Q4 2023 Fifth Third Bancorp Earnings Call

January 19, 2024

Hello and welcome to the Q4 2023 Fifth Third Bancorp Earnings Conference call. All lines have been placed on mute to prevent any background noise.

Hello, and welcome to the Q4 2023 Fifth Third Bancorp Earnings Conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star 1 on your telephone keypad. If you would like to withdraw your question again, press the star 1. I'll now turn the conference over to Matt Kiro, Director of Investor Relations. Please go ahead.

Hello, and welcome to the Q4 2023 fifth third Bancorp earnings Conference call. All lines have been placed on mute to prevent any background noise.

After the speaker's remarks, there will be a question and answer session.

After the Speakers' remarks, there will be a question and answer session.

If you would like to ask a question during this time, simply press star 1 on your telephone keypad.

If you'd like to ask a question. During this time simply press star one on your telephone keypad if.

If you would like to withdraw your question again, press the star 1. I'll now turn the conference over to Matt Kiro, Director of Investor Relations. Please go ahead.

If you would like to withdraw your question again press the star one.

The conference over to Matt Giraud Director of Investor Relations. Please go ahead.

Okay.

Matt Burnell: Good morning, everyone, and welcome to the Fifth Third's Fourth Quarter 2023 Earnings Call. This morning, our Chairman, President, and CEO, Tim Spence, and CFO, Brian Preston, will provide an overview of our Fourth Quarter results and outlook.

Matt Burnell: Good morning, everyone, and welcome to Fifth Third's Fourth Quarter 2023 Earnings Call. This morning, our Chairman, President, and CEO, Tim Spence, and CFO, Brian Preston, will provide an overview of our fourth quarter results and outlook. Our Chief Operating Officer, Jamie Leonard, and Chief Credit Officer, Greg Schreck, have also joined for the Q&A portion of the call. Please review the cautionary statements in our materials, which can be found in our earnings release and presentation. These materials contain information regarding the use of non-GAAP measures and reconciliations to the GAAP results, as well as forward-looking statements about Fifth Third's performance. These statements speak only as of January 19, 2024, and Fifth Third undertakes no obligation to update them.

Matt Burnell: Good morning, everyone and welcome to the fifth third and fourth quarter 2023 earnings call. This morning are chairman, President and CEO, Tim Spence and CFO, Brian Preston will provide an overview of our fourth quarter results and outlook are chief operating officer, Jamie Leonard Chief Credit Officer, Greg Shrek have also joined for the Q&A portion of the call.

Matt Burnell: Our Chief Operating Officer, Jamie Leonard, and Chief Credit Officer, Greg Schreck have also joined for the Q&A portion of the call.

Matt Burnell: Please review the cautionary statements in our materials, which can be found in our earnings release and presentation.

Matt Burnell: Please review the cautionary statements in our materials, which can be found in our earnings release and presentation. These materials contain information regarding the use of non-GAAP measures and reconciliations to the GAAP results as well as forward looking statements about fifth Third's performance. These statements speak only as of January 19, 2024, and fifth third.

Matt Burnell: These materials contain information regarding the use of non-GAAP measures and reconciliations to the GAAP results, as well as forward-looking statements about Fifth Third's performance. These statements speak only as of January 19, 2024, and Fifth Third undertakes no obligation to update them.

Matt Burnell: Following prepared remarks by Tim and Brian, we will open up the call for questions. With that, I will turn it over to Tim.

Matt Burnell: <unk> undertakes no obligation to update them.

Matt Burnell: Following prepared remarks by Tim and Brian, we will open up the call for questions.

Matt Burnell: Following prepared remarks by Tim and Brian We will open up the call for questions.

Matt Burnell: With that, let me turn it over to Tim.

Matt Burnell: Let me turn it over to Tim.

Tim Spence: Thanks Matt, and good morning everyone.

Tim Spence: Thanks Matt, and good morning everyone. At Fifth Third, we believe that great banks distinguish themselves based on how they navigate challenging and uncertain operating environments.

Tim Spence: Thanks, Matt and good morning, everyone.

Tim Spence: At Fifth Third, we believe that great banks distinguish themselves based on how they navigate challenging and uncertain operating environments.

Tim Spence: Fifth third we believe the great banks distinguished themselves based on how they navigate challenging and uncertain operating environment two.

Tim Spence: 2023 was certainly a challenging year for the industry, but I am very pleased with how we measured up.

Tim Spence: 2023 was certainly a challenging year for the industry, but I am very pleased with how we measured up. Our defensive balance sheet positioning, strong execution, and multi-year strategic investments produced top quartile profitability, the best core deposit growth, and the best total shareholder return among all regional peers who did not participate in an FDIC-assisted transaction. We generated an all-time record full-year revenue of $8.7 billion, and deposits grew 5% compared to an industry-wide decline of 3%. Credit performance was strong, with net charge-offs remaining below historical averages, and, although it would be foolish to expect it to repeat forever, in commercial real estate, we experienced zero net charge-offs in 2023 and only two basis points of delinquent loans as of early January.

Tim Spence: <unk> 2023 was certainly a challenging year for the industry and I am very pleased with how we measure that.

Tim Spence: Our defensive balance sheet positioning, strong execution, and multi-year strategic investments produce top quartile profitability, the best core deposit growth, and the best total shareholder return among all regional peers who did not participate in an FDIC-assisted transaction.

Tim Spence: A defensive balance sheet positioning strong execution and multi year strategic investments produce top quartile profitability.

Tim Spence: Core deposit growth and the best total shareholder return among all regional peers, who did not participate in an FDIC assisted transaction.

Tim Spence: We generated an all-time record full-year revenue of $8.7 billion.

Tim Spence: We generated an all time record full year revenue of $8 7 billion.

Tim Spence: Deposits grew 5% compared to an industry-wide decline of 3%.

Tim Spence: Deposits grew 5% compared to an industry wide decline of 3%.

Tim Spence: Credit performance was strong with net charge-offs remaining below historical averages and, although it would be foolish to expect it to repeat forever, in commercial real estate we experienced zero net charge-offs in 2023 and only two basis points of delinquent loans as of early January.

Tim Spence: Credit performance was strong with net charge offs remaining below historical averages and although it would be foolish to expect it to repeat forever and commercial real estate, we experienced zero net charge offs in 2023, and only two basis points in delinquent loans as of early January.

Tim Spence: These strong outcomes, combined with our multi-year expense discipline, produced a full-year adjusted return on assets of 1.25%, an adjusted return on tangible common equity, XAOCI, of 15.9%, and an adjusted efficiency ratio of 55.9%, all among the best of our peers. We also continue to take market share organically by growing our customer base and deepening relationships. We grew consumer households by 3% overall, punctuated by 6% growth in the southeast. In commercial, we added a record number of new quality middle market relationships, up to 11% over the prior year. As a result, we grew or maintained our deposit market share position in all 40 of our largest MSAs.

Tim Spence: These strong outcomes combined with our multiyear expense discipline produced a full year adjusted return on assets of 125% and adjusted return on tangible common equity ex Aoc all of 15, 9% and an adjusted efficiency ratio of 55, 9% all among the <unk>.

Tim Spence: All among the best of our peers.

Tim Spence: Best of our peers.

Tim Spence: We also continue to take market share organically by growing our customer base and deepening relationships.

Tim Spence: We also continued to take market share organically by growing our customer base and deepening relationships.

Tim Spence: We grew consumer households by 3% overall, punctuated by 6% growth in the southeast.

Tim Spence: We grew consumer households by 3% overall punctuated by 6% growth in the southeast.

Tim Spence: In commercial, we added a record number of new quality middle market relationships up to 11% over the prior year. As a result, we grew or maintained our deposit market share position in all 40 of our largest MSAs.

Tim Spence: In commercial we added a record number of new quality middle market relationships up 11% over the prior year.

Tim Spence: As a result, we grew or maintained our deposit market share position in all 40 of our largest msas.

Tim Spence: As we turn the page to 2024, we remain focused on differentiating Fifth Third based on the strength and consistency of our financial performance by prioritizing stability, profitability, and growth in that order.

Tim Spence: As we turn the page to 2024, we remain focused on differentiating based on the strength and consistency of our financial performance by prioritizing stability profitability and growth in that order.

Operator: Hello, and welcome to the Q4 2023 Fifth Third Bancorp Earnings Conference call. All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star 1 on your telephone keypad. If you would like to withdraw your question again, press star 0. I'll now turn the conference over to Matt Kiro, Director of Investor Relations. Please go ahead.

Speaker Change: Brian will take you through the detail on the fourth quarter and our outlook for the year shortly, but before that, I would like to touch on a few points.

Speaker Change: Brian will take you through the detail on the fourth quarter and our outlook for the year shortly, but before that, I would like to touch on a few points. The first of these is the strength of our balance.

Tim Spence: Brian will take you through the detail on the fourth quarter on our outlook for the year shortly but before that I would like to touch on a few points.

Speaker Change: The first of these is the strength of our balance.

Tim Spence: First of these is the strength of our balance sheet.

Speaker Change: Our defensive positioning and decision to move quickly to adapt to proposed regulatory changes have put us in a position to play offense in 2024.

Speaker Change: Our defensive positioning and decision to move quickly to adapt to proposed regulatory changes have put us in a position to play offense in 2024. Having achieved full Category 1 LCR compliance on August 31st and maintained it since, our liquidity position is very strong. We completed our RWA diet in the fourth quarter, and it created nearly 50 basis points of CET1, putting us on pace to reach a 10.5% CET1 ratio by mid-year 2024. Given our strong earnings profile and the significant rally in interest rates in December, our tangible book value per share grew nearly 30% during the fourth quarter.

Tim Spence: Offensive positioning and decision to move quickly to adapt to proposed regulatory changes have put us in a position to play offense in 2024.

Speaker Change: Having achieved full Category 1 LCR compliance on August 31st and maintained it since, our liquidity position is very strong.

Tim Spence: Having achieved full category one LCR compliance on August 31, and maintained it since our liquidity position is very strong.

Speaker Change: We completed our RWA diet in the fourth quarter, and it created nearly 50 basis points of CET1, putting us on pace to reach a 10.5% CET1 ratio by mid-year 2024.

Tim Spence: We completed our <unk> diet in the fourth quarter and accreted nearly 50 basis points of CET, one putting us on pace to reach a 10, 5% CET one ratio by midyear 2024.

Speaker Change: Given our strong earnings profile and the significant rally in interest rates in December, our tangible book value per share grew nearly 30% during the fourth quarter.

Tim Spence: Given our strong earnings profile and the significant rally in interest rates in December our tangible book value per share grew nearly 30% during the fourth quarter.

Speaker Change: At the beginning of January, we moved $12.6 billion of securities to held in maturity, representing roughly one quarter of our AFF portfolio. We expect this move will de-risk potential AOCI volatility to capital by about 30% in the event that market rates rise again. If the economic outlook remains stable and the capital rules are finalized, no worse than the current NPR, these actions put us in a position to resume share repurchases of up to $300 to $400 million in the second half of 2024, including $100 to $200 million as early as the beginning of the third quarter.

Speaker Change: At the beginning of January, we moved $12.6 billion of securities to held in maturity, representing roughly one quarter of our AFF portfolio.

Tim Spence: At the beginning of January we moved 12 $6 billion of securities to held to maturity, representing roughly one quarter of our <unk> portfolio.

Speaker Change: We expect this move will de-risk potential AOCI volatility to capital by about 30% in the event that market rates rise again.

Tim Spence: We expect this move will derisk potential LCI volatility the capital by about 30% in the event that market rates rise again.

Tim Spence: At Fifth Third, we believe that great banks distinguish themselves based on how they navigate challenging and uncertain operating environments. 2023 was certainly a challenging year for the industry, but I am very pleased with how we measured up. Our defensive balance sheet positioning, strong execution, and multi-year strategic investments produce top quartile profitability, the best core deposit growth, and the best total shareholder return among all regional peers who did not participate in an FDIC-assisted transaction. We generated an all-time record full-year revenue of $8.7 billion.

Speaker Change: If the economic outlook remains stable and the capital rules are finalized, no worse than the current NPR, these actions put us in a position to resume share repurchases of up to $300 to $400 million in the second half of 2024, including $100 to $200 million as early as the beginning of the third quarter.

Tim Spence: If the economic outlook remains stable and the capital rules are finalized no worse than the current NPR. These actions put us in a position to resume share repurchases of up to $300 million to $400 million in the second half of 2024, including $100 million to $200 million as early as the beginning of the third quarter.

Tim Spence: Should the final rules prove less stringent than the initial proposals will have additional flexibility in deploying excess capital and liquidity to further improve profitability and position fifth third for growth.

Speaker Change: Should the final rules prove less stringent than the initial proposals, we'll have additional flexibility in deploying excess capital and liquidity to further improve profitability and position Fifth Third for growth. The second point I'd like to highlight is profitability. Expense discipline, strong returns, and positive operating leverage remain core areas of focus for Fifth Third.

Speaker Change: The second point I'd like to highlight is profitability.

Tim Spence: The second point I would like to highlight is profitability expense discipline strong returns and positive operating leverage remain core areas of focus for fifth third.

Speaker Change: Expense discipline, strong returns, and positive operating leverage remain core areas of focus for Fifth Third.

Tim Spence: Deposits grew 5% compared to an industry-wide decline of 3%. Credit performance was strong, with net charge-offs remaining below historical averages, and, although it would be foolish to expect it to repeat forever, in commercial real estate, we experienced zero net charge-offs in 2023 and only two basis points of delinquent loans as of early January. These strong outcomes, combined with our multi-year expense discipline, produced a full-year adjusted return on assets of 1.25%, an adjusted return on tangible common equity, XAOCI, of 15.9%, and an adjusted efficiency ratio of 55.9%, all among the best of our peers.

Tim Spence: Supported by our technology modernization investments and a focus on leaning out key value streams, we reduced full time equivalent employee head count by 4% from our peak in 2023 to the end of the year without the need for a companywide expense program.

Speaker Change: Supported by our technology modernization investments and a focus on leaning out key value streams, we reduced full-time equivalent employee headcount by 4% from our peak in 2023 to the end of the year without the need for a company-wide expense program. The run rate benefits of these efforts put us in a position to sustain the peer-leading annualized expense growth that we have averaged the past several years, even as we continue to invest for growth.

Speaker Change: The run rate benefits of these efforts put us in a position to sustain the peer-leading annualized expense growth that we have averaged the past several years, even as we continue to invest for growth.

The run rate benefits of these efforts put us in a position to sustain the peer leading annualized expense growth that we have averaged the past several years, even as we continue to invest for growth.

Speaker Change: While the carryover effect of the RWA diet makes it unfeasible for the full year, we do anticipate returning to positive operating leverage in the second half of 2024.

Tim Spence: While the carryover effect of the <unk> diet makes it unfeasible for the full year, we do anticipate returning to positive operating leverage in the second half of 2024.

Speaker Change: The third point I'd like to highlight is about growth. Our strategies have been consistent, building out our southeast markets, producing a strong feed-to-total revenue mix, and leveraging software that differentiates our product offerings and improves productivity. These are multi-year investments that cannot be replicated easily by competitors through one to two years of hiring, a few new branches, or small token acquisition. In 2023, we opened 37 new branches concentrated in the southeast, bringing us to 107 branches opened over the past five years. We plan to open another 31 branches in the Southeast in 2024. As a portfolio, these branches have continued to outperform our expectations for both household acquisition and deposit growth and should provide a tailwind for several years.

Tim Spence: We also continue to take market share organically by growing our customer base and deepening relationships. We grew consumer households by 3% overall, punctuated by 6% growth in the southeast. In commercial, we added a record number of new quality middle market relationships, up to 11% over the prior year. As a result, we grew or maintained our deposit market share position in all 40 of our largest MSAs. As we turn the page to 2024, we remain focused on differentiating Fifth Third based on the strength and consistency of our financial performance by prioritizing stability, profitability, and growth in that order. Brian will take you through the detail on the fourth quarter and our outlook for the year shortly, but before that, I would like to touch on a few points. The first of these is the strength of our balance.

Tim Spence: The third point I would like to highlight is about growth our strategies have been consistent building out our southeast markets producing a strong fees to total revenue mix and leveraging software that differentiates our product offerings and improves productivity.

Speaker Change: These are multi-year investments that cannot be replicated easily by competitors through one to two years of hiring, a few new branches, or small token acquisition.

Tim Spence: These are multiyear investments that cannot be replicated easily by competitors to one to two years of hiring a few new branches or small tuck in acquisitions.

Speaker Change: In 2023, we opened 37 new branches concentrated in the southeast, bringing us to 107 opened over the past five years.

Tim Spence: 'twenty three we opened 37, new branches concentrated in the southeast, bringing us to 107 opened over the past five years.

Speaker Change: We plan to open another 31 branches in the Southeast in 2024.

Tim Spence: We plan to open another 31 branches in the southeast in 2024.

Speaker Change: As a portfolio, these branches have continued to outperform our expectations on both household acquisition and deposit growth and should provide a tailwind for several years forward.

Tim Spence: As the portfolio. These branches have continued to outperform our expectations on both household acquisition and deposit growth and should provide a tailwind for several years forward.

Speaker Change: We also continue to invest in treasury management, wealth and asset management, and capital markets. All three of these businesses grew for us in 2023, and we expect mid to high single-digit growth in each in 2024. In treasury management, our acquisitions of Rise and Big Data Healthcare and the launch of New Line, our embedded payments business, should continue to support peer-leading performance.

Speaker Change: We also continue to invest in treasury management, wealth and asset management, and capital markets.

Tim Spence: We also continue to invest in Treasury management wealth and asset management and capital markets.

Tim Spence: Our defensive positioning and decision to move quickly to adapt to proposed regulatory changes have put us in a position to play offense in 2024. Having achieved full Category 1 LCR compliance on August 31st and maintained it since, our liquidity position is very strong. We completed our RWA diet in the fourth quarter, and it created nearly 50 basis points of CET1, putting us on pace to reach a 10.5% CET1 ratio by mid-year 2024. Given our strong earnings profile and the significant rally in interest rates in December, our tangible book value per share grew nearly 30% during the fourth quarter. At the beginning of January, we moved $12.6 billion of securities to held for maturity, representing roughly one quarter of our AFF portfolio.

Speaker Change: All three of these businesses grew for us in 2023 and we expect mid to high single digit growth in each in 2024.

Tim Spence: All three of these businesses grew for us in 2023, and we expect mid to high single digit growth in each in 2024.

Speaker Change: In treasury management, our acquisitions of Rise and Big Data Healthcare and the launch of New Line, our embedded payments business, should continue to support peer-leading performance.

Tim Spence: Treasury management, our acquisitions of rise in big data healthcare and the launch of New line are embedded payments business should continue to support peer leading performance.

Speaker Change: In Wealth and Asset Management, Global Finance recently named our private bank as best U.S. regional private bank for the fifth consecutive year and best private bank for entrepreneurs globally for the first time.

Speaker Change: In Wealth and Asset Management, Global Finance recently named our private bank the best U.S. regional private bank for the fifth consecutive year and the best private bank for entrepreneurs globally for the first time. In our capital markets business, we have seen more robust activity levels to start the year, including an M&A pipeline that is one and a half times the full-year revenue target embedded in our guidance. Overall, we expect 2024 to be a solid year of improving revenue trends and continued expense. Given what we believe to be a less certain outlook than the markets would imply, we are positioned to perform well under a range of economic and interest rate scenarios.

Tim Spence: In wealth and asset management Global Finance recently named our private bank as Best U S Regional private bank for the fifth consecutive year and best private bank for entrepreneurs globally for the first time.

Speaker Change: In our capital markets business, we have seen more robust activity levels to start the year, including an M&A pipeline that is one and a half times the full-year revenue target embedded in our guidance.

In our capital markets business, we have seen more robust activity levels to start the year, including an M&A pipeline that is one five times the full year revenue target embedded in our guidance.

Tim Spence: We expect this move will de-risk potential AOCI volatility to capital by about 30% in the event that market rates rise again. If the economic outlook remains stable and the capital rules are finalized, no worse than the current NPR, these actions put us in a position to resume share repurchases of up to $300 to $400 million in the second half of 2024, including $100 to $200 million as early as the beginning of the third quarter. Should the final rules prove less stringent than the initial proposals, we'll have additional flexibility in deploying excess capital and liquidity to further improve profitability and position Fifth Third for growth. The second point I'd like to highlight is profitability.

Speaker Change: Overall, we expect 2024 to be a solid year of improving revenue trends and continued expense

Tim Spence: Overall, we expect 2024 to be a solid year of improving revenue trends and continued expense discipline, given what we believe to be a less certain outlook. Then the markets would imply we are positioned to perform well under a range of economic and interest rate scenarios.

Speaker Change: Given what we believe to be a less certain outlook than the markets would imply, we are positioned to perform well under a range of economic and interest rate scenarios.

Speaker Change: Before I hand it over to Brian, I want to say thank you to our employees for hustling to deliver great results in 2023 and for the job you do every day to take care of our customers and community.

Tim Spence: Before I hand, it over to Brian I want to say, thank you to our employees for hustling to deliver great results in 2023 and for the job you do every day to take care of our customers and communities.

Brian Preston: You make our company the special place.

Brian Preston: You make our company a special place.

Brian Preston: We make our company a special place it is.

Brian Preston: That, I'm going to turn it over to Brian to provide additional details on our fourth quarter results and our current outlook for 2024.

Brian Preston: I'm going to turn it over to Brian to provide additional details on our fourth quarter results and our current outlook for 2024. Thanks, Tim, and thank you to everyone joining us today.

Brian Preston: I'll now turn it over to Bryan to provide additional details on our fourth quarter results and our current outlook for 2024.

Brian Preston: Thanks, Tim, and thank you to everyone joining us today.

Bryan: Thanks, Tim and thank you to everyone joining us today.

Brian Preston: 2023 was a very different year than what we were expecting 12 months.

Brian Preston: 2023 was a very different year than what we were expecting in the next 12 months. For fifth third, our success in outperforming this year was driven by our intentional actions to create and maintain flexibility to navigate uncertainty. As we enter 2024, we are very pleased with the results from 2023 and how we continue to be well positioned for a wide range of economic outcomes. We have optionality in our balance sheet and diversification in our business mix that will allow us to adapt to changing environments.

Bryan: 2023 was a very different year than what we were expecting 12 months ago for fifth third our success in outperforming this year was driven by our intentional actions to create and maintain flexibility for navigating uncertainty.

Tim Spence: Expense discipline, strong returns, and positive operating leverage remain core areas of focus for Fifth Third. Supported by our technology modernization investments and a focus on leaning out key value streams, we reduced full-time equivalent employee headcount by 4% from our peak in 2023 to the end of the year without the need for a company-wide expense program. The run rate benefits of these efforts put us in a position to sustain the peer-leading annualized expense growth that we have averaged the past several years, even as we continue to invest for growth. While the carryover effect of the RWA diet makes it unfeasible for the full year, we do anticipate returning to positive operating leverage in the second half of 2024. The third point I'd like to highlight is about growth. Our strategies have been consistent, building out our southeast markets, producing a strong feed-to-total revenue mix, and leveraging software that differentiates our product offerings and improves productivity. These are multi-year investments that cannot be replicated easily by competitors through one to two years of hiring, a few new branches, or small token acquisitions.

Brian Preston: For fifth third, our success in outperforming this year was driven by our intentional actions to create and maintain flexibility for navigating uncertainty.

Brian Preston: As we enter 2024, we are very pleased with the results from 2023 and how we continue to be well positioned for a wide range of economic outcomes.

Bryan: As we enter 2024, we are very pleased with the results from 2023, and how we continue to be well positioned for a wide range of economic outcomes.

Brian Preston: We have optionality in our balance sheet and diversification in our business mix that will allow us to adapt to changing environments.

Bryan: We have optionality on our balance sheet and diversification of our business mix that will allow us to adapt to changing environments.

Speaker Change: As Tim mentioned, achieving this positioning requires discipline and years of deliberate investment.

Speaker Change: As Tim mentioned, achieving this positioning requires discipline and years of deliberate investment. Our full-year financial performance in 2023 will benefit from this long-term investment.

Speaker Change: Tim mentioned, achieving this positioning requires discipline and years of deliberate investments.

Speaker Change: Our full-year financial performance in 2023 benefited from this long-term investment.

Speaker Change: Our full year financial performance in 2023 benefitted from this long term investment fifth third delivered industry, leading deposit growth of 5% record revenue of $8 7 billion.

Speaker Change: Fifth Third delivered industry-leading deposit growth of 5%, record revenue of $8.7 billion, and 100 basis points of capital accretion during the year, all while maintaining expense and We delivered another solid quarter to end the year. Adjusting for the FDIC special assessment and the other discrete items listed on page 2 of our release, return on assets was 1.3%, ROTCE was 17%, and our efficiency ratio was 55%. Additionally, we completed our risk-weighted asset diet in the fourth quarter, which reduced RWA by 3%, which was a little more than we previously estimated. The diet, combined with our strong earnings, led to a nearly 50 basis point increase in CDT1 during the quarter, which ended at 10.3%.

Speaker Change: And the 100 basis points of capital accretion during the year, all while maintaining expense and credit discipline.

Speaker Change: We delivered another solid quarter to end the year. Adjusting for the FDIC special assessment and the other discrete items listed on page 2 of our release, return on assets was 1.3%, ROTCE was 17%, and our efficiency ratio was 55%.

Speaker Change: We delivered another solid quarter to end the year adjusting for the FDIC special assessment and the other discrete items listed on page two of our release.

Speaker Change: Turn on assets was one 3%, our OTC was 17% and our <unk>.

Speaker Change: <unk> ratio was 55%.

Tim Spence: In 2023, we opened 37 new branches concentrated in the southeast, bringing us to 107 opened over the past five years. We plan to open another 31 branches in the southeast in 2024. As a portfolio, these branches have continued to outperform our expectations on both household acquisition and deposit growth and should provide a tailwind for several years. We also continue to invest in treasury management, wealth and asset management, and capital markets. All three of these businesses grew for us in 2023, and we expect mid to high single-digit growth in each in 2024. In Treasury Management, our acquisitions of RISE and Big Data Healthcare and the launch of NewLine, our embedded payments business, should continue to support peer-leading performance. In Wealth and Asset Management, Global Finance recently named our private bank the best U.S. regional private bank for the fifth consecutive year and the best private bank for entrepreneurs globally for the first time.

Speaker Change: Additionally, we completed our risk-weighted asset diet in the fourth quarter, which reduced RWA by 3%, which was a little more than we previously estimated.

Speaker Change: Additionally, we completed our risk weighted asset diet in the fourth quarter, which reduced <unk> by 3%, which was a little more than we previously estimated.

Speaker Change: The diet, combined with our strong earnings, led to a nearly 50 basis point increase in CDT1 during the quarter, which ended at 10.3%.

Speaker Change: The diet combined with our strong earnings led to a nearly 50 basis points increase in CET, one during the quarter, which ended at 10, 3%.

Speaker Change: This capital accretion, combined with the rally in market rates during the fourth quarter, resulted in a pro forma CDT-1 ratio, including the AOCI impact from unrealized losses on AFS securities, increasing to 7.7% at year end, well above the 7% minimum. Net interest income for the quarter was $1.4 billion, which was consistent with our expectations. While NII continues to be impacted by the increasing cost of deposits due to higher market interest rates,

Speaker Change: This capital accretion combined with the rally in market rates during the fourth quarter resulted in a pro forma CET, one ratio, including the OCI impact from unrealized losses on <unk> securities increasing to seven 7% at year end, well above the 7% minimum.

Speaker Change: Net interest income for the quarter was $1.4 billion.

Speaker Change: Net interest income for the quarter was $1 4 billion.

Speaker Change: which was consistent with our expectations.

Speaker Change: We've been able to build a robust liquidity position by generating peer-leading core deposit growth.

Speaker Change: This was consistent with our expectations, while NII continues to be impacted by the increasing cost of deposits due to higher market interest rates, we have been able to build a robust liquidity position by generating peer leading core deposit growth.

Speaker Change: While NII continues to be impacted by the increasing cost of deposits due to higher market interest,

Speaker Change: We've been able to build a robust liquidity position by generating peer-leading core deposit growth.

Speaker Change: Our core interest-bearing deposit costs increased 24 basis points sequentially, reflecting a cycle-to-date interest-bearing core deposit beta of 54% in the fourth quarter.

Speaker Change: Our core interest-bearing deposit costs increased 24 basis points sequentially, reflecting a cycle-to-date interest-bearing core deposit beta of 54% in the fourth quarter. We believe maintaining significant liquidity on the balance sheet is a prudent decision given the uncertain economic and regulatory environment. Our short-term investments, which are primarily comprised of our cash at the Fed, increased $8.6 billion in the fourth quarter on an average basis and drove all of the 13 basis points sequential decrease in net.

Speaker Change: Our core interest bearing deposit costs increased 24 basis points sequentially, reflecting a cycle to date interest bearing core deposit beta of 54% in the fourth quarter.

Tim Spence: In our capital markets business, we have seen more robust activity levels to start the year, including an M&A pipeline that is one and a half times the full-year revenue target embedded in our guidance. Overall, we expect 2024 to be a solid year of improving revenue trends and continued expense. Given what we believe to be a less certain outlook than the markets would imply, we are positioned to perform well under a range of economic and interest rate scenarios. Before I hand it over to Brian, I want to say thank you to our employees for hustling to deliver great results in 2023 and for the job you do every day to take care of our customers and community. You make our company a special place.

Speaker Change: We believe maintaining significant liquidity on balance sheet is a prudent decision given the uncertain economic and regulatory environment.

Speaker Change: We believe maintaining significant liquidity on balance sheet is a prudent decision given the uncertain economic and regulatory environments are short term investments, which are primarily comprised of our cash at the fed increased $8 6 billion in the fourth quarter on an average basis and drove all of the 13 basis points sequentially.

Speaker Change: Our short-term investments, which are primarily comprised of our cash at the Fed, increased $8.6 billion in the fourth quarter on an average basis and drove all of the 13 basis points sequential decrease in net.

Speaker Change: Excluding the impacts of securities gains losses and the Visa Total Return Swap, adjusted non-interest income increased 3% sequentially due to the growth in commercial banking, mortgage, wealth, and card and processing revenue, as well as the normal fourth-quarter impact of the CRA. The growth in commercial banking fees was driven by strong institutional brokerage and improved corporate bonds.

Speaker Change: Decrease in NIM excluding.

Speaker Change: Excluding the impact from securities gains losses, and the visa total return swap adjusted noninterest income increased 3% sequentially due to the growth in commercial banking mortgage wealth and card and processing revenues as well as the normal fourth quarter impact of the TRA.

Speaker Change: as well as the normal fourth quarter impact of the CRA.

Tim Spence: I'm going to turn it over to Brian to provide additional details on our fourth quarter results and our current outlook for 2024. Thanks, Tim, and thank you to everyone joining us today. 2023 was a very different year than what we were expecting in the next 12 months. For fifth-third, our success in outperforming this year was driven by our intentional actions to create and maintain flexibility for navigating uncertainty. As we enter 2024, we are very pleased with the results from 2023 and how we continue to be well positioned for a wide range of economic outcomes. We have optionality in our balance sheet and diversification in our business mix that will allow us to adapt to changing environments. As Tim mentioned, achieving this position requires discipline and years of deliberate investment.

Speaker Change: The growth in commercial banking fees was driven by strong institutional brokerage and improved corporate bonds.

Speaker Change: The growth in commercial banking fees was driven by strong institutional brokerage and improved corporate bond fees.

Speaker Change: The podcast is brought to you by Lower Lease for Marketing Revenue.

Speaker Change: Offset by lower lease for marketing revenue fourth quarter noninterest income was also impacted by the decision to eliminate our extended overdraft fee, which was the driver of the decrease in service charges on deposits compare.

Speaker Change: Fourth quarter non-interest income was also impacted by the decision to eliminate our extended overdraft fee, which was the driver of the decrease in service charges on deposits.

Speaker Change: Fourth quarter non-interest income was also impacted by the decision to eliminate our extended overdraft fee, which was the driver of the decrease in service charges on deposits. Compared to the prior year, non-interest income decreased 3%, primarily due to a $25 million reduction in TRA revenue. Adjusted non-interest expense increased 2% sequentially, primarily driven by the impact of the non-qualified deferred compensation mark-to-market, which is mostly offset by securities gains and losses.

Speaker Change: Compared to the prior year, non-interest income decreased 3%, primarily due to a $25 million reduction in TRA revenue.

Third to the prior year noninterest income decreased 3%, primarily due to a $25 million reduction in TRA revenue.

Speaker Change: Adjusted non-interest expense increased 2% sequentially, primarily driven by the impact of the non-qualified deferred compensation mark-to-market, which is mostly offset in securities gains loss.

Speaker Change: Adjusted noninterest expense increased 2% sequentially, primarily driven by the impact of the nonqualified deferred compensation Mark to market, which is mostly offset in securities gains losses.

Speaker Change: Excluding the impact of the NQDC mark, which was a $17 million expense in the fourth quarter, compared to a $5 million benefit in the prior quarter, expenses for flat sequential. Compared to the prior year, fourth quarter expenses were down 1%, which reflects our ongoing commitment to expense discipline Ken mentioned earlier.

Speaker Change: Excluding the impact of the NQDC mark, which was a $17 million expense in the fourth quarter, compared to a $5 million benefit in the prior quarter, expenses for flat sequential

Speaker Change: Excluding the impact of the <unk>, Mark, which was a $17 million expense in the fourth quarter compared to a $5 million benefit in the prior quarter expenses were flat sequentially.

Brian Preston: Our full-year financial performance in 2023 benefited from this long-term investment. Fifth Third delivered industry-leading deposit growth of 5%, record revenue of $8.7 billion, and 100 basis points of capital accretion during the year, all while maintaining expenses and We delivered another solid quarter to end the year. Adjusting for the FDIC special assessment and the other discrete items listed on page 2 of our release, return on assets was 1.3%, ROTCE was 17%, and our efficiency ratio was 55%. Additionally, we completed our risk-weighted asset diet in the fourth quarter, which reduced RWA by 3%, which was a little more than we previously estimated. The diet, combined with our strong earnings, led to a nearly 50 basis point increase in CDT1 during the quarter, which ended at 10.3%. This capital accretion, combined with the rally in market rates during the fourth quarter, resulted in a pro forma CDT-1 ratio, including the AOCI impact from unrealized losses on AFS securities, increasing to 7.7% at year end, well above the 7% minimum. Net interest income for the quarter was $1.4 billion, which was consistent with our expectations.

Speaker Change: Compared to the prior year, fourth quarter expenses were down 1%, which reflects our ongoing commitment to expense discipline Ken mentioned earlier.

Speaker Change: Compared to the prior year fourth quarter expenses were down, 1%, which reflects our ongoing commitment to expense discipline, Tim mentioned earlier.

Speaker Change: Moving to the balance.

Speaker Change: Moving to the balance, as expected, total average portfolio loans and leases decreased 2% sequentially, most significantly driven by the 3% decrease in average total commercial loans. Our corporate banking business experienced the biggest reductions due to the RWA diet, with period-end corporate banking total commitments decreasing 6% and unused commitments decreasing 4%. The period and the commercial revolver utilization rate was 35%. A 1% decrease from the prior quarter. Average total consumer portfolio loans and leases decreased 1% sequentially due to our intentional pullback in indirect auto and the overall slowdown in residential mortgage originations given the rate environment, partially offset by growth from dividends.

Speaker Change: Moving to the balance sheet as expected total average portfolio loans and leases decreased 2% sequentially.

Speaker Change: As expected, total average portfolio loans and leases decreased 2% sequentially, most significantly driven by the 3% decrease in average total commercial loan.

Speaker Change: Significantly driven by a 3% decrease in average total commercial loans.

Speaker Change: Our corporate banking business experienced the biggest reductions due to the RWA diet, with period-end corporate banking total commitments decreasing 6% and unused commitments decreasing 4%.

Speaker Change: Our corporate banking business experienced the biggest reduction due to the <unk> diet.

Speaker Change: With period end corporate banking total commitments, decreasing 6% and unused commitments decreasing 4% Peter.

Speaker Change: The period and the commercial revolver utilization rate was 35%.

Speaker Change: Period end commercial revolver utilization rate was 35% a 1% decrease from the prior quarter.

Speaker Change: A 1% decrease from the prior quarter.

Speaker Change: Average total consumer portfolio loans and leases decreased 1% sequentially due to our intentional pullback in indirect auto and the overall slowdown in residential mortgage originations given the rate environment, partially offset by growth from dividends.

Average total consumer portfolio loans and leases decreased 1% sequentially due to our intentional pullback in indirect auto and the overall slowdown in residential mortgage originations given the rate environment, partially offset by growth from dividends and ads.

Speaker Change: Average core deposits increased 3% sequentially, driven by the growth in interest checking, money market, and customer CD balances.

Speaker Change: Average core deposits increased 3% sequentially, driven by the growth in interest checking, money market, and customer CD balance.

Speaker Change: Average core deposits increased 3% sequentially driven by the growth in interest checking money market and customer CD balances.

Speaker Change: DDA migration is showing signs of deceleration, with fourth quarter showing the smallest dollar decline in DDA balances since the onset of the rate hiking cycle, even when adjusting for normal seasonal strength at year end.

Speaker Change: DDA migration is showing signs of deceleration, with the fourth quarter showing the smallest dollar decline in DDA balances since the onset of the rate hiking cycle, even when adjusting for normal seasonal strength at year end.

Speaker Change: <unk> migration is showing signs of deceleration with fourth quarter, showing the smallest dollar decline in DDA balances since the onset of the rate hiking cycle, even when adjusting for normal seasonal strength at year end.

Speaker Change: <unk> as a percent of core deposits were 26% for the quarter compared to 28% in the prior quarter. In addition to the migration impact. This measure is negatively impacted by the strong interest bearing core deposit growth from new consumer and commercial relationships.

Speaker Change: BDAs as a percent of core deposits were 26% for the quarter compared to 28% in the prior quarter.

Speaker Change: BDAs as a percent of core deposits were 26% for the quarter compared to 28% in the prior quarter. In addition to the migration impact, this measure is negatively impacted by the strong interest-bearing core deposit growth from new consumer and commercial relationships. By segment, average commercial deposits increased 5% sequentially, while both consumer and wealth deposits increased 1%. As a result of our balance sheet positioning, RWA diet, and success in growing deposits, we achieved a loan to core deposit ratio of 72% at year end, which continues to rank as the best compared to our regional peers.

Speaker Change: In addition to the migration impact, this measure is negatively impacted by the strong interest-bearing core deposit growth from new consumer and commercial relationships.

Brian Preston: While NII continues to be impacted by the increasing cost of deposits due to higher market interest rates, we've been able to build a robust liquidity position by generating peer-leading core deposit growth. Our core interest-bearing deposit costs increased 24 basis points sequentially, reflecting a cycle-to-date interest-bearing core deposit beta of 54% in the fourth quarter. We believe maintaining significant liquidity on the balance sheet is a prudent decision given the uncertain economic and regulatory environment. Our short-term investments, which are primarily comprised of our cash at the Fed, increased $8.6 billion in the fourth quarter on an average basis and drove all of the 13 basis points sequential decrease in net. Excluding the impacts of securities gains losses and the Visa Total Return Swap, adjusted non-interest income increased 3% sequentially due to the growth in commercial banking, mortgage, wealth, and card and processing revenue, as well as the normal fourth-quarter impact of the CRA. The growth in commercial banking fees was driven by strong institutional brokerage and improved corporate bonds. The podcast is brought to you by Lower Lease for Marketing Revenue.

Speaker Change: By segment, average commercial deposits increased 5% sequentially, while both consumer and wealth deposits increased 1%.

Speaker Change: By segment average commercial deposits increased 5% sequentially, while both consumer and wealth deposits increased 1%.

Speaker Change: As a result of our balance sheet positioning, RWA diet, and success growing deposits, we achieved a loan to core deposit ratio of 72% at year end.

Speaker Change: As a result of our balance sheet positioning <unk> diet and success growing deposits, we achieved a loan to core deposit ratio of 72% at year end.

Speaker Change: which continues to rank as the best compared to our regional

Speaker Change: Which continues to rank as the best compared to our regional peers as Tim mentioned, we ended the year with full category, one LCR compliance at 129%.

Speaker Change: As Tim mentioned, we ended the year with full Category 1 LCR compliance at 129%.

Speaker Change: As Tim mentioned, we ended the year with full Category 1 LCR compliance at 129%. The strong funding profile provides us with great flexibility as we enter 2024. Moving to credit, asset quality trends remain strong and below historical averages in that charge-off ratio, with 32 basis points, which was down 9 basis points sequentially and consistent with our guidelines. 30-89 day delinquencies are flat compared to the end of 2022. The NPA ratio increased 8 basis points to 59 basis points, but remains below our 10-year average of 65 basis points. We will maintain our credit discipline, focusing on generating and maintaining granular, high-quality revenue for all of our customers.

Speaker Change: The strong funding profile provides us with great flexibility as we enter 2024.

Speaker Change: Moving to credit, asset quality trends remain strong and below historical averages in that charge-off ratio with 32 basis points, which was down 9 basis points sequentially and consistent with our guidelines.

Speaker Change: Moving to credit and asset quality trends remained strong and below historical averages and the net charge off ratio was 32 basis points, which was down nine basis points sequentially and consistent with our guidance.

Speaker Change: 30-89 day delinquencies are flat compared to the end of 2022. The NPA ratio increased 8 basis points to 59 basis points, but remains below our 10-year average of 65 basis points.

Speaker Change: 30 to 89 day delinquencies are flat compared to the end of 2022, the NPL ratio increased eight basis points to 59 basis points, but remains below our 10 year average of 65 basis points.

Speaker Change: We will maintain our credit discipline, focusing on generating and maintaining granular, high-quality revenue for all of our customers.

Speaker Change: We will maintain our credit discipline, focusing on generating and maintaining granular high quality relationships.

Speaker Change: In consumer lending, we remain focused on lending to homeowners, which is a segment less impacted by inflationary pressures, and have maintained our conservative underwriting policy. However, we are beginning and expect to continue to see normalization of delinquency and credit loss trends from the historically low levels experienced over the last couple of years. From an overall credit risk management perspective, we continue to assess forward-looking client vulnerabilities based on firm-specific and industry trends and closely monitor all exposures where inflation and higher-for-longer interest rates may cause stress. Moving to the ACL, while our reserve coverage increased one basis point sequentially to 2.12%, the ACL balance decreased by $41 million due to lower period end loans, which was the primary driver of the report.

Speaker Change: In consumer, we remain focused on lending to homeowners, which is a segment less impacted by inflationary pressures.

Speaker Change: In consumer we remain focused on lending to homeowners, which is a segment less impacted by inflationary pressures and has maintained our conservative underwriting policies. However, we are beginning and expect to continue to see normalization of delinquency and credit loss trends from the historically low levels experienced over the last couple of years.

Speaker Change: and have maintained our conservative underwriting policy.

Brian Preston: Fourth quarter non-interest income was also impacted by the decision to eliminate our extended overdraft fee, which was the driver of the decrease in service charges on deposits. Compared to the prior year, non-interest income decreased 3%, primarily due to a $25 million reduction in TRA revenue. Adjusted non-interest expense increased 2% sequentially, primarily driven by the impact of the non-qualified deferred compensation mark-to-market, which is mostly offset by securities gains and losses.

Speaker Change: However, we are beginning and expect to continue to see normalization of delinquency and credit loss trends from the historically low levels experienced over the last couple of years.

Speaker Change: From an overall credit risk management perspective, we continue to assess forward-looking client vulnerabilities based on firm-specific and industry trends and closely monitor all exposures where inflation and higher-for-longer interest rates may cause stress.

Speaker Change: From an overall credit risk management perspective, we continue to assess forward looking client vulnerabilities based on firm specific and industry trends and closely monitor all exposures, where inflation and higher for longer interest rates may cost dress move.

Speaker Change: Moving to the ACL, while our reserve coverage increased one basis point sequentially to 2.12%, the ACL balance decreased by $41 million due to lower period end loans, which was the primary driver of the report.

Speaker Change: Moving to the ACL.

Speaker Change: Our reserve coverage increased one basis points sequentially to $2, one 2% the ACL balance decreased by $41 million due to lower period end loans, which was the primary driver of the release, we continue to utilize Moody's macroeconomic scenarios when evaluating our allowance and made no changes to our scenario weightings.

Brian Preston: Excluding the impact of the NQDC mark, which was a $17 million expense in the fourth quarter, compared to a $5 million benefit in the prior quarter, expenses were flat sequentially. However, compared to the prior year, fourth quarter expenses were down 1%, which reflects our ongoing commitment to expense discipline Ken mentioned earlier. Moving to the balance, as expected, total average portfolio loans and leases decreased 2% sequentially, most significantly driven by the 3% decrease in average total commercial loans. Our corporate banking business experienced the biggest reductions due to the RWA diet, with period-end corporate banking total commitments decreasing 6% and unused commitments decreasing 4%. The period and the commercial revolver utilization rate was 35%.

Speaker Change: We continue to utilize Moody's macroeconomic scenarios when evaluating our allowance and made no changes to our scenario weight.

Speaker Change: We continue to utilize Moody's macroeconomic scenarios when evaluating our allowance, and we have made no changes to our scenario weight.

Speaker Change: Our capital build is pacing ahead of the expectations. We set at the beginning of the <unk> diet. We are highly confident in our ability to build our CET one ratio to 10, 5% by June 2024, as Tim mentioned on January three we made the decision to hold $12 6 billion of securities until maturity result.

Speaker Change: Our capital build is pacing ahead of the expectations we set at the beginning of the RWA diet. We are highly confident in our ability to build our CET1 ratio to 10.5% by June 2024.

Speaker Change: As Tim mentioned, on January 3rd, we made the decision to hold $12.6 billion of securities until maturity, resulting in the reclassification to HTM during 2024.

Speaker Change: As Tim mentioned, on January 3rd, we made the decision to hold $12.6 billion of securities until maturity, resulting in the reclassification to HTM in 2024. This decision reduces the risk of potential capital volatility associated with investment security market price fluctuations under the proposed capital rule. We continue to expect improvement in the unrealized losses in our remaining AFS portfolios, resulting in approximately 32% of our current loss position accreting back into equity by the end of 2025 and approximately 66% by 2028, assuming the forward curve plays out. After the transfer to HTM, 65% of the remaining AFS portfolio is in bullet or lockout securities, which provides a high degree of certainty to our principal cash flow expectations.

Speaker Change: And the reclassification to HTM during 2020 for this.

Speaker Change: This decision reduces the risk of potential capital volatility associated with investment security market price fluctuations under the proposed capital rule.

This decision reduces the risk of potential capital volatility associated with investment security market price fluctuations under the proposed capital rules.

Speaker Change: We continue to expect improvement in the unrealized losses in our remaining AFS portfolios.

Speaker Change: We continue to expect improvement in the unrealized losses in our remaining <unk> portfolio, resulting in approximately 32% of our current loss position accretive back into equity by the end of 2025 and approximately 66% by 2028, assuming the forward curve plays out.

Speaker Change: Resulting in approximately 32% of our current loss position accreting back into equity by the end of 2025 and approximately 66% by 2028, assuming the forward curve plays out.

Brian Preston: A 1% decrease from the prior quarter. Average total consumer portfolio loans and leases decreased 1% sequentially due to our intentional pullback in indirect auto and the overall slowdown in residential mortgage originations given the rate environment, partially offset by growth from dividends. Average core deposits increased 3% sequentially, driven by the growth in interest checking, money market, and customer CD balances. DDA migration is showing signs of deceleration, with the fourth quarter showing the smallest dollar decline in DDA balances since the onset of the rate hiking cycle, even when adjusting for normal seasonal strength at year end.

Speaker Change: After the transfer to HTM, 65% of the remaining AFS portfolio is in bullet or lockout securities, which provides a high degree of certainty to our principal cash flow expectations.

Speaker Change: After the transfer to HTM, 65% of the remaining <unk> portfolio is in bullet or locked out securities, which provides a high degree of certainty to our principal cash flow expectations.

Speaker Change: We continue to believe that 10.5% is an appropriate near-term operating level for our capital. And, as Tim mentioned, we expect to resume share repurchases during the second half of 2024, assuming the economic environment remains stable and the capital rules are finalized, consistent with the NPR.

Speaker Change: We continue to believe that 10.5% is an appropriate near-term operating level for our capital.

Speaker Change: We continue to believe that 10, 5% is an appropriate near term operating level for our capital and as Tim mentioned, we expect to resume share repurchases. During the second half of 2024, assuming the economic environment remains stable and the capital rules are finalized consistent with the MPR.

Speaker Change: And as Tim mentioned, we expect to resume share repurchases during the second half of 2024, assuming the economic environment remains stable and the capital rules are finalized, consistent with the NPR.

Moving to our current outlook.

Speaker Change: Moving to our current outlook.

Speaker Change: Moving to our current outlook, we expect full-year average total loans to be down 2% compared to 2023, with the decrease primarily driven by the impact of the RWA diet on commercial loans and indirect consumer, as well as lower mortgage production due to the higher rate environment, partially offset by the continued growth of dividend and provident. While we expect full-year average total loans to decrease,

Speaker Change: We expect full-year average total loans to be down 2% compared to 2023.

Speaker Change: We expect full year average total loans to be down 2% compared to 2023 with.

Speaker Change: with the decrease primarily driven by the impact of the RWA diet on commercial loans and indirect consumer, as well as lower mortgage production due to the higher rate environment, partially offset by the continued growth of dividend and provide.

Speaker Change: With the decrease primarily driven by the impact of the <unk> diet on commercial loans and indirect consumer as well as lower mortgage production due to the higher rate environment, partially offset by the continued growth of dividend and provide.

Brian Preston: BDAs as a percent of core deposits were 26% for the quarter compared to 28% in the prior quarter. In addition to the migration impact, this measure is negatively impacted by the strong interest-bearing core deposit growth from new consumer and commercial relationships. By segment, average commercial deposits increased 5% sequentially, while both consumer and wealth deposits increased 1%. As a result of our balance sheet positioning, RWA diet, and success in growing deposits, we achieved a loan to core deposit ratio of 72% at year end, which continues to rank as the best compared to our regional peers. As Tim mentioned, we ended the year with full Category 1 LCR compliance at 129%. The strong funding profile provides us with great flexibility as we enter 2024. Moving to credit, asset quality trends remain strong and below historical averages in that charge-off ratio, with 32 basis points, which was down 9 basis points sequentially and consistent with our guidelines. 30-89 day delinquencies are flat compared to the end of 2022.

Speaker Change: While we expect full-year average total loans to decrease,

Speaker Change: While we expect full year average total loans to decrease we expect average total loans in the fourth quarter of 2024 to be up 2% compared to the fourth quarter of 2023.

Speaker Change: We expect average total loans in the fourth quarter of 2024 to be up 2% compared to the fourth quarter of 2022.

Speaker Change: We expect average total loans in the fourth quarter of 2024 to be up 2% compared to the fourth quarter of 2022. Commercial balances are expected to be up low single digits by the end of 2024, and dividend originations are projected between $2.5 and $3 billion for the full year. We are also assuming that commercial revolver utilization remains.

Speaker Change: Commercial balances are expected to be up low single digits by the end of 2024, and dividend originations are projected between $2.5 and $3 billion for the full year.

Speaker Change: Commercial balances are expected to be up low single digits by the end of 2024 and dividend originations are projected between two and a half and $3 billion for the full year.

Speaker Change: We are also assuming commercial revolver utilization remains

Speaker Change: We are also assuming commercial revolver utilization remained stable.

Speaker Change: For the first quarter of 2025,

Speaker Change: For the first quarter of 2025, we expect average total loan balances to be down 1%, again driven by the full quarter impact of the RWA diet. Both commercial and consumer loans should be down around 1%. Dividend finance originations are projected to be $400 to $500 million in the first quarter.

Speaker Change: For the first quarter of 2024, we expect average total loan balances to be down 1% again, driven by the full quarter impact of the RWC diet.

Speaker Change: We expect average total loan balances to be down 1%, again, driven by the full quarter impact of the RWA diet.

Speaker Change: Both commercial and consumer loans should be down around 1%.

Speaker Change: Dividend finance originations are projected to be $400 to $500 million in the first quarter.

Speaker Change: Dividend finance originations are projected to be 4% to $500 million in the first quarter total loan balances should be relatively stable throughout the first quarter.

Speaker Change: Total loan balances should be relatively stable throughout the birth.

Speaker Change: Total loan balances should be relatively stable throughout the pregnancy. We expect deposit growth to continue during 2024, with four-year average core deposits increasing two to three percent.

Speaker Change: We expect deposit growth to continue during 2024 with full year average core deposits, increasing 2% to 3%.

Speaker Change: We expect deposit growth to continue during 2024, with four-year average core deposits increasing two to three percent.

Speaker Change: While we expect DBA migration to continue given the high absolute level of interest rate,

Speaker Change: While we expect DBA migration to continue given the high absolute level of interest rates, the pace of migration will be sensitive to the path of the Fed Funds Rate in 2024. If rates remain at current levels, we could see the DDA mix dip below 25% by the fourth quarter of 2024. However, we would expect to see a more stable composition if the more aggressive rate cut forecasts were to be realized.

Speaker Change: While we expect DBA migration to continue given the high absolute level of interest rates the pace of migration will be sensitive to the path of the fed funds rate in 2024.

Speaker Change: The pace of migration will be sensitive to the path of the Fed Funds Rate in 2024.

Speaker Change: If rates remain at current levels, we could see the DDA mix dip below 25% by the fourth quarter of 2024. However, we would expect to show a more stable composition if the more aggressive rate cut forecasts were to be realized.

Speaker Change: If rates remain at current levels, we could see the DDA mix dipped below 25% by the fourth quarter of 2024. However, we would expect to show a more stable composition, if the more aggressive great Cup forecasts were to be realized.

Speaker Change: Moving to the income statement, given the impact of the RWA diet on average loan balances and the impact of higher deposit costs, we expect full-year NII to decrease 2% to 4%. Our forecast assumes our security portfolio remains relatively stable and our cash levels begin a slow but steady decrease throughout 2024. This outlook is consistent with the forward curve as of early January, which projected six total rate cuts. Given the uncertainty regarding the rate outlook, our balance sheet is positioned such that, even with fewer rate cuts, such as the three-cut scenario being projected by the FOMC, we would expect to see only a modest deterioration in our NI We expect NII in the first quarter to be down 2% to 3% sequentially, reflecting the impact of lower average loan balances, a lower day count in the quarter, and higher deposit costs.

Speaker Change: Shifting to the income statement.

Speaker Change: Given the impact of the RWA diet on average loan balances and the impact of higher deposit costs, we expect full-year NII to decrease 2% to 4%.

Speaker Change: Given the impact of the <unk> die on average loan balances and the impact of higher deposit costs, we expect full year NII to decrease 2% to 4%.

Brian Preston: The NPA ratio increased 8 basis points to 59 basis points, but remains below our 10-year average of 65 basis points. We will maintain our credit discipline, focusing on generating and maintaining granular, high-quality revenue for all of our customers. In consumer lending, we remain focused on lending to homeowners, which is a segment less impacted by inflationary pressures, and have maintained our conservative underwriting policy. However, we are beginning and expect to continue to see normalization of delinquency and credit loss trends from the historically low levels experienced over the last couple of years. From an overall credit risk management perspective, we continue to assess forward-looking client vulnerabilities based on firm-specific and industry trends and closely monitor all exposures where inflation and higher-for-longer interest rates may cause stress. Moving to the ACL, while our reserve coverage increased one basis point sequentially to 2.12%, the ACL balance decreased by $41 million due to lower period end loans, which was the primary driver of the report. We continue to utilize Moody's macroeconomic scenarios when evaluating our allowance, and we have made no changes to our scenario weight.

Speaker Change: Our forecast assumes our security portfolio remains relatively stable and our cash levels begin a slow but steady decrease throughout 2024.

Speaker Change: Our forecast assumes our security portfolio remains relatively stable and our cash levels began a slow but steady decrease throughout 2024.

Speaker Change: This outlook is consistent with the forward curve as of early January, which projected six total rate

Speaker Change: This outlook is consistent with the forward curve as of early January which projected six total rate cuts.

Speaker Change: Given the uncertainty regarding the rate outlook, our balance sheet is positioned such that, even with fewer rate cuts, such as the three-cut scenario being projected by the FOMC,

Speaker Change: Given the uncertainty regarding the rate outlook, our balance sheet is positioned such that even with fewer rate cuts such as the three cuts scenario being projected by the epilepsy.

Speaker Change: We would expect to see only a modest deterioration in our NII outlook and would still fall within a full year guidance of down 2-4%.

Speaker Change: We would expect to see only a modest deterioration in our NII outlook and would still fall within our full year guidance of down 2% to 4%.

We expect NII in the first quarter to be down 2% to 3% sequentially, reflecting the impact of the lower average loan balances are lower day count in the quarter and higher deposit costs are.

Speaker Change: We expect NII in the first quarter to be down 2% to 3% sequentially, reflecting the impact of the lower average loan balances, a lower day count in the quarter, and higher deposit costs.

Speaker Change: Our current outlook assumes interest-bearing core deposit costs, which were 289 basis points in the fourth quarter of 2023, increase 5 to 10 basis points in the first quarter, a deceleration from the 24 basis point increase experienced in the fourth quarter. With rate cuts forecasted to begin in late March and continue through the end of the year, we would expect deposit costs to decrease throughout the remainder of 2024. Under this outlook, the terminal beta for the rising rate cycle would be in the mid-50s for interest-bearing core deposits. We continue to believe we will reach our NIM trough in the fourth quarter of 2023.

Our current outlook assumes interest bearing core deposit costs, which were 289 basis points in the fourth quarter of 2023 increased 5% to 10 basis points in the first quarter, a deceleration from the 24 basis points increase experienced in the fourth quarter.

Speaker Change: With rate cuts forecasted to begin in late March and continue through the end of the year, we would expect deposit costs to decrease throughout the remainder of 2024.

Speaker Change: With rate cuts forecasted to begin in late March and continue through the end of the year, we would expect deposit cost to decrease throughout the remainder of 2024.

Speaker Change: Under this outlook, the terminal beta for the rising rate cycle would be in the mid-50s for interest-bearing core deposits.

Under this outlook the terminal beta for the rising rate cycle would be in the mid fifties for interest bearing core deposits.

Brian Preston: Our capital build is pacing ahead of the expectations we set at the beginning of the RWA diet. We are highly confident in our ability to build our CET1 ratio to 10.5% by June 2024. As Tim mentioned, on January 3rd, we made the decision to hold $12.6 billion of securities until maturity, resulting in the reclassification to HTM in 2024. This decision reduces the risk of potential capital volatility associated with investment security market price fluctuations under the proposed capital rule.

Speaker Change: We continue to believe we are at our NIM trough in the fourth quarter of 2023. However, another quarter of outperformance in deposit growth resulting in a higher than expected cash position, while a good outcome, could impact NIM by a few more bases.

Speaker Change: We continue to believe we are at or near trough in the fourth quarter of 2023, however, another quarter of outperformance in deposit growth, resulting in a higher than expected cash position, while a good outcome could impact NIM by a few more basis points.

Speaker Change: However, another quarter of outperformance in deposit growth resulting in a higher than expected cash position, while a good outcome, could impact NIM by a few more bases. Barring a significant change in the economic outlook, we would expect NII to stabilize and then begin growing sequentially during the remainder of 2024.

Speaker Change: Barring a significant change in economic outlook, we would expect NII to stabilize and then begin growing sequentially during the remainder of 2024.

Speaker Change: Borrowing a significant change in economic outlook, we would expect NII to stabilize and then begin growing sequentially during the remainder of 2024.

Speaker Change: We expect adjusted non-interest income to be up 1% to 2% in 2024, reflecting continued growth in treasury management revenue, capital market fees, and wealth and asset management revenue, partially offset by the full-year impact of the elimination of our extended overdraft. We expect mortgage origination to remain muted in 2024 and net servicing revenue to decrease modestly as the servicing portfolio UPB continues to amortize lower.

Speaker Change: We expect adjusted noninterest income to be up 1% to 2% in 2024, reflecting continued growth in Treasury management revenue capital market fees and wealth and asset management revenue, partially offset by the full year impact of the elimination of our extended overdraft fee.

Brian Preston: We continue to expect improvement in the unrealized losses in our remaining AFS portfolios, resulting in approximately 32% of our current loss position accreting back into equity by the end of 2025 and approximately 66% by 2028, assuming the forward curve plays out. After the transfer to HTM, 65% of the remaining AFS portfolio is in bullet or lockout securities, which provides a high degree of certainty to our principal cash flow expectations.

Speaker Change: We expect mortgage origination will remain muted in 2024 and net servicing revenue to decrease modestly as the servicing portfolio UPB continues to amortize lower.

Speaker Change: We expect mortgage origination will remain muted in 2024 and net servicing revenue to decrease modestly as the servicing portfolio <unk> continues to amortize lower.

Speaker Change: Adjusted other non-interest income, which excludes the impact of the Visa Total Return Swap, is expected to decline by over 15% as TRA revenue will decrease from $22 million in 2023 to $10 million in the fourth quarter of 2024, and we are not including any large one-time private equity gains in our forecast. We expect first quarter adjusted non-interest income to be down 3% to 4% compared to the fourth quarter, excluding the impacts of the Normal seasonal items include lower capital markets activity and M&A activity, partially offset by seasonal strength and wealth from tax planning.

Speaker Change: Adjusted other noninterest income, which excludes the impact of the visa total return swap is expected to decline by over 15% as TRA revenue will decrease from $22 million in 2000 $23 million to $10 million in the fourth quarter of 2024, and we are not including any large one time private equity.

Brian Preston: We continue to believe that 10.5% is an appropriate near-term operating level for our capital. And, as Tim mentioned, we expect to resume share repurchases during the second half of 2024, assuming the economic environment remains stable and the capital rules are finalized, consistent with the NPR. Moving to our current outlook, we expect full-year average total loans to be down 2% compared to 2023, with the decrease primarily driven by the impact of the RWA diet on commercial loans and indirect consumer, as well as lower mortgage production due to the higher rate environment, partially offset by the continued growth of dividend and provident. While we expect full-year average total loans to decrease, we expect average total loans in the fourth quarter of 2024 to be up 2% compared to the fourth quarter of 2022. Commercial balances are expected to be up low single digits by the end of 2024, and dividend originations are projected between $2.5 and $3 billion for the full year.

Speaker Change: Gains in our forecast.

We expect first quarter, adjusted noninterest income to be down 3% to 4% compared to the fourth quarter, excluding the impacts of the TRA largely reflecting seasonal factors.

Speaker Change: We expect first quarter adjusted non-interest income to be down 3% to 4% compared to the fourth quarter, excluding the impacts of the TRA, largely reflecting seasonal tax.

Speaker Change: Normal seasonal items include lower capital markets activity and M&A activity, partially offset by seasonal strength and wealth from tax planning.

Speaker Change: Normal seasonal items include lower capital markets activity, and M&A activity, partially offset by seasonal strength in wealth from tax planning.

Speaker Change: We expect full-year adjusted non-interest expense to be up around 1% compared to 2023. Our expense outlook assumes continued investments in technology, with tech expense growth in the mid to high single digits and Salesforce additions in the middle market, treasury management, and wealth. We will also close 29 branches in 2024 to offset costs associated with the 31 new branches opening in our high-growth southeast market. We expect first quarter total adjusted non-interest expense to be up around 8% compared to the fourth quarter. As is always the case for us, our first quarter expenses are impacted by seasonal items associated with the timing of compensation awards and payroll taxes.

Speaker Change: We expect full-year adjusted non-interest expense to be up around 1% compared to 2023.

We expect full year, adjusted noninterest expense to be up around 1% compared to 2023.

Speaker Change: Our expense outlook assumes continued investments in technology, with tech expense growth in the mid to high single digits, and Salesforce additions in middle market, treasury management, and wealth.

Speaker Change: Our expense outlook assumes continued investments in technology with tech expense growth in the mid to high single digits and sales force additions in middle market Treasury management and wealth.

Speaker Change: We will also close 29 branches in 2024 to offset costs associated with the 31 new branches opening in our high-growth southeast market.

Speaker Change: We will also closed 29 branches in 2024 to offset costs associated with the 31, new branches opening in our high growth southeast markets.

Speaker Change: Sure.

Speaker Change: We expect first quarter total adjusted non-interest expense to be up around 8% compared to the fourth quarter.

Speaker Change: We expect first quarter total adjusted noninterest expense to be up around 8% compared to the fourth quarter as.

Speaker Change: As is always the case for us, our first quarter expenses are impacted by seasonal items associated with the timing of compensation awards and payroll taxes.

Speaker Change: As is always the case for us our first quarter expenses are impacted by seasonal items associated with the timing of compensation awards and payroll taxes, excluding the seasonal items expenses would be flat in the first quarter.

Speaker Change: Excluding the seasonal items, expenses would be flat in the first quarter.

Speaker Change: Excluding the seasonal items, expenses would be flat in the first quarter. In total, our guide implies full-year adjusted revenue to be down 1% to 2% and PPNR to decline in the 4% to 5% range. This outcome will result in an efficiency ratio of around 57% for the full year, a modest increase relative to 2023, driven by the decrease in NIH. As Tim mentioned, we expect positive operating leverage in the second half of 2024 compared to the second half of 2023.

Brian Preston: We are also assuming commercial revolver utilization remains. For the first quarter of 2025, we expect average total loan balances to be down 1%, again, driven by the full quarter impact of the RWA diet. Both commercial and consumer loans should be down around 1%. Dividend finance originations are projected to be $400 to $500 million in the first quarter.

Speaker Change: In total, our guide implies full-year adjusted revenue to be down 1% to 2% and PPNR to decline in the 4% to 5% range.

Speaker Change: In total our guide implies full year adjusted revenue to be down, 1% to 2% and <unk> to decline in the 4% to 5% range.

Speaker Change: This outcome will result in an efficiency ratio of around 57% for the full year, a modest increase relative to 2023, driven by the decrease in NIH.

Speaker Change: This outcome will result in an efficiency ratio of around 57% for the full year.

Speaker Change: Modest increase relative to 2023, driven by the decrease in NII.

Speaker Change: As Tim mentioned, we expect positive operating leverage in the second half of 2024 compared to the second half of 2023.

Speaker Change: Moving to credit, we continue to expect 2024 net charge-offs to be in the 35 to 45 basis point range as credit continues to normal, with first quarter net charge-offs in the 35 to 40 range.

Speaker Change: Sure.

Speaker Change: Moving to credit, we continue to expect 2024 net charge-offs to be in the 35 to 45 basis point range as credit continues to normal.

Moving to credit we continue to expect 2024 net charge offs to be in the 35 to 45 basis point range as credit continues to normalize with first quarter net charge offs in the 35 to 40 basis point range.

Brian Preston: Total loan balances should be relatively stable throughout the pregnancy. We expect deposit growth to continue during 2024 with four-year average core deposits increasing two to 3%. While we expect DBA migration to continue given the high absolute level of interest rates, the pace of migration will be sensitive to the path of the Fed Funds Rate in 2024. If rates remain at current levels, we could see the DDA mix dip below 25% by the fourth quarter of 2024. However, we would expect to show a more stable composition if the more aggressive rate cut forecasts were to be realized, shifting to the income state. Given the impact of the RWA diet on average loan balances and the impact of higher deposit costs, we expect full-year NII to decrease 2% to 4%.

Speaker Change: with first quarter net charge-offs in the 35 to 40 basis.

Speaker Change: As we return to Lone Grove, we expect to resume provision bills.

Speaker Change: As we return to Lone Grove, we expect to resume provision bills. Assuming no change to the economic outlook, loan growth and mix is expected to drive a $100 to $150 million provision bill for the year, with the first quarter being in the $0 to $25 million range. The provision billed over the last three quarters of the year should be fairly flat. In summary, 2024 is expected to be a year of transition as we begin the shift to a rate-cutting cycle.

Speaker Change: As we returned to loan growth, we expect to resume provision builds.

Speaker Change: Assuming no change to the economic outlook, loan growth and mix is expected to drive a $100 to $150 million of provision bill for the year, with the first quarter being in the $0 to $25 million range.

Speaker Change: <unk> no change to the economic outlook loan growth and mix is expected to drive a $100 million to $150 million of provision build for the year with the first quarter of being in the zero to $25 million range.

Speaker Change: The provision billed over the last three quarters of the year should be fairly

The provision build over the last three quarters of the year should be fairly even.

Speaker Change: In summary, 2024 is expected to be a year of transition as we begin the shift to a rate-cutting cycle.

Speaker Change: In summary, 2024 is expected to be a year of transition as we begin to shift to a rate cutting cycle.

Speaker Change: With our well-positioned balance sheet, disciplined credit risk management, and commitment to delivering strong performance through the cycle, we will continue to generate long-term sustainable value for shareholders, customers, communities, and employees.

Speaker Change: With our well positioned balance sheet disciplined credit risk management and commitment to delivering strong performance through the cycle. We will continue to generate long term sustainable value for shareholders customers communities and employees.

Speaker Change: With that, let me turn it over to Matt to open the call up for Q&A.

Speaker Change: With that let me turn it over to Matt to open the call up for Q&A.

Matt: Thanks, Bryan before we start Q&A given the time, we have this morning, we ask that you limit yourself to one question and a follow up and then return to the queue. If you have additional questions. Operator, please open the call for Q&A.

Matt: Thanks, Brian. Before we start Q&A, given the time we have this morning, we ask that you limit yourself to one question and a follow-up, and then return to the queue if you have additional questions. Operator, please open the call for Q&A.

Matt: Thanks, Brian. Before we start Q&A, given the time we have this morning, we ask that you limit yourself to one question and a follow-up and then return to the queue if you have additional questions. Operator, please open the call for Q&A.

Brian Preston: Our forecast assumes our security portfolio remains relatively stable, and our cash levels begin a slow but steady decrease throughout 2024. This outlook is consistent with the forward curve as of early January, which projected six total rate cuts. Given the uncertainty regarding the rate outlook, our balance sheet is positioned such that, even with fewer rate cuts, such as the three-cut scenario being projected by the FOMC, we would expect to see only a modest deterioration in our NII outlook and would still fall within a full year guidance of down 2-4%. We expect NII in the first quarter to be down 2% to 3% sequentially, reflecting the impact of lower average loan balances, a lower day count in the quarter, and higher deposit costs.

Speaker Change: Thank you. And again, if you have a question, please press star 1 on your telephone keypad. And if you wish to remove yourself from the queue, simply press star 1 again. One moment please for your first question.

Speaker Change: Thank you.

Again, if you have a question. Please press star one on your telephone keypad, if you wish to remove yourself from the queue simply press Star One again one moment. Please for your first question.

Speaker Change: Yes.

Speaker Change: Your first question comes from the line of Scott <unk> of Piper Sandler Your line is open.

Speaker Change: Your first question comes from the line of Scott Seifers of Piper Sandler. Your line is open.

Speaker Change: Your first question comes from the line of Scott Seifers on Piper Sandler. Your line is open.

Scott Siefers: Good morning, everybody. Thank you for taking the question. A lot of good color on the NII expectations, so I appreciate that. I guess just within there, I think, Brian, you noted your comment about deposit costs decreasing through the course of this year. Maybe a thought or two on how those trajectories will differ, in your view, between the commercial and the consumer portfolios?

Scott Siefers: Good morning, everybody. Thank you for taking the time to answer the question. A lot of good color on the NII expectations, so I appreciate that. I guess just within there, I think, Brian, you noted your comment about deposit costs decreasing through the course of this year. Maybe a thought or two on how those trajectories will differ, in your view, between the commercial and the consumer portfolios?

Scott: Good morning, everybody. Thank you for taking the question.

Scott: Good color on the NII expectation. So I appreciate that I guess just within there.

Speaker Change: I think Brian you noted that your comment about deposit costs decreasing through the course of this year, maybe a thought or two on how those trajectories will differ in your view between the commercial and the consumer portfolios.

Brian Preston: Thanks, Scott Great question.

Brian Preston: Thanks, Scott. Great question. We'd tell you that obviously similar to what we've seen from a rising rate perspective, the commercial and the wealth betas in particular have come through recently at a much higher level. We're in the range of probably low to high 80s from a beta perspective in both of those businesses. Cumulative betas have started to reach that point. So we're going to get a lot of repricing out of those portfolios as rates move lower. To give you a little bit of perspective, our indexed commercial deposits right now are up around $30 billion, so that gives us a lot of confidence in our ability to get some price out of that book. The consumer book is one that the betas, the cumulative betas in that book is kind of in the mid-30s right now. It's certainly moved up from a marginal perspective. And we continue to have a lot of optionality between our promos and exceptions. As well as what we've done from a CDE perspective, where we're going to be able to get rate cuts out of those portfolios as well. Our CDE book, which is $10 billion now, is fairly evenly laddered across the year with about 25% maturities across each quarter. We've been very careful as part of our pricing strategy to make sure that we could be able to reprice those down quickly at the right environment.

Brian Preston: Thanks, Scott. Great question. We'd tell you that, obviously, similar to what we've seen from a rising rate perspective, the commercial and the wealth betas, in particular, have come through recently at a much higher level. We're in the range of probably low to high 80s from a beta perspective in both of those businesses. Cumulative betas have started to reach that point, so we're going to get a lot of repricing out of those portfolios as rates move lower. To give you a little bit of perspective, our indexed commercial deposits right now are up around $30 billion, so that gives us a lot of confidence in our ability to get some value out of that book.

Brian Preston: We would tell you that obviously similar to what we've seen from a rising rate perspective, the commercial and the wealth betas in particular were kept come through recently at a much higher level you were.

Brian Preston: Our current outlook assumes interest-bearing core deposit costs, which were 289 basis points in the fourth quarter of 2023, increase 5 to 10 basis points in the first quarter, a deceleration from the 24 basis point increase experienced in the fourth quarter. With rate cuts forecasted to begin in late March and continue through the end of the year, we would expect deposit costs to decrease throughout the remainder of 2024. Under this outlook, the terminal beta for the rising rate cycle would be in the mid-50s for interest-bearing core deposits. We continue to believe we will reach our NIM trough in the fourth quarter of 2023. However, another quarter of outperformance in deposit growth resulting in a higher than expected cash position, while a good outcome, could impact NIM by a few more bases.

Brian Preston: We're in the range of probably low to high Eighty's from a beta perspective in both of those businesses cumulative betas have started to reach that point. So we're going to get a lot of repricing out of those portfolios as rates move lower to give you a little bit of perspective are indexed commercial deposits right now are up up around $30 billion so that.

Brian Preston: It gives us a lot of confidence in our ability to get some price out of that book. The consumer book is one that the beta is the cumulative betas in that book is kind of in the mid <unk> right. Now, it's certainly moved up from a marginal perspective, we continue to have a lot of optionality between our promos and exceptions as well as what we've done from a CD perspective.

Brian Preston: The consumer book is one that the betas, the cumulative betas in that book, are kind of in the mid-30s right now. It's certainly moved up from a marginal perspective. And we continue to have a lot of optionality between our promos and exceptions, as well as what we've done from a CDE perspective, where we're going to be able to get rate cuts out of those portfolios as well. Our CDE book, which is $10 billion now, is fairly evenly laddered across the year with about 25% maturities across each quarter. We've been very careful as part of our pricing strategy to make sure that we could be able to reprice those down quickly in the right environment.

We're going to be able to get.

Brian Preston: Rate cuts out of those portfolios as well our CD book, which is $10 billion now is fairly evenly ladder it across the year with about 25% maturities across each quarter, we've been very careful as part of our pricing strategy to make sure that we could be.

Brian Preston: Barring a significant change in the economic outlook, we would expect NII to stabilize and then begin growing sequentially during the remainder of 2024. We expect adjusted non-interest income to be up 1% to 2% in 2024, reflecting continued growth in treasury management revenue, capital market fees, and wealth and asset management revenue, partially offset by the full-year impact of the elimination of our extended overdraft. We expect mortgage origination to remain muted in 2024 and net servicing revenue to decrease modestly as the servicing portfolio UPB continues to amortize lower. Adjusted other non-interest income, which excludes the impact of the visa total return swap, is expected to decline by over 15% as TRA revenue will decrease from $22 million in 2023 to $10 million in the fourth quarter of 2024, and we are not including any large one-time private equity gains in our forecast We expect first quarter adjusted non-interest income to be down 3% to 4% compared to the fourth quarter, excluding the impacts of the TRA, largely reflecting seasonal tax. Normal seasonal items include lower capital markets activity and M&A activity, partially offset by seasonal strength and wealth from tax planning.

Brian Preston: Be able to reprice those down quickly if the rate environment were to change.

Speaker Change: Okay perfect. Thank you and then separately so given that you're done with the <unk> mitigation effort. It sounds like you've got the option to be on your front foot to the extent that you choose to be going into the year.

Speaker Change: Perfect. Thank you. And then separately, so given that you're done with the RWA mitigation effort, it sounds like you've got the option to be on your front foot to the extent that you choose to be going into the year. You're just sort of curious what your expectation is in terms of loan demand as the year plays out.

Speaker Change: Perfect. Thank you. And separately, given that you're done with the RWA mitigation effort, it sounds like you've got the option to be on your front foot to the extent that you choose to be going into the year. You're just sort of curious what your expectation is in terms of loan demand as the year plays out. Yeah, hey, Scott, it's Tim. I'll take that one.

Speaker Change: You just sort of curious what your expectation is in terms of loan demand as the year plays out.

Speaker Change: Yeah, hey, Scott, it's Tim. I'll take that one.

Speaker Change: Yes, Hey, <unk>.

Speaker Change: Got it Tim I'll take.

Speaker Change: That understand.

Tim Spence: I mean, look, when we talk to customers today, I think in general, they're cautious, but not pessimistic. So rates and the election uncertainty are definitely weighing on the appetite for new investments in the near term. I don't know of anybody who's stopped an existing program or an existing investment, but they are being very careful about new expansion. So I don't expect that we're going to see a big pickup in loan demand. And I'm sure we'll get a question later on the economy. We're not expecting robust growth to drive the top line there. It's going to have to come.

Tim Spence: I mean, look, when we talk to customers today, I think, in general, they're cautious but not pessimistic. So rates and the election uncertainty are definitely weighing on the appetite for new investments in the near term. I don't know of anybody who's stopped an existing program or an existing investment, but they are being very careful about new expansion. So I don't expect that we're going to see a big pickup in loan demand. And I'm sure we'll get a question later on the economy. But we're not expecting robust growth to drive the top line there. It's going to have to come from market share gains.

Speaker Change: Look when we talk to customers today I think in general they are cautious, but not pessimistic at.

Speaker Change: Raytheon the election uncertainty is definitely weighing on the appetite.

Speaker Change: For new investments in the near term I don't know of anybody who has stopped an existing program or an existing.

Speaker Change: Our investment, but they are being very careful.

Speaker Change: About new expansion. So I don't expect that were going to see a big pickup in loan demand and I'm sure. We'll get a question later on the economy, we're not expecting robust growth to drive that topline there it's going to have to come from market share gains. So.

Tim Spence: from market share gains. So in our world, the key areas of investment there are very clearly in the middle market where we have been very focused in driving more granularity into the C&I portfolio. Our middle market loan production this past year was nearly 50-50 split between the Midwest markets, including Chicago, and then the Southeast markets and our expansion markets in California and Texas. And our sales force in those locations across the entire footprint is going to be up about 20% over a three-year period here for 2024. So we've got a good pent-up sales capacity there and high activity levels that will drive the outcome. And then I think the other area of strength has been in the healthcare and telecom media and technology verticals. And then in the fintech platform. The continued seasoning in of both provide and dividend portfolios. The last thing is the absence of a negative here, which is the auto business. Our deliberate rundown of the outstandings in the auto business have created a little bit of a drag on loan growth. And the combination of credit unions being a little bit more funding constrained and all the banks who exited have created a much more favorable environment for auto origination. So we expect volumes there to come up. We're generating a volume today with a weighted average FICO north of 780 and very attractive risk-adjusted spreads, and that should stop the headwind and give us a more stable platform from which we'll get growth through the rest of the year.

Tim Spence: So in our world, the key areas of investment there are very clearly in the middle market, where we have been very focused on driving more granularity into the C&I portfolio. Our middle market loan production this past year was nearly 50-50 split between the Midwest markets, including Chicago, and then the Southeast markets and our expansion markets in California and Texas. And our sales force in those locations across the entire footprint is going to be up about 20% over a three-year period here in 2024. So we've got a good pent-up sales capacity there and high activity levels that will drive the outcome.

Speaker Change: Our world and the key areas of investment there are at very clearly in the middle market, where we have been very focused in driving more granularity into the C&I portfolio, our middle market loan production. This past year was nearly 50 50 split between the Midwest markets, including Chicago and in the southeast markets are.

Expansion markets in California, and Texas, and our Salesforce in those locations across the entire footprint is going to be up about 20% over a three year period here.

Brian Preston: We expect full-year adjusted non-interest expense to be up around 1% compared to 2023. Our expense outlook assumes continued investments in technology, with tech expense growth in the mid to high single digits and Salesforce additions in the middle market, treasury management, and wealth. We will also close 29 branches in 2024 to offset costs associated with the 31 new branches opening in our high-growth southeast market. We expect first quarter total adjusted non-interest expense to be up around 8% compared to the fourth quarter. As is always the case for us, our first quarter expenses are impacted by seasonal items associated with the timing of compensation awards and payroll taxes. However, excluding the seasonal items, expenses would be flat in the first quarter.

Speaker Change: For 2024, so we've got a good pent up.

Tim Spence: And then, I think the other area of strength has been in the healthcare and telecom, media, and technology verticals. And then, in the fintech platform. The continued seasoning in of both provident and dividend portfolios. The last thing is the absence of a negative here, which is the auto business. Our deliberate rundown of the outstandings in the auto business has created a little bit of a drag on loan growth, and the combination of credit unions being a little bit more funding constrained and all the banks who have exited has created a much more favorable environment for auto origination.

<unk> capacity, there and high activity levels that will that will drive that.

Speaker Change: Outcome, and then I think the other area of strength has been in health care.

Speaker Change: And telecom media and technology verticals.

Speaker Change: And then in the Fintech platforms right. The continued seasoning in both provide.

Provide an dividend portfolios.

Speaker Change: The last thing is the absence of a negative here, which is the auto business, our deliberate rundown of the outstandings in the auto business that created a little bit of a drag on loan growth and the combination of credit unions being a little bit more funding constrained and all the banks, who exited have created a much more favorable environment for auto.

Tim Spence: So we expect volumes there to come up. We're generating volume today with a weighted average FICO north of 780 and very attractive risk-adjusted spreads, and that should stop the headwind and give us a more stable platform from which we'll get growth through the rest of the year.

Speaker Change: <unk>. So we expect volumes there to come up were generating a weighted volume today with a weighted average FICO north of 780, and very attractive risk adjusted spreads a napkin stopped the headwind.

Brian Preston: In total, our guide implies full-year adjusted revenue to be down 1% to 2% and PPNR to decline in the 4% to 5% range. This outcome will result in an efficiency ratio of around 57% for the full year, a modest increase relative to 2023, driven by the decrease in NIH. As Tim mentioned, we expect positive operating leverage in the second half of 2024 compared to the second half of 2023. Moving to credit, we continue to expect 2024 net charge-offs to be in the 35 to 45 basis point range as credit continues to normal, with first quarter net charge-offs in the 35 to 40 range. As we return to Lone Grove, we expect to resume provision bills.

Speaker Change: And give us a more stable platform from which we will get growth through the rest of the year.

Speaker Change: Perfect. Okay, great color. Thank you very much.

Speaker Change: Perfect. Okay, great call. Thank you very much.

Speaker Change: Absolutely.

Speaker Change: Your next question comes from the line of Gerard Cassidy of RBC. Your line is open.

Speaker Change: Question comes from the line of Gerard Cassidy of RBC. Your line is open.

Gerard Cassidy: Hi Tim, I'm Brian. Morning.

Gerard Cassidy: Hi Tim, I'm Brian. Good morning. Congratulations, Brian, on your new role, and if Jamie is listening, congratulations to him as well. Worse than that, Gerard, Jamie's here. I hear that laugh. That's great. Here's a great – and you touched on it, Tim, about the economy. Many of the banks, you as well, are following the forward curve for rates, which is understandable. And there continue to be signs that the U.S. economy is proving more resilient than we all expected. And so the question is this: For the upcoming year, what if we're all wrong and all of a sudden we see 2-plus percent real GDP growth, the Fed doesn't move on rates, maybe one or two cuts like what we saw in 1995, and credit remains even better?

Gerard Cassidy: Hi, Brian.

<unk>.

Gerard Cassidy: Congratulations, Brian, on your new role, and if Jamie is listening, congratulations to him as well. Worse than that, Gerard, Jamie's here. I hear that laugh. That's great. Here's a great – and you touched on it, Tim, about the economy. Many of the banks, you as well, are following the forward curve for rates, which is understandable. And there continue to be signs that the U.S. economy is proving more resilient than we all expected. And so the question is this. For the upcoming year, what if we're all wrong and all of a sudden we see 2-plus percent real GDP growth, the Fed doesn't move on rates, maybe one or two cuts like what we saw in 1995, and credit remains even better? How does that affect the way you approach what you've set up for? I know Brian gave us some color on the different interest rate scenarios, but what if we just come into this year – at the end of this year, it proves to be much stronger than any of us are expecting, and inflation stays around 3 percent?

Gerard Cassidy: Congratulations Brian on the new role and have Jamie is listening congratulations to him as well.

Gerard Cassidy: At worst than that derive jamie's here.

Speaker Change: I hear that laugh that's great.

Speaker Change: Here's a great yeah, and you touched on and Tim were about the economy.

Speaker Change: Many of the banks you as well.

Speaker Change: Following the forward curve for race, which is understandable and they're.

Speaker Change: You didnt be signs that the U S economy is proving more resilient than we all expected and so the question is this for the upcoming year wondering if we're all wrong and all of a sudden we see two 2% real GDP growth.

Brian Preston: Assuming no change to the economic outlook, loan growth and mix is expected to drive a $100 to $150 million of provision bill for the year, with the first quarter being in the $0 to $25 million range. The provision billed over the last three quarters of the year should be fairly. In summary, 2024 is expected to be a year of transition as we begin the shift to a rate-cutting cycle. With our well-positioned balance sheet, disciplined credit risk management, and commitment to delivering strong performance through the cycle, we will continue to generate long-term sustainable value for shareholders, customers, communities, and employees. With that, I will turn it over to Matt to open the call to questions and answers. Thanks, Brian.

Speaker Change: It doesn't move on rates may be one or two cuts like what we saw in <unk> 95.

Gerard Cassidy: How does that affect the way you approach what you've set up for? I know Brian gave us some color on the different interest rate scenarios, but what if we just come into this year and at the end of this year, the economy proves to be much stronger than any of us are expecting, and inflation stays around 3 percent?

Speaker Change: <unk>.

Speaker Change: Credit remains even better.

Speaker Change: The way you approach what you've set up for 2004, I know, Brian gave us some color on the different interest rate scenarios, but wonderfully just come into this year at the end of this year proves to be much stronger than any of us are expecting an inflation stays around 3%.

Speaker Change: Yes.

I'll leave it to Brian to provide more.

Matt Burnell: Before we start Q&A, given the time we have this morning, we ask that you limit yourself to one question and a follow-up, and then return to the queue if you have additional questions. Operator, please open the call for Q&A. Thank you. And again, if you have a question, please press star 1 on your telephone keypad. And if you wish to remove yourself from the queue, simply press star 1 again.

Speaker Change: Tailed gerard but I'm glad you asked that question because if there is one frustration I have a in particular on the way that the media is reporting on economic activity as they're treating the world like it's deterministic and it's not right. It's stochastic in terms of the outcomes here and while you can see the slowdown in <unk>.

Speaker Change: <unk> you can see some slowdown in the economy in particular in specific sectors. It's just hard to be certain given that they impact of deficit spending in a way that has continued to provide a buffer against any consumer slowdown.

Operator: One moment, please, for your first question. Your first question comes from the line of Scott Seifers on Piper Sandler. Your line is open. Good morning, everybody.

Scott Siefers: Thank you for taking the question. A lot of good color on the NII expectations, so I appreciate that. I guess just within there, I think, Brian, you noted your comment about deposit costs decreasing through the course of this year. Maybe a thought or two on how those trajectories will differ, in your view, between the commercial and the consumer portfolios? Thanks, Scott. Great question.

Speaker Change: As bad.

The possibility that maybe we returned to a world where recessions in the U S. A regional as opposed to being national phenomenon, which people have forgotten about because of the last two were driven by a global health pandemic and a global financial crisis. So we are trying to run the company in a way that that provides an outlook on that day.

Speaker Change: Expected outcomes in the middle of the distribution, but that manages to a much more stable return profile in the event, we get into either of the tails right more robust economic growth stickier inflation on one side of the equation and therefore the fed.

Brian Preston: We'd tell you that, obviously, similar to what we've seen from a rising rate perspective, the commercial and the wealth betas, in particular, have come through recently at a much higher level. We're in the range of probably low to high 80s from a beta perspective in both of those businesses, and cumulative betas have started to reach that point.

Speaker Change: Not being able to come off.

Speaker Change: So restrictive policies as fast and.

Brian Preston: So we're going to get a lot of repricing out of those portfolios as rates move lower. To give you a little bit of perspective, our indexed commercial deposits right now are up around $30 billion, so that gives us a lot of confidence in our ability to get some value out of that book. The consumer book is one that the betas, the cumulative betas in that book are kind of in the mid-30s right now.

Speaker Change: The other alternative where I think you have to say you have some sort of a geopolitical event that creates a price shock in energy and other supply chain issue or otherwise, which could trigger an unexpected slowdown so bryan maybe a little color on the upside.

Speaker Change: Yeah, absolutely. I think the scenario that you're laying out there with fewer Fed cuts, continued strength from an economic perspective, that's not a remote scenario in our view. We feel like that is something that could very easily happen, especially in the first half of the year, as we continue to see potentially some strong resiliency from the consumer.

Speaker Change: Yeah, absolutely. I think the scenario that you're laying out there with fewer Fed cuts, and continued strength from an economic perspective, that's not a remote scenario in our view. We feel like that is something that could very easily happen, especially in the first half of the year, as we continue to see potentially some strong resiliency from the consumer. What that means for us, and it's a big part of the actions that we've taken thus far, is that we think that could cause the long end of the curve to move up a little bit. That would actually be beneficial for us as we get an even greater benefit from the fixed-rate asset repricing.

Bryan: Yes, absolutely I think the scenario that you're laying out there with fewer fed cuts continued strength from an economic perspective.

Bryan: It's not a remote scenario in our view, we feel like that is something that could very easily have been especially in the first half of the year as we continue to see potentially some strong resiliency from the consumers.

Brian Preston: It's certainly moved up from a marginal perspective, and we continue to have a lot of optionality between our promos and exceptions. As well as what we've done from a CDE perspective, where we're going to be able to get rate cuts out of those portfolios as well. Our CDE book, which is $10 billion now, is fairly evenly laddered across the year with about 25% maturities across each quarter. We've been very careful as part of our pricing strategy to make sure that we could be able to reprice those down quickly in the right environment. Thank you.

Speaker Change: What that means for us, and it's a big part of the actions that we've taken thus far, is that we think that could cause the long end of the curve to move up a little bit. That would actually be beneficial for us as we get an even greater benefit from the fixed-rate asset repricing. We've talked previously that a full-year impact of fixed-rate asset repricing should generate about $300 million of annualized run rate NII improvement. And that number would look even better if we saw that long end move up. It also is part of the rationale associated with shifting some of our securities into HTM. So a stronger economy is one that we're actually, would obviously always hope for because we're very well positioned for that. To quote Jamie, you can't spell flexibility without F-I-T-B. That's something that we have been very focused on and recognizing that we can be wrong on both sides, the economy weaker or stronger, and we're well positioned.

Bryan: What that means for us and it's a big part of the actions that we've taken thus far is that we think that could cause the long end of the curve to move up a little bit that would actually be beneficial for us as we get an even greater benefit from the fixed rate asset repricing. We've talked previously that full year impact of fixed rate asset repricing should generate about $300 million of annual.

Speaker Change: We've talked previously that a full-year impact of fixed-rate asset repricing should generate about $300 million of annualized run rate NII improvement. And that number would look even better if we saw that long end move up. It also is part of the rationale associated with shifting some of our securities into HTM.

Bryan: <unk> run rate NII improvement in.

Bryan: And that number would look even better if we saw that long and it also is part of the rationale associated with shifting some of our securities into HTM. So.

Scott Siefers: And separately, so given that you're done with the RWA mitigation effort, it sounds like you've got the option to be on your front foot to the extent that you choose to be going into the year. You're just sort of curious what your expectation is in terms of loan demand as the year plays out. Yeah, hey, Scott, it's Tim.

Speaker Change: So a stronger economy is one that we're actually, would obviously always hope for because we're very well positioned for that. To quote Jamie, you can't spell flexibility without F-I-T-B. That's something that we have been very focused on and recognizing that we can be wrong on both sides, the economy weaker or stronger, and we're well positioned.

Bryan: <unk> economy is one that we're actually would obviously always hoped for because we're very well positioned for that quote Jamie you can't spell flexibility without television that's something that we have been very focused on and recognizing that we can be wrong on both sides of the economy weaker or stronger and we're well positioned for that.

Tim Spence: I'll take that one. I mean, look, when we talk to customers today, I think, in general, they're cautious but not pessimistic. So rates and the election uncertainty are definitely weighing on the appetite for new investments in the near term. I don't know of anybody who's stopped an existing program or an existing investment, but they are being very careful about new expansion.

Speaker Change: Very good. Thank you. And then another bigger picture question, Tim, I think you touched on your middle market business customers grew 11% year over year. And then later in the comments, I think you said that, you know, you got to take these customers or clients from maybe other banks. How are you guys doing that? And then if you could tie it into that loan to deposit ratio, I think you guys said you're at 72%. What's the ideal level that you'd eventually like to get to? Thank you.

Speaker Change: Very good. Thank you. And then another bigger picture question, Tim, I think you touched on your middle market business customers growing 11% year over year. And then later in the comments, I think you said that, you know, you got to take these customers or clients from maybe other banks. How are you guys doing that? And then if you could tie it into that loan to deposit ratio, I think you guys said you're at 72%. What's the ideal level that you'd eventually like to get to? Thank you.

Speaker Change: Very good. Thank you and then and then a bigger picture question, Tim I think you touched on your middle market business customers grew 11% year over year.

Tim Spence: So I don't expect that we're going to see a big pickup in loan demand. And I'm sure we'll get a question later on the economy. We're not expecting robust growth to drive the top line there.

Speaker Change: And then later in the comments I think you said that you're going to take these customers or clients for maybe other banks. How are you guys doing that and then if you could tie it into that loan to deposit ratio. I think you guys said youre at 72%, what's the ideal level that you had.

Tim Spence: It's going to have to come from market share gains. So in our world, the key areas of investment there are very clearly in the middle market, where we have been very focused on driving more granularity into the C&I portfolio. Our middle market loan production this past year was nearly 50-50 split between the Midwest markets, including Chicago, and then the Southeast markets and our expansion markets in California and Texas.

Speaker Change: We'd like to get too. Thank you, yes and.

Speaker Change: Yeah, and

Tim Spence: I mean, I think it's a combination of things, Gerard. The first one is we've been very deliberate to select a few places and invest multi-year when we think about how we invest strategically, right? So the Southeast is obviously a key point of focus there. And I know a lot of people are investing in the Southeast, but it bears reminding that we've been in nearly every one of the markets down there for more than 15 years. And we're not running small LPOs. We have more than 200 client-facing people in those markets across commercial banking and wealth management alone. And then like another 1,700 that sit in more than 300 branches. And the brand is seeded in those markets. So those investments, when you make them, you make the investment in year one, but they don't actually hit the sort of peak benefit until year five or six. So you have this accumulation, I guess a coiled spring for lack. Of a better term that supports then more sustained growth. We have the same benefit in the Midwest, in Chicago in particular. I mean, we added nearly 100 new quality relationships in Chicago in the middle market alone last year and have been gaining share pretty steadily. At least if you use the FDIC deposit share measures as the guide in Chicago, because we're still seeing the benefits that we got out of the combination. Between a fifth third and MB in those markets, the other area that we are winning where we win is through the strength of the treasury management and the capital markets platform, which really is a middle market focused offering for fifth third, about a third of the new quality relationships we added in treasury management last year were treasury management only. So as opposed to being a follow on product that you deliver into a customer that you've lent money to, they're actually contributing. To the relationship acquisition and that's an engine that just wouldn't have existed here in the past and I think still doesn't exist inside most of our peers.

Tim Spence: I mean, I think it's a combination of things, Gerard. The first one is that we've been very deliberate in selecting a few places and investing over a multi-year period when we think about how we invest strategically, right? So the Southeast is obviously a key point of focus there, and I know a lot of people are investing in the Southeast, but it bears reminding that we've been in nearly every one of the markets down there for more than 15 years. And we're not running small LPOs. We have more than 200 client-facing people in those markets across commercial banking and wealth management alone.

I mean, I think it's a combination of things drew what are the first one is we've been very deliberate.

Speaker Change: Select a few places in invest mode add multi year, when we think about how we invest strategically right. So the southeast is obviously a key point of focus there.

Tim Spence: And our sales force in those locations across the entire footprint is going to be up about 20% over a three-year period here for 2024. So we've got a good pent-up sales capacity there and high activity levels that will drive the outcome. And then I think the other areas of strength have been in the healthcare and telecom, media, and technology verticals. And then in the fintech platform.

Speaker Change: And I know a lot of people are investing in the southeast, but it bears reminding that we've been in nearly every one of the markets down there for more than 15 years, and we're not running small lpl's, we have more than 200 client facing people in those markets across commercial banking and wealth management alone and then like another 700 that said and more than <unk>.

Tim Spence: And then, like another 1,700 that sit in more than 300 branches, and the brand is seeded in those markets. So those investments, when you make them, you make the investment in year one, but they don't actually hit the sort of peak benefit until year five or six. So you have this accumulation, I guess a coiled spring for lack. Of a better term that supports more sustained growth. We have the same benefit in the Midwest, in Chicago in particular. I mean, we added nearly 100 new quality relationships in Chicago in the middle market alone last year and have been gaining share pretty steadily.

Tim Spence: The continued seasoning in of both the provide and dividend portfolios. The last thing is the absence of a negative here, which is the auto business. Our deliberate rundown of the outstandings in the auto business has created a little bit of a drag on loan growth.

Speaker Change: 300 branches and the brand is seeded in those market. So those investments when you make them you make the investment in year, one, but they don't actually hit the peak benefit until year five or six so you have this accumulation.

Tim Spence: And the combination of credit unions being a little bit more funding constrained and all the banks who have exited have created a much more favorable environment for auto origination. So we expect volumes there to go up. We're generating volume today with a weighted average FICO north of 780 and very attractive risk-adjusted spreads, and that should stop the headwind and give us a more stable platform from which we'll get growth through the rest of the year. Okay, great call. Thank you very much.

Speaker Change: I guess, a coiled spring for lack of a better term that supports then at more sustained growth.

The same benefit in the Midwest in Chicago in particular, I mean, we added nearly 100, new quality relationships in Chicago in the middle market alone last year and have been gaining share pretty steadily at least if you use the FDIC deposit share measures as the guide in Chicago.

Tim Spence: At least if you use the FDIC deposit share measures as the guide in Chicago, because we're still seeing the benefits that we got out of the combination. Between a fifth third and MB in those markets, the other area that we are winning where we win is through the strength of the treasury management and the capital markets platform, which really is a middle market focused offering for Fifth Third. About a third of the new quality relationships we added in So as opposed to being a follow-on product that you deliver to a customer that you've lent money to, they're actually contributing to the relationship acquisition, and that's an engine that just wouldn't have existed here in the past and, I think, still doesn't exist inside most of our peers.

Scott Siefers: Your next question comes from the line of Gerard Cassidy of RBC. Your line is open. Hi Tim, I'm Brian.

Speaker Change: We're still seeing the benefits that we got out of the combination between at fifth third and MB in those markets. The other area that we are winning where we win is through the strength of the Treasury management and our capital markets platform, which really is a middle market focused offering for fifth third about a third of it.

Gerard Cassidy: Morning. Congratulations, Brian, on your new role, and if Jamie is listening, congratulations to him as well. Worse than that, Gerard, Jamie's here.

Jamie Leonard: I hear that laugh. That's great. Here's a great – and you touched on it, Tim, about the economy. Many of the banks, you as well, are following the forward curve for rates, which is understandable. And there continue to be signs that the U.S. economy is proving more resilient than we all expected. And so the question is this: For the upcoming year, what if we're all wrong and all of a sudden we see 2-plus percent real GDP growth, the Fed doesn't move on rates, maybe one or two cuts like what we saw in 1995, and credit remains even better? How does that affect the way you approach what you've set up for?

Speaker Change: New quality relationships, we added in Treasury management last year, where treasury management, only so as opposed to being a follow on product that you're delivering to a customer that you've lent money to they're actually contributing to the relationship acquisition.

Speaker Change: And that's an engine it just wouldn't have existed here in the past and I think still doesn't exist.

Speaker Change: Inside most of our peers.

Speaker Change: Thank you.

Thank you.

Speaker Change: Yes.

Speaker Change: Right.

Speaker Change: Your next question comes from the line of Mike Mayo of Wells Fargo Securities. Your line is open.

Mike Mayo: Hey Mike, I'll ask a question about the quarter, then re-queue for bigger picture questions, but you don't hear too many regionals talking about buybacks like you are right now, but you have a lot of numbers here tossing out there. You have a 7% CET1 minimum, 7.7%, and 10.5% by mid-year. You know, it might be better on the buybacks of $300 to $400 million, depending on the rules. So, I guess I just want to be a little more concrete. So, are you sure that you want to be talking about buybacks as much as you are now, and what gives you confidence in doing so? And then on the other side of that, you say if the rules get eased, then you might be able to buy back more than $300 million or $400 million. So just give us the kind of the whole range of options if you could.

Mike Mayo: Mike Pyle, Hey, I'll ask a question about the quarter, then re queue for bigger picture question, but.

Mike Mayo: You don't hear too many regional is talking about buybacks, but you are right now so but you have a lot of numbers here.

Tim Spence: I know Brian gave us some color on the different interest rate scenarios, but what if we just come into this year and, at the end of this year, the economy proves to be much stronger than any of us are expecting, and inflation stays around 3 percent? I'll leave it to Brian to provide more detail, Gerard, but I'm glad you asked that question because if there is one frustration I have, in particular with the way that the media is reporting on economic activity, they're treating the world like it's deterministic, and it's not, right? It's stochastic in terms of the outcomes here, and while you can see the slowdown in inflation, you can see some slowdown in the economy, in particular in specific sectors.

Mike Mayo: tossing out there. You have a 7% CET1 minimum, 7.7%, 10.5% by mid-year. You know, it might be better on the buybacks of $300 to $400 million, depending on the rules. So, I guess I just want to be a little more concrete. So,

Mike Mayo: <unk> out there you have a 7% CET one minimum.

Seven 7% 10, 5% by mid year.

Speaker Change: Yes, it might be better on the buybacks in the 300 or $400 million, depending on the role. So I guess I just wanted to be a little more concrete so.

Speaker Change: Are you sure that you want to be talked about buybacks as much as you are now and what gives you confidence in doing so and then the other side of that as you say if the rules get eased.

Mike Mayo: Are you sure that you want to be talking about buybacks as much as you are now and what gives you confidence in doing so? And then the other side of that is you say if the rules get eased, then you might be able to buy back more than the $300 million, $400 million. So just give us the kind of the whole range of options if you could.

Might be able to buyback more than the 300 $400 million.

Speaker Change: So just give us the.

Kind of a whole range of options if you could.

Tim Spence: It's just hard to be certain given the impact of deficit spending and the way that has continued to provide a buffer against any consumer slowdown, and I think the possibility that maybe we will return to a world where recessions in the U.S. are regional as opposed to being national phenomena, which I think people have forgotten about because the last two were driven by a global health pandemic and a global financial crisis. So we're trying to run the company in a way that provides an outlook on the expected outcomes in the middle of the distribution, but that manages to have a much more stable return profile in the event we get into either of the tails, right? More robust economic growth, stickier inflation on one side of the equation, and therefore the Fed not being able to come off of its restrictive policies as fast, and the other alternative, where I think you have to say you have some sort of a geopolitical event that creates a price shock or energy or another supply chain issue or otherwise, which could trigger an unexpected slowdown. So Brian, maybe a little color on the upside.

Speaker Change: Yeah, Mike, and what we would tell you on the buybacks and in particular on the rule, the

Speaker Change: Yeah, Mike, and what we would tell you on the buybacks and in particular on the rule, there appears to be momentum associated with some relief on both the ops risk side and the credit risk RWA. As we've continued to refine our estimate from an RWA perspective, the rule as proposed is a low single-digit impact from an RWA perspective, and almost seven points of RWA are created by the ops risk rule. So if that is pared back, we could actually see our RWA go down under the new rule, which obviously creates a lot of incremental capacity for us as we think about how much capital we need to help run the company from a long-term perspective.

Speaker Change: Yes, Mike and what we would tell you on the buybacks and in particular on the rule.

Speaker Change: There is there appears to be momentum associated with some relief on both the ops risk side and the credit risk <unk>.

Speaker Change: There appears to be momentum associated with some relief on both the ops risk side and the credit risk RWA. As we've continued to refine our estimate from an RWA perspective, the rule as proposed is a low single-digit impact from an RWA perspective, and almost seven points of RWA is created by the ops risk rule. So if that is pared back, we could actually see our RWA go down under the new rule, which obviously creates a lot of incremental capacity for us as we think about how much capital we need to help run the company from a long-term perspective. Additionally, we have a lot of confidence in the stability of the capital ratios going forward and the pace at which we're creating capital. That, in combined with the actions that we've taken from a security portfolio perspective to de-risk the portfolio with the HTM election, as well as just the continued benefit that we're going to get from roll-in on the remaining AFS portfolio, it just puts us in a position where we are going to have a lot of capital generation and a lot of ability to have flexibility to return capital if the organic growth opportunities are met.

Speaker Change: As we've continued to refine our estimate from an <unk> perspective. The rule as proposed is a low single digit impact from an <unk> perspective, and almost seven points of <unk> is created by the <unk> rule. So that is paired back we could actually see <unk> go down under the new rule.

Speaker Change: Which obviously creates a lot of incremental capacity for us as we think about how much capital we need to help run the company from a long term perspective.

Speaker Change: Additionally, we have a lot of confidence in the stability of the capital ratios going forward and the pace at which we're creating capital. That, combined with the actions that we've taken from a security portfolio perspective to de-risk the portfolio with the HTM election, as well as just the continued benefit that we're going to get from rolling-in on the remaining AFS portfolio, puts us in a position where we are going to have a lot of capital generation and a lot of ability to have flexibility to return capital if the organic growth opportunities are met.

Speaker Change: Additionally, we have a lot of confidence in the stability of the capital ratios going forward and the pace at which we are creating capital that and combined with the actions that we've taken from our security portfolio perspective to Derisk the portfolio with the HTM election, as well as just the continued benefit that we're going to get from Roland on the remaining portfolio.

Speaker Change: It just puts us in a position where we're going to have a lot of capital generation and a lot of ability to have flexibility to return capital if the organic growth opportunities arent, there, yes, and Mike I think the one thing I would add to what Bryan said is we've tried to be very clear and transparent that our belief is it's always better if you have to.

Brian Preston: Yeah, absolutely. I think the scenario that you're laying out there with fewer Fed cuts, and continued strength from an economic perspective, that's not a remote scenario in our view. We feel like that is something that could very easily happen, especially in the first half of the year, as we continue to see potentially some strong resiliency from the consumer. What that means for us, and it's a big part of the actions that we've taken thus far, is that we think that could cause the long end of the curve to move up a little bit. That would actually be beneficial for us as we get an even greater benefit from the fixed-rate asset repricing. We've talked previously that a full-year impact of fixed-rate asset repricing should generate about $300 million of annualized run rate NII improvement. And that number would look even better if we saw that long end move up.

Speaker Change: Yeah, and Mike, I think the one thing I would add to what Brian said is we've tried to be very clear and transparent that our belief is it's always better if you have to make a change to adapt to new regulation, it's better to get there first. We did that as it related to consumer deposit fees, right, and very deliberate about being early there because we just viewed those profit pools as being unsustainable. I think we were clear this past summer and through the fall and winter that our intention on putting ourselves on the RWA diet and focusing as much as we did on building liquidity was that we wanted to get to the rules there first because of the flexibility that it provided. So, you know, we ended the year at roughly 10.3 in terms of the CET1. We said we wanted to get to 10.5. You know, we'll get there just based on the current run rate. In the middle of the second quarter, if you had to pick a particular spot, and that gives us then the ability to return to share repurchases subject to the environment not changing, maybe a little bit earlier than others.

Speaker Change: Yeah, and Mike, I think the one thing I would add to what Brian said is that we've tried to be very clear and transparent that our belief is it's always better if you have to make a change to adapt to new regulation; it's better to get there first. We did that as it related to consumer deposit fees, right, and we were very deliberate about being early there because we just viewed those profit pools as being unsustainable. I think we were clear this past summer and through the fall and winter that our intention was to put ourselves on the RWA diet and focus as much as we did on building liquidity was that we wanted to get to the rules there first because of the flexibility that it provided.

Speaker Change: To make a change to adapt to new regulation, it's better to get there first and we did that as it related to consumer deposit fees bright and very deliberate about being early there because we just viewed those profit pools as being a sustainable I think we were clear this past summer and through the fall and winter that our intention on.

Speaker Change: Putting ourselves on the <unk> diet and focusing as much as we get on building liquidity was that we wanted to get to the rules there first because of the flexibility that it provided so.

Brian Preston: It also is part of the rationale associated with shifting some of our securities into HTM. So a stronger economy is one that we're actually, would obviously always hope for because we're very well positioned for that. To quote Jamie, you can't spell flexibility without F-I-T-B.

Speaker Change: So, you know, we ended the year at roughly 10.3 in terms of CET1. We said we wanted to get to 10.5. You know, we'll get there just based on the current run rate. In the middle of the second quarter, if you had to pick a particular spot, and that gives us then the ability to return to share repurchases, subject to the environment not changing, maybe a little bit earlier than others.

Speaker Change: We ended the year at roughly 10 three in terms of the CET. One we said we wanted to get to 10, 5%.

Speaker Change: We will get there and just based on the current run rate in the middle of the second quarter, you had to pick a particular spot and that gives us of that and the ability to return to share repurchases subject to the environment not changing maybe a little bit earlier.

Jamie Leonard: That's something that we have been very focused on and recognizing that we can be wrong on both sides, the economy weaker or stronger, and we're well positioned. Very good. Thank you.

Speaker Change: Than others.

Speaker Change: And a short follow-up. So if the Basel III gets gutted, I guess not a high probability, but some have mentioned that recently, then your RWAs obviously would be flat. So you might be better off if they change the opt-for-all and it passes. Did I get that right? Yeah. Other than if it truly gets gutted and the AOCI impact, that would be a better option than even if the opt-for-risk rule got gutted.

Speaker Change: And a short follow-up. So if Basel III gets gutted, I guess not a high probability, but some have mentioned that recently, then your RWAs obviously would be flat. So you might be better off if they change the opt-for-all and it passes. Did I get that right? Yeah. Other than if it truly gets gutted and the AOCI impact, that would be a better option than even if the opt-for-risk rule gets gutted.

Speaker Change: And a short follow up.

Speaker Change: Basel III gets got it I guess not a high probability, but some have mentioned that recently.

Gerard Cassidy: And then another bigger picture question, Tim, I think you touched on your middle market business customers growing 11% year over year. And then later in the comments, I think you said that, you know, you got to take these customers or clients from maybe other banks. How are you guys doing that? And then if you could tie it into that loan to deposit ratio, I think you guys said you're at 72%. What's the ideal level that you'd eventually like to get to? Thank you. Yeah, and, I mean, I think it's a combination of things, Gerard.

Speaker Change: <unk>, obviously would be flat, so you might be better off if they change the opt role and it passes and I get that right yes.

Speaker Change: Other than if it truly gets got it in the OCI impact that would be a better option than even if.

Speaker Change: After risk Rogue I got it so yes.

Speaker Change: Thank you.

Speaker Change: Okay. Thank you.

Speaker Change: Okay, thank you.

Speaker Change: Yes.

Speaker Change: Your next question comes from the line of Abraham Punawala of Bank of America. Your line is open.

Speaker Change: Your next question comes from the line of Ebrahim <unk> of Bank of America. Your line is open.

Ebrahim: Hey, good morning.

Abraham Punawala: Good morning. Good morning. I guess two questions. One, first on trying to make sense of the loan to deposit ratio at 70%.

Abraham Punawala: Good morning. Good morning. I guess there are two questions. One, first, on trying to make sense of the loan to deposit ratio at 70%. Relative to Fifth Third history prior to the pandemic, and even relative to some of your peers, is a 70% loan to deposit ratio the new normal for the bank? I'm trying to understand if there's anything idiosyncratic about the deposit base that requires you to hold and operate with a lower loan to deposit ratio.

Tim Spence: The first one is we've been very deliberate in selecting a few places and investing for the long term when we think about how we invest strategically, right? So the Southeast is obviously a key point of focus there. And I know a lot of people are investing in the Southeast, but it bears reminding you that we've been in nearly every one of the markets down there for more than 15 years. And we're not running small LPOs. We have more than 200 client-facing people in those markets across commercial banking and wealth management alone. And then there are another 1,700 that sit in more than 300 branches.

Ebrahim: I guess two questions one first on.

Ebrahim: Trying to make sense of the loan to deposit ratio at 70%.

Abraham Punawala: Relative to Fifth Third History prior to the pandemic, and even relative to some of your peers, is a 70% loan to deposit ratio the new normal for the bank?

Ebrahim: Relative to fifth third history prior to the pandemic and even relative to some of your peers.

It is a 70% loan to deposit ratio the new normal for the bank or <unk>.

Abraham Punawala: Trying to understand if there's anything idiosyncratic about the deposit base that requires you to hold and operate with a lower loan deposit ratio.

Ebrahim: Trying to understand if there's anything idiosyncratic about the deposit base that requires you to hold and operate with a lower loan to deposit ratio.

Speaker Change: Great question. I would tell you that 72% is not our long-term target, but I would say that our loan-to-deposit ratio has come down relative to pre-pandemic levels, and a big portion of that is just heightened expectations regarding liquidity. So I would expect us to operate in the mid-70s more than likely from a long-term perspective with loan-to-deposit. We will probably mid-80s pre-pandemic, so that is something that we would expect to continue, but we do think that we can move up from the current level.

Speaker Change: Great question. I would tell you that 72% is not our long-term target, but I would say that our loan-to-deposit ratio has come down relative to pre-pandemic levels, and a big portion of that is just heightened expectations regarding liquidity. So I would expect us to operate in the mid-70s, more than likely from a long-term perspective with loan-to-deposit. We will probably be in the mid-80s pre-pandemic, so that is something that we would expect to continue, but we do think that we can move up from the current level.

Speaker Change: Great question I would tell you that 72% is not our long term target, but I would say that our loan our loan to deposit ratio has come down relative to pre pre pandemic levels and a big.

Tim Spence: And the brand is seeded in those markets. So those investments, when you make them, you make the investment in year one, but they don't actually hit the sort of peak benefit until year five or six. So you have this accumulation, I guess a coiled spring for lack of a better term that supports then more sustained growth. We have the same benefit in the Midwest, in Chicago, in particular.

A big portion of that is just heightened expectations regarding liquidity.

Speaker Change: So I would expect us to operate in the mid seventies more than likely from a long term perspective with loan to deposit we will probably mid <unk> pre pandemic. So that is something that we would expect to continue but we do think that we can move up from the current levels.

Tim Spence: I mean, we added nearly 100 new quality relationships in Chicago in the middle market alone last year and have been gaining share pretty steadily, at least if you use the FDIC deposit share measures as the guide in Chicago because we're still seeing the benefits that we got out of the combination. Between a fifth-third and MB in those markets, the other area that we are winning where we win is through the strength of the treasury management and the capital markets platform, which really is a middle market focused offering for fifth third. About a third of the new quality relationships we added to treasury management last year were treasury management only. So as opposed to being a follow-on product that you deliver to a To relationship acquisition, and that's an engine that just wouldn't have existed here in the past and, I think, still doesn't exist inside most of our peers.

Got it and I guess, a separate question maybe for Tim.

Speaker Change: Got it. And I guess a separate question maybe for Tim. I think you tried to sort of

Speaker Change: Got it. And I guess a separate question, maybe for Tim. I think you tried to sort of

Tim Spence: You'd like to sort of.

Tim Spence: Draw some distance between you and some of your peers around the Southeast, technology investments.

Tim Spence: Draw some distance between you and some of your peers around the Southeast on technology investments.

Tim Spence: Draw some distance between you and some of your peers around the southeast technology investments.

Tim Spence: If we take those statements and account for how do you think this should reflect into should Fisker become a higher growth bank relative to these banks, a more efficient bank? Like what should we be measuring you against and do we start seeing that this year and next year or is this more of a longer term process? Yeah, great.

Tim Spence: If we take those statements and account for them, how do you think this should reflect in terms of Fisker becoming a higher growth bank relative to these banks, a more efficient bank? Like what should we be measuring it against, and do we start seeing that this year and next year, or is this more of a longer-term process? Yeah, great.

Tim Spence: If we take those statements and account for how do you think this should reflect into fiscal become a higher growth bank relative to these banks are more efficient bank like what should we be measuring you against and we're seeing that this year and next year or is this more of a longer term.

Speaker Change: Yes, great question.

Jamie Leonard: Thank you. Your next question comes from the line of Mike Mayo of Wells Fargo Securities. Your line is open.

Speaker Change: Maybe a nuance I'm less trying to draw a distinction between us and others than I am to say that you can't get what we think we have in terms of.

Speaker Change: The advantages overnight right theyre not advantages that can be built in one to two years, they require steady and consistent investment which of course has been the philosophy here.

Speaker Change: Long with the belief that you have to find ways to self fund it through.

Speaker Change: Efficiency and better productivity, along along the way.

Speaker Change: I'm hesitant to say fifth third is going to be a growth bank because I think four or five of the people who are described as growth banks failed. This past year. Our belief, though is that great company should be able to take market share on an organic basis. So if you assume that.

Speaker Change: That base market growth is somewhere around 2% or at least say financial services.

Brian Preston: Yeah, Mike, and what we would tell you on the buybacks and in particular on the rule, there appears to be momentum associated with some relief on both the ops risk side and the credit risk RWA. As we've continued to refine our estimate from an RWA perspective, the rule as proposed is a low single-digit impact from an RWA perspective, and almost seven points of RWA are created by the ops risk rule. So if that is pared back, we could actually see our RWA go down under the new rule, which obviously creates a lot of incremental capacity for us as we think about how much capital we need to help run the company from a long-term perspective. Additionally, we have a lot of confidence in the stability of the capital ratios going forward and the pace at which we're creating capital.

Speaker Change: Sector should be able to track GDP. There is a headwind with the emergence of all of these nonbank competitors. Therefore, the more realistic goal from my perspective is to try to beat GDP by a couple of percentage points on an annualized basis, which probably means you need to have 3% to 4% outsized growth relative to your market.

Speaker Change: These granular.

Speaker Change: Investments, we're making across the southeast are definitely part of the way that.

Speaker Change: And Matriculates.

Speaker Change: And the performance I think the other place than that you should expect to see it given where we are investing is continued support for our better fees to total revenue mix.

Speaker Change: <unk> is going to be really critically important in the event that the rules as they are proposed do pass because of the impact that higher capital and liquidity requirements.

Brian Preston: That, combined with the actions that we've taken from a security portfolio perspective to de-risk the portfolio with the HTM election, as well as just the continued benefit that we're going to get from rolling-in on the remaining AFS portfolio, puts us in a position where we are going to have a lot of capital generation and a lot of ability to have flexibility to return capital if the organic growth opportunities are met. Yeah, and Mike, I think the one thing I would add to what Brian said is that we've tried to be very clear and transparent that our belief is it's always better if you have to make a change to adapt to new regulations; it's better to get there first.

We're going to have and youre seeing that today.

Speaker Change: Core fifth third consumer franchise. If you just look at household acquisition as a measure is outgrowing Midwest population growth by about one 5% per year, it's outgrowing the southeast markets by about four percentage points.

Speaker Change: Per year.

Speaker Change: So you can see the impact of the incremental investment if you just disaggregate our business and look at it on a market-by-market basis. Jamie, maybe you want to add something here? Yeah, Ibrahim, maybe to tie your two questions together, on the loan-to-deposit ratio, part of the improvement has been the strong...

Speaker Change: So you can see the impact of the incremental investment if you just disaggregate our business and look at it on a market by market basis, Jamie maybe you want to add something here yeah Ebrahim on maybe to tie your two questions together on the loan to deposit ratio part of the.

Brian Preston: We did that as it related to consumer deposit fees, right, and we were very deliberate about being early there because we just viewed those profit pools as being unsustainable. I think we were clear this past summer and through the fall and winter that our intention was to put ourselves on the RWA diet and focus as much as we did on building liquidity was that we wanted to get to the rules there first because of the flexibility that it provided. So, you know, we ended the year at roughly 10.3 in terms of CET1. We said we wanted to get to 10.5 You know, we'll get there just based on the current run rate. In the middle of the second quarter, if you had to pick a particular spot, that gives us then the ability to return to share repurchases, subject to the environment not changing, maybe a little bit earlier than others. And a short follow-up. So if Basel III gets gutted, I guess not a high probability, but some have mentioned that recently, then your RWAs obviously would be flat. So you might be better off if they change the opt-for-all and it passes. Did I get that right?

<unk> has been strong.

Jamie Leonard: Deposit growth we've been able to get both from the RWA diet, which I talked about a couple quarters ago, just how customer reaction resulted in more deposits and a better share of wallet. And that continued in the fourth quarter. Commercial deposits, you see in the numbers, are up nicely. And then on the southeast, we actually grew deposits in the southeast 5% just in the fourth quarter. And so you do get that growth in the numbers, but the midwest still grew in total about 1%. So we've got a very nice balance here of midwest and southeast. And I was down in South Carolina on Wednesday. We opened our 10th branch in South Carolina this week and have plans to do 25 more over the next five years. So I think you'll continue to see the benefits of the investments over the last three years as we continue to really expand that southeast price. All right.

Jamie Leonard: Deposit growth We've been able to get both from the RWA diet, which I talked about a couple quarters ago, just how customer reaction resulted in more deposits and a better share of wallet. And that continued in the fourth quarter. Commercial deposits, you see in the numbers, are up nicely. And then on the southeast, we actually grew deposits in the southeast by 5% just in the fourth quarter. And so you do get that growth in the numbers, but the Midwest still grew by about 1%. So we've got a very nice balance here of the Midwest and southeast.

Jamie Leonard: Deposit growth, we've been able to get both from the <unk> Dyer, which I've talked about a couple of quarters ago just how.

Jamie Leonard: Customer reaction resulted in more deposits on a better share of wallet and that continued in the fourth quarter in commercial deposits you see in the numbers are up.

Jamie Leonard: Up nicely and then on the southeast we actually grew deposits of the southeast 5%.

Jamie Leonard: Just in the fourth quarter and so you do get that growth in the numbers, but the Midwest still grew in total about 1%. So we've got a very nice.

Jamie Leonard: And I was down in South Carolina on Wednesday. We opened our 10th branch in South Carolina this week and have plans to do 25 more over the next five years. So I think you'll continue to see the benefits of the investments over the last three years as we continue to really expand that southeast price. All right.

Jamie Leonard: Balance here of Midwest, and southeast and I was down in South Carolina on Wednesday, We opened our 10th branch in South Carolina. This.

Jamie Leonard: This week.

Jamie Leonard: We have plans to do 25 more over the next five years. So I think youll continue to see the benefits of the investments over the last three years.

Jamie Leonard: We continue to really stay on that southeast program.

Speaker Change: Thank you.

Alright, thank you.

Mike Mayo: Yeah. Other than if it truly gets gutted and the AOCI impact, that would be a better option than even if the opt-for-risk rule got gutted. Thank you. Okay, thank you. Your next question comes from the line of Abraham Punawala of Bank of America. Your line is open. Good morning. Good morning.

Speaker Change: Your next question comes from the line of Erika Najarian of UBS. Your line is open.

Speaker Change: Yes.

Speaker Change: Good morning, this is Nick Holocco on for Erika.

Speaker Change: Good morning, this is Nick <unk> on for Erika.

Nick Holocco: I think in the past you've talked about a curve where the front end is in the low 3% range as an ideal rate environment for the bank. Is that still the right way to think about it? And if we get to that range, do you think we could see NIMH migrate back to the 320 to 330% range that you were producing back in the 2018-2019 period? Thank you.

Nick: I think in the past you've talked about occur where the front end is in the low 3% range is an ideal rate environment for the bank is that still the right way to think about it and if we get to that range. Do you think we could see NIM migrate back to the $3, 20% to 330% range.

Abraham Punawala: I guess I have two questions. One, first, on trying to make sense of the loan to deposit ratio at 70%. Relative to Fifth Third history prior to the pandemic, and even relative to some of your peers, is a 70% loan to deposit ratio the new normal for the bank? Trying to understand if there's anything idiosyncratic about the deposit base that requires you to hold and operate with a lower loan deposit ratio. Great

You are producing back in 2018 2019 period. Thank you.

Speaker Change: Yeah, absolutely. Returning to a normal curve where we would have, you know, say a 3% front end and maybe 100 to 200 basis points of spread between the front end and the 10-year rate is a very ideal environment for us because, one, we are going to get the benefit of deposit repricing lower and at the same time still being able to pick up a lot of benefit associated with that fixed rate asset repricing. So, being able to achieve a 320 plus NIM in that kind of scenario, you know, a year or two forward would be something that would be easily, that should be very easily achievable and we feel good about that environment.

Speaker Change: Yeah, absolutely. Returning to a normal curve where we would have, you know, say a 3% front end and maybe 100 to 200 basis points of spread between the front end and the 10-year rate is a very ideal environment for us because, one, we are going to get the benefit of deposit repricing lower and, at the same time, still being able to pick up a lot of benefits associated with that fixed-rate asset repricing. So, being able to achieve a 320 plus NIM in that kind of scenario, you know, a year or two forward would be something that would be easily, that should be very easily achievable, and we feel good about that environment.

Yes, absolutely returning to a normal curve, where we would have say a 3% front end, maybe 100 200 basis points of spread between the front end in the 10 year rate is a very ideal environment for us because one we are going to get the benefit of deposit repricing lower and at the same time still being able to pick up a lot of benefit associated.

Brian Preston: I would tell you that 72% is not our long-term target, but I would say that our loan-to-deposit ratio has come down relative to pre-pandemic levels, and a big portion of that is just heightened expectations regarding liquidity. So I would expect us to operate in the mid-70s, more than likely from a long-term perspective on loan-to-deposit. We will probably be in the mid-80s pre-pandemic, so that is something that we would expect to continue, but we do think that we can move up from the current level. Got it. And I guess a separate question, maybe for Tim.

Nick: <unk> with that fixed rate asset repricing, so being able to achieve a 320 plus NIM in that kind of scenario two forward would be.

Nick: Something that would be easily that should be very easily achievable and we feel good about that environment.

Speaker Change: Thanks for watching!

Nick: Okay.

Speaker Change: Your next question comes from the line of Vivek <unk> of Jpmorgan. Your line is open.

Speaker Change: Your next question comes from the line of Vivek Junaidja of J.P. Morgan. Your line is open.

Vivek Junaidja: Hi, congrats Brian and Jamie.

Vivek Junaidja: Hi, congrats Brian and Jamie. A couple of quick questions for you guys. One question is, in your NII outlook that you gave for the year, what are you assuming for deposit betas on the way down? Sorry if I missed that. I tried to keep an eye on a bunch of different releases this morning. I'm glad you asked the question. It's the first time it's come up, actually, and it wasn't in our scripted remarks. We are expecting betas on the way down to look very similar to what we saw on the last couple of hikes, which is in a 60% to 70% range.

Vivek: Hi, Congrats Brian and Jeremy.

Tim Spence: I think you tried to sort of draw some distance between you and some of your peers around the Southeast in terms of technology investments. If we take those statements and account for them, how do you think this should reflect in terms of Fisker becoming a higher growth bank relative to these banks, a more efficient bank? Like, what should we be measuring you against, and do we start seeing that this year and next year, or is this more of a longer-term process?

Vivek Junaidja: A couple of quick questions for you guys. One is, in your NII outlook that you've given for the year, what are you assuming for deposit betas on the way down? Sorry if I missed that. Try to keep an eye on a bunch of different releases this morning. Glad you asked the question. It's the first time it's come up, actually, and it wasn't in our scripted remarks. We are expecting betas on the way down to look very similar to what we saw on the last couple hikes, which is in a 60% to 70% range. We don't expect a significant difference in betas between the first cut and the third cut. You're still at such a high level that that beta should be relatively high from a marginal perspective. Our rate risk disclosures, we talk about, say, a 60% to 65% beta on the way down. We tend to be a little bit conservative on those disclosures, so we think we're going to be able to deliver that, if not a little bit better.

Vivek: A couple of quick questions for you guys. One is in your NII outlook that you've given for the year. What are you assuming for deposit betas on the way down sorry, if I missed that try to keep an eye on a bunch of different releases.

Speaker Change: Glad glad you asked the question. It's first time, it's come up actually and it wasn't in our scripted remarks.

Tim Spence: Yeah, great. I think maybe a nuance: I'm less trying to draw a distinction between us and others than I am to say that you can't get what we think we have in terms of advantages overnight. They're not advantages that can be built in one to two years.

Speaker Change: We are expecting betas on the way down to look very similar to what we saw on the last couple of hikes.

Vivek Junaidja: We don't expect a significant difference in betas between the first cut and the third cut. You're still at such a high level that that beta should be relatively high from a marginal perspective. In our rate risk disclosures, we talk about, say, a 60% to 65% beta on the way down. We tend to be a little bit conservative on those disclosures, so we think we're going to be able to deliver that, if not a little bit better.

Speaker Change: Which isn't a 60% to 70% range. We didn't we don't expect a significant difference in beta is between like the first cut in the third cut youre still at such a high level that that that data should be relatively high from a marginal perspective.

Tim Spence: They require steady and consistent investment, which, of course, has been the philosophy here, along with the belief that you have to find ways to self-fund it through efficiency and productivity along the way. I'm hesitant to say Fifth Third is going to be a growth bank because I think four or five of the banks who are described as growth banks failed this past year. Our belief, though, is that great companies should be able to take market share on an organic basis. So if you assume that the base market growth is somewhere around 2% or at least the financial services sector should be able to track GDP, there's a headwind with the emergence of all of these non-bank competitors. Therefore, the more realistic goal, from my perspective, is to try to beat GDP by a couple of percentage points on an annualized basis, which probably means you need to have three to 4% outsized growth relative to your market.

Speaker Change: Our rate risk disclosures, we talk about say, a 60% to 65% beta on the way down.

Tend to be a little bit conservative on those disclosures. So we think we're going to be able to deliver that if not a little bit better.

Speaker Change: Great. Another little one.

Speaker Change: Great.

Speaker Change: Another little one.

Speaker Change: Other consumer loans, the NPLs moved up quite a bit, linked quarter to a little over 1%. Any color, is that coming from dividend finance or is that something else?

Speaker Change: Other consumer loans, the NPLs moved up quite a bit, linked quarter to a little over 1%. Any color, is that coming from dividend finance, or is that something else? Yeah, it's Jamie Levesque. Yeah, it is actually from Dividend Finance.

Other consumer loans, the mpls moved up.

Speaker Change: Quite a bit linked quarter.

Speaker Change: A little over 1% any color on is that coming from dividend finance or is that something else.

Speaker Change: Yeah, it's Jamie Levesque. Yeah, it is actually from Dividend Finance.

Speaker Change: Yes, Jamie.

Speaker Change: Jamie Vivek.

Jamie Leonard: It is actually from dividend finance.

Jamie Leonard: <unk>.

Jamie Leonard: The driver of that, there's some element that just normalization as you go through, you know, growing a new company, but, you know, that's a smaller part of it. The larger part of it, of the increase, is actually from our...

Jamie Leonard: The driver of that, there's some element that just normalizes as you go through, you know, growing a new company, but, you know, that's a smaller part of it. The larger part of it, of the increase, is actually from our...

Jamie Leonard: The driver of that there's some element that just normalization as you go through.

Tim Spence: These granular investments we're making across the Southeast are definitely part of the way that matriculates into performance. I think the other place then that you should expect to see it, given where we're investing, is continued support for a better fees-to-total revenue mix, which is going to be really critically important in the event that the rules as they are proposed do pass because of the impact that higher capital and liquidity requirements are going to have. You're seeing this today.

Growing a new company, but that's a smaller part of it is the larger part of it.

Jamie Leonard: The increase is actually from our.

Jamie Leonard: The decision to deliver a good customer experience for the borrowers that have had instances where there are delays in getting the solar panel installations to receive permission to operate from the utilities. That could also be delayed due to installer performance issues or supply chain shortages so what we've elected to do is different forms of deferment or modification in order to assist the borrowers and then I would expect this to improve over time as we continue to improve the installer network as well.

Jamie Leonard: The decision to deliver a good customer experience for the borrowers who have had instances where there are delays in getting the solar panel installations to receive permission to operate from the utilities. That could also be delayed due to installer performance issues or supply chain shortages, so what we've elected to do is different forms of deferment or modification in order to assist the borrowers, and then I would expect this to improve over time as we continue to improve the installer network as well.

Jamie Leonard: Decision to deliver a good customer experience for the borrowers that have had instances where there are delays in getting the solar panel installations to receive permission to operate from the utilities.

Jamie Leonard: That could also.

Jamie Leonard: Be delayed due to installer performance issues with.

Jamie Leonard: Our supply chain shortages, so what we've elected to do is different.

Jamie Leonard: The core fifth, third consumer franchise, if you just look at household acquisition as a measure, is outgrowing Midwest population growth by about 1.5% per year. It's outgrowing the Southeast markets by about 4 percentage points per year. So you can see the impact of the incremental investment if you just disaggregate our business and look at it on a market-by-market basis. Jamie, maybe you want to add something here? Yeah, Ibrahim, maybe to tie your two questions together, on the loan-to-deposit ratio, part of the improvement has been the strong... Deposit growth we've been able to get both from the RWA diet, which I talked about a couple quarters ago, just how customer reaction resulted in more deposits and a better share of wallet. And that continued in the fourth quarter.

Jamie Leonard: Different forms of deferment or modification.

Jamie Leonard: Order to assist the borrowers and then I would expect us to improve overtime as we continue to improve the installer network as well.

Speaker Change: So not much lost content you'd expect from that, Jamie, then, since it seems like you're deferring rather than...

Speaker Change: So not much loss content do you expect from that Jeremy.

Speaker Change: It seems like.

Speaker Change: Deferring rather.

Jeremy: There will be.

Speaker Change: There will...

Speaker Change: There will be...

Speaker Change: The challenge we've had

Speaker Change: The challenge we've had From a loss content perspective, it's been on the home improvement side, where dividend had a subprime component to their portfolio that had higher losses. And we stopped originating that product back over a year ago. So there'll be some loss content, but I don't think you would see it impacting income.

Jeremy: The loss content in there it is appropriately reserved so not income impact.

Jeremy: But from a solar perspective, we continue to run solar losses.

Jamie Leonard: Commercial deposits, you see in the numbers, are up nicely. And then on the southeast, we actually grew deposits in the southeast 5% just in the fourth quarter. And so you do get that growth in the numbers, but the midwest still grew in total about 1%. So we've got a very nice balance here of Midwest and southeast. And I was down in South Carolina on Wednesday.

Round, 1% or so.

As we've talked about our deal model was.

Jeremy: Hundred 30 basis points on solar.

Jeremy: The challenge we've had.

Speaker Change: From a loss content perspective, it's been on the home improvement side where dividend had a subprime component to their portfolio that has higher losses. And we stopped originating that product back over a year ago. So there'll be some loss content, but I don't think you would see it impacting income.

Jeremy: Loss content perspective has been on the home improvement side.

Jeremy: Our dividend had a subprime component to their portfolio that has higher losses, and we stopped originating that product back over a year ago. So.

Jamie Leonard: We opened our 10th branch in South Carolina this week and have plans to do 25 more over the next five years. So I think you'll continue to see the benefits of the investments over the last three years as we continue to really expand that southeast price. All right. Thank you. Your next question comes from the line of Erika Najarian of UBS. Your line is open. Good morning, this is Nick Holocco on for Erika.

Jeremy: There'll be some loss content, but I don't think you would.

Jeremy: See it impacting income.

Okay. Thank you.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Matt O'connor of Deutsche Bank. Your line is open.

Speaker Change: Your next question comes from the line of Matt O'Connor of Deutsche Bank. Your line is open.

Matt Burnell: Good morning. I was wondering if you guys could elaborate a bit on the commercial real estate exposure. Obviously, it's a bit less than peers. And as you noted, you know, no charge off last year, but your non-performers are also, you know, interdifferent. And even the office criticized as a relatively low 6%, you know, compared to others. So how is it so good? And I guess, are you confident that, you know, the marks and estimates are up to date? Thank you.

Matt Burnell: Good morning. I was wondering if you guys could elaborate a bit on the commercial real estate exposure. Obviously, it's a bit less than peers, and as you noted, you know, no charge off last year, but your non-performers are also, you know, interdifferent. And even the office was criticized as a relatively low 6%, you know, compared to others. So how is it so good? And I guess, are you confident that, you know, the marks and estimates are up to date? Thank you.

Matt Burnell: Good morning, I was wondering if you guys could elaborate a bit on the commercial real estate exposure, obviously, it's a bit less than peers.

Erika Najarian: I think in the past you've talked about a curve where the front end is in the low 3% range as an ideal rate environment for the bank. Is that still the right way to think about it? And if we get to that range, do you think we could see NIMH migrate back to the 320 to 330% range that you were producing back in the 2018-2019 period? Thank you. Yeah, absolutely. Returning to a normal curve where we would have, you know, say a 3% front end and maybe 100 to 200 basis points of spread between the front end and the 10-year rate is a very ideal environment for us because, one, we are going to get the benefit of deposit repricing lower and, at the same time, still being able to pick up a lot of benefits associated with that fixed-rate asset repricing. So, being able to achieve a 320 plus NIM in that kind of scenario, you know, a year or two forward would be something that would be easily, that should be very easily achievable, and we feel good about that environment. Thanks for watching!

Speaker Change: Got it.

Speaker Change: No charge offs last year, but your non performers are also into their present and even the office criticized.

Speaker Change: Relatively low 6%.

Speaker Change: Fair to others so.

Speaker Change: So good and I guess are you confident that.

The marks and estimates are up to date. Thank you.

Speaker Change: Yeah, that's great. Great question. So, yes, very confident in our marks and where we currently are. Also, very, very comfortable with the overall asset quality. We've been for the last several years very disciplined in terms of our client selection. We're underwriting commercial real estate, specifically office at something below 60% loan to value. We've got 90% recourse on that portfolio. And so.

Speaker Change: Yeah, that's great. A great question. So, yes, very confident in our marks and where we currently are. Also, very, very comfortable with the overall asset quality. We've been for the last several years very disciplined in terms of our client selection. We're underwriting commercial real estate, specifically office, at something below 60% loan to value. We've got 90% recourse on that portfolio. And so on. Our borrowers are continuing to exhibit the right behaviors. They're supporting their projects. They're writing checks to reduce the debt as necessary. We're out in front of that portfolio. The maturities are evenly split over the next four to five years, so we don't have that so-called wall of maturities that we've heard from some other banks and that you've heard in the marketplace. So I do feel very good about the overall portfolio, our office included.

Speaker Change: Yes, Thats correct great question, So, yes, very confident in our marks and where we currently are also very very comfortable with the overall asset quality. We have been for the last several years very disciplined in terms of our client selection, where underwriting commercial real estate, specifically office at something below 60% loan to.

Value, we've got 90% recourse on that portfolio and so on.

Speaker Change: Our borrowers are continuing to exhibit the right behaviors. They're supporting their projects. They're writing checks to reduce the debt as necessary. We're out ahead of that portfolio. The maturities are evenly split over the next four to five years. We don't have that so-called wall of maturities that we've heard from some other banks and you've heard in the marketplace. So I do feel very good about the overall portfolio, our office included.

Speaker Change: Borrowers are continuing to exhibit the right behaviors. They are supporting their projects. They are writing checks to reduce reduce the debt as necessary.

Speaker Change: Ahead of that portfolio. The maturities are evenly split over the next four to five years, we don't have that so called wall of maturities that we've heard from some other banks and you've heard in the marketplace. So I do feel very good.

Speaker Change: About the overall portfolio our office included.

Speaker Change: and then just more broadly speaking obviously the overall charge off outlook for this year is fairly benign you know 35 to 45 basis points any more color in terms of drivers of you know call it the mid point of that range versus 2023 levels

Speaker Change: And then just more broadly speaking obviously, the overall charge off outlook for this year.

Brian Preston: Your next question comes from the line of Vivek Junaidja of J.P. Morgan. Your line is open. Hi, congrats Brian and Jamie. A couple of quick questions for you guys. One question is, in your NII outlook that you gave for the year, what are you assuming for deposit betas on the way down? Sorry if I missed that. I tried to keep an eye on a bunch of different releases this morning. I'm glad you asked the question. It's the first time it's come up, actually, and it wasn't in our scripted remarks.

Speaker Change: Benign 35 to 45 basis points any more color in terms of drivers.

Speaker Change: Call. It the mid point of that range versus 2023 levels.

Speaker Change: Okay.

Speaker Change: I think we're going to continue to see a lot of what we saw in 2024, what we saw in 2023, right? We don't have any significant trends geographically or by product. And so, you know, what we saw in 2023 was a little bit more episodic.

Speaker Change: I think we're going to continue to see a lot of what we saw in 2024, and what we saw in 2023, right? We don't have any significant trends geographically or by product. And so, you know, what we saw in 2023 was a little bit more episodic.

Speaker Change: We're going to continue to see a lot of what we saw in 202024, what we saw in 2023 right. We don't have any significant trends geographically or by product.

Speaker Change: So.

Vivek Junaidja: We are expecting betas on the way down to look very similar to what we saw on the last couple hikes, which is in a 60% to 70% range. We don't expect a significant difference in betas between the first cut and the third cut. You're still at such a high level that that beta should be relatively high from a marginal perspective.

Speaker Change: What we saw in 2023.

Speaker Change: <unk> was a little bit more episodic.

Speaker Change: And based on what we're seeing on the C&I side right now our borrowers have done a nice job.

Both on the executing on the revenue expense management side.

Speaker Change: There is obviously margin compression, but overall as Tim said earlier.

Brian Preston: In our rate risk disclosures, we talk about, say, a 60% to 65% beta on the way down. We tend to be a little bit conservative on those disclosures, so we think we're going to be able to deliver that, if not a little bit better. Great. Another little one.

Speaker Change: Looking for the same things, we're looking for which is what is the fed going to do.

Speaker Change: When we hear a lot about labor costs are they are keeping their eye on that so.

Speaker Change: We're going to have a lot of the same same old same will certainly as we get into the first and second quarters in terms of what we're seeing both from a loss content in commercial real estate minimal and C&I.

Jamie Leonard: Other consumer loans, the NPLs moved up quite a bit, linked quarter to a little over 1%. Any color, is that coming from dividend finance, or is that something else? Yeah, it's Jamie Levesque.

C&I alright.

Speaker Change: We will have a named pop up every once in a while we'll deal with it but again, we're not seeing trends that would lead me to believe that our criticized assets.

Jamie Leonard: Yeah, it is actually from Dividend Finance. The driver of that, there's some element of just normalization as you go through, you know, growing a new company, but, you know, that's a smaller part of it. The larger part of it, of the increase, is actually from our... decision to deliver a good customer experience for the borrowers that have had instances where there are delays in getting the solar panel installations to receive permission to operate from the utilities. That could also be delayed due to installer performance issues or supply chain shortages, so what we've elected to do is different forms of deferment or modification in order to assist the borrowers, and then I would expect this to improve over time as we continue to improve the installer network as well. So not much lost content you'd expect from that, Jamie, then, since it seems like you're deferring rather than... There will be...

Speaker Change: Our overall asset quality is going to move much from where it is right now again as we sit here today heading into the first quarter.

Speaker Change: Okay, that's helpful. Thank you.

Okay. That's helpful. Thank you.

Speaker Change: Your next question comes from the line of Christopher <unk> of Janney Montgomery Scott Your line is open.

Speaker Change: Your next question comes from the line of Christopher Marinac of Jenny Montgomery Scott. Your line is open.

Christopher William Marinac: Hey, thanks. Good morning. Can you remind us how the commercial C&I DDAs behave on a downright environment? And is there any reason to believe that they kind of behave positively in your favor this time?

Christopher William Marinac: Hey, thanks. Good morning. Can you remind us how the commercial C&I DDAs behave in a downright environment? And is there any reason to believe that they will behave positively in your favor this time?

Hey, Thanks, Good morning could you remind us how the commercial C&I dda's behave on a down rate environment and is there any reason to believe it.

Speaker Change: Kind of behave positively in your favor this time.

Speaker Change: Yeah, absolutely. We would expect DDAs to, especially the migration, to stop migrating into interest-bearing and begin growing as rates cuts begin to occur. We talked about that a little bit in the scripted remarks, that if we were to see more aggressive cuts, we'd see some opportunity there. We've typically modeled somewhere between $500 and $1 billion of DDA migration per 100 basis points of rate hikes or rate cuts. We'd expect that to be a fairly similar rate.

Speaker Change: Yeah, absolutely. We would expect DDAs, especially the migration, to stop migrating into interest-bearing and begin growing as rates cuts begin to occur. We talked about that a little bit in the scripted remarks, that if we were to see more aggressive cuts, we'd see some opportunity there. We typically model somewhere between $500 and $1 billion of DDA migration per 100 basis points of rate hikes or rate cuts. We'd expect that to be a fairly similar rate. Migration level on up or down, just positive or negative. We would tell you that probably the beginning cut or two, maybe it's a little bit slower, but if you were to see a much more aggressive path and if the Fed funds rate got down into the threes, we would expect a decent reversal.

Speaker Change: Yes, absolutely, we would expect DDA as to especially the migration to stop.

Speaker Change: Grading into interest bearing and begin growing as rates cuts begin to occur and we've talked about that a little bit in the scripted remarks that if we were to see more aggressive cuts we'd see some opportunity. There we've typically model somewhere between $501 billion of DDA migration per 100 basis points.

Vivek Junaidja: The challenge we've had, From a loss content perspective, it's been on the home improvement side where dividend had a subprime component to their portfolio that had higher losses. And we stopped originating that product back over a year ago. So there'll be some loss content, but I don't think you would see it impacting income.

Speaker Change: Rate hikes or rate cuts, we would expect that to be fairly similar.

Speaker Change: Migration level on up or down, just positive or negative. We would tell you that probably the beginning cut or two, maybe it's a little bit slower, but if you were to see a much more aggressive path and if the Fed funds rate got down into the threes, we would expect a decent reversal.

Speaker Change: Migration level on up or down just positive or negative we will tell you that probably the beginning cut or two maybe its a little bit slower, but if you were to see a much more aggressive path and the feds if the fed funds rate got down into the threes, we would expect a decent reversal.

Matt Burnell: Thank you. Your next question comes from the line of Matt O'Connor of Deutsche Bank. Your line is open. Good morning.

Jamie Leonard: I was wondering if you guys could elaborate a bit on the commercial real estate exposure. Obviously, it's a bit less than peers. And as you noted, you know, no charge-off last year, but your non-performers are also, you know, interdifferent. And even the office was criticized as a relatively low 6%, you know, compared to others. So how is it so good?

Yeah.

Speaker Change: Got it and that makes sense. Thank you, Brian and just a quick follow up on reserve build would you still build reserves kind of within the current level. We have today Im just trying to compare the guide of 35 to 40 basis points and the average life of the portfolio is less than four destroy strong coverage. So just curious if you would build that same level.

Speaker Change: Got it. And that makes sense. Thank you, Brian. And just a quick follow up on reserve build. Would you still build reserves kind of within the current level we have today? I'm just trying to compare the guide of 35 to 40 basis points in the average life for the portfolio is, you know, less than four. There's really strong coverage. I'm just curious if you would build to that same level.

Speaker Change: I got it. And that makes sense. Thank you, Brian. And just a quick follow up on the reserve build. Would you still build reserves kind of within the current level we have today? I'm just trying to compare the guide of 35 to 40 basis points when the average life for the portfolio is, you know, less than four. There's really strong coverage. I'm just curious if you would build to that same level.

Jamie Leonard: And I guess, are you confident that, you know, the marks and estimates are up to date? Thank you. Yeah, that's great. Great question.

Speaker Change: As long as the economic scenario is similar and the mix of the portfolio obviously is very important in terms of what drives a build, certainly dividend, some of the things that we're talking about from an auto perspective where it can carry a little bit more reserve that has an impact from a build perspective, that drives more of the dollar build than anything else.

Speaker Change: As long as the economic scenario is similar, and the mix of the portfolio is obviously very important in terms of what drives a build, certainly dividend, some of the things that we're talking about from an auto perspective, where it can carry a little bit more reserve that has an impact from a build perspective, that drives more of the dollar build than anything else.

Brian Preston: Yeah as long as the economic scenario is similar and the mix of the portfolio. Obviously is very important in terms of what drives drive to build certainly dividend some of the things that we're talking about from an auto perspective.

Jamie Leonard: So, yes, very confident in our marks and where we currently are. Also, very, very comfortable with the overall asset quality. We've been for the last several years very disciplined in terms of our client selection. We're underwriting commercial real estate, specifically office, at something below 60% loan to value.

Brian Preston: Where can carry a little bit more reserve that has an impact from a build perspective that drives more of the dollar Bill then.

Brian Preston: Anything else at this point.

Jamie Leonard: We've got 90% recourse on that portfolio. And so it goes. Our borrowers are continuing to exhibit the right behaviors. They're supporting their own projects. They're writing checks to reduce the debt as necessary. We're out in front of that portfolio. The maturities are evenly split over the next four to five years. We don't have that so-called wall of maturities that we've heard from some other banks and that you've heard in the marketplace. So I do feel very good about the overall portfolio, our office included, and then just more broadly speaking, obviously, the overall charge-off outlook for this year is fairly benign, 35 to 45 basis points. Any more color in terms of drivers of, you know, call it the mid point of that range versus 2023 levels, I think we're going to continue to see a lot of what we saw in 2024 and what we saw in 2023, right? We don't have any significant trends geographically or by product.

Speaker Change: Great. Thank you for taking my questions.

Speaker Change: Great. Thank you for taking my question.

Speaker Change: Thank you.

Thank you.

Speaker Change: There are no further questions at this time. I will now turn the call back to Matt Kiro for some closing remarks.

Speaker Change: There are no further questions at this time I will now turn the call back to <unk> for some closing remarks.

Matt Burnell: Thank you, Jael. And thanks, everyone, for your interest in Fifth Third. Please contact the Investor Relations Department if you have any follow-up questions.

Thank you Jill and thanks, everyone for your interest in fifth third please contact the Investor Relations Department. If you have any follow up question. Jill you can now disconnect the call.

Speaker Change: JL, you can now disconnect the call.

Speaker Change: This concludes today's conference call you may now disconnect.

Speaker Change: This concludes today's conference call. You may now disconnect.

Speaker Change: Okay.

Speaker Change: Yeah.

Jamie Leonard: And so, you know, what we saw in 2023 was a little bit more episodic. And based on what we're seeing on the C&I side right now, I mean, our borrowers have done a nice job both on the execution and the revenue expense management side. There's obviously margin compression, but overall, as Tim said earlier, they're looking for the same things we're looking for, which is what the Fed is going to do and when. We hear a lot about labor costs, so they're keeping their eye on that. So I think we're going to have a lot of the same old, same old, certainly as we get into the first and second quarters in terms of what we're seeing both from the lost content in commercial real estate, minimal, and C&I. But we will have a name pop up every once in a while. We'll deal with it, but again, we're not seeing trends that would lead me to believe that our criticized assets, our overall asset quality, is going to move much from where it is right now. Again, as we sit here today, heading into the first quarter.

Matt Burnell: Okay, that's helpful. Thank you. Your next question comes from the line of Christopher Marinac on behalf of Jenny Montgomery Scott. Your line is open. Hey, thanks. Good morning.

Christopher William Marinac: Can you remind us how the commercial C&I DDAs behave in a downright environment? And is there any reason to believe that they will behave positively in your favor this time? Yeah, absolutely. We would expect DDAs, especially the migration, to stop migrating into interest-bearing and begin growing as rates cuts begin to occur. We talked about that a little bit in the scripted remarks, that if we were to see more aggressive cuts, we'd see some opportunity there. We typically model somewhere between $500 and $1 billion of DDA migration per 100 basis points of rate hikes or rate cuts. We'd expect that to be a fairly similar rate. Migration level on up or down, just positive or negative. We would tell you that probably the beginning cut or two, maybe it's a little bit slower, but if you were to see a much more aggressive path and if the Fed funds rate got down into the threes, we would expect a decent reversal. And that makes sense to me.

Brian Preston: Thank you, Brian. And just a quick follow up on the reserve build. Would you still build reserves kind of within the current level we have today? I'm just trying to compare the guide of 35 to 40 basis points when the average life for the portfolio is, you know, less than four. There's really strong coverage. I'm just curious if you would build to that same level. As long as the economic scenario is similar, and the mix of the portfolio is obviously very important in terms of what drives a build, certainly dividend, some of the things that we're talking about from an auto perspective, where it can carry a little bit more reserve that has an impact from a build perspective, that drives more of the dollar build than anything else.

Brian Preston: Great. Thank you for taking my question. Thank you. There are no further questions at this time. I will now turn the call back to Matt Kiro for some closing remarks. Thank you, Jael. And thanks, everyone, for your interest in Fifth Third. Please contact the Investor Relations Department if you have any follow-up questions. JL, you can now disconnect the call. This concludes today's conference call. You may now disconnect.

Q4 2023 Fifth Third Bancorp Earnings Call

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