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spk00: Next, we are excited to have Comerica at the conference. Comerica has done a good job managing through a challenging backdrop as it's returned to growing deposits, has made significant investments in the business that should position it well for growth in the future, and continues to have best-in-class credit. Here to tell us more about the strategy and how they will continue is Chairman and CEO Kurt Farmer, also joining us on stage is CFO Jim Herzog. So Kurt is going to do a short presentation before we get into Q&A.
spk02: Okay, good morning everyone. So I don't have a podium, so I apologize for doing this seated, but I do have some comments that we'll share with you, and you should have a copy of our published materials as well. So thank you, Ryan, and slide two has our forward-looking statements and our non-GAAP financial measures notices, which will apply to our entire webcast. I'll now move to slide three and our formal presentation. We believe our model is a competitive advantage. Our products and credit capacity rival those of much larger banks, and our size enables tailored solutions that meet the unique needs of our customers. Tenured colleagues deliver insights and local, consistent service, which we believe are key to maintaining our long-term customer relationships. Industry recognition affirms the effectiveness of our strategy in supporting our customers, colleagues, and communities.
spk03: Diversification on slide four has been an intentional strategy.
spk02: Our commercial bank is comprised of diverse segments which enhance both the balance of our business and risk mitigation over time. Complementing our commercial focus, we believe our strong retail and wealth management capabilities are key to delivering a full solution set to our customers and optimizing our financial results. Moving to slide five, we reduced quarter-to-date average loan balances by approximately $1 billion And our strategic exit of mortgage banker finance drove almost half of that decline. As we preserve capital and funding for full relationships, we've also seen lower balances from select non-relationship customers within corporate banking and equity fund services. Growth in commercial real estate and national dealer services partially offset optimization-related actions. Total loan balance has flattened in the last several weeks, and we expect them to remain generally stable through year-end. Although trends through the last two months pressured our fourth quarter average loan guide, we believe our strategic efforts are positioning the business for enhanced returns and growth over time.
spk04: Can we get the slides up here? There we go. Sorry about that. Great.
spk02: We're on the right slide now. On slide six, despite a minor headwind from the exit of mortgage banker finance and a reduction in brokerage CDs, quarter-to-date average deposits remained in line with third quarter average, which we believe underscores the stability in our customer base. Middle market grew in each major market, followed by increases in retail and TLS. Based on results from the first two months of the fourth quarter, We expect full quarter average deposits to land in the upper end of our guidance range. As expected, Fed monetary policy continues to influence noninterest-bearing deposits as balance modestly trended down. Our noninterest-bearing mix was further impacted by success in growing interest-bearing deposits, but still remains the most favorable of our peer group. Deposit basis continues to modestly trend up, and that trajectory remained in line with observations for the third quarter call. We are not seeing signs of re-acceleration. Land optimization and deposit stability better position us to refocus on higher return loan growth in 2024. Slide seven highlights the success of our interest rate strategy as we are effectively asset neutral. and we still project record net interest income for full year 2023. Our outlook for the fourth quarter remains unchanged, as we expect the impact of loan optimization, continued modest remixing of deposits, and higher deposit betas to contribute to a decline relative to the third quarter. Fed monetary policy remains the largest variable in the trajectory of net interest income, But with deceleration of both deposit betas and non-interest-bearing balances, we continue to feel we are nearing an inflection point. Credit quality on slide eight remained very strong, as our net charge-off percentage and non-performing asset ratio both outperformed our peer group in the third quarter. We saw migration into the criticized category as the higher rate environment continued to pressure customer profitability, but we feel it is in line with our expectations. This migration was more concentrated in commercial real estate, leveraged loans, technology and life sciences, and automotive production, which generally carry higher risk than the rest of the portfolio. Shared national credits drew more industry attention in the last quarter, but the credit metrics in our SNCC portfolio remain stronger, on average, than the rest of our book. It is also important to remember that we do not have a dedicated SNCC business line. and our underwriting and relationship guidelines remain consistent with the rest of our portfolio. Overall, we feel very good about our credit quality and believe our prudent underwriting and well-regarded discipline position us well to navigate a potential cycle. Continued growth in non-interest income on slide nine remains a priority, and we have been pleased with our results. Third quarter non-interest income was up 15% relative to the same quarter pre-COVID, with growth across both categories. On this slide, we provide additional insights into anticipated non-customer related income trends. For example, income from FHLB dividends and risk management have been elevated year to date, and we expect them to come down in 2024. Dividend income correlates with FHLB advances, which have reduced as we normalize our cash position. Risk management income is expected to move with rates as they influence the amount of cash we hold with a CME to clear our hedge position. However, movement in risk management is somewhat line item geography because we would expect similar offsets with net interest income. Shifting to customer-related non-interest income, we feel very good about our momentum. Our objective is to increase the mix of capital-efficient fee income to enhance consistent profitability and overall returns. And investments underway in payments, capital markets, and wealth management are expected to help us achieve this outcome. Our track record of discipline and efficiency on slide 10 demonstrates our proven success in balancing revenue, expenses, and necessary investments. In the past five years, our expense management outperformed our pure average. And over the past 10 years, we've reduced headcount by 15% despite growing revenue. Our third quarter efficiency ratio was near our 15-year average. and our expense growth in the quarter was in line with several of our peers. However, we acknowledge the structural impact on the industry from events earlier in the year, and we're going beyond our normal expense management practices as we planned for 2024. Moving to slide 11, we throw that we and the industry are in a recalibration phase as we pivot from a focus on growth investment to a new funding paradigm with emerging expense pressures. We intend to share more detail during our fourth quarter earnings call when we normally provide guidance for 2024, but we are looking diligently at a number of options to right-size costs in order to maintain capacity for critical investments while enhancing returns over time. This is one of the highest priorities of our leadership teams as we challenge ourselves to strike the right balance, improving efficiency, and increase the value of our franchise. We have targeted focus areas where we see optimal opportunity to adjust while preserving the strength of our business. In my view, this is not just about cutting expenses. This is about positioning our company for sustainable growth and competitive returns for the long term. Our capital position remained a source of strength, as shown on slide 12, as our third quarter CETU-1 ratio increased further above our 10% target. While common equity declined with movement in the rate curve, we expect to recoup the unrealized security losses within AACI over time. Despite a healthy cushion above our strategic capital targets and regulatory minimums, share repurchases remain paused as we await further clarity on final Basel III endgame rules and less volatility within AACI. In the meantime, we expect to continue to accrete capital above our target and feel confident in our capacity to support our customers' needs. Slide 13 highlights what we believe is our compelling value proposition. As a leading bank for business with strong wealth management and retail solutions, we have a unique business mix. We believe the combination of tenure and expertise in our bankers supports attraction and retention of long-standing customer relationships. Our tailored product set is designed to meet the needs of our target customers while delivering more consistent, capital-efficient revenue. Our deposit profile has long been a strength, with a focus on commercial operating deposits, a stable retail base, and a high mix of non-interest-bearing deposits amongst our peers. Investments in small business and payments are already producing results and are expected to further enhance this core funding source. Finally, we remain committed to running an efficient organization and see opportunities to leverage technology investments to further increase productivity. Steps we are taking to optimize our balance sheet, increase our earnings power, and invest strategically only enrich our stronger foundation and position us for an even more successful future. Thank you, Ron, and we'll be glad to take some questions.
spk00: Great. Thanks for the in-depth overview, Kurt. Maybe starting with some of the updates that you provided, you talked about the decrease in average loans quarter a day with greater than half of it in mortgage banker. Can you maybe just talk broadly about the lending strategy from here Where are you continuing to optimize and what are you seeing in terms of consumer demand? Also, I think you highlighted commercial real estate continues to grow. When do you expect that to moderate? And maybe to just kind of bring it all together, when do you expect loans to begin growing again?
spk02: Great. Ryan, I apologize for the slides earlier, but hopefully you have access to the presentation and could follow along as we went through that. Yeah, there's been a deliberateness in the slowdown in lending activity. As you know, we made a decision back in the summer to exit the mortgage banker finance business. And I won't go through all the reasons behind that. We've shared that with you previously. And that decline or reduction in mortgage banker finance balances is nearing the end. We've got a little bit more ways to go. So certainly that's impacting with about half of the decline that we saw in the quarter. And then we just have been More selective in a number of our businesses where we do not have probably as good of pricing, as good of connectivity, cross-sell opportunity in those relationships, and certainly those that are not as deposit sort of funding strong. But at the same time, I would say that we are leaning heavily, continuing to lean heavily into sort of the core businesses, especially middle markets. business banking, small business, and taking care of our customers. We're seeing some new customer opportunities in those businesses as well. What I would probably summarize to say is that we have really seen this second half of the year as a chance to recalibrate, pull back a little bit, as we saw liquidity build back up, but we're really trying to position ourselves for growth in 2024 or so. You know, the decline we saw in the quarter, probably a little bit more than we anticipated, but it's sort of a blunt instrument as you pull back somewhat. But certainly another part of that has been just that we have seen some slowdown in customer demand kind of across the board, and I think it's uncertainty about the economy, interest rate environment, et cetera. So that's sort of impacting new requests that we might have. And then maybe to finish out on the commercial real estate side, Most of that growth that we have seen and have seen all year really is stuff that we were originating, you know, a couple years ago, one or two years ago. And it's not really new requests, so to speak, on primarily the multifamily industrial side. But some of that sort of the tail end of that will continue into 2024. So we'll probably feel a little bit more growth and then it'll start to taper off at some point because certainly new originations are down quite a bit.
spk00: Got it. And maybe to dig in on the deposits update, where I don't think you assume much in the form of seasonality. Jim, maybe give us an update, you know, what you're expecting for deposit growth from here. And then also, I think you gave some updates on, Kurt referenced both the mix at 42% and the betas continuing to trend. Maybe give us an update on your latest and greatest thoughts on where you expect non-interest bearing to bottom and where you see betas headed in this cycle.
spk01: Yeah, thanks, Ryan, and good morning, everyone. Yeah, we continue to be really pleased with the overall deposit growth that we're seeing. And as you saw, we're kind of at the upper end of the range that we've given during the last earnings call. I think in spite of the fact that we have quantitative tightening going on, we continue to have really good deposit results. I would say non-interest-bearing deposits very much on the trajectory that we had expected when we gave the last guidance. So I feel like things are staying very consistent there and no real surprises. Probably having a little bit more success than we even thought with interest-bearing deposits. I would say that seasonality is probably a component of that. As I think you may have mentioned, we did have an element of seasonality, a very modest element when we gave the last guidance. We're probably seeing a little bit more seasonality than we'd expected previously. And it's interesting, in past years, much of that seasonality came in non-interest bearing deposits. But as I've said many times, it feels like all past seasonality trends are kind of out the window in this new world we live in. And it feels like some of the seasonality is coming in both, not just non-interest bearing, but a little bit more in interest bearing that we may have seen in the past also. So I do think we have an element of seasonality, maybe a little more than we expected. You know, we will see a little bit of outflow in the first quarter next year, as we have always seen every year, and I think next year will be no different there. I think it'll be a little milder from some of the more extreme seasonal years we used to experience. In terms of non-interest-bearing mix, very much trending, again, as we thought, you know, in that 42 to 43 percent range in the outlook and the results that we gave for the mid-quarter updates. I do think we're going to end up in the low 40s, but I always like to reinforce that there is a numerator and denominator, and as we continue to have success with interest-bearing deposits, that could drive that ratio down an extra percent or so. But overall, really pleased with the overall trajectory of non-interest-bearing deposits. On the interest-bearing side and the betas, we had seen a little bit of an acceleration at some point in the third quarter. And then I mentioned at the earnings call that in the weeks leading up to the end of the quarter, we saw deposit betas behaving a little bit more mildly and more behaved. And we continue to see that. I do think as rates stay higher for longer, you will see betas continue to edge up. But it feels like edge up is probably the operative phrase there. I don't think we're going to see leaps and bounds. Most customers who have asked for exception pricing have asked at this point. I feel like things are at somewhat of a point of equilibrium there. You know, we'll see some CDs roll over and reprice at a little higher rate. There will be the stray corporate treasurer who hadn't asked for a rate increase that may come to us and ask for that at this point in time. But it feels somewhat predictable and a little bit steady and quite modest in terms of the increases we're seeing. But I do think higher for longer does mean you continue to see across the industry, America being no exception, just a little bit more edging up in the rates.
spk00: Great. Maybe to dig in a little bit on liquidity, even allowing the securities book to run down, maybe thoughts on when to start reinvesting. When you think about other liquidity, you reduced FHLB and excess cash last quarter, and you signaled that's going to continue. How do you think about repayment of FHLB relative to broker deposits? Do you prefer one over the other? And then obviously there was some new recommendations out for the FHLB regarding eligibility is being reconsidered to limit access to companies with at least 10% of mortgages. Do you expect this to impact you?
spk01: I think it's appropriate how you bundled some of those together, Ryan, both the security side of the ledger as well as how we're paying back some of the FHLB. We have been for some period of time now letting securities mature. We've been using those proceeds to pay down FHLB balances. We do have a smaller balance sheet than we did just less than a year ago. And so I believe that our target level of securities is probably going to be $4 to $5 billion smaller than what we have right now. So it will be some period of time, I suspect, before we buy more securities. Now, having said that, securities are part of an overall hedge position strategy, so we could always pivot in some ways. We consider the overall positioning, the balance sheet. But my best guess is for the foreseeable future and then some, we will probably not be purchasing securities anymore. We will continue to let FHLB continue to pay down all things equal. When I look at FHLB funding versus something like brokered CDs, we continue to want a very diversified funding base. That means diversified not just in what we're using, but in terms of the dry powder and the capacity we have also. And so I don't see us necessarily letting brokered CDs run off until we pay down the FHLB just a little bit more. since we do have a higher level of FHLB funding today than we do in terms of brokered CDs. But we do want to keep those proportional. Now, the FHLB is a very important funding source. They've played a critical role for the industry in the past, and they are going through some proposed rule changes right now. I don't expect any adverse impact from those rule changes. It is very early on. I think a lot of constituents are going to weigh in on the final set of rules. The way the rules were proposed was somewhat vague, but it's looking to us like asset classes like mortgage-backed securities will qualify not just for the test, but you'll be able to post them as collateral also. And then perhaps even more importantly for a Comerica or a bank of Comerica's profile, it looks like multi-tenant commercial real estate will also qualify as part of the test, as well as being able to be posted as collateral. But having said all that, we'll wait and see how the final rules go. But we are not anticipating any kind of adverse impact at this point in time, so feeling good about that.
spk00: Jim, maybe one more for you before we switch back to Kurt. So, you know, you reiterated the NII guy, which I think was for a 5% to 6% decline. I think you had been talking about it dropping early in 24. Maybe any updates to your expected drop or inflection for NII in 24, you know, given the changes in the forward curve since earnings? What are the drivers that are going to influence that inflection, and what risks do you see?
spk01: Yeah, I would say our base case is still a trough in the first quarter of 24, and then the slope up from there will really be dependent upon a lot of factors. So the curve shift that has occurred hasn't really materially changed our view in that way. We do like the way the curve has shifted down. We think that increases the probability of a stronger net interest income year next year. But we're keeping our eye on a number of variables, and the curve itself is a key one. And so we did run some scenarios right before Thanksgiving with the curve that existed at that point in time. And again, I think a curve that is pointing downward is probably a little more favorable and advantageous to us than one that continues to stay higher for longer. So that will certainly be a variable. As I look at deposits, that's probably the next largest variable, both the flows and the betas. Our base case is that we do have a little bit of a deposit outflow in the first quarter. And then if the curve plays out, we think deposits will then stabilize and potentially grow, we think, in the second half of the year. So deposit flows will certainly be a variable. And then deposit betas, you know, higher for longer would not be good, you know, for net interest income. But if the curve plays out as expected, we do think that betas will respond pretty quickly to a drop in rates. You might not get the full impact in the first month, but you'll get some impact. And I think the rest of it will come shortly after that. And so deposit betas were probably right up there with deposit flows in terms of being huge variables. Now beyond that, I'm looking at the other side of the balance sheet with loans, and loan volume would certainly be a plus in terms of the shape of that upward slope once we do trough. And then loan spreads are something that we have our eye on also. The cost of funding has gone up in the industry, and we think it's appropriate for the industry to ask for fair and appropriate pricing for that higher cost of funds. We are being more selective and trying to make sure that we're matching how we lend out funds relative to our cost of funding. And if that plays out as we expect, we think that will be a positive force for the slope of that line. But all these factors will affect whether or not it's a relatively shallow slope up from a trough or something a little bit better than a shallow slope up.
spk00: Kurt, there were a couple of slides in the deck regarding expense management and pressures that you're feeling as well as opportunities. I know you said we'll get formal guidance at earnings, but can you just speak a little bit more about what you're considering at this front and maybe any preliminary thoughts on what are going to be the drivers into expense growth into next year, where I think you've said modest growth or whatever the exact phrase was.
spk02: Well, you know, Ryan, it's an interesting sort of inflection point, because the 2021 2022 were some of the most high growing, most profitable years in the history of our company. And look at sort of long growth, the income, certainly overall return metrics for the company. And so we had been in a heavy sort of investment phase in the company expanding into some new markets like the southeast. which is going very well for us, investing heavily in product capabilities, treasury management payments, capital markets, wealth management, investing heavily in small business. And so those are all things we want to keep on track because we believe those are the right things long term for the success of our company and that this is really a sort of an inflection point, a period of time that we and the entire industry need to manage through. So I would sort of think of this as a recalibration not a major expense sort of restructuring type initiative. And we're looking across sort of several areas in the company that we pointed to on the slide earlier. Certainly, you're always looking at real estate. We've done a good job there. We have some more opportunities. We're looking at sort of business processes that we have in place, looking at technology, looking at some of our lines of business, which ones do we need to invest heavier in, which can we sort of pull back on, and just overall how we manage headcount. We're in the midst of sort of finalizing some decisions there, and we will definitely have – we're targeting to have at the fourth quarter earnings call more specifics around the actions we've taken, the sort of expense impact of those actions, et cetera. And like a lot of initiatives, some of that will happen in sort of 2024 benefit. We'll also – some of it will sort of spill over in benefit in 2025 as well.
spk00: And Jim, maybe one sort of, I'll refer to it as non-core on the pension, which was obviously a big drag this year. We've seen rates come back in a decent amount. I know you talked on the earlier call about there being some offsets. Maybe just help us understand the magnitude as we sit here today, how you foresee this impacting the expense base, and what are some of those offsets?
spk01: Yeah, the pension expense line is impacted by a number of variables. I would say interest rates are by far and away the most important variable there. It's great to see the curve come down. I mean, it's benefiting not just the overall industry. We talked about debt interest income. It's benefiting ALDI, which we may or may not talk about later. But it's benefiting the pension expense, too. So we have been looking at some what I thought were potentially material increases in the pension expense once again for 2024. That's looking a lot better now. I'm sleeping much better at night. You know, I would say interest rates make up probably a little over half of the overall variables that go into the pension expense calculation. We're still above where we were in 1231, and I'll remind everyone all these actuarial assumptions are set on 1231 at a point in time, the way the accounting world has set it up. We're still going to be materially above where the 10-year was at that point in time, but we have a lot of factors going in our favor in terms of actuarial assumptions and you know, based on where the bond market is, we're expecting higher returns overall on our bonds within that pension trust. So at this point in time, if you looked at the sensitivities on our pension expense, you know, I think we're going to be potentially well less than half of what those sensitivities might suggest. And at this point in time, it's looking like it may not be a material drag on earnings. But again, a lot of assumptions will be set between now and 1231. And as Kurt said, we'll talk about that at the fourth quarter earnings call.
spk00: Maybe an update on credit, what you guys are seeing in the portfolio, particularly some of your higher risk areas, anything specifically within CRE. And you guys have been operating below your targeted loss range. Any insights into how you see those progressing over the next year or so?
spk01: Yeah, overall credit, as you know, has been a strength of Comerica. And during times of potential slowdown in the economy, we've always shined in that regard. And at this point in time, we feel really good about credit. Do we expect the near zero or negative charge offs to continue in the next year? You know, let's face it, probably not. But at this point in time, we're not seeing anything that's overly worrisome. You know, we have our eye on, of course, leverage loans. And as Kurt, I think, implied in his opening comments, leverage loans aren't something that's a business of ours, but some of our middle market companies naturally find themselves in that position, as well as TLS and So we have our eye on leveraged loans. We think that might be the canary in the coal mine, but there's nothing that's overly concerning us at this point in time. You know, we've seen some migration there. We've seen some migration in TLS, which tends to be leveraged in automotive, but we expected that migration. There's nothing really surprising happening there. Overall criticized loans for Comerica are still a blower historical average. So we're not seeing anything to be overly concerned about. There's obviously been a lot of focus on commercial real estate in the industry. And that's an area where we continue to feel pretty comfortable with where we're at right now. You know, when I look at what differentiates our commercial real estate credit, you know, I think about strategy. You know, it's mostly a multi-tenant, you know, class A infill strategy, storage strategy, very little office. Office is not a focus of ours. And where we do have office, they tend to be granular credits and they're not inner city based or more suburban based office. So, with office being less than 2% of our loans, just not a big concern there. So the strategy works in our favor. Our structure works in our favor. A lot of equity in these deals, typically 30 to 40%. And so a loss in value might impair some of the profitability on the part of the owner of the project, but doesn't really impair their ability to pay us back. And I don't necessarily even see a correlation between migration and ultimate losses on the commercial real estate portfolio for that reason. And then I'll just say tenure. Tenure of our customers, most of our customers have been with us for many years. We know them very well. We're very careful about who we onboard as a customer. And then tenure of our relationship managers all the way up to the gentleman that runs that business line. So we continue to feel really good about all aspects of credit. We do expect things to normalize a little bit. We are keeping our eye on some things. There is some migration going on, not surprisingly, but overall feeling somewhat good about it right now.
spk00: Maybe switching to regulatory and capital, sort of a two-part question. You are below $100 billion, so some of the rules don't pertain to you, but I think you highlighted it would be a 400 base point or so impact. Maybe just talk about how you're managing your capital positions. Are there strategies you're continuing to mitigate the exposure of AOCI? And then second, you indicated I think you're not likely to repurchase shares in 2023. You know, how are you thinking about repurchasing 24, and what would you need to see to resume?
spk01: Yeah, I mean, number one, you know, we certainly feel quite comfortable in our ability to meet the rules as they've been proposed in Basel III endgame by the phase and period of 2028. Earnings capacity certainly will allow us to do that. The drop in the curve certainly was helpful to AOCI recently. So overall, we feel quite comfortable in terms of meeting those requirements. In terms of share buyback, we do keep our eye on the curve because AOCI has been my number one focus right now to make sure that didn't go the wrong direction, waiting for the rules to be finalized, of course. And, of course, first and foremost, we like to use our capital for customer growth, which we expect to come back at some point in time. You know, I would say that share buyback is not likely to be turned on early in 24. But that is something that we will monitor as we move through the year, keep an eye on the overall economy, where the curve has gone with the AOCI, where loan growth is going. And that's just something we'll continuously monitor as we move through 2024.
spk00: Kurt, a couple more things to get through. So when you think about the cost of regulatory compliance and the operational readiness, I think you talked about being partially ready, given that you were already subject to a lot of these regulations before tailoring. What do you think the costs of preparing to comply with this be? How much would it cost you to get ready and what would be the ongoing cost?
spk02: Well, just maybe from a context standpoint, so at the end of the third quarter, we were $85.7 billion in assets. So we do believe that we've got a number of years before just organically we would get over the $100 billion threshold. But we are thinking about things and looking at capital from the perspective that at some point, we will be over that threshold. We've been working now for probably 18 to 24 months on readiness for that, and I would say we're probably over halfway through the journey of the things that we think we would need to do to be fully ready, and we continue to work on it. And we've anticipated the cost being about $50 million from a run rate perspective, and Some of that would already be sort of built into some of our expenses in 23, and sort of the forecast will give for 2024. But we think it is manageable, and we will certainly look for other ways to sort of offset some of the expense associated with it.
spk00: Two last questions you're hearing in the last few minutes. I think you had made some comments about punching your way through $100 billion, and then the earnings call you seem to indicate M&A is not a near-term priority. Help us maybe just clarify the position on M&A. Beyond an acquisition target, does an MOE make sense for you strategically?
spk02: Yeah, the question I was asked at a prior conference really was around if you were going to do a deal, would you want to do a larger deal? Well, certainly. I mean, from the position that we're in, if we did do a transaction, it would make more sense to do something that had a little bit more scale to it so that you didn't just sort of creep over the $100 billion mark, but you went over it in a bigger way. But I want to be really clear. That's not where our focus is. Our focus is on organic growth, as it has been. We've been a very patient acquirer. Those of you that know us well, we've done one deal in the last 20 years. We've always felt with kind of our commercial orientation that the better model for us was organic expansion. Examples of that, like moving into the southeast, expanding into Colorado, or strengthening our presence there more recently. And a deal would have to make a lot of sense for us strategically. sort of alignment, geographic alignment, cultural alignment, and ultimately something that we believe would be accretive for our shareholders. So, you know, that's not a major focus of ours. We'll continue to watch the landscape, so to speak. But, you know, some of you may have taken away the impression that we felt otherwise based on prior comments, but really that was sort of the context upon which that question was asked.
spk00: Maybe one last question. So your direct express is a slide in the deck. I think the contractor is up for renewal beginning at 25. Maybe help us understand the bidding process. When would you likely expect to know whether you would be retaining, and if you don't retain, how quickly would you expect the deposits to transition to a new provider?
spk02: We've been the provider of that service for the fiscal service for the Treasury for over 10 years. We've gone through two rebidding processes already and been successful in retaining that business. And so, you know, we don't know how it'll play out necessarily, but we feel like we've done a really good job. We're proud of the relationship we have and the job we do in taking care of those clients. The bidding process, we believe submissions will be in the early part of 2024, and we don't know exactly the timeline upon which they'll make their decision, but based on what we've seen in the past, it's probably seven, eight, nine months of consideration. So probably the summer second half of 2024 we would know. The only thing I would say there in addition, while it does represent some deposits for us, we believe that if we were not successful in retaining it, all the modeling we have, there would be a transition period. It would take a period of time for those balances to transition away because the new provider would have to get set up. You have to reissue cards. You have to transition sort of client by client And so there would be sort of a wind-down of the program, and hopefully we'd have opportunities to offset that with other things that we're doing. And we are in still the state government card programs, and we've got a number of those and some others that we're looking at, and some of that would sort of help to sort of offset if we did lose that relationship.
spk00: Great. Well, we're out of time. Please join me in thanking America.
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