KeyCorp (KEY) Earnings Call Transcript & Summary

All right. Perfect. Next up, we have KeyBank. But before that, I'm going to just get a disclosure out of the way. For important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. The taking of photographs and use of recording devices is also not allowed. If you have any questions, please reach out to your Morgan Stanley sales representative. With that out of the way, we're delighted to have with us today Chris Gorman, Chairman and CEO of Key and Clark Khayat, CFO. Thanks so much for joining us.

Thanks for having us. It's quite a turnout. It's.

It is. Investor interest has definitely been up this year. Chris, maybe to start, a lot has happened this year. Can you give us an update to your longer-term Investor Day targets? And maybe while you speak to that, given how much the environment has changed. Are you making any changes to your near- and longer-term strategy?

Well, there's a lot in there. Let me kind of unpack that, and good morning, everyone. Let me first start with what isn't changing. So what's not changing is that we, at Key are relationship banks. So we have a relationship strategy, and I'll come back to that because that's actually going to be important in, I think, kind of the new world as we go forward. The next thing is we've been focused now for probably 4 or 5 years on what we call primacy, primacy is having the primacy account, whether it's an individual or a corporation, that's not going to change. The other thing that we've been focused on, there's so many banks in the United States, this notion of targeted scale, finding places where we can be meaningful and focusing on those areas. In the past, we've talked about areas like affordable housing, where we're the #4 player in the country. We've talked about things like renewables, just to pick a couple of things. So those are the things that absolutely won't change. The other thing that won't change is our risk management. We are -- it's my view that we're on the precipice of going into an economic downturn. How deep or how long? I don't know. But I think the kind of shape that your portfolio is in is really, really important, and that's unchanged for us. We've got -- 70% of our clients have a -- consumer clients have a FICO score of 760 or greater. 56% of our C&I loans are investment grade. And I think that's really, really important as you go into a downturn, and we have been derisking Key ever since the global financial crisis. So that's kind of what's not changing. So what is changing? What's changing is basically what people demand in terms of deposit pricing, that obviously is changing, and that's changing quickly. We obviously are going into a regulatory cycle where I think category 4 banks are going to have more capital and more liquidity requirements. And so I think those things are changing. And so how are we at Key kind of adjusting to that. One, we're paying a very close attention to RWAs because we don't know how this is going to play out. But as you think about kind of the levers that you can pull, that's really important. The other thing that we are benefited from is, I think there's going to be a movement to fee-based income. And we are in a good position to do that. You'll recall that back in 2021, for example, we got rid of $4 billion worth of indirect auto because it wasn't relationship, you couldn't cross sell it, et cetera. So that's the kind of thing that I think everybody is going to be looking at. And what I think the net effect of this is going to be that I think banks are going to have lower loan-to-deposit ratios. So people are going to be riveted on the quality of the deposit base. People are going to -- what's the duration of these deposits, what's the granularity of the deposits. We happen to have 3.5 million customers, and we have -- 2/3 of our deposits are either insured or collateralized. And most of these clients have been with us for a long time, but I think that is going to be the gating item for banking kind of going forward. So that's kind of around the world of what stays the same and what changes.

All right. But in fact, no, there's a lot to unpack there, regulation, loan growth and, of course, deposits, which there's been a lot of interest on. But maybe before we dig into those topics, Clark, any update on the quarter? There's clearly a lot of uncertainty in the market. So maybe if you can update us on the quarter as well as the full year guidance that you've given before.

Sure. So on the quarter, I'd say loans and deposits kind of pretty much where we expected. NII is going to come in softer. I'll come back to that because my sense is there's a fair bit of interest around that one. Capital markets, other fee-based income will reflect the broad market environment we're in right now. Expenses will be well managed on track for where we've guided based on actions we took earlier in the year. And then credit quality, as Chris noted, there continues to be really strong. So broadly, that's where we'd be kind of second quarter. As it relates to NII we're going to come in softer than we thought again based on funding mix and deposit cost pressures, which, again, I think you're hearing from a lot of people. We'd expect that number in the second quarter to be kind of in the range of down 12 versus the 4 to 5 we guided on the first quarter call. I think as we exited Q1, we had a cumulative deposit beta kind of high 20s. That was relatively strong. That's based really on having been very retention-oriented in our deposit strategies. In the second quarter, really kind of in May, we started to pivot a little bit more to some acquisition-oriented behavior. I think when you think about where money market funds are, where other banks are pricing deposits and then being more acquisitive, that's caused that deposit pricing to accelerate a little bit more than we expected. But we're getting really good customer traction in that path. So from a balance standpoint, we really feel very good about that. So I'd say Q2, given the forward curve is likely to be at or the bottom of NII going forward, and we'll see where things progress over the course of the year. And as is kind of our standard practice, we'll update the year on our earnings call in July.

Perfect. So second quarter, down 12% Q-on-Q versus the prior guide down 4% to 5%. And then on the deposit beta side, I think you've mentioned before that your cumulative deposit beta should be somewhere in the low 40s. Is there an update to that number?

No. I mean, we said sort of last month, we're kind of low to mid-30s. I think we're progressing towards that low 40s. A lot of it's going to be dependent on what you see in the back half of the year and whether rates stick high or whether the forward curve unfolds, but we'll update that as we have more information.

All right. Perfect. So maybe let's dig in on the deposit side. Take us through some of the broader thoughts on how customer behavior has changed, not only since March 8, but also over the course of the last month. As we look at the Fed H8 data, it seems like deposits have stabilized, but maybe you can talk to some of the trends around the mix of deposits as well as behavior you're seeing from customers?

Yes. Well,let me start, and I'll talk a little bit about client behavior. And then Clark, we can talk a little bit -- you can cover a little more on kind of what we have on betas. So kind of backing up, going back to the beginning of March, what we did is we said, just like we did when -- in the PPP, we said, we were all in on that Sunday prior to the Monday. We said we need to reach out and touch all of our clients. And just keep in mind, our clients are clients that have been with us for a long time. Many of them are kind of in the C&I book are like 15 years in duration. So our clients have been with us for a long time. So we went out and touched all these clients because we knew clients were going to be concerned, frankly, about the industry. They're going to be concerned about their deposits. They're being concerned about Key and everything else. And we've been able to really maintain our deposit base. We said when we reported our first quarter in April, we said that deposits were holding in nicely. We said when I had our annual meeting, we said they were holding in nicely and they still are. But we've been really pleased with the durability of our deposit base. Not surprised, but pleased. I would say in a couple of stats on our deposit base, which is kind of interesting. So 81% of our C&I deposits are operating accounts. 98% of the dollars are attached to those clients that have those operating accounts. So even where we do have what one might term to be excess deposits, they're tied to these client relationships. And so we did see early in the crisis, a limited number of people that had large dollars, moved those dollars around. We've seen in many instances, those dollars come back. In terms of client behavior. As everybody knows, probably in this room, there's a couple of platforms out there that basically bifurcate deposits. I think they've probably seen a lot of flow. We have not really experienced that. And I think I'm just really pleased with how our deposits have performed. But I think it goes back to this notion that we've been focused on primacy for some time. I mean if you have the operating account for these businesses, they're paying their payroll twice a month. Everything flows through that. I mean it's just not something that people split up. If you have excess deposits, obviously, that's something that someone could. Clark, what would you add to that?

So I think the stability of the deposit base today is probably the most important piece and maybe even to take Chris' comments one step further when we talk to clients. I think we've mostly moved past any concern. And often, the clients are saying, "How can we help you?" So I think clients are standing behind us in the same way we've stood behind them, and I think that's important to the relationship construct. I will say, just broadly, and this is no surprise, right, clients' deposits are staying in place. They're just more expensive, and they're going to continue to be more expensive as long as rates sort of sit where they are.

So what does that mean in terms of the mix shift between interest-bearing and noninterest-bearing accounts? Is there a little bit more going towards interest-bearing now?

There certainly is. So I think people are getting smarter about what their excess dollars are. In some cases, we facilitate that on the commercial side to make things simpler for our clients. I do think we are in certain pockets starting to see that level off, and I think we're just getting down to what are really the core operating deposits or core kind of personal checking account kind of operating dollars. So I think we're starting to see that trajectory plateau a little bit. But clearly, at rates like this, given where we've been, we're going to see continued migration.

So I think in the earnings, you mentioned mid-20s NIB the total deposit number. Is that still the right level to think about?

I think at this point, that's -- that's where we're headed. And again, as we've seen pockets of this start to stabilize a little bit. So as long as that continues, we feel good about that.

Perfect. And one of the questions I get from a lot of investors is why look back at 4Q '19, why not go back to GFC and pre-GFC if that and look at the NIB mix back then. Can you talk about whether we could actually go back to that historic low for the industry? Or has the industry fundamentally changed?

Yes. I mean if you -- maybe before March 8, people would say never, but these are good reminders you never say never. So of course, it's possible. I think what's different in banking pre-financial crisis is just the product capability and the way that we engage clients differently around not just dollars in the account, but things as simple as online banking. But on the commercial side, right, there's just -- there's so many ways for your treasury capabilities to plug into these clients that make to Chris's point. It just makes it very difficult to pull them out. So I think that's an aspect of it. Will we see it -- continued pressure? I think we will, again, as long as rates sort of sit where they are, but I do think we are fundamentally different in the way we engage clients on deposits.

If you have primacy, it would be unusual for dollars not to be hooked up to some kind of software that's embedded in businesses, whether it's as simple as online banking for individuals or within business kind of as you know, we go to market based on sectors. It is -- you certainly could, but it would be -- it would take a lot of work.

Perfect. So maybe on that topic, the stress in March drove some deposits out, but many corporates also opened accounts across a range of banks, including yours. Can you speak to the trends in account openings and how they're being funded so far?

Sure. So the weekend that you just referenced that weekend, we had our biggest weekend of the year on our consumer side of our business. And a lot of our consumer growth is driven by young customers in the West and that weekend was no different. And those trends have continued in terms of client capture. Within our commercial businesses, we've been opening twice as many accounts on a monthly basis consistently since that first week in March. So it's been positive.

All right. Perfect. And then on the deposit side because that's where investors are pretty focused. Any -- I think you mentioned that deposits have been trending in line with what you had expected. Any numbers around that for the quarter?

Well, we'll give -- I mean we'll give -- we're not changing our guidance. So I think our guidance was down 1% to 2%, and we're performing well. There's flows within into the quarter, whether it's tax payments or it's escrows, but everything is performing exactly as we would have anticipated it.

All right. Perfect. Another topic that you brought up on the earnings call was the hybrid accounts that you have. Can you provide some more color and just explained functionally how these accounts work? And are they -- how are they different from the traditional sweep account offering?

So think about your traditional sweep as a treasurer picking a threshold. And then at the end of every day, whatever is above that threshold gets pushed out off balance sheet into a money market fund. This would be, one, kind of keeping it all on the balance sheet. Two, what we've tried to do for our clients, particularly kind of the core middle market clients where the CFO, is the Treasurer, is the AP manager and has 7 or 8 different jobs. We don't actually cause them to think about where that threshold is on a daily or weekly basis. We've done some math to understand and sit down with them and say, this is really your core and we'll kind of run that every day and whatever is not core, we will put in at a "excess rate", but it's all in 1 account. So they don't have to worry about dollars moving. They don't have to worry about looking at the account every day and setting it. So it's very simplified from their standpoint, which, again, tends to be fairly attractive. We keep it all on balance sheet, which works well for us. The general kind of gist of it is probably doesn't feel that different than a sweep account other than again, the sort of the simplicity and the amount that's being calculated.

And that qualifies as an interest-bearing account, correct?

Correct.

All right, perfect, right. And any thoughts on what the balances are on those accounts? Has that been a meaningful driver over the course of the last couple of quarters?

So it was late last year and early into this year in business -- in our larger business accounts. We've sort of -- we've been in front of our business banking clients, the smaller commercials on that, but those will be probably large in client numbers, small in total volume. So that's slowed down as we've come through the year because clients that are interested in that we generally have been in front of for now quite some time.

All right. Perfect. And then maybe just continuing on the same theme on commercial versus consumer clients. betas are clearly different. A lot of banks have been talking about how commercial clients, the betas are stabilizing was consumers are still moving. Can you talk about what you're seeing from your client base?

Yes, very similar. We would have seen commercial, I think, as you'd expect, commercial move sooner because commercial clients pay for people to think about where their money is being invested. So that would have been -- started middle of last year, been pretty well ingrained by the end of last year coming into this year. And so again, it's not that there is a beta there. It's that it's not moving in the same trajectory as consumer. Consumer lags and we're going to see that continue to lag into higher rates over time.

So we're closer to a peak on the commercial side and a bit further away on the consumer side.

I would say the vast majority of our commercial book is indexed in some way. doesn't always mean indexed at 100 beta, but index so that it's going to move with rates one way or the other. And that positive is when rates come down, those will come down sort of naturally.

All right. Perfect. And Chris, you touched on this a little bit, but are corporates and small businesses placing a greater emphasis on diversifying their deposit balances between different banks? What are you seeing from your customer base?

So I think let's talk first kind of what's going on in the industry and then kind of what we're experiencing because I think there's a little bit of a dichotomy there. I think within the industry, there's no question that people are diversifying some of their deposits. As I mentioned earlier, there's a couple of platforms. We are not seeing that though. And really, that's because -- we're not -- we never had a whole slew of excess deposits. We had sort of this granular half, this granular 3.5 million customers, and most of all of our deposits with respect to our -- and we have a strong C&I business, our operating accounts. So you don't split up an operating account. It would be no different than somebody in this room that uses online banking, all of a sudden start utilizing 2 separate platforms for online banking. You could do it. It would be a risk mitigation device, but you probably aren't going to do it.

All right. Maybe pivoting a little bit, Chris, from reading the Fed and FDIC's reports on Silicon Valley Bank and Signature, it's clear that regulations are going to change and change pretty quickly. What are you hearing from regulators? And what sort of proactive actions are you taking on that front?

Sure. So as you can well imagine, we talk to the regulators all the time. I spend time in Washington talking to the regulators. I'll tell you the one thing that has been very consistent is whatever actions are taken, it will be subject to the standard rule-making in a phase-in period. And so I think that is really, really an important concept. We, as you can imagine, have modeled out 100 different scenarios, whether it's running AOCI through CET1 or TLAC starting tomorrow or TLAC where you can use the holding company debt or TLAC where you can use. We have modeled out everything. It's our belief that Key is in good shape in terms of having a glide path to whatever comes our way. There will be additional regulation around both capital and liquidity that's coming. But I think we feel like we're in good shape. Our AOCI, 40% of it burns off in 7 quarters. and 90% of that has nothing to do with rates. It's just straight, short durated. So we think that's really helpful. The other thing that we're doing is we have a very strong loan growth franchise, and we can dial it up and dial it back. And as you can well imagine, as we prepare for the inevitable changes in terms of the regulatory environment, we are being very, very careful about saving and preserving our capital for those really good clients. And we have a lot of full clients, and that's fine. But I think -- and I'll say this for the whole industry, I think it's going to be really challenging for people that are borrowers that don't have whole relationships because if you think about all the changes, and I mentioned earlier, lower loan-to-deposit ratios, and I've said and some of you have probably heard me say this before, on a risk-adjusted basis, stand-alone credit never returned its cost of capital. And now the cost of raw material just went up significantly. I think it's going to be really hard for people that just borrow money to have access the kind of access they used to have. And I think one of the knock-on effects of that, by the way, is I think it's going to drive a lot of lending out of the banking system. And so if you think about when people lighten up on RWAs, it will probably -- that will probably move to people that are outside of the banking industry. So those are just a couple of things that I'm thinking about. We are, as you can imagine, making sure that we're well prepared for whatever comes our way.

And what does that mean for capital return, both on the buyback side as well as the dividend front?

So our capital priorities have always been, first, to support the organic growth of our customers, and we will continue to do that. On the other end of the spectrum in terms of repurchasing of shares, it will be just de minimis until we get clarity as to kind of what the requirements are. So we'll continue to support our clients. But with respect to share repurchases, we'll be doing those as I said, in a de minimis way until there's more clarity.

And maybe on the liquidity front, as you mentioned like the LCR could change. How does that impact how you manage your securities portfolio? I think you've noted that your securities book is already short dated. Is that something that will likely continue? Would you pivot more towards treasuries and. Can you just talk about how you manage the balance sheet?

First of all, we're very conservative in terms of how we manage our liquidity. I think we're probably sitting on $8 billion or $9 billion of liquidity as we speak. We run -- I do think that the category 4 banks will be subject to increased scrutiny around that. We run our own liquidity tests all the time. So I feel good about where we are, but it will drive people to purchase shorter durated securities. I don't think there's any question on a go-forward basis.

And any thoughts on even beyond just LCR, when you think about the duration of your deposit book, has that changed post the events of March? How do you think about the duration for noninterest-bearing deposits? And does that have an impact on how you think about the asset side?

Yes, it is the question, right? I think what I would expect to see over time, and I would think most banks are doing this today. But I think you'll see more granularity around client types and product types. And if you think about those, that is kind of a matrix like what's the duration in each bucket. And how has that impacted when rates change. So I think you'll see more granularity around those buckets. And I think you'll see more rate sensitivity attached to those just because of what we've seen. So my guess is on the broad deposit base, assuming it looks the way it does today, the likely duration is going to be shorter. I think you'll see way more disparity across those buckets. So the one thing I would say, and we haven't done this yet in detail, but I would expect our best relationships in those core accounts to look exactly the way we've always thought they looked because they're here. We just went through a pretty significant stress event, and they haven't moved. So again -- so I think that's really positive. I think as you break out and get more granularity and sort of get farther away from that core, you'll just see deposits that sort of have and are treated as having much shorter life span.

And is that a process? Is that an analysis that will happen over the course of this year? Or how soon can we expect the industry generally to change how they're managing their deposits?

Again, I think in a starting point today, I think different banks have different views of that. I think over the course of this year and maybe the next 12 months, you'll see more and more of that. And I think some of it will be part of the regulatory changes that we see coming.

All right.

I want to go back to -- embedded in your last question that I answered, you asked about returns, which are so important with all the changes. I think people are, in some ways, overestimating the impact on returns. We've always had a target of 16% to 19%. I can't tell you what I think the number is, but I don't think it's going to be geometrically different than that. The biggest thing that drives returns in our industry, and I've been doing this a long time, are credit losses. So yes, capital, if you consume more capital, does that drive down returns, it absolutely does. Do I think they're going to go down? I do. I don't think they're going to go down by a huge amount, but I don't know yet what the framework is going to be. But the biggest determinant, I think, because I believe that we're going into an economic downturn, the biggest determinant is going to be who has credit losses. That's what really decimates returns and decimates them for a period of time. So it will be interesting. I don't think the change in returns is going to be as great as some of the literature I've read.

So maybe while we're on the topic of credit, I think you've spoken about in the past at CRE that you've been derisking your CRE book over the last decade. Your total exposure is down pretty meaningfully, I think, by 10 percentage points since the crisis. Can you talk about what you're doing on the CRE front, how are you managing that book and how you're trying to get ahead of any stress that comes through in the system?

Yes. And just to give the group just some historical context. We were underperformer during the global financial crisis as it related to our CRE book. And specifically, we were in a couple of asset classes like homebuilders, for example, that we just completely exited. The other thing that I really got us focused on is we changed that business 10 years ago. Now by the way, I think our real estate business is one of our best businesses. We said, one, we're going to have a lot less exposure period. So to your good point, we've gone from I it being 26% of our book to 16% of our book. But even more importantly is construction because when the music stops, construction is a huge problem. We have 2% of our book with very good sponsors in construction today. Going into the global financial crisis, that number would have been 12. The other thing we did is we said, we're going to be really focused on who we back and in what location. So 2/3 of our exposure in real estate right now is multifamily with certain sponsors in certain cities in a subcategory that and the not insignificant subcategory is affordable housing and affordable housing is a massive unmet need in this country. So I feel really good about it. And then the last thing that we did is like the rest of our business, we converted that to an underwriting distribute model. What we have been doing is just putting things on our balance sheet and that doesn't work. We now can distribute and do distribute, whether it's Fannie, Freddie, FHA, the life companies, the CMBS market and so on and so forth. So we can serve these select clients, but we don't have the tail risk. So I feel really, really good about our real estate book since we're sitting here in a central business district, I'd be remiss if I didn't talk about exposure with respect to office because I do think there's -- I think there's significant losses in office. We, in particularly B and C class office, multi-tenant central business districts. we have a total exposure in that category of $127 million. We also have -- I don't know, most of you probably know this, we have a third-party commercial loan servicing business. So this is all off us debt. So picture servicing principal interest, taxes and insurance. And then also named special servicer on over $200 billion worth of debt that when it goes bad or needs to be restructured, we don't have any dollars in it, but we're the restructuring agent. So we have a pretty good window on kind of what's not working out there. And no surprise, it's been retail forever that goes into active special servicing. During the pandemic, obviously, it was a leisure. Right now, the fastest-growing sector by far is B&C class office in central business districts. And so I feel really, really good about our real estate exposure. It's a business that I really like. I didn't like it when we had the global financial crisis, and I didn't think we were properly positioned. We are going to have a downturn, and I think we're properly positioned for this one.

All right. Perfect. I do want to delve into loan growth a little bit before moving to the audience for a question or 2. But I think you spoke about how loan-to-deposit ratios are going to be lower going forward. Can you talk about what is driving that? Is it the demand side of it? Is it the supply side and tightening lending standards? Can you talk about what's happening in the industry and also specifically what you guys are doing?

Well, I think all the things you just described are happening, but in our case, it's really how we are going to manage our balance sheet. In answer to one of your earlier questions, like the regulatory regime is going to change and what are you guys going to do differently? And so yes, there's a slowdown out there. Yes, there's less demand. We're not changing our credit box. One of the things I feel strongly about is in this business, you make money by not losing it. We've been really, really conservative. We'll continue to support our clients. I think being aggressive, not aggressive is not a good way to do that. But what we will be very demanding is we will be supporting full relationships. And it goes back to what I mentioned earlier on kind of what the returns are on credit-only deals. And so you're going to see us manage our RWAs as we prepare for kind of what I think the next chapter of banking is going to be.

And then you touched on this before that a lot of the lending is going to move away from banks into the nonbanks. We've also seen headlines that there is private capital out there that's looking to partner with some of the banks. Can you talk about, a, are you willing to partner with any of those thumbs, and b, how do you think that will change the banking landscape as we get into '24 and '25?

Well, I mean I'll answer the first -- the second part of your question first. I mean I think the way it's going to change the banking landscape is there'll be fewer dollars within the system, which I don't think is necessarily a great thing if you think about systemic risk but would I be willing to partner with people that can help us serve our clients and are less demanding in terms of kind of what the returns are and kind of what they're looking for. The answer is absolutely. We think about our business in the ordinary course, we only put 23% of the capital that we raised on our balance sheet anyway, sometimes 20%, last quarter was up to 30%, because the markets were dislocated. So I don't have any problem partnering with a variety of people that have a -- perhaps have a different perspective than we do or perhaps have a different regulatory regime than we do.

And on that front, we've been partnering with fintechs since over the last 7 or 8 years. I think we're pretty good at figuring out how to deliver the best solutions to clients, even if they're not ours. But I do think we've seen the trend over the last decade of dollars moving out of the system, I don't think that's going to slow down.

Right. Perfect. Are there any questions in the room? One over there.

You're very convinced that we're headed into a downturn. What are you seeing that's making you so convinced and what would change your mind?

So I just think the -- I think the lag effects of the significant tightening that we've had, I think, are going to come into play. I'm out talking with clients all the time. And what I see is, right now, they're saying, well, we're actually going to put that on hold. And we're going to put that on hold and maybe we're not even going to do it. The flip side of that is the conundrum for the Fed is the labor market continues to be very strong, and it's very hard to slow down the economy without damaging the labor market. Having said that, I just think the cumulative effect -- and keep in mind, we've got other things going on, too, that are going to naturally have an impact. The $85 billion that rolls off of the Fed's balance sheet every single month. That has an impact of effectively raising rates. The notion of -- the treasury is going to wait into the market in the not-too-distant future for $1 trillion of financing based on resolving the debt ceiling issue. I think that will have an impact. So just as I'm out talking to people, I've seen people go from we're definitely going to have a soft landing to. We need to be cautious to people starting now to either delay indefinitely big projects or in some cases, scrap them. Thank you for your question.

We can do a quick last question here.

Can you talk about the repricing on the loan side? Obviously, some of it is -- some of your loans are floating, and therefore, they reprice, but in that part of the book, interested in hearing about how that is being taken by borrowers? And on the part that's not floating, just how is it the cadence of repricing?

Yes. Well, unfortunately, and this is always the case the banking industry lags the bond market, and that's because there's excess capacity in the banking industry. So the banks right now are not getting the repricing to the degree that I feel that we should. Obviously, the deals that come to my desk, we are pricing -- our raw material has gone up significantly as a result of pricing. But in general, will that happen? Absolutely. But it never happens as fast in the banking sector as it does in the capital markets. There's just a little bit of a lag due to the excess capacity and people just have a different perspective. There's -- the borrowers that get the best deals are kind of the big company in a relatively small town that's banked by the local bank. They get whatever pricing they ask for. So it takes a while for it to adjust. It will happen though. It's a good question.

Right. Perfect. With that, we're out of time. Chris, Clark, thanks so much for your time.

Thank you.