REGIONS FINANCIAL CORP — Call Transcript 2026

Okay. Up next we have Regions Financial, and I'm delighted to have with us today John Turner, Chairman, President, and CEO. Anil Chadha, CFO of Regions Financial. Thanks so much for joining us. Thank you for having us. Okay. I've been starting a lot of these conversations with an update on the environment. What are you guys seeing in your Southeastern footprint? Are you seeing any impacts maybe on the negative side or on the positive side as we think about high energy prices here? You're aware, I guess we operate in 15 states, but the bulk of our business is seven Southeastern states and Texas, and 90% plus of our deposits. As I've gotten across our markets talking to customers, the topic of oil prices and the war really doesn't come up unless I bring it up. I think businesses generally are well-positioned. Their balance sheets are strong. They have good liquidity, and they've been through so much over the last five, six years with just uncertainty, changes, dealing with COVID and the things that followed that most of them are just focused on how they operate their business and operate it well. I'd characterize businesses as positive. They're making investments. We're seeing job growth either through new job announcements, new investments, or extensions of existing projects and things. Unemployment rates are fairly low in our markets. The consumer is very healthy. We see consumer spending debit transactions up about 4%, dollar value spend up 6% on credit cards, up 6% transactions, and spend up about 8%. Consumers are spending, they feel confident, and generally, I'd say the economy is good. That translates well in the corporate and in small business side as well. It does. Yeah. We're seeing good stability across the wholesale sector generally. I think that feeds nicely into loan growth. We've seen a clear positive inflection on loan growth over the last couple of quarters. You had some non-core runoff previously that's now largely behind you. Talk about where you're seeing the strongest growth on the commercial side right now. Yeah. We had nice growth in the first quarter, it was split between about half of it was increases in line utilization. The other half was new originations to support capital investments of different kinds. It also was bifurcated about half between our middle market commercial banking business and half in our corporate banking group, some of our specialized industries functions. Specifically, we saw growth in the energy sector, power and utilities, healthcare, our asset-based lending business, our REIT business all demonstrated nice growth during the quarter. As we think about what's been happening since the end of last quarter, as you think about the line utilization on the middle market side and the corporate side, has that continued? Has that held up? Line utilization's stable, pipelines continue to grow. I'd say yes, the momentum is holding up. Okay. Perfect. The other side of that is, increasingly we're hearing anecdotes of maybe loan spreads tightening in certain geographies. Are you seeing any of that? Is there any risk of any of that right now? Yeah. We saw some loan spread tightening in the first quarter. I'd say, one, it's been broad across the markets. We've seen it in credit markets broadly. We also, within our portfolio, have had some mix shifts as well, which has contributed to lower loan yields. It's better credit quality, but lower yields as a result. Credit spreads being tight has been kind of a theme throughout this year. We actually took advantage of that and capitalized on issuing some unsecured debt over the past couple of weeks, which helps us from an overall funding standpoint. We think credit spreads will remain tight probably for the next few months, but maybe in the latter part of the year you'll see some relief on that. Tighter credit spreads, but I guess better- Better credit quality ...risk adjustment to this now. Yeah. Profitability looks good. Got it. Okay. One of the other areas is loan spreads tighten, maybe a little bit of that is competition. You're seeing some competition on the deposit side as well across the industry. How are you thinking about, especially as you're in the Southeast, it's a highly competitive market, it's a highly sought-after market as well. How are you thinking about defending and even maybe growing market share in that region? First of all, we enjoy the benefit of good liquidity, so we're operating at about a 74% loan-to-deposit ratio today. Our customer base is generally a mass market customer. If you kind of bifurcate our deposits between the wholesale bank, our commercial banking business built around primarily middle-market companies that we've been doing business with for a long time in markets that we know well. 67% of our commercial banking relationships have treasury management relationships with us, there's a real stability in that deposit base, which we enjoy. On the consumer side, the average customer deposit's about $5,400. The average checking account balance is about $3,200, and the mean balance, $900. We have, I would say again, a sort of a blue collar mass market deposit base. 47% of our checking account customers have a savings account with us. Only 8% have a money market account. These are people that are working class that don't have a lot of investable dollars. What we're competing for is the operating accounts of small businesses and mid-sized businesses, and the household accounts of consumers. Day in and day out, if we're winning those opportunities, we believe we can continue to grow our business, not only defend the business we have, but grow the business in the markets that we serve. When we need to compete on rate, we can, that's not something that we choose to do, that we have to do, We've built our business around just trying to manage that core deposit base really well. Manan, I'd add that competition in the Southeast has been fierce for years now. There's new entrants coming in, we have a well-established playbook, if you will, as to how to be proactive when we anticipate competition coming in. We know where they're going to open branch locations. We know our customers in those locations, so we can be proactive in terms of reaching out to them. To John's point, we win when we grow household accounts and operating accounts. The key to us is to make sure we're making investments in those platforms such that our customers want to stay on that, we can bring more customers on the platform. That's where we win. I think you mentioned, was it 5,400 was the average- Deposit count. Yeah deposit account, 900 was the median? Fairly low deposit- Right balances per account. I think one of the areas where there is a debate going on right now is whether eventually, maybe not right now, but eventually agentic AI, stablecoins, maybe tokenized money market funds might drive even more yield-seeking behavior with some of the smaller balance accounts as well. Is that something that you're thinking about right now? How are you thinking through that? Well, we're thinking about it because we keep getting asked about it. I think generally, when you think about our customer, they maintain in their account about 1.6 times what they spend every month. They have very little investable excess balances. Most have, if they have savings, it's for an emergency, and that's it. I do believe there may come a time when agents do help people search for best rate and move money around, and people have confidence in that capability, and they're willing to let a bot move their money around. I don't think that's going to impact our customer base anytime soon. One, I don't know that our customer base would be willing to accept that sort of innovation. Two, more importantly, they just don't have the excess liquidity to rely on that service. Just as a gauge for our customer, even across our wealth space, we opened up a couple crypto ETFs a few months back for our wealth customers, and we've seen less than $200,000 of investment into it. It's just not who our customer base is right now. Got it. Anything on the corporate side there? I guess some of these deposits are already fully optimized, but any concerns there? Anything you're thinking through there? Not me. Okay. Yeah. John mentioned earlier, treasury management's a key. Having that relationship is really important to that customer, and so we think we have to continue to invest in that. That's what they're looking for is efficiency of payments, and that's where our focus is. Got it. Okay, maybe we can bring this a little bit more near term. Anil, are there any updates that you'd like to share on the second quarter and what you're seeing so far? Yeah. We're pleased with how the year's progressing. I'll start, kind of our longer term guidance is unchanged across each of the areas. We expect to see low single-digit loan and deposit growth. Fee revenue, NII, all expected to perform full year as we'd expect. With respect to short-term guidance, we guided NII to be up 2% quarter-over-quarter. That looks to be intact. With respect to capital markets, we've given a range of 90-105. We pointed to the low end of the range. As we look at the businesses within our capital markets, real estate capital markets is a rate-dependent business, and with rates being a bit elevated here, we're seeing a little bit of a slowdown in activity in that part of the business. I'd say second quarter will probably look more like the first quarter when it comes to capital markets. We think that'll rebound into the second half of the year. Got it. Any impact specifically as we think about the belly of the curve being higher, the long end of the curve being higher on NIM and NII? How are you thinking about those pieces? Yeah. We're neutral to short-term rates. Longer-term rates, as they tick up, we'll benefit from that. Our margin was 367 in the first quarter. We expect to be in the mid-360s in the second quarter and grow into the balance of the year, exit kind of in the low 370s. For us, with higher rates, we benefit with fixed asset repricing turnover. Deposit competition remaining kind of steady as it has been, and maintaining that will be key. We feel good about the path of the NIM and where we're positioned relative to what we're seeing in the yield curve. You still feel good about the path Yeah to that low mid 370s Yes number by the end of this year? Yep. Okay, perfect. Maybe we'll touch on the real estate capital markets side because that's another aspect that you mentioned. Your point, it is a more difficult environment as rates move higher. As you look across the business today, and as you think about where the rebound will eventually come from, where do you see areas where you're seeing the strongest momentum? Our business sort of breaks down each part making an almost equal contribution. Where we have, I'd say, stalled out a little, or we don't have as much momentum as we would like is in the M&A advisory space, where we think we'd like to have some more capabilities, frankly. That business has not been growing over the last 24 months as much as we would like. Separately, in the real estate capital markets business, we've made really good investments there. It's a nice business. It has been impacted some by rising rates as we see customers tend to want to extend and renew rather than access the permanent placement market in this rate environment. That could change if rates stabilize for a longer period of time. The anticipation rates may come back down. We expect there'll be a little delay there in terms of that business regaining momentum, I guess I'd say. All in all, happy with the capital markets business. I was making a point earlier today, in 2014, we generated $64 million in capital markets revenue. Last year it was $360 million. We've made investments, we've seen the business grow, and we're ready to grow it to $400 million and beyond. We just need a few things to fall into place. There's other fee businesses where you've talked about an opportunity, whether it's wealth management, treasury management, mortgage banking. You've continued to see momentum and continue to grow your scale there. Which businesses do you think have the potential to become structurally more important as we think about the earnings profile over the next few years? Treasury management's super important to us. That's the core of all the relationships we have across our commercial wholesale bank, and we have an opportunity, we think, to continue to grow that. It's been growing at 7%-8% and should continue on that pace, we believe. Wealth management in the markets we're in with the in-migration of people, the opportunities that we have across our commercial banking business to deliver more products and services to customers. Another part of the business now growing at 8%-9%, we expect that trend to continue as well. Both would be really important. We like the mortgage business a lot. We have mortgage servicing capabilities that we think are differentiated. We like banking. People that own their own homes, they tend to have more deposit balances. They help to generate more revenue. We'll stay invested in the mortgage business as well. I think Treasury management and wealth management likely have the opportunity to be a little more differentiated in terms of contribution. I'm sure we'll get into Basel Endgame and the changes there a little bit later. As I think about the mortgage banking business and the changes that are coming with mortgage risk weights and potentially around even mortgage servicing, does that change your appetite or change the economics of that business over time? Yeah. I think, Luke, our appetite remains strong for it. To your point, it's been a highly competitive space right now where prices have really not really met our return thresholds. With a potential improvement in the risk weights from the 250% to maybe closer to 100% risk weight, that would help in and of itself. I think the one thing to keep in mind is many banks exited the space when you saw an increase in risk weights. Who we're competing against today tends to be non-bank players who won't necessarily benefit from that risk weight change. It's our hope that that can move in our favor a bit. To John's point, we really like that business. It's a business we've stayed invested in, and we think we'll continue to grow through time. Would you accelerate ahead of time, or would you need to wait for the Basel III Endgame rules? We're still competitive now with where we're pricing. We won't get too far ahead in terms of what could happen. We'll stay diligent in terms of deals that come our way now in terms of how we're pricing them. Got it. Maybe let's pivot over to expenses. Your guide for this year is expense growth between about 1.5%-3.5%. How should we think about operating leverage and the right level of operating leverage for Regions over time, just given the amount of investment spend that's underway in the company? Yeah. Look, we think over time we should continue to deliver positive operating leverage. Any one given year, the math could present a difficulty, but through time, we think our business is structured in such a way that we should be able to consistently deliver positive operating leverage. When it comes to investments in technology, those are things that should, at their core, either make us more efficient or provide opportunities to deepen relationships and grow revenue. So there could always be a timing mismatch of investment ahead of revenue or cost benefit recognition. We think all those investments through time even solidify our ability to generate positive operating leverage, and that's how we make investment decisions in that area. One of the areas where you've been spending investment dollars is on your multi-year core systems modernization effort. Another topic that a lot of banks have spoken about at this conference is AI and how that impacts the overall operating spend of the business. Does that new system help you unlock more of an opportunity on the AI side? I think on the deposit side, when you talk AI, you start with data, right? So one of the most important benefits we're getting out of this deposit platform is we had to really clean up our data. So that will naturally provide us opportunities to consider how GenAI can be deployed off of that data. The platform in and of itself is not really a thing that we'd say would be a GenAI enabler, but I think the data will clearly help us better leverage advanced analytics on a go-forward basis. What are you doing on the AI side in terms of the investment spend. Sure are you seeing any productivity gains already? Yeah. I'd remind everyone, go back seven years, we've been deploying traditional AI across many parts of our business. We call it IQ products, and we've done it across small business, commercial, and wealth. Structurally, what we've been doing is putting AI tools on top of our customers' data and having that inform bankers as to best ways to interact with the customer in terms of products or services they may want or potential areas of risk that might be emerging. We think that continues even as you move into generative AI. We're doing some of that in our retail banking banker assist product. We think that continues. At the core, it's investments in AI to better help our employees be more productive in meeting our customers' needs. That's kind of one place I'd point you to. The other place we've talked about before is on GitHub Copilot across our developer community. We've deployed it through the end of the first quarter across about 50% of our developers. We're seeing about a 30% lift in code development. For us, that equates to about 6,000-7,000 additional coding hours per month. That's real benefit that we're seeing right now, that as we look to future investments in technology, it allows us to reduce that marginal cost of technology development and code writing. When we think about the tech spend, you've also spoken about how that's gone from like 9%-11% of revenues historically. Yeah That's gone up by at least a percentage point or so going forward. How much of that investment is change the bank versus run the bank right now? Yeah. We don't split the two. Historically, I think we had a pie chart that maybe bifurcated it a bit. I'd say, on a go-forward basis, the two are a bit interchangeable. Just going back to my example that I gave on the Temenos system, when you invest in data cleanup, you're naturally making an investment to change the bank in terms of how you can use that data. I think that differentiation will probably abate through time. We think about it in terms of total investment and making sure that we have the right platforms and systems and processes to be efficient as a bank and meet our customers' needs in the most efficient way. Got it. Maybe let's dig in on some of the newer priority markets that you're growing deposits in. I think Houston and Dallas are two of your key priority markets. What are you seeing in those markets today in terms of, I guess, pricing dynamics or deposit competition or anything else there? Well, first of all, they're great markets. A lot of competition. I wouldn't say it's necessarily any more competitive than it always is because they're just big dynamic markets, but plenty of opportunity focused on the right sub-markets for us. We are enjoying continuing to grow our business out there. I think you'll see more people focus on Texas as a place to do business because it's very pro-business oriented, very growth oriented, no income tax. The growth profile will continue, and I think you'll see, again, more people investing there. As you think about small business opportunity, whether it's in those new markets or even in your existing markets, I think you've initially called out that that's an area where you have an opportunity to do much more. What specifically do you think is the opportunity today, and are there any investments that you need to make to capture that opportunity? Across our footprint, I think there are 12 million small businesses. We bank about 450,000 of them. There's plenty of opportunity. Our focus has been more recently around understanding the composition of our branch markets. Where we have concentrations of small businesses, we've been dedicating additional resources, people, to focus on calling on those small businesses. Small business owners, they need help, they need advice just like consumers do. We're dedicating about 300 additional resources in our branches dedicated specifically to small businesses. We'll roll out a new digital platform for small businesses later this year, which we think will also be helpful. At the end of the day, I still think it's about people. It's about bankers connecting with business owners. We believe that is a recipe for having success, particularly in areas where we have concentrated opportunities. Got it. Well, maybe let's pivot over to credit. You spoke about the environment, you spoke about you're not really seeing anything major there. As we think about any portfolios of interest, or anything else that you might be seeing in the credit environment today, where are you most concerned? Where are you most focused on? Yeah, I mean, the primary areas of concern have been office and transportation we called out. We watched multifamily. It seems to have worked through some of the softness that was in the portfolio and specifically in some markets. We're actually seeing nice momentum in multifamily originations again, which is good. Office, we've generally worked through the problems that we have. We may have one or two more credits to resolve. Same thing with transportation after what was probably a three-year recession in transportation. It seems to have stabilized. I've been asked about, what about energy prices? What about the cost of fuel? It could have an impact, but I think by and large today, for the most part, the weaker transportation operators have been eliminated. Stronger companies are now in the market and things have rationalized a bit there. Feel less concerned. We've seen a pocket of stress in, let's say, television stations in that subsector. Maybe in digital distribution of the internet on a rural basis. There are a couple of credits that related to the build-out of an internet network in the rural areas. Other than that, I can't really point to anything that I would say where there's been some stress, particularly in our portfolios. If you look at our allowance coverage ratio as an example, as we've taken charges that we've fully reserved for, you've seen that continue to tick down. We ended the first quarter at 1.68%. Based on what we see right now, we still think we're on a path to that day one number, call it 162, dependent upon how the macro environment continues to evolve. Yeah, we continue to see criticized classified come down, NPLs have come down, credit has returned just to more normal circumstance. Is that largely a function of we had rates go up to 5%, they've since come down at the end of 2024, end of 2025. Does that help the end customer? Is that what's driving the credit improvement? Is it more so just portfolio seasoning over time? What's been driving it? I think with the exception of, let's say, office and transportation, those were two discrete portfolios that others across the industry had issue. Office, clearly everybody had issues with, beyond that, business has been pretty stable for most industry sectors. I think that's a variety of things, including people managing their businesses well. They're not overly leveraged. Interest rate environment certainly has been helpful. Say energy prices stay where they are right now. Does that meaningfully impact cash flows that trucking and transportation businesses? Is that something that you're focused on? We're watching broadly what the higher energy prices might mean for businesses and for consumers. I can't point to any area that I would call out as being more potentially impacted than another at this point. There clearly could be implications if energy prices are sustained for a long period of time. We're not going to speculate on what those are as much as we just continue to do what we do to monitor and manage potential emerging risk in the business. Got it. Maybe let's pivot over to M&A. Let's look at this from both aspects. One is there's been an acceleration of M&A across your footprint. That's created some disruption. That's presumably an opportunity for you. What are you seeing there? What's causing disruption out there, and what are you doing to capitalize on it? Well, during merger and acquisition activity, to your point, disruption is created. There's uncertainty on the part of bankers, uncertainty on the part of customers. Some number of bankers and/or customers will consider moving their relationship or their place of employment. We try to identify who those customers potentially are. Presumably because we've been in the markets for long periods of time, we've been prospecting on those customers, and we just up our efforts. Sometimes it works out, sometimes it takes longer, maybe doesn't work out at all. We have a heightened amount of activity in places where we think there's potential disruption. On the other side, we have a number of competitors who are doing a great job trying to keep those customers and keep those bankers. It's not a foregone conclusion that there's going to be a lot of net loss or gain, but we certainly make a lot of effort in those opportunities. To your point, there are a number of things going on in our market, so maybe that does create some opportunity. It's also important for us to keep what we have today, whether it's customers and associates, and really good to see kind of getting through bonus season. Our attrition rate on the banker side is down north of 100 basis points. Bankers really like the platform that we have, and even in an area of increased competition, we're able to retain our good bankers. Are there any verticals or geographies specifically that you're focused on to take advantage of this disruption? We've called out eight priority markets. That would be Miami, Orlando, Tampa, Atlanta, Nashville, Huntsville, Dallas, and Houston. Those are areas where we think we can make additional investment in people, in facilities, and have opportunity to grow. We'd highlight those for sure. All right, perfect. I'll ask the other side of the M&A question, and I know you've answered this before, but I sort of have to ask. As we think about the regulatory environment, the window's open right now. We don't know how long that window will be open. You guys have excess capital. How are you thinking about M&A strategically from here? We remain interested in non-depository M&A. We've made a number of acquisitions over the years that have added to our capital markets capabilities, wealth management, bought mortgage servicing rights, consumer finance business, small business finance business. Those are the things we want to continue to do, and none of them have been big investments, and none of them have had huge impacts on our business, but they've been helpful. We'll keep looking for those opportunities. With respect to depository M&A, we have not been active. We've said we're not interested, and that remains our position. We're generating an 18-plus % return on tangible common equity. We're growing earnings per share and tangible book value at the top of the peer group. We think we can continue to do that, just executing our plan over the next few years. The risk associated with, on the other side, execution of a transaction to generate what I would consider marginal benefits from our perspective just doesn't make a lot of sense to us. We think our shareholders want to see consistent performance. We think they want to continue to see top quartile returns on tangible common equity and earnings per share growth, and we're going to continue to work on delivering that through organic growth and management of our business. Fair enough. As we think about capital and we think about the changes with Basel III Endgame, what does that mean for capital deployment? What does that mean for the longer-term return profile of the bank? Can you give us some more color there? Sure. Just to level set, our Common Equity Tier 1 on a reported basis was 10.7% in the first quarter. If you could pro forma the two main aspects of the Basel III Endgame, inclusion of AOCI, and then for us, standardized approach on risk weights, that's about a 10% benefit in RWA for us. That'll equate to a pro forma CET1 ratio of 10.4%. So our capital distribution priorities are unchanged. We'll continue to invest in good loan growth on balance sheet. We'll ensure we have good growth and dividend consistent with our earnings profile. As John alluded to, non-bank M&A is something we'll consistently look for, and then ultimately, we'll buy back shares after that. We're fortunate we generate between 40 and 45 basis points of capital every quarter, we don't need to warehouse capital. That's how we'll think about deploying that. You can pro forma what the net effect would be if you got the full benefit just through RWA. It would increase returns by potentially north of 100 basis points. That's just doing math, right? We need to first get a final rule. We need to understand how the rating agencies think about the RWA through that lens. Once we get clarity around all that, you should see us kind of execute and bring our capital back in line with our targets, which are still nine and a quarter to nine and three-quarters. Is there an internal governor on TCE to TA ratios? Or I guess, how do you think about capital ratios outside of the CET1 ratio? Yeah. I think risk-based measures are important. Clearly, we track things like leverage ratio, and we look at TCE to TA. Not being risk-sensitive, I think, is an important factor there. The other thing, just in the weeds on the math, the inclusion of the mark on derivatives, I think, is another kind of negative towards the TCE ratio. It's not like securities which have liquidity. This is just your mark on. This was kind of one side, if you will, of your interest rate risk management. I think those two factors are reasons why I think TCE to TA. It's something to calculate, but hopefully, we can be more advanced as a system in terms of how we manage capital and use risk-sensitive measures. Got it. We're almost out of time. Maybe with that, I'll ask a final question. John, as we wrap up, what do you think the market is still missing about the Regions Financial story here? I don't know about missing so much as I think we believe we have the real value in our franchises is our low-cost deposit base. We're committed to managing and protecting that deposit base and growing it. We believe if we do that, we continue to focus on taking care of our customers, managing the risk in our business. We have built a model that delivers consistent, sustainable results, and we believe those results will be top quartile in terms of returns over the next number of years. If we do that, then we think our shareholders will be happy with our performance. All right. Perfect. With that, please join me in thanking John and Anil. Thanks so much for your time. Thank you. Thanks for having us.

Speaker 3: Okay. Up next we have Regions Financial, and I'm delighted to have with us today John Turner, Chairman, President, and CEO. Anil Chadha, CFO of Regions Financial. Thanks so much for joining us. Okay. okay Up next we have Regions Financial, and I'm delighted to have with us today John Turner, Chairman, President, and CEO. up next we have regions financial and i'm delighted to have with us today john turner chairman president and ceo Anil Chadha, CFO of Regions Financial. anil chadha cfo of regions financial Thanks so much for joining us. thanks so much for joining us

Speaker 1: Thank you for having us. Thank you for having us. thank you for having us

Speaker 3: Okay. I've been starting a lot of these conversations with an update on the environment. What are you guys seeing in your Southeastern footprint? Are you seeing any impacts maybe on the negative side or on the positive side as we think about high energy prices here? Okay. okay I've been starting a lot of these conversations with an update on the environment. i've been starting a lot of these conversations with an update on the environment What are you guys seeing in your Southeastern footprint? what are you guys seeing in your southeastern footprint Are you seeing any impacts maybe on the negative side or on the positive side as we think about high energy prices here? are you seeing any impacts maybe on the negative side or on the positive side as we think about high energy prices here

Speaker 2: You're aware, I guess we operate in 15 states, but the bulk of our business is seven Southeastern states and Texas, and 90% plus of our deposits. As I've gotten across our markets talking to customers, the topic of oil prices and the war really doesn't come up unless I bring it up. I think businesses generally are well-positioned. Their balance sheets are strong. They have good liquidity, and they've been through so much over the last five, six years with just uncertainty, changes, dealing with COVID and the things that followed that most of them are just focused on how they operate their business and operate it well. I'd characterize businesses as positive. They're making investments. We're seeing job growth either through new job announcements, new investments, or extensions of existing projects and things. Unemployment rates are fairly low in our markets. You're aware, I guess we operate in 15 states, but the bulk of our business is seven Southeastern states and Texas, and 90% plus of our deposits. you're aware i guess we operate in 15 states but the bulk of our business is seven southeastern states and texas and 90% plus of our deposits As I've gotten across our markets talking to customers, the topic of oil prices and the war really doesn't come up unless I bring it up. as i've gotten across our markets talking to customers the topic of oil prices and the war really doesn't come up unless i bring it up I think businesses generally are well-positioned. i think businesses generally are well-positioned Their balance sheets are strong. their balance sheets are strong They have good liquidity, and they've been through so much over the last five, six years with just uncertainty, changes, dealing with COVID and the things that followed that most of them are just focused on how they operate their business and operate it well. they have good liquidity and they've been through so much over the last five six years with just uncertainty changes dealing with covid and the things that followed that most of them are just focused on how they operate their business and operate it well I'd characterize businesses as positive. i'd characterize businesses as positive They're making investments. they're making investments We're seeing job growth either through new job announcements, new investments, or extensions of existing projects and things. we're seeing job growth either through new job announcements new investments or extensions of existing projects and things Unemployment rates are fairly low in our markets. unemployment rates are fairly low in our markets The consumer is very healthy. We see consumer spending debit transactions up about 4%, dollar value spend up 6% on credit cards, up 6% transactions, and spend up about 8%. Consumers are spending, they feel confident, and generally, I'd say the economy is good. The consumer is very healthy. the consumer is very healthy We see consumer spending debit transactions up about 4%, dollar value spend up 6% on credit cards, up 6% transactions, and spend up about 8%. we see consumer spending debit transactions up about 4% dollar value spend up 6% on credit cards up 6% transactions and spend up about 8% Consumers are spending, they feel confident, and generally, I'd say the economy is good. consumers are spending they feel confident and generally i'd say the economy is good

Speaker 3: That translates well in the corporate and in small business side as well. That translates well in the corporate and in small business side as well. that translates well in the corporate and in small business side as well

Speaker 2: It does. Yeah. We're seeing good stability across the wholesale sector generally. It does. it does Yeah. yeah We're seeing good stability across the wholesale sector generally. we're seeing good stability across the wholesale sector generally

Speaker 3: I think that feeds nicely into loan growth. We've seen a clear positive inflection on loan growth over the last couple of quarters. You had some non-core runoff previously that's now largely behind you. Talk about where you're seeing the strongest growth on the commercial side right now. I think that feeds nicely into loan growth. i think that feeds nicely into loan growth We've seen a clear positive inflection on loan growth over the last couple of quarters. we've seen a clear positive inflection on loan growth over the last couple of quarters You had some non-core runoff previously that's now largely behind you. you had some non-core runoff previously that's now largely behind you Talk about where you're seeing the strongest growth on the commercial side right now. talk about where you're seeing the strongest growth on the commercial side right now

Speaker 2: Yeah. We had nice growth in the first quarter, it was split between about half of it was increases in line utilization. The other half was new originations to support capital investments of different kinds. It also was bifurcated about half between our middle market commercial banking business and half in our corporate banking group, some of our specialized industries functions. Specifically, we saw growth in the energy sector, power and utilities, healthcare, our asset-based lending business, our REIT business all demonstrated nice growth during the quarter. Yeah. yeah We had nice growth in the first quarter, it was split between about half of it was increases in line utilization. we had nice growth in the first quarter it was split between about half of it was increases in line utilization The other half was new originations to support capital investments of different kinds. the other half was new originations to support capital investments of different kinds It also was bifurcated about half between our middle market commercial banking business and half in our corporate banking group, some of our specialized industries functions. it also was bifurcated about half between our middle market commercial banking business and half in our corporate banking group some of our specialized industries functions Specifically, we saw growth in the energy sector, power and utilities, healthcare, our asset-based lending business, our REIT business all demonstrated nice growth during the quarter. specifically we saw growth in the energy sector power and utilities healthcare our asset-based lending business our reit business all demonstrated nice growth during the quarter

Speaker 3: As we think about what's been happening since the end of last quarter, as you think about the line utilization on the middle market side and the corporate side, has that continued? Has that held up? As we think about what's been happening since the end of last quarter, as you think about the line utilization on the middle market side and the corporate side, has that continued? as we think about what's been happening since the end of last quarter as you think about the line utilization on the middle market side and the corporate side has that continued Has that held up? has that held up

Speaker 2: Line utilization's stable, pipelines continue to grow. I'd say yes, the momentum is holding up. Line utilization's stable, pipelines continue to grow. line utilization's stable pipelines continue to grow I'd say yes, the momentum is holding up. i'd say yes the momentum is holding up

Speaker 3: Okay. Perfect. The other side of that is, increasingly we're hearing anecdotes of maybe loan spreads tightening in certain geographies. Are you seeing any of that? Is there any risk of any of that right now? Okay. okay Perfect. perfect The other side of that is, increasingly we're hearing anecdotes of maybe loan spreads tightening in certain geographies. the other side of that is increasingly we're hearing anecdotes of maybe loan spreads tightening in certain geographies Are you seeing any of that? are you seeing any of that Is there any risk of any of that right now? is there any risk of any of that right now

Speaker 1: Yeah. We saw some loan spread tightening in the first quarter. I'd say, one, it's been broad across the markets. We've seen it in credit markets broadly. We also, within our portfolio, have had some mix shifts as well, which has contributed to lower loan yields. It's better credit quality, but lower yields as a result. Credit spreads being tight has been kind of a theme throughout this year. We actually took advantage of that and capitalized on issuing some unsecured debt over the past couple of weeks, which helps us from an overall funding standpoint. We think credit spreads will remain tight probably for the next few months, but maybe in the latter part of the year you'll see some relief on that. Yeah. yeah We saw some loan spread tightening in the first quarter. we saw some loan spread tightening in the first quarter I'd say, one, it's been broad across the markets. i'd say one it's been broad across the markets We've seen it in credit markets broadly. we've seen it in credit markets broadly We also, within our portfolio, have had some mix shifts as well, which has contributed to lower loan yields. we also within our portfolio have had some mix shifts as well which has contributed to lower loan yields It's better credit quality, but lower yields as a result. it's better credit quality but lower yields as a result Credit spreads being tight has been kind of a theme throughout this year. credit spreads being tight has been kind of a theme throughout this year We actually took advantage of that and capitalized on issuing some unsecured debt over the past couple of weeks, which helps us from an overall funding standpoint. we actually took advantage of that and capitalized on issuing some unsecured debt over the past couple of weeks which helps us from an overall funding standpoint We think credit spreads will remain tight probably for the next few months, but maybe in the latter part of the year you'll see some relief on that. we think credit spreads will remain tight probably for the next few months but maybe in the latter part of the year you'll see some relief on that

Speaker 3: Tighter credit spreads, but I guess better- Tighter credit spreads, but I guess better- tighter credit spreads but i guess better-

Speaker 1: Better credit quality Better credit quality better credit quality

Speaker 3: ...risk adjustment to this now. ...risk adjustment to this now. ...risk adjustment to this now

Speaker 1: Yeah. Profitability looks good. Yeah. yeah Profitability looks good. profitability looks good

Speaker 3: Got it. Okay. One of the other areas is loan spreads tighten, maybe a little bit of that is competition. You're seeing some competition on the deposit side as well across the industry. How are you thinking about, especially as you're in the Southeast, it's a highly competitive market, it's a highly sought-after market as well. How are you thinking about defending and even maybe growing market share in that region? Got it. got it Okay. okay One of the other areas is loan spreads tighten, maybe a little bit of that is competition. one of the other areas is loan spreads tighten maybe a little bit of that is competition You're seeing some competition on the deposit side as well across the industry. you're seeing some competition on the deposit side as well across the industry How are you thinking about, especially as you're in the Southeast, it's a highly competitive market, it's a highly sought-after market as well. how are you thinking about especially as you're in the southeast it's a highly competitive market it's a highly sought-after market as well How are you thinking about defending and even maybe growing market share in that region? how are you thinking about defending and even maybe growing market share in that region

Speaker 2: First of all, we enjoy the benefit of good liquidity, so we're operating at about a 74% loan-to-deposit ratio today. Our customer base is generally a mass market customer. If you kind of bifurcate our deposits between the wholesale bank, our commercial banking business built around primarily middle-market companies that we've been doing business with for a long time in markets that we know well. 67% of our commercial banking relationships have treasury management relationships with us, there's a real stability in that deposit base, which we enjoy. On the consumer side, the average customer deposit's about $5,400. The average checking account balance is about $3,200, and the mean balance, $900. We have, I would say again, a sort of a blue collar mass market deposit base. 47% of our checking account customers have a savings account with us. Only 8% have a money market account. First of all, we enjoy the benefit of good liquidity, so we're operating at about a 74% loan-to-deposit ratio today. first of all we enjoy the benefit of good liquidity so we're operating at about a 74% loan-to-deposit ratio today Our customer base is generally a mass market customer. our customer base is generally a mass market customer If you kind of bifurcate our deposits between the wholesale bank, our commercial banking business built around primarily middle-market companies that we've been doing business with for a long time in markets that we know well. 67% of our commercial banking relationships have treasury management relationships with us, there's a real stability in that deposit base, which we enjoy. if you kind of bifurcate our deposits between the wholesale bank our commercial banking business built around primarily middle-market companies that we've been doing business with for a long time in markets that we know well 67% of our commercial banking relationships have treasury management relationships with us there's a real stability in that deposit base which we enjoy On the consumer side, the average customer deposit's about $5,400. on the consumer side the average customer deposit's about $5,400 The average checking account balance is about $3,200, and the mean balance, $900. the average checking account balance is about $3,200 and the mean balance $900 We have, I would say again, a sort of a blue collar mass market deposit base. 47% of our checking account customers have a savings account with us. we have i would say again a sort of a blue collar mass market deposit base 47% of our checking account customers have a savings account with us Only 8% have a money market account. only 8% have a money market account These are people that are working class that don't have a lot of investable dollars. What we're competing for is the operating accounts of small businesses and mid-sized businesses, and the household accounts of consumers. Day in and day out, if we're winning those opportunities, we believe we can continue to grow our business, not only defend the business we have, but grow the business in the markets that we serve. When we need to compete on rate, we can, that's not something that we choose to do, that we have to do, We've built our business around just trying to manage that core deposit base really well. These are people that are working class that don't have a lot of investable dollars. these are people that are working class that don't have a lot of investable dollars What we're competing for is the operating accounts of small businesses and mid-sized businesses, and the household accounts of consumers. what we're competing for is the operating accounts of small businesses and mid-sized businesses and the household accounts of consumers Day in and day out, if we're winning those opportunities, we believe we can continue to grow our business, not only defend the business we have, but grow the business in the markets that we serve. day in and day out if we're winning those opportunities we believe we can continue to grow our business not only defend the business we have but grow the business in the markets that we serve When we need to compete on rate, we can, that's not something that we choose to do, that we have to do, We've built our business around just trying to manage that core deposit base really well. when we need to compete on rate we can that's not something that we choose to do that we have to do we've built our business around just trying to manage that core deposit base really well

Speaker 1: Manan, I'd add that competition in the Southeast has been fierce for years now. There's new entrants coming in, we have a well-established playbook, if you will, as to how to be proactive when we anticipate competition coming in. We know where they're going to open branch locations. We know our customers in those locations, so we can be proactive in terms of reaching out to them. To John's point, we win when we grow household accounts and operating accounts. The key to us is to make sure we're making investments in those platforms such that our customers want to stay on that, we can bring more customers on the platform. That's where we win. Manan, I'd add that competition in the Southeast has been fierce for years now. manan i'd add that competition in the southeast has been fierce for years now There's new entrants coming in, we have a well-established playbook, if you will, as to how to be proactive when we anticipate competition coming in. there's new entrants coming in we have a well-established playbook if you will as to how to be proactive when we anticipate competition coming in We know where they're going to open branch locations. we know where they're going to open branch locations We know our customers in those locations, so we can be proactive in terms of reaching out to them. we know our customers in those locations so we can be proactive in terms of reaching out to them To John's point, we win when we grow household accounts and operating accounts. to john's point we win when we grow household accounts and operating accounts The key to us is to make sure we're making investments in those platforms such that our customers want to stay on that, we can bring more customers on the platform. the key to us is to make sure we're making investments in those platforms such that our customers want to stay on that we can bring more customers on the platform That's where we win. that's where we win

Speaker 3: I think you mentioned, was it 5,400 was the average- I think you mentioned, was it 5,400 was the average- i think you mentioned was it 5,400 was the average-

Speaker 2: Deposit count. Yeah Deposit count. deposit count Yeah yeah

Speaker 3: deposit account, 900 was the median? deposit account, 900 was the median? deposit account 900 was the median Fairly low deposit- Fairly low deposit- fairly low deposit-

Speaker 2: Right Right right

Speaker 3: balances per account. I think one of the areas where there is a debate going on right now is whether eventually, maybe not right now, but eventually agentic AI, stablecoins, maybe tokenized money market funds might drive even more yield-seeking behavior with some of the smaller balance accounts as well. Is that something that you're thinking about right now? How are you thinking through that? balances per account. balances per account I think one of the areas where there is a debate going on right now is whether eventually, maybe not right now, but eventually agentic AI, stablecoins, maybe tokenized money market funds might drive even more yield-seeking behavior with some of the smaller balance accounts as well. i think one of the areas where there is a debate going on right now is whether eventually maybe not right now but eventually agentic ai stablecoins maybe tokenized money market funds might drive even more yield-seeking behavior with some of the smaller balance accounts as well Is that something that you're thinking about right now? is that something that you're thinking about right now How are you thinking through that? how are you thinking through that

Speaker 2: Well, we're thinking about it because we keep getting asked about it. I think generally, when you think about our customer, they maintain in their account about 1.6 times what they spend every month. They have very little investable excess balances. Most have, if they have savings, it's for an emergency, and that's it. I do believe there may come a time when agents do help people search for best rate and move money around, and people have confidence in that capability, and they're willing to let a bot move their money around. I don't think that's going to impact our customer base anytime soon. One, I don't know that our customer base would be willing to accept that sort of innovation. Two, more importantly, they just don't have the excess liquidity to rely on that service. Well, we're thinking about it because we keep getting asked about it. well we're thinking about it because we keep getting asked about it I think generally, when you think about our customer, they maintain in their account about 1.6 times what they spend every month. i think generally when you think about our customer they maintain in their account about 1.6 times what they spend every month They have very little investable excess balances. they have very little investable excess balances Most have, if they have savings, it's for an emergency, and that's it. most have if they have savings it's for an emergency and that's it I do believe there may come a time when agents do help people search for best rate and move money around, and people have confidence in that capability, and they're willing to let a bot move their money around. i do believe there may come a time when agents do help people search for best rate and move money around and people have confidence in that capability and they're willing to let a bot move their money around I don't think that's going to impact our customer base anytime soon. i don't think that's going to impact our customer base anytime soon One, I don't know that our customer base would be willing to accept that sort of innovation. one i don't know that our customer base would be willing to accept that sort of innovation Two, more importantly, they just don't have the excess liquidity to rely on that service. two more importantly they just don't have the excess liquidity to rely on that service

Speaker 1: Just as a gauge for our customer, even across our wealth space, we opened up a couple crypto ETFs a few months back for our wealth customers, and we've seen less than $200,000 of investment into it. It's just not who our customer base is right now. Just as a gauge for our customer, even across our wealth space, we opened up a couple crypto ETFs a few months back for our wealth customers, and we've seen less than $200,000 of investment into it. just as a gauge for our customer even across our wealth space we opened up a couple crypto etfs a few months back for our wealth customers and we've seen less than $200,000 of investment into it It's just not who our customer base is right now. it's just not who our customer base is right now

Speaker 3: Got it. Anything on the corporate side there? I guess some of these deposits are already fully optimized, but any concerns there? Anything you're thinking through there? Got it. got it Anything on the corporate side there? anything on the corporate side there I guess some of these deposits are already fully optimized, but any concerns there? i guess some of these deposits are already fully optimized but any concerns there Anything you're thinking through there? anything you're thinking through there

Speaker 2: Not me. Not me. not me

Speaker 3: Okay. Okay. okay

Speaker 1: Yeah. John mentioned earlier, treasury management's a key. Having that relationship is really important to that customer, and so we think we have to continue to invest in that. That's what they're looking for is efficiency of payments, and that's where our focus is. Yeah. yeah John mentioned earlier, treasury management's a key. john mentioned earlier treasury management's a key Having that relationship is really important to that customer, and so we think we have to continue to invest in that. having that relationship is really important to that customer and so we think we have to continue to invest in that That's what they're looking for is efficiency of payments, and that's where our focus is. that's what they're looking for is efficiency of payments and that's where our focus is

Speaker 3: Got it. Okay, maybe we can bring this a little bit more near term. Anil, are there any updates that you'd like to share on the second quarter and what you're seeing so far? Got it. got it Okay, maybe we can bring this a little bit more near term. okay maybe we can bring this a little bit more near term Anil, are there any updates that you'd like to share on the second quarter and what you're seeing so far? anil are there any updates that you'd like to share on the second quarter and what you're seeing so far

Speaker 1: Yeah. We're pleased with how the year's progressing. I'll start, kind of our longer term guidance is unchanged across each of the areas. We expect to see low single-digit loan and deposit growth. Fee revenue, NII, all expected to perform full year as we'd expect. With respect to short-term guidance, we guided NII to be up 2% quarter-over-quarter. That looks to be intact. With respect to capital markets, we've given a range of 90-105. We pointed to the low end of the range. As we look at the businesses within our capital markets, real estate capital markets is a rate-dependent business, and with rates being a bit elevated here, we're seeing a little bit of a slowdown in activity in that part of the business. Yeah. yeah We're pleased with how the year's progressing. we're pleased with how the year's progressing I'll start, kind of our longer term guidance is unchanged across each of the areas. i'll start kind of our longer term guidance is unchanged across each of the areas We expect to see low single-digit loan and deposit growth. we expect to see low single-digit loan and deposit growth Fee revenue, NII, all expected to perform full year as we'd expect. fee revenue nii all expected to perform full year as we'd expect With respect to short-term guidance, we guided NII to be up 2% quarter-over-quarter. with respect to short-term guidance we guided nii to be up 2% quarter-over-quarter That looks to be intact. that looks to be intact With respect to capital markets, we've given a range of 90-105. with respect to capital markets we've given a range of 90-105 We pointed to the low end of the range. we pointed to the low end of the range As we look at the businesses within our capital markets, real estate capital markets is a rate-dependent business, and with rates being a bit elevated here, we're seeing a little bit of a slowdown in activity in that part of the business. as we look at the businesses within our capital markets real estate capital markets is a rate-dependent business and with rates being a bit elevated here we're seeing a little bit of a slowdown in activity in that part of the business I'd say second quarter will probably look more like the first quarter when it comes to capital markets. We think that'll rebound into the second half of the year. I'd say second quarter will probably look more like the first quarter when it comes to capital markets. i'd say second quarter will probably look more like the first quarter when it comes to capital markets We think that'll rebound into the second half of the year. we think that'll rebound into the second half of the year

Speaker 3: Got it. Any impact specifically as we think about the belly of the curve being higher, the long end of the curve being higher on NIM and NII? How are you thinking about those pieces? Got it. got it Any impact specifically as we think about the belly of the curve being higher, the long end of the curve being higher on NIM and NII? any impact specifically as we think about the belly of the curve being higher the long end of the curve being higher on nim and nii How are you thinking about those pieces? how are you thinking about those pieces

Speaker 1: Yeah. We're neutral to short-term rates. Longer-term rates, as they tick up, we'll benefit from that. Our margin was 367 in the first quarter. We expect to be in the mid-360s in the second quarter and grow into the balance of the year, exit kind of in the low 370s. For us, with higher rates, we benefit with fixed asset repricing turnover. Deposit competition remaining kind of steady as it has been, and maintaining that will be key. We feel good about the path of the NIM and where we're positioned relative to what we're seeing in the yield curve. Yeah. yeah We're neutral to short-term rates. we're neutral to short-term rates Longer-term rates, as they tick up, we'll benefit from that. longer-term rates as they tick up we'll benefit from that Our margin was 367 in the first quarter. our margin was 367 in the first quarter We expect to be in the mid-360s in the second quarter and grow into the balance of the year, exit kind of in the low 370s. we expect to be in the mid-360s in the second quarter and grow into the balance of the year exit kind of in the low 370s For us, with higher rates, we benefit with fixed asset repricing turnover. for us with higher rates we benefit with fixed asset repricing turnover Deposit competition remaining kind of steady as it has been, and maintaining that will be key. deposit competition remaining kind of steady as it has been and maintaining that will be key We feel good about the path of the NIM and where we're positioned relative to what we're seeing in the yield curve. we feel good about the path of the nim and where we're positioned relative to what we're seeing in the yield curve

Speaker 3: You still feel good about the path You still feel good about the path you still feel good about the path

Speaker 1: Yeah Yeah yeah

Speaker 3: to that low mid 370s to that low mid 370s to that low mid 370s

Speaker 1: Yes Yes yes

Speaker 3: number by the end of this year? number by the end of this year? number by the end of this year

Speaker 1: Yep. Yep. yep

Speaker 3: Okay, perfect. Maybe we'll touch on the real estate capital markets side because that's another aspect that you mentioned. Your point, it is a more difficult environment as rates move higher. As you look across the business today, and as you think about where the rebound will eventually come from, where do you see areas where you're seeing the strongest momentum? Okay, perfect. okay perfect Maybe we'll touch on the real estate capital markets side because that's another aspect that you mentioned. maybe we'll touch on the real estate capital markets side because that's another aspect that you mentioned Your point, it is a more difficult environment as rates move higher. your point it is a more difficult environment as rates move higher As you look across the business today, and as you think about where the rebound will eventually come from, where do you see areas where you're seeing the strongest momentum? as you look across the business today and as you think about where the rebound will eventually come from where do you see areas where you're seeing the strongest momentum

Speaker 2: Our business sort of breaks down each part making an almost equal contribution. Where we have, I'd say, stalled out a little, or we don't have as much momentum as we would like is in the M&A advisory space, where we think we'd like to have some more capabilities, frankly. Our business sort of breaks down each part making an almost equal contribution. our business sort of breaks down each part making an almost equal contribution Where we have, I'd say, stalled out a little, or we don't have as much momentum as we would like is in the M&A advisory space, where we think we'd like to have some more capabilities, frankly. where we have i'd say stalled out a little or we don't have as much momentum as we would like is in the m&a advisory space where we think we'd like to have some more capabilities frankly That business has not been growing over the last 24 months as much as we would like. Separately, in the real estate capital markets business, we've made really good investments there. It's a nice business. It has been impacted some by rising rates as we see customers tend to want to extend and renew rather than access the permanent placement market in this rate environment. That could change if rates stabilize for a longer period of time. The anticipation rates may come back down. We expect there'll be a little delay there in terms of that business regaining momentum, I guess I'd say. All in all, happy with the capital markets business. I was making a point earlier today, in 2014, we generated $64 million in capital markets revenue. Last year it was $360 million. That business has not been growing over the last 24 months as much as we would like. that business has not been growing over the last 24 months as much as we would like Separately, in the real estate capital markets business, we've made really good investments there. separately in the real estate capital markets business we've made really good investments there It's a nice business. it's a nice business It has been impacted some by rising rates as we see customers tend to want to extend and renew rather than access the permanent placement market in this rate environment. That could change if rates stabilize for a longer period of time. it has been impacted some by rising rates as we see customers tend to want to extend and renew rather than access the permanent placement market in this rate environment. that could change if rates stabilize for a longer period of time The anticipation rates may come back down. the anticipation rates may come back down We expect there'll be a little delay there in terms of that business regaining momentum, I guess I'd say. we expect there'll be a little delay there in terms of that business regaining momentum i guess i'd say All in all, happy with the capital markets business. all in all happy with the capital markets business I was making a point earlier today, in 2014, we generated $64 million in capital markets revenue. i was making a point earlier today in 2014 we generated $64 million in capital markets revenue Last year it was $360 million. last year it was $360 million We've made investments, we've seen the business grow, and we're ready to grow it to $400 million and beyond. We just need a few things to fall into place. We've made investments, we've seen the business grow, and we're ready to grow it to $400 million and beyond. we've made investments we've seen the business grow and we're ready to grow it to $400 million and beyond We just need a few things to fall into place. we just need a few things to fall into place

Speaker 3: There's other fee businesses where you've talked about an opportunity, whether it's wealth management, treasury management, mortgage banking. You've continued to see momentum and continue to grow your scale there. Which businesses do you think have the potential to become structurally more important as we think about the earnings profile over the next few years? There's other fee businesses where you've talked about an opportunity, whether it's wealth management, treasury management, mortgage banking. there's other fee businesses where you've talked about an opportunity whether it's wealth management treasury management mortgage banking You've continued to see momentum and continue to grow your scale there. you've continued to see momentum and continue to grow your scale there Which businesses do you think have the potential to become structurally more important as we think about the earnings profile over the next few years? which businesses do you think have the potential to become structurally more important as we think about the earnings profile over the next few years

Speaker 2: Treasury management's super important to us. That's the core of all the relationships we have across our commercial wholesale bank, and we have an opportunity, we think, to continue to grow that. It's been growing at 7%-8% and should continue on that pace, we believe. Wealth management in the markets we're in with the in-migration of people, the opportunities that we have across our commercial banking business to deliver more products and services to customers. Another part of the business now growing at 8%-9%, we expect that trend to continue as well. Both would be really important. We like the mortgage business a lot. We have mortgage servicing capabilities that we think are differentiated. We like banking. People that own their own homes, they tend to have more deposit balances. They help to generate more revenue. Treasury management's super important to us. treasury management's super important to us That's the core of all the relationships we have across our commercial wholesale bank, and we have an opportunity, we think, to continue to grow that. that's the core of all the relationships we have across our commercial wholesale bank and we have an opportunity we think to continue to grow that It's been growing at 7%-8% and should continue on that pace, we believe. it's been growing at 7%-8% and should continue on that pace we believe Wealth management in the markets we're in with the in-migration of people, the opportunities that we have across our commercial banking business to deliver more products and services to customers. wealth management in the markets we're in with the in-migration of people the opportunities that we have across our commercial banking business to deliver more products and services to customers Another part of the business now growing at 8%-9%, we expect that trend to continue as well. another part of the business now growing at 8%-9% we expect that trend to continue as well Both would be really important. both would be really important We like the mortgage business a lot. we like the mortgage business a lot We have mortgage servicing capabilities that we think are differentiated. we have mortgage servicing capabilities that we think are differentiated We like banking. we like banking People that own their own homes, they tend to have more deposit balances. people that own their own homes they tend to have more deposit balances They help to generate more revenue. they help to generate more revenue We'll stay invested in the mortgage business as well. I think Treasury management and wealth management likely have the opportunity to be a little more differentiated in terms of contribution. We'll stay invested in the mortgage business as well. we'll stay invested in the mortgage business as well I think Treasury management and wealth management likely have the opportunity to be a little more differentiated in terms of contribution. i think treasury management and wealth management likely have the opportunity to be a little more differentiated in terms of contribution

Speaker 3: I'm sure we'll get into Basel Endgame and the changes there a little bit later. As I think about the mortgage banking business and the changes that are coming with mortgage risk weights and potentially around even mortgage servicing, does that change your appetite or change the economics of that business over time? I'm sure we'll get into Basel Endgame and the changes there a little bit later. i'm sure we'll get into basel endgame and the changes there a little bit later As I think about the mortgage banking business and the changes that are coming with mortgage risk weights and potentially around even mortgage servicing, does that change your appetite or change the economics of that business over time? as i think about the mortgage banking business and the changes that are coming with mortgage risk weights and potentially around even mortgage servicing does that change your appetite or change the economics of that business over time

Speaker 1: Yeah. I think, Luke, our appetite remains strong for it. To your point, it's been a highly competitive space right now where prices have really not really met our return thresholds. With a potential improvement in the risk weights from the 250% to maybe closer to 100% risk weight, that would help in and of itself. I think the one thing to keep in mind is many banks exited the space when you saw an increase in risk weights. Who we're competing against today tends to be non-bank players who won't necessarily benefit from that risk weight change. It's our hope that that can move in our favor a bit. To John's point, we really like that business. It's a business we've stayed invested in, and we think we'll continue to grow through time. Yeah. yeah I think, Luke, our appetite remains strong for it. i think luke our appetite remains strong for it To your point, it's been a highly competitive space right now where prices have really not really met our return thresholds. to your point it's been a highly competitive space right now where prices have really not really met our return thresholds With a potential improvement in the risk weights from the 250% to maybe closer to 100% risk weight, that would help in and of itself. with a potential improvement in the risk weights from the 250% to maybe closer to 100% risk weight that would help in and of itself I think the one thing to keep in mind is many banks exited the space when you saw an increase in risk weights. i think the one thing to keep in mind is many banks exited the space when you saw an increase in risk weights Who we're competing against today tends to be non-bank players who won't necessarily benefit from that risk weight change. who we're competing against today tends to be non-bank players who won't necessarily benefit from that risk weight change It's our hope that that can move in our favor a bit. it's our hope that that can move in our favor a bit To John's point, we really like that business. to john's point we really like that business It's a business we've stayed invested in, and we think we'll continue to grow through time. it's a business we've stayed invested in and we think we'll continue to grow through time

Speaker 3: Would you accelerate ahead of time, or would you need to wait for the Basel III Endgame rules? Would you accelerate ahead of time, or would you need to wait for the Basel III Endgame rules? would you accelerate ahead of time or would you need to wait for the basel iii endgame rules

Speaker 1: We're still competitive now with where we're pricing. We won't get too far ahead in terms of what could happen. We're still competitive now with where we're pricing. we're still competitive now with where we're pricing We won't get too far ahead in terms of what could happen. we won't get too far ahead in terms of what could happen We'll stay diligent in terms of deals that come our way now in terms of how we're pricing them. We'll stay diligent in terms of deals that come our way now in terms of how we're pricing them. we'll stay diligent in terms of deals that come our way now in terms of how we're pricing them

Speaker 3: Got it. Maybe let's pivot over to expenses. Your guide for this year is expense growth between about 1.5%-3.5%. How should we think about operating leverage and the right level of operating leverage for Regions over time, just given the amount of investment spend that's underway in the company? Got it. got it Maybe let's pivot over to expenses. maybe let's pivot over to expenses Your guide for this year is expense growth between about 1.5%-3.5%. your guide for this year is expense growth between about 1.5%-3.5% How should we think about operating leverage and the right level of operating leverage for Regions over time, just given the amount of investment spend that's underway in the company? how should we think about operating leverage and the right level of operating leverage for regions over time just given the amount of investment spend that's underway in the company

Speaker 1: Yeah. Look, we think over time we should continue to deliver positive operating leverage. Any one given year, the math could present a difficulty, but through time, we think our business is structured in such a way that we should be able to consistently deliver positive operating leverage. When it comes to investments in technology, those are things that should, at their core, either make us more efficient or provide opportunities to deepen relationships and grow revenue. So there could always be a timing mismatch of investment ahead of revenue or cost benefit recognition. We think all those investments through time even solidify our ability to generate positive operating leverage, and that's how we make investment decisions in that area. Yeah. yeah Look, we think over time we should continue to deliver positive operating leverage. look we think over time we should continue to deliver positive operating leverage Any one given year, the math could present a difficulty, but through time, we think our business is structured in such a way that we should be able to consistently deliver positive operating leverage. any one given year the math could present a difficulty but through time we think our business is structured in such a way that we should be able to consistently deliver positive operating leverage When it comes to investments in technology, those are things that should, at their core, either make us more efficient or provide opportunities to deepen relationships and grow revenue. when it comes to investments in technology those are things that should at their core either make us more efficient or provide opportunities to deepen relationships and grow revenue So there could always be a timing mismatch of investment ahead of revenue or cost benefit recognition. so there could always be a timing mismatch of investment ahead of revenue or cost benefit recognition We think all those investments through time even solidify our ability to generate positive operating leverage, and that's how we make investment decisions in that area. we think all those investments through time even solidify our ability to generate positive operating leverage and that's how we make investment decisions in that area

Speaker 3: One of the areas where you've been spending investment dollars is on your multi-year core systems modernization effort. Another topic that a lot of banks have spoken about at this conference is AI and how that impacts the overall operating spend of the business. Does that new system help you unlock more of an opportunity on the AI side? One of the areas where you've been spending investment dollars is on your multi-year core systems modernization effort. one of the areas where you've been spending investment dollars is on your multi-year core systems modernization effort Another topic that a lot of banks have spoken about at this conference is AI and how that impacts the overall operating spend of the business. another topic that a lot of banks have spoken about at this conference is ai and how that impacts the overall operating spend of the business Does that new system help you unlock more of an opportunity on the AI side? does that new system help you unlock more of an opportunity on the ai side

Speaker 1: I think on the deposit side, when you talk AI, you start with data, right? So one of the most important benefits we're getting out of this deposit platform is we had to really clean up our data. So that will naturally provide us opportunities to consider how GenAI can be deployed off of that data. The platform in and of itself is not really a thing that we'd say would be a GenAI enabler, but I think the data will clearly help us better leverage advanced analytics on a go-forward basis. I think on the deposit side, when you talk AI, you start with data, right? i think on the deposit side when you talk ai you start with data right So one of the most important benefits we're getting out of this deposit platform is we had to really clean up our data. so one of the most important benefits we're getting out of this deposit platform is we had to really clean up our data So that will naturally provide us opportunities to consider how GenAI can be deployed off of that data. so that will naturally provide us opportunities to consider how genai can be deployed off of that data The platform in and of itself is not really a thing that we'd say would be a GenAI enabler, but I think the data will clearly help us better leverage advanced analytics on a go-forward basis. the platform in and of itself is not really a thing that we'd say would be a genai enabler but i think the data will clearly help us better leverage advanced analytics on a go-forward basis

Speaker 3: What are you doing on the AI side in terms of the investment spend. What are you doing on the AI side in terms of the investment spend. what are you doing on the ai side in terms of the investment spend

Speaker 1: Sure Sure sure

Speaker 3: are you seeing any productivity gains already? are you seeing any productivity gains already? are you seeing any productivity gains already

Speaker 1: Yeah. I'd remind everyone, go back seven years, we've been deploying traditional AI across many parts of our business. We call it IQ products, and we've done it across small business, commercial, and wealth. Structurally, what we've been doing is putting AI tools on top of our customers' data and having that inform bankers as to best ways to interact with the customer in terms of products or services they may want or potential areas of risk that might be emerging. We think that continues even as you move into generative AI. We're doing some of that in our retail banking banker assist product. We think that continues. At the core, it's investments in AI to better help our employees be more productive in meeting our customers' needs. That's kind of one place I'd point you to. Yeah. yeah I'd remind everyone, go back seven years, we've been deploying traditional AI across many parts of our business. i'd remind everyone go back seven years we've been deploying traditional ai across many parts of our business We call it IQ products, and we've done it across small business, commercial, and wealth. we call it iq products and we've done it across small business commercial and wealth Structurally, what we've been doing is putting AI tools on top of our customers' data and having that inform bankers as to best ways to interact with the customer in terms of products or services they may want or potential areas of risk that might be emerging. structurally what we've been doing is putting ai tools on top of our customers' data and having that inform bankers as to best ways to interact with the customer in terms of products or services they may want or potential areas of risk that might be emerging We think that continues even as you move into generative AI. we think that continues even as you move into generative ai We're doing some of that in our retail banking banker assist product. we're doing some of that in our retail banking banker assist product We think that continues. we think that continues At the core, it's investments in AI to better help our employees be more productive in meeting our customers' needs. That's kind of one place I'd point you to. at the core it's investments in ai to better help our employees be more productive in meeting our customers' needs. that's kind of one place i'd point you to The other place we've talked about before is on GitHub Copilot across our developer community. We've deployed it through the end of the first quarter across about 50% of our developers. We're seeing about a 30% lift in code development. For us, that equates to about 6,000-7,000 additional coding hours per month. That's real benefit that we're seeing right now, that as we look to future investments in technology, it allows us to reduce that marginal cost of technology development and code writing. The other place we've talked about before is on GitHub Copilot across our developer community. the other place we've talked about before is on github copilot across our developer community We've deployed it through the end of the first quarter across about 50% of our developers. we've deployed it through the end of the first quarter across about 50% of our developers We're seeing about a 30% lift in code development. we're seeing about a 30% lift in code development For us, that equates to about 6,000-7,000 additional coding hours per month. for us that equates to about 6,000-7,000 additional coding hours per month That's real benefit that we're seeing right now, that as we look to future investments in technology, it allows us to reduce that marginal cost of technology development and code writing. that's real benefit that we're seeing right now that as we look to future investments in technology it allows us to reduce that marginal cost of technology development and code writing

Speaker 3: When we think about the tech spend, you've also spoken about how that's gone from like 9%-11% of revenues historically. When we think about the tech spend, you've also spoken about how that's gone from like 9%-11% of revenues historically. when we think about the tech spend you've also spoken about how that's gone from like 9%-11% of revenues historically

Speaker 1: Yeah Yeah yeah

Speaker 3: That's gone up by at least a percentage point or so going forward. How much of that investment is change the bank versus run the bank right now? That's gone up by at least a percentage point or so going forward. that's gone up by at least a percentage point or so going forward How much of that investment is change the bank versus run the bank right now? how much of that investment is change the bank versus run the bank right now

Speaker 1: Yeah. We don't split the two. Historically, I think we had a pie chart that maybe bifurcated it a bit. I'd say, on a go-forward basis, the two are a bit interchangeable. Just going back to my example that I gave on the Temenos system, when you invest in data cleanup, you're naturally making an investment to change the bank in terms of how you can use that data. I think that differentiation will probably abate through time. We think about it in terms of total investment and making sure that we have the right platforms and systems and processes to be efficient as a bank and meet our customers' needs in the most efficient way. Yeah. yeah We don't split the two. we don't split the two Historically, I think we had a pie chart that maybe bifurcated it a bit. historically i think we had a pie chart that maybe bifurcated it a bit I'd say, on a go-forward basis, the two are a bit interchangeable. i'd say on a go-forward basis the two are a bit interchangeable Just going back to my example that I gave on the Temenos system, when you invest in data cleanup, you're naturally making an investment to change the bank in terms of how you can use that data. just going back to my example that i gave on the temenos system when you invest in data cleanup you're naturally making an investment to change the bank in terms of how you can use that data I think that differentiation will probably abate through time. i think that differentiation will probably abate through time We think about it in terms of total investment and making sure that we have the right platforms and systems and processes to be efficient as a bank and meet our customers' needs in the most efficient way. we think about it in terms of total investment and making sure that we have the right platforms and systems and processes to be efficient as a bank and meet our customers' needs in the most efficient way

Speaker 3: Got it. Maybe let's dig in on some of the newer priority markets that you're growing deposits in. I think Houston and Dallas are two of your key priority markets. What are you seeing in those markets today in terms of, I guess, pricing dynamics or deposit competition or anything else there? Got it. got it Maybe let's dig in on some of the newer priority markets that you're growing deposits in. maybe let's dig in on some of the newer priority markets that you're growing deposits in I think Houston and Dallas are two of your key priority markets. i think houston and dallas are two of your key priority markets What are you seeing in those markets today in terms of, I guess, pricing dynamics or deposit competition or anything else there? what are you seeing in those markets today in terms of i guess pricing dynamics or deposit competition or anything else there

Speaker 2: Well, first of all, they're great markets. A lot of competition. I wouldn't say it's necessarily any more competitive than it always is because they're just big dynamic markets, but plenty of opportunity focused on the right sub-markets for us. We are enjoying continuing to grow our business out there. I think you'll see more people focus on Texas as a place to do business because it's very pro-business oriented, very growth oriented, no income tax. The growth profile will continue, and I think you'll see, again, more people investing there. Well, first of all, they're great markets. well first of all they're great markets A lot of competition. a lot of competition I wouldn't say it's necessarily any more competitive than it always is because they're just big dynamic markets, but plenty of opportunity focused on the right sub-markets for us. i wouldn't say it's necessarily any more competitive than it always is because they're just big dynamic markets but plenty of opportunity focused on the right sub-markets for us We are enjoying continuing to grow our business out there. we are enjoying continuing to grow our business out there I think you'll see more people focus on Texas as a place to do business because it's very pro-business oriented, very growth oriented, no income tax. i think you'll see more people focus on texas as a place to do business because it's very pro-business oriented very growth oriented no income tax The growth profile will continue, and I think you'll see, again, more people investing there. the growth profile will continue and i think you'll see again more people investing there

Speaker 3: As you think about small business opportunity, whether it's in those new markets or even in your existing markets, I think you've initially called out that that's an area where you have an opportunity to do much more. What specifically do you think is the opportunity today, and are there any investments that you need to make to capture that opportunity? As you think about small business opportunity, whether it's in those new markets or even in your existing markets, I think you've initially called out that that's an area where you have an opportunity to do much more. as you think about small business opportunity whether it's in those new markets or even in your existing markets i think you've initially called out that that's an area where you have an opportunity to do much more What specifically do you think is the opportunity today, and are there any investments that you need to make to capture that opportunity? what specifically do you think is the opportunity today and are there any investments that you need to make to capture that opportunity

Speaker 2: Across our footprint, I think there are 12 million small businesses. We bank about 450,000 of them. There's plenty of opportunity. Our focus has been more recently around understanding the composition of our branch markets. Where we have concentrations of small businesses, we've been dedicating additional resources, people, to focus on calling on those small businesses. Small business owners, they need help, they need advice just like consumers do. We're dedicating about 300 additional resources in our branches dedicated specifically to small businesses. We'll roll out a new digital platform for small businesses later this year, which we think will also be helpful. At the end of the day, I still think it's about people. It's about bankers connecting with business owners. We believe that is a recipe for having success, particularly in areas where we have concentrated opportunities. Across our footprint, I think there are 12 million small businesses. across our footprint i think there are 12 million small businesses We bank about 450,000 of them. we bank about 450,000 of them There's plenty of opportunity. there's plenty of opportunity Our focus has been more recently around understanding the composition of our branch markets. our focus has been more recently around understanding the composition of our branch markets Where we have concentrations of small businesses, we've been dedicating additional resources, people, to focus on calling on those small businesses. where we have concentrations of small businesses we've been dedicating additional resources people to focus on calling on those small businesses Small business owners, they need help, they need advice just like consumers do. small business owners they need help they need advice just like consumers do We're dedicating about 300 additional resources in our branches dedicated specifically to small businesses. we're dedicating about 300 additional resources in our branches dedicated specifically to small businesses We'll roll out a new digital platform for small businesses later this year, which we think will also be helpful. we'll roll out a new digital platform for small businesses later this year which we think will also be helpful At the end of the day, I still think it's about people. at the end of the day i still think it's about people It's about bankers connecting with business owners. it's about bankers connecting with business owners We believe that is a recipe for having success, particularly in areas where we have concentrated opportunities. we believe that is a recipe for having success particularly in areas where we have concentrated opportunities

Speaker 3: Got it. Well, maybe let's pivot over to credit. You spoke about the environment, you spoke about you're not really seeing anything major there. As we think about any portfolios of interest, or anything else that you might be seeing in the credit environment today, where are you most concerned? Where are you most focused on? Got it. got it Well, maybe let's pivot over to credit. well maybe let's pivot over to credit You spoke about the environment, you spoke about you're not really seeing anything major there. you spoke about the environment you spoke about you're not really seeing anything major there As we think about any portfolios of interest, or anything else that you might be seeing in the credit environment today, where are you most concerned? as we think about any portfolios of interest or anything else that you might be seeing in the credit environment today where are you most concerned Where are you most focused on? where are you most focused on

Speaker 2: Yeah, I mean, the primary areas of concern have been office and transportation we called out. We watched multifamily. It seems to have worked through some of the softness that was in the portfolio and specifically in some markets. We're actually seeing nice momentum in multifamily originations again, which is good. Office, we've generally worked through the problems that we have. We may have one or two more credits to resolve. Same thing with transportation after what was probably a three-year recession in transportation. It seems to have stabilized. I've been asked about, what about energy prices? What about the cost of fuel? It could have an impact, but I think by and large today, for the most part, the weaker transportation operators have been eliminated. Stronger companies are now in the market and things have rationalized a bit there. Feel less concerned. Yeah, I mean, the primary areas of concern have been office and transportation we called out. yeah i mean the primary areas of concern have been office and transportation we called out We watched multifamily. we watched multifamily It seems to have worked through some of the softness that was in the portfolio and specifically in some markets. it seems to have worked through some of the softness that was in the portfolio and specifically in some markets We're actually seeing nice momentum in multifamily originations again, which is good. we're actually seeing nice momentum in multifamily originations again which is good Office, we've generally worked through the problems that we have. office we've generally worked through the problems that we have We may have one or two more credits to resolve. we may have one or two more credits to resolve Same thing with transportation after what was probably a three-year recession in transportation. same thing with transportation after what was probably a three-year recession in transportation It seems to have stabilized. it seems to have stabilized I've been asked about, what about energy prices? i've been asked about what about energy prices What about the cost of fuel? what about the cost of fuel It could have an impact, but I think by and large today, for the most part, the weaker transportation operators have been eliminated. it could have an impact but i think by and large today for the most part the weaker transportation operators have been eliminated Stronger companies are now in the market and things have rationalized a bit there. stronger companies are now in the market and things have rationalized a bit there Feel less concerned. feel less concerned We've seen a pocket of stress in, let's say, television stations in that subsector. Maybe in digital distribution of the internet on a rural basis. There are a couple of credits that related to the build-out of an internet network in the rural areas. Other than that, I can't really point to anything that I would say where there's been some stress, particularly in our portfolios. We've seen a pocket of stress in, let's say, television stations in that subsector. we've seen a pocket of stress in let's say television stations in that subsector Maybe in digital distribution of the internet on a rural basis. maybe in digital distribution of the internet on a rural basis There are a couple of credits that related to the build-out of an internet network in the rural areas. there are a couple of credits that related to the build-out of an internet network in the rural areas Other than that, I can't really point to anything that I would say where there's been some stress, particularly in our portfolios. other than that i can't really point to anything that i would say where there's been some stress particularly in our portfolios

Speaker 1: If you look at our allowance coverage ratio as an example, as we've taken charges that we've fully reserved for, you've seen that continue to tick down. We ended the first quarter at 1.68%. Based on what we see right now, we still think we're on a path to that day one number, call it 162, dependent upon how the macro environment continues to evolve. If you look at our allowance coverage ratio as an example, as we've taken charges that we've fully reserved for, you've seen that continue to tick down. if you look at our allowance coverage ratio as an example as we've taken charges that we've fully reserved for you've seen that continue to tick down We ended the first quarter at 1.68%. we ended the first quarter at 1.68% Based on what we see right now, we still think we're on a path to that day one number, call it 162, dependent upon how the macro environment continues to evolve. based on what we see right now we still think we're on a path to that day one number call it 162 dependent upon how the macro environment continues to evolve

Speaker 2: Yeah, we continue to see criticized classified come down, NPLs have come down, credit has returned just to more normal circumstance. Yeah, we continue to see criticized classified come down, NPLs have come down, credit has returned just to more normal circumstance. yeah we continue to see criticized classified come down npls have come down credit has returned just to more normal circumstance

Speaker 3: Is that largely a function of we had rates go up to 5%, they've since come down at the end of 2024, end of 2025. Does that help the end customer? Is that what's driving the credit improvement? Is it more so just portfolio seasoning over time? What's been driving it? Is that largely a function of we had rates go up to 5%, they've since come down at the end of 2024, end of 2025. is that largely a function of we had rates go up to 5% they've since come down at the end of 2024 end of 2025 Does that help the end customer? does that help the end customer Is that what's driving the credit improvement? is that what's driving the credit improvement Is it more so just portfolio seasoning over time? is it more so just portfolio seasoning over time What's been driving it? what's been driving it

Speaker 2: I think with the exception of, let's say, office and transportation, those were two discrete portfolios that others across the industry had issue. Office, clearly everybody had issues with, beyond that, business has been pretty stable for most industry sectors. I think that's a variety of things, including people managing their businesses well. They're not overly leveraged. Interest rate environment certainly has been helpful. I think with the exception of, let's say, office and transportation, those were two discrete portfolios that others across the industry had issue. i think with the exception of let's say office and transportation those were two discrete portfolios that others across the industry had issue Office, clearly everybody had issues with, beyond that, business has been pretty stable for most industry sectors. office clearly everybody had issues with beyond that business has been pretty stable for most industry sectors I think that's a variety of things, including people managing their businesses well. i think that's a variety of things including people managing their businesses well They're not overly leveraged. they're not overly leveraged Interest rate environment certainly has been helpful. interest rate environment certainly has been helpful

Speaker 3: Say energy prices stay where they are right now. Does that meaningfully impact cash flows that trucking and transportation businesses? Is that something that you're focused on? Say energy prices stay where they are right now. say energy prices stay where they are right now Does that meaningfully impact cash flows that trucking and transportation businesses? does that meaningfully impact cash flows that trucking and transportation businesses Is that something that you're focused on? is that something that you're focused on

Speaker 2: We're watching broadly what the higher energy prices might mean for businesses and for consumers. I can't point to any area that I would call out as being more potentially impacted than another at this point. There clearly could be implications if energy prices are sustained for a long period of time. We're not going to speculate on what those are as much as we just continue to do what we do to monitor and manage potential emerging risk in the business. We're watching broadly what the higher energy prices might mean for businesses and for consumers. we're watching broadly what the higher energy prices might mean for businesses and for consumers I can't point to any area that I would call out as being more potentially impacted than another at this point. i can't point to any area that i would call out as being more potentially impacted than another at this point There clearly could be implications if energy prices are sustained for a long period of time. there clearly could be implications if energy prices are sustained for a long period of time We're not going to speculate on what those are as much as we just continue to do what we do to monitor and manage potential emerging risk in the business. we're not going to speculate on what those are as much as we just continue to do what we do to monitor and manage potential emerging risk in the business

Speaker 3: Got it. Maybe let's pivot over to M&A. Let's look at this from both aspects. One is there's been an acceleration of M&A across your footprint. That's created some disruption. That's presumably an opportunity for you. What are you seeing there? What's causing disruption out there, and what are you doing to capitalize on it? Got it. got it Maybe let's pivot over to M&A. maybe let's pivot over to m&a Let's look at this from both aspects. let's look at this from both aspects One is there's been an acceleration of M&A across your footprint. one is there's been an acceleration of m&a across your footprint That's created some disruption. that's created some disruption That's presumably an opportunity for you. that's presumably an opportunity for you What are you seeing there? what are you seeing there What's causing disruption out there, and what are you doing to capitalize on it? what's causing disruption out there and what are you doing to capitalize on it

Speaker 2: Well, during merger and acquisition activity, to your point, disruption is created. There's uncertainty on the part of bankers, uncertainty on the part of customers. Some number of bankers and/or customers will consider moving their relationship or their place of employment. We try to identify who those customers potentially are. Presumably because we've been in the markets for long periods of time, we've been prospecting on those customers, and we just up our efforts. Sometimes it works out, sometimes it takes longer, maybe doesn't work out at all. We have a heightened amount of activity in places where we think there's potential disruption. On the other side, we have a number of competitors who are doing a great job trying to keep those customers and keep those bankers. Well, during merger and acquisition activity, to your point, disruption is created. well during merger and acquisition activity to your point disruption is created There's uncertainty on the part of bankers, uncertainty on the part of customers. there's uncertainty on the part of bankers uncertainty on the part of customers Some number of bankers and/or customers will consider moving their relationship or their place of employment. some number of bankers and/or customers will consider moving their relationship or their place of employment We try to identify who those customers potentially are. we try to identify who those customers potentially are Presumably because we've been in the markets for long periods of time, we've been prospecting on those customers, and we just up our efforts. presumably because we've been in the markets for long periods of time we've been prospecting on those customers and we just up our efforts Sometimes it works out, sometimes it takes longer, maybe doesn't work out at all. sometimes it works out sometimes it takes longer maybe doesn't work out at all We have a heightened amount of activity in places where we think there's potential disruption. we have a heightened amount of activity in places where we think there's potential disruption On the other side, we have a number of competitors who are doing a great job trying to keep those customers and keep those bankers. on the other side we have a number of competitors who are doing a great job trying to keep those customers and keep those bankers It's not a foregone conclusion that there's going to be a lot of net loss or gain, but we certainly make a lot of effort in those opportunities. To your point, there are a number of things going on in our market, so maybe that does create some opportunity. It's not a foregone conclusion that there's going to be a lot of net loss or gain, but we certainly make a lot of effort in those opportunities. it's not a foregone conclusion that there's going to be a lot of net loss or gain but we certainly make a lot of effort in those opportunities To your point, there are a number of things going on in our market, so maybe that does create some opportunity. to your point there are a number of things going on in our market so maybe that does create some opportunity

Speaker 1: It's also important for us to keep what we have today, whether it's customers and associates, and really good to see kind of getting through bonus season. Our attrition rate on the banker side is down north of 100 basis points. Bankers really like the platform that we have, and even in an area of increased competition, we're able to retain our good bankers. It's also important for us to keep what we have today, whether it's customers and associates, and really good to see kind of getting through bonus season. it's also important for us to keep what we have today whether it's customers and associates and really good to see kind of getting through bonus season Our attrition rate on the banker side is down north of 100 basis points. our attrition rate on the banker side is down north of 100 basis points Bankers really like the platform that we have, and even in an area of increased competition, we're able to retain our good bankers. bankers really like the platform that we have and even in an area of increased competition we're able to retain our good bankers

Speaker 3: Are there any verticals or geographies specifically that you're focused on to take advantage of this disruption? Are there any verticals or geographies specifically that you're focused on to take advantage of this disruption? are there any verticals or geographies specifically that you're focused on to take advantage of this disruption

Speaker 2: We've called out eight priority markets. That would be Miami, Orlando, Tampa, Atlanta, Nashville, Huntsville, Dallas, and Houston. Those are areas where we think we can make additional investment in people, in facilities, and have opportunity to grow. We'd highlight those for sure. We've called out eight priority markets. we've called out eight priority markets That would be Miami, Orlando, Tampa, Atlanta, Nashville, Huntsville, Dallas, and Houston. that would be miami orlando tampa atlanta nashville huntsville dallas and houston Those are areas where we think we can make additional investment in people, in facilities, and have opportunity to grow. those are areas where we think we can make additional investment in people in facilities and have opportunity to grow We'd highlight those for sure. we'd highlight those for sure

Speaker 3: All right, perfect. I'll ask the other side of the M&A question, and I know you've answered this before, but I sort of have to ask. As we think about the regulatory environment, the window's open right now. We don't know how long that window will be open. You guys have excess capital. How are you thinking about M&A strategically from here? All right, perfect. all right perfect I'll ask the other side of the M&A question, and I know you've answered this before, but I sort of have to ask. i'll ask the other side of the m&a question and i know you've answered this before but i sort of have to ask As we think about the regulatory environment, the window's open right now. as we think about the regulatory environment the window's open right now We don't know how long that window will be open. we don't know how long that window will be open You guys have excess capital. you guys have excess capital How are you thinking about M&A strategically from here? how are you thinking about m&a strategically from here

Speaker 2: We remain interested in non-depository M&A. We've made a number of acquisitions over the years that have added to our capital markets capabilities, wealth management, bought mortgage servicing rights, consumer finance business, small business finance business. Those are the things we want to continue to do, and none of them have been big investments, and none of them have had huge impacts on our business, but they've been helpful. We'll keep looking for those opportunities. With respect to depository M&A, we have not been active. We've said we're not interested, and that remains our position. We're generating an 18-plus % return on tangible common equity. We're growing earnings per share and tangible book value at the top of the peer group. We think we can continue to do that, just executing our plan over the next few years. We remain interested in non-depository M&A. we remain interested in non-depository m&a We've made a number of acquisitions over the years that have added to our capital markets capabilities, wealth management, bought mortgage servicing rights, consumer finance business, small business finance business. we've made a number of acquisitions over the years that have added to our capital markets capabilities wealth management bought mortgage servicing rights consumer finance business small business finance business Those are the things we want to continue to do, and none of them have been big investments, and none of them have had huge impacts on our business, but they've been helpful. those are the things we want to continue to do and none of them have been big investments and none of them have had huge impacts on our business but they've been helpful We'll keep looking for those opportunities. we'll keep looking for those opportunities With respect to depository M&A, we have not been active. with respect to depository m&a we have not been active We've said we're not interested, and that remains our position. we've said we're not interested and that remains our position We're generating an 18-plus % return on tangible common equity. we're generating an 18-plus % return on tangible common equity We're growing earnings per share and tangible book value at the top of the peer group. we're growing earnings per share and tangible book value at the top of the peer group We think we can continue to do that, just executing our plan over the next few years. we think we can continue to do that just executing our plan over the next few years The risk associated with, on the other side, execution of a transaction to generate what I would consider marginal benefits from our perspective just doesn't make a lot of sense to us. We think our shareholders want to see consistent performance. We think they want to continue to see top quartile returns on tangible common equity and earnings per share growth, and we're going to continue to work on delivering that through organic growth and management of our business. The risk associated with, on the other side, execution of a transaction to generate what I would consider marginal benefits from our perspective just doesn't make a lot of sense to us. the risk associated with on the other side execution of a transaction to generate what i would consider marginal benefits from our perspective just doesn't make a lot of sense to us We think our shareholders want to see consistent performance. we think our shareholders want to see consistent performance We think they want to continue to see top quartile returns on tangible common equity and earnings per share growth, and we're going to continue to work on delivering that through organic growth and management of our business. we think they want to continue to see top quartile returns on tangible common equity and earnings per share growth and we're going to continue to work on delivering that through organic growth and management of our business

Speaker 3: Fair enough. As we think about capital and we think about the changes with Basel III Endgame, what does that mean for capital deployment? What does that mean for the longer-term return profile of the bank? Can you give us some more color there? Fair enough. fair enough As we think about capital and we think about the changes with Basel III Endgame, what does that mean for capital deployment? as we think about capital and we think about the changes with basel iii endgame what does that mean for capital deployment What does that mean for the longer-term return profile of the bank? what does that mean for the longer-term return profile of the bank Can you give us some more color there? can you give us some more color there

Speaker 1: Sure. Just to level set, our Common Equity Tier 1 on a reported basis was 10.7% in the first quarter. If you could pro forma the two main aspects of the Basel III Endgame, inclusion of AOCI, and then for us, standardized approach on risk weights, that's about a 10% benefit in RWA for us. That'll equate to a pro forma CET1 ratio of 10.4%. So our capital distribution priorities are unchanged. We'll continue to invest in good loan growth on balance sheet. We'll ensure we have good growth and dividend consistent with our earnings profile. As John alluded to, non-bank M&A is something we'll consistently look for, and then ultimately, we'll buy back shares after that. We're fortunate we generate between 40 and 45 basis points of capital every quarter, we don't need to warehouse capital. That's how we'll think about deploying that. Sure. sure Just to level set, our Common Equity Tier 1 on a reported basis was 10.7% in the first quarter. just to level set our common equity tier 1 on a reported basis was 10.7% in the first quarter If you could pro forma the two main aspects of the Basel III Endgame, inclusion of AOCI, and then for us, standardized approach on risk weights, that's about a 10% benefit in RWA for us. if you could pro forma the two main aspects of the basel iii endgame inclusion of aoci and then for us standardized approach on risk weights that's about a 10% benefit in rwa for us That'll equate to a pro forma CET1 ratio of 10.4%. So our capital distribution priorities are unchanged. that'll equate to a pro forma cet1 ratio of 10.4%. so our capital distribution priorities are unchanged We'll continue to invest in good loan growth on balance sheet. we'll continue to invest in good loan growth on balance sheet We'll ensure we have good growth and dividend consistent with our earnings profile. we'll ensure we have good growth and dividend consistent with our earnings profile As John alluded to, non-bank M&A is something we'll consistently look for, and then ultimately, we'll buy back shares after that. as john alluded to non-bank m&a is something we'll consistently look for and then ultimately we'll buy back shares after that We're fortunate we generate between 40 and 45 basis points of capital every quarter, we don't need to warehouse capital. we're fortunate we generate between 40 and 45 basis points of capital every quarter we don't need to warehouse capital That's how we'll think about deploying that. that's how we'll think about deploying that You can pro forma what the net effect would be if you got the full benefit just through RWA. It would increase returns by potentially north of 100 basis points. That's just doing math, right? We need to first get a final rule. We need to understand how the rating agencies think about the RWA through that lens. Once we get clarity around all that, you should see us kind of execute and bring our capital back in line with our targets, which are still nine and a quarter to nine and three-quarters. You can pro forma what the net effect would be if you got the full benefit just through RWA. you can pro forma what the net effect would be if you got the full benefit just through rwa It would increase returns by potentially north of 100 basis points. it would increase returns by potentially north of 100 basis points That's just doing math, right? that's just doing math right We need to first get a final rule. we need to first get a final rule We need to understand how the rating agencies think about the RWA through that lens. we need to understand how the rating agencies think about the rwa through that lens Once we get clarity around all that, you should see us kind of execute and bring our capital back in line with our targets, which are still nine and a quarter to nine and three-quarters. once we get clarity around all that you should see us kind of execute and bring our capital back in line with our targets which are still nine and a quarter to nine and three-quarters

Speaker 3: Is there an internal governor on TCE to TA ratios? Or I guess, how do you think about capital ratios outside of the CET1 ratio? Is there an internal governor on TCE to TA ratios? is there an internal governor on tce to ta ratios Or I guess, how do you think about capital ratios outside of the CET1 ratio? or i guess how do you think about capital ratios outside of the cet1 ratio

Speaker 1: Yeah. I think risk-based measures are important. Clearly, we track things like leverage ratio, and we look at TCE to TA. Not being risk-sensitive, I think, is an important factor there. The other thing, just in the weeds on the math, the inclusion of the mark on derivatives, I think, is another kind of negative towards the TCE ratio. It's not like securities which have liquidity. This is just your mark on. This was kind of one side, if you will, of your interest rate risk management. I think those two factors are reasons why I think TCE to TA. It's something to calculate, but hopefully, we can be more advanced as a system in terms of how we manage capital and use risk-sensitive measures. Yeah. yeah I think risk-based measures are important. i think risk-based measures are important Clearly, we track things like leverage ratio, and we look at TCE to TA. clearly we track things like leverage ratio and we look at tce to ta Not being risk-sensitive, I think, is an important factor there. not being risk-sensitive i think is an important factor there The other thing, just in the weeds on the math, the inclusion of the mark on derivatives, I think, is another kind of negative towards the TCE ratio. the other thing just in the weeds on the math the inclusion of the mark on derivatives i think is another kind of negative towards the tce ratio It's not like securities which have liquidity. it's not like securities which have liquidity This is just your mark on. this is just your mark on This was kind of one side, if you will, of your interest rate risk management. this was kind of one side if you will of your interest rate risk management I think those two factors are reasons why I think TCE to TA. i think those two factors are reasons why i think tce to ta It's something to calculate, but hopefully, we can be more advanced as a system in terms of how we manage capital and use risk-sensitive measures. it's something to calculate but hopefully we can be more advanced as a system in terms of how we manage capital and use risk-sensitive measures

Speaker 3: Got it. We're almost out of time. Maybe with that, I'll ask a final question. John, as we wrap up, what do you think the market is still missing about the Regions Financial story here? Got it. got it We're almost out of time. we're almost out of time Maybe with that, I'll ask a final question. maybe with that i'll ask a final question John, as we wrap up, what do you think the market is still missing about the Regions Financial story here? john as we wrap up what do you think the market is still missing about the regions financial story here

Speaker 2: I don't know about missing so much as I think we believe we have the real value in our franchises is our low-cost deposit base. We're committed to managing and protecting that deposit base and growing it. We believe if we do that, we continue to focus on taking care of our customers, managing the risk in our business. We have built a model that delivers consistent, sustainable results, and we believe those results will be top quartile in terms of returns over the next number of years. If we do that, then we think our shareholders will be happy with our performance. I don't know about missing so much as I think we believe we have the real value in our franchises is our low-cost deposit base. i don't know about missing so much as i think we believe we have the real value in our franchises is our low-cost deposit base We're committed to managing and protecting that deposit base and growing it. we're committed to managing and protecting that deposit base and growing it We believe if we do that, we continue to focus on taking care of our customers, managing the risk in our business. we believe if we do that we continue to focus on taking care of our customers managing the risk in our business We have built a model that delivers consistent, sustainable results, and we believe those results will be top quartile in terms of returns over the next number of years. we have built a model that delivers consistent sustainable results and we believe those results will be top quartile in terms of returns over the next number of years If we do that, then we think our shareholders will be happy with our performance. if we do that then we think our shareholders will be happy with our performance

Speaker 3: All right. Perfect. With that, please join me in thanking John and Anil. Thanks so much for your time. All right. all right Perfect. perfect With that, please join me in thanking John and Anil. with that please join me in thanking john and anil Thanks so much for your time. thanks so much for your time

Speaker 2: Thank you. Thanks for having us. Thank you. thank you Thanks for having us. thanks for having us