COMERICA INC — Call Transcript 2025

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kelly Gage, Director of Investor Relations. Thank you. Please go ahead. Thanks, Donna. Good morning and welcome to Comerica's first quarter 2025 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 Chausse, and Chief Banking Officer, Peter Sefzik. 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 earnings presentation on slide two. Also, the presentation and this conference call will reference non-GAAP measures. In that regard, I direct you to the reconciliation of these measures in the earnings materials that are available on our website, comerica.com. Now I'll turn the call over to Curt, who will begin on slide three. Good morning, everyone, and thank you for joining our call. This was a strong quarter for Comerica. We exceeded expectations across a number of categories, resulting in higher profitability over the prior quarter. Although we saw seasonal deposit outflows, non-interest-bearing balances performed well and contributed to net interest income outperforming guidance. Movement in the rate curve benefited our tangible common equity ratio and drove an increase in our book value at quarter end. Conservative capital management remained a priority, and we grew our estimated CET1 ratio while returning $143 million to common shareholders through share repurchases and dividends. Beyond our financial results, customer sentiment took a step back as the market saw an increase in macroeconomic uncertainty. As our customers await further clarity, we plan to continue confidently executing on our relationship model, striving to provide customers with the consistency and support they need to adapt and succeed. Comerica's legacy is built on successfully managing through cycles, and we feel our unique model positions us well to navigate a dynamic environment. Credit is a competitive differentiator with net charge-offs that have historically outperformed peers. We are regarded for our underwriting discipline. It's in our DNA, and it's a crucial part of our culture. We benefit from a diversified, commercially oriented business mix and have limited consumer exposure. We enjoy long-tenured customer relationships with seasoned leadership teams who, in many cases, have successfully weathered downturns before. Our capital position provides us flexibility with an estimated CET1 ratio well above our strategic target. We have robust liquidity with a strong loan-to-deposit ratio and have demonstrated our ability to quickly access additional liquidity as needed. We took deliberate steps to minimize our exposure to rate volatility. In fact, if rates decline, we expect to benefit, and in the last down rate cycle, we felt outsized deposit growth relative to our peers. There are still a number of unknowns, and we, along with the market, will continue to monitor developments closely. Regardless of the direction of the economy, we feel confident in our playbook and track record to perform competitively. Moving back to a summary of the first quarter on slide four, we reported earnings of $172 million, or $1.25 per share. Muted loan demand, coupled with declines in national dealer services and commercial real estate, drove a modest reduction in average loan balances in the quarter. Good deposit trends, the impact of BISV cessation, and the structural benefit of our swap and securities portfolios offset the negative impact of lower loans, keeping net interest income flat. These factors also drove a 12 basis point expansion of our net interest margin. Our credit portfolio remained resilient, and despite inflationary pressures continuing to impact customers, our credit metrics remained historically low. Although net charge-offs increased over the very low levels seen post-COVID, they remained at the low end of the normal 20-40 basis point range. Non-interest income grew, but we saw CVA, non-customer related, and seasonal pressures across several line items. Non-interest expenses declined as we prioritized efficiency, but also saw some slowdown in business activity. Capital remained a strength with an estimated CET1 ratio of 12.05%, comfortably above our strategic target, again providing us flexibility to navigate the economic environment. In all, we felt great about the quarter and feel we are positioned to support our customers while delivering results. Now I'd like to turn the call over to Jim for further details. Thanks, Curt, and good morning, everyone. Turning to loans on slide five, average loans declined less than 1% with lower forward plan balances in National Dealer Services and paydowns in commercial real estate, offsetting modest increases across several businesses. Dealers' inventory levels came down from a year-end peak, and at the end of the quarter, they saw an uptick in car sales. Total commitments declined largely due to commercial real estate trends. Although commitment utilization increased slightly, this was partially due to dealer and the nature of forward plan facilities. Excluding dealer, utilization would have been relatively flat quarter to quarter. Average loan yields came down 12 basis points as lower rates and non-accrual interest more than offset the benefit of the swap portfolio and BISV cessation. On slide six, average deposits outperformed guidance in the first quarter. Lower brokered time deposits and seasonal outflows contributed to the $1.4 billion decrease in average balances from the fourth quarter. While seasonality can be challenging to predict and other macroeconomic factors may influence balances, our strong deposit focus and offerings have helped us to mitigate some of the seasonality we've seen thus far. Non-interest-bearing deposits as a percentage of total remained flat at 38%, continuing to reflect a compelling funding mix. Period end deposits decreased $2.3 billion. Adjusting for the timing-related impact from Direct Express disbursements, the period end decline would have been $1.2 billion, concentrated almost entirely in interest-bearing balances. The proactive execution of our pricing strategy drove a 26 basis points decline in deposit pricing in the first quarter. Our deposit portfolio has long been a key strength of our franchise, and we are continuing to make investments in products, processes, and talent to further enhance this competitive funding source. We have already seen results from this strategic focus, including efficient pricing, new products, and deposit acquisition, and we are encouraged by what we see as the potential for future success. Our securities portfolio on slide seven increased slightly as the benefit of lower unrealized losses at quarter end more than offset paydowns and maturities. We expect future repayments and maturities to continue to benefit AOCI over time. Beyond periodic purchases to replace treasury maturities, we are not currently expecting more meaningful securities reinvestments to begin until late this year. Turning to slide eight, net interest income remained stable quarter over quarter at $575 million. Stronger than expected non-interest-bearing deposits and successful deposit pricing strategies helped offset the negative impact of muted loans. We also saw the benefit of a robust fourth quarter securities repositioning. With the structural tailwinds associated with our swap and securities portfolios, as shown on slide nine, we continue to see promising trends for continued net interest income growth. Moving to slide ten, we continue to believe the successful execution of our interest rate strategy allows us to better protect our profitability from rate volatility. If we do see a reduction in rates, as the forward curve predicts, our modeling shows a slight benefit to income. That said, we generally consider ourselves to be asset neutral. By strategically managing our swap and securities portfolios while considering the balance sheet dynamics, we intend to maintain our insulated position over time. Our credit portfolio shown on slide 11 performed as expected. Net charge-offs increased to 21 basis points, but were at the low end of our normal range. Consistent with prior quarters, persistent inflation and elevated rates pressured customer profitability, driving continued but expected normalization in criticized loans, and notably, they remained well below historical levels. Non-performing loans remained well-controlled and below our long-term average. The allowance for credit losses was down slightly due to lower loan balances, stable credit metrics, and a relatively benign economic forecast at quarter end. Given the elevated risks and uncertainty at the time, we increased our qualitative reserves, which resulted in maintaining our 1.44% coverage ratio. With the benefit of our relationship model, we plan to stay close to our customers as they better understand potential supply chain implications on their businesses and formulate their action plans. We feel confident in our highly regarded approach to credit and have a proven track record of navigating cycles over many years. On slide 12, first quarter non-interest income increased $4 million, largely due to the $19 million fourth quarter loss from securities repositioning, which did not repeat in the first quarter. Setting aside that benefit, the largest decline was in the CVA, which reduced $5 million due to rate and commodity price movement. We also saw non-customer and seasonal declines across several other line items. Despite pressures observed in the quarter, we continue to prioritize non-interest income and expect to drive positive momentum in customer-related fees. Expenses on slide 13 decreased $3 million over the prior quarter. Seasonally higher salaries and benefits and an increase in the FDIC special assessment were more than offset by the benefit of lower litigation-related expenses, charitable contributions, and consulting fees. We also incurred lower outside processing expenses correlated with lower business activity in products like carb. While we did not see the level of gains related to real estate that we saw in the fourth quarter, we did recognize a sizable gain on the sale of a leasing asset. Expense discipline remains a key priority as we continue to focus on driving efficiency. As shown on slide 14, we continue to favor a conservative approach to capital and value the flexibility our position provides us. With an estimated CET1 at 12.05%, we are above our strategic target even after returning capital to shareholders through repurchases and dividends in the quarter. Movement in the forward curve reduced unrealized losses in AOCI, contributing to an 82 basis point improvement in our tangible common equity ratio and growing book value. Our outlook for 2025 is on slide 15. Given increased economic uncertainty, we see potential for a wide range of outcomes if market trends differ from our economic assumptions. By way of context, our outlook assumes uncertainty begins to abate, and while we are not assuming a recession, we do assume slower GDP growth in 2025 than in 2024. We project full year 2025 average loans to be down 1%-2%. Although pipelines and activity levels remain strong, we expect customers to await better visibility before seeing a stronger uptick in loan demand. Recognizing that may not be immediate, we think the second quarter average loans will continue to move down slightly relative to the first quarter. From there, we expect to see loan growth resume in the second half of the year. Our deposit forecast remains unchanged as we expect lower brokered CDs to drive full year average deposits down 2%-3% in 2025. We believe the second quarter average deposits will be relatively flat to the first quarter as core deposit growth is offset by a small decline in average brokered time deposits. Although we anticipate continued success in winning interest-bearing balances, we believe our non-interest-bearing deposit mix will remain relatively consistent in the upper 30% range. Based on our current understanding of the transition strategy, we are still not assuming Direct Express deposit attrition within our 2025 outlook. We expect full year 2025 net interest income to increase 5%-7% with the benefit of BISV cessation, maturing and replaced securities and swaps, and a more efficient funding mix, all more than offsetting lower average non-interest-bearing balances and loans year-to-year. We expect the second quarter to be relatively unchanged from the first quarter as the lower benefit of BISV cessation is offset by the impact of day count. You can find details on the BISV cessation in the appendix, and excluding BISV, we expect to see growth in net interest income quarter to quarter throughout 2025. We expect full year 2025 non-interest income to increase approximately 2%, considering the negative pressure we saw in the first quarter, including the credit valuation adjustment and deferred compensation. We expect the second quarter to be stronger than the first and project growth in customer-related fee income through the balance of the year. Full year 2025 non-interest expenses are expected to grow 2%-3% with the objective of managing within this range, subject to the revenue trajectory as we progress through the year. We expect second quarter expenses to tick up slightly from the first quarter as we continue to balance strategic and risk management investments with the drive towards efficiency. Considering our strong credit metrics, proven underwriting approach, and consistent portfolio monitoring, we expect full year net charge-offs to be in the lower end of our normal 20-40 basis point range. Moving to capital, we continue to appreciate the importance of a strong capital position, and we intend to maintain a CET1 ratio well above our 10% strategic target throughout 2025. With an estimated CET1 at over 12%, we feel we have ample capacity in our position to continue repurchases in the second quarter, perhaps even as much as we repurchased in the fourth quarter of 2024. Given the volatility in the market and the movement in the forward curve, we are not committing to a targeted amount today. Instead, we intend to closely monitor market conditions and execute opportunistically with consideration to economic developments throughout the quarter. Stepping back, as we in the market await more clarity, we will continue to stay close to our customers, prioritize responsible loan growth where it makes sense, and focus on our deposit gathering efforts while conservatively managing capital, expenses, and credit. Now I'll turn the call back to Curt. Thank you, Jim. In times of uncertainty, we understand what is important to our customers. They seek stability. They prioritize consistent access to capital and a value-added partner who is patient and understands how to help them overcome obstacles. We have a proven track record of doing just that for over 175 years. With the foundation of conservative capital, credit, and liquidity management, we have demonstrated resiliency. We understand there is uncertainty in the marketplace, and we see this as an opportunity to stay close with our customers. History would tell us that these are the times where Comerica's relationship model and strategy tends to shine. We have a geographically diverse model, tenured colleagues, an experienced leadership team, a conservative approach to underwriting, and a blue-chip customer base, which all together position us well to outperform through cycles. We had a great quarter, and we plan to continue investing in responsible growth for the long term while benefiting from the structural tailwinds embedded in our swap and securities portfolios. With that, I'd be happy—we'd be happy to take your questions. Thank you. The floor is now open for questions. If you would like to ask a question, please press star one on your telephone keypad at this time. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Again, that's star one to register a question at this time. Our first question is coming from Jon Arfstrom of RBC Capital Markets. Please go ahead. Thanks. Good morning. Good morning, Jon. Thank you. Yep. Maybe for you, Peter, I guess. On the loan growth outlook, I think we all understand it. You guys are really a proxy for commercial lending. Can you talk a little bit about what you're hearing right now from your lenders and borrowers, maybe some of the very near-term conversations? Maybe talk a little bit more about the longer-term outlook.It sounds like you're still thinking the pipelines are there, and the growth outlook could get better as the year progresses. Maybe very near-term stuff and then confidence in the longer term. Yeah, Jon. I think I would say near-term, if I had to describe the whole portfolio, I would say that what you're hearing from customers is that they're not putting the brakes on, but they're taking their foot off the accelerator. You're seeing that around the country and around our businesses, maybe different speeds, if you will, to that approach. I think in markets like Michigan, we've probably seen more concern there than we have per se in Texas, just quite candidly, as when you talk about middle market. We've seen a little bit more of a pullback in our equity fund services businesses versus our environmental services business that is still pretty robust. It really kind of depends on the business. It depends on the type of services they do, geographically where they are. I think in the near term, and I think that's sort of where we're going with our outlook for the second quarter, is that there's a lot of folks that are pulling their foot off the accelerator, but they're not necessarily putting the brakes on. All that said, we continue to hear really good long-term outlook, and we do continue to see our pipeline creep up. It's a little bit interesting to see the pipeline go up, but not necessarily feel like we're going to see outstandings in the next quarter per se. Throughout the year, as it goes on, we feel like it's going to, I guess you might say, get better with loan demand. Again, we're not projecting a recession. We do not feel that way. We feel like the economy is going to grow this year, and we feel like we are in the right markets and lines of business to benefit from that growth, even if it is not what we have seen over the last year or two. Okay. Okay. Got it. We talked about this maybe in past quarters. Can you talk a little bit more about commercial real estate and what you are seeing there? It seems like there are still some headwinds, and I am curious if there is any hope for stabilizing that category. Candidly, I think there is some hope for stabilizing it. Part of our outlook actually includes commercial real estate not coming down as much as we thought it would 90 days ago. We still foresee it being a headwind, but I do not think it is maybe blowing as hard as it was 90 days ago. We've seen deal flow pick up in commercial real estate. I was really glad last year we were one of the first banks to kind of get back to doing deals second quarter of last year, and I think that's benefited us. We're seeing some opportunities, and to the extent that our borrowers need us, we're putting out commitments in commercial real estate. I do think as we go into next year, we'll probably continue again to see it level off. We'll see what interest rates do to that business. As of right now, it's a headwind, but maybe not as strong actually as it was 60 days ago. Yeah. Okay. All right. Thank you very much. Thanks, Jon. Thank you. The next question is coming from Scott Siefers of Piper Sandler. Please go ahead. Good morning, Scott. Morning, everybody. Thanks for taking the question. Let's see. Jim, could you maybe walk through sort of the progression on both the fee and the expense guides? I know in the past you've discussed the full year puts and takes on the fee side, but I guess just looking at it, I think you'd need to average much higher quarterly base to get to the updated guide. Maybe sort of how do you do so? By contrast, on the expense side, it looks like the guidance would suggest that the second half expense base will be lower than what you experienced in the first half. Maybe just sort of some color on how the flow works to your thinking. Yes. Good morning, Scott.Looking at non-interest income, we did have some non-customer trends that appeared in the first quarter, probably put $6 million-$7 million of pressure on the overall guidance that we provided back in January. Some of those will probably continue to some extent, maybe not to the same pace that we had in the first quarter, but we do expect a little more pressure from non-interest income. Relative to expenses, I really think that we're going to have to monitor that as the year goes on and see how PPNR progresses. Certainly, there's a piece of that that's in the bag. Certainly, the sale of equipment and the gain we had there will be pocketed and won't be going away. We had some other expenses related to maybe timing, maybe challenging of projects and expenses that we'll have to make decisions on as we move through the year and try to calibrate to how revenue progresses through the year also. We do have a little bit more control, obviously, on the expenses than we do in the non-interest income. We do see non-interest income for the customer categories getting largely back to plan or back to consensus and outlook that we had back in January. We do think we're going to get some bounce back there. We did have a weaker customer quarter in the first quarter. We did have a weaker non-customer quarter. Some of those non-customer trends may continue to a very small degree. We'll let the overall revenue pace inform both our expense control and as we continue to monitor the non-interest income flows. Jim, I might add, Scott, this is obviously an environment which is somewhat difficult to accurately forecast go forward trends. Depending upon how things play out, depending upon if we do or do not see loan demand return and sort of stabilization from the economy, depending on whether or not we have recession, again, we are seeing that probability a little bit lower. We'll really calibrate how we think about expenses going forward. We are very committed to the things that we have in flight, the expansion of many of our businesses, product development, technology, expansion into new markets that we've talked about previously. But the pace upon which we are doing some of those things could be calibrated if we really do see a more elongated disruption to the market, or certainly if we saw a recession. Got it. Perfect. All right. Curt and Jim, thank you very much. Thanks, Scott. Thank you. The next question is coming from Ken Usdin of Autonomous Research. Please go ahead. Good morning, Ken. Thanks. Good morning. Good morning, guys. You're doing a great job reducing deposit costs and continue to show a really fast data on the downside. I'm just wondering how much more room do you have to either remix deposits further, take down brokered CDs within that, and then I'll ask a follow-up. Thanks. All right, Ken. Good morning. It's Jim. Yeah, we have had great success with deposit pricing, a little better than we'd actually expected in the first quarter. As I look at our deposit betas, if I go back to when the Fed started cutting rates in the third quarter of last year, we are running about a 71% beta through the first quarter. That is obviously higher than the 60% or so that we long-term think we will get back to. We were well above that 71%, obviously, in the first quarter. We are having great success. As I mentioned, I think at the January earnings call and certainly at the conference that we attended in March, we do expect to see that slow up a little bit. In fact, we may, given how proactively we moved, actually in some small pockets have to give a little bit back to customers. Having said that, as rates continue to move down, we do expect to still achieve on an incremental go forward basis of probably a 40%-50% beta going forward. We certainly have room to continue to react as rates continue to go down, but we will have probably some pockets of pressure upward. You mentioned brokered deposits. Yes, we do expect to run off really that remaining about $1 billion of brokered deposits by the end of the year. We are paying in the low to mid 5% range on those. That will certainly be a big benefit too as those roll off. We expect to get even a nice beta on the non-brokered deposits, the core deposits too, as rates continue to move down. Overall, a really good story. Probably will not continue at the same pace that we have seen, but certainly can continue to adjust as the FOMC continues to lower rates. That is one that we also have to monitor overall market trends. I have mentioned in the past too, we do plan on being fairly proactive in gathering more interest-bearing deposits. In some cases, we may pay up for those. We are happy to do that if we can garner them. We still make money on those. They are still a preferred funding source versus purchased funds. Overall, I just feel really good about the deposit story, both the volume as well as the success we have had with pay rates thus far. Got it. Great. The second question just relates to deposits as well. You mentioned very clearly that the Direct Express, there are no changes in the 2025 outlook. I believe you had said it really wouldn't be in play until the out years. Can you just give us an update on how you're thinking about that? If deposit growth continues to be strong, do you think about starting to get ahead of some of that mix shifting at some point? Thanks, guys. Yeah, Ken, it's Peter. Yeah, there's no real change to our outlook on what we see with Direct Express. We think that balances really aren't going to be impacted at all in 2025. We haven't provided, obviously, outlook for next year, but we continue to believe that the transition here is quite long. What I would tell you is that as far as running the rest of the company, we're very focused on deposits in all the other businesses that we have, whether that be in small business and what we do in some of our corporate businesses that are deposit gathering. Really even what we do on the consumer side, I think there's a tremendous opportunity there for us to increase our deposit base through those channels. We are looking at that pretty regularly. I'd say that's kind of a constant conversation that we have. At the moment, there's no real updates about what the transition plan for Direct Express. I think our messaging is consistent at the current time. Okay. Thanks very much. Yep. Thanks, Ken. Thank you. The next question is coming from Manan Gosalia of Morgan Stanley. Please go ahead. Good morning, Manon. Hey, good morning. Can you expand on how you're thinking about the trajectory of NII from here and the jumping-off point for 2026? As you noted, the BISB benefits fade, which might be masking some nice growth in core NII. Can you talk about the factors driving that increase as we go through the year? Sure. Good morning, Manon. Yeah. Excluding the BISB impact, which we do have that schedule in the appendix, as we always do, we are expecting steady growth in net interest income, both dollars and a little tick up each quarter in NIM percentage also, most likely. A number of drivers there. We are expecting deposits to continue to grow as we move through the rest of 2025. Deposits will certainly be a key contributor. Non-interest bearing could be just a very small drag in the second quarter because we were higher than we expected in the first quarter. In the second half of the year, we do see the potential for some small increases in non-interest bearing. Most of those deposit increases will be on the interest bearing side, all contributing to increasing net interest income. Of course, the loan growth that we expect to happen in the second half of the year will be a key contributor also. If you look at our maturity schedule for swaps and securities, we do expect to get a few million dollars, ranges anywhere from $2 million-$6 million, if you do the math each quarter, benefit on maturing swaps and securities. That will be a contributor too. That is obviously more of a known factor. I do not expect that to bounce around very much. A lot of tailwinds are contributing to kind of consistent small to moderate increases each quarter. Overall, we just feel good about the overall trajectory of net interest income. That is helpful. Appreciate it. Maybe just to switch over to credit, are there any early signs of stress you are seeing among your client base at all, whether it is in CNI or CRE, small business, anywhere that you are particularly focused on? Manon, this is Melinda. I would say overall, the credit environment remains strong and stable. You can see that by the metrics that are shown on our slide. I mean, criticized balances were up ever so slightly. That was really driven by the commercial real estate line of business. As Peter mentioned, the payoff pace, we think it's going to be a little bit slower than what we had originally anticipated coming into the year. That's really driven by the fact that rates have remained somewhat elevated. Obviously, there's a lot of uncertainty. Some of the leasing times on some of the construction projects are elongated. That's where we're seeing a little bit of migration into the non-pass. The absolute levels of non-pass and commercial real estate remain very manageable. We're still seeing resolution every single quarter on non-pass credit. We have some migrating in, some migrating out. As it relates to CNI, I would call this quarter very stable. If you bifurcated charge-offs this quarter, they were very stable from a CNI perspective. We did see two charge-offs in commercial real estate, which is really what drove the increase between the fourth quarter and the first quarter in terms of the basis point. Not really seeing anything yet. The reality is there's an enormous amount of uncertainty right now and risk in the economy. Supply chain disruption is bound to happen. We do not know exactly where that's going to land and what that's going to look like. We have very good visibility into our customers. We have excellent portfolio management, proven track record of managing through economic cycles. I am really confident that the portfolio as a whole is going to perform. We are just going to have to wait and see some of this uncertainty to sort of abate and folks to have a little bit more clarity on how they're going to manage supply chains going forward. That's good color. Thank you so much. You're welcome. Thank you. The next question is coming from Bernard von Gizycki of Deutsche Bank. Please go ahead. Morning, Bernard. Hey, guys. Good morning. Just on the first question, just on share repurchases, I know you did the $50 million during the quarter. And you noted it's going to depend on market conditions and economic developments. Any thoughts on how you're going to think about 2Q or any expectations you could share? Yes, good morning, Bernard. Yeah, as I mentioned, we do see the potential, and we certainly have the capacity to do additional share repurchases. We had done $100 million in the fourth quarter. We dialed that down to $50 million in the first quarter. Then I mentioned I see the potential to do up to maybe the same $100 million that we did in the fourth quarter. Now, we are keeping our eye on a number of factors there. We've seen the ten-year really ping-pong around the last few weeks and the last few months. Where long-term rates go and what the curve does to AOCI is something we continue to keep our eye on. Credit, while very stable and performing very well, as Melinda was saying, in this environment, it's prudent to keep an eye on that also. Loan demand, of course, is a factor also. We want to make sure that we're there should this uncertainty abate. We see the potential for loan demand to maybe surprise to the higher side if, again, the uncertainty abates. We are keeping our eye on a number of factors. Having said that, we've recognized that 12.05% is a very healthy CET1 ratio. I think you can expect this to likely be active on the share repurchase side. We are going to keep our eye on this week to week as we move through the second quarter, which is why we're not committing to a very specific amount with certainty at this point in time. Okay. And then just one modeling question, Jim. I know you mentioned there was a slight benefit from the 4Q securities repositioning and net interest income. I might have missed it, but could you just size that benefit in the quarter and then just what the remaining benefit could be for the rest of the year? Yeah. If you look at our net interest income slide, you see that securities income overall was up $9 million quarter to quarter. I would say just a little over half of that was due to the securities repositioning. The rest of it due to other factors such as just the normal maturities on a quarter to quarter basis. We have recognized, I think, most of that benefit going forward. You see it in the run rate right now. We will certainly have some additional securities just naturally mature as we move through the rest of the year here. Okay. Great. Thanks for taking my question. Thank you. The next question is coming from John Pancari of Evercore ISI. Please go ahead. Good morning, John. Good morning. On the expense front, you had a pretty solid operating expense quarter. Given this uncertain revenue backdrop, can you maybe discuss the degree of expense flexibility you have if revenue pressure persists longer than you had expected? Can you maybe give your thoughts on your ability to achieve positive operating leverage in 2025 and the degree of which you think could be reasonable? Thanks. Yeah. Good morning, John. As we indicated, I see the range of expense growth for us for 2025 to be in that 2%-3% range that we mentioned. We are going to keep our eye on revenue trends and try to calibrate accordingly. We do have a certain degree of flexibility there. I think that in this environment, with all the uncertainty, where it's very hard to predict where the year is going to go, I think we do need to be prepared to continue to take expense reduction steps if the revenue does not come. I will say at the same time, we are pretty committed to a lot of the investments we're making also. We're certainly not going to turn down or turn off key investments that we're in the middle of making right now on the product side, the risk management side, getting ready for category four. As Curt and I said earlier, we just plan on trying to calibrate as best we can to the overall PP&R stream that we see. Thanks, Jim. Separately, on the M&A front, I know you prided yourselves on your independence. That said, there's clearly a need for scale that's developing and intensifying in the regional bank space. The regulatory backdrop might actually be improving to M&A. Is there anything that you look at that would lead to Comerica considering either being a buyer and pursuing a transaction on the whole bank side more actively than you may have in the past, or conversely, consider partnering with a larger acquirer? Thanks. I would say that we continue to be focused on our independence. We know we have to earn that right every day and certainly a long history as an institution. We've been a very patient acquirer. Right now, I think the M&A environment is a little bit murky from a go-forward standpoint. We would certainly consider opportunities as they came along that made sense for us, that were aligned with our strategic direction or focus as an organization, would be complementary to our businesses, our geography, etc. That said, the number of institutions that sort of fit that category is fairly small. I think what we can focus on, what we can control is what we've historically done, which is organic growth. We've done a good job of that, including expansion into some new markets like the Southeast, but also expansion into our existing markets. As you know, we operate in some of the largest MSAs in the U.S. and just great opportunities for us in markets like Dallas and LA and Houston and other markets that we operate in. Maybe from the broader perspective, there's always noise about M&A in the industry. I've been doing this for over 40 years, and it ebbs and flows. I don't think, personally, that you're going to see a lot of M&A in the next 12-18 months in the industry. I go back to what I said earlier. We are focused really on our independence and believe we've got the right model to be successful going forward with the geographic balance we have, with the product line balance we have, with our commercial orientation, with the strategic investments that we've made, and then all the financial underpinnings: a strong capital position, strong liquidity, and a bank that historically has managed well through credit cycles, especially if we end up facing a credit cycle in the next 12, 18, 24 months. Got it. Thank you so much. Appreciate it. Thank you. The next question is coming from Chris McGratty of KBW. Please go ahead. Good morning, Chris. Oh, great. Good morning. On the balance sheet, I think in prepared remarks, you talked about waiting for the back half of the year to really step up the reinvestment of the securities portfolio. I guess maybe a little bit inside of that view, what's driving that view, and then what could make you change your view of either stepping up the pace or restructuring the securities book like you did a little bit in the fourth quarter? Yeah. Good morning, Chris. In terms of how we size our balance sheet and securities positioning, we do keep an eye on our liquidity metrics and just the overall composition of the balance sheet. We do think we're a little high right now relative to the overall size of the securities portfolio, given where the balance sheet is. We are obviously in the very high teens right now. Historically, we've been kind of in that mid to upper teen range. I would actually expect us going forward to be, again, more in the upper teens, not just quite as high as we are today. We do want to see it come down just a little bit more before we start reinvesting in the MVS. It is probably going to be in the fourth quarter of this year. That is always dependent upon just the overall size of the balance sheet, liquidity needs, characteristics of our deposits. We have a pretty robust way of looking at that. In terms of securities repositioning, that is not something that we are a big fan of in terms of doing it in a big way. We did do a little hygiene in the fourth quarter. We do think a better use of capital is to put it towards share repurchase, both in the second quarter and then hopefully throughout the remainder of the year also. We think that actually returns a higher return to shareholders more so than securities repositioning, where, again, it is just time geography. You still end up with the same TBV at the end of the day, whereas we think we can increase and improve tangible book value over time with share repurchase. That is where our focus is going to be. It is going to be more share repurchase and loan growth and supporting that loan growth as opposed to doing any kind of securities repositioning. Having said that, we may choose to do a little bit here and there. Again, it is just normal hygiene and smoothing out maturity schedules and so on. It is not anything that we expect to do in a real big way. Okay. Great. Thank you. My follow-up on your slides where you highlight the higher risk portfolios and those portfolios have not changed. Are there additional portfolios, and maybe this was touched upon earlier, that you're looking at more closely given the tariff situation, given your C&I book? Maybe within C&I, where could we be surprised if we are going to be surprised? Yeah, Chris. Obviously, our leverage portfolio in automotive, which are considered higher risk, we have great visibility and really good monitoring and tenured teams monitoring those portfolios. The other ones that are on high alert at this point would be anything related to manufacturing whose inputs are steel and aluminum, wholesale and retail trade, and consumer discretionary. So we're watching all of those. Great. Thank you. Welcome. Thank you. The next question is coming from Anthony Elian of JPMorgan. Please go ahead. Good morning, Tony. Hi, everyone. On your outlook slide and for fee income specifically, does it assume an uptick in capital markets income, ex-CVA? More broadly, what are you seeing in that business now? Yeah, Tony, it's Peter. In our capital markets business, it does assume a little bit of an uptick throughout the year. If you think about what our business is made up of, it's our syndications business, what we do in some of our risk products for our customers, so interest rate, FX, and energy. What we also do, we've started an M&A business that is pretty much in its second year of starting to generate positive fee income. We are very excited about what's happening there. We do some work in our capital markets where we participate in bonds and securities offerings, which actually had a really good first quarter. When we add it all together, we feel like 2025 is going to be an uptick year for our capital markets business. I think between activity levels, what we see out in the market opportunity-wise, that's something that we feel like is going to be a growth business through the year. Thank you. My follow-up. In the national dealer portfolio, you saw a decline in Q1 of about a couple hundred million dollars. What are you hearing from that segment on potential supply chain impacts and the impacts from tariffs? Thank you. Yeah, Tony, it's Peter again. I think what we're hearing is a little bit of to be determined. I think that what our customers would say is they've had a great practice run at supply chain with COVID. That was a period where the dealers actually performed really, really well. It will be interesting to see how many cars get sold this year. I mean, I think the outlook is still over 15 million cars to be sold. It will be interesting to see what that ultimately looks like, how much do prices get pushed on to consumers, what sort of car manufacturing looks like through the year. As far as our dealer customers go, I think that they are very prepared to weather this, particularly, again, with what they have been through the last few years. Right now, there is still a little bit of wait and see. As I was describing earlier, I think a lot of our dealer customers are probably, they have definitely taken their foot off of the accelerator and are just kind of cruising to find out how things are going to play out here. Thank you. Yep. Thank you. The next question is coming from Brian Foran of Truist. Please go ahead. Good morning, Brian. Good morning. I wanted to ask one follow-up on your M&A and then one on loans. On the M&A, I mean, I think we can all appreciate things are uncertain and murky, I think was the word you used. Just on this comment that you do not think there will be a lot of deal activity in the industry, I think you said for 12-18 months, is the murkiness regulatory rules, the economy, interest rates, and the marks, all of the above, maybe just kind of what is underneath the hood that you think is going to hold up deals for the next year or so? First of all, this is just my opinion. No one knows for sure. I think it is all of the above that you just mentioned. Okay. On loan growth, what do you think the leading indicators are most likely to be over the next three to four months on whether this is a pause or kind of builds on itself? Is it commitments, utilization, certain sub-portfolios you think will move first? Just any thoughts like if we are sitting here three months from now, what will be the two or three metrics that will either be showing activity coming back or the pause building on itself? Gosh, Brian. I think it probably has a little bit of even the factors that we have talked about throughout the call. I do think what interest rates do and what the outlook there is for the rest of 2025 will be a factor. I think if we continue to stay out of a recession, which we project that we will, I think our outlook, we feel really, really good about it. To the extent that macroeconomy continues to move in the direction it's moving, I think that's going to be a real positive for us across our geographies. I think, too, when I look at all of our businesses, I think probably, as Melinda discussed a little bit earlier, we're watching Michigan middle market, the auto situation there more than any. That's probably where we've seen, at least in our middle market businesses, the slowdown has occurred mostly in Michigan versus what we've seen in the Southeast, Texas, and California. I think if we are sitting here next quarter and a number of the factors that we've got going on in the economy continue to level out, then I think that the outlook we have, we feel really good about. As Jim said, there may be some upside to that if things continue. If things were to go the other direction and you started to see the economy pull back stronger, you started to see unemployment tick up, you started to see interest rates going up instead of down, I think all of those are going to be a real headwind to loan demand in the second half of the year and really into 2026. Those are probably the big variables that we're watching. I appreciate that. Thank you. Thanks, Brian. Thank you. The next question is coming from Ben Gerlinger of Citi. Please go ahead. Morning, Ben. Good morning. When you think about just kind of commentary, I know you kind of gave a geographic representation of Michigan versus Texas. When you think about just growth itself, some of your competition has grown a little bit. I'm sure some of that is just market share gain. When you look at pricing or covenants, are you seeing anything in the market that would kind of lead an indicator on kind of their growth? Not to say name names or anything, just kind of trying to think of the competitive market itself. Are people trying to lead with rate in order to kind of? Ben, it's a little hard to hear you. I can hear you. Did you hear the question? Yeah, I can hear you. Yeah. Ben, we're having a little trouble hearing you.I think that you're asking about the competitive environment and whether or not rates or credit are impacting the competition. I think that's your question. At least that's what I'm going to answer based on what we thought we heard you say. I would say that it is extremely competitive right now. I think that across all of our geographies, we compete in our businesses. We compete with lots of different institutions. I continue to feel like we want to stay really, really focused on being responsible on credit. I will tell you, I think pricing in the industry has probably gotten a little more aggressive than it was 90 days ago. Again, I think each customer and each relationship warrants different decisions that you have to make at any one time. I feel very confident in our ability to win on pricing. I think that the value we provide to our customers ends up helping us win the business. I also do think that the banks in general continue to be pretty responsible, quite candidly, across the board in a lot of these businesses when it comes to credit. Pricing is probably a bigger factor today than, per se, credit statistics that you see being put out. That is what we think you asked, Ben. Thank you, Ben. Thank you. We will move on to the next question. Our next question is coming from Terry McEvoy of Stephens. Please go ahead. Morning, Terry. Hi, good morning. Just one question left on my list. If I look at average loan growth in the other markets, it increased from $8.5 billion- $8.9 billion. Could you maybe update us on the progress in the Southeast and the Mountain West region where you've been making investments? Maybe I'm assuming that growth was in those two regions. Yeah. When we say other markets, it could actually also include some of our businesses that we have that we have offices in New York. We have offices in Boston, up in Washington, so sort of around the country. I'll answer your question in general about the Southeast. It's a great story for us. We expect loan growth this year down there to be just fantastic, north of 50%. We continue to add really, really good relationships. We're continuing to add bankers in the market all the way from Florida to North Carolina. That is very exciting for us. When we talk about the Mountain West, we're also very excited there. We've hired some new leadership to lead that whole region. We've hired new leadership in our Phoenix market. We are trying to add bankers in both Denver and Phoenix. We are very excited about what those opportunities are as well. When we say other markets, too, it could be a lot of our we are a national bank, even though we get described often as a regional bank. We play around the entire country. We have customers in many, many states and cities. Those could be some of the other markets that are included there as well. Great. Thanks for that. Yep. Thanks, Terry. Thank you. The next question is coming from Nick Holowko of UBS. Please go ahead. Morning, Nick. Good morning. Thanks for taking my question. Maybe just first one on expenses. I know last quarter and the past, you've talked about working towards getting to that high 50s efficiency ratio over time in terms of reaching your ROTCE targets over the next couple of years. Just looking at the expense outlook and pairing that with the revenues, it seems like it's still pointing to an upper 60% efficiency ratio type range in the second half. How should we think about the timeline of improving that efficiency ratio and when you think you can get back to that high 50s type range? Yeah. Good morning, Nick. It's Jim. Yeah, we are expecting ourselves to move back into the 50% range at some point. That won't be real near term. I will say, with all this uncertainty, I think it's hard to make any kind of commitment right now until things become a little more clear in terms of where the economy is headed. We do think that the key to achieving that ratio and moving into the 50s, we think first and foremost, it's going to be driven by revenue. As you kind of model this out, it's really hard to expense save yourself into the 50s. I mean, you can do that for any one year or two and make a little bit of progress. If you start compounding that backwards, you really start starving the bank of the investments it needs to make. You get diminishing returns at some point. Conversely, we like what we have going in terms of revenue initiatives. We talked about some of those at the big investor conference in March. We do think that revenue has the potential to compound itself in an upward fashion over time. We are very much focused on a number of revenue initiatives, which, again, we laid out at that investor conference. We will be talking more about some of those revenue initiatives as time goes on. Having said that, expenses are part of the equation. We do need to be diligent in terms of how we manage expenses. We want to make sure that where we are spending money, it is for investment and revenue-oriented activities and making sure that we are managing those as tight as we can, especially the discretionary expenses. We have our eyes on both sides of the equation. Really, revenue over the next two, three, four years, that's really what we think is going to start moving our efficiency ratio in the right direction. Understood. Thank you. Maybe just one last one on the loan growth outlook. Obviously, the backdrop kind of is what it is. You highlighted the environmental services as being relatively more robust. Could you just remind us what sort of drives the strength in that business and how long you think it can continue to sort of outperform here in this softer growth backdrop? Thank you. Yeah, Nick. In the appendix on slide 37 is a breakout of that business. I think we really talk about two verticals there. Our waste management business, which continues to just grow with the economy, with population. I mean, it's a fantastic growth business for us. We have also started our renewables energy business that we show on the environmental services slide, which continues to be a real growth opportunity for us as well. I think when you look at that on an outlook quarter-by-quarter basis, I think we are going to continue to see just nice, steady growth in really both of those verticals. We are really excited about continuing to add people and customers in that space. Got it. Thank you very much. Thanks, Nick. Thank you. The next question is coming from Bill Carcache of Wolfe Research. Please go ahead. Morning, Bill. Good morning. Good morning. Just a quick follow-up on your comments around non-interest-bearing deposit growth potentially accelerating in the second half of the year. I believe you said you would be willing to pay up for those. Would that be through earnings credits? If you could just unpack that a little bit, it would be helpful. Yeah, Bill, let me clarify that. When I talked about being willing to pay up for deposits, that was interest-bearing deposits. We do expect to see a small tick up in non-interest-bearing as we move through the latter part of the year. The greater proportion of our deposit growth that we're projecting will be interest-bearing deposits. Now, broker deposits will continue to come down. We still think that non-interest-bearing percentage will stay in the upper 30s. In terms of our core deposits, I believe we'll see more growth on the interest-bearing side as we have a number of initiatives in place. In many cases, we'll actually garner those deposits at pay rates similar to what we have today. In some cases, we may be willing to pay up for those deposits. Again, happy to do so to the extent we can be successful in gathering deposits. Hopefully that helps clarify it. Yeah. And Bill, just to emphasize there, that's not a strategy of ours to pay up for interest-bearing deposits. It's more just what we think the market might give us as the year sort of plays out and things sort of settle down. Now, if we sort of go through a recession, etc., that may be a different story as we typically have seen deposits grow for us, especially in the non-interest-bearing category. Understood. That's very helpful. Thank you for the clarification. If I may, since we're on the topic, could you elaborate a little bit on how you're thinking about the longer-term trajectory of your sort of non-interest-bearing deposit growth sort of under different macro scenarios? Maybe it's been an important part of the Comerica story historically. And as we sort of look to sort of a more normalized environment in the years ahead, how do you envision that part of the business? Would be helpful. Yeah, Bill. Non-interest-bearing deposits are a very key part of our business model, as you point out. It's probably the biggest X factor, especially in this rate environment for 2025 that we have. We are watching those very closely. We do think in this higher rate environment, customers are a little more sensitized to their mix of deposits. That has put some pressure on non-interest-bearing deposits. We do think that if and when rates start to lower a little bit, we'll actually see that as a positive tailwind to growing non-interest-bearing deposits as customers become a little less sensitive to how they store their mix of deposits. We also expect to the extent we have some inflation, which it looks like we may continue to have some inflationary environment with us, that does result ultimately in overall working capital levels needing to be larger for our customers. We would expect as the nominal economy grows that we would see non-interest-bearing deposits grow proportionately to that. Of course, we're doing a lot on the product side with our Treasury Management Services, which are key to garnering additional non-interest-bearing deposits. Very much a focus of ours from a product development standpoint. We also think just economic trends will also be beneficial to non-interest-bearing deposits. It has been a little bit of a tough go on non-interest-bearing deposits the last couple of years. We do see some tailwinds going forward in the future. That's very helpful. Thank you for taking my questions. Thank you, Bill. Thank you. At this time, I'd like to turn the floor back over to Curt Farmer, President, Chairman, and Chief Executive Officer, for closing comments. As always, thank you for your ongoing interest in Comerica and for joining our call today. I hope you have a nice day. Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.

Speaker 5: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kelly Gage, Director of Investor Relations. Thank you. Please go ahead. As a reminder, this conference is being recorded. as a reminder this conference is being recorded It is now my pleasure to introduce your host, Kelly Gage, Director of Investor Relations. it is now my pleasure to introduce your host kelly gage director of investor relations Thank you. thank you Please go ahead. please go ahead

Speaker 10: Thanks, Donna. Good morning and welcome to Comerica's first quarter 2025 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 Chausse, and Chief Banking Officer, Peter Sefzik. 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 earnings presentation on slide two. Thanks, Donna. thanks donna Good morning and welcome to Comerica's first quarter 2025 earnings conference call. good morning and welcome to comerica's first quarter 2025 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 Chausse, and Chief Banking Officer, Peter Sefzik. participating on this call will be our president chairman and ceo curt farmer chief financial officer jim herzog chief credit officer melinda chausse and chief banking officer peter sefzik 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. 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 earnings presentation on slide two. please refer to the safe harbor statement in today's earnings presentation on slide two Also, the presentation and this conference call will reference non-GAAP measures. In that regard, I direct you to the reconciliation of these measures in the earnings materials that are available on our website, comerica.com. Now I'll turn the call over to Curt, who will begin on slide three. 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 reconciliation of these measures in the earnings materials that are available on our website, comerica.com. in that regard i direct you to the reconciliation of these measures in the earnings materials that are available on our website comerica.com Now I'll turn the call over to Curt, who will begin on slide three. now i'll turn the call over to curt who will begin on slide three

Speaker 15: Good morning, everyone, and thank you for joining our call. This was a strong quarter for Comerica. We exceeded expectations across a number of categories, resulting in higher profitability over the prior quarter. Although we saw seasonal deposit outflows, non-interest-bearing balances performed well and contributed to net interest income outperforming guidance. Movement in the rate curve benefited our tangible common equity ratio and drove an increase in our book value at quarter end. Conservative capital management remained a priority, and we grew our estimated CET1 ratio while returning $143 million to common shareholders through share repurchases and dividends. Beyond our financial results, customer sentiment took a step back as the market saw an increase in macroeconomic uncertainty. As our customers await further clarity, we plan to continue confidently executing on our relationship model, striving to provide customers with the consistency and support they need to adapt and succeed. Good morning, everyone, and thank you for joining our call. good morning everyone and thank you for joining our call This was a strong quarter for Comerica. this was a strong quarter for comerica We exceeded expectations across a number of categories, resulting in higher profitability over the prior quarter. we exceeded expectations across a number of categories resulting in higher profitability over the prior quarter Although we saw seasonal deposit outflows, non-interest-bearing balances performed well and contributed to net interest income outperforming guidance. although we saw seasonal deposit outflows non-interest-bearing balances performed well and contributed to net interest income outperforming guidance Movement in the rate curve benefited our tangible common equity ratio and drove an increase in our book value at quarter end. movement in the rate curve benefited our tangible common equity ratio and drove an increase in our book value at quarter end Conservative capital management remained a priority, and we grew our estimated CET1 ratio while returning $143 million to common shareholders through share repurchases and dividends. conservative capital management remained a priority and we grew our estimated cet1 ratio while returning $143 million to common shareholders through share repurchases and dividends Beyond our financial results, customer sentiment took a step back as the market saw an increase in macroeconomic uncertainty. beyond our financial results customer sentiment took a step back as the market saw an increase in macroeconomic uncertainty As our customers await further clarity, we plan to continue confidently executing on our relationship model, striving to provide customers with the consistency and support they need to adapt and succeed. as our customers await further clarity we plan to continue confidently executing on our relationship model striving to provide customers with the consistency and support they need to adapt and succeed Comerica's legacy is built on successfully managing through cycles, and we feel our unique model positions us well to navigate a dynamic environment. Credit is a competitive differentiator with net charge-offs that have historically outperformed peers. We are regarded for our underwriting discipline. It's in our DNA, and it's a crucial part of our culture. We benefit from a diversified, commercially oriented business mix and have limited consumer exposure. We enjoy long-tenured customer relationships with seasoned leadership teams who, in many cases, have successfully weathered downturns before. Our capital position provides us flexibility with an estimated CET1 ratio well above our strategic target. We have robust liquidity with a strong loan-to-deposit ratio and have demonstrated our ability to quickly access additional liquidity as needed. We took deliberate steps to minimize our exposure to rate volatility. Comerica's legacy is built on successfully managing through cycles, and we feel our unique model positions us well to navigate a dynamic environment. comerica's legacy is built on successfully managing through cycles and we feel our unique model positions us well to navigate a dynamic environment Credit is a competitive differentiator with net charge-offs that have historically outperformed peers. credit is a competitive differentiator with net charge-offs that have historically outperformed peers We are regarded for our underwriting discipline. we are regarded for our underwriting discipline It's in our DNA, and it's a crucial part of our culture. it's in our dna and it's a crucial part of our culture We benefit from a diversified, commercially oriented business mix and have limited consumer exposure. we benefit from a diversified commercially oriented business mix and have limited consumer exposure We enjoy long-tenured customer relationships with seasoned leadership teams who, in many cases, have successfully weathered downturns before. we enjoy long-tenured customer relationships with seasoned leadership teams who in many cases have successfully weathered downturns before Our capital position provides us flexibility with an estimated CET1 ratio well above our strategic target. our capital position provides us flexibility with an estimated cet1 ratio well above our strategic target We have robust liquidity with a strong loan-to-deposit ratio and have demonstrated our ability to quickly access additional liquidity as needed. we have robust liquidity with a strong loan-to-deposit ratio and have demonstrated our ability to quickly access additional liquidity as needed We took deliberate steps to minimize our exposure to rate volatility. we took deliberate steps to minimize our exposure to rate volatility In fact, if rates decline, we expect to benefit, and in the last down rate cycle, we felt outsized deposit growth relative to our peers. There are still a number of unknowns, and we, along with the market, will continue to monitor developments closely. Regardless of the direction of the economy, we feel confident in our playbook and track record to perform competitively. Moving back to a summary of the first quarter on slide four, we reported earnings of $172 million, or $1.25 per share. Muted loan demand, coupled with declines in national dealer services and commercial real estate, drove a modest reduction in average loan balances in the quarter. Good deposit trends, the impact of BISV cessation, and the structural benefit of our swap and securities portfolios offset the negative impact of lower loans, keeping net interest income flat. In fact, if rates decline, we expect to benefit, and in the last down rate cycle, we felt outsized deposit growth relative to our peers. in fact if rates decline we expect to benefit and in the last down rate cycle we felt outsized deposit growth relative to our peers There are still a number of unknowns, and we, along with the market, will continue to monitor developments closely. there are still a number of unknowns and we along with the market will continue to monitor developments closely Regardless of the direction of the economy, we feel confident in our playbook and track record to perform competitively. regardless of the direction of the economy we feel confident in our playbook and track record to perform competitively Moving back to a summary of the first quarter on slide four, we reported earnings of $172 million, or $1.25 per share. moving back to a summary of the first quarter on slide four we reported earnings of $172 million or $1.25 per share Muted loan demand, coupled with declines in national dealer services and commercial real estate, drove a modest reduction in average loan balances in the quarter. muted loan demand coupled with declines in national dealer services and commercial real estate drove a modest reduction in average loan balances in the quarter Good deposit trends, the impact of BISV cessation, and the structural benefit of our swap and securities portfolios offset the negative impact of lower loans, keeping net interest income flat. good deposit trends the impact of bisv cessation and the structural benefit of our swap and securities portfolios offset the negative impact of lower loans keeping net interest income flat These factors also drove a 12 basis point expansion of our net interest margin. Our credit portfolio remained resilient, and despite inflationary pressures continuing to impact customers, our credit metrics remained historically low. Although net charge-offs increased over the very low levels seen post-COVID, they remained at the low end of the normal 20-40 basis point range. Non-interest income grew, but we saw CVA, non-customer related, and seasonal pressures across several line items. Non-interest expenses declined as we prioritized efficiency, but also saw some slowdown in business activity. Capital remained a strength with an estimated CET1 ratio of 12.05%, comfortably above our strategic target, again providing us flexibility to navigate the economic environment. In all, we felt great about the quarter and feel we are positioned to support our customers while delivering results. Now I'd like to turn the call over to Jim for further details. These factors also drove a 12 basis point expansion of our net interest margin. these factors also drove a 12 basis point expansion of our net interest margin Our credit portfolio remained resilient, and despite inflationary pressures continuing to impact customers, our credit metrics remained historically low. our credit portfolio remained resilient and despite inflationary pressures continuing to impact customers our credit metrics remained historically low Although net charge-offs increased over the very low levels seen post-COVID, they remained at the low end of the normal 20-40 basis point range. although net charge-offs increased over the very low levels seen post-covid they remained at the low end of the normal 20-40 basis point range Non-interest income grew, but we saw CVA, non-customer related, and seasonal pressures across several line items. non-interest income grew but we saw cva non-customer related and seasonal pressures across several line items Non-interest expenses declined as we prioritized efficiency, but also saw some slowdown in business activity. non-interest expenses declined as we prioritized efficiency but also saw some slowdown in business activity Capital remained a strength with an estimated CET1 ratio of 12.05%, comfortably above our strategic target, again providing us flexibility to navigate the economic environment. capital remained a strength with an estimated cet1 ratio of 12.05% comfortably above our strategic target again providing us flexibility to navigate the economic environment In all, we felt great about the quarter and feel we are positioned to support our customers while delivering results. in all we felt great about the quarter and feel we are positioned to support our customers while delivering results Now I'd like to turn the call over to Jim for further details. now i'd like to turn the call over to jim for further details

Speaker 13: Thanks, Curt, and good morning, everyone. Turning to loans on slide five, average loans declined less than 1% with lower forward plan balances in National Dealer Services and paydowns in commercial real estate, offsetting modest increases across several businesses. Dealers' inventory levels came down from a year-end peak, and at the end of the quarter, they saw an uptick in car sales. Total commitments declined largely due to commercial real estate trends. Although commitment utilization increased slightly, this was partially due to dealer and the nature of forward plan facilities. Excluding dealer, utilization would have been relatively flat quarter to quarter. Average loan yields came down 12 basis points as lower rates and non-accrual interest more than offset the benefit of the swap portfolio and BISV cessation. On slide six, average deposits outperformed guidance in the first quarter. Thanks, Curt, and good morning, everyone. thanks curt and good morning everyone Turning to loans on slide five, average loans declined less than 1% with lower forward plan balances in National Dealer Services and paydowns in commercial real estate, offsetting modest increases across several businesses. turning to loans on slide five average loans declined less than 1% with lower forward plan balances in national dealer services and paydowns in commercial real estate offsetting modest increases across several businesses Dealers' inventory levels came down from a year-end peak, and at the end of the quarter, they saw an uptick in car sales. dealers' inventory levels came down from a year-end peak and at the end of the quarter they saw an uptick in car sales Total commitments declined largely due to commercial real estate trends. total commitments declined largely due to commercial real estate trends Although commitment utilization increased slightly, this was partially due to dealer and the nature of forward plan facilities. although commitment utilization increased slightly this was partially due to dealer and the nature of forward plan facilities Excluding dealer, utilization would have been relatively flat quarter to quarter. excluding dealer utilization would have been relatively flat quarter to quarter Average loan yields came down 12 basis points as lower rates and non-accrual interest more than offset the benefit of the swap portfolio and BISV cessation. average loan yields came down 12 basis points as lower rates and non-accrual interest more than offset the benefit of the swap portfolio and bisv cessation On slide six, average deposits outperformed guidance in the first quarter. on slide six average deposits outperformed guidance in the first quarter Lower brokered time deposits and seasonal outflows contributed to the $1.4 billion decrease in average balances from the fourth quarter. While seasonality can be challenging to predict and other macroeconomic factors may influence balances, our strong deposit focus and offerings have helped us to mitigate some of the seasonality we've seen thus far. Non-interest-bearing deposits as a percentage of total remained flat at 38%, continuing to reflect a compelling funding mix. Period end deposits decreased $2.3 billion. Adjusting for the timing-related impact from Direct Express disbursements, the period end decline would have been $1.2 billion, concentrated almost entirely in interest-bearing balances. The proactive execution of our pricing strategy drove a 26 basis points decline in deposit pricing in the first quarter. Lower brokered time deposits and seasonal outflows contributed to the $1.4 billion decrease in average balances from the fourth quarter. lower brokered time deposits and seasonal outflows contributed to the $1.4 billion decrease in average balances from the fourth quarter While seasonality can be challenging to predict and other macroeconomic factors may influence balances, our strong deposit focus and offerings have helped us to mitigate some of the seasonality we've seen thus far. while seasonality can be challenging to predict and other macroeconomic factors may influence balances our strong deposit focus and offerings have helped us to mitigate some of the seasonality we've seen thus far Non-interest-bearing deposits as a percentage of total remained flat at 38%, continuing to reflect a compelling funding mix. non-interest-bearing deposits as a percentage of total remained flat at 38% continuing to reflect a compelling funding mix Period end deposits decreased $2.3 billion. period end deposits decreased $2.3 billion Adjusting for the timing-related impact from Direct Express disbursements, the period end decline would have been $1.2 billion, concentrated almost entirely in interest-bearing balances. adjusting for the timing-related impact from direct express disbursements the period end decline would have been $1.2 billion concentrated almost entirely in interest-bearing balances The proactive execution of our pricing strategy drove a 26 basis points decline in deposit pricing in the first quarter. the proactive execution of our pricing strategy drove a 26 basis points decline in deposit pricing in the first quarter Our deposit portfolio has long been a key strength of our franchise, and we are continuing to make investments in products, processes, and talent to further enhance this competitive funding source. We have already seen results from this strategic focus, including efficient pricing, new products, and deposit acquisition, and we are encouraged by what we see as the potential for future success. Our securities portfolio on slide seven increased slightly as the benefit of lower unrealized losses at quarter end more than offset paydowns and maturities. We expect future repayments and maturities to continue to benefit AOCI over time. Beyond periodic purchases to replace treasury maturities, we are not currently expecting more meaningful securities reinvestments to begin until late this year. Turning to slide eight, net interest income remained stable quarter over quarter at $575 million. Our deposit portfolio has long been a key strength of our franchise, and we are continuing to make investments in products, processes, and talent 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 investments in products processes and talent to further enhance this competitive funding source We have already seen results from this strategic focus, including efficient pricing, new products, and deposit acquisition, and we are encouraged by what we see as the potential for future success. we have already seen results from this strategic focus including efficient pricing new products and deposit acquisition and we are encouraged by what we see as the potential for future success Our securities portfolio on slide seven increased slightly as the benefit of lower unrealized losses at quarter end more than offset paydowns and maturities. our securities portfolio on slide seven increased slightly as the benefit of lower unrealized losses at quarter end more than offset paydowns and maturities We expect future repayments and maturities to continue to benefit AOCI over time. we expect future repayments and maturities to continue to benefit aoci over time Beyond periodic purchases to replace treasury maturities, we are not currently expecting more meaningful securities reinvestments to begin until late this year. beyond periodic purchases to replace treasury maturities we are not currently expecting more meaningful securities reinvestments to begin until late this year Turning to slide eight, net interest income remained stable quarter over quarter at $575 million. turning to slide eight net interest income remained stable quarter over quarter at $575 million Stronger than expected non-interest-bearing deposits and successful deposit pricing strategies helped offset the negative impact of muted loans. We also saw the benefit of a robust fourth quarter securities repositioning. With the structural tailwinds associated with our swap and securities portfolios, as shown on slide nine, we continue to see promising trends for continued net interest income growth. Moving to slide ten, we continue to believe the successful execution of our interest rate strategy allows us to better protect our profitability from rate volatility. If we do see a reduction in rates, as the forward curve predicts, our modeling shows a slight benefit to income. That said, we generally consider ourselves to be asset neutral. By strategically managing our swap and securities portfolios while considering the balance sheet dynamics, we intend to maintain our insulated position over time. Our credit portfolio shown on slide 11 performed as expected. Stronger than expected non-interest-bearing deposits and successful deposit pricing strategies helped offset the negative impact of muted loans. stronger than expected non-interest-bearing deposits and successful deposit pricing strategies helped offset the negative impact of muted loans We also saw the benefit of a robust fourth quarter securities repositioning. we also saw the benefit of a robust fourth quarter securities repositioning With the structural tailwinds associated with our swap and securities portfolios, as shown on slide nine, we continue to see promising trends for continued net interest income growth. with the structural tailwinds associated with our swap and securities portfolios as shown on slide nine we continue to see promising trends for continued net interest income growth Moving to slide ten, we continue to believe the successful execution of our interest rate strategy allows us to better protect our profitability from rate volatility. moving to slide ten we continue to believe the successful execution of our interest rate strategy allows us to better protect our profitability from rate volatility If we do see a reduction in rates, as the forward curve predicts, our modeling shows a slight benefit to income. if we do see a reduction in rates as the forward curve predicts our modeling shows a slight benefit to income That said, we generally consider ourselves to be asset neutral. that said we generally consider ourselves to be asset neutral By strategically managing our swap and securities portfolios while considering the balance sheet dynamics, we intend to maintain our insulated position over time. by strategically managing our swap and securities portfolios while considering the balance sheet dynamics we intend to maintain our insulated position over time Our credit portfolio shown on slide 11 performed as expected. our credit portfolio shown on slide 11 performed as expected Net charge-offs increased to 21 basis points, but were at the low end of our normal range. Consistent with prior quarters, persistent inflation and elevated rates pressured customer profitability, driving continued but expected normalization in criticized loans, and notably, they remained well below historical levels. Non-performing loans remained well-controlled and below our long-term average. The allowance for credit losses was down slightly due to lower loan balances, stable credit metrics, and a relatively benign economic forecast at quarter end. Given the elevated risks and uncertainty at the time, we increased our qualitative reserves, which resulted in maintaining our 1.44% coverage ratio. With the benefit of our relationship model, we plan to stay close to our customers as they better understand potential supply chain implications on their businesses and formulate their action plans. Net charge-offs increased to 21 basis points, but were at the low end of our normal range. net charge-offs increased to 21 basis points but were at the low end of our normal range Consistent with prior quarters, persistent inflation and elevated rates pressured customer profitability, driving continued but expected normalization in criticized loans, and notably, they remained well below historical levels. consistent with prior quarters persistent inflation and elevated rates pressured customer profitability driving continued but expected normalization in criticized loans and notably they remained well below historical levels Non-performing loans remained well- controlled and below our long-term average. non-performing loans remained well- controlled and below our long-term average The allowance for credit losses was down slightly due to lower loan balances, stable credit metrics, and a relatively benign economic forecast at quarter end. the allowance for credit losses was down slightly due to lower loan balances stable credit metrics and a relatively benign economic forecast at quarter end Given the elevated risks and uncertainty at the time, we increased our qualitative reserves, which resulted in maintaining our 1.44% coverage ratio. given the elevated risks and uncertainty at the time we increased our qualitative reserves which resulted in maintaining our 1.44% coverage ratio With the benefit of our relationship model, we plan to stay close to our customers as they better understand potential supply chain implications on their businesses and formulate their action plans. with the benefit of our relationship model we plan to stay close to our customers as they better understand potential supply chain implications on their businesses and formulate their action plans We feel confident in our highly regarded approach to credit and have a proven track record of navigating cycles over many years. On slide 12, first quarter non-interest income increased $4 million, largely due to the $19 million fourth quarter loss from securities repositioning, which did not repeat in the first quarter. Setting aside that benefit, the largest decline was in the CVA, which reduced $5 million due to rate and commodity price movement. We also saw non-customer and seasonal declines across several other line items. Despite pressures observed in the quarter, we continue to prioritize non-interest income and expect to drive positive momentum in customer-related fees. Expenses on slide 13 decreased $3 million over the prior quarter. Seasonally higher salaries and benefits and an increase in the FDIC special assessment were more than offset by the benefit of lower litigation-related expenses, charitable contributions, and consulting fees. We feel confident in our highly regarded approach to credit and have a proven track record of navigating cycles over many years. we feel confident in our highly regarded approach to credit and have a proven track record of navigating cycles over many years On slide 12, first quarter non-interest income increased $4 million, largely due to the $19 million fourth quarter loss from securities repositioning, which did not repeat in the first quarter. on slide 12 first quarter non-interest income increased $4 million largely due to the $19 million fourth quarter loss from securities repositioning which did not repeat in the first quarter Setting aside that benefit, the largest decline was in the CVA, which reduced $5 million due to rate and commodity price movement. setting aside that benefit the largest decline was in the cva which reduced $5 million due to rate and commodity price movement We also saw non-customer and seasonal declines across several other line items. we also saw non-customer and seasonal declines across several other line items Despite pressures observed in the quarter, we continue to prioritize non-interest income and expect to drive positive momentum in customer-related fees. despite pressures observed in the quarter we continue to prioritize non-interest income and expect to drive positive momentum in customer-related fees Expenses on slide 13 decreased $3 million over the prior quarter. expenses on slide 13 decreased $3 million over the prior quarter Seasonally higher salaries and benefits and an increase in the FDIC special assessment were more than offset by the benefit of lower litigation-related expenses, charitable contributions, and consulting fees. seasonally higher salaries and benefits and an increase in the fdic special assessment were more than offset by the benefit of lower litigation-related expenses charitable contributions and consulting fees We also incurred lower outside processing expenses correlated with lower business activity in products like carb. While we did not see the level of gains related to real estate that we saw in the fourth quarter, we did recognize a sizable gain on the sale of a leasing asset. Expense discipline remains a key priority as we continue to focus on driving efficiency. As shown on slide 14, we continue to favor a conservative approach to capital and value the flexibility our position provides us. With an estimated CET1 at 12.05%, we are above our strategic target even after returning capital to shareholders through repurchases and dividends in the quarter. Movement in the forward curve reduced unrealized losses in AOCI, contributing to an 82 basis point improvement in our tangible common equity ratio and growing book value. Our outlook for 2025 is on slide 15. We also incurred lower outside processing expenses correlated with lower business activity in products like carb. we also incurred lower outside processing expenses correlated with lower business activity in products like carb While we did not see the level of gains related to real estate that we saw in the fourth quarter, we did recognize a sizable gain on the sale of a leasing asset. while we did not see the level of gains related to real estate that we saw in the fourth quarter we did recognize a sizable gain on the sale of a leasing asset Expense discipline remains a key priority as we continue to focus on driving efficiency. expense discipline remains a key priority as we continue to focus on driving efficiency As shown on slide 14, we continue to favor a conservative approach to capital and value the flexibility our position provides us. as shown on slide 14 we continue to favor a conservative approach to capital and value the flexibility our position provides us With an estimated CET1 at 12.05%, we are above our strategic target even after returning capital to shareholders through repurchases and dividends in the quarter. with an estimated cet1 at 12.05% we are above our strategic target even after returning capital to shareholders through repurchases and dividends in the quarter Movement in the forward curve reduced unrealized losses in AOCI, contributing to an 82 basis point improvement in our tangible common equity ratio and growing book value. movement in the forward curve reduced unrealized losses in aoci contributing to an 82 basis point improvement in our tangible common equity ratio and growing book value Our outlook for 2025 is on slide 15. our outlook for 2025 is on slide 15 Given increased economic uncertainty, we see potential for a wide range of outcomes if market trends differ from our economic assumptions. By way of context, our outlook assumes uncertainty begins to abate, and while we are not assuming a recession, we do assume slower GDP growth in 2025 than in 2024. We project full year 2025 average loans to be down 1%-2%. Although pipelines and activity levels remain strong, we expect customers to await better visibility before seeing a stronger uptick in loan demand. Recognizing that may not be immediate, we think the second quarter average loans will continue to move down slightly relative to the first quarter. From there, we expect to see loan growth resume in the second half of the year. Our deposit forecast remains unchanged as we expect lower brokered CDs to drive full year average deposits down 2%-3% in 2025. Given increased economic uncertainty, we see potential for a wide range of outcomes if market trends differ from our economic assumptions. given increased economic uncertainty we see potential for a wide range of outcomes if market trends differ from our economic assumptions By way of context, our outlook assumes uncertainty begins to abate, and while we are not assuming a recession, we do assume slower GDP growth in 2025 than in 2024. by way of context our outlook assumes uncertainty begins to abate and while we are not assuming a recession we do assume slower gdp growth in 2025 than in 2024 We project full year 2025 average loans to be down 1%-2%. we project full year 2025 average loans to be down 1%-2% Although pipelines and activity levels remain strong, we expect customers to await better visibility before seeing a stronger uptick in loan demand. although pipelines and activity levels remain strong we expect customers to await better visibility before seeing a stronger uptick in loan demand Recognizing that may not be immediate, we think the second quarter average loans will continue to move down slightly relative to the first quarter. recognizing that may not be immediate we think the second quarter average loans will continue to move down slightly relative to the first quarter From there, we expect to see loan growth resume in the second half of the year. from there we expect to see loan growth resume in the second half of the year Our deposit forecast remains unchanged as we expect lower brokered CDs to drive full year average deposits down 2%-3% in 2025. our deposit forecast remains unchanged as we expect lower brokered cds to drive full year average deposits down 2%-3% in 2025 We believe the second quarter average deposits will be relatively flat to the first quarter as core deposit growth is offset by a small decline in average brokered time deposits. Although we anticipate continued success in winning interest-bearing balances, we believe our non-interest-bearing deposit mix will remain relatively consistent in the upper 30% range. Based on our current understanding of the transition strategy, we are still not assuming Direct Express deposit attrition within our 2025 outlook. We expect full year 2025 net interest income to increase 5%-7% with the benefit of BISV cessation, maturing and replaced securities and swaps, and a more efficient funding mix, all more than offsetting lower average non-interest-bearing balances and loans year-to-year. We expect the second quarter to be relatively unchanged from the first quarter as the lower benefit of BISV cessation is offset by the impact of day count. We believe the second quarter average deposits will be relatively flat to the first quarter as core deposit growth is offset by a small decline in average brokered time deposits. we believe the second quarter average deposits will be relatively flat to the first quarter as core deposit growth is offset by a small decline in average brokered time deposits Although we anticipate continued success in winning interest-bearing balances, we believe our non-interest-bearing deposit mix will remain relatively consistent 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 relatively consistent in the upper 30% range Based on our current understanding of the transition strategy, we are still not assuming Direct Express deposit attrition within our 2025 outlook. based on our current understanding of the transition strategy we are still not assuming direct express deposit attrition within our 2025 outlook We expect full year 2025 net interest income to increase 5%-7% with the benefit of BISV cessation, maturing and replaced securities and swaps, and a more efficient funding mix, all more than offsetting lower average non-interest-bearing balances and loans year-to-year. we expect full year 2025 net interest income to increase 5%-7% with the benefit of bisv cessation maturing and replaced securities and swaps and a more efficient funding mix all more than offsetting lower average non-interest-bearing balances and loans year-to-year We expect the second quarter to be relatively unchanged from the first quarter as the lower benefit of BISV cessation is offset by the impact of day count. we expect the second quarter to be relatively unchanged from the first quarter as the lower benefit of bisv cessation is offset by the impact of day count You can find details on the BISV cessation in the appendix, and excluding BISV, we expect to see growth in net interest income quarter to quarter throughout 2025. We expect full year 2025 non-interest income to increase approximately 2%, considering the negative pressure we saw in the first quarter, including the credit valuation adjustment and deferred compensation. We expect the second quarter to be stronger than the first and project growth in customer-related fee income through the balance of the year. Full year 2025 non-interest expenses are expected to grow 2%-3% with the objective of managing within this range, subject to the revenue trajectory as we progress through the year. We expect second quarter expenses to tick up slightly from the first quarter as we continue to balance strategic and risk management investments with the drive towards efficiency. You can find details on the BISV cessation in the appendix, and excluding BISV, we expect to see growth in net interest income quarter to quarter throughout 2025. you can find details on the bisv cessation in the appendix and excluding bisv we expect to see growth in net interest income quarter to quarter throughout 2025 We expect full year 2025 non-interest income to increase approximately 2%, considering the negative pressure we saw in the first quarter, including the credit valuation adjustment and deferred compensation. we expect full year 2025 non-interest income to increase approximately 2% considering the negative pressure we saw in the first quarter including the credit valuation adjustment and deferred compensation We expect the second quarter to be stronger than the first and project growth in customer-related fee income through the balance of the year. we expect the second quarter to be stronger than the first and project growth in customer-related fee income through the balance of the year Full year 2025 non-interest expenses are expected to grow 2%-3% with the objective of managing within this range, subject to the revenue trajectory as we progress through the year. full year 2025 non-interest expenses are expected to grow 2%-3% with the objective of managing within this range subject to the revenue trajectory as we progress through the year We expect second quarter expenses to tick up slightly from the first quarter as we continue to balance strategic and risk management investments with the drive towards efficiency. we expect second quarter expenses to tick up slightly from the first quarter as we continue to balance strategic and risk management investments with the drive towards efficiency Considering our strong credit metrics, proven underwriting approach, and consistent portfolio monitoring, we expect full year net charge-offs to be in the lower end of our normal 20-40 basis point range. Moving to capital, we continue to appreciate the importance of a strong capital position, and we intend to maintain a CET1 ratio well above our 10% strategic target throughout 2025. With an estimated CET1 at over 12%, we feel we have ample capacity in our position to continue repurchases in the second quarter, perhaps even as much as we repurchased in the fourth quarter of 2024. Given the volatility in the market and the movement in the forward curve, we are not committing to a targeted amount today. Instead, we intend to closely monitor market conditions and execute opportunistically with consideration to economic developments throughout the quarter. Considering our strong credit metrics, proven underwriting approach, and consistent portfolio monitoring, we expect full year net charge-offs to be in the lower end of our normal 20-40 basis point range. considering our strong credit metrics proven underwriting approach and consistent portfolio monitoring we expect full year net charge-offs to be in the lower end of our normal 20-40 basis point range Moving to capital, we continue to appreciate the importance of a strong capital position, and we intend to maintain a CET1 ratio well above our 10% strategic target throughout 2025. moving to capital we continue to appreciate the importance of a strong capital position and we intend to maintain a cet1 ratio well above our 10% strategic target throughout 2025 With an estimated CET1 at over 12%, we feel we have ample capacity in our position to continue repurchases in the second quarter, perhaps even as much as we repurchased in the fourth quarter of 2024. with an estimated cet1 at over 12% we feel we have ample capacity in our position to continue repurchases in the second quarter perhaps even as much as we repurchased in the fourth quarter of 2024 Given the volatility in the market and the movement in the forward curve, we are not committing to a targeted amount today. given the volatility in the market and the movement in the forward curve we are not committing to a targeted amount today Instead, we intend to closely monitor market conditions and execute opportunistically with consideration to economic developments throughout the quarter. instead we intend to closely monitor market conditions and execute opportunistically with consideration to economic developments throughout the quarter Stepping back, as we in the market await more clarity, we will continue to stay close to our customers, prioritize responsible loan growth where it makes sense, and focus on our deposit gathering efforts while conservatively managing capital, expenses, and credit. Now I'll turn the call back to Curt. Stepping back, as we in the market await more clarity, we will continue to stay close to our customers, prioritize responsible loan growth where it makes sense, and focus on our deposit gathering efforts while conservatively managing capital, expenses, and credit. stepping back as we in the market await more clarity we will continue to stay close to our customers prioritize responsible loan growth where it makes sense and focus on our deposit gathering efforts while conservatively managing capital expenses and credit Now I'll turn the call back to Curt. now i'll turn the call back to curt

Speaker 15: Thank you, Jim. In times of uncertainty, we understand what is important to our customers. They seek stability. They prioritize consistent access to capital and a value-added partner who is patient and understands how to help them overcome obstacles. We have a proven track record of doing just that for over 175 years. With the foundation of conservative capital, credit, and liquidity management, we have demonstrated resiliency. We understand there is uncertainty in the marketplace, and we see this as an opportunity to stay close with our customers. Thank you, Jim. thank you jim In times of uncertainty, we understand what is important to our customers. in times of uncertainty we understand what is important to our customers They seek stability. they seek stability They prioritize consistent access to capital and a value-added partner who is patient and understands how to help them overcome obstacles. they prioritize consistent access to capital and a value-added partner who is patient and understands how to help them overcome obstacles We have a proven track record of doing just that for over 175 years. we have a proven track record of doing just that for over 175 years With the foundation of conservative capital, credit, and liquidity management, we have demonstrated resiliency. with the foundation of conservative capital credit and liquidity management we have demonstrated resiliency We understand there is uncertainty in the marketplace, and we see this as an opportunity to stay close with our customers. we understand there is uncertainty in the marketplace and we see this as an opportunity to stay close with our customers History would tell us that these are the times where Comerica's relationship model and strategy tends to shine. We have a geographically diverse model, tenured colleagues, an experienced leadership team, a conservative approach to underwriting, and a blue-chip customer base, which all together position us well to outperform through cycles. We had a great quarter, and we plan to continue investing in responsible growth for the long term while benefiting from the structural tailwinds embedded in our swap and securities portfolios. With that, I'd be happy—we'd be happy to take your questions. Thank you. The floor is now open for questions. If you would like to ask a question, please press star one on your telephone keypad at this time. A confirmation tone will indicate your line is in the question queue. History would tell us that these are the times where Comerica's relationship model and strategy tends to shine. history would tell us that these are the times where comerica's relationship model and strategy tends to shine We have a geographically diverse model, tenured colleagues, an experienced leadership team, a conservative approach to underwriting, and a blue-chip customer base, which all together position us well to outperform through cycles. we have a geographically diverse model tenured colleagues an experienced leadership team a conservative approach to underwriting and a blue-chip customer base which all together position us well to outperform through cycles We had a great quarter, and we plan to continue investing in responsible growth for the long term while benefiting from the structural tailwinds embedded in our swap and securities portfolios. we had a great quarter and we plan to continue investing in responsible growth for the long term while benefiting from the structural tailwinds embedded in our swap and securities portfolios With that, I'd be happy—we'd be happy to take your questions. with that i'd be happy—we'd be happy to take your questions Thank you. thank you The floor is now open for questions. the floor is now open for questions If you would like to ask a question, please press star one on your telephone keypad at this time. if you would like to ask a question please press star one on your telephone keypad at this time A confirmation tone will indicate your line is in the question queue. a confirmation tone will indicate your line is in the question queue

Speaker 5: You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Again, that's star one to register a question at this time. Our first question is coming from Jon Arfstrom of RBC Capital Markets. Please go ahead. You may press star two if you would like to remove your question from the queue. you may press star two if you would like to remove your question from the queue For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. for participants using speaker equipment it may be necessary to pick up the handset before pressing the star keys Again, that's star one to register a question at this time. again that's star one to register a question at this time Our first question is coming from Jon Arfstrom of RBC Capital Markets. our first question is coming from jon arfstrom of rbc capital markets Please go ahead. please go ahead

Speaker 3: Thanks. Good morning. Thanks. thanks Good morning. good morning

Speaker 15: Good morning, Jon. Thank you. Good morning, Jon. good morning jon Thank you. thank you

Speaker 3: Yep. Maybe for you, Peter, I guess. On the loan growth outlook, I think we all understand it. You guys are really a proxy for commercial lending. Can you talk a little bit about what you're hearing right now from your lenders and borrowers, maybe some of the very near-term conversations? Maybe talk a little bit more about the longer-term outlook.It sounds like you're still thinking the pipelines are there, and the growth outlook could get better as the year progresses. Maybe very near-term stuff and then confidence in the longer term. Yep. yep Maybe for you, Peter, I guess. maybe for you peter i guess On the loan growth outlook, I think we all understand it. on the loan growth outlook i think we all understand it You guys are really a proxy for commercial lending. you guys are really a proxy for commercial lending Can you talk a little bit about what you're hearing right now from your lenders and borrowers, maybe some of the very near-term conversations? can you talk a little bit about what you're hearing right now from your lenders and borrowers maybe some of the very near-term conversations Maybe talk a little bit more about the longer-term outlook. maybe talk a little bit more about the longer-term outlook It sounds like you're still thinking the pipelines are there, and the growth outlook could get better as the year progresses. it sounds like you're still thinking the pipelines are there and the growth outlook could get better as the year progresses Maybe very near-term stuff and then confidence in the longer term. maybe very near-term stuff and then confidence in the longer term

Speaker 6: Yeah, Jon. I think I would say near-term, if I had to describe the whole portfolio, I would say that what you're hearing from customers is that they're not putting the brakes on, but they're taking their foot off the accelerator. You're seeing that around the country and around our businesses, maybe different speeds, if you will, to that approach. I think in markets like Michigan, we've probably seen more concern there than we have per se in Texas, just quite candidly, as when you talk about middle market. We've seen a little bit more of a pullback in our equity fund services businesses versus our environmental services business that is still pretty robust. Yeah, Jon. yeah jon I think I would say near-term, if I had to describe the whole portfolio, I would say that what you're hearing from customers is that they're not putting the brakes on, but they're taking their foot off the accelerator. i think i would say near-term if i had to describe the whole portfolio i would say that what you're hearing from customers is that they're not putting the brakes on but they're taking their foot off the accelerator You're seeing that around the country and around our businesses, maybe different speeds, if you will, to that approach. you're seeing that around the country and around our businesses maybe different speeds if you will to that approach I think in markets like Michigan, we've probably seen more concern there than we have per se in Texas, just quite candidly, as when you talk about middle market. i think in markets like michigan we've probably seen more concern there than we have per se in texas just quite candidly as when you talk about middle market We've seen a little bit more of a pullback in our equity fund services businesses versus our environmental services business that is still pretty robust. we've seen a little bit more of a pullback in our equity fund services businesses versus our environmental services business that is still pretty robust It really kind of depends on the business. It depends on the type of services they do, geographically where they are. I think in the near term, and I think that's sort of where we're going with our outlook for the second quarter, is that there's a lot of folks that are pulling their foot off the accelerator, but they're not necessarily putting the brakes on. All that said, we continue to hear really good long-term outlook, and we do continue to see our pipeline creep up. It's a little bit interesting to see the pipeline go up, but not necessarily feel like we're going to see outstandings in the next quarter per se. Throughout the year, as it goes on, we feel like it's going to, I guess you might say, get better with loan demand. Again, we're not projecting a recession. It really kind of depends on the business. it really kind of depends on the business It depends on the type of services they do, geographically where they are. it depends on the type of services they do geographically where they are I think in the near term, and I think that's sort of where we're going with our outlook for the second quarter, is that there's a lot of folks that are pulling their foot off the accelerator, but they're not necessarily putting the brakes on. i think in the near term and i think that's sort of where we're going with our outlook for the second quarter is that there's a lot of folks that are pulling their foot off the accelerator but they're not necessarily putting the brakes on All that said, we continue to hear really good long-term outlook, and we do continue to see our pipeline creep up. all that said we continue to hear really good long-term outlook and we do continue to see our pipeline creep up It's a little bit interesting to see the pipeline go up, but not necessarily feel like we're going to see outstandings in the next quarter per se. it's a little bit interesting to see the pipeline go up but not necessarily feel like we're going to see outstandings in the next quarter per se Throughout the year, as it goes on, we feel like it's going to, I guess you might say, get better with loan demand. throughout the year as it goes on we feel like it's going to i guess you might say get better with loan demand Again, we're not projecting a recession. again we're not projecting a recession We do not feel that way. We feel like the economy is going to grow this year, and we feel like we are in the right markets and lines of business to benefit from that growth, even if it is not what we have seen over the last year or two. We do not feel that way. we do not feel that way We feel like the economy is going to grow this year, and we feel like we are in the right markets and lines of business to benefit from that growth, even if it is not what we have seen over the last year or two. we feel like the economy is going to grow this year and we feel like we are in the right markets and lines of business to benefit from that growth even if it is not what we have seen over the last year or two

Speaker 3: Okay. Okay. Got it. We talked about this maybe in past quarters. Can you talk a little bit more about commercial real estate and what you are seeing there? It seems like there are still some headwinds, and I am curious if there is any hope for stabilizing that category. Okay. okay Okay. okay Got it. got it We talked about this maybe in past quarters. we talked about this maybe in past quarters Can you talk a little bit more about commercial real estate and what you are seeing there? can you talk a little bit more about commercial real estate and what you are seeing there It seems like there are still some headwinds, and I am curious if there is any hope for stabilizing that category. it seems like there are still some headwinds and i am curious if there is any hope for stabilizing that category

Speaker 6: Candidly, I think there is some hope for stabilizing it. Part of our outlook actually includes commercial real estate not coming down as much as we thought it would 90 days ago. We still foresee it being a headwind, but I do not think it is maybe blowing as hard as it was 90 days ago. Candidly, I think there is some hope for stabilizing it. candidly i think there is some hope for stabilizing it Part of our outlook actually includes commercial real estate not coming down as much as we thought it would 90 days ago. part of our outlook actually includes commercial real estate not coming down as much as we thought it would 90 days ago We still foresee it being a headwind, but I do not think it is maybe blowing as hard as it was 90 days ago. we still foresee it being a headwind but i do not think it is maybe blowing as hard as it was 90 days ago We've seen deal flow pick up in commercial real estate. I was really glad last year we were one of the first banks to kind of get back to doing deals second quarter of last year, and I think that's benefited us. We're seeing some opportunities, and to the extent that our borrowers need us, we're putting out commitments in commercial real estate. I do think as we go into next year, we'll probably continue again to see it level off. We'll see what interest rates do to that business. As of right now, it's a headwind, but maybe not as strong actually as it was 60 days ago. We've seen deal flow pick up in commercial real estate. we've seen deal flow pick up in commercial real estate I was really glad last year we were one of the first banks to kind of get back to doing deals second quarter of last year, and I think that's benefited us. i was really glad last year we were one of the first banks to kind of get back to doing deals second quarter of last year and i think that's benefited us We're seeing some opportunities, and to the extent that our borrowers need us, we're putting out commitments in commercial real estate. we're seeing some opportunities and to the extent that our borrowers need us we're putting out commitments in commercial real estate I do think as we go into next year, we'll probably continue again to see it level off. i do think as we go into next year we'll probably continue again to see it level off We'll see what interest rates do to that business. we'll see what interest rates do to that business As of right now, it's a headwind, but maybe not as strong actually as it was 60 days ago. as of right now it's a headwind but maybe not as strong actually as it was 60 days ago

Speaker 3: Yeah. Okay. All right. Thank you very much. Yeah. yeah Okay. okay All right. all right Thank you very much. thank you very much

Speaker 6: Thanks, Jon. Thanks, Jon. thanks jon

Speaker 5: Thank you. The next question is coming from Scott Siefers of Piper Sandler. Please go ahead. Thank you. thank you The next question is coming from Scott Siefers of Piper Sandler. the next question is coming from scott siefers of piper sandler Please go ahead. please go ahead

Speaker 15: Good morning, Scott. Good morning, Scott. good morning scott

Speaker 17: Morning, everybody. Thanks for taking the question. Let's see. Jim, could you maybe walk through sort of the progression on both the fee and the expense guides? I know in the past you've discussed the full year puts and takes on the fee side, but I guess just looking at it, I think you'd need to average much higher quarterly base to get to the updated guide. Maybe sort of how do you do so? By contrast, on the expense side, it looks like the guidance would suggest that the second half expense base will be lower than what you experienced in the first half. Maybe just sort of some color on how the flow works to your thinking. Morning, everybody. morning everybody Thanks for taking the question. thanks for taking the question Let's see. let's see Jim, could you maybe walk through sort of the progression on both the fee and the expense guides? jim could you maybe walk through sort of the progression on both the fee and the expense guides I know in the past you've discussed the full year puts and takes on the fee side, but I guess just looking at it, I think you'd need to average much higher quarterly base to get to the updated guide. i know in the past you've discussed the full year puts and takes on the fee side but i guess just looking at it i think you'd need to average much higher quarterly base to get to the updated guide Maybe sort of how do you do so? maybe sort of how do you do so By contrast, on the expense side, it looks like the guidance would suggest that the second half expense base will be lower than what you experienced in the first half. by contrast on the expense side it looks like the guidance would suggest that the second half expense base will be lower than what you experienced in the first half Maybe just sort of some color on how the flow works to your thinking. maybe just sort of some color on how the flow works to your thinking

Speaker 13: Yes. Good morning, Scott.Looking at non-interest income, we did have some non-customer trends that appeared in the first quarter, probably put $6 million-$7 million of pressure on the overall guidance that we provided back in January. Some of those will probably continue to some extent, maybe not to the same pace that we had in the first quarter, but we do expect a little more pressure from non-interest income. Relative to expenses, I really think that we're going to have to monitor that as the year goes on and see how PPNR progresses. Certainly, there's a piece of that that's in the bag. Certainly, the sale of equipment and the gain we had there will be pocketed and won't be going away. Yes. yes Good morning, Scott. good morning scott Looking at non-interest income, we did have some non-customer trends that appeared in the first quarter, probably put $6 million-$7 million of pressure on the overall guidance that we provided back in January. looking at non-interest income we did have some non-customer trends that appeared in the first quarter probably put $6 million-$7 million of pressure on the overall guidance that we provided back in january Some of those will probably continue to some extent, maybe not to the same pace that we had in the first quarter, but we do expect a little more pressure from non-interest income. some of those will probably continue to some extent maybe not to the same pace that we had in the first quarter but we do expect a little more pressure from non-interest income Relative to expenses, I really think that we're going to have to monitor that as the year goes on and see how PPNR progresses. relative to expenses i really think that we're going to have to monitor that as the year goes on and see how ppnr progresses Certainly, there's a piece of that that's in the bag. certainly there's a piece of that that's in the bag Certainly, the sale of equipment and the gain we had there will be pocketed and won't be going away. certainly the sale of equipment and the gain we had there will be pocketed and won't be going away We had some other expenses related to maybe timing, maybe challenging of projects and expenses that we'll have to make decisions on as we move through the year and try to calibrate to how revenue progresses through the year also. We do have a little bit more control, obviously, on the expenses than we do in the non-interest income. We do see non-interest income for the customer categories getting largely back to plan or back to consensus and outlook that we had back in January. We do think we're going to get some bounce back there. We did have a weaker customer quarter in the first quarter. We did have a weaker non-customer quarter. Some of those non-customer trends may continue to a very small degree. We had some other expenses related to maybe timing, maybe challenging of projects and expenses that we'll have to make decisions on as we move through the year and try to calibrate to how revenue progresses through the year also. we had some other expenses related to maybe timing maybe challenging of projects and expenses that we'll have to make decisions on as we move through the year and try to calibrate to how revenue progresses through the year also We do have a little bit more control, obviously, on the expenses than we do in the non-interest income. we do have a little bit more control obviously on the expenses than we do in the non-interest income We do see non-interest income for the customer categories getting largely back to plan or back to consensus and outlook that we had back in January. we do see non-interest income for the customer categories getting largely back to plan or back to consensus and outlook that we had back in january We do think we're going to get some bounce back there. we do think we're going to get some bounce back there We did have a weaker customer quarter in the first quarter. we did have a weaker customer quarter in the first quarter We did have a weaker non-customer quarter. we did have a weaker non-customer quarter Some of those non-customer trends may continue to a very small degree. some of those non-customer trends may continue to a very small degree We'll let the overall revenue pace inform both our expense control and as we continue to monitor the non-interest income flows. We'll let the overall revenue pace inform both our expense control and as we continue to monitor the non-interest income flows. we'll let the overall revenue pace inform both our expense control and as we continue to monitor the non-interest income flows

Speaker 15: Jim, I might add, Scott, this is obviously an environment which is somewhat difficult to accurately forecast go forward trends. Depending upon how things play out, depending upon if we do or do not see loan demand return and sort of stabilization from the economy, depending on whether or not we have recession, again, we are seeing that probability a little bit lower. We'll really calibrate how we think about expenses going forward. We are very committed to the things that we have in flight, the expansion of many of our businesses, product development, technology, expansion into new markets that we've talked about previously. Jim, I might add, Scott, this is obviously an environment which is somewhat difficult to accurately forecast go forward trends. jim i might add scott this is obviously an environment which is somewhat difficult to accurately forecast go forward trends Depending upon how things play out, depending upon if we do or do not see loan demand return and sort of stabilization from the economy, depending on whether or not we have recession, again, we are seeing that probability a little bit lower. depending upon how things play out depending upon if we do or do not see loan demand return and sort of stabilization from the economy depending on whether or not we have recession again we are seeing that probability a little bit lower We'll really calibrate how we think about expenses going forward. we'll really calibrate how we think about expenses going forward We are very committed to the things that we have in flight, the expansion of many of our businesses, product development, technology, expansion into new markets that we've talked about previously. we are very committed to the things that we have in flight the expansion of many of our businesses product development technology expansion into new markets that we've talked about previously But the pace upon which we are doing some of those things could be calibrated if we really do see a more elongated disruption to the market, or certainly if we saw a recession. But the pace upon which we are doing some of those things could be calibrated if we really do see a more elongated disruption to the market, or certainly if we saw a recession. but the pace upon which we are doing some of those things could be calibrated if we really do see a more elongated disruption to the market or certainly if we saw a recession

Speaker 17: Got it. Perfect. All right. Curt and Jim, thank you very much. Got it. got it Perfect. perfect All right. all right Curt and Jim, thank you very much. curt and jim thank you very much

Speaker 15: Thanks, Scott. Thanks, Scott. thanks scott

Speaker 5: Thank you. The next question is coming from Ken Usdin of Autonomous Research. Please go ahead. Thank you. thank you The next question is coming from Ken Usdin of Autonomous Research. the next question is coming from ken usdin of autonomous research Please go ahead. please go ahead

Speaker 9: Good morning, Ken. Thanks. Good morning. Good morning, guys. You're doing a great job reducing deposit costs and continue to show a really fast data on the downside. I'm just wondering how much more room do you have to either remix deposits further, take down brokered CDs within that, and then I'll ask a follow-up. Thanks. Good morning, Ken. good morning ken Thanks. thanks Good morning. good morning good morning Good morning, guys. good morning guys You're doing a great job reducing deposit costs and continue to show a really fast data on the downside. you're doing a great job reducing deposit costs and continue to show a really fast data on the downside I'm just wondering how much more room do you have to either remix deposits further, take down brokered CDs within that, and then I'll ask a follow-up. i'm just wondering how much more room do you have to either remix deposits further take down brokered cds within that and then i'll ask a follow-up Thanks. thanks

Speaker 13: All right, Ken. Good morning. It's Jim. Yeah, we have had great success with deposit pricing, a little better than we'd actually expected in the first quarter. As I look at our deposit betas, if I go back to when the Fed started cutting rates in the third quarter of last year, we are running about a 71% beta through the first quarter. That is obviously higher than the 60% or so that we long-term think we will get back to. We were well above that 71%, obviously, in the first quarter. We are having great success. As I mentioned, I think at the January earnings call and certainly at the conference that we attended in March, we do expect to see that slow up a little bit. In fact, we may, given how proactively we moved, actually in some small pockets have to give a little bit back to customers. All right, Ken. all right ken Good morning. good morning It's Jim. it's jim Yeah, we have had great success with deposit pricing, a little better than we'd actually expected in the first quarter. yeah we have had great success with deposit pricing a little better than we'd actually expected in the first quarter As I look at our deposit betas, if I go back to when the Fed started cutting rates in the third quarter of last year, we are running about a 71% beta through the first quarter. as i look at our deposit betas if i go back to when the fed started cutting rates in the third quarter of last year we are running about a 71% beta through the first quarter That is obviously higher than the 60% or so that we long-term think we will get back to. that is obviously higher than the 60% or so that we long-term think we will get back to We were well above that 71%, obviously, in the first quarter. we were well above that 71% obviously in the first quarter We are having great success. we are having great success As I mentioned, I think at the January earnings call and certainly at the conference that we attended in March, we do expect to see that slow up a little bit. as i mentioned i think at the january earnings call and certainly at the conference that we attended in march we do expect to see that slow up a little bit In fact, we may, given how proactively we moved, actually in some small pockets have to give a little bit back to customers. in fact we may given how proactively we moved actually in some small pockets have to give a little bit back to customers Having said that, as rates continue to move down, we do expect to still achieve on an incremental go forward basis of probably a 40%-50% beta going forward. We certainly have room to continue to react as rates continue to go down, but we will have probably some pockets of pressure upward. You mentioned brokered deposits. Yes, we do expect to run off really that remaining about $1 billion of brokered deposits by the end of the year. We are paying in the low to mid 5% range on those. That will certainly be a big benefit too as those roll off. We expect to get even a nice beta on the non-brokered deposits, the core deposits too, as rates continue to move down. Overall, a really good story. Having said that, as rates continue to move down, we do expect to still achieve on an incremental go forward basis of probably a 40%-50% beta going forward. having said that as rates continue to move down we do expect to still achieve on an incremental go forward basis of probably a 40%-50% beta going forward We certainly have room to continue to react as rates continue to go down, but we will have probably some pockets of pressure upward. we certainly have room to continue to react as rates continue to go down but we will have probably some pockets of pressure upward You mentioned brokered deposits. you mentioned brokered deposits Yes, we do expect to run off really that remaining about $1 billion of brokered deposits by the end of the year. yes we do expect to run off really that remaining about $1 billion of brokered deposits by the end of the year We are paying in the low to mid 5% range on those. we are paying in the low to mid 5% range on those That will certainly be a big benefit too as those roll off. that will certainly be a big benefit too as those roll off We expect to get even a nice beta on the non-brokered deposits, the core deposits too, as rates continue to move down. we expect to get even a nice beta on the non-brokered deposits the core deposits too as rates continue to move down Overall, a really good story. overall a really good story Probably will not continue at the same pace that we have seen, but certainly can continue to adjust as the FOMC continues to lower rates. That is one that we also have to monitor overall market trends. I have mentioned in the past too, we do plan on being fairly proactive in gathering more interest-bearing deposits. In some cases, we may pay up for those. We are happy to do that if we can garner them. We still make money on those. They are still a preferred funding source versus purchased funds. Overall, I just feel really good about the deposit story, both the volume as well as the success we have had with pay rates thus far. Probably will not continue at the same pace that we have seen, but certainly can continue to adjust as the FOMC continues to lower rates. probably will not continue at the same pace that we have seen but certainly can continue to adjust as the fomc continues to lower rates That is one that we also have to monitor overall market trends. that is one that we also have to monitor overall market trends I have mentioned in the past too, we do plan on being fairly proactive in gathering more interest-bearing deposits. i have mentioned in the past too we do plan on being fairly proactive in gathering more interest-bearing deposits In some cases, we may pay up for those. We are happy to do that if we can garner them. in some cases we may pay up for those. we are happy to do that if we can garner them We still make money on those. They are still a preferred funding source versus purchased funds. we still make money on those. they are still a preferred funding source versus purchased funds Overall, I just feel really good about the deposit story, both the volume as well as the success we have had with pay rates thus far. overall i just feel really good about the deposit story both the volume as well as the success we have had with pay rates thus far

Speaker 9: Got it. Great. The second question just relates to deposits as well. You mentioned very clearly that the Direct Express, there are no changes in the 2025 outlook. I believe you had said it really wouldn't be in play until the out years. Can you just give us an update on how you're thinking about that? If deposit growth continues to be strong, do you think about starting to get ahead of some of that mix shifting at some point? Thanks, guys. Got it. got it Great. great The second question just relates to deposits as well. the second question just relates to deposits as well You mentioned very clearly that the Direct Express, there are no changes in the 2025 outlook. you mentioned very clearly that the direct express there are no changes in the 2025 outlook I believe you had said it really wouldn't be in play until the out years. i believe you had said it really wouldn't be in play until the out years Can you just give us an update on how you're thinking about that? can you just give us an update on how you're thinking about that If deposit growth continues to be strong, do you think about starting to get ahead of some of that mix shifting at some point? if deposit growth continues to be strong do you think about starting to get ahead of some of that mix shifting at some point Thanks, guys. thanks guys

Speaker 6: Yeah, Ken, it's Peter. Yeah, there's no real change to our outlook on what we see with Direct Express. We think that balances really aren't going to be impacted at all in 2025. We haven't provided, obviously, outlook for next year, but we continue to believe that the transition here is quite long. Yeah, Ken, it's Peter. yeah ken it's peter Yeah, there's no real change to our outlook on what we see with Direct Express. yeah there's no real change to our outlook on what we see with direct express We think that balances really aren't going to be impacted at all in 2025. we think that balances really aren't going to be impacted at all in 2025 We haven't provided, obviously, outlook for next year, but we continue to believe that the transition here is quite long. we haven't provided obviously outlook for next year but we continue to believe that the transition here is quite long What I would tell you is that as far as running the rest of the company, we're very focused on deposits in all the other businesses that we have, whether that be in small business and what we do in some of our corporate businesses that are deposit gathering. Really even what we do on the consumer side, I think there's a tremendous opportunity there for us to increase our deposit base through those channels. We are looking at that pretty regularly. I'd say that's kind of a constant conversation that we have. At the moment, there's no real updates about what the transition plan for Direct Express. I think our messaging is consistent at the current time. What I would tell you is that as far as running the rest of the company, we're very focused on deposits in all the other businesses that we have, whether that be in small business and what we do in some of our corporate businesses that are deposit gathering. what i would tell you is that as far as running the rest of the company we're very focused on deposits in all the other businesses that we have whether that be in small business and what we do in some of our corporate businesses that are deposit gathering Really even what we do on the consumer side, I think there's a tremendous opportunity there for us to increase our deposit base through those channels. really even what we do on the consumer side i think there's a tremendous opportunity there for us to increase our deposit base through those channels We are looking at that pretty regularly. we are looking at that pretty regularly I'd say that's kind of a constant conversation that we have. i'd say that's kind of a constant conversation that we have At the moment, there's no real updates about what the transition plan for Direct Express. at the moment there's no real updates about what the transition plan for direct express I think our messaging is consistent at the current time. i think our messaging is consistent at the current time

Speaker 9: Okay. Thanks very much. Okay. okay Thanks very much. thanks very much

Speaker 15: Yep. Thanks, Ken. Yep. yep Thanks, Ken. thanks ken

Speaker 5: Thank you. The next question is coming from Manan Gosalia of Morgan Stanley. Please go ahead. Good morning, Manon. Thank you. thank you The next question is coming from Manan Gosalia of Morgan Stanley. the next question is coming from manan gosalia of morgan stanley Please go ahead. please go ahead Good morning, Manon. good morning manon

Speaker 15: Hey, good morning. Hey, good morning. hey good morning

Speaker 11: Can you expand on how you're thinking about the trajectory of NII from here and the jumping-off point for 2026? As you noted, the BISB benefits fade, which might be masking some nice growth in core NII. Can you talk about the factors driving that increase as we go through the year? Can you expand on how you're thinking about the trajectory of NII from here and the jumping-off point for 2026? can you expand on how you're thinking about the trajectory of nii from here and the jumping-off point for 2026 As you noted, the BISB benefits fade, which might be masking some nice growth in core NII. as you noted the bisb benefits fade which might be masking some nice growth in core nii Can you talk about the factors driving that increase as we go through the year? can you talk about the factors driving that increase as we go through the year

Speaker 13: Sure. Good morning, Manon. Yeah. Excluding the BISB impact, which we do have that schedule in the appendix, as we always do, we are expecting steady growth in net interest income, both dollars and a little tick up each quarter in NIM percentage also, most likely. A number of drivers there. We are expecting deposits to continue to grow as we move through the rest of 2025. Deposits will certainly be a key contributor. Sure. sure Good morning, Manon. good morning manon Yeah. yeah Excluding the BISB impact, which we do have that schedule in the appendix, as we always do, we are expecting steady growth in net interest income, both dollars and a little tick up each quarter in NIM percentage also, most likely. excluding the bisb impact which we do have that schedule in the appendix as we always do we are expecting steady growth in net interest income both dollars and a little tick up each quarter in nim percentage also most likely A number of drivers there. a number of drivers there We are expecting deposits to continue to grow as we move through the rest of 2025. we are expecting deposits to continue to grow as we move through the rest of 2025 Deposits will certainly be a key contributor. deposits will certainly be a key contributor Non-interest bearing could be just a very small drag in the second quarter because we were higher than we expected in the first quarter. In the second half of the year, we do see the potential for some small increases in non-interest bearing. Most of those deposit increases will be on the interest bearing side, all contributing to increasing net interest income. Of course, the loan growth that we expect to happen in the second half of the year will be a key contributor also. If you look at our maturity schedule for swaps and securities, we do expect to get a few million dollars, ranges anywhere from $2 million-$6 million, if you do the math each quarter, benefit on maturing swaps and securities. That will be a contributor too. That is obviously more of a known factor. Non-interest bearing could be just a very small drag in the second quarter because we were higher than we expected in the first quarter. non-interest bearing could be just a very small drag in the second quarter because we were higher than we expected in the first quarter In the second half of the year, we do see the potential for some small increases in non-interest bearing. in the second half of the year we do see the potential for some small increases in non-interest bearing Most of those deposit increases will be on the interest bearing side, all contributing to increasing net interest income. most of those deposit increases will be on the interest bearing side all contributing to increasing net interest income Of course, the loan growth that we expect to happen in the second half of the year will be a key contributor also. of course the loan growth that we expect to happen in the second half of the year will be a key contributor also If you look at our maturity schedule for swaps and securities, we do expect to get a few million dollars, ranges anywhere from $2 million-$6 million, if you do the math each quarter, benefit on maturing swaps and securities. if you look at our maturity schedule for swaps and securities we do expect to get a few million dollars ranges anywhere from $2 million-$6 million if you do the math each quarter benefit on maturing swaps and securities That will be a contributor too. that will be a contributor too That is obviously more of a known factor. that is obviously more of a known factor I do not expect that to bounce around very much. A lot of tailwinds are contributing to kind of consistent small to moderate increases each quarter. Overall, we just feel good about the overall trajectory of net interest income. I do not expect that to bounce around very much. i do not expect that to bounce around very much A lot of tailwinds are contributing to kind of consistent small to moderate increases each quarter. a lot of tailwinds are contributing to kind of consistent small to moderate increases each quarter Overall, we just feel good about the overall trajectory of net interest income. overall we just feel good about the overall trajectory of net interest income

Speaker 11: That is helpful. Appreciate it. Maybe just to switch over to credit, are there any early signs of stress you are seeing among your client base at all, whether it is in CNI or CRE, small business, anywhere that you are particularly focused on? That is helpful. that is helpful Appreciate it. appreciate it Maybe just to switch over to credit, are there any early signs of stress you are seeing among your client base at all, whether it is in CNI or CRE, small business, anywhere that you are particularly focused on? maybe just to switch over to credit are there any early signs of stress you are seeing among your client base at all whether it is in cni or cre small business anywhere that you are particularly focused on

Speaker 1: Manon, this is Melinda. I would say overall, the credit environment remains strong and stable. You can see that by the metrics that are shown on our slide. I mean, criticized balances were up ever so slightly. That was really driven by the commercial real estate line of business. Manon, this is Melinda. manon this is melinda I would say overall, the credit environment remains strong and stable. i would say overall the credit environment remains strong and stable You can see that by the metrics that are shown on our slide. you can see that by the metrics that are shown on our slide I mean, criticized balances were up ever so slightly. i mean criticized balances were up ever so slightly That was really driven by the commercial real estate line of business. that was really driven by the commercial real estate line of business As Peter mentioned, the payoff pace, we think it's going to be a little bit slower than what we had originally anticipated coming into the year. That's really driven by the fact that rates have remained somewhat elevated. Obviously, there's a lot of uncertainty. Some of the leasing times on some of the construction projects are elongated. That's where we're seeing a little bit of migration into the non-pass. The absolute levels of non-pass and commercial real estate remain very manageable. We're still seeing resolution every single quarter on non-pass credit. We have some migrating in, some migrating out. As it relates to CNI, I would call this quarter very stable. If you bifurcated charge-offs this quarter, they were very stable from a CNI perspective. As Peter mentioned, the payoff pace, we think it's going to be a little bit slower than what we had originally anticipated coming into the year. as peter mentioned the payoff pace we think it's going to be a little bit slower than what we had originally anticipated coming into the year That's really driven by the fact that rates have remained somewhat elevated. that's really driven by the fact that rates have remained somewhat elevated Obviously, there's a lot of uncertainty. obviously there's a lot of uncertainty Some of the leasing times on some of the construction projects are elongated. some of the leasing times on some of the construction projects are elongated That's where we're seeing a little bit of migration into the non-pass. that's where we're seeing a little bit of migration into the non-pass The absolute levels of non-pass and commercial real estate remain very manageable. the absolute levels of non-pass and commercial real estate remain very manageable We're still seeing resolution every single quarter on non-pass credit. we're still seeing resolution every single quarter on non-pass credit We have some migrating in, some migrating out. we have some migrating in some migrating out As it relates to CNI, I would call this quarter very stable. as it relates to cni i would call this quarter very stable If you bifurcated charge-offs this quarter, they were very stable from a CNI perspective. if you bifurcated charge-offs this quarter they were very stable from a cni perspective We did see two charge-offs in commercial real estate, which is really what drove the increase between the fourth quarter and the first quarter in terms of the basis point. Not really seeing anything yet. The reality is there's an enormous amount of uncertainty right now and risk in the economy. Supply chain disruption is bound to happen. We do not know exactly where that's going to land and what that's going to look like. We have very good visibility into our customers. We have excellent portfolio management, proven track record of managing through economic cycles. I am really confident that the portfolio as a whole is going to perform. We are just going to have to wait and see some of this uncertainty to sort of abate and folks to have a little bit more clarity on how they're going to manage supply chains going forward. We did see two charge-offs in commercial real estate, which is really what drove the increase between the fourth quarter and the first quarter in terms of the basis point. we did see two charge-offs in commercial real estate which is really what drove the increase between the fourth quarter and the first quarter in terms of the basis point Not really seeing anything yet. not really seeing anything yet The reality is there's an enormous amount of uncertainty right now and risk in the economy. the reality is there's an enormous amount of uncertainty right now and risk in the economy Supply chain disruption is bound to happen. supply chain disruption is bound to happen We do not know exactly where that's going to land and what that's going to look like. we do not know exactly where that's going to land and what that's going to look like We have very good visibility into our customers. we have very good visibility into our customers We have excellent portfolio management, proven track record of managing through economic cycles. we have excellent portfolio management proven track record of managing through economic cycles I am really confident that the portfolio as a whole is going to perform. We are just going to have to wait and see some of this uncertainty to sort of abate and folks to have a little bit more clarity on how they're going to manage supply chains going forward. i am really confident that the portfolio as a whole is going to perform. we are just going to have to wait and see some of this uncertainty to sort of abate and folks to have a little bit more clarity on how they're going to manage supply chains going forward

Speaker 11: That's good color. Thank you so much. That's good color . that's good color Thank you so much. thank you so much

Speaker 1: You're welcome. You're welcome. you're welcome

Speaker 5: Thank you. The next question is coming from Bernard von Gizycki of Deutsche Bank. Please go ahead. Thank you. thank you The next question is coming from Bernard von Gizycki of Deutsche Bank. the next question is coming from bernard von gizycki of deutsche bank Please go ahead. please go ahead

Speaker 15: Morning, Bernard. Morning, Bernard. morning bernard

Speaker 8: Hey, guys. Good morning. Just on the first question, just on share repurchases, I know you did the $50 million during the quarter. And you noted it's going to depend on market conditions and economic developments. Any thoughts on how you're going to think about 2Q or any expectations you could share? Hey, guys. hey guys Good morning. good morning Just on the first question, just on share repurchases, I know you did the $50 million during the quarter. just on the first question just on share repurchases i know you did the $50 million during the quarter And you noted it's going to depend on market conditions and economic developments. and you noted it's going to depend on market conditions and economic developments Any thoughts on how you're going to think about 2Q or any expectations you could share? any thoughts on how you're going to think about 2q or any expectations you could share

Speaker 13: Yes, good morning, Bernard. Yeah, as I mentioned, we do see the potential, and we certainly have the capacity to do additional share repurchases. We had done $100 million in the fourth quarter. We dialed that down to $50 million in the first quarter. Then I mentioned I see the potential to do up to maybe the same $100 million that we did in the fourth quarter. Yes, good morning, Bernard. yes good morning bernard Yeah, as I mentioned, we do see the potential, and we certainly have the capacity to do additional share repurchases. yeah as i mentioned we do see the potential and we certainly have the capacity to do additional share repurchases We had done $100 million in the fourth quarter. we had done $100 million in the fourth quarter We dialed that down to $50 million in the first quarter. we dialed that down to $50 million in the first quarter Then I mentioned I see the potential to do up to maybe the same $100 million that we did in the fourth quarter. then i mentioned i see the potential to do up to maybe the same $100 million that we did in the fourth quarter Now, we are keeping our eye on a number of factors there. We've seen the ten-year really ping-pong around the last few weeks and the last few months. Where long-term rates go and what the curve does to AOCI is something we continue to keep our eye on. Credit, while very stable and performing very well, as Melinda was saying, in this environment, it's prudent to keep an eye on that also. Loan demand, of course, is a factor also. We want to make sure that we're there should this uncertainty abate. We see the potential for loan demand to maybe surprise to the higher side if, again, the uncertainty abates. We are keeping our eye on a number of factors. Having said that, we've recognized that 12.05% is a very healthy CET1 ratio. Now, we are keeping our eye on a number of factors there. now we are keeping our eye on a number of factors there We've seen the ten-year really ping-pong around the last few weeks and the last few months. we've seen the ten-year really ping-pong around the last few weeks and the last few months Where long-term rates go and what the curve does to AOCI is something we continue to keep our eye on. where long-term rates go and what the curve does to aoci is something we continue to keep our eye on Credit, while very stable and performing very well, as Melinda was saying, in this environment, it's prudent to keep an eye on that also. credit while very stable and performing very well as melinda was saying in this environment it's prudent to keep an eye on that also Loan demand, of course, is a factor also. loan demand of course is a factor also We want to make sure that we're there should this uncertainty abate. we want to make sure that we're there should this uncertainty abate We see the potential for loan demand to maybe surprise to the higher side if, again, the uncertainty abates. we see the potential for loan demand to maybe surprise to the higher side if again the uncertainty abates We are keeping our eye on a number of factors. we are keeping our eye on a number of factors Having said that, we've recognized that 12.05% is a very healthy CET1 ratio. having said that we've recognized that 12.05% is a very healthy cet1 ratio I think you can expect this to likely be active on the share repurchase side. We are going to keep our eye on this week to week as we move through the second quarter, which is why we're not committing to a very specific amount with certainty at this point in time. I think you can expect this to likely be active on the share repurchase side. i think you can expect this to likely be active on the share repurchase side We are going to keep our eye on this week to week as we move through the second quarter, which is why we're not committing to a very specific amount with certainty at this point in time. we are going to keep our eye on this week to week as we move through the second quarter which is why we're not committing to a very specific amount with certainty at this point in time

Speaker 8: Okay. And then just one modeling question, Jim. I know you mentioned there was a slight benefit from the 4Q securities repositioning and net interest income. I might have missed it, but could you just size that benefit in the quarter and then just what the remaining benefit could be for the rest of the year? Okay. okay And then just one modeling question, Jim. and then just one modeling question jim I know you mentioned there was a slight benefit from the 4Q securities repositioning and net interest income. i know you mentioned there was a slight benefit from the 4q securities repositioning and net interest income I might have missed it, but could you just size that benefit in the quarter and then just what the remaining benefit could be for the rest of the year? i might have missed it but could you just size that benefit in the quarter and then just what the remaining benefit could be for the rest of the year

Speaker 13: Yeah. If you look at our net interest income slide, you see that securities income overall was up $9 million quarter to quarter. I would say just a little over half of that was due to the securities repositioning. The rest of it due to other factors such as just the normal maturities on a quarter to quarter basis. We have recognized, I think, most of that benefit going forward. You see it in the run rate right now. We will certainly have some additional securities just naturally mature as we move through the rest of the year here. Yeah. yeah If you look at our net interest income slide, you see that securities income overall was up $9 million quarter to quarter. if you look at our net interest income slide you see that securities income overall was up $9 million quarter to quarter I would say just a little over half of that was due to the securities repositioning. i would say just a little over half of that was due to the securities repositioning The rest of it due to other factors such as just the normal maturities on a quarter to quarter basis. the rest of it due to other factors such as just the normal maturities on a quarter to quarter basis We have recognized, I think, most of that benefit going forward. we have recognized i think most of that benefit going forward You see it in the run rate right now. you see it in the run rate right now We will certainly have some additional securities just naturally mature as we move through the rest of the year here. we will certainly have some additional securities just naturally mature as we move through the rest of the year here

Speaker 8: Okay. Great. Thanks for taking my question. Okay. okay Great. great Thanks for taking my question. thanks for taking my question

Speaker 5: Thank you. The next question is coming from John Pancari of Evercore ISI. Please go ahead. Thank you. thank you The next question is coming from John Pancari of Evercore ISI. the next question is coming from john pancari of evercore isi Please go ahead. please go ahead

Speaker 15: Good morning, John. Good morning, John. good morning john

Speaker 18: Good morning. On the expense front, you had a pretty solid operating expense quarter. Given this uncertain revenue backdrop, can you maybe discuss the degree of expense flexibility you have if revenue pressure persists longer than you had expected? Can you maybe give your thoughts on your ability to achieve positive operating leverage in 2025 and the degree of which you think could be reasonable? Thanks. Good morning. good morning On the expense front, you had a pretty solid operating expense quarter. on the expense front you had a pretty solid operating expense quarter Given this uncertain revenue backdrop, can you maybe discuss the degree of expense flexibility you have if revenue pressure persists longer than you had expected? given this uncertain revenue backdrop can you maybe discuss the degree of expense flexibility you have if revenue pressure persists longer than you had expected Can you maybe give your thoughts on your ability to achieve positive operating leverage in 2025 and the degree of which you think could be reasonable? can you maybe give your thoughts on your ability to achieve positive operating leverage in 2025 and the degree of which you think could be reasonable Thanks. thanks

Speaker 13: Yeah. Good morning, John. As we indicated, I see the range of expense growth for us for 2025 to be in that 2%-3% range that we mentioned. We are going to keep our eye on revenue trends and try to calibrate accordingly. We do have a certain degree of flexibility there. I think that in this environment, with all the uncertainty, where it's very hard to predict where the year is going to go, I think we do need to be prepared to continue to take expense reduction steps if the revenue does not come. I will say at the same time, we are pretty committed to a lot of the investments we're making also. Yeah. yeah Good morning, John. good morning john As we indicated, I see the range of expense growth for us for 2025 to be in that 2%-3% range that we mentioned. as we indicated i see the range of expense growth for us for 2025 to be in that 2%-3% range that we mentioned We are going to keep our eye on revenue trends and try to calibrate accordingly. we are going to keep our eye on revenue trends and try to calibrate accordingly We do have a certain degree of flexibility there. we do have a certain degree of flexibility there I think that in this environment, with all the uncertainty, where it's very hard to predict where the year is going to go, I think we do need to be prepared to continue to take expense reduction steps if the revenue does not come. i think that in this environment with all the uncertainty where it's very hard to predict where the year is going to go i think we do need to be prepared to continue to take expense reduction steps if the revenue does not come I will say at the same time, we are pretty committed to a lot of the investments we're making also. i will say at the same time we are pretty committed to a lot of the investments we're making also We're certainly not going to turn down or turn off key investments that we're in the middle of making right now on the product side, the risk management side, getting ready for category four. As Curt and I said earlier, we just plan on trying to calibrate as best we can to the overall PP&R stream that we see. We're certainly not going to turn down or turn off key investments that we're in the middle of making right now on the product side, the risk management side, getting ready for category four. we're certainly not going to turn down or turn off key investments that we're in the middle of making right now on the product side the risk management side getting ready for category four As Curt and I said earlier, we just plan on trying to calibrate as best we can to the overall PP&R stream that we see. as curt and i said earlier we just plan on trying to calibrate as best we can to the overall pp&r stream that we see

Speaker 18: Thanks, Jim. Separately, on the M&A front, I know you prided yourselves on your independence. That said, there's clearly a need for scale that's developing and intensifying in the regional bank space. The regulatory backdrop might actually be improving to M&A. Is there anything that you look at that would lead to Comerica considering either being a buyer and pursuing a transaction on the whole bank side more actively than you may have in the past, or conversely, consider partnering with a larger acquirer? Thanks. Thanks, Jim. thanks jim Separately, on the M&A front, I know you prided yourselves on your independence. separately on the m&a front i know you prided yourselves on your independence That said, there's clearly a need for scale that's developing and intensifying in the regional bank space. that said there's clearly a need for scale that's developing and intensifying in the regional bank space The regulatory backdrop might actually be improving to M&A. the regulatory backdrop might actually be improving to m&a Is there anything that you look at that would lead to Comerica considering either being a buyer and pursuing a transaction on the whole bank side more actively than you may have in the past, or conversely, consider partnering with a larger acquirer? is there anything that you look at that would lead to comerica considering either being a buyer and pursuing a transaction on the whole bank side more actively than you may have in the past or conversely consider partnering with a larger acquirer Thanks. thanks

Speaker 15: I would say that we continue to be focused on our independence. We know we have to earn that right every day and certainly a long history as an institution. We've been a very patient acquirer. Right now, I think the M&A environment is a little bit murky from a go-forward standpoint. We would certainly consider opportunities as they came along that made sense for us, that were aligned with our strategic direction or focus as an organization, would be complementary to our businesses, our geography, etc. That said, the number of institutions that sort of fit that category is fairly small. I think what we can focus on, what we can control is what we've historically done, which is organic growth. I would say that we continue to be focused on our independence. i would say that we continue to be focused on our independence We know we have to earn that right every day and certainly a long history as an institution. we know we have to earn that right every day and certainly a long history as an institution We've been a very patient acquirer. we've been a very patient acquirer Right now, I think the M&A environment is a little bit murky from a go-forward standpoint. right now i think the m&a environment is a little bit murky from a go-forward standpoint We would certainly consider opportunities as they came along that made sense for us, that were aligned with our strategic direction or focus as an organization, would be complementary to our businesses, our geography, etc. That said, the number of institutions that sort of fit that category is fairly small. we would certainly consider opportunities as they came along that made sense for us that were aligned with our strategic direction or focus as an organization would be complementary to our businesses our geography etc that said the number of institutions that sort of fit that category is fairly small I think what we can focus on, what we can control is what we've historically done, which is organic growth. i think what we can focus on what we can control is what we've historically done which is organic growth We've done a good job of that, including expansion into some new markets like the Southeast, but also expansion into our existing markets. As you know, we operate in some of the largest MSAs in the U.S. and just great opportunities for us in markets like Dallas and LA and Houston and other markets that we operate in. Maybe from the broader perspective, there's always noise about M&A in the industry. I've been doing this for over 40 years, and it ebbs and flows. I don't think, personally, that you're going to see a lot of M&A in the next 12-18 months in the industry. I go back to what I said earlier. We've done a good job of that, including expansion into some new markets like the Southeast, but also expansion into our existing markets. we've done a good job of that including expansion into some new markets like the southeast but also expansion into our existing markets As you know, we operate in some of the largest MSAs in the U.S. and just great opportunities for us in markets like Dallas and LA and Houston and other markets that we operate in. as you know we operate in some of the largest msas in the u.s and just great opportunities for us in markets like dallas and la and houston and other markets that we operate in Maybe from the broader perspective, there's always noise about M&A in the industry. maybe from the broader perspective there's always noise about m&a in the industry I've been doing this for over 40 years, and it ebbs and flows. i've been doing this for over 40 years and it ebbs and flows I don't think, personally, that you're going to see a lot of M&A in the next 12-18 months in the industry. i don't think personally that you're going to see a lot of m&a in the next 12-18 months in the industry I go back to what I said earlier. i go back to what i said earlier We are focused really on our independence and believe we've got the right model to be successful going forward with the geographic balance we have, with the product line balance we have, with our commercial orientation, with the strategic investments that we've made, and then all the financial underpinnings: a strong capital position, strong liquidity, and a bank that historically has managed well through credit cycles, especially if we end up facing a credit cycle in the next 12, 18, 24 months. We are focused really on our independence and believe we've got the right model to be successful going forward with the geographic balance we have, with the product line balance we have, with our commercial orientation, with the strategic investments that we've made, and then all the financial underpinnings: a strong capital position, strong liquidity, and a bank that historically has managed well through credit cycles, especially if we end up facing a credit cycle in the next 12, 18, 24 months. we are focused really on our independence and believe we've got the right model to be successful going forward with the geographic balance we have with the product line balance we have with our commercial orientation with the strategic investments that we've made and then all the financial underpinnings a strong capital position strong liquidity and a bank that historically has managed well through credit cycles especially if we end up facing a credit cycle in the next 12 18 24 months

Speaker 18: Got it. Thank you so much. Appreciate it. Got it. got it Thank you so much. thank you so much Appreciate it. appreciate it

Speaker 5: Thank you. The next question is coming from Chris McGratty of KBW. Please go ahead. Thank you. thank you The next question is coming from Chris McGratty of KBW. the next question is coming from chris mcgratty of kbw Please go ahead. please go ahead

Speaker 15: Good morning, Chris. Good morning, Chris. good morning, chris

Speaker 16: Oh, great. Good morning. On the balance sheet, I think in prepared remarks, you talked about waiting for the back half of the year to really step up the reinvestment of the securities portfolio. I guess maybe a little bit inside of that view, what's driving that view, and then what could make you change your view of either stepping up the pace or restructuring the securities book like you did a little bit in the fourth quarter? Oh, great. oh great Good morning. good morning On the balance sheet, I think in prepared remarks, you talked about waiting for the back half of the year to really step up the reinvestment of the securities portfolio. on the balance sheet i think in prepared remarks you talked about waiting for the back half of the year to really step up the reinvestment of the securities portfolio I guess maybe a little bit inside of that view, what's driving that view, and then what could make you change your view of either stepping up the pace or restructuring the securities book like you did a little bit in the fourth quarter? i guess maybe a little bit inside of that view what's driving that view and then what could make you change your view of either stepping up the pace or restructuring the securities book like you did a little bit in the fourth quarter

Speaker 13: Yeah. Good morning, Chris. In terms of how we size our balance sheet and securities positioning, we do keep an eye on our liquidity metrics and just the overall composition of the balance sheet. We do think we're a little high right now relative to the overall size of the securities portfolio, given where the balance sheet is. We are obviously in the very high teens right now. Historically, we've been kind of in that mid to upper teen range. I would actually expect us going forward to be, again, more in the upper teens, not just quite as high as we are today. Yeah. yeah Good morning, Chris. good morning chris In terms of how we size our balance sheet and securities positioning, we do keep an eye on our liquidity metrics and just the overall composition of the balance sheet. in terms of how we size our balance sheet and securities positioning we do keep an eye on our liquidity metrics and just the overall composition of the balance sheet We do think we're a little high right now relative to the overall size of the securities portfolio, given where the balance sheet is. we do think we're a little high right now relative to the overall size of the securities portfolio given where the balance sheet is We are obviously in the very high teens right now. we are obviously in the very high teens right now Historically, we've been kind of in that mid to upper teen range. historically we've been kind of in that mid to upper teen range I would actually expect us going forward to be, again, more in the upper teens, not just quite as high as we are today. i would actually expect us going forward to be again more in the upper teens not just quite as high as we are today We do want to see it come down just a little bit more before we start reinvesting in the MVS. It is probably going to be in the fourth quarter of this year. That is always dependent upon just the overall size of the balance sheet, liquidity needs, characteristics of our deposits. We have a pretty robust way of looking at that. In terms of securities repositioning, that is not something that we are a big fan of in terms of doing it in a big way. We did do a little hygiene in the fourth quarter. We do think a better use of capital is to put it towards share repurchase, both in the second quarter and then hopefully throughout the remainder of the year also. We think that actually returns a higher return to shareholders more so than securities repositioning, where, again, it is just time geography. We do want to see it come down just a little bit more before we start reinvesting in the MVS. we do want to see it come down just a little bit more before we start reinvesting in the mvs It is probably going to be in the fourth quarter of this year. it is probably going to be in the fourth quarter of this year That is always dependent upon just the overall size of the balance sheet, liquidity needs, characteristics of our deposits. that is always dependent upon just the overall size of the balance sheet liquidity needs characteristics of our deposits We have a pretty robust way of looking at that. we have a pretty robust way of looking at that In terms of securities repositioning, that is not something that we are a big fan of in terms of doing it in a big way. in terms of securities repositioning that is not something that we are a big fan of in terms of doing it in a big way We did do a little hygiene in the fourth quarter. we did do a little hygiene in the fourth quarter We do think a better use of capital is to put it towards share repurchase, both in the second quarter and then hopefully throughout the remainder of the year also. we do think a better use of capital is to put it towards share repurchase both in the second quarter and then hopefully throughout the remainder of the year also We think that actually returns a higher return to shareholders more so than securities repositioning, where, again, it is just time geography. we think that actually returns a higher return to shareholders more so than securities repositioning where again, it is just time geography You still end up with the same TBV at the end of the day, whereas we think we can increase and improve tangible book value over time with share repurchase. That is where our focus is going to be. It is going to be more share repurchase and loan growth and supporting that loan growth as opposed to doing any kind of securities repositioning. Having said that, we may choose to do a little bit here and there. Again, it is just normal hygiene and smoothing out maturity schedules and so on. It is not anything that we expect to do in a real big way. You still end up with the same TBV at the end of the day, whereas we think we can increase and improve tangible book value over time with share repurchase. you still end up with the same tbv at the end of the day whereas we think we can increase and improve tangible book value over time with share repurchase That is where our focus is going to be. It is going to be more share repurchase and loan growth and supporting that loan growth as opposed to doing any kind of securities repositioning. that is where our focus is going to be. it is going to be more share repurchase and loan growth and supporting that loan growth as opposed to doing any kind of securities repositioning Having said that, we may choose to do a little bit here and there. having said that we may choose to do a little bit here and there Again, it is just normal hygiene and smoothing out maturity schedules and so on. again, it is just normal hygiene and smoothing out maturity schedules and so on It is not anything that we expect to do in a real big way. it is not anything that we expect to do in a real big way

Speaker 16: Okay. Great. Thank you. My follow-up on your slides where you highlight the higher risk portfolios and those portfolios have not changed. Are there additional portfolios, and maybe this was touched upon earlier, that you're looking at more closely given the tariff situation, given your C&I book? Maybe within C&I, where could we be surprised if we are going to be surprised? Okay. okay Great. great Thank you. thank you My follow-up on your slides where you highlight the higher risk portfolios and those portfolios have not changed. my follow-up on your slides where you highlight the higher risk portfolios and those portfolios have not changed Are there additional portfolios, and maybe this was touched upon earlier, that you're looking at more closely given the tariff situation, given your C&I book? are there additional portfolios and maybe this was touched upon earlier that you're looking at more closely given the tariff situation given your c&i book Maybe within C&I, where could we be surprised if we are going to be surprised? maybe within c&i where could we be surprised if we are going to be surprised

Speaker 1: Yeah, Chris. Obviously, our leverage portfolio in automotive, which are considered higher risk, we have great visibility and really good monitoring and tenured teams monitoring those portfolios. The other ones that are on high alert at this point would be anything related to manufacturing whose inputs are steel and aluminum, wholesale and retail trade, and consumer discretionary. So we're watching all of those. Yeah, Chris. yeah chris Obviously, our leverage portfolio in automotive, which are considered higher risk, we have great visibility and really good monitoring and tenured teams monitoring those portfolios. obviously our leverage portfolio in automotive which are considered higher risk we have great visibility and really good monitoring and tenured teams monitoring those portfolios The other ones that are on high alert at this point would be anything related to manufacturing whose inputs are steel and aluminum, wholesale and retail trade, and consumer discretionary. the other ones that are on high alert at this point would be anything related to manufacturing whose inputs are steel and aluminum wholesale and retail trade and consumer discretionary So we're watching all of those. so we're watching all of those

Speaker 16: Great. Thank you. Great. great Thank you. thank you

Speaker 1: Welcome. Welcome. welcome

Speaker 5: Thank you. The next question is coming from Anthony Elian of JPMorgan. Please go ahead. Thank you. thank you The next question is coming from Anthony Elian of JP Morgan. the next question is coming from anthony elian of jp morgan Please go ahead. please go ahead

Speaker 15: Good morning, Tony. Good morning, Tony. good morning tony

Speaker 4: Hi, everyone. On your outlook slide and for fee income specifically, does it assume an uptick in capital markets income, ex-CVA? More broadly, what are you seeing in that business now? Hi, everyone. hi everyone On your outlook slide and for fee income specifically, does it assume an uptick in capital markets income, ex-CVA? on your outlook slide and for fee income specifically does it assume an uptick in capital markets income ex-cva More broadly, what are you seeing in that business now? more broadly what are you seeing in that business now

Speaker 6: Yeah, Tony, it's Peter. In our capital markets business, it does assume a little bit of an uptick throughout the year. If you think about what our business is made up of, it's our syndications business, what we do in some of our risk products for our customers, so interest rate, FX, and energy. What we also do, we've started an M&A business that is pretty much in its second year of starting to generate positive fee income. We are very excited about what's happening there. We do some work in our capital markets where we participate in bonds and securities offerings, which actually had a really good first quarter. When we add it all together, we feel like 2025 is going to be an uptick year for our capital markets business. Yeah, Tony, it's Peter. yeah tony it's peter In our capital markets business, it does assume a little bit of an uptick throughout the year. in our capital markets business it does assume a little bit of an uptick throughout the year If you think about what our business is made up of, it's our syndications business, what we do in some of our risk products for our customers, so interest rate, FX, and energy. if you think about what our business is made up of it's our syndications business what we do in some of our risk products for our customers so interest rate fx and energy What we also do, we've started an M&A business that is pretty much in its second year of starting to generate positive fee income. what we also do we've started an m&a business that is pretty much in its second year of starting to generate positive fee income We are very excited about what's happening there. we are very excited about what's happening there We do some work in our capital markets where we participate in bonds and securities offerings, which actually had a really good first quarter. we do some work in our capital markets where we participate in bonds and securities offerings which actually had a really good first quarter When we add it all together, we feel like 2025 is going to be an uptick year for our capital markets business. when we add it all together we feel like 2025 is going to be an uptick year for our capital markets business I think between activity levels, what we see out in the market opportunity-wise, that's something that we feel like is going to be a growth business through the year. I think between activity levels, what we see out in the market opportunity-wise, that's something that we feel like is going to be a growth business through the year. i think between activity levels what we see out in the market opportunity-wise that's something that we feel like is going to be a growth business through the year

Speaker 4: Thank you. My follow-up. In the national dealer portfolio, you saw a decline in Q1 of about a couple hundred million dollars. What are you hearing from that segment on potential supply chain impacts and the impacts from tariffs? Thank you. Thank you. thank you My follow-up. my follow-up In the national dealer portfolio, you saw a decline in Q1 of about a couple hundred million dollars. in the national dealer portfolio you saw a decline in q1 of about a couple hundred million dollars What are you hearing from that segment on potential supply chain impacts and the impacts from tariffs? what are you hearing from that segment on potential supply chain impacts and the impacts from tariffs Thank you. thank you

Speaker 6: Yeah, Tony, it's Peter again. I think what we're hearing is a little bit of to be determined. I think that what our customers would say is they've had a great practice run at supply chain with COVID. That was a period where the dealers actually performed really, really well. It will be interesting to see how many cars get sold this year. Yeah, Tony, it's Peter again. yeah tony it's peter again I think what we're hearing is a little bit of to be determined. i think what we're hearing is a little bit of to be determined I think that what our customers would say is they've had a great practice run at supply chain with COVID. i think that what our customers would say is they've had a great practice run at supply chain with covid That was a period where the dealers actually performed really, really well. that was a period where the dealers actually performed really really well It will be interesting to see how many cars get sold this year. it will be interesting to see how many cars get sold this year I mean, I think the outlook is still over 15 million cars to be sold. It will be interesting to see what that ultimately looks like, how much do prices get pushed on to consumers, what sort of car manufacturing looks like through the year. As far as our dealer customers go, I think that they are very prepared to weather this, particularly, again, with what they have been through the last few years. Right now, there is still a little bit of wait and see. As I was describing earlier, I think a lot of our dealer customers are probably, they have definitely taken their foot off of the accelerator and are just kind of cruising to find out how things are going to play out here. I mean, I think the outlook is still over 15 million cars to be sold. i mean i think the outlook is still over 15 million cars to be sold It will be interesting to see what that ultimately looks like, how much do prices get pushed on to consumers, what sort of car manufacturing looks like through the year. it will be interesting to see what that ultimately looks like how much do prices get pushed on to consumers what sort of car manufacturing looks like through the year As far as our dealer customers go, I think that they are very prepared to weather this, particularly, again, with what they have been through the last few years. as far as our dealer customers go i think that they are very prepared to weather this particularly again with what they have been through the last few years Right now, there is still a little bit of wait and see. right now there is still a little bit of wait and see As I was describing earlier, I think a lot of our dealer customers are probably, they have definitely taken their foot off of the accelerator and are just kind of cruising to find out how things are going to play out here. as i was describing earlier i think a lot of our dealer customers are probably they have definitely taken their foot off of the accelerator and are just kind of cruising to find out how things are going to play out here

Speaker 4: Thank you. Thank you. thank you

Speaker 6: Yep. Yep. yep

Speaker 5: Thank you. The next question is coming from Brian Foran of Truist. Please go ahead. Thank you. thank you The next question is coming from Brian Foran of Truist. the next question is coming from brian foran of truist Please go ahead. please go ahead

Speaker 15: Good morning, Brian. Good morning, Brian. good morning brian

Speaker 14: Good morning. I wanted to ask one follow-up on your M&A and then one on loans. On the M&A, I mean, I think we can all appreciate things are uncertain and murky, I think was the word you used. Just on this comment that you do not think there will be a lot of deal activity in the industry, I think you said for 12-18 months, is the murkiness regulatory rules, the economy, interest rates, and the marks, all of the above, maybe just kind of what is underneath the hood that you think is going to hold up deals for the next year or so? Good morning. good morning I wanted to ask one follow-up on your M&A and then one on loans. i wanted to ask one follow-up on your m&a and then one on loans On the M&A, I mean, I think we can all appreciate things are uncertain and murky, I think was the word you used. on the m&a i mean i think we can all appreciate things are uncertain and murky i think was the word you used Just on this comment that you do not think there will be a lot of deal activity in the industry, I think you said for 12-18 months, is the murkiness regulatory rules, the economy, interest rates, and the marks, all of the above, maybe just kind of what is underneath the hood that you think is going to hold up deals for the next year or so? just on this comment that you do not think there will be a lot of deal activity in the industry i think you said for 12-18 months is the murkiness regulatory rules the economy interest rates and the marks all of the above maybe just kind of what is underneath the hood that you think is going to hold up deals for the next year or so

Speaker 15: First of all, this is just my opinion. No one knows for sure. I think it is all of the above that you just mentioned. First of all, this is just my opinion. first of all this is just my opinion No one knows for sure. no one knows for sure I think it is all of the above that you just mentioned. i think it is all of the above that you just mentioned

Speaker 14: Okay. On loan growth, what do you think the leading indicators are most likely to be over the next three to four months on whether this is a pause or kind of builds on itself? Is it commitments, utilization, certain sub-portfolios you think will move first? Just any thoughts like if we are sitting here three months from now, what will be the two or three metrics that will either be showing activity coming back or the pause building on itself? Okay. okay On loan growth, what do you think the leading indicators are most likely to be over the next three to four months on whether this is a pause or kind of builds on itself? on loan growth what do you think the leading indicators are most likely to be over the next three to four months on whether this is a pause or kind of builds on itself Is it commitments, utilization, certain sub-portfolios you think will move first? is it commitments utilization certain sub-portfolios you think will move first Just any thoughts like if we are sitting here three months from now, what will be the two or three metrics that will either be showing activity coming back or the pause building on itself? just any thoughts like if we are sitting here three months from now what will be the two or three metrics that will either be showing activity coming back or the pause building on itself

Speaker 6: Gosh, Brian. I think it probably has a little bit of even the factors that we have talked about throughout the call. I do think what interest rates do and what the outlook there is for the rest of 2025 will be a factor. I think if we continue to stay out of a recession, which we project that we will, I think our outlook, we feel really, really good about it. To the extent that macroeconomy continues to move in the direction it's moving, I think that's going to be a real positive for us across our geographies. Gosh, Brian. gosh brian I think it probably has a little bit of even the factors that we have talked about throughout the call. i think it probably has a little bit of even the factors that we have talked about throughout the call I do think what interest rates do and what the outlook there is for the rest of 2025 will be a factor. i do think what interest rates do and what the outlook there is for the rest of 2025 will be a factor I think if we continue to stay out of a recession, which we project that we will, I think our outlook, we feel really, really good about it. i think if we continue to stay out of a recession which we project that we will i think our outlook we feel really really good about it To the extent that macroeconomy continues to move in the direction it's moving, I think that's going to be a real positive for us across our geographies. to the extent that macroeconomy continues to move in the direction it's moving i think that's going to be a real positive for us across our geographies I think, too, when I look at all of our businesses, I think probably, as Melinda discussed a little bit earlier, we're watching Michigan middle market, the auto situation there more than any. That's probably where we've seen, at least in our middle market businesses, the slowdown has occurred mostly in Michigan versus what we've seen in the Southeast, Texas, and California. I think, too, when I look at all of our businesses, I think probably, as Melinda discussed a little bit earlier, we're watching Michigan middle market, the auto situation there more than any. i think too when i look at all of our businesses i think probably as melinda discussed a little bit earlier we're watching michigan middle market the auto situation there more than any That's probably where we've seen, at least in our middle market businesses, the slowdown has occurred mostly in Michigan versus what we've seen in the Southeast, Texas, and California. that's probably where we've seen at least in our middle market businesses the slowdown has occurred mostly in michigan versus what we've seen in the southeast texas and california I think if we are sitting here next quarter and a number of the factors that we've got going on in the economy continue to level out, then I think that the outlook we have, we feel really good about. As Jim said, there may be some upside to that if things continue. If things were to go the other direction and you started to see the economy pull back stronger, you started to see unemployment tick up, you started to see interest rates going up instead of down, I think all of those are going to be a real headwind to loan demand in the second half of the year and really into 2026. Those are probably the big variables that we're watching. I think if we are sitting here next quarter and a number of the factors that we've got going on in the economy continue to level out, then I think that the outlook we have, we feel really good about. i think if we are sitting here next quarter and a number of the factors that we've got going on in the economy continue to level out then i think that the outlook we have we feel really good about As Jim said, there may be some upside to that if things continue. as jim said there may be some upside to that if things continue If things were to go the other direction and you started to see the economy pull back stronger, you started to see unemployment tick up, you started to see interest rates going up instead of down, I think all of those are going to be a real headwind to loan demand in the second half of the year and really into 2026. if things were to go the other direction and you started to see the economy pull back stronger you started to see unemployment tick up you started to see interest rates going up instead of down i think all of those are going to be a real headwind to loan demand in the second half of the year and really into 2026 Those are probably the big variables that we're watching. those are probably the big variables that we're watching

Speaker 14: I appreciate that. Thank you. I appreciate that. i appreciate that Thank you. thank you

Speaker 6: Thanks, Brian. Thanks, Brian. thanks brian

Speaker 5: Thank you. The next question is coming from Ben Gerlinger of Citi. Please go ahead. Thank you. thank you The next question is coming from Ben Gerlinger of Citi. the next question is coming from ben gerlinger of citi Please go ahead. please go ahead

Speaker 15: Morning, Ben. Morning, Ben. morning ben

Speaker 2: Good morning. When you think about just kind of commentary, I know you kind of gave a geographic representation of Michigan versus Texas. When you think about just growth itself, some of your competition has grown a little bit. I'm sure some of that is just market share gain. When you look at pricing or covenants, are you seeing anything in the market that would kind of lead an indicator on kind of their growth? Not to say name names or anything, just kind of trying to think of the competitive market itself. Are people trying to lead with rate in order to kind of? Good morning. good morning When you think about just kind of commentary, I know you kind of gave a geographic representation of Michigan versus Texas. when you think about just kind of commentary i know you kind of gave a geographic representation of michigan versus texas When you think about just growth itself, some of your competition has grown a little bit. when you think about just growth itself some of your competition has grown a little bit I'm sure some of that is just market share gain. i'm sure some of that is just market share gain When you look at pricing or covenants, are you seeing anything in the market that would kind of lead an indicator on kind of their growth? when you look at pricing or covenants are you seeing anything in the market that would kind of lead an indicator on kind of their growth Not to say name names or anything, just kind of trying to think of the competitive market itself. not to say name names or anything just kind of trying to think of the competitive market itself Are people trying to lead with rate in order to kind of? are people trying to lead with rate in order to kind of

Speaker 15: Ben, it's a little hard to hear you. Ben, it's a little hard to hear you. ben it's a little hard to hear you

Speaker 6: I can hear you. I can hear you. i can hear you

Speaker 2: Did you hear the question? Did you hear the question? did you hear the question

Speaker 6: Yeah, I can hear you. Yeah. Ben, we're having a little trouble hearing you.I think that you're asking about the competitive environment and whether or not rates or credit are impacting the competition. I think that's your question. At least that's what I'm going to answer based on what we thought we heard you say. I would say that it is extremely competitive right now. I think that across all of our geographies, we compete in our businesses. We compete with lots of different institutions. I continue to feel like we want to stay really, really focused on being responsible on credit. I will tell you, I think pricing in the industry has probably gotten a little more aggressive than it was 90 days ago. Again, I think each customer and each relationship warrants different decisions that you have to make at any one time. Yeah, I can hear you. yeah i can hear you Yeah. yeah Ben, we're having a little trouble hearing you. ben we're having a little trouble hearing you I think that you're asking about the competitive environment and whether or not rates or credit are impacting the competition. i think that you're asking about the competitive environment and whether or not rates or credit are impacting the competition I think that's your question. i think that's your question At least that's what I'm going to answer based on what we thought we heard you say. at least that's what i'm going to answer based on what we thought we heard you say I would say that it is extremely competitive right now. i would say that it is extremely competitive right now I think that across all of our geographies, we compete in our businesses. i think that across all of our geographies we compete in our businesses We compete with lots of different institutions. we compete with lots of different institutions I continue to feel like we want to stay really, really focused on being responsible on credit. i continue to feel like we want to stay really really focused on being responsible on credit I will tell you, I think pricing in the industry has probably gotten a little more aggressive than it was 90 days ago. i will tell you i think pricing in the industry has probably gotten a little more aggressive than it was 90 days ago Again, I think each customer and each relationship warrants different decisions that you have to make at any one time. again i think each customer and each relationship warrants different decisions that you have to make at any one time I feel very confident in our ability to win on pricing. I think that the value we provide to our customers ends up helping us win the business. I also do think that the banks in general continue to be pretty responsible, quite candidly, across the board in a lot of these businesses when it comes to credit. Pricing is probably a bigger factor today than, per se, credit statistics that you see being put out. That is what we think you asked, Ben. I feel very confident in our ability to win on pricing. i feel very confident in our ability to win on pricing I think that the value we provide to our customers ends up helping us win the business. i think that the value we provide to our customers ends up helping us win the business I also do think that the banks in general continue to be pretty responsible, quite candidly, across the board in a lot of these businesses when it comes to credit. i also do think that the banks in general continue to be pretty responsible quite candidly across the board in a lot of these businesses when it comes to credit Pricing is probably a bigger factor today than, per se, credit statistics that you see being put out. pricing is probably a bigger factor today than per se credit statistics that you see being put out That is what we think you asked, Ben. that is what we think you asked ben

Speaker 15: Thank you, Ben. Thank you, Ben. thank you ben

Speaker 5: Thank you. We will move on to the next question. Our next question is coming from Terry McEvoy of Stephens. Please go ahead. Thank you. thank you We will move on to the next question. you we will move on to the next question Our next question is coming from Terry McEvoy of Stephens. our next question is coming from terry mcevoy of stephens Please go ahead. please go ahead

Speaker 15: Morning, Terry. Morning, Terry. morning terry

Speaker 7: Hi, good morning. Just one question left on my list. If I look at average loan growth in the other markets, it increased from $8.5 billion- $8.9 billion. Could you maybe update us on the progress in the Southeast and the Mountain West region where you've been making investments? Maybe I'm assuming that growth was in those two regions. Hi, good morning. hi good morning Just one question left on my list. just one question left on my list If I look at average loan growth in the other markets, it increased from $8.5 billion- $8.9 billion. if i look at average loan growth in the other markets it increased from $8.5 billion- $8.9 billion Could you maybe update us on the progress in the Southeast and the Mountain West region where you've been making investments? could you maybe update us on the progress in the southeast and the mountain west region where you've been making investments Maybe I'm assuming that growth was in those two regions. maybe i'm assuming that growth was in those two regions

Speaker 6: Yeah. When we say other markets, it could actually also include some of our businesses that we have that we have offices in New York. We have offices in Boston, up in Washington, so sort of around the country. I'll answer your question in general about the Southeast. It's a great story for us. We expect loan growth this year down there to be just fantastic, north of 50%. We continue to add really, really good relationships. We're continuing to add bankers in the market all the way from Florida to North Carolina. That is very exciting for us. When we talk about the Mountain West, we're also very excited there. Yeah. yeah When we say other markets, it could actually also include some of our businesses that we have that we have offices in New York. when we say other markets it could actually also include some of our businesses that we have that we have offices in new york We have offices in Boston, up in Washington, so sort of around the country. we have offices in boston up in washington so sort of around the country I'll answer your question in general about the Southeast. i'll answer your question in general about the southeast It's a great story for us. it's a great story for us We expect loan growth this year down there to be just fantastic, north of 50%. we expect loan growth this year down there to be just fantastic north of 50% We continue to add really, really good relationships. we continue to add really really good relationships We're continuing to add bankers in the market all the way from Florida to North Carolina. we're continuing to add bankers in the market all the way from florida to north carolina That is very exciting for us. that is very exciting for us When we talk about the Mountain West, we're also very excited there. when we talk about the mountain west we're also very excited there We've hired some new leadership to lead that whole region. We've hired new leadership in our Phoenix market. We are trying to add bankers in both Denver and Phoenix. We are very excited about what those opportunities are as well. When we say other markets, too, it could be a lot of our we are a national bank, even though we get described often as a regional bank. We play around the entire country. We have customers in many, many states and cities. Those could be some of the other markets that are included there as well. We've hired some new leadership to lead that whole region. we've hired some new leadership to lead that whole region We've hired new leadership in our Phoenix market. we've hired new leadership in our phoenix market We are trying to add bankers in both Denver and Phoenix. we are trying to add bankers in both denver and phoenix We are very excited about what those opportunities are as well. we are very excited about what those opportunities are as well When we say other markets, too, it could be a lot of our we are a national bank, even though we get described often as a regional bank. when we say other markets too it could be a lot of our we are a national bank even though we get described often as a regional bank We play around the entire country. we play around the entire country We have customers in many, many states and cities. we have customers in many many states and cities Those could be some of the other markets that are included there as well. those could be some of the other markets that are included there as well

Speaker 7: Great. Thanks for that. Great. great Thanks for that. thanks for that

Speaker 6: Yep. Thanks, Terry. Yep. yep Thanks, Terry. thanks terry

Speaker 5: Thank you. The next question is coming from Nick Holowko of UBS. Please go ahead. Thank you. thank you The next question is coming from Nick Holowko of UBS. the next question is coming from nick holowko of ubs Please go ahead. please go ahead

Speaker 15: Morning, Nick. Morning, Nick. morning nick

Speaker 19: Good morning. Thanks for taking my question. Maybe just first one on expenses. I know last quarter and the past, you've talked about working towards getting to that high 50s efficiency ratio over time in terms of reaching your ROTCE targets over the next couple of years. Just looking at the expense outlook and pairing that with the revenues, it seems like it's still pointing to an upper 60% efficiency ratio type range in the second half. How should we think about the timeline of improving that efficiency ratio and when you think you can get back to that high 50s type range? Good morning. good morning Thanks for taking my question. thanks for taking my question Maybe just first one on expenses. maybe just first one on expenses I know last quarter and the past, you've talked about working towards getting to that high 50s efficiency ratio over time in terms of reaching your ROTCE targets over the next couple of years. i know last quarter and the past you've talked about working towards getting to that high 50s efficiency ratio over time in terms of reaching your rotce targets over the next couple of years Just looking at the expense outlook and pairing that with the revenues, it seems like it's still pointing to an upper 60% efficiency ratio type range in the second half. just looking at the expense outlook and pairing that with the revenues it seems like it's still pointing to an upper 60% efficiency ratio type range in the second half How should we think about the timeline of improving that efficiency ratio and when you think you can get back to that high 50s type range? how should we think about the timeline of improving that efficiency ratio and when you think you can get back to that high 50s type range

Speaker 13: Yeah. Good morning, Nick. It's Jim. Yeah, we are expecting ourselves to move back into the 50% range at some point. That won't be real near term. I will say, with all this uncertainty, I think it's hard to make any kind of commitment right now until things become a little more clear in terms of where the economy is headed. We do think that the key to achieving that ratio and moving into the 50s, we think first and foremost, it's going to be driven by revenue. Yeah. yeah Good morning, Nick. good morning nick It's Jim. it's jim Yeah, we are expecting ourselves to move back into the 50% range at some point. yeah we are expecting ourselves to move back into the 50% range at some point That won't be real near term. that won't be real near term I will say, with all this uncertainty, I think it's hard to make any kind of commitment right now until things become a little more clear in terms of where the economy is headed. i will say with all this uncertainty i think it's hard to make any kind of commitment right now until things become a little more clear in terms of where the economy is headed We do think that the key to achieving that ratio and moving into the 50s, we think first and foremost, it's going to be driven by revenue. we do think that the key to achieving that ratio and moving into the 50s we think first and foremost it's going to be driven by revenue As you kind of model this out, it's really hard to expense save yourself into the 50s. I mean, you can do that for any one year or two and make a little bit of progress. If you start compounding that backwards, you really start starving the bank of the investments it needs to make. You get diminishing returns at some point. Conversely, we like what we have going in terms of revenue initiatives. As you kind of model this out, it's really hard to expense save yourself into the 50s. as you kind of model this out it's really hard to expense save yourself into the 50s I mean, you can do that for any one year or two and make a little bit of progress. i mean you can do that for any one year or two and make a little bit of progress If you start compounding that backwards, you really start starving the bank of the investments it needs to make. if you start compounding that backwards you really start starving the bank of the investments it needs to make You get diminishing returns at some point. you get diminishing returns at some point Conversely, we like what we have going in terms of revenue initiatives. conversely we like what we have going in terms of revenue initiatives We talked about some of those at the big investor conference in March. We do think that revenue has the potential to compound itself in an upward fashion over time. We are very much focused on a number of revenue initiatives, which, again, we laid out at that investor conference. We will be talking more about some of those revenue initiatives as time goes on. Having said that, expenses are part of the equation. We do need to be diligent in terms of how we manage expenses. We want to make sure that where we are spending money, it is for investment and revenue-oriented activities and making sure that we are managing those as tight as we can, especially the discretionary expenses. We have our eyes on both sides of the equation. We talked about some of those at the big investor conference in March. we talked about some of those at the big investor conference in march We do think that revenue has the potential to compound itself in an upward fashion over time. we do think that revenue has the potential to compound itself in an upward fashion over time We are very much focused on a number of revenue initiatives, which, again, we laid out at that investor conference. We will be talking more about some of those revenue initiatives as time goes on. we are very much focused on a number of revenue initiatives which again we laid out at that investor conference. we will be talking more about some of those revenue initiatives as time goes on Having said that, expenses are part of the equation. having said that expenses are part of the equation We do need to be diligent in terms of how we manage expenses. we do need to be diligent in terms of how we manage expenses We want to make sure that where we are spending money, it is for investment and revenue-oriented activities and making sure that we are managing those as tight as we can, especially the discretionary expenses. we want to make sure that where we are spending money, it is for investment and revenue-oriented activities and making sure that we are managing those as tight as we can especially the discretionary expenses We have our eyes on both sides of the equation. we have our eyes on both sides of the equation Really, revenue over the next two, three, four years, that's really what we think is going to start moving our efficiency ratio in the right direction. Really, revenue over the next two, three, four years, that's really what we think is going to start moving our efficiency ratio in the right direction. really revenue over the next two three four years that's really what we think is going to start moving our efficiency ratio in the right direction

Speaker 19: Understood. Thank you. Maybe just one last one on the loan growth outlook. Obviously, the backdrop kind of is what it is. You highlighted the environmental services as being relatively more robust. Could you just remind us what sort of drives the strength in that business and how long you think it can continue to sort of outperform here in this softer growth backdrop? Thank you. Understood. understood Thank you. thank you Maybe just one last one on the loan growth outlook. maybe just one last one on the loan growth outlook Obviously, the backdrop kind of is what it is. obviously the backdrop kind of is what it is You highlighted the environmental services as being relatively more robust. you highlighted the environmental services as being relatively more robust Could you just remind us what sort of drives the strength in that business and how long you think it can continue to sort of outperform here in this softer growth backdrop? could you just remind us what sort of drives the strength in that business and how long you think it can continue to sort of outperform here in this softer growth backdrop Thank you. thank you

Speaker 6: Yeah, Nick. In the appendix on slide 37 is a breakout of that business. I think we really talk about two verticals there. Our waste management business, which continues to just grow with the economy, with population. I mean, it's a fantastic growth business for us. Yeah, Nick. yeah nick In the appendix on slide 37 is a breakout of that business. in the appendix on slide 37 is a breakout of that business I think we really talk about two verticals there. i think we really talk about two verticals there Our waste management business, which continues to just grow with the economy, with population. our waste management business which continues to just grow with the economy with population I mean, it's a fantastic growth business for us. i mean it's a fantastic growth business for us We have also started our renewables energy business that we show on the environmental services slide, which continues to be a real growth opportunity for us as well. I think when you look at that on an outlook quarter-by-quarter basis, I think we are going to continue to see just nice, steady growth in really both of those verticals. We are really excited about continuing to add people and customers in that space. We have also started our renewables energy business that we show on the environmental services slide, which continues to be a real growth opportunity for us as well. we have also started our renewables energy business that we show on the environmental services slide which continues to be a real growth opportunity for us as well I think when you look at that on an outlook quarter-by-quarter basis, I think we are going to continue to see just nice, steady growth in really both of those verticals. i think when you look at that on an outlook quarter-by-quarter basis i think we are going to continue to see just nice steady growth in really both of those verticals We are really excited about continuing to add people and customers in that space. we are really excited about continuing to add people and customers in that space

Speaker 19: Got it. Thank you very much. Got it. got it Thank you very much. thank you very much

Speaker 6: Thanks, Nick. Thanks, Nick. thanks nick

Speaker 5: Thank you. The next question is coming from Bill Carcache of Wolfe Research. Please go ahead. Thank you. thank you The next question is coming from Bill Carcache of Wolfe Research. the next question is coming from bill carcache of wolfe research Please go ahead. please go ahead

Speaker 15: Morning, Bill. Good morning. Morning, Bill. morning bill Good morning. good morning

Speaker 12: Good morning. Just a quick follow-up on your comments around non-interest-bearing deposit growth potentially accelerating in the second half of the year. I believe you said you would be willing to pay up for those. Would that be through earnings credits? If you could just unpack that a little bit, it would be helpful. Good morning. Just a quick follow-up on your comments around non-interest-bearing deposit growth potentially accelerating in the second half of the year. good morning. just a quick follow-up on your comments around non-interest-bearing deposit growth potentially accelerating in the second half of the year I believe you said you would be willing to pay up for those. i believe you said you would be willing to pay up for those Would that be through earnings credits? would that be through earnings credits If you could just unpack that a little bit, it would be helpful. if you could just unpack that a little bit it would be helpful

Speaker 13: Yeah, Bill, let me clarify that. When I talked about being willing to pay up for deposits, that was interest-bearing deposits. We do expect to see a small tick up in non-interest-bearing as we move through the latter part of the year. The greater proportion of our deposit growth that we're projecting will be interest-bearing deposits. Now, broker deposits will continue to come down. We still think that non-interest-bearing percentage will stay in the upper 30s. In terms of our core deposits, I believe we'll see more growth on the interest-bearing side as we have a number of initiatives in place. In many cases, we'll actually garner those deposits at pay rates similar to what we have today. In some cases, we may be willing to pay up for those deposits. Yeah, Bill, let me clarify that. yeah bill let me clarify that When I talked about being willing to pay up for deposits, that was interest-bearing deposits. when i talked about being willing to pay up for deposits that was interest-bearing deposits We do expect to see a small tick up in non-interest-bearing as we move through the latter part of the year. we do expect to see a small tick up in non-interest-bearing as we move through the latter part of the year The greater proportion of our deposit growth that we're projecting will be interest-bearing deposits. the greater proportion of our deposit growth that we're projecting will be interest-bearing deposits Now, broker deposits will continue to come down. now broker deposits will continue to come down We still think that non-interest-bearing percentage will stay in the upper 30s. we still think that non-interest-bearing percentage will stay in the upper 30s In terms of our core deposits, I believe we'll see more growth on the interest-bearing side as we have a number of initiatives in place. in terms of our core deposits i believe we'll see more growth on the interest-bearing side as we have a number of initiatives in place In many cases, we'll actually garner those deposits at pay rates similar to what we have today. in many cases we'll actually garner those deposits at pay rates similar to what we have today In some cases, we may be willing to pay up for those deposits. in some cases we may be willing to pay up for those deposits Again, happy to do so to the extent we can be successful in gathering deposits. Hopefully that helps clarify it. Again, happy to do so to the extent we can be successful in gathering deposits. again happy to do so to the extent we can be successful in gathering deposits Hopefully that helps clarify it. hopefully that helps clarify it

Speaker 15: Yeah. And Bill, just to emphasize there, that's not a strategy of ours to pay up for interest-bearing deposits. It's more just what we think the market might give us as the year sort of plays out and things sort of settle down. Now, if we sort of go through a recession, etc., that may be a different story as we typically have seen deposits grow for us, especially in the non-interest-bearing category. Yeah. yeah And Bill, just to emphasize there, that's not a strategy of ours to pay up for interest-bearing deposits. and bill just to emphasize there that's not a strategy of ours to pay up for interest-bearing deposits It's more just what we think the market might give us as the year sort of plays out and things sort of settle down. it's more just what we think the market might give us as the year sort of plays out and things sort of settle down Now, if we sort of go through a recession, etc., that may be a different story as we typically have seen deposits grow for us, especially in the non-interest-bearing category. now if we sort of go through a recession etc that may be a different story as we typically have seen deposits grow for us especially in the non-interest-bearing category

Speaker 12: Understood. That's very helpful. Thank you for the clarification. If I may, since we're on the topic, could you elaborate a little bit on how you're thinking about the longer-term trajectory of your sort of non-interest-bearing deposit growth sort of under different macro scenarios? Maybe it's been an important part of the Comerica story historically. And as we sort of look to sort of a more normalized environment in the years ahead, how do you envision that part of the business? Would be helpful. Understood. understood That's very helpful. that's very helpful Thank you for the clarification. thank you for the clarification If I may, since we're on the topic, could you elaborate a little bit on how you're thinking about the longer-term trajectory of your sort of non-interest-bearing deposit growth sort of under different macro scenarios? if i may since we're on the topic could you elaborate a little bit on how you're thinking about the longer-term trajectory of your sort of non-interest-bearing deposit growth sort of under different macro scenarios Maybe it's been an important part of the Comerica story historically. maybe it's been an important part of the comerica story historically And as we sort of look to sort of a more normalized environment in the years ahead, how do you envision that part of the business? and as we sort of look to sort of a more normalized environment in the years ahead how do you envision that part of the business Would be helpful. would be helpful

Speaker 13: Yeah, Bill. Non-interest-bearing deposits are a very key part of our business model, as you point out. It's probably the biggest X factor, especially in this rate environment for 2025 that we have. We are watching those very closely. We do think in this higher rate environment, customers are a little more sensitized to their mix of deposits. That has put some pressure on non-interest-bearing deposits. We do think that if and when rates start to lower a little bit, we'll actually see that as a positive tailwind to growing non-interest-bearing deposits as customers become a little less sensitive to how they store their mix of deposits. Yeah, Bill. yeah bill Non-interest-bearing deposits are a very key part of our business model, as you point out. non-interest-bearing deposits are a very key part of our business model as you point out It's probably the biggest X factor, especially in this rate environment for 2025 that we have. it's probably the biggest x factor especially in this rate environment for 2025 that we have We are watching those very closely. we are watching those very closely We do think in this higher rate environment, customers are a little more sensitized to their mix of deposits. we do think in this higher rate environment customers are a little more sensitized to their mix of deposits That has put some pressure on non-interest-bearing deposits. that has put some pressure on non-interest-bearing deposits We do think that if and when rates start to lower a little bit, we'll actually see that as a positive tailwind to growing non-interest-bearing deposits as customers become a little less sensitive to how they store their mix of deposits. we do think that if and when rates start to lower a little bit we'll actually see that as a positive tailwind to growing non-interest-bearing deposits as customers become a little less sensitive to how they store their mix of deposits We also expect to the extent we have some inflation, which it looks like we may continue to have some inflationary environment with us, that does result ultimately in overall working capital levels needing to be larger for our customers. We would expect as the nominal economy grows that we would see non-interest-bearing deposits grow proportionately to that. Of course, we're doing a lot on the product side with our Treasury Management Services, which are key to garnering additional non-interest-bearing deposits. Very much a focus of ours from a product development standpoint. We also think just economic trends will also be beneficial to non-interest-bearing deposits. It has been a little bit of a tough go on non-interest-bearing deposits the last couple of years. We do see some tailwinds going forward in the future. We also expect to the extent we have some inflation, which it looks like we may continue to have some inflationary environment with us, that does result ultimately in overall working capital levels needing to be larger for our customers. we also expect to the extent we have some inflation which it looks like we may continue to have some inflationary environment with us that does result ultimately in overall working capital levels needing to be larger for our customers We would expect as the nominal economy grows that we would see non-interest-bearing deposits grow proportionately to that. we would expect as the nominal economy grows that we would see non-interest-bearing deposits grow proportionately to that Of course, we're doing a lot on the product side with our Treasury Management Services, which are key to garnering additional non-interest-bearing deposits. of course we're doing a lot on the product side with our treasury management services which are key to garnering additional non-interest-bearing deposits Very much a focus of ours from a product development standpoint. very much a focus of ours from a product development standpoint We also think just economic trends will also be beneficial to non-interest-bearing deposits. we also think just economic trends will also be beneficial to non-interest-bearing deposits It has been a little bit of a tough go on non-interest-bearing deposits the last couple of years. it has been a little bit of a tough go on non-interest-bearing deposits the last couple of years We do see some tailwinds going forward in the future. we do see some tailwinds going forward in the future

Speaker 12: That's very helpful. Thank you for taking my questions. That's very helpful. that's very helpful Thank you for taking my questions. thank you for taking my questions

Speaker 15: Thank you, Bill. Thank you, Bill. thank you bill

Speaker 5: Thank you. At this time, I'd like to turn the floor back over to Curt Farmer, President, Chairman, and Chief Executive Officer, for closing comments. Thank you. thank you At this time, I'd like to turn the floor back over to Curt Farmer, President, Chairman, and Chief Executive Officer, for closing comments. at this time i'd like to turn the floor back over to curt farmer president chairman and chief executive officer for closing comments

Speaker 15: As always, thank you for your ongoing interest in Comerica and for joining our call today. I hope you have a nice day. As always, thank you for your ongoing interest in Comerica and for joining our call today. as always thank you for your ongoing interest in comerica and for joining our call today I hope you have a nice day. i hope you have a nice day

Speaker 5: Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day. Ladies and gentlemen, thank you for your participation. ladies and gentlemen thank you for your participation This concludes today's event. this concludes today's event You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day. you may disconnect your lines or log off the webcast at this time and enjoy the rest of your day