Flagstar Bank, National Association ($FLG)

Ready? Great. Well, thanks, everybody. Thanks -- good afternoon. Thanks for joining us. We're excited to have Flagstar Bank, NA. No longer Flagstar Financial. Joining us today, we have Joseph Otting, the Chairman and CEO; and Lee Smith, the CFO. Thanks very much for joining us here.

Thank you, Jared.

Thanks for having us, Jared.

Honored to be here. Phenomenal conference. So thank you very much.

Thanks. Glad that you're having a good day.

Maybe just to start off with a little bit of a higher level. You all have come into a franchise that needed some dramatic transformation. You've executed on that. Maybe just spend a few minutes at the beginning here sharing with us where you are in that transformation journey, what some of the bigger challenges were and what we should expect in the near to midterm from that?

Great. Well, thank you, Jared, and thanks for people that are here to hear our story. So when we came into the bank in March of 2024, the bank really was experiencing capital issues, liquidity issues, credit issues and regulatory issues. And I, like the kid, it made the Bermuda trying to look like an amusement park, from where we started. And really, it's -- we're proud to say today, you look 25 months later, our CET1 is 13.2%, if not the best -- the best in our peer group. Our liquidity is $27.5 billion. We started with $6.5 billion. We had a lot of unrecognized credit issues where we think we've now recognized those credit issues and we've continued to bring those down since we've been there. And we really built now a solid risk governance structure that we're proud of and we brought a lot of talent in to build that risk governance structure. So we feel really confident no matter where the levels of enhanced regulatory standards when the bank would be in a position to accomplish that. And the other thing that we kind of talked about when we got there is we wanted to diversify the balance sheet. Clearly, one of the legacy organizations had gotten highly concentrated into the multifamily and then with a further specialization regulated in New York. And so we set out on a path to really look at the balance sheet from 1/3, 1/3, 1/3. 1/3 being in commercial real estate, 1/3 being in C&I and 1/3 being in consumer cash flows, which we put mortgage-backed securities into that category to show that diversification. And when we got there, we really didn't have a commercial banking group the way that we felt and envisioned that, which was relationship based, where we knew the executives of the company, we could be important to those companies. And started that build. We now built where the last 2 quarters, we generated over $2 billion of new loan outstandings, we've continued to see good deposit and fee income growth. And really, that business, we think we're in like the bottom of the second inning, that we really have a lot of future head -- Rich Raffetto, who came into our company has recruited over 300 people into that strategy. It's really proving where a lot of people question, could you do that? Now people are like, we know that's now a really core part of your business. We've also taken our criticized and classified problem loans down. We've reduced now our nonperforming loans. And we have a really, I think, a glide path towards the end of the year to really improve the overall quality of the institution. So people ask me, like, where do you think the journey is? I'd say the journey is like half time. But the neat thing is we got to come out of the locker room at half time already with really well-established [ wheels ] and now it really comes down to executing, which we're really excited about.

One of the things as you have targeted this 1/3, 1/3, 1/3, I think that you had mentioned in the past was just the rating agency rating made it a little more difficult to grow the deposit side. You got a couple of upgrades recently. How does that sort of help accelerate that transformation? And is that something that we should expect to see an acceleration in deposit growth coming from commercial customers out of that?

Yes. Clearly, we're excited about the upgrades and really we're reflective, I think, of not only telling the story with the rating agencies, but then also being able to deliver the results. And after the 2009/2010 challenges to the economy, and then the disruption in the banking business in 2023, a lot of companies have implemented policies where they had to have the banks with certain rating to be able to put deposits over the FDIC limit. And so it really opens up the door as we are adding 75 new commercial banking and corporate banking customers a quarter for us to penetrate deeper into those customers and becoming their primary bank. Because most of the time, the business customers carry multimillion dollars in their checking accounts for operating funds, and if they were constantly at a 250,000 FDIC limit, it limited the amount of activities they could do with the bank. And so now we're in a position where they feel very comfortable. And we've seen a large influx of deposits. In the first quarter, we were up $1.1 billion, which really was our first quarter of significant growth in our core deposits. And that was really prior to the rating increase. So we're very encouraged not only by our products, our people and our service, but now having the backstop of that the rating agencies have made our deposit investment grade.

As part of that transformation of 1/3, 1/3, 1/3, it involves reducing the CRE component, you've had a lot of progress with exiting some of those maybe non-relationship balances. I think last quarter was down $1.1 billion. Is that pushing out the -- what's the impact on NII from that? It feels like it's more of a near-term pressure as opposed to still creating that long-term opportunity. How long should we expect to see sort of accelerated paydown on the CRE side?

Yes. I would say that when we arrived at the bank, we modeled out that we could see $600 million to $800 million of payoffs of real estate on a quarterly basis. And that occurs both from maturities and rate resets. And the last couple of quarters, we've been in the $1.5 billion or $1.6 billion. So the market really has demonstrated there's ample liquidity to be able to reduce our real estate exposure. We see half of it coming from the agencies, another 15% to 20% from JPMorgan, and then the rest is kind of spread all over. But the market has helped us, and our documentation helps also, because when the loans reset on a SOFR basis or 5-year SOFR, we charge SOFR plus 300. And the market can be found in the 225 range. So people -- as those loans are interest rate resetting are looking to take those and get cheaper interest rate. So it helps us on our strategy of diversifying the balance sheet. As we've ran multiple quarters well over $1 billion, that has reduced the earning assets on the bank's balance sheet and obviously the impact of the NII. But we've started to see now net loan growth in the balance sheet. And so we're really optimistic that even with the payoffs, we'll continue to grow the balance sheet with the C&I growth that we're experiencing.

The thing I would add, Jared, is the other thing to remember is from March '24 through pretty much the end of '25, we deliberately took ourselves out of originating new CRE loans because we were overweight that asset class. If you look at our concentration to capital, it was over 500% in Q1 of '24. If you look at where we are now, we're about 365%. So we've made phenomenal progress. But in Q4 of '25, we've started originating new CRE loans. We're obviously not looking to do multifamily New York City, but good-quality CRE loans with real estate funds in other parts of our footprint. So the Midwest, South Florida, California, short-duration, floating loans, not fixed rate. We're looking to do that. And then as we said on the Q1 earnings call, we're also looking and saying if we've got high-quality CRE loans, we've got a very active builder finance business, for example. And there's a relationship there in the way of deposits of fee income, then we'll lean into that, and we want to retain those relationships. Because the other thing you've got to remember is a lot of the multifamily loans that are on the balance sheet. They were brought to us by one particular broker. It wasn't a direct relationship. And so you don't have those deposits or that fee income business. We're building a relationship bank where it is a direct lending relationship. And so we're looking -- as we talk about 1/3, 1/3, 1/3, you think about $100 billion balance sheet, it basically means that we should be $30 billion to $35 billion in CRE, C&I and consumer. We're about $36 billion today in all CRE categories. But what we've got to do is pivot out of the low coupon 3.7% multifamily loans originated during COVID and move those into market rate, higher-quality loans. And that's what we're looking to do. And that's part of how you see the NIM expansion that we have in our projections.

When you look at the loans that are either coming up for reset or being refi-ed away, are the sponsors there with equity, are you seeing them obviously, I guess, to get a new rate somewhere else, or having to put new equity into their deals? Do you see any concern with that trajectory going forward?

It actually has gotten better. We modeled out last quarter that 50% of the rate resets would roll over, and it ended up being about 35%. So whether borrowers are adding additional collateral or being down the loans or using cash flow off of other sources, they've clearly been able to tap the market with a lot of liquidity.

When you look at the remaining rent-controlled properties or book in New York, there's a lot of talk with the new mayor about 0% rent increases. I guess the city has been in that environment before, but they didn't have the impact of the 2019 law limiting the ability to recoup some of the maintenance investments. How do you feel the book that's remaining on the balance sheet is positioned to absorb a tougher rent environment?

Yes, sure. So we've obviously looked at this in detail. So today, we have about $8.8 billion of rent-regulated New York City units, they are over 50% rent regulated. The analysis that we did is we assumed the rent freeze starting this October for 3 years. We also assumed the operating costs would increase 2.75% a year. Think of that as inflationary. Market rents would increase 2.1%. So non-rent-regulated units would be able to increase the rent on those units 2.1% annually. What we found is the demarcation line is 70%. So any building that is 70% or less rent regulated, there's very little -- no impact on NOIs because they can offset the rent freeze by -- through rent increases in the market units. Where you have an impact is those units that are more than 70% rent regulated. And the impact on NOIs over a 3-year period is 7% or 8%. When you think about that $8.8 billion that I mentioned, $4.6 billion of that is pass rated for us, with a DSCR of 1.5%. So those pass rated loans have the cash flows to be able to absorb a rent freeze. And then if you look at the criticized and classified loans, so the remaining $4.2 billion, we have taken over $500 million of charge-offs in ACL reserve coverage against that population. So we feel we're more than adequately covered. I think the other things that we've done, Jared, as well is we do -- we get annual financials from all these borrowers and we're taking a hard look at all of those. We've got 97% of financials from borrowers. We're doing an 18-month look-forward of everything that is resetting or maturing 18 months out. So we're almost through full year '27 when you look 18 months out. '27 is our largest reset maturity year where we have $9 billion. So we've taken a real hard deep dive look on 3 quarters of that. We're looking at the violations and the [ lean list ]. We don't have much exposure there. We look at the 100 Worst Landlords List in New York City, we don't have much exposure there. A lot of our borrowers, these buildings have been in the families for generations. So they have a low-cost basis or they've benefited from the 1031 rollover. So we don't have any OREO. People are not handing the keys back. And then as Joseph pointed out, there's a lot of liquidity out there for this asset class, whether it be from the agencies, Fannie and Freddie, or other banks and they get CRA benefits if they're funding a more than 50% rent-regulated building.

So when you look at the remaining '27 vintage that you're going to be wrapping up this quarter, no reason to expect that there is a significant divergence in the performance versus what we've sort of seen so far I think?

That's right because we're 3 quarters of the way through '27 already. So with the majority of the way through, in Q4, the actual amount of resets of maturities versus the earlier quarters actually decreases slightly. And the way it would show up is if you look at what's happened to their ACL reserve, the last 2 quarters, it's come down. Provision has been $3 million in Q4, 0 in Q1. Our net charge-offs have come down to about 30 basis points when you adjust for the 1 bankruptcy -- the 1 borrower that was in bankruptcy in Q1. And criticized and classified loans have come down. So in Q1, you saw a reduction of $1 billion between nonaccruals and substandard. So if there was anything, it would be showing up in either the ACL reserve, which it is -- or you'd start to see in some of those other components that feed into the ACL reserve, and we're not seeing it.

Okay. Maybe one more of a technical side of the question, but the loan yields this quarter, I think were down a little more than people were thinking. Is there any dynamic that we should be thinking about with loan yields as we move forward, some, I guess, maybe more of the loans had hit reset than some people were thinking, so the roll-off yield may not have been as low as expected? How should we think about sort of the pace of loan yields going forward given a flat Fed environment?

Yes. There was a couple of things playing out in the first quarter. First of all, you had the December rate cut, and so that obviously impacted yields in Q1. But then if you look in totality in Q1, including the par payoffs, but the paydowns of that CRE portfolio, it was down about $1.6 billion. And the average coupon of those payoffs was just over -- or paydowns was just over 5%. And so as we said, it's good news, bad news. It's allowing us to more quickly diversify into that 1/3, 1/3, 1/3 and reduce exposure to an asset class we're overweighting, which is derisking. But it does impact short-term net interest income and NIM. But as we've said, in terms of the overall thesis and strategy, it's intact completely. And the worst case is maybe instead of Q4 of '27, it takes us to Q1 or Q2 of '28. Because you just need another quarter or 2 of net $2 billion plus of C&I growth to replace that CRE runoff that is happening more quickly and sooner.

But it doesn't change your view of, call it, the second half of '28, the trajectory of the...

Not at all. Not at all.

Maybe shifting on to the C&I side. You talked about hiring Rich Raffetto and bringing in 300 people there. What's the outlook going forward from that? Is that the base you need? Are you still going to be hiring? And how is the sort of go-to-market strategy on the C&I side?

Yes. So it's important to lay out, I think, the strategy for us in C&I. We have kind of a 2-pronged approach to this. Under Joe Abruzzo's group, we been infilling in the markets where we have branches. So in California and Arizona and Florida, New York, New Jersey, Ohio, Michigan, Indiana, in Wisconsin, we've been covering now those markets with C&I or commercial bankers, and we did not have those before. So when people drive by a Flagstar bank and they get called on by a commercial banking, there's a tie-in that the bank is in the community. Then also under [ Adam Fife], we've created what we call specialized industry strategy. And those kind of trail your big GDP levers in the economy: health care, energy, entertainment, sports franchises, technology, a wide variety of segments. And so we have a two-pronged approach of both geographic and industry specialization. All of those really start by hiring what I would say are highly qualified 15 to 30-year commercial bankers. And our approach is a little bit different. We don't go hire a team. I can't where we've gone and did a lift-out of any team. Our approach is hire 1 or 2 people in a geographic area or industry specialization. And then as we grow that book of business, we add people to that. So I think if Rich was sitting here today, he's probably going to add 30 to 40 people in 2026. And then based upon our continued growth in the portfolio, we'll continue to add resources into that segment.

And how is that helping drive deposit growth and deposit mix shift? And how -- what's sort of the optimal mix for you as we look out over the rest of this year?

Well, I'll let Lee comment on like the ideal ratio. But I mean, I think what we have found last quarter, we had really solid deposit growth with $1.1 billion across the franchise, and we grew the C&I book $1.4 billion. So I do think there's a really strong momentum within the company on the deposit side. And it depends a little bit on the sector. If you look at the middle market, generally, that's like winner-take-all approach. So you bid on the business and you win the depository and the foreign exchange and interest rate derivatives and treasury management fee and the loan. In some of the upper middle market corporate, usually making the loan gives you a ticket to solicitating the rest of the relationship. But I think the ideal scenario is 30% to 40% of every loan you make in that sector, you should be able to gather in deposits to fund that. And then we obviously have the $36 billion of deposits in our retail bank. We look for that to grow 2% to 4% on an annualized basis, and changing the mix in all of those categories to more operating accounts and less interest bearing.

A couple of things I'd add. So I want to start with the loan growth on the C&I side because I think that's important. So the way we think about it -- and the team -- Rich and the team have done a phenomenal job in the areas that Joseph has alluded to. But we have 131 customer-facing C&I bankers. And we put this in the Q4 earnings deck, but they've got 25, 30 years tenure. We expect those bankers to do 1 deal a quarter. So call it 4 deals a year. The average loan size is $25 million. So it's very granular. We're not taking outsized positions in any one name, which is another way we're protecting ourselves from a credit point of view. 70% of our loans are utilized at an average spread to SOFR of 225 to 242 as it was in Q1. So if you just do the math on that 131 bankers, 4 deals a year, $25 million, 70% utilization, you can see how we're getting and building up to that C&I growth. And we were at $1.4 billion net in Q1. And we feel that, certainly, by the second half of this year and maybe even this quarter, we'll be close to that $2 billion of net C&I growth in terms of fundings. And that's how we sort of think about it mathematically. And it's played out that way. On the deposit side, we have about 90% today, we have about a 90% loan-to-deposit ratio. And we would expect to continue that as we move through sort of '26 and into the early part of '27. So we're funding the loan growth with deposits. And as Joseph said, it's coming from the new C&I relationships. We're not just giving the balance sheet away. It is relationship banking, leveraging the loan to bring in deposits and fee income. It's leveraging the private bank, and they've got all the products now and businesses. So we've got the interest-only mortgage, subscription lending, Chief Investment Officer. We've got an insurance adviser, trusted adviser, family wealth planner. So we feel that's an area where we can grow deposits, as well as leveraging the 340 bank branches we have in terrific markets throughout the U.S.

How about on the spreads? Are you seeing spread compression from the competitive landscape? Or are you maintaining spreads as sort of as expected?

We actually saw spreads widen on new transaction. We were 225 in the Q4 and 242 our Q1. And that has a little bit to do with the business mix in the market, but we did not see a falloff in spreads.

Great. You mentioned the fee income opportunities. You've made investments in wealth management and other areas. How has that build-out progressed? And what should we expect in terms of is there a target for fee income per commercial relationship on the commercial side? Or what are some of the targets on the wealth management?

Yes. So we have -- first of all, we have a pricing model every relationship. And so we're not just looking at the spread on the loan, we're looking at the deposits, and we're looking for the fee income opportunities. And incidentally, all of our bankers know management teams of the companies that we're lending to, which makes a big difference. So we're looking at the over -- we're trying to drive to an ROE target and we're looking at every relationship, not just from a lending point of view, but including in the deposits, the cost of those deposits and the fee income as well. So it's absolutely part of the playbook here in terms of driving incremental deposits and fee income business for the bank. We also hired a new Head of Capital Markets towards the end of 2025, and we feel that you're going to start to see that come to fruition as we move through '26. So capital markets, FX swap, syndication fees. But we also think we can drive fees in other areas. So with the new loan fees, unused loan fees, mortgage -- gain on loan sale, particularly as we move out of the Q1 seasonally low period or quarter for mortgage, deposit fees as well, we think we can do a little bit more there on service fees and overdraft fees. And then historically, on the private bank side, the company waived a lot of those fees and we're just being tighter in how we manage that. So we feel that you will see our fee income increase and increase proportionately as we're bringing in those new C&I customers in particular.

Great. Any questions in the room? You just wait for the microphone, sorry, so we can have it on the webcast.

Can you say a few words about your digital strategy?

Are you referencing consumer or are you referencing wholesale? Because -- yes. So a couple of things I think are important to point out. When we've got to the bank, we had 6 legacy data centers. And this last quarter, we completed the conversion of those -- closed all 6 of those data centers into 2 co-location centers, which what that does is brings a state-of-the-art solid foundation to grow off of. The second thing is, today, the bank operates off 2 cores. We have an FIS core and we have a [ FISR ] core. It's our goal in the second quarter of next year to be down to 1 core. In conjunction with all that work, we've been looking at our treasury management and our direct offerings on the consumer online. On the commercial side, you really have to have digital offerings for your customers, meaning when they go in sending wires, checking balances, transferring money, account reconciliation, and we have those tools today, we're in the process of enhancing those tools. The digital format in the consumer side, we've been upgrading how people come in to the bank and how they open up accounts. And that's very important because last year was the first year that digital accounts opened -- were opened at banks more than they were opened in a branch. And we actually think that trend is going to continue where people are going to be digitally inclined to conduct their business but branch domiciled when they're looking for consulting around retirements, investments and mortgages and things like that.

I think the thing that I would add to what Joseph said is -- and then on the mortgage side, we actually leveraged with a partner called Blend to make that digital experience a lot more seamless. And I know you talked about digital, but I'm also going to talk about AI, we'll take the opportunity to talk about -- yes, I'd like to talk about it. So we've -- the technology team have just done a phenomenal job, and they have built what we refer to as Star IQ, which is our own proprietary AI platform in -- so it's contained and we're using that internally. And it's -- think of it in terms of 3 levels. So you've got a bachelor level, a master's level and a PhD level. It is open to all 5,400 employees. And we monitor this, about 83%, 84% are using it on a regular basis. And this is so powerful in terms of its ability to analyze a lot of data quickly. It can access all of the company's records, policies, procedures, and it can just identify key points very quickly. It can help in terms of producing PowerPoints, presentations, marketing materials. And we're just beginning to scratch the surface, but there is so much that that can do in terms of driving efficiencies internally. And the fact that we -- the technology team has built our own proprietary platform, which they've just patented by the way, that's how sort of proprietary is, we think that that is going to create a lot of opportunities as we move forward. The other thing on the technology side, Joseph alluded to is one of the foundational aspects of what we've done, we've rightsized our cost structure and taken over $700 million of cost out. We've done that at the same time we've been investing in growing the C&I business, investing in the risk structure, but also investing heavily in technology on things like AI development and other projects, that you're going to see those come onstream later this year and into '27. And that's going to drive further efficiencies. And that's how when you look at our projections, our revenues are increasing but our costs are going down. They continue to decrease.

Yes. The thing I would comment on AI, yesterday we had our top 100 leaders of the company together for a training session, what -- the steps we've found is people quit using Google, they started using Star IQ as their new Google. But we really want them to really advance. And so we spent time yesterday going over 2 cases where, in one case, how to do a proposal for a customer, where you can feed in the credit proposal, you can feed in the treasury management, you can feed in the capital markets. And AI, in 3 minutes, produces this customer-specific proposal. It's really fascinating that -- the 30, 40 hours you historically would do to put something like that together. We also put a 500-page policy of the bank into AI and then asked it a bunch of questions, 3 minutes. The answers all came out. Now you still have to take that data, evaluate it, make sure it looks right. But just the opportunities are really endless. I mean it's so exciting to see what you can do with that kind of tool that you have available to you. And I would like to think we have what we call S2, simple and sophisticated, as our technology platform, that that will be a really big competitive advantage for us as we move forward.

I guess on the expense side, you've highlighted you've done a great job of reducing a lot of the operating expenses, trying to build in scale. You have the core systems conversion coming up. So I guess there's, what, $40 million or so of savings after that. What other initiatives should we expect over the next 18 months that haven't already been built in? And where do you ultimately see sort of the efficiency of the combined company once it's up at full scale?

Well, so from -- [indiscernible] because I know Joseph will, and he's drilled this into all of us, the efficiency target is sort of [indiscernible] 50% to 55%, joseph wants us to be at 50%. And so we're working to get to 50%. But if you think about the additional cost takeouts as we move forward here, it's sort of several fold. One, I mentioned we've got IT projects that are going to be completed over the coming 18 months. And as they come on stream, that's going to allow us to get much more efficient. You're going to see a continued reduction in FDIC expense. So the return to profitability, improvement in asset quality as we continue to pay down wholesale borrowings, you will see those FDIC expenses continue to come down. There's still some things we're doing, optimizing real estate, there's a couple of operating centers that we're looking to consolidate. That's another area that will drive cost benefits. Vendor expenses, we've been very focused on the vendor expenses and driving those lower, especially as you look at the synergies from the -- bringing the 3 banks together, and I think we've done a nice job there, and there's a little more to come. And then as you alluded to, we're on 2 cores at the moment, and we'll be on 1 core by the middle of next year, and that will lead to $40 million, $45 million annualized cost savings. So those are just some of the initiatives that we continue to work through.

So with first quarter earnings, that was your second quarter of profitability. This quarter, you're finalizing the evaluation of the biggest [indiscernible] of that '27 vintage. So how should we think about how you view capital, what sort of an optimal capital level is? I think everybody is excited to see what a buyback could look like at Flagstar. What's sort of the broader view of capital for you?

Yes. So it's a fun side of the mountain to be on, is what I would say. The other side of the mountain was not as fun to be involved with. But the company today is probably sitting at 13.2% CET1. We think when the Basel rules get enacted, that's another 60 to 80 basis points. So the bank does have a very strong capital base. When we got here, we felt there were 20 items that needed to be dealt with. We think we're down to roughly 4 regarding capital. The first being that sustained profitability at a level that we and the Board feel confident of. I think we'll be able to check that box as we go through 2026. And specifically, the second quarter. The second being that continued improvement in the loan portfolio. So while we think we've taken strong marks and charge-down loans, as we resolve loans, the proof is in the pudding, up until now, most of the loans that we've cleared off the book, we've traded at or above where we had the loans marked. But bringing those levels down are very important. The third is this issue we discussed at the beginning between C&I growth and CRE payoffs. If all of a sudden the CRE payoffs started to slow and we had that kind of C&I growth and we'll have another good solid quarter to take a look at, I think, during this particular quarter. And once we get to that, I think management will make a recommendation to the Board of what we do with the excess capital, which today is probably $1.6 billion or $1.7 billion of excess capital in light of where we are as an organization.

And obviously, at and below tangible book value...

It's a very attractive [indiscernible] right. And when we say excess capital, we're just taking it down to 10.5%. So we're not even dipping below what would be kind of the upper edge of the...

Normal [ exits].

Yes, that's correct.

Your background is diverse. You spent time as the controller of the currency. I think you have a great view of regulation and the Washington view of banks. What else do you see coming out of Washington for the industry after the finalization of Basel? Anything [indiscernible]?

Yes. I really complement the banking regulators in Washington, D.C. I think they've observed what they thought were the most important thing is to get banks actively involved in the economy to be a source of strength. I think today, our banking industry is the most well-capitalized, liquid and profitable. And there's a reason for that, is people worked really hard to understand the risk in banks. I think what we're seeing coming out of Washington now is sensible and logical regulation on items. And I think also you're seeing a pullback of regulators looking at what is the end result and not how the banks got there. And for a while there, it was very prescriptive around processes. And I think today, it will be, well, how much capital do you have, how much capital are you creating, how much liquidity you have, not necessarily how you got to that point. And I think Jonathan Gould is doing a phenomenal job as the controller. I think him coming out and early on saying that we're going to change under what case an MRA or an MOU or a formal action, that it has to have a material financial impact on the institution, is very significant. Doesn't think it gets the headlines it deserves, but no longer will banks be diverted away from serving their customers and focusing on the bank when it is virtually an immaterial item that they would be cited for. Clearly, banks want to do the right thing and have the right risk infrastructures and processes, but every time you're focused on items like that, that are not relevant, it takes away from what banks are supposed to do, which is being out in the marketplace, taking care of their customers.

Okay. I think that's probably a perfect place to end this. Thank you very much, gentlemen, for joining us. And thanks, everybody here, for taking the time.

Thank you, Jared.