Q3 2025 Texas Capital Bancshares Inc Earnings Call

Two quick questions and answers at the end if you would like to ask a question. Please press star one on your telephone keypad. Unlike the past the conference over to our host Jocelyn can Coca head of Investor Relations Charles Lynch. Please go ahead.

Good morning, and thank you for joining us for <unk> third quarter 2025 earnings Conference call I'm, Jocelyn Kolka head of Investor Relations.

Before we begin please be aware. This call will include forward looking statements that are based on our current expectations of future results or events forward looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from these statements.

Our forward looking statements are as of the date of this call and we do not assume any obligation to update or revise them. Today's presentation will include certain non-GAAP measures, including but not limited to adjusted operating metrics adjusted earnings per share and return on invested capital.

For a reconciliation of these and other non-GAAP measures to the corresponding GAAP measures. Please refer to our earnings press release and our website statements made on this call should be considered together with the cautionary statements and other information contained in today's earnings release. Our most recent annual report on Form 10-K, and subsequent filings with the SEC.

We will refer to slides during today's presentation, which can be found along with the press release in the Investor Relations section of our website at Texas capital Dot Com.

Our speakers for the call today are Rob Holmes, Chairman, President and CEO, Matt Scurlock CFO at the conclusion of our prepared remarks, our operator will open up the call for Q&A I'll now turn over the call to Rob for his opening remarks.

In September of 'twenty, 'twenty, one we announced a detailed historically ambitious four year plan to transform Texas capital into Texas first full service financial services firm.

Worthy of banking the best clients in our markets.

We said the time that the magnitude and timeline associated with this wholesale rebuilding of the firm was the result of an immense opportunity to create something of unique and durable value.

And that achievement of our vision will be defined by a series of specific and important measures of strategic and financial successes. Despite the many expected and unforeseen challenges we've been steadfast in our strategic objectives transparent with necessary improvements to our business model.

And unwavering in our commitment to deliver a differentiated offering for our clients and result for our shareholders.

Thanks to the resolute work of our team I am incredibly pleased to report third quarter results, which confirmed delivery of the remaining goal described at the beginning of our transformation in September of 2021.

Achievement of a one 3% return on average assets well above the communicated target of one 1%.

These results Mark an important milestone in our financial acknowledgment of the continued intensity in which we deliver distinctive value to our clients through our wholly differentiated and increasingly scalable platform.

When we began this transformation in 2021, we noted specifically the material gaps in our balance sheet and business model that required resolution to facilitate consistently high quality client outcomes.

Septimal risk adjusted returns and ultimately enhance franchise value.

A critical early component of earning the right to bank the best clients in our markets was moving away from the legacy approach of relying on leverage to deliver financial performance and instead building a platform characterized by its resilience to market and rate cycles.

Since that September 2020, one announcement, we've added 247 basis points of tangible common equity the most of any bank in the country with over 20 billion in assets and finished the third quarter with tangible common equity to tangible assets of 10.25% and all.

Hi for the firm.

This exceptionally strong capital position, coupled with liquid assets of 24%.

Continues to allow for consistent and proactive market facing posture as we are now the steeply capable of supporting the diverse and broad needs of our clients in any operating environment.

Prior to our transformation existing operational silos resulted in limited scalability and disjoined market coverage after developing well defined and disciplined organizational routines early in the transformation. The extensive investments made across the franchise to deliver a higher.

Quality operating model is facilitating the intended results.

Our now cohesive platform enabled the entire company to effectively contribute to a third quarter that was the best in the firm's history.

During record revenue of $340 million record pre provision net revenue of $150 million record net income to common of $101 million record earnings per share of $2.18 and record tangible book value per share of $73.

And two sets.

As we also described in 2021 the foundation of our transformation is the deliberate evolution of our Treasury solutions platform.

The firm is no longer overly reliant on disconnected high cost high beta national deposit verticals.

Index deposits now comprise only 6% of average total deposits and are down nearly $10 billion from 2020.

This dramatic rebuilding of our funding base is in large part attributable to our best in class payments offering which enables us to successfully compete for win and serve as the primary operating relationship for the best clients in our markets.

Speaker #1: Line with the remittance of property tax and insurance payments. Our model, the earnings at risk, were relatively flat quarter over quarter, with current and prospective balance sheet positioning continuing to reflect a business model that is intentionally more resilient to changes in market rates.

Speaker #1: Necessary improvements to our business model and unwavering in our commitment to deliver a differentiated offering for our clients and result for our shareholders .

Our firm now provides faster more seamless client onboarding than a major money center banks and ongoing frictionless client journeys that match or exceed theirs with high touch local service and local decisioning.

Speaker #1: Thanks to the work of our team , I am incredibly pleased to report third quarter results which confirm delivery of the remaining goal described at the beginning of our transformation in September of 2021 .

Speaker #1: This is most readily depicted by our 13% increase in year to date net interest income . 12% increase in year to date . Adjusted total revenue , and 31 basis point increase in quarterly net interest margin .

This sustained focus resulted in an industry, leading 91% increase in treasury product fees over the past four years.

Speaker #1: The years . strength of our The strength balance of our balance sheet , sheet breadth of our product breadth , strength of our balance offerings sheet and quality and of our quality of our talent now offerings ensure our clients now never ensure outgrow our the talent never services outgrow the we can now .

Speaker #1: Despite short term rates being approximately 100 basis points lower over the first nine months of this year . We continue to effectively manage duration against this backdrop , it's previously executed swaps that have matured over the last few quarters , or only partially replaced with both additional securities and new forward starting received fixed swaps during the third quarter .

Speaker #1: Achievement of a 1.3% return on average assets . Well above the communicated target of 1.1% . These results mark an important milestone and are a financial acknowledgement of the continued intensity in which we deliver distinctive value to our clients through our wholly differentiated and increasingly scalable platform .

Speaker #1: provide for Ensure our them clients never outgrow . the services Historically , we our provide for them . Our relatively low relatively low client client relevance relevance , our was in relatively part a low result of a narrow levels product of a narrow offering part leading to result of a narrow overdependence on loan product on loan growth to drive growth to reading over earnings .

The strength of our balance sheet breath of our product offerings and quality of our talent now ensure our clients never outgrow the services, we can provide for them.

Historically, a relatively low client rebalances was impart result of a narrow product offering leading to overdependence on loan growth to drive earnings.

Speaker #1: not We now our approach the market own . based on With tailored our clients tailored offerings for each offering on our own . stage of their life Each stage of their life , cycles tailored and offerings double the for number of each client stage of their life facing cycle .

Speaker #1: Approximately $1.5 billion in swaps matured at roughly 2.95% receive rate, while another $250 million matured on October 1st at 3.25%. Based on purchases made earlier in the year through early October, a series of received fixed SOFR swaps have recently become or will soon become active.

We now approach the market based on our clients' needs not our own with tailored offerings for each stage of their life cycles and double the number of client facing professionals, providing advice not just capital.

Speaker #1: When we began this transformation in 2021 , we noted specifically the material gaps in our balance sheet and business model that required resolution to facilitate consistently high quality client outcomes .

Speaker #1: This capital . This cultural and cultural and structural structural shift shift , this is driving cultural is material driving success structural with success , targeted with targeting clients material and success prospects of and all prospects .

Speaker #1: $200 million became active on August 1st at a blended receive rate of 3.94%. $100 million became effective on September 1st at a rate of 3.76%. $200 million became effective on October 1st at a blended rate of 3.58%.

This cultural and structural shift is driving material success with targeted clients and prospects of all sizes.

Speaker #1: Acceptable risk adjusted returns , and ultimately enhanced franchise value . A critical early component of earning the right to bank the best clients in our markets was moving away from the legacy approach of relying on leverage to deliver financial performance and instead building a platform characterized by its resilience to market and rate cycles .

The firm is now a top five Texas based originator of SBA loans, evidenced our commitment and ability to effectively serve small businesses. We now have industry specific coverage aligned with businesses that comprise 100% of addressable Texas economy.

Speaker #1: 100 million becomes effective on November 1st at 3.55% and another 100 million becomes effective December 1st at a rate of 3.32% . We do still anticipate future interest rate , derivative or securities actions over the remainder of the year .

Speaker #1: built We the built the first full service investment first full service bank in the investment state , bank in the first full service , achieving one of the most successful achieving one of the most launches in successful launches history .

Speaker #1: Since that September 2021 announcement , we've added 247 basis points of tangible common equity . The most of any bank in the country , with over 20 billion in assets , and finished the third quarter with tangible common equity to tangible assets of 10.25% .

Speaker #1: As we look to augment potential rates , fall earnings generation at materially better terms than available during our deliberate pause through the mid part of last year .

And we built the first full service investment bank in the state achieving one of the most successful launches in history. This unique and sustainable competitive positioning results in over 90% of the new clients choosing Texas capital for additional products and services alongside traditional bank debt.

Speaker #1: Net interest margin expanded 12 basis points this 2:45 .47 percent , supported by increased loan yields , growth in loans and previously noted improvements in deposit pricing .

Speaker #1: And all time high for the firm . This exceptionally strong capital position , coupled with liquid assets of 24% , continues to allow for consistent and proactive market facing posture as we are now distinctly capable of supporting the diverse and broad needs of our clients in any operating environment .

Signaling, our increasing relevance and supporting the largest organic noninterest income growth rate of any bank in the country with more than $20 billion in assets over the last four years.

Speaker #1: The total allowance for credit loss , including off balance sheet reserves of 333 million , remains near our all time high , which , when excluding the impact of mortgage finance allowance and related loan balances , was flat linked quarter at 1.79% of total lie in the top decile among the peer group ending period reserves is a multiple of Non-accrual loans increased to 3.5 times , benefiting from steady allowance levels and a $17.5 million reduction in previously identified problem credits .

Strong execution across each area. We noted for improvement is supported by a highly disciplined and analytically rigorous capital allocation process focused solely on driving long term shareholder value.

Speaker #1: We long have and term . We continue to have bias continue to bias capital capital . We towards franchise have and continue to accretive bias client capital segments towards franchise by our commercial client loan commercial growth .

Speaker #1: Prior to our transformation , existing operational silos resulted in limited scalability and disjoined market coverage . After developing well-defined and disciplined organizational routines early in the transformation , the extensive investments made across the franchise to deliver a higher quality operating model is facilitating the intended results .

We have and continue to bias capital towards franchise accretive client segments, evidenced by our commercial loan growth when excluding PPP loans and the divesture of the premium finance.

Speaker #1: Positive grade migration trends continue to cross the portfolio , with total criticized loans down 108 million , or 17% , linked quarter and 368 million , or 41% year over year , criticized loans to total .

Speaker #1: since 2020 . Nearly And in 80% . times of And in market times of market dislocation , we dislocation , and in times of market repurchased dislocation , percent of 12% of shares outstanding shares , we at a repurchased weighted average 12% of shares price outstanding of and average price $59 per per share share .

A $5 $3 billion or nearly 80% since 2020 and.

And in times of market dislocation, we repurchased 12% of shares outstanding.

Speaker #1: Finished the quarter at 2.19%, the lowest level since 2022, with watchlist loans also declining to multi-year lows. Despite continued notable portfolio improvements.

Speaker #1: Our now cohesive platform enabled the entire company to effectively contribute to a third quarter . That was the best in the firm's history , featuring record revenue of $340 million , record Pre-provision net revenue of $150 million , record net income to common of $101 million .

At a weighted average price of $59 per share.

Taken together, we accomplished the most successful bank transformation in the last 20 years and are increasingly the first call for the premier clients in each of the markets we serve.

Speaker #1: Intentional market's decisions decisions along the along the journey have journey have been positioned us to deliver attractive additional decisions along the journey have through positioned us to cycle shareholder deliver attractive returns returns , with both through cycle , with higher both quality earnings and higher quality a lower earnings and a cost of lower cost capital .

Speaker #1: We remain focused on proactively assessing the credit impact of a wide range of macroeconomic and portfolio-specific scenarios. Intended is a regular assessment of loans to non-depository financial institutions, which 80% are loans to mortgage credit intermediaries within our well-described and long-held mortgage finance business.

And digital decisions along the journey have positioned us to deliver attractive through cycle shareholder returns with both higher quality earnings and a lower cost of capital as we continue to scale high value businesses through increased cloud adoption improved client journeys and realized operational efficiencies.

Speaker #1: Record earnings per share of $2.18 , and record tangible book value per share of $73.02 . As we also described in 2021 , the foundation of our transformation is the deliberate evolution of our treasury Solutions platform .

Speaker #1: This is in part characterized by its short dwell times , robust monitoring and direct collateral access . The remaining portion , which equates to 8% of our total September 30th loan balances , is comprised of high quality asset managers or finance companies covered within our designated industry verticals , with which we often have direct operating relationships supported by multiple product touchpoints .

Speaker #1: None value . of this would None of this be possible would be without the possible without incredible the none of commitment commitment possible without the , creativity incredible and commitment and professionalism professionalism demonstrated by demonstrated the professionalism .

All timeless objectives, we intend to remain focused on and consistent with creating lasting value.

Speaker #1: The firm is no longer overly reliant on disconnected , high cost , high beta national deposit verticals . Index deposits now comprise only 6% of average total deposits and are down nearly $10 billion from 2020 .

None of this would be possible without the incredible commitment creativity and professionalism demonstrated by the Texas capital employees.

Speaker #1: Heavily structured credit agreements , and utilization of in-house field examiners . When applicable . As of September 30th , 99.7% of these credits were rated in our past category , with only 23 million in special mention .

Your belief in our long term vision of the firm perseverance in the face of at times intense skepticism.

Speaker #1: This dramatic rebuilding of our funding base is, in large part, attributable to our best-in-class payments offering, which enables us to successfully compete for wins and serve as the primary operating relationship for the best clients in our markets.

Speaker #1: Consistent with prior quarters, capital levels remain at or near the top of the industry. Total regulatory capital remains exceptionally strong relative to both the peer group and our internally assessed risk profile.

And continued dedication to driving positive outcomes for our clients.

Is the leading force behind the transformation.

Speaker #1: I look forward to continuing our partnership with each of you. As we move ahead, I want you to know that we will never stop continuing to partner with you.

It is truly remarkable to see the talent on this platform and the culture, we are defining with our actions every day.

Speaker #1: Ct1 finished the quarter at 12.14% , a 69 basis point increase from prior quarter , with strong capital generation again augmented by a reduction in risk weightings associated with enhanced credit structures in the mortgage finance portfolio by quarter end , approximately 54% of the mortgage finance loan portfolio had migrated to the enhanced credit structures , bringing the blended risk rating to 62% .

Speaker #1: Our firm now provides faster , more seamless client onboarding and ongoing Frictionless client client journey and journeys that ongoing match or frictionless client exceed journey theirs that match with high with high touch local touch local service service with and high touch local , local decision , decisioning local service .

I look forward to continuing to partner with each of you as we never stop working to build something special for our clients who deserve nothing less.

Speaker #2: Thanks ,

Speaker #2: Rob , and financial results . good Rob . Good afternoon afternoon . . Third quarter . Total Thanks , Rob . revenue Total revenue increased 35 .

Thank you for your continued interest in and support of our firm I'll turn it over to Matt for details on the financial results.

Speaker #1: and local This sustained decision focus . Sustained focus resulted in an resulted in industry sustained leading 91% 91 industry leading increase increase in Treasury product fees , 91% over increase the past over the product four years fees over the past four .

Speaker #2: increased Total 35.4 million , revenue increased or 12% , relative to Q3 35.4 million . adjusted total Adjusted revenue total revenue year last year .

Speaker #1: Our continued client dialogue suggests that another 10 to 15% of funded mortgage loan balances could migrate into the structure over the next two quarters .

Thanks, Rob and good afternoon.

Third quarter total revenue increased $35 4 million or 12% relative to Q3 adjusted total revenue last year supported by 13% growth in net interest income 6% growth in fee based revenue link.

Speaker #1: Further improving both our credit positioning and return on allocated capital . Turning to our full year 2025 outlook , we're reaffirming our . Earnings platform and ability to drive consistent client engagement across a range of market conditions .

Linked quarter, adjusted total revenue increased 10% or $31 million as continued balance sheet momentum resulted in an $18 $4 million increase in net interest income broad contributions across investment banking into a $12 $6 million improvement in adjusted noninterest revenue.

Speaker #2: adjusted Over non-interest $12.6 million noninterest revenue revenue and adjusted . Total non-interest total non-interest expense increased expense just increased 1.7 million compared to just 1.7 million .

Speaker #1: dependence on loan We now growth , we approach the now market based on approach , our based on our clients needs , client .

Speaker #2: adjusted Increased adjusted non-interest expense in Q2 7 million compared to . As adjusted previously realized , non-interest structural realized structural efficiencies efficiencies continue to enable previously realized structural repositioning of the expense efficiencies base continued to and enable support of defined repositioning of the capability .

Speaker #1: Importantly , our guidance is unchanged despite now including 225 basis point rate cuts over the remainder of the year , one in October and one in December , with the forward curve assuming an extra rate of 3.75% at year end .

Total noninterest expense increased just $1 7 million compared to adjusted noninterest expense in Q2 as previously realized structural efficiencies continue to enable repositioning of the expense base in support of defined capability build.

Speaker #1: Facing professional professionals double the providing number of providing , advice advising not professionals just , not just providing capital advice . Not just .

Speaker #2: Build capabilities . Support of taken together defining together . year over year , adjusted Year over year adjusted Pre-provision net revenue Pre-provision and year over year increased 30% or adjusted Pre-provision net revenue increased 34.9 million , to 9% to 149.8 million , an all time record for the firm 149 million to 148 million .

Speaker #1: Given continued success , effectively matching our expense base with stated Firmwide priorities , we are decreasing our non-interest expense outlook to mid-single digit percent growth from mid to high single percent growth previously communicated .

Speaker #1: Client sizes sizes . and The firm is prospects . The firm is now now a top a five Texas top based five originator firm , is of SBA now a top loans five Texas based originator , evidencing our of commitment SBA and commitment and ability to ability , to effectively serve effectively small and ability small businesses .

Taken together year over year, adjusted pre provision net revenue increased 30% or $34 9 million to $149 8 million, an all time record for the firm.

Speaker #1: This reduction is driven by sustained realization of structural efficiencies , partially offset by continued platform build out , including modest growth and non salaries and benefits related expense associated with putting new capabilities into the market .

Speaker #1: businesses to We now effectively serve . have We now have small , industry specific industry specific coverage aligned with coverage . We now have industry businesses specific coverage that that comprise comprise 100% of the addressable Texas 100% of that economy comprise 100% of the , and addressable we Texas economy .

This quarter's provision expense of $12 million resulted from modest growth in gross Sally Jive $13 7 million of net charge offs and our continued view of the uncertain economic environment, which remains decidedly more conservative than consensus expectations, partially offset by the notable multi quarter improvement and portfolio credit quality.

Speaker #2: The firm's allowance for portfolio credit allowance for loss credit loss . Finished the finished the quarter quarter affirmed at 333 million , or 1.79% of allowance for LCE , credit loss .

Speaker #1: The full year outlook remains 30 to 35 basis points of loan for investment , excluding mortgage finance , which should enable the preservation of industry leading coverage ratios .

Speaker #1: in This achieving one of the most unique and successful launches in sustainable , sustainable competitive positioning competitive . This unique results in and over sustainable over 90% of the new clients 90% of the new choosing clients Texas results in capital for over additional 90% of the new products and clients .

Speaker #1: While effectively supporting our clients growth needs . Taken together , this outlook suggests continued earnings momentum on the back of what was clearly a historic quarter for our firm .

The allowance for credit loss finished the quarter at $333 million or $1, 79% of <unk> when excluding the impact of mortgage finance allowance and related loan balances, which is the highest level relative to criticized loans since 2014.

Speaker #1: Using techniques services and services alongside traditional alongside bank debt traditional bank services . signaling . Our Alongside increasing traditional bank , increasing relevance relevance , and signaling supporting and the increasing largest relevance .

Speaker #1: Operator , we'd now like to open up the call for questions . Thank you .

Speaker #1: The largest organic organic noninterest income noninterest growth income rate of any , organic bank in the non-interest country . income growth rate With more with any than bank of the $20 billion in country in assets .

As Rob noted a record quarterly net income to common of $100 9 million represents a 36% increase compared to adjusted net income to common in Q3 of last year.

Speaker #2: If you would like to ask a question , please press star followed by one on your telephone keypad . If for any reason you would like to remove that question , please press star followed by two again to ask a question .

Speaker #1: assets Over the with more than last $20 billion in assets four years over the , strong execution last strong execution across each across area , we noted each for area , strong execution across is each supported by a highly area by highly disciplined and disciplined , analytically rigorous supported by capital highly allocation disciplined allocation , process analytically rigorous focused solely focus on driving on long driving long term shareholder term value shareholder value solely on driving .

Speaker #2: approach Consistently , disciplined , contributed to multi-year a , 37% increase in 37% quarterly earnings contributed to per share a compared to adjusted earnings per 37% increase in share from a year earnings per share a ago to adjusted .

This continued financial progress coupled with a consistently disciplined multiyear share repurchase approach contributed to a 37% increase in quarterly earnings per share compared to adjusted earnings per share from a year ago.

Speaker #2: Press star one . As a reminder , if you're using a speakerphone , please remember to pick up your handset before asking your question .

Speaker #2: The firm continues to operate from a position of financial earnings per strength , share from continues to operate from a position of with balance financial firm continues to operate sheet from a position metrics of remaining metrics exceptionally remaining exceptionally strong strong .

Speaker #2: We will pause here briefly as questions are registered . First question is from the line of Michael Rose with Raymond James . Your line is now open .

The firm continues to operate from a position of financial strength with balance sheet metrics remain exceptionally strong.

Speaker #2: Any loan growth balances with any period growth balances excluding mortgage finance, growing approximately loan balances excluding $100 million during the mortgage finance quarter.

Speaker #1: loan growth . When Evidence excluding . When including Pfpe loans and loans the and the divestiture dividend of the Premium Finance cheap loan Sub finance and the divestiture of the of premium $5.3 billion , or $5.3 billion nearly of 80% $5.3 billion since 20 .

Speaker #3: Good afternoon everyone . Thanks for taking my questions . Just to start with , if I could pick anything apart in this quarter , it seems like maybe the the loan growth is going through the quarter .

Routines on target client acquisition are delivering risk appropriate and return accretive loan portfolio expansion with any period gross LSI balances, excluding mortgage finance growing approximately $100 million during the quarter and total commitments, excluding mortgage finance up $577 million or eight 2% annualized.

Speaker #3: The period end was a little bit lower on the investment side than the average . Just wanted to see if there was any paydowns , because it does look like the you guys had a pretty nice growth and commitments .

Speaker #1: of $59 . Taken Taken together , together , we we accomplished the most accomplished . Taken together , successful bank successful . We accomplished the transformation most in the last successful last 20 years and year are in our increasingly the first call for the increasingly premier 21st call for the clients in each of the markets we serve increasingly the first call for the premier clients in each of the .

Average commercial loan balances increased 3% or $317 million during the quarter, featuring broad contributions across areas of industry and geographic coverage with ending period balances up approximately $1 billion or 9% year over year.

Speaker #3: I think they were up 11% or so . You know . Q1 . Q so I know you guys don't like to talk about loan growth per se , but it would point to maybe something a little bit better as we think about the fourth quarter , which is love to hear the puts and takes .

Speaker #2: loans were Real estate flat loans were quarter over quarter , flat as expected , including payoffs and real estate paydowns loans were flat of criticized .

Speaker #2: assets Record payoffs and . Despite a paydowns . modest Despite a modest increase in increase real estate in real clients , estate new business clients , volume .

As expected real estate loans were flat quarter over quarter, including payoffs and pay downs of criticized assets.

Speaker #3: And you know , any sort of forward outlook you might have . Thanks .

Speaker #1: of capital , As we continue quality earnings in to a lower scale , cost of high value capital value . As we businesses continue through to scale increased client high value adoption options , improved client through increased client journeys adoption and and realized realize client operational generational efficiencies efficiency and .

Despite a modest increase in real estate clients, new business volume, our expectation remains that payoffs will outpace originations over the duration of the year, resulting in lower fourth quarter ending balances.

Speaker #2: increased As 3% , anticipated , average linked mortgage 4:45 point loans increased 5 billion as seasonal 3% homebuying activity hits linked quarter to its five hits its annual high annual high during the homebuying third quarter , activity hits its with ending annual high period balances balances of 6.1 billion , of 6.1 billion reflecting initial pull period , through from the late quarter .

Speaker #4: Yeah . You bet . Michael , you broke up a little bit . So if you have follow on feel free to go ahead and ask .

Speaker #4: I think at this point our track record suggests we are uniquely differentiated in our ability to effectively access the right type of capital for our clients.

Speaker #1: realized All operational timeless efficiency objectives . We intend to remain objectives , we intend to remain focused on timeless . and Objectives . We consistent with intend to remain focused creating lasting on lasting value value , consistent with creating lasting .

As anticipated average mortgage finance loans increased 3% linked quarter to $5 5 billion of seasonal homebuyer activity hits its annual high during the third quarter.

Speaker #2: Reduction in 4.1 billion , mortgage reflecting initial pull rates . through We from the late quarter continue to . Reduction in expect mortgage full year rates , full average year average balances to increase balances continue to expect approximately 10% , which average is balances to predicated increased on a $1.9 trillion origination approximately market $1.9 trillion on .

Speaker #4: And our focus is squarely on providing the right solution for them , not on where it ultimately shows up in our financials . So with that backdrop , we were highly active this quarter in terms of capital distribution with really strong client acquisition trends across the entirety of the platform .

With any period balances of $6 1 billion, reflecting initial pull through from the late quarter reduction in mortgage rates.

Speaker #2: As noted on previous a $1.9 trillion noted on calls , previous calls sustained success , . Sustained success winning high winning quality deposit previous relationships calls , sustained success , continues to winning high allow for the quality select reduction of production higher cost continues to deposits allow the select where we are unable to reduction of earn an unable to adequate earn an return adequate on the return on aggregate the aggregate , able to relationship earn an adequate .

We continue to expect full year average balances to increase approximately 10%, which is predicated on a 1.9 trillion origination market.

Speaker #1: The Texas Capital Texas employees demonstrated by the Texas . Your capital . Your belief in the beliefs long term in the long vision term of the vision , firm your belief , , perseverance and in the long term vision face of , at of the faith of times intense perseverance and the face of skepticism skepticism at and times .

As noted on previous calls sustained success, winning high quality deposit relationships continues to allow for the select reduction of higher cost deposits, where we are unable to earn an adequate return on the aggregate relationship.

Speaker #4: So as you noted , for those clients that are best served in the bank markets , we continue to be an industry leader .

Speaker #2: These return trends are on the evidenced in part actions are evidenced by our in part by our sustained sustained ability to decisions are effectively evidenced in part grow by our client interest sustained bearing ability to deposits , positively which , when grow excluding client , multi-year including multi-year contraction and index deposits , contraction index when excluding are multi-year up contract index 3.3 billion , or are 22% year over up year , 23% while also effectively managing , 3 billion or 22 , effectively deposit managing betas , which deposit betas while also are 70% cycle to effectively managing date .

Speaker #1: And continued continued dedication to dedication driving positive to driving outcomes for our positive . Continue clients dedication to driving , is positive the leading outcomes for our force behind the clients .

Speaker #1: Behind the transformation transformation . The leading . It is force truly behind the truly remarkable to see remarkable to see the the talent on this talent truly platform remarkable and the culture to see the we are talent on defining with this our platform with our actions every actions day every day , we are .

These trends are evidenced in part by our sustained ability to effectively grow client interest bearing deposits, which when excluding multi year contraction index deposits are up $3 3 billion or 22% year over year, while also effectively managing deposit betas, which are 70% cycle to date accounting for the late September rate cut.

Speaker #1: Never stop working to each of build you to something build special for our as we never stop clients working to who deserve build nothing , to deserve less nothing .

Speaker #1: Clients . Thank who you for your deserve continued nothing . Your interest continued in interest and in . Thank support you for of your our continued firm .

Speaker #1: interest in I'll turn it over to and support . Turn it Matt for over to Matt details on for the details on the financial .

This impact is also observed in the structural reduction in the ratio of average mortgage finance deposits to average mortgage finance loans, which we made at 90% this quarter down significantly from 116% in Q3 of last year. The result of which continues to positively affect margin, while also improving liquidity value.

Speaker #1: Turn it over to Results Matt for details on the.

Speaker #2: The result of which from 116% continues to result in which.

Speaker #2: Q3 , . supported Adjusted total by revenue 13% growth in net growth and interest net interest income and 6% growth income in fee 13% .

Speaker #2: Growth in net-based revenue interest income leaned in this quarter with 6% growth adjusted over the total quarter. Adjusted total revenue increased by 10%, marking an increase over ten quarters.

We expect this ratio to decline to roughly 85% during the fourth quarter as loan volumes come off their seasonal peak and deposit balances predictably decline, but the remittance of property tax and insurance payments.

Speaker #2: Adjusted total or revenue 31 million , as increased continued balance sheet ten . momentum Continued resulted in 31 million in continued balance sheet an momentum $18.4 million increase in net interest .

Speaker #2: Increase in net income interest income , $4 million in . Broad contributions across contributions across investment investment banking banking , broad drove a contributions across $12.6 million improvement and investment banking .

Our model the earnings at risk were relatively flat quarter over quarter with current and prospective balance sheet positioning continuing to reflect a business model that is intentionally more resilient to changes in market rates.

This is most readily depicted by a 13% increase in year to date net interest income 12% increase in year to date adjusted total revenue and 31 basis point increase in quarterly net interest margin. Despite short term rates being approximately 100 basis points lower one of the first nine months of this year, we continue to effectively manage duration against this backdrop has previously executed swaps at a.

Speaker #2: Firm an all time record . This for the quarter's provision provision expense of 12 million resulted expense of from modest growth 12 million resulted provision in gross LCE , expensive , 12 million resulted from modest growth , 13.7 million of net charge 7 million net charge offs , and our offs , continued view of the uncertain 13.7 million of net charge offs , economic certain economic environment , which continued view of the remains uncertain decidedly more economic environment conservative than consensus remains decidedly more expectations conservative than , partially offset by consensus , the notable offset by the notable multi multi-quarter improvement in , partially portfolio offset by credit the notable quality multi-quarter improvement in .

A matured over the last few quarters were only partially replaced with both additional securities and new forward starting receive fixed swaps during the third quarter approximately $1 5 billion in swaps matured at roughly two point, 95% receive rate.

While another 250 matured on October one at $3 two 5%.

Based on purchases made earlier in the year through early October a series of receive fixed so for swaps have recently or will become active 200 million became active on August 1st at a blended receive rate of 394% a 100 million became effective September one at a rate of 376%.

Speaker #2: Finished the when excluding the quarter impact of three seven mortgage finance allowance and related 9,000,001.79% of loan LCE . Excluding the impact of balances , mortgage which is Finance the allowance , which is the highest level highest relative to level relative to criticized criticize the highest loans .

Speaker #2: level relative to Since criticized loans . 2014 . As Rob Since 20 . noted , our record As Rob noted , our quarterly record net income quarterly net income to to common of 100.9 million 100.9 million , net represents income to a common 36% increase compared 100.9 million represents , to adjusted net compared to income to common adjusted net income to in common Q3 of last Q3 to year .

200 million became effective October 1st at a blended rate of 3.58% a 100 million becomes effective on November 1st at 355% and another $100 million becomes effective December one at a receive rate of 3.32%.

Speaker #2: adjusted income to This continued common financial progress , continued to coupled with progress , a coupled with a consistently continued disciplined financial multiyear progress share repurchase .

We do still anticipate future interest rate derivative or securities actions over the remainder of the year as we look to augment potential rates fall earnings generation at materially better terms and available during a deliberate pause through the mid part of last year.

Speaker #2: Balance sheet metrics . Focused remaining remains on target client acquisition are delivering risk appropriate and return on accretive target client loan acquisition are delivering portfolio on target client acquisition , expansion delivering risk appropriate and return with accretive .

Net interest margin expanded 12 basis points this quarter to 347% supported by increase loan yields growth in loans and previously noted improvements in deposit pricing.

Speaker #2: growing In total commitments , excluding mortgage approximately 100 million , excluding finance , mortgage finance in total commitments , up 577 million , excluding mortgage or finance , 8.2% annualized average 877 million or 8.2% .

The total allowance for credit loss, including off balance sheet reserves of $333 million remains near our all time high which when excluding the impact of mortgage finance allowance and related loan balances was flat linked quarter at 1.79% of total HIV and a top decile among the peer group.

Speaker #2: Average commercial loan commercial loan balances balances increased 3% , increased 3% . or Commercial loan 317 million , during the balances quarter , featuring broad 17,000,000% , contributions across or 370 broad areas of industry and geographic coverage , contributions with across ending areas .

Speaker #2: Broad period contributions across areas balances up of industry and balances of approximately approximately 1 billion 1 billion , or period . Balances of 9% year over year approximately 1 billion , or as 9% year over expected , real estate year .

Ending period reserved as a multiple of nonaccrual loans increased to three five times benefiting from steady allowance levels in a $17 $5 million reduction in previously identified problem credits.

Speaker #2: despite a Our modest increase in expectation real estate , remains that maintenance payoffs will volumes outpace will outpace originations over the remains . duration of The the payoffs will year , outpace resulting in originations lower in the fourth quarter fourth quarter , ending balances ending balance as in lower anticipated , average fourth quarter anticipated mortgage average mortgage finance loans loans .

Positive grade migration trends continued across the portfolio with total criticized loans down $108 million or 17% linked quarter and $368 million or 41% year over year.

Criticized loans the total NHI finished the quarter at 2.19% the lowest level since 2022 with.

With watch list loans also declining to multi year lows.

Despite continued notable portfolio improvements we remain focused on proactively assessing the credit impact of a wide range of macroeconomic and portfolio specific scenarios.

Internet is regular assessment of loans to non depository financial institutions, which 80% are loans to mortgage credit and intermediaries within are well described in long held mortgage finance business. There is in part characterized by short dwell times robust monitoring and direct collateral access.

The remaining portion, which equates to 8% of our total September 30th loan balances is comprised of high quality asset managers or finance companies covered within our designated industry verticals with which we often have direct operating relationships supported by multiple product touch points heavily structured credit agreements and utilization of in house field examiners when applicable.

Speaker #2: deposit betas Accounting for the late September rate cut 70% September rate cut accounting . This impact for the is also latest impact is observed in the also observed in structural the reduction in the structural impact ratio of is also average mortgage finance observed on the deposits to structural reduction average in the mortgage ratio of finance average loans , mortgage finance which deposits , remained at 90% this to quarter , down 90% this quarter , down significantly from 90% this quarter , down 116% in Q3 of last significantly year .

As of September 30th 99.7%. These credits were rented in our past category with only $23 million in special mentioned.

Consistent with prior quarters capital levels remain at or near the top of the industry total regulatory capital remains exceptionally strong relative to both the peer group and our internally assessed risk profile CET. One finished the quarter at $12 one 4% at 69 basis point increase from prior quarter with strong capital generation again augmented by a reduction in risk weight.

<unk> associate with enhanced credit structures in the mortgage finance portfolio by.

By quarter end, approximately 54% of the mortgage finance loan portfolio had migrated to the enhanced credit structures, bringing the blended risk weighting to 62%.

Our continued client dialogues suggest another 10% to 15% of funded mortgage loan balances could migrate into the structure over the next two quarters further improving both our credit positioning and return on allocated capital.

Turning to our full year 2025 outlook.

We are reaffirming our revenue guidance of low double digit percent growth, reflecting confidence in the durability of our diversified earnings platform and ability to drive consistent client engagement across a range of market conditions.

Importantly, our guidance is unchanged, despite now, including 225 basis point rate cuts over the remainder of the year one in October and one in December with the forward curve, assuming an exit rate of 375% at year end.

Given continued success effectively matching our expense base with state of firm wide priorities, we are decreasing our noninterest expense outlook to mid single digit percent growth from mid to high single percent growth previously communicated.

This reduction is driven by sustained realization of structural efficiencies, partially offset by continued platform build out including modest growth in non salaries and benefits related expense associated with putting new capabilities into the market.

The full year provision outlook remains 30% to 35 basis points of loan held for investment excluding mortgage finance, which should enable the preservation of industry, leading coverage ratios, while effectively supporting our clients' growth needs.

Taken together. This outlook suggests continued earnings momentum on the back of what was clearly a historic quarter for our firm.

Operator, we'd now like to open up the call for questions. Thank you.

If you would like to ask a question. Please press star followed by one on your telephone keypad. If for any reason you elect to remove their question. Please press star followed by two again to ask a question Press Star one as a reminder, if you are using a speakerphone. Please limit to pick up your handset before asking your question. We will talk to you briefly as questions are registered.

First question is from the line of Michael Rose with Raymond James Your line is now open.

Hey, good afternoon, everyone and thanks for taking my questions.

Just wanted to start with if I can take anything in this quarter. It seems like maybe the the loan growth.

<unk>.

<unk> was a little bit lower on the health for investment side then.

Just wondering if there are any pay downs because it doesn't look like the <unk>.

Guys had pretty nice.

Growth in commitments I think they were up.

11% or so.

Q on Q so.

I know you guys don't like to talk about loan growth per se.

Maybe a little bit better as we think about the fourth quarters.

Here kind of the puts and takes.

Any sort of forward outlook you might have thanks.

Yes, you bet, Michael you broke up a little bit. So if you have follow on feel free to go ahead and ask.

At this point our track record suggests we are uniquely differentiated in our ability to effectively access the right type of capital for our clients.

Focus is squarely on providing the right solution for them not on where it ultimately shows up in our financials.

So with that backdrop, we were highly active this quarter in terms of capital distribution with really strong client acquisition trends across the entirety of the platform.

So as you noted for those clients that are best served in the bank markets. We continue to be an industry leader C&I commitments this quarter increased by $576 million or 11% annualized up 12, 6% to $4 billion year over year. According to Middle market League tables in Q3, we arranged access to more syndicated bank debt.

One of the country other than Jpmorgan.

So we noted in our prepared remarks that full year client growth continues to be broad based across corporate and middle market and business banking, particularly the last four years trying to ensure we have a platform and solution set that's tailored for each stage of our clients' lifecycle.

For clients use capital needs of our best in that outside of the bank markets. We delivered a highly successful capital markets transactions and high yield.

On the private credit this quarter, which importantly, an increased volume of repeat clients, which supports a more granular repeatable and we certainly think higher quality fee base.

And then finally after clearing the first trade on the last day of the last quarter.

Equity capital markets business participate a series of Ipos this quarter, which provides yet another capability for clients looking to access capital.

As we think about our ability to support clients. When you combine record high capital levels for the firm, which in most cases and it is industry, leading and that improved capabilities across the firm that should drive really strong revenue growth in terms of the related with finding capital for our clients, whether our balance sheets, but not spot for it or not.

<unk>.

I really appreciate the color that's really helpful. Matt maybe just as my follow up.

Do you think about that investment banking and trading line item, obviously really good results I know you guys have kind of talked about the 50.

$50 million a quarter run rate at some point can you just update maybe some expectations. There and then would you expect any near term headwinds maybe from the government shutdown.

Maybe you guys.

Or things like that.

Yeah, I can't I'll talk about the fee outlook Michael.

Michael on the Rockwood talked about the investment banking business in general. So obviously the Q3 fees were on the high end of the guide.

From the fourth consecutive quarter for us in TFS reporting a year over year growth in excess of 20%. We did have a record investment banking quarter that despite some meaningfully sized transactions. It was really characterized by the volume of client interactions the breadth of the capabilities that they chose to utilize and then as I mentioned to incur.

<unk> granularity repeatability of those fees.

We're narrowing the full year fee income guide to $230 million to $235 million with expectations for fourth quarter noninterest income of about 60 to 65 on the back of 35% to 40 again in the investment banking business.

I don't really have anything to add Matt other than it is.

A much healthier earning.

Earnings.

Right.

In the investment bank as Matt mentioned, it's much broader in terms of product and clients.

Much more granular.

And it's much more repeatable and now the whole platform is working in unison debt equity M&A sales trading.

Rates FX all of it.

Most clients use more than one of those products at a time. So we're really really encouraged about the business really happy with the team we have on the platform and I think they've proved it to be.

Highly valuable.

Accretive practice.

I don't know if it didn't novo investment bank.

<unk> grown as fast as we have become profitable as quickly as we did.

Across the entirety of the platforms.

From sales and trading.

The 300 billion of notional trades to date and they have crossed it today as a matter of fact, we'll see so.

Cni commitment to this quarter, increased by 576 million or 11% annualized up, 12.6% 2.4 billion dollars year-over-year.

We're like five of the quality of earnings.

Thanks, Rob all the color guys ill step back.

According to Middle Market League tables and Q3 rearranged access to more syndicated Bank debt than anyone in the country other than JP Morgan.

Thank you for your question next question is from the line of Woody lay with <unk>. Your line is now open.

Hey, Thanks for taking my question wanted to start on NII I appreciate the comment about how despite a 125 basis point reduction in short term rate you were able to increase NII, 13% year to date.

So we noted in the prepared remarks that full year client growth continues to be broad-based across corporate, Middle Market, and business banking specifically the last 4 years trying to assure, we have a platform and solution set. That's tailored for each stage of our our client's life cycle.

The September cut and kind of expected additional cuts from here how do you think about your ability to continue to grow NII.

For for clients whose capital needs were best met outside of the bank markets. We delivered highly successful debt Capital markets transactions and high yield Term Loan B and private Credit Credit. This quarter with importantly, an increased volume of repeat clients, which supports a more granular repeatable. And and we certainly think higher quality based,

Backdrop.

Yeah.

Yeah. The other stats that we quoted related to that year to date performance, what do you where revenue and PPE and are up 12% and 35% respectively with the 100 basis point reduction in short term rates.

and then finally, after clearing the, the first trade on the last day of the last quarter,

Equity capital markets business participated in a series of IPOs this quarter, which provides yet another capability for clients looking to access capital.

I think for us that experience suggests it's really less about the absolute level of rates and it's more about the timing.

As you know it does take us a quarter or two for the balance sheet fully reprice. After a series of cuts with implied forwards and therefore, our guidance, suggesting that's going to occur again in October and December so against that backdrop, we think about <unk> net interest income is $2 55 to $2 60 with net interest margin around three 3%.

So, as we think about our ability to support clients, when you combine record, high Capital levels for the firm which in most cases and it is industry-leading, and then improved capabilities across the firm, that should drive really strong Revenue growth, uh, in terms of related with finding capital for our clients, whether our balance sheets the best spot for it or not.

As you know our variable alone portfolio well absorbed those changes in rates before we can effectively repriced deposits.

We continue really pleased that the ability to increasingly compete in the spot and deposit space based on the value that we add not just price. So we noted in the prepared remarks that cycle to date beta at 70% included those September cuts, which after repricing the deposit base over the last few weeks should at current level.

I really appreciate the caller. That is really helpful. Matt. Um, maybe just as my follow-up. Um, just as we as we do. Think about that investment banking trading line item, obviously really good results. I know you guys have have kind of talked about, you know, 15 million and a quarter run rate at some point, can you just update, you know, maybe some expectations there and then would you expect any near-term headwinds, maybe from the the government shutdown? Um, as maybe or things like that? Thanks.

It was back to about that 80% interest bearing deposit beta that we experienced through Q2.

Yeah, I'll I'll I'll talk about the CL. Look, Michael on this rapid would talk about the the business investment making business in general.

Also consistent with previous quarters, the guide contemplates only 60% interest bearing deposit beta across the next two cuts.

So obviously the the Q3 fees were on the high end of the guide.

Which reflects at least our expectation for increased liquidity costs as folks look more aggressively extend credit and then sustained composition of our commercial noninterest bearing average question on our screen at about 13% of total deposits.

I would just add that we were before highly commoditized as a bank and now.

Quarter that, despite some meaningfully sized transactions, was really characterized by the volume of client interactions, the breadth of the capabilities that they chose to utilize, and then, as I mentioned, the increased granularity and repeatability of those fees.

People banked with us for a lot more reasons than price of liabilities for capital, which allows us to demand more.

when they're in the full year, the income guide to 230 to 235 million

It's a direct reflection of the quality of product service and advice, we deliver to our clients.

With expectations for fourth quarter non-interest income of 60, to 65 on the back of 35 to 40 again in the investment banking business.

Yeah.

Got it.

Helpful color and NEC.

I don't really have anything to add, Matt, other than it is, um, a much healthier, uh, earnings, uh, it.

I wanted to move to credit.

You know dating back to 2021, it's been a remarkable transformation, it's easy for us to see from a earnings standpoint, a capital standpoint, because we can see the numbers but.

But I know that there is.

Been a credit transformation as well and it seems like sometimes the market.

Unfairly punished punished a view based on you.

Yeah.

Some of the legacy that pre date.

You also leadership sidewall digits here about the credit transformation dating back to 2021.

Thanks.

And then you take the specifics look I think this quarter criticized loans down $368 million or 41% that Matt discussed.

In the Investment Bank, as Matt mentioned, it's much broader in terms of product and clients as much more granular, uh, and it's much more repeatable. And now, the whole platform is working in unison that Equity m&a sales trading, um, uh, rates FX, you know, all of it. And, you know, most clients use more than 1 of those, uh, products at a time. So we're really, really encouraged about the business. Really happy with the team we have on the platform, and I think they've proved it to be a, um, highly valuable, uh, client of creative practice. I mean, I, I don't know of a denovo, Investment Bank.

Is is on par with strategy right were really really aggressive when it comes to.

Client solutions, and we're very very conservative as it relates to risk, whether it's credit risk operating risk market risk whatever risk you want to contemplate we think client selection as the number one mitigate and I think that clients electric or banking clients. They do the right things, even though there was a problem.

That's, uh, grown as fast as we have become profitable as quickly as we did, um, across the entirety of the platform. Uh, so, uh, from sales and trading doing close to 300 billion of notional trades today. It may have crossed it today. As a matter of fact, we'll see. So, um, we're we're really excited about the quality of earnings.

Thanks, Rob and guys. I'll sit back.

Most of the time.

More often than not.

Thank you for your question. The next question is from the line of Woody Lay with KBW. Who has an open...

Adverse client selection not having those problems and that's I think that really manifest itself here recently with a lot of banks being caught without collateral or without the proper underwriting and diligence by their teams.

Yeah.

As you know that did not happen here, so I'm really pleased with the intensity.

The risk platform.

How they proactively manage the loan book, but also our bankers our bankers are very focused on client selection as it relates to risk.

Hey, thanks for taking my questions. Wanted to start on knee. I appreciate the comment about how you know, despite 125 basis, point reduction in short-term rates, you were able to increase knee 13% year to date. Um, so yeah, in light of the September cut and and kind of the expected additional cuts from here. How do you think about your ability to continue to grow nii, um, with that backdrop?

As much as they are on treasury or other parts of the platform. So I.

I think it's foundational to what we built and it goes along with being well capitalized.

Yeah, the other stats that we quoted related to that year's performance. Revenues and PPP&R were up 12% and 35%, respectively, with a 100 basis point reduction in short-term rates.

Yes, the only thing I would add that what is it that the metrics that ticketing portfolio health.

So, I think for us, that experience suggests it's really less about the absolute level of rates, and it's more about the timing.

<unk> today are certainly as strong as they've been since we started the transformation, but in a lot of cases as strong as they've been in over a decade.

As you know, it does take us a quarter to for the balance sheet to fully repriced.

After a series of cuts.

Rob generally demands constant monitoring.

And multiple portfolio or scenario specific stresses every quarter.

Today really see no systemic or industry specific themes in the credit book most of whats remaining in criticized as idiosyncratic in nature.

With implied fors and therefore our guidance suggesting that's going to occur again in October and December. So against that backdrop, we think about 4 q net interest income is 255 to 260 with net interest, margin around 3.3%. As you know, our variable loan portfolio, will absorb those changes in rates before we can effectively price the deposits.

Alright, well.

Thanks for all the color and I'll hop back in queue.

We we continue really pleased with the ability to increase in the despot and deposit space based on the value that we add and not just price.

Thanks Marty.

Thank you for your question next question is from the line of Matt Olney with Stephens. Your line is now open.

So we know that in the prepared remarks that cycle, the day data of 70% included those September cuts.

Yeah.

Hi, Thanks for taking the question guys.

First off great to see all the green check marks on slide four great execution.

which, after repricing the deposit base over the last few weeks, should get current levels back to about that 80% interest rate deposit data that we experienced through Q2.

As far as capital I think the presentation notes that the risk weighted assets at the bank.

also consists of a previous quarters, the guide contemplates, only 60% interest bearing deposit but the next 2 cuts

Now in the top quintile of the peer group in that TCE ratio in the top quartile I think from our side, we're trying to weigh this capital could be a deployment opportunity next few years for you.

which reflects at least our expectation for increased liquidity costs as folks looked at more aggressively extend credit and then sustain composition of commercial non-interest bearing average commercial on inspiring at about 13% of total deposits.

Or do you feel like having this excess capital gives you a competitive advantage as you add new customers, which could suggest you want to continue to maintain these capital ratios.

Close to current levels.

Thanks Pat.

I appreciate the question I think it's more than fair if I repeat myself from previous calls forgive me, but as you know we have a very disciplined capital menu that we follow.

I would just add that we were before highly commoditized as a bank and now uh people bank with us for a lot more reasons than price of liabilities or Capital which allows us to demand more. Um, and I think it's a direct reflection the quality of product service and advice that we deliver to our clients.

Literally every day and the first is in fast organic growth with new clients and there is an abundance of demand and the new organic growth with new and deepening clients.

And vendors are investing in the platform products and services.

I would argue we felt the most broad.

Relevant product platform in banking in the last 10 years with all of our capabilities done a pretty good job with that getting a return.

Then you move on to the.

Conventional capital menu, but I look at bond repositioning and loan portfolio acquisition that we did in the third quarter of last year.

So, I’d love to just hear about the credit transformation, dating back to 2021.

And then we moved to distribution policy, we're not going to do a dividend, but we bought back 12% of the company.

At an average price of $59 per share below book value are all below book value and then.

Then you get to M&A, which is.

We sold the company for three Napoli in dollars, which really was the foundational components and they just turnaround possible.

So I think and by the way we did that before other banks tried and failed. So I think we've probably being really good stewards of capital.

Including the the expense capital, we took out $270 million of Nia and put that back plus more and rebuilding.

The platform Thats, achieving these rich.

Returns so the last thing on that capital menu would be whole bank M&A.

Uh, thanks kind of check it, then you take the specifics look, I think this quarter criticized loans down 368 million or 41%. Then Matt discussed, um, is is on par with strategy, right? We're really, really aggressive when it comes to, uh, client solutioning. And we're very, very conservative as it relates to risk, whether it's credit risk, operating risk, uh, Market risk, whatever risk you want to contemplate. We think client selection is the number 1 mitigant and I think that client select you, if you're banking the right clients, they do the right thing, even when there's a problem. Uh, and most of the time, uh, you know, more often than not versus address client selection, you're not having those problems. And that's, I think that really manifests itself to your recently, uh, with a lot of banks being, uh, caught without collateral or uh, without the proper underwriting and diligence by their teams and uh, would that as you know, that did not happen here.

And until you get to profitability that was read on the menu. We look at it we study it we focus on it we're ready for it but it was read on the capital maybe you know maybe it's yellow.

We have the earnings, but we need the currency, we're super focused on tangible book value per share that's paramount to us that's gone up 40% since the beginning of the transformation I think the average bank 30, or 31%. So while doing a transformation, we outperformed and I was just hoping to get the benefit of the doubt the weekend all.

So I'm really pleased with the intensity of of the risk platform. Uh, how they proactively manage the loan book, but also, our Bankers. Our Bankers are very focused on client selection, as it relates to risk, uh, just as much as they are on Treasury or other parts of the platform. So, um, I think it's foundational to what we built and it goes a long way.

With being well, capitalized.

Yeah. The only the only thing I would add on that Woody. Is that the the metrics depicting portfolio health?

For them going forward, and we'll be good stewards and be highly sensitive to red yellow and painted.

Coverage today is certainly as strong as it has been since we started the transformation, and in a lot of cases, as strong as it has been in over a decade.

Tangible book value.

Yeah.

Okay, Matt to the commentary, but yeah, but Matt let me add let me add one quick thing because you mentioned it it is absolutely.

Benefit go to market with clients you cannot deny it I have the CEO of one of the fastest growing.

So Rob generally demands constant monitoring uh and multiple portfolio or scenario specific stresses every quarter and we today. Really see? No systemic or industry specific themes in the credit book, most of what's remaining and criticized is is idiosyncratic in nature.

Property that specific industry every day and watch what they and we talked about back and they do when you're on the cover of the debt deal. They do treasury with us They did a corporate card with us and and we talk about how well capitalized when we were and how comfortable they were with us because of that.

Yep. All right. Well, uh, thanks for all the color, and I'll hop back in with you.

Thanks Woody.

So it is undoubtedly a competitive position in the market.

Yeah.

Okay got it. Thanks, Thanks for the commentary and then I guess just following up on that.

Some of your commentary Rob on the M&A front as you think about kind of what's the what's your building and then what do you prefer to build organically versus acquire are there certain businesses that kind of lends itself more towards M&A for example, depository versus investment banking or wealth management, I guess, where does your what would the M&A focus.

Thank you for your question. Next question is from the line of Matt Oli with Stevens. You want to open. Hey uh thanks for taking the question guys. Um first off, great to see all the the green check marks on on slot for uh great execution. Um as far as capital, I think the presentation knows that the the risk rate assets at the bank. Um, now in the top quintile, the peer group and that TC ratio in the top cortile. I think, from our side, we're trying to, to weigh. If, if this Capital could be a deployment opportunity, the next few years for you or, or do you feel like having this excess Capital gives you a competitive Advantage as you add new customers, which could suggest you want to continue to?

If and when that comes to pass.

Maintain these capital ratios, you know, close to current levels.

I think that.

I think you should assume that we look at.

Thanks, Matt. I appreciate the question. I think it's more than...

Everything out a disciplined fintech depository.

<unk> you name it we also.

We also recognize that our best return would be.

Realizing the revenue and cost synergies of the transformation.

Repeat myself from previous calls, forgive me. But, as you know, we have a very disciplined capital menu that we follow, uh, literally every day. And the first is fast and organic growth with new clients, and there's an abundance of demand in the new organic growth with new and deepening clients.

We have so many costs that we don't have to add too to realize revenues and earnings and return already embedded in the platform.

<unk> talked about our new equities business.

I have a return on that yet our new corporate card 16th largest transaction volume card in the country and we don't have a return on that yet.

But they're also they're doing so well and we fully expect to get a super return in the near term. So we have a lot of revenue and expense synergies that we can.

Realize without doing M&A.

Thank you guys.

You bet. Thank you for your question.

Next question is from the line of Brett Robinson with hopefully group. Your line is now open.

Hey, good afternoon, Thanks for taking my question.

Wanted to ask about the expense guide you, obviously trimmed it a little bit for the full year and obviously for <unk>.

Then then there's, uh, investing in the platform products and services. I I would argue we built the most broad, uh, uh, relevant product platform and banking in the last 10 years, uh, with all of our capabilities, done. A pretty good job with that, getting a return, uh, then you move on to not in the conventional Capital menu. But I look at Bond repositioning and and uh, loan portfolio, acquisition that we did the third quarter of last year, uh, and then we moved to distribution policy. We're not going to do a dividend, but we bought back. 12% of the company, uh, in an average price of $59 per share below Book value, uh, all below, Book value. And then, uh, then you get to m&a, which is, uh, we sold the company for 3 and a half billion dollars, which really was the foundational component that they just turn around possible. So, I think, in the way we did that before,

<unk> relative to maybe prior expectations, but it does suggest kind of mid single digit.

Suggest a little growth in the fourth quarter.

Can you maybe talk about the fourth quarter in terms of expenses and then just as you guys think about it.

Bill I know you're.

Really efficient at this point, but to build that might happen in 2006 with additional initiatives. Thanks.

Let me take that Brett we do expect noninterest expense to about $195 million in the fourth quarter as salaries and benefits move into the low Twenty's and then other noninterest expense drifts above $70 million due to higher occupancy marketing costs and legal and professional this soon.

We're putting new capabilities into market.

Puts you at about $778 million for the full year, which is right on top of that now revised lower expense guide of mid single digit it's probably too early to talk about expectations for 2026, but to Rob's commentary.

We do think we have a track record of effectively.

Uh and you know until you get to profitability that was read on the menu. We've looked at it, we study it, we focus on it, we're ready for it, but it was read on the capitol menu. Now maybe it's yellow because we have the earnings but we need the currency. We're super focused on tangible book, value per share. That's Paramount to us. That's gone up 40% since the beginning of the transformation, I think the average Banks, 30 or 31%. So while doing a transformation we outperformed and I would just hope that we get the benefit of the doubt that we can outperform going forward and we'll be a good stewards and be highly sensitive to red yellow and uh, cable value.

Issuing the expense base against the most productive sources directly align with the strategic objectives that the theme you should expect to continue.

Okay, but back to the commentary. But yeah, but but.

Okay. That's helpful. And then the other question I had was just given the solid improvement in criticized assets.

We had 1 quick thing because you mentioned it, it is absolutely.

I thought it was interesting Rob you kind of sounded like during your prepared comments that maybe are a little more cautious or conservative relative to the macro environment expectations.

Uh, a benefit of going to market with clients, you cannot deny it. I have the CEO of one of the fastest growing. Um,

Any color on that and what that might mean and how youre thinking about the go forward.

No I think that that's if you ask anybody that works here or knows me.

I am.

Highly paranoid and so we are always looking at downside scenarios doing table top exercises trying to understand I mean, we.

Companies that operate in a specific industry here today at lunch with me, and we talked about that. We were on the cover of their debt deal. They do treasury with us, they do their corporate card with us, and we talked about how well capitalized we were and how comfortable they were with us because of that. So, it is undoubtedly a competitive position in the market.

As you know we've talked about before.

We're doing tabletops on tariffs.

Six months before Trump was elected because he was talking about it during this campaign, we didn't even know if he'd be elected.

So we try to look around corners, best we can we don't always get it right, we're not perfect, but that's why we focus so much on it so it's nothing more than a conservative posture in Stansted is kind of how we run the business.

Okay, got it. Thanks, thanks for the commentary and then I guess just following up on that some of your commentary Rob on, on on the m&a front, as you think about kind of what's uh, what you're building and then what you prefer to build organically versus the choir, are there certain businesses that that kind of lend itself more towards m&a, for example, depository versus Investment Banking or wealth management. I guess what is your what would the m&a focus be. If and when that comes to pass,

Okay, Great. That's helpful. Thanks for all the color.

You bet. Thank you.

Thank you for your question next question is from the line of being Grilling grew with Citi. Your line is now open.

Okay.

Hi, good afternoon.

Hey, Ben.

With respect with respect to the mortgage finance I know quarter to quarter volatility, but the home selling season.

Out of discipline fintech depository. Uh, wealth, you name it. We also, uh, recognize that our best return would be realizing the revenue and cost synergies of the transformation.

And all of that but for the last couple of years you guys have made tremendous strides on both sides of that.

Silo I guess, you can say the business.

When you think about this the yield.

Thank you.

A year or so and calculators.

Peak to trough would be an appropriate yield or what you guys might think for next year.

Yeah too early then on next year God, I think you're safe from the fourth quarter, which is where we're giving guidance today to think about mortgage finance at about three eight and that's where the 87% self funding ratio and two fed cuts.

I mean, we have so many costs that we don't have to add to realize revenues and earnings that are already embedded in the platform. Matt just talked about our new equities business; you know, we don't have a return on that yet. Our new corporate card is the 16th largest transaction volume card in the country, and we don't have a return on that yet, but they're awesome. I mean, they're doing so well, and we fully expect to get a super return in the near term. So, we have a lot of revenue and expense synergies.

Then we can uh, realize without doing m&a.

Yeah.

Thank you guys.

Right No I got it.

Okay, that's fair.

You bet, thank you for your question.

It seems like you guys, obviously been awfully, but are the.

Probably four plus.

Next question is from the line of Brett, rabbitson with Huffy group, your line is now open.

Yes.

As you know Ben we alluded to it in the discussion on NII and margin.

It takes a couple of months for the reduction in deposit cost that flow through to you.

So if you think about third quarter yields $4 32 down to $3 80.

Our seasonally slow quarter, that's about as it's punitive impact to the mortgage finance yield as you could see yet we're still talking about an aggregate NIM of 330 and ni.

I I have $2 55 to $2 60.

Hey, good afternoon, thanks for taking my question. Um, wanted to ask about the expense guide, you know, when you obviously trimmed it a little bit for the full year and obviously for um, 4q relative to maybe prior expectations, but it, it does suggest kind of missing digit. So I suggest a little growth in the fourth quarter. Um, can you maybe talk about the the fourth quarter in terms of the expenses? And then just as you guys think about it, the build, I know you're really efficient at this point, but the build that might happen in 26 with additional initiatives, thanks.

It gets back to some of the earlier commentary on the improved the visibility of the revenue profile. Despite what's happening with short term interest rates.

Got it Okay fair enough and then.

Have a take that breath. We do expect non-interest expensive about 195 million in the fourth quarter as salaries, and benefits move into the low 120s and then other non-interest expense drifts

The kind of core loan yield was up 14 bps linked quarter what was that.

Something idiosyncratic thing there or is it just kind of hedging and new production being added.

Above 70 million due to higher occupancy, marketing costs, and primary legal, and professional. That's associated with putting new capabilities into Market.

It was primarily new production there was about a $3 million pick up in linked quarter fees that flowed into the loan yield.

That put you at about 778 million for the full year which is around top of it now, revised lower expense, kind of mid single digit.

That's been honestly and steadily building for the last year or so as our train back transaction volumes increase.

So again, if we think about 50 basis points coming out between now and the end of the year that could push that la yaqui yield inclusive of mortgage finance down to call it six or so.

It's probably too early to talk about expectations for 2026 but to Rob's commentary we we do think we have a track record of effectively, positioning the expense case against the most productive sources directly aligned with the Strategic objectives so that the theme you should expect to continue.

And then we gave.

It's about as painstakingly, it's clear guidance on the hedge profile as a kid [laughter], Yeah, I've got to read the transcript from that one.

Much but I appreciate all the color. Thank you guys [laughter], we can't say it again.

Okay.

Thank you for your question next.

At a relative to the macro environment, expectations, you know any any color on that and what that might mean and how you're thinking about the go forward?

The next question is from the line of Janet Lee with TD Securities. Your line is now open.

Hello.

No, I think that if you ask anybody that works here or knows me, I am...

Is there a mortgage finance self funding ratio I appreciate hi, I appreciate the table that you guys include it there.

It looks like that 85% self funding ratio for the fourth quarter has to do with some seasonality factors if I were to look into.

Just over an intermediate term is there a structural opportunity to reduce that further as you get more client deposits or is this is 85% ish level the right level for you guys.

Highly paranoid. And so we are always looking at downside scenarios, doing tabletop exercises trying to understand. I mean, we like, as you know, we've talked about before, I mean we're doing tabletops on tariffs, you know, six months before Trump was elected because he was talking about it during his campaign. We didn't even know if he'd be elected. So we try to look around corners as best we can. We don't always get it right; we're not perfect, but that's why we focus so much on it. So it's nothing more than a conservative posture and stance. That is kind of how we run the business.

Great question Janet.

That question specifically in Iraq.

Okay, great, that's helpful. Thanks for all the caller.

Talking about the business, which is an important one for us.

You bet. Thank you.

How funding ratio peaked at 148% for us.

So the impact on this quarter's margin of the year over year change in self funding ratio is 12 basis points.

Thank you for your question. Next question is from the line of Ben gerlinger with City. He wants to open.

Good afternoon.

Um,

It's been incredibly impactful for us to effectively drive relevance with primarily depositors in the commercial bank, which has enabled us to lessen our reliance on those mortgage finance deposits.

So I think we've said maybe for the past three or four calls we're going to continue to focus a lot of resource a lot of investment on.

With respect with respect to the mortgage Finance. I know quarter to quarter is going to have volatility just with the home selling season and liquidity levels and all that. But the last couple years you guys have made tremendous strides on both sides of that.

On continuing to expand the treasury and deposit walk with commercial clients and to the extent that we continue to grow that at 3 billion or 20 plus percent year over year, it'll give us opportunities to lessen our reliance on those mortgage cash deposits.

Silo, I guess you could say, is part of the business. When you think about this, the yield—do you think full year, so it encapsulates?

Peak to trough.

What would be an appropriate yield, or what do you guys think for next year?

Too early bet on next year guide.

Absolutely a trend that we hope to continue it.

It improves the margin.

I think you're safe from the fourth quarter, which is where we're giving guidance today to think about mortgage finance at about $38, and that's with an 87% self-funding ratio and two Fed cuts.

Data profile as well as importantly for us the quality of our liquidity base, which is something that we focus a lot on internally and our relevance to our clients I mean quarterly the quarterly treasury fees have grown 91% since the beginning of the transformation. So we're pretty good at it.

Right? No, I got you. Okay, that's fair. So it seems like you guys are obviously going to offer it, but I would assume probably 4 plus.

I would just say is the mortgage business remains very very important to the to the farm, but it's totally different than it was when we started so think of it as an industry vertical not just a place to lend money, we're doing whole loan trading TBA.

Yeah, as you know, as you know, Ben and we alluded to it in a discussion on knee and margin.

It, it takes a couple of months for the reduction and deposit cost to flow through to yield.

Spec pool trading we're doing hedging we're doing some of our largest treasury service operating accounts are with mortgage clients. If you look at it as a segment or sector like health care for TNT or energy.

So if you think about the third quarter yield its 432 down to a 380 in a seasonally slow quarter that's about as as punitive of impact to the mortgage Finance yield. As you could see yet, we're still talking about an aggregate number of 330 and knee of 255 to 260.

Which gets back to some of the earlier commentary on the improved defensibility of the revenue profile.

A very profitable very good business or bringing it out the art W. A into business or increasing the margin of that business and at our diversity of our revenue coming from that segment is very broad so it.

Despite what's happening with short-term interest rates?

Okay, fair enough. And then with the kind of core loan yield, it was up 14 basis points quarter over quarter.

It's way more than just the the yield in the warehouse, even though that's still a big part of the income statement.

So is there something idiosyncratic in there, or is it just kind of hedging in a new production being added?

Yeah.

Got it thanks for that color and just on the your commentary on expenses. This line around reflecting maturation of the platform should I.

It was primarily new production. There was about a $3 million pickup in loan quarter fees that flowed into loan yield.

And that's been honestly been steadily building for the last year or so as our trans transaction volumes increase.

Maybe I'm reading into this too much but it does that mean that you have enough.

People and businesses in place without you needing to high like hire a lot more.

So again, if we think about 50 basis points coming out between now and the end of the year, that could push that LHI yield inclusive, where it's financed, down to call it 6 or so.

Talent into our company as you have in the past few years or how should I interpret that.

That commentary.

And then we, we hope we gave about his painstakingly as queer. Guidance on the Hedge profile as we could prepare to work.

I think I think you should look at.

Doing a transformation with expense discipline, we've had over the last four years and last year, keeping in I E flat, while dramatically improving the earnings base of the franchise.

Yeah, I gotta read the transcript on that 1. That was that was too much but I I appreciate all the color. Thank you guys. Yes we can't say it again.

Thank you for your question.

Next question is from the line of Janet Leigh with TD Securities. You don’t have to open.

No we will do it in a very careful way, but are we looking to add talent to the platform absolutely do we need to add.

Hello.

The operating risk and controls and the accounting and the compliance everything behind that pallet.

Is there a mortgage finance self-funding ratio? I appreciate that. I appreciate the table that you guys included there.

No. We do that's there so the incremental head count that we add now is it is very small on the margin versus what we were doing before before we'd have to add talent, we had to build a whole infrastructure behind that talent from the front to the middle to the back office and I think that's what most people missed.

Now we're through that process now the incremental head count that we add to the front office not little them back or focused on fraud.

Um, it looks like that 85% self-funding ratio for the fourth quarter has to do with some seasonality factors. If I were to look into, um, just over an intermediate term, is there a structural opportunity to reduce that further as you get more client deposits? Or is this 85% ish level the right level for you guys?

We're excited about adding and our clients are looking for us to add it and we will do it a very disciplined way.

Great question. Janet, I'll hit that question specifically. Now you can we talk about the business which is an important 1 for us? I mean that that's how funding ratio peaked at 148% for us.

Thank you.

Thank you.

On this quarter's margin of the year-over-year change in self-funding ratios, 12 basis points.

Thank you for your question.

Next question is from the line of Anthony <unk> with J P. Morgan. Your line is now open.

So it it's it's been incredibly impactful for us to effectively, Drive relevance with primarily depositors in the Commercial Bank.

Matt can you go over the maturity of the Cds and <unk> what rates, they're maturing at the posted rates we've seen recently.

Which has enabled us to lessen our reliance on those mortgage finance deposits.

Okay.

765 million matures in <unk> at a weighted average rate of 422%.

So so I think we've said maybe for the past 3 or 4 calls we're going to continue to focus, a lot of resource, a lot of investment.

Posted rates are currently at 4%.

You would obviously see those step down Tony if the fed realizes the forward curve.

That's clear and then Rob slide four it's clear all the progress you've made the company has made over the past several years, including achieving your ROA target in <unk>. So I'm wondering what happens now right is it just purely about execution some incremental hires should we expect new targets at some point.

On continuing to expand the treasury and deposit wallet with commercial clients, and to the extent that we continue to grow that at $3 billion or 20-plus percent year-over-year, it will give us opportunities to lessen reliance on those mortgage deposits. So it's absolutely a trend that we hope to continue. It both improves.

The margin.

To get announced thank you.

Great question look I think it was I don't think a lot of.

Public companies get for your guidance.

And we recognize it in the middle of a transformation and a wholesale change.

Attaching the entirety of the platform how important that was for a number of reasons. One for you all to have something to anchor on our progress to take to earn credibility.

The data profile, as well as, importantly for us, the quality of our liquidity base, which is something that we focus a lot on internally, and our relevance to our clients. I mean, quarterly treasury fees have grown 91% since the beginning of the transformation. So we're pretty good at it. Um, what I would just say is the mortgage business remains very, very important to the farm, but it's wholly different than it was when we started. So think of it as an industry vertical, not just a place to lend money. We're doing whole loan trading, TBA, spec pool trading, we're doing hedging. We're

<unk> et cetera. So if this was never the yen the one one quite the contrary this is a milestone for <unk>.

Doing some of our largest treasury service operating accounts or with mortgage clients. If you look at it as a

Really excited about the future.

Well I don't know I don't.

Contemplate.

Giving long term guidance again, but we will see certainly I think we've been the most transparent.

Management team in banking since we started this if you go back and look at my September 1st 2021 call and we will continue to be very very transparent.

But I think that realizing the revenue and cost synergies that we just stopped it and in a market that we are with the capital we have and the talent on the platform and our investment in technology. It ops is just super exciting and that alone will keep us really really busy for a long time the demand for.

Segment or sector like healthcare or TMT or energy, it's a very profitable, very good business. We're bringing it down the RWA in the business, we're increasing the margin of business and our diversity of revenue coming from that segment is very broad. So it's way more than just the yield and the warehouse, even though that's still a big part of the income statement.

Got it. Thanks for the color. Just on your commentary and expenses, this line around reflecting maturation of the platform. Should I...

By new clients and current clients on the platform is quite extraordinary.

Maybe I'm reading into this too much, but does that mean that you have enough people and businesses in place without you needing to, you know, hire a lot more?

Thank you.

Thank you for your question.

Next question is from the line of Jon <unk> with RBC. Your line is now open.

Talent into your company as you have in the past few years or how should I interpret, um, that commentary?

Great. Thanks, good afternoon.

I think, I think you should look at.

Hi, John.

Okay, congrats on having achieved or exceeding the one one hurdle I think that's notable.

Thank you just Rob on the client selection, yeah, you're welcome.

On the client selection topic.

Are you seeing anything from any kind of market disruption from the recent Texas consolidation there've been a lot of bank deals I'm not sure.

Those banks have your clients, but are there more clients in motion right now.

That's a great question so.

We are so flat footed and end market.

We were already calling on all the prospects of clients that may be at a competitor bank anyway. So when we when we hear of an announcement of a transaction and we look at which clients, we're calling on and in terms of prospects.

And we focus like Hey, there may be a disruption in the market you should be doing something different usually we shouldn't be doing something different we're already calling on those clients and prospects and frankly, winning those clients and prospects and some of those banks that sold.

Doing a transformation with the expense discipline. We've had, over the last four years and last year, keeping NIE flat while dramatically improving the earnings base of the franchise, and now we'll do it in a very careful way. But are we looking to add talent to the platform? Absolutely. Do we need to add the operating risk and controls, and the accounting, and the compliance, and everything behind that talent? No, we don't. That's there. So, the incremental headcount that we add now is very small on the margin versus what we were doing before. Before, we would have to add talent; we had to build a whole infrastructure behind that talent from the front to the middle to the back office. And I think that's what most people missed. Now, we're through that process. Now, the incremental headcount that we add to the front office is not little, and back, we're focused on front.

We're excited about adding and our clients are looking for us to add it and we'll do it in a very disciplined way.

Not really interested in those prospects so.

Thank you.

Thank you.

Because you know that.

We just.

Thank you for your question.

I don't want to be negative at all whatsoever, but we're calling all the all the high quality clients or prospects of our markets already.

Next question is from the line of Anthony Ellen, with JP Morgan. Your line is that open?

Now I will say.

Oh and disruption in our markets eliminating in the past we've got a lot of great talent.

Matt, can you go over the maturities of CDs and Q4? What rates are they maturing at in the post rates we've seen recently?

164.

A lot of great talent from banks that have been acquired.

5 million matures in 4 q.

2, 2 percent.

Okay.

Posted rates are currently at 4%.

The commitment question came up earlier in the call up 11% annualized.

You would obviously see those steps down, Tony, if the Fed realizes the four curves.

What does that signal to you do you feel like demand for credit is accelerating.

Is this increase from existing clients or new clients or something else.

I would say, it's more timing than than signaling anything else.

Again, we're not we're not concerned about when high quality clients and prospects borrow but to be there when.

That's clear. And then, Rob, slide 4. It's clear all the progress you've made and the company's made over the past several years, including achieving your ROA target in Q3. So, I'm wondering what happens now, right? Is it just purely about execution, some incremental hires? Should we expect new targets at some point to get announced? Thank you.

So they I think it's more of a timing thing than anything else.

John.

Okay. The only thing to add to that John that we mentioned in the comments.

Um, I don't think a lot of public companies give four-year guidance, and we recognize that we are in the middle of a transformation and a wholesale change.

I think it's really important is that three two years ago three years ago, all of the fees and the investment bank, where basically generated by new client acquisition.

And you are you are Jewish is different than anyone else in the market.

We're just now starting to see repeat business flow from the investment bank and contribute to fees, which is why we've made such a point on the call to emphasize Ricky.

Our repeat ability.

Increasingly granular in nature of that line item, which obviously signaled a lot of client receptivity and adoption, but also suggest continued growth in those categories alongside continuing higher floor of <unk>.

Literally touching the entirety of the platform. How important that was, uh, for a number of reasons 1, uh, for you all to have something to anchor on our progress, 2 to, to earn your earn credibility, uh, Etc. So this this was never the end, the the 1 1, quite the contrary, this is a milestone, we're really excited about the future. Um, I don't know if I don't contemplate. Uh, giving long-term guidance again, but we'll see. Um, certainly I think we've been the most transparent uh management team in banking uh since we started this. If you go back and look at my September 1st 2021 call

Revenue.

Okay.

Yes.

Good I appreciate the granularity comment I'll.

I'll leave it there thanks, a lot nice job.

Thanks, John.

Thank you for your question there are no additional questions waiting at this time, so I'll pass the call back to Rob.

Chairman and CEO for any closing remarks.

And we will continue to be very, very transparent. But I think that realizing the revenue and cost synergies that we discussed is, in the markets that we are, with the capital that we have, with the talent on the platform, and our investment in technology and operations, is just super exciting. And that alone will keep us really, really busy for a long time. The demand for...

I just I don't usually do this but I'll do at this time I want to thank all the employees listening for all their dedication and focus it's been a long for years and I hope you're very very proud. Thanks al.

Five new clients and current clients on the platform is quite extraordinary.

Thank you.

Yeah.

Thank you for your question.

That concludes the call. Thank you for joining you may now disconnect your lines.

Next question is from the line of John Arm with RBC. Operator, please open it.

Great. Thanks. Good afternoon.

Hi John.

Uh, congrats on hitting or exceeding the 111 hurdle. I think that's notable.

Um thank you just robbed on the client selection. Yeah, you're welcome. Um, on the client selection topic, what are you seeing anything from any kind of Market disruption, from the recent Texas, consolidation there have been a lot of Bank deals. I'm not sure if

Those banks have your clients, but are there more clients in motion right now?

Uh, that's that's a great question. So

We are so front footed and in Market that, um, we were already calling on all the prospects of clients that may be at a competitive bank. Anyway, so when we we hear of an announcement of a transaction and we look at which clients we're calling on, in terms of prospects. Um, and we we focus like, hey, there may be a destruction in the market, you should be doing something different. Usually we shouldn't be doing something different. We're already calling on this clients and Prospects and frankly winning those clients and Prospects and some of those banks that sold

Not really interested in those prospects. So uh because you know, we just

I don't want to be negative at all, uh, whatsoever. But we're calling on all the high-quality clients and prospects in our markets already.

No, I will say.

On disruption in the market, to eliminate in the past, we've gotten a lot of great talent—like a lot of great talent from banks that have been acquired.

um,

The commitment question came up earlier in the call, up 11% annualized.

What, what is that signal to you? Do you feel like demand for credit is accelerating? Um, is this increase from existing clients or new clients or something else?

I I would say it's more timing than than signaling anything else.

You know, we're again we're not we're not concerned about when high quality clients and Prospects borrow but to be there when. Um, so I think, I think it's more of a timing thing than anything else.

so, John

Okay, the only thing to add to that, John, is we mentioned in the comments, and I think it's really important, is that 2 or 3 years ago, all of the fees in the investment bank were basically generated by new Pine acquisitions.

And you are who you are, which is different than anyone else in the market.

You are just now starting to see repeat business flow through the investment bank and contribute to fees, which is why we've made such a point on the call to emphasize.

The repeatability and increasingly granular nature of that line item, which obviously signals a lot of client receptivity and adoption, but also suggests continued growth in those categories alongside a continuing higher floor of revenue.

Yep. Um, that sounds good. I appreciate the granularity comment. Um I'll leave it there. Thanks a lot. Nice job.

Thank you for your question. There are no additional questions waiting at this time, so I'll pass the call back to Rome Home, Chairman and CEO, for any closing remarks.

I just—I don't usually do this, but I'll do it this time. I want to thank all the employees listening for all their dedication and focus. It's been a long four years, and I hope you're very, very proud. Thanks, all.

That concludes the call. Thank you for joining me. Now, disconnect your lines.