franklin, please, that the number of expectations of rate cuts for 2025 has actually been cut a little bit in the futures market, at least, that really gives it makes it more sustainable over time.

Speaker Change: I might say a more tempered race decline, we actually think works at our favorite.

Speaker Change: and that it has to be thought really, really suddenly, I think it's going to, you know, maybe have almost...

Speaker Change: Almost a rush of refinance that may not last as much. And part of the reason why mortgage rates are elevated relative to the 10 year is we believe it's you know it's simply because there's an expectation that if you re-fi right now, you're going to re-fi again in six months and it's not going to be worth all the processing cost to get that done. And so if that you were to dissipate a little bit and frankly I'm pleased that the number of expectations of rate cuts for 2025 has actually been cut a little bit in the futures market and we're going to leave.

Tim Arfstrom: And with that, we think we can maybe see a reduction in the disparity between mortgage rates and the 10-year, you know, 10-year treasury, for example, from what it's been historically.

Speaker Change: That that really gives it more sustainable over time. And with that we think we can maybe see a reduction in the disparity between mortgage rates.

Tim Arfstrom: The next question comes from the line of team up with Wells Fargo team up, please go ahead. Hi, good morning. I wanted to just get some clarity on the expectation for 4Q to be the NII trough. Is the expectation that 1Q maybe you get some additional margin compression from the asset sensitive balance sheet and then volume makes it up, or should 4Q be the trough for nymph compression as well? Yeah, I believe 4Q can be the trough as well on the nymph side. Yes. Okay.

Speaker Change: The next question comes from the line of team at Brazil, and I'll let it with Wells Fargo.

Speaker Change: Team up, please go ahead.

Speaker Change: Hi, good morning.

Speaker Change: I wanted to just get some clarity on the expectation for 4Q to be the NII trough. Is the expectation that one to maybe get some additional margin compression from the asset sensitive balance heat and then volume makes it up, or should 4Q be the trough for nymph compression as well?

Tim Arfstrom: And then just to maybe put a finer point on Bernie's question. So for the earnings at risk analysis, I guess what are you assuming for mortgage rates and kind of mortgage revenues with this? Yeah, so I believe that we would tail into maybe something that takes into a five by the end of the next year, the five handle, high five. Great.

Speaker Change: Yes, okay, and then...

Speaker Change: Yeah, so I'll be there.

Speaker Change: that we would tail into maybe something that ticks into a five by the end of next year.

Speaker Change: The 5-year-old, high five.

Tim Arfstrom: And then just, I just wanted to add a point to Dale's comments when talking about, about nymph; he was really, he was referencing the adjusted nymph. Okay. And so that when you think about us, that's the way I think that adjusted nymph is just net net net interest income less of the positive cost. That is all going to flow upward or move upward throughout the year. Okay. I just want to make that a little clarification. Sorry. I didn't mean it. No, I appreciate that clarification.

Speaker Change: and then just let's see what we have on just sure.

Speaker Change: I just wanted to add a point to Dale's comments when I'm talking about.

Speaker Change: about him. He was really, he was referencing the adjusted.

Speaker Change: Nam.

Speaker Change: Okay, and so that when you think about it, that's the way I think about it, is that adjusted the image is net, you know, net interesting, come less than the power of the cost.

Speaker Change: That is all going to flow upward or move upward throughout the year.

Speaker Change: Okay, I just want to make that little clarification. Sorry, I am in the throat.

Dale Githin: And then just lastly for me, just thinking about HQLA deposits in a rate down environment. I'm assuming just that the short term nature, there's going to be a little bit punitive and I just how are you thinking about hqla levels growing, maybe commiserate with the acid base or acid growth and then what that might look like from a rate perspective. Yeah. So we think we're, you know, we're kind of intact in terms of where we are on, on what we have hqla privately. You know, that number kind of came down a little bit because we, you know, dispose of some of these deposits that were collateralized all with HQLA category.

Speaker Change: Yeah, so we think we're kind of in taxes in terms of where we are on what we have an H2LA presently. You know, that number kind of came down a little bit because we, you know, dispose of some of these.

Dale Githin: So, from here, again, you know, it gives us latitude to grow our loans, our loans, commensurate with the growth rate we're going to show in deposits. And so, you know, as Ken mentioned, you know, so if we're going to grow deposits, you know, two billion on average. And that means that includes like the fourth quarter decline that's already built into higher growth earlier in those quarters. And then if you can grow at, you know, 75, 80%, you're going to have, you know, $6 billion of deposit growth, you know, in that, you know, a loan growth to match that.

Speaker Change: Deposits that were collateralized all with HQA categories. So from here, again, you know, it gives us latitude to grow our loans, our loans, commensurate with the growth rate we're going to show in deposits. And so, you know, as Ken mentioned, you know, so we're going to grow deposits, you know, two billion on average. And that means that includes like the fourth quarter decline that's already built into higher growth earlier in those quarters. And then if you can grow at, you know, [inaudible]

Dale Githin: And then the rest of it is going to fall into other categories like HQLA.

Anthony Alien: Our next question comes from the line of Anthony Alien with JP Morgan.

Speaker Change: Our next question comes from the line of Anthony Alian with JP Morgan. Please go ahead, Anthony.

Anthony Alien: Please go ahead, Anthony.

Ken Dekeoni: Hi, everyone. Does your four q deposit guide of down two billion include any additional pay downs of broker deposits, or is it a crime really coming from these seasonality of warehouse? It's really seasonality of warehouse. We expect our broker deposits to be fairly flat. Got it. Okay.

Speaker Change: yeah

Speaker Change: I have run.

Anthony Alian: Does your 4-Q deposit guide of down to a billion include any additional pay-downs of broker deposits or is it a client really coming from the seasonality of warehouse?

Ken Dekeoni: And then my follow-up also on deposits, I understand the warehouse is going to seasonally outflow and fork you, but I guess are there not enough deposit opportunities from other areas of the company to be able to offset that seasonal headwind for this quarter? Specifically, thank you. So the other areas, other deposit channels doing fact the gate, some of that outflow that you're seeing, but the warehouse lending group has a larger, is a larger contributor to deposit growth. And so, and the other thing that's happening, and I can't, I really should emphasize this, is that in the warehouse lending group or the industry, we've had several competitors either leave the industry or retreat from it in a significant way.

Anthony Alian: Okay, and then my follow-up also on the passage.

Anthony Alian: I understand the warehouse is going to seasonly outflow and forercue, but I guess are there not enough to posit opportunities from other areas of the company to be able to offset that seasonal headwind for this quarter specifically? Thank you.

Speaker Change: The other areas, other deposit channels, doing fact, the gate, some of that outflow that you're seeing. But the wild flooding group has, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh,

Speaker Change: A larger contributor to the positive growth. And the other thing is happening, and I can't.

Speaker Change: I really should emphasize this, is that in the warehouse funding group or the industry, we've had several competitors either leave the industry or retreat from it in a significant way.

Ken Dekeoni: And we are just seeing more inflow than we would normally have expected. And that inflow came in in Q3 and will kind of reverse out in Q4. So that's why it's harder to have the other deposit channels cover that larger inflow for us in Q4.

Ken Dekeoni: But after these deposits go on a hiatus, as we call them, they do come back into Q1, come back starting Q1, and we'll help us with our liquidity as we roll forward throughout 2025.

Gary Tenner: The next question comes from the line of Gary, Hannah with DA Davidson. Gary, please go ahead. Thanks, good morning. I appreciate the phone thoughts on the combined NII and ECR costs. I just wonder if you're willing to, you know, put a finer dime on just the gap NII outlook, obviously the four quarters lower guide. Based on your rate forecast for next year, kind of the 25 basis points per quarter, how deep into the year would you think it would be, and so you could turn dollars of gap NII from a bottom?

Speaker Change: The next question comes from the line of Gary and I with DA Davidson.

Speaker Change: Gary please go ahead

Speaker Change: Thanks, good morning. I appreciate the phone thoughts on the combined NII and ECR costs. I just wonder if you're willing to put a finer dime on just the Gap NII outlook, obviously the four quarters lower guide based on your rate forecast for next year, kind of the 25 basis points per quarter. How deep into the year would you think it would be and so you could turn dollars of

Gary Tenner: You know, at this point, I think we've given more clarity around 2025 and what we expect and any other conference call that I've read about so far. And we're going to leave it here as we get, as we, as we announce our Q4 earnings, we'll get into more detail what that 2025 for years going to look like. But I think we've given plenty of guidance here on how to kind of construct what to expect in 2025. All right, thank you.

Speaker Change: You know, at this point, I think we've given more clarity around 2025 and what we expect and any other conference call that I've re-read about so far and we're going to leave it here as we get as we announce our Q4 earnings, we'll get into more detail what that 2020-20 final full year is going to look like but I think we've given plenty of guidance here on how it kind of construct what to expect in 2025.

Speaker Change: All right, thank you.

Samuel Varga: The next question comes from the line of Samuel Varga with UBS. Please go ahead, Samuel. Good morning. I just wanted to touch on the theory again. I wanted to get your sense for, let's say it's a set of normalizers around the 3%, but a lot of people are pegging. What would be the floor on ECRA?

Speaker Change: The next question comes from the line of Samuel Varga with UBS.

Speaker Change: Please go ahead Samuel

Samuel Varga: Good morning. Dale, I just wanted to touch on the theory again.

Samuel Varga: I wanted to get your sense for if let's say it's set for normalizers around the 3% but a lot of people are pegging.

Ken Dekeoni: I understand that the, you know, the beta, at least initially, is expected to be, you know, near 100%, but, but how, at what point does it just level off and then move lower? Well, you know, I mean, if you look to kind of where we were before when racer even lower than that during the pandemic, you know, our ECR is, you know, mostly bottomed out around 40 basis points. So there's still a lot of room to continue to push things down. And frankly, I mean, it's, you know, it's all about, you know, what's the alternative, you know, money for money in these, you know, so it's like, okay, so they have these funds, you know, is, is some other financial institution going to be paying more than what, you know, if a 3% number in your example, I think it would be paying, you know, 353, 360, I doubt it because that generally means that funds are available elsewhere.

Speaker Change: Well, you know, I mean if you look to kind of where we were before when race were even lower than that during the pandemic, you know, our ECR is, you know, mostly bottom data routes for devices points.

Speaker Change: So, there's still a lot of room to continue to push things out and, frankly, I mean, it's all about, you know, wish they all turn it off, you know, and money.

Speaker Change: for money in these, so it's like okay, so they have these funds.

Speaker Change: You know, is some other financial institution going to be paying more than what, you know, if a 3% number in your example, are they going to be paying, you know, 353, 360? I doubt it because that generally means that funds are available elsewhere. So we have these diversified funding sources so that we've got all these channels so that we can meet, you know, kind of the credit demand that we have. So I don't, I don't see. I don't see. I don't see.

Ken Dekeoni: So we have these diversified funding sources so that we've got all these channels so that we can meet, you know, kind of the credit demand that we have. So I don't, I don't see that there is a number there that, you know, that we're going to really, it's going to really get sticky in terms of pushing things lower as they were much lower before, and, and, you know, and they're alternatives, you know, for not, and not just for, you know, for, but they're alternatives for us, you know, if, you know, we can go to other other sectors as well and look for funds.

Speaker Change: that there is a number there that's going to really get sticky in terms of pushing things lower if they were much slower before and their alternatives, and not just for their alternatives for us, if we can go to other sectors as well and look for fun. So, I mean, they're not going to move that far away from what the market rate for money is in terms of how low it can go. Thank you.

Ken Dekeoni: So I mean, they're not going to move that far away from what the market rate for money is in terms of how low it can go. Got it. Thank you for that.

Ken Dekeoni: And then just follow up on the, the earnings at risk. Can you, can you give us a sense? It's hard for us to know exactly what you're assuming a mortgage, but can you give us a sense for? Or, yes, what helps more in offsetting the NII compression is that these areas or the mortgage benefit from American Home on the fee income slide? What offsets the mortgage income on the fee income slide? Well, you know, I mean, so, I mean, they have funds that come from, you know, kind of their origination of mortgage service you write, so they manufacture these.

Speaker Change: What I said to the War of the Kingdom on the Fiancum site well.

Speaker Change: You know, I mean, so, I mean, they have funds that come from, you know, kind of their origination of mortgage service you write, so they manufacture these and depending on what that estimated value is, kind of determines what the gain on sale is, and then we have the service you write that we, you know, value and amortize down. So that's why I look at them more in concert rather than, you know, kind of a singular element. I think it was more important in the third quarter where they were, they were more, I'll say, bifurcated in terms of the response and that was really related to this 50% increase we had in concert procurement rates that took place in August , that we, that was an excess of, I think, what most models would have captured.

Ken Dekeoni: And depending on what that estimated value is, kind of determines what the gain on CLS, and then we have the service you write that we, you know, value and amortize down. So that's why I look at them more in concert rather than, you know, kind of a singular element. I think it was more important in the third quarter where they were, they were more, I'll say, bifurcated in terms of the response, and that was really related to this 50% increase we had in constant prepayment rates that took place in August that we, that was an excess of, I think, what most models would have, would have captured.

Chris McGressy: The next question comes from Chris McGrathie with KBWA. Please go ahead, Chris. Oh, great. Thanks for the follow up.

Speaker Change: The next question comes from Chris McGrassian with KVWA. Please go ahead Chris.

Unknown Executive: The only can longer term question about are we potential in a downright environment? Are you thinking about are we over the next couple of years? Yeah, so. I don't think that our ROE potential is really that dependent upon the rate environment. That is, you know, we're, you know, based on the balance sheet that we have, the capital that we need, the spread that we can obtain, that we can continue to efficiently manage the organization. We know our cost of, you know, come up, you know, for the past, you know, a couple of years or so.

Chris McGrassian: Yeah, so...

Speaker Change: I don't, I don't we don't think that our our elite potential is really that dependent upon the rate environment.

Speaker Change: That is, you know, work.

Speaker Change: You know, based on the balance sheet that we have, the capital that we need, the spreads that we can obtain, that we can continue to efficiently manage the organization. We know our costs have, you know, come up, you know, for the past, you know, a couple of years or so, but we believe we're going to get back to an efficiency ratio that begins with a four instead of a five on an adjusted basis, i.e. with the, you know, the deposit cost that it against interest income. And, and so that should leave us with a, with a, a rocky, you know, in the upper teens. And, and we believe we're on our way to get there. And that's where, you know, frankly, that's kind of where we're at it.

Ken Dekeoni: But we believe we're going to get back to an efficiency ratio that begins with a four instead of a five on an adjusted basis. IE with the, you know, the positive cost that is against interest income. And so that should leave us with it with a, a Rossi, you know, in the upper teens. And we believe we're on our way to get there. And that's where, you know, frankly, that's kind of where we're headed.

Sean Oström: We're not going to get back to the 20s that we were out before because our leverage is lower with our higher CT1 ratio. Understood. Thanks a lot, then.

Speaker Change: We're not going to get back to the 20s that we were at before because our leverage is lower with our higher CET1 ratio.

Sean Oström: Our next question comes from Sean Oström with RBC.

Sean Oström: John, please go ahead. Hey, thanks. Thanks. Good morning. Thank you.

Speaker Change: Our next question comes from John Arstram with RBC.

Speaker Change: John, please go ahead. Thanks for coming.

Ken Dekeoni: Abraham, Abraham, set me up, I guess, but can I hear you on your 20, 25 spots? Are you more optimistic on 25 with the recent rate cuts and the current rate outlook? Is this good for the company generally? Yeah, yeah, I am. I'm, you know, my, my optimism comes first from the balance sheet.

Speaker Change: I remember him setting me up, I guess.

John Arstram: I hear you on your 2025 thoughts. Are you more optimistic on 25 with the recent rate cuts and the current rate outlook is this good for the company, generally?

Speaker Change: Yeah, yeah, I am.

Speaker Change: You know, my...

Speaker Change: My optimism comes first.

Ken Dekeoni: All right. I, you know, we've given that guy the one billion from loans and two billion on average with the boss, right. And, and we've been giving that guy for boy, for seems like a couple of years now that we continue to do that. And I think we have these credit origination platforms that work well. And over the years, we've added the deposit platforms. And so my confidence is in, I feel very strong, strongly about the, about the guy that we can achieve the balance sheet. The overall liability, sensitive nature of the bank, I think we're in a falling rate environment is still talked about.

Speaker Change: from the Balancing.

Speaker Change: All right. We've given that guy the one billion from loans and two billion on average for the boss, right? And we've been giving that guy for, boy, for seems like a couple of years now that we continue to do that. And I think we have these credit origination platforms that work well. And over the years, we've added the deposit platforms. And so my confidence is in, I feel very strong. It's strongly about the about the guy that we can achieve the balance sheet, the overall liability.

Speaker Change: Sensitive nature of the bank, I think, within a falling rate environment, as Dale talked about, and we're talking about this on an adjusted net interest income basis, goose above deposit cost, you know, with rate cuts coming out of us, we see that getting better, and so that gives us, gives me some confidence as well. As the quality, as we see it today, is stable, knock on wood. And so, yeah, I always believe next year is always going to be both more difficult than the previous year, but I always tend to have a higher level of confidence that we can get there.

Ken Dekeoni: And we're talking about this on an adjusted net interest income basis, goose, goose above deposit cost. You know, with rate cuts coming at us, we see that getting better. And so that gives us, gives me some confidence as well. As the quality, as we see it today, is stable, not gone wood. And so yeah, I have. I always believe next year is always going to be both, both more difficult than the previous year. But I always tend to have a higher level of confidence that we can get there.

Ken Dekeoni: Yeah, okay.

Ken Dekeoni: You guys, you use the word transitional a lot. And I understand that it feels like this was kind of an unusual quarter for you. And I hear you on transitional, but do you have like a non-gap core EPS? Number in your mind for the quarter. I mean, I think you've got MSR, Bowley, I don't know, Gaines, Lower Gain Unsaille, ECR pressure, there's a lot going on. And I guess it'd be helpful if you have some kind of a shot at like a repeatable, sustainable quarterly EPS run rate in your mind, just because there was a lot, I think a lot going on here.

Speaker Change: You guys use the word transitional a lot and I understand that it feels like this is kind of an unusual quarter for you and I hear you on transitional, but do you have like a non-gap core EPS?

Speaker Change: Number in your mind for the quarter, I think you've got MSR, Bowley, I don't know, gains, lower gain on sale.

Ken Dekeoni: Yeah, I think that's a fair question. You know, we kind of get to $1.80, which is what was reported. The decline from the mortgage business was all set by Gaines from the collateralized deposits that the securities that helped collateralize deposits. And those two things kind of equal out for us. And as we don't think, we're going to see that MSR valuations decline in Q4. And as Dale said that, you know, we have other collateralized deposits and settlements that are rolling off where we have gains in Q4 that I think it was Chris who asked the question that we think it's captured in the run rate.

Speaker Change: Yeah, I think that's a fair question.

Speaker Change: You know, we kind of get to a dollar eighty, which is what was reported, the climb from the mortgage business was offset by games.

Speaker Change: from the collateralized deposits that the securities have helped collateralize deposits and those two things kind of equal out for us.

Brandon King: Our next question comes from the line of Brandon King with Truist.

Speaker Change: i

Dale Githin: Brandon, please go ahead. Hey, just one for me on court expenses, stripping out, you know, ECR deposit call looks like the court growth run rate was around, you know, 5% in the quarter and taking your commentary on the deposit cost. Next quarter seems like another step higher than 4%. So that's 5% to 4% quarterly run rate of growth. Is that something we should expect in the foreseeable future?

Speaker Change: Our next question comes from the line of Brandon King with Jurist.

Speaker Change: Brandon Pisco ahead.

Brandon King: Hey, just one for me on court spaces. I was stripping out, you know, he started a private call, it looks like the court.

Brandon King: Growth Run rate was around, you know, 5% in the quarter and taking your commentary on the project called next quarter seems like another step higher to 4%. So that's 5% quarterly run rate of growth. Is that something we should expect an over the foreseeable future? Anything temporary within that quarter's minutes for a run rate of next quarter's.

Dale Githin: You know, anything temporary within that course minutes from right over the next quarter. So the way I come out is I think about it as the adjusted efficiency ratio as we come out of Q4 through 2025, which excludes the policies. And we think over the course of the year that that will get at or near, you know, 50%. By the end of 2025, we see the adjusted efficiency ratio declining through 2025.

Speaker Change: So the way I come out is I think about it as the adjusted efficiency ratio as we come out of Q4 through 2025, which excludes the positive fees. And we think over the cost of the year that that will get at or near 50% by the end of 2025. So we see the adjusted efficiency ratio declining through 2025.

Dale Githin: Okay, and within that any sort of commentary on as far as the infrastructure bill as you continue to go towards any cat for. That's better than that.

Speaker Change: Okay, and within that any sort of commentary on as far as the infrastructure bill as you can go towards being a cat for.

Speaker Change: Dale, that's better than that. That's better than that.

Speaker Change: Those are all the questions we have, and so I'll turn the call back to Ken Zecki, only for any closing remarks.

Unknown Executive: Thank you all for attending the call. We look forward to talking to you in January about our Q4 results. So thanks again.

Ken Beck-Yoni: Thank you all for attending the call. We look forward to talking to you in January about our Q4 results. So thanks again.

Unknown Executive: Thank you, everyone, for joining us today.

Unknown Executive: This concludes our call, and you may now disconnect your line.

Ken Zecki: Thank you everyone for joining us today, this concludes our call and you may now disconnect your lines

Ken Zecki: Music

Unknown Executive: Thank you for watching.