Q4 2021 Earnings Conference Call


spk_0: the morning and welcome to take was fourth quarter twenty twenty one earnings conference call as a reminder this conference is being recorded i would now like to turn the conference over to the chairman and ceo chris gorman please go ahead
spk_1: thank you for joining us for three corpse fourth quarter twenty twenty one earnings conflicts cause shorting me on the call today are done kimball or chief financial officers and marksmanship or chief risk officers on slide to you will find our statement on forward looking disclosure and i guess financial measures it covers our presentation material and comments as well as the question and answer segment of a call i am now moving to slide three this morning we reported a strong finish to a record year for the fourth quarter earnings per share were sixty four cents or two dollars and to sixty three cents for the year before we discuss our quarterly results i would like to provide some perspective on our performance for the year importantly we continue to deliver on our commitments and make progress toward each of our long term targets or start with positive operating leverage and twenty twenty one we generated positive operating leverage for the eighth time in the past nine years importantly we expect to generate positive operating leverage ago again and twenty twenty two we delivered record revenue which was up nine percent year over year with growth in both net interest income and non interest income pre provision that revenue also a cheap record levels last year up ten percent from the pro you we raised a record level of capital for clients the sheer over a hundred billion dollars resulting in a record level of investment banking fees our investment banking business has been a consistent sustainable growth engine for t going at fifteen percent compound annual growth rate over the last decade we expect another year of growth and twenty twenty two or pipelines remain strong and are higher than at this time last year we continue to take share in our seven industry verticals we also have leading positions and some very targeted sub verticals including renewables financing and affordable housing in order to enhance our strong competitive position we have continued to add bankers and twenty twenty one we increase our population of senior bankers by ten percent and we expect further growth and twenty twenty two we also saw strong momentum and our consumer business we grew net new households at a record pace and we continue to expand our existing client relationships are strongest growth and twenty twenty one came from the western part of our franchise which grew households that over two times the rate of the rest of our footprint consumer loans and our western franchise were up seventeen percent last year we're also seeing very strong growth with younger clients twenty five percent of our new households are under thirty we continue to benefit from to consumer growth engines low road and consumer mortgage can find these businesses generated a record sixteen billion and originations for the year ending twelve thirty one twenty one we also continue to invest in order to support future growth in addition a growing number of bankers we have continued to make meaningful investments in digital and analytics these investments have accelerated our growth improved our efficiency and enhance the point spirit experience it's one twenty one we launched our national digital sending back low road for doctors which expanded our consumer footprints nationally for a very targeted high quality quite segments seventy five percent of our new business is coming from outside of our traditional fifteen stay put press we also acquired a when strategies a leading consumer focused analytics firm and most recently we acquired zap a be to be focused digital payments platform that provides an integrated and was on board and experience foundational to our model is a relentless focus on maintaining our risk discipline credit quality remain strong throughout the year as net charge us as a percentage of average loans remained at historically low levels we will continue to support our clients while maintaining our moderate risk profile which has and will continue to position the companies to perform well to all business cycles finally we have maintained are strong capital position while continuing to return capital to our shareholders in twenty twenty one we returned seventy five percent of our net income to shareholders in the form of dividends and share repurchases we are committed to delivering value for all of our stakeholders i am very proud of our accomplishments and twenty twenty one i want to say our teammates for their dedication and commitment to serving our clients and growing our business i am confident in our future we are positioned to deliver on our commitments
spk_2: now i'll turn would have done to provide more details on the results for the quarter and our outlook for twenty twenty two done thanks chris i'm now and slide fine with a fourth quarter that completely still continuing operations with sixty four cents for common share of fourteen percent from last year our results reflect record performance for many of our businesses as well continued strong credit
spk_1: importantly we delivered positive offering leverage for both the fourth quarter and the for you we also achieve record revenue for both the fourth quarter and four year we had year over year growth and of minister symptoms and none and for us
spk_2: a return on channel common equity for the quarter with sixteen point seven percent i will cover the other items on this like later my presentation
spk_1: ernest like six average loans for the quarter or ninety nine point four billion dollars down to present the year ago period down less lesson one presents the first quarter
spk_2: the driver of the decline from both period with a decrease in average ppp balances as we help clients take advantage of loan forgiveness forgiveness this quarter was one point five billion dollars importantly we thought for growth and both are commercial and industrial books as well as commercial real estate portfolio versus the per year and prior quarter
spk_1: if we adjust for the sale the indirect auto portfolio of quarter as well as the impact of c or for line up perfectly four billion dollars on average report recess and up over four point eight billion dollars or five percent on it's the basis for the first quarter
spk_2: on consumer time we continue to see strong momentum driven by moral wrote a consumer mortgage combine these businesses originated one billion dollars of high quality ones says cooler continuing on the flight seven
spk_1: average deposits total the hundred and fifty one billion dollars for the fourth quarter of twenty twenty one of fifteen billion dollars for eleven percent compared to the year ago period
spk_2: and a four billion for three percent from the for for
spk_1: the link quarter and years ago comparisons reflect frozen both commercial consumer balance the road with partially offset by continued and expects decline and kind of us
spk_2: the cost of interest very deposits remained unchanged six basis
spk_3: the country to have a strong stable for deposited with consumer deposits accounting for approximately sixty percent of the total deposit next
spk_1: from like a
spk_2: that's what was that interests him come with one point o three eight billion dollars for the fourth quarter of twenty twenty one compared to one point o for three billion dollars a year ago and one point o two five billion for the for airport arnett it was marginally two point four four percent for the fourth quarter twenty twenty one to thirty two point seven percent of same period last year and two point four seven percent for the for for year over year and quarter over quarter so that interest income and manager martin reflect these impacts of lower and doesn't feel as well as the exit of the indirect out alone four point the last quarter which impact of analysis margin by freebase of these were largely offset by example earning asset mess financial margin was also impacted by elevated levels of ladies and we continue to experienced higher levels of the other than was and twenty twenty one
spk_4: couple of areas of interest in the past is in the impact of rephrasing of our interest rates what portfolio and a potential benefit from investing are excess liquidity position
spk_2: today the current market rates actually exceed the average received six rate of current swap portfolio also if we're we're if we reinvested the twenty billion dollars liquid or benefits you know interests income would be about three hundred and sixty million dollars a year
spk_1: we've also included in the appendix additional detail on the portfolio and a half of my body position moving on the flight nice we reported record of non interest income for both the quarter and for year
spk_2: i and income with nine hundred and nine million dollars for fourth quarter twenty twenty one compared to eight hundred tonight as a year ago period and seven hundred ninety seven million in the third floor
spk_1: compared to the year ago period nine interest income increased thirteen percent increases largely driven by an all time high schooler for investment banking that see which reached three hundred and twenty three million dollars additionally commercial mortgage servicing fee increase sixteen million dollars year over year
spk_2: reading this growth was lower consumer mortgage these reflecting higher balance sheet pretentious and lower been on sale march compared to the third quarter nine interests and can increase their hundred and twelve million dollars again primarily driven by the record fourth quarter investment banking that placements each other notable drivers were other income and commercial mortgage servicing to use which increased thirty three million and fourteen million dollars respectively partially offsetting as with a twenty five nine dollar decrease and cards and payments and them driven by lower prepaid card reminisce and now on flights and not interested spencer the order was one point one seven billion dollars compared to one point one two eight billion last year and one point one one two billion in the fire for or expense levels reflect higher production related centers related to our record revenue generation as well as investments we've made drive future growth
spk_5: i've spent levels and twenty twenty one reflects a number of direct best as chris benson we invested in our team including adding and process new senior basis
spk_2: we'd better than laurel wrote whoever national dish or back in the team and an increased marketing and we strength their digital and analytics capability including acquisitions of a few and and stuff these investment and correlated the higher levels of first now cause from fixing hired as well as the professionalism centers on the not personal side we saw an increase in business services and professional fees
spk_6: and computer processing expense and marketing
spk_1: now moving the flight eleven
spk_2: overall credit for your continues to outperform expectations for the fourth quarter net towards us remained at historic lows and were nineteen million dollars or a six point of average well a provision for credit losses as four million dollars that reflects the continued strong credit measures as well as or our for the overall economy and long production nonperforming loans or four hundred fifty four million dollars to school for forty five basis points of period and low a decline of a hundred million dollars or twenty two percent from the for quarter
spk_1: now the flights well he ended the fourth quarter with common equity tier one ratio of nine point four percent with are targeted range of nine nine have for this provides us with official capacity to continue to support our customers and they're borrowing and return careful for sure
spk_2: importantly we continue to return catholics were shareholders in accordance with our travel trailers the final settlement of accelerated share repurchase program to play last quarter was reflected in our circle discourse no additional open market repurchase it's were at
spk_1: additionally a board of directors approve a fourth quarter give an increase of five percent which now places are dividend at making the ass and for common shares on flight thirteen is or four years twenty twenty two outlook
spk_2: the guidance is relative to our for your twenty twenty one results in rangers are shown on the fly importantly using the bit points for guidance ranges would support christmas gonna start delivering another year of has of offering leverage and twenty twenty two average loans will be uppermost single digits on a reporter basis
spk_1: excluding ppp and the effects of the silver and direct auto business average loans will be up low doubled it with such continued growth and average deposits which be a slow single digits
spk_2: that i think i'm is expect to be relatively stable reflecting lower fees and cpp forgiveness offset by growth and the average burning assets primarily loan balances or guys the sims three rate increases and twenty twenty two with the last one in december which would not have a meaningful impact on results for the here
spk_1: on a reporter basis nine interest income will be down low single digits reflecting lower prepaid card revenue was related to the support of government programs
spk_2: excluding prepaid card or non interest income would be relatively stable we expect non interest expense to be down slow single that is once again adjusting for the expect the production and expenses related to prepaid cards expenses would be relatively stable
spk_1: or the year we expect net charges in the range of twenty to thirty basis even are strong credit friends we would expect love last rates remain below arrange for early in the year and to be mildly higher later images and our guide for the gas tax rate is approximately twenty percent finally shown at the bottomless like our long term targets which remain unchanged we expect to continue to make progress on the target financing a more moderate risk profile and improving our productivity efficiency which will drive return overall it was a strong quarter and a good finished the year and we remain confident in our ability to grow and deliver on our commitments to all of our staples
spk_0: with that on outrun the call back over the operator for instructions of the q and a portion of the coal operators
spk_7: thank you and ladies and gentlemen if you wish to ask a question please press of one and then zero on you had to tom found you we're here town indicating that you been placed think you you may remove yourself from to by pressing the same one it's your command once again it's one and then see well for any questions or comments
spk_8: our first question will come from the line of time the carry lift evercore i as i your line is open
spk_9: morning
spk_10: morning john wouldn't see if you could elaborate a little bit more in terms of these the main drivers of long growth are you expecting your most in the digits average some growth outlook for twenty twenty two
spk_1: you know where did you think you can see that you know the biggest outside where did you see some of the momentum building a immense related to that i know the and a period balances i'm pointed to you know apartment above the average bounces on the loan sides at a good jumping off point as a model logo for next year thanks they're john so as you as you look at it it out when the last couple years we've had the benefit of a lot of strength and the consumer loan engines that we've built around both mortgage which was is up basically southern accents twenty six teams and of course laura road which has exceeded or expectations as we look forward i think you're going to see the commercial side leading the growth and do what back from the second quarter to the third quarter and the third quarter to the fourth quarter we had total long growth of four percent in each of those quarters adjusted for both ppp and indirect auto and where i see think you're going to see the growth continue his first of all let's talk a little bit about just what the utilization rates are our historic utilization rates have said mid thirties right now we're at twenty seven every percent that we go up is a billion dollars so that's one source a growth we called the bottom of that if the end of the second quarter and this quota for example wept seventy five basis points on utilization it's my view that once people can get product table probably build inventory to a degree even greater than they had prior and that's because other people have learned a lesson i'm just in time and also i went an inflationary environments there's just not a lot of cost to going along on inventory so to speak other than that we also have you known are targeted scale approach we have some areas that really generate outsized long growth and you think about our focus on healthcare they're certainly lot of consolidation going on there are focus on technology and we have a couple real drivers that i mentioned in my remarks one is renewable energy which obviously there's a from them
spk_2: this amount of capital flowing into and the others this notion of affordable housing which is really have a real unmet need not country so if you think about or backlogs and you think about our current trajectory i think ira i think that guidance is us it is it's it's pretty logical
spk_10: across the christiane you think though it added that really are our skin or were seen a lot of benefit from adding senior bankers we talked about addict and percent senior bankers the here in their health nut dry that commercial growth worth going forward so getting the be excited about the benefits and if you look at the period and balances the only thing they were cautionary as it's so includes but a billion six where the cpp bounces we thought billion five of forgiveness is past quarter and so that will become a smaller and smaller part of of the overall vibe of the still excited and optimistic that the road going forward okay great thanks for that and then separately as common question that we get busy guys have given how solid years
spk_1: your capital markets and idea that and then is the question around the with potential of they consider or he always during the cliffs coming in that the net revenue so can you give us more that a color on higher secret about capital markets revenues as you look at twenty twenty two i know you've indicated you prepared remarks they expect another solid year but bunches to be given some of that more in terms of how we should pick about the yes the the run rate thanks serves so this is a business that for on the last decade we've had a compound annual growth rate of fifteen for set and so it's a business that has a good track record of growing i think it's important to note that in this line or investment banking line we don't have any trading revenues are some of the extreme volatility that one might expect to see from trading one we don't have it as part of a business we trade just to provide liquidity for our customers but certainly within our investment banking wine we don't have any of those revenues the other thing that gives me comfort are obviously or backlogs or backlogs are stronger today than they were a year ago more bankers on the street as dad just mentioned out talking to more customers in addition to that we've made other investments we fought on boutiques that we've successfully integrated we also have hired groups of bankers that around the platform i've said for a long time that i thought that it was a platform that was under leveraged the other thing
spk_10: thing that gives us a lot of opportunity to do business as when you're a middle market bank obviously the number of targets as you can it go down the pyramid expand geometrically and south is really a lot of potential customers out there for us to be calling on and the customers that we do have because we've picked areas like i just met
spk_1: check whether it's renewables are affordable housing there's a lot of repeat issuers as a normal part of their business or we have a lot of repeat business
spk_11: oh okay thank you know any any way to his think about those are we should speak about the level of growth and not miners and are you mentioned you expect growth is years as anyone else think about the magnitude
spk_12: now i think the you know that what we're really focused on is making sure we continue to maintain growth in that business in spite of coming off of a year where we grew up by forty nine percent
spk_7: got it okay thanks chris thank you
spk_13: i next question comes on the line as that see priests that piper sandler and your line is open when a guys thanks for taking the question is gone on a as douglas is something you can maybe
spk_2: as or unpack the expense cancel that i guess is as person i would have thought maybe a little more pressure on that the car sides in twenty twenty two then what you're going to particularly in light of the expectation for such ongoing strengths in the investment banking line so maybe just sort of the the potentates as did you see answer are you keeping as a lid on overall costs a be happy to the to as we mentioned that on the the comments that us we do expect expenses and also fee income come down from the expected decline in a prepaid card activity we did see a nice reduction and that in the fourth quarter and and the year over year change from from that activities to be that ninety million dollars for both the income and expenses coming now in addition to that we have a similar issue going on with property operating lease area we're get request reclassify certain leases and to capital he says from operating leases and so you see a smaller than that but of a reclassification out of the income and expenses and so it will help us
spk_1: a reduction of both of those
spk_2: in other categories where we would expect to have declines and twenty twenty two compared to twenty twenty one would include professional fees which we had some programs that finished up your in the fourth quarter and and had an artificially high level i'm in the quarter and parts of of twenty twenty one that we wouldn't expect going into twenty twenty two and then an incentive system many of or incentives are are based on our performances compared to our planet we clearly suit or plan levels and and twenty twenty one and so we would expect a incentives to be found your over here compared to what we hadn't twenty twenty one now hopefully we'll will have performance that exceeds expectations again next year and this year should say and and and dry that back that but this will seize on outside performance and and revenue there as well and the last piece i'd like to high their as far as expenses as a they're both in the third and fourth quarter we made additional fifteen million dollar contributions to our charitable foundation as a result of have some us additional fee income that was realized than and and so we should see a little lower other expense coming through their now you mention investments that so we will see salaries go up year over year and this part of that is just the expectation that to a married increases will be higher that historically we would see married increases in the two percent range and because of the us market pressures and others we will probably see three or four percent or married
spk_14: increases and on top that continuing to invest in her senior bankers and with were those a ten percent this year or expectations whatever another nice year of growth again and and twenty twenty two and the last piece of of of growth and expenses will be computer processing center we we did see that one line item increase a year over year and and linkohr
spk_12: or and and we would expect to see that continued to go off a little bit too overall and so if you mess all that together and and swirled around a little bit as it is i get to our guys have been going on low down single or that down low single digits with so us i know it's a little messy but that hopefully that helps provide a the more color there
spk_7: yeah it does that's a perfect and i appreciate the thought thank you
spk_10: next we will go to the line of to add cassidy with i b c
spk_15: and your line is open the moniker his mine done more injured
spk_1: chris to conceal in this on the in this in banking i think you guys aren't about retaining about eighty percent of the loans that you can out for these clients the new give us some column what types of loans on any leverage transactions are they a those some low income housing mortgages that you referenced certainty given some color about sad part of the in doesn't banking business yet it it it's a it's a wide range ride and it ranges from investment grade debt that we would be distributing to on the other end of the spectrum we would be distributing to fannie freddie fh a slash heard your ten year done recourse
spk_15: debt and in those instance obviously we wouldn't be retaining any for balance sheet so it's really are kind of criteria for what we hold on our balance sheets and what we distribute first and foremost we start with what is in the clients' best interests and when markets are as open as they are now there's and we have a moderate risk appetite there are certain sleep other places where we can solder serve our clients than on our balance sheets and then the other thing we think about again keeping our moderate risk profile is just not having get out a lot of risk and anyone name such kind of how we think about it
spk_1: nice it's happening in commons earlier to a question about the repeatable business much is it can you get this nest minimum how much of your investment banking business are in those industries that constantly need funding in any given year it's not unusual for a third at to a half of our issuers to be repeat customers of bars and so uncertain it's to your question in certain businesses for example if your a real estate developer and low income housing low income which is the same as affordable
spk_15: your business is built around putting these projects and at work in the business of helping them do that and then and in providing the public financing by placing it the yankees fans all of consonance done you guys have done in very good job in changing the image of key on credits from one it was like in the financial crisis and on the recession's the consensus and need a new references as well as some your camp about credit remains real strong first half of the year and me booster seats normalization trends in the second half of the is it just more into didn't think you feel that way brazil some modeling that you guys can really see
spk_2: yep and came in this cannot be sustained much longer and because it's been so unusually strong but it's a to me it's it's more intuitive alas market the provide all that more color there as well but better you think about it sees the consumer his benefit so much from all the stimulus the provided we're starting to see some of those stimulus programs us actually a wind down and as enzo us we would expect to see some of the consumer performance art director and that's that's a more normal levels of delinquency and charge off level for for the consumer portfolio or are all time record lows and and don't see that as as be sustainable long term commercial i am i would say it's a similar that to if you look at what's happened i criticized classified nonperforming loans
spk_16: the trends have just been is so so far as and an nes don't see anything on the horizon which would suggest that it's good turn anytime soon but that this got would just tell you that are some time ago at the start to see something starts rubber fact close for normal thought it would add to that you know because some somebody the world just the general criticized classified infielders this will begin the moderate
spk_1: he gets it for the level bottoms
spk_17: is this the news for rooms are full that
spk_7: no it's interesting even though the stimulus programs clearly or waning as we look at our but there's about five billion dollars of deposits for our consumers that are greater than three pandemic so they're still lot of cash in the system for sure
spk_18: got it thank you gentlemen
spk_19: thanks er
spk_15: thank you i next class incomes on the line of peter winter with let's say securities and your line is open
spk_2: ah good morning
spk_1: i wanted to ask about net interesting come and i was just wondering time if he if maybe could quantify the impact
spk_2: in twenty twenty two vs twenty one on on both the t v t income and and the swapping come
spk_20: sure can as far as the ppp well said sir
spk_2: we talk to each quarter about what the fee income is that we realized and as and the fourth quarter with forty eight million dollars and so us comes at combine throughout the year the fee income with a hundred ninety one million dollars in and twenty twenty one and then on top of that we had their normal interests and come on the ppp loans over and over fifty million dollars
spk_1: so are we think that two hundred and forty four million dollars of income us actually get cut by that two hundred million dollars to twenty twenty one and twenty twenty two and so that clearly as a headwind forests and so if if if that would have been a consistent the your year we will be showing mid single digit kind of growth rate it's a net interest income as opposed to us
spk_2: wow what we're reporting have been relatively stable as far as a swaps i don't have that the of stuff my head as far as the the impact for twenty twenty two i think the important thing that sets and we get this on the call little bit as as a to what we're seeing for market rates today actually you are at are higher than the than what the us
spk_11: total portfolio of was received six rates are so in other words earth for seen a one twenty five as far as i received six races we have for a swap book and and that
spk_19: that the is is at or below what they current market rates would be for three or four years while afterwards places and the only reason i hesitated far as is what impact beyond that peter is as it says that all depends on the raid assumptions and and anchor we would expect swaps come down and rates go up because that's essentially what the law
spk_2: to do with help convert some of those variable rate loans to float artifact rate laugh cash and just just regarding rates harm
spk_21: can you mentioned to in a prepared remarks ah three rate hikes and and one of them being a december so not much of an impasse could could you can quantify the impact to none interesting come from for every twenty five basis points rate hike and and which are assuming for to constipated us
spk_2: sure kansas as a teacher twenty five basis points
spk_14: for the full year impact will be above fifty to sixty million dollars of additional that interests income
spk_7: our assumption right now that's an r s at liability mismanagement model would would show about a thirty percent deposit beta a we're assuming a much lower deposit data on the first couple of right moves and our outlook and and nes some of our a commercial pilots are tied the that a changes in fly ball
spk_22: now so for and others are the consumer cider are more minister right so i'll that flexibility their as far as i quickly sosa rates move up with that will expect such show a lower paid us the first couple of moves and that move to a thirty basis for thirty percent are paid overtime great thanks to present
spk_2: thank you i next question comes from the line as air conditioning it with you bs and your line is helping hi good morning hours wanted to follow up i am peters clash at dawn on as net interest income sensitivity i just wanted to clarify that fifty to sixty million for each twenty five basis points does include a thirty percent say that and therefore what you're telling as is and where yeah
spk_23: ease
spk_22: you know there's going to be is there know the first few be the first few rate hike should be in theory higher than as fifty to sixty
spk_2: i would agree that there there will be some negative impact initially in erica for of a few commercial loans as the have a floors that are above zero that that that there would expect that really rate increases the have more of a listens and that to fifty to sixty like oranges correct got it and
spk_1: what what can you remind us of the twenty five going to have an allen sloths what see of maturity profile looks like and in a given expectations for a tightening cycle that goes through two thousand and twenty three and out of what are your plans to you know
spk_2: replace maturing swaps and out the debate for in terms of capturing the right you know more of the rate sensitivity vs and replacing the slops for to protect your and i'm the future sure that the as far as a swap say they have a duration of two point four years and and so are as if we look at the or twenty twenty two maturity that the
spk_22: there's about four billion dollars of the twenty five that mature and in that first year we take a look at our position from a net assets sensitivity perspective the of all the time to see where we want to target the right now we're showing about a five percent assets sensitive position the earlier point that was with the assumption of a thirty percent so far as say that and in our offend actually we show that for every five percentage points decline in that status or episodes to be actually increases i appoint a quarter and so are there is a real impact from from that we're are getting their to the point where where the rates are getting more attractive and more consistent with where our outlook would be and and so as we look at the long road that we would be expecting for this year will have to continue to reassess the how much of a swap of we roll over and how much we might add to it
spk_24: if we're if we're and more more come that former curb and and able to realize that with the swaths of that defensive right now we're not a semi any additional swap beyond just are replacing the maturities at some point in time around
spk_1: data and as i could sneak one last one and for crests the press i feel like i'm during this earnings season ceos are in two counts and you are those that are of letting the rate hikes to the bottom line in those that you know our splendid investing the rate hikes in know the way on explain the or expense outlets clearly there are t specific idiosyncrasies you know your your ass strategies loud and clear that you invest back in a franchise and you pay for increase klein activity
spk_2: but as we think about he had a i am a year without tpp noise and good long rallies and rate hikes else how how should i think about positive operating leverage t eleven and and other words or are you going to allow more of those rate hikes to drop to the bottom line and therefore pie positive operating leverage actually widens as he gets further into the rate cycle or you feel like eating see positive operating leverage stable and you take that opportunity to invest it's really the latter erica we we said today that we will generate as evaporating leverage and twenty twenty two but that assumes that we are out there and and best thing and we're investing in our existing people were out successfully hiring people as you know we've made a lot of niche acquisitions we continue to see
spk_12: a lot of flow are so it's really we will achieve positive operating leverage but but we will clearly invest in our team we think we have a unique platform with it gets under library and look at data and dusted it
spk_7: just or reemphasize that point the chris may that the think about the headwinds we have and twenty twenty two for ppp program as of two hundred million dollars or
spk_25: vpn are a number is there are two point eight billion that a meaningful increase to are adjusted or for vpn are without that stuff impact of of of of the ppp forgiveness and so we would have ended an extremely strong positive obering leveraging and and twenty twenty two and and i think though it were continue to invest with rose and would expect that to us continue to have a nice trajectory in the twenty twenty three mb on
spk_1: thank you i'd next question will pounce on the line of matt o'connor would die to pay and your line is open you guys are less reliance on overdrafts or not sufficient funds
spk_25: and familiar clarified maybe give us an update on what your strategy is they're gone for your for the changes and the industry and what the impact of the on your revenues are this year and maybe look out a couple years
spk_1: two met so you're right for us did say on a relative basis it's not as important but kind of starting a what is most important as were relationship bank and so it is very very important was that we have a value proposition that is attractive to our existing customers are into our clients are currently
spk_25: twenty two percent of all are checking accounts or what we call hassle free and by definition you can't overdraft it's with that with that accounts and also there are absolutely no fees on a monthly basis having said that obviously in the last couple weeks there's been a series of changes in sort of where the market is and we will continue to reassess where we are making sure that it's a us as i say a great that
spk_2: you proposition for both our customers and prospects
spk_26: okay just remind us of what does the total and twenty one and are you have them he a changes and the guidance
spk_2: though aren't those the if you look at overdraft fees for us and twenty twenty one i think they would just over one point five percent and we haven't made any formal changes in our model yet as were assessing where we're going to come out
spk_27: okay or another separately and quick clarification question heard arguments and about a times in accounting on only thing and pack in the fees and costs
spk_7: they got about three just damn offense or take out both of those fees and costs and them
spk_28: my great nuts out or is there are no interest income impact will let us for for for that those two line items you would see them declined by a little bit though that would be completely removed a bit but there are certain leases that we have currently is included in our opportunely accounts that will because consider the capital he says go going forward and so you would see that opportunely income and up release expense both declined by twenty to thirty million dollars you every year from that you would see the net difference going through the net interesting as great okay i guess
spk_1: thank you next oh god line as much me out with well side on securities and your line is open i hate i guess i have a positive and negative question that media the negative question first but wage pressure you're hiring a lot of bankers are you saying wages go up and technology and outside what are you saying and what are you assuming as part of your expense guides sure it will force will get more like up so a couple things we like everybody else or seeing wage pressures and if you go back to go back five years and you look at our entry level teammates depending on what they do what their background was what geography there and they are starting wages are up over forty
spk_28: for says so that's over five years that's that's real and we've been saying that also there's wage there's just certain areas where there's even more wage pressure on one would be
spk_29: certain areas around analytics and technology
spk_28: those employees are and teammates are obviously very valuable was recruiting in those areas so you see if inflation there and that it's pretty well documented
spk_30: we and others gave junior bankers and our investment banking business increases sort of mid cycle so that's kind of we're we've seen it as from an overall planning perspective we typically would think that we would have to put said merit increases every year would fight shooting for three to four
spk_28: this coming year mike
spk_1: okay and then they are deposits class no good deed goes unpunished i'm not record and as bagging markets last year record this year i now use his he grew and ran that business and them yeah you're the only cat market player that i've heard so far
spk_31: to guide for higher twenty twenty two results
spk_7: some people said ceos as said impossible cops ah normalizing lower yeah you're saying it should still go higher that you don't need to put yourself out there with that specific forecast look at you that extra confident yes it's it's it's a few things it's first of all the fact that and i mentioned this earlier is that the line item that you're looking at doesn't have any trading and it with trade just for the benefit of our customers liquidity we have a lot of repeat customers we as you know might have built the business on this notion of targeted scale around certain sectors of the economy that are growing and that need capital places like healthcare technology and i mentioned a couple of the subsectors as well and we continue to to to
spk_32: add to our platform and and as i mentioned we have a unique and under leverage platform that we continue to hire teammates we grew our number of senior bankers by ten percent last year i'm looking at our backlogs obviously there's no guarantees in the deal business but i feel really good about our team and i feel good about the moment a good business
spk_33: in spite of the fact that as you point out were up forty nine percent year over year i thank you thank you thank you
spk_2: next we'll go to line of evil him a i would think of america and your line is open good morning good morning i guess just or done one question on fun or put on the sensitivity on slight eighteen you outline twenty billion dollars in cash and shot them securities ah in the numbers you provided earlier the fifty to sixty million what are you assuming in terms of missing some of that cash
spk_33: into longer needed assets and loans just give us a biscuit color own dad and also i think this and fast you've talked about maybe two or three billion dollars in deposits that could leave as things normalize consumers are back and out and about he was a perspective on what you're assuming in terms of deposit outflows as far as the real rid of women that twenty million twenty billion dollars of liquidy that the we were thinking that for twenty twenty two that says it figures uses of them excess liquidity will really come from loaned me as a week we expect from this point forward that the or loan balances will outpace the part about as as far as growth and and so that
spk_1: was a use of some of that the excess liquidity and and twenty twenty two so a strong position after that are simpsons with word to have a reinvesting the runoff which is about when a half billion dollars of quarter was another a billion three billion dollars a quarter of of additional rose and so is it
spk_33: doesn't have any significance or redeployment of that the excess liquidity and to the bond market at all so us
spk_1: with said something will continue to evaluate fine tune as as as a good throughout the year
spk_33: on the deposit the assumption that the we are still going to grow your rear and deposits but at a slower pace than what we see know i will be honest and tell you that the over the last few years we've all been wrong as far as or deposit growth and has come and stronger than what we would have expected in the balance is have retained or longer than what we would have expected but it's some
spk_1: points on we do think some of that cash will be put to work is is us or from or company for the there to have a opportunity to invest in an inventory and other things like that to support their growth and and we do believe the consumer at some point time will will start to use the cash flow the paper said such as well it's helpful and i guess separate questions on loan goes you talked about are some of the see a nice utilization rate of informing your guidance you also talked about don't have escorts franchise and s the household acquisitions been two weeks what you're seeing dennis of the footprints how big is that all the household acquisition in terms of actually translating into heaven you don't lose any calories in for light on that shovel that one data point that i mentioned was in the west we grew our loans on the consumer side by seventeen percent in twenty twenty one and and a lot of actors goes back to targeted scale a lot of that growth was frankly around mortgages for doctors and dentists
spk_34: got it and is is that where we should see growth is tied to consumers it in that medical sort of political points out that such one of the areas but i just think the demographics as other the point i was making on the west is just the demographics are much stronger than other
spk_7: parts of our franchise and it's really important for us we're focused on growing in the west the a growing and growth markets and so are the opportunity there is about to and and a terms a households we group households to acts or in twenty twenty one in the west
spk_35: and just one or is a good sneak in how many more else legs up a to any kind of opportunities that are dead and are at any particular areas they usually really focus on when it comes to these acquisitions
spk_36: so there are a lot of opportunities because we've been involved in the syntax space is an investor as a partner for well over a decade with pretty tight end of the ecosystem it's not unusual for us to see ten or fifteen deals a month so there are a lot of opportunities are
spk_2: first screen is always how does this help us distinguish ourselves with our customers and a lot of and tax are very good at taking out one particular pain points or a certain clients us and so that kind of how we look at it so i think they'll be a lot of opportunities the interesting thing for us is zap is one of the first send text that we've acquired since exclusively focused on our commercial franchise in the past we've really made investments are on the consumer side so i think going forward or not at the expense of the consumer side but you'll see us continue to invest on the on the commercial side it's helpful thank you said you thank you i next question comes on the line of came mceveley with stevens and your line is open
spk_36: hi good morning more territory
spk_1: maybe don just a question for you i was when if you could be to help us think about the first quarter a expenses based on some of the comments earlier on this call and in the fourth quarter and and maybe some of the step up or or i'm seasonality that he did typically can see here's a tip we we would expect to is normal seasonality their that for first quarter tend to be kind of a low spot on on revenues for for for many the areas that the the day count is this is your and so that drives a of the that the revenue components kappa markets really to revenues and to be lower in the first quarter as well and so with that you would expect to see incentive coming down the nicely i could convict compared to this the fourth quarter as as well because we have a high correlation for the and send a coffee cup calculations to us as a total revenues the other expense categories we would expect to see from decline them from the area that i've mentioned before employee professional fees
spk_37: the up lisa expense will will start to say then and some of the other expense category should or should also shows some some declines of there because of the us
spk_7: with nonrecurring type of items that that they hit us the fourth quarter or also
spk_38: i get and then is a follow up on his four billion dollars a good quarterly run rate for twenty twenty two as i think about consumer loan originations and can law road continue to grow as if the consumer mortgage channel comes down of it there's a couple things going on their fish you think about our consumer business let's start with law road they had obviously about two billion of a rich nations in spite of what was a federal student loan payment how they all year so i think actually there's a little and up the man there as you think about our mortgage business
spk_1: that will come down in terms of volume we we are originations a fourteen billion this year we're about half purchase half rifai we will exceed the and be a numbers and take share and salsa those but i would expect purchase to continue to rise and obviously based on our forecasts for interest rates we would expect read five to drop off would rather significantly
spk_39: thank you both and you
spk_38: thank you i next question comes on the line of kin as them with jeffries and your line is open
spk_2: thanks good morning nice couple of rick ones thumbs you mentioned that he argued for year retention of that are commercial investment bank originations was eighteen percent you had been doing a little bit more than twenty so just just checking that while the number was do it in the fourth quarter did you actually keep a lower percentage and is at a potential driver you know presuming that the organic origination grow so what's good in your outlook for twenty two
spk_38: it's it's a good question what really goes back to on
spk_2: what's in the clients' best interest and and they'll be sometimes where of financing we will actually we won't fall any of it's sometimes will hold a piece of itself any fluctuations you'll see there is really just a function of us taking our clients to the market that we think suits them best okay gotcha that can move okay is dawn can you talk a little bit about what you're buying securities that today versus what still running off and how that the front of that backpack looks going forward sure the last quarter we're gonna run off field of two point one person on roughly two point seven billion dollars that in the fourth quarter we blood as securities and of one eighty two and or even when sixty two and enough around the into the year that had moved up to about a one eighty to one ninety it's it's actually north of super said today so are getting that point of a break even as far as a rollover of of the that the portfolio as well
spk_38: okay great and last one just on on capital year nine for that's right around your your zone where you want a way of so can you talk this about your rw a gross vs buyback and and how you think about cap return for after the dividend thanks
spk_7: ciaran and enough to keep you fit on our priority their the for the first is is to kids into is for organic growth we we have seen the strong alone growth than and and forecasting for continued insinuation of strong growth and so that will require additional countless for this second is this for a very strong a dividend and and we did increase
spk_1: or florida nike and a half cents a share and and still continue to target
spk_0: somewhere in there forty to fifty percent kind of a range and and
spk_40: and then after that you share buybacks it's it's a manager rock f opposition

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