Zions Bancorporation, National Association (ZION) Earnings Call Transcript & Summary

Great. Moving right along, very pleased to have Zions with us, returning once again. From the company, we have Scott McLean, who's President and Chief Operating Officer. We also have James Abbott, who's Director of Investor Relations. Scott's going to walk us through some quick slides, and then we're going to do Q&A. So with -- Scott, take it away.

Thank you, Jason. Yes, it's good to be with you, and appreciate your attendance here today. I think as a large regional bank, most folks are familiar with us, and they're familiar with the elements that we're -- we really bring national distinction and have national distinction, and first, really, it's our strong history as a collection of community banks with a very strong local orientation and distinctive brands in every one of our states. Secondly, it's the fact that about 2/3, so 70%, of our revenues, total revenues come from banking businesses, small to medium-sized businesses. And thirdly, as a result of that customer focus, we have this deposit mix, which has been industry-leading for decades. The mix of noninterest-bearing deposits to total deposits, which is currently about 50%, is industry-leading and has been for decades despite interest rate periods and monetary easing, et cetera. And then customer satisfaction, and you've seen that in our data for years. Greenwich Research is sort of the gold standard for measuring how business customers feel about banks around the country, and we have fared with national distinction in that for many years. And then finally, technology. It's an emerging story for us. It's one we've been talking about for years. But as I talk about it here today, you'll have even more of a sense of that. Let's see -- and I don't think I got our slides started. There we -- okay. I just went past our first slide. But this gives you a little bit of a picture of our strong regional brands and, again, great names in all the states in which we operate. This is the slide on Greenwich Research. And we've had this in almost all of our decks. We finished second among all U.S. banks in their survey for 2021. We finished first in 2015. And there are only 3 other banks, again, in the United States that have done as well in this gold-standard research that's done on how business customers feel about banks. Only 3 others that have done as well as we have since the survey started in 2009. And none of those 3 really operate in our banks. This particular slide is comparing us to the 4 major global banks. And we compare ourselves to them because in every market we're in, they represent somewhere between 50% and 65% of the deposits in those markets. And you'll also see Net Promoter Score there. Net Promoter Score, remember 50 or better on a Net Promoter Score is considered excellent. 50 or better is considered excellent on Net Promoter Score. If you go to the next slide, you'll see our strategy. And very simply, McKinsey came in and worked with us in 2018 and basically reaffirmed -- helped us reaffirm our core business. We basically are doubling down what we've done traditionally, which is banking small and medium-sized businesses and evolving our focus with additional resources being placed on capital markets, which supports the upper end of our business segment and then the affluent market, which is certainly the upper end of consumer, but that's where a lot of our small business owners are, is in that basic affluent segment. Now we're in a lot of other businesses like consumer and CRE and energy and municipal finance, a lot of other businesses that we're in. But these 4 businesses are the ones that over the last 3 years, we want to make sure we're getting a disproportionate share of our management time and capital investment, et cetera. And then you see 5 enablers there. That sounds kind of like right out of general strategy creation. But we have very specific tactics related to each of those 5 enablers. They're very important. I'd be happy to come back to this slide, Jason, if you'd like to talk more about it. I do want to comment, just a moment, about technology, and it is nationally distinctive for us. Greenwich -- on that Greenwich slide, it shows that our business customers perceive that we are on par or better than our 4 major global bank competitors today. And that's before we had rolled out the -- our new business online and mobile platform, which we did earlier this year. We rolled it out for consumers in 2021. And before the completion of our core project, which we call FutureCore, you'll see 3 panels up from the bottom. So every bank in the country operates on 30 to 40-year-old core loan and deposit systems, every single bank. And we will be the only bank in the United States by this time next year, towards the end of next year, to have completed our FutureCore transition. It's been about a 10-year journey. We've replaced our 3 loan systems as of February of 2019. So we have all of our loans -- virtually, all of our loans on our new modern core, one data model, and that is distinctive in itself. We will have our deposit system converted by the third, fourth quarter of next year. And we'll -- at that point, we'll have all loan and deposits on our new modern core, which is really quite significant if go to the next slide. Basically, what this means is that if you want to be competitive in a digital world, you have to be digital to your core. You absolutely have to be. And so this new modern core that we have converted to and are converting to consists of one data model. That's an important concept. You'll probably begin to start asking your other banks about one data model. It's API-enabled, native to the application. It's cloud deployable, native to the application. And it's real time. The rest of the world's banking system operates on a real-time system. The United States mimics it, okay? There's a big difference between mimicking real time and operating in real time. Just a few of the advantages that we think will set us apart from the rest of the industry. It should give us a competitive advantage of anywhere from 5 to 10 years on the vast majority of our competitors. Turning to the financials. We've had really strong loan growth in the last 3 quarters. Four quarters of loan growth. Last 3 have been especially strong. Our deposit franchise is the source of a lot of the value of our company. I'll talk more about that in just a minute. If you look at slide -- I'm going to look at Slide 10 and 11 together here. We're comparing ourselves here to the most favorable quartile as the green line of our peers, 19 peers. The blue is the least favorable quartile. I'm just looking at the left-hand side. We're green. And you'll notice that our deposit growth over this period, which goes back to 2017, has been at about peer median, okay? You have to kind of juxtapose that to the right-hand side of this slide, which is our average cost of deposits. Again, over -- this slide goes all the way back to 2000. And you'll see that for 2 decades, we've had this industry favorable comparison of cost of deposits being very low against deposit growth that's been about peer median. And clearly, if we had wanted to pay more, we probably could have grown deposits at a faster cliff. But the most important part about these 2 slides, 10 and 11, is the left-hand side of 11, the mix of noninterest-bearing deposits to total deposits. And you can see in the green line there, going back all the way to 2000 -- 2 decades, we could go back into the '90s. It'd be about the same. This mix has -- we pretty much lead the league on and have in all environments, interest rate environments, economic environments. And the reason is our very granular deposit base. Again, about 65%, 70% of our revenue comes from banking, small and medium-sized businesses. We have this really granular collection of operating accounts, where the CEOs, the owners of these companies, they're more worried about generating revenue than they are creating an extra 50 basis points on a $75,000 operating account. This is a fundamental strength of our company and I think one of the most important things to understand if you're trying to think about the value. I'm not going to really hit this slide on loan growth. Happy to come back, talk about it. Neither am I going to spend time on our liquidity. Again, happy to talk about it, Jason, if you want to ask questions in that regard. And you see net interest income. Clearly a topic everybody is going to be interested in. We were poised for rising interest rates. We're seeing it come through, and we're in a great position relative to that. You'll see on this next slide, Slide 15. In the second quarter in July, when we announced earnings, we talked about this concept of latent sensitivity and emergent interest rate sensitivity. And I'll let you read about it, but combined, it's 23%, which is basically 15% latent, which means from the interest rate increases that have occurred, as they take place over the next 12 months, we should see about a 15% lift in net interest income. And if we follow the curve between now and the next 12 months, there should be another 8% of net interest income lift, not counting any loan growth changes, growth in the balance sheet, et cetera, et cetera. So a really important disclosure we made in the second quarter. As it relates to customer fees, this has been a real bright spot as well. We've had growth year-over-year in all categories. Our commercial account fees, our retail and business fees, our card fees, all have returned to pre-pandemic levels. And then we've continued to see really nice growth in wealth, capital markets, foreign exchange as a component of that. If you look at noninterest expense -- I'm sure there'll be some questions on this, very similar to the industry. We've seen a pickup in expense growth over the last year, driven by employment costs, technology costs and just investing in our growth businesses. I would put a really big sticky note on this. If you look at our expenses from 2014 to 2021, they grew about 6% in absolute terms; 2014 to 2021, prior to this year, expenses grew about 6% in absolute terms. And now we're seeing a ramp-up in expenses for reasons that I think most everybody understands, but that ramp-up is coming after a period of really strong expense discipline. Pre-provision net revenue, PPNR, it's basically moving along at a nice pace for all the reasons we've talked about. Let me turn to credit real quickly. We're fundamentally -- and happy to talk about it in more detail. We're not seeing any real cracks in the portfolio at the moment, okay? Watching closely, very attentive, but not seeing it. And historically, what you see on this slide and on the next slide is that our loss rates over a long period of time have been well less than our peers, and this is loss rates on problem loans largely because of the secured nature of what we do. That's the fundamental reason why these have been different. So we're generally a secured lender, and I think we make good decisions. I think the real question though is where will we see credit quality potentially deteriorate if we go into a recession of some significance. And no one knows whether that will happen or not. But generally, people believe it will probably start with consumer. And it's important to know that we don't have a big consumer unsecured exposure. We don't have a big card portfolio. We don't have an indirect auto business. Our personal unsecured loans are small. It really won't come in personal unsecured or car lending for us. We do have -- we note on this slide, we have about $10 billion in 1-4 family mortgages and another about $3 billion in home equity loans. And you can see here, we want to show you the data on the 1-4 family, the HELOC portfolio, the home equity loan portfolio is very similar. But we have very low loan to values, high FICO scores, exact same underwriting we did going into the '08 recession, Great Recession. Our mortgage portfolio and HELOC did great during that time period because of just this fundamentally conservative underwriting that we've done. Average loan size in this 1-4 family portfolio is about $700,000. So these are not first-time homebuyers. That is not who's in this portfolio where there's generally more risk. Another place where risk could emerge would be in real estate lending. We have about $12 billion in commercial real estate loans. 80% of that is in term real estate. These are properties with stabilized cash flows. Average loan size is about $2 million, $2.5 million, so small loans. It's about $9 billion in term real estate. It's 80% of our CRE exposure spread out across our footprint, and low loan to values, stabilized cash flow. This portfolio did very well in the Great Recession. And the other part of our real estate portfolio, we've got about $2 billion in outstandings in construction loans, virtually no land exposure. So we think that's -- we think CRE is going to be a place where we will fare well relative to the others. And the other really important thing is as you look at us against our peers and regional banks that are smaller than us, as you go down in size, you'll see that their CRE exposure increased probably 8% to 12%, some higher, over the last 5, 7, 8 years. Our CRE portfolio has been growing about 3% to 5% over the last 7, 8 years. So we're going into the -- and that was by design. We would be going into a downturn with much lower growth rates in CRE. Allowance for credit loss, no specific comments there other than I think we're well reserved. You know that we have strong capital. We're committed to maintaining capital levels at or above peer averages. We went into the pandemic with capital levels at or above peer averages. We said we would be ready for the next downturn, and that continues to be our approach to capital. And then this slide is, I think, an interesting one. There's 2 measures that we watch closely. One is earnings per share modified by replacing the provision, the loan-loss provision, with net charge-offs. The reason we do that is the CECL protocol. When it came into play, it's a very pro cyclical approach to reserving and can create really big swings in terms of volatility. And so here, we're just replacing the provision driven by CECL with actual net charge-offs. And you can see how we compare again relative to these other peers, 18 some-odd peers. And then looking at tangible book value per share and other, obviously, important measure. And then on this slide, final slide, we absolutely are well positioned for rising interest rates. But we are also very cautious about low interest rates as well. I mean we could see disruptions in the global economy that could take interest rates right back to 0 again. So you'll see that we're not running as asset sensitive as we have been, but we're still focused on remaining asset sensitive, but we want to be very cautious about any sort of black swan event that would take interest rates back to 0. We clearly have been carefully managing our loan growth. I think our deposit franchise is in great shape. And we think we're as well prepared for a recession as we possibly can be. So with that, I'd be -- I skipped through some of those slides, Jason. I'm happy to go in whatever direction you'd like to go in. And James and I will now take questions.

Super. If you want to have a seat, you could stay up there, whatever is easiest for you. I didn't see the kind of the 12-month outlook slide that we tend to like to see from you guys. And maybe just start off -- there we go. Looks like no changes.

Unchanged.

Unchanged since the quarter end.

All right. Okay. And just maybe -- Scott, we're going to -- I guess, actually, why don't we bring up the first ARS question so we can get this live because we have it for everyone else. You guys have clickers in front of you.

Do I get to participate?

You're overweight, not by choice, so you don't count.

We get a choice.

A lot of people not involved. Let me go to the next question, too, which ties into the guidance slide, which one...

So tell me -- let me just say, for those not involved, you probably should be, but you're not paying attention if you're not involved.

We're going to delve into that in the rest of Q&A.

Was that from my inner voice? That got away from there.

And then for the next ARS, of the 12-month outlook slide that Scott just put up, what do you have the most concerns about? And this is what we're going to delve into next. So expenses. Interesting. We'll get to that. First I want to start out is on deposits just because, Scott, you showed that slide where you had an above-average amount of noninterest-bearing deposits. One of the things we've heard some other banks presenting so far is maybe a faster expected mix shift out of noninterest-bearing into interest-bearing. So maybe just talk to both kind of expectations for overall deposit growth. I think they were down 4%. And then talk to kind of within that, what kind of mix shift should we expect and just how deposit betas are tracking this quarter.

Sure. So we had about a $3.5 billion contraction in deposits through 6 months. And to put that in perspective, though, if you go back to December of '19, pre-pandemic to, say, the end of last year, end of '21, depending on whether you're looking at averages or period end, et cetera, et cetera, deposits were up about $22 billion. Compared to the industry, we were up about 4, 5, 6 points better than the industry. We were about in peer average, and that's with a cost of deposits that is lower than virtually all of our competitors. So we experienced this really strong deposit growth related to the quantitative easing that took place. That deposit growth was 70% in our business clients. So it was right where you would have expected it to be in our -- kind of our granular customer base. And the deposits -- as we entered the year, we thought deposits would be flat to decline. That's kind of what we went into the year expecting. We saw that through 6 months. About 1/3 of the deposits that left actually went to our off-balance sheet suite. And I think through the cycle, we'll see about 30% to 50% of the deposits that leave the balance sheet, go into our off-balance sheet suites, where we earn fees and revenue share with those providers. So it's actually not a bad thing. And generally speaking, when we lose deposits, we're not losing the relationship. It's just -- it's truly the excess deposits that certain clients have. And in this case, through the first 6 months, about half of it was a couple of handfuls of really large clients, very easy situations to look at where we weren't losing the relationship. They just moved to higher rates. And in terms of beta, we -- like most other banks, we've not seen beta realization to any extent. We still are projecting kind of high teens-ish sort of beta. You can look back to 2016 to 2017 when rates went up last time. And you can see that our betas were very low early in that rate cycle. And you can see that they generally were less than our competitors. Our deposit franchise has not changed materially since then. And so I think -- yes, we fully expect to have the same experience this time. I was asked several times this morning. So do you think that large depositor, that couple of handfuls of accounts that moved balances in the first half of the year, is that over? I would never say anything is over, particularly if we follow the rate curve for the next 12 months. We'll have other sets of depositors that are especially large that may choose to move totally off our balance sheet. And so I would expect that to happen if we see the rate increases that we think we'll see. But all of that is very manageable. James has been making the point all morning that if you believe money supply, the money supply is going to be flat to slightly growing. Deposits in the banking industry almost always follow the money supply. And so we're not looking for a big contraction in the money that's in the banking...

Jason, I just might add that we were anticipating -- so we track the deposits, and maybe other banks do it this way. But anyway, what we've done is we've said deposits that churn a lot, that's a good thing. It's a bad thing if you're a stock broker. You don't want to churn your account. But in the banking industry, if you've got an account that's churning a lot, it's a good thing. It's a relationship deposit. It's a transaction-oriented deposit account. Then we've got on the other end of the spectrum -- we track the whole spectrum, but on the other end of the spectrum is low churn. It just is fairly idle. It turns over once every 2 months, once every 3 months perhaps. We've always had a big stack of that. It's -- the other element, the high churn, is much, much larger than the low churn. But we've always had a several billion dollars' worth of low churn deposits. During the pandemic, that low churn deposit balance grew by a substantial amount, several billion dollars. Rather than invest that money into 3, 4, 5-year duration securities or loans, we ended up just holding it in cash. So you saw us invest left and right in the securities portfolio and in the loan portfolio until we reached a level where we said now we're down to the surplus liquidity, and we're going to kind of stop there. So we -- the balance sheet was positioned for this period of time where we're seeing some attrition.

Got it. Maybe we could talk to just loan growth. If you look, the last couple of quarters have been good. Particularly last quarter has some good kind of underlying trends. On the flip side, we've heard a lot of talk about a recession. The H.8 data C&I loans were down 3 in the last 4 weeks. Don't -- try not to get too caught up in that. Just maybe in terms of talk to kind of what you're seeing kind of quarter to date.

So the third quarter of last year -- second quarter of last year, we were -- we had a number of -- excluding PPP, we had a number of down quarters in total loans, excluding PPP. And we went flat in the second quarter of last year. Third quarter, we saw an increase. Fourth quarter and then the first 2 quarters of this year have been 3 of the strongest quarters in our history. And all these comparisons are difficult because we're coming off of very unusual pandemic times. And -- but what we're seeing is that there's clearly inventory build that's going. On and some are saying, well, that inventory build's over, et cetera, et cetera. Who -- I mean, the answer is who knows. But the customers that we talk to, customers that I talk to, in a broad range of industries, are highly focused on restoring inventory. Because if you think about a small business owner or a medium-sized business owner, they absolutely cannot create revenue if they don't have inventory. And if you're in a big giant business, you can kind of move your revenues around and et cetera, et cetera. But if you're in a small to medium-sized business, you have to have inventory. And in 2021, they yanked back -- and 2020, yanked back so hard on inventory to create cash that inventories are at way historical low levels. And so rebuilding inventory takes a lot of capital to do it. And in the psyche of, I think, most small business owners, they're thinking, wow, I am not going to get caught short of inventory again. I'll find some other way. You never want to be long in inventory either. That's been the historical preference, don't get overly long in inventory. But in a world that's now been totally upset by supply chain in all kinds of industries, I think the business owner's psyche is changing to I have to have inventory. I have to get ahead of this. So it's not just getting back to where they were. It's getting -- it's actually getting a little bit ahead of the game. And the supply chain pressures in most industries have not abated. They -- it's as complicated today as it has been. So I think that's actually going to be a source of continued loan growth. Utilization rates are still on revolving -- credit lines are still about 3 or 4 points below where they were for the 5 to 7, 8 years going into the pandemic. And while I think most small and medium-sized business owners are worried about a recession, they've come through such a difficult time in the pandemic that I don't think it looks as scary to them as maybe a recession would have looked before. So I don't think they're going to be leaning back as much as they might ordinarily do going in.

Got you. Maybe bring up the next ARS question as we tie this all together. What's your estimate for Zion's 2023 NIM? 2.87% in the second quarter for those who don't have the models in front of them. And I guess as people answer, I think James got credit for inventing the terms latent sensitivity and emergent sensitivity last quarter.

Actually, Paul did that. I got to totally give credit to Paul because we spent hours trying to figure out how to communicate that better.

And I guess while as helpful as that is, you did leave out, I think, a key component, which is balance sheet growth. And I guess as we kind of look out, just maybe talk to the impact. I think some people said, oh, it's going to be better than that because loans are going to grow. Some people said, it's going to be worse than that because deposits are going to contract. Just how do you think about overall balance sheet growth playing in?

I think one of the things that -- we want to provide all of the key components so that people can make the best decisions on their own modeling, but we don't -- that's why we left that out. We said here's what it is under a -- if you don't think interest rates are going to move at all, it will be about a 15% increase in net interest income. If you think interest rates are going to go to the forward curve, which, by the way, is bouncing 100 basis points plus or minus on any given quarter, you need to figure that out and layer that in. And then loan growth, if you think we're going to get loan growth, great. We think we're going to get loan growth. We think it will be in the mid-single digits, which would be sort of about $3 billion or thereabouts. And so we would anticipate taking it out of the securities portfolio, generally speaking, because we're anticipating that deposits will be flat to slightly down. So we would anticipate pulling that -- those -- the cash needed to fund those loans out of the securities portfolio cash flow, which, by the way, is about $3.5 billion a year. So that matches up decently there. And as a result of that, you'd get probably about 200 to maybe 250 basis points extra spread relative to what the securities portfolio is yielding or would have yielded, let's put it that way.

Okay. So we should expect you to outperform those numbers if...

If loan growth emerges, yes, yes. So -- but we do want everybody to make our own educated guesses, I suppose, as to what loan growth will do. We've said it many, many times over the years. Our ability to predict loan growth, especially 12 months out, is about as good as all the investors and analysts have at predicting stock prices 12 months out. We struggle with it. We do the best we can to make a reasonable estimate at it, but it's a very different -- next 3 months, we have a pretty good handle on it, but 9 and 12 months is difficult.

Got you. The question to the audience that we posed earlier about what part of the guidance you have most concerns about, whether it's expenses. I want to make sure I touch on that. Scott, you talked about historically 6% type expense growth. I think last quarter is closer to 8%, up...

Yes, 6% over 7 years -- 6 years.

Yes. And now running higher than that.

Totally. Absolutely. Not annual.

Right. And now we're talking 8% year-over-year, just 1 quarter given the -- in part given inflationary pressures, some of the technology initiatives you talked about. Just maybe talk to kind of your outlook from here. And then kind of once we're over the hump on this new operating platform, does expense growth kind of moderate?

Yes. If you look at our expense growth year-over-year just for the quarter, what you'll see is base salaries is about half of the growth, okay? Base salaries. And that's just dealing with the competitive issues related to staffing and retention. And so that's very real. I don't think that's going to go away in the next 3 months or 6 months. I think we're going to be living with staffing issues as all industries will be for at least another 12 months, and it could go longer than that. So we're in a pretty unusual time period when it comes to just wage pressure and retention issues and attraction issues. This is not a time period that most people have experienced in their career. So that's one piece. You've also seen on the employment cost side an increase in incentive compensation. And that's definitely related to the growth. And if you just take the net interest income growth that we're talking about that we've given guidance on, PPNR growth will be solid, commensurate. And so our incentive comp goes up. Some of that incentive comp is related to our profit-sharing plan, which impacts all of our employees. And it's very formulaic. Some of it is in discretionary bonuses as earnings go up and credit quality remains strong. And some is related to how we compare to peers, principally around growth in earnings per share and growth -- and return on assets. So it's a relative term. There are some other elements to the longer-term plan in that calculation. But those are the 3 major components. And then there's pressure on benefits expense as well that are being seen in all industries. So all in all, employment cost, which is 60% of our noninterest expense is -- it's under a certain degree of pressure on all fronts. And then we've continued to invest significantly in technology, which you know, and that's a meaningful component. And then you have things like FDIC expense that are going up not because of our credit quality but because of the actions taken by the FDIC. And those are not small numbers either. When you think about our big technology project, FutureCore, we have said for quite some time that when we finish the deposit replacement component, the Release 3 of this project, our expenses in that year would go up about $10 million to $12 million. That's coming next year. So about $10 million or $12 million of our expense increase next year will be related to the fact that we're going live with that final phase. In the following year, '24, expenses related to that project come down by about $15 million. So it will go up about $10 million. It will come down $15 million in the following year. And then it will kind of slowly come down over time. I think in terms of our overall technology cost that runs through the P&L, it's hard to think of a time where it will not be a meaningful portion of our expense growth because its technology is just so important. But having that core replacement behind us is huge because it makes everything else we do easier to do and cheaper to do going forward. And there's not another bank that can say that. Their cost will be higher to do new things. It just has to be. And so I don't think you'll see technology cost -- I think it will probably kind of go flat in '24 to where we are in '23, flat to down. But there's still big investment opportunities on customer-facing applications, cybersecurity, building resiliency into everything you do. Resiliency is a topic you'll hear banks talking much more about and what it really means and what it costs. And customers and shareholders want their banks to be resilient.

And then we can go to the last ARS question is, where do you see Zions 2023 net charge-off ratio? I mean you're 7 basis points in the second quarter. And I guess it gives me an opportunity just to talk about credit quality. At some point, I guess we'd expect losses to normalize. Hasn't happened. Trying to find signs for it happening. Still haven't found it. I guess maybe where should we be looking first? What portion of the portfolio are you more focused on? And how do you see this whole credit normalization process playing out?

Yes. So we've been operating -- we'll see what your survey pulls up here. But...

So I mean it's in here. The #1 answer is 30 to 40 basis points for next year, which is a significant increase from 7.

Yes.

If you want to share what your answer would be. But just maybe talk to in terms of how you're thinking about it.

So for many, many years, our net charge-off ratio has been kind of sub-20 basis points. And for many years, sub-10 basis points. So we tend to live under 20, 25 basis points. Many of our peers live in the 30 to 50 basis point range. Some of the larger banks, even higher. And so again, some of that depends on the mix of consumer and particularly card business. But for us to be in 30 to 40 basis points would be -- that'd be a pretty unfavorable place for us to be relative to our history. It would be hard for us to get there, barring a really deep recession. And if we were to get into a really deep recession, you have to go back to the comments I was making about credit quality that the consumer side of our portfolio, we think, is in really strong shape. And our real estate component is really strong. And our small businesses have fared very well through previous downturns. So I think you're going to see us continue to stay in that sub-25 basis point range, which is where we've operated for many, many years, barring the Great Recession.

Perfect. With that, please join me in thanking Scott and James for their time today.