Q2 2025 Regions Financial Corp Earnings Call

Unknown Executive: Quarterly Earnings Calls.

Chris: My name is Chris and I will be your operator for today's call. I would like to remind everyone that all participant phone lines have been placed on listen only.

Good morning and welcome to the region Financial corporations quarterly earnings call.

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

Chris: At the end of the call, there will be a question and answer session. If you wish to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue.

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

Chris: At the end of the call, there will be a question and answer session.

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

Dana Nolan: I will now turn the call over to Dana Nolan to begin. Thank you, Chris. Welcome to Regions' second quarter earnings call.

Chris: A confirmation tone. Will indicate your line is in the question queue?

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

Unknown Executive: John and David will provide high-level commentary regarding our results.

Unknown Executive: Earning documents, which include our forward-looking statement disclaimer and non-GAAP reconciliations, are available in the Investor Relations section of our website. These disclosures cover our presentation materials, today's prepared remarks, and Q&A.

John: I will now turn the call over to John. Thank you, Dana, and good morning, everyone. We appreciate you joining our call today. Earlier this morning, we reported strong quarterly earnings of $534 million, resulting in earnings per share of $0.59. On an adjusted basis, earnings were $538 million, or $0.60 per share. We delivered pre-tax, pre-provision income of $832 million, a 14% increase year-over-year. And we generated a return on tangible common equity of 19%.

Dana Nolan: Thank you, Chris welcome to Regions second quarter earnings call John and David will provide high level commentary regarding our results earning documents, which include our forward-looking statement, disclaimer, and non-gaap, reconciliations are available in the investor relations section of our website. These disclosures cover our presentation materials, today's prepared, remarks and Q&A. I will now turn the call over to John

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

Earlier this morning we reported strong quarterly earnings of 534 million, resulting in earnings per share of 59 cents.

Speaker Change: On an adjusted basis, earnings were 538 million or 60 cents per share.

Speaker Change: A 14% increase year-over-year.

John: We are very proud of our second quarter performance as we continue to reap the benefits of the investments we've made across our businesses and the successful execution of our strategic plan. We continue to grow average deposits during the second quarter and are growing accounts across consumer checking, small business, and wealth management. In fact, we grew consumer deposits across every one of our eight priority markets. Our focus on growing consumer checking accounts and the core operating accounts of a business has driven more than 30% organic growth in total average deposits over the last five years, among the most in our peer set.

And we generated a return on tangible, common Equity of 19%.

We are very proud of our second quarter performance as we continue to reap the benefits of the Investments we've made.

Across our businesses and the successful execution of our strategic plans.

Speaker Change: We continue to grow average deposits. During the second quarter and are growing accounts across consumer, checking small business and wealth management.

Speaker Change: In fact, we grew consumer deposits across every 1 of our eighth priority markets.

Speaker Change: Our focus on growing consumer, checking accounts and the core operating accounts of a business.

John: While average loans remained stable during the quarter, we grew ending loans in both the consumer and corporate banks. Corporate client sentiment has improved since the first part of April, and notably, consistent with the execution of our strategic plans, we've added over 300 new commercial relationships across our wholesale business year to date. Pipelines within our small and middle market businesses in particular continue to grow. Our consumers also remain healthy. Debit and credit spend continue to increase modestly versus the prior year. During the quarter, we generated modest growth in average consumer credit card and home equity lines of credit balance.

Speaker Change: Has driven more than 30% organic growth in total average, deposits, Over The Last 5 Years, among the most in our peer set.

Speaker Change: While average loans remain stable. During the quarter, we grew ending loans in both the consumer and corporate bank.

Speaker Change: Corporate client sentiment has improved since the first part of April and notably consistent with the execution of our strategic plans, we've added over 300 new commercial relationships across our wholesale business year to date.

Speaker Change: Pipelines within our small and Middle Market businesses. In particular, continue to grow

Our consumers also remain healthy.

Speaker Change: Debit and credit, spend continue to increase modestly versus the prior year.

John: Importantly, consumer credit quality remains strong. Asset quality metrics are improving and payment rates on our consumer credit card remain above pre-pandemic levels.

Speaker Change: During the quarter. We generated modest growth in average consumer credit card and home equity lines of credit balances.

Importantly, Consumer Credit quality remains strong.

John: We also had a lot of success growing and diversifying our fee revenue. Treasury management revenue is up 8% year-to-date, while the total number of clients served has increased 10%. We see continued opportunity to grow clients within our existing customer base, especially as we focus on our priority markets and further expansion of our treasury management services and of the small business sector. Wealth management continues to be a good story for us, generating another quarter of record fee income while representing a steady source of revenue attributable to both strong client acquisition and good revenue diversification. Since 2018, wealth management revenue has grown at more than an 8% compounded annual growth rate.

Speaker Change: Asset quality metrics are improving and payment rates on our consumer. Credit card remain above pre-pandemic levels.

Speaker Change: We also had a lot of success growing in diversifying, our fee Revenue.

Speaker Change: Treasury management, revenue is up 8% year to date.

Speaker Change: While the total number of clients served has increased 10%.

Speaker Change: We see continued opportunity to grow clients within our existing customer base, especially as we focus on our priority markets.

Speaker Change: And further expansion of our treasury Management Services into the small business sector.

Wealth management continues to be a good story for us. Generating, another quarter of record fee income while representing a steady source of Revenue attributable, to both strong client acquisition and good Revenue diversification.

John: Further, Regions was recently recognized in Global Private Bankers 2025 Innovation Awards as the best trust services by a private bank and best wealth planning execution. Since 2019, capital markets revenue has grown to 14% compounded annual growth rate, driven by a combination of organic activities and strategic acquisition.

Says, 2018 wealth management Revenue has grown at more than an 8% compounded annual growth rate.

Further regions was recently recognized in global private Bankers, 2025 Innovation Awards as the best Trust Services by private bank and best wealth planning execution.

John: We continue to make progress on investments to modernize our core technology platforms. We've begun rolling out a new native mobile app in just the past few weeks. And we're planning to upgrade our commercial loan system to a new cloud platform in the coming month. We plan to begin running pilots on our new cloud based deposit system beginning in late 2026, with full conversion anticipated in 2027. Once completed, we expect to be one of the first regional banks in the country on a truly modern core platform. So as you can see, we continue to focus on growth across our businesses, as evidenced by our overall financial performance.

Speaker Change: Since 2019, Capital markets Revenue has grown into 14% compounded annual growth rate driven by a combination of organic activities and strategic acquisitions.

We continue to make progress on investments to modernize our core technology platforms.

Speaker Change: We've begun rolling out a new native mobile app in just the past few weeks. And we're planning to upgrade our commercial loan system to a new Cloud platform in the coming months.

Speaker Change: We plan to begin running pilots on our new cloud-based deposit system. Beginning in the late 2026 with full conversion, anticipated in 2027,

Speaker Change: once completed, we expect to be 1 of the first Regional banks in the country, on a truly modern core platform.

John: Our dedication to driving shareholder value has resulted in the highest returns on tangible common equity over the last four years, compared to our peer group. And we're on track to make it a fifth year in a row. We have also delivered top quartile EPS growth over the last five and 10 year period. And importantly, over the last six years, we've increased our dividend at a 10 plus percent compounded annual growth rate, the highest among our peers. We announced another 6% increase in the common dividend earlier this week. And notably, over the last 10 years, we have bought back more stock on a relative basis than any of our peers.

Speaker Change: So, as you can see, we continue to focus on growth across our businesses as evidenced by our overall financial performance.

Speaker Change: Our dedication to driving shareholder value. Has resulted in the highest Returns on tangible. Common Equity, over the last 4 years, compared to our peer group.

Speaker Change: And we're on track to make it a fifth year in a row.

We have also delivered top quartile EPS growth over the last 5 and 10 year periods.

Speaker Change: and importantly, over the last 6 years, we've increased our dividend at a 10 plus percent compounded, annual growth rate,

Speaker Change: Highest among our peers.

Speaker Change: We announced another 6% increase in the common dividend earlier this week.

John: All of this has contributed to top quartile total shareholder returns over the last three, five and 10 years. Finally, we think the ability to grow tangible book value plus dividends should be closely correlated to stock price. We've delivered top quartile performance on this metric over the last three and five year period.

Speaker Change: And notably over the last 10 years, we have bought back more stock on a relative basis than any of our peers.

Speaker Change: All of this is contributed to top quartile total shareholder returns over the last 3 5 and 10 years.

Speaker Change: Finally, we think the ability to grow tangible Book Value Plus dividends should be closely correlated to stock price.

John: In conclusion, we're very proud of our second quarter results. Our strong performance is attributable to our 20,000 plus associates, and their commitment to keep our customers at the center of everything we do, and their focus on executing our plan. As a result, we expect this momentum to carry into the second half of 2025 and beyond, providing a real opportunity to continue to grow and deliver the same kind of results that we've delivered in recent years.

Speaker Change: Periods.

In conclusion, we're very proud of our second quarter results. Our strong performance is attributable to our 20,000 plus Associates and their commitment to keep our customers at the center of everything we do. And their focus on executing our plan,

Speaker Change: as a result, we expect this momentum to carry into the second half of 2025 and Beyond.

John: With that, I'll hand it over to David to provide some highlights regarding the quarter. Thank you, John.

Speaker Change: Providing a real opportunity to continue to grow and deliver the same kind of results that we've delivered in recent years.

David: Let's start with the balance sheet. Lending loans grew 1% while average loans remained stable. Growth in ending business loans was driven by C&I and, to a lesser extent, real estate. Specifically within C&I, growth was driven primarily within structured products and manufacturing. Within real estate, growth primarily resulted from previously approved multi-family projects continuing to fund up. Overall, pipelines are up 17% over last year, and line commitments are up 1%. So we believe we are well positioned as the macro backdrop improves. Average and ending consumer loans remained relatively stable, as growth in average credit card and home equity was offset by modest declines in other categories.

David: With that, I'll hand it over to David, to provide some highlights regarding the quarter.

David: Thank you, John. Let's start with the balance sheet, cleaning loans, grew 1% while average loans remain stable.

David: Growth and ending. Business loans was driven by cni and to a lesser extent, real estate.

David: Specifically within cni, growth was driven primarily within Structured Products and Manufacturing.

David: We now expect full-year 2025 average loans to be stable to up modestly versus 2024.

David: Within real estate growth, primarily resulted from previously approved multi family projects, continuing to fund up. Overall pipelines, are up 17% over last year and lying commitments are up 1%. So, we believe we are well positioned as the macro backdrop, improves average, and ending Consumer loans, remained relatively stable as growth in average credit card and home equity was offset by Modest declines in other categories.

David: Building upon John's remarks on our multi-year successes with respect to deposits, we continue to observe positive trends in both core and priority markets. Targeted acquisition strategies have had good traction in the second quarter, reflecting positive consumer growth in every priority market. In fact, overall, consumer deposits in priority markets grew 20% more than core markets during the quarter. Additionally, 60% of the consumer deposit dollars resulting from our most recent money market campaign were in priority markets. and 85% of the campaign dollars represented due money.

David: We now expect 4 year 2025 average loans to be stable to up modestly versus 2024.

Speaker Change: Building upon John from marks on our multi-year successes with respect to deposits. We continue to observe positive Trends in both core and priority markets.

Speaker Change: Targeted acquisition, strategies have had good Traction in the second quarter reflecting positive consumer growth in every priority Market. In fact, overall consumer deposits and priority markets grew 20% more than core markets during the quarter.

David: In the Corporate Banking Group, relationship management and new customer focus has led to average quarterly balance growth of more than 2%. The Corporate Banking Group has traction in priority markets as well, with momentum there helping the overall growth picture. Average deposit balances grew over 1% sequentially, while ending balances remained relatively stable. Interest-bearing deposit costs continue to decline, as expected, to 1.39 percent, despite higher marginal acquisition costs. Additionally, our non-interest-bearing proportion remains in the low 30 percent range, reflective of our strong operating deposit base.

Additionally, 60% of the consumer. Deposit dollars resulting from our most recent money market campaign were in priority markets and 85% of the campaign dollars represented new money.

In the corporate banking group relationship management and new customer focus has led to average quarterly balanced growth of more than 2%.

The corporate banking group has traction, and priority markets as well with momentum there, helping the overall growth picture.

Speaker Change: Average deposit, balances grew over 1% sequentially. While ending balance has remained relatively stable.

David: Looking forward, we now expect four-year average balances to be up modestly versus the prior year.

Speaker Change: Interest bearing deposit costs. Continue to decline as expected to 1.39% despite higher marginal acquisition costs. Additionally, our non-interest, bearing proportion remains in the low 30% range, reflective of our strong, operating deposit base,

David: Let's shift to net interest income. Net interest income rebounded, increasing by 5% in the link quarter. As expected, the negative impacts from day count and other non-recurring items in the first quarter did not repeat. In addition to some modest nonrecurring positive items during the second quarter, deposit pricing performance and the benefits from fixed rate asset turnover exceeded our initial estimates and are expected to continue to support net interest income going forward. Although Fed funds remained stable in the quarter, we were able to manage deposit costs lower while also supporting growth initiatives. The ability to grow deposits while achieving our mid-30s falling rate beta target and best-in-class funding costs further exemplifies Regions' funding advantage.

Speaker Change: Looking forward. We now expect full year. Average, balances to be up modestly versus the prior year.

Let's shift to net interest income.

Net interest income, rebounded, increasing by 5% link quarter as expected the negative impacts from day, count and other non-recurring items. In the first quarter did not repeat.

Speaker Change: In addition to some modest non-recurring positive items during the second quarter deposit pricing performance and the benefits from fixed rate asset turnover. Exceeded our initial estimates and are expected to continue to support net, interest income going forward.

Speaker Change: Although fed funds remain stable in the quarter, we were able to manage deposit costs lower while also supporting growth initiatives.

David: During the quarter, approximately $3 billion of new fixed-rate loan and securities production was added at approximately 140 basis points above the yield on maturing and amortizing balance. With approximately 50% of the runoff coming from longer-duration mortgage collateral, we expect these tailwinds to persist for multiple years, assuming middle and long-term rates remain near current levels. Next, we took advantage of spread levels in April by adding $1 billion of agency mortgage-backed security. The securities will serve to store liquidity, insulate rate exposure, and optimize returns, and can easily be deployed back into loans in the future as necessary.

Speaker Change: The ability to grow deposits while achieving our mid-30s falling rate beta, Target and best-in-class funding costs, further exemplifies, Region's funding advantage.

During the quarter, approximately 3 billion dollars of new fixed rate loan and securities production was added at approximately 140 basis points above the yield on maturing and advertising balances.

Speaker Change: With approximately 50% of the runoff coming from longer duration, mortgage collateral. We expect these Tailwinds to persist for multiple years. Assuming middle and long-term rates remain near current levels.

Speaker Change: Next, we took advantage of spread levels in April, by adding 1 billion dollars of agency mortgage back securities.

David: The higher interest rate environment supports balance sheet repricing dynamics. Net interest income is expected to be stable to modestly higher in the third quarter as the benefits from fixed rate asset turnover and one additional day are offset by fewer non-recurring positives and higher hedging notional amounts.

Speaker Change: The Securities will serve to store liquidity insulate rate, exposure and optimize returns and can easily be deployed back into loans in the future as necessary.

Higher interest, rate, environment supports balance sheet, repricing Dynamics.

David: We now expect full year 2025 net interest income to grow between 3 and 5 percent. Finally, assuming market forward interest rates, the net interest margin is expected to remain in the low to mid 360s for the remainder of the year, with the ability to resume its upward trajectory as we move into 2026.

Speaker Change: Non-recurring positives and higher hedging notional amounts.

Speaker Change: We now expect full year 2025 net interest income to grow between 3 and 5%.

David: Now let's take a look at fee revenue performance during the quarter. Adjusted Non-Interest Income Increased 5% Link Quarter Driven Primarily by Growth in Mortgage, Seasonally Elevated Car and ATM Fees, and Another Record Quarter in Wealth Management Income. Additionally, market value adjustments on HR assets increased $19 million during the quarter. These market value adjustments are offset primarily in salaries and benefits expense. Mortgage Income Increase 20% Link Quarter Driven Primarily by $13 Million Net Favorable Adjustment Associated with Changes to the Company's MSR Valuation Model Assumption. Capital Markets Income, excluding CBA, increased 5% compared to the prior quarter, driven by elevated M&A advisory and real estate capital markets activity.

Speaker Change: Finally assuming Market forward, interest rates the net interest margin is expected to remain in the low to mid 360s for the remainder, of the year, with the ability to resume its upward trajectory, as we move into 2026.

Speaker Change: Now, let's take a look at fee Revenue performance during the quarter.

Speaker Change: Adjusted non-interest income, increased 5%, link quarter driven primarily by growth in mortgage seasonally elevated card and ATM fees and another record quarter in wealth management income.

Speaker Change: Additionally, market value adjustments. On HR assets, increased 19 million during the quarter.

Speaker Change: These market value, adjustments are offset, primarily in salaries, and benefits expense.

Mortgage income increased 20% link quarter driven, primarily by 13 million, net, favorable adjustment associated with changes to the company's MSR evaluation model assumptions.

David: With respect to the third quarter, we currently expect a modest increase in the 85 to 95 million dollar range for capital markets income.

Speaker Change: Capital markets income, excluding CVA, increased 5% compared to the prior quarter driven by elevated. M&a advisory and real estate Capital markets activity.

David: Service charges decreased 6% during the quarter, driven primarily by seasonal decline in Treasury management income.

Speaker Change: With respect to the third quarter, we currently expect a modest increase in the 85 to 95 million range for Capital markets income.

David: With respect to the full year 2025, we now expect adjusted non-interest income to grow between 2.5% and 3.5% versus 2024.

Speaker Change: Service charges decreased 6%. During the quarter driven primarily by seasonal decline in treasury management income.

David: Let's move on to nine-inch or six-fifths. Adjusted non-interest expense increased 4% compared to the prior quarter, driven primarily by an expected 5% increase in salaries and benefits, which included one additional workday, the impact of a full quarter of merit, higher revenue-based incentives, and the offset to increased HR asset valuation. Full-time equivalent headcount also increased during the quarter by just over 100 associates.

Speaker Change: With respect to the full year 2025. We now expect adjusted 9 interest income to grow between 2 and a half and 3 and a half percent versus 2024.

Speaker Change: Let's move on to 9 interest expense.

Adjusted 9 interest expense increased 4% compared to the prior quarter driven primarily by an expected 5%, increase in salaries, and benefits which included 1 additional. Workday the impact of a full quarter of Merit

Speaker Change: Higher Revenue based incentives, and the offset to increase HR asset valuations.

David: We now expect full year 2025 adjusted non-interest expense to be up one to 2%. And we anticipate generating full year positive operating leverage in the 150 to 250 basis point range.

Speaker Change: Full-time. Equivalent headcount also increased during the quarter by just over 100 Associates.

David: Regarding asset quality, provision expense was $13 million over net charge-offs during the quarter. The increase in the allowance was driven primarily by loan growth with some offset from improving underlying credit metrics. The resulting allowance for credit loss ratio declined one basis point to 1.80%. Annualized net charge-offs as a percentage of average loans decreased five basis points to 47 basis points. Non-performing loans as a percent of total loans improved 8 basis points to 80 basis points. Business services criticized loans improved by 6% and total delinquencies also improved. Our through-the-cycle net charge-off expectations are unchanged and remain between 40 and 50 basis points.

Speaker Change: We now expect full year, 2025 adjusted 9 inch expense to be up 1 to 2% and we anticipate generating full year positive operating leverage and the 150 to 250 basis point range.

Regarding asset quality.

Provision expense was 13, million over net. Charge offs during the quarter,

Speaker Change: The increase in the allowance of driven. Primarily by loan growth was some offset from improving underlying credit metrics.

The resulting allowance for credit loss ratio declined. 1 basis point to 1.80%.

Annualized net charge offs as a percentage of average loans decreased 5 basis points to 47 basis points.

Non-performing loans as a percent of total loans, improved 8 basis points to 80 basis points.

Speaker Change: Business Services criticized loans. Improved by 6% and total delinquencies. Also improved.

David: We continue to expect full-year net charge-offs to be towards the higher end of the range, attributable primarily to loans within our previously identified portfolios of interest.

Speaker Change: Our through the cycle, net charge off. Expectations are unchanged and remain between 40 and 50 basis points.

David: We expect third quarter losses to be generally in line with the second quarter and then decline in the fourth quarter. Importantly, we have reserved for remaining anticipated losses associated with these portfolios.

Speaker Change: we continue to expect 4-year net charge offs to be towards the higher end of the range attributable primarily to loans within our previously, identified portfolios of Interest,

Speaker Change: We expect third quarter losses, to be generally in line with the second quarter. And then decline in the fourth quarter,

David: Let's turn to capital and liquidity. We ended the quarter with an estimated common equity Tier 1 ratio of 10.7 percent while executing $144 million in share repurchases and paying $224 million in common dividends during the quarter. When adjusted to include AOCI, Common Equity Tier 1 increased from 9.1% to an estimated 9.2% from the first to the second quarter, attributable to strong capital generation and a reduction in long-term interest rates.

Speaker Change: importantly, we have reserved for remaining anticipated, losses associated with es portfolios,

Let's turn to Capital and liquidity.

Speaker Change: We ended the quarter with an estimated common Equity, Tier 1 ratio of 10.7% while executing 144 million in share repurchases and paying 224 million in common dividends during the quarter.

David: In the near term, we continue to manage common equity tier one, inclusive of AOCI, closer to the lower end of our 9.25 to 9.75 percent operating range. This should provide meaningful capital flexibility to meet proposed and evolving regulatory changes while supporting strategic growth objectives and allowing us to continue to increase the dividend and repurchase shares commensurate with earnings.

Speaker Change: When adjusted to include aoci common Equity, Tier 1, increase from 9.1% to an estimated 9.2% from the first to the second quarter attributable, to strong, Capital generation, and a reduction in long-term interest rates.

Speaker Change: 25 to 9.75% operating range.

David: As John indicated, we are really pleased with our quarterly performance, particularly given uncertain market dynamics, and we believe we are well positioned regardless of market conditions.

Speaker Change: this should provide meaningful Capital flexibility to meet proposed and evolving regulatory changes, while supporting strategic growth objectives and allowing us to continue to increase the dividend and repurchase shares, commensurate with earnings

Unknown Executive: This covers our prepared remarks.

Speaker Change: John indicated, we are really pleased with our quarterly performance, particularly given uncertain market dynamics. And we believe we are well, positioned for regardless of market conditions.

Chris: We will now move to the Q&A portion of the call. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. Any confirmation to home will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. Please hold while we compile the Q&A roster. Thank you.

Speaker Change: This covers our prepared remarks, we will now move to the Q&A portion of the call.

Thank you. We will now be conducting. Your question and answer session.

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

Speaker Change: Hey, confirmation Tom will indicate your lines in the question queue.

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

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

Ebrahim Poonawala: Our first question comes from the line of Ebrahim Poonawala with Bank of America. Please proceed with your question. Just maybe this first big picture. or if you can talk to The tax bill.

Speaker Change: Thank you. Our first question comes from the line of Abraham puno. Wallow with Bank of America, please receive with your questions.

Speaker Change: Morning.

yes, maybe this first big picture,

Speaker Change: I don't know if you can talk to.

Speaker Change: The tax.

John: What implications does that have and maybe tie in like the customer sentiment, maybe, what are the implications of the tax bill, the bonus depreciation, what does all of that mean as we think about loan growth and spending from your customers? And then on the other side, from a consumer standpoint, any of the tax breaks, taxes and tips, etc. Is that any of that meaningful in terms of shoring up some of the consumer sort of balance sheets at the lower income level? Thanks. Ebrahim, I think amongst our wholesale bank, our business customers, continue to see some improvement in sentiment.

Speaker Change: Implication. Does that have an maybe tie in like the customer sentiment? But what is the implications of the tax, bill, the bonus depreciation? What does all of that mean? As we think about loan growth and spending from your customers? And then on the other side, at from a consumer standpoint that any of the tax breaks, no taxes and tips. Etc is, is that is any of that, meaningful in terms of showing up, uh, some of the consumers, sort of balance sheets at the lower income level. Thanks.

marked our

John: I would say in general, sentiment hasn't changed much since we were last together 90 days ago, the passage of the big beautiful bill and tax package does create some certainty, which is quite helpful, I think, to businesses and to consumers on the consumer side, our customers are still in very good shape. They maintain good liquidity, much like our business customers do. They're managing their debt levels. Well, we're not seeing any real deterioration at all. I do think consumers are spending a little less being a little more careful, particularly on luxury items and things of that nature just because of some volatility and uncertainty, but but all in businesses and consumers are in a pretty good place.

Speaker Change: Wholesale Bank, our business customers. Um, consider continue to sell some improvement in cinnamon, I would say in general, cinnamon has it changed much since we were last together. 90 days ago, the passage of the big beautiful, Bill and tax package does create some certainty, which is quite helpful, I think to businesses. And, and to Consumers on the consumer side,

John: There remains some, I think, uncertainty about the path of interest rates, and generally whether or not we're going to experience any increase in in prices. There's more clarity around tariffs, it does appear that that the administration's focus is on fair trade, I would say. So most businesses have had now a couple of months to think through the impact on their business on their supply chains and other things. And so I think they are gaining confidence.

Our customers are still in very good shape. They maintain good liquidity. Much like our business customers, do they're managing their debt levels. Well, we're not seeing any real deterioration at all. I, I do think consumers are spending a little less that being a little more careful, particularly on luxury items and things of that nature, just because of some volatility and uncertainty, but but all in all businesses and consumers are in a pretty good place. They remains some I think uncertainty about the path of interest rates and generally whether or not, we're going to experience any increase in in prices. There's more clarity around tariffs that does appear that that the administration's focus is on Fair Trade, I would say. So most businesses have had now a couple of months to Think Through the impact on their business, on their supply, chains and other things. And so,

John: With respect to your particular question about the tax package, bonus depreciation is has historically been very helpful. And we will we believe it will be again, in talking to customers who sell as an example, heavy equipment, construction related equipment, there has been a real uptick in inquiries. And we expect there will be an uptick in activity with respect to that category. And I think consumers just appreciate the clarity and the confirmation that tax package, and the 2017 tax package will be extended. And so they know what to expect. So all those things, I think, portend for positive momentum in the second half of 2025 and in 2026.

Speaker Change: I think they are gaining a confidence with respect to your particular question about the tax package. Bonus depreciation is, has historically been very helpful and we will, We believe it will be again and talking to customers who sell as an example, heavy equipment construction related equipment. There has been a real uptick in inquiries and we expect that we'll be an uptick in activity with respect to that category. And I, I think consumers, just appreciate the clarity.

And the confirmation that the tax package and the 2017 tax package will be extended and so they know what to expect. So all those things I think pretend for um, positive,

Ebrahim Poonawala: Got it.

Speaker Change: Momentum in the second half of 2025 and then 2026.

Ebrahim Poonawala: And I guess maybe just as a follow up. We obviously we're seeing some pickup in bank M&A activity. The regulatory window seems to be open. Now, both you and David have know all the good, bad and the ugly of bank M&A. So give us a sense of your perspective, like you have a decent stock currency, done a good job in terms of where the franchise is today. Like how should we think about inorganic growth, how you would think about and assess bank deals? Thanks. Our, you know, our point of view on this hasn't changed. I think we've been very consistent that we're not interested in depository M&A.

Speaker Change: Got it and I guess maybe just as a follow up.

Speaker Change: We obviously, we're seeing some pick up in Bank m&a activity. The regulatory Windows seems to be seems to be open. Now, both you and David have no, all the good Bad and the Ugly of bank m&a. So give us a sense of your perspective, like you have a decent stock currency, General. Good job, in terms of where the franchise is today. Like how should we think about the inorganic growth?

John: We think we have a really good plan. We continue to execute the plan. We're able to deliver top quartile results. M&A is disruptive. It's challenging. It takes your focus off what you're doing every day. And we think we have a plan and a path to continue to deliver top quartile results for our shareholders.

John: And as a consequence, we're not today interested in bank M&A. We also have a substantial technology project underway. We've talked about to modernize our core deposit platform and our commercial loan system. That's the other area of focus for us. And once we get that complete and have what will be, we think the most contemporary. cloud-based core platform amongst our peers, then we can reassess where we are. But in the meantime, we're just going to keep doing what we do. We'll look for some non-bank opportunities. Those have been good to us. We haven't seen anything recently that has interested us, but we'll continue to look.

Speaker Change: Deals thanks. Yeah, our uh you know our point of view on this hasn't changed. I think we've been very consistent that we've not interested in depository m&a. We think we have a really good plan. We continue to execute the plan, we're able to deliver top cortile results, m&a is disruptive. It's challenging. Uh, it takes your focus off, what you're doing every day and and we think we have a plan and a path to continue to deliver top, cortile results for our shareholders. And as a consequence, we are not today. Interested in, in bank m&a, we also have a substantial technology project underway. We've talked about to modernize our core deposit platform and our commercial loan system.

That's the other area of focus for us. And once we get that complete and uh, have what will be? We think the most contemporary

Ebrahim Poonawala: Very clear. Thank you very much.

Cloud-based core platform, amongst our amongst our peers. Then we can reassess where we are. But in the meantime, we're just going to keep doing what we do. We'll look for some non-bank opportunities. Those have been good to us. We haven't seen anything recently that has interests interests us, but we will, um, but we'll continue to look

Speaker Change: Very clear. Thank you very much.

Scott Siefers: Our next question comes from the line of Scott Siefers with Piper Sandler. Please proceed with your question. Morning, everybody. Thank you for taking the question.

Speaker Change: Our next question comes from the line of Scott seers with Piper Sandler. Please receive with your question morning.

David: David was hoping maybe with regard to the margin, if you could spend a little more time unpacking exactly where things are coming in better than you had expected. I know you touched on fixed asset turnover in your prepared remarks. But it is given, I think you'd sort of previously teased the possibility of getting to 360 sooner than the end of the year. But now it's both both higher and sooner. So just just curious how things are playing out from your Sure. Just to level set, you know, we had talked about getting to 360. We changed our guidance to get there a little sooner than the end of the year.

Morning everybody, thank you for taking the question. Um, David was helping maybe with regard to the the margin. If you could spend a little more time unpacking exactly where things are coming in better than you had expected. I know you touched on, um, fixed asset turnover, uh, in your prepared remarks. Um, but it was given, I think you, you'd sort of previously, teased the possibility of getting, to 360 sooner than the end than the end of the year, but now it's both both higher and sooner. Um, so just just curious how things are playing out from your perspective.

David: We did have a nice growth in the margin this quarter. But let me give you a couple of things that aren't going to repeat. We had some hedge notional that matured at the beginning of the quarter that had been serving as a negative to NII and margin that went away. And so that helped us. Call that $5 million, $6 million. We'll have new notional going on in the third quarter that will replace that. And just to remind everybody, we put these swaps on three years in advance. So the timing isn't exactly perfect. So that's $5 million or $6 million.

David: It won't repeat. And then we had a little bit more recoveries on some credit that we received. Normally, that number is about $5 million a quarter. It was about 10 this quarter. So we had five extra there. So call it $10 million or three basis points that won't repeat. So you got to take your 365 margin and really start at 362. As we think about next quarter, this past quarter and next quarter is we really had the front book, back book. We told you 140 basis points to pick up, but we've also been controlling our deposit cost.

Sure, just a level set. You know, we had talked about, getting the 360 who changed our guidance to get there, a little sooner than the end of the year. Uh, we did, uh, have a nice growth in in the margin this quarter. But let me, let me give you a couple of things, uh, that aren't going to repeat. We did. We had some notional hedge notional that matured at the beginning of the quarter that had been serving as a as a negative to knee and margin. Uh, that went away and so that that helped us, I call that 5 6 million dollars. Um, we'll have new notional going on in the third quarter, uh, that'll replace that. And just to remind everybody, we put these swaps on 3 years in advance. So, uh, the timing isn't exactly perfect. So that's 5 or 6 million.

Speaker Change: It won't repeat. Uh, and then we have a little bit more recoveries on some credit uh, that we uh, uh, that we received normally that number is about 5 million a quarter. It was about 10 this quarter so we had 5 extra, uh, there. So call it 10 million or 3 basis points that won't repeat. So you got to take your 365 margin and really start at 362.

David: We had a pretty big CD maturity month in the month of May, so this quarter. We don't have that type of change in the third quarter, but we do in the fourth quarter. So the third quarter is going to be a little bit more muted growth. We had nice loan growth at the end of the quarter, continuing to control our cost, and the front book, back book will continue at about the same level this quarter. As I said in the prepared comments, that front book, back book lasts for about three years, albeit diminishing over time.

David: But it's a nice tailwind for us, and with the recent loan growth, that gives us pretty good confidence of having growth in the third quarter and beyond. Perfect.

Um, as we think about uh, next quarter or this past quarter. And next quarter is we we really uh had the front book back book. We told you 140 basis points to pick up but we've also been controlling our deposit cost. Uh, we had a pretty big CD maturity month and the month of May. Uh, so this quarter, we don't have that type of change in the third quarter, but we do in the fourth quarter. So the third quarter is going to be a little bit more muted growth. Uh, we had nice loan growth at the end of the quarter uh continuing to control our cost and uh the front book back book will continue at about the same level this quarter. As I said in the prepared comments that front book back booked last for about 3 years, albeit diminishing over time. Uh but it's a nice Tailwind for us. And with the recent loan growth that uh

Speaker Change: Gives us pretty good confidence of having growth in the third quarter and Beyond.

David: Okay, thanks. And then, actually, David, while I've got you, can you sort of discuss kind of the tale of deposit cost leverage from here? I always think of Regions as having a little bit of a longer trend, given the retail focus. How are you thinking about overall the price and deposit pricing? Yeah, so first off, as you noted, we had our deposit, our interest rate deposit cost came down, and we continued to grow deposits, we grew all the deposits in all of our priority markets, which are eight of them. So we're very excited about that.

Speaker Change: Perfect. Okay, thanks and then, um, actually David while I got you, can you sort of discuss kind of the tale of deposit cost leverage from here? I always think of a regions is having a little bit of a longer Trend. Um, given the the retail Focus, how are you? How are you thinking about overall the price and deposit pricing from here?

David: In terms of our, our beta, as you recall, on the up cycle, we had the lowest beta at about 43%. We said for, for kind of guidance purposes, we're using the mid 30s So we're at 35% as a cumulative beta thus far, we expect over time to get back to that 43%. But just for planning purposes in that mid 30s, we think is important. And, you know, our focus on continuing to grow checking accounts and operating accounts of businesses helps us have and sustain a pretty high level of non interest bearing deposits, which is a little over 30%.

Speaker Change: Yeah. So um, first off as as you noted, we had, um, our our deposit, our industry deposit cost came down, and we continue to grow deposits. We grew all the deposits in all of our priority markets which are 8 of them. Uh, so uh, we're very excited about that in terms of our our beta as you recall on the upcycle, we had the lowest bait at about 43%

David: So I think that we have the ability to get that beta that 35% down or up even more as the Fed starts its cutting cycle, which we can debate when that would be we don't we don't see a cut in July, but maybe there's a cut later on in the year. Perfect.

Speaker Change: From kind of guidance purposes. We're using the mid-30s. So we're at 35% as a cumulative beta thus far. Uh, we expect over time to get, you know, back to that 43%. But just for planning purposes in that mid-30s, we think is important. And, uh, you know, our focus on continuing to grow checking accounts and operating accounts of businesses. Helps us have and sustain a pretty high level of non-interest-bearing, deposits, which is a little over 30%. So, I think that, um, we have the ability to get that beta that 35% down, or up, even more as the FED, uh, starts its cutting cycle, which we can debate. When that would be, we don't, we don't see a cut in July, but uh, maybe there's a cut, uh, later on in the year.

David: All right. Thank you.

Speaker Change: Perfect. All right. Thank you.

John Pancari: Our next question comes from the line of John Pancari with Evercore ISI. Please proceed with your question. Morning, John. Morning. Yeah, John, so we've had, I think, particularly over the last couple quarters, we've seen a nice uptick in our pipelines, they're improving pipelines are up. 17% year-over-year and 30% over the first quarter. That's in our wholesale business in the corporate bank. Production's up 19% versus the quarter and 15% year-over-year, so about half of that funded. So we're seeing some good growth as we benefit from just our day-to-day blocking and tackling and we benefit from the good markets we're in and some improving sentiment, I would say.

Our next question comes from the line of John P. Perry with Aber, isi, please proceed with your questions.

Speaker Change: Morning, John morning.

Speaker Change: Morning morning.

Just wanted to see if um you could kind of walk through the loan growth Dynamics, a little bit more and what's in your, you know, underneath that stable to up guidance, what are you seeing in terms of line utilization Trends? And what are the the biggest drivers on the on the commercial side from here in terms of either your markets or or you know, the or product areas and then I

Similarly, on the consumer side. Where do you see the greatest drivers to asset growth. Thanks. Yeah, John so um, we've had I think particularly over the last couple quarters we've seen a nice uptick

In our pipelines. They are improving pipelines are up.

John: We're experiencing growth in our energy portfolio and asset-based lending in the manufacturing sector within our structured finance portfolio also. All areas where we're seeing some nice growth, our REIT business, and we have previously committed to some multifamily projects that are continuing to fund up, which is a catalyst for growth. All that's offset by our continued discipline to remix our portfolio.

Speaker Change: 17% year-over-year and 30% over the first quarter that's in our, our wholesale business in the corporate bank, Productions up, 19% versus the quarter and 15% year-over-year. So we're about half of that funded. So we're seeing some good growth as we benefit from just our day-to-day blocking and tackling, and we benefit from the good markets, we're in and some improving salmon. I would say, we're experiencing growth and, and our energy portfolio and asset based Lending.

Speaker Change: And some in the manufacturing sector within our structured Finance portfolio. Also all areas where we're seeing some nice growth. Our our reap business and we have previously committed to some multi family projects that are continuing to fund up which is a catalyst for growth. All that's offset.

John: So we've exited, over the last 12 months, almost a billion dollars in leverage lending, enterprise value lending, relationships, much of which was in a technology portfolio that we just felt it was appropriate to exit. We weren't getting the It turns on that risk that we thought we should, and that's, again, I think a discipline that we've developed now over a number of years, and so it offsets some of the growth that we're experiencing, which is not why we're not projecting a lot. But we're seeing good activity amongst particularly our commercial middle market customers. Pipelines are also improving in our larger corporate business, and real estate has been stable.

Uh, our continued discipline to remix our portfolio. So we've exited over the last 12 months, almost a billion dollars in leveraged lending, Enterprise Value, lending relationships much of which was in the technology portfolio that we just felt. It was appropriate to exit. We weren't getting

Speaker Change: The.

John: So all that is positive. On the consumer side, again, we've seen some improvement in home equity lending activity, and we expect customers continue to borrow there. We're continuing to hire mortgage bankers. We believe in that business, and while it's a little challenged today, there are some green shoots, we think, and we'd expect to see some positive activity there. And then our home improvement finance business is also one that we have a lot of optimism for over the longer term. We expect the consumer credit card growing a bit, and that's an important relationship-oriented business with us.

Speaker Change: The Returns on that risk that we thought we should. And that's again, I think a a discipline that we've developed now, over a number of years. And so that offsets some of the growth that we're experiencing which is not why we're not. Um, we're not projecting a lot but we're seeing good activity amongst, particularly our our commercial Middle Market. Customers pipelines are also improving in our larger corporate business. And, and real estate has been stable. So, all that is positive on the consumer side, again, we've seen some improvement in home equity lending activity and we expect customers continue to borrow their. We're continuing to hire Mortgage Bankers. We believe in that business. And while it's a little challenge today, there are some green shoots, we think, and we'd expect to see some positive activity there and then our home improvement. Finance business is also 1 that we we have a a lot of optimism for over the longer term.

John: All of our credit card customers also have other products with Regions, and that's growing nicely. Okay, now, John, thank you for that. I appreciate it.

Speaker Change: Actually consumer credit card growing a bit and that's a important relationship oriented business. With all of our credit card, customers also have other products with with regions and and that's growing nicely.

John: And, and just secondly, I probably sound like a broken record, asking this on the various calls, but on, particularly in the southeast, I think it's relevant, but on competition and the competitive backdrop, certainly a heavy focus around the southeast markets, hearing some pretty clear commentary around a step up in Online Between Law and Law. on Competitive Dynamics. And are there considerations you're making whether you participate where you do see that intensification happening around the on the loan pricing side award device? Well, to your point, we are experiencing competition. We're in great markets. And so we have to expect that other banks and non-banks, frankly, are going to continue to want to compete in the markets that we serve.

John: As I've said a number of times, we've been in a lot of these markets for over 170 years. We have a strong brand, a real strong reputation. We're building our business around people. We take advantage of the great places that we're in. We think our teams partner well together, focus on delivering great products and services to customers. And so it's really about how we execute every day, how we execute our plans and recognize that it is a competitive environment. There are going to be people coming into our markets every day. We want to take our customers, we want to make sure that we're protecting the relationships we have, and at the same time, calling on new prospects to establish broader relationships.

What are you seeing on competitive Dynamics? And are there considerations? You're making whether you participate where you do see that intensification happening around the uh on the loan pricing side or deposits. Thanks. Well we yeah. I mean to your point we are experiencing competition. We're in great markets. And so uh, we have to expect that other Banks and non-banks, frankly are going to continue to want to compete in the markets that we serve. As I've said a number of times, we've been in a lot of these markets for over, 170 years. We have a strong brand, a real strong reputation we're building our business around people. We take advantage of the great places that we're in. We think our teams partner well together, focus on delivering great products and services to customers.

John: And in fact, in within our commercial banking business, we've already grown relationships this year that equate to about 5% growth in total relationships on an annualized basis. So we are not only protecting the business we have, but we're continuing to grow and markets are important.

Speaker Change: And um, so it's really about how we execute every day how we execute our plans and recognize that it is a competitive environment, they're going to be people coming into our markets every day. We want to take our customers, we want to make sure that we're protecting the relationships we have. And, and at the same time, calling on new prospects, to establish broader relationships. And in fact, in our within our Commercial Banking business, we've already grown relationships this year that equate to about 5% growth and and total relationship.

Speaker Change: On annualized basis. So we are not only protecting the business we have, but we're continuing to grow and markets are important to us.

John: Okay, great.

Ken Usdin: Thank you. Our next question comes from the line of Ken Usdin with Autonomous Research. Please proceed with your question. Morning. Hi, good morning. Good morning.

Speaker Change: Okay, great. Thank you.

Speaker Change: Our next question comes from the line of Ken Houston with autonomous research, please receive with your question.

John: John, I wanted to follow up on one of your prepared remarks where you talked about, like, now that we've got that line of sight on the systems being, you know, closer to being done, just wondering what we should be thinking about in terms of when we get to that moment. Do we start to see just an incremental amount of efficiency either come out of the system? Does it free up some legacy costs when we get there? And also, does it change anything in your mind about, like, you know, the strategic, you know, push forward for, you know, for regions?

David: Thanks.

John: Yeah, maybe I'll let David talk about the efficiency and cost part of this. But I do think it positions us really well with respect to our strategy. We believe just If nothing else, we have the benefit of continuing to offer more products, more services to our customers and to do it more quickly, more efficiently. And so we think because we'll have a single deposit platform operating across our footprint, it will be cloud-based and contemporary in form that we really will have a competitive advantage with respect to technology and our ability to bring products and services to our customers and to our bankers much more efficiently and effectively.

Ken Houston: Morning, hi, good morning. Um, good morning. Um, John, I wanted to follow up on your, on your 1 of your prepared, remarks, or you talked about like now that we're got that line of sight on the systems being, you know, closer to being done, just wondering what we should be thinking about in terms of when we get to that moment. Do we start to see just a, an incremental amount of efficiency they're come out of the system, does it free up some Legacy costs when we get there? And, and also does it change anything in your minds about? Like the, you know, the Strategic, you know, Bush forward for, you know, for Regions. Thanks. Yeah. Maybe I'll David talked about the um, the efficiency and cost part of this, but I do think it positions us

David: really well with respect to our strategy. We believe just

David: If nothing else, we have the benefit of continuing to offer more products, more services to our customers, and to do it more quickly more efficiently. And so we think, uh, because we'll have a single deposit platform operating across our footprint, it will be cloud-based and contemporary in form.

John: And that then might change some of the aspects of our strategy.

David: But today, we're focused on just delivering that project. Yeah, I think from an efficiency standpoint, that really is both sides of the equation. John mentioned the revenue efficiencies, getting to market quicker, being able to have an offer in one area versus another area based on the dynamics of a given market. You know, from a total cost standpoint, we do expect over time that technology costs will increase. Software-as-a-Service, just broad-based, is going to cause that across the industry, we would believe. And so the issue is, as we leverage that technology, including artificial intelligence and generative AI, is how can we use those tools and, over time, we will have attrition in our workforce that we won't have to replace because we have technology that can do a particular job.

David: That we really will have a competitive Advantage with respect to technology and our ability to bring products and services to our customers and to our Bankers much more efficiently and effectively and that then might change some of the aspects of our of our strategy. But today we're focused on just delivering that that project. Yeah, I think from an efficiency standpoint that really is both sides of the equation. John mentioned, the revenue efficiency is getting to Market quicker, being able to have an offer in 1 area versus another area. Based on the Dynamics of a given Market, you know, from a total cost standpoint, we do expect over time, that technology costs will increase.

David: So I think that the key is, how does all that happen in tandem? And we don't have that clear answer just yet, but in theory, that's what the expectation should be with this new technology that we're going to be implementing. and it includes a commercial loan system and deposit system and a new general ledger. So there's a lot going on there over the next couple, two, three years actually. Got it.

David: Uh, software as a service just broad-based is going to cause that across the industry, we would believe. And so the the issue is, as we leverage that technology including artificial intelligence and generative AI is how can we use those tools and over time, we will have uh, attrition in our Workforce that will uh, that we won't have to replace because we have technology that can do a particular job. So, um, I think that, uh, the key is how, how does all that happen in Tandem? And we don't we don't have that. Clear answer just yet, but in theory that's that's what the expectation should be with this new technologies that we're going to be uh, implementing

And it includes a commercial loan system and deposit system and a new general ledger. So there's a lot going on there, over the next couple, 2, 3 years actually.

David: And as a follow up to what you've been building, you just mentioned the commercial system, like how run rated are the bankers that you've hired so far in terms of their production potential?

John: And how are you doing in terms of your pacing, in terms of the competitive ability to add more people like you've talked about over the last few years, looking at upwards of 150 plus over the next couple of years? Yeah, I think we're on track. We should have hired about half of the bankers that we expect to hire by the end of the third quarter. Began building around support staff first, because we want to make sure we have the teams in place to support our bankers when they join our teams. I think our recruiting has been good.

In terms of the, you know, the competitive ability to to add more people that you've talked about over the last few years, you know, looking at like, what upwards of 150 plus over the next couple years.

John: We talk often about the importance of recruiting every day, expect our leaders to know who the best bankers are in the markets that they're operating in. And as a result, we should have a leg up on recruiting, because we're actively doing that all the time. And we're pretty confident in our ability to complete our recruiting of the bankers we anticipate hiring, as I say, about half of them by the end of the third quarter, which is on pace with our expectations and the balance midway through 2026 probably.

Yeah, I think we're, we're on track. We should have hired about half of the bankers that we expect to hire by the end of the third quarter began building around support staff first, because we want to make sure we have the teams in place to support our Bankers when they join our teams. I think our recruiting has been good. We talk often about the importance of of recruiting every day. Expect our leaders to know who the best Bankers are in the markets that they're operating in. And as a result, we should have a leg up on recruiting because we're actively doing that all the time. And and we're pretty confident in our ability to complete our recruiting of the bankers. We anticipate hiring as I say with about half of them, by the end of the third quarter, which is on Pace with our expectations and the balance Midway through 2026 probably

John: Great.

Stephen Alexopoulos: Thanks a lot. Our next question comes from the line of Stephen Alexopoulos with TD Cowen. Please proceed with your question. Hey, good morning. Morning to morning. So I want to start, so the short interest is fairly high in your stock, and part of Page PAGE of NUMPAGES www.verbalink.com Page PAGE of NUMPAGES Now, in the slides, you do say you expect to hold the non-interest-bearing mix stable.

David: Great. Thanks a lot.

Speaker Change: Our next question comes from the line of Stephen Alexa pulis with TD Cowen. Please receive with your questions.

Speaker Change: Hey, good morning everyone. Good morning.

David: Could you unpack this for us? You know, how do you expect to maintain that stable means you have to grow it if you're growing total deposits of fund loan growth? And then, you know, ultimately, that'll lead to what environment do we need to see for you to see NIM expansion? Yeah, so a couple things there. You know, our whole business model is predicated on, when we think of a customer, we think of a checking account of a consumer and an operating account of a business, non-interest bearing deposits. From that, we can leverage all the other products and services that those customers need and value.

Speaker Change: The word to start. So the short interest is fairly high in your stock and part of the thesis on those more negative is that it's going to be tough for you to maintain this High mix of non-interest, bearing, right. It's tied to that, your manager's margin, might be at a peak. Now in the slides, you do say, you expect to hold that knot interest bearing mixed stable.

Speaker Change: Could you unpack this for us? You know, how do you expect to maintain that stable means you have to grow it. If you're growing total deposits of fund loan growth and then, you know, ultimately that will lead to what environment do we need to see for you to see Nim expansion beyond the second half?

David: And so when we're growing, if we want to have a money market, especially in one of our growth markets, we're going to bring and expect a checking account to come with that. So continuing to grow new clients, John had mentioned 300 new clients, so operating accounts, that we think we can continue to maintain that low 30% non-interest bearing deposit account. I mean, again, a lot of those, two-thirds of those are consumer checking accounts with $5,000 on average in them. Those aren't going anywhere. And if you're in markets and making investments where there's a lot of growth in people and businesses, we should expect as we grow total deposits that we can continue to grow non-interest bearing.

Speaker Change: Yeah. So a couple things there. Uh, you know, our whole business model is predicated on when we think of a customer, we think of a checking account of a consumer and operating account of a business, non-interest, bearing deposits from that. We can leverage all the other products and services that those customers need and value. And so, when we're growing, um, you know, if we want to have a, a money market special and 1 of our, our growth markets, we're going to bring an expected checking account to come with that. Uh, so continuing to grow new class, John had mentioned, 300 new clients. So, uh, operating accounts that we think we can continue to maintain that low 30%, non-interest bearing, uh, deposit account. I mean again,

Speaker Change: A lot of those 2/3 of, those are consumer checking accounts with $1,000 on average in them.

David: Relative to the margin, we had talked about trying to get our margin more stable and less volatile. And we've said we could be, depending on where the interest rate environment is, somewhere between 350 and 4%. And we still believe that. So I think that at the end of the day, we have some more room to grow the margin, and it really depends on what absolute interest rates are, but also the shape of the yield curve. And so if we can have a normal yield curve, you call it in the 4% range, maybe a tad over that on the 10, and 3% on the short end, that's a pretty good environment for us to continue to grow net interest income and the resulting margin.

Speaker Change: Those aren't going anywhere. And if you're in markets and making Investments where there's a lot of growth in people and businesses we should expect. As as we grow total deposits, that we can continue to grow non-interest, bearing relative to the margin. We had talked about trying to get our margin, uh, more stable, uh, less volatile. Uh and we've said, we could be depending on where the interest rate environment is so on between 350 and 4% and we still believe that. So I think that at the end of the day uh we have some more room to grow uh the margin and it's really depends on what absolute rates are but also the shape of the yield curve. And so if we can have a normal yield curve, uh you call it, you know, in the 4% range. Maybe a tad over that on the 10 and a, a 3% on the short end,

John: Yeah, I would just add, if I can, we have almost four and a half million consumer checking account customers average balance, as David suggested, is about $5,500. So we have a very loyal, low cost, and granular, importantly, customers based, who are actively using their accounts for 39 or 40 quarters. Visa recognizes the bank whose debit card base is most utilizes their cards and is most active. And we've been at the top of that group, which means our customers are actually operating out of their accounts, and we believe that that will continue. We have 400,000 small business customers, and they have an average balance of about $15,000.

Speaker Change: That's a pretty good environment for for us to continue to grow net, interest income and the resulting margin.

Speaker Change: Yeah, and I, I would just add, um, if I can, we have almost 4 and a half million consumer, checking account, customers average balance as David suggested is about 5,500. So we have a very loyal low cost, uh, and granular importantly, customer base, who are actively using their accounts for

Speaker Change: Uh, 39 or 40 quarters.

John: So again, really core, granular customers, and we're growing consumer checking accounts. We're growing small business checking accounts in the markets that we're in, and we believe that we can continue to do that. The final thing is, amongst our core commercial customer base, we have about a 64% or 65% penetration rate for treasury management products and services. So there's some upside there as we continue to broaden and deepen relationships, which should solidify and help us grow non-dispairing deposits.

Visa recognizes the bank whose debit card base is most utilizes their cards in his most active. And we've been at the top of that group, which means, you know, our customers are actually operating out of their accounts and we believe that that will continue. We have 400,000 small business customers and they have an average balance of about 15,000. So again, really core granular customers, and we're growing consumer checking accounts. We're growing small business, checking accounts in the markets that we're in, and we believe that we can continue to do that. The final thing is amongst our

4, 65% penetration rate for treasury management products and services. So there's some upside there as we continue to broaden and deepen relationships which should solidify and help us grow.

Stephen Alexopoulos: for a follow-up question. which goes back to your answer to John Pancari. when we listen to other banks.

Got it. That's helpful. It for a follow-up question.

John: Transcripts provided by Transcription Outsourcing, LLC. your market, can you just give us a sense, you know, we think about whatever long growth is for the industry, do you guys have an expectation that you'll be at that level or better, you know, which is partially has to do with appetite to grow? Yeah, I mean, we have, and I think I've tried to make the point just a few minutes ago, we have over the last seven, eight years been really focused on capital allocation, risk adjusted returns. We've been remixing our portfolio. And that's a real discipline process we continue to go through.

Speaker Change: Uh, which goes back to your answer to job. Hey, car's question. You know, when we listen to other Banks, if you heard the PNC call as an example, they talk about good long growth coming from your markets and its share gate. So there's also a view that you know, regions is a bit on defense with all these other Banks coming into your Market. Can you just give us a sense? You know, we think about whatever

Speaker Change: Loan growth is for the industry. Do you guys have an expectation? That you'll be at that level or better, you know, which is is partly to do with appetite to grow? Thanks.

Speaker Change: Yeah, I I mean we have and I think I've tried to make the point just a few minutes ago.

John: It's not been so much about growth for us as it has been the position, our portfolio, for soundness, for profitability, and then ultimately, for growth. There will be periods of time when we just don't grow. And now is one where we're growing modestly. But as I pointed out, we've had a billion dollars in forced runoff related to our leveraged lending and enterprise value lending portfolios. Primarily within the technology sector, we just decided to exit that space. So, and all the while, we're continuing to improve our profitability and return returns for our customers. That's what we're focused on consistent, sustainable performance, we will continue to grow.

We have over the last 7, 8 years, been really focused on Capital allocation risk adjusted returns. We've been remixing our portfolio and that's a a real discipline process. We continue to go through it's not been so much about growth for us as it has been the position our portfolio for soundness for profitability and then ultimately for growth there will be periods of time when we just don't

John: And I believe and have said consistently, we should grow with the economy plus a little in the markets that we operate in. But that assumes that we're not also trying to exit some other part of our business to continue to reshape the portfolio. The other thing I'd say about growth, and I love slide four, in our deck, we're continuing to grow core deposits. And we look at deposit growth in our markets over the last five years, we're growing at a rate faster than virtually all of our peers, and doing it at a cost that is significantly less than our That is ultimately, that's the, in my mind anyway, the real proxy for do we have a business that's growing, is it sustainable, and will it create long-term value for our shareholders?

Speaker Change: Grow. And now is 1 where we're growing modestly, but as I pointed out, we've had a billion dollars in force runoff related to our leveraged lending and Enterprise Value lending portfolios, uh, primarily within the technology sector, we just decided to exit that space. So, and all the while we're continuing to improve our profitability and returns for our customers. That's what we're focused on consistent. Sustainable performance, we will continue to grow and I believe and have said, consistently, we should grow with the economy plus a little in the markets that we operate in. But that assumes that we're not also trying to exit some other part of our business to continue to reshape the portfolio. The other thing I'd say about growth and I I I love slide 4 in Our Deck, we're continuing to grow core deposits and when you look at

Speaker Change: Deposit growth.

Speaker Change: in our markets over the last,

5 years, we're growing at a rate faster than virtually all of our peers and doing it at a cost that is significantly less than our peers.

John: And I think the answer is yes.

John: And I'll add one thing, Stephen, to that. On the loan side, if you look at our loan yields relative to peers, loan yields have come down over an extended period of time. Ours have come down less so than everybody else's because we are trying to use rate to grow. We will grow when we get paid for the risks that we take with an appropriate return on the capital that our shareholders have given us. And if that means we grow a little bit slower than everybody else, so be it. But we're going to be focused on risk-adjusted returns.

Speaker Change: That is ultimately, that's the in my mind. Anyway, the the real proxy for do we have a business that's growing? Is it sustainable and will it create long-term value for our shareholders? And I think the answer is yes. And I I'll add 1 Thing Stephen to that on the loan side. If you look at our loan yields relative to peers, um uh loan yields have come down over an extended period of time. Ours have come down less so than everybody else's because we are trying to use rate to grow

Stephen Alexopoulos: We think that's really what our shareholders want us to do. Got it. Terrific color.

Speaker Change: We will grow when we get paid for the risk that we take with an appropriate return on the capital that our shareholders are giving us the use and if that means we grow a little bit slower than than everybody else, so be it. But we're going to be focused on risk adjusted returns. We think that's really what our shareholders want us to do.

Gerard Cassidy: Thanks for taking my questions. Our next question comes from the line of Gerard Cassidy with RBC. Please proceed with your question.

Speaker Change: Got it. Terrific color. Thanks for taking my questions. Thank you.

Gerard: Good morning, Gerard. Good morning. Hello, gentlemen. How are you? Good. Thank you. Can you guys share with us? Your credit quality is very good, improved this quarter, but many of the banks this quarter had really good improvement. And it's interesting because the backdrop that we have of the economic uncertainty brought on by the Trump administration's tariff policies, potentially causing increased inflation, Predictions three months ago of recession probabilities going up, and credit across the board this quarter was really good. Can you give any color on what you guys are seeing? And then second, John or David, if those two portfolios that you have identified that you keep extra scrutiny on, transportation and office, commercial real estate, any color on those portfolios as well?

Our next question comes from the line of Gerard Cassidy with RBC pleased with you with your question.

Gerard Cassidy: Orange Gerard. Good morning. Hey hello gentlemen. How are you? Good. Thank you.

Gerard Cassidy: Can you guys share with us? Um,

Gerard Cassidy: you know, your credit quality is very good, improved this quarter.

John: Yeah, I think in general, Gerard, businesses have had a number of good years in a row. And so they have generally strong, much stronger balance sheets, a lot of liquidity, true of the consumer as well, while they may have more debt, debt to income ratios are actually improved better, they have more liquidity. So all in all, I think customers have been more prudent in how they manage their business, so to speak. At the same time, I think the industry has done a much better job of managing risk, exposure, concentrations, et cetera, all of which has manifested itself in better outcomes.

Speaker Change: But many of the banks this quarter had really good Improvement and it's interesting because the backdrop dropped that we have of the economic uncertainty brought on by the Trump administration's tariff policies, potentially causing you know increase inflation predictions earlier, you know 3 months ago of recession probabilities going up and credit across the board. This quarter was really good. Can you give any color on what you guys are seeing? And then second John or David if um, those 2 portfolios that you have identified that you keep extra scrutiny on transportation and office commercial, real estate any color on those portfolios as well.

Speaker Change: true of the consumer as well, while they may have more debt debt to income ratios are actually

Speaker Change: Improved better, they have more liquidity. And so, all all in all I think, um,

John: With respect to the two portfolios you mentioned, we're continuing to work through a handful of credits in the office space, and while we're guiding to 40 to 50 basis points of charge-offs and potentially to the higher end of the range during the next quarter, that contemplates that we resolve a large issue, which may not get resolved in the third quarter. As you know, working through large credits sometimes is—the timing of the resolution is unpredictable. But we've just got a couple, and we've identified those now over a number of quarters. and we have plans to work through them.

Speaker Change: Customers have been more prudent in how they manage their business. So to speak at the same time, I think the industry has done a much better job of managing risk exposure, concentrations, Etc, all of which is manifested itself. In in, in better outcomes with respect to the 2 portifino

During the next quarter, you know that contemplates that we resolve a large issue which may not get resolved in the third quarter. As you know, working through as far as credits, sometimes is the timing of the resolution is unpredictable.

Speaker Change: So, uh, but we just got a couple and we've identified those now over a number of quarters.

John: On the transportation side of that. The sector continues to be stressed in part because of conversations, uncertainty about tariffs. But again, we think that is manageable and customers have reacted to what has been a long period of recession in that sector and are doing okay. You know, from the consumer side, Gerard, consumers are in pretty good shape, too. Now, there is some pressure on the lower FICO individuals, but we don't—that's not where we bank. We bank homeowners, generally speaking, on the consumer side, and so we don't see that risk. Consumers that we're banking from a loan standpoint are actually in good shape where their income is outpacing inflation, and they have quite a bit of net worth because of housing prices continuing to stay as strong as they are.

Speaker Change: And we have plans to work through them on the transportation side. Now that

Speaker Change: Sector continues to be stressed in part because of conversations uncertainty about tariffs. But again we think that is manageable and customers have reacted to what has been

Speaker Change: a long period of of recession in that sector and are doing doing, okay?

You know, from the consumer side Gerard, um, consumers are in pretty good shape too. Now, there is some pressure on the lower FICO um,

John: So you look at our losses and our supplement on the consumer side, you don't see anything in the—related to mortgage or home equity to speak of, because any time we have a—may have a foreclosure, there's equity in the home that we have from a collateral standpoint. So all in all, businesses and consumers are in pretty good shape, and we just have to work through a couple of these portfolios, which is why we'll be at the higher end of our 40 to 50 charge-off range in time. We'll expect that to go down to the lower end.

Gerard Cassidy: Very good.

Gerard: And then just a more broad question for either of you.

Individuals. But we don't, that's not where we Bank. We Bank homeowners generally speaking on the consumer side. And uh, so we don't see that risk of consumers that we're banking from a loan standpoint or are actually in good shape where they're uh income is outpacing inflation. And they have quite a bit of net worth because of housing prices continue to, to stay as strong as they are. So you look at our losses in our supplement. On the consumer side, you don't see anything in the related to the mortgage or home equity to speak of because anytime we have a may have a foreclosure. There's there's Equity, uh, in the home that we have for, from a collateral standpoint. So, all in all businesses and consumers are in pretty good shape. But uh, you know, we just have to work through a couple of couple of these portfolios which is why we'll be at the higher end of our 40 to 50 charge off range in time. We'll expect that to go down to the to the lower end.

John: Can you share with us your thoughts on, you know, the coin legislation passed yesterday in Congress, and stable coins are probably going to be, you know, part of the payment system as we go forward, and also deposits, how are you guys approaching, you know, adopting some sort of stable coin solution? And do you think there could be a consortium of banks getting together for a single stable coin, kind of like what you're doing?

John: What do you guys do with Zelle? Yeah, I think we do believe that there'll be a consortium of banks getting together, and we would intend to participate with them. We're typically a follower, and when big changes like this occur within the industry, and more specifically, within the payment space, we've been actively engaged with the clearinghouse and with early warning systems around Zelle and real-time payments at the clearinghouse, etc.

Speaker Change: Very good and then just a more broad question for either of you, um, can you share with us, your thoughts on, you know, the coin legislation passed yesterday in Congress and stable coins are probably going to be, you know, part of the payment system as we go forward. And also deposits. How are you guys approaching, you know, adopting some sort of stable, coin solution, and do you think there could be a Consortium of banks getting together? For a single stable coin, kind of like what you guys do with zelle?

Speaker Change: yeah, I think we do believe that there will be a Consortium of banks get getting together and, and we would intend to participate with them, you know, we're typically a follower and when big changes like this occur within the industry and more specifically within the payment space, we've been actively engaged with the clearing house and with early Warning Systems around zelle, and

John: will also like, like in those. be engaged with other peers and the larger banks in the industry to find a solution around stablecoin and the impact on the payment.

Speaker Change: Real-time payments that the Clearing House, Etc.

Speaker Change: Will also like like in those instances be engaged with other peers and the larger banks in the industry to find a solution around. Um,

Speaker Change: Stablecoin and the impact on on the payment system.

John: Very good.

Unknown Executive: Thank you. I'd also add, John, to your slide four, slides 17 and 18 are very impressive, too. So thank you.

Unknown Executive: Thank you.

Speaker Change: Very good. Thank you. I'd also add John to your slide 4, slide, 17 and 18 are very impressive too. So thank you.

Speaker Change: Thank you.

Betsy Graseck: Our next question comes from the line of Betsy Graseck with Morgan Stanley. Please proceed with your question. Hi, good morning. So the question I have just is on the operating leverage, which you identified in the $150 to $250 range this year, is that right? That's correct. So, as I reflect on all the conversation around the technology, investments, Transcripts provided by Transcription Outsourcing, LLC. being in place in the not-too-distant future. How should we be thinking about operating leverage? Is this run rate of 150 to 250 something that you think that you should be able to continue to deliver over time?

Our next question comes from the line of Betsy Grace. That is Morgan Stanley. Please proceed with your question.

Hi, good morning.

So, the question I have just is on the operating leverage, which you identified in the 150, to 250 range this year. Is that right?

Speaker Change: That's correct.

Speaker Change: So as I reflect on all the conversation around the technology Investments,

Speaker Change: um,

I guess I should say maturing right? And the uh systems.

Speaker Change: Being in place and then not too distant future.

Betsy Graseck: And I'm not asking for a 26 outlook or anything, but I mean, what I'm really just trying to get at is with the technology stack you have and is about to be fully deployed with the AI that you identified in the presentation discussed a little bit. And with, you know, coupled with the new.

David: banker headcount, you know, should we be thinking here that This is a go-forward range, or is operating leverage this year unusually high to what you think you can generate over time? Betsy, I would just say, we're committed to delivering positive operating leverage over time. There'll be periods of time where that's more challenging to do, but we are committed to delivering positive operating leverage over time. Yeah, I think the key here is we don't want to force positive operating leverage when we need to make investments. That being said, we expect to generate it. We're working on our three-year strategic plan.

Continued to deliver over time and I'm not asking for a 26 Outlook or anything. But I, I mean, what, what I'm really just trying to get at is, with the technology stack you have, and is about to be fully deployed with the AI that you identified in the um, presentation discussed a little bit. Um, and with, you know, coupled with the new

Speaker Change: bank or headcount, you know, should we be thinking here that

Speaker Change: This is a go forward range or is operating leverage this year. Unusually high to what you think you can generate over time.

Betsy I would just say and we're committed to delivering positive operating leverage over time. Um there'll be periods of time where that's more challenging to do.

David: We're asking all the businesses, when they submit their original budgets, that they need to have positive operating leverage built into it. And we need to control the back office spend. We need to make the investments we need to make, but we also need to go find savings in everything else that we're doing. And we've done a really good job of controlling our expense base. As you can see, I'm not sure what slide it is. And so you'll see that focus and what exactly operating the leverage will be in 26. We're not going to sign off on that just yet.

Speaker Change: But we are committed to delivering positive operating leverage over time. Yeah, I I think the, the key here is, we don't want to force operating positive, operating leverage, when we need to make investments. Uh, that being said, we expect to generate it, uh, we're working on our 3 years, strategic plan. Uh, we're asking all the businesses when they submit their original budgets, uh, that they need to have positive operating leverage built into it, and we need to control the back office. Spend, we need to make the Investments we need to make, but we also need to go find savings and everything else that we're doing and we've done a really good job of controlling our expense base as you can see. Um, I'm not sure what slide it is and so you'll see that folks

David: But, you know, we're making investments this year outside of technology. We're making them at all three of our business segments on the consumer side, wealth side and corporate banking group. And we expect those investments will generate more revenue. Now, it will take time. And somebody I have forgotten who asked a question about that. It will take time for those new hires to generate revenue. But, you know, we just have to continue to look for ways to become more efficient. And we've got to do, I think we and the industry has to do a better job of leveraging all the new technologies that are coming at us pretty rapidly.

Speaker Change: Um, what exactly operating a leverage will be in 26. We're not going to sign off on that just yet, but, you know, we're making Investments this year. Outside of Technology. We're making them at all. 3 of our business. Segments on the consumer side, welt side, and the corporate banking group.

David: And let, you know, like I said, let our attrition, which is about six to seven percent of our workforce every year, help pay for some of these this technology. Got it. Okay. And then my follow up is just on the net interest margin where you indicated, you know, You mentioned 4% at one point. I wanted to understand the, and I understand that, you know, a normal ideal curve and you indicated, you know, front end at 3, long end at 10, but I'm sorry, long end at 4, right? Not 10, 4. I guess the question is, what other factors besides a normalized yield curve and, you know, with a front end of three would be?

Uh, and we expect those investments will generate more Revenue. Now, it will take time, and somebody have forgotten who asked a question about that, that will take time for those new hires to generate Revenue. But, uh, you know, we just have to continue to look for ways to become more efficient. Um, and we've got to do, I, I think we and the industry has to do a better job of leveraging. All the new technologies that are coming at us pretty rapidly. Um, and let you know, like I said, let our attrition which is about 6 to 7% of our Workforce, every year uh, help calm, help pay for some of these uh this technology spend

Speaker Change: Got it. Okay. And then this my follow-up is just on the net interest margin, where you indicated, you know,

You mentioned 4%, at 1 point, I I wanted to understand the and I understand that, you know, uh, normalized yield curve and you indicated, you know, front end at 3, long end at 10 but I'm sorry long end at 4 right? Um not 10 4. Um I hope you're not live. Uh, I guess the question is what other factors but

David: Yeah, I think it's a backdrop for that type of outcome. Yeah, so a number of factors, obviously, the big ones, the yield curve, that one's continuing to grow, grow customers, non interest bearing accounts, checking counts and operating accounts, as we've mentioned, controlling our deposit costs as as rates are cut, we've got to, we've got to be timely with the one we can to make sure we're cutting rates, we have to be fair to our customers and fair to the market. But we need to also be fair to our shareholders and make sure we get an appropriate margin.

Speaker Change: besides normalized yield curve and you know, with the front and a 3 would be

Speaker Change: Yeah, I think it's the drop for that.

David: Mix of what we put on the books also matters. And so we have a couple of of high interest portfolios, our Cynthium portfolio, our HiFi portfolio, those make a lot of money for us, because they're a high fixed rate and the input costs, as as fed funds get cut, creates a much bigger margin quickly. And so that's through all those is how we could get to 4% at some point. Super.

Speaker Change: Factors obviously, a big 1 to yield curve. Another 1's continuing to grow. Um, Growers, 9 interest bearing accounts, checking accounts and operating accounts as we mentioned, uh, controlling our deposit cost as as rates are cut. We've got a, we've got to be timely with. And when we can to make sure we're cutting rates. We have to be fair to our customers and fair to the market, but we need to also be fair to our shareholders and make sure we get an appropriate margin. Mix of what we put on the books. Also matters. And so uh, we have a couple of them, uh, of of high interest portfolios. Our Cynthia portfolio, our high 5 portfolios for us because they're a high fixed rate and the input cost uh, as as fed funds get cut.

David: Thanks so much.

Creates a much bigger margin quickly. And so that's um through all those uh is how we could get the 4% um, at at some point.

Speaker Change: Super, thanks so much.

Matt O'connor: Your final question comes from the line of Matt O'Connor with Deutsche Bank. Please proceed with your question. Morning, Matt. Morning. Thanks for sleuthing me in here. You mentioned a couple of times about a billion dollars of runoff in the past year within the commercial book. And I was just wondering if you could size how much runoff there's still to do and the timing of that on the commercial side. And then I think there's some consumer stuff that you've been running off as well and to size that the same. Thanks. Yeah, about four to 500 million probably is our target.

Your final question comes from a line of Matt o'conor with Deutsche Bank. Please repeat with your question.

Speaker Change: Morning, Matt.

Uh morning thanks for uh squeezing me in here. Uh, you mentioned a couple of times about um a billion dollars of runoff in the past year within the commercial book and I was just wondering if you could size how much runoff, there's still to do, uh, and the timing of that on the commercial side. And then I think there's, uh, some consumer stuff that you've, uh, been, uh, running off as well and and decides that the same. Thanks.

David: We expect balance of the year in terms of runoff today. That's targeted and focused.

David: I'm sorry, I missed maybe the second part of your question. Yep, so the actually just to clarify the four to 500 million that further commercial runoff by the end of the year. Yes. And how much how much in total? Is that coming to an end? It is. As of now, we may change our mind, but yes, that's our current target.

Spouse of the year in terms of runoff today, that's targeted and focused.

Speaker Change: I'm sorry, I missed maybe the second part of your question.

Yep. So the actually just to clarify the 4 to 500 million. That's uh further commercial runoff by the end of the year. Yes. And how much how much in total um is that coming to an end?

David: I don't mean to be flip about that, but what I mean is, from time to time, we take a view of a particular portfolio or relationship and the profitability of that relationship relative to the risk or profitability of the portfolio. We could make some decisions that cause us to focus on something else, but today, based upon what we know, you can expect it to be $400 million to $500 million. Okay.

It it is it is as of now we may change our mind. Uh, but yes, that's our, you know, our current Target

Oh man. Just okay, I don't mean to be flip about that. But what I what I mean is you know, from time to time we take a view of a particular portfolio or a relationship and and the profitability of that relationship relative to the risk or profitability of the portfolio. And so uh we could make some decisions that cause us to focus on something else. But today, based upon what we know, you can expect it to be 4 to 500 million dollars.

David: And the second part of the question was just from the consumer side. I think you might saw it from like Indirect Auto. Just remind us like how much is left to run off in the pace of that. Not the material there, Matt. That's negligible. Yeah. Okay, great. So I guess the point is like on loans, you know, the drag from runoff should be a lot less, especially going into next year. And then the production is obviously increasing. So right. That's the way we see it. Okay, thank you. Thank you.

Speaker Change: Okay. And then the second part of the question was just from the consumer side, uh, I think you might thought from like interact Auto,

Speaker Change: Uh just remind us like how much is left to run off in the pace of that. No, not the material there. Matt. That's negligible, yeah.

Speaker Change: Okay great. So I guess the point is like on loans um you know the drag from runoff should be a lot less, especially going into next year and then the production is obviously increasing. So right

Speaker Change: That's that's that's the way we see it.

Okay, thank you.

Speaker Change: Thank you.

John: Well, I appreciate your interest in Regions, participation in the call this morning, really proud of the quarter, proud of the effort of our team and excited about the momentum we think we have as we focus on the balance of the year and into 2026.

Speaker Change: Okay.

Chris: So thank you all and have a good weekend.

Speaker Change: Well, I appreciate your interest in, uh, Regent participation in the call this morning, really proud of the quarter, proud of the effort of our team and excited about the momentum. We think we have as we focus on the balance of the year and into 2026. So thank you all and have a good weekend.

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

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