Comerica Incorporated (CMA) Earnings Call Transcript & Summary

Hi , this is Jason Goldberg. I cover the U.S. large cap banks here at Barclays. Thanks again for joining our 19th Annual Global Financial Services Conference. Next up, very pleased to have Comerica. From the company, we have Curt Farmer, Chairman, President and CEO; Jim Herzog, Chief Financial Officer; and Peter Sefzik, Executive Director and runs the Commercial Bank, the largest business. [Operator Instructions] With that, let me turn it over to Curt.

Thank you, Jason, and good morning, everyone. It is a pleasure to be here. Before we get started, I'd like to remind you that today's presentation may contain forward-looking statements. I refer you to Slide 2 for our safe harbor statement, which I incorporated into this presentation as well as our filings with the SEC for factors that could cause actual results to differ materially from expectations. Forward-looking statements speak only as of the day of this presentation, and we undertake no obligation to update any forward-looking statement. We provided a brief overview of Comerica on Slide 3. Our long-standing corporate mission is to achieve balanced growth and profitability by providing a higher level of banking that nurtures long-lasting relationship. This mission enables us to deliver shareholder value by maintaining a sustainable competitive advantage and has driven our success for over 170 years. With $88 billion in assets, our size allows us to be nimble and efficient. We are a leading bank for business as over 90% of our loans are to commercial entities, complemented by very strong retail bank and wealth management capabilities. We have a unique geographic footprint with locations in 7 of the top 10 fastest-growing metropolitan areas, which provides significant growth opportunities. Slide 4 summarizes Comerica's key strengths, which are fundamental to our success. Our long-tenured employees have expertise in industries they serve, which include several faster-growing areas such as environmental services and equity fund services. We deliver high-quality financial products with a goal of building full relationships, which drive loan, deposit and fee income growth. Our disciplined approach to credit underwriting has resulted in lower nonperforming assets and net charge-off ratios than the peer average since the beginning of the pandemic. We have a culture of continuous improvement, which assists us in investing for the future while carefully controlling expenses. Finally, our capital position is strong, and our first priority is to use it to support growth or returning excess capital to our shareholders in a meaningful way. Turning to Slide 5, our unique footprint. Our markets cover the majority of the major metropolitan areas in Texas, California and Michigan. Our Chief Economist forecast these states will grow at or above the national pace in 2022. We have offices in 13 of the 15 largest cities in the U.S., which affords abundant opportunities. Our locations also provide balance among a wide variety of industries and customer segments. We have customers throughout the Continental U.S., and we pursue certain businesses on a national scale that fall outside of these primary markets, such as U.S. banking, mortgage banker, environmental services and auto dealer services. We have strategically placed offices in faster-growing markets where there is a concentration of customers and industries we serve, such as Boston and New York for technology and life sciences or Denver for dealer and energy. Last month, we announced that we've established commercial offices in Raleigh, Winston-Salem and Charlotte. North Carolina is an economically diverse and fast-growing state with a robust business environment. As of June 30, we had more than $5 billion of loan commitments from customers who are based in the Southeast region. We are in the process of staffing the offices, which will be led by our 36-year financial service veteran and North Carolinian native who joined us in May. Our unique geographic footprint provides a diverse business mix, which should help us achieve consistent, sustainable growth over time. On Slide 6 is our typical mid-quarter update on loans, which is based on preliminary results through the end of August. The drivers for loan performance have been similar to the second quarter. Excluding the large decline in PPP loans, as the forgiveness process has picked up, there were solid loan growth in several business lines, led by general middle market. Also, auto dealer floor plan loans continue to decline, albeit at a slower pace due to supply constraints. Excluding PPP loans, we believe that third quarter loans should be stable at the current level. As we progress through the end of the year, we expect recent trends to continue with loan growth led by middle market and mostly offset by lower dealer and mortgage banker activity. This is supported by our strong pipeline, which sits above pre-pandemic levels and commitments, which continue to increase. Slide 7 provides an update on PPP loans, which have been instrumental in helping customers keep their businesses open and their workforces intact during the pandemic. Since launching last year, Comerica helped over 20,000 customers funding nearly $5 billion in PPP loans. As of the end of August, balances declined to $1.5 billion, primarily due to repayments through the forgiveness process. Despite the decline in balances with the benefit of accelerated fees, we expect PPP revenue will be similar to second quarter. While it's difficult to predict, we continue to believe that loan forgiveness will continue in earnest and the bulk should be repaid by year-end. Turning to our mid-quarter update on deposits on Slide 8. Average deposits again set a new record with an increase of $2.7 billion quarter-to-date. Customers continue to maintain and grow excess balances. This is due to normal seasonality, our customers sought profitability and capital markets activity as well as liquidity being injected in the economy through physical and monetary actions. We remain prudent in managing deposit pricing, which is really at an all-time low. We expect average deposits for the third quarter to remain strong and we believe will continue to remain strong for the near future. Turning to Slide 9. As you probably know, our balance sheet is very sensitive to rate movements. Our models at the end of the second quarter estimated a 10% increase in annual net interest income over 12 months as rates gradually rise 100 basis points. And there's an additional lift in the second year. This is primarily due to the fact that the bulk of our loans are floating rate, and we have a large proportion of noninterest-bearing deposits. This fact also means the impact of the current low-rate environment has been mostly absorbed and there is significant upside as rates rise. However, some challenges remain. In the near term, we expect pressure from decreasing PPP loans and, to a lesser extent, lower security yields and swap maturities. However, over time, our goal is to mute asset sensitivity by deploying some of our excess liquidity to maintain a larger securities portfolio, gradually adding interest rate swaps, increasing our appetite for fixed rate loans and preserving rate floors to the extent the market allows. We expect this will provide a more sustainable earnings stream through the cycles. In addition, we are aiming to deliver a more diversified and balanced revenue base with an emphasis on fee generation. Our success is evident in the increase in noninterest income we have achieved over the past 5 quarters. Our card platform is a great example, as shown on Slide 10. Card provides about 1/4 of the bank's fee income and has increased $28 million or 22% in the first half of the year over the same period a year ago. We've seen growth in all card products with the largest driver being prepaid government card activity. Economic stimulus, changes in customer behavior as well as new and expanded customer relationships have spurred activity in all card segments. In the near term, we believe we may see card fees decrease modestly for a quarter or 2 as the benefit from growing merchant and card volumes could be more than offset by lower government card activity as stimulus-related volume wanes. Prepaid card contributes over 60% of card income. We are the third largest prepaid card issuer in the U.S. as we serve 57 state and local programs as well as the U.S. Treasury Direct Express program. Our merchant services and commercial cards are a key component of our integrated treasury management products, providing customers with increased efficiency through payment processing technology. We remain focused on continuing to grow revenue derived from our robust card platform. Fiduciary services outlined on Slide 11 is another area where we are driving growth to balance our revenue stream. Fiduciary comprised over 20% of noninterest income in the second quarter and increased to a record level with 7% growth in the first half of the year relative to the same period a year ago. With strong collaboration, our Wealth Management business brings fiduciary solutions as well as Private Banking and investment management to our commercial and retail bank customers. Our capabilities include a wide range of planning and investment management products with open architecture. Assets under administration totaled over $200 billion on June 30. Also, we continue to build our unique adviser solutions business, where we partner with third-party broker dealers and investment advisers provide trust services for their clients. Earlier this year, we added this business through the acquisition of a small trust adviser. We believe our robust product offering, talented team and continued strong market performance will assist us in achieving sustainable growth over time. As outlined on Slide 12, our expense discipline is well ingrained and is assisting us in navigating this low-rate environment as we invest for the future. We have proven our ability to optimize our resources by reducing our workforce and real estate footprint over the past several years while continuing to grow our business. Our deposits per banking center is one of the highest in our peer group, which demonstrates the efficiency of our network. We've increased our productivity and effectiveness as illustrated by our ratio of loans and deposits per employee as well as expenses to loans and deposits. These ratios also compare well to our peers. As you know, on a macro level, there's been evidence of an increase in employee turnover and wage inflation. We are seeing some pressure there, and we are working to stay in front of it by providing the right benefits, utilizing retention tools where needed and proactively communicating, connecting with our team. We've always been very supportive of our colleagues, which has resulted in a long-tenured team. In summary, by carefully managing our resources, we have the wherewithal to invest in product development and attract strong talent which is key to developing deep, loyal customer relationships. Turning to technology on Slide 13, our digital transformation, which we bucketed into 3 key themes: enabling our business, modernizing our platform and building our digital future. As far as enabling the business, the bar chart shows the significant growth in our digital products. At the same time, our technology efforts and spend are increasingly focused on enhancing the customer experience. For example, we were recently among the first banks to roll out real-time payments. Also, by utilizing artificial intelligence to read tax filings, we are accelerating the credit approval process. These investments help attract and retain customers and drive revenue growth. The second key theme is continuous modernization of our core technology platform. We have migrated over 50% of our applications to cloud and started to consolidate our data centers. This provides for greater agility and cost savings. In addition, we expect to complete the conversion of our trust platform by the end of the year. Also, we are in the process of replacing our general ledger and related financial systems. We call this project DigiFi, and it encompasses a multiyear modernization using Workday. These projects are expected to greatly improve colleague efficiency. Finally, we are keenly focused on ensuring we have the right talent, skills and strategy to meet our digital aspirations and prioritize opportunities. We recently launched a training and reskilling program, which has been highly successful with numerous colleagues completing courses and earning industry certifications. Also our new digital CIO -- under our new digital CIO, we have created an enterprise digital technology team. Overall, our technology investments are enhancing the customer and colleague experience, helping to attract and retain customers, improving -- and improving colleague efficiency. These benefits help us moderate the growing costs as we continue on our technology journey. Slide 14 provides an update on capital management. As always, our top priority is to use our capital to support our customers and drive growth, while providing an attractive return to our shareholders. With our CET1 sitting above our 10% target, we restarted our share repurchase program in the second quarter, repurchasing nearly 6 million shares for $450 million. We expect to purchase about $200 million in shares in the third quarter. We will continue to keep a close eye on loan growth trends and capital generation as we manage towards a 10% CET1 target. In addition, we have maintained a very competitive dividend yield. In regard to sustainability, our ESG Counsel recently defined the most significant ESG issues for our company. We call this our ESG platform as outlined on Slide 15. Specifically, these are the areas that are most impactful for our customers and colleagues and in which we feel we can make a meaningful difference. I encourage you to review our annual corporate responsibility report, which we published last month and includes updates on our progress in these areas. In closing, Slide 16 reiterates Comerica's key strengths. Our expertise and experience helps us build and solidify long-term relationships, particularly in extraordinary times like these. We are committed to maintaining our strong expense discipline while investing for the future to ensure we have the right and high-caliber products. Our disciplined credit culture and strong capital base continues to serve us well. Finally, we are uniquely positioned with our nimble asset size, commercial bank weighting and very strong deposit base. These key strengths provide the foundation for building long-term shareholder value. Thank you for your time. And Jason, now we'd be happy to take some questions.

Appreciate the time and the presentation. I guess maybe we could start off just delving a bit more into loan growth commentary you gave. Clearly that's probably almost in best interest at the moment. Maybe start with some of the positives and then maybe switch to some of the constraints. But I guess, first middle market, clearly the strongest dollar growth segment quarter-to-date. I don't know if you or maybe Peter want to expand upon in terms of just what you're hearing from Middle Market segment, they still have kind of elevated cash utilization rates still low. What is kind of your outlook from there? And maybe when could we kind of see that further ramp up from these levels?

Yes, Jason, it's Peter. I would say that sentiment in middle market continues to be really good. This question of whether balances come down before borrowing picks up, I continue to feel like it's going to be a little bit of both. I think you're going to see some utilization of cash, some utilization of borrowing, but I don't think you're going to see a big swing one way or another. Our pipeline continues to be really good in all of our markets and really across a number of verticals and industries in the business. And so we're encouraged by it. I would say probably in August, we saw the pipeline maybe do a little bit of a turnaround, by the end of September, it's come back. And I don't know how correlated, that certainly seems to have been to the delta variant and so forth. But we don't see a real big pullback with everything going on with COVID across the country. So middle market continues to feel really good. The sentiment feels good. When you talk to customers, they're having really good profitability. They're able to push out cost increases to their customers across the space and the credit quality continues to be really, really good. I do suspect you're going to continue to see M&A activity. You're going to continue to see private equity really busy in the space. So those will be challenges that we'll deal with as we go into the rest of this year and next year. But overall, sentiment feels really good in middle market.

Okay. And then maybe on the flip side, you mentioned dealer and mortgage banker are 2 headwinds. Obviously, in dealer, supply chain constraints, chip shortages are just -- are clearly weighing on your customer. I guess, looking out, you're obviously closer to this than we are. When is the expectation that begins to bottom out? And then I noticed you mentioned that you actually saw an uptick in utilization rate in dealer. Just maybe just flesh out in terms of what your expectations are there.

Yes, Jason, it's Peter again. I'll maybe take both businesses talk about each. So on dealer, we continue to see challenges in the space. Obviously, the last 60 days, even additional challenges on shortages, some further plant closures. All that said, we are looking to add customers. And -- so I think you're going to see the floor plan balances continue to come down, albeit the decline is slowing, if you will, frankly, because the balances are just reaching the lowest levels that we've really ever seen. We were $1.2 billion into the Q2, most of the decline that you've seen in Q3 to date is in floor plan. And I suspect that will continue into the rest of this year. We've kind of thought -- been encouraged at least that 2021 would be the bottom in the second half of the year. I can't tell you exactly what's going to happen, but we continue to believe as we see those floor plan balances come down, that it feels like that will sort of reach the bottom in the second half of this year. When it returns to normal next year, I don't know. Does that look like a big uptick going into 2022? I don't think so. I think it's probably another year to 18 months before we see a normal inventory environment on dealer lots, at least. So that's dealer. But all that said, we're in the space. We're adding customers. We're supportive of our customers, and you continue to see consolidation, and we're going to be there to take care of them. On mortgage banker, look, you're going to see a little bit of a decline with everything that's going on. We're mostly a purchase shop. We are very correlated to that MBA forecast. But at the same time, we are adding customers in that space. So our goal there over time has been to increase the customer base, increase the commitments that we have out there knowing that there's going to be quarterly ups and downs in that space, some of it seasonality, some of it macro, with everything going on with rates. But our focus is on growing our customer base and making sure that we take care of them, and we're doing that. And I think that going forward, you're going to see us continue to kind of be up and to the right, knowing there's going to be quarterly swings.

Got it. Okay. I think we have a good sense of the near-term loan growth trends, maybe, Jim, you look into this. But as I as we kind of get a flavor for the overall kind of net interest income trends, Curt mentioned wanting to maybe pare back some of the asset sensitivity, investing in securities, putting some of that excess liquidity to work. Obviously, rates still are low. And just how do you think about changing the balance sheet, given where rates are, the securities portfolio or you mentioned adding swaps. And just how do you think about, I guess, the other balance sheet components away from loan growth in the near term?

Great. Yes, happy to answer that, Jason. We clearly have abundant levels of excess liquidity. We clearly have a tremendous amount of asset sensitivity even after growing our securities book in recent quarters. And so we do feel like we need to make steady progress and taken some of that asset sensitivity off the table, essentially monetizing it given the large amounts that we have. And I feel like we've taken some pretty good steps even in the slow rate environment. We did increase the size of the securities portfolio by $500 million in the second quarter. I think we'll probably end up with something near that amount in the third quarter and once it's all said and done. And with all the excess liquidity we have, we feel like the securities book is a good place to spend some of that asset sensitivity. I do think that as rates start moving up we likely won't see a big increase in terms of how we spend some of that liquidity, but we will likely start using some more synthetic tools, adding swaps as rates move up. I really don't see this as any all-or-nothing exercise. Even in this low rate environment, we're taking steps to spend some of the asset sensitivity. I think we'll gradually spend it and take some of that sensitivity off the table as rates move up. We're not going to sit here and do nothing right now, but we're not going to go all in, obviously, at this point either. So we think being very measured makes sense, being consistent makes sense. I feel like that's what we've been doing in recent quarters, and that's what I would expect going forward before those rates potentially start rising. And if they don't, we'll at least stay on track in terms of spending some of the excess liquidity and asset sensitivity that we have.

I guess on that topic, your deposit growth continues to be quite strong and meaningfully outpacing loan growth and others. How should we think about that trajectory kind of going forward? Maybe talk to the stickiness of those deposits on the beta on those deposits and particularly as we kind of get closer to a point where the Fed is likely going to begin tapering.

Yes. We're clearly in uncharted territory when it comes to deposits. We had very strong growth, just as some others in the industry have had. And I really don't expect that this will pay in any large way anytime soon. We do have some businesses that have benefited directly from some of the recent onetime stimulus and we may see a small step down in some of those select businesses. In general, when I look back at what's really created so much of this excess liquidity for Comerica and the industry, when I look at the unprecedented monetary policy, very significant fiscal spending, high levels of economic activity, GDP is growing nicely, so you get the velocity factor there. I really don't expect any of these to completely go away in the near future, tapering is just that. It's tapering. It's not stopping the liquidity. We're not going to see the record levels of physical spending we've seen recently, but I think everyone is familiar with some of the infrastructure bills being discussed, and I do expect fiscal spending to stay strong. I also expect the economy to stay relatively strong. You add to that the fact that I think corporate treasurers will want to retain a little bit more cash in terms of the safety net going forward in the future. I think when you put all this together, it just bodes well for deposits staying relatively strong. They will likely take a step down at some point, but I don't expect liquidity to be a challenge anytime in the near to medium future. So I expect deposits to largely stick around for some time to come.

Right? So I guess we have good middle market loan growth or improved middle market loan growth, you have PPP coming down, the additional securities, robust deposit growth. Kind of pulling back, I guess, how are you kind of thinking about the net interest margin trajectory, both near term and maybe the intermediate term, assuming a stable rate environment.

Yes. I really think that loan growth is going to be the biggest driver there over the short to medium term. We are attempting to mitigate some of the pressure on the securities book and the yields there with securities volume. We think that's a bit of a push. We do, as you see in the deck, have some swaps maturing in the near to the medium future. And so that will put a little bit of pressure on net interest income. But I really think the big X factor in the coming quarters is going to be loan growth and what we can do there. We do feel relatively optimistic in terms of what's going to come over the next several quarters. But I think that will be the biggest driver and then trying to mitigate some of the more modest challenges with swaps and trying to retain the customer for us will be more secondary, but still something we're keeping our eye on. And so those are the things that we're thinking about as I look out over the next several quarters.

Got it. [Operator Instructions] I guess, Curt, one of the things you mentioned was the North Carolina expansion. It seems like a lot of banks are doing something similar. I think it's been a while since Comerica entered a new market. So talk to kind of just what are the opportunities and challenges and maybe kind of initial results in North Carolina? And then just what are your expectations longer term in kind of taking that model and going to additional new markets de novo?

Well, Jason, as we showed on one of the slides, just sort of the breadth and scope of our bank overall, maybe to touch on that first. We operate as a full bank in 5 primary states. We talk a lot about Michigan, California and Texas, but we also operate in Arizona and Florida. And then as we shared on that slide, we already have a national presence in a lot of major metropolitan markets for many of our commercial businesses as well as some of our Wealth Management services. And so as a company, what we've done is try to look at where are there additional opportunities where we believe we have a good market expansion opportunity, sort of coupled with a strong existing customer base. And we've been looking at the Southeast for some time. And really, the opportunity for us sort of unfolded when we found the right leader for that market, someone that we felt like was culturally aligned with our company and strategically aligned to help us build out that market. And we're starting in North Carolina, but we believe over time, there's an opportunity to expand a little bit more broadly in the Southeast. And as we've done so many times when we've gone to other markets when we came to California when we came to Texas 30, 40 years ago. We really start with a commercial bank orientation. And over time, if that grows, we'll leverage it into wealth management and potentially banking centers or branch locations as well. No immediate plans around any other markets today, but we continue to look at sort of the U.S. overall, again, sort of the great market opportunity, existing customer base sort of with the right town in the market there. And we think we've got a good opportunity. We're really early in that process, really sort of building out the team and hiring the team there. So not a lot to report yet in terms of financial results, but it's something we'll be talking about on earnings calls and other investor forums on a go-forward basis as we get traction there.

No, obviously, Comerica runs an efficient shop, but expansion to new markets and new products, there's a cost associated with that. I guess just when you look at your overall expense base, are there kind of additional opportunities for further expense reductions.

Jason, I'll take that question as well. I mean we've had a history of being a very good company in terms of how we manage expenses, a real proven expense discipline as an organization. And we showed some slides and some comments in my presentation about that. What we look at always is, first and foremost, is as we look for growth opportunities, how can we reallocate existing resources. How do we allocate FTEs? We're doing that in the case of North Carolina, really moving some of our positions around to support higher growth markets. We on the product side, really try to leverage technology and how do we become more efficient on the technology side to help us better control expenses on the product delivery side. And then technology overall, I think it's helping with efficiency, not only for us, but across the industry. We've done a lot to reduce headcount overall over the last 5 years or so and to reduce our real estate footprint. And we're always looking for opportunities there. Having said that, we're going to do the right thing in terms of making sure that we're competitive, that we're maximizing growth opportunities in new markets with new products that we're investing in the right technology on a go-forward basis. But we think we can manage all that within a reasonable range on the expense front. And I think we've proven our expense discipline over a longer period of time.

Maybe shift gears to credit quality. It's obviously resulted in really, really good. But I guess anything on the horizon that causes you concern in terms of credit quality? And maybe what do you think the catalyst is that would cause results to begin to return to normal credit cost levels?

We've been really pleased with how our portfolio has performed really over the last 18 months since COVID became a reality in 2020. I think part of the benefit we've seen is that our portfolio mix has really not been subject to a lot of the social distancing, COVID-related issues. We're not big in hospitality or restaurants or transportation or some of the areas that have been more impacted. Having said that, we talked about already some this morning, there are some signs of stress on credit more broadly, not just to Comerica but across the industry, supply chain disruptions, labor shortages, inflation. We're seeing some of that and just sort of the resurgence now with Delta. But we've been managed -- been able to manage through it well with charge-offs really below historical levels. We do believe that as we get into 2022, at some point, we would get back to a more normalized net charge-off environment, which for us has been sort of 20 to 40 basis points. And we're thinking 2022, it looks like maybe on the low end of that kind of early to say yet. We'll provide more guidance as we get into fourth quarter earnings report. But we have felt really good about our ability to manage the credit cycle. Our customers are doing well. Jim alluded to this earlier. They're all sitting on more liquidity. I think they've done a good job of being cautious in this environment and managing expenses well and also being opportunistic where there are some opportunities to take advantage even in this tough environment that we operated in.

Got it. And then maybe just capital and M&A. I think you did Imperial in late 2000, you did Sterling about a decade later in 2011. We're now kind of another decade later. I guess just what are your thoughts about obviously your role in consolidation with the banking industry? Are you interested in bank deals to either accelerate growth, gain scale? We've certainly seen it from other regional banks over the last year or 2.

Jason, I mean, we've been very consistent in our messaging there. Our model is really built on organic growth. I think we've talked this morning about some of the examples of things that we're focused on, whether it's fee income or whether it's reallocating resources, looking at some new market opportunities. And we think we can continue to grow that way. We've got a great customer base, a long-tenured customer base, great business lines, et cetera. Having said that, we have, and we'll look at sort of small tuck-in opportunities, especially on the fee income side. And then we'll continue to be aware of the M&A landscape. We've been a very patient acquirer, and we don't want to do something that -- just to do something, it would have to make strategic sense, be a good cultural alignment for us, be aligned with a market that we're interested in and be accretive over the right period of time for our shareholders. So we are sort of primarily focused on organic growth day in and day out, and we think we've got really good opportunities there.

Got it. And maybe it's a better question for Jim. But you talked about lowering -- or saying buying back, I guess, roughly $200 million worth of stock in the third quarter, down from $450 million last quarter. Is that kind of $200 million kind of the pace we should think about going forward? Or just kind of what are your expectations for kind of buyback in the intermediate term?

Yes. As you mentioned and as Curt mentioned in his comments, we have been very conservative in the share buyback, buying back 1% of our shares in the second quarter, $200 million in the third quarter. I do like to always remind people that in addition to share buyback, we have one of the strongest dividends in the industry, which obviously is just another form of returning capital to shareholders. So with that said, as I look to the fourth quarter, we are very cognizant of the fact that we have a very strong pipeline on the loan side. As Peter said, we're looking to add customers over the next year. We continue to look forward to a strong economy in 2022. And I'm very cognizant of the fact that our national dealer balances are $4 billion below their peak. So our first choice of deploying capital is always to be there for our customers and be there to support their financing needs. But we do see the potential for some pretty strong loan growth over the next several quarters. So we will probably keep some level modestly above our target of 10% CET1. Having said that, as we move through the fourth quarter, we will continue to evaluate just earnings capacity and where we see the loan pipeline going and likely our loan demand is going. And we'll make the right assessment as we move through the fourth quarter in terms of share buyback. So more to come there. But in the meanwhile, we feel really good about our capital position and our ability to support customer growth over the next several quarters.

You mentioned a 10% CET1 ratio. That feels a little bit higher compared to some of your other regional bank peers. Just given how benign the credit environment is, is there a potential to maybe move that a bit lower?

Yes, it is a little bit higher. We're also a little bit lower than Tier 1. So I think what you may see over time is, even though we feel really good about our business model, feel really good about our credit profile, both historical and going forward, we would like to see more stability of earnings from a net interest income standpoint. That means smoothing out some of the asset sensitivity. And I think that's the one missing ingredient that we'd like to take care of before we start considering taking CET1 down below 10%. So we do think that day will come. We'll do so being very thoughtful of our key constituents, the regulators, the rating agencies and, of course, investors. And it may be accompanied by some optimizing of the capital stack as we do that. And so I do see that potential down the road but we would like to smooth out our earnings ability first, and then we'll look at what we can do with capital.

Makes sense. We have about a minute remaining. Maybe just to wrap -- to end on, Curt, you mentioned a bunch of times wanting to grow fee income. Let me just highlight 1 or 2 or 3 kind of the biggest opportunities in your view.

Jason, I think it's really in the businesses we're in today, but continuing to build product depth and capability and expand and grow in those businesses. Primarily, in the commercial bank, it would be our card platform, commercial card, more broadly. We mentioned the prepaid program, treasury management services, and we are spending a lot of time and effort making sure we're very competitive in all those spaces, and we continue to feel like -- and have the right technology and we continue to feel like we have good growth opportunities there. It would also include the bucket of all other commercial-related fees, syndication fees, derivative fees, foreign exchange, et cetera. And then in the wealth management space, we feel like we've still got a lot of opportunity, a lot of synergy between the commercial bank, between business owners and executives of companies cross-selling into our wealth management platform. We've got a very strong platform today. We've been investing in additional planning capability, strengthening our asset management investment capabilities and continuing to look for opportunities to add customers. And an example of that was the Trust acquisition we did earlier in the year. So really across our existing product base. And we've shown very good traction in terms of increasing fee income, as I mentioned, over the last several quarters during my presentation.

Great. Gentlemen, thank you so much for participating again this year, and we hope to see you again at next year's event.

Thank you, Jason.

Thank you.