M&T Bank Corporation (MTB) Earnings Call Transcript & Summary

All right. So last time I opened with the fact, this one will be a disturbing fact. Did you know that M&T's provision for taxes in the third quarter of '21 was $162 million. They have a market cap of $21 billion. [ Square ] has a market cap of $117 billion and the Street estimates for their entire tax expense for 2022 is $46 million. So one of the valuation is wrong. But thank you very much for M&T for attending the conference again. We really appreciate it. Before we start, we just wanted to highlight Don MacLeod is his last fab. He's been a great friend over the years. And you're always welcome to come back, you can negotiate the fee with Gerard. And then -- but yes, I'd like to start. So M&T is a top 20 bank in the country, $152 billion of assets -- in assets. The -- I was joking before, this was once Warren Buffetts Bank and now it's [ Boston and zone ]. Representing M&T today are Rene Jones, CEO. Rene has been with the bank since 1992. He was appointed CEO in the end of 2017. And Darren King joined the bank in 2000, and is the Chief Financial Officer. So thank you again for coming. We really appreciate it.

Thanks for having us.

Happy to be here. You leading online?

Rene can lead us. I guess could you -- do you want to just talk A lot of what we've heard today is, I guess, I would summarize as relevance of the traditional banks within the future of financial services. So I don't know if -- You want to just kind of give some of your thoughts on how M&T Bank and others, the traditional banks, remain relevant in the next decade?

Yes. Thanks, John. I think -- I'll start by boring you to death, after all, we are in banking. People often ask us, well, what's changed. And so we reflect on that quite a bit. And I think most of our core operating approach and, in turn, our relevance has remained the same. We talk today a lot about share. It has always been our focus that we want to dominate the markets that we're in. We believe in local focus and operating in markets where you own less than 10% of the share, it's really hard to be an effective intermediary and scale in that local is, in our minds, as useful as sort of large, broad national scale. We believe in being efficient because we're an intermediary in finding the most efficient ways to do business. And we believe that a big part of that is being good at credit. You can do a math exercise on -- if you invest in more risky loans and you can have higher yields and all that, all that wonderful stuff they teach us in business school. But at the end of the day, if you're not super healthy and don't have a clean book, when everybody else is in trouble, you miss a huge opportunity to pick up share and back up to the top, increase that density and that share that you need to be an efficient operator. So most of those things have remained the same. I think, though, as you think about that, it becomes harder and harder to scale as you move to new markets. And so, as you know, we have -- we're getting ready to do the deal with People's United. We had wanted and thought that we could be competitive in New England for a very, very long time, but we just didn't have the right entry point with a willing seller who actually had some size in the markets. And so we think less about what are the growth rates for businesses in Vermont, and we think more about the #1 deposit share in Vermont. We think about the #2 deposit share in Connecticut, for example. And then we begin to think what can we do with that franchise. One of the things we talk about often is that, we've both been here for a very long time, deposits and relationships have been sticky. Today, when you look at the facts, the retention rates are even higher than they have ever been at any time in my 30-year career in banking, right? So that underlying premise still stays the same. But I think, in our view, what we're likely to see is the continued acceleration of the consolidation. I think, in the long view, I see large banks having significant advantages. So I don't discount the advantages that people mention about them. But I see communities operating with one or two or four large banks, and then [ hot pot ] a few regionals will be around. So we won't have 6,000 banks. But we're going to have regionals who are very focused, serve a niche, and can do that better, right, than what the large banks are focusing on that are more complex, so they are doing things international and so forth. So with us, our secret sauce has been that we've been really, really close to our customers. And we've understood that -- everything about them. We immerse ourselves in the communities. We know information about our customers faster than anybody else because of how we live and operate in the communities. And what's interesting is, we will hear crazy stories about doing business for our customers in moments that matter. But now to do it, what we have to do is you have to get up, and we have to jump on a plane, jump in a car, go to Baltimore, go to different places, and we have to hear it directly from the individuals who had the experience, or it could be negative experience with customers that are happening. One of the things that has afforded all of us, including the small guys, is the ability of digital to actually make that scalable, right? To be able to sit back in Buffalo and look at what's happening -- what are those moments that matter that are happening in Baltimore, and how do we replicate them? And what are those moments that aren't happening in other places when we look at the data to begin to actually change what we're doing and move best practice. So it's more than likely that if we're successful, we'll have dominant local share. You will find people saying things about M&T that are really meaningful, deep memorable stories. Usually, that comes in times that are very, very difficult, and we saw that in Square and PPP. I mean just the amount of ability of favorability that we were able to create, particularly because of the stress of that environment because our operating model had people on the ground that could sit at kitchen tables was a real differentiator. So I'll stop there. I think when I step back, people often ask us about where do you go from here. I think we're going to use digital capabilities and those things to strengthen our existing operating model. And from what we can see today that we're making great progress in both places, and it is possible to do to differentiate yourself in the face of...

There was maybe there are a little bit of lessons learned during the pandemic, and that might have been one of them, I guess, are you -- are you doing anything differently, operating differently from things you've learned in the pandemic?

Well, the first thing, I mean, we made significant investments in our tech infrastructure. Our new CIO, has been here for three years or so, called it technical debt. And one of the things we realized is that in order to create a modern technology environment, the first thing to do is just clean up your technical debt. And so think of infrastructure capabilities that you might not have had that you needed. Unfortunately, four years ago, we made huge investments in that. You guys, by the way -- a bunch of you guys were asking us what we were trying to do? If we had not made those investments, the whole idea that everybody left and went to work, went work from home and so forth, could have never happened. The fact that we seamlessly were able to service the customers, the fact that we were ramp up during PPP and build our app in 72 hours to actually get that done, it wouldn't have happened. We just wouldn't have had the capabilities if you look back five years ago. So I think that's a huge lesson. And it's a lesson that sort of says you can't fall behind. But the technical infrastructure that we will need 5 years from now will be different than the one that we have today. So call that a near miss.

Rene, just to build on that and complement it, part of it was the technical infrastructure, the hardware underneath. A lot of it, though, was the software and more of the methods by which we went to market, right, and shifting that thought process to an agile methodology of working. And when we talk about some of the things that happened during the pandemic, talked about the e-notary instance. We talked about how we built the app in 72 hours to take in the PPP loans. That just wasn't the way technology was done for us for the longest time, and we use a lot of outside professional services because it gave us some flexibility from a cost perspective. But what was realized was we needed that capability in-house. And when you change the methodologies we're able to react more quickly to changes in the marketplace and take advantage and provide services for your clients.

And part of that -- there's a number of things in that space, but part of that was actually bringing the tech back in-house, and we're still not quite finished with that journey, but we've brought lots of things that we weren't controlling back into our shop, reduce the use of contractors so that we could control the environment to be able to do that. So a really good point.

A question on the Peoples Bank. I guess why -- I know you were already doing some business obviously in New England. But why New England, and why not the [ Cayman Islands ]? I mean I know for your model density matters, but why does it have to be contiguous density?

Well, it helps, right? And I know we complete this acquisition will up -- our footprint will be cover 22% of the U.S. population, 26% of GDP growth. I haven't looked, but someone tells me this is the fourth largest country in the world. I don't know. This idea for me of getting bigger, it's sort of the opposite for me. I would rather get better than bigger. And if I perfect that, and if I can do that in the local markets in contiguous states, then maybe I can earn the right to export larger. But when you think of this issue of scaling your operations, right? It doesn't come all at once, it comes in steps, and you learn a lot. So by moving slow and going contiguously, we're gaining -- in this case, we're gaining a great share position, but we're also sort of derisking that expansion. I don't -- this idea that I need to be everywhere in the country would take away resources from me in getting better.

To Complement that little CFO type answer, when you're contiguous, in a lot of cases, media markets overlap, so you get better leverage out of your marketing spend and your brand spend, you get better leverage out of your management infrastructure, right? And one of the most important parts of the cultural integration is mixing and matching the leadership because if you want to change the culture, you want to change the practices, it starts with the leadership. And so your ability to have -- make that change more quickly when you've got those contiguous markets definitely helps. Than, obviously, the more you build density, it's also leveraging.

So this is really key, like when I look at People's United and coming to New England, I don't see just the 400 branch locations that they have. What I see is the entire corridor from Maine to Boston to Hartford to Bridge Ford to Long Island, all the way down -- that -- and you -- those of you who are in the Northeast, you know that corridor, you know the traffic and the word of mouth is there. And if you were to look at traffic patterns by individuals, those are the places that we really want to bank. And I'll just say this real quick. So I took a visit to see the M&T and the People's United folks on Long Island. And I'm not from Long Island, so I don't know much about it. So I asked them, do they ever take the ferry to Bridgeport. And they said, yes, we take the ferry to Bridgeport. I said like why you go to -- what do you going to bridge for? Like what do you do? They're like, we're not going to Bridgeport, we're going to Maine. When we wake up in the morning, we look at the traffic and we see if it's longer to drive around the sound or go over, and we take the ferry and we go through Bridgeport, our ability to understand those trends in those individuals, right, and is going to be how we position ourselves to be the bank of choice in these markets. But there's lots of scale in that space.

I guess, a question on lesson learned in terms of diversification. You obviously have more commercial real estate exposure than your peer group, and also, in Greater New York City, which, I guess, proved a little bit problematic at least on paper initially. How do you think about commercial real estate and diversification within the loan book? And is there any lessons learned there?

Yes, a lot of lesson there. I mean I think I think when you step back, we've done a lot of work in this space. And what we simply did is we took a team, internal and external, and we said, let's just relook at the entire market for commercial real estate, who are all the players, what are the ways you can play? Where do we sit, and where could we sit? And what you realize is that the market has changed significantly, mostly from the capital structure. And all of you know the loan funds are heavily involved in this space. But when you think about it, think about M&T, four decades, I think we have an average loss rate of 32, 34 basis points or something like that. When we ran the stress test, they said we had to assume we're going to have 16% losses on that, and we had to hold capital for that, which, if you don't do anything about it, you've just taken a major hit to an intermediary, right? If you think about that differential. And so what that means is that it forced the market has changed over time, where commercial real estate is held in many, many places other than bank balance sheets. So we always had Freddie and Fannie. We always did work with taking stuff off our balance sheet with insurance companies. But our view today is that we probably can increase our PPNR revenue, add more services using our expertise in commercial real estate, but actually reduce our exposure on the balance sheet, which will allow us also to free up and unlock the capital, right? That is probably the most important element of the economics when you go through that. So it's really expanding our capabilities as opposed to trying to any sort of shrinking of those capabilities. Our track record really helps us in that space in terms of doing partnerships with other people.

Sorry about that. You guys are at the intersection of Community Banking, and you have talked about the underserved. So could you talk about how you relate to and compete with or work with the community banks? And I mentioned that because Michel Bomen has given a couple of speeches about how there are a few new community banks are being created and that that's possibly an issue. And then the second thing is, the underserved banking world, and how you guys are navigating that and making money from?

Thanks, John. I was just chastising a couple of members of the health care community who never seem to complement each other. That's the single factor that makes me not bode things -- the things don't bode well for health care. We love the community banks. I mean we've always been super supporters of those -- the other community banks that are in our footprint. We share ideas. We think it's a thing to do. I think it might come a little bit from Bob Wilmers, who kind of had this vision of what the money center banks -- the role that money center banks played back in the day, where they were sort of the knowledge keeper and they were partners with a lot of the community banks, and we did our separate things. We've learned a lot in terms of underserved markets. Most of what we learned is about our own behaviors. And I told some of the stories before, but the one that really launched us was when we went into the neighborhood where we've long had a school and been educating the students, and we asked them what they thought about M&T, they thought the greatest thing ever. Great brand. You guys are incredible citizens, and we ask them that they bank with us, and they said, "No, you don't have any products or services that are useful to us." And we addressed that problem, had some crazy success, and it turned out millennials in Washington, D.C. and Baltimore wanted the products. They were low fees, they were, right? One of the things we learned in several different experiments is that we had all these communities that were in our community that we just weren't tapping and addressing. It had a lot to do with when we were watching deposit trends, and we weren't growing accounts. And I think in the face of large banks growing them, when we started to shift our thinking in our product set in that space, you see now that our account growth, I think -- I forget the number, but last year, we took -- I forget whether it's 7 out of 10 or 7 out of 12. We took share in the majority of our markets last year. And most of it was from looking at those different opportunities in those different customers. We just launched a $43 billion, we call it community growth plan, which embodies a whole slew of products and services that have -- that there's huge demand for in a number of those communities. We don't look at that as like a charitable event. We actually think that it's really important for us to be like one of the healthiest partners of any of the companies in those individual communities. We agreed to have our New England headquarters to be in Bridgeport. And so we decided we'd like to start with a tough environment first.

Yes. You started off your talk with what's changed. I actually think you missed the most important thing about what's changed in the last -- today versus the last 20 years. And that is Buffalo Bills or Super Bowl contenders and...

I agree.

Anyway, you do take a long-term view. And it's interesting in your slides, if you look at 20 years, your ROTCE averaged about 20%. You look last 10 years, it was averaging about 16%, the last 5 years, 15%. So there's been sort of a secular decline, not just in your ROTCE, but the industries. And if you were go back to 2019, the projections from most banks was maybe we could earn a 12% to 15% ROTCE. What is changing that you think you can start to do better than that? I mean, COVID was unique in terms of the ROTCEs that are being produced. What do you -- are we back to -- are we going back to a 12%, 15% ROTCE's norm? Or has something changed?

So there's always things changing some of the larger institutions have improved themselves significantly. I think when I fully complete this year, my guess is, the last 4 years, we'll have averaged somewhere around 17% return on equity. Basically, the whole part of that has been that we have twice as much capital. And then if you observe a little bit further, there's a lot less flexibility with that capital. So before we would -- we would do crazy stuff that would say like, okay, well, we're just going to do a 60-40 deal. We'll let our capital go way down, and we'll build it up later. Those days are gone. Or we'll hold off, we'll do a large acquisition, and then we'll buy back shares later. And then, of course, you're like waiting, waiting like the Maytag man for the deal to get approved. The flexibility around capital has changed those returns in my mind. And that is probably one of the biggest issues around. So it means that we have to adjust our operating model. But banks getting -- or at least our bank getting mid-teens return on tangible equity, that, I see, as very, very probable. We're sitting here today, to do the math, we're going to come below 3% on our margin for the first time in our history. 50 basis points of that is the cash. If you take the cash out, so we're probably at [ $320, $330 ] last time when we were down the view rate environment, we were [ $306, ] right? So look underneath like what's happening in the current environment, the infrastructure, the core infrastructure is still there. And then lastly, what I'd say is there's a lot of ways to improve the banks. We're way behind manufacturers still as much as innovation is going on now. It's like the new thing. We're the new kid on the block for innovation, but there's a lot of inefficiencies in the banking system that, I think, can be run out so...

And the other thing I'd add on that is we spend a lot of time as a management team talking about our PPNR to risk-weighted assets, right? So how much income before credit costs are you producing against the risk that you're taking? It's not quite like a sharp ratio, but similar kind of thought process. And then from that take away your actual charge-offs because a lot of the ROTCE movement in the last little while has been accounting, right? And the provision in CECL, to me, is capital by another name, and it's going to affect your ROTCE year-to-year. But over the long run, it should normalize itself because you should bring that back into earnings. And so really, how -- what we can control and what we can affect as a team is that PPNR to risk-weighted assets and the charge-offs, right? The charge-off is a reflection of the quality of our underwriting and our workout process. And the PPNR is, are we getting paid for the risk that we're taking? Are we managing our operations efficiently? And how we're thinking about the mix between spread income and fee income, right? Because the fee income is more capital friendly. And we look at that and look at how we're stacking up on a relative basis because that's your core earnings and capital generating capacity that then gives you the options, right? And as long as you run a bank where you're towards the top on that, you've got more choices about what you can do with that than the other banks.

Follow-up question. Issue capital in capital -- In the fixed income market, I don't hear the acinar talking about a [indiscernible]. She would like to reintroduce the [indiscernible] elevated asset. And maybe the offset is [indiscernible]. If there's a discussion of those [indiscernible] any insight.

No. I mean no, I mean, I can't comment about what [ flail ] might want to do or not. I guess -- look, let me not say this is good or bad, but. But we've watched now for a decade pretty much the disintermediation of the banking system, right? Into the capital markets. And I think when you saw the response that, that person had, for the first time actually looking and doing some things with corporates and so forth, I think that...

During the pandemic.

During the pandemic. I think that I'm very pleased that there's an awareness of that. But if we were to continue to do certain things about asset prices and what I know is that he to date, he would be applied to the banking system. And that's going to get less and less effective, right? As we -- in my conversation about commercial real estate, right? I mean it's just moved out of the system any kind of high-risk loan, leverage lending, right, is all moved out of the system. And so I don't know what they do, but I do know as they do that, it's going to become less and less effective tool, right? Because we just don't have those assets.

It's interesting too Rene, any of the other place you see those assets moving is not just out of the regulated system but to the non-CCAR space, too. It's moving down market into the community banks that we talked about. And so they end up with more of that on their balance sheet as a percentage.

Yes, that's just not a great risk for the system.

Yes.

Sorry just a quick question. Also a first comment was, despite the home of M&T being in Buffalo as Ravens at M&T Bank Stadium, and that will always be where you guys are based out of but...

There's no video.

I just wanted to actually talk a little bit about the people's deal. There's obviously a ton of M&A going on right now. Can you talk about retention plans? And obviously, there's been a fair amount of regulatory oversight going on, especially in Connecticut. Can you just talk about getting through some of those regulatory issues and getting the deal to the finish line?

Yes. Well, let's start with Connecticut. I assume I described this once before, but in hindsight, Connecticut thing was who wants to go through it, but it's a positive thing because we were forced to -- we had reached out, prior to our announcement of what we were doing on the headcount, to 170 for different constituents throughout the footprint of people. So we were actually pretty well prepared. I think we got a few people off guard. But more importantly, it forced us to engage in like a really intense way to tell our story and to tell who we are and what we do. And I think that has to happen any time that you enter new markets. And in that particular case, it just really accelerated the process. Part of that process, we were already working on our plan to do the community growth plan. And -- but we -- because we had already done that, we were able to talk about what we had planned to do, and you saw the announcement on that space. I don't think we're waiting for regulatory approval. There's nothing that we see that's sort of related to M&T. I think there just seems to be a pause in deals being approved through the system. If I'm encouraged by something, I'm encouraged by the fact that people continue to announce deals. And I assume they're in close contact with their regulatory authorities before they do that, right? So I think we're probably just in sort of a temporary space. But in terms of our application, our workers have done, and now we just sit up here and talk to you guys.

And then just on the [indiscernible].

Big deal. The #1 way to retain your customers is to retain your employees. We were heavily focused on it. We're very, very fortunate that, of any acquisition we've -- well, I'll say it this way, that I've been associated with, the culture and the values of the two teams are really, really close, really close. so it doesn't matter where you go, which has been a surprise to me. You often expect you can see it one place or the other. But every market that we've gone into, we've seen that. So far, so good. Our attention has been good. I think employees are excited. I think customers are excited as well. So no worries today.

One cyclical question for Darren. And when will you deploy your excess cash, I got the sense on one of the earnings calls that it would take a very high interest rate. Is that because you're thinking there might be some sort of inflation, or you're just being conservative self that you've been? And then separately, Rene, as it relates to technology, you say banks are way behind manufacturing. And you said reducing your technical debt, you brought contractors back in. On the other hand, you're dealing with a lot of fintechs externally. I'm just trying to reconcile those thoughts about going to third parties to help you with your tax. The cyclical for you, Darren, and the structural one for you, Rene.

Sure. So with all the cash, it's continued to build through time. And really what's changed over time and in the last, I'd say, 6 months is our views on how long that might stick around. And if you look at what we did early on, with the excess cash. We tried to do a lot of things on the liability side of the balance sheet with taking out long-term debt, moving around some brokered CDs and brokered money market to use those excess funds and reduce our funding costs. Then we did some work with the Ginnie Mae buyouts because we like the duration of those securities or assets they produce some net interest income in the short term and gain on sale over time, but it's a shorter duration product and to hold the cash balances keep going. And over the course of the last quarter, we've started to maintain and slightly grow the securities book. And so you'll see that bump up maybe couple of hundred million dollars a quarter as we go forward, and then we'll be watching rates closely. And we've started to retain some of our own mortgage production rather than selling it with the thought process being, why would I go by mortgage-backed securities and pay the guarantee for you when I could just retain my own production and get about another 100 basis points yield on that. And the thing you're always worried about is, as rates move up, or as it seems like they will, if you take on too much duration, you kill yourself on the write-down on tangible equity. And so we're always kind of trading off the short-term income that you can get versus what the longer-term impact is on your tangible equity. And so we're doing a little bit. We're kind of legging into it, and we'll adjust the pace depending on what we see happen with inflation in rates.

So Mike, the way I'll answer your question is that sort of my evolution, which was 2016, we felt there was something wrong with our technology. It's not fast enough. -- too long to actually make an improvement in something you want to do for your customers and so forth. Then we launched into this whole restructure of our whole way that we do technology. we did that to prove quality to move speed to market, those types of things. But the thing that I learned from the approach that we took is one of the largest benefits going forward is you're in an environment -- I'll do it two ways. You are in an environment where a modern technologist, someone coming out of school would want to work in it. And where if you were going to partner with somebody, let's say, a fintech company, the way in which you work, right? Is appealing to them. And so therefore, you can partner. And if you look at the world today, 2010, just under $1 billion of private equity venture money into fintechs, this year, probably $22 billion, $23 billion, right? It's scaling. The R&D is going up. I can't predict who's going to do it, but I can make my environment such that people want to work with me and they want to partner with me. So I'll try to do this quick. I won't mention who, but as part of my education when I became CEO, I just decided to go elsewhere and also bring in CEOs of fintech companies. And I still remember, after a great discussion with one individual, at the end of it, as some of you have been to Buffalo, well, when you were last there, it looked like the Mad Men, scene from Mad Men but it's kind of older, we've changed it all. But I said at the end, as I always say, like, this is great. You should come back and you should bring your whole team. And this very successful fintech founder said, sort of did this, "Yes, you should come to our offices in San Francisco and bring your team to us." And it just proves like this is not who I want to partner with right? And since we've made that change, it's been incredible. So my goal is to be the #1 partner, the best place to work with as a financial institution for anybody who's inventing for finance.

If we think about what's great about M&T Bank, it's the business bank, which has got a very deep customer knowledge, local franchise. Those attributes are less useful on the consumer bank. And the previous speaker was talking about how consumer banking is moving towards a scale tech business, he kind of likend it actually almost to a social network. So how do you think you're competitively positioned in the consumer bank? And what's the long-term outlook for your consumer bank?

So I think we do a fairly good job today in our consumer bank. As I said, our customer retention rates are great. We don't really chase deposits with rates and things like that. So very sticky deposit base. I think the work we do in that space, I think you've got that perfectly right. It's going to be hard to differentiate yourself on the consumer side to be something that is unique in a particular market. We do have a lot of ways to take friction out to just get rid pain points out of the way. So when I step back and think about it, I think, on the small business and middle market side with those businesses, because the owners are so high touch already, that there's much more opportunity to differentiate yourself. So we will spend a fair amount of money keeping up with processes that are, maybe, simplistic and friction-free on the consumer side, but really where we want to invent and differentiate ourselves would be on the business side.

Rene, during the last presentation, I mean, generally paraphrase. You basically said that the smaller banks kind of crushed it, right? When it comes to innovation, when it comes to PPP, their ability to work with index. You're not a small bank, right? And i just heard...

We are tiny.

What?

We are tiny.

[indiscernible] And I certainly heard your answer that you're making yourself very open to partnering with fintechs and I definitely appreciate that. But how do you prevent sort of that, I'm going to say, large bank creep, I guess? How do you continue to be flexible and nimble and working with fintechs in a way that a community they can, how do you continue to grow? As you add people. So it's just -- I can imagine it must be harder and harder as you continue to get bigger you kind of morph into a sort of a big bank, and you lose some of that flexibility. How do you maintain that?

You're right in my space. That's the challenge, right? This is why I'm not so sure -- let me just say it this way, if we were to take a strategy to be national, we would not have any room to invest in keeping the information gap small, right? So when we started out with fourth largest bank in Buffalo, we could just dominate the market, we could be everywhere. We knew well before the owner, whether he was going to charge off or not or she was going to charge off. As you move out, it gets hard to do. When we ran, which I wrote about in our letter a couple of years ago, Mission Maryland, effectively, what happened was we told the market, you see things closer than we do sitting up in the headquarters. And structure yourself in a way where you will reduce the amount of information between silos. So think of customers who are saying good things about you in Maryland and 10 customers are saying bad things about you in Maryland. Well, so that's a lot of information. But what was happening is, one was in business banking, two were in -- right? And so they couldn't see the information. So when we reorganized, right? And empowered the team to work together and own the community, things started happening like, literally, people will go to lunch and they would work in one division, and they would hear a complaint from a customer in the line to get a sandwich. And immediately, they would come back in our network. So what you're doing is you're taking that network effect and you're closing the information gap. Technology allows us to do that today, right? So as we begin to think about instrumenting our businesses so that we can see those moments, right? That's what's going to allow us to continue to be an effective intermediary. The issue is, we can't do that and then spend lots of money trying to do it in several communities invest before we've got that build. So I think this is -- I used to describe it as our job is to keep the bank small. You know all those characteristics of it, but you're spot on. I think that's the #1 thing that we can do is reduce the information gap, so we know what's happening, what the experiences are, and we can influence it from a central place.

I think another part of that is culture, right? The culture that exists, you've talked about before, we grew up in an owner mentality and owner culture and how do you continue to spread that and move that around the bank as we go forward, that people take note when someone complains about another part of the bank, they actually care enough to solve it and do something about it, right? I mean, that story is great, but if the person didn't actually care enough to do something about it, it wouldn't have changed a thing. And a lot of the culture is what happens when the boss isn't there. And that's what we're trying to do. As we get bigger reinforce that culture, complement it with technology, and it's probably one of the toughest things, one of things we worry about all the time.

I don't want to put words in your model, but I think within the senior -- the executive team, you're adding people that aren't 30-year veterans attain now. That is a new...

Yes, they're bringing modern capabilities. I would say if I look at the last 4 executives that are hired here, they are in different spaces, what they all have in common is they know how to build and scale, like that's a really important thing. John...

[indiscernible] against time, so I'll be quick. Just regarding the -- your answer on the excess liquidity into the bond book, is there a level of rates that you would be willing to deploy that excess liquidity at a faster pace than a couple of hundred million per quarter? And then secondly, do you still expect your NII to trough in the first quarter?

I don't have a specific rate threshold where we look and say we're going all in. I mean our #1 objective is to deploy that on supporting customers. And, ultimately, loan growth comes back in a way that doesn't require us to put it into securities because that's not really what we're here for. But we're kind of watching what all the alternatives are of how we can invest. And we continue to make trade-offs around -- or thinking around how much could it impact equity depending on how far rates go, right? And what the curve looks like. And so we'll be watching it and adjust up and down, but there's not a 1.5% Fed funds were all in, and it's all going into securities. There's [indiscernible].

So, Darren and his team do all the math. You hear what I do. You should do this. Take a 20-year chart of the 2 years, the 3-year, the 5-year, the 15 and the 30, just take the rate and look where we are now. And look how easy it would be for any of those rates to go up by 300 basis points and destroy tangible capital. And as we see rates move up, which they've been moving up, right? It reduces that risk, right? That's essentially what we're looking at, right? But there are certain places on the curve you just don't want to be because the pain could be too high. And that used to be everywhere so...

Thank you very much for coming.

Thanks, John. Great to be here.

Thanks, John. Appreciate it.