Q4 2024 Wintrust Financial Corp Earnings Call

Tim Crane, President and Chief Executive Officer.

Speaker Change: David Dykstra, Vice Chairman and Chief operating Officer, and Richard Murphy, Vice Chairman and Chief lending Officer.

Speaker Change: As part of their review the presenters may make reference to both the earnings press release and the earnings release presentation. Following their presentations there will be a formal question and answer session. During.

Speaker Change: During the course of today's call when Trust management May make statements that constitute projections expectations beliefs or similar forward looking statements.

Speaker Change: Actual results could differ materially from the results anticipated or projected in any such forward looking statements. The company's forward looking assumptions that could cause the actual results to differ materially from the information discussed during this call are detailed in our earnings press release and in the company's most recent form 10.

Speaker Change: K and any subsequent filings with the SEC.

Speaker Change: Also our remarks may reference certain non-GAAP financial measures our earnings press release and the earnings release presentation include a reconciliation of each non-GAAP financial measure to the nearest comparable GAAP financial measure.

[music].

Yeah.

Yeah.

Speaker Change: Welcome to win Trust financial Corporation's fourth quarter, and full year 'twenty 'twenty four earnings conference call.

Speaker Change: As a reminder, this conference call is being recorded I would now.

Speaker Change: Now I'll turn the conference over to Mr. Tim Crane.

Speaker Change: A review of the results will be made by Tim Crane, President and Chief Executive Officer.

Tim Crane: Good morning, Thank you Latif and thank you for joining the wind Trust financial fourth quarter earnings call and.

[music].

David Dykstra: David Dykstra.

David Rice: Rice, Chairman and Chief operating Officer, and Richard Murphy, Vice Chairman and Chief lending Officer.

Yeah.

Tim Crane: In addition to the teeth introductions with me. This morning are Dave Star, Chief Financial Officer, and Kate Bogie, our general counsel.

Yeah.

Welcome to win Trust financial Corporation's fourth quarter, and full year 'twenty 'twenty four earnings conference call.

David Rice: As part of their review the presenters may make reference to both the earnings press release and their earnings release presentation.

Tim Crane: In terms of an agenda I'll share some high level highlights, Dave Dykstra will speak to the financial results and rich will add some additional information and color on credit performance and loan activity.

A review of the results will be made by Tim Crane, President and Chief Executive Officer.

David Rice: Following their presentations there will be a formal question and answer session during.

David Dykstra.

Rice, Chairman and Chief operating Officer, and Richard Murphy, Vice Chairman and Chief lending Officer.

Tim Crane: We will cover both fourth quarter and in some cases full year 2024 results I'll be back to wrap up with some summary thoughts on what we expect in 2025 and of course, we will do our best to answer some questions at the end.

Speaker Change: During the course of today's call when stress management may make statements that constitute projections expectations beliefs or similar forward looking statements.

As part of their review the presenters may make reference to both the earnings press release and the earnings release presentation. Following their presentations there will be a formal question and answer session. During.

Speaker Change: Actual results could differ materially from the results anticipated or projected in any such forward looking statements. The company's forward looking assumptions that could cause the actual results to differ materially from the information discussed during this call are detailed in our earnings press release and in the company's most recent form 10.

For the year, we reported record net income of $695 million up over 11, 5% from 2023. These.

During the course of today's call when stress management may make statements that constitute projections expectations beliefs or similar forward looking statements.

Tim Crane: These results reflect our efforts to generate the solid and continued growth of our franchise with a stable net interest margin.

Tim Crane: We target steady growth in both loans and deposits the expansion of our noninterest revenue sounded conservative liquidity and risk management and an unwavering commitment to take care of our clients.

Actual results could differ materially from the results anticipated or projected in any such forward looking statements. The company's forward looking assumptions that could cause the actual results to differ materially from the information discussed during this call are detailed in our earnings press release and in the company's most recent form 10.

K and any subsequent filings with the SEC.

Speaker Change: Also our remarks may reference certain non-GAAP financial measures our earnings press release and the earnings release presentation include a reconciliation of each non-GAAP financial measure to the nearest comparable GAAP financial measure.

Tim Crane: In our presentation materials as we do it every year and we've included a series of historical charts.

Tim Crane: So solid progress on key metrics over the last 10 years, evidenced that our approach not only works, but differentiates us from many of our peers.

Speaker Change: As a reminder, this conference call is being recorded.

K and any subsequent filings with the SEC.

Speaker Change: Now I'll turn the conference over to Mr. Tim Crane.

Also our remarks may reference certain non-GAAP financial measures our earnings press release and the earnings release presentation include a reconciliation of each non-GAAP financial measure to the nearest comparable GAAP financial measure.

Tim Crane: While this is not new information, we think these charts illustrate perhaps better than I can describe to you verbally or strong and consistent consistent historical performance.

Speaker Change: Good morning, Thank you Latif and thank you for joining the <unk> financial fourth quarter earnings call and.

Latif: In addition to Latif Central <unk> with me. This morning are Dave Star, Chief Financial Officer, and Kate Bogie, our general counsel.

Tim Crane: If you haven't already had a chance to review these materials I would encourage you to take a few minutes to do so.

As a reminder, this conference call is being recorded I would now.

Latif: In terms of an agenda I'll share some high level highlights, Dave Dykstra will speak to the financial results and rich will add some additional information and color on credit performance and loan activity.

Tim Crane: For the fourth quarter, we reported net income of approximately $185 $4 million net.

Now I'll turn the conference over to Mr. Tim Crane.

Good morning, Thank you Latif and thank you for joining the wind Trust financial fourth quarter earnings call and.

Tim Crane: Net interest income increased four 5% quarter over quarter, and almost 12% versus last year's fourth quarter.

Latif: We will cover both fourth quarter and in some cases full year 2024 results I'll be back to wrap up with some summary thoughts on what we expect in 2025 and of course, we will do our best to answer some questions at the end.

In addition to Latif introductions with me. This morning are Dave Star, Chief Financial Officer, and Kate Bogie, our general counsel.

Tim Crane: For the quarter, we grew loans and deposits by approximately $1 billion. Each importantly, adding clients on both sides of the balance sheet that we believe will be with us for years to come.

In terms of an agenda I'll share some high level highlights, Dave Dykstra will speak to the financial results and rich will add some additional information and color on credit performance and loan activity.

Latif: For the year, we reported record net income of $695 million up over 11, 5% from 2023. These.

Tim Crane: Net interest margin of $3 51 was in line with our expectations and represents good success in our effort to reduce margin volatility independent of interest rate fluctuations.

We will cover both fourth quarter and in some cases full year 2024 results I'll be back to wrap up with some summary thoughts on what we expect in 2020.

Latif: These results reflect our efforts to generate the solid and continued growth of our franchise with a stable net interest.

Tim Crane: I know many of you remember us as historically asset sensitive it's important I think to note that we are now well positioned for an orderly movement of rates <unk> shift in the slope of the yield curve.

Speaker Change: On the credit front nonperforming loans and charge offs were down relative to last quarter and again rich will spend some time walking you through the credit results and to offer some additional detail on the loan growth experienced during the quarter in just a few minutes.

Speaker Change: Except for fair value related movements, the mortgage business remains relatively insignificant in terms of financial impact. While we are hopeful to see our seasonal spring pickup in activity current mortgage activity remains muted.

To take care of our clients.

In our presentation materials as we do it every year and we've included a series of historical charts that show solid progress on key metrics over the last 10 years, evidenced that our approach not only works, but differentiates us from many of our peers.

Speaker Change: Our other two major fee based businesses, our Treasury management business and our wealth businesses continue to exhibit very steady growth.

Speaker Change: Overall, a solid and clean quarter in particular, I think our teams continue to do a very nice job with respect to pricing and credit discipline, which will continue to show up in our results and specifically our margin going forward.

While this is not new information, we think these charts illustrate perhaps better than I can describe to you verbally or strong and consistent consistent historical performance.

If you haven't already had a chance to review these materials I would encourage you to take a few minutes to do so.

Speaker Change: With that I'll turn this over to Dave to rich and we'll be back to wrap up.

For the fourth quarter, we reported net income of approximately $185 $4 million net.

Dave Dykstra: Great. Thanks, Tim.

Tim Crane: First with respect to the balance sheet growth, Tim mentioned, another strong quarter of balanced loan and deposit growth specifically the company.

Net interest income increased four 5% quarter over quarter, and almost 12% versus last year's fourth quarter.

Tim Crane: <unk> recorded $1 billion of growth for loans and $1 $1 billion of deposit growth. The loan growth was 8% on an annualized basis that was in line with our prior guidance of being in the mid to high single digit growth range and deposit growth for the quarter was approximately 9% on an annualized basis.

For the quarter, we grew loans and deposits by approximately $1 billion. Each importantly, adding clients on both sides of the balance sheet that we believe will be with us for years to come.

The net interest margin of $3 51 was in line with our expectations and represents good success in our effort to reduce margin volatility independent of interest rate fluctuations.

Tim Crane: For the period.

Tim Crane: Loan to deposit ratio remained stable compared to the prior quarter at roughly 91, 5%.

Noninterest bearing deposits remained relatively stable also during the quarter and increased slightly to 22% of total deposits.

I know many of you remember us as historically asset sensitive it's important I think to note that we're now well positioned for an orderly movement of rates <unk> shift in the slope of the yield curve.

Tim Crane: And it's interesting to note that noninterest bearing deposits and a fairly tight range during the course of 2000.

On the credit front nonperforming loans and charge offs were down relative to last quarter and again rich will spend some time walking you through the credit results and to offer some additional detail on the loan growth experienced during the quarter in just a few minutes.

Tim Crane: 24 in the 21% to 22% range as.

Speaker Change: Yes, the other aspects of the balance sheet results total assets grew approximately $1 1 billion to $64 9 billion and our risk based capital ratios were relatively stable or slightly increased due to the strong earnings were supported the balance sheet growth overall.

Except for fair value related movements, the mortgage business remains relatively insignificant in terms of financial impact. While we are hopeful to see a seasonal spring pickup in activity current mortgage activity remains muted.

Speaker Change: Overall it was another successful quarter for our franchise, our differentiation differentiated business model exceptional team and service and our unique position in our respective markets that we serve continue to serve us very well turning to the income statement again, a solid operating quarter with just a few moving pieces.

Our other two major fee based businesses, our Treasury management business and our wealth businesses continue to exhibit very steady growth.

Overall, a solid and clean quarter in particular, I think our teams continue to do a very nice job with respect to pricing and credit discipline, which will continue to show up in our results and specifically our margin going forward.

Speaker Change: To that end ill start off by highlighting what we consider the uncommon items to be for the quarter from our perspective. The quarter included acquisition related cost of approximately $1 $8 million security losses of approximately $2 8 million unfavorable fair value mortgage banking revenue marks of one 5 million and approximately five.

With that I'll turn this over to Dave to rich and we'll be back to wrap up.

Thanks, Tim.

First with respect to the balance sheet growth, Tim mentioned, another strong quarter of balanced loan and deposit growth specifically the company.

$7 million of additional quarterly expense related to the inclusion of the Macintosh Bank operations.

Recorded $1 billion of growth for loans and $1 $1 billion of deposit growth. The loan growth was 8% on an annualized basis that was in line with our prior guidance of being in the mid to high single digit growth range.

Speaker Change: Full quarter compared to just two thirds of a quarter.

Speaker Change: In the third quarter of this year.

Speaker Change: Each of these items are discussed in the first two pages of the earnings release, if you'd like to refer to them later.

And deposit growth for the quarter was approximately 9% on an annualized basis and for the period alone.

Speaker Change: But those items in mind I will now touch on some of the major balance sheet are major income statement categories. Our net interest income increased $22 6 million from the prior quarter and represented a record high amount of quarterly net interest income of $2 6 billion increase in average, earning assets and a stable net interest margin contributed to the.

Our loan to deposit ratio remained stable compared to the prior quarter at roughly 91, 5%.

Noninterest bearing deposits remained relatively stable also during the quarter and increased slightly to 22% of total deposits.

And it's interesting to note that noninterest bearing deposits and a fairly tight range during the course of 'twenty.

Speaker Change: Increase our.

Speaker Change: Our fourth quarter net interest margin was 351%, which was equal to the negative margin in the prior quarter yields and rates on major balance sheet categories were lower because of recent market declines in short term interest rates with loan yields moving down 22 basis points to 668% in the fourth quarter in interest bearing.

24 in the 21% to 22% range.

The other aspects of the balance sheet results total assets grew approximately $1 $1 billion to $64 9 billion and our risk based capital ratios were relatively stable or slightly increased due to the strong earnings were supported the balance sheet growth.

Deposits declining 33 basis points from the third quarter to 339%.

Overall it was another successful quarter for our franchise, our differentiation differentiated business model exceptional team and service and our unique position in our respective markets that we serve continue to serve us very well turning to the income statement.

Speaker Change: It's also interesting to note that as a result of these changes in loan and deposit rates in the balance sheet growth was at the interest income increased during the quarter, while interest expense actually decreased decreased during the quarter.

A solid operating quarter with just a few moving pieces.

Speaker Change: Given the current interest rate environment consensus forecast for future interest rates, we remain confident that our net interest margin can continue to be in a narrow range around three 5% throughout 2025.

To that end I'll start off by highlighting what we consider the uncommon items to be for the quarter from our perspective. The quarter included acquisition related cost of approximately $1 8 million security losses of approximately $2 8 million unfavorable fair value mortgage banking revenue marks of one 5 million and approximately five <unk>.

Speaker Change: We recorded a provision for credit losses of $17 million in the fourth quarter, which was lower than the $22 3 million amount recorded in the prior quarter, the lower provision for credit losses recognized in the fourth quarter as compared to the prior quarter.

$7 million of additional quarterly expense related to the inclusion of the Mac Italo bank operations for a full quarter compared to just two thirds of a quarter.

Speaker Change: It is primarily attributable to the day, one provision for credit losses of approximately $15 $5 million related to the macro tower acquisition, which was recognized in the third quarter of this year.

In the third quarter of this year.

Each of these items are discussed in the first two pages of the earnings release, if you'd like to refer to them later.

For those items in mind I will now touch on some of the major balance sheet are major income statement categories. Our net interest income increased $22 $6 million from the prior quarter and represented a record high amount of quarterly net interest income of $2 6 billion increase in average, earning assets and a stable net interest margin contributed to the.

Speaker Change: Turning to other noninterest income and noninterest expense sections.

Speaker Change: Total noninterest income remained stable at approximately $113 million in both the third and the fourth quarter.

Speaker Change: Wealth management revenue mortgage revenue and service charge income had the largest gains during the quarter with those gains offset by security losses.

The increase.

Speaker Change: Foreign currency Remeasurement losses, and miscellaneous other changes with the net result for the noninterest income increasing just 304.

Our fourth quarter net interest margin was 351%, which was equal to the net margin in the prior quarter yields and rates on major balance sheet categories were lower because of recent market declines in short term interest rates with loan yields moving down 22 basis points to 668% in the fourth quarter in interest bearing.

Speaker Change: As to mortgage banking revenue.

Speaker Change: It increased by $4 5 million in the fourth quarter compared to the third quarter, primarily due to a change in fair value marks.

Speaker Change: <unk> $5 $5 million impact offsetting this positive impact was a decrease in operational mortgage banking revenue of approximately $1 million in the fourth quarter compared to the prior quarter and that was due to slightly lower originations of mortgage loans.

Deposits declining 33 basis points from the third quarter to 339%.

Also interesting to note that as a result of these changes in loan and deposit rates in the balance sheet growth was at the interest income increased during the quarter, while interest expense actually decreased decreased during the quarter.

Speaker Change: And the slightly lower gain on sale margins.

As to noninterest expenses.

Given the current interest rate environment consensus forecasts for future interest rates, we remain confident that our net interest margin can continue to be in a narrow range around three 5% throughout 2025.

Speaker Change: Expenses total noninterest expenses totaled $368 $5 million in the fourth quarter and were up approximately seven $9 million from the third quarter.

We recorded a provision for credit losses of $17 million in the fourth quarter, which was lower than the $22 3 million amount recorded in the prior quarter, the lower provision for credit losses recognized in the fourth quarter as compared to the prior quarter.

Speaker Change: The primary reasons were one the noninterest expenses associated with mercantile Bank acquisition, which are approximately $5 $7 million higher than the fourth quarter, including the core deposit intangible amortization to account for a full quarter of activity rather than two thirds of a quarter.

It is primarily attributable to the day, one provision for credit losses of approximately $15 $5 million related to the macro tower acquisition, which was recognized in the third quarter of this year.

Speaker Change: Recorded in the third quarter the.

Speaker Change: The remaining increase of approximately $2 $2 million was a combination of relatively normal fluctuations.

Speaker Change: With one of the largest increases of $2 $7 million related to increased software expense associated with upgrading and maintaining our information security infrastructure and furthering our investments in digital products and services.

Turning to other noninterest income and noninterest expense sections.

Total noninterest income remained stable at approximately $113 million in both the third and the fourth quarter.

Speaker Change: And the largest decrease of approximately $5 1 million related to less advertising.

Wealth management revenue mortgage revenue and service charge income had the largest gains during the quarter with those gains offset by security losses.

Speaker Change: Marketing cost as this category of expenses tends to be lower in the fourth and the first quarters due primarily to less marketing for sponsorship expenditures related debate various major league and minor league sponsorships and other summertime sponsorship events that we hold in our communities.

Foreign currency Remeasurement losses, and miscellaneous other changes with the net result for the noninterest income increasing just 304.

As to mortgage banking revenue.

It increased by $4 5 million in the fourth quarter compared to the third quarter, primarily due to a change in fair value marks.

Speaker Change: Total non interest expenses as a percent of average assets declined to 231% for the fourth quarter compared to 236% in the prior quarter and 262% in the fourth quarter of last year, demonstrating improved expense leverage.

<unk> $5 $5 million impact offsetting this positive impact was a decrease in operational mortgage banking revenue of approximately $1 million in the fourth quarter compared to the prior quarter and that was due to slightly lower origination of mortgage loans.

Speaker Change: In summary, this is a very solid quarter with good loan and deposit growth a stable net interest margin with a steady outlook a record level of net interest income and a continued low level of nonperforming assets. Our team delivered net income that was a record for any full fiscal year in the company's history, and we have a positive outlook.

And slightly lower gain on sale margins.

As to noninterest expense.

Expenses total noninterest expenses totaled $368 $5 million in the fourth quarter and were up approximately $7 $9 million from the third quarter.

Speaker Change: For continued growth in asset revenue and earnings. We also continued to build our tangible book value per common share in 2024, and as you can see on slide 10 of our presentation deck, we've grown tangible book value per common share every year since we've been a public company.

The primary reasons were one the noninterest expenses associated with the <unk> Bank acquisition, which were approximately $5 $7 million higher than the fourth quarter, including the core deposit intangible amortization to account for a full quarter of activity rather than two thirds of a quarter.

Speaker Change: And although it's easy to get caught up in these quarterly results I think it's instructive to look back over time and as Tim referred to the 10 year charts that we included in our earnings release.

Recorded in the third quarter the.

The remaining increase of approximately $2 $2 million was a combination of relatively normal fluctuations with one of the largest increases of $2 $7 million related to increased software expense associated with upgrading and maintaining our it and information security infrastructure and furthering our investments in digital products and services.

Speaker Change: If you look at those they really provided impressive evidence that our approach to running the business has provided for consistent growth in loans deposits earnings and tangible book value per share over an extended period of time, all while managing our credit risk very well.

And the largest decrease of approximately $5 1 million related to less advertising marketing cost as this category of expenses tends to be lower in the fourth and first quarters due primarily to less marketing for sponsorship expenditures related debate various major league and minor league sponsorship and other summertime spot.

Speaker Change: We will continue to work hard.

Speaker Change: Many of those trends into 2025 and beyond.

Speaker Change: And with that I'll conclude my comments and turn it over to rich Murphy to discuss credit.

Rich Murphy: Thanks, Dave as Tim and Dave Both noted credit performance continued to be very solid in the fourth quarter.

Rich Murphy: As detailed in the earnings release loan growth for the quarter was $1 billion or 8% annualized as noted on slide seven we saw a strong and consistent growth across all major portfolios.

Our ship events that we hold in our communities.

Total noninterest expenses as a percent of average assets declined to 231% for the fourth quarter compared to 236% in the prior quarter and 262% in the fourth quarter of last year, demonstrating improved expense leverage.

Rich Murphy: A couple of specific areas of note include the mortgage warehouse team, which had another strong quarter as we continue to onboard new relationships, which have come with some meaningful deposit opportunities.

Rich Murphy: Portfolio residential real estate loans, which grew by $225 million down from $321 million in Q3, but indicative of the pickup of mortgage activity. We saw in the second half of the year.

In summary, this is a very solid quarter with good loan and deposit growth.

Stable net interest margin with a steady outlook a record level of net interest income and a continued low level of nonperforming assets. Our team delivered net income that was a record for any full fiscal year in the company's history and we have a positive outlook for continued growth in asset revenue and earnings. We also continued.

Rich Murphy: We also saw growth in both the commercial premium finance and life premium finance segments.

Rich Murphy: Loan growth for all of 2024 was $5 9 billion or 14%, including the acquisition of mercantile Bank and organic growth was $4 6 billion or 11%.

To build our tangible book value per common share in 2024, and as you can see on slide 10 of our presentation deck, we've grown tangible book value per common share every year since we've been a public company.

Rich Murphy: We believe that loan growth for the first quarter of 2025 will continue to be strong and aligned with our previous guidance of mid to high single digits for a number of reasons.

Rich Murphy: Our core C&I and leasing pipelines remained very solid and we have very strong momentum in our niche businesses, including leasing.

And although it's easy to get caught up in these quarterly results I think it's instructive to look back over time and as Tim referred to the 10 year charts that we included in our earnings release.

Rich Murphy: Mortgage warehouse and winter Us light.

Rich Murphy: Offsetting this growth are signs of increased competition.

I think if you look at those they really provided a impressive evidence that our approach to running the business as provided for consistent growth in loans deposits earnings and tangible book value per share over an extended period of time, all while managing our credit risk very well and we will continue to work hard to continue those trends into 2025 and <unk>.

Rich Murphy: Competitive pressure as other banks and non banks look to deploy their capital by offering more aggressive pricing and structures that we will not meet our standards.

Rich Murphy: In summary, we continue to be optimistic about our ability to grow loans at attractive rates and maintain our credit discipline.

Rich Murphy: From a credit quality perspective as detailed on slide 15, we continue to see strong performance with signs of stabilization across the portfolio.

David Dykstra: <unk>.

Speaker Change: And with that I'll conclude my comments and turn it over to rich Murphy to discuss credit.

Rich Murphy: This can be seen in a number of metrics nonperforming loans as a percentage of total loans decreased slightly from 38 basis points to 36 basis points.

Speaker Change: Thanks, Dave as Tim and Dave Both noted credit performance continue to be very solid in the fourth quarter.

David Rice: As detailed in the earnings release loan growth for the quarter was $1 billion or 8% annualized as noted on slide seven we saw a strong and consistent growth across all major portfolios.

Rich Murphy: Pls in total were down for the quarter from 188 million to $171 million.

Rich Murphy: It's interesting to note that we have seen three straight quarters of lower npls in our commercial premium finance portfolio as we continue to manage the stress from the transportation segment of that portfolio.

Speaker Change: A couple of specific areas of note include the mortgage warehouse team, which had another strong quarter as we continue to onboard new relationships, which have come with some meaningful deposit opportunities.

Rich Murphy: We are pleased to see this trend improve as a result of tighter loan structures and enhanced underwriting.

Speaker Change: Portfolio residential real estate loans, which grew by $225 million down from $321 million in Q3, but indicative of the pickup of mortgage activity. We saw in the second half of the year.

Rich Murphy: Charge offs for the quarter were $15 9 million or 13 basis points down from $26 7 million or 23 basis points in Q3.

Rich Murphy: This reduction in charge offs.

Speaker Change: We also saw growth in both the commercial premium finance and life premium finance segments.

Rich Murphy: Is primarily the result of improved performance at our core commercial loan portfolio.

Speaker Change: Loan growth for all of 2024 was $5 9 billion or 14%, including the acquisition of mercantile Bank and organic growth was $4 6 billion or 11%.

Rich Murphy: Our portfolio continues to be very solid well diversified and very granular additional evidence of this can be seen on slide 15, where we saw stable and stable to improving levels in our special mention and substandard loans.

Speaker Change: We believe that loan growth for the first quarter of 2025, we will continue to be strong and aligned with our previous guidance of mid to high single digits for a number of reasons.

Rich Murphy: We believe that this quarters level of Npls and charge offs reflect a more stabilized credit environment as evidenced by the chart of historical nonperforming asset levels on slide 16.

Speaker Change: Our core C&I and leasing pipelines remained very solid and we have very strong momentum in our niche businesses, including leasing.

Rich Murphy: Finally, we are firmly committed to identifying problems early and charging them down where appropriate our goal as always is to stay ahead of any credit challenges.

Speaker Change: Mortgage warehouse and winter a slight <unk>.

Speaker Change: Offsetting this growth are signs of increased competition.

Speaker Change: <unk> pressure as other banks and non banks look to deploy their capital by offering more aggressive pricing and structures that will not meet our standards.

Rich Murphy: As noted in our last few earnings calls we continue to be highly focused on our exposure to commercial real estate loans, which comprise roughly a quarter of our total portfolio.

Latif: In summary, we continue to be optimistic about our ability to grow loans at attractive rates and maintained our credit discipline.

Rich Murphy: A prolonged higher interest rate environment and continued pressure on occupancy and lease rates has affected the CRE valuations, particularly in the office category.

Latif: From a credit quality perspective as detailed on slide 15, we continue to see strong performance with signs of stabilization across the portfolio.

Rich Murphy: As detailed on slide 19, we saw promising signs of stabilization during the third quarter.

Rich Murphy: CRE npls decreased from three.

Latif: This can be seen in a number of metrics now.

Nonperforming loans as a percentage of total loans decreased slightly from 38 basis points to 36 basis points.

Rich Murphy: Three 3% to one 6% as noted earlier, we also saw CRE charge offs reduced from 53 basis points in Q2 to essentially zero for the third and fourth quarter.

Latif: Npls in total were down for the quarter from 180 80 million to $171 million.

Rich Murphy: On slide 20, we continue to provide enhanced detail on our CRE office exposure. Currently is portfolio remained steady at $1 7 billion or 12, 8% of our total CRE portfolio and only three 5% of our total loan portfolio of the $1 7 billion in office exposure, 44% as medical officer owner occupied the average.

Latif: Interesting to note that we have seen three straight quarters of lower npls in our commercial premium finance portfolio as we continue to manage the stress from the transportation segment of that portfolio.

Latif: We are pleased to see this trend improve as a result of tighter loan structures and enhanced underwriting.

Latif: Charge offs for the quarter were $15 9 million or 13 basis points down from $26 7 million or 23 basis points in Q3.

Rich Murphy: Size of alone in the office portfolio is only $1 5 million and we have eight only eight loans above $20 million and only five of which are non medical are owner occupied.

Latif: This reduction in charge offs.

Latif: Is primarily the result of improved performance at our core commercial loan portfolio.

Rich Murphy: We performed portfolio reviews regularly on our CRE portfolio and we stay very engaged with our borrowers as mentioned on prior calls our CRE credit team regularly updates our deep dive analysis of every non owner occupied loan over $2 5 million, which will be renewing between now and the end of the third quarter of 2025, this analysis, which covered 84% of all new and add on.

Latif: Our portfolio continues to be very solid well diversified and very granular additional evidence of this can be seen on slide 15, where we saw stable and stable to improving levels in our special mention and substandard loans.

Latif: We believe that this quarters level of Npls and charge offs reflect a more stabilized credit environment as evidenced by the chart of historical nonperforming asset levels on slide 16.

Rich Murphy: Our occupied CRE loans maturing this period resulted in the following.

Rich Murphy: Roughly half of the loans reviewed will clearly qualify for a renewal at prevailing rates roughly 34% of these loans are anticipated to be paid off or which will require a short term extension at prevailing rates. The remaining loans will require some additional attention which could include a pay down or a pledge of additional collateral we continue to back check the results of portfolio reviews.

Latif: Finally, we are firmly committed to identifying problems early and charging them down where appropriate our goal as always is to stay ahead of any credit challenges.

Latif: As noted in our last few earnings calls we continue to be highly focused on our exposure to commercial real estate loans, which comprise roughly a quarter of our total portfolio.

Latif: A prolonged higher interest rate environment and continued pressure on occupancy and lease rates has affected CRE valuations, particularly in the office category.

Rich Murphy: Conducted during prior quarters and have found that the projected outcomes versus the actual outcomes were very tightly correlated and generally speaking borrowers of loans deemed to require additional attention continue to support those loans.

Latif: As detailed on slide 19, we saw promising signs of stabilization during the third quarter is as CRE npls decreased from three.

Rich Murphy: We have stated on prior calls our portfolio is not immune from the effects of higher rates or the market forces behind lease rates, but we continue to proactively identify weaknesses in the portfolio and work with our borrowers to identify the best possible outcomes.

Latif: Three 3% to 6% as noted earlier, we also saw CRE charge offs reduced from 53 basis points in Q2 to essentially zero for the third and fourth quarter.

Rich Murphy: We are also focused on the effects on our portfolio from the tragic wildfires in California, particularly in light of the relationship first insurance funding has with the insurance industry. We have done a thorough review of our entire portfolio and we would anticipate little impact, particularly in our premium finance portfolio, which is primarily secured by commercial policies are.

Latif: On slide 20, we continue to provide enhanced detail on our CRE office exposure. Currently is portfolio remained steady at $1 7 billion or 12, 8% of our total CRE portfolio and only three 5% of our total loan portfolio of the $1 7 billion in office exposure, 44% as medical officer owner occupied the average.

Rich Murphy: Our thoughts and prayers are with those who have been impacted by these tragic events as many of you know we have been in this business almost since our inception, and we have seen minimal impact on our results from the numerous natural disasters experienced during this time.

Latif: Size of alone in the office portfolio was only $1 5 million and we have only eight loans above $20 million and only five of which are non medical or owner occupied.

Latif: We performed portfolio reviews regularly on our CRE portfolio and we stay very engaged with our borrowers as mentioned on prior calls our CRE credit team regularly updates or deep dive analysis of every non owner occupied loan over $2 5 million, which will be renewing between now and the end of the third quarter of 2025, this analysis, which covered 84% of all new and add on.

Rich Murphy: However, it does provide our teams the opportunity to utilize our industry expertise to service and support our clients during these difficult times.

Rich Murphy: In summary, we continue to be encouraged by the trends we saw in the fourth quarter and throughout 2024, and we believe that our portfolio is in reasonably good shape and appropriately reserved that.

Tim Crane: That concludes my comments on credit and now I will turn it back to Tim.

Latif: Our occupied CRE loans maturing this period resulted in the following.

Tim Crane: Great. Thanks rich.

Rich Murphy: <unk> up our.

Tim Crane: Prepared remarks, I'd like to offer a couple of observations.

Latif: Roughly half of the loans reviewed will clearly qualify for a renewal at prevailing rates.

Tim Crane: This past year, our diverse businesses, specifically those related to asset generation allowed us to grow loans and add clients when many others did not.

Latif: Roughly 34% of these loans are anticipated to be paid off or which will require a short term extension at prevailing rates. The remaining loans will require some additional attention which could include a pay down of our pledge of additional collateral.

Tim Crane: The growth this quarter was evidence of that it was spread nicely across all categories and while we're not immune to macro market factors. These diverse businesses allow us to effectively manage our growth risk and to a degree pricing.

Latif: We continue to back check the results of portfolio reviews conducted during prior quarters and have found that the projected outcomes versus the actual outcomes were very tightly correlated and generally speaking borrowers of loans deemed to require additional attention continue to support those loans.

Tim Crane: We believe the market moves to an area where pricing our credit structures become pressured we're not compelled to compete and can adjust accordingly, often without compromising our target results.

Latif: As we have stated on prior calls our portfolio is not immune from the mix of higher rates or the market forces behind lease rates, but we continue to proactively identify weaknesses in the portfolio and work with our borrowers to identify the best possible outcomes.

Tim Crane: We believe the margin will be relatively stable into 2025 you.

Tim Crane: You might ask if we would benefit from a steepening yield curve. The answer is that we may but as rich mentioned, we are also seeing some early signs of spread compression in loan pricing we.

Latif: We are also focused on the effects on our portfolio from the tragic wildfires in California, particularly in light of the relationship first insurance funding has with the insurance industry. We have done a thorough review of our entire portfolio and we would anticipate little impact, particularly in our premium finance portfolio, which is primarily secured by commercial policies.

We believe this is a reaction to muted loan growth at some competitor financial institutions in 2024.

We entered 2025 with a lot of momentum we're optimistic about our ability to continue to profitably grow our franchise pipelines are good we remain excited about the opportunities in west Michigan as a result of the <unk> acquisition and in other markets, where we've expanded for example, Rockford, Illinois, the fourth largest city in Illinois, where we recently.

Latif: Our thoughts and prayers are with those who have been impacted by these tragic events as many of you know we have been in this business almost since our inception, and we have seen minimal impact on our results from the numerous natural disasters experienced during this time.

Latif: However, it does provide our teams the opportunity to utilize our industry expertise to service and support our clients during these difficult times.

Tim Crane: Added three locations and are seeing very nice early results.

Tim Crane: We have a great team. They focus every day on taking care of clients in a way that others don't and in some cases can't and managing the related risks.

Latif: In summary, we continue to be encouraged by the trends we saw in the fourth quarter and throughout 2024, and we believe that our portfolio is in reasonably good shape and appropriately reserved that.

Tim Crane: That's how we win and that's what will generate continued strong financial results going forward I.

That concludes my comments on credit and now I'll turn it back to Tim.

Tim Crane: Great. Thanks, rich to wrap up our.

Tim Crane: I am pleased with the fourth quarter in 2024 results and at this point I'll pause and we can take some questions.

Latif: Prepared remarks, I'd like to offer a couple of observations.

Latif: This past year, our diverse businesses, specifically those related to asset generation allowed us to grow loans and add clients when many others did not the.

Speaker Change: As a reminder to ask a question you will need to press star one on your telephone to remove yourself from the queue. You May press Star one again, please standby, while we compile the Q&A roster.

Latif: The growth this quarter was evidence of that it was spread nicely across all categories and while we're not immune to macro market factors. These diverse businesses allow us to effectively manage our growth risk and to a degree pricing.

Speaker Change: Our first question.

Speaker Change: It comes from the line of John Armstrong of RBC capital markets. Your question. Please John.

Latif: We believe the market moves to an area, where pricing or credit structures become pressured we're not compelled to compete and can adjust accordingly, often without compromising our target results.

John Armstrong: Hey, good morning, guys.

John Armstrong: Tim Tim just on some of your and maybe rich as well on some of your comments on loan growth I think I understand what youre, saying you alluded to it.

Latif: We believe the margin will be relatively stable into 2025 you.

John Armstrong: Growing when others have not but youre seeing some more competition.

Speaker Change: You might ask if we would benefit from a steepening yield curve.

John Armstrong: Can you just talk about what Youre hearing from your clients from a sentiment point of view.

Speaker Change: The answer is that we may but as rich mentioned, we are also seeing some early signs of spread compression in loan pricing.

John Armstrong: Curious, what youre really saying on whats you are flagging for growth expectations for 2005 based on what Youre seeing today.

Speaker Change: We believe this is a reaction to muted loan growth at some competitor financial institutions in 2024.

John Armstrong: Yep.

John Armstrong: The guidance that we provided I think it is very realistic and.

Speaker Change: We entered 2025 with a lot of momentum we're optimistic about our ability to continue to profitably grow our franchise pipelines are good we remain excited about the opportunities in west, Michigan as a result of the <unk> acquisition.

John Armstrong: As you know, we've actually done better in this past year than the guidance.

John Armstrong: I think that we're I do get nervous and I think I kind of pointed out.

Speaker Change: And in other markets, where we've expanded.

John Armstrong: My comments in Tim's comments is that a lot of the opportunities that we saw like in CRE I would point to in particular that we saw some really good opportunities over the course of the last two years that we're priced right structured right.

Speaker Change: For example, Rockford, Illinois, the fourth largest city in Illinois, where we recently added three locations and are seeing very nice early results.

Speaker Change: We have a great team. They focus every day on taking care of clients in a way that others don't and in some cases can't and managing the related risks.

John Armstrong: It really is an opportunity to grow our portfolio and also to grow relationships.

Speaker Change: That's how we win and that's what will generate continued strong financial results going forward.

John Armstrong: Those have and I'd say in the last 60 days become much more price sensitive.

Speaker Change: I am pleased with the fourth quarter in 2024 results and at this point I'll pause and we can take some questions.

John Armstrong: Lot more people in the market right now looking to do deals I think people, who may have been a little bit anxious about their exposure and thats that category. It kind of pulled out and now are back in.

Speaker Change: As a reminder to ask a question you will need to press star one on your telephone to remove yourself from the queue. You May press Star one again, please standby, while we compile the Q&A roster.

And again as Tim pointed out we're just not going to chase deals that we got to get appropriately paid.

John Armstrong: Paid for it so.

Speaker Change: Our first question.

John Armstrong: Not overly concerned about those issues I think again thats why we have all these different asset categories. When something's not working generally speaking something else will.

Speaker Change: Comes from the line of John Armstrong from RBC capital markets. Your question. Please John.

John Armstrong: Hey, good morning, guys.

Speaker Change: Tim Tim just on some of your and maybe rich as well on some of your comments on loan growth I think I understand what youre, saying you alluded to it.

John Armstrong: But just a reminder to ourselves that we don't need to grow if it if it's not going to work for us. So again, we're not changing our guidance, we're not suggesting anything other than it's going to be a little bit of a headwind that we hadn't experienced over the last couple of years.

John Armstrong: <unk> growing when others have not but youre seeing some more competition.

Speaker Change: Can you just talk about what Youre hearing from your clients from a sentiment point of view.

Speaker Change: Im curious what Youre really saying on whats you are flagging for growth expectations for 25% based on what Youre seeing today.

John Armstrong: Okay fair enough on that.

John Armstrong: And then.

John Armstrong: Maybe Tim or Dave for you.

Speaker Change: Yep.

Speaker Change: The guidance that we provided I think it is very realistic and.

Speaker Change: It's a difficult question, but Tim you mentioned muted activity in mortgage.

Speaker Change: As you know, we've actually done better in this past year than the guidance.

Speaker Change: I actually thought you had a decent production quarter given the environment, but curious how you guys are feeling about the near to medium term outlook is there is there a right level of mortgage rate level, where activity really starts to pick up.

Speaker Change: I think that we're I do get nervous and I think I'd kind of point out in that.

Speaker Change: My comments in Tim's comments is that a lot of the opportunities that we saw like in CRE I would point to in particular that we saw some really good opportunities over the course of the last two years that we're priced right structured right.

Tim: Yes, John we're obviously hopeful that there'll be some sort of pickup in the spring. There are signs that inventory is getting a little bit better that was certainly one of the issues.

Speaker Change: On the rate front.

Speaker Change: We mentioned last quarter.

Speaker Change: Really an opportunity to grow our portfolio and also to grow relationships.

Speaker Change: When in the third quarter, we saw rates dipped down to near 6%. We saw a pickup in activity that was was pretty material and pretty rapid.

Speaker Change: Those have been I would say in the last 60 days become much more price sensitive.

Speaker Change: At 7%, that's that's less the case in many of our markets. We are hopefully on the tail end of kind of winter here. So.

Speaker Change: A lot more people in the market right now looking to do deals I think people, who may have been a little bit anxious about their exposure and thats that category. It kind of pulled out and now are back in.

I would say something close to six would help inventory is going to get better, but we're still bouncing along the bottom right now.

Speaker Change: And again as Tim pointed out we're just not going to chase deals that we got to get appropriately paid.

Speaker Change: Okay, Alright. Thank you guys. So I'll step back thanks, Sean.

Speaker Change: Paid for it so.

Speaker Change: Not overly concerned about those issues I think again thats why we have all these different asset categories. When something's not working generally speaking something else will.

Speaker Change: Thank you.

Our next question.

Speaker Change: It comes from the line of Jeff <unk> of D. A Davidson. Please go ahead Jeff.

Speaker Change: But it's just we just it's a reminder to ourselves that we.

Jeff: Thanks, Good morning, good morning.

Speaker Change: Tom.

Speaker Change: Early part of the press release, you kind of call out some of the somatic or focal points for $25.

Speaker Change: We don't need to grow if it's if it's not going to work for us. So again, we're not changing our guidance, we're not suggesting anything other than it's going to be a little bit of a headwind.

Speaker Change: Included the expense management.

Speaker Change: Just wanted to re check if that chip of course of just general good practice or if theres some real.

Speaker Change: That we hadn't experienced over the last couple of years.

Okay fair enough on that.

Speaker Change: <unk> do you want it.

Speaker Change: And then.

Speaker Change: Tighten up or areas that you're looking at on that front on the expense specifically.

Speaker Change: Maybe Tim or Dave for you.

Speaker Change: Yeah.

It's a difficult question, but Tim you mentioned muted activity in mortgage.

Speaker Change: I think it's just an area of good practice to watch our expenses.

Sorry, you had a decent production quarter, given the environment, but curious how you guys are feeling about the near to medium term outlook and is there is there a right level of mortgage rate level, where activity really started to pick up.

Speaker Change: We're still a growing company and so we're still investing in our digital products and our infrastructure and supporting the growth of the company.

Speaker Change: Yes, I mean, John we're obviously hopeful that there'll be some sort of pickup in the spring. There are signs that inventory is getting a little bit better that was certainly one of the issues on the rate front.

Speaker Change: We certainly expect as rich said that our loan growth will be in the mid to high single digits.

Speaker Change: The year and we expense our expect our expense growth to be less than that and I think we set out in our last call sort of maybe mid single digits over the current run rate.

Speaker Change: As we mentioned last quarter.

Speaker Change: Then in the third quarter, we saw rates dipped down to near 6%. We saw a pickup in activity that was was pretty material and pretty rapid.

Speaker Change: For expense growth and then you would get operating leverage out of that to the extent that loan growth didn't come we have levers that we can pull and we could pull back on the expense growth, but our goal is to to watch expenses closely but continued to invest in the business to support the growth and we think thats prudent.

Speaker Change: At 7%, that's that's less the case in many of our markets. We are hopefully on the tail end of kind of winter here.

Speaker Change: No.

Speaker Change: I would say something close to six would help inventory is going to get better, but we're still bouncing along the bottom right now.

As we.

Speaker Change: Okay, Alright, thank you guys.

Speaker Change: Have always done in our life is invest in the business and grow and get new customers in.

Speaker Change: Step back yes, thanks, Sean.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: That investment pays dividends.

Speaker Change: It comes from the line of Jeff <unk> of D. A Davidson. Please go ahead Jeff.

Speaker Change: They compete with the big guys. So just more watching watching expenses closely.

Thanks, Good morning.

Speaker Change: Morning, Jeff.

Speaker Change: And.

Speaker Change: That characterization I think is the best okay.

Speaker Change: Early part of the press release, you kind of call out some of the somatic.

Speaker Change: Thanks, Dave.

Speaker Change: Points for $25.

Speaker Change: Maybe if I could just checking on an M&A and appetite post market tower.

Speaker Change: Included the expense.

Speaker Change: Management.

Speaker Change: Just wanted to re check if that chip of course of just general good practice or if theres some real.

Speaker Change: And kind of see about.

Speaker Change: Interest levels on your end and then and then maybe if you could just touch on the priorities on capital.

Speaker Change: Focal points that you want it.

Speaker Change: Tighten up or areas that you're looking at on that front on the expense specifically.

Speaker Change: M&A is quiet if you don't find those partnerships.

Speaker Change: Well with respect to M&A.

Speaker Change: I think it was a scenario of good practice to watch our expenses.

Speaker Change: Obviously field phone calls and post election, there is level of enthusiasm that is perhaps increased.

Speaker Change: We're still a growing company.

Speaker Change: We're still investing in our digital products and our infrastructure and supporting the growth of the company.

Speaker Change: I would expect that we would continue to be disciplined to Dave's point, we're investing in the business. We're building an infrastructure that can support a larger institution.

Speaker Change: We certainly expect as rich said that our loan growth will be in the mid to high single digits for the year and we expense our expect our expense growth to be less than that and I think we set out in our last call sort of maybe mid single digits over the current run rate for.

Speaker Change: And.

Speaker Change: If we find an opportunity great if not we're very good at organic growth on a de novo basis in Rockford that I mentioned would be an example of that.

We've added several locations in the fourth largest city in Illinois, and there's been some disruption in that market and we're doing quite well so.

Speaker Change: For expense growth and then you would get operating leverage out of that to the extent that loan growth didn't come we have levers that we can pull and we could pull back on the expense growth, but our goal is to watch.

Speaker Change: I think I think time will tell but certainly there is a higher level of enthusiasm.

Speaker Change: But nothing specific to talk about.

Speaker Change: Watch expenses closely but continued to invest in the business to support the growth and we think thats prudent.

Speaker Change: Dave you underground second part of that from a capital perspective.

Speaker Change: And our capital ratios are relatively stable CET, one went up a tangible point, we'd expect that to continue to grow with our mid to high single digit loan growth projections in our earnings levels. So I think we'll just continue.

Speaker Change: As we.

Speaker Change: Have always done in our life is invest in the business and grow and get new customers in that.

Speaker Change: That investment pays dividends.

Speaker Change: To compete with the big guys. So just more Watson watching expenses closely and.

Speaker Change: Grow the capital over time and look for the acquisition opportunities but.

Speaker Change: That characterization I think is the best.

Speaker Change: I think the.

Speaker Change: Thanks, Dave.

Speaker Change: Supporting that growth is the best use of capital right now and we don't have so much excess capital that we would look at a buyback right now.

Speaker Change: Maybe if I could just.

Speaker Change: On M&A and appetite.

Speaker Change: Macintosh.

Speaker Change: Okay.

Speaker Change: See about.

Speaker Change: Just a housekeeping item.

Speaker Change: Interest levels on your end and then and then maybe if you could just touch on the priorities on capital with.

Speaker Change: MTL move lower.

Speaker Change: Oreo.

Speaker Change: Did anything on is that acquired or legacy Youre, just things flowing through on the on the Oreo side.

Speaker Change: M&A is quiet if you don't find those.

Speaker Change: Ships.

Speaker Change: Well with respect to M&A, we are.

Speaker Change: Just things flowing through.

Speaker Change: Obviously field phone calls and post election, there is level of enthusiasm that is perhaps increased.

Speaker Change: In nonperforming, taking possession of the asset getting the asset marketed moving it out and that's just what we do okay.

I would expect that we would continue to be disciplined to Dave's point, we're investing in the business. We're building an infrastructure that can support a larger institution.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: Come from the line of Terry Mcevoy.

Speaker Change: And.

Speaker Change: If we find an opportunity great if not.

Speaker Change: Devens, Inc.

Speaker Change: Line is open Terry.

Speaker Change: We're very good at organic growth on a de novo basis in Rockford that I mentioned would be an example of that.

Speaker Change: Hey, Thanks, good morning, everyone.

Speaker Change: Maybe just starting with the 350 ish margin outlook could you just talk about some of your deposit repricing and beta assumptions in that $3 50, and and also where you see noninterest bearing deposits trending.

Speaker Change: We've added several locations in the fourth largest city in Illinois, and there's been some disruption in that market and we're doing quite well so.

Speaker Change: I think I think time will tell but certainly there is a higher level of enthusiasm.

Speaker Change: Sure.

Speaker Change: But nothing specific to talk about.

Speaker Change: The noninterest or the interest bearing deposit data.

David Dykstra: And Dave you underground second part of that from a capital perspective.

Speaker Change: Round, 67%, 65%, which is very close to what we saw kind of in the other side of the cycle here.

Our capital ratios are relatively stable CET, one went up a 10th of a point, we would expect that to continue to grow with our mid to high single digit loan growth projections in our earnings levels. So I think we'll just continue.

Speaker Change: Incremental interest bearing deposits coming on in kind of the 4% range for Cds, the 3% range for money market.

Speaker Change: Kind of on a blended basis, the deposit growth in the low threes and with incremental asset generation and the kind of high sixes. It continues to support our margin in the $3 50 range. So.

David Dykstra: Grow the capital over time.

David Dykstra: And look for the acquisition opportunities but.

David Dykstra: I think.

David Dykstra: Supporting that growth is the best use of capital right now and we don't have so much excess capital that we would look at a buyback right now.

Speaker Change: Feel very good about the matched loan and deposit growth as we go forward.

Speaker Change: We did see a bump up a little bit in noninterest bearing deposits at the end of the quarter as we sometimes do but to Dave's point earlier pretty consistent for the year in the 21% plus range.

David Dykstra: Okay.

David Dykstra: Just a housekeeping item.

David Dykstra: Nice MTL move lower.

David Dykstra: Oreo.

David Dykstra: Just anything on is that acquired or legacy Youre, just things flowing through on the on the Oreo side.

Speaker Change: And expect that that would continue going forward, we'd like it to continue going forward.

David Dykstra: Just things flowing through.

Speaker Change: Especially the reason.

David Dykstra: Again, nonperforming, taking possession of the asset and getting the asset marketed moving it out and Thats just what we do okay.

Speaker Change: I think thats a good result for us in particular, because we've experienced very material deposit growth. This year. So is the denominator moves to be able to keep that flat is good indication that we're adding commercial relationships and commercial deposits.

Okay. Thank you.

David Dykstra: Thank you.

David Dykstra: Our next question.

Speaker Change: Understood.

David Dykstra: Come from the line.

Speaker Change: And then as a follow up rich I think you've talked about just larger banks committing to loan growth in 2025, and it sounds like more of that is backend loaded but when you look at your mix of businesses core leasing niche niche what what areas have kind of a moat around it where do you think youre better protected from.

David Dykstra: Mcevoy.

David Dykstra: Stephens Inc.

David Dykstra: Your line is open Terry.

David Dykstra: Hey, Thanks, good morning, everyone.

David Dykstra: Maybe just starting with the 350 ish margin outlook could you just talk about some of your deposit repricing and beta assumptions in that $3 15, and also where you see noninterest bearing deposits strengthening.

Speaker Change: From market competition should that occur this year or as this occurs this year.

Sure.

Speaker Change: Yes, no. That's a great question I think that.

David Dykstra: The noninterest or the interest bearing deposit beta.

Speaker Change: The <unk>.

David Dykstra: It's around 67%, 65%, which is very close to what we saw kind of in the other side of the cycle here.

Speaker Change: Certainly I think you'd look at both premium finance businesses as having reasonably sized most I think we are industry leaders, where we are our teams are very seasoned.

David Dykstra: Incremental interest bearing deposits coming on in kind of the 4% range for Cds, the 3% range for money market.

Speaker Change: There is a lot of.

Speaker Change: Interesting pieces floating around in the insurance World. These days.

David Dykstra: Kind of on a blended basis, the deposit growth in the low threes and with incremental asset generation and the kind of high sixes. It continues to support our margin in the $3 50 range. So.

Speaker Change: Having a trusted partner is really an important piece. So I think there's a good sized moat there I think.

Speaker Change: The work that we've done on the leasing side and growing that business out also has a pretty good opportunity for us to grow another interesting areas, we talk about mortgage a lot too.

David Dykstra: Feel very good about the matched loan and deposit growth as we go forward.

We did see a bump up a little bit in noninterest bearing deposits at the end of the quarter as we sometimes do but to Dave's point earlier pretty consistent for the year in the 21% plus range.

Speaker Change: Two areas that I think have been somewhat muted in their growth, but if rates do come down.

Speaker Change: Our mortgage warehouse, we've demonstrated pretty meaningful growth here over the course of the last year.

David Dykstra: And expect that that would continue going forward, we'd like it to continue going forward.

And our resin portfolio has also grown nicely that we.

Speaker Change: We do get a pickup in mortgage volume, we will see some growth there so I.

David Dykstra: Especially.

David Dykstra: Is.

David Dykstra: I think thats a good result for us in particular, because we've experienced very material deposit growth. This year. So is the denominator moves to be able to keep that flat is good indication that we're adding commercial relationships and commercial deposits.

Speaker Change: I think there is real opportunities here.

Speaker Change: But the other the.

Speaker Change: The other one that is kind of interesting and we've talked about it a lot is.

Speaker Change: As our course.

Speaker Change: Ni growth that we've seen over the course of really the last 10 years, but certainly more pronounced in the last couple of years because of some of the marketplace dynamics in our primary market of Chicago, those dynamics really hasnt changed and so we think that that ability to compete in the Chicago market on core C&I still is.

David Dykstra: Understood.

David Dykstra: And then as a follow up rich I think you've talked about just larger banks committing to loan growth in 2025, and it sounds like more of that is backend loaded but when you look at your mix of businesses core leasing niche niche what what areas have kind of a moat around it where do you think youre better protected from.

Speaker Change: Really a great opportunity for us so.

David Dykstra: Market competition should should that occur this year or as this occurs this year.

Speaker Change: I think there are some decent moats and that's why we continue to be pretty optimistic about our guidance on loan growth.

David Dykstra: Yes, no. It's a great question I think that.

David Dykstra: The <unk>.

Speaker Change: Great. Thanks for taking my questions.

David Dykstra: Certainly I think you'd look at both premium finance businesses as having reasonably sized most I think we are industry leaders, where we are our teams are very seasoned.

Speaker Change: You bet. Thanks.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: It comes from the line Nathan race with Piper Sandler. Please go ahead Nathan.

Speaker Change: Hey, guys. Good morning, Thanks for taking the questions.

David Dykstra: There is a lot of.

David Dykstra: Interesting pieces floating around in the insurance World. These days.

Speaker Change: Good morning going back.

Speaker Change: Discussion around the margin outlook.

David Dykstra: Having a trusted partner is really an important piece. So I think there's a good sized moat there I think.

Speaker Change: The fed remains on pause this year or maybe we get one cut.

Speaker Change: In early <unk> I was curious if you think the margin can expand under that outlook just given what you have in terms of additional deposit cost leverage or is some of the repricing headwinds that kind of lagged fed cuts on the insurance premium finance side of things somewhat of a headwind.

David Dykstra: The work that we've done on the leasing side and growing that business out also has a pretty good opportunity for us to grow another interesting areas, we talk about mortgage a lot too.

David Dykstra: Two areas that I think have been somewhat muted in their growth, but if rates do come down.

Speaker Change: A number of other yield curve dynamics that play into that but just curious if you think there is some potential for margin expansion.

David Dykstra: Our mortgage warehouse, we've demonstrated pretty meaningful growth here over the course of the last year.

That is on hold for 2025.

David Dykstra: And our <unk> portfolio has also grown nicely.

Speaker Change: So our kind of baseline assumption assumes one cut in the model.

David Dykstra: We do get a pickup in mortgage volume, we will see some growth there so.

Speaker Change: I think if it were to move on an orderly basis, either way from that margin kind of continues to hold in the $3 50 range.

David Dykstra: I think there is real opportunities here.

David Dykstra: Yes.

David Dykstra: The other one that's kind of interesting and we've talked about it a lot.

Speaker Change: To the degree that there is kind of upside opportunity it'll depend on the competitive environment that we find ourselves in an and sort of the mix of business, but.

Our course C&I growth that we've seen over the course of really the last 10 years, but certainly more pronounced in the last couple of years because of some of the marketplace dynamics in our primary market of Chicago, those dynamics really hasnt changed and so we think that that ability to compete in the Chicago market on core C&I.

Speaker Change: We've positioned for a pretty stable margin and think that we'll get good NII growth as a result of growth of the balance sheet.

Speaker Change: Okay.

David Dykstra: Still is really a great opportunity for us so.

Speaker Change: I'd say the thing that maybe impacts that view a little bit more is not so much what the fed does on the short end because as Tim says pretty neutral to that for the smart moves but.

David Dykstra: I think there are some decent moats and that's why we continue to be pretty optimistic about our guidance on loan growth.

David Dykstra: Great. Thanks for taking my questions.

Speaker Change: The positive slope to the yield curve is helpful to us versus inverted curve in the past so.

David Dykstra: You bet. Thanks.

David Dykstra: Thank you.

David Dykstra: Our next question.

Speaker Change: Comes from the line Nathan race Piper Sandler. Please go ahead it makes sense.

Speaker Change: That offset some of the headwinds that rich studies concerned with with competitive pricing, but we don't have that much that we priced long until.

Nathan: Hey, guys. Good morning, Thanks for taking the questions.

David Dykstra: Good morning going back.

Speaker Change: There is some upside there I think but these headwinds on the mix of business and alike.

David Dykstra: Discussion around the margin outlook.

David Dykstra: Fed remains on pause this year, maybe we get one cut.

Speaker Change: You put it all on the part of Chile, and it comes out being relatively stable we think.

David Dykstra: In early <unk> curious if you think the margin can expand under that outlook just given what you have in terms of <unk>.

Speaker Change: Got it that's helpful and Dave will I have you I think last quarter. We are discussing maybe that the gain on sale margin mortgages can get back to 2%. Obviously there were a number of factors that maybe inhibiting this quarter, but just curious how youre thinking about the gain on sale margin trajectory.

David Dykstra: Deposit cost leverage or is some of the repricing headwinds that kind of lag.

David Dykstra: <unk> finance side of things.

Speaker Change: More of a headwind I know, there's a number of other yield curve dynamics that play into that but just curious if you think there is some potential for margin expansion.

Speaker Change: Trajectory in 2025.

David Dykstra: That is on hold for 2025.

Speaker Change: I still think when we talked about that last quarter. The rates were higher we saw that little bit of a pop in applications and we're optimistic and then sort of the.

Speaker Change: So Nate are kind of baseline assumption assumes one cut in the model.

And all of that.

Speaker Change: I think if it were to move on an orderly basis, either way from that our margin kind of continues to hold in the $3 50 range.

Tim Crane: The curve shot back up and mortgage prices have shot back up and as Tim says in the low sixes.

Tim Crane: <unk> to hit that because we did see a lot of pickup in volume in that short period of time.

Speaker Change: To the degree that there is kind of upside opportunity it'll depend on the competitive environment that we find ourselves in and sort of the mix of business, but.

Tim Crane: But then the market move sort of dramatically back back up so put a little pressure, but you've got to put in perspective, we have about $20 million roughly of mortgage revenue and $10 million of that is pretty steady in servicing. So the remaining 10 is.

Speaker Change: We've positioned for a pretty stable margin and think that we'll get good NII growth as a result of growth of the balance sheet.

Tim Crane: As we said is muted in law.

Speaker Change: Okay.

Speaker Change: I'd say the thing that maybe impacts that view a little bit more is not so much what the fed does on the short end because as Tim says pretty neutral to that for the smart moves but.

Tim Crane: Hopefully that goes up.

Tim Crane: I would expect.

Tim Crane: Unless rates come down we probably stay in an all in $20 million to $30 million of net revenue in mortgage banking and if rates come down when we can it's gravy if rates come down if we see some pickup in mortgage that's just positive to us I think at this point because we think we have the infrastructure to support it but.

Speaker Change: The positive slope to the yield curve is helpful to us versus inverted curve in the past so.

Speaker Change: That offset some of the headwinds that rich studies concerned with with competitive pricing, but we don't have that much that we priced long and so.

Tim Crane: <unk>.

Tim Crane: If the activity picks up I would expect that margin to get closer to 2% again.

Speaker Change: There is some upside there.

Tim Crane: But it's really a fairly small piece of our earnings right now so.

Speaker Change: These headwinds on the mix of business and alike.

Tim Crane: Alright.

Speaker Change: We put it all on our part.

Speaker Change: Helpful. If I could just sneak one more question and I know, we have some time until some of the preferred series reset or they are callable, but would just be curious to get your updated thoughts on.

Speaker Change: Chile and it comes out.

Speaker Change: Relatively stable we think.

Speaker Change: Got it that's helpful and Dave will have I think last quarter. We are discussing maybe that began to our margin and mortgage you can get back to 2%. Obviously there are a number of factors that maybe inhibiting that this quarter, but just curious how youre thinking about the gain on sale margin trajectory.

Speaker Change: Managing capital and just in light of potentially refinancing or redeeming some of those preferred series.

Speaker Change: Yes.

Speaker Change: They come up for repricing in June and given the spreads that are on those with or if you would look today.

Speaker Change: Trajectory in 2025.

Speaker Change: I still think when we talked about that last quarter. The rates were higher we saw that little bit of a pop in applications and we're optimistic and then sort of the.

Speaker Change: We will either replace replace summit with a new instrument that would have a tighter spread on them.

Speaker Change: Or just look to see what the other.

Speaker Change: And all of that.

Speaker Change: The curve sharp backup and mortgage prices shot back up and as Tim says in the low sixes. It was instructive to hit that because we did see a lot of pickup in volume in that short period of time, but.

Speaker Change: Capital alternatives are in the market and we always do what's most favorable.

Speaker Change: To the shareholders and so we'll look at like you said, we have some time and those arent until June.

Speaker Change: But then the market moved sort of dramatically back back up so put a little pressure, but you've got to put in perspective, we had about $20 million roughly of mortgage revenue and $10 million of that is pretty steady in servicing. So the remaining 10 is.

Speaker Change: Yes.

Speaker Change: Five or six months seemed like an eternity in the banking world. These days, so we'll see what happens with rates and what the markets do but.

Speaker Change: I think we like leverage in our capital stack and so if the preferred market is open and favorable with most likely we would just replace them.

Speaker Change: As we said is muted in law.

Speaker Change: Hopefully that goes up.

Yeah.

Speaker Change: Okay. That's very helpful. I appreciate all the color. Thanks, guys. Okay. Thanks Nate.

Speaker Change: I would expect.

Speaker Change: Unless rates come down, we probably say in all in $20 million to $30 million of net revenue in markets banking and if rates come down it's gravy if rates come down.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: It comes from the line of Chris Mcgratty of <unk>. Please go ahead Chris.

Speaker Change: We see some pickup in mortgage that's just positive to us I think at this point because we think we have the infrastructure.

Chris Mcgratty: Hey, good morning, everybody.

Speaker Change: To support it but.

Speaker Change: Hi, Chris.

Speaker Change: Dave maybe for you on just the expense clarity.

Speaker Change: If the activity picks up I would expect that margin to get closer to 2% again.

Dave: The mid single digit.

Speaker Change: You talked about given the.

Speaker Change: But it's really a fairly small piece of our earnings right now so.

Speaker Change: Partial contribution of Mexicali is that a comment of <unk>.

Speaker Change: Right.

Speaker Change: Growth off of Q4's run rate, we should be growing 5% or should I, just simply look at 25 over 24 and 30.

Speaker Change: Is helpful. If I could just sneak one more question.

Speaker Change: No we have some time until some of the preferred series reset or they are callable, but would just be curious to get your updated thoughts on.

5% on revenues grow a little bit better.

Speaker Change: I think I was trying to say in my my.

Speaker Change: Managing capital and just in light of.

Speaker Change: Earlier comments that it's off the current run rate so in the fourth quarter run rate because it's got a full quarter of Mac can tower in there and it also accommodates the.

Speaker Change: Refinancing are redeeming some of those preferred series.

Speaker Change: Yes.

Speaker Change: They come up for repricing in June and given the spreads that are on those with or if you were to look today.

Speaker Change: Decent growth we had during the course of the year so the.

Speaker Change: Mid to high single digit loan growth is also based off of that run rate. So we're looking from this point forward.

Speaker Change: We will either replace replace sentiment with the new instrument that would have.

Speaker Change: Hydrous spread on them.

Speaker Change: Sort of mid single digit expense growth and high single digit loan growth so that would be the view.

Speaker Change: Or just look to see what the other.

Speaker Change: Capital alternatives are in the market, we always do what's most favorable.

Speaker Change: Got it Okay and then.

Speaker Change: To the shareholders and so we'll look at it like you said, we have some time and those arent until June.

Speaker Change: Given.

Speaker Change: Given that is there anything as you are now only six youre only $65 billion is there anything.

Speaker Change: Sure.

Speaker Change: Yes.

Speaker Change: Five or six months seemed like an eternity in the banking world. These days, so we'll see what happens with rates and what the markets.

In terms of the Downpayments you eventually considering going to 100 and that growth rate or is that too far we are not yet quite building spend.

Speaker Change: Markets do but.

Speaker Change: I think we like leverage in our capital stack and so if the preferred market is open and favorable with most likely we would just replace them.

Speaker Change: Well I don't we don't break it out specifically, but we invest very regularly to be a larger institution. So our infrastructure is continually being upgraded to handle a higher level of activity geographic expansion, if that becomes an opportunity available to us. So.

Speaker Change: Okay. That's very helpful. I appreciate all the color. Thanks, guys. Okay. Thanks, Nick.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: Comes from the line of Chris Mcgratty of <unk>. Please go ahead Chris.

Speaker Change: We think we've acquired good talent.

Chris Mcgratty: Hey, good morning, everybody.

Speaker Change: Would put us in good stead to become a larger institution. So theres, probably some built in but we don't break it out kind of discreetly.

Speaker Change: Chris.

Speaker Change: Dave maybe for you on the just to the extent clarity.

Dave Dykstra: Mid single digit.

Speaker Change: You talked about.

Speaker Change: Given the partial contribution of macro towers is that a comment of.

Tim Crane: Okay. Thanks, and then maybe one for rich I want to leave reach out.

Speaker Change: On slide 20, Chris.

Speaker Change: Growth off of Q4's run rate, we should be growing 5% or should I, just simply look at 25 over 24 and 30.

Tim Crane: Okay.

Tim Crane: Starting with slide <unk>.

Tim Crane: Got it everybody involved.

Speaker Change: 5% on revenues grow a little bit better.

Tim Crane: The non accruals in the office book went down was that curing or charge off this morning.

Speaker Change: I think I was trying to say in my mind.

Speaker Change: Earlier comments that it's off the current run rate so in the fourth quarter run rate because it's got a full quarter of Mac and tower in there and it also accommodates the.

Tim Crane: The cadence.

Tim Crane: That particular one was.

Tim Crane: Alone that we were able to exit out of.

Speaker Change: Decent growth we had during the course of the year so.

Tim Crane: Okay. Thank you.

Speaker Change: Mid to high single digit loan growth is also based off of that run rate. So we're booking from this point forward.

Tim Crane: Sure.

Tim Crane: Thank you.

Tim Crane: Our next question.

Speaker Change: Comes from the line of Ben Garlinger of Citi. Your question. Please Ben.

Speaker Change: Sort of.

Speaker Change: Mid single digit expense growth and high single digit loan growth so that would be the view.

Ben Garlinger: Good morning, guys.

Speaker Change: Hello, Ben.

Speaker Change: I know, we've talked through quite a bit with NII and spread and then also a mortgage from previous also there's look at fee income ex mortgage. It seems like you guys are looking to hire bankers aren't relationship footprint.

Speaker Change: Got it Okay and then.

Speaker Change: Given.

Speaker Change: Given that is there anything as you are now only six youre only $65 million is there anything in terms of like a down payment to eventually considering going to 100 and that growth rate or is that too far we are.

Speaker Change: Is there anything you can do from a supplemental or additional hiring perspective that would help drive nodes fee income line items.

Speaker Change: Not yet quite building expenses.

Speaker Change: They are significantly smaller than your core banking.

Well I don't we don't break it out specifically, but.

Just any thoughts there potentially down the road that would be an area for M&A deployment on kind of a supplemental ad.

Speaker Change: We invest very regularly to be a larger institution. So our infrastructure is continually being upgraded to handle.

Speaker Change: Well one we're pleased with the results both on the wealth side and with respect to kind of our treasury management and interest rate risk management products and other kind of fee income areas, but.

Speaker Change: Level of activity geographic expansion, if that becomes an opportunity available to us so.

Speaker Change: We think we've acquired good talent.

Speaker Change: Would put us in good stead to become a larger institution. So theres, probably some built in but we don't break it out kind of discreetly.

Speaker Change: Some of Thats sort of part and parcel to our ability to expand our relationships, both with our retail clients and maybe more than that with our commercial clients.

Speaker Change: Okay. Thanks, and then maybe one for Richard I want to leave reach out.

Speaker Change: We're always looking for opportunities and if we were to find those we certainly wouldn't hesitate to move forward, but they tend to be businesses that exhibit more kind of steady growth and trajectory changing growth. So.

Chris Mcgratty: On slide 20, Chris.

Chris Mcgratty: [laughter] flywheel right.

Chris Mcgratty: Okay.

Chris Mcgratty: Got to get everybody involved.

Chris Mcgratty: The non accruals in the office book went down was that a curing or charge off this morning.

Speaker Change: Nothing on the horizon right now.

Speaker Change: Okay.

Chris Mcgratty: Got you that's helpful. And then from an expense front just to follow up on Chris's question in terms of like the.

Chris Mcgratty: Good.

Chris Mcgratty: That particular one was.

Chris Mcgratty: Alone that we were able to exit out of.

Speaker Change: <unk> annualized.

Speaker Change: Time is roughly 5% is there anything within that outside of just kind of a normal marketing and baseball games and things like that we should look for in terms of seasonality now that you do have the western Michigan franchise or is it kind of just actual legacy kind of seasonality trials.

Chris Mcgratty: Okay. Thank you.

Chris Mcgratty: Sure.

Thank you.

Chris Mcgratty: Our next question.

Chris Mcgratty: Comes from the line of Ben Garlinger of Citi. Your question. Please Ben.

Ben Garlinger: Good morning, guys.

Chris Mcgratty: So a little bit.

Speaker Change: Well as we've talked about on prior calls we will continue to provide resources in west, Michigan and as an example, we would expect to grow that market and to the extent that included people.

Chris Mcgratty: I know, we've talked through quite a bit with NII and spread and then also mortgage where premiums but also just looking at fee income ex mortgage. It seems like you guys are looking to hire bankers aren't relationship footprint.

Speaker Change: Sort of built into the plan so.

Chris Mcgratty: Is there anything you can do from a supplemental or additional hiring our term debt.

Speaker Change: There is there's nothing kind of atypical in the expense run rate, but we're always looking to add talented people and teams and we expect to expand geographically in the markets, where we've started to operate so.

Chris Mcgratty: Im nodes fee income.

Chris Mcgratty: They are smaller than your core banking.

Chris Mcgratty: Just any thoughts there potentially down the road that would be an area for M&A deployment.

Speaker Change: I would just view it as supportive of our growth.

Chris Mcgratty: Couple of mental ad.

Chris Mcgratty: Well one we're pleased with the results both on the wealth side and with respect to kind of our treasury management and interest rate risk management products and other kind of fee income areas, but.

Speaker Change: Gotcha, that's helpful color I appreciate it.

Speaker Change: Thank you.

Speaker Change: Our next question.

Comes from the line of Brendan Nelson.

Speaker Change: Hanmi group your question please Brendan.

Chris Mcgratty: Some of Thats sort of part and parcel to our ability to expand our relationships, both with our retail clients and maybe more than that with our commercial clients.

Brendan Nelson: Hey, good morning, guys hope, you're all doing well thanks for taking the questions.

Speaker Change: You bet.

Speaker Change: If I look at slide 24.

Chris Mcgratty: We're always looking for opportunities and if we were to find those we certainly wouldn't hesitate to.

Speaker Change: The deck.

Speaker Change: <unk> strategy it looks like you added about $1 billion.

Chris Mcgratty: To move forward, but they tend to be businesses that exhibit more kind of steady growth and then trajectory changing growth. So.

Speaker Change: Starting swaps during the quarter and maybe just walk us through the thinking here and what you are trying to accomplish I mean is it as simple as youre, taking that rate cuts have been pushed out. So you wanted to extend that downside protection.

Chris Mcgratty: Nothing on the horizon right now.

Chris Mcgratty: Okay.

Chris Mcgratty: Got you that's helpful and then for me.

Speaker Change: Well as we've talked about before we think plus or minus $6 billion worth of hedges stabilizes our margin in a down rate environment and so the hedges that were added recently many of which were forward starting just sort of fill up the bucket for <unk>.

Speaker Change: Just to follow up on Chris's question in terms of like the.

Chris Mcgratty: <unk> annualized.

Chris Mcgratty: Timing is roughly 5% is there anything within that outside of just kind of a normal marketing at baseball games and things like that we should look for in terms of seasonality now that you do have the western Michigan franchise or is it kind of just back to legacy kind of seasonality trends.

Speaker Change: Six and 27% and just add to our ability to kind of cushion any margin pressure from a downward rate environment.

Chris Mcgratty: Well as we've talked about on prior calls we will continue to provide resources in west, Michigan and as an example, we would expect to grow that market and to the extent that included people.

Speaker Change: Got it okay.

Film of buckets.

The maturity schedule.

Speaker Change: Yes, yes that makes a good deal of sense.

Chris Mcgratty: Built into the plan so.

There is.

Speaker Change: Then maybe turning to.

Chris Mcgratty: There's nothing kind of atypical in the expense run rate, but we're always looking to add talented people and teams and we expect to expand geographically in the markets, where we've started to operate so.

Speaker Change: The premium finance business.

Speaker Change: A few there wondering if you can add some color on what drove the increase in P&C loss content this quarter.

Speaker Change: And then just any color on new money origination yields in that business versus what is rolling off today.

Chris Mcgratty: I would just view it as supportive of our growth.

Speaker Change: Yes.

Speaker Change: Gotcha, that's helpful color I appreciate it.

Speaker Change: Two there were two loans.

Speaker Change: That occurred in the quarter that.

Speaker Change: Thank you.

Ended up being.

Speaker Change: Our next question.

Speaker Change: Comes from the line of Brendan Nelson.

Speaker Change: Somewhat problematic, but yes, we would anticipate that we will recover.

Speaker Change: Of Hanmi group your question please Brendan.

Speaker Change: The first quarter.

Brendan Nelson: Hey, good morning, guys hope, you're all doing well thanks for taking the questions.

Speaker Change: What we have left so we would anticipate that ultimately it's more of a timing issue than anything else.

Speaker Change: You bet.

Speaker Change: If I look at slide 24.

Speaker Change: If it had happened during the quarter you wouldn't have even noticed but it just carried over the quarter. So.

Speaker Change: The deck.

Speaker Change: Hedging strategy.

Speaker Change: You added about $1 billion.

Speaker Change: That's kind of all there is to that.

Speaker Change: Forward, starting swaps during the quarter and maybe just walk us through the thinking here and what Youre trying to accomplish is it as simple as youre, taking that rate cuts have been pushed out. So you wanted to extend that downside protection.

Speaker Change: Other than what we talked about in prior quarters on the transportation side the loss history in the delinquency history have largely been unchanged.

Speaker Change: Just kind of sticks out a little bit.

Speaker Change: Well as we've talked about before we think plus or minus $6 billion worth of hedges.

Speaker Change: Yes, both of those businesses are predictable low loss businesses for us.

Speaker Change: Really like the growth opportunities attached to them.

Speaker Change: Stabilize our margin in a in a down rate environment and so the hedges that were added recently many of which were forward starting just sort of fill up the bucket for 'twenty six 'twenty seven and just add to our ability to kind of cushion any margin pressure from a downward rate.

Speaker Change: Kind of yields on the PNC business are creeping up a little bit.

Speaker Change: <unk> continues to be a hard market, we will see what happens with respect to the <unk>.

Speaker Change: Impacts of these latest natural disasters, but.

Speaker Change: Expect the blended loan yield to be in the high sixes for incremental business in the.

Speaker Change: <unk>.

Speaker Change: Got it got it okay.

Speaker Change: Coming periods here.

Speaker Change: Film of buckets, all anchors on the maturity schedule.

Speaker Change: Alright, thank you.

Speaker Change: The P&C business tends to be a little bit higher than that but the life businesses last P&C, if you're getting a stable environment is probably a little north of the prime rate and life generally is a couple hundred basis points over the one year treasury, so depending on the growth in all of it mixes out but.

Speaker Change: Yes, yes that makes a good deal of sense.

Speaker Change: And then maybe turning to the premium finance business.

Speaker Change: Just a few there wondering if you can add some color on what drove the increase in P&C loss content this quarter.

Speaker Change: And then just any color on new money origination yields in that business versus what is rolling off today.

Speaker Change: You put them together, it's like Tim So as you put it all together, it's probably high <unk> low sevens sort of if you put the commercial and the premium threads together.

Speaker Change: Yes.

Speaker Change: Two there were two loans that occurred in the quarter that.

Speaker Change: Understood. Okay. Thank you for taking the questions.

Speaker Change: Ended up being.

Speaker Change: Somewhat problematic, but yes, we would anticipate that we will recover.

Speaker Change: Thank you.

Speaker Change: Thank you once again to ask a question. Please press star one on your telephone again Thats Star one on your telephone to ask a question.

Speaker Change: The first quarter.

Speaker Change: What we have left so we would anticipate that.

Speaker Change: Ultimately, it's more of a timing issue than anything else.

Speaker Change: Our next question comes from the line of Jared Shaw of Barclays. Your question. Please Jared.

Speaker Change: If it had happened during the quarter you wouldn't have even noticed but it just carried over the quarter. So.

Speaker Change: That's kind of all there is to that.

Jared Shaw: Hey, good morning.

Speaker Change: Other than what we talked about in prior quarters on the transportation side the loss history in the delinquency history have largely been unchanged.

Speaker Change: Good morning.

Speaker Change: I guess, maybe just looking at the at the DDA grew.

Speaker Change: Growth this quarter that was that was that was good how should we be thinking about that sort of growing on a relative basis or an absolute basis. Throughout 2025, do you think that you see that increasing as a percentage of the of the funding base from here now.

Speaker Change: Just kind of sticks out a little bit.

Yes, both of those businesses are predictable low loss businesses for us.

Speaker Change: Really like the growth opportunities attached to them.

Speaker Change: Well number one it's episodic and year end is always a little bit of a volatile period as customers kind of get through their year end process, but we've been pretty steady at 21% ish plus or minus and given that we've grown deposits.

Speaker Change: Kind of yields on the P&C business are creeping up a little bit.

Speaker Change: Continues to be a hard market, we will see what happens with respect to the <unk>.

Speaker Change: Impacts of these latest natural disasters, but.

Speaker Change: Expect the blended loan yield to be in the high sixes for incremental business in the.

Speaker Change: Pretty healthy clip, we feel pretty comfortable we're adding <unk>.

Speaker Change: Coming periods here.

Speaker Change: On an absolute basis quarter over quarter, and we would expect that trend to continue.

Speaker Change: Alright, thank you.

Speaker Change: The P&C business tends to be a little bit higher than that but the life businesses last P&C, if you're getting a stable environment is probably a little north of the prime rate and life generally is a couple hundred basis points over the one year treasury, so depending on the growth in malls it mixes out but.

Speaker Change: Okay, great. Thanks, and then.

Speaker Change: Any color on on commercial line utilization rates during the quarter and where you expect that to sort of go within your guidance do you expect growth in that.

Speaker Change: Yes, it's interesting we are somewhat optimistic during the year.

Speaker Change: We saw utilization rates coming up.

Speaker Change: You put them together and Tim So as you put it altogether, it's probably high <unk> low sevens sort of if you put the commercial and the premium threads together.

Speaker Change: The tail down a little bit during the fourth quarter not exactly sure why that was.

Speaker Change: Yeah.

Speaker Change: I think some of it was originations of new business, where there is a fair amount of unused capacity, but.

Speaker Change: Understood. Okay. Thank you for taking the questions.

Speaker Change: Thank you.

Speaker Change:

Speaker Change: Thank you once again to ask a question. Please press star one on your telephone again Thats Star one on your telephone to ask a question.

Speaker Change: Hard to know, we still would imagine that over the course of this year, particularly if there is some pickup in economic activity that you'd start to see those utilization rates tick up so right now I think thats, a little bit of a tailwind because they are historically low.

Our next question comes from the line of Jared Shaw of Barclays. Your question. Please Jared.

Speaker Change: From what we've seen in the past so.

Jared Shaw: Hey, good morning.

Speaker Change: Fourth quarter was not particularly great utilization quarter, but.

Speaker Change: Good morning.

Speaker Change: I guess, maybe just looking at the at the DDA grew.

Speaker Change: We're not overly concerned by it.

Speaker Change: Growth this quarter that was that was that was good how should we be thinking about that sort of growing on a relative basis or an absolute basis. Throughout 2025, do you think that you see that increasing as a percentage of the of the funding base from here now.

Speaker Change: Okay. Thanks, and then just finally for me maybe more of a modeling.

Speaker Change: Housekeeping question, David you have the accretion from macro tower, that's within the third and fourth quarter NII and then what an estimate would be for 'twenty five.

Speaker Change: Well number one it's episodic and year end is always a little bit of a volatile period as customers kind of get through their year end process, but we've been pretty steady at 21% ish plus or minus and given that we've grown deposits.

Speaker Change: Yes, no we didn't do it I think if you go back and look at last quarter, where you put the table in the presentation I think thats a pretty good indication on how to look at it going forward.

Speaker Change: Great.

Speaker Change: We don't expect any large prepayments in that portfolio to impact and so if you go back to last quarter I think that'd be a good guide.

Speaker Change: Pretty healthy clip, we feel pretty comfortable we're adding <unk>.

Speaker Change: <unk> on an absolute basis quarter over quarter, and we would expect that trend to continue.

Speaker Change: Okay, Alright, great. Thank you very much.

Speaker Change: Okay, great. Thanks, and then.

Speaker Change: Thank you I would now like to turn the conference back to Tim Crane for closing remarks, Sir.

Speaker Change: Any color on on commercial line utilization rates during the quarter and where you expect that to sort of go within your guidance do you expect growth in that.

Speaker Change: Thank you and for those on the call. Thank you for joining US. This morning, we're always excited to share our results until the winter a story.

Speaker Change: Yes, it's interesting we are somewhat optimistic during the year.

Speaker Change: As I mentioned earlier, we're off to a good start in 2025, if you have additional comments or feedback for US. Please don't hesitate to call any of us.

Speaker Change: We saw utilization rates coming up.

Speaker Change: The tail down a little bit during the fourth quarter not exactly sure why that was.

Speaker Change: With that we'll sign off to have a good day.

Speaker Change: I think some of it was originations of new business, where there is a fair amount of unused capacity, but.

Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.

Hard to note, we still would imagine that over the course of this year, particularly if there is some pickup in economic activity. Then you would start to see those utilization rates tick up so right now I think that's a little bit of a tailwind because they are historically low.

Speaker Change: From what we've seen in the past so.

Speaker Change: Fourth quarter was not particularly great utilization quarter, but.

Speaker Change: We're not overly concerned by it.

Speaker Change: Okay. Thanks, and then just finally for me maybe more of a modeling.

Speaker Change: Housekeeping question, David you have the accretion from <unk>, that's within the third and fourth quarter NII and then with an estimate would be for 25%.

Speaker Change: Yes, we do.

Speaker Change: I think if you go back and look at last quarter, where you put the table in the presentation I think thats a pretty good indication on how to look at it going forward.

Speaker Change: Yeah.

Speaker Change: We don't expect any large prepayments in that portfolio are impacted.

Speaker Change: If you go back to last quarter, I think that'd be a good guide.

Okay, Alright, great. Thank you very much.

Speaker Change: Thank you I would now like to turn the conference back to Tim Crane for closing remarks, Sir.

Speaker Change: Thank you and for those on the call. Thank you for joining US. This morning, we're always excited to share our results until the interest story.

Speaker Change: As I mentioned earlier, we're off to a good start in 2025.

Speaker Change: <unk>.

Speaker Change: Additional comments or feedback for us please don't hesitate to call any of us and with that we'll sign off have a good day.

Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].