Xyron at Morgan Stanley Conference: Strategic Insights Amid Uncertainty

On Tuesday, 10 June 2025, Xyron (NASDAQ:ZION) participated in the Morgan Stanley US Financials Conference 2025. The discussion highlighted Xyron’s strategic outlook, focusing on both the challenges, such as customer uncertainty due to tariffs, and opportunities, like leveraging its strong deposit franchise and strategic investments in commercial lending.

Key Takeaways

• Xyron aims to expand its loan portfolio, particularly through commercial and SBA lending.
• The company is navigating a competitive landscape, with significant competition from private credit and regional banks.
• Xyron’s strong deposit franchise supports its growth strategy, with a focus on managing deposit costs.
• The company expects net interest income growth driven by securities portfolio repositioning.
• Fee income is anticipated to grow, bolstered by treasury management and mortgage business shifts.

Financial Results

Xyron reported robust fee income generation, approximately $635 million, with treasury management contributing about 30%. The company is strategically investing in its capital markets business, which has shown significant revenue growth. Additionally, a shift from held-for-investment to held-for-sale in the mortgage business is expected to enhance fee income.

Operational Updates

Xyron is focusing on expanding its commercial lending, which constitutes 50% of its loan portfolio. The company is aggressively pursuing SBA lending, aiming to become a top 5 originator within 12 to 18 months. Strategic hires in Salt Lake, Denver, and California are expected to drive this growth.

Future Outlook

Despite the competitive pressures from private credit and credit unions, Xyron remains confident in its customer-centric approach and technological investments. The company is closely monitoring risks in private credit and commercial real estate while maintaining strong credit performance. Xyron’s capital position, particularly CET1, is projected to improve, meeting all regulatory requirements.

Q&A Highlights

During the conference, Scott McLean, President and COO of Xyron, emphasized the impact of tariffs on SMBs, stating, "The genie is out of the bottle on tariffs, and I don’t think anyone can put it back." He also addressed competitive concerns, remarking, "Competition is a good thing. We are not worried about competing with anyone that wants to parachute into our markets."

For further insights, please refer to the full transcript below.

Full transcript - Morgan Stanley US Financials Conference 2025:

Manon, Morgan Stanley Sales Representative, Morgan Stanley: All right. Thanks everyone for joining us. Up next we have Zion. I’ll just read a quick disclosure. 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 not allowed. If you have any questions, please reach out to your Morgan Stanley sales representative. And with that, we’re delighted to have with us today Scott McLean, President and Chief Operating Officer of Xyron. Scott, it’s great to have you here.

Scott McLean, President and Chief Operating Officer, Xyron: Well, I’m great to be here. Thank you very much.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: So Scott, I wanted to start with the overall environment, get a pulse check on what you’re seeing. During the first quarter call, Harris highlighted that the level of uncertainty from tariffs was negative for sentiment across businesses. And then since then, we’ve had a few positive announcements. So how has that impacted customer sentiment?

Scott McLean, President and Chief Operating Officer, Xyron: Thank you, Manon. Customer sentiment, still there’s a lot of uncertainty. The genie is out of the bottle on tariffs, and I don’t think anyone can put it back in terms of the mindset, the psyche of small and medium sized business owners. And about 65%, 70% of what we do of our revenue and our deposit balances are banking small and medium sized companies in the country. So whether tariffs are on or off, just the threat of it will cause them to take action.

I think with small and medium sized business customers, they’re immediately thinking back about COVID and the pandemic. And what they had to do there was to make sure that they had inventory. And in many cases, they couldn’t you’ve got a gross profit margin of 20% to 40%. They learn they are never going to be without inventory again. And so I think what you’re going to see is that small and medium sized businesses will move.

They’ll increase inventory, move their supply chains back to The US more, whether tariffs stay on or off. The threat of it is enough to do that. And so I think that actually will probably be a good thing for loan growth ultimately. I think really big companies, it’s a different story. I think for them, it’s more about capital investment.

And it just is going to be really difficult for CEOs and executives of large public companies to go in and commit to a three, five year capital investment and be able to talk with any certainty about long term rates, inflation, the price of their products, all the kinds of things you would want to have some certainty about if you were going to make an investment.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: So it sounds like from these large capital investments that’s still on hold a little bit, for the smaller businesses, you are seeing some inventory build here?

Scott McLean, President and Chief Operating Officer, Xyron: Not yet. Not yet. I mean, this story really just started in the first quarter. And so I think there’s still kind of a wait and see that’s going on. But when you think about where we were a year ago or eighteen months ago, what did we think ’twenty five would be like?

I think we thought there’d be some kind of recession. I think we were really concerned about CRE. And so when you kind of go back and with that historical lens, basically, I think most people feel like we’ll have lower GDP growth, but probably a positive operating environment, clearly with a little more volatility. And I think the whole CRE topic, while there’s risk in CRE loan portfolios, I think people are more comfortable with where that stands now. And they can see the underwriting, the post-two thousand and eight CRE underwriting, which was dramatically different than pre-two thousand and eight, really holding these portfolios up pretty nicely.

It certainly has for us.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: And Zion operates separate entities in many different markets in Utah, California, Texas. Are you seeing any different trends in any of the markets?

Scott McLean, President and Chief Operating Officer, Xyron: We’re really not. The customer survey work that we do is pretty consistent across we’re in 11 Western states starting in Texas and going to the West. And really, the only thing that we’re seeing a little different right now is our loan growth in Texas has been stronger. It was stronger last year. It is stronger through the first quarter than it is in our other states.

But really, the operating conditions, I think, across our affiliates are pretty similar right now in terms of how customers are feeling and what they’re doing. I would say, though, for investors, we do operate in these different states. And sometimes that’s confusing to investors. We look decentralized. Our technology and back office have been consolidated since the early 2000s.

And then in the last eleven years, we had a lot of customization even though we were highly centralized in operations and technology. But in the last eleven years, we’ve taken most of that customization out. So really what is in these are separate affiliates is kind of the front end, the client facing piece, which is what you would want there, the decision making about client decisions, pricing, and some middle office activities. But most of it is the real revenue producing strength of our company.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: And Scott, another comment that you made in April was that there was more than the usual level of uncertainty around the one year guides that you gave. Has some of that uncertainty reduced given that we clawed back a little bit, we pulled back a little bit from the peak in what could have been the peak in tariffs? Do you feel better about your guide today?

Scott McLean, President and Chief Operating Officer, Xyron: Yeah, I think the funny thing about guidance and it drives you guys crazy, may drive some investors crazy guidance is kind of there to help complete your models. And we all understand what it’s there for. But I don’t think you go back just five years, Did anyone’s guidance ever predict the pandemic? No. Did it predict Silicon Valley?

No. Did it predict rates going up 500 basis points in ’twenty two, Silicon Valley in ’twenty three? Did it predict this tariff thing? Guidance, it just doesn’t embrace any of that, really. And so that’s why we work really hard to just make sure people understand the fundamentals of our business.

And that is pound for pound being one of the biggest banks for small businesses in the country, having national recognition in that regard. Our deposit franchise has national recognition. Our customer satisfaction scores are nationally distinctive. And we think our technology is now nationally distinctive as well. And so those are all things I think for long term investors, I hope speak more loudly than actual guidance.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: Yes. So that’s totally fair. And maybe we should dig into some of those more fundamental trends. On loan growth side, you’ve spoken about focusing on the commercial side to drive loan growth from here. What are the biggest opportunities for the bank there?

Yeah. So

Scott McLean, President and Chief Operating Officer, Xyron: commercial lending makes up about 50% of our loan portfolio. About 20 plus percent is CRE and another 20%, 25% is consumer, principally one to four family mortgage. And the C and I side is very broad based, a lot of just fundamental general industry. And we’re seeing moderate activity there. Again, I think 3% loan growth doesn’t really excite anybody.

But the rest of the industry is kind of at that rate. And I think investors should look at that growth rate and go, you know what? Again, going back twelve months, if you look forward, maybe a national recession, I think 3% loan growth is not a bad thing from a health standpoint. I think as we get through these tariff talks and maybe the economy becomes a little more certain, I think you’re going to see loan growth pick up. We’re also leaning heavily into our SBA lending activity.

It’s really exciting. We were the largest SBA seven originator. And their fiscal year October, we had originated 700 SBA loans. We’re on track to originate 1,500 this year. It would take us from number 20 to about number 10.

We just passed Bank of America, which is cool. They’re a bank about 40 times our size. JPMorgan and Wells, assuming we get to 1,500, I think we will pass them shortly. And so once we get to 1,500, that’ll be nice three years of growth. Our goal is to go to 3,000 in the following twelve to eighteen months, which would get us in the top five.

And it’s not going to change our stripes, really, as a company. But when you think about it, it is really granular growth. It will have a positive influence on C and I. It is very deposit rich type of lending. And there’s a nice fee income component and a consumer banking component to it.

So we finally just got kind of mad about it. We saw where our SBA rankings were, and we thought, man, who other than us should be leading the league in SBA lending? And that’s really what got us started. Harris Simmons, our CEO, just said, this is nuts. And off we go.

And it’s going to be a fun part of the story.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: And to clarify, this 1,500, is that new client relationships or new loans?

Scott McLean, President and Chief Operating Officer, Xyron: That’s a great question. And it’s seven. We do five zero four also. So it’s just a component. But it’s an important component.

And some of it is certainly to existing customers. But it’s about fifty-fifty right now. And that number is going to change over time. But quite frankly, if we never brought in a new customer, which is not going to be the case related to this, about 70% of small businesses don’t borrow from banks. They might have a business credit card or they’re financing it personally.

So 70% of your small business client base doesn’t borrow. And so this is just a way to deepen our relationship with those and generally help them bring their banking needs kind of all to one bank.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: And that gets you the relationship on the deposit side and the fees side and the

Scott McLean, President and Chief Operating Officer, Xyron: absolutely. It should. I mean, it doesn’t just happen accidentally. But yeah, if we do our job as bankers and most clients, when they get an SBA loan, it’s kind of the difference between having a business or not having a business or really growing the business. I mean, it’s a life event.

So generally, if we show up with a financing, they’re happy to do their business with us.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: So you spoke about loan growth activity should pick up at some point as the confidence builds. You’re making all these new investments. Talk a little bit more about the steps you’re taking to benefit from that loan growth activity once it picks up. What investments are you making? What hires are you making?

Scott McLean, President and Chief Operating Officer, Xyron: Yeah. It’s not what we’ll do when the loan growth picks up that I think is as important as what we need to do to make sure it picks up. And so we actually have made some real nice strategic hires in Salt Lake, some very exciting news there in Denver and in California. And so we’re always doing that. But we are just highly focused on our fundamental call programs.

And I just refer to it as shoe leather. We were in this ten, eleven year period of modernization of our company with our big core transformation project, which was the time it’s ever been done in The United States. It’s been done 300 times around the world. But we’re really the only bank in the country that has replaced its core loan and deposit platform. It’s a really big deal.

And so the benefit of that is that it’s allowing our bankers to spend less time with our systems and spend more time out with our clients. But our call programs, we have a customer appreciation calling campaign that we’ve been doing for a number of years. It’s just a simple call. You just call a customer and say, hey, we appreciate your business. Any of our employees can do it.

And it’s stunning. We’ll do about 130,000 of these calls this year. It’s stunning to see the anecdotal positive things that comes from it. We also are very aggressively calling on the prospects. We’ve kind of got a top 25% of the prospects in any of our markets.

It’s about 10,000 names that we’re calling on across the company. A lot of banks just sit back and wait for referrals or business to come in. We’ve always been very forward leaning in this regard. And that’s an important campaign. And I think the other element we’re bringing forward is a new approach to marketing in our company.

We’ve had really a solid approach to marketing. But I don’t think it’s been a strategic weapon for us, a strategic driver. And we’ll talk more about this as the next twelve months unfolds. But we’re going to be using much more active marketing that I think will be really helpful to our small business initiative and this SBA initiative, to our consumer deposit growth initiatives, and to all of our fee income products.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: Got it. And maybe talk a little bit more about competition. I mean, you’re clearly competing against not just other regional banks, but also the large money center banks in the small business arena. Talk about what you’re seeing on the competition side right now and how that’s been evolving over the past year or so.

Scott McLean, President and Chief Operating Officer, Xyron: Yeah. and I’ve been in this business for forty six years. And it’s just always I don’t remember a time that it wasn’t competitive. And my main office is in Salt Lake, but I live in Texas. And folks have been parachuting into Texas for decades.

And so we’ve seen a lot of banks come and go. And the playbook that they run is increase everybody’s compensation when they hire teams by 20% to 40%, maybe more, big bonus packages, blah, blah, blah. They lower pricing to win relationships and big money spent on marketing and sponsorships. It’s just kind of a worn out playbook. And some banks have done it Okay.

But in what we do, banking small and medium sized businesses, there are always four to six proposals when we’re trying to win a piece of business. So the fact that some big regional, giant regional bank or global bank wants to increase the branches in our market, blah, blah, blah, we just let them come on. Competition is a good thing. We are not worried about competing with anyone that wants to parachute into our markets. I think it’s going to be a bad experience for them, generally speaking.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: Especially in cases where you already have the client relationship.

Scott McLean, President and Chief Operating Officer, Xyron: Exactly. Got it. And we will when people run, hey, we’re going to lower your price dramatically compared to what Zions affiliate is charging, if it’s a bank that has said they are going to dramatically increase their presence, we will fight like tigers. And if they get it, they are not going make any money on it. And they are not going to be happy with it long term.

We’re a pretty nice squad, but we know how to fight when we need to.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: So the other aspect of competition is not just from traditional banks, but also from private credit. Can you talk about how you’re thinking about Zion’s relationship with private credit, both as a competitor and as a partner?

Scott McLean, President and Chief Operating Officer, Xyron: Yeah. It’s something we all ought to be really worried about. You guys have written about it. Everybody’s writing about it. The growth in private credit, I’m not going to quote numbers, but it’s been dramatic.

And generally, those providers of private credit, they’re outside the regulatory environment. Their terms are normally longer. Their covenants are weaker. Their requirements for equity are less. And so when they’re all it’s going to be a volatile type financing.

When we’re in deals with them, we just have learned to become very careful about our position relative to theirs. And people think just because you’re senior somehow you have a great position in difficult negotiations. It’s not always true. It’s just the more complexity in the capital structure, the more complicated it is for clients to work through difficult situations. I think what’s going to happen with private credit is that it’s going to keep growing until something happens on the regulatory environment.

Something has to happen. Or it’ll just blow up, like all things. They grow really fast and uncontrolled. It’ll blow up. And the problem with that is that a lot of customers are going to find out that they don’t know who to talk to.

They don’t have anyone to talk to. And so it’s going to be a reminder. And we’ve had different times like this in our past. It’ll be a reminder to customers that relationships really matter. They really do matter.

And we’ll be there to help pick up the pieces when that happens. But it will happen. It absolutely will in this case.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: And where is the traditional banking system winning business right now? So whether it’s Zion, whether it’s your peers relative to private credit, where is the advantage that the banks have?

Scott McLean, President and Chief Operating Officer, Xyron: That’s a great question. I think the advantage we’ve always had has been on the relationship side. That’s our advantage at Zions. And you’d have no way of knowing that other than looking at external surveying. And it sounds like corporate speak.

But if you look at Greenwich Research, which is the gold standard for measuring how business customers feel about their banks in The United States, they survey 500 banks, 25,000 surveys. Only three other banks, in addition to us, have received their scores of national distinction, national recognition as much as we have over the last sixteen years. And two of the things that they measure is a bank that values relationships and a bank that you can trust. We have in our investor deck our scores on that relative to the global banks. The global banks are terrific JPMorgan, BofA Wells, and US Bank.

They’re just terrific banks, great people. But customers just think very differently about us. And so where we compete, I think relationship matters, product matters, technology matters, price matters, etcetera. But relationship still matters. The fintechs, they don’t really penetrate what we do.

They penetrate consumer. They penetrate micro business. But they’re not really a player in what we do. I think this you mentioned private credit. Credit unions is another place that it’s just inherently unfair.

Credit unions anybody can join any credit union on the planet. You don’t have to have this general association anymore, practically speaking. And they have this tax advantage. And they’re going into commercial lending, into real estate lending. They’re going into all businesses.

And the reporting and the transparency on credit unions again, wonderful people, I’m sure is just totally different. Talk about an unfair playing field. And so when you talk about where do banks win, credit unions are alive and well and they are tough competitors where they exist. And I just would submit, like private credit, that we really need some legislative and regulatory oversight of what is this industry and why has it continued to be given a tax break.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: Got it. Excellent. I want to pivot over to what you’re seeing on the deposit side. Zion has seen five quarters of NIM expansion. A lot of that has been driven by success on lowering deposit costs.

Can you talk a little bit more about what’s driving that?

Scott McLean, President and Chief Operating Officer, Xyron: On the deposit side? Correct. Yeah. So one of the we start with a really strong deposit franchise. And our total cost of deposits is among the lowest of our peers.

Even after Silicon Valley, it’s still among the lowest of our peers. And part of that is because our demand deposit, our non interest bearing deposit to total deposit ratio has been peer leading, industry leading for decades. And so that strong, non interest bearing, balanced franchise that we have contributes to this overall lower cost of deposits. We haven’t lost that. The mix, even though rates have changed dramatically, you can go back thirty years and our mix in that ratio is as strong today as it’s always been relative to peers.

So I think that helps. The other thing that we saw, we basically said leading up to the rate cuts in the fall that our beta coming down would look a lot like our beta going up. And our beta going up was 40% overall, 60% on interest bearing. And so we’re seeing that coming down, particularly of our highest priced deposits. There’s about $15,000,000,000 in these larger highest priced deposits.

We had about 100% beta coming down from the three rate declines. That was not accidental. It actually took a lot of work to make sure that when rates changed, we lowered our rates. And we did on that $15,000,000,000 that you can think of it, pretty much market rates are a little bit less. And so we’re committed to, as rate declines continue, bringing that down instantly.

But among those highest priced deposits, we have a lot of opportunity to continue to kind of trim what we’re actually paying without losing those deposits because they’re all related, virtually all related to our existing commercial and private banking relationships.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: So is there more room for the overall portfolio cost to come down if rates don’t go down further?

Scott McLean, President and Chief Operating Officer, Xyron: Yes. I think there is on deposit costs. Yes. of all, growth will help bring it down. Secondly, the fact that our demand deposits at the end of the first quarter had been declining like all banks in the entire industry.

We’re about $25,000,000,000 right now. And they were down a little bit in the first quarter, but it looked like they were stabilizing. And so to the extent we have that stabilization, then I think the overall cost of deposits will have some further declines that they can go through. We also have some latency in our time deposits. So that’s a smaller impact.

But as that time deposit portfolio that we have, which is principally consumer, rolls over, we’ll see some incremental benefit from that too.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: Got it. And then as you think about NII, you’ve spoken about seeing NII growth even with rate cuts and flattish loan growth. Can you talk about some of the inherent tailwinds that you have on the asset side of the balance sheet that drive that?

Scott McLean, President and Chief Operating Officer, Xyron: Yeah. Basically, you can see our NII disclosures. And we’re basically assuming the forward curve at the March. It calls for about 4.5% NII growth. And it’s coming largely from repositioning in our securities portfolio.

We have about $750,000,000 of cash flow coming off our securities portfolio each quarter. And about half of that, we’re repurchasing securities at higher rates. And the other half will probably pay down brokered deposits or support loan growth. That’s probably the biggest element that will impact that growth. And then we do have some continued loan yield latency that is a positive in repricing.

And that and then again, this DDA stabilization, those are probably the three biggest drivers of that growth.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: And then you spoke about the latent sensitivity of the balance sheet. How are you thinking about the overall asset sensitivity of the book as you think about the next few years? The balance sheet is more asset sensitive right now. Are you thinking about bringing that down to neutral over time? Or how do you think about that?

Scott McLean, President and Chief Operating Officer, Xyron: That’s a great question. Ultimately, we try to keep the balance sheet pretty balanced, I mean, the sense of asset sensitivity. So we would try to probably have a little less asset sensitivity than we do today. But there is a trade off. If we have higher rates, long term rates, then we produce a little more AOCI.

But we also, if we’re asset sensitive, we have more income to offset that. And on the downside, there’s a little bit of risk there. But I don’t think so right now. So we basically have this projection for asset sensitivity. And I think it’ll play out just fine.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: Got it. All right, perfect. Maybe talk a little bit more about the fee side of the business. Where are you prioritizing investments on that front, whether it’s in treasury management, card, mortgage?

Scott McLean, President and Chief Operating Officer, Xyron: Right. So we’ve got about $635,000,000 in fees. And it’s a great collection of businesses. Treasury management is about a About 30% of our fee income comes from the operating services we provide to businesses. It’s the workhorse of our fee income engine.

And it’s nationally recognized. Again, Greenwich Research has given us national distinction in our treasury services. And so it’s great when your workhorse, which is so critical to your primary client base, is nationally recognized. And it’s a business that should grow kind of mid single digit, low single digit. We always grow a little faster than the industry is growing, almost always.

And so that core workhorse is in great shape and is important to our growth. We then have a collection of other businesses like card, retail, business service charges, lending fees that have had some softness in the last couple of years. And they’re actually showing some low single digit growth rates. Some will probably migrate into mid single digit growth. And then we have some growth activities like our capital markets business, which we’ve invested a lot of money in.

It’s growing great. We were at about $70,000,000 a couple of years ago in revenue. We were at $107,000,000 last year. And it’s just a great collection of capital markets activities, interest rate hedging, foreign exchange, syndications, bond underwriting. We have a commercial real estate capital markets business that has a lot of upside from a revenue standpoint.

And so that $107,000,000 of revenue, what we basically said is that we think it’s going to be a high growth, and it has been. And so it should continue to provide some nice positive energy. The other two things wealth is that way too. Our wealth business, the revenue has flattened a little bit, but it’s a huge opportunity for us. And we’ve got great leadership there.

So I think that’ll kick in. And the other places, our mortgage business, we’ve shifted from held for investment to held for sale. And when you do that, it just drives a lot more fee income. So I think where mortgage fees have not been a great driver of fees for us in the past, you’ll see a real positive influence there. And I think this small business lending activity, even though the numbers aren’t big, it actually could have a disproportional impact on overall fee income growth.

So I’m actually pretty forward leaning and positive about our fee income outlook.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: All right. Perfect. Just talking about maybe credit, you noted that there’s still some level of uncertainty for small businesses. Are there any specific sectors that you’re looking at where you’re seeing a higher level of stress? Anything to call out on the credit side?

Scott McLean, President and Chief Operating Officer, Xyron: Well, I think overall, our credit performance in terms of net charge offs has been outstanding for fifteen plus years and more even before the Great Recession. So we run at about 10 basis in that charge off ratio. And most of our peers run at 20 to 40 basis points. And so it’s a big strength. And a lot of it has to do with underwriting.

Most of our underwriting is secured. And so as investors think about going into a recession, the thing people think about is consumer unsecured going into a recession. That’s not us. We’ve got about $400,000,000 of consumer unsecured. Not us.

And if you look at our business portfolios, look at 02/2008, they performed great. They performed great in 2020. So you look at our small and medium sized business, C and I portfolios, have performed great in two real shock systems shock moments. And our one to four family mortgage book also has performed well. CRE, a lot of focus on that.

We saw classifieds go up last year. And then we said in January we thought they’d flatten out. And at the end of the first quarter, they were up a little bit, classifieds, but not much. I think what investors should look at there, though, Manon, is that while classifieds have gone up, non performers have stayed low. That’s really untraditional.

Most previous cycles wouldn’t show that.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: And that’s what drives the losses.

Scott McLean, President and Chief Operating Officer, Xyron: Exactly. And the losses we’ve had on commercial real estate have been negligible, by any measure negligible, even during this period of rising classifieds. So we actually there’s a lot to play out with real estate, but I think we’re well reserved. We understand the portfolio. There was given how long that cycle’s been going, the deterioration in CRE, if it was going to produce losses, it would have started to produce it by now.

I mean, we’re two and a half years into that. And you would have seen non performers build if the loss content was there.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: All right, perfect. We’re almost out of time. I’ll wrap up with a question on capital. There’s a lot of volatility on the long end of the curve. How are you thinking about managing capital?

And is there a CET1 ratio, including AOCI, that you’re managing through For

Scott McLean, President and Chief Operating Officer, Xyron: most investors and analysts, CET1 has kind of been the most important measure that most people look at and understand. And now CET1 less minus AOCI. And on that, we screen lower than most of our peers. But that’s why we are really transparent about how this AOCI mark that we have accretes back into capital. So most analysts can look at it and go, Okay, over a four year period here three, four year period you’ll see that AOCI accrete.

We report on it every quarter. It hadn’t changed hardly at all from our original projections. And capital improves to where the original Basel endgame kind of compliance date was June of twenty twenty eight. And any investor analyst projection would have us well above on CET1 minuteus AOCI well above any requirements with buffers and more buffers. And we’re in good shape.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: And plus you have the earnings accretion as well.

Scott McLean, President and Chief Operating Officer, Xyron: No, exactly. That’s exactly right. So think most investors understand our capital ratio. And I think our regulators do and the rating agencies do.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: All right. Perfect. With that, we’re out of time. Scott, thank so much for joining us.

Scott McLean, President and Chief Operating Officer, Xyron: No, thank you very much.

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