First Citizens BancShares - Q2 2024

Transcript

Operator (participant)

Ladies and gentlemen, thank you for standing by, and welcome to the First Citizens BancShares Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you need to press star followed by one on your telephone keypad. If you require operator assistance during the program, please press star followed by zero. As a reminder, today's conference is being recorded. I would now like to introduce the host of this conference call, Deanna Hart, Head of Investor Relations. You may begin.

Deanna Hart (SVP of Investor Relations)

Good morning, and welcome to First Citizens' Second Quarter Earnings Call. Joining me on the call today are our Chairman and Chief Executive Officer Frank Holding and Chief Financial Officer Craig Nix. They will provide second quarter business and financial updates referencing our earnings presentation, which you can find on our website. Our comments will include forward-looking statements, which are subject to risks and uncertainties that may cause actual results to differ materially from expectations. We assume no obligation to update such statements. These risks are outlined on page three. We will also reference non-GAAP financial measures. Reconciliations of these measures against the most directly comparable GAAP measures can be found in section five of the presentation. Finally, First Citizens is not responsible for and does not edit nor guarantee the accuracy of earnings transcripts provided by third parties. I will now turn it over to Frank.

Frank Holding (Chairman and CEO)

Thank you, Deanna. Good morning, everyone, and welcome to our earnings call. Starting on page six, and this is the second quarter snapshot slide, we delivered another quarter of solid financial results, including peer-leading return on assets, net interest margin, adjusted efficiency ratio, loan growth, CET1 ratio, and loan portfolio yield. Our board has approved a share repurchase plan, allowing us to repurchase shares in an aggregate amount up to $3.5 billion, and Craig will speak to those details later. I'd like to point out that we were recently included in the Fortune 500 list for the first time. Continuing on to page seven, I'll take a look at, well, I'll take a moment to focus on our business segment performance as well as their outlooks moving forward.

Starting with the General Bank, we saw positive loan trends as growth remained particularly resilient in business and commercial loans within our branch network. We also experienced strong growth in our SBA, SVB Private, and wealth channels. Importantly, we have not made any significant changes in our risk appetite or client selection to chase growth, as we feel our expertise and deep client relationships position us well to continue to grow prudently. Deposit growth in our branch network during the first half of the year exceeded our expectations. Looking forward, we see new production and client acquisition contributing to further balance sheet growth. We also see growth coming from deepening our relationships with existing customers, including SVB-acquired customers. On the downside, we recognize that reductions in interest rates will cause margin compression.

However, we're building strategies to mitigate the expected negative impact, including a focus on the mix of our deposits by targeting operating accounts, growing quality loans, and improving non-interest income from all sources. Our Commercial Bank segment continued to deliver strong loan growth driven by several of our specialized industry verticals, primarily in project financing for energy and data centers. CRE volume remains challenged, driven by the higher-for-longer interest rate environment. Deal volume is expected to remain muted during the second half of the year. While portfolio stress is expected to remain above historic levels in equipment finance, we expect loss rates to decline in the second half of the year and into 2025.

From a production standpoint, we expect this segment to continue to benefit, first, from liquidity concerns bringing the market rates on a greater number of transactions into our target range, and second, from a focus on originating larger, higher-quality transactions. Funding for the Commercial Bank is aided by our nationwide online Direct Bank with more than 700,000 core deposit accounts. We plan to continue to use the Direct Bank as a lever to grow core deposits in the current environment where pricing pressure and competition remain high. Turning to SVB Commercial, we achieved quarter-over-quarter loan growth driven by high-quality loans in our Global Fund Banking or capital call lending business. The uptick in loans reflects both the increased level of investment activity driving up utilization and Global Fund Banking's continued success in winning the fund banking business of active VC and PC investors.

Encouragingly, we also witnessed a quarter-over-quarter increase in SVB Commercial total client funds for the first time since the fourth quarter of 2021. SVB Commercial deposits increased for the first time since the first quarter of 2022. These increases were driven by slight improvement in the macroeconomic environment and client acquisition. As we look ahead, it's too early to call an innovation economy turnaround despite increasing deal counts and encouraging investment trends. We are encouraged that the rebound will be significant as high levels of VC dry powder remain a strong catalyst for future growth. We expect that the positive trends that we saw in the second quarter could continue to result in gradual improvement in the second half of this year, but remain guarded about the absolute levels of deposit growth given the continued headwinds in the environment.

Our SVB team remains the bank of choice for the innovation economy. Moving on to page eight, our strategic priorities have not changed. Given our growth over the past few years, we have been focused on maturing our risk management framework and overall regulatory environment. We have made significant enhancements not only to meet Category IV large financial institution requirements, but to develop those capabilities in ways that are scalable through Category III expectations. To conclude, we're continuing to see positive momentum in our businesses. While we recognize uncertainty remains in the current macroeconomic environment, we are committed to deepening customer relationships, prudently growing core deposits and loans, and allocating capital. We remain in a position of strength, and I'm excited about the opportunities ahead of us in 2024 and beyond. Craig, I'll turn it over to you.

Craig Nix (CFO)

Thank you, Frank, and all of you joining us today. My comments will be anchored to the key takeaways found on page 10, pages 11 through 28, providing more details underlying our second quarter results. I will start with the $3.5 billion share repurchase plan that Frank just mentioned. Using capital to support organic growth remains our top priority, but strong earnings have led to an excess capital position. Share repurchases provide an opportunity for us to return capital to our shareholders into more efficient capital levels over time. We manage capital ratios excluding any benefit from the share loss agreement, and all planned capital activities are assessed in this context. We intend to supplement organic capital use with methodical share repurchases, with the ultimate goal of managing our adjusted CET1 ratio down to the 10.5% range by the end of 2025. This repurchase plan puts us on that path.

Moving forward, we will assess capital management strategies based on balance sheet growth expectations, earnings trajectories, and economic and regulatory environments. This will be reflected in our next capital plan, which will be completed in the first quarter of 2025. To the extent that capital accretion from earnings continues to outpace organic growth, we expect share repurchases to continue beyond this plan. Turning to second quarter results, all of our return metrics exceeded our expectations. ROE and ROA adjusted for notable items for 14.05% and 1.39%, respectively. Headline net interest income increased slightly over the linked quarter as higher interest income was partially offset by lower accretion and higher deposit costs. While modest, the increase in headline net interest income followed three quarters of sequential declines where interest expense on deposits was increasing at a faster pace than interest income.

During the second quarter, while interest expense on deposits increased, the pace slowed. Given the likelihood of Fed rate cuts, we continued to mitigate a portion of our asset sensitivity profile by moving an additional $5 billion of cash into short-duration securities in the investment portfolio. Headline NEM contracted modestly by three basis points to 3.64%. Ex-accretion NEM increased by one basis point to 3.36%, signaling that deposit pressures, while still present, continued to stabilize and were more than offset by the benefit of strong loan origination. Before the second quarter, NEM ex-accretion had declined in the previous three quarters. Adjusted non-interest income was slightly better than expected due to higher client investment fees, aided by an increase in average balances in SVB Commercial off-balance sheet client funds, offsetting the expected decrease in net rail income on rail operating lease equipment.

Rental income was negatively impacted by a return from more normalized maintenance expenses in line with expectations we laid out last quarter. Adjusted non-interest expense came in at the lower end of our guidance range, increasing sequentially by approximately 1%. Expense growth was concentrated in equipment expenses related to accelerated depreciation on assets that will no longer be used following the SVB acquisition and favorable variances in prior periods related to reimbursement from third parties. Second quarter expenses also reflected higher marketing expense as we increased focus on retaining clients in the Direct Bank channel to help offset expected maturity in their time deposits and in brokered deposits. We continue to execute on cost savings from the acquisition and maintain vigilance on overall expense management. We are now close to achieving the lower end of our cost savings estimate and anticipate achieving it by the end of the year.

Credit continued to stabilize during the quarter. Net charge-offs of $132 million or 0.38% were on the low end of our guidance range, and non-performing loans remained relatively stable. While losses increased modestly over the linked quarters, they were largely in the same portfolios as previous quarters, and we noted no emergent problems outside of those pressure points. Encouragingly, while we saw continued stress in the small-ticket leasing portfolios and the investor-dependent portfolios, we saw modest improvement in our general office portfolio. While this is a good sign given the continued focus on CRE, particularly CRE office, we do not believe this is indicative of any shift in current stress within that portfolio and really more of a function of loan resolution timing. We continue to be well reserved with an allowance of 11.84% on the Commercial Bank office portfolio, covering second quarter net charge-offs two times.

Overall, the allowance ratio decreased six basis points to 1.22%, with the most significant factor related to a migration from recent growth in the Global Fund Banking portfolio, which carries a low reserve percentage. The decrease was also driven by lower specific reserves on individually evaluated loans, reasonably consistent credit quality trends, and positive changes in macroeconomic forecasts. All these factors were partially offset by an increase in loan volume. While the allowance did decline this quarter, we feel good about our overall reserve coverage as well as coverage on the portfolios experiencing stress. Moving to the balance sheet, loans grew by $4 billion over the linked quarter and annualized growth rate of 11.8%. Growth was led by a $2.1 billion increase in SVB Commercial driven by the Global Fund Banking Capital Call Lending business.

These increases were partially offset by expected declines in technology and healthcare banking, given continued payoffs and increased competition. The General Bank and Commercial Bank segments also grew loans by $1.5 billion and $386 million, respectively. While the broader industry continues to experience tepid loan growth, we continue to see broad-based expansion across our business segment, as Frank mentioned earlier. Turning to the right-hand side of the balance sheet, deposits grew at an annualized rate of 4%, or by $1.5 billion, due to strong core deposit growth in SVB Commercial and in the General Bank. In SVB Commercial, we saw deposits grow by $1.9 billion. A $329 million increase in the General Bank was driven by our continued emphasis on expanding relationships with current customers and attracting new ones.

These increases were partially offset by expected declines in broker deposits and in Direct Bank deposits of $527 million and $145 million, respectively. The decline in the Direct Bank was due to a $1.9 billion decrease in time deposits, partially offset by a $1.8 billion increase in savings accounts. Given pricing on CDs and the expectation that rates will decline in the second half of 2024, we made the strategic decision to let these roll off and will continue to grow core deposits to offset this decline. Moving to capital, our CET1 ratio declined by 11 basis points sequentially, ending the quarter at 13.33%. This was driven by a continued decline in the benefit provided by the share loss agreement, which added approximately 85 basis points to the ratio this quarter, down 22 basis points from the first quarter.

The CET1 ratio, excluding the benefits of the share loss agreement, increased 11 basis points from the linked quarter, as earnings growth again outpaced organic growth. I will close on page 28 with our third quarter 2024 and full year outlook. On loans, we move our expectations higher, given the starting point at the beginning of the third quarter and solid momentum in our pipeline. We anticipate high single digits annualized percentage growth in the third quarter, driven broadly across our business segments. We anticipate SVB Commercial will benefit from growth in the Global Fund Banking business, where we see success in client outreach. While the second quarter benefited from increased activity in Commercial Real Estate funds, M&A, and debt activity, the market continues to be challenged and remains somewhat unpredictable.

While we do expect to see a modest increase in VC investment compared to 2023, we believe our growth will continue to be pressured by headwinds in the private equity and venture capital markets. We also expect continued growth in our business and commercial loan portfolio within the general bank. In the Commercial Bank, we anticipate our specialty verticals will be key contributors to continued loan growth. We also continue to expand our middle market banking business and expect to see positive momentum from these strategic moves. Looking at the full year, we expect loans to end in the $143 billion-$146 billion range, or mid- to high-single-digits% growth on a year-over-year basis. We anticipate this growth to be concentrated across all three banking segments for the reasons previously discussed.

We expect deposits to be up slightly in the $152 billion-$154 billion range in the third quarter due to growth in the General Bank. We expect relatively flat balances in SVB Commercial due to continued cash burn in the still muted fundraising environment. We anticipate growth in the branch network as we benefit from increasing our customer base by building deposits through successful execution of our organic growth and relationship banking strategy. For the full year, we anticipate deposits in the $153 billion-$155 billion range, primarily related to growth in the General Bank previously discussed, flat to modestly increasing balances in SVB Commercial, supplemented by growth in the Direct Bank if needed. We anticipate the Direct Bank remaining flat to modestly higher through the end of the year as expiring time deposits are offset by money market and savings growth.

This is in line with our strategy of reducing higher cost CDs. In the Direct Bank, we have the option to bring down rates quicker should the Fed cut cycle be more aggressive than anticipated while providing a strong source of insured customer consumer deposits in our funding base. The current implied forward curve indicates a 98% probability of two rate cuts in the second half of this year. Our interest rate forecast covers a range of one to three rate cuts, with the effective Fed funds rate declining from 550 currently to a range of 475-525 by the end of the year. These projections do include the impact of planned share repurchase activity in the back half of 2024.

For the third quarter, if we get one rate cut, we expect headline net interest income to be relatively flat with the second quarter, given that our forecast calls for the cut in September. We expect that lower accretion, slightly higher deposit costs, and a slightly lower loan yield will be offset by higher investment securities yield. For the full year, we expect headline net interest income in the range of $7.2 billion-$7.3 billion, up from our previous guide of $7.1 billion-$7.3 billion, reflecting the higher-for-longer rate environment, as well as potential rate cuts in the updated forecast occurring later in 2024. In either case, we continue to project loan accretion of just over $500 million for the year, over a $200 million decline for 2023, as loan discounts on the shorter portfolios will have been fully recognized.

On credit losses, while we have experienced positive trends in recent quarters, we do anticipate continued elevated net charge-offs in the investor-dependent general office and equipment finance portfolios. We anticipate third quarter net charge-offs in the 35-45 basis points range, but are lowering the full year range to 35-40 basis points, given lower losses during the first half of the year. We do caution that many of our portfolios in the Commercial Bank and SVB Commercial have large hold sizes, and one or two of these loans deteriorating unexpectedly could influence this range. In commercial real estate, higher-for-longer rates continue to have effect on values, being felt most heavily in the general office sector, where market liquidity to support refinancing remains scarce. We expect these market dynamics will continue to elevate losses within this portfolio for the remainder of 2024.

We're seeing some green shoots in the investor-dependent portfolio, and we believe that continued market optimism and a greater consensus on valuation is an encouraging sign that should help reduce some pressure. Still, given the uncertainty in the innovation economy, we do expect continued stress throughout 2024. Moving to adjusted non-interest income, we expect the third quarter to be materially in line to down low single digits from the late quarter. We expect full year adjusted non-interest income to be in the range of $1.85 billion-$1.9 billion, which is slightly higher than our previous guidance. This is driven by our rail outlook, as we expect a continuation of healthy fundamental trends in the near term from a supply-driven recovery, which is generating strong demand for existing rail cars, resulting in a stronger-for-longer scenario.

We are also expecting higher fee income on service charges, resulting from higher lending-related fees as loan volumes continue to be strong. Moving to expenses, we expect a modest increase from the second quarter due to marketing expenses to help replace time deposit runoff in the Direct Bank, as well as professional fees and temporary manpower as we ramp up project spend related to a few regulatory items. Furthermore, as Frank mentioned earlier, we continue to focus on building out our risk and technology capabilities and continue to make some strategic hires on these teams, resulting in higher salaries and benefit expenses. All of this will be partially offset by continued acquisition synergies, which I spoke to earlier. We expect to achieve the lower 25% band of our cost savings goal by the end of 2024.

These savings will be offset by continued capability build-out for regulatory capabilities, as well as cost-related dues, the strategic priorities to maximize growth in our core lines of business and optimize our systems and processes. Our Adjusted Efficiency Ratio is expected to remain in the low 50% range in 2024. Longer term, especially if we enter a Fed rate cut cycle, we expect it to gravitate towards the mid-50s as our Net Interest Margin compresses and we continue to make investments into areas that will help us scale efficiently in the future and be ready for Category III status when we cross that threshold. Looking at the full year, we anticipate adjusted non-interest expense to be in the range of $4.65 billion-$4.7 billion, in line with our previous guidance.

For both the third quarter and full year 2024, we expect our tax rate to be in the range of 27%-28%, which is exclusive of any discrete items. In summary, we are very pleased with our performance this quarter and will begin our share repurchase plan shortly. As Frank's comments earlier indicate, we will continue to grow in a prudent manner and allocate capital in alignment with our long-term focus and strong risk management framework. I will now turn it over to the operator for instructions for the Q&A portion of the call.

Operator (participant)

Thank you. Ladies and gentlemen, if you have a question or comment at this time, please press star followed by one on your telephone keypad now.

As a courtesy to others on the call, we ask that you limit yourself to one question and one follow-up, and then return to the call queue if you have additional questions. If your question has been answered and you wish to remove yourself from the queue, please press star followed by two. We'll pause for one moment to compile our Q&A roster. Our first question comes from Steven Alexopoulos from JPMorgan. Steven, please go ahead. Your line is open.

Steven Alexopoulos (Analyst)

Hi. Good morning, everyone.

Frank Holding (Chairman and CEO)

Morning.

Steven Alexopoulos (Analyst)

I want to start on the stock buyback, and I heard you that you want to get to the 10.5% CET1 target by the end of 2025. By our math, $3.5 billion in 2025 through 2025 would leave you above 10.5? I'm just curious, by your math, is $3.5 billion of buybacks through the end of 2025 get you to 10.5% CET1?

Craig Nix (CFO)

Steve, this plan puts us on a path to CET1 in the 10.5% range by the end of 2025, and we anticipate the plan will be executed over the next four to five quarters, and we will be updating our capital plan in the first half of next year. So you're right, and the ratios would be elevated, all things being equal right now, but to the extent that earnings accretion continues to outpace organic growth, we do contemplate another share repurchase plan in the back half of 2025. So yes, they would be if we stopped here, they would be there, but we are giving ourselves room for organic growth. We will assess our capital plan, and if we are, again, accreting earnings faster than organic growth, we would contemplate another plan to guide us down to that 10.5% range by the end of 2025.

Steven Alexopoulos (Analyst)

Got it. Just given the valuation of the stock here, how do you think about front-loading the buybacks? Do you think it'll be pretty even? I mean, I know the incentive system's tangible book value growth-based. What are your thoughts on that?

Craig Nix (CFO)

Well, we would obviously plan to front-load, obviously given especially if we anticipate stock price to continue to increase over time as our tangible book value increases. So our plan is periodical, but does have a heavier emphasis on the last half of 2024. So it's really not a straight line, but it is expected to occur over the next four to five quarters.

Steven Alexopoulos (Analyst)

Got it. Okay. Then for my follow-up question, I'm curious, so the NII outlook, and we know there's positives and negatives, right? Growth and loan growth is helping NII, and you have purchase accounting accretion, and now we have rate cuts in the forecast.

But if I look, so you're $1.8 billion NII for 2Q24, basically implying the same for 3Q and 4Q. And Craig, if I look at consensus for 2025, it basically has the $1.8 billion sort of being the run rate for the next, call it, six quarters or so. I'm just curious, given the strategies you're looking at, you talked about maybe mitigating some of the asset sensitivity. Given all the puts and takes, do you see that as reasonable, that NII sort of trends just flattish over the next several quarters? Just curious directly what you see, how you see this playing out. Thank you.

Craig Nix (CFO)

When we're looking at the exit margin in the fourth quarter, with zero rate cuts, we would be up, and this is net interest income ex accretion, we would be up low- to mid-single digits with zero rate cuts.

With one, we would be up low single digits, and with three, we would be up low single digits. Fast forward to 2025 exit with zero cuts, we would be at mid-high single digits. With one cut and four next year, we would be up low single digits. And then if we have three this year and four next year, we would be down low to mid-single digits in terms of net interest income.

Steven Alexopoulos (Analyst)

Got it. So just so I understand, so if we get two, follow the forward curve, which is two this year and four next year, where does that leave NII?

Craig Nix (CFO)

It leaves NII down low to single digits from the fourth quarter 2024 exit to the fourth quarter 2025 exit. And that's ex accretion thing.

Steven Alexopoulos (Analyst)

Yep. Got it.

Craig Nix (CFO)

With accretion, it would be down mid-single digits.

Steven Alexopoulos (Analyst)

Got it.

Craig Nix (CFO)

And that's the narrative.

Steven Alexopoulos (Analyst)

Thanks for taking my question.

Craig Nix (CFO)

That's the Martian scenario. Yep.

Steven Alexopoulos (Analyst)

Yep. Got it. Thank you.

Craig Nix (CFO)

Thank you.

Operator (participant)

The next question comes from Christopher Marinac from Janney Montgomery Scott. Christopher, your line is open. Please go ahead.

Christopher Marinac (Director of Research)

Thanks. Just wanted to talk about the capital levels and kind of what the lower bound may be as the buyback gets executed, and would you revisit that as next year unfolds?

Craig Nix (CFO)

So what we would anticipate if we just executed this plan, CET1 ratio in the mid-11% ex full share, but we would intend to, if that's the case and our capital plan holds, we would intend to execute another plan and manage those ratios down to the 10.5% level at the end of 2025.

Christopher Marinac (Director of Research)

Great. And the timing for now, for today's authorization, is to do this in the next 12 months, Craig, or would it be really 18?

Craig Nix (CFO)

Well, we're looking at four to five quarters in our performance. Tom, do you want to comment on that?

Tom Eklund (Treasurer)

Yeah. No, and Craig mentioned we're slightly front-loaded in the plan, but still trying to space it out over sort of the next four to five quarters and wrap it up and really get on that large bank capital planning cycle and sort of reassess against first half of next year and then hopefully come back with a new plan.

Christopher Marinac (Director of Research)

Great. Thank you for that. And just a quick follow-up on the venture capital space, and do you see any improvement there as you look through the next few quarters?

Frank Holding (Chairman and CEO)

Marc Cadieux, did you hear that question?

Marc Cadieux (President)

Sure. Happy to take that. This is Marc Cadieux. As we've alluded to, it remains a bit mixed in terms of the outlook for venture investment.

We saw a nice uptick this quarter to $55.6 billion, which was initially encouraging. You peel that number apart, there were two very big ones, big investments in there. That net of those makes for a quarter that looked a lot like 2023 and the first quarter of 2024. So there's certainly a lot of optimism out there. I have not yet seen it translate, and it's really unclear if we'll see that over the next couple of quarters at this time.

Christopher Marinac (Director of Research)

Great. Thank you for that background. I appreciate it.

Operator (participant)

Comes from Casey Haire from Jefferies. Casey, your line is open. Please go ahead.

Casey Haire (VP and Senior Equity Analyst)

Great. Thanks. Good morning, everyone. Wanted to touch on the loan-to-deposit ratio. It did tick up here a little bit in the quarter on some pretty nice loan growth. Just I know you guys have a long-term goal to drive that lower.

If SVB kind of returned to form from the 165% level currently, obviously that would go a long way. Just wondering, can you comment on how the SVB depositors are behaving and your ability to drive that loan-to-deposit ratio back to what was a very deposit-rich vertical and help you achieve these targets?

Craig Nix (CFO)

Yeah. I'll start, and then Tom maybe amplify here. We started the acquisition around 99% loan-to-deposit. It did tick up from 90%-92%. So we're making really good progress, getting it to our sort of mid-80s target range, and we feel confident that over the next three and a half years, as we work down this purchase money note from the FDIC, that we can achieve that range. Tom, do you have any comment on that?

Tom Eklund (Treasurer)

Only thing I'd add on sort of the SVB side, I mean, we're obviously encouraged with deposit growth during the quarter. That being said, we're looking holistically at the client relationship there, making sure we put them in the right products, use the off-balance sheet products when they're better suited for the client. So we're not binarily focused on the deposit growth there and also looking to, Craig mentioned earlier, General Bank to drive a portion of that deposit growth needed as well.

Craig Nix (CFO)

Keep in mind, given that SVB deposits can be sort of transitory, especially in this environment, the Direct Bank is a level we can pull as well.

Casey Haire (VP and Senior Equity Analyst)

Got it. Thank you. And then just my follow-up on the you guys mentioned that you've moved $5 billion into the bond portfolio to sort of dampen the asset sensitivity profile.

Is there anything more that you can do on that front to mitigate the impact from Fed cuts?

Craig Nix (CFO)

Our asset sensitivity, we embarked on this four quarters ago. Our asset sensitivity was around 20% and a 200 basis point rate shock. We've gotten that down to around 14% with these actions. That's about two-thirds of the path to where we'd like to be, which is somewhere in the 10%-12% range. So we're very close to that as we sit here today. And that 10%-12% range is where we were pre-SVB. I think we're making good progress there. And as you know, we're TBV-focused. So what happens there is rates go down 200 basis points. It's about a billion-dollar shock to net interest income.

However, on the AOCI side, it would more than compensate with increased value of the investment portfolio to TBV, where our balance sheet position would be neutral. Tom, is there anything else you'd like to add to that?

Tom Eklund (Treasurer)

The only thing I'd add is tactically, we did add some hedges during the quarter as well. We put on $2.5 billion for the cash flow hedging on the variable rate loan look and moving some of that pricing out over the next 12 to 18 months.

Casey Haire (VP and Senior Equity Analyst)

Does that equate us to $4 billion?

Tom Eklund (Treasurer)

Yeah. Total. Total hedges. Yeah.

Casey Haire (VP and Senior Equity Analyst)

And they're interest rate hedges, cash flow and fair value interest rate hedges.

Tom Eklund (Treasurer)

Yeah.

Operator (participant)

As a reminder, if you'd like to ask a question on today's call, please press star followed by one on your telephone keypad now.

As we have no further questions, I'll hand the call back to Deanna Hart for any concluding remarks.

Deanna Hart (SVP of Investor Relations)

Thank you, everyone, for joining us today, and we hope you have a great day. Thanks.

Operator (participant)

This concludes today's call. Thank you very much for your attendance. You may now disconnect your line.