Q4 2023 Regions Financial Corp Earnings Call

Good morning and welcome to the Region's Financial Corporation's quarterly earnings call.

Unnamed Host: Good morning, and welcome to the Region's Financial Corporation's quarterly earnings call.

Good morning, and welcome to the regions financial Corporation's quarterly earnings call.

Christine: My name is Christine and I'll be your operator for today's call.

Operator: My name is Christine, and I'll be your operator for today's call. I would like to remind everyone that all participant phone lines have been placed on listen only. At the end of the call, there will be a question and answer session. If you have any questions or other problems, please post them in the Q&A box below. If you wish to ask a question, please press star 1 on your telephone keypad. I will now turn the call over to Dana Nolan.

Christine: My name is Christine and I'll be your operator for today's call.

Christine: I would like to remind everyone that all participant phone lines have been placed on listen only.

Christine: I would like to remind everyone that all participant phone lines have been placed on listen only.

Christine: At the end of the call, there will be a question and answer session. If you have any questions or other problems, please post them in the Q&A box below.

Christine: At the end of the call there'll be a question and answer session.

Christine: If you wish to ask a question, please press star 1 on your telephone keypad.

Christine: If you wish to ask a question. Please press star one on your telephone keypad.

Christine: I will now turn the call over to Dana Nolan to begin.

Christine: Now I'll turn the call over to Dana Nolan to begin.

Dana W. Nolan: Thank you Christine. Welcome to region's fourth quarter 2023 earnings call. John and David will provide high-level commentary regarding our results. Earnings documents which include our forward-looking statement disclaimer and non-GAAP information are available in the investor relations section of our website. These disclosures cover our presentation materials, prepared comments, and Q&A. I will now turn the call over to John. Thank you for joining us.

Dana W. Nolan: Thank you Christine. Welcome to the region's fourth quarter 2023 earnings call. John and David will provide high-level commentary regarding our results. Earnings documents, which include our forward-looking statement disclaimer and non-GAAP information, are available in the investor relations section of our website. These disclosures cover our presentation materials, prepared comments, and Q&A. I will now turn the call over to John. Thank you for joining us.

Dana W. Nolan: Thank you Christy and welcome to regions fourth quarter 2023 earnings call, John and David will provide high level commentary regarding our results earnings documents, which include our forward looking statement disclaimer on a non-GAAP information are available in the Investor Relations section of our website.

Dana Nolan: Disclosures cover our presentation materials prepared comments and Q&A.

Dana Nolan: Now I'll turn the call over to John.

John: Thank you, Dana, and good morning, everyone. We appreciate you joining our call today.

John M. Turner: Thank you, Dana, and good morning, everyone. We appreciate you joining us on our call today. This morning, we reported full-year 2023 earnings of $2 billion, reflecting record pre-tax, pre-provision income of $3.2 billion and one of the best returns on average tangible common equity in our peer group at 22%. Our results speak to and underscore the comprehensive work that's taken place over the past decade to position the company to generate consistent, sustainable earnings regardless of the economic environment we're experiencing. We've enhanced our credit and interest rate risk management processes and platforms while sharpening our focus on risk-adjusted returns and capital allocation.

John: Thank you Dana and good morning, everyone. We appreciate you joining our call today.

John: This morning, we reported full-year 2023 earnings of $2 billion, reflecting record pre-tax, pre-provision income of $3.2 billion and one of the best returns on average tangible common equity in our peer group at 22%.

John: This morning, we reported full year 2023 earnings of $2 billion, reflecting record pre tax pre provision income of $3 $2 billion and one of the best returns on average tangible common equity in our peer group at 22%.

John: Our results speak to and underscore the comprehensive work that's taken place over the past decade to position the company to generate consistent, sustainable earnings regardless of the economic environment we're experiencing.

John: Our results speak to and underscore the comprehensive work that's taken place over the past decade to position the company to generate consistent sustainable earnings regardless of the economic environment, we're experiencing.

John: We've enhanced our credit and interest rate risk management processes and platforms.

John: We've enhanced our credit and interest rate risk management processes and platforms, while sharpening our focus on risk adjusted returns and capital allocation.

John: while sharpening our focus on risk-adjusted returns and capital allocation.

John M. Turner: Although the industry continues to face headwinds from lingering economic and geopolitical uncertainties, as well as the continued evolution of the regulatory framework, we feel confident about our positioning and adaptability heading into 2024. We'll continue to benefit from our strong and diverse balance sheet, with solid capital and liquidity. Prudent, Credit Risk Management. Our proactive hedging strategies continue to position us for success in an array of economic conditions, and our desirable footprint, granular deposit base, and relationship banking approach will continue to serve us well.

John: Although the industry continues to face headwinds from lingering economic and geopolitical uncertainties,

John: Although the industry continues to face headwinds from lingering economic Geo political uncertainty as well as the continued evolution of the regulatory framework.

John: as well as the continued evolution of the regulatory framework.

John: We feel confident about our positioning and adaptability heading into 2024.

John: We feel confident about our positioning and adaptability heading into 2024.

John: We'll continue to benefit from our strong and diverse balance sheet.

John: We will continue to benefit from our strong and diverse balance sheet solid capital and liquidity and prudent credit risk management.

John: Solid capital and liquidity.

John: Prudent, Credit Risk Management.

John: Our proactive hedging strategies continue to position us for success in an array of economic conditions.

John: Our proactive hedging strategies continue to position us for success in an array of economic conditions.

John M. Turner: Our strategic plan continues to deliver consistent, sustainable, long-term performance as we focus on soundness, profitability, and growth.

John: and our desirable footprint, granular deposit base and relationship banking approach will continue to serve us well.

John: And our desirable footprint granular deposit base and relationship banking approach, we will continue to serve us well.

John: Our strategic plan continues to deliver consistent, sustainable, long-term performance as we focus on soundness, profitability, and growth.

John: Our strategic plan continues to deliver consistent sustainable long term performance as we focus on soundness.

John: <unk> ability and growth.

John: In closing, I'm excited to work alongside the 20,000 region's associates who put customers and their needs at the center of all we do and focus on doing the right things the right way every day.

John M. Turner: In closing, I'm excited to work alongside the 20,000 associates in the region who put customers and their needs at the center of all we do and focus on doing the right things the right way every day.

John: Closing I am excited to work alongside the 20000 regions associates, who put customers and their needs at the center of all we do and focus on doing the right things the right way every day.

John: Now, they will provide some highlights regarding the quarter.

Unnamed Host: Now, they will provide some highlights regarding the quarter.

John: Now Dave will provide some highlights regarding the quarter.

Speaker Change: Thank you, John. Let's start with the balance sheet. Average and ending loans decreased modestly on a sequential quarter basis, while ending loans grew a little over 1% compared to the prior year.

David J. Turner: Thank you, John. Let's start with the balance sheet. Average and ending loans decreased modestly on a sequential quarter basis, while ending loans grew a little over 1% compared to the prior year. Within the business portfolio, average and ending loans declined 1% quarter over quarter. We are remaining judicious, preserving capital for businesses where we can have a full relationship. However, loan demand remains soft as clients continue to exhibit cautious behavior. We are seeing clients make long-term investments when they have to, but if they can defer, they're holding off. In general, sentiment varies across industries, with some continuing to expect growth while others have a more muted outlook. Average and ending consumer loans remained relatively stable as growth in mortgage and interbank was partially offset by declines in home equity and the green sky exit portfolio sell we completed this quarter. Looking forward, we expect 2024 average loan growth to be in the low single digits.

Thank you John let's start with the balance sheet average in ending loans decreased modestly on a sequential quarter basis, while ending loans grew a little over 1% compared to the prior year.

Speaker Change: Within the business portfolio, average and ending loans decline 1% quarter over quarter. We are remaining judicious, preserving capital for business where we can have a full relationship.

Within the business portfolio average and ending loans declined 1% quarter over quarter.

We are remaining judicious preserving capital for business, where we can have a full relationship.

Speaker Change: Loan demand remains soft as clients continue to exhibit cautious behavior.

Christine: Good morning, and welcome to the Region's Financial Corporation's quarterly earnings call. My name is Christine, and I'll be your operator for today's call.

Demand remained soft as clients continued to exhibit cautious behavior.

Speaker Change: We are seeing clients make long-term investments when they have to, but if they can defer, they're holding off.

We are seeing clients make long term investments when they have to but if they can defer their holding off and general sentiment varies across industries with some continuing to expect growth while others have a more muted outlook.

Christine: I would like to remind everyone that all participant phone lines have been placed on listen only. At the end of the call, there will be a question and answer session. If you have any questions or other problems, please post them in the Q&A box below. If you wish to ask a question, please press star 1 on your telephone keypad. I will now turn the call over to Dana Nolan.

Speaker Change: In general, sentiment varies across industries with some continuing to expect growth while others have a more muted outlook.

Speaker Change: Average and ending consumer loans remained relatively stable as growth in mortgage and interbank was partially offset by declines in home equity and the green sky exit portfolio sell we completed this quarter.

Average and ending consumer loans remained relatively stable as growth in mortgage and interbank was partially offset by declines in home equity and the green Sky exit portfolio sale, we completed this quarter.

Dana W. Nolan: Thank you, Christine. Welcome to the Region's fourth quarter 2023 earnings call. John and David will provide high-level commentary regarding our results. Earnings documents, which include our forward-looking statement disclaimer and non-GAAP information, are available in the investor relations section of our website. These disclosures cover our presentation materials, prepared comments, and Q&A. I will now turn the call over to John. Thank you for joining us.

Speaker Change: Looking forward, we expect 2024 average loan growth to be in the low single digits.

Looking forward, we expect 2020 for average loan growth to be in the low single digits.

David J. Turner: From a deposit standpoint, deposits increased modestly on an average and ending basis primarily due to increases in interest-bearing business products, which we expect will partially reverse with tax season in the first quarter. Across all three businesses, we continue to experience a shift from non-interest-bearing to interest-bearing deposits. However, the pace of remixing has slowed down.

Speaker Change: From a deposit standpoint, deposits increase modestly on an average and ending basis primarily due to increases in interest-bearing business products, which we expect will partially reverse with tax season in the first quarter.

From a deposit standpoint.

<unk> increased modestly on an average and ending basis, primarily due to increases in interest bearing business.

Products, which we expect will partially reversed with tax season in the first quarter.

John M. Turner: We appreciate you joining our call today. This morning, we reported full-year 2023 earnings of $2 billion, reflecting record pre-tax, pre-provision income of $3.2 billion and one of the best returns on average tangible common equity in our peer group at 22%. Our results speak to and underscore the comprehensive work that's taken place over the past decade to position the company to generate consistent, sustainable earnings regardless of the economic environment we're experiencing. We've enhanced our credit and interest rate risk management processes and platforms, while sharpening our focus on risk-adjusted returns and capital allocation. The industry continues to face headwinds from lingering economic and geopolitical uncertainties, as well as the continued evolution of the regulatory framework.

Speaker Change: Across all three businesses, we continue to experience remixing from non-interest-bearing to interest-bearing deposits. However, the pace of remixing has slowed.

Across all three businesses, we continue to experience remixing from noninterest bearing to interest bearing deposits. However, the pace of Remixing has slowed.

Speaker Change: Within consumer, we continue to see balance normalization, but we believe the pace of remixing will continue to slow as short-term market rates appear to have peaked and the relationship of checking balances to spending levels is getting closer to pre-pandemic levels.

David J. Turner: Within consumer, we continue to see balance normalization, but we believe the pace of remixing will continue to slow as short-term market rates appear to have peaked and the relationship of checking balances to spending levels is getting closer to pre-pandemic levels. Our overall views on deposit balances and rates are unchanged. We expect incremental mixing out of low-cost savings and checking products of between two and three billion dollars. For more information, visit www.fema.gov, and total balances to stabilizing by mid-year. This results in a non-interest-bearing mixed percentage remaining in the low 30% range.

Within consumer we continue to see balanced normalization, but we believe the pace of Remixing. We will continue to slow as short term market rates appear to have peaked in the relationship of checking balances to spending levels is getting closer to pre pandemic levels.

Speaker Change: Our overall views on deposit balances and rates are unchanged.

Our overall views on deposit balances and rates are unchanged, we expect incremental remixing out of low cost savings and checking products of between two and $3 billion.

Speaker Change: We expect incremental remixing out of low-cost savings and checking products of between two and three billion dollars. For more information, visit www.fema.gov.

Speaker Change: and total balances stabilizing by mid-year. This results in a non-interest bearing mixed percentage remaining in the low 30% range.

John: In total balances stabilizing by mid year. This results in a noninterest bearing mix percentage remaining in the low 30% range. So let's shift to net interest income.

Speaker Change: So let's shift in that interest income.

David J. Turner: So let's shift to that interest income. Net interest income declined by approximately 4.5% in the quarter, driven mostly by deposit cost and mixed normalization. As well as the start of the active period on $3 billion of incremental hedging, asset yields benefited from the maturity and replacement of lower yielding fixed rate loans and securities. Notably, during the quarter, we returned to full reinvestment of paydowns in the securities portfolio and added $500 million over and above that to the portfolio balance, taking advantage of an attractive market rate and spread level.

John M. Turner: We feel confident about our positioning and adaptability heading into 2024, and we'll continue to benefit from our strong and diverse balance sheet. Solid capital and liquidity. Prudent, Credit Risk Management. Our proactive hedging strategies continue to position us for success in an array of economic conditions, and our desirable footprint, granular deposit base, and relationship banking approach will continue to serve us well. Our strategic plan continues to deliver consistent, sustainable, long-term performance as we focus on soundness, profitability, and growth. In closing, I'm excited to work alongside the 20,000 associates in the region who put customers and their needs at the center of all we do and focus on doing the right things the right way every day. Now, they will provide some highlights regarding the quarter. Thank you, John.

Speaker Change: Net interest income declined by approximately 4.5% in the quarter, driven mostly by deposit cost and mixed normalization.

Net interest income declined by approximately four 5% in the quarter, driven mostly by deposit cost and mix normalization.

Speaker Change: As well as the start of the active period on $3 billion of incremental hedging.

As well as the start of the active period on $3 billion of incremental hedging.

Speaker Change: Asset yields benefited from the maturity and replacement of lower yielding fixed rate loans and securities.

John: Asset yields benefited from the maturity and replacement of lower yielding fixed rate loans and securities, notably during the quarter. We returned to full reinvestment of pay downs in the securities portfolio and added $500 million over and above that to the portfolio Bal.

Speaker Change: Notably, during the quarter, we returned to full reinvestment of paydowns in the securities portfolio and added $500 million over and above that to the portfolio balance.

Taking advantage of attractive market rate and spread levels.

Speaker Change: Taking advantage of attractive market rate and spread level.

David J. Turner: Interest-bearing deposit costs were 2.14% in the quarter, representing a 39% rising rate cycle beta. Growth in higher-cost corporate deposits increased our reported deposit basis by approximately 1% but allowed for the termination of all outstanding FHLB advances. This and a more pronounced slowing in the pace of rate-seeking behavior by retail customers drove modest net interest income outperformance compared to expectations. As we look to 2024, we expect net interest income trends to stabilize over the first half of the year and grow over the second half of the year. $3 billion of additional forward-starting hedges in the first quarter and further late-cycle deposit remixing will be a headwind. However, we expect deposit trends to continue to improve, with interest-bearing betas peaking in the mid-40% range.

Speaker Change: Interest-bearing deposit costs were 2.14% in the quarter, representing a 39% rising rate cycle beta.

Interest bearing deposit costs were $2, one 4% in the quarter, representing a 39% rising rate cycle beta.

Speaker Change: Growth in higher cost corporate deposits increased our reported deposit basis by approximately 1%.

Growth in higher cost corporate deposits increased our reported deposit betas by approximately 1%.

Speaker Change: but allowed for the termination of all outstanding FHLB advances.

David J. Turner: Let's start with the balance sheet. Average and ending loans decreased modestly on a sequential quarter basis, while ending loans grew a little over 1% compared to the prior year. Within the business portfolio, average and ending loans declined 1% quarter over quarter. We are remaining judicious, preserving capital for businesses where we can have a full relationship. Loan demand remains soft as clients continue to exhibit cautious behavior.

John: But it allowed for the termination of all outstanding <unk> advances.

Speaker Change: This and a more pronounced slowing in the pace of rate-seeking behavior by retail customers drove modest net interest income outperformance compared to expectations.

This and a more pronounced slowing in the pace of rate seeking behavior by retail customers drove modest net interest income outperformance compared to expectations.

Speaker Change: As we look to 2024, we expect net interest income trends to stabilize over the first half of the year and grow over the back half of the year.

John: As we look to 2024, we expect net interest income trends to stabilize over the first half of the year and grow over the back half of the year.

Speaker Change: $3 billion of additional forward-starting hedges in the first quarter and further late-cycle deposit remixing will be a headwind. However, we expect deposit trends to continue to improve, with interest-bearing betas peaking in the mid-40% range.

David J. Turner: We are seeing clients make long-term investments when they have to, but if they can defer, they're holding off. In general, sentiment varies across industries with some continuing to expect growth while others have a more muted outlook. Average and ending consumer loans remained relatively stable as growth in mortgage and interbank was partially offset by declines in home equity and the green sky exit portfolio sell we completed this quarter.

John: $3 billion of additional four starting hedges in the first quarter and further late cycle deposit remixing will be a headwind.

John: However, we expect deposit trends to continue to improve with interest bearing betas, peaking in the mid 40% range.

Speaker Change: The benefits of fixed-rate asset turnover will persist, overcoming the headwinds and driving net interest income growth in the second half of the year.

David J. Turner: The benefits of fixed-rate asset turnover will persist, overcoming the headwinds and driving net interest income growth in the second half of the year. With respect to outlook, we expect full-year 2024 net interest income to be between $4.7 and $4.8 billion. Our guidance assumes four 25 basis point rate cuts with long-term rates remaining stable from year end. However, the path for net interest income is well insulated from changes in market interest rates. The primary driver of net interest income in 2024 will be deposit performance. The lower end of our expected 2024 net interest income range assumes a 25% beta as rates fall, while the higher end assumes a deposit beta similar to what we have experienced during the rising rate environment.

John: The benefits of fixed rate asset turnover will persist overcoming the headwinds and driving net interest income growth in the second half of the year.

David J. Turner: Looking forward, we expect 2024 average loan growth to be in the low single digits. From a deposit standpoint, deposits increased modestly on an average and ending basis primarily due to increases in interest-bearing business products, which we expect will partially reverse with tax season in the first quarter. Across all three businesses, we continue to experience remixing from non-interest-bearing to interest-bearing deposits, but the pace of remixing has

With respect to outlook, we expect full year 2024, net interest income to be between four seven and $4 $8 billion.

Speaker Change: With respect to outlook, we expect full year 2024 net interest income to be between $4.7 and $4.8 billion.

Speaker Change: Our guidance assumes four 25 basis point rate cuts with long-term rates remaining stable from year end.

Our guidance assumes for 25 basis point rate cuts with long term rates remaining stable from year end.

Speaker Change: However, the path for net interest income is well insulated from changes in market interest rates.

John: However, the path, where net interest income is well insulated from changes in market interest rates.

Speaker Change: The primary driver of net interest income in 2024 will be deposit performance.

John: The primary driver of net interest income in 2024 will be deposit performance.

David J. Turner: Within consumer, we continue to see balance normalization, but we believe the pace of remixing will continue to slow as short-term market rates appear to have peaked and the relationship of checking balances to spending levels is getting closer to pre-pandemic levels. Our overall views on deposit balances and rates are unchanged. We expect incremental mixing out of low-cost savings and checking products of between two and three billion dollars. For more information, visit www.fema.gov, and total balances to stabilizing by mid-year. This results in a non-interest bearing mixed percentage remaining in the low 30% range. So let's shift in that interest income. Net interest income declined by approximately 4.5% in the quarter, driven mostly by deposit cost and mixed normalization.

Speaker Change: The lower end of our expected 2024 net interest income range assumes a 25% beta as rates fall, while the higher end assumes a deposit beta similar to what we have experienced during the rising rate environment.

John: The lower end of our expected 2024 net interest income range assumes at 25% beta as rates fall, while the higher end assumes that deposit beta similar to what we have experienced during a rising rate environment.

David J. Turner: In a falling rate environment, we are prepared to manage deposit costs lower to protect the market. A relatively small portion of interest-bearing deposit balances is responsible for the majority of the deposit cost increase this cycle. These market price deposits include index and other high-beta corporate deposit types that will reprice immediately with Fed funds. The other primary contributor is CDs with a seven month average maturity. While these products will lag in a falling rate environment, we are positioned to offset this cost.

John: In a falling rate environment, we are prepared to manage deposit costs lower to protect the margin.

Speaker Change: In a falling rate environment, we are prepared to manage deposit costs lower to protect the market.

Speaker Change: A relatively small portion of interest-bearing deposit balances is responsible for the majority of the deposit cost increase this cycle.

John: A relatively small portion of interest bearing deposit balances is responsible for the majority of the deposit cost increase the cycle.

Speaker Change: These market price deposits include index and other high-beta corporate deposit types that will reprice immediately with Fed funds.

John: These market price deposits include index and other high beta corporate deposit types that will reprice immediately with fed funds.

Speaker Change: The other primary contributor is CDs with a seven month average maturity.

John: The other primary contributor is C DS with a seven month average maturity.

Speaker Change: While these products will lag in a falling rate environment, we are positioned to offset this cost.

John: While these products will lag in a falling rate environment, we are positioned to offset those cost.

David J. Turner: As well as the start of the active period on $3 billion of incremental hedging, asset yields benefited from the maturity and replacement of lower yielding fixed rate loans and securities. Notably, during the quarter, we returned to full reinvestment of paydowns in the securities portfolio and added $500 million over and above that to the portfolio balance, taking advantage of an attractive market rate and spread level. Interest-bearing deposit costs were 2.14% in the quarter, representing a 39% rising rate cycle beta.

Speaker Change: So let's take a look at fee revenue and expense.

David J. Turner: So let's take a look at fee revenue and expense. Adjusted non-interest income increased 2% during the quarter as a sequential decline in capital markets was offset by modest increases in most other categories. Full-year adjusted non-interest income declined 5%, primarily due to reductions in capital markets and mortgage income, as well as the impact of the company's overdraft grace feature implemented late in the second quarter. Partially offsetting these declines were new records in 2023 for both treasury management and wealth management revenue. With respect to outlook, we expect full-year 2024 adjusted non-interest income to be between $2.3 and $2.4 billion.

John: So, let's take a look at fee revenue and expense.

John: Adjusted noninterest income increased 2% during the quarter as a sequential decline in capital markets was offset by modest increases in most other categories.

Speaker Change: Adjusted non-interest income increased 2% during the quarter as a sequential decline in capital markets was offset by modest increases in most other categories.

Speaker Change: Full-year adjusted non-interest income declined 5%, primarily due to reductions in capital markets and mortgage income, as well as the impact of the company's overdraft grace feature implemented late in the second quarter.

John: Full year adjusted noninterest income declined 5%, primarily due to reductions in capital markets and mortgage income as well as the impact of the company's overdraft Grace feature implemented late in the second quarter.

John: Partially offsetting these declines were new records in 2023 for both Treasury management and wealth management revenue.

Speaker Change: Partially offsetting these declines were new records in 2023 for both treasury management and wealth management revenue.

David J. Turner: Growth in higher-cost corporate deposits increased our reported deposit basis by approximately 1% but allowed for the termination of all outstanding FHLB advances. This and a more pronounced slowing in the pace of rate-seeking behavior by retail customers drove modest net interest income outperformance compared to expectations. As we look to 2024, we expect net interest income trends to stabilize over the first half of the year and grow over the back half of the year. $3 billion of additional forward-starting hedges in the first quarter and further late-cycle deposit remixing will be a headwind.

John: With respect to outlook, we expect full year 2024, adjusted noninterest income to be between two three and $2 $4 billion.

Speaker Change: With respect to outlook, we expect full year 2024 adjusted non-interest income to be between $2.3 and $2.4 billion.

Unnamed Host: Let's move on to non-interest expense.

John: Let's move on to noninterest expense.

Speaker Change: Let's move on to non-interest expense.

Speaker Change: Reported non-interest expense increased 8% compared to the prior quarter but included two significant adjusted items. For more UN videos visit www.un.org

David J. Turner: Reported non-interest expense increased 8% compared to the prior quarter but included two significant adjusted items. For more UN videos, visit www.un.org $119 million for the FDIC special assessment and $28 million in severance-related costs. Adjusted non-interest expense decreased 5%, driven primarily by lower operational losses in the United States. Full-year adjusted non-interest expense increased 9.7%, or approximately 6%, excluding elevated operational losses experienced primarily in the second and third quarters. We remain committed to prudently managing expenses to fund investments in our business. We will continue focusing on our largest expense categories, which include salaries and benefits, occupancy, and vendor spend. We expect full-year 2024 adjusted non-interest expenses to be approximately $4.1 billion.

John: Reported noninterest expense increased 8% compared to the prior quarter, but included two significant adjusted items $119 million for the FDIC Special assessment.

Speaker Change: $119 million for the FDIC special assessment and $28 million in severance-related costs.

John: And $28 million severance related costs.

Speaker Change: Adjusted non-interest expense decreased 5% driven primarily by lower operational losses in the United States.

John: Adjusted noninterest expense decreased 5% driven primarily by lower operational losses.

David J. Turner: However, we expect deposit trends to continue to improve, with interest-bearing betas peaking in the mid-40% range. The benefits of fixed-rate asset turnover will persist, overcoming the headwinds and driving net interest income growth in the second half of the year. With respect to outlook, we expect full-year 2024 net interest income to be between $4.7 and $4.8 billion. Our guidance assumes four 25 basis point rate cuts with long-term rates remaining stable from year end. However, the path for net interest income is well insulated from changes in market interest rates.

John: Full year, adjusted noninterest expense increased nine 7% or approximately 6% excluding elevated operational losses experienced primarily in the second and third quarters.

Speaker Change: Full-year adjusted non-interest expense increased 9.7%, or approximately 6%, excluding elevated operational losses experienced primarily in the second and third quarters.

John: We remain committed to prudently managing expenses to fund investments in our business.

Speaker Change: We remain committed to prudently managing expenses to fund investments in our business.

Speaker Change: We will continue focusing on our largest expense categories, which include salaries and benefits, occupancy, and vendor spend.

John: We will continue focusing on our largest expense categories, which include salaries and benefits occupancy and vendor spend.

Speaker Change: We expect full-year 2024 adjusted non-interest expenses to be approximately $4.1 billion.

David J. Turner: From an asset quality standpoint, overall credit performance continues to normalize as expected. Reported annualized net charge-offs for the fourth quarter increased 14 basis points. However, excluding the impact of the Green Sky loan sale, adjusted net charge-offs decreased one basis point versus the prior quarter to 39 basis points. Full-year adjusted net charge-offs were 37 basis points. Total non-performing loans and business services criticized loans increased during the quarter. Non-performing loans as a percentage of total loans increased to 82 basis points due primarily to downgrades within industries previously identified as higher risk.

John: We expect full year 2024, adjusted noninterest expenses to be approximately $4 $1 billion.

Speaker Change: From an asset quality standpoint, overall credit performance continues to normalize as expected.

John: From an asset quality standpoint, overall credit performance continues to normalize as expected.

Speaker Change: Reported annualized net charge-offs for the fourth quarter increased 14 basis points. However, excluding the impact of the Green Sky loan sale, adjusted net charge-offs decreased one basis point versus the prior quarter to 39 basis points.

John: Reported annualized net charge offs for the fourth quarter increased 14 basis points. However, excluding the impact of the Green Sky loan sale adjusted net charge offs decreased one basis point versus the prior quarter to 39 basis points.

David J. Turner: The primary driver of net interest income in 2024 will be deposit performance. The lower end of our expected 2024 net interest income range assumes a 25% beta as rates fall, while the higher end assumes a deposit beta similar to what we have experienced during the rising rate environment. In a falling rate environment, we are prepared to manage deposit costs lower to protect the market. A relatively small portion of interest-bearing deposit balances is responsible for the majority of the deposit cost increase this cycle. These market price deposits include index and other high-beta corporate deposit types that will reprice immediately with Fed funds.

Speaker Change: Full-year adjusted net charge-offs were 37 basis points.

John: Full year adjusted net charge offs were 37 basis points.

Speaker Change: Total non-performing loans and business services criticized loans increased during the quarter.

John: Total nonperforming loans and business services criticized loans increased during the quarter non.

Speaker Change: Non-performing loans as a percentage of total loans increased to 82 basis points due primarily to downgrades within industries previously identified as higher risk.

John: Nonperforming loans as a percentage of total loans increased to 82 basis points due primarily to downgrades within industries previously identified as higher risk.

Speaker Change: Keep in mind, between 2013 and 2019, our average MPL ratio was 107 basis points.

David J. Turner: Keep in mind, between 2013 and 2019, our average MPL ratio was 107 basis points, and we expect to see further normalization towards these levels in 2024. Provision expense was $155 million, or $23 million in excess of net charge-offs, and included an $8 million net provision expense related to the consumer loan sale. The allowance for credit loss ratio increased three basis points to 1.73%. Excluding the loan portfolio sold during the quarter, the allowance for credit loss ratio would have increased six basis points. The increase in our allowance was primarily due to adverse risk migration and continued credit quality normalization, as well as higher qualitative adjustments for incremental risk in certain higher-risk portfolios.

John: Keep in mind between 2013 and 2019, our average NPL ratio was 107 basis points, we expect to see further normalization towards these levels in 2024.

Speaker Change: We expect to see further normalization towards these levels in 2024.

David J. Turner: The other primary contributor is CDs with a seven month average maturity. While these products will lag in a falling rate environment, we are positioned to offset this cost. So let's take a look at fee revenue and expense. Adjusted non-interest income increased 2% during the quarter as a sequential decline in capital markets was offset by modest increases in most other categories. Full-year adjusted non-interest income declined 5%, primarily due to reductions in capital markets and mortgage income, as well as the impact of the company's overdraft grace feature implemented late in the second quarter.

Speaker Change: Provision expense was $155 million, or $23 million in excess of net charge-offs, and includes an $8 million net provision expense related to the consumer loan sale.

John: Provision expense was $155 million or $23 million in excess of net charge offs and includes an $8 million net provision expense related to the consumer loan sale.

Speaker Change: The allowance for credit loss ratio increased three basis points to 1.73%.

John: The allowance for credit loss ratio increased three basis points to 173%.

Speaker Change: Excluding the loan portfolio sold during the quarter, the allowance for credit loss ratio would have increased six basis points.

John: Excluding the loan portfolio sold during the quarter the allowance for credit loss ratio would have increased six basis points.

Speaker Change: The increase to our allowance was primarily due to adverse risk migration and continued credit quality normalization, as well as higher qualitative adjustments for incremental risk in certain higher risk portfolios.

John: The increase to our allowance was primarily due to adverse risk migration and continued credit quality normalization.

David J. Turner: Partially offsetting these declines were new records in 2023 for both treasury management and wealth management revenue. With respect to outlook, we expect full year 2024 adjusted non-interest income to be between $2.3 and $2.4 billion. Let's move on to non-interest expense. Reported non-interest expense increased 8% compared to the prior quarter but included two significant adjusted items.

David J. Turner: Our average net charge-offs from 2013 to 2019 were 46 basis points, and we've seen modest acceleration towards these normalized levels in recent quarters. As a result, we expect our full-year 2024 net charge-off ratio to be between 40 and 50 basis points.

John: As well as higher qualitative adjustments for incremental risk and certain higher risk portfolios.

Our average net charge offs from 2013 to 2019 or <unk> 46 basis points.

Speaker Change: Our average net charge-offs from 2013 to 2019 were 46 basis points.

Speaker Change: We've seen modest acceleration towards these normalized levels in recent quarters. As a result, we expect our full year 2024 net charge-off ratio to be between 40 and 50 basis points.

John: Seen modest acceleration towards these normalized levels in recent quarters as a result, we expect our full year 2024, net charge off ratio to be between 40 and 50 basis points.

Speaker Change: Turning to Capital and Liquidity.

David J. Turner: Turning to Capital and Liquidity. Given the evolution of the regulatory environment, we expect to maintain our common equity Tier 1 ratio around 10% over the near term. This level will provide sufficient flexibility to meet the proposed changes along the implementation timeline while supporting strategic growth objectives and allow us to continue to increase the dividend commensurate with earnings. We ended the year with an estimated common equity Tier 1 ratio of 10.2%, while executing $252 million in share repurchases and $223 million in common dividends during the quarter.

John: Turning to capital and liquidity.

David J. Turner: For more UN videos, visit www.un.org, $119 million for the FDIC special assessment and $28 million in severance-related costs. Adjusted non-interest expense decreased 5%, driven primarily by lower operational losses in the United States. Full-year adjusted non-interest expense increased 9.7%, or approximately 6%, excluding elevated operational losses experienced primarily in the second and third quarters.

Speaker Change: Given the evolution of the regulatory environment, we expect to maintain our common equity Tier 1 ratio around 10% over the near term.

John: Given the evolution of the regulatory environment, we expect to maintain our common equity tier one ratio around 10% over the near term.

Speaker Change: This level will provide sufficient flexibility to meet the proposed changes along the implementation timeline while supporting strategic growth objectives and allow us to continue to increase the dividend commensurate with earnings.

John: This level will provide sufficient flexibility to meet the proposed changes along the implementation timeline, while supporting strategic growth objectives and allow us to continue to increase the dividend commensurate with earnings.

Speaker Change: We ended the year with an estimated common equity Tier 1 ratio of 10.2%.

John: We ended the year with an estimated common equity tier one ratio of 10, 2%.

David J. Turner: We remain committed to prudently managing expenses to fund investments in our business. We will continue focusing on our largest expense categories, which include salaries and benefits, occupancy, and vendor spend. We expect full-year 2024 adjusted non-interest expenses to be approximately $4.1 billion. From an asset quality standpoint, overall credit performance continues to normalize as expected. Reported annualized net charge-offs for the fourth quarter increased 14 basis points.

Speaker Change: while executing $252 million in share repurchases and $223 million in common dividends during the quarter.

John: While executing $252 million in share repurchases and $223 million in common dividends during the quarter.

Speaker Change: With that, we'll move to the Q&A portion of the call.

Unnamed Host: With that, we'll move to the Q&A portion of the call.

John: With that we'll move to the Q&A portion of the call.

Speaker Change: Thank you we will now be conducting a question and answer session.

Speaker Change: Thank you. We will now be conducting a question and answer session.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. You may press star 2 if you would like to remove your question from the queue. Please hold while we compile the Q&A roster.

Speaker Change: If you would like to ask a question, please press star 1 on your telephone keypad.

I would like to ask a question. Please press star one on your telephone keypad.

Speaker Change: You may press star 2 if you would like to remove your question from the queue.

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Speaker Change: Please hold while we compile the Q&A roster.

Speaker Change: Please hold while we compile the Q&A roster.

David J. Turner: However, excluding the impact of the Green Sky loan sale, adjusted net charge-offs decreased one basis point versus the prior quarter to 39 basis points. Full-year adjusted net charge-offs were 37 basis points. Total non-performing loans and business services criticized loans increased during the quarter. Non-performing loans as a percentage of total loans increased to 82 basis points due primarily to downgrades within industries previously identified as higher risk. Keep in mind, between 2013 and 2019, our average MPL ratio was 107 basis points, and we expect to see further normalization towards these levels in 2024. Provision expense was $155 million, or $23 million in excess of net charge-offs and includes an $8 million net provision expense related to the consumer loan sale.

Speaker Change: Thank you. Our first question comes from the line of Scott <unk> with Piper Sandler. Please proceed with your question.

Speaker Change: Thank you. Our first question comes from the line of Scott Severs with Piper Sandler. Please proceed with your question.

Unnamed Analyst: Thank you. Our first question comes from the line of Scott Severs with Piper Sandler. Please proceed with your question.

Scott: Good morning, everyone. Thank you for taking the question Oh excuse me I appreciate the comments on the main levers for NII or within NII.

Scott Severs: Morning, everyone. Thank you for taking the question. Excuse me. I appreciate the comments on the main levers for NII or within NII for your guidance. I was hoping you could discuss a little more about the deposit repricing thoughts that you had. You know, maybe specifically thoughts about sort of the bifurcation between commercial and consumer deposits. And then just any opportunities you've seen with the Fed already having sort of peaked out, presumably, any opportunities you've had already to maybe take some actions to ease the pressure on costs.

David J. Turner: Morning, everyone. Thank you for taking the time to answer the question. Excuse me. I appreciate the comments on the main levers for NII or within NII for your guidance. I was hoping you could discuss a little more the deposit repricing thoughts that you had. You know, maybe specifically thoughts about sort of the bifurcation between commercial and consumer deposits. And then just any opportunities you've seen with the Fed already having sort of peaked out, presumably, any opportunities you've had already to maybe take some actions to ease the pressure on costs.

Scott: NII for your guidance I was hoping you could discuss little more about the deposit repricing thoughts that you had.

Scott: Maybe specifically thoughts about a sort of a bifurcation between commercial and.

Consumer deposits and then just any opportunities you've seen with the fed already having a sort of peaked out presumably any opportunities you've had already to maybe take some actions to ease the pressure on costs.

Sure.

Scott: David.

One important thing to note is that about 30% of our customer base is really the driver of our interest bearing deposit beta.

Speaker Change: The important thing to note is that about 30% of our customer base is really the driver of our interest-bearing deposit beta.

David J. Turner: The important thing to note is that about 30% of our customer base is really the driver of our interest-bearing deposit beta. If you look at that, a little over half of that's related to our commercial book, and those deposits are indexed, so to the extent the Fed changes rates, those will index the day that changes, so you're talking about roughly 55, almost 60% of that will come down as rates come down. Represents consumer deposits. So these have been CDs and money market accounts where we've seen migration out of non-interest bearing accounts.

Speaker Change: If you look at that, a little over half of that's related to our commercial book, and those deposits are indexed, so to the extent Fed changes rates, those will index the day that changes, so you're talking about roughly 55, almost 60% of that will come down as rates come down.

Scott: If you look at that little over half of that is related to our commercial book and those deposits are indexed so to the extent fed changes rates those windex today that changes so you've talked about roughly 55, almost 60% of that'll come down as rates come down the other.

David J. Turner: The allowance for credit loss ratio increased three basis points to 1.73%. However, excluding the loan portfolio sold during the quarter, the allowance for credit loss ratio would have increased six basis points. The increase to our allowance was primarily due to adverse risk migration and continued credit quality normalization, as well as higher qualitative adjustments for incremental risk in certain higher-risk portfolios. Our average net charge-offs from 2013 to 2019 were 46 basis points. We've seen modest acceleration towards these normalized levels in recent quarters. As a result, we expect our full-year 2024 net charge-off ratio to be between 40 and 50 basis points. Turning to Capital and Liquidity. Given the evolution of the regulatory environment, we expect to maintain our common equity Tier 1 ratio around 10% over the near term.

Speaker Change: Represents consumer deposits. So these have been CDs and money market accounts there where we've seen migration out of non-interest bearing accounts. The money market piece, both of these have to be competitive. We have to watch what our competitors are doing to some degree. But we have mechanisms to really start working that down.

Ah represents consumer deposits. So these than Cds and money market accounts, there, where we've seen migration out of noninterest bearing accounts.

David J. Turner: The money market piece and both of these have to be competitive. We have to watch what our competitors are doing to some degree. But we have mechanisms to really start working that down. Part of that is making sure we don't go too long on our CD maturities. So we've been fairly short. I think I mentioned in the prepared comments that our average CD term is seven months. And so we don't want to extend that much going forward. As a matter of fact, we'd like to shorten that to coincide with what we think is going to happen with the Fed.

Scott: The money market piece of both of these have to be competitive we have to watch what our what our competitors are doing to some degree but we have.

Scott: Mechanisms to really.

Scott: Start working that down.

Speaker Change: Part of that is making sure we don't go too long on our CD maturities. So we've been fairly short. I think I mentioned in the prepared comments our average CD term is seven months. And so we don't want to extend that much going forward. As a matter of fact, we'd like to shorten that to coincide with what we think is going to happen with the Fed. And we have four cuts baked in to our guidance to hit the midpoint of our guidance, which is on page six of our presentation.

Scott: Part of that is making sure we don't go too long on our CD maturities. So we've been fairly short.

Scott: I think I mentioned in the prepared comments our average CD.

Scott: <unk> is seven months and so we don't want to extend that much going forward as a matter of fact, we would like to shorten that.

David J. Turner: And we have four cuts baked in to our guidance to hit the midpoint of our guidance, which is on page six of our presentation, and we think that starts probably at the May meeting, and we know that's different than what the market participants believe, but we think that that's going to be slower versus faster. It's important to note we're neutral to short-term rates, and so it's all about managing our deposit costs, and I think we We've given you a really tight range on NII performance on page six, and we kind of talk about betas.

Scott: Coincide with what we think is going to happen with the fed and we have four cuts baked in.

Scott: So our guidance to hit the midpoint of our guidance, which is on page six of our presentation.

Speaker Change: and we think that starts probably at the May meeting and we know that's different than what the market participants believe but we think that that's going to I think it's going to be slower versus faster. It's important to note we're neutral to short-term rates and so it's all about managing our deposit costs.

Scott: And we think that starts probably at the May meeting.

David J. Turner: This level will provide sufficient flexibility to meet the proposed changes along the implementation timeline while supporting strategic growth objectives and allow us to continue to increase the dividend commensurate with earnings. We ended the year with an estimated common equity Tier 1 ratio of 10.2%, while executing $252 million in share repurchases and $223 million in common dividends during the quarter. With that, we'll move to the Q&A portion of the call. Thank you.

Scott:

Scott: And we know thats different than what the market participants believe but we think that that's going to I think it's going to be slower.

Scott: It's faster and it's important to note were neutral to short term rates and so it's all about managing our deposit costs.

Speaker Change: and I think we have a good plan to do so. We've given you really a range. It's a pretty tight range on NII performance on the page six and we kind of talk about betas. So, you know, if our betas kind of follow what we had and as rates have gone up, we're at 39 a day, we said we'd probably finish in the mid 40s. If we have that coming back down, then we'll be at the upper end of our range. If we're only at 25% beta as rates come down,

Scott: And I think we have a good plan to do so.

David J. Turner: So, you know, if our betas kind of follow what we had and as rates have gone up, we're at 39 a day, we said we'd probably finish in the mid 40s. If we have that coming back down, then we'll be at the upper end of our range. If we're only at 25% beta as rates come down,

Scott: Given you really a range, it's a pretty tight range on NII performance on the page six and we kind of talk about betas. So.

If our betas kind of follow what we had and as rates have gone up where 39 day, we said, we'd probably finish in the mid forty's.

Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. You may press star 2 if you would like to remove your question from the queue.

Scott: If we have that coming back down and we will be at the upper end of our range.

We are only at 25% beta as rates come down.

Speaker Change: Knowing things won't match perfectly, then we'd be at the lower end of the range. So our midpoint is a 35% beta, which we think is very doable, in particular relative to that half of that, a little over half of that's related to indexed deposits on the commercial side.

David J. Turner: Knowing things won't match perfectly, then we'd be at the lower end of the range. So our midpoint is a 35% beta, which we think is very doable, in particular relative to half of that, a little over half of that's related to indexed deposits on the commercial side.

No one things will match perfectly.

Operator: Please hold while we compile the Q&A roster. Thank you. Our first question comes from the line of Scott Severs with Piper Sandler. Please proceed with your question. Morning, everyone. Thank you for taking the question. Excuse me.

Scott: And then we'd be at the lower in the range. So are our midpoint is a 35% beta which we think is very doable in particular relative to that half of that a little over half of that is related to indexed deposits on the commercial side.

Scott: Yeah.

Speaker Change: Perfect. Thank you. Thank you for that color, David and then maybe on the lending side you noted.

Speaker Change: Perfect. Thanks for that call, David. And then maybe on the lending side, noted soft fine demand, which is very understandable. Just curious how you expect demand to trend as the year unfolds.

Unnamed Analyst: Perfect. Thanks for that call, David. And then maybe on the lending side, you noted soft fine demand, which is very understandable. Just curious how you expect demand to trend as the year unfolds. Yeah, Scott, this is John. I would, you know, our current projections are that we believe economic activity picks up toward the second half of the year. And we believe we will experience some growth and core middle market banking and small business banking through our sentient platform, asset-based lending, which would be typical of this period of time. And on the consumer side, mortgage and interbank continue to contribute to growth. Again, any growth we have will be modest, and that will occur, likely toward the back half.

David J. Turner: I appreciate the comments on the main levers for NII or within NII for your guidance. I was hoping you could discuss a little more the deposit repricing thoughts that you had. You know, maybe specifically thoughts about sort of the bifurcation between commercial and consumer deposits. And then just any opportunities you've seen with the Fed already having sort of peaked out, presumably, any opportunities you've had already to maybe take some actions to ease the pressure on costs. The important thing to note is that about 30% of our customer base is really the driver of our interest-bearing deposit beta. If you look at that, a little over half of that's related to our commercial book, and those deposits are indexed, so to the extent the Fed changes rates, those will index the day that changes, so you're talking about roughly 55, almost 60% of that will come down as rates come down. Represents consumer deposits

Speaker Change: By demand, which is very understandable just curious how you expect demand to trend as the year unfolds.

Speaker Change: Yeah, Scott This is John I would.

Speaker Change: Yeah, Scott, this is John. I would, you know, our current projections are we believe economic activity picks up toward the second half of the year. And we believe we will experience some growth and core middle market banking and small business banking through our sentient platform, asset based lending, which would be typical of this period of time. And on the consumer side, mortgage and interbank continue to contribute to growth. Again, any growth we have will be modest, and that will occur. Likely toward the back half.

John: Current projections are we believe economic activity picks up towards the second half of the year and we believe we will experience some growth in core middle market banking and small business banking through our SAPIEN platform.

John: <unk> based lending, which would be typical of this period of time.

John: On the consumer side mortgage and interbank continue to contribute to growth again any growth, we have will be modest and will occur likely towards the back half of the year.

John: Okay.

Speaker Change: Perfect. All right. Thank you all very much.

John M. Turner: Perfect. All right. Thank you all very much.

Speaker Change: Perfect Alright, Thank you all very much.

Speaker Change: Oh.

Speaker Change: Our next question comes from a line of Ibrahim Kunawala with Bank of America. Please proceed with your questions.

Unnamed Analyst: Our next question comes from a line from Ibrahim Kunawala with Bank of America. Please proceed with your questions.

Speaker Change: Our next question comes from the line of Ebrahim <unk> with Bank of America. Please proceed with your question.

Ibrahim Kunawala: Good morning. Hey, good morning. I just maybe wanted to follow up on the fee income guide, maybe if you can drill into where do you see growth across fee revenue, particularly what are you assuming in there for capital markets, was it week-ish, fourth quarter, so we'd love to hear our outlook on capital market income within fees. And then do you expect to do more purchases for mortgage servicing rights as you did in the quarter, and should that boost mortgage income?

Unnamed Analyst: Good morning. Hey, good morning. I just maybe wanted to follow up on the fee income guide, maybe if you could drill into where you see growth across fee revenue, particularly what you are assuming in there for capital markets. Was it week-ish, fourth quarter? We'd love to hear our outlook on capital market income within fees. And then do you expect to do more purchases for mortgage servicing rights as you did in the quarter, and should that boost mortgage income? Yeah, so your, that's David. So your first point on capital markets, you know, we had a pretty tough capital markets finish in the fourth quarter.

Ebrahim: Good morning, Hey, good morning.

Just maybe wanted to follow up on the fee income guide, maybe if you can sell into.

Ebrahim: Where do you see.

Gorilla.

Ebrahim: Gross fee revenue, particularly what are you assuming in there for capital markets.

David J. Turner: So these have been CDs and money market accounts where we've seen migration out of non-interest bearing accounts. The money market piece, both of these have to be competitive. We have to watch what our competitors are doing to some degree, but we have mechanisms to really start working that down. Part of that is making sure we don't go too long on our CD maturities. So we've been fairly short.

Ebrahim: Fourth.

Ebrahim: Fourth quarter, so, let's not forget also.

Ebrahim: Capital markets income within food and then do you expect to do more.

Ebrahim: Purchases for mortgage servicing rights as you did in the quarter and so that boost mortgage income. Thank you.

Ibrahim Kunawala: Yeah, so your, that's David. So your first point on capital markets, you know, we had a pretty tough capital markets finish in the fourth quarter. A bit of that is timing. We think some deals, in particular in the M&A world, got pushed into the first quarter. You know, the rate environment has really hampered our real estate corporate banking income line a bit.

Ebrahim: Yes.

Speaker Change: Yes, David So your first point on capital markets, we had a pretty tough comp for markets finish in the fourth quarter.

David J. Turner: A bit of that is timing. We think some deals, in particular in the M&A world, got pushed into the first quarter. You know, the rate environment has really hampered our real estate corporate banking income line a bit, but we think it will rebound. Both of those rebounded. We think M&A has a tendency, a chance to pick up probably towards the back half of the year after we've seen a little bit of rate relief, if you will. So, you know, we have a pretty good feel about our capital markets rebound for 2024. Relative to mortgage servicing rights, as you know, we have a good capital position. We look to support our business to grow our loan book. However, we think loan growth will be muted, so we look to other ways to put the capital to work. Mortgage servicing rights has been one of those.

David: A bit of that is timing, we think some deals in particular in the M&A world got pushed into the first quarter the rate environment is really <unk>.

David J. Turner: I think I mentioned in the prepared comments that our average CD term is seven months, and so we don't want to extend that much going forward. As a matter of fact, we'd like to shorten that to coincide with what we think is going to happen with the Fed. And we have four cuts baked in to our guidance to hit the midpoint of our guidance, which is on page six of our presentation, and we think that starts probably at the May meeting, and we know that's different than what the market participants believe, but we think that that's going to be slower versus faster. It's important to note we're neutral to short-term rates, and so it's all about managing our deposit costs, and I think we have a good plan to do so. We've really given you a range.

David: Tampered, our real estate corporate banking.

David: Income line a bit.

Ibrahim Kunawala: We think those rebound. Both of those rebound. We think M&A has a tendency, a chance to pick up probably towards the back half of the year after we've seen a little bit of rate relief, if you will. So, you know, we have a pretty good...

We think those rebound both of those rebound we think M&A can is it Tennessee, a chance to pick up probably towards the back half of the year actually we've seen a little bit of rate right.

David: Relief.

Speaker Change: We'll see.

Speaker Change: We have a pretty good.

Ibrahim Kunawala: A pretty good feel about our capital markets rebound for 2024. Relative to mortgage servicing rights, as you know, we have a good capital position. We look to support our business to grow our loan book. We think loan growth will be muted, so we look to other ways to put the capital to work. Mortgage servicing rights has been one of those.

Speaker Change: Pretty good I feel about our capital market's rebound for 2024 relative to mortgage servicing rights as you know we have.

Speaker Change: Good capital position.

Speaker Change: We look to support our business to grow our loan book, we think loan growth will be muted so we'd look to.

Speaker Change: To put the capital to work mortgage servicing rights has been one of those we.

David J. Turner: It's a pretty tight range on NII performance on page 6, and we kind of talk about betas. So, you know, if our betas kind of follow what we had and as rates have gone up, we're at 39 a day, we said we'd probably finish in the mid 40s. If we have that coming back down, then we'll be at the upper end of our range. If we're only at 25% beta as rates come down, knowing things won't match perfectly, then we'd be at the lower end of the range. So our midpoint is a 35% beta, which we think is very doable, in particular relative to half of that, a little over half of that's related to indexed deposits on the commercial side. Perfect. Thanks for that call, David.

Ibrahim Kunawala: We feel good about that asset class because we're good at it. We have a low-cost servicing group, and we're looking to grow when packages make sense and the economics work to our advantage. There have been a number of those on the market. You know, if we can hit the bid that we have to make sure we get an appropriate risk-adjusted return, we'll do that. We suspect there will be a couple of opportunities during the year, as there usually are. But we have room to grow that without adding a lot of fixed overhead. We have to add people to do the servicing, but we don't have to add a lot of fixed overhead. Yeah, I'd just add two things, Ibrahim. One is we continue to grow consumer checking accounts and consumer households. That contributes to growth.

David J. Turner: We feel good about that asset class because we're good at it. We have a low-cost servicing group, and we're looking to grow when packages make sense and the economics work to our advantage. There have been a number of those on the market. You know, if we can hit the bid that we have to make sure we get an appropriate risk-adjusted return, we'll do that. We suspect there will be a couple of opportunities during the year, as there usually are, but we have room to grow that without adding a lot of fixed overhead. We have to add people to do the servicing, but we don't have to add a lot of fixed overhead.

Speaker Change: We feel good about that asset class because we're good at it.

<unk> low cost servicing group.

Speaker Change: Group and.

Speaker Change: We're looking to grow when packages makes sense and the economics work to our advantage there have been a number of those on the market.

Speaker Change:

Speaker Change: If we can hit the bid that we have to make sure we get an appropriate risk adjusted return we'll do that.

I suspect there'll be a couple of opportunities during the year as there usually are but we have room to grow that without adding a lot of fixed overhead and to add people to do the servicing but we don't have to add a lot of fixed overhead.

Speaker Change: To add two things Ebrahim, one as we continue to grow consumer checking accounts and consumer households that contributes to growth.

John M. Turner: Yeah, I'd just add two things, Ibrahim. One is that we continue to grow consumer checking accounts and consumer households. That contributes to growth. Secondly, we had the best year we've probably ever had in treasury management, as we saw increases in the number of operating accounts that we're originating and services that we're providing customers. And then finally, wealth management had maybe the best year it's had, certainly in some time, and we expect wealth management fee revenue to continue to grow in 2024.

David J. Turner: And then maybe on the lending side, you noted soft fine demand, which is very understandable. Just curious how you expect demand to trend as the year unfolds. Yeah, Scott. This is John.

Ibrahim Kunawala: Secondly, we had the best year we've probably ever had in treasury management, as we see increases in the number of operating accounts that we're originating and services we're providing the customers. And then finally, wealth management had maybe the best year it's had, certainly in some time, and we expect wealth management fee revenue to continue to grow in 2024.

Speaker Change: Secondly, we had had the best year, we've probably ever had in Treasury management as we see increases in the number of operating accounts that we are.

John M. Turner: I would, you know, our current projections are that we believe economic activity picks up toward the second half of the year. And we believe we will experience some growth and core middle market banking and small business banking through our sentient platform, asset-based lending, which would be typical of this period of time. And on the consumer side, mortgage and interbank lending continue to contribute to growth. Again, any growth we have will be modest, and that will occur. Likely toward the back half.

Speaker Change: We're originating in services, we're providing to customers and then finally wealth management had maybe the best year. It said certainly in some time and we expect wealth management fee revenue continued to grow in 2024.

Speaker Change: That's helpful. And just one other one, David. I guess the one flex on deposit pricing is your loan-to-deposit ratio at 77.

Unnamed Analyst: That's helpful. And just one other one, David. I guess the one flex on deposit pricing is your loan-to-deposit ratio at 77.

Speaker Change: That's helpful. And then just one other one David I guess, the one flex on deposit pricing is.

Speaker Change: The deposit ratio at 77.

David: Just give us a sense of is this steady state in somewhere in the mid to high 70s where you see running the bank going forward or if rates get cut, you could see this ratio drift into the 80s and that probably provides you some pricing flexibility. Thank you.

David J. Turner: Just give us a sense of this steady state in somewhere in the mid to high 70s where you see running the bank going forward or if rates get cut, you could see this ratio drift into the 80s, and that probably provides you with some pricing flexibility. Thank you.

Speaker Change: Just give us a sense of is this steady state and some of them in the mid to high seventies, basically you're running the bank going forward or if thats. Good got you.

John M. Turner: Perfect. All right. Thank you all very much.

Speaker Change: See this issue of gifting to date, these and that probably provides some pricing flexibility.

Scott Severs: Our next question comes from a line from Ibrahim Kunawala with Bank of America. Please proceed with your questions. Good morning. Hey, good morning.

Speaker Change: Thank you.

Speaker Change: Yeah, so we really don't run the bank trying to solve for our loan deposit ratio. It's just kind of a result of all of our activities that we have. You know, at 77%, we're a little bit lower than the peer median by two, three points. It gives us some flexibility to not have to put a lot of pressure on the deposit base. Remember my opening comments where we want to be fair and balanced with regards to our customers, making sure that we're competitive. But we don't have to push. We don't have to be at the upper end of pricing just to maintain those deposits. We have a good core deposit base, and it gives us flexibility to not have to chase with rate. And that's why our deposit costs have a tendency to be a bit lower across the board.

Unnamed Analyst: Yeah, so we really don't run the bank trying to solve for our loan deposit ratio. It's just kind of a result of all of our activities that we have. You know, at 77%, we're a little bit lower than the peer median by two, three points. It gives us some flexibility to not have to put a lot of pressure on the deposit base. Remember my opening comments where we want to be fair and balanced with regard to our customers, making sure that we're competitive. But we don't have to push. We don't have to be at the upper end of pricing just to maintain those deposits. We have a good core deposit base, and it gives us flexibility to not have to chase rates. And that's why our deposit costs have a tendency to be a bit lower across the board.

Speaker Change: Yeah. So we really don't run the bank trying to solve for our loan deposit ratio. It just kind of a result of all of our activities that we have at <unk>.

David J. Turner: I just maybe wanted to follow up on the fee income guide, maybe if you could drill into where you see growth across fee revenue, particularly what are you assuming in there for capital markets, was it week-ish, fourth quarter? We'd love to hear our outlook on capital market income within fees. And then do you expect to do more purchases for mortgage servicing rights as you did in the quarter, and should that boost mortgage income? Yeah, so your name, that's David.

Speaker Change: 77%, we're a little bit lower than the peer median by two three points.

It gives us some flexibility to not have to put a lot of pressure on deposit base remember my opening comments, where we want to be fair and balanced with regards to our customers, making sure that we're competitive but we don't have to push we don't have to be at the upper end of pricing just to maintain those deposits. We have a good core deposit base.

David J. Turner: So your first point on capital markets, you know, we had a pretty tough capital markets finish in the fourth quarter. A bit of that is timing. We think some deals, in particular in the M&A world, got pushed into the first quarter. You know, the rate environment has really hampered our real estate corporate banking income line a bit. But we think those will rebound. Both of those will rebound.

Speaker Change: <unk>.

It gives us flexibility to not have to chase with with rate and Thats why our deposit cost tendency to been be a bit lower.

Speaker Change: Cross the board.

Speaker Change: Thank you.

David J. Turner: Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Manan Ghasalia with Morgan Stanley. Please proceed with your question.

Unnamed Analyst: Our next question comes from the line of Manan Ghasalia with Morgan Stanley. Please proceed with your question.

Speaker Change: Our next question comes from the line of Manav <unk> with Morgan Stanley. Please proceed with your question.

Manan Ghasalia: Good morning.

Unnamed Analyst: Good morning.

David J. Turner: We think M&A has a tendency, a chance to pick up probably towards the back half of the year after we've seen a little bit of rate relief, if you will. So, you know, we have a pretty good feeling about our capital markets rebound for 2024. Relative to mortgage servicing rights, as you know, we have a good capital position. We look to support our business to grow our loan book. We think loan growth will be muted, so we look to other ways to put the capital to work. Mortgage servicing rights has been one of those. We feel good about that asset class because we're good at it. We have a low-cost servicing group, and we're looking to grow when packages make sense and the economics work to our advantage. There have been a number of those on the market.

Manav: Hi, good morning.

Manan Ghasalia: You know, I think you mentioned earlier on in the call that clients are deferring longer term investments if they can. Can you talk about what's driving that? Is it just rates and they're waiting for rates to come down? Is part of it the environment and they need more certainty there? So any light on your conversations there would be helpful.

John M. Turner: You know, I think you mentioned earlier in the call that clients are deferring longer-term investments if they can. Can you talk about what's driving that? Is it just rates, and they're waiting for rates to come down? Is part of it the environment, and they need more certainty there? So any light on your conversations there would be helpful.

I think you mentioned earlier on in the call is that our clients are deferring longer term investments if they can.

Manav: Can you talk about what's driving that is it is it just red sand they are waiting for rates to come down as part of it the environment that they need more certainty there. So any light on your conversations that would be helpful.

Speaker Change: Yeah, I think probably all of the above. Clearly, rising interest rates have had some impact. Rising cost, cost of goods, cost of labor has had an impact. And then uncertainty related to the economy, geopolitical conditions, the political environment here in the U.S. all have

John M. Turner: Yeah, I think probably all of the above. Clearly, rising interest rates have had some impact. Rising costs, the cost of goods, and the cost of labor, have had an impact. And then uncertainty related to the economy, geopolitical conditions, and the political environment here in the U.S. all have, I think, created some restraint. Borrowers are, I believe, more optimistic today than they were 60 to 90 days ago, and that's in line with what appear to be improving economic conditions, but still reluctant to initiate long-term investments currently just based upon the things that I described.

I think probably all of the above clearly rising interest rates that have had some impact rising costs cost of goods cost of labor has had an impact and then uncertainty related to the economy geopolitical conditions with political environment here in the U S. All have I think create.

Speaker Change: I think created some restraint. Borrowers are, I believe, more optimistic today than they were 60 to 90 days ago, and that's in line with what appear to be improving economic conditions, but still reluctant to initiate long-term investments currently just based upon the things that I described.

Manav: Did some restraint borrowers are.

Manav: I believe more optimistic today than they were 60 to 90 days ago and that's in line with what appear to be improving economic conditions, but still reluctant too.

David J. Turner: You know, if we can hit the bid that we have to make sure we get an appropriate risk-adjusted return, we'll do that. We suspect there will be a couple of opportunities during the year, as there usually are. But we have room to grow that without adding a lot of fixed overhead. We have to add people to do the servicing, but we don't have to add a lot of fixed overhead. Yeah, I'd just add two things, Ibrahim.

Manav: Long term investments currently just based upon.

Manav: The things that I described.

Manav: Yeah.

Manav: So as we as we think about that.

Speaker Change: So as we think about deposit betas when rates go down, I think you and a number of your peers have suggested that, okay, loan growth will accelerate as we get a resolution in some of these matters and as rates go down. But then on the flip side, does that mean that deposit competition picks back up? I'm just trying to assess the level of confidence on the high and low end of that range of that 25% to 45% down beta.

Unnamed Analyst: So as we think about deposit betas when rates go down, I think you and a number of your peers have suggested that, okay, loan growth will accelerate as we get a resolution in some of these matters and as rates go down. But then, on the flip side, does that mean that deposit competition picks back up? I'm just trying to assess the level of confidence on the high and low ends of that range of that 25% to 45% down beta.

Manav: Positive betas when rates go down.

Manav: And then number of your peers. It suggests is that okay loan growth will accelerate as we get.

John M. Turner: One is that we continue to grow consumer checking accounts and consumer households. That contributes to growth. Secondly, we had the best year we've probably ever had in treasury management, as we see increases in the number of operating accounts that we're originating and services we're providing customers. And then finally, wealth management had perhaps the best year it's had, certainly for some time, and we expect wealth management fee revenue to continue to grow in 2024. That's helpful. And just one other one, David.

Manav: Solution in some of these matters and as rates go down.

Manav: But then on the flip side does that mean that deposit competition picks back up and I'm just trying to assess the level of confidence on that high end low end of that range of that 25% to 45% down beta.

Manav: Well, we still think loan growth for the year is going to be relatively muted.

Speaker Change: Well, we still think loan growth for the year is going to be relatively muted. And, you know, competition for deposits has always been fairly intense. You know, what you don't want to do is use rate. You want to have a relationship banking model, which is what we do. We leverage off of the checking account of the consumer and an operating account of a business.

John M. Turner: Well, we still think loan growth for the year is going to be relatively muted. And, you know, competition for deposits has always been fairly intense. You know, what you don't want to do is use rate. You want to have a relationship banking model, which is what we do. We leverage off of the checking account of the consumer and an operating account of a business, and with that comes all other type of funding you know for us we have no wholesale borrowings to speak of paid off all of our FHLB advances so we have the ability to lever up there to cover incremental growth without having to reprice our deposit base so if there's incremental pressure or competition on deposit I don't think it'll be all that meaningful for us in particular

Manav: We have competition for deposits has always been fairly intense.

David J. Turner: I guess the one flex on deposit pricing is your loan-to-deposit ratio at 77. Just give us a sense of whether this steady state is somewhere in the mid to high 70s where you see running the bank going forward or if rates get cut, you could see this ratio drift into the 80s, and that probably provides you some pricing flexibility. Thank you. Yeah, so we really don't run the bank trying to solve for our loan deposit ratio. It's just kind of a result of all of our activities that we do.

Manav: Which you don't want to do is use rate you want to have a relationship banking model, which is what we do and we leverage off of the checking account of the consumer in an operating account of our business and with that comes all other type of funding.

Speaker Change: and with that comes all other type of funding you know for us we have no wholesale borrowings to speak of paid off all of our FHLB advances so we have the ability to lever up there to cover incremental growth without having to reprice our deposit base so if there's incremental pressure or competition on deposit I don't think it'll be all that meaningful for us in particular

Manav: For us we have no wholesale borrowings to speak of.

Manav: Paid off all of our <unk> advances so we have the ability to lever up there to cover.

Manav: Incremental growth.

David J. Turner: You know, at 77%, we're a little bit lower than the peer median by two or three points. It gives us some flexibility to not have to put a lot of pressure on the deposit base. Remember my opening comments where we want to be fair and balanced with regard to our customers, making sure that we're competitive. But we don't have to push.

Manav: Without having to reprice, our deposit base so.

Manav: If there is incremental.

Manav: Pressure or competition on deposit I don't think it will be all that meaningful for us in particular.

Speaker Change: Thank you.

Unnamed Analyst: Thank you.

Speaker Change: Thank you.

David J. Turner: We don't have to be at the upper end of pricing just to maintain those deposits. We have a good core deposit base, and it gives us flexibility to not have to chase rates. And that's why our deposit costs have a tendency to be a bit lower across the board. Thank you.

Speaker Change: Our next question comes from the line of Ryan Nash with Goldman Sachs. Please proceed with your question.

Unnamed Analyst: Our next question comes from the line of Ryan Nash with Goldman Sachs. Please proceed with your question.

Speaker Change: Our next question comes from the line of Ryan Nash with Goldman Sachs. Please proceed with your question.

Ryan M. Nash: Good morning, Ryan.

Unnamed Analyst: Good morning, Ryan. Good morning, John. Good morning, David. Maybe I have a question on capital. David, on the slides, you talked about maintaining 10%. You're over 8% on an adjusted basis. Maybe just talk about how you think about uses of capital outside of loan growth. I know we had some buyback this quarter. I think in December we were talking about the potential for securities portfolio restructuring. Maybe just talk a little bit about how you think about incremental uses of capital.

Ryan M. Nash: Morning, Ryan good morning.

Ryan M. Nash: Good morning, John. Good morning, David. Maybe a question on capital. David, in the slides, you talked about maintaining 10%. You're over 8% on an adjusted basis. Maybe just talk about how you think about uses of capital outside of loan growth. I know we had some buyback this quarter. I think in December, we were talking about the potential for securities portfolio restructuring. Maybe just talk a little bit about how you think about incremental uses of capital.

Ryan M. Nash: Hey, good morning, John Good morning, David.

Speaker Change: Maybe a question on capital David in the slides you talked about maintaining a 10% year over 8% on an adjusted basis, maybe just talk about how you think about uses of capital outside of loan growth I know, we had some buyback this quarter I think in December we were talking about the potential for securities portfolio.

John M. Turner: Our next question comes from the line of Manan Ghasalia with Morgan Stanley. Please proceed with your question. Good morning.

Structuring, maybe just talk a little bit about how you're thinking about incremental uses of capital from here.

David J. Turner: You know, I think you mentioned earlier in the call that clients are deferring longer-term investments if they can. Can you talk about what's driving that? Is it just rates, and they're waiting for rates to come down? Is part of it the environment, and they need more certainty there? So any light on your conversations there would be helpful.

David: Yeah, so obviously let me just go through the kind of checkpoints as we think about it. So we want to use our capital to support loan growth. It's going to be fairly muted, as I mentioned. We want to pay a fair dividend, 35% to 45% of our earnings, so we think that's covered.

David J. Turner: Yeah, so obviously, let me just go through the kind of checkpoints as we think about it. So we want to use our capital to support loan growth. It's going to be fairly muted, as I mentioned. We want to pay a fair dividend, 35% to 45% of our earnings, so we think that's covered. We then have excess capital that we look to put to work in growing our business. We've looked at mortgage servicing rights, as I mentioned just a couple calls ago. And we'll continue to look for businesses that we think can help us grow. We have talked about the securities repositioning.

Yes so.

Speaker Change: Obviously, let me just go through that kind of check points as we think about it. So we want to use our capital to support loan growth is going to be fairly muted as I mentioned, we want to pay a fair dividend, 35% to 45% of our earnings. So we think thats covered.

David: We then have excess capital that we look to put to work in growing our business. We've looked at mortgage servicing rights, as I mentioned just a couple calls ago. And we'll continue to look for businesses that we think can help us grow. We have talked about the securities repositioning. We continue to evaluate that. We have not made any decisions to do that just yet. And, you know, outside of that, we don't want our capital to get too far away from 10%. And the 10% is pegged on the fact that we think we're close enough with our ability to accrete capital every quarter to adapt to whatever the regulatory environment is going to be. There's a lot of uncertainty with regards to what that's going to look like. And there's no need for us to continue to...

We then have excess capital that we look to put to work in growing our business. We've looked at mortgage servicing rights as I mentioned, just a couple of calls ago.

John M. Turner: Yeah, I think probably all of the above. Clearly, rising interest rates have had some impact. Rising costs, the cost of goods, and the cost of labor, have had an impact. And then uncertainty related to the economy, geopolitical conditions, and the political environment here in the U.S. all have, I think, created some restraint. Borrowers are, I believe, more optimistic today than they were 60 to 90 days ago, and that's in line with what appear to be improving economic conditions, but still reluctant to initiate long-term investments currently just based upon the things that I described. So as we think about deposit betas when rates go down, I think you and a number of your peers have suggested that, okay, loan growth will accelerate as we get a resolution in some of these matters and But then, on the flip side, does that mean that deposit competition picks back up? I'm just trying to assess the level of confidence on the high and low ends of that range of that 25% to 45% down beta.

Speaker Change: And we will continue to look for businesses that we think can help us grow.

<unk> talked about the securities repositioning will continue to evaluate that we have not made any decisions to do that.

David J. Turner: We continue to evaluate that, and we have not made any decisions to do that just yet. And, you know, outside of that, we don't want our capital to get too far away from 10%. And the 10% is pegged on the fact that we think we're close enough with our ability to accrete capital every quarter to adapt to whatever the regulatory environment is going to be.

Speaker Change: Just yet and.

Speaker Change: Outside of that we don't want our capital to get too far away from 10% in the 10% pegged on the fact that we think we're close enough with our ability to accrete capital every quarter to adapt to whatever the regulatory environment is going to be there's a lot of uncertainty with regards to what that's going to look like and there is no need for us to continue to.

David J. Turner: There's a lot of uncertainty with regard to what that's going to look like, and there's no need for us to continue to ramp up capital to an unnecessary level and hurt our return. We think we're in an optimal spot to be able to maneuver, and so we think the 10% number is the right place to be.

<unk>.

David: To ramp up capital to an unnecessary level and hurt our return, we think we're in an optimal spot to be able to maneuver, and so we think the 10% number is the right place to be.

Speaker Change: Due to ramp up capital to an unnecessary level unheard or return.

Speaker Change: We think we're in an optimal spot to be able to maneuver and.

Speaker Change: And so we think that 10% number is the right thing to do the right place to be.

Yeah.

Speaker Change: Got it. Maybe to come at net interest income and net interest margin from a little bit of a different perspective, you gave us guidance for the first quarter and NIM is expected to be around 350 for the full year. Maybe, David, you or Darren talk about how you see it evolving over the course of the year. And when you look out as we think about the declining rate cycle, where do you foresee the net interest margin settling out over time? I know historically we've talked about a 3.6 to 4% range, maybe just a little bit of color on, you know, where you see it settling out over the course of the next couple of years. Thank you.

Unnamed Analyst: Got it. Maybe to come at net interest income and net interest margin from a little bit of a different perspective, you gave us guidance for the first quarter, and NIM is expected to be around 350 for the full year. Maybe, David, you or Darren could talk about how you see it evolving over the course of the year. And when you look out, as we think about the declining rate cycle, where do you foresee the net interest margin settling out over time? I know historically we've talked about a 3.6 to 4% range, maybe just a little bit of color on where you see it settling out over the course of the next couple of years. Thank you.

Speaker Change: Got it maybe.

Speaker Change: To come out.

Speaker Change: Net interest income and net interest margin from a little bit of a different perspective.

Speaker Change: You gave us guidance for the first quarter in NIM is expected to be around $3 50 for the full year, maybe David you or Darren can talk about how you see it evolving over the course of the year and when.

David J. Turner: Well, we still think loan growth for the year is going to be relatively muted. And, you know, competition for deposits has always been fairly intense. You know, what you don't want to do is use the interest rate.

Speaker Change: You look out as we think about the declining rate cycle, where do you foresee the net interest margin settling out over time I know historically, we've talked about a three 6% to 4% range, maybe just a little bit of color on where you see it settling out over the course of the next couple of years. Thank you.

David J. Turner: You want to have a relationship banking model, which is what we do. We leverage off of the checking account of the consumer and an operating account of a business, and with that comes all other types of funding. You know, for us, we have no wholesale borrowings to speak of. We paid off all of our FHLB advances, so we have the ability to lever up there to cover incremental growth without having to reprice our deposit base, so if there's incremental pressure or competition on deposits, I don't think it'll be Our next question comes from the line of Ryan Nash with Goldman Sachs. Please proceed with your question. Good morning, Ryan.

Speaker Change: Yeah, so I think you're going to see that margin pressure a little bit in the first quarter and slightly in the second quarter. The first quarter has another, call it $3 billion of received fixed swaps that will become effective that will have some negative carry that hurts us a bit in the first quarter. And then, you know, things start to change a bit beginning in the second quarter, so literally like after the first month. So I think you'll see a little bit more of a movement in the first quarter and a tiny movement in the second. And then we can start to rebound a bit where we'll finish, we think, you know, for the year in the $3.50 range. I think as things settle down, we had talked about $3.60 to 4%. That $3.60 was predicated on rates really going back down to the very low levels. And that's the purpose of our whole hedging strategy. Is because we have lower deposit costs than most everybody, if we're going to protect our margin, we have to do it synthetically. And so we have about $20 billion in any given year of received fixed swaps and some other derivatives to help us manage the net interest margin in the $3.60 to 4% range. So you're likely over time to be, you know, kind of in the middle of that. And we think that that's a possibility in time. Now things have to settle out. We've got to get deposit costs. We've got to get deposit costs back to tie up with, you know, with where rates are, but we can probably exit the year in the $3.60 range.

David J. Turner: Yeah, so I think you're going to see that margin pressure a little bit in the first quarter and slightly in the second quarter. The first quarter has another, call it $3 billion of received fixed swaps that will become effective that will have some negative carry that hurts us a bit in the first quarter. And then, you know, things start to change a bit beginning in the second quarter, so literally after the first month. So I think you'll see a little bit more of a movement in the first quarter and a tiny movement in the second.

Speaker Change: Yes, so I think youre going to see.

Speaker Change: <unk> margin.

Speaker Change: Pressure in the little bit in the first quarter and slightly in the second quarter. The first quarter has another call it $3 billion.

Speaker Change: See fixed swaps that will become effective.

Speaker Change: That will have some negative carry that hurts us a bit in the first quarter and then.

Speaker Change: Things start to change a bit.

Speaker Change: <unk> in the second quarter, so liberally like after the first month, so I think youll see a little bit more of a movement in the first quarter and a tiny movement in the second and then we can start to rebound a bit where we will finish we think.

David J. Turner: And then we can start to rebound a bit where we'll finish the year in the $3.50 range. I think as things settle down, we talked about $3.60 to 4%. That $3.60 was predicated on rates really going back down to very low levels, and that's the purpose of our whole hedging strategy. It is because we have lower deposit costs than most everybody else, so if we're going to protect our margin, we have to do it synthetically.

Speaker Change: For the year in the $3 50 range I think as things settle down we had talked about $3, 60% to 4%.

Speaker Change: <unk> hundred 60 was predicated on rates really going back down to.

Ryan M. Nash: Good morning, John. Good morning, David. Maybe a question on capital. David, in the slides, you talked about maintaining 10%. You're over 8% on an adjusted basis.

Speaker Change: It's a very low levels and that's the the purpose of our whole hedging strategy is because we have lower deposit costs and most everybody. If we're going to protect our margin we have to do it synthetically and so we have about $20 billion in any given year of receive fixed swaps and some other derivatives to help us manage the net.

David J. Turner: Maybe just talk about how you think about uses of capital outside of loan growth. I know we had some buyback this quarter. I think in December we were talking about the potential for securities portfolio restructuring. Maybe just talk a little bit about how you think about incremental uses of capital. Yeah, so obviously, let me just go through the kind of checkpoints as we think about it. So we want to use our capital to support loan growth. It's going to be fairly muted, as I mentioned.

David J. Turner: And so we have about $20 billion in any given year of received fixed swaps and some other derivatives to help us manage the net interest margin in the $3.60 to 4% range. So you're likely over time to be, you know, kind of in the middle of that. And we think that that's a possibility in time. Now things have to settle out. We've got to get deposit costs back to tie up with where rates are, but we can probably exit the year in the $3.60 range.

Speaker Change: The interest margin in the 360% to 4% range, so youre likely over time to be kind of in the middle of that.

Speaker Change: And we think that that's a possibility in time things have to settle out and we've got to get deposit cost back to tie up with.

David J. Turner: We want to pay a fair dividend, 35% to 45% of our earnings, so we think that's covered. We then have excess capital that we look to put to work in growing our business. We've looked at mortgage servicing rights, as I mentioned just a couple calls ago. And we'll continue to look for businesses that we think can help us grow.

Speaker Change: With where rates are but we can probably exit the year in the $3 60 range.

Speaker Change: Thanks for the call, David.

Unnamed Analyst: Thanks for the call, David.

Speaker Change: Thanks for all the color David Okay.

Speaker Change: Thank you.

Unnamed Host: Thank you.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of John <unk> with Evercore ISI. Please proceed with your question.

Speaker Change: Our next question comes from the line of John Pancari with Evercore ISI. Please proceed with your question.

Unnamed Analyst: Our next question comes from the line of John Pancari with Evercore ISI. Please proceed with your question.

David J. Turner: We have talked about the securities repositioning. We continue to evaluate that, and we have not made any decisions to do that just yet.

Speaker Change: Yes.

John Pancari: Good morning.

David J. Turner: Good morning. Good morning. On the operating leverage side, I mean, your guidance implies negative operating leverage, unsurprisingly, for 2024, but as you look at your trajectory on the revenue front, your assumptions there combined with your expense expectations, how do you view the likelihood of achieving positive operating leverage in 2025 and when do you expect that you could break into a more positive trajectory on a quarterly basis? Thank you for watching.

John: Good morning.

John Pancari: Good morning. On the operating leverage side, I mean, your guidance implies...

John: Good morning.

John: <unk>.

John: Operating leverage side I mean your guidance implies.

David J. Turner: And, you know, outside of that, we don't want our capital to get too far away from 10%. And the 10% is pegged on the fact that we think we're close enough with our ability to accrete capital every quarter to adapt to whatever the regulatory environment is going to be. There's a lot of uncertainty with regard to what that's going to look like, and there's no need for us to continue to... ramp up capital to an unnecessary level and hurt our return. We think we're in an optimal spot to be able to maneuver, and so we think the 10% number is the right place to be. I got it.

John: Negative operating leverage unsurprisingly for 2024, but as you've looked at.

John Pancari: negative operating leverage unsurprisingly for 2024 but as you look at your you know trajectory on the on the revenue front your assumptions there combined with your expense expectations how do you view the likelihood of achieving positive operating leverage in 2025 and when do you expect that you could break into a more positive trajectory on a quarterly basis? Thank you for watching.

John: Trajectory on the on the revenue front your assumptions there combined with.

John: Your expense expectations, how do you view the likelihood of achieving positive operating leverage.

John: 25, and when do you expect that you could break it to four positive trajectory on a quarterly basis.

Speaker Change: Yeah, John, so I have a tendency to look at it on an annual basis, and you're right, we can't generate positive operating leverage in 24, primarily because of our outperformance in the first two quarters of 23, where we were having above 4% margin, which is way above most everybody. And so I think that's been acknowledged in the marketplace. I do think we can get back in 25 to generate positive operating leverage, and we'll start trending there towards the back half of the year as we see us bottoming out in terms of net interest income and margin in the second quarter, and then we can start to grow from there. We'll see what the economy looks like. We'll see what loan growth looks like. I think that picks up a bit. And we think the pressure on deposit may just start to go the other way, and as I just mentioned, we can exit with a little stronger margin, so I think positive operating leverage towards the back half is a possibility.

David J. Turner: Yeah, John, so I have a tendency to look at it on an annual basis, and you're right, we can't generate positive operating leverage in 24, primarily because of our outperformance in the first two quarters of 23, where we were having above 4% margin, which is way above most everybody. And so I think that's been acknowledged in the marketplace. I do think we can get back to 25 to generate positive operating leverage, and we'll start trending there towards the back half of the year as we see us bottoming out in terms of net interest income and margin in the second quarter, and then we can start to grow from there.

Speaker Change: Hey, John its opt to have a tendency to look at it on the on an annual basis and you are right. We cant generate positive operating leverage in 'twenty four primarily because of our outperformance in the first two quarters of 2003, when we were having about 4% margin, which is way above most everybody.

David J. Turner: Maybe to come at net interest income and net interest margin from a little bit of a different perspective, you gave us guidance for the first quarter, and NIM is expected to be around 350 for the full year. Maybe, David, you or Darren could talk about how you see it evolving over the course of the year. And when you look out as we think about the declining rate cycle, where do you foresee the net interest margin settling out over time? I know historically we've talked about a 3.6 to 4% range. Maybe just a little bit of color on where you see it settling out over the course of the next couple of years. Thank you.

And so.

Speaker Change: I think that's been acknowledged in the marketplace.

Speaker Change: I do think we can we can get back at 25 to generate positive operating leverage and we will start trending there towards the back half of the year as we continue as we see.

US bottoming out in terms of.

Speaker Change: Net interest income and margin in the second quarter and then we can start to grow from there we will see what the economy looks like we'll see what loan growth looks like we think that picks up a bit and we think the pressure on deposit betas start to go the other way.

David J. Turner: We'll see what the economy looks like. We'll see what loan growth looks like. I think that picks up a bit. And we think the pressure on deposits may just start to go the other way, and as I just mentioned, we can exit with a little stronger margin, so I think positive operating leverage towards the back half is a possibility.

David J. Turner: Yeah, so I think you're going to see that margin pressure a little bit in the first quarter and slightly in the second quarter. The first quarter has another, call it $3 billion of received fixed swaps that will become effective that will have some negative carry that hurts us a bit in the first quarter. And then, you know, things start to change a bit beginning in the second quarter, so literally after the first month. So I think you'll see a little bit more of a movement in the first quarter and a tiny movement in the second.

Speaker Change: And as I just mentioned, we can exit with a little stronger margin. So I think positive operating leverage towards the back half as a possibility.

Speaker Change: And definitely.

Speaker Change: and definitely for 2025. And we're going to get there for 2025. Right. Okay, great. That's helpful. And then secondly, around credit, regarding the MPA increase, I know you flagged the downgrade, the risk rating downgrade in some of the higher risk sectors. Maybe can you give us a little bit more color? Was it concentrated in any one sector? Was there a broader scrub of the loan book that you completed that led you to the multiple of the multiple downgrades? Or is it just episodic? And then I guess just separately, can you just talk about the reserve? I know you built it a bit here. What's the outlook there? Could you continue to add from here?

Unnamed Analyst: and definitely for 2025. And we're going to get there by 2025. Right. Okay, great. That's helpful. And then secondly, around credit, regarding the MPA increase, I know you flagged the downgrade, the risk rating downgrade, in some of the higher risk sectors. Maybe you can give us a little bit more color? Was it concentrated in any one sector? Was there a broader scrub of the loan book that you completed that led you to the multiple of multiple downgrades? Or is it just episodic? And then, I guess, just separately, can you just talk about the reserve? I know you built it up a bit here. What's the outlook there? Could you continue to add from here?

Speaker Change: And we're going to get there for 2025.

Speaker Change: Alright, Okay, great. That's helpful and then secondly around credit.

Speaker Change: Regarding.

Speaker Change: I know you've flagged to downgrade the risk rating downgrades and some of the higher risk sectors.

Speaker Change: Maybe can you give us a little bit more color whether was it concentrated in any one sector was there a broader scrub of the loan book that you completed that led you to the multiple of the.

David J. Turner: And then we can start to rebound a bit where we'll finish the year in the $3.50 range. I think as things settle down, we had talked about $3.60 to 4%. That $3.60 was predicated on rates really going back down to very low levels.

Speaker Change: The multiple downgrades or just episodic.

Speaker Change: And then I guess just separately can you just talk about the reserve I know you're building.

Speaker Change: What's the outlook there.

David J. Turner: And that's the purpose of our whole hedging strategy. Because we have lower deposit costs than most everybody, if we're going to protect our margin, we have to do it synthetically. And so we have about $20 billion in any given year of received fixed swaps and some other derivatives to help us manage the net interest margin in the $3.60 to 4% range. So you're likely over time to be, you know, kind of in the middle of that.

Speaker Change: As we continue to add from here. Thanks.

Speaker Change: I'd just say, John, with respect to the increase in NPLs, we've called out portfolios that have been under some stress for a number of quarters now. What we saw in the quarter was some migration from criticized classified to non-performing, specifically in senior housing, in transportation and warehousing, transportation specifically, and office. And then, additionally, manufacturing of consumer discretionary items, so that is and was our expectation. We have one large technology credit that moved in the third quarter. That is episodic, we believe, and something that we

John M. Turner: I'd just say, John, with respect to the increase in NPLs, we've called out portfolios that have been under some stress for a number of quarters now. What we saw in the quarter was some migration from criticized classified to non-performing, specifically in senior housing, in transportation and warehousing, transportation specifically, and office. And then, additionally, manufacturing of consumer discretionary items, so that is and was our expectation. We have one large technology credit that moved in the third quarter. That is episodic, we believe, and something that we and I believe we will manage through so when you look at the migration as we pointed out we are moving back to more traditional sort of historical levels of non-performing loans which is somewhere between 80 and 100 to 110 basis points I think maybe David said the average was 102 or 106 107 and I believe we will manage through so when you look at the migration as we pointed from 14 to 19, and we've guided to 40 to 50 basis points of charge-offs, which we think is in line with our expectations for potential loss in the portfolio over time.

Speaker Change: Yes, I would just say John with respect to the increase in Npls and we've called out portfolios that have been under some stress for a number of quarters now and what we saw.

Speaker Change: In the quarter was some migration from criticized classified and nonperforming specifically in senior housing and.

In transportation and warehousing transportation specifically in office.

David J. Turner: And we think that that's a possibility in time. Now things have to settle out. We've got to get deposit costs back to tie up with where rates are, but we can probably exit the year in the $3.60 range. Thanks for the call, David.

Speaker Change: And then additionally, manufacturing of consumer discretionary items so.

Speaker Change: That is and that was our expectation we have one large technology credits that moved in the third quarter that is episodic we believe it's something that we.

John Pancari: Thank you. Our next question comes from the line of John Pancari with Evercore ISI. Please proceed with your question. Good morning. Good morning.

Speaker Change: and I believe we will manage through so when you look at the migration as we pointed out we are moving back to more traditional sort of historical levels of non-performing loans which is somewhere between 80 and 100 to 110 basis points I think maybe David said the average was 102 or 106 107 and I believe we will manage through so when you look at the migration as we pointed

Speaker Change: And believe we will manage through so when you look at the migration as we pointed out we are moving back to more traditional sort of historical levels of nonperforming loans, which is somewhere between 80 and 100 to 110 basis points I think maybe David said the average was 100 to 106 one.

David J. Turner: On the operating leverage side, I mean, your guidance implies negative operating leverage, unsurprisingly, for 2024, but as you look at your trajectory on the revenue front, your assumptions there combined with your expense expectations, how do you view the likelihood of achieving positive operating leverage in 2025 and when do you expect that you could break into a more positive trajectory on a quarterly basis? Thank you for watching. Yeah, John, so I have a tendency to look at it on an annual basis, and you're right, we can't generate positive operating leverage in 24, primarily because of our outperformance in the first two quarters of 23, where we were having above 4% margin, which is way above most everybody.

Speaker Change: <unk> from 14 to 19 and.

Speaker Change: from 14 to 19.

Speaker Change: and we've guided to 40 to 50 basis points of charge-offs, which we think is in line with our expectations for potential loss in the portfolio over time. So I think we feel we have good insight into the credits that we're managing as to why I would say the burden of increasing interest rates, increasing cost, cost of labor, operating costs, all those things have had an impact specifically on the industries that we've historically now called out, transportation, senior housing, office, consumer discretionary

We've guided to 40 to 50 basis points of charge offs, which we think is in line with our expectations for potential loss in the portfolio over time. So I think we feel we have good insight into the credits that we're managing as to what I would say the burden of increasing interest rates increasing call.

John M. Turner: So I think we feel we have good insight into the credits that we're managing as to why I would say the burden of increasing interest rates, increasing costs, cost of labor, operating costs, all those things have had an impact specifically on the industries that we've historically now called out, transportation, senior housing, office, consumer discretionary.

Speaker Change: Cost cost of labor operating costs, all those things have had an impact specifically on the industries that we've historically now called out transportation Senior housing office consumer discretionary.

Speaker Change: And with respect to the allowance, we have a process we follow and go through every quarter. And I think we believe that we currently believe, obviously, that we've provided for potential losses in the portfolio over time. Unless we experience growth in the portfolio, paydowns in the portfolio, some changes and outstandings in the portfolio or in economic conditions, you can assume that our allowance is appropriate and likely won't change. The trajectory of it will not change unless the economy changes.

John M. Turner: And with respect to the allowance, we have a process we follow and go through every quarter. And I think we currently believe, obviously, that we've provided for potential losses in the portfolio over time. Unless we experience growth in the portfolio, paydowns in the portfolio, some changes and outstandings in the portfolio, or changes in economic conditions, you can assume that our allowance is appropriate and likely won't change. The trajectory of it will not change unless the economy changes.

Speaker Change: With respect to the allowance.

David J. Turner: And so I think that's been acknowledged in the marketplace. I do think we can get back to 25 to generate positive operating leverage, and we'll start trending there towards the back half of the year as we see us bottoming out in terms of net interest income and margin in the second quarter, and then we can start to grow from there. We'll see what the economy looks like. We'll see what loan growth looks like. I think that picks up a bit. And we think the pressure on deposits may just start to go the other way, and as I just mentioned, we can exit with a little stronger margin, so I think positive operating leverage towards the back half is a possibility, and definitely for 2025. And we're going to get there by 2025.

Speaker Change: Have a process we follow.

Speaker Change: <unk>.

Go through every quarter and I think we believe we currently believe obviously, we've provided for potential losses in the portfolio over time, unless we experienced growth in the portfolio pay downs in the portfolio. Some changes in outstandings in the portfolio or an economic conditions, you can assume that our allowance is appropriate.

Speaker Change: Likely won't change the trajectory of it will not change unless the economy changes.

Speaker Change: And the only other thing, John, on that would be if the risk ratings change, then that, up or down, that also impacts your provisioning or release of reserves. So I had that point with the other two or three that John mentioned.

David J. Turner: And the only other thing, John, on that would be if the risk ratings change, then that, up or down, that also impacts your provisioning or release of reserves. So I had that point with the other two or three that John mentioned.

Speaker Change: And the only other thing John on that would be if the risk rating change up.

Speaker Change: Up or down.

Speaker Change: That also impacts your provisioning or release of reserves.

Speaker Change: So at that point with the two or three that John mentioned.

Speaker Change: And David, I'm sorry, if I could just, regarding that last point, isn't risk rating migration negatively assumed? Isn't it now assumed as part of your outlook, just given where we are in this downfall?

Unnamed Analyst: And David, I'm sorry, if I could just, regarding that last point, isn't risk rating migration negatively assumed? Isn't it now assumed as part of your outlook, just given where we are in this downfall?

Speaker Change: David I'm, sorry, if I could just regarding that last point.

Speaker Change: Risk rating migration negatively I assume it didn't know assumed as part of your outlook just given where we are in this downturn.

John M. Turner: Right. Okay, great. That's helpful. And then secondly, around credit, regarding the MPA increase, I know you flagged the downgrade, the risk rating downgrade, in some of the higher risk sectors. Maybe you could give us a little bit more color?

David: Yeah, that's right. You look at your reasonable and forecast period and think about where the credits are going. If that changes, though, to go the other way, that can cause you not to have to provide any more. So we've provided what we think we need to have.

David J. Turner: Yeah, that's right. You look at your reasonable and forecast period and think about where the credits are going. If that changes, though, to go the other way, that can cause you not to have to provide any more. So we've provided what we think we need to have. If things get better, then you don't need the reserves that you put up. You can release those reserves. If things get worse, then you have to provide more. You know, generally, loan growth is also a driver of having to add to the provision. If your loans are going the other way, then you don't need the reserves that you had set up for them. So you can have a release related to that.

Speaker Change: Right.

Speaker Change: You look at your reasonable.

Speaker Change: And forecast period, and think about where the credits are going.

John M. Turner: Was it concentrated in any one sector? Was there a broader scrub of the loan book that you completed that led you to the multiple of multiple downgrades? Or is it just episodic?

That changes, though to go the other way that can cause you to not have to provide any anymore. So we provided what we think we need to have.

David: If things get better, then you don't need the reserves that you put up. You can release those reserves. If things get worse, then you have to provide more. You know, generally, loan growth is also a driver of having to add to the provision. If your loans are going the other way, then you don't need the reserves that you had set up for them. So you can have a release related to that. Economic conditions got a little better in the fourth quarter than the third. So that was a positive. But net-net, we're continuing to look at the life of the loan and where that's going to go. And we think we have appropriate reserves for losses that are there.

Speaker Change: If things get better then you don't need the reserves that you put up you can release those reserves.

David J. Turner: And then, separately, can you just talk about the reserve? I know you built it a bit here. What's the outlook there? Could you continue to add from here?

Speaker Change: Things get worse than you had to provide more.

Speaker Change: Generally loan growth is also a driver of having to add provision. If your loans are going the other way then you don't need the reserves that you had set up for them. So you can have a release related to that economic conditions.

John M. Turner: I'd just say, John, with respect to the increase in NPLs, we've called out portfolios that have been under some stress for a number of quarters now. What we saw in the quarter was some migration from criticized classified to non-performing, specifically in senior housing, in transportation and warehousing, transportation specifically, and office. And then, additionally, manufacturing of consumer discretionary items, so that is and was our expectation. We have one large technology credit that moved in the third quarter. That is episodic, we believe, and something that we, and I believe we will manage through so when you look at the migration as we pointed out we are moving back to more traditional sort of historical levels of non-performing loans which is somewhere between 80 and 100 to 110 basis points I think maybe David said the average was 102 or 106 107 and I believe we will manage through so when you look at the migration as we pointed from 14 to 19, and we've guided to 40 to 50 basis points of charge-offs, which we think is in line with our expectations for potential loss in the portfolio over time.

Got a little better in the fourth quarter than third so that was a positive but net net.

David J. Turner: Economic conditions got a little better in the fourth quarter than in the third, so that was positive. But net-net, we're continuing to look at the life of the loan and where that's going to go, and we think we have appropriate reserves for losses that are there.

Speaker Change: We're continuing to look at the life of the loan and where that's going to go and we think we have appropriate reserves.

Speaker Change: For losses.

Speaker Change: But are there.

Speaker Change: Okay, Great makes sense. Thank you David.

Speaker Change: Okay, great. Makes sense. Thank you, David.

Unnamed Analyst: Okay, great. It makes sense. Thank you, David.

Speaker Change: Our next question comes from the line of Dave Rochester with Compass Point. Please proceed with your questions.

Unnamed Analyst: Our next question comes from the line of Dave Rochester with Compass Point. Please proceed with your questions.

Speaker Change: Our next question comes from the line of Dave Rochester with Compass point. Please proceed with your question.

Dave Rochester: Hey, good morning guys. On the NII guide, I was just wondering how slide six might change if we don't get those cuts you're factoring in for the year. I know you mentioned you're neutral to those, so maybe this range wouldn't change much. Just figured that might maybe change some of the deposit flow and beta assumptions in here and maybe some other stuff.

Unnamed Analyst: Hey, good morning guys. On the NII guide, I was just wondering how slide six might change if we don't get those cuts you're factoring in for the year. I know you mentioned you're neutral to those, so maybe this range wouldn't change much. Just figured that might maybe change some of the deposit flow and beta assumptions here and maybe some other stuff.

Dave Rochester: Hey, good morning, guys.

Dave Rochester: NII Guide I was just wondering how slide six might change if we don't get those cuts you're factoring in for the year I know you mentioned you're neutral to those so maybe this range wouldn't change much just figure that might maybe change some of the deposit flow and beta assumptions in here and maybe some other stuff.

Speaker Change: Yeah, so we tried to put that in. If you look at the lower box, on the lower end of that, we say stable. That was trying to address exactly what your question is. So to the extent that we're kind of where we are. That was all within this range. That's right. That's right. But the lower end.

David J. Turner: Yeah, so we tried to put that in. If you look at the lower box, at the lower end of that, we say stable. That I was trying to address exactly what your question is. So, to the extent that we're kind of where we are. That was all within this range. That's right. That's right, but on the lower end.

Yes, so we tried to put that in and if you look at the lower box on the lower end of that and we say stable that was trying to address exactly what your what's your question.

Dave Rochester: To the extent that that we're kind of where we are.

Dave Rochester: That would fall within this range that's right that's right.

Dave Rochester: The lower end.

Speaker Change: Yep, gotcha. And then for the $12 to $14 billion in the fixed rate loan production and securities and investment you mentioned per year, I was just curious what the breakdown of that was for securities and loans and what yields you're putting on today on both securities and investment and new loan production just on average. I know you've got many different categories of loans you're producing. Yeah, so I think just in total the kind of front book, back book between those two is about 200, 250 basis points of pickup. If you look at that 12 to 15, about a quarter of that's related to securities. That going on is front book, back book pieces of call it 300 basis points and loans, front book, back book are probably in the 150 to 200 range.

Unnamed Analyst: Yep, gotcha. And then for the $12 to $14 billion in fixed-rate loan production and securities and investment you mentioned per year, I was just curious what the breakdown of that was for securities and loans and what yields you're putting on today on both securities and investment and new loan production just on average. I know you've got many different categories of loans you're producing. Yeah, so I think just in total the kind of front book, back book between those two is about 200, 250 basis points of pickup. If you look at that 12 to 15, about a quarter of that's related to securities. What's going on is front book, back book pieces of call it 300 basis points, and loans, front book, back book are probably in the 150 to 200 range.

Speaker Change: Got you and then for the 12 months to $14 billion in the fixed rate loan production and Securities investment you mentioned per year.

Speaker Change: Just curious what the breakdown of that was for securities and loans and what yields you are putting on today in both the securities are investment in new loan production just on average I know you've got different categories of loans are you producing.

John M. Turner: So I think we feel we have good insight into the credits that we're managing as to why I would say the burden of increasing interest rates, increasing costs, cost of labor, operating costs, all those things have had an impact specifically on the industries that we've historically now called out, transportation, senior housing, office, consumer discretionary. And with respect to the allowance, we have a process we follow and go through every quarter. And I think we currently believe, obviously, that we've provided for potential losses in the portfolio over time. Unless we experience growth in the portfolio, paydowns in the portfolio, some changes and outstandings in the portfolio, or changes in economic conditions, you can assume that our allowance is appropriate and likely won't change. The trajectory of it will not change unless the economy changes. And the only other thing, John, on that would be if the risk ratings change, then that, up or down, that also impacts your provisioning or release of reserves. So I had that point with the other two or three that John mentioned.

Speaker Change: So I think in <unk>.

Speaker Change: Total the kind of the front book back book between those two is about 200 250 basis points of pick up.

If you look at.

Speaker Change: Of that 12 to 15 about a quarter of that is related to securities.

Speaker Change: Of that going on as.

Speaker Change: Front book back book pieces of call. It 300 basis points in loans front book back book, we're probably in the 150 to 200 range.

Yes.

Speaker Change: Okay, Great and then just on capital given your comments on 10% CET, one targeting that unadjusted.

Speaker Change: Great. And then just on capital, given your comments on 10% CT1 targeting that unadjusted, what does that mean for the pace of buybacks here? Is the fourth quarter pace a good one going forward for the next few quarters maybe? And then as it relates to your adjusted CT1 ratio, which is just over 8% you've got here, how are you thinking about where you want that to be over time as the new regs kick in?

David J. Turner: Great. And then just on capital, given your comments on 10% CT1 targeting that is unadjusted, what does that mean for the pace of buybacks here? Is the fourth-quarter pace a good one going forward for the next few quarters maybe? And then, as it relates to your adjusted CT1 ratio, which is just over 8% you've got here, how are you thinking about where you want that to be over time as the new regulations kick in?

Speaker Change: Does that mean for the pace of buybacks here as the fourth quarter pace of good one going forward for the next few quarters maybe.

Speaker Change: And then as it relates to your adjusted CET, one ratio, which is just over 8% you've got here. How are you thinking about where you want that to be over time as the new regs kick in.

Speaker Change: Well, one we don't know what the new rules are going to be so we through fully fully loaded it with eight two to say that show you that that doesn't impact our stress capital buffer are our absolute minimum were in good shape there.

Speaker Change: Well, one, we don't know what the new rules are going to be, so we fully loaded it with 8-2 to show you that that doesn't impact our stress capital buffer or our absolute minimum. We're in good shape there. We just need to see where the rules come out, and by the time all that happens, AOCI is going to be in a different spot than it is today, assuming rates continue to come down a bit. We saw a pretty big move in all of the peers with AOCI this quarter.

David J. Turner: Well, first, we don't know what the new rules are going to be, so we fully loaded it with 8-2 to show you that that doesn't impact our stress capital buffer or our absolute minimum. We're in good shape there. We just need to see where the rules come out, and by the time all that happens, AOCI is going to be in a different spot than it is today, assuming rates continue to come down a bit. We saw a pretty big move in all of the peers with AOCI this quarter. You know, from a capital standpoint, we think 10 is the right number.

Speaker Change: We just need to see where the rules come out and by the time all that happens <unk> is going to be in a different spot than it is today, assuming rates continue to come down a bit.

David J. Turner: And David, I'm sorry, if I could just, regarding that last point, isn't risk rating migration negatively assumed? Isn't it now assumed as part of your outlook, just given where we are in this downfall? Yeah, that's right.

Speaker Change: We saw a pretty big move in all of the peers with OCI.

Speaker Change: This quarter.

David J. Turner: You look at your reasonable and forecast period and think about where the credits are going. If that changes, though, to go the other way, that can cause you not to have to provide any more. So we've provided what we think we need to have. If things get better, then you don't need the reserves that you put up. You can release those reserves.

Speaker Change: <unk>.

Speaker Change: You know, from a capital standpoint, you know, we think 10 is the right number. What was the buyback pace? So, again, we used the buyback as our last mechanism to help us keep our common equity tier one in that 10% range. And so the pace is do your favorite earnings expectation, take out the dividend, use a bit of that with low single-digit loan growth, and then the rest is either going to be buying mortgage servicing rights or things of that nature, and then we toggle with share repurchases. So, yeah.

From a capital standpoint.

Speaker Change: We think 10 is the right number what was the.

Speaker Change: The buyback pace so.

David J. Turner: What was the buyback pace? So, again, we used the buyback as our last mechanism to help us keep our common equity tier one in that 10% range. And so the pace is, do your favorite earnings expectation, take out the dividend, use a bit of that with low single-digit loan growth, and then the rest is either going to be buying mortgage servicing rights or things of that nature, and then we toggle with share repurchases. So, yeah.

Speaker Change: Again, we use the buyback as our last mechanism to help us keep up.

Speaker Change: Our common equity tier one in that 10% range.

David J. Turner: If things get worse, then you have to provide more. You know, generally, loan growth is also a driver of having to add to the provision. If your loans are going the other way, then you don't need the reserves that you had set up for them. So you can have a release related to that. Economic conditions got a little better in the fourth quarter than the third.

Speaker Change: And so the paces.

Speaker Change: <unk> do your favorite earnings expectation takeout.

Speaker Change: Dividend.

Speaker Change: Use a bit of that with low single digit loan growth and then the rest is either going to be buying mortgage servicing rights or things of that nature, and then we toggle with share repurchases. So.

David J. Turner: So that was a positive. But net-net, we're continuing to look at the life of the loan and where that's going to go. And we think we have appropriate reserves for losses that are there. Okay, great. Makes sense.

Speaker Change: You know, I don't want to comment on whether we stay on the page because then I'm getting your earnings guidance. That's a trick. Understood. All right. Thanks, guys. Appreciate it. Thank you. All right. Thanks.

Unnamed Analyst: You know, I don't want to comment on whether we stay on the page because then I'm getting your earnings guidance. That's a trick. Understand? All right. Thanks, guys. I appreciate it. Thank you. All right. Thanks.

I don't want to I don't want to comment on whether we stay on the pace because we end up getting your earnings guidance.

Speaker Change: That's correct.

Speaker Change: [laughter] alright, thanks, guys appreciate it.

Speaker Change: Alright. Thanks.

Speaker Change: Our next question comes from the line of Gerard Cassidy with RBC. Please proceed with your question.

Speaker Change: Our next question comes from the line of Gerard Cassidy with RBC. Please proceed with your question.

Unnamed Analyst: Our next question comes from the line of Gerard Cassidy with RBC. Please proceed with your question. Morning, Gerard. Hey, Gerard. Hi John. Hi David. David, can you share with us, you guys have given us good detail on credit quality, and John, you pointed out that the non-performing loan increase was to the sectors of your portfolio that you've already identified as being weak. Could we look at it another way? And you gave us good details on slides 27 and 28 on the leveraged portfolio and the shared national credit portfolio. How are those portfolios holding up credit-wise, and when you think back to where we were a year ago, I remember many of the calls; the word recession was used quite often in those calls. We're not hearing that on this fourth-quarter earnings call from nearly all the banks. So have these portfolios held up better than you would have thought from a year ago?

David J. Turner: Thank you, David. Our next question comes from the line of Dave Rochester with Compass Point. Please proceed with your questions. Hey, good morning guys. On the NII guide, I was just wondering how slide six might change if we don't get those cuts you're factoring in for the year. I know you mentioned you're neutral to those, so maybe this range wouldn't change much.

Speaker Change: Morning, Gerard. Hey, Gerard. Hi, John. Hi, David. David, can you share with us, you guys have given us good detail on credit quality, and John, you pointed out that the non-performing loan increase was to the sectors of your portfolio that you've already identified as being weak. Could we look at it another way, and you give us good details on slides 27 and 28 on the leveraged portfolio and the shared national credit portfolio. How are those portfolios holding up credit-wise, and when you think back to where we were a year ago, I remember many of the calls, the word recession was used quite often in those calls. We're not hearing that on this fourth quarter earnings call from nearly all the banks. So have these portfolios held up better than what you would have thought it from a year ago?

Gerard Cassidy: Good morning, Gerard Gerard John David.

David can you share with us.

Gerard Cassidy: Yes.

David: Given us good detail on credit quality.

David: You pointed out that the non performing loan increase.

David: Sectors of your portfolio that you have already identified as being weak.

David: Should we look at it another way.

Give us good details on slides 27, and 28 on the leverage portfolio and the shared national credit portfolio.

David J. Turner: Just figured that might maybe change some of the deposit flow and beta assumptions in here and maybe some other stuff. Yeah, so we tried to put that in. If you look at the lower box, at the lower end of that, we say stable.

David: How are those portfolios are holding up credit wise in and when you think back to where we were a year ago I remember many of the calls that word recession was used quite often in those calls were not hearing that on this fourth quarter earnings call for most newly all the banks. So have these portfolios held up better than what you were.

David J. Turner: I was trying to address exactly what your question was. So, to the extent that we're kind of where we are, that was all within this range. That's right. That's right. But the lower end.

David: From a year ago.

Speaker Change: I would say yes, Gerard. The leverage portfolio is largely relationship-based.

John M. Turner: I would say yes, Gerard. The leveraged portfolio is largely relationship-based. The same is true of our shared national credit book as we We began to build a capital markets business to help us grow and diversify our revenue and to meet more customer needs. We naturally then began to expand the size of our shared national credit book so that we could serve those customers that had need of those products and services. And with that, as you can imagine, comes some tall tree risk, single name risk. And as I mentioned earlier, we have a technology credit that's fairly substantial, that's an NPL.

I would say, yes to our leveraged portfolio is largely relationship based.

Speaker Change: The same is true of our shared national credit book as we We

David J. Turner: Yep, gotcha. And then for the $12 to $14 billion in fixed-rate loan production and securities and investment you mentioned per year, I was just curious what the breakdown of that was for securities and loans and what yields you're putting on today on both securities and investment and new loan production just on average. I know you've got many different categories of loans you're producing. Yeah, so I think just in total the kind of front book, back book between those two is about 200, 250 basis points of pickup.

David: Business those are banking relationships that we enjoy.

David: Close to those customers and we've been close to them throughout this period of elevated rates there was some risk in it.

Rates rose that we've had.

David: Some softness in the portfolio, but are things perform well the same is true of our shared national credit book as we <unk>.

Speaker Change: We began to build a capital markets business to help us grow and diversify our revenue and to meet more customer needs. We naturally then began to expand the size of our shared national credit book so that we could serve those customers that had need for those products and services. And with that, as you can imagine, comes some tall tree risk, single name risk. And while I mentioned earlier, we have a technology credit that's fairly substantial, that's an NPL. That is an example of a shared national credit exposure that we have good visibility into, we think has very limited risk of loss, but still is a non-performing loan. But overall, I would say just based upon reflection on the performance of that book, it's been good. We've enjoyed expanding relationships, growing revenue from capital markets and or deposits, treasury management that we enjoy with those customers. And so I think we've been pleased with the performance of both the leverage book and the shared national credit book.

David: Began to build a capital markets business to help us grow and diversify our revenue and meet more customer needs.

David: We then began to expand.

Size of our shared national credit book, So that we can serve those customers that had need for those products and services.

With that as you can imagine comes some toll free risk single name risking while I mentioned earlier, we have a technology credit.

John M. Turner: That is an example of a shared national credit exposure that we have good visibility into, and we think has a very limited risk of loss, but still is a non-performing loan. But overall, I would say, just based on reflection on the performance of that book, it's been good. We've enjoyed expanding relationships, growing revenue from capital markets and or deposits, and the treasury management that we enjoy with those customers. And so I think we've been pleased with the performance of both the leverage book and the shared national credit book.

David J. Turner: If you look at that 12 to 15, about a quarter of that's related to securities. What's going on is front book, back book pieces of call it 300 basis points, and loans, front book, back book are probably in the 150 to 200 range. Great. And then just on capital, given your comments on 10% CT1 targeting that is unadjusted, what does that mean for the pace of buybacks here? Is the fourth-quarter pace a good one going forward for the next few quarters, maybe?

David: Fairly substantial that's an NPL.

David: As an example of shared national credit exposure that we have good visibility into we think.

David: Is very limited risk of loss, but still.

David: As a nonperforming loan, but overall, we'd say just based upon reflection on the performance of that book. It's been good we've enjoyed expanding relationships growing revenue from capital markets <unk> deposits Treasury management that we enjoy with those customers and so.

David: I think we've been pleased with the performance of both the leverage book.

David J. Turner: And then as it relates to your adjusted CT1 ratio, which is just over 8% you've got here, how are you thinking about where you want that to be over time as the new regulations kick in? Well, one, we don't know what the new rules are going to be, so we fully loaded it with 8-2 to show you that that doesn't impact our stress capital buffer or our absolute minimum. We're in good shape there.

David: Shared national credit book.

Speaker Change: Very good. And then coming back to loans, I think, David, in your comments, you talked about loan demand remains soft and you're looking for low single-digit growth for average loans in 2024.

Unnamed Analyst: Very good. And then coming back to loans, I think, David, in your comments, you talked about loan demand remaining soft, and you're looking for low single-digit growth for average loans in 2024.

Very good and then coming back to loans I think David in your comments you talked about loan demand remained soft and you are looking for low single digit growth for average loans in 2024.

Speaker Change: I know during our careers the shadow banking industry has continued its competition against the banks, but it seems today there's more coverage of the private equity side getting into lending, maybe greater than we've seen in years. How are you guys competing against the private credit markets, and at the same time, are any of those private credit lenders customers of yours that you have to balance that relationship of a customer competing against you?

David J. Turner: I know during our careers the shadow banking industry has continued its competition against the banks, but it seems today there's more coverage of the private equity side getting into lending, maybe greater than we've seen in years. How are you guys competing against the private credit markets, and at the same time, are any of those private credit lenders customers of yours that you have to balance that relationship of a customer competing against you?

Speaker Change: I know during our careers the shadow banking industry has continued its competition against the banks, but it seems today, there's more coverage of the private equity side getting into lending maybe greater than we've seen in years. How are you guys competing against the private credit markets.

David J. Turner: We just need to see where the rules come out, and by the time all that happens, AOCI is going to be in a different spot than it is today, assuming rates continue to come down a bit. We saw a pretty big move in all of the peers with AOCI this quarter. From a capital standpoint, we think 10 is the right number. What was the buyback pace?

Speaker Change: At the same time or any of those.

Speaker Change: Credit lenders customers of yours that you have to balance that relationship of our customer competing against you.

Speaker Change: We have very modest exposure to <unk>.

Speaker Change: You know, we have a very modest exposure to private equity who then is, we're not lending to private equity to in turn lend lend

John M. Turner: You know, we have a very modest exposure to private equity, who then is, we're not lending to private equity to, in turn, lend to our customer base. So, if we had any exposure, it would be very modest. Separately, we don't have investment grade type shared natural credit exposure. We're just not, We're not seeing private credit as a competitor today.

Speaker Change: But equity who then is we're not lending to private equity and in turn Lynn.

David J. Turner: So, again, we used the buyback as our last mechanism to help us keep our common equity tier one in that 10% range. And so the pace is, do your favorite earnings expectation, take out the dividend, use a bit of that with low single-digit loan growth, and then the rest is either going to be buying mortgage servicing rights or things of that nature, and then we toggle with share repurchases. So, yeah. You know, I don't want to comment on whether we stay on the page because then I'll be getting your earnings guidance. That's a trick.

Speaker Change: into our customer base.

Speaker Change: Into our customer base.

Speaker Change: So, if we have any exposure, it would be very modest there. Separately, we don't...

So.

Speaker Change: If we have any exposure it would be very modest there are separately.

Speaker Change: Don't see private equity as a competitor necessarily within our core middle market customer base I ask Ronnie Smith. The question. The other day, if he could name a customer there.

Speaker Change: We lost to private credit and we can't think of one now it doesn't mean, it's not occurring and some of the markets that we're in but by and large given our focus on the core middle market business.

David J. Turner: Understand? All right. Thanks, guys. I appreciate it.

Speaker Change: And <unk>.

Speaker Change: Investment grade type shared natural credit exposure. We're just not, we're not seeing private credit as a competitor today.

Investment grade type shared national credit exposure, we're just not we're not seeing private credit as a competitor today.

David J. Turner: Thank you. All right. Thanks.

Gerard Cassidy: Our next question comes from the line of Gerard Cassidy with RBC. Please proceed with your question. Morning, Gerard. Hey, Gerard.

Speaker Change: On the wholesale side now, there are lots of competitors on the consumer side that we're seeing in a variety of different ways, including mortgage and home improvement that we compete with.

John M. Turner: On the wholesale side now, there are lots of competitors on the consumer side that we're seeing in a variety of different ways, including mortgage and home improvement. We compete with them.

Speaker Change: On the wholesale side now and there are lots of competitors on the consumer side that we're seeing in a variety of.

John M. Turner: Hi John. Hi David. David, can you share with us, you guys have given us good detail on credit quality, and John, you pointed out that the non-performing loan increase was to the sectors of your portfolio that you've already identified as being weak. Could we look at it another way? And you gave us good details on slides 27 and 28 on the leveraged portfolio and the shared national credit portfolio. How are those portfolios holding up credit-wise, and when you think back to where we were a year ago, I remember many of the calls; the word recession was used quite often in those calls. We're not hearing that on this fourth-quarter earnings call from nearly all the banks. So have these portfolios held up better than you would have thought from a year ago? I would say yes, Gerard.

Speaker Change: Different ways, including mortgage and home improvement and we compete with.

Speaker Change: Which are non-traditional depositories. That's right. Okay, great. Thank you.

Unnamed Analyst: Which are non-traditional depositories? That's right. Okay, great. Thank you.

Speaker Change: Would you or not.

Speaker Change: Which are non traditional depositors.

Speaker Change: Yeah, that's right okay, great. Thank you John.

Speaker Change: Our next question comes from the line of Christopher Spahr with Love Fargo. Please proceed with your question.

Unnamed Analyst: Our next question comes from the line of Christopher Spahr with Love Fargo. Please proceed with your question.

Speaker Change: Our next question comes from the line of Christopher Spahr with Wells Fargo. Please proceed with your question.

Christopher Spahr: Good morning. Good morning.

Unnamed Analyst: Good morning. Good morning.

Christopher Spahr: Good morning, good morning.

Christopher Spahr: Hello?

Unnamed Analyst: Hello, Christopher Spahr. Your line is live.

Hello.

Christopher Spahr: Christopher Spahr, your line is live.

Christopher Spahr: Christopher Spahr your line is live.

Speaker Change: Let's go ahead and move to the next.

Operator: Let's go ahead and move to the next question. Our next question comes from the line of Brandon King with Truist. Please proceed with your question.

Speaker Change: Let's go ahead and move to the next caller.

Speaker Change: Our next question comes from the line of Brandon <unk> with <unk>. Please proceed with your question.

Speaker Change: Our next question comes from the line of Brandon King with Truist. Please proceed with your question.

Brandon King: Hey, good morning.

Unnamed Analyst: Hey, good morning. I appreciate the guidance on expenses and expense control there, but I did have a question on, just an update on the Technology Modernization Project and kind of what you're baking in for expenses in 2024, and if part of that or the expense savings is related to, you know, maybe delaying some of that project for the year.

Brandon: Hey, good morning.

John M. Turner: The leverage portfolio is largely relationship-based, and the same is true of our shared national credit book as we We began to build a capital markets business to help us grow and diversify our revenue and to meet more customer needs. We naturally then began to expand the size of our shared national credit book so that we could serve those customers that had need for those products and services. And with that, as you can imagine, comes some tall tree risk, single name risk.

Brandon King: So, appreciate the guidance on expenses and expense control there, but I did have a question on, just an update on the...

Brandon: So I appreciate the guidance on expenses and expense control there.

Brandon: I did have a question on <unk>.

Brandon: Update on the.

Brandon: Technology monetization project.

Brandon King: Technology Modernization Project, and kind of what you're baking in for expenses in 2024, and if part of that or the expense savings is related to, you know, maybe delaying some of that project for the year.

Brandon: Kind of whats you are baking in for expenses in 2024.

Brandon: Part of that other expense savings is related to you know maybe delaying some some of that project.

John M. Turner: And while I mentioned earlier, we have a technology credit that's fairly substantial, that's an NPL. That is an example of a shared national credit exposure that we have good visibility into, we think has a very limited risk of loss, but still is a non-performing loan. But overall, I would say, just based on reflection on the performance of that book, it's been good.

For the us.

Speaker Change: Yeah, Brandon. So, we've given you our overall expense guide to be, you know, essentially flat after you carve out operational losses from the past year. You know, we continue to make investments in our business. We call it R2, which is our transformation project in cyber and risk management, consumer compliance. A lot of investment in areas of the bank that we're looking to offset elsewhere. Our R2 project is coming along very well. We spend anywhere, depending on the year, 9 to 11 percent of our revenue in terms of technology costs. We don't expect that to change materially in the short term. We continue to evaluate how we can better leverage technology. And I think we have a lot of upside potential. We have a lot of potential to leverage that in our business to continue to improve and to continue to take out manual steps, manual processes, and have a technology solution, too. So, we think our investment in technology is the right thing to do, and we're going to have a modern core deposit platform in the not-too-distant future, which we think will be a competitive advantage for us as well. So, anyway, that's kind of the spending plan.

David J. Turner: Yeah, Brandon. So, we've given you our overall expense guide to be, you know, essentially flat after you carve out operational losses from the past year. You know, we continue to make investments in our business. We call it R2, which is our transformation project in cyber and risk management, and consumer compliance. A lot of investment in areas of the bank that we're looking to offset elsewhere. Our R2 project is coming along very well. We spend anywhere, depending on the year, 9 to 11 percent of our revenue in terms of technology costs. We don't expect that to change materially in the short term. We continue to evaluate how we can better leverage technology, and I think we have a lot of upside potential.

Speaker Change: Yes, Brandon So we're giving you our overall expense guide to be.

Brandon: Essentially flat after you carve out operational losses from the past year.

Brandon: We continue to make investments in our business are art, we call it ought to.

Brandon: Which is our transformation project in cyber and.

John M. Turner: We've enjoyed expanding relationships, growing revenue from capital markets and or deposits, and the treasury management that we enjoy with those customers. And so I think we've been pleased with the performance of both the leverage book and the shared national credit book. Very good.

Brandon: Risk management consumer compliance a lot of investment in areas of the bank that we're looking to.

Brandon: Offset elsewhere.

<unk> project is coming along very well, we spend anywhere depending on the year, 9% to 11% of our revenue in terms of technology cost.

David J. Turner: And then coming back to loans, David, in your comments, you talked about loan demand remaining soft, and you're looking for low single-digit growth for average loans in 2024. I know during our careers the shadow banking industry has continued its competition against the banks, but it seems today there's more coverage of the private equity side getting into lending, maybe greater than we've seen in years. How are you guys competing against the private credit markets, and at the same time, are any of those private credit lenders customers of yours that you have to balance that relationship of a customer competing against you? You know, we have a very modest exposure to private equity, which then is, we're not lending to private equity to, in turn, lend to our customer base. So if we had any exposure, it would be very modest there. But separately, we don't. I asked Ronnie Smith the question the other day if he could name a customer that we lost to private credit, and we can't think of one.

Brandon: We don't expect that to change materially in.

Brandon: In the short term, we continue to evaluate how we can better leverage technology.

Brandon: And I think we I think we have a lot of upside potential to leverage that in our business to continue to improve and to continue to take.

David J. Turner: We have a lot of potential to leverage that in our business to continue to improve and to continue to take out manual steps, manual processes, and have a technology solution, too. So, we think our investment in technology is the right thing to do, and we're going to have a modern core deposit platform in the not-too-distant future, which we think will be a competitive advantage for us as well. So, anyway, that's kind of the spending plan.

Brandon: Takeout manual steps manual processes and have a technology solution to so.

Brandon: We think our investment in technology is the right thing to do.

Brandon: We're going to have a modern core deposit platform not too distant future, which we think will be a competitive advantage for us as well so anyway, that's kind of the spending.

Brandon: Range, if you will 911 for revenue.

Speaker Change: Range, if you will, 9 to 11 for revenue.

David J. Turner: Range, if you will, 9 to 11 for revenue.

Speaker Change: Okay, and just to confirm, no delays in the timing of that? Yeah, to answer your question specifically, that project is on time and on budget, no delay.

Unnamed Analyst: Okay, and just to confirm, no delays in the timing of that? Yeah, to answer your question specifically, that project is on time and on budget, no delay.

Brandon: Okay.

Brandon: No no delays in the timing, yes, no yes to answer your question specifically that project is on time and on budget no delays.

Speaker Change: Okay, okay. And then just had to follow up on credit and particularly senior housing. I just wanted to get more details as far as your exposure there. And what are you thinking as far as ultimate loss content and protections from a credit loss?

John M. Turner: Okay, okay. And then I just had to follow up on credit and, particularly, senior housing. I just wanted to get more details as far as your exposure there is concerned. And what are you thinking as far as ultimate loss content and protections from credit losses?

Brandon: Okay. Okay, and then just had a follow up on credit, particularly at senior housing.

Brandon: Wanted to get more details as far as exposure there what are you thinking as far as the ultimate loss content.

John M. Turner: Now that doesn't mean it's not occurring in some of the markets that we're in, but by and large, given our focus on the core middle market business and investment grade type shared natural credit exposure, we're just not, we're not seeing private credit as a competitor today. On the wholesale side now, there are lots of competitors on the consumer side that we're seeing in a variety of different ways, including mortgage and home improvement that we compete with. Which are non-traditional depositories.

Brandon: And for the questions.

Brandon: Credit loss.

Speaker Change: Yeah, you know, we're seeing improvement in the senior housing space, notwithstanding the fact that we have a couple of credits we're carrying as non-performing.

Unnamed Analyst: Yeah, you know, we're seeing improvement in the senior housing space, notwithstanding the fact that we have a couple of credits we're carrying as non-performing. 118 million dollars in non-performing loans and reserves against those credits of about 3.7 percent so I think we maybe provided information on slide 20 in your in your deck but we are seeing improvement in senior housing as occupancy rates pick up and people become a little more comfortable with communal living again amongst that age group we're seeing improvement in senior housing as occupancy rates pick up and people become a little more comfortable with communal living again amongst that age group

Brandon: Yes.

Brandon: We're seeing improvement in the senior housing space Notwithstanding the fact that we have a couple of credits were carrying as nonperforming.

Brandon: <unk>.

Brandon: Generally occupancy rates are improving.

Over time today, we've got about $63 million in I'm, sorry $57 million in.

Speaker Change: 118 million dollars in non-performing loans and reserves against those credits of about 3.7 percent so I think we maybe provided information on slide 20 in your in your deck but we are seeing improvement in senior housing as occupancy rates pick up and people become a little more comfortable with communal living again amongst that age group we're seeing improvement in senior housing as occupancy rates pick up and people become a little more comfortable with communal living again amongst that age group

Brandon: $118 million in nonperforming loans and reserves against those credits of about three 7%. So I think maybe provided information on slide 20.

David J. Turner: That's right. Okay, great. Thank you. Our next question comes from the line of Christopher Spahr with Love Fargo. Please proceed with your question. Good morning. Good morning. Hello?

And you're in your deck.

Brandon: But we are seeing improvement in senior housing as occupancy rates.

Brandon: Pick up and people become more comfortable with communal living again amongst that age group.

Operator: Christopher Spahr, your line is live. Let's go ahead and move to the next question. Our next question comes from the line of Brandon King with Truist. Please proceed with your question. Hey, good morning. I appreciate the guidance on expenses and expense control there, but I did have a question on, just an update on the... Technology Modernization Project, and kind of what you're baking in for expenses in 2024, and if part of that or the expense savings is related to, you know, maybe delaying some of that project for the year. Yeah, Brandon.

Brandon: <unk>.

Speaker Change: Thanks for all the color.

Unnamed Analyst: Thanks for all the color.

Speaker Change: Okay. Thanks.

Speaker Change: Thanks for all the color.

Speaker Change: Yes.

Speaker Change: Our next question comes from the line of Erika Najarian with UBS. Please proceed with your question.

Unnamed Analyst: Our next question comes from the line of Erika Najarian with UBS. Please proceed with your question.

Our next question comes from the line of Erika Najarian with UBS. Please proceed with your question.

Erika Najarian: Hi, good morning, everyone.

Erika Najarian: Good morning, one follow up.

Erika Najarian: Dave I think.

Speaker Change: Very notable what you said to Ryan's line of questioning to three six exit rate.

Speaker Change: For the net interest margin in the fourth quarter.

David J. Turner: So, we've given you our overall expense guide to be, you know, essentially flat after you carve out operational losses from the past year. We continue to make investments in our business. We call it R2, which is our transformation project in cyber and risk management, and consumer compliance. A lot of investment in areas of the bank that we're looking to offset elsewhere. Our R2 project is coming along very well. We spend anywhere from 9 to 11 percent of our revenue in terms of technology costs.

Speaker Change: Investors are not focused on that exit rate so.

Speaker Change: I was wondering if I could.

Speaker Change: Ask me what the component pieces is are our rather so.

Erika Najarian: unless you would change anything on the on the um in terms of adding swaps it seems like you do have 1.6 billion of notional rolling off in the fourth quarter so I guess that's a good guy um you also mentioned a terminated swap gain in your 10q um but you had like a forward look for four four quarters wondering what that could be for 4q24 and then more notably obviously you guys have said um unequivocally that it's a deposit um assumptions that's really going to make a difference I'm wondering sort of what the speed is that you're assuming on that 35 percent down down beta um you know especially if you think that the first rate cut I think you said was in May

Unnamed Analyst: unless you would change anything on the on the um in terms of adding swaps it seems like you do have 1.6 billion of notional rolling off in the fourth quarter so I guess that's a good guy um you also mentioned a terminated swap gain in your 10q um but you had like a forward look for four four quarters wondering what that could be for 4q24 and then more notably obviously you guys have said um unequivocally that it's a deposit um assumptions that's really going to make a difference I'm wondering sort of what the speed is that you're assuming on that 35 percent down down beta um you know especially if you think that the first rate cut I think you said was in May

Speaker Change: I must give you change anything on the.

Speaker Change: In terms of adding swaps. It seems like you do have $1 6 billion of notional rolling off in the fourth quarter. So I guess, that's a good guy.

Speaker Change: You also mentioned a terminated swap gain in your 10-Q.

Speaker Change: Like a forward look for four quarters wondering what that could be for <unk> through 'twenty four.

Speaker Change: And then more notably obviously you guys have said.

David J. Turner: We don't expect that to change materially in the short term. We continue to evaluate how we can better leverage technology, and I think we have a lot of upside potential.

Speaker Change: Unequivocally that the deposit assumption.

Speaker Change: That's really going to make a difference I'm wondering sort of what the speed is that you're assuming on that 35% down down data.

David J. Turner: We have a lot of potential to leverage that in our business to continue to improve and to continue to take out manual steps, manual processes, and have a technology solution, too. So, we think our investment in technology is the right thing to do, and we're going to have a modern core deposit platform in the not-too-distant future, which we think will be a competitive advantage for us as well. So, anyway, that's kind of the spending plan. Range, if you will, 9 to 11 for revenue.

Especially if you think that the first rate cut I think you said within that.

Speaker Change: Yes so.

Speaker Change: Yeah, so I think all in, the big drivers there are controlling the deposit costs. We do have a headwind of the $3 billion notional for starting swap in the first quarter, and then we're kind of in the running rate. The terminated swaps are in the amortization already. Those aren't the huge drivers. I think after we get our headwind and if rates start to come down, then, you know, like I said, almost 60% of our beta is associated with index deposits on the commercial side. So they'll start to come down, and you start then having the loan and security repricing, the fixed maturity repricing, adding 200, 250 basis points. It overwhelms that headwind towards the back end of the year, and you get a little bit of loan growth in the back end. And all that helps you propel you to a much stronger fourth quarter finish than you have at the beginning of the year.

David J. Turner: Yeah, so I think all in, the big drivers there are controlling the deposit costs. We do have a headwind of the $3 billion notional for starting the swap in the first quarter, and then we're kind of in the running rate. The terminated swaps are in the amortization already, so those aren't the huge drivers. I think after we get our headwind and if rates start to come down, then, you know, like I said, almost 60% of our beta is associated with index deposits on the commercial side. So they'll start to come down, and you start then having the loan and security repricing, the fixed maturity repricing, adding 200, 250 basis points.

Speaker Change: I think all in the the big drivers are there are controlling the deposit costs. We do have the headwind of the $3 billion notional forward starting swap in the first quarter and then we're kind of in the run rate that the terminated.

Speaker Change: <unk> are in the amortization already that's those aren't huge drivers.

Speaker Change: I think after we get our headwind and if rates start to come down then like I said, almost 60% of our beta is associated with indexed deposits on the commercial side. So they will start to come down and you start then having.

David J. Turner: Okay, and just to confirm, no delays in the timing of that? Yeah, to answer your question specifically, that project is on time and on budget, no delay. Okay, okay. And then I just had to follow up on credit and, particularly, senior housing. I just wanted to get more details as far as your exposure there.

The loan and security repricing, the fixed maturity repricing, adding 200 250 basis points. It overwhelms that headwind towards the back end of the year and you get a little bit of loan growth in the back and all of that helps you propel you to a much stronger fourth quarter finished than you have at the beginning of the year.

David J. Turner: It overwhelms that headwind towards the back end of the year, and you get a little bit of loan growth in the back end. And all that helps propel you to a much stronger fourth quarter finish than you did at the beginning of the year. So I think if you really looked at what the one big thing that you have to get done, and it's controlling the deposit cost, and we do that through managing the beta as rates change, like I said, 55%, 60% of it indexed.

John M. Turner: And what are you thinking as far as ultimate loss content and protections from credit losses? Yeah, you know, we're seeing improvement in the senior housing space, notwithstanding the fact that we have a couple of credits we're carrying as non-performing. Generally, occupancy rates are improving over time.

Speaker Change: So I think if you really looked at what is the one big thing that you have to get done, and it's controlling the deposit cost, and we do that through managing the beta as rates change, like I said, 55%, 60% of it indexed. The other is decisioning we have to make, and that gets to be a little herky-jerky because, as I mentioned, some of that's money market that we can change pretty quickly. The other is CD, so we're locked in today, it's seven months. And as things renew this month, next month, and going forward, we're looking to be shorter rather than longer so that we are prepared to take advantage to reduce our deposit costs as rates come down.

Speaker Change: So I think if you really looked at what is the one big thing that you have to get done.

Speaker Change: Controlling the deposit cost and we do that through managing the beta as rates change.

Speaker Change: As I said 50, 560% of an index others Decisioning, we have to make.

David J. Turner: The other is decisioning we have to make, and that gets to be a little herky-jerky because, as I mentioned, some of that's the money market that we can change pretty quickly. The other is the CD, so we're locked in today; it's seven months. And as things renew this month, next month, and going forward, we're looking to be shorter rather than longer so that we are prepared to take advantage of reducing our deposit costs as rates come down.

John M. Turner: Today, we've got about $63 million in, I'm sorry, $57 million in. 118 million dollars in non-performing loans and reserves against those credits of about 3.7 percent, so I think we maybe provided information on slide 20 in your deck, but we are seeing improvement in senior housing as occupancy rates pick up and people become a little more comfortable with communal living again amongst that age group. Thanks for all the color. Our next question comes from the line of Erika Najarian with UBS. Please proceed with your question. Hi, good morning.

Speaker Change: And that gets to be a little herky-jerky, because as I mentioned.

Speaker Change: Some of that money market that we can change pretty quickly the other CD. So we're locked in today, it's seven months and as things.

Speaker Change: Renewed this month next month and going forward, we're looking to be shorter rather than longer.

Speaker Change: So that we are prepared to take advantage.

Speaker Change: To reduce our deposit costs as rates come down.

Speaker Change: and a follow-up to that you know you mentioned 55 to 60 percent of that down data will be coming from these index commercial deposits you know one of your peers made a differentiation between index and contractual yesterday and I guess just you know give us some sense of how much of that is contracted versus index and you know but really it sounds like you're confident that either way you can control that to the downside especially you know if as you said loan growth remains softened

David J. Turner: and a follow-up to that you know you mentioned 55 to 60 percent of that down data will be coming from these index commercial deposits you know one of your peers made a differentiation between index and contractual yesterday and I guess just you know give us some sense of how much of that is contracted versus index and you know but really it sounds like you're confident that either way you can control that to the downside especially you know if as you said loan growth remains softened

Speaker Change: And a follow up to that.

Speaker Change: <unk>, 55% to 60% of that Alberta coming from these index commercial deposits one of your peers made a differentiation between index and contractual yesterday.

Speaker Change: And I guess, just give us some sense of how.

Speaker Change: How much of that is contracted versus index.

David J. Turner: One follow up question, Dave, I think very notable what you said to Ryan's line of questioning the 3-6 exit rate for the net interest margin in the fourth quarter, you know, a lot of investors are now focused on that exit rate. So I'm just wondering if I could ask you sort of what the component pieces is, or are rather. So, unless you would change anything on the on the um in terms of adding swaps it seems like you do have 1.6 billion of notional rolling off in the fourth quarter so I guess that's a good guy um you also mentioned a terminated swap gain in your 10q um but you had like a forward look for four four quarters wondering what that could be for 4q24 and then more notably obviously you guys have said um unequivocally that it's a deposit um assumptions that's really going to make a difference I'm wondering sort of what the speed is that you're assuming on that 35 percent down down beta um you know especially if you think that the first rate cut I think you said was in May, Yeah, so I think all in, the big drivers there are controlling the deposit costs. We do have a headwind of the $3 billion notional for starting swap in the first quarter, and then we're kind of in the running rate. The terminated swaps are in the amortization already. Those aren't the huge drivers.

Speaker Change: But really it sounds like you're confident that either way you can control that to the downside, especially.

Speaker Change: I think that loan growth remained soft this year.

Speaker Change: Yeah, so when we say index, we're talking about it's tied to Fed funds. When Fed funds changes through the contract, it changes automatically.

David J. Turner: Yeah, so when we say index, we're talking about it being tied to Fed funds. When Fed funds change through the contract, it changes automatically. There's no, it's not a contractual number locked in like effectively a CD. It's the day, just like a loan that's based on SOFR. I mean, SOFR changes, so there's a loan rate that day. And so that's what we're talking about when we say indexed deposit.

Speaker Change: Yeah. So when we say index, we're talking about it's tied to fed funds is when fed funds changes through the contract it changes automatically theres no theres.

Speaker Change: There's no, it's not a contractual number locked in like effectively a CD. It's the day, just like a loan, that's based on SOFR. I mean, SOFR changes, so there's a loan rate that day. And so that's what we're talking about when we say indexed deposit.

Speaker Change: No it's not a contract rule number locked in like a effectively a CD.

The day just like.

Speaker Change: Alone this based on Sofa sofa changes. So there is a loan rate that day and so that's what we're talking about when we say indexed deposits.

Speaker Change: Okay, got it. Thank you.

David J. Turner: Okay, I got it. Thank you.

Speaker Change: Okay got it thank you.

Speaker Change: Thank you.

Unnamed Host: Thank you.

Speaker Change: Thank you.

Speaker Change: Thank you. Our final question comes from the line of Matt O'connor with Deutsche Bank. Please proceed with your question.

Speaker Change: Thank you. Our final question comes from the line of Matt O'Connor with Deutsche Bank. Please proceed with your question.

Unnamed Analyst: Thank you. Our final question comes from the line of Matt O'Connor with Deutsche Bank. Please proceed with your question. Good morning, Matt. Good morning. Any updated thoughts on potential regulatory changes to the debit card interchange rate or overdraft fees and thoughts about potential offsets to that?

Speaker Change: Good morning, Matt. Good morning. Any updated thoughts on potential regulatory changes to the debit card interchange rate or overdraft fees and thinking about potential offsets to that?

Matt Burnell: Good morning, Matt Good morning.

Matt Burnell: Okay.

So regulatory changes to the debit card interchange rate overdraft fees.

Matt Burnell: And thinking about potential offsets to that.

Matt Burnell: Well.

Matt Burnell: Well, so Debit Interchange are going through a discussion to adjust that down, as was written in the original law, they had to revisit the costs associated with Debit Interchange.

David J. Turner: Well, so Debit Interchange is going through a discussion to adjust that down, as was written in the original law; they have to revisit the costs associated with Debit Interchange. To the extent that does get put into place, that'll have a negative impact on us. I think that was going to be kicking in in June. So it's about a half year, and based on our numbers, that's about a $45 million risk item for us in our NIR. Relative to overdrafts, we're a long way from knowing where that comes from.

Matt Burnell: So debit and debit interchange going through discussion too.

Adjust that down as it was written in the original all they had to revisit the costs associated with debit interchange.

Matt Burnell: To the extent that does get put into place, that'll have a negative impact to us. I think that was going to be kicking in in June. So it's about a half a year, and based on our numbers, that's about a $45 million risk item to us in our NIR. Relative to the overdrafts, we're a long way from knowing where that comes out.

Matt Burnell: To the extent that does get put into place that will have a negative impact to us.

Matt Burnell: Starting I think that was going to be kicking in in June. So it's about a half a year and based on our numbers, that's about a $45 million risk item to us.

David J. Turner: I think after we get our headwind and if rates start to come down, then, you know, like I said, almost 60% of our beta is associated with index deposits on the commercial side. So they'll start to come down, and you start then having the loan and security repricing, the fixed maturity repricing, adding 200, 250 basis points. It overwhelms that headwind towards the back end of the year, and you get a little bit of loan growth in the back end. And all that helps propel you to a much stronger fourth quarter finish than you did at the beginning of the year.

Matt Burnell: And our NAR.

Matt Burnell: Relative to the overdrafts, we're a long way from knowing where that comes out.

Matt Burnell: If there are any changes and I think that's a 'twenty.

Matt Burnell: If there are any changes, and I think that's a 20. If there are any changes, and I think that's a 20.

David J. Turner: If there are any changes, I think that's a 20. If there are any changes, I think that's a 20.

Matt Burnell: 2025 date that was mentioned. That just hit the wire. I think there's going to be a lot of discussion on that because we're disappointed in that. We think provision of liquidity to our customer base is really, really important. We do charge a fee for that, but we're paying an item for somebody and charging a fee, and to the extent we return that item to wherever it was written or used,

David J. Turner: The 2025 date that was mentioned. That just hits the wire. I think there's going to be a lot of discussion on that because we're disappointed in that. We think the provision of liquidity to our customer base is really, really important. We do charge a fee for that, but we're paying for an item for somebody and charging a fee, and to the extent we return that item to wherever it was written or used, that entity is going to charge a fee. And so it isn't helpful not to be able to provide liquidity to our customer base. And so we're hoping there's going to be further discussion on that point. And I think it'd be premature to really talk about the impact of OD until we get further down the road.

Matt Burnell: 2025 date that was mentioned.

Matt Burnell: That just hit the wire I think theres going to be a lot of discussion on that because we are disappointed.

Matt Burnell: And that we think provision of liquidity to our customer base is really really important we do charge a fee for that but we're paying an item for somebody and charging a fee and to the extent, we return that item to wherever those written or to use that.

David J. Turner: So I think if you really looked at what the one big thing that you have to get done, and it's controlling the deposit cost, and we do that through managing the beta as rates change, like I said, 55%, 60% of it indexed. The other is the decisioning we have to make, and that gets to be a little herky-jerky because, as I mentioned, some of that's the money market that we can change pretty quickly. The other is a CD, so we're locked in today; it's seven months.

Matt Burnell: That entity is going to charge a fee.

Matt Burnell: <unk> entity is going to charge a fee.

Matt Burnell: And so it doesn't, it's not helpful to not be able to provide liquidity to our customer base. And so we're hoping there's going to be further discussion on that point. And I think it'd be premature to really talk about the impact of OD until we get further down the road.

Matt Burnell: And so it doesn't it's not helpful to not be able to provide liquidity to our customer base and so were hoping theres going to be further discussion on that point and I think it would be premature to really talk about the impact of <unk> until we get further down the road.

Matt Burnell: Yes.

Speaker Change: Okay, and then just separately, you know, good to see the elevated check fraud came down as you expected and the outlook kind of implies that you're confident that you're past this issue. I guess just want to reconfirm that and then also just any meaningful changes that you made to address it and whether it showed up in expenses or not.

John M. Turner: Okay, and then separately, you know, good to see the elevated check fraud came down as you expected, and the outlook kind of implies that you're confident that you're past this issue. I guess just want to reconfirm that and then also just any meaningful changes that you made to address it and whether it showed up in expenses or not.

Matt Burnell: Okay.

Matt Burnell: Good to see elevated stock fraud came down as expected and the outlook kind of implies.

Youre confident that you are positive.

David J. Turner: And as things renew this month, next month, and going forward, we're looking to be shorter rather than longer so that we are prepared to take advantage of reducing our deposit costs as rates come down. And a follow-up to that, you know, you mentioned 55 to 60% of that data will be coming from these index commercial deposits. You know, one of your peers made a differentiation between index and contractual yesterday, and I guess just give us some sense of how much of that is contract versus index. But really, it sounds like you're confident that either way you can control that to the downside, especially, you know, as you said, loan growth remains softest. Yeah, so when we say index, we're talking about it being tied to Fed funds. When Fed funds change through the contract, it changes automatically. There's no, it's not a contractual number locked in like, effectively, a CD.

Matt Burnell: I guess just wanted to confirm that and then also just any meaningful changes that you've made.

Matt Burnell: To address this and to weather.

Operating expenses level.

Speaker Change: I would just say that the countermeasures that we've put in place, which include talent, technology, process changes, all have been effective, and we believe going forward the run rate will be $20 to $25 million a quarter in operating losses, and the expenses associated with those countermeasures are embedded in our run rate and in our projection for expenses for 2024.

John M. Turner: I would just say that the countermeasures that we've put in place, which include talent, technology, and process changes, all have been effective, and we believe going forward the run rate will be $20 to $25 million a quarter in operating losses, and the expenses associated with those countermeasures are embedded in our run rate and in our projection for expenses for 2024. You know, we have to continue to be vigilant with regard to this, just like we are with cyber. So we have bad people attacking us, as does every financial institution, and we have to continue to stay ahead of them.

Matt Burnell: I would just say that the countermeasures countermeasures that we've put in place which include talent technology process changes all have been effective and we believe going forward the run rate will be $20 million to $25 million a quarter in operating losses, and the expenses associated with those countermeasures Orenburg.

Matt Burnell: And our run rate and in our projection for expenses for 2024.

Speaker Change: You know, we got to continue to be vigilant with regards to this, just like we are with cyber. So we have bad people attacking us, as does every financial institution, and we have to continue to stay ahead of it. We feel good about what we put in place, but we are not sitting idle. We're continuing to push and challenge ourselves to get even better than we are today.

Matt Burnell: Yes.

Matt Burnell: We got to continue to be vigilant with regards to this just like we are with cyber. So we have bad people attacking us as does every every financial institution and we have to continue to stay ahead of it and we feel good about what we put in place, but we are not sitting idle, we're continuing to push and challenge ourselves to get even better than we are today.

John M. Turner: We feel good about what we put in place, but we are not sitting idle. We're continuing to push and challenge ourselves to get even better than we are today.

Speaker Change: Okay, perfect. That's helpful. Thank you.

Unnamed Analyst: Okay, perfect. That's helpful. Thank you.

Okay perfect. That's helpful. Thank you.

Speaker Change: Thank you.

Unnamed Host: Thank you.

Speaker Change: Thank you.

Speaker Change: Okay, operator, is that the end of the calls?

Operator: Okay, operator, is that the end of the calls?

Speaker Change: Okay operators at the end of the calls.

Speaker Change: Yes, I would now like to turn the floor back over to you for closing comments. Okay, well thank you very much. Appreciate everybody's participation today and interest in our company.

John M. Turner: Yes, I would now like to turn the floor back over to you for closing comments. Okay, well, thank you very much. I appreciate everybody's participation today and interest in our company.

Yes, I would now like to turn the floor back over to you for closing comments, okay. Well. Thank you very much appreciate everybody's participation today and interest in our company.

David J. Turner: It's the day, just like a loan that's based on SOFR. I mean, SOFR changes, so there's a loan rate that day. And so that's what we're talking about when we say indexed deposit. Okay.

Speaker Change: Have a good weekend.

Unnamed Host: Have a good weekend!

Speaker Change: Have a good weekend.

Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time.

Operator: This concludes today's teleconference. You may disconnect your lines at this time.

Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time.

Speaker Change: Thanks for watching!

Unnamed Analyst: Thanks for watching!

Speaker Change: Okay.

David J. Turner: Thank you. Thank you. Thank you. Our final question comes from the line of Matt O'Connor with Deutsche Bank. Please proceed with your question. Good morning, Matt. Good morning.

David J. Turner: Any updated thoughts on potential regulatory changes to the debit card interchange rate or overdraft fees and thinking about potential offsets to that? Well, so Debit Interchange is going through a discussion to adjust that down, as was written in the original law; they had to revisit the costs associated with Debit Interchange. To the extent that that does get put into place, that'll have a negative impact on us. I think that was going to be kicking in in June.

David J. Turner: So it's about a half year, and based on our numbers, that's about a $45 million risk item to us in our NIR. Relative to the overdrafts, we're a long way from knowing where that comes out. If there are any changes, and I think that's a 20. 2025 date that was mentioned. That just hit the wire.

David J. Turner: I think there's going to be a lot of discussion on that because we're disappointed in that. We think the provision of liquidity to our customer base is really, really important. We do charge a fee for that, but we're paying for an item for somebody and charging a fee, and to the extent we return that item to wherever it was written or used, that entity is going to charge a fee.

David J. Turner: And so it doesn't, it's not helpful to not be able to provide liquidity to our customer base. And so we're hoping there's going to be further discussion on that point. And I think it'd be premature to really talk about the impact of OD until we get further down the road.

David J. Turner: Okay, and then separately, you know, good to see the elevated check fraud came down as you expected, and the outlook kind of implies that you're confident that you're past this issue. I guess just want to reconfirm that and then also just any meaningful changes that you made to address it and whether it showed up in expenses or not. I would just say that the countermeasures that we've put in place, which include talent, technology, and process changes, all have been effective, and we believe going forward the run rate will be $20 to $25 million a quarter in operating losses, and the expenses associated with those countermeasures are embedded in our run rate and in our projection for expenses for 2024. You know, we have to continue to be vigilant with regard to this, just like we are with cyber. So we have bad people attacking us, as does every financial institution, and we have to continue to stay ahead of them. We feel good about what we have put in place, but we are not sitting idle. We're continuing to push and challenge ourselves to get even better than we are today.

David J. Turner: Okay, perfect. That's helpful. Thank you. Thank you. Okay, operator, is that the end of the calls? Yes, I would now like to turn the floor back over to you for closing comments. Okay, well, thank you very much. I appreciate everybody's participation today and interest in our company. Have a good weekend. This concludes today's teleconference. You may disconnect your lines at this time. Thanks for watching!