COMERICA INC — Call Transcript 2025

Good morning, and welcome to Comerica Bank's Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note that this conference is being recorded. I will now turn the conference over to your host, Kelly Gage, Director of Investor Relations. Thank you. You may begin. Thanks, Jesse. Good morning, and welcome to Comerica's second quarter twenty twenty five earnings conference call. Participating on this call will be our President, Chairman and CEO, Curt Farmer Chief Financial Officer, Jim Herzog Chief Credit Officer, Melinda Chauci and Chief Banking Officer, Peter Suszik. During this presentation, we will be referring to slides which provide additional details. The presentation slides and our press release are available on the SEC's website as well as in the Investor Relations section of our website, comerica.com. The presentation and this conference call contain forward looking statements. In that regard, you should be mindful of the risks and uncertainties that can cause actual results to differ materially from expectations. Forward looking statements speak only as of the date of this presentation, and we undertake no obligation to update any forward looking statements. Please refer to the Safe Harbor statement in today's presentation on slide two. Also, the presentation and this conference call will reference non GAAP measures. In that regard, I direct you to the reconciliations of these measures in the earnings materials available on our website, comerica.com. Now, I'll turn the call over to Kurt, who will begin on slide three. Thank you, Kelly. Good morning, and thank you for joining our call. We are incredibly proud of this quarter's results. We saw an inflection in loans as balances grew consistently throughout the quarter across most of our businesses. While deposits came down modestly, favorable loan fee income and expense trends drove a sizable increase in both net income and PPNR. Capitalization remained a strength with an estimated CET1 of 11.94%, well above our 10% strategic target even after a compelling dividend and higher share repurchases. Sentiment improved as we saw signs of customers beginning to make measured investments in their businesses. While economic and geopolitical uncertainty persists, customers appear more confident in their ability to navigate the environment and make adjustments where necessary. Beyond our financial results, this was an exciting quarter for payments and deposits as we announced new capabilities and product enhancements for our customers. We believe the milestones we achieved demonstrate the successful execution of our strategy and we feel ongoing efforts in this space position us well for future growth. Moving to a summary of the second quarter on slide four. We reported earnings per share of $1.42 representing an almost 14% increase over the prior quarter. Loans grew throughout the quarter and offset deposit pressures as net interest income remained flat. Credit quality continued to perform well and both interest income and non interest expense improved resulting in a lower efficiency ratio. Despite higher profitability, tax expense came down with the benefit of discrete items. In all, we saw an impressive increase in profitability and we turned $193,000,000 to common shareholders through share repurchases and dividends, while keeping capitalization strong. We continue to feel well positioned to support our customers and drive growth in our business. Now, I'll turn the call over to Jim to go into some more details. Thanks Kurt and good morning everyone. Beginning with loans on slide five, we saw strong growth in the quarter with average loans up almost 1% and period end loans up approximately 3%. Importantly, loans in most businesses increased driven by new loan production for new and existing customers. Although average loans and equity fund services declined period end trends were up with an improved outlook for private equity and venture capital in both deal activity as well as fundraising. Total commitments increased by $400,000,000 with increases in environmental services and commercial real estate offsetting decreases in equity fund services and total utilization remained relatively unchanged. Pipeline activity was strong even after closing new opportunities reflecting continued positive momentum. Average loan yields came down three basis points as the smaller benefit from BISB cessation more than offset the tailwind of our maturing swap portfolio. On slide six, average deposits declined just over 1% with the largest decreases in retail, corporate banking and technology and life sciences. In select businesses, we continue to see seasonality related to the timing of tax payments and in others we saw customers use their funds for working capital or project related purposes. Non interest bearing deposits as a percentage of total deposits remained flat at 38% for the fourth consecutive quarter demonstrating stability in our compelling funding mix. Deposit pricing increased four basis points but as we signaled previously, we expected to see some give back in pricing and this was in line with our expectations. In fact, with a cumulative beta of 67% since the third quarter of last year, we've still outperformed the betas that we saw on the way up. We intend to remain diligent and agile with our pricing strategy as we monitor the competitive environment and balance our customers' objectives with our funding needs. Our deposit portfolio has long been a key strength of our franchise and we are continuing to make strategic investments to further enhance this competitive funding source. Just this quarter, we delivered two new real time payment solutions providing additional flexibility for our customers. We feel these success stories are strong proof points of the effectiveness of our strategy and we look forward to sharing more in the future. Our securities portfolio on Slide seven declined with paydowns and maturities offsetting lower unrealized losses. We continue to expect AOCI improvement over time with the benefit of ongoing pay downs and maturities. Beyond periodic purchases to replace attrition, we are not currently expecting more meaningful securities reinvestments until late this year. Turning to Slide eight, net interest income remained stable at $575,000,000 for the third consecutive quarter as higher loans offset the impact of deposits. The lower benefit from Bisbee cessation was effectively offset by one more day in the quarter. Robust loan growth was supported by a seasonally more expensive liability mix, which contributed to a modest two basis point reduction in net interest margin. We continue to see promising trends for net interest income over time given the structural tailwinds associated with our swap and securities portfolios coupled with the objective of balance sheet growth. Credit quality as shown on slide nine remained relatively stable. Net charge offs of 22 basis points were at the low end of our normal range and effectively flat compared to last quarter. Persistent inflation and elevated rates continue to pressure customer profitability in certain businesses driving expected normalization in criticized loans largely concentrated in middle market this quarter. Non performing loans declined to the lowest level that we've seen in the last four quarters and remain well below our long term average. Trade policy developments impacted the economic forecast, but our coverage ratio remained unchanged at 1.44% since we accounted for a similar level of risk and uncertainty in our qualitative reserves set last quarter. We believe our proven credit discipline coupled with our relationship model positions us well to support our customers. On slide ten, second quarter non interest income increased $20,000,000 with growth across most customer line items as we saw higher loan volumes, less economic uncertainty and some seasonal benefits. Capital markets income improved $11,000,000 with higher syndication fees and derivative income, which included increased interest rate hedging and foreign exchange activity in addition to the quarter over quarter benefit in CVA. Income related to deferred compensation increased but was offset in higher expenses. And fiduciary income did increase seasonally. Overall, we are pleased with the improvement in customer related fee income and look to sustain this momentum in the future quarters. Expenses on slide 11 decreased $23,000,000 over the prior quarter largely due to lower litigation related expenses and salaries and benefits. Seasonal declines related to incentive compensation more than offset higher deferred compensation and merit increases. We saw a $3,000,000 reduction in expenses from changes in the FDIC special assessment and conversely saw $3,000,000 increases in both outside processing and advertising expenses. Notable items favorably impacted expenses in the quarter, including net litigation benefits, gain on sale of assets and an interest recovery for a state tax matter. Recognizing that we may not see the same benefit from notable items in future quarters, we remain disciplined in our focus to drive improved efficiency over time. As shown on slide 12, we continue to favor a conservative approach to capital producing an estimated CET1 of 11.94% well above our strategic target even after returning capital to shareholders. Our strong capital position afforded us the opportunity to redeem preferred stock avoiding a more punitive coupon reset, but also resulting in a slight negative drag to EPS this quarter from costs related to the preferred stock redemption. We went in the forward curve reduced unrealized losses in AOCI contributing to a 22 basis point improvement in our tangible common equity ratio. Even with the dynamic market, robust loan growth and the redemption of our preferred stock, we increased our share repurchases to $100,000,000 in the second quarter. Our outlook for 2025 is on Slide 13. We now project full year 2025 average loans to be flat to down 1% representing an improvement from prior guidance. Although economic uncertainty persists, customers appear to be navigating the environment and beginning to invest in their businesses. Second quarter results exceeded expectations and pipelines and activity levels remain supporting our outlook for consistent growth in the third and fourth quarters. We expect to see the second half growth across most of our businesses excluding commercial real estate. Our deposit forecast remains unchanged as we expect full year average deposits down 2% to 3% in 2025 with relatively flat customer deposits and a deliberate reduction in brokered CDs. We see positive momentum driving a moderate increase in the third quarter balances with a bigger uptick in the fourth quarter benefiting from core deposit growth and seasonality. Although we anticipate continued success in winning interest bearing balances, we believe our non interest bearing deposit mix will remain in the upper 30% range. Based on our current understanding of the transition strategy, we still do not assume direct express deposit attrition within our 2025 outlook. We still project net interest income growth of 5% to 7% in 2025. Loan trends have outperformed expectations and we expect that to contribute favorably to our outlook. However, we believe deposit trends may offset benefit as we have seen slightly lower non interest bearing balances with the continued high rate environment. Further, we expect upward pressure on deposit pricing as we fund robust loan growth and successfully execute on our strategic deposit growth initiatives. Lastly, while the redemption of preferred stock will be accretive to EPS, it does create a slight drag on net interest income as we lose the benefit of the cash used for redemption. Although we expect these factors contribute to a slight decline in third quarter net interest income relative to the second quarter, which may push our full year results to the lower end of our 5% to 7% range. We continue to expect full year 2025 non interest income to grow 2%. We saw favorable trends this quarter and we anticipate continued momentum in customer related fees in the second half of the year. Given the second quarter benefits of deferred compensation and CVA within capital markets, We expect third quarter to be relatively flat, but that still assumes customer related growth quarter over quarter. Our outlook for full year 2025 non interest expenses improved as we now project only 2% growth year over year with the benefit of strong expense performance year to date. As we look at the second half of twenty twenty five, we expect to see an increase in the third quarter driven largely by the impact of second quarter notable items, seasonality, inflationary pressures and our ongoing strategic focus to drive revenue. We believe the fourth quarter will be relatively flat to the third quarter and we remain committed to driving efficiency as we balance longer term growth and return objectives with prudent expense control. Considering our strong credit metrics, proven underwriting approach and consistent portfolio monitoring, we continue to expect full year net charge offs to be in the lower end of our normal 20 to 40 basis point range. Looking at taxes, we saw an improvement in our anticipated 2025 tax rate now down to approximately 20 excluding discrete items. Moving to capital, we appreciate the flexibility that our conservative capital position affords us and we intend to maintain a CET1 ratio well above our 10% strategic target throughout 2025. With an estimated CET1 at just under 12%, we feel we have ample capacity to continue share repurchases and we intend to repurchase approximately $100,000,000 of common stock in the third quarter. As we consider future capital decisions, we intend to continue our measured approach calibrating the size and frequency of future repurchases with expected loan trends. We also plan to monitor the economic environment, our profitability and the regulatory landscape as these factors may also influence our strategy. Overall, we expect continued momentum to drive balance sheet growth while maintaining strong capital, which together position us to drive favorable returns over time. Now I'll turn the call back to Curt. Thank you, Jim. As I mentioned in my opening remarks, we are incredibly proud of this quarter's results. We feel our conservative capital, credit and liquidity management provide a solid foundation to consistently support our customers. Further, with our orientation towards growth markets, proven commercial model and long tenured customer relationships, we feel well positioned to grow alongside the economy as customer demand continues to increase. We saw evidence of that this quarter. We expect to benefit from maturities of our swaps and securities portfolios, which create a structural tailwind to net interest income over the next several years. On top of that, we are continuing to invest strategically in our business to drive responsible growth aligned with our strategy. Earlier this year, we shared tangible examples of investments in small business, middle market, business banking and payments. And we outlined what we see as potential growth opportunities stemming from those investments. We've already driven successful outcomes from our efforts with a few examples highlighted just this quarter. And we look forward to demonstrating the additional growth potential we see in our business in the coming quarters. Before we go to Q and A, I would like to take just a moment to acknowledge the immense loss of life related to the catastrophic flooding that occurred in Central Texas earlier this month. Our thoughts are with the families and communities devastated by this tragic event. With that, we'd be happy to take your questions. Thank you. Ladies and gentlemen, we will now be conducting our question and answer session. Our first question is coming from the line of Manon Gosalia with Morgan Stanley. Please proceed with your question. Good morning. Good morning. Hey, good morning all. I wanted to start on the NII trajectory. It seems like you're implying that NII will be down in 3Q and then up in the fourth quarter. So I was wondering if you could give us some more color on that? Yes. Good morning, Manon. It's Jim. Happy to go through some of those primary drivers. As you said, we do expect a slight decrease in Q3 before continuing an upward trajectory in Q4, which of course we will continue to see go upward, I think as we move through 2026. But we do have some particular events occurring in the third quarter that maybe I can just cover at a high level. Number one, I think it's important to understand the tailwinds that we continue to have in Q3 and beyond. The first is loan growth, which we expect to be strong in the foreseeable future. And that's not just in the results, but we see that in the pipeline also. The second is we do expect to benefit from stronger deposits both in the third quarter and beyond. And that's important because that will help fund our loan growth. And the third is just the continued maturity of our swaps and securities and that will continue for many quarters to come. So those are positives that we'll see both in the third quarter and will continue. But we do have some headwinds in the third quarter and we think they may more than offset the tailwinds, but importantly, we think these are just for the third quarter And then we think the tailwinds take back over the fourth quarter. The first of these is the redemption of our preferred stock. And as I mentioned in the comments, we do think this is a prudent move and it does benefit EPS, but that benefit is below the net income line. So net interest income will be missing the cash that we use for that redemption. The second is pay rates on deposits. We are expecting deposits to fund very strong loan growth and we want to make sure we're prepared for that. But we do expect pay rates to take a larger step up in the third quarter compared to the second. And I'll maybe break that into two components. About half of that pay rate increase is an increase in selected consumer pay rates that we made towards the end of second quarter, which is really just us staying dialed into the market and calibrating our strategy with the rate curve, which has been pushed out as well as considering our loan growth that we expect and other factors. The other half of the increase is we do expect to be very successful in obtaining new customers and deposits in both third and fourth quarters. But in some cases, these deposits are likely to look more like an index type rate. While they are more expensive than our traditional deposits, we do welcome them as a proactive way to fund what we think will be very robust loan growth in the future. The net of all this is that pay rates will likely step up in the third quarter to at least twice the increase of the four bps that you saw in Q2 and that's assuming a flat rate environment. Now regarding betas, totally independent of these increases I just talked about, we do expect to have maybe a little bit less than our standard data for the first FOMC reduction. And just a reminder, we do use the forward curve as of quarter end. And then I might just refer you back to my opening comments for maybe some smaller drivers. But again, I'd reinforce once we get past the third quarter, we do expect net interest income to be on an upward trajectory as we continue to grow both loans and deposits. And we would expect deposit pay rates to settle down and betas to return back to normal once we get in the fourth quarter. So that's really some of the mechanics. Peter, I don't know if there's any color that you want to add there. Well, I might just add, Madam, that I mean, we're having really good success growing deposits. And a lot of those as of late tend to be interest bearing opportunities with some of the work that we've been doing in our businesses. And I think the third quarter is probably a little bit of an inflection point. We feel good about what we look like on the other side of it. And we think it's more important to bring on deposits and fund our loan growth than to be necessarily worrying too much about whether or not those are interest bearing or non interest bearing. And that's a little bit of where the timing is right now. So I mean, we view it as a positive outlook about how things are growing for the company. And really, I'd say, getting ready for 2026 and beyond, just having that good granular deposit base. This is really a good long term move, we think. Got it. Okay. That's very thorough. I appreciate that. Maybe if I can ask the same question on the expense side. The guidance implies, I think, if I'm calculating correctly, a $600,000,000 expense number roughly for 3Q and 4Q. And that's a meaningful step up versus 2Q even if you adjust for some of those one timers in there. I was wondering if you could help us with how you're thinking about the expense side as well? Yes. It's Jim again. Yes, your math is essentially correct. Let's keep in mind that we did have an incredible second quarter on expenses, beating our outlook at consensus significantly. And some of that, as you say, and I mentioned earlier, was due to the notable items that we outlined on the expense slide. I would say there were some project expense that was deferred from the second quarter to the second half of the year. So as I look at the increase in the second quarter to the third, notable items assumed not to repeat, it is the largest component of that as we outlined in the slide. But we also do have some seasonalities we typically do in the third quarter and some inflation. And then we do continue to step up our investments for revenue, some of which were simply deferred from the second quarter to the second half of the year. So hopefully that gives you a little bit of feel for why we're stepping up and really not out of sync with what we saw for the entire year, actually some nice decreases that we'll pocket for the second quarter. But we still want to continue with the same projects and investment that we'd always originally anticipated. That's great. Thanks so much. You. Our next question is coming from the line of Jon Arfstrom with RBC Capital Markets. Please proceed with your question. Good morning, Jon. Hey, good morning. I heard Jim or Peter, you referenced it, but can you give us a little bit more on the pipelines and activity? It sounds like things are a lot better, but is there a way to quantify it? And how should we think about longer term loan growth potential beyond maybe a quarter or two? Yes, John, it's Peter. Quantifying it, probably a little harder to do, but I would say that from the last quarter definitely seems like we've seen improvement. So our manager surveys came in more positive, which we thought they would. And I articulated at the conference earlier this quarter. So pretty much across the board, we saw some really good uptick in loan growth. Our pipelines grew and we're feeling pretty good about the second half of the year. Despite a lot of the things that you feel like you're hearing across the country, there certainly seems to be noise. But I think our your average middle market customer base is progressing forward and figuring out how to navigate it. I'm a little hesitant to talk about 2026. We're not putting out any sort of outlooks for 2026. But I would say that it feels like momentum is picking up across the board for us. And so I think that we'll continue to see good loan growth throughout the year. And again, I feel like we benefit from being in some great markets. We've got a great diverse geographic base. You have seen some of the impacts in Michigan to the economy to the auto space, but I don't know that that's been a terribly strong headwind for us. So really across the board, I think we feel pretty good about it. If I were to try to quantify it John, I would say, we're still not back to kind of pre SVB pipeline numbers, but we are going in that direction. And I would say it probably feels better than it has in a while as far as the activity level since the SVB situation. And so hopefully that continues absent some sort of major event in the economy that we don't see at the moment. Okay. Good. That's helpful. And then Jim back on net interest income with some of your comments your prepared comments and the preferred redemption, you pointed us to the lower end of 5% to 7% range. How do you get off that 5%? What needs to happen to generate NII growth that's maybe midpoint or higher in the range? Thank John, if you're talking shorter term, this outlook doesn't necessarily contemplate a preferred issuance. We're being very patient there. Obviously, that would help. But I continue to say in this rate environment, probably in the short term, I think that non interest bearing deposits is still very much an X factor. So I would say seeing some stability and an inflection point in non interest bearing deposits, which is something we and from what I can tell this quarter, the whole industry is still kind of waiting for. I think that would be probably the biggest X factor out there. All right. Thank you very much. Thanks, John. Thank you. The next question is coming from the line of David George with Baird. Please proceed with your question. Good morning, David. Hey, guys. Hey, guys. Good morning. Hey, question for Kurt. I agree, Kurt, with a lot of things you said about Comerica as it relates to your reputation in the market. You've got experienced bankers. You didn't need to raise capital during the GFC. So a lot of great things about your company. And it's funny, I was going through my file this morning just looking at your quarter, and I found my initiation report, about my last firm, and it was October 6, obviously, a long time ago. Stock hit 60 was $61 that day. And today, twenty five years later, we're at $62 And then if I look at kind of where you were in 2018, 2019, the stock is down 3025%, 30%. Revenues are down and expenses are up. I just want to kind of understand from you what your plan is and what the Board's plan is to improve the performance of the company. And obviously, there's a market today, obviously, with Huntington doing a deal. In Texas there's a pretty substantial private market for banks in your backyard. So just kind of how you're thinking about longer term improvement of performance and enhancing shareholder value? Thanks. Hey, David. That was a lot of information in that question, but let me try to address it for you. First of all, the if you go back to 2018, 2019, those were good years for our company and stock performance. And if you look sort of forward from there, I think everyone's aware of the hurdles that the whole world faced and certainly the regional banks faced and we faced as well between COVID and then the significant buildup that we saw in quantitative easing and just the governmental programs that were driving deposits, was really a peak for us and we sort of saw record performance in 2022 heading into 2023. And then we had the regional bank crisis. Then we along with others saw some rationalization in assets as deposits came down. And then we exited a business line mortgage banker finance and did some rationalization across the rest of our portfolio. So we've been in a bit of a rebuilding phase since that time. And as we pointed out on the call already, we're seeing nice loan growth, got a good fee income quarter as well. Feel really good about sort of our deposit position and ability to fund our lending activity going forward. We're very excited about the structural tailwinds that we've got on NII from a forward Curt, I'm sorry to interrupt. Your loans have been flat for a decade. David, again, I would go back to what I said earlier that if you look at the last five years, which I think is what you were pointing out, I can't speak as much to the ten year prior period of time, but we did do some rationalization in the portfolio, which brought down loan growth. And I can't go back and sort of recap that. It was what we needed to do at the moment. But you are seeing nice growth in the portfolio now and I think that's what we're going to lean into. And some of the expenses that you're seeing for us is really a fact that we are trying to invest in the business for growth longer term including our expansion into some new markets, investment in our investment in payments and treasury management, wealth management, some of the other things that we've been doing in capital markets. And we believe that if you look at the efficiency ratio, it improved for the quarter. We generated a nice ROE for the quarter and we're going to lean into those things on a go forward basis. Again efficiency is going the wrong direction. Okay. And you're happy with the performance and so forth and the Board is as well? David, I'm always focused on improving performance across the company. And we are always focused on how we can make sure that we're generating positive operating leverage and improving overall all of our performance metrics across the company. Okay. Sounds great. Thank you. Our next question is coming from the line of Bernard Von Gazzicchi with Deutsche Bank. Please proceed with your question. Hey guys, good morning. So just on if the $100,000,000,000 asset threshold on Cat four is moved based on inflation and gets to say $130,000,000,000 or gets moved to $250,000,000,000 how would either one of these ranges impact your willingness and timeline to pursue a whole bank acquisition if that's in play? Thank you, Bernard. I just would say that and I've said this consistently the last couple of years, the 100,000,000,000 threshold for us is not a governor as to whether we would look at a transaction or not. We believe that the right thing for our shareholders is continue to grow the company. And we've been focused on organic growth and feel like we're seeing good organic opportunities across the enterprise. We've been a patient acquirer, something which still have to make a lot of strategic sense for us, be aligned with one of our primary geographies, a good cultural fit, etcetera. So we're aware of the landscape and we'll continue to be aware of the landscape, but believe that we've got good growth dynamics based on organic as our primary focus. Okay. And just as a follow-up, you noted some seasonality in deposits during the quarter and I think you've pointed out customer utilization of funds for funding capital investments. Do you expect to see clients utilize deposit funds like kind of in the second half, like what you're hearing or expecting on this front? Bernard, I think you may see a little bit of that still in this higher rate environment. But when I look at both some of the initiatives we have going on for deposit gathering, as well as seasonality, I do think that some of that use of funds will probably get kind of drowned out in the noise. So I don't expect it to be a significant factor going forward. We'll continue to monitor that. But we did have an inflection point in the second quarter. I will point out that June was higher than May. So the seasonality did as well as the use of funds netting against with that did continue maybe a little later than I would have hoped for. But again, we saw an inflection point halfway through the quarter and just feels like we have some really good trajectory. And I'll just say even as I look at the July, that seems to continue. So I think we've kind of moved past a lot of it. And I think some of these positive tailwinds with deposits will probably drowned out any use of funds going forward is what I'm kind of seeing here. Okay, great. Thanks for taking my question. Thank you. Thank you. The next question is coming from the line of Mike Mayo with Wells Fargo. Please proceed with your question. Good morning, Mike. Good morning. The short question is on the first quarter call, Curt, you repeated as you've done several times that Comerica has to earn its right to be independent every day and that makes sense. So under what conditions would you say that Comerica has not earned the right to remain independent every day? And this is part of the whole industry debate of skill versus scale. And I guess you've had one hundred and thirty five years at Comerica. And the question is at what point do you say, you know what, we need to scale this up. The longer version of this question is, as you know, think you were in the room, Curt, when I came to the annual meeting a decade ago and there are like five to 10 other institutional investors in the room and I asked the same question. And I recognize your comments today that you're rebuilding, you have some tailwinds quarter over quarter EPS is up, loan growth is up, period end loans are up. But when you just look at the data objectively, you say your efficiency ratio is still worst in class 68% year to date. That's where it was when I was came to the meeting a decade ago. The returns are about worst in class only better than Citigroup, which coincidentally I recommend still also it's not always the death knell, but the stock performance as was brought up earlier has also underperformed and I always stack rank the I've done this for twenty five years, I stack rank the CEO stock performance versus the BTX and unfortunately for the bottom by a big margin since you arrived the stock's down 21%, the BTX up 43%, the S and P is up a lot more. So maybe the market is really missing a story here, maybe you're about to have a hockey stick improvement. So if you could just educate me on why a decade later America has continued to earn the right to remain independent? Thank you. Mike, that's a lot as well in your question there, but I'll try to respond to it here. I'd go back to what I said earlier and you echoed, which is that we are always aware of the need to perform at an acceptable level and relative to our peer group and relative to the market overall. And certainly the regional bank space as well as the bank space across the board has had some volatility in equity performance this year, but we've seen a nice rebound in the last sixty days or so as the KBW and the KRE has as well. We have done a lot I think over the last number of years to take some of the volatility out of our performance relative to interest rate sensitivity. And now we are starting to benefit I think from some of what we put in place as well as we've got some of the structural tailwinds that I talked about earlier that we believe will continue to position us well from a performance standpoint NII etcetera the next couple of years. We continue to see nice growth across the portfolio on the lending side and we're going lean into that in the second half of the year. And again, I can't go back and sort of replay past performance. But what I am charged with doing is protecting the company overall, serving our clients, making sure that we have the appropriate risk profile, the right capital, the right credit metrics and credit expertise that we bring sort of day in and day out, protecting our franchise, the markets that we serve and doing a good job for our customers, our employees and our shareholders longer term. And I think we're well positioned from that perspective. And you mentioned one hundred and thirty five years is actually one hundred and seventy five years. But having said all that, we are aware of the landscape and we are always going to do the right thing by our shareholders. And we understand responsibility related to that. And so does our management team and so does our Board and we take the return to our shareholders very, very seriously. I appreciate that. I think also last quarter you said you did not expect a lot of mergers in the next twelve to eighteen months. If they're starting to be mergers, would that kind of change your thought process and to what degree? And why don't you expect many mergers in the twelve to eighteen months or maybe that's changed in the last three months? Yes. Mike, I may have overstated that when I asked the question. I was asked about the industry overall at the end of or at the first quarter call. And you might recall at that time when you certainly recall lots of volatility whether it's geopolitical or the trade policy and the uncertainty related to it. And it just felt like that that might sometimes when you're heading into uncertainty or possibly a credit cycle etcetera across the industry that can tend to dampen M and A. But since then we've seen a couple of deals happen. It feels like that maybe there's a more favorable regulatory environment around M and A. And as the noise settles down some around economic certainty, geopolitical certainty, etcetera, I think it is likely that you're probably going to see a bit more M and A than we've seen previously. And it just continues to factor into what we think about overall, whether we'd be an acquirer or continue to pursue our organic growth or whether we'd ever entertain something from a third party. All right. We'll watch that volatility and your rebuilding and the tailwinds. Thank you. Thanks Mike. Thank you. Our next question is coming from the line of Anthony Elion with JPMorgan. Please proceed with your question. Yes. Hi, everyone. On the 4Q NII guide of up versus 3Q, Jim, you called out earlier some of the deposit pricing headwinds you expect in the third quarter. Pay rates will likely be twice the level we just saw. But I'm curious why would those headwinds ease in 4Q, particularly if you expect both strong customer deposit growth in 4Q and the momentum in loan growth is expected to persist? Yes. Good morning, Tony. I really look at what we did towards the end of the second quarter with consumer pricing. It's kind of a reset recognizing that the forward curve has been pushed out. So I kind of think of that as onetime reset. We would expect to kind of track the market once we get into any kind of fourth quarter environment, whether that be the FOMC cut or just the general competitive environment. We probably to be said, we see any increase in deposit pay rates in the fourth quarter, think it would be accompanied by higher deposits, which net net would be a benefit for the bank. But again, it kind of view what's going on in the third quarter. It's a little bit of a onetime reset here. Again, we're not going to be sending out $400,000,000 of preferred cash every quarter either. So there are just some unique events that are occurring as we move from the second quarter to the third quarter. Okay. And then if I look at the bottom of Slide three, you're calling out payments products such as real time solutions, embedded finance. We had the house passed the stablecoin bill last night. I'm just thinking about the additional opportunities that could exist with stablecoins complementing everything you're doing on payments and the role that banks could play. Is this a technology you guys are considering leveraging down the road? Or is it still too early? Thank you. Tony, it's Peter. I think I would probably say it's a little too early to know necessarily. We do feel positioned to be involved in it. We're a member of the clearinghouse. We do feel like we have the right talent both in our technology side as well as our product side. And we do think we're making really good investment in payments to be involved now. So what this looks like though, I think is still a little bit to be determined. And I think that we are monitoring the situation. We're going to stay really close to it. We've got the right products, talent and awareness. And so but I think the answer to your question is at least from our perspective, it's a little still too early to tell how this is going to play out really for the industry and for us. Thank you. Thank you. The next question is coming from the line of Chris McGratty with KBW. Please proceed with your question. Good morning, Chris. Hey, how's it going? This is Angela Eichter on for Chris McGratty. In your prepared remarks, I know you mentioned this here, but it looks like as an industry, deposit repricing is getting a little more difficult and competition is picking up. I know you've outperformed your beta from the way up, but can you provide an update on what you're seeing here in terms of repricing and expectations for any repricing opportunities going forward? Thanks. I'm not sure I heard that question. It was deposit pricing. Is that correct? Yes. Just an update on what you're seeing in terms of your near term expectations for deposit cost repricing and any opportunities you're seeing going forward? I would probably refer you back to my answer previously where I kind of sized up where I think the third quarter increases are coming from and what the drivers of those are. It does continue to be a very competitive environment for deposits. I think we saw that with some of the banking releases so far this week. But yes, I'm not sure I would add a lot on to what I had mentioned a few minutes ago in terms of just where we see deposit pricing going. Yes. And I guess I might just say in general, whether it's loan pricing or deposit pricing, it's extremely competitive in all of the markets. And I think that we stay really focused on doing what we can to grow our customer base and make sure we've got the right products and services available to our customers that they need. So managing pricing on either side of the balance sheet is something we pay really close attention to. And I think it is a extremely competitive environment right now on both of them. Okay, great. Thank you. And then just on credit, you provide a little more color on the increase in criticized loans this quarter? I think in the deck, it looks like the leverage loan criticized has up a little higher. So any thoughts there? Thanks. Chris, this is Melinda. Yes, the increase in the criticized this quarter, I would call it moderate increase. As Jim mentioned in his prepared comments, the vast majority of that was in our core middle market book. And honestly, it was concentrated in three credits. And the commonality in those three credits is they all have some kind of a consumer component that the end customer was a consumer. And so there's been some stress there. One, I would call more luxury goods and the other in two segments that are under some pressure already so that we the liquor industry and then transportation, freight and things like that. So that's really the commonality is the consumer is the end customer and then all of them are pressured by this longer higher or longer rate environment, which is obviously putting pressure on profitability. So other than those commonalities, the book has continued to perform quite well. And what you don't really see in the chart is what's cycling in and out of criticized. So, you know, we have, credits that migrate, from a downward perspective, but we also have a lot of credits that continue to get, you know, better, and are able to move back into that past category. So I'm not really seeing anything that I would call underlying themes other than what we've been really telegraphing all year, which is the higher for longer interest rates and the inflationary pressures. Okay, great. Thank you for taking the questions. You're welcome. Thank you. There are no additional questions at this time. So I'd like to pass the floor back over to Mr. Farmer for closing comments. Thank you very much, and thank you again for joining our call today. Ladies and gentlemen, once again, we thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day.

Speaker 1: Good morning, and welcome to Comerica Bank's Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note that this conference is being recorded. I will now turn the conference over to your host, Kelly Gage, Director of Investor Relations. Thank you. You may begin. Good morning, and welcome to Comerica Bank's Second Quarter twenty twenty five Earnings Conference Call. good morning and welcome to comerica bank's second quarter twenty twenty five earnings conference call At this time, all participants are in a listen only mode. at this time all participants are in a listen only mode A question and answer session will follow the formal presentation. a question and answer session will follow the formal presentation Please note that this conference is being recorded. please note that this conference is being recorded I will now turn the conference over to your host, Kelly Gage, Director of Investor Relations. i will now turn the conference over to your host kelly gage director of investor relations Thank you. thank you You may begin. you may begin

Speaker 2: Thanks, Jesse. Good morning, and welcome to Comerica's second quarter twenty twenty five earnings conference call. Participating on this call will be our President, Chairman and CEO, Curt Farmer Chief Financial Officer, Jim Herzog Chief Credit Officer, Melinda Chauci and Chief Banking Officer, Peter Suszik. During this presentation, we will be referring to slides which provide additional details. The presentation slides and our press release are available on the SEC's website as well as in the Investor Relations section of our website, comerica.com. Thanks, Jesse. thanks jesse Good morning, and welcome to Comerica's second quarter twenty twenty five earnings conference call. good morning and welcome to comerica's second quarter twenty twenty five earnings conference call Participating on this call will be our President, Chairman and CEO, Curt Farmer Chief Financial Officer, Jim Herzog Chief Credit Officer, Melinda Chauci and Chief Banking Officer, Peter Suszik. participating on this call will be our president chairman and ceo curt farmer chief financial officer jim herzog chief credit officer melinda chauci and chief banking officer peter suszik During this presentation, we will be referring to slides which provide additional details. during this presentation we will be referring to slides which provide additional details The presentation slides and our press release are available on the SEC's website as well as in the Investor Relations section of our website, comerica.com. the presentation slides and our press release are available on the sec's website as well as in the investor relations section of our website comerica.com The presentation and this conference call contain forward looking statements. In that regard, you should be mindful of the risks and uncertainties that can cause actual results to differ materially from expectations. Forward looking statements speak only as of the date of this presentation, and we undertake no obligation to update any forward looking statements. Please refer to the Safe Harbor statement in today's presentation on slide two. Also, the presentation and this conference call will reference non GAAP measures. The presentation and this conference call contain forward looking statements. the presentation and this conference call contain forward looking statements In that regard, you should be mindful of the risks and uncertainties that can cause actual results to differ materially from expectations. in that regard you should be mindful of the risks and uncertainties that can cause actual results to differ materially from expectations Forward looking statements speak only as of the date of this presentation, and we undertake no obligation to update any forward looking statements. forward looking statements speak only as of the date of this presentation and we undertake no obligation to update any forward looking statements Please refer to the Safe Harbor statement in today's presentation on slide two. please refer to the safe harbor statement in today's presentation on slide two Also, the presentation and this conference call will reference non GAAP measures. also the presentation and this conference call will reference non gaap measures In that regard, I direct you to the reconciliations of these measures in the earnings materials available on our website, comerica.com. Now, I'll turn the call over to Kurt, who will begin on slide three. In that regard, I direct you to the reconciliations of these measures in the earnings materials available on our website, comerica.com. in that regard i direct you to the reconciliations of these measures in the earnings materials available on our website comerica.com Now, I'll turn the call over to Kurt, who will begin on slide three. now i'll turn the call over to kurt who will begin on slide three

Speaker 3: Thank you, Kelly. Good morning, and thank you for joining our call. We are incredibly proud of this quarter's results. We saw an inflection in loans as balances grew consistently throughout the quarter across most of our businesses. While deposits came down modestly, favorable loan fee income and expense trends drove a sizable increase in both net income and PPNR. Thank you, Kelly. thank you kelly Good morning, and thank you for joining our call. good morning and thank you for joining our call We are incredibly proud of this quarter's results. we are incredibly proud of this quarter's results We saw an inflection in loans as balances grew consistently throughout the quarter across most of our businesses. we saw an inflection in loans as balances grew consistently throughout the quarter across most of our businesses While deposits came down modestly, favorable loan fee income and expense trends drove a sizable increase in both net income and PPNR. while deposits came down modestly favorable loan fee income and expense trends drove a sizable increase in both net income and ppnr Capitalization remained a strength with an estimated CET1 of 11.94%, well above our 10% strategic target even after a compelling dividend and higher share repurchases. Sentiment improved as we saw signs of customers beginning to make measured investments in their businesses. While economic and geopolitical uncertainty persists, customers appear more confident in their ability to navigate the environment and make adjustments where necessary. Beyond our financial results, this was an exciting quarter for payments and deposits as we announced new capabilities and product enhancements for our customers. We believe the milestones we achieved demonstrate the successful execution of our strategy and we feel ongoing efforts in this space position us well for future growth. Capitalization remained a strength with an estimated CET1 of 11.94%, well above our 10% strategic target even after a compelling dividend and higher share repurchases. capitalization remained a strength with an estimated cet1 of 11.94% well above our 10% strategic target even after a compelling dividend and higher share repurchases Sentiment improved as we saw signs of customers beginning to make measured investments in their businesses. sentiment improved as we saw signs of customers beginning to make measured investments in their businesses While economic and geopolitical uncertainty persists, customers appear more confident in their ability to navigate the environment and make adjustments where necessary. while economic and geopolitical uncertainty persists customers appear more confident in their ability to navigate the environment and make adjustments where necessary Beyond our financial results, this was an exciting quarter for payments and deposits as we announced new capabilities and product enhancements for our customers. beyond our financial results this was an exciting quarter for payments and deposits as we announced new capabilities and product enhancements for our customers We believe the milestones we achieved demonstrate the successful execution of our strategy and we feel ongoing efforts in this space position us well for future growth. we believe the milestones we achieved demonstrate the successful execution of our strategy and we feel ongoing efforts in this space position us well for future growth Moving to a summary of the second quarter on slide four. We reported earnings per share of $1.42 representing an almost 14% increase over the prior quarter. Loans grew throughout the quarter and offset deposit pressures as net interest income remained flat. Credit quality continued to perform well and both interest income and non interest expense improved resulting in a lower efficiency ratio. Despite higher profitability, tax expense came down with the benefit of discrete items. Moving to a summary of the second quarter on slide four. moving to a summary of the second quarter on slide four We reported earnings per share of $1.42 representing an almost 14% increase over the prior quarter. we reported earnings per share of $1.42 representing an almost 14% increase over the prior quarter Loans grew throughout the quarter and offset deposit pressures as net interest income remained flat. loans grew throughout the quarter and offset deposit pressures as net interest income remained flat Credit quality continued to perform well and both interest income and non interest expense improved resulting in a lower efficiency ratio. credit quality continued to perform well and both interest income and non interest expense improved resulting in a lower efficiency ratio Despite higher profitability, tax expense came down with the benefit of discrete items. despite higher profitability tax expense came down with the benefit of discrete items In all, we saw an impressive increase in profitability and we turned $193,000,000 to common shareholders through share repurchases and dividends, while keeping capitalization strong. We continue to feel well positioned to support our customers and drive growth in our business. Now, I'll turn the call over to Jim to go into some more details. In all, we saw an impressive increase in profitability and we turned $193,000,000 to common shareholders through share repurchases and dividends, while keeping capitalization strong. in all we saw an impressive increase in profitability and we turned $193,000,000 to common shareholders through share repurchases and dividends while keeping capitalization strong We continue to feel well positioned to support our customers and drive growth in our business. we continue to feel well positioned to support our customers and drive growth in our business Now, I'll turn the call over to Jim to go into some more details. now i'll turn the call over to jim to go into some more details

Speaker 4: Thanks Kurt and good morning everyone. Beginning with loans on slide five, we saw strong growth in the quarter with average loans up almost 1% and period end loans up approximately 3%. Importantly, loans in most businesses increased driven by new loan production for new and existing customers. Although average loans and equity fund services declined period end trends were up with an improved outlook for private equity and venture capital in both deal activity as well as fundraising. Total commitments increased by $400,000,000 with increases in environmental services and commercial real estate offsetting decreases in equity fund services and total utilization remained relatively unchanged. Thanks Kurt and good morning everyone. thanks kurt and good morning everyone Beginning with loans on slide five, we saw strong growth in the quarter with average loans up almost 1% and period end loans up approximately 3%. beginning with loans on slide five we saw strong growth in the quarter with average loans up almost 1% and period end loans up approximately 3% Importantly, loans in most businesses increased driven by new loan production for new and existing customers. importantly loans in most businesses increased driven by new loan production for new and existing customers Although average loans and equity fund services declined period end trends were up with an improved outlook for private equity and venture capital in both deal activity as well as fundraising. although average loans and equity fund services declined period end trends were up with an improved outlook for private equity and venture capital in both deal activity as well as fundraising Total commitments increased by $400,000,000 with increases in environmental services and commercial real estate offsetting decreases in equity fund services and total utilization remained relatively unchanged. total commitments increased by $400,000,000 with increases in environmental services and commercial real estate offsetting decreases in equity fund services and total utilization remained relatively unchanged Pipeline activity was strong even after closing new opportunities reflecting continued positive momentum. Average loan yields came down three basis points as the smaller benefit from BISB cessation more than offset the tailwind of our maturing swap portfolio. On slide six, average deposits declined just over 1% with the largest decreases in retail, corporate banking and technology and life sciences. In select businesses, we continue to see seasonality related to the timing of tax payments and in others we saw customers use their funds for working capital or project related purposes. Non interest bearing deposits as a percentage of total deposits remained flat at 38% for the fourth consecutive quarter demonstrating stability in our compelling funding mix. Pipeline activity was strong even after closing new opportunities reflecting continued positive momentum. pipeline activity was strong even after closing new opportunities reflecting continued positive momentum Average loan yields came down three basis points as the smaller benefit from BISB cessation more than offset the tailwind of our maturing swap portfolio. average loan yields came down three basis points as the smaller benefit from bisb cessation more than offset the tailwind of our maturing swap portfolio On slide six, average deposits declined just over 1% with the largest decreases in retail, corporate banking and technology and life sciences. on slide six average deposits declined just over 1% with the largest decreases in retail corporate banking and technology and life sciences In select businesses, we continue to see seasonality related to the timing of tax payments and in others we saw customers use their funds for working capital or project related purposes. in select businesses we continue to see seasonality related to the timing of tax payments and in others we saw customers use their funds for working capital or project related purposes Non interest bearing deposits as a percentage of total deposits remained flat at 38% for the fourth consecutive quarter demonstrating stability in our compelling funding mix. non interest bearing deposits as a percentage of total deposits remained flat at 38% for the fourth consecutive quarter demonstrating stability in our compelling funding mix Deposit pricing increased four basis points but as we signaled previously, we expected to see some give back in pricing and this was in line with our expectations. In fact, with a cumulative beta of 67% since the third quarter of last year, we've still outperformed the betas that we saw on the way up. We intend to remain diligent and agile with our pricing strategy as we monitor the competitive environment and balance our customers' objectives with our funding needs. Our deposit portfolio has long been a key strength of our franchise and we are continuing to make strategic investments to further enhance this competitive funding source. Just this quarter, we delivered two new real time payment solutions providing additional flexibility for our customers. Deposit pricing increased four basis points but as we signaled previously, we expected to see some give back in pricing and this was in line with our expectations. deposit pricing increased four basis points but as we signaled previously we expected to see some give back in pricing and this was in line with our expectations In fact, with a cumulative beta of 67% since the third quarter of last year, we've still outperformed the betas that we saw on the way up. in fact with a cumulative beta of 67% since the third quarter of last year we've still outperformed the betas that we saw on the way up We intend to remain diligent and agile with our pricing strategy as we monitor the competitive environment and balance our customers' objectives with our funding needs. we intend to remain diligent and agile with our pricing strategy as we monitor the competitive environment and balance our customers' objectives with our funding needs Our deposit portfolio has long been a key strength of our franchise and we are continuing to make strategic investments to further enhance this competitive funding source. our deposit portfolio has long been a key strength of our franchise and we are continuing to make strategic investments to further enhance this competitive funding source Just this quarter, we delivered two new real time payment solutions providing additional flexibility for our customers. just this quarter we delivered two new real time payment solutions providing additional flexibility for our customers We feel these success stories are strong proof points of the effectiveness of our strategy and we look forward to sharing more in the future. Our securities portfolio on Slide seven declined with paydowns and maturities offsetting lower unrealized losses. We continue to expect AOCI improvement over time with the benefit of ongoing pay downs and maturities. Beyond periodic purchases to replace attrition, we are not currently expecting more meaningful securities reinvestments until late this year. Turning to Slide eight, net interest income remained stable at $575,000,000 for the third consecutive quarter as higher loans offset the impact of deposits. We feel these success stories are strong proof points of the effectiveness of our strategy and we look forward to sharing more in the future. we feel these success stories are strong proof points of the effectiveness of our strategy and we look forward to sharing more in the future Our securities portfolio on Slide seven declined with paydowns and maturities offsetting lower unrealized losses. our securities portfolio on slide seven declined with paydowns and maturities offsetting lower unrealized losses We continue to expect AOCI improvement over time with the benefit of ongoing pay downs and maturities. we continue to expect aoci improvement over time with the benefit of ongoing pay downs and maturities Beyond periodic purchases to replace attrition, we are not currently expecting more meaningful securities reinvestments until late this year. beyond periodic purchases to replace attrition we are not currently expecting more meaningful securities reinvestments until late this year Turning to Slide eight, net interest income remained stable at $575,000,000 for the third consecutive quarter as higher loans offset the impact of deposits. turning to slide eight net interest income remained stable at $575,000,000 for the third consecutive quarter as higher loans offset the impact of deposits The lower benefit from Bisbee cessation was effectively offset by one more day in the quarter. Robust loan growth was supported by a seasonally more expensive liability mix, which contributed to a modest two basis point reduction in net interest margin. We continue to see promising trends for net interest income over time given the structural tailwinds associated with our swap and securities portfolios coupled with the objective of balance sheet growth. Credit quality as shown on slide nine remained relatively stable. Net charge offs of 22 basis points were at the low end of our normal range and effectively flat compared to last quarter. The lower benefit from Bisbee cessation was effectively offset by one more day in the quarter. the lower benefit from bisbee cessation was effectively offset by one more day in the quarter Robust loan growth was supported by a seasonally more expensive liability mix, which contributed to a modest two basis point reduction in net interest margin. robust loan growth was supported by a seasonally more expensive liability mix which contributed to a modest two basis point reduction in net interest margin We continue to see promising trends for net interest income over time given the structural tailwinds associated with our swap and securities portfolios coupled with the objective of balance sheet growth. we continue to see promising trends for net interest income over time given the structural tailwinds associated with our swap and securities portfolios coupled with the objective of balance sheet growth Credit quality as shown on slide nine remained relatively stable. credit quality as shown on slide nine remained relatively stable Net charge offs of 22 basis points were at the low end of our normal range and effectively flat compared to last quarter. net charge offs of 22 basis points were at the low end of our normal range and effectively flat compared to last quarter Persistent inflation and elevated rates continue to pressure customer profitability in certain businesses driving expected normalization in criticized loans largely concentrated in middle market this quarter. Non performing loans declined to the lowest level that we've seen in the last four quarters and remain well below our long term average. Trade policy developments impacted the economic forecast, but our coverage ratio remained unchanged at 1.44% since we accounted for a similar level of risk and uncertainty in our qualitative reserves set last quarter. We believe our proven credit discipline coupled with our relationship model positions us well to support our customers. On slide ten, second quarter non interest income increased $20,000,000 with growth across most customer line items as we saw higher loan volumes, less economic uncertainty and some seasonal benefits. Persistent inflation and elevated rates continue to pressure customer profitability in certain businesses driving expected normalization in criticized loans largely concentrated in middle market this quarter. persistent inflation and elevated rates continue to pressure customer profitability in certain businesses driving expected normalization in criticized loans largely concentrated in middle market this quarter Non performing loans declined to the lowest level that we've seen in the last four quarters and remain well below our long term average. non performing loans declined to the lowest level that we've seen in the last four quarters and remain well below our long term average Trade policy developments impacted the economic forecast, but our coverage ratio remained unchanged at 1.44% since we accounted for a similar level of risk and uncertainty in our qualitative reserves set last quarter. trade policy developments impacted the economic forecast but our coverage ratio remained unchanged at 1.44% since we accounted for a similar level of risk and uncertainty in our qualitative reserves set last quarter We believe our proven credit discipline coupled with our relationship model positions us well to support our customers. we believe our proven credit discipline coupled with our relationship model positions us well to support our customers On slide ten, second quarter non interest income increased $20,000,000 with growth across most customer line items as we saw higher loan volumes, less economic uncertainty and some seasonal benefits. on slide ten second quarter non interest income increased $20,000,000 with growth across most customer line items as we saw higher loan volumes less economic uncertainty and some seasonal benefits Capital markets income improved $11,000,000 with higher syndication fees and derivative income, which included increased interest rate hedging and foreign exchange activity in addition to the quarter over quarter benefit in CVA. Income related to deferred compensation increased but was offset in higher expenses. And fiduciary income did increase seasonally. Overall, we are pleased with the improvement in customer related fee income and look to sustain this momentum in the future quarters. Expenses on slide 11 decreased $23,000,000 over the prior quarter largely due to lower litigation related expenses and salaries and benefits. Capital markets income improved $11,000,000 with higher syndication fees and derivative income, which included increased interest rate hedging and foreign exchange activity in addition to the quarter over quarter benefit in CVA. capital markets income improved $11,000,000 with higher syndication fees and derivative income which included increased interest rate hedging and foreign exchange activity in addition to the quarter over quarter benefit in cva Income related to deferred compensation increased but was offset in higher expenses. income related to deferred compensation increased but was offset in higher expenses And fiduciary income did increase seasonally. and fiduciary income did increase seasonally Overall, we are pleased with the improvement in customer related fee income and look to sustain this momentum in the future quarters. overall we are pleased with the improvement in customer related fee income and look to sustain this momentum in the future quarters Expenses on slide 11 decreased $23,000,000 over the prior quarter largely due to lower litigation related expenses and salaries and benefits. expenses on slide 11 decreased $23,000,000 over the prior quarter largely due to lower litigation related expenses and salaries and benefits Seasonal declines related to incentive compensation more than offset higher deferred compensation and merit increases. We saw a $3,000,000 reduction in expenses from changes in the FDIC special assessment and conversely saw $3,000,000 increases in both outside processing and advertising expenses. Notable items favorably impacted expenses in the quarter, including net litigation benefits, gain on sale of assets and an interest recovery for a state tax matter. Recognizing that we may not see the same benefit from notable items in future quarters, we remain disciplined in our focus to drive improved efficiency over time. As shown on slide 12, we continue to favor a conservative approach to capital producing an estimated CET1 of 11.94% well above our strategic target even after returning capital to shareholders. Seasonal declines related to incentive compensation more than offset higher deferred compensation and merit increases. seasonal declines related to incentive compensation more than offset higher deferred compensation and merit increases We saw a $3,000,000 reduction in expenses from changes in the FDIC special assessment and conversely saw $3,000,000 increases in both outside processing and advertising expenses. we saw a $3,000,000 reduction in expenses from changes in the fdic special assessment and conversely saw $3,000,000 increases in both outside processing and advertising expenses Notable items favorably impacted expenses in the quarter, including net litigation benefits, gain on sale of assets and an interest recovery for a state tax matter. notable items favorably impacted expenses in the quarter including net litigation benefits gain on sale of assets and an interest recovery for a state tax matter Recognizing that we may not see the same benefit from notable items in future quarters, we remain disciplined in our focus to drive improved efficiency over time. recognizing that we may not see the same benefit from notable items in future quarters we remain disciplined in our focus to drive improved efficiency over time As shown on slide 12, we continue to favor a conservative approach to capital producing an estimated CET1 of 11.94% well above our strategic target even after returning capital to shareholders. as shown on slide 12 we continue to favor a conservative approach to capital producing an estimated cet1 of 11.94% well above our strategic target even after returning capital to shareholders Our strong capital position afforded us the opportunity to redeem preferred stock avoiding a more punitive coupon reset, but also resulting in a slight negative drag to EPS this quarter from costs related to the preferred stock redemption. We went in the forward curve reduced unrealized losses in AOCI contributing to a 22 basis point improvement in our tangible common equity ratio. Even with the dynamic market, robust loan growth and the redemption of our preferred stock, we increased our share repurchases to $100,000,000 in the second quarter. Our outlook for 2025 is on Slide 13. We now project full year 2025 average loans to be flat to down 1% representing an improvement from prior guidance. Our strong capital position afforded us the opportunity to redeem preferred stock avoiding a more punitive coupon reset, but also resulting in a slight negative drag to EPS this quarter from costs related to the preferred stock redemption. our strong capital position afforded us the opportunity to redeem preferred stock avoiding a more punitive coupon reset but also resulting in a slight negative drag to eps this quarter from costs related to the preferred stock redemption We went in the forward curve reduced unrealized losses in AOCI contributing to a 22 basis point improvement in our tangible common equity ratio. we went in the forward curve reduced unrealized losses in aoci contributing to a 22 basis point improvement in our tangible common equity ratio Even with the dynamic market, robust loan growth and the redemption of our preferred stock, we increased our share repurchases to $100,000,000 in the second quarter. even with the dynamic market robust loan growth and the redemption of our preferred stock we increased our share repurchases to $100,000,000 in the second quarter Our outlook for 2025 is on Slide 13. our outlook for 2025 is on slide 13 We now project full year 2025 average loans to be flat to down 1% representing an improvement from prior guidance. we now project full year 2025 average loans to be flat to down 1% representing an improvement from prior guidance Although economic uncertainty persists, customers appear to be navigating the environment and beginning to invest in their businesses. Second quarter results exceeded expectations and pipelines and activity levels remain supporting our outlook for consistent growth in the third and fourth quarters. We expect to see the second half growth across most of our businesses excluding commercial real estate. Our deposit forecast remains unchanged as we expect full year average deposits down 2% to 3% in 2025 with relatively flat customer deposits and a deliberate reduction in brokered CDs. We see positive momentum driving a moderate increase in the third quarter balances with a bigger uptick in the fourth quarter benefiting from core deposit growth and seasonality. Although economic uncertainty persists, customers appear to be navigating the environment and beginning to invest in their businesses. although economic uncertainty persists customers appear to be navigating the environment and beginning to invest in their businesses Second quarter results exceeded expectations and pipelines and activity levels remain supporting our outlook for consistent growth in the third and fourth quarters. second quarter results exceeded expectations and pipelines and activity levels remain supporting our outlook for consistent growth in the third and fourth quarters We expect to see the second half growth across most of our businesses excluding commercial real estate. we expect to see the second half growth across most of our businesses excluding commercial real estate Our deposit forecast remains unchanged as we expect full year average deposits down 2% to 3% in 2025 with relatively flat customer deposits and a deliberate reduction in brokered CDs. our deposit forecast remains unchanged as we expect full year average deposits down 2% to 3% in 2025 with relatively flat customer deposits and a deliberate reduction in brokered cds We see positive momentum driving a moderate increase in the third quarter balances with a bigger uptick in the fourth quarter benefiting from core deposit growth and seasonality. we see positive momentum driving a moderate increase in the third quarter balances with a bigger uptick in the fourth quarter benefiting from core deposit growth and seasonality Although we anticipate continued success in winning interest bearing balances, we believe our non interest bearing deposit mix will remain in the upper 30% range. Based on our current understanding of the transition strategy, we still do not assume direct express deposit attrition within our 2025 outlook. We still project net interest income growth of 5% to 7% in 2025. Loan trends have outperformed expectations and we expect that to contribute favorably to our outlook. However, we believe deposit trends may offset benefit as we have seen slightly lower non interest bearing balances with the continued high rate environment. Although we anticipate continued success in winning interest bearing balances, we believe our non interest bearing deposit mix will remain in the upper 30% range. although we anticipate continued success in winning interest bearing balances we believe our non interest bearing deposit mix will remain in the upper 30% range Based on our current understanding of the transition strategy, we still do not assume direct express deposit attrition within our 2025 outlook. based on our current understanding of the transition strategy we still do not assume direct express deposit attrition within our 2025 outlook We still project net interest income growth of 5% to 7% in 2025. we still project net interest income growth of 5% to 7% in 2025 Loan trends have outperformed expectations and we expect that to contribute favorably to our outlook. loan trends have outperformed expectations and we expect that to contribute favorably to our outlook However, we believe deposit trends may offset benefit as we have seen slightly lower non interest bearing balances with the continued high rate environment. however we believe deposit trends may offset benefit as we have seen slightly lower non interest bearing balances with the continued high rate environment Further, we expect upward pressure on deposit pricing as we fund robust loan growth and successfully execute on our strategic deposit growth initiatives. Lastly, while the redemption of preferred stock will be accretive to EPS, it does create a slight drag on net interest income as we lose the benefit of the cash used for redemption. Although we expect these factors contribute to a slight decline in third quarter net interest income relative to the second quarter, which may push our full year results to the lower end of our 5% to 7% range. We continue to expect full year 2025 non interest income to grow 2%. We saw favorable trends this quarter and we anticipate continued momentum in customer related fees in the second half of the year. Further, we expect upward pressure on deposit pricing as we fund robust loan growth and successfully execute on our strategic deposit growth initiatives. further we expect upward pressure on deposit pricing as we fund robust loan growth and successfully execute on our strategic deposit growth initiatives Lastly, while the redemption of preferred stock will be accretive to EPS, it does create a slight drag on net interest income as we lose the benefit of the cash used for redemption. lastly while the redemption of preferred stock will be accretive to eps it does create a slight drag on net interest income as we lose the benefit of the cash used for redemption Although we expect these factors contribute to a slight decline in third quarter net interest income relative to the second quarter, which may push our full year results to the lower end of our 5% to 7% range. although we expect these factors contribute to a slight decline in third quarter net interest income relative to the second quarter which may push our full year results to the lower end of our 5% to 7% range We continue to expect full year 2025 non interest income to grow 2%. we continue to expect full year 2025 non interest income to grow 2% We saw favorable trends this quarter and we anticipate continued momentum in customer related fees in the second half of the year. we saw favorable trends this quarter and we anticipate continued momentum in customer related fees in the second half of the year Given the second quarter benefits of deferred compensation and CVA within capital markets, We expect third quarter to be relatively flat, but that still assumes customer related growth quarter over quarter. Our outlook for full year 2025 non interest expenses improved as we now project only 2% growth year over year with the benefit of strong expense performance year to date. As we look at the second half of twenty twenty five, we expect to see an increase in the third quarter driven largely by the impact of second quarter notable items, seasonality, inflationary pressures and our ongoing strategic focus to drive revenue. We believe the fourth quarter will be relatively flat to the third quarter and we remain committed to driving efficiency as we balance longer term growth and return objectives with prudent expense control. Considering our strong credit metrics, proven underwriting approach and consistent portfolio monitoring, we continue to expect full year net charge offs to be in the lower end of our normal 20 to 40 basis point range. Given the second quarter benefits of deferred compensation and CVA within capital markets, We expect third quarter to be relatively flat, but that still assumes customer related growth quarter over quarter. given the second quarter benefits of deferred compensation and cva within capital markets we expect third quarter to be relatively flat but that still assumes customer related growth quarter over quarter Our outlook for full year 2025 non interest expenses improved as we now project only 2% growth year over year with the benefit of strong expense performance year to date. our outlook for full year 2025 non interest expenses improved as we now project only 2% growth year over year with the benefit of strong expense performance year to date As we look at the second half of twenty twenty five, we expect to see an increase in the third quarter driven largely by the impact of second quarter notable items, seasonality, inflationary pressures and our ongoing strategic focus to drive revenue. as we look at the second half of twenty twenty five we expect to see an increase in the third quarter driven largely by the impact of second quarter notable items seasonality inflationary pressures and our ongoing strategic focus to drive revenue We believe the fourth quarter will be relatively flat to the third quarter and we remain committed to driving efficiency as we balance longer term growth and return objectives with prudent expense control. we believe the fourth quarter will be relatively flat to the third quarter and we remain committed to driving efficiency as we balance longer term growth and return objectives with prudent expense control Considering our strong credit metrics, proven underwriting approach and consistent portfolio monitoring, we continue to expect full year net charge offs to be in the lower end of our normal 20 to 40 basis point range. considering our strong credit metrics proven underwriting approach and consistent portfolio monitoring we continue to expect full year net charge offs to be in the lower end of our normal 20 to 40 basis point range Looking at taxes, we saw an improvement in our anticipated 2025 tax rate now down to approximately 20 excluding discrete items. Moving to capital, we appreciate the flexibility that our conservative capital position affords us and we intend to maintain a CET1 ratio well above our 10% strategic target throughout 2025. With an estimated CET1 at just under 12%, we feel we have ample capacity to continue share repurchases and we intend to repurchase approximately $100,000,000 of common stock in the third quarter. As we consider future capital decisions, we intend to continue our measured approach calibrating the size and frequency of future repurchases with expected loan trends. We also plan to monitor the economic environment, our profitability and the regulatory landscape as these factors may also influence our strategy. Looking at taxes, we saw an improvement in our anticipated 2025 tax rate now down to approximately 20 excluding discrete items. looking at taxes we saw an improvement in our anticipated 2025 tax rate now down to approximately 20 excluding discrete items Moving to capital, we appreciate the flexibility that our conservative capital position affords us and we intend to maintain a CET1 ratio well above our 10% strategic target throughout 2025. moving to capital we appreciate the flexibility that our conservative capital position affords us and we intend to maintain a cet1 ratio well above our 10% strategic target throughout 2025 With an estimated CET1 at just under 12%, we feel we have ample capacity to continue share repurchases and we intend to repurchase approximately $100,000,000 of common stock in the third quarter. with an estimated cet1 at just under 12% we feel we have ample capacity to continue share repurchases and we intend to repurchase approximately $100,000,000 of common stock in the third quarter As we consider future capital decisions, we intend to continue our measured approach calibrating the size and frequency of future repurchases with expected loan trends. as we consider future capital decisions we intend to continue our measured approach calibrating the size and frequency of future repurchases with expected loan trends We also plan to monitor the economic environment, our profitability and the regulatory landscape as these factors may also influence our strategy. we also plan to monitor the economic environment our profitability and the regulatory landscape as these factors may also influence our strategy Overall, we expect continued momentum to drive balance sheet growth while maintaining strong capital, which together position us to drive favorable returns over time. Now I'll turn the call back to Curt. Overall, we expect continued momentum to drive balance sheet growth while maintaining strong capital, which together position us to drive favorable returns over time. overall we expect continued momentum to drive balance sheet growth while maintaining strong capital which together position us to drive favorable returns over time Now I'll turn the call back to Curt. now i'll turn the call back to curt

Speaker 3: Thank you, Jim. As I mentioned in my opening remarks, we are incredibly proud of this quarter's results. We feel our conservative capital, credit and liquidity management provide a solid foundation to consistently support our customers. Further, with our orientation towards growth markets, proven commercial model and long tenured customer relationships, we feel well positioned to grow alongside the economy as customer demand continues to increase. We saw evidence of that this quarter. Thank you, Jim. thank you jim As I mentioned in my opening remarks, we are incredibly proud of this quarter's results. as i mentioned in my opening remarks we are incredibly proud of this quarter's results We feel our conservative capital, credit and liquidity management provide a solid foundation to consistently support our customers. we feel our conservative capital credit and liquidity management provide a solid foundation to consistently support our customers Further, with our orientation towards growth markets, proven commercial model and long tenured customer relationships, we feel well positioned to grow alongside the economy as customer demand continues to increase. further with our orientation towards growth markets proven commercial model and long tenured customer relationships we feel well positioned to grow alongside the economy as customer demand continues to increase We saw evidence of that this quarter. we saw evidence of that this quarter We expect to benefit from maturities of our swaps and securities portfolios, which create a structural tailwind to net interest income over the next several years. On top of that, we are continuing to invest strategically in our business to drive responsible growth aligned with our strategy. Earlier this year, we shared tangible examples of investments in small business, middle market, business banking and payments. And we outlined what we see as potential growth opportunities stemming from those investments. We've already driven successful outcomes from our efforts with a few examples highlighted just this quarter. We expect to benefit from maturities of our swaps and securities portfolios, which create a structural tailwind to net interest income over the next several years. we expect to benefit from maturities of our swaps and securities portfolios which create a structural tailwind to net interest income over the next several years On top of that, we are continuing to invest strategically in our business to drive responsible growth aligned with our strategy. on top of that we are continuing to invest strategically in our business to drive responsible growth aligned with our strategy Earlier this year, we shared tangible examples of investments in small business, middle market, business banking and payments. earlier this year we shared tangible examples of investments in small business middle market business banking and payments And we outlined what we see as potential growth opportunities stemming from those investments. and we outlined what we see as potential growth opportunities stemming from those investments We've already driven successful outcomes from our efforts with a few examples highlighted just this quarter. we've already driven successful outcomes from our efforts with a few examples highlighted just this quarter And we look forward to demonstrating the additional growth potential we see in our business in the coming quarters. Before we go to Q and A, I would like to take just a moment to acknowledge the immense loss of life related to the catastrophic flooding that occurred in Central Texas earlier this month. Our thoughts are with the families and communities devastated by this tragic event. With that, we'd be happy to take your questions. And we look forward to demonstrating the additional growth potential we see in our business in the coming quarters. and we look forward to demonstrating the additional growth potential we see in our business in the coming quarters Before we go to Q and A, I would like to take just a moment to acknowledge the immense loss of life related to the catastrophic flooding that occurred in Central Texas earlier this month. before we go to q and a i would like to take just a moment to acknowledge the immense loss of life related to the catastrophic flooding that occurred in central texas earlier this month Our thoughts are with the families and communities devastated by this tragic event. our thoughts are with the families and communities devastated by this tragic event With that, we'd be happy to take your questions. with that we'd be happy to take your questions

Speaker 1: Thank you. Ladies and gentlemen, we will now be conducting our question and answer session. Our first question is coming from the line of Manon Gosalia with Morgan Stanley. Please proceed with your question. Thank you. thank you Ladies and gentlemen, we will now be conducting our question and answer session. ladies and gentlemen we will now be conducting our question and answer session Our first question is coming from the line of Manon Gosalia with Morgan Stanley. our first question is coming from the line of manon gosalia with morgan stanley Please proceed with your question. please proceed with your question

Speaker 3: Good morning. Good morning. Good morning. good morning Good morning. good morning

Speaker 5: Hey, good morning all. I wanted to start on the NII trajectory. It seems like you're implying that NII will be down in 3Q and then up in the fourth quarter. So I was wondering if you could give us some more color on that? Hey, good morning all. hey good morning all I wanted to start on the NII trajectory. i wanted to start on the nii trajectory It seems like you're implying that NII will be down in 3Q and then up in the fourth quarter. it seems like you're implying that nii will be down in 3q and then up in the fourth quarter So I was wondering if you could give us some more color on that? so i was wondering if you could give us some more color on that

Speaker 4: Yes. Good morning, Manon. It's Jim. Happy to go through some of those primary drivers. As you said, we do expect a slight decrease in Q3 before continuing an upward trajectory in Q4, which of course we will continue to see go upward, I think as we move through 2026. Yes. yes Good morning, Manon. good morning manon It's Jim. it's jim Happy to go through some of those primary drivers. happy to go through some of those primary drivers As you said, we do expect a slight decrease in Q3 before continuing an upward trajectory in Q4, which of course we will continue to see go upward, I think as we move through 2026. as you said we do expect a slight decrease in q3 before continuing an upward trajectory in q4 which of course we will continue to see go upward i think as we move through 2026 But we do have some particular events occurring in the third quarter that maybe I can just cover at a high level. Number one, I think it's important to understand the tailwinds that we continue to have in Q3 and beyond. The first is loan growth, which we expect to be strong in the foreseeable future. And that's not just in the results, but we see that in the pipeline also. The second is we do expect to benefit from stronger deposits both in the third quarter and beyond. But we do have some particular events occurring in the third quarter that maybe I can just cover at a high level. but we do have some particular events occurring in the third quarter that maybe i can just cover at a high level Number one, I think it's important to understand the tailwinds that we continue to have in Q3 and beyond. number one i think it's important to understand the tailwinds that we continue to have in q3 and beyond The first is loan growth, which we expect to be strong in the foreseeable future. the first is loan growth which we expect to be strong in the foreseeable future And that's not just in the results, but we see that in the pipeline also. and that's not just in the results but we see that in the pipeline also The second is we do expect to benefit from stronger deposits both in the third quarter and beyond. the second is we do expect to benefit from stronger deposits both in the third quarter and beyond And that's important because that will help fund our loan growth. And the third is just the continued maturity of our swaps and securities and that will continue for many quarters to come. So those are positives that we'll see both in the third quarter and will continue. But we do have some headwinds in the third quarter and we think they may more than offset the tailwinds, but importantly, we think these are just for the third quarter And then we think the tailwinds take back over the fourth quarter. The first of these is the redemption of our preferred stock. And that's important because that will help fund our loan growth. and that's important because that will help fund our loan growth And the third is just the continued maturity of our swaps and securities and that will continue for many quarters to come. and the third is just the continued maturity of our swaps and securities and that will continue for many quarters to come So those are positives that we'll see both in the third quarter and will continue. so those are positives that we'll see both in the third quarter and will continue But we do have some headwinds in the third quarter and we think they may more than offset the tailwinds, but importantly, we think these are just for the third quarter And then we think the tailwinds take back over the fourth quarter. but we do have some headwinds in the third quarter and we think they may more than offset the tailwinds but importantly we think these are just for the third quarter and then we think the tailwinds take back over the fourth quarter The first of these is the redemption of our preferred stock. the first of these is the redemption of our preferred stock And as I mentioned in the comments, we do think this is a prudent move and it does benefit EPS, but that benefit is below the net income line. So net interest income will be missing the cash that we use for that redemption. The second is pay rates on deposits. We are expecting deposits to fund very strong loan growth and we want to make sure we're prepared for that. But we do expect pay rates to take a larger step up in the third quarter compared to the second. And as I mentioned in the comments, we do think this is a prudent move and it does benefit EPS, but that benefit is below the net income line. and as i mentioned in the comments we do think this is a prudent move and it does benefit eps but that benefit is below the net income line So net interest income will be missing the cash that we use for that redemption. so net interest income will be missing the cash that we use for that redemption The second is pay rates on deposits. the second is pay rates on deposits We are expecting deposits to fund very strong loan growth and we want to make sure we're prepared for that. we are expecting deposits to fund very strong loan growth and we want to make sure we're prepared for that But we do expect pay rates to take a larger step up in the third quarter compared to the second. but we do expect pay rates to take a larger step up in the third quarter compared to the second And I'll maybe break that into two components. About half of that pay rate increase is an increase in selected consumer pay rates that we made towards the end of second quarter, which is really just us staying dialed into the market and calibrating our strategy with the rate curve, which has been pushed out as well as considering our loan growth that we expect and other factors. The other half of the increase is we do expect to be very successful in obtaining new customers and deposits in both third and fourth quarters. But in some cases, these deposits are likely to look more like an index type rate. While they are more expensive than our traditional deposits, we do welcome them as a proactive way to fund what we think will be very robust loan growth in the future. And I'll maybe break that into two components. and i'll maybe break that into two components About half of that pay rate increase is an increase in selected consumer pay rates that we made towards the end of second quarter, which is really just us staying dialed into the market and calibrating our strategy with the rate curve, which has been pushed out as well as considering our loan growth that we expect and other factors. about half of that pay rate increase is an increase in selected consumer pay rates that we made towards the end of second quarter which is really just us staying dialed into the market and calibrating our strategy with the rate curve which has been pushed out as well as considering our loan growth that we expect and other factors The other half of the increase is we do expect to be very successful in obtaining new customers and deposits in both third and fourth quarters. the other half of the increase is we do expect to be very successful in obtaining new customers and deposits in both third and fourth quarters But in some cases, these deposits are likely to look more like an index type rate. but in some cases these deposits are likely to look more like an index type rate While they are more expensive than our traditional deposits, we do welcome them as a proactive way to fund what we think will be very robust loan growth in the future. while they are more expensive than our traditional deposits we do welcome them as a proactive way to fund what we think will be very robust loan growth in the future The net of all this is that pay rates will likely step up in the third quarter to at least twice the increase of the four bps that you saw in Q2 and that's assuming a flat rate environment. Now regarding betas, totally independent of these increases I just talked about, we do expect to have maybe a little bit less than our standard data for the first FOMC reduction. And just a reminder, we do use the forward curve as of quarter end. And then I might just refer you back to my opening comments for maybe some smaller drivers. But again, I'd reinforce once we get past the third quarter, we do expect net interest income to be on an upward trajectory as we continue to grow both loans and deposits. The net of all this is that pay rates will likely step up in the third quarter to at least twice the increase of the four bps that you saw in Q2 and that's assuming a flat rate environment. the net of all this is that pay rates will likely step up in the third quarter to at least twice the increase of the four bps that you saw in q2 and that's assuming a flat rate environment Now regarding betas, totally independent of these increases I just talked about, we do expect to have maybe a little bit less than our standard data for the first FOMC reduction. now regarding betas totally independent of these increases i just talked about we do expect to have maybe a little bit less than our standard data for the first fomc reduction And just a reminder, we do use the forward curve as of quarter end. and just a reminder we do use the forward curve as of quarter end And then I might just refer you back to my opening comments for maybe some smaller drivers. and then i might just refer you back to my opening comments for maybe some smaller drivers But again, I'd reinforce once we get past the third quarter, we do expect net interest income to be on an upward trajectory as we continue to grow both loans and deposits. but again i'd reinforce once we get past the third quarter we do expect net interest income to be on an upward trajectory as we continue to grow both loans and deposits And we would expect deposit pay rates to settle down and betas to return back to normal once we get in the fourth quarter. So that's really some of the mechanics. Peter, I don't know if there's any color that you want to add there. And we would expect deposit pay rates to settle down and betas to return back to normal once we get in the fourth quarter. and we would expect deposit pay rates to settle down and betas to return back to normal once we get in the fourth quarter So that's really some of the mechanics. so that's really some of the mechanics Peter, I don't know if there's any color that you want to add there. peter i don't know if there's any color that you want to add there

Speaker 6: Well, I might just add, Madam, that I mean, we're having really good success growing deposits. And a lot of those as of late tend to be interest bearing opportunities with some of the work that we've been doing in our businesses. And I think the third quarter is probably a little bit of an inflection point. We feel good about what we look like on the other side of it. And we think it's more important to bring on deposits and fund our loan growth than to be necessarily worrying too much about whether or not those are interest bearing or non interest bearing. Well, I might just add, Madam, that I mean, we're having really good success growing deposits. well i might just add madam that i mean we're having really good success growing deposits And a lot of those as of late tend to be interest bearing opportunities with some of the work that we've been doing in our businesses. and a lot of those as of late tend to be interest bearing opportunities with some of the work that we've been doing in our businesses And I think the third quarter is probably a little bit of an inflection point. and i think the third quarter is probably a little bit of an inflection point We feel good about what we look like on the other side of it. we feel good about what we look like on the other side of it And we think it's more important to bring on deposits and fund our loan growth than to be necessarily worrying too much about whether or not those are interest bearing or non interest bearing. and we think it's more important to bring on deposits and fund our loan growth than to be necessarily worrying too much about whether or not those are interest bearing or non interest bearing And that's a little bit of where the timing is right now. So I mean, we view it as a positive outlook about how things are growing for the company. And that's a little bit of where the timing is right now. and that's a little bit of where the timing is right now So I mean, we view it as a positive outlook about how things are growing for the company. so i mean we view it as a positive outlook about how things are growing for the company

Speaker 4: And really, I'd say, getting ready for 2026 and beyond, just having that good granular deposit base. This is really a good long term move, we think. And really, I'd say, getting ready for 2026 and beyond, just having that good granular deposit base. and really i'd say getting ready for 2026 and beyond just having that good granular deposit base This is really a good long term move, we think. this is really a good long term move we think

Speaker 5: Got it. Okay. That's very thorough. I appreciate that. Maybe if I can ask the same question on the expense side. Got it. got it Okay. okay That's very thorough. that's very thorough I appreciate that. i appreciate that Maybe if I can ask the same question on the expense side. maybe if i can ask the same question on the expense side The guidance implies, I think, if I'm calculating correctly, a $600,000,000 expense number roughly for 3Q and 4Q. And that's a meaningful step up versus 2Q even if you adjust for some of those one timers in there. I was wondering if you could help us with how you're thinking about the expense side as well? The guidance implies, I think, if I'm calculating correctly, a $600,000,000 expense number roughly for 3Q and 4Q. the guidance implies i think if i'm calculating correctly a $600,000,000 expense number roughly for 3q and 4q And that's a meaningful step up versus 2Q even if you adjust for some of those one timers in there. and that's a meaningful step up versus 2q even if you adjust for some of those one timers in there I was wondering if you could help us with how you're thinking about the expense side as well? i was wondering if you could help us with how you're thinking about the expense side as well

Speaker 4: Yes. It's Jim again. Yes, your math is essentially correct. Let's keep in mind that we did have an incredible second quarter on expenses, beating our outlook at consensus significantly. And some of that, as you say, and I mentioned earlier, was due to the notable items that we outlined on the expense slide. Yes. yes It's Jim again. it's jim again Yes, your math is essentially correct. yes your math is essentially correct Let's keep in mind that we did have an incredible second quarter on expenses, beating our outlook at consensus significantly. let's keep in mind that we did have an incredible second quarter on expenses beating our outlook at consensus significantly And some of that, as you say, and I mentioned earlier, was due to the notable items that we outlined on the expense slide. and some of that as you say and i mentioned earlier was due to the notable items that we outlined on the expense slide I would say there were some project expense that was deferred from the second quarter to the second half of the year. So as I look at the increase in the second quarter to the third, notable items assumed not to repeat, it is the largest component of that as we outlined in the slide. But we also do have some seasonalities we typically do in the third quarter and some inflation. And then we do continue to step up our investments for revenue, some of which were simply deferred from the second quarter to the second half of the year. So hopefully that gives you a little bit of feel for why we're stepping up and really not out of sync with what we saw for the entire year, actually some nice decreases that we'll pocket for the second quarter. I would say there were some project expense that was deferred from the second quarter to the second half of the year. i would say there were some project expense that was deferred from the second quarter to the second half of the year So as I look at the increase in the second quarter to the third, notable items assumed not to repeat, it is the largest component of that as we outlined in the slide. so as i look at the increase in the second quarter to the third notable items assumed not to repeat it is the largest component of that as we outlined in the slide But we also do have some seasonalities we typically do in the third quarter and some inflation. but we also do have some seasonalities we typically do in the third quarter and some inflation And then we do continue to step up our investments for revenue, some of which were simply deferred from the second quarter to the second half of the year. and then we do continue to step up our investments for revenue some of which were simply deferred from the second quarter to the second half of the year So hopefully that gives you a little bit of feel for why we're stepping up and really not out of sync with what we saw for the entire year, actually some nice decreases that we'll pocket for the second quarter. so hopefully that gives you a little bit of feel for why we're stepping up and really not out of sync with what we saw for the entire year actually some nice decreases that we'll pocket for the second quarter But we still want to continue with the same projects and investment that we'd always originally anticipated. But we still want to continue with the same projects and investment that we'd always originally anticipated. but we still want to continue with the same projects and investment that we'd always originally anticipated

Speaker 5: That's great. Thanks so much. That's great. that's great Thanks so much. thanks so much

Speaker 1: You. Our next question is coming from the line of Jon Arfstrom with RBC Capital Markets. Please proceed with your question. You. you Our next question is coming from the line of Jon Arfstrom with RBC Capital Markets. our next question is coming from the line of jon arfstrom with rbc capital markets Please proceed with your question. please proceed with your question

Speaker 3: Good morning, Jon. Good morning, Jon. good morning jon

Speaker 7: Hey, good morning. I heard Jim or Peter, you referenced it, but can you give us a little bit more on the pipelines and activity? It sounds like things are a lot better, but is there a way to quantify it? And how should we think about longer term loan growth potential beyond maybe a quarter or two? Hey, good morning. hey good morning I heard Jim or Peter, you referenced it, but can you give us a little bit more on the pipelines and activity? i heard jim or peter you referenced it but can you give us a little bit more on the pipelines and activity It sounds like things are a lot better, but is there a way to quantify it? it sounds like things are a lot better but is there a way to quantify it And how should we think about longer term loan growth potential beyond maybe a quarter or two? and how should we think about longer term loan growth potential beyond maybe a quarter or two

Speaker 6: Yes, John, it's Peter. Quantifying it, probably a little harder to do, but I would say that from the last quarter definitely seems like we've seen improvement. So our manager surveys came in more positive, which we thought they would. And I articulated at the conference earlier this quarter. So pretty much across the board, we saw some really good uptick in loan growth. Yes, John, it's Peter. yes john it's peter Quantifying it, probably a little harder to do, but I would say that from the last quarter definitely seems like we've seen improvement. quantifying it probably a little harder to do but i would say that from the last quarter definitely seems like we've seen improvement So our manager surveys came in more positive, which we thought they would. so our manager surveys came in more positive which we thought they would And I articulated at the conference earlier this quarter. and i articulated at the conference earlier this quarter So pretty much across the board, we saw some really good uptick in loan growth. so pretty much across the board we saw some really good uptick in loan growth Our pipelines grew and we're feeling pretty good about the second half of the year. Despite a lot of the things that you feel like you're hearing across the country, there certainly seems to be noise. But I think our your average middle market customer base is progressing forward and figuring out how to navigate it. I'm a little hesitant to talk about 2026. We're not putting out any sort of outlooks for 2026. Our pipelines grew and we're feeling pretty good about the second half of the year. our pipelines grew and we're feeling pretty good about the second half of the year Despite a lot of the things that you feel like you're hearing across the country, there certainly seems to be noise. despite a lot of the things that you feel like you're hearing across the country there certainly seems to be noise But I think our your average middle market customer base is progressing forward and figuring out how to navigate it. but i think our your average middle market customer base is progressing forward and figuring out how to navigate it I'm a little hesitant to talk about 2026. i'm a little hesitant to talk about 2026 We're not putting out any sort of outlooks for 2026. we're not putting out any sort of outlooks for 2026 But I would say that it feels like momentum is picking up across the board for us. And so I think that we'll continue to see good loan growth throughout the year. And again, I feel like we benefit from being in some great markets. We've got a great diverse geographic base. You have seen some of the impacts in Michigan to the economy to the auto space, but I don't know that that's been a terribly strong headwind for us. But I would say that it feels like momentum is picking up across the board for us. but i would say that it feels like momentum is picking up across the board for us And so I think that we'll continue to see good loan growth throughout the year. and so i think that we'll continue to see good loan growth throughout the year And again, I feel like we benefit from being in some great markets. and again i feel like we benefit from being in some great markets We've got a great diverse geographic base. we've got a great diverse geographic base You have seen some of the impacts in Michigan to the economy to the auto space, but I don't know that that's been a terribly strong headwind for us. you have seen some of the impacts in michigan to the economy to the auto space but i don't know that that's been a terribly strong headwind for us So really across the board, I think we feel pretty good about it. If I were to try to quantify it John, I would say, we're still not back to kind of pre SVB pipeline numbers, but we are going in that direction. And I would say it probably feels better than it has in a while as far as the activity level since the SVB situation. And so hopefully that continues absent some sort of major event in the economy that we don't see at the moment. So really across the board, I think we feel pretty good about it. so really across the board i think we feel pretty good about it If I were to try to quantify it John, I would say, we're still not back to kind of pre SVB pipeline numbers, but we are going in that direction. if i were to try to quantify it john i would say we're still not back to kind of pre svb pipeline numbers but we are going in that direction And I would say it probably feels better than it has in a while as far as the activity level since the SVB situation. and i would say it probably feels better than it has in a while as far as the activity level since the svb situation And so hopefully that continues absent some sort of major event in the economy that we don't see at the moment. and so hopefully that continues absent some sort of major event in the economy that we don't see at the moment

Speaker 7: Okay. Good. That's helpful. And then Jim back on net interest income with some of your comments your prepared comments and the preferred redemption, you pointed us to the lower end of 5% to 7% range. How do you get off that 5%? Okay. okay Good. good That's helpful. that's helpful And then Jim back on net interest income with some of your comments your prepared comments and the preferred redemption, you pointed us to the lower end of 5% to 7% range. and then jim back on net interest income with some of your comments your prepared comments and the preferred redemption you pointed us to the lower end of 5% to 7% range How do you get off that 5%? how do you get off that 5% What needs to happen to generate NII growth that's maybe midpoint or higher in the range? Thank What needs to happen to generate NII growth that's maybe midpoint or higher in the range? what needs to happen to generate nii growth that's maybe midpoint or higher in the range Thank thank

Speaker 4: John, if you're talking shorter term, this outlook doesn't necessarily contemplate a preferred issuance. We're being very patient there. Obviously, that would help. But I continue to say in this rate environment, probably in the short term, I think that non interest bearing deposits is still very much an X factor. So I would say seeing some stability and an inflection point in non interest bearing deposits, which is something we and from what I can tell this quarter, the whole industry is still kind of waiting for. John, if you're talking shorter term, this outlook doesn't necessarily contemplate a preferred issuance. john if you're talking shorter term this outlook doesn't necessarily contemplate a preferred issuance We're being very patient there. we're being very patient there Obviously, that would help. obviously that would help But I continue to say in this rate environment, probably in the short term, I think that non interest bearing deposits is still very much an X factor. but i continue to say in this rate environment probably in the short term i think that non interest bearing deposits is still very much an x factor So I would say seeing some stability and an inflection point in non interest bearing deposits, which is something we and from what I can tell this quarter, the whole industry is still kind of waiting for. so i would say seeing some stability and an inflection point in non interest bearing deposits which is something we and from what i can tell this quarter the whole industry is still kind of waiting for I think that would be probably the biggest X factor out there. I think that would be probably the biggest X factor out there. i think that would be probably the biggest x factor out there

Speaker 7: All right. Thank you very much. All right. all right Thank you very much. thank you very much

Speaker 3: Thanks, John. Thanks, John. thanks john

Speaker 1: Thank you. The next question is coming from the line of David George with Baird. Please proceed with your question. Thank you. thank you The next question is coming from the line of David George with Baird. the next question is coming from the line of david george with baird Please proceed with your question. please proceed with your question

Speaker 3: Good morning, David. Good morning, David. good morning david

Speaker 8: Hey, guys. Hey, guys. hey guys Hey, guys. Good morning. Hey, question for Kurt. I agree, Kurt, with a lot of things you said about Comerica as it relates to your reputation in the market. You've got experienced bankers. Hey, guys. hey guys Good morning. good morning Hey, question for Kurt. hey question for kurt I agree, Kurt, with a lot of things you said about Comerica as it relates to your reputation in the market. i agree kurt with a lot of things you said about comerica as it relates to your reputation in the market You've got experienced bankers. you've got experienced bankers You didn't need to raise capital during the GFC. So a lot of great things about your company. And it's funny, I was going through my file this morning just looking at your quarter, and I found my initiation report, about my last firm, and it was October 6, obviously, a long time ago. Stock hit 60 was $61 that day. And today, twenty five years later, we're at $62 And then if I look at kind of where you were in 2018, 2019, the stock is down 3025%, 30%. You didn't need to raise capital during the GFC. you didn't need to raise capital during the gfc So a lot of great things about your company. so a lot of great things about your company And it's funny, I was going through my file this morning just looking at your quarter, and I found my initiation report, about my last firm, and it was October 6, obviously, a long time ago. and it's funny i was going through my file this morning just looking at your quarter and i found my initiation report about my last firm and it was october 6 obviously a long time ago Stock hit 60 was $61 that day. stock hit 60 was $61 that day And today, twenty five years later, we're at $62 And then if I look at kind of where you were in 2018, 2019, the stock is down 3025%, 30%. and today twenty five years later we're at $62 and then if i look at kind of where you were in 2018 2019 the stock is down 3025% 30% Revenues are down and expenses are up. I just want to kind of understand from you what your plan is and what the Board's plan is to improve the performance of the company. And obviously, there's a market today, obviously, with Huntington doing a deal. In Texas there's a pretty substantial private market for banks in your backyard. So just kind of how you're thinking about longer term improvement of performance and enhancing shareholder value? Thanks. Revenues are down and expenses are up. revenues are down and expenses are up I just want to kind of understand from you what your plan is and what the Board's plan is to improve the performance of the company. i just want to kind of understand from you what your plan is and what the board's plan is to improve the performance of the company And obviously, there's a market today, obviously, with Huntington doing a deal. and obviously there's a market today obviously with huntington doing a deal In Texas there's a pretty substantial private market for banks in your backyard. in texas there's a pretty substantial private market for banks in your backyard So just kind of how you're thinking about longer term improvement of performance and enhancing shareholder value? so just kind of how you're thinking about longer term improvement of performance and enhancing shareholder value Thanks. thanks

Speaker 3: Hey, David. That was a lot of information in that question, but let me try to address it for you. First of all, the if you go back to 2018, 2019, those were good years for our company and stock performance. And if you look sort of forward from there, I think everyone's aware of the hurdles that the whole world faced and certainly the regional banks faced and we faced as well between COVID and then the significant buildup that we saw in quantitative easing and just the governmental programs that were driving deposits, was really a peak for us and we sort of saw record performance in 2022 heading into 2023. And then we had the regional bank crisis. Hey, David. hey david That was a lot of information in that question, but let me try to address it for you. that was a lot of information in that question but let me try to address it for you First of all, the if you go back to 2018, 2019, those were good years for our company and stock performance. first of all the if you go back to 2018 2019 those were good years for our company and stock performance And if you look sort of forward from there, I think everyone's aware of the hurdles that the whole world faced and certainly the regional banks faced and we faced as well between COVID and then the significant buildup that we saw in quantitative easing and just the governmental programs that were driving deposits, was really a peak for us and we sort of saw record performance in 2022 heading into 2023. and if you look sort of forward from there i think everyone's aware of the hurdles that the whole world faced and certainly the regional banks faced and we faced as well between covid and then the significant buildup that we saw in quantitative easing and just the governmental programs that were driving deposits was really a peak for us and we sort of saw record performance in 2022 heading into 2023 And then we had the regional bank crisis. and then we had the regional bank crisis Then we along with others saw some rationalization in assets as deposits came down. And then we exited a business line mortgage banker finance and did some rationalization across the rest of our portfolio. So we've been in a bit of a rebuilding phase since that time. And as we pointed out on the call already, we're seeing nice loan growth, got a good fee income quarter as well. Feel really good about sort of our deposit position and ability to fund our lending activity going forward. Then we along with others saw some rationalization in assets as deposits came down. then we along with others saw some rationalization in assets as deposits came down And then we exited a business line mortgage banker finance and did some rationalization across the rest of our portfolio. and then we exited a business line mortgage banker finance and did some rationalization across the rest of our portfolio So we've been in a bit of a rebuilding phase since that time. so we've been in a bit of a rebuilding phase since that time And as we pointed out on the call already, we're seeing nice loan growth, got a good fee income quarter as well. and as we pointed out on the call already we're seeing nice loan growth got a good fee income quarter as well Feel really good about sort of our deposit position and ability to fund our lending activity going forward. feel really good about sort of our deposit position and ability to fund our lending activity going forward We're very excited about the structural tailwinds that we've got on NII from a forward We're very excited about the structural tailwinds that we've got on NII from a forward we're very excited about the structural tailwinds that we've got on nii from a forward

Speaker 8: Curt, I'm sorry to interrupt. Your loans have been flat for a decade. Curt, I'm sorry to interrupt. curt i'm sorry to interrupt Your loans have been flat for a decade. your loans have been flat for a decade

Speaker 3: David, again, I would go back to what I said earlier that if you look at the last five years, which I think is what you were pointing out, I can't speak as much to the ten year prior period of time, but we did do some rationalization in the portfolio, which brought down loan growth. And I can't go back and sort of recap that. It was what we needed to do at the moment. But you are seeing nice growth in the portfolio now and I think that's what we're going to lean into. And some of the expenses that you're seeing for us is really a fact that we are trying to invest in the business for growth longer term including our expansion into some new markets, investment in our investment in payments and treasury management, wealth management, some of the other things that we've been doing in capital markets. David, again, I would go back to what I said earlier that if you look at the last five years, which I think is what you were pointing out, I can't speak as much to the ten year prior period of time, but we did do some rationalization in the portfolio, which brought down loan growth. david again i would go back to what i said earlier that if you look at the last five years which i think is what you were pointing out i can't speak as much to the ten year prior period of time but we did do some rationalization in the portfolio which brought down loan growth And I can't go back and sort of recap that. and i can't go back and sort of recap that It was what we needed to do at the moment. it was what we needed to do at the moment But you are seeing nice growth in the portfolio now and I think that's what we're going to lean into. but you are seeing nice growth in the portfolio now and i think that's what we're going to lean into And some of the expenses that you're seeing for us is really a fact that we are trying to invest in the business for growth longer term including our expansion into some new markets, investment in our investment in payments and treasury management, wealth management, some of the other things that we've been doing in capital markets. and some of the expenses that you're seeing for us is really a fact that we are trying to invest in the business for growth longer term including our expansion into some new markets investment in our investment in payments and treasury management wealth management some of the other things that we've been doing in capital markets And we believe that if you look at the efficiency ratio, it improved for the quarter. We generated a nice ROE for the quarter and we're going to lean into those things on a go forward basis. And we believe that if you look at the efficiency ratio, it improved for the quarter. and we believe that if you look at the efficiency ratio it improved for the quarter We generated a nice ROE for the quarter and we're going to lean into those things on a go forward basis. we generated a nice roe for the quarter and we're going to lean into those things on a go forward basis

Speaker 8: Again efficiency is going the wrong direction. Okay. And you're happy with the performance and so forth and the Board is as well? Again efficiency is going the wrong direction. again efficiency is going the wrong direction Okay. okay And you're happy with the performance and so forth and the Board is as well? and you're happy with the performance and so forth and the board is as well

Speaker 3: David, I'm always focused on improving performance across the company. And we are always focused on how we can make sure that we're generating positive operating leverage and improving overall all of our performance metrics across the company. David, I'm always focused on improving performance across the company. david i'm always focused on improving performance across the company And we are always focused on how we can make sure that we're generating positive operating leverage and improving overall all of our performance metrics across the company. and we are always focused on how we can make sure that we're generating positive operating leverage and improving overall all of our performance metrics across the company

Speaker 8: Okay. Sounds great. Okay. okay Sounds great. sounds great

Speaker 1: Thank you. Our next question is coming from the line of Bernard Von Gazzicchi with Deutsche Bank. Please proceed with your question. Thank you. thank you Our next question is coming from the line of Bernard Von Gazzicchi with Deutsche Bank. our next question is coming from the line of bernard von gazzicchi with deutsche bank Please proceed with your question. please proceed with your question

Speaker 9: Hey guys, good morning. So just on if the $100,000,000,000 asset threshold on Cat four is moved based on inflation and gets to say $130,000,000,000 or gets moved to $250,000,000,000 how would either one of these ranges impact your willingness and timeline to pursue a whole bank acquisition if that's in play? Hey guys, good morning. hey guys good morning So just on if the $100,000,000,000 asset threshold on Cat four is moved based on inflation and gets to say $130,000,000,000 or gets moved to $250,000,000,000 how would either one of these ranges impact your willingness and timeline to pursue a whole bank acquisition if that's in play? so just on if the $100,000,000,000 asset threshold on cat four is moved based on inflation and gets to say $130,000,000,000 or gets moved to $250,000,000,000 how would either one of these ranges impact your willingness and timeline to pursue a whole bank acquisition if that's in play

Speaker 3: Thank you, Bernard. I just would say that and I've said this consistently the last couple of years, the 100,000,000,000 threshold for us is not a governor as to whether we would look at a transaction or not. We believe that the right thing for our shareholders is continue to grow the company. And we've been focused on organic growth and feel like we're seeing good organic opportunities across the enterprise. We've been a patient acquirer, something which still have to make a lot of strategic sense for us, be aligned with one of our primary geographies, a good cultural fit, etcetera. Thank you, Bernard. thank you bernard I just would say that and I've said this consistently the last couple of years, the 100,000,000,000 threshold for us is not a governor as to whether we would look at a transaction or not. i just would say that and i've said this consistently the last couple of years the 100,000,000,000 threshold for us is not a governor as to whether we would look at a transaction or not We believe that the right thing for our shareholders is continue to grow the company. we believe that the right thing for our shareholders is continue to grow the company And we've been focused on organic growth and feel like we're seeing good organic opportunities across the enterprise. and we've been focused on organic growth and feel like we're seeing good organic opportunities across the enterprise We've been a patient acquirer, something which still have to make a lot of strategic sense for us, be aligned with one of our primary geographies, a good cultural fit, etcetera. we've been a patient acquirer something which still have to make a lot of strategic sense for us be aligned with one of our primary geographies a good cultural fit etcetera So we're aware of the landscape and we'll continue to be aware of the landscape, but believe that we've got good growth dynamics based on organic as our primary focus. So we're aware of the landscape and we'll continue to be aware of the landscape, but believe that we've got good growth dynamics based on organic as our primary focus. so we're aware of the landscape and we'll continue to be aware of the landscape but believe that we've got good growth dynamics based on organic as our primary focus

Speaker 9: Okay. And just as a follow-up, you noted some seasonality in deposits during the quarter and I think you've pointed out customer utilization of funds for funding capital investments. Do you expect to see clients utilize deposit funds like kind of in the second half, like what you're hearing or expecting on this front? Okay. okay And just as a follow-up, you noted some seasonality in deposits during the quarter and I think you've pointed out customer utilization of funds for funding capital investments. and just as a follow-up you noted some seasonality in deposits during the quarter and i think you've pointed out customer utilization of funds for funding capital investments Do you expect to see clients utilize deposit funds like kind of in the second half, like what you're hearing or expecting on this front? do you expect to see clients utilize deposit funds like kind of in the second half like what you're hearing or expecting on this front

Speaker 4: Bernard, I think you may see a little bit of that still in this higher rate environment. But when I look at both some of the initiatives we have going on for deposit gathering, as well as seasonality, I do think that some of that use of funds will probably get kind of drowned out in the noise. So I don't expect it to be a significant factor going forward. We'll continue to monitor that. But we did have an inflection point in the second quarter. Bernard, I think you may see a little bit of that still in this higher rate environment. bernard i think you may see a little bit of that still in this higher rate environment But when I look at both some of the initiatives we have going on for deposit gathering, as well as seasonality, I do think that some of that use of funds will probably get kind of drowned out in the noise. but when i look at both some of the initiatives we have going on for deposit gathering as well as seasonality i do think that some of that use of funds will probably get kind of drowned out in the noise So I don't expect it to be a significant factor going forward. so i don't expect it to be a significant factor going forward We'll continue to monitor that. we'll continue to monitor that But we did have an inflection point in the second quarter. but we did have an inflection point in the second quarter I will point out that June was higher than May. So the seasonality did as well as the use of funds netting against with that did continue maybe a little later than I would have hoped for. But again, we saw an inflection point halfway through the quarter and just feels like we have some really good trajectory. And I'll just say even as I look at the July, that seems to continue. So I think we've kind of moved past a lot of it. I will point out that June was higher than May. i will point out that june was higher than may So the seasonality did as well as the use of funds netting against with that did continue maybe a little later than I would have hoped for. so the seasonality did as well as the use of funds netting against with that did continue maybe a little later than i would have hoped for But again, we saw an inflection point halfway through the quarter and just feels like we have some really good trajectory. but again we saw an inflection point halfway through the quarter and just feels like we have some really good trajectory And I'll just say even as I look at the July, that seems to continue. and i'll just say even as i look at the july that seems to continue So I think we've kind of moved past a lot of it. so i think we've kind of moved past a lot of it And I think some of these positive tailwinds with deposits will probably drowned out any use of funds going forward is what I'm kind of seeing here. And I think some of these positive tailwinds with deposits will probably drowned out any use of funds going forward is what I'm kind of seeing here. and i think some of these positive tailwinds with deposits will probably drowned out any use of funds going forward is what i'm kind of seeing here

Speaker 9: Okay, great. Thanks for taking my question. Okay, great. okay great Thanks for taking my question. thanks for taking my question

Speaker 3: Thank you. Thank you. thank you

Speaker 1: Thank you. The next question is coming from the line of Mike Mayo with Wells Fargo. Please proceed with your question. Thank you. thank you The next question is coming from the line of Mike Mayo with Wells Fargo. the next question is coming from the line of mike mayo with wells fargo Please proceed with your question. please proceed with your question

Speaker 6: Good morning, Mike. Good morning, Mike. good morning mike

Speaker 10: Good morning. Good morning. good morning The short question is on the first quarter call, Curt, you repeated as you've done several times that Comerica has to earn its right to be independent every day and that makes sense. So under what conditions would you say that Comerica has not earned the right to remain independent every day? And this is part of the whole industry debate of skill versus scale. And I guess you've had one hundred and thirty five years at Comerica. And the question is at what point do you say, you know what, we need to scale this up. The short question is on the first quarter call, Curt, you repeated as you've done several times that Comerica has to earn its right to be independent every day and that makes sense. the short question is on the first quarter call curt you repeated as you've done several times that comerica has to earn its right to be independent every day and that makes sense So under what conditions would you say that Comerica has not earned the right to remain independent every day? so under what conditions would you say that comerica has not earned the right to remain independent every day And this is part of the whole industry debate of skill versus scale. and this is part of the whole industry debate of skill versus scale And I guess you've had one hundred and thirty five years at Comerica. and i guess you've had one hundred and thirty five years at comerica And the question is at what point do you say, you know what, we need to scale this up. and the question is at what point do you say you know what we need to scale this up The longer version of this question is, as you know, think you were in the room, Curt, when I came to the annual meeting a decade ago and there are like five to 10 other institutional investors in the room and I asked the same question. And I recognize your comments today that you're rebuilding, you have some tailwinds quarter over quarter EPS is up, loan growth is up, period end loans are up. But when you just look at the data objectively, you say your efficiency ratio is still worst in class 68% year to date. That's where it was when I was came to the meeting a decade ago. The returns are about worst in class only better than Citigroup, which coincidentally I recommend still also it's not always the death knell, but the stock performance as was brought up earlier has also underperformed and I always stack rank the I've done this for twenty five years, I stack rank the CEO stock performance versus the BTX and unfortunately for the bottom by a big margin since you arrived the stock's down 21%, the BTX up 43%, the S and P is up a lot more. The longer version of this question is, as you know, think you were in the room, Curt, when I came to the annual meeting a decade ago and there are like five to 10 other institutional investors in the room and I asked the same question. the longer version of this question is as you know think you were in the room curt when i came to the annual meeting a decade ago and there are like five to 10 other institutional investors in the room and i asked the same question And I recognize your comments today that you're rebuilding, you have some tailwinds quarter over quarter EPS is up, loan growth is up, period end loans are up. and i recognize your comments today that you're rebuilding you have some tailwinds quarter over quarter eps is up loan growth is up period end loans are up But when you just look at the data objectively, you say your efficiency ratio is still worst in class 68% year to date. but when you just look at the data objectively you say your efficiency ratio is still worst in class 68% year to date That's where it was when I was came to the meeting a decade ago. that's where it was when i was came to the meeting a decade ago The returns are about worst in class only better than Citigroup, which coincidentally I recommend still also it's not always the death knell, but the stock performance as was brought up earlier has also underperformed and I always stack rank the I've done this for twenty five years, I stack rank the CEO stock performance versus the BTX and unfortunately for the bottom by a big margin since you arrived the stock's down 21%, the BTX up 43%, the S and P is up a lot more. the returns are about worst in class only better than citigroup which coincidentally i recommend still also it's not always the death knell but the stock performance as was brought up earlier has also underperformed and i always stack rank the i've done this for twenty five years i stack rank the ceo stock performance versus the btx and unfortunately for the bottom by a big margin since you arrived the stock's down 21% the btx up 43% the s and p is up a lot more So maybe the market is really missing a story here, maybe you're about to have a hockey stick improvement. So if you could just educate me on why a decade later America has continued to earn the right to remain independent? Thank you. So maybe the market is really missing a story here, maybe you're about to have a hockey stick improvement. so maybe the market is really missing a story here maybe you're about to have a hockey stick improvement So if you could just educate me on why a decade later America has continued to earn the right to remain independent? so if you could just educate me on why a decade later america has continued to earn the right to remain independent Thank you. thank you

Speaker 3: Mike, that's a lot as well in your question there, but I'll try to respond to it here. I'd go back to what I said earlier and you echoed, which is that we are always aware of the need to perform at an acceptable level and relative to our peer group and relative to the market overall. And certainly the regional bank space as well as the bank space across the board has had some volatility in equity performance this year, but we've seen a nice rebound in the last sixty days or so as the KBW and the KRE has as well. We have done a lot I think over the last number of years to take some of the volatility out of our performance relative to interest rate sensitivity. And now we are starting to benefit I think from some of what we put in place as well as we've got some of the structural tailwinds that I talked about earlier that we believe will continue to position us well from a performance standpoint NII etcetera the next couple of years. Mike, that's a lot as well in your question there, but I'll try to respond to it here. mike that's a lot as well in your question there but i'll try to respond to it here I'd go back to what I said earlier and you echoed, which is that we are always aware of the need to perform at an acceptable level and relative to our peer group and relative to the market overall. i'd go back to what i said earlier and you echoed which is that we are always aware of the need to perform at an acceptable level and relative to our peer group and relative to the market overall And certainly the regional bank space as well as the bank space across the board has had some volatility in equity performance this year, but we've seen a nice rebound in the last sixty days or so as the KBW and the KRE has as well. and certainly the regional bank space as well as the bank space across the board has had some volatility in equity performance this year but we've seen a nice rebound in the last sixty days or so as the kbw and the kre has as well We have done a lot I think over the last number of years to take some of the volatility out of our performance relative to interest rate sensitivity. we have done a lot i think over the last number of years to take some of the volatility out of our performance relative to interest rate sensitivity And now we are starting to benefit I think from some of what we put in place as well as we've got some of the structural tailwinds that I talked about earlier that we believe will continue to position us well from a performance standpoint NII etcetera the next couple of years. and now we are starting to benefit i think from some of what we put in place as well as we've got some of the structural tailwinds that i talked about earlier that we believe will continue to position us well from a performance standpoint nii etcetera the next couple of years We continue to see nice growth across the portfolio on the lending side and we're going lean into that in the second half of the year. And again, I can't go back and sort of replay past performance. But what I am charged with doing is protecting the company overall, serving our clients, making sure that we have the appropriate risk profile, the right capital, the right credit metrics and credit expertise that we bring sort of day in and day out, protecting our franchise, the markets that we serve and doing a good job for our customers, our employees and our shareholders longer term. And I think we're well positioned from that perspective. And you mentioned one hundred and thirty five years is actually one hundred and seventy five years. We continue to see nice growth across the portfolio on the lending side and we're going lean into that in the second half of the year. we continue to see nice growth across the portfolio on the lending side and we're going lean into that in the second half of the year And again, I can't go back and sort of replay past performance. and again i can't go back and sort of replay past performance But what I am charged with doing is protecting the company overall, serving our clients, making sure that we have the appropriate risk profile, the right capital, the right credit metrics and credit expertise that we bring sort of day in and day out, protecting our franchise, the markets that we serve and doing a good job for our customers, our employees and our shareholders longer term. but what i am charged with doing is protecting the company overall serving our clients making sure that we have the appropriate risk profile the right capital the right credit metrics and credit expertise that we bring sort of day in and day out protecting our franchise the markets that we serve and doing a good job for our customers our employees and our shareholders longer term And I think we're well positioned from that perspective. and i think we're well positioned from that perspective And you mentioned one hundred and thirty five years is actually one hundred and seventy five years. and you mentioned one hundred and thirty five years is actually one hundred and seventy five years But having said all that, we are aware of the landscape and we are always going to do the right thing by our shareholders. And we understand responsibility related to that. And so does our management team and so does our Board and we take the return to our shareholders very, very seriously. But having said all that, we are aware of the landscape and we are always going to do the right thing by our shareholders. but having said all that we are aware of the landscape and we are always going to do the right thing by our shareholders And we understand responsibility related to that. and we understand responsibility related to that And so does our management team and so does our Board and we take the return to our shareholders very, very seriously. and so does our management team and so does our board and we take the return to our shareholders very very seriously

Speaker 10: I appreciate that. I think also last quarter you said you did not expect a lot of mergers in the next twelve to eighteen months. If they're starting to be mergers, would that kind of change your thought process and to what degree? And why don't you expect many mergers in the twelve to eighteen months or maybe that's changed in the last three months? I appreciate that. i appreciate that I think also last quarter you said you did not expect a lot of mergers in the next twelve to eighteen months. i think also last quarter you said you did not expect a lot of mergers in the next twelve to eighteen months If they're starting to be mergers, would that kind of change your thought process and to what degree? if they're starting to be mergers would that kind of change your thought process and to what degree And why don't you expect many mergers in the twelve to eighteen months or maybe that's changed in the last three months? and why don't you expect many mergers in the twelve to eighteen months or maybe that's changed in the last three months

Speaker 3: Yes. Mike, I may have overstated that when I asked the question. I was asked about the industry overall at the end of or at the first quarter call. And you might recall at that time when you certainly recall lots of volatility whether it's geopolitical or the trade policy and the uncertainty related to it. And it just felt like that that might sometimes when you're heading into uncertainty or possibly a credit cycle etcetera across the industry that can tend to dampen M and A. Yes. yes Mike, I may have overstated that when I asked the question. mike i may have overstated that when i asked the question I was asked about the industry overall at the end of or at the first quarter call. i was asked about the industry overall at the end of or at the first quarter call And you might recall at that time when you certainly recall lots of volatility whether it's geopolitical or the trade policy and the uncertainty related to it. and you might recall at that time when you certainly recall lots of volatility whether it's geopolitical or the trade policy and the uncertainty related to it And it just felt like that that might sometimes when you're heading into uncertainty or possibly a credit cycle etcetera across the industry that can tend to dampen M and A. and it just felt like that that might sometimes when you're heading into uncertainty or possibly a credit cycle etcetera across the industry that can tend to dampen m and a But since then we've seen a couple of deals happen. It feels like that maybe there's a more favorable regulatory environment around M and A. And as the noise settles down some around economic certainty, geopolitical certainty, etcetera, I think it is likely that you're probably going to see a bit more M and A than we've seen previously. And it just continues to factor into what we think about overall, whether we'd be an acquirer or continue to pursue our organic growth or whether we'd ever entertain something from a third party. But since then we've seen a couple of deals happen. but since then we've seen a couple of deals happen It feels like that maybe there's a more favorable regulatory environment around M and A. it feels like that maybe there's a more favorable regulatory environment around m and a And as the noise settles down some around economic certainty, geopolitical certainty, etcetera, I think it is likely that you're probably going to see a bit more M and A than we've seen previously. and as the noise settles down some around economic certainty geopolitical certainty etcetera i think it is likely that you're probably going to see a bit more m and a than we've seen previously And it just continues to factor into what we think about overall, whether we'd be an acquirer or continue to pursue our organic growth or whether we'd ever entertain something from a third party. and it just continues to factor into what we think about overall whether we'd be an acquirer or continue to pursue our organic growth or whether we'd ever entertain something from a third party

Speaker 10: All right. We'll watch that volatility and your rebuilding and the tailwinds. Thank you. All right. all right We'll watch that volatility and your rebuilding and the tailwinds. we'll watch that volatility and your rebuilding and the tailwinds Thank you. thank you

Speaker 3: Thanks Mike. Thanks Mike. thanks mike

Speaker 1: Thank you. Our next question is coming from the line of Anthony Elion with JPMorgan. Please proceed with your question. Thank you. thank you Our next question is coming from the line of Anthony Elion with JPMorgan. our next question is coming from the line of anthony elion with jpmorgan Please proceed with your question. please proceed with your question

Speaker 11: Yes. Hi, everyone. On the 4Q NII guide of up versus 3Q, Jim, you called out earlier some of the deposit pricing headwinds you expect in the third quarter. Pay rates will likely be twice the level we just saw. But I'm curious why would those headwinds ease in 4Q, particularly if you expect both strong customer deposit growth in 4Q and the momentum in loan growth is expected to persist? Yes. yes Hi, everyone. hi everyone On the 4Q NII guide of up versus 3Q, Jim, you called out earlier some of the deposit pricing headwinds you expect in the third quarter. on the 4q nii guide of up versus 3q jim you called out earlier some of the deposit pricing headwinds you expect in the third quarter Pay rates will likely be twice the level we just saw. pay rates will likely be twice the level we just saw But I'm curious why would those headwinds ease in 4Q, particularly if you expect both strong customer deposit growth in 4Q and the momentum in loan growth is expected to persist? but i'm curious why would those headwinds ease in 4q particularly if you expect both strong customer deposit growth in 4q and the momentum in loan growth is expected to persist

Speaker 4: Yes. Good morning, Tony. I really look at what we did towards the end of the second quarter with consumer pricing. It's kind of a reset recognizing that the forward curve has been pushed out. So I kind of think of that as onetime reset. Yes. yes Good morning, Tony. good morning tony I really look at what we did towards the end of the second quarter with consumer pricing. i really look at what we did towards the end of the second quarter with consumer pricing It's kind of a reset recognizing that the forward curve has been pushed out. it's kind of a reset recognizing that the forward curve has been pushed out So I kind of think of that as onetime reset. so i kind of think of that as onetime reset We would expect to kind of track the market once we get into any kind of fourth quarter environment, whether that be the FOMC cut or just the general competitive environment. We probably to be said, we see any increase in deposit pay rates in the fourth quarter, think it would be accompanied by higher deposits, which net net would be a benefit for the bank. But again, it kind of view what's going on in the third quarter. It's a little bit of a onetime reset here. Again, we're not going to be sending out $400,000,000 of preferred cash every quarter either. We would expect to kind of track the market once we get into any kind of fourth quarter environment, whether that be the FOMC cut or just the general competitive environment. we would expect to kind of track the market once we get into any kind of fourth quarter environment whether that be the fomc cut or just the general competitive environment We probably to be said, we see any increase in deposit pay rates in the fourth quarter, think it would be accompanied by higher deposits, which net net would be a benefit for the bank. we probably to be said we see any increase in deposit pay rates in the fourth quarter think it would be accompanied by higher deposits which net net would be a benefit for the bank But again, it kind of view what's going on in the third quarter. but again it kind of view what's going on in the third quarter It's a little bit of a onetime reset here. it's a little bit of a onetime reset here Again, we're not going to be sending out $400,000,000 of preferred cash every quarter either. again we're not going to be sending out $400,000,000 of preferred cash every quarter either So there are just some unique events that are occurring as we move from the second quarter to the third quarter. So there are just some unique events that are occurring as we move from the second quarter to the third quarter. so there are just some unique events that are occurring as we move from the second quarter to the third quarter

Speaker 11: Okay. And then if I look at the bottom of Slide three, you're calling out payments products such as real time solutions, embedded finance. We had the house passed the stablecoin bill last night. I'm just thinking about the additional opportunities that could exist with stablecoins complementing everything you're doing on payments and the role that banks could play. Is this a technology you guys are considering leveraging down the road? Or is it still too early? Thank you. Okay. okay And then if I look at the bottom of Slide three, you're calling out payments products such as real time solutions, embedded finance. and then if i look at the bottom of slide three you're calling out payments products such as real time solutions embedded finance We had the house passed the stablecoin bill last night. we had the house passed the stablecoin bill last night I'm just thinking about the additional opportunities that could exist with stablecoins complementing everything you're doing on payments and the role that banks could play. i'm just thinking about the additional opportunities that could exist with stablecoins complementing everything you're doing on payments and the role that banks could play Is this a technology you guys are considering leveraging down the road? is this a technology you guys are considering leveraging down the road Or is it still too early? or is it still too early Thank you. thank you

Speaker 6: Tony, it's Peter. I think I would probably say it's a little too early to know necessarily. We do feel positioned to be involved in it. We're a member of the clearinghouse. We do feel like we have the right talent both in our technology side as well as our product side. Tony, it's Peter. tony it's peter I think I would probably say it's a little too early to know necessarily. i think i would probably say it's a little too early to know necessarily We do feel positioned to be involved in it. we do feel positioned to be involved in it We're a member of the clearinghouse. we're a member of the clearinghouse We do feel like we have the right talent both in our technology side as well as our product side. we do feel like we have the right talent both in our technology side as well as our product side And we do think we're making really good investment in payments to be involved now. So what this looks like though, I think is still a little bit to be determined. And I think that we are monitoring the situation. We're going to stay really close to it. We've got the right products, talent and awareness. And we do think we're making really good investment in payments to be involved now. and we do think we're making really good investment in payments to be involved now So what this looks like though, I think is still a little bit to be determined. so what this looks like though i think is still a little bit to be determined And I think that we are monitoring the situation. and i think that we are monitoring the situation We're going to stay really close to it. we're going to stay really close to it We've got the right products, talent and awareness. we've got the right products talent and awareness And so but I think the answer to your question is at least from our perspective, it's a little still too early to tell how this is going to play out really for the industry and for us. And so but I think the answer to your question is at least from our perspective, it's a little still too early to tell how this is going to play out really for the industry and for us. and so but i think the answer to your question is at least from our perspective it's a little still too early to tell how this is going to play out really for the industry and for us

Speaker 11: Thank you. Thank you. thank you

Speaker 1: Thank you. The next question is coming from the line of Chris McGratty with KBW. Please proceed with your question. Thank you. thank you The next question is coming from the line of Chris McGratty with KBW. the next question is coming from the line of chris mcgratty with kbw Please proceed with your question. please proceed with your question

Speaker 3: Good morning, Chris. Good morning, Chris. good morning chris

Speaker 12: Hey, how's it going? This is Angela Eichter on for Chris McGratty. In your prepared remarks, I know you mentioned this here, but it looks like as an industry, deposit repricing is getting a little more difficult and competition is picking up. I know you've outperformed your beta from the way up, but can you provide an update on what you're seeing here in terms of repricing and expectations for any repricing opportunities going forward? Thanks. Hey, how's it going? hey how's it going This is Angela Eichter on for Chris McGratty. this is angela eichter on for chris mcgratty In your prepared remarks, I know you mentioned this here, but it looks like as an industry, deposit repricing is getting a little more difficult and competition is picking up. in your prepared remarks i know you mentioned this here but it looks like as an industry deposit repricing is getting a little more difficult and competition is picking up I know you've outperformed your beta from the way up, but can you provide an update on what you're seeing here in terms of repricing and expectations for any repricing opportunities going forward? i know you've outperformed your beta from the way up but can you provide an update on what you're seeing here in terms of repricing and expectations for any repricing opportunities going forward Thanks. thanks

Speaker 4: I'm not sure I heard that question. I'm not sure I heard that question. i'm not sure i heard that question

Speaker 3: It was deposit pricing. Is that correct? It was deposit pricing. it was deposit pricing Is that correct? is that correct

Speaker 12: Yes. Just an update on what you're seeing in terms of your near term expectations for deposit cost repricing and any opportunities you're seeing going forward? Yes. yes Just an update on what you're seeing in terms of your near term expectations for deposit cost repricing and any opportunities you're seeing going forward? just an update on what you're seeing in terms of your near term expectations for deposit cost repricing and any opportunities you're seeing going forward

Speaker 4: I would probably refer you back to my answer previously where I kind of sized up where I think the third quarter increases are coming from and what the drivers of those are. It does continue to be a very competitive environment for deposits. I think we saw that with some of the banking releases so far this week. But yes, I'm not sure I would add a lot on to what I had mentioned a few minutes ago in terms of just where we see deposit pricing going. I would probably refer you back to my answer previously where I kind of sized up where I think the third quarter increases are coming from and what the drivers of those are. i would probably refer you back to my answer previously where i kind of sized up where i think the third quarter increases are coming from and what the drivers of those are It does continue to be a very competitive environment for deposits. it does continue to be a very competitive environment for deposits I think we saw that with some of the banking releases so far this week. i think we saw that with some of the banking releases so far this week But yes, I'm not sure I would add a lot on to what I had mentioned a few minutes ago in terms of just where we see deposit pricing going. but yes i'm not sure i would add a lot on to what i had mentioned a few minutes ago in terms of just where we see deposit pricing going

Speaker 6: Yes. And I guess I might just say in general, whether it's loan pricing or deposit pricing, it's extremely competitive in all of the markets. And I think that we stay really focused on doing what we can to grow our customer base and make sure we've got the right products and services available to our customers that they need. So managing pricing on either side of the balance sheet is something we pay really close attention to. And I think it is a extremely competitive environment right now on both of them. Yes. yes And I guess I might just say in general, whether it's loan pricing or deposit pricing, it's extremely competitive in all of the markets. and i guess i might just say in general whether it's loan pricing or deposit pricing it's extremely competitive in all of the markets And I think that we stay really focused on doing what we can to grow our customer base and make sure we've got the right products and services available to our customers that they need. and i think that we stay really focused on doing what we can to grow our customer base and make sure we've got the right products and services available to our customers that they need So managing pricing on either side of the balance sheet is something we pay really close attention to. so managing pricing on either side of the balance sheet is something we pay really close attention to And I think it is a extremely competitive environment right now on both of them. and i think it is a extremely competitive environment right now on both of them

Speaker 12: Okay, great. Thank you. And then just on credit, you provide a little more color on the increase in criticized loans this quarter? I think in the deck, it looks like the leverage loan criticized has up a little higher. So any thoughts there? Thanks. Okay, great. okay great Thank you. thank you And then just on credit, you provide a little more color on the increase in criticized loans this quarter? and then just on credit you provide a little more color on the increase in criticized loans this quarter I think in the deck, it looks like the leverage loan criticized has up a little higher. i think in the deck it looks like the leverage loan criticized has up a little higher So any thoughts there? so any thoughts there Thanks. thanks

Speaker 13: Chris, this is Melinda. Yes, the increase in the criticized this quarter, I would call it moderate increase. As Jim mentioned in his prepared comments, the vast majority of that was in our core middle market book. And honestly, it was concentrated in three credits. And the commonality in those three credits is they all have some kind of a consumer component that the end customer was a consumer. And so there's been some stress there. Chris, this is Melinda. chris this is melinda Yes, the increase in the criticized this quarter, I would call it moderate increase. yes the increase in the criticized this quarter i would call it moderate increase As Jim mentioned in his prepared comments, the vast majority of that was in our core middle market book. as jim mentioned in his prepared comments the vast majority of that was in our core middle market book And honestly, it was concentrated in three credits. and honestly it was concentrated in three credits And the commonality in those three credits is they all have some kind of a consumer component that the end customer was a consumer. and the commonality in those three credits is they all have some kind of a consumer component that the end customer was a consumer And so there's been some stress there. and so there's been some stress there One, I would call more luxury goods and the other in two segments that are under some pressure already so that we the liquor industry and then transportation, freight and things like that. So that's really the commonality is the consumer is the end customer and then all of them are pressured by this longer higher or longer rate environment, which is obviously putting pressure on profitability. So other than those commonalities, the book has continued to perform quite well. And what you don't really see in the chart is what's cycling in and out of criticized. So, you know, we have, credits that migrate, from a downward perspective, but we also have a lot of credits that continue to get, you know, better, and are able to move back into that past category. One, I would call more luxury goods and the other in two segments that are under some pressure already so that we the liquor industry and then transportation, freight and things like that. one i would call more luxury goods and the other in two segments that are under some pressure already so that we the liquor industry and then transportation freight and things like that So that's really the commonality is the consumer is the end customer and then all of them are pressured by this longer higher or longer rate environment, which is obviously putting pressure on profitability. so that's really the commonality is the consumer is the end customer and then all of them are pressured by this longer higher or longer rate environment which is obviously putting pressure on profitability So other than those commonalities, the book has continued to perform quite well. so other than those commonalities the book has continued to perform quite well And what you don't really see in the chart is what's cycling in and out of criticized. and what you don't really see in the chart is what's cycling in and out of criticized So, you know, we have, credits that migrate, from a downward perspective, but we also have a lot of credits that continue to get, you know, better, and are able to move back into that past category. so you know we have credits that migrate from a downward perspective but we also have a lot of credits that continue to get you know better and are able to move back into that past category So I'm not really seeing anything that I would call underlying themes other than what we've been really telegraphing all year, which is the higher for longer interest rates and the inflationary pressures. So I'm not really seeing anything that I would call underlying themes other than what we've been really telegraphing all year, which is the higher for longer interest rates and the inflationary pressures. so i'm not really seeing anything that i would call underlying themes other than what we've been really telegraphing all year which is the higher for longer interest rates and the inflationary pressures

Speaker 12: Okay, great. Thank you for taking the questions. Okay, great. okay great Thank you for taking the questions. thank you for taking the questions

Speaker 13: You're welcome. You're welcome. you're welcome

Speaker 1: Thank you. There are no additional questions at this time. So I'd like to pass the floor back over to Mr. Farmer for closing comments. Thank you. thank you There are no additional questions at this time. there are no additional questions at this time So I'd like to pass the floor back over to Mr. Farmer for closing comments. so i'd like to pass the floor back over to mr farmer for closing comments

Speaker 3: Thank you very much, and thank you again for joining our call today. Thank you very much, and thank you again for joining our call today. thank you very much and thank you again for joining our call today

Speaker 1: Ladies and gentlemen, once again, we thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day. Ladies and gentlemen, once again, we thank you for your participation. ladies and gentlemen once again we thank you for your participation This does conclude today's teleconference. this does conclude today's teleconference You may disconnect your lines at this time, and have a wonderful day. you may disconnect your lines at this time and have a wonderful day