First Republic Bank (FRCB) 13 Jan 232022 Q4 Earnings call transcript

Company Profile

Participants

Mike Ioanilli	Vice President and Director of Investor Relations
Jim Herbert	Founder, Executive Chairman
Mike Roffler	President and Chief Executive Officer
Mike Selfridge	Chief Banking Officer
Bob Thornton	President, Private Wealth Management
Olga Tsokova	Chief Accounting Officer and Deputy Chief Financial Officer
Neal Holland	Chief Financial Officer
Steven Alexopoulos	JP Morgan
Dave Rochester	Compass Point
Casey Haire	Jefferies
Manan Gosalia	Morgan Stanley
Jared Shaw	Wells Fargo
John Pancari	Evercore
Bill Carcache	Wolfe Research
Erika Najarian	UBS
Chris McGratty	KBW
Terry McEvoy	Stephens
Andrew Liesch	Piper Sandler
David Smith	Autonomous

Call transcript

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Operator

Greetings and welcome to First Republic Bank's Fourth Quarter and Full Year 2022 Earnings Conference Call. Today's conference is being recorded.

During today's call, the lines will be in a listen-only mode.

Following the presentation, the conference will be opened for questions. [Operator Instructions].

to and call Director like Ioanilli, to now President Vice of would turn over the Mike I Investor Relations. ahead. go Please

Mike Ioanilli

Thank Republic First call. welcome quarter and conference Bank's XXXX you fourth to

Holland President; Founder Speaking will Chairman; CEO Officer; Banking Wealth President be Financial Bob Herbert, Management; Chief Neal Mike today and and Olga Deputy Chief Selfridge, Chief Chief Tsokova, Jim Mike Executive Roffler, Thornton, Financial Private Officer. Officer; and Accounting and Officer

that call to Before make to assumptions. over we I note call subject may statements please are the risks today's during hand forward-looking Jim, and that uncertainties

We measures to which not discuss with measures our addition should substitute a financial accordance for financial also performance certain non-GAAP as prepared in be considered in of GAAP.

the actual FDIC the could uncertainties the any measures filed website. today, of risks most the all materially reconciliations from financial GAAP For and results see the statements differ calculation financial a on cause bank's bank's and for Form the non-GAAP to available X-K filings comparable forward-looking including of complete that to certain more of discussion measure

like to I'd to call the now And Jim Herbert. over turn

Jim Herbert

Thank everyone. you, and very Mike, morning, much, good

very First time-tested model perform Republic, service year was business to strong really culture our continued It and well. a for

our in In best year fact, many it was ever ways.

Score, Our morning, is new satisfaction announced was actually Promoter XXXX strong. extraordinarily our level Net this which highest is ever client

year First at just during This to our five year. growth were assets led end client Republic. focus Exceptional the for non-performing service, low organic Our safe basis lending even strong points. is and

grow is times to for rare. very billion record like quite the uncertain viable a In In record safely XXXX, and to and earnings $XX ability total these, continue and had loans year. grew we

increased perspective Fed The it. to XX rate our environment to last put XX has about interest the net Let provide rates current see tightening XXX some time, the another income. Fed inversion Treasury our call has on me points. rate take days net Since cycle as pressure basis the raised we begun a the same basis moment the ago, and XX-year on resulting and declined points. At margin has interest some

and that Cycles cycles. this of are has type shown just duration. are a curve experience history limited they However, inverted has that yield

First there tightening and last the of years, to yield to tenure especially currently prosper have be prior history, Fed consistent Republic's cut cutting the will also over During The has this We've year, our average, after the XX-year Fed continued five them and the cycles one. rates cycle. expects to been after less year has through back than On grow rates started with tightening the a each start assumption. market which and half peaked. during current XX is

market performance staying results delivering all truly credit, very our focused delivering strong on safe, model providing and committed to through We're The we of differentiated growth solid exceptional results is follow. bedrock and very the executing remain our conditions. maintaining organic service,

Now over CEO let to Roffler, turn call Mike and President. the me

Mike Roffler

share. a record growth, per and with loan record Thanks, loan terrific origination Jim. record volume, was XXXX revenue year earnings record

covering by key the results year. some begin me for Let

Total importantly, XX% share than loans per down earnings wealth This over in net X%. per And strong performance. share down tangible have to the total value have book has XX%, increased during XX% year. period. has grown while up grown financial grown interest revenues led management has has growth X%, deposits income strong total XX%, the were was S&P Year-over-year, XX%, outstanding only XX%, XXX more the grown same were turn assets

growth methodically culture through of the as of result very we positioned capital We over well our to safe, a model. As more well focused business execution capitalized year time. service challenging raising to deliver ahead, remain look a we and remain consistent and strong opportunistically

end, quarter million. at XXX the was Net ratio than fourth less remains credit $X offs leverage excellent. quarter quality Tier-X for were charge Our

were the at year, of only a points than or of total five million average basis X single X/X year charge basis assets. assets less offs less loans. than net the Non-performing For ended entire point of

do of Jim deliver one mentioned, quality our As best is levels this on ever. stretch not We growth. loan credit to

driven exceptional growth consistent and is Our day. by service, one at each of every a execution client client time

is time, our released Today, pleased banking a we client have Score of at of achieved to record satisfaction XX. survey, from our industry. for high Promoter year's is declined also scorecard. a last score, satisfaction the the overall At the which the results This XXXX We're same score an Net increase record was client time.

banking promoter XXXX, net XX. In only to the industry score U.S. for declined the

Our even environments. so more and during service disruptive model focused challenging is truly differentiated,

years we our core We largest brought XXXX, successfully on XX we've excellence we undertaken. also that our investments banking into ever. continued support During area thoughtful teams, one best by market. make upgraded location Seattle our expanded and And opening ever banking the to project growth. We wealth system, in technology recruiting first service the the of manager new

yield As a been operating curve. Jim challenging mid-November, have mentioned, we with since

exceptional margin in moderate business At time, we to to same growth. term, the To the leverage households. and remain continue drive long-term grow focused navigate new near the expense help the our our and reputation total pressure us service on to we of continue

and more drives with us do our their and as growth Our focus friends stay refer service with colleagues. on us clients

fact, growth for strong very since a Over this Overall, a ever First prior of and founding. deliver year. double to time, rate In driven was XXXX This XXXX during for Republic. it has years nearly year shareholder value growth as satisfaction, our continuing XX%. compounds level consistent XX by is of very total strong the the increased and households highest client our profitability

over Now I'd to the Mike turn call Chief Banking to like Selfridge, Officer.

Mike Selfridge

you, Thank Mike.

was at update me business. record across on billion. an for the volume Let deposits year a provide lending our Loan $XX origination and

XX% of lending year during achieved single-family for fourth Both accounted family record residential single the diversified. XX% estate the volumes and volume Purchase real secured year. during Our the quarter. remained activity residential for well and multifamily

have slowed, has This rates. base so a activity the loan repayment for strong growth. provides refinance As

originations note expect some first We continue seasonality have loan with typically to loan I growth somewhat for to deliver the being XXXX. mid-teens slower. that quarter would

to In credit, during for we to the terms continue was conservative loans average maintain just The loan our real year all XX%. originated ratio value underwriting of standards. estate

to banking, business own we continue Turning they the to relationships our clients deepen to following influence. businesses by or

the XX%. lines credit a XXXX, increased commitments and clients. Our grew relationship-based The strong of were loans slightly client to line call on during business quarter. up approximately to Business base utilization XX% our leads of model also to referrals new In by capital level year-over-year. business fourth rate XX%

call year we as acquire to XX% new the grew clients. Our during continue line commitments capital

Turning were pleased year-over-year, and up deposits, X.X% that are to we total quarter-over-quarter. deposits XX%

result CDs as XX% mix of total We continue shift deposits a September, accounted represented up total see of in at year September. end at in from XX% of deposit Checking rates. in year X% for XX% rising end to and down deposits product a from

Preferred banking offices for drive important continue channel clients gathering. to an service our deposit provide and

the we open our existing to new expect selectively to our year, next offices footprint. Over deepen presence in

and to more decade which Our growing began strong next continue deliver relationships, of generation client our results. than ago, a programs for acquiring

part clients households XX%. These see the long-term to of that millennial of the growth are younger grew our attracted high-quality and XXXX, we same strategy are First have always In households Republic.

differentiated Net ability to exceptional Jim Score and service. our demonstrate continues client our Promoter to deliver Mike As noted,

to additional Let me take detail. some a moment provide

of the economic of we three a each us who in our past core bank. our have as nearly lead system clients is increased overall thirds clients For score as a net in bank, even And score. XX us importantly, promoter uncertainty. early identify our of Remarkably, XXXX. net as with higher score lead consider our dealt as rising promoter And we and implemented than levels new years, banking two now pandemic,

scores clients. And business every across high time, every line region, during also every this our of consistently and generation increased of

our Our long-term the satisfaction growth. high remains client of driver

to let Wealth Bob me call over President, turn Private Now Thornton, Management. the

Bob Thornton

Thank It year was successful very management you, our for business. Mike. wealth a

was strong growth management fees total services. foreign growth insurance inflow. the strong and also net in these increased the diversified fee S&P our year-over-year X%, XX% during XX%. up year, year. more is was fees management down Client revenue. increased the and actually the includes only year in from Wealth than than while the During management under combined XX% down by services driven products more assets XXX exchange This from were these further strong wealth assets prior revenue fee The from brokerage trust, Investment management

volatility. As take We highly market clients needs we've to conditions market engage opportunities is understand noted these even service client times their before, our our and during of clients valued as change. more exceptional by

level to of of totaled than regard, benefits year, strong deposit and of to driven fact, our a clients holistic referrals, our meeting key now a the of model sweep colleagues our XXXX is AUM and business In during $X strength was bank's balances from and year wealth In needs. wealth over management balances by total represent billion a new this our Wealth relationships a XX% referred our billion. wealth client the referred through strong referred more deposits management, bankers over growth management management $XX.X particularly relationships. is This and approach deposits. clients banking and deepening internal of

teams continues included In of attractive Our strongest very management to welcomed one teams five XX in First XXXX, for integrated ever. professionals. our banking This and to Republic, and quarter we successful also fourth make manager wealth wealth model wealth a alone. years destination Republic First the new

management Republic, the of far continued So welcomed two in new this investment to we've reflecting First long-term teams success our XXXX, already in business. wealth

to exceptional service, well. continues opportunity relationships team execute I'm new a are our very acquire our to deepen demonstrate excited, Overall, great existing these households. and

Olga to Officer over Chief to Financial Accounting Deputy like the turn Officer. I'd Chief call Now and Tsokova,

Olga Tsokova

discuss our and Bob. Thank strength will I you, stability. briefly

strong. remains position capital Our

remains of we quality year XXXX, capital of fourth in quarter. successful Tier-X stock a XX% During At ratio average assets end $XXX total was over X.XX%. high added Liquidity new the strong, through offering. also for assets million common liquid Tier-X leverage net

credit remains excellent. Our quality

were year the for million. only off charges Net $X

by This turn the Chief loan is remains a the strong. multiple our credit for Financial sheet Officer. was Over Holland, into Neal call over our to nearly was growth. our same which million, now losses strong Heading balance XXXX, driven $XXX XXx. I'll And of period, provision

Neal Holland

very Thank you, Olga. year. It was a strong

safe Our credit strong our powered client exceptional growth. and service

with in the XXXX communicated than were year. or the of the better Our start results expectations line at

the a about take Let talk ahead. me to year moment

the X% continue expect in decline we currently gradually yield second and funds rise rate experience rates half to curve, peak in then rapid year. the With to We Fed current in margin the the the pressure. the of inverted at

be result lower quarter. year XXXX, than fourth to XX approximately XX the a expected net As to interest margin for our the basis full points

model. compounding value key growth base, our Therefore, service differentiated we exceptional the we of net metric asset a result is create As for by our direct bank, business a provide. income consistently a interest

net expect X% continued full year we pressure, be to in given to margin X% XXXX interest income down current only investments. growth for loans, the and Despite the of our strong

a strong As we look in environment. we to continued loan XXXX, rate more normalized expect growth

expect to past As a in deliver strong result, performance. interest double-digit our we with income net line growth

been As cycles Jim tightening for years mentioned, have bank. strong the following the historically

in expect single XXXX, for we expenses expense to Turning growth the high digits.

expenses quarter As taxes to are seasonal a payroll in typically and the benefits. of due first higher impact reminder, the

expenses As our a service, or prioritize we and soundness. at discussed sacrifice growth client not that Investor safety Day, way will continued to we in

and in impact We flat us is third helped our not from on will the already to positive a and have $XXX expenses planned This million base expenses XXXX. we identified expense keep fourth that having quarter. incur

expected The taxes. to is full to rate With be income around XX%. year respect tax

While the current challenging, is model is our strong. environment rate

We service, grow XXXX client new to households and deliver in safe provide exceptional beyond. growth continue will and

turn let Mike call the back Now, to Roffler. me

Mike Roffler

loan a growth, Neal. with credit strong was Thank levels, performance. and It record record client year you, record service

Our model time-tested solid. service remains

service time. Our client executing our entire a team focused remains on at client strategy, one

to we'd Now, be your happy questions. take

Operator

[Operator Please you. we'll Alexopoulos first Instructions] Steven our JPMorgan. ahead. question with And from Thank take go

Steven Alexopoulos

outlook view, picture had my the which outlook, since Investor for a at if worse changed driving Investor I lower NIM into questions, year? the Day, than the big look deeper to bit a guided the you Day. what we from before is NIM the what's it get So it's And

Mike Roffler

Thanks. Steve. Yes,

basis if think then, prepared XX what's think I and we since look I this points. Investor happened bit in the XX, highlighted you has remarks, tenure a gone at the Day, down

how macro And obviously, general. we can't the curve The so control. a can of thing and in control things the we pretty the we inversion our service is on are rates impact has yield the households. And that just environment significant acquire levels

won't And so inversion, partway are that noted, we with through long a very last and which, now it. time as we

about the so that And relative biggest I ago. in to outlook the driver think XX is for days change

Steven Alexopoulos

Got you.

expectations the Is about for upping when sounds XXXX. efficiency that expense together? you like it XX% intact these still Mike, Okay. to pieces think for guided management. you're you put And ratio I a

Mike Roffler

outlook, of planned have identified current little a it the that be we will But deferred, not margin incremental Because bit be will higher. the expenses year. for

Steven Alexopoulos

willing range us? new you Are share a with to

Mike Roffler

mean, I revenue single X% of just net Yes. math the to of rates the high expenses. about decline the that digit of equation, side with doing with interest income, because of growth it's with to just it's XX% guideposts X% XX%,

Steven Alexopoulos

Got you.

then, to And just into side deeper. Okay. a deposit dive the little

where paid rate maybe So the Thanks. it's And that with checking us scenes underlying but more the in from balances you remarkable came the does quarter? X paid down to pretty with mix the behind see to doubled customers? What's moving rate average maybe assumptions? you conversation do and still Where the take you being checking NIM balances stabilize? the see on billion. had typical that quarter, about the Can than prior on

Mike Roffler

think which our about, Well, cost where able a and rates Obviously, And is in the operating XX better facing alternatives leaving I a balances have in focus they organization, people their and service for continue importantly, balance have client what they're clients on The yield about market, of either right checking alternatives. as that's zero certificates billion as needs, other of and to money relationship might management, different bit X.X%. clients we costs. our I deposit, still of achieve with to there's yield. think conversations operating wealth be gone to between their talked ensure that is to checking,

still on I data think like deposits this point, and feel in before range overall we Day. at to And we of XX consistent a low the is XX XXs communicated the at what Investor past. that's we sort about with said right

Steven Alexopoulos

half in if decline come not the to more and Jim Mike, move outlook then, NIM and his squeeze rates know of there down in I NIM the XXXX? to back If in how the that outlook. your XXXX. line that said the X%, with rates of expect to new And more, in by you X.X% were for half, would second guys one commentary say, just Okay. second could change market Thanks. stay I going rates

Mike Roffler

Once changes it of stabilizes, you it there, a from but I don't lot. sort that stabilized think whole

net it that the the real to led is is change funding increase, has now you where But quarter. you'll happened basis. inflection the income linked might starts about costs. inflection a the if think you forward in you're if that is, the I what future, Fed this delays of back pace then grow. the year higher If looks the see delay to impact in or to start half increase of thereafter. to on stable, the year leap to see that interest the And that think XX. you Right the quarter a And that start like when

Steven Alexopoulos

Okay. Great. my questions. for taking Thanks

Operator

Point. go Rochester the Please next from ahead. take with Compass Dave will We question

Dave Rochester

real CDs asset thinking borrowings mix remaining? expect Or Just off? assuming this continue? just that's down level experiencing the pace of did point? you trend just and of of point. subside you Was primarily for Thanks. have of a we growth sort the which the then this about see earning talk are deposits a starting more base do that at expect at type and sort to Maybe do banks to of of that growth, Where which are a trailing the And see curious, bearing and decent on how sticky this you should quick, to funding you get you'd NIM there non-interest you one a amount and lot about. off of at then of you're guide

Mike Roffler

the Yes. Maybe has down. getting -- the is, average balance you're size, on it on what come

have come probably So operate that end there's our pre-pandemic to to of clients as needs have mentioned average down peaked, levels. balances last at their then operating And closer the level have a per account obviously, of year, with. to they I earlier,

I in mix where have will our outlook. and be And year is we to then the are that's rates think that utilized largely checking will with there'll in given than going past. also deposits, like the of greater a reflected growth fund growth this that rate CDs and in we're the outlook, borrowings probably just it loan be the be in

Dave Rochester

And good. thinking going level on about great. Tier-X Okay, looks And leverage Notice issue just capital, you a then Thanks. maybe X%. forward? CETX ratio are Is down just the that bit how all? below an that little at

Mike Roffler

with currently. issue capital No our

we always, a remained common. and capital won't As preferred relative opportunistic methodical to or be

Dave Rochester

one talk loan kind pricing then on the just and today. And Thanks. key great. of one if through Great. was where could production go you rates. your be Maybe That'd last maybe about products

Mike Selfridge

will couple Sure. at rather of and Dave, it's give -- of you today. the Mike indicators Selfridge, more more I look look pipeline locked as a here

or estate single queue. that due about And locked now family close over single to family loans the right X.X%, real locked commercial are So And X.X%. X.XX, whole multifamily X.XX. deals soon, pipeline. little are about about are maybe mortgages These in X%, the

banking business capital XX point prime the range. to and prime lines the be in part minus of call their the larger to XXX that side, The basis changed still minus remains nothing's tend pipeline,

Dave Rochester

Great. guys. Thanks color, for the

Operator

with go We'll Please ahead. next of Bank from take question the America. [indiscernible]

Unidentified Analyst

Mike I forward you actually don't where curve on beta. just to mentioned, out. the In the XX% the on XX% play up follow doesn't things. two rates caught I world wanted still margin, One, get think the deposit to and expect

risk. the Just handicap

we've your that XX generally comfort concern today heard holding? just from much in think the long banks be beta worse mix of this to some has seen tested than costs level for the we've time, outlook a we've not other the what's shift on given long, big could on the XX margin deposit I been the

Mike Roffler

at outlook. point time, is perspective this Jim history given plus this mentioned XX our that best given in And So -- of last as doesn't our years. forever

something year XXX, And of it's moving. is so market you where jumped telling the to as to XX as the feels, rates where also yesterday, are

beta that if the two. But little bit of at a a cycle. because little of catch is passes. is an up, call they what fact I be just so there'll a pace could the or higher slows, And end bit be the hold a quarter extra the time the pace But that always the slowing,

pretty thing confident that does we which it'll the so and know feel know, upon you all that I we one don't And are. control And would where we be is macro-outlook, else. say anyone anyone depending nor

Unidentified Analyst

just -- XX you in And some Understood. terms we back in about of by benefit I'm to in or think half, of quarter the half. assuming so does closer XX NIM I NIM it Like rate talk cuts the it, before did the fall How if as you assume missed your guidance middle trajectory? the down of should there's in by the like bps? to rebounding the X%, year back the second about third margin?

Mike Roffler

to No, wouldn't in dip the half little stabilizes of year you of part XX. see bit the to trajectory a It's towards middle positive that interest into starts a go importantly, I here real increase year. start net of of you have then after back the first in it a the And the to sort half, have and X%. income

Unidentified Analyst

gaining of in, the buy a this -- that is one appetite Jim, it's in in your ton been any terms terms like environments And terms of you've to factoring XX wealth destruction? growth around or how question customers us and Understood. about just share share years? market versus the mortgage How and give last sense I today just a homes just loan of XX was in environment talked last this, of, market of growth. know. different

Mike Selfridge

little moment, is is We all a for lower. mortgage an take Well, are and very bit this special. moments demand of that all know being disruptive market extraordinary like opportunity The know this volume is to The that. us we disrupted share.

us will in the on But pick a a in people is going the up Although hanging mortgage on cetera disruption quite lot. pulling back, that's my just It's guess market, spring up. disruptive it the the platter. et silver nature, is,

Unidentified Analyst

some pricing this did create like product? spreads the as curve, you yield Mike, that -- does earlier power dropped And widen on the mentioned

Mike Selfridge

It's service availability and not a pricing issue. issue. issue It's a

Unidentified Analyst

with are when happened that the see curve? you more send to I'm the the But is the wondering, spreads X.XX on curve? Or whatever better able yield like Will Mike or pricing with just these mentioned? yield less

Mike Selfridge

to on is new this the a turn acquisition pricing [p] asset me But the well-off mortgage, a irrelevant. short-term Let four- of a household like five-year Mike. on or [semi]

like life. a take this. You with for it you They stay into household

Mike Roffler

Yes. said, about these the under little on single good And on Abraham, very and plus production the get at at we've X.XX. are is full want relationship Dave and clarify they say the families meant comment X% as first past, Rochester's to service I what But still -- I pricing lock for to full Republican. a eight clients in

Unidentified Analyst

with helps thanks Thank the That and taking my questions. for you clarification. much, so

Operator

The next ahead. go question comes from Casey Haire with Jefferies. Please

Casey Haire

Operating on that digits NII low question the XX. leverage up next guide double for year. Appreciate

expense wondering, that on job a Just are the good you just guys doing deferring. and front given

I bumped XXX up think million. it to you

do catch-up ratio going deferral? way? an Just that on year all in expense XX, improve NIM to right XX from efficiency next wondering, the is this when starts the see Or a opportunity there we

Mike Roffler

in efficiency than make really are looking our for even the XX to ways a strong as a more There's very opportunity see we're efficient ratio company improvement optimize today. strong prioritize we Yes. in to

We expect operating future. the strong into leverage

Casey Haire

good. very Okay,

year the X/XX? versus the On at growth, we end to is the for switching gears pipeline can how doing sense loan get a

Mike Selfridge

headwinds Hi, I quarter, Casey. last there's been would the from up I but side. And -- healthy, refinance say it's it's Mike And on down year-over-year. Selfridge. as it would characterize well. the very avenues that's other is been Banking, the lending. more high, But other at that would of are a PLP, PLOC, difficult. note there's example, securities Business for I pipeline, doing parts obviously,

into going pipeline healthy quarter. again, So the

Casey Haire

up just And following Mike. on thanks, Okay,

Mike Selfridge

down. say, I'll note I CPR was itself. that growth loan are going to the just also

And so grow. that which gives us good a base to from

Casey Haire

picking experiencing that sort on? certainly in any what color call in capital little bit the were came Yes. up? of November, business stronger Does And you than that then just a

Mike Roffler

XX% just say, well, utilization to from little bit That's XX% of a improvement XX%. a year ago, was would from over down which I

of industry that in seeing, of there the slight And the private active still deals a industry. little still the is fundraising, cautious, was a but for slower overall like drove quarter velocity sense us. bit And just last that So investors. slower pace it's of in of for equity challenged utilization activity but hiccup

Casey Haire

Okay, XX.XX just the great. costs in CD quarter, And bps one and that spot can a more deposit the at versus costs, provide you given that's XX -- if also the spot here. critical driver

Mike Roffler

the of up ended XX an at quarter points. We spot ended And We Yes. with XXXX. we average where XX basis there. looking basis from at about were points

Casey Haire

Okay. color on the level CDs Any versus that on the XXX quarter?

Mike Roffler

to move to trying around, tends position. we're on just depending It where

think So I right I place spots be. the the XXX don't a think meaningful, to it's

Casey Haire

you. thank Okay,

Operator

question Manan Stanley. ahead. Please the Gosalia with the from We'll Morgan take next go

Manan Gosalia

question a the book. of had the on duration I CD

are Some four closer offering CDs the of promo durations past CD you promo the offering that or to were you months. of were in the some

now? bit those an of of just is, the comments what reprice likely and course CD couple offering Or you eight-month they will question over the for extending book So think of next percentage that term the you rolling my is, do what there? have what Then, you're promo quarters? little over doing the if maybe duration on a term? any clients CDs perhaps also the rate right given same Are the

Mike Roffler

an demonstrate service. for eight versus client XX to every Usually the and Currently month I'd presents extraordinary our more us inclined shorter. opportunity are say clients opportunity little on rollover a

so to important is And other conversation with what's a in little so the their the our they drives clients and client role about they a Do opportunity shorter? And needs? want want bit And cash engaging to talk in be they importantly. the bankers maybe do more? think lock to of have most offices are needs? I Do with

sort talked call you what a lot mid-year. sort of of in cycles that a earlier. for range if rollover, sense, us Given I'll the about believe with four-to-seven-month cycle has made does the of what we Staying

in pretty -- range. our been that's that so been has much And duration

Manan Gosalia

Got it.

should majority six to going assume -- So course a we the are reprice CDs of to over three next months?

Mike Roffler

assumption. that's Yes,

Manan Gosalia

that then a -- maybe customer the share FHLB to there And number the with CDs well? is you've openings like new in might are past through good come promo Thanks. said make you offerings maybe that, more in great. you to the there some have that over a anything are it account can given that CDs And mind you of CD rate over Okay, in and Is there so bringing in pivot checking related just FHLB on which tool. you they sense typically customers CDs? acquisition as funding, to

Mike Roffler

first client we'd the FHLB, I little the So choose bit than And more there. first, the always think the on especially now. pricing typically, attractive part CD actually a right

versus and but are And those first first being so different, other something And client, they an absolutely, the the two benefits, foremost. offices. when come into office, experience they

one bring their relationship primary developer our and to them banking. where second we is level have in, meant but checking -- service so their And

the most we're relationship, long-term time, so moment. able build current offering to very And on in over the the which good relationship typically, accounts and rate the just playing the not a important get we're percentage for of client because those checking is

Manan Gosalia

questions. Appreciate taking thanks my it, for

Operator

Let's ahead. from go Fargo. next with Wells take question our Please Jared Shaw

Jared Shaw

or just deferred me is circling the spending that Let technology you on expenses. systems spending? expenses separate general how marketing back of overall, versus hiring maybe on versus the coming much and from and Could deferred those maybe out

Mike Roffler

it's a Jared, good So question.

of in think people we've couple the a I is some really it last Um, years. of base. hired it's of lot broad

will new from bit less system, core efficiencies a we have certain maybe in areas. little we So the hire

headcount less As Mike Selfridge said, growth you in in like any so there. gym less mortgage volume, refinance, need there's

to be less, Investor headcount, business grow Neil mix service, safe in. of in the going factored And for best of grow given bands our we about we're to some this a and so it And then doing focused. spend marketing make approach think that's natural is, mentioned we're to that's sound levels, client else sure also Olga, where's and grow. projected really had to compensation And to and where there's how team we Day, little I the to and some if everywhere dollars to together everywhere, think, had is adjustment bit a continue we're it the at team

we've For two bring to this time. over a and teams for clients into people, as year bank the at announced management, already hire new and wealth them hired have great come us same example, mentioned, opportunity terrific Bob that's

it's optimizing And growth more time. a little continue to and over so spend prioritizing to stable drive bit of safe, our

Jared Shaw

give expect And me, securities Okay, few we and we just what you the the cash go quarters. for as finally, on to as great. assets should guess in can maybe an securities then, next a target Thanks. portfolio, update total I reinvestment rates to on

Olga Tsokova

a Jared, with X. this a fourth end on at low lower The quarter the lowered today, quarter remained there X.X. is relatively six yields X, X.X. yields in just X.X, and at quarter And munis, came Olga the our look during subsequent five, to a similar seen at Tsokova, and the we've And low we in quarter. and Hi, if HQLA end levels X.XX like a at munis from quarter. and as purchases look yields what the higher slightly HQLA

Jared Shaw

thank the next to the you. assets total expect cash the through keep year. we of level Can Great, same at

Operator

with Please go question Pancari Next Evercore. comes ahead. John from

John Pancari

to activity looking as a key really you're reasonable mortgage On would the mid-teens the break if you the going growth can helpful. on expectation that growth perhaps be growth? we're could is particularly side, where mid-teens well you give on on and purchase out by rates what category, as for a loan the drivers expectation, that breakdown we're, Thanks, given us it of the loan at thinking

Mike Selfridge

be growth John, it it's comfortable previous. mix with going we're years consistent say as Mike. would been to loan has is I that. in the mid-teens Yes,

keep acquire, mind, were new households, of banks as mentioned, unusual never it's other on, acquire nothing surprised was the and from, Jim disruption for a We there terms we mix the coming XX%. time even those clients are going clients pleasantly that the where So those refi mix. well. to so nothing reviser And as First in the it's as well, majority in at been That's side better unusual Republican. lending true that

John Pancari

C-side, in to the on see then your baked us and thinking color you case impact of you're it brokerage that about their non-interest for maybe of and specifically, on And All S&P Okay. efficiency how curious XX% how more assumption management you income type can and what XX% investment growth into that just is likely what and give do is growth then separately wondering the expectation, upside right. what kind there, investment range? you base fees, management And revenue. wealth have some could

Bob Thornton

start. This is Bob, I'll maybe

since the be to team so year strong year look In In in we're at we're in So investment -- management that of $XXX investment of range total reflect, September the the part, but of fully the of we fees, we a year growth S&P fees. looking new hires pretty team a wealth million. reflection first quarter, some XX. is looking in hadn't up had and terms hires, benefits. overall we got late management and this for we number management somewhere that our seen fees

Mike Selfridge

part to Yes, John. et income, it big non-interest fees, in And And which have for management that. a stand fees, total also then I we'd the wealth if of cetera. inclusive digits, items is deposit back double of that we other expect is loan be had, just

John Pancari

-- is color the what a indication portfolio. real LTV an the more commercial estate what comment little Mike. at is in I refreshed loans I LTV in but my estate us guess around -- produced, your was, portfolio? real the And loan of give you more real on origination it. think Thanks, And that if is got do you LTV all value have Okay, last just what estate the that and in on importantly, can maybe the you is the to was mentioned over question year, commercial your XX% then

Mike Roffler

last The for has LTV years precise, Mike. it's go about XX% median origination estate John, been $X two and on XX%, commercial median size real to million. just about be would that under about the today

John Pancari

idea a estate other of pressure how as office see have to to here us areas? that an the LTV and book in start for you to book you Do Okay. commercial refreshed how your positioned is give real try

Mike Roffler

standards. our Yes, from no, change conservative underwriting

We more always more I think and clients cautious, and have conservative cautious. are our been even cautious, even

conservative So just expect underwriting. very

John Pancari

Mike. Thanks, Okay. it. Appreciate

Operator

Research. from next ahead. Bill the Wolfe Please with Carcache take go question We'll

Bill Carcache

how to the interest basis follow divergence the to I the XXX your eventually you is net with the interest across will on spread points, address NIM including those NIM points growing commentary, your up would down wanted concerns net converge basis XXX metrics, versus that at margin spread?

Mike Roffler

Well, Bill, in I doesn't difference billion think those the that, between factor $XX of non-interest. nearly thing big two is spread items the the

the we and versus income, concern talked So us what divergence earlier, so we're at the much the, will really all. doesn't interest about focused be more net margin as on

Bill Carcache

like CD then the environment, And think back move XX% over back pre-COVID is just CD to on GFC there's revert concern closer CDs of deposits this but Max that remixing, levels, rate your XXXX. see about In pre we sort was Okay. could topic mix we growing you to mix, of of levels. that in

thinking be non-interest-bearing deposits, lower the that higher? deposits helpful. on non-interest-bearing the about remixing like of are remixing coming CDs Now, of essentially Any would and you mix thoughts

Mike Selfridge

Yes. consumers And need. There earlier, mentioned pre-pandemic. clients to as on starting our average in and is a balances level of operating we and business close that are accounts do approaching

have past. the CDs in higher We run

way some provided clients. into to as to it's that does earlier, here a to And expect continue terrific we and outlook with of deepen continue we we that with new relationships mentioned get And, our reflect earlier trial households XXXX. that

one more. it you so a And was has than the used are now using those others. we periods XX it for it a less it's In And tool use just some bank years. lot periods, of

Bill Carcache

Whether on putting that way? loan at you dynamic the Understood. cash with guys your little on, historically done have line with you financial you If may, instruments you're influence the earning with yields. with a all, about now roughly consider thought in or swaps I on question change in derivative Does how yield that of any final very derivatives? use

Mike Roffler

It does not.

Bill Carcache

Thank taking Helpful. for you Okay. questions. my

Operator

Erika with UBS. go ahead. question Please from Next come Najarian will

Erika Najarian

is My Mike first for Roffler. question

your efficiency natural bill And to you the normal we cycle, are modified behind think share think XXXX and, ratio to expected ahead to looking moves envisioned that is of a more rate investment the a to, volatile goal. difficulty how about XX. think indication a as clear I is us we impact that, Republic, we contemplate guidance they HQLA LCR, put and also in as today be First market what for could you responding to the with us, that end, more

Mike Roffler

Thank and this a XX right you, stabilize, forward, look margin forward when to under to sort think to where which interest we've you're get we after Erika, through net you'd where pressure, go range, I you income period, bit is XXXX. And think a then you I XX many back is come turns, and the cycle for to of when years. when been, the

Erika Najarian

costs Fed have costs where to deposit been to end, rate, follow deposit settle investors obviously, And think the you. to to to deposits are that Thank right, relative XXXX, funds. so when just Funds there, other where think should would zero. up it's terminal Fed while we've How rate a trough to troughs terminal at since seen we we've And tend used about we've to, And cuts in settle above, a we're to looked the starting right, would as historically, where to above about your a been deposits troughs. points, zero. relative

how costs, you can a perhaps starts us easing? of you give how Fed think much the deposit you cut as So sense

Mike Roffler

the thanks right. question. Erika, driven, very for It'll be mixed,

and of continues the the the valuable. of rate hard through one depend like checking our the do what From shift on to the by project that important value things market and because up. be But talked and cost CD up deposits from ends year, about will we've want most money And then appetite, banking. that business end reflective I walk is versus it's wherever a relative will which for it mixed that's think the client of possibly about the to terminal again has that the is money so client of growth of XXXX, just and they checking. the where time-to-time now. And CDs thing to relationships perspective the ends extremely in market. be And And to XX% the

going rates We zero terminal have very continues to the relative strong forward. to be above

Jim Herbert

predict. the high we Jim, it abnormal was But bought Mike to bit is of sort of when driver. add total. It got and a between XX%, is the if said you Erika, that little CDs XX% What for back they it's mix and the many the to XX% back be in the tends before an that, bank is even in the between when of mix rate I long-term it’s money went as mix of the actually checking land, XX% range even into little might checking a The up perspective. market. issue XXs. but We and the range hard long-term historical go -- years

Erika Najarian

to it. it's Got you, from And good Jim. hear

Operator

question Chris I'll go take kB our McGratty next Please from ahead. with W.

Chris McGratty

comment The question. I bit. there's modeling margin full to seasonality bolly lowered any And I on quick know a a some you rate kind help help. of the questions, have quarter a there. Just of Most year But run think any addressed. but any, quarter bullying know rate the Great. been Thanks. tax I coming.

Olga Tsokova

Chris. Hi,

that also, of And of a benefit quarter. a that realized increase remind third quarter, from some costs. loss the had on we life from have our the had goals year. and from contracts. think we couple a brought which benefit in I the the we contributed mark-to-market the we to quarter fourth up items the we of So fourth the our to in policy you, to One, And it use changes for some the last on offset impact positive increases just we insurance spot of insurance

fill for say quarter, within removing if change components think to would two the quarter. those in the And about run rate still yes, the from the you items, quarter. So XXXX those two contributed the third I

Chris McGratty

thanks. Okay,

Operator

take ahead. next question Please Stephens. McEvoy We'll with from our go Terry

Terry McEvoy

is I in on the market Jim present and/or add on think you some call. focus that could near-term that capturing was mentioned strategically the opportunities certain the XXXX, the new of wondering disruption markets some and of you more color if on and the deposits, offices earlier best kind

Mike Roffler

the answer Terry, yes. is

we terms in out around his And maybe we're footprint. existing lot that of expanded disruption or comes expect so have Mike of six of that focused to year relationships Seattle. and We But full offices mentioned And relationships expect as good a delighted next Bellevue, capturing the we're are we Jim breadth on then the over into what with We region. remarks, things in offer. probably mentioned. the

Terry McEvoy

XXXX, guys at in average account think you checking all did put the attrition I longer in question, presentation? term last at X% that One differ from investor that? it's

Mike Roffler

No, it not. did

Terry McEvoy

That's good questions. taking Thanks my hear. for to

Operator

the take Sandler. We'll Andrew Piper ahead. next Liesch go with question Please from

Andrew Liesch

you areas the question anything credit. you most do out on seeing return, And the expect expect Everything of what concerning a credit stressed? Just been you portfolio there? asked and see Are answered. else when to would

Mike Selfridge

Mike, issues don't in expect we right now We forward. feel very positioning going good any it's credit. our Andrew, about

So Mike XX-year the his the usual, And remarks as perspective. quality business basis noted charge is, the credit three and period. over it's offs a of in our from points answer at look net

to So cautious, knitting, relationships. sticking our on being focusing selective

Andrew Liesch

Great.

much. You cleared so Thanks else. everything

Operator

next question from Autonomous. the go ahead. with comes Smith Please And David

David Smith

question a had I team the about wealth management profitability.

to year, it historically, in up even long How the of few it tend been there? long wrap there the of runway profitability? lot last year reach these see does before You've kind teams first of teams a and both you is having lately, start the this to weeks take how

Mike Selfridge

a also quick, of fact actually deposit And successful. the months. we're It's as well, then that's from been which teams benefit getting with really have to usually relatively a XX those function And generally we teams within clients. hired quite a that the lot has Yes. traction year of their

David Smith

Thank it. you. Got

Operator

will question-and-answer closing additional turn Mike And At that today's or this session. I Roffler, any the to time, remarks. concludes conference back for

Mike Roffler

today's ahead. you, forward continue to on year a everyone Thank about the joining the weekend. us and for We're future optimistic to call. wonderful Have look

Operator

for This participation. you call. your Thank concludes today's

disconnect. now may You

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