Good day, and thank you for standing by. Welcome to Relay Financial Fourth Quarter 2025, our news conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your touch-down telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please pay advice. Today's conference is being recorded. I will now turn the conference over to your speaker host for today, Sean Leary, Chief Financial Planning and Invest Relations Officer. Please go ahead.

Thank you, Lydia. Good morning and welcome to Ally Financial's fourth quarter 2025 earnings call. This morning, our CEO, Michael Rhodes, and our CFO, Russ Hutchinson, will review Ally's results before taking questions. The presentation we'll reference can be found on the investor relations section of our website, ally.com. Forward-looking statements and risk factor language governing today's call are on page 2. GAAP and non-GAAP measures pertaining to our operating performance and capital results are on pages 3 and 4. As a reminder, non-GAAP or core metrics are supplemental to and not a substitute for U.S. GAAP measures. Definitions and reconciliations can be found in the appendix. And with that, I'll turn the call over to Michael.

Thank you, Sean, and good morning, everyone. I appreciate you joining us today for a quarter earnings call. Before we cover our results, I'd like to take a moment to reflect on the year. After my first full year as Chief Executive, I am grateful and optimistic. Grateful for what has been built before I joined and optimistic for what's ahead. My optimism is shaped by the strategic refresh we undertook in 2025. Deliberate choices backed by discipline execution have delivered solid results. At the heart of our refresh was the focus strategy we rolled out to start the year. Focus means we are investing in businesses and segments where we have clear competitive advantages and a reason to win. That is, areas where we are unique and special. Our results validate that we are on the right path. 2025 marked a shift where results demonstrated tangible progress, including delivering on the detailed guidance we provided in January. With that, let me recap full-year performance on page 5. Adjusted EPS of $3.81 was up 62% year-over-year. Core ROTCE of 10.4% was up more than 300 basis points versus 2024. for, encouraging progress with room to expand further. The three drivers for sustainable mid-teens returns have been consistent, and the progress we are making is clear. We have executed against two of the three drivers and remain positioned to deliver on the final as we progress forward. Retail net charge-offs ended the year below 2%. Importantly, we see further opportunity as we continue to benefit from vintage rollover and our dynamic approach to underwriting and servicing. Clearly, the macro will play a role in how losses materialize in any given year, but we remain confident in the direction of travel over time. Expense and capital discipline remain a top priority. We have been and will continue to be prudent stewards of shareholder capital and make investments to position Ally for durable long-term performance. And we remain on track to deliver NIM in the upper 3% range. NIM increased more than 30 basis points in 2025 when you adjust for the sale of card. That progress, along with embedded tailwinds across the balance sheet, gives me confidence in our ability to drive further margin expansion for full year 2026. Adjusted net revenue of $8.5 billion was up 3% year-over-year, and up 6% when adjusting for the sale of card. Finally, CET1 end of the year at 10.2%. Taking into account AOCI, fully phased-in CET1 was up 120 basis points in 2025, ending the year at 8.3%. These financial results reflect the impact of a handful of deliberate choices, including exiting non-core businesses, Repositioning a portion of our investment securities portfolio as we continue migrating towards a more neutral rate position Maintaining expense discipline to create capacity for appropriate investments while reducing controllable expenses by 1% versus 2024 And executing two credit risk transfer transactions for a total of $10 billion in notional retail auto loans sourcing highly efficient capital Together, our actions have resulted in lower credit risk, lower interest rate risk, higher capital levels, a more efficient expense base, and in aggregate, a stronger foundation. And we grew in the core businesses that we want to grow with a sharp focus on risk and returns. Retail auto and corporate finance loans were up 5% in 2025 on the back of strong momentum in these core franchises. As a result of this progress, we announced a $2 billion open-ended share repurchase authorization in December. The resumptions of repurchases is not a declaration of victory, but a clear indication of the progress we've made and our confidence in the path ahead. And as we've said before, we will start low and slow with share repurchases. The opportunities for growth across our core franchises are encouraging and accretive. Organic growth remains our priority when allocating capital. However, adding share repurchases provides another option for capital deployment as we maintain an unwavering focus on risk-adjusted returns. With that, let's turn to page six and discuss those core franchises. Execution within each of our core franchises has been strong and momentum positions us for sustainably higher returns. Dealer Financial Services delivered an exceptional year of performance, reflecting the benefits of our scale, the breadth of our products and services, and the depth of our relationships with our dealer customers. 15.5 million applications were an all-in record and allow us to be selective in what we originate. Given the strength at the top of the funnel, we originated $43.7 billion in consumer loans. That's up 11% year-over-year, with a 9.7% origination yield, while 43% of the volume was concentrated within our highest tier of credit quality. We continue to see opportunities for responsible growth at attractive risk-adjusted spreads based on the uniquely strong partnership we have with our dealer network. Beyond headline origination figures, I'm encouraged by the continued growth across smart auction and our pass-through programs, which are expected to contribute durable fee growth moving forward. Moving to insurance, written premiums exceeded $1.5 billion, a record for our life. Synergies between auto finance and insurance continue to strengthen our all-in value proposition enables us to support our dealer partners across all aspects of their business. In corporate finance, we deliver a 28% ROE with strong year-over-year growth in the loan portfolio. Managing credit risk remains a top priority, and a second consecutive year with no charge-offs reflects the strength of our underwriting. We have the benefit of being a lead agent in virtually all of our transactions, given us the ability to own the diligence process and structure transactions appropriately. Turning to digital bank, our customer-first approach continues to set us apart. We ended the year with $144 billion in retail deposit balances, reinforcing our position as the largest all-digital direct bank in the U.S. We saw a solid growth in the fourth quarter, and on a full-year basis, balances were roughly flat. that's in line with our expectations to start the year. Our focus remains on providing best-in-class products and services to drive customer growth and retention. We now serve 3.5 million customers as 2025 marked our 17th consecutive year of customer growth. Over time, this will continue driving a less rate-sensitive portfolio with lower average account balances. The strength and stability of what we've built is a valuable component of our enterprise. Retail deposits continue to represent nearly 90% of total funding, and 92% are FDIC-insured. Before passing to Russ, I want to share a few high-level thoughts. Our core franchises are well-positioned, and their success is fueled by our strong, do-it-right culture and leading brand. I am energized by how our 10,000 teammates deliver for our customers every day and how they've rallied around the focus strategy. Our engagement scores remain in the top 10% of companies globally for this sixth consecutive year, and we were eight points higher than the industry average. Demonstration Ally's purpose-driven culture remains a key differentiator. Our brand continues to resonate in the market and serves as a key reason customers come to Ally and want to do more business with us. Overall, 2025 marked a meaningful step forward for Ally. I'm encouraged by the progress we've made, but more importantly, I'm excited for what remains ahead. And with that, I'll turn over to Russ to walk through the financials in more detail.

Thank you, Michael. I'll begin by walking through fourth quarter performance on slide seven. In the fourth quarter, net financing revenue excluding OID of $1.6 billion was up 6% from the prior year. We continue to benefit from the momentum in our core franchises, disciplined deposit pricing, and ongoing optimization of the balance sheet toward higher-yielding asset classes. Adjusted other revenue of $550 million in the fourth quarter was down 2% year-over-year and excludes a $27 million loss as we move nearly $400 million of legacy mortgage assets to help for sale. This move reflects ongoing optimization of our balance sheet and is consistent with our focus strategy. We are taking advantage of a strong bid for mortgage credit to sell portions of our portfolio which carry more complexity and higher servicing costs. Following the expected sale of these mortgage loans, our portfolio will be entirely first lien, fixed-rate mortgages, which will continue to run off over time. Full-year adjusted other revenue was up approximately 2%, despite the headwind from the sale of credit card and the exit from mortgage originations. Excluding that headwind, other revenue was up 5%, reflecting the momentum across our core franchises. Diversified other revenue streams, including insurance, smart auction, and our auto pass-through programs are capital-efficient and less sensitive to consumer credit cycles. positioning them to remain tailwinds into 2026 and beyond. Fourth-quarter adjusted provision expense of $486 million was down $71 million year-over-year, largely driven by continued improvement in retail auto NCOs, as well as the exit from the credit card business. The year-over-year net charge-off comparison includes $56 million of credit card activity in 4Q 2024. The fourth-quarter retail auto NCO rate declined 20 basis points year-over-year to 2.14%. Adjusted non-interest expense of $1.2 billion excludes a $31 million restructuring charge associated with a reduction in force. These decisions are never easy, but reflect our unwavering focus on balancing investments with expense discipline. Our strategic pivot has created a more focused, efficient organization, and these actions create capacity to continue investing in our core businesses in areas like cyber and AI. Full-year adjusted non-interest expense was approximately flat year-over-year, while controllable expenses were down 1%, demonstrating our commitment to cost discipline that will continue going forward. Gap and adjusted EPS for the quarter were $0.95 and $1.09, respectively. Moving to slide 8, net interest margin, excluding OID, of 3.51 percent decreased four basis points from the prior quarter, resulting in full year NAM of 3.47 percent. That is in the top half of the net interest margin guide we provide at the beginning of the year. Continued expansion of the retail auto portfolio yield and decreasing deposit costs were offset by the repricing of floating rent exposures and lower lease yields during the quarter. Retail auto portfolio yield, excluding the impact from hedges, increased six basis points sequentially as we continue to originate above the portfolio yield. Resilient yields, while maintaining consistent risk appetite, reflect the benefit of record application flow, enabling selectivity in what we ultimately originate. Given the forward curve, we expect the portfolio yield has peaked and will remain relatively flat throughout 2026, as lower benchmarks are reflected in originated yields. While used values were stable in aggregate, we recognized losses of $11 million on lease terminations concentrated in a subset of weaker performing models residual values on plug-in electric hybrids have been pressured following the elimination of the ev tax credit an oem recall and increased oem incentives on new models pressure on these models increased later in the quarter and we'll continue to monitor trends as we move throughout 1q and into the used vehicle selling season our lease portfolio mix is shifting about half of the leases we originated over the past two years have OEM residual value guarantees, and the leases we have originated without the benefit of residual value guarantees reflect a more diversified mix of OEMs. While we may see pressure moving forward, the ongoing remixing of the portfolio should reduce gain and lost volatility over time. Cost of funds decreased 11 basis points quarter over quarter, driven by a 12 basis point decrease in deposit costs. Last quarter, we spoke about deposit pricing beta starting low as we began another easing cycle. Over time, we expect deposit pricing beta will increase, driving NIM expansion. We believe a through-the-cycle beta in the 60s, which we continue to expect, is sufficient to reach our high-threes NIM target. Importantly, we have strong momentum on both sides of the balance sheet from our multi-year transformation and remain confident in our path to an upper threes margin over time. Average earning assets on a full-year basis ended down 2%, consistent with the outlook we shared during second quarter earnings. Importantly, ending asset balances were up 2%, reflecting the growth we've seen in the places where we want to grow and demonstrating our momentum as we head into 2026. In aggregate, ending balances across retail, auto, and corporate finance were up $5 billion, or more than 5% year-over-year. On a fully phased-in basis for AOCI, CET1 for the period was 8.3%, an increase of approximately 120 basis points during the year. During the quarter, we executed our second credit risk transfer of the year, issuing a $550 million note on $5 billion of high-quality retail auto loans, which generated approximately 20 basis points of CET-1 at issuance. Following our announced share repurchase authorization in December, we repurchased $24 million in common stock, reflecting the low and slow approach we've outlined. Moving forward, we'll be dynamic with our level of buybacks in any given quarter. We're encouraged by our ability to execute a story of and, not or. We are prioritizing organic growth across our core portfolios while maintaining our competitive dividend, continuing to build our fully safe-end capital levels, and returning capital to shareholders through share repurchases. At the bottom of the page, we ended the year with adjusted tangible book value per share of $40, up nearly 20% in the past year. Earnings expansion and AOCI accretion will support further book value growth over time. Additionally, we updated our calculation of core return on tangible common equity. This new methodology does not alter our earnings outlook in any way. It improves transparency and creates alignment between returns, book value, and ultimately earnings per share. We have added incremental disclosure, clearly outlining the changes in the supplemental slides of this presentation. In short, we have eliminated the deferred tax asset adjustment from our prior methodology to streamline calculation as well as increase transparency and comparability. As we approach our 9% management target for fully phased-in CET1, we believe this new core ROTCE metric is appropriately aligned to our mid-teens target for sustainable return. Let's turn to slide 10 to review asset quality trends. Consolidated net charge-offs of 134 basis points were up 16 basis points quarter-over-quarter driven by seasonality. We continue to see strong credit performance in our commercial portfolios, resulting in zero net charge-offs for the second consecutive year. Full-year consolidated NCOs finished below the range provided a year ago, driven by continued improvement in retail auto credit and the aforementioned strength across our commercial portfolios. Retail auto net charge-offs of 214 basis points were up 26 basis points quarter-over-quarter, reflecting seasonal trends, but down 20 basis points compared to a year ago. Year-over-year improvement across all quarters of 2025 reflects the tailwind from vintage rollover dynamics and the benefit of enhanced servicing strategies. Our full-year retail auto net charge-off rate was 1.97%. below the bottom end of our guide, and notably below the 2% mark we referenced as a key pillar to achieve our mid-teens return target. Moving to the top of the page, 30-plus all-in delinquencies of 5.25% were down 21 basis points from the prior year, marking the third consecutive quarter of year-over-year improvement on an all-in basis. This continued improvement further reinforces our constructive view on the near-term loss trajectory within our portfolio. but we remain mindful of the macroeconomic environment, particularly the labor market and used vehicle values. Turning to the bottom of the page on reserves, consolidated coverage decreased three basis points this quarter to 2.54%, while the retail auto coverage rate remained flat at 3.75%. Our retail auto coverage levels continue to balance favorable credit trends within our portfolio against macroeconomic uncertainty. Moving to slide 11 to review auto segment highlights. Pre-tax income of $372 million was lower year-over-year, primarily driven by lower commercial balances, lease mix dynamics, and reserve build and higher servicing-related expenses given growth in the retail portfolio. On the bottom left, we've highlighted the trajectory of retail auto portfolio yields. Excluding the impact from hedges, yields were up 6 basis points quarter-over-quarter and 18 basis points year-over-year. Our scale and record application volume led to another strong quarterly vintage with attractive risk-adjusted spreads. Fourth quarter originated yield of 9.6% was down quarter-over-quarter, but demonstrated resilience given the move and underlying benchmarks. Our ability to actively calibrate our buy box at the evolving markets supports risk-adjusted returns through the cycle. On the bottom right of the page, $10.8 billion of consumer originations were up 6% versus the prior year period and were enabled by the 10% increase in application volume that we saw. Our established dealer relationships and full-spectrum approach enabled this accretive growth despite headwinds. Last year, we faced elevated competition, significant pull-forward demand in 2Q and 3Q tied to tariffs and EV tax credit expiration, and fourth quarter New Light vehicle sales that were down more than 5% year-over-year. Record application volume throughout the year has supported our ability to remain selective, driving accretive growth while also providing opportunity to monetize declined applications through our pass-through program. Turning to insurance on slide 12, core pre-tax income was $89 million, roughly flat year-over-year. Total written premiums of $384 million were also relatively flat versus 2024, while insurance losses of $111 million were down $5 million year-over-year. Insurance provides a durable, capital-efficient revenue source and remains a key driver of our long-term growth strategy. As Michael noted, we continue to leverage synergies with auto finance to drive momentum within the business and deepen our all-in value proposition as we support our dealer partners in all aspects of their business. Turning to corporate finance on slide 13, the business delivered another strong quarter with corporate tax income of $98 million. Fourth quarter ROE of 29% and a full-year ROE of 28% underscore the strength of the franchise and the durable, accretive profile of the business as we continue to look for growth opportunities within the markets we compete in. On a year-over-year basis, we grew the portfolio by just over $3 billion. Spot portfolio balances can move considerably given the timing of new deals, paydowns, and capital markets activity. Taking a step back, the portfolio has grown at an 8% CAGR since 2022, reflecting the disciplined approach that continues to guide our growth philosophy and is reflected in the credit characteristics of the portfolio. 2025 marked a second consecutive year with no new non-performing loans, while criticized assets and non-accrual loan exposures were 10% and 1% of the portfolio, remaining near historically low levels. Leveraging longstanding relationships with key partners in the industry remains critical to maintaining our culture of strong risk management. I will discuss our financial outlook on slide 14. We expect full-year NIM between 3.6% and 3.7%. The range for NIM reflects the evolving path of interest rates as the Fed easing cycle continues, with two cuts assumed for 2026. As we have consistently messaged, we are liability-sensitive over the medium term and asset-sensitive in the very near term. We'd expect early beta to drive a relatively flat margin through 1Q, but given current trends on lease residuals, we expect NIM to be slightly down on a sequential basis. Looking beyond 1Q, we remain confident in NIM migrating to the upper threes over time, supported by continued optimization on both sides of the balance sheet. Deposit repricing and continued remixing of the balance sheet towards higher-yielding assets will support margin expansion. In aggregate, retail auto and corporate finance are expected to grow in the mid-single digits, while mortgage loans and lower-yielding investment securities will continue to run off. In total, margin expansion will accelerate as deposit pricing data increases toward our through-the-cycle target, consistent with what we observed in 2025 following Fed easing in 2024. Given the fourth quarter NIM of 3.51 percent and expectation for NIM to be down a bit in the first quarter, the full-year guide implies we expect to be approaching our upper threes NIM target exiting 2026. As a reminder, our NIM progression will be choppy on a quarter-to-quarter basis, but we remain confident in the destination. Moving to other revenue, we expect continued momentum across insurance, smart auction, and auto pass-through programs to drive low single-digit percent growth year-over-year, which includes a roughly $25 million headwind from the lost card fees earlier this year. On credit, we see retail AutoNet charge-offs between 1.8% and 2% for the year. 2025 performance showed tangible results from the dynamic underwriting and enhanced servicing capabilities we have implemented over the past two years. Our outlook reflects a balance between continued improvement from the remaining vintage rollover with ongoing macro uncertainty. Last year, we highlighted the continuation of existing trends across delinquency, low-to-loss rates, and used values provided a potential path to the low end of our guidance range. Those dynamics largely played out, and we achieved a full-year NCO rate just below the low end of our guide. This year, a continuation of these same trends would support performance around the midpoint of our guide, and achieving the lower end of the range would require incremental favorability within these drivers. Looking beyond retail auto, we expect consolidated net charge-offs between 1.2% and 1.4%. As we have noted, we are pleased with the performance of our commercial portfolios. However, these are not zero-loss businesses, nor do we price for that, and our full-year guide assumes a return to more normalized losses. On expenses, we expect 2026 to be up approximately 1% with investment focused on our core franchises fueling revenue growth, while also investing in areas like AI, cyber, servicing, and customer experiences. This disciplined expense management, along with top-line revenue growth, positions us for positive operating leverage this year and over the medium term. Building upon the momentum we saw throughout the back half of 2025, average earning assets are expected to be up between 2% and 4% year-over-year. Importantly, our growth is focused on the areas where we want to grow for attractive returns, retail, auto, and corporate finance. Finally, we expect an effective tax rate between 20% and 22%. We are encouraged by the momentum we have established across the businesses. We have said that achieving our mid-teams return target requires, one, an upper threes NIM, two, a sub-2% retail auto and CO rate, and three, capital and expense discipline. As Michael noted, we have achieved two of the three and see a path to achieving the third. That said, it remains a dynamic operating environment, and while reaching our targets continues to move closer, we don't feel it's prudent to call a specific quarter. We'll remain nimble and ready to pivot as the macro and competitive landscape evolves. Our focus strategy is working. I'm confident in our ability to deliver improved returns and drive long-term shareholder value. And with that, I'll turn it over to Michael for a few closing remarks.

Thanks, Russ. Before heading into Q&A, I want to reiterate what we've accomplished for the past year and how that positions us for the future. First, our focus strategy has created clarity on where we will compete and how we will win. Second, we have a much stronger foundation. Our balance sheet and risk position are stronger today, giving us greater resilience and flexibility as we move forward. Our core franchises each have relevant scale and a refined focus has streamlined resources and strengthened our competitive positioning. Third, we are executing. That means we are operating smarter, moving faster, and delivering improved efficiency and effectiveness. Earnings growth, credit performance, and capital metrics all showed meaningful progress and momentum as we head into 2026. Fourth, authorizing a $2 billion buyback program is an important step. Resuming share of repurchases underscores the progress we've made and our confidence in our ability to execute moving forward. Finally, while we were encouraged by our progress, we remain focused on the road ahead. There is more work to do, but I am certain we are on the right path and excited for what's ahead as we continue to execute and deliver compelling long-term value for our shareholders. With that, I'll turn it back to you, Sean, so we can head to Q&A.

Thank you, Michael. As we head into the Q&A, we do ask that participants limit yourself to one question and one follow-up. Livia, please begin the Q&A.

Thank you. Ladies and gentlemen, as I wanted to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, simply press star 1-1 again. Please stand by while we compile the Q&A roster. Now first, question coming from the line-up. Robert Waldhack with autonomous research, Ulan, is now open. Robert Waldhack with Autonomous Research, your line is now open.

Hey guys, maybe just to start on the NIM, Ross, I appreciate the commentary that you gave. You said down quarter over quarter in 1 Q and then sounded pretty strong on the exit trajectory, I just wanted to double check that I heard that correctly. And then is there any more detail that you could give on what exactly drives the NIMS sort of progression through the year and how it ramps from kind of down quarter over quarter to what sounds like a pretty strong exit rate?

Yeah, sure. Sure, Robert. Thanks for your question. I appreciate it. You know, when you kind of look at the quarter-to-quarter NIMS dynamic between third quarter and fourth quarter last year and heading into first quarter of this year, it really comes down to mainly early beta, as well as some pressure from lease terminations. And so maybe I'll start on early beta. This is the same thing that we saw last year, right? We saw soft early beta exiting 2024 and starting 2025. And then we saw some nice catch-up in the middle of 2025 with some healthy NIMM expansion. our expectations are to see similar dynamics play out this year, right? And as I kind of get underneath what leads to that, rate cuts are beneficial to Ally over time, and we've talked about that before, but we've also talked about near-term asset sensitivity that impacts us on a quarter-to-quarter basis. So our NIM progression is not a straight line, and we've talked about that before, And it's part of why we, you know, we don't guide for NIM on a quarter-to-quarter basis. We guide on a full-year basis. The beta catch-up dynamics are strong. The ongoing portfolio mix dynamics that we mentioned earlier are strong and give us confidence in driving meaningful and sustainable improvement, both in profitability and NIM expansion. You know, you pointed to the NIM guide at 360 to 370 for the year. You know, I think as you dig in and, you know, you think about where we're starting the year, it's pretty clearly implied that we expect some meaningful NIM expansion through the course of the year. You know, again, you know, this kind of NIM expansion that looks kind of like the dynamics that we saw play out last year. And, you know, obviously on a quarter-to-quarter basis, we could get some impacts as no doubt, you know, our expectation is there will be some kind of ongoing movement in the Fed funds rate throughout the year. You know, but again, you know, we feel confident in terms of the medium trajectory around NIM. And I think if you kind of do the, you know, kind of as you dig in on, you know, our full-year NIM expectations and then where we're starting the year, I think you'll see that, you know, we expect to end the year, you know, above the high end of our guide or, you know, approaching our high threes, medium-term target. You know, the pressure from on the lease side, as we mentioned earlier, it's driven by a few hybrid electric vehicle models, the plug-in hybrid models. Those specific vehicles were impacted by an OEM recall, as well as significant OEM incentives on new vehicles that came with the expiration of the EV lease tax credit. And so that's kind of what we're dealing with in terms of kind of some of this near-term NIM pressure. But, again, I just reiterate our confidence in the medium term and in terms of the destination and the high threes.

That's great. And then just quickly on credit and the retail auto coverage ratio specifically, You know, you talk a lot about the S-tier mix, vintage remixing, net charge-offs coming down, et cetera, et cetera. The retail auto coverage ratio, though, hasn't budged in, like, a year. Just curious what you think it would take for you to actually start, you know, releasing some of the reserves there in retail auto.

You know, it's a fair question, Robert, and we get that question from time to time. I mean, we've often said, you know, when we think about our returns over the medium term, as we think about our targets, we don't include reserve releases. You know, those are more of an output than an input from our perspective. And our focus is on, you know, just kind of managing the credit in a prudent way in terms of how we underwrite and how we service, you know, kind of just our overall approach to the portfolio. So as I think about where our reserve is set today, it's really balancing a few things. On the one hand, we're seeing clear benefits, as you said, from vintage rollover to vintages that were originated towards the end of 2023 through 24 and now 25 that are clearly stronger vintages from a credit perspective than what we saw in early 23 and in 2022. So that vintage rollover is a clear benefit. We've made improvements to our underwriting, we've made improvements to our servicing, and we're seeing that benefit over time, and that's certainly something that we're seeing in terms of delinquency improving, strong photo loss rates, and also we're seeing good support from the used vehicle market in terms of used car prices and severity. So all those things are incorporated in terms of how we think about reserves. But at the same time, we're also looking at some of the macro uncertainty out there, in particular focused on the labor market and used vehicle prices. Our current expectation is that unemployment over the course of 2026 is going to be higher than the unemployment that we saw over the full year of 2025. And there's obviously some uncertainty around that, and that's factored into how we think about reserves, as well as how we think about our forward NCO guide. And then similarly, you know, we've got a careful eye on the used vehicle market. We're watching what we see on smart auction as well as in the auction lanes, and very much paying attention to used car prices overall. So there are a number of things that factor in, but again, I just reiterate, reserve releases is not something that we factor into, you know, how we think about the business from a return perspective, and it's not factored into our mid-teens return guide.

Okay, thanks a lot.

Thank you. And our next question coming from the line of Sanjay Sakrani with KBWE, Alanis Malpin.

Thank you. Good morning. Maybe, Michael, can we start with contextualizing 2026 as you look ahead to the year. It's obviously been a bumpy ride so far. But curious, as you look at the guidance as a whole, where do you think the biggest risks lie, the opportunities as well? Russ, you could also chime in.

Yeah, Sonny, thanks for the question. I think about 26. Look, I can't think about 26 without reflecting a bit on 25. And I'm really proud of what this team did in 25, you know, on page five of our materials we call our notable items, and a lot of good work has been done. And I started out by talking about, you know, both gratitude for what's been built and optimism for what's in the future, and so I do feel a lot of optimism for 26, and it's anchored on the fundamentals of the business. And so while 25 was a year where we made a lot of shifts and pivots, you know, 26, the The rhetoric we have inside the organization is really about bridging strategy to execution. And so it's really we've set the table up in quite nicely for ourselves. And 26 will be about building strong volumes with the right margins, the right pricing, the auto franchise, continue with the momentum we have in the corporate finance business, continue with our customer acquisitions, the strength that we have in our retail bank and our consumer bank, which, you know, again, Our balance has been relatively flat, but we're attracting a less rate-sensitive customer, so we like that dynamic, more of that. And then, of course, you know, from a technology perspective, continue to deliver the capabilities that ensure that we win here in the 21st century and certainly for next year. And so if I take a step back, I feel really good about the fundamentals of the business. So in terms of, you know, when I think of the guide for 26, you can kind of go line item by line item. And, you know, like on the expense side, like you've seen a lot of discipline from this team in terms of how we manage expenses. So, you know, continue to expect to see some discipline on expense management. You know, on revenue, look, there's, you know, we have NIM, we have fee income. And I think Russ did a nice job of talking about what's going on with NIM. And hope you took away from that some optimism on the exit rate. Recognize there's probably some buffiness as we go along. But the balance sheet dynamics are playing out the way we would expect that. and so I'd expect a continuity of that in 26. And then, again, on the fee income side, we like what we're seeing. And then credit, the dynamics playing out pretty much like we said it would. Last year, beginning of the year, we said if certain things happened, we'd be at the low end of the guide. We ended up being below that low end. And so, you know, assuming the macro holds, we feel good about that. Consumer behavior right now, we're pleased with what we're seeing at the consumer. There's a bit of this disconnect between kind of the rhetoric in terms of the headlines and what we're seeing in consumer behavior, but we're pleased with what we're seeing on the consumer side. So overall, you know, I feel good about the estimate that we put out for 26 in terms of what we're going to do kind of by a line item and feel good about the foundation of the business. And I was going to say, you know, what I worry most about, it's really about the macro. And, you know, if there's something going to happen that's going to affect, you know, a lot of financial institutions, not just us, from an unemployment perspective or some other discontinuity. But I start off, I talk about optimism. I'll probably end this narrative on optimism. I feel very good about how we're positioned.

I might just add just – sorry, Sandy. You did say that I could comment as well. Absolutely. Go ahead. I mean, I might just add, just as I kind of cut across the three main franchises, I just feel really good about the level of dealer engagement we have, you know, in a quarter where, like, vehicle sales were down and there were all sorts of reasons for, you know, there were all sorts of reasons and pressures, but our applications were up and it supported our ability to be selective and underwrite a really great vintage. You know, similarly, when I look at the consumer bank, you know, we added customers. We kind of hit our expectations on the pin in terms of flat balances for the year. We continue to affect a nice migration of customer base towards, you know, more favorable demographics. On the corporate finance side, we continued with disciplined growth, and we really like what we see in the portfolio in terms of non-accruals and criticized assets. So, you know, as I look across all three of the franchises, there's a lot of really good things going on in each of those franchises. And then I turn to the balance sheet as a CFO, and, you know, I think we've taken deliberate steps to reduce credit risk, to reduce rate risk, and to increase capital. We put a lot of capital on the balance sheet over the course of 2025. And so, you know, again, I feel good about all those things. And so it's really just watching that macro, particularly the labor market and the read across to used vehicle prices.

No question, you guys had a good 2025 and seems like good momentum in 2026. Just one clarification on some of the questions Robert was asking on credit. Just as we look at the performance of credit, it would seem like the momentum you have on delinquencies suggests further improvement in the charge-off rate. And I know, Russ, you mentioned that you would probably need further improvement in delinquencies or momentum in the delinquencies to get to the low end of the range, but it seems like there's a progression there. Is there anything sort of weighing against that that we need to think about?

Yeah, I mean, I kind of point back to unemployment. You know, our expectation for 2026 is that, you know, over the course of the year, unemployment is going to be higher than it was in 2025. And I know some of the data is a little up and down with, you know, with some of the stuff that happened later last year, but our general expectation is that it's higher. And so that is something that weighs on kind of how we think about it. In terms of our overall NCO guide, you know, at the 180 to 2% level that we mentioned earlier, you know, we've effectively kind of priced into that guide, the vintage rollover, you know, the strong indicators we've seen in terms of delinquency, flow-to-loss rates, used car pricing, you know, as well as somewhat weaker, a weaker labor market versus what we saw in 2025. So as I kind of think about the range and what takes us, you know, above the midpoint or below the midpoint, you know, I think we'd actually have to see, you know, some improvement in terms of delinquency, in terms of flow-to-loss, or in terms of used vehicle pricing to get us certainly below that midpoint. You know, that could happen in the context of a labor market that's certainly stronger than we anticipate. You know, on the other hand, you know, we could see things going the other way in terms of labor market, used vehicle prices, delinquency, photo loss, severity, you know, kind of moving in a different direction. And so I think the outlook that we've provided is balanced. You know, and where last year we pointed to a continuation of some of these favorable indicators we were seeing getting us to the low end this year, I'd say, you know, given the persistence of those variables over the last 15 months or so, you know, we're pricing that into the midpoint.

Okay. Thank you so much.

Thank you. And our next question coming from the line-up, Mark DeVries with Deutsche Bank, PLN is now Yeah, thanks.

I had a follow-up question on some of the NIMH commentary. I was just wondering if we could get you to, you know, maybe quantify kind of the upper bound on what you mean by kind of the upper threes or high threes. And then just to follow up on that, I think, Russ, you indicated you expect to be, you know, the guide implies you're kind of near that run rate at the end of 2025. Does that imply you're kind of by then, you know, given charge-off guidance below the 2% range from retail auto that you're near kind of a 15% ROE run rate by the end of the year? Or are there other things you need to do around capital efficiency or operating leverage to get there?

You know, it's a fair question. As you can imagine, you know, we've stayed away from calling quarters and providing, you know, quarterly guidance, just, you know, just kind of given some of the choppiness that we've talked about in our business in terms of, you know, the near-term impacts of rate moves and things like that. You know, but I think as I think about your math, you know, upper threes, you know, I think we talked about it previously as being, you know, we talked about kind of 4% back when we still had the card business, and we talked about about a 20 basis point impact to NIM as a result of selling card, and so obviously we've sold card, and so I think that kind of gives you a sense for how we dimension what we mean by upper threes, you know, given that we no longer have that card business. You know, as you kind of think about the guide for the year at 360 to 370 and you look at kind of where we're starting the year, I mean, I think the progression math as you parse through that is pretty clear. But, again, I just reiterate, you know, obviously, you know, in any given quarter, you know, we have impacts from just rate moves that are kind of very near term, you know, but in terms of the medium term don't really have a real impact. And so we don't call the quarter, you know, but I think the basic arithmetic around kind of what you need to see over the course of the year is pretty clear. You know, we've talked about mid-teens in terms of three things. Those three things are unchanged. It's high three NIMS, it's sub-2% retail auto NCO rate, and it's continued discipline around capital and expenses. We don't think we need to make a change to how we're running the business or what we're doing. you know, it's consistent and we continue to see our path to mid-teens. And so I would characterize this right now as having checked off two of those things with retail auto NCOs now sub 2% and with the capital and expense discipline that we currently have in place. You know, and I'd say that the kind of one outstanding item is getting them to the high threes, and there's nothing that's changed with respect to that.

Great. Thank you.

Thank you. Our next question coming from the lineup, Jeff Edelson with Morgan Stanley. Your line is now at Bryn.

Hey, good morning. Thanks for taking my questions. Russ, maybe just to follow up on, you know, the discussion around retail auto yields peaking, is that assuming that you're keeping the S-tier origination mix consistent with these 40% plus levels you've been doing recently? And, you know, I know you're still mindful of the macro environment, but, you know, how are you thinking about the opportunity to maybe step down a little bit in tier and pick up some extra yield, you know, as you've talked about in the past, and when would you maybe think about actually doing that if at some point?

Yeah, look, I'd say yes to your kind of overall question around S-tier consistency and kind of the 40% area. You know, obviously we don't kind of micromanage that on a quarter-to-quarter basis, But, you know, overall, as we look at flat portfolio yields, I think that's kind of consistent with that level of S-tier. I would point out, though, we don't have a set-it-and-forget-it approach to credit, and there's a lot going on, you know, underneath the surface. And so, you know, even at S-tier in that, you know, 40% range, as you can imagine, we're doing a lot of work at the micro-segment level, you know, kind of, you know, analyzing kind of different combinations of credit characteristics that have over or underperformed our expectations over the last year or two. And so, you know, we're continuously tweaking our approach to underwriting to make it better and our approach to kind of how we take risk. You know, I would say as you kind of think about that kind of flattish portfolio yield over the next year or so, So the way to kind of think about that is, you know, we're running, you know, at about our expected 80% pricing data on originated yield. And so as you think about, you know, our expectation of kind of roughly two Fed cuts over the course of this year, and you kind of put on that portfolio beta and you look at where our originated yield goes versus where our portfolio yield is, I think you kind of get a good sense for why we're pointing to flattish portfolio yield over the course of the year.

Okay, great.

I might also just point out while I've got you, you know, we're also obviously looking at, you know, continued improvements to deposit pricing. You know, one is early beta catches up, and then two, obviously, as we get further cuts, you know, we'll look forward to further benefits in terms of deposit pricing there. And so that flattish portfolio yield is mated to declining cost of deposits, which is obviously an important driver of NIMIC.

Okay, great. And just in terms of the capital with the slow and slow approach to start here, it was, I think, nice to see you highlight the 9% fully phased in target. I know that's the old historic target overall. It's a way to be thinking about here is, like, once you get there, you know, you can start to think about being a little bit more aggressive on the cadence of buyback. And I don't believe you disclosed, but in terms of the securities repositioning, could you just quickly remind us how much capital that consumed? And, you know, I think previously you were talking about an AOCI accretion of about $350 million per year. How did that perhaps change on the latest repositioning here?

Yeah. Yeah, so let me, you know, let me try and dissect that. There's, you know, there's a lot there. I mean, maybe just starting on the AOCI accretion. You know, we currently expect, call it $400 to $450 million per year after-tax benefit from OIC, AOIC accretion going forward. And so that's, you know, that's on top of our reported earnings level, and it's a good guy in terms of building tangible book value going forward. You know, on the securities repositioning, you know, that was kind of towards the end of the first quarter and beginning of second quarter of last year. I'd be happy to have our IR team follow up with you and spend some time just kind of going through what we disclosed at that time about the securities repositioning. And, yeah, that's obviously been, you know, kind of baked into our numbers and, you know, from our perspective is a bit in the past. But we're happy to go through and, you know, kind of go through the dynamics of that from last year, if that's helpful to you. Sure.

Thank you.

Thank you. And our next question coming from the line of Ryan Nash with Goldman Sachs. Here line is now open.

Hey, good morning, guys.

Hey, Ryan.

Hey, Ross. So maybe as a follow-up to Jeff's question, maybe help us think a little bit about the pacing of buyback until we reach that 9%. Obviously, understand that, you know, it's an open-ended authorization, and I know you've been saying we're going to start slow and leg into it, but maybe just sort of contextualize how do you think about the pacing of buyback over the medium term.

Yeah, it's a fair question, Ryan. And, you know, maybe I just kind of reiterate our capital priorities, right, which is first and foremost organic growth in the places we want to grow. You know, predominantly our retail auto book and our corporate finance book, those are our highest returning assets. We saw some nice growth in those books over the course of 2025, and we've got good momentum going into 2026. And so our first priority is going to go to growing those businesses, and we think that's the best outcome for our shareholders in terms of driving an improvement in our profitability going forward and driving some really good IRRs for the investor. And then obviously, you know, we've got our dividend. As you mentioned, we've got our capital bill to 9%. You know, we really see, you know, having this share repurchase authorization in place as something that gives us flexibility. It's another lever to do, as we say, to, you know, to not chase growth for growth's sake, but to continue to be disciplined stewards of our shareholders' capital. And that, you know, that's important to us. And, you know, you pointed out the 9% fully phased-in CDT1 target. You know, obviously, as we're approaching that, we will do share repurchases while we're growing capital. We are not going to be subject to the tyranny of ore. Our story is a story of and, and we think we can build capital, support the organic growth of our core businesses, maintain our dividend, and do share repurchases. And I think, as you and Jeff both pointed out, I think it's a fair expectation that, you know, obviously as we get through that 9% build, our share repurchase level will accelerate. And so as you kind of think about it, low and slow, but doing share repurchases alongside all the other capital priorities, is kind of getting through that 9%, and then obviously, you know, it's our expectation that, you know, getting through the 9% and with our earnings levels continuing to improve, that is obviously going to support higher levels of share repurchases going forward.

Gotcha. Maybe just as my follow-up, Russ, on slide 21, will you show the new core ROTC methodology change? You know, just so I'm looking at it, it doesn't seem like there's any big change here, but I'm curious, does this change impact the timing or the level of returns that you view as the destination return for the company?

No, and this is an important point. This is an updated methodology. It in no way alters our mid-teens return target, our timing, or our conviction in our ability to sustain that target over time. This is a simplification. In our view, it increases transparency and comparability. It has the benefit of aligning how we think about returns, book value, and earnings per share. And so, you know, we think this is helpful to our investors in a number of ways. You know, but importantly, we remain confident in the sustainability of our mid-teens return targets. You know, and as we kind of pointed out earlier, you know, I just want to point out the burn-off of AOCI obviously adds to our tangible book value per share trajectory over time on top of what we show in terms of reported EPS.

Awesome.

Thank you. Our next question coming from the lineup. Moshe Arnbach with TD Cohen. Your line is now open.

Great. Most of my questions have been asked and answered, but maybe Michael or Russ, could you talk a little bit about the competitive dynamic? We've, you know, there have been some players that have come back into the market over the last year, some particularly hard by the end of the year. Anything that that kind of makes you do, obviously you noted the 10% growth in applications, but I mean, does it make you kind of look at anything different from different credit tiers or anything like that, maybe just discuss that a little bit.

Yeah, maybe I'll jump in first. You know, I kind of added this in the response to Sanjay's question earlier, but I, you know, I feel really good about where the franchises are, in particular, our dealer financial services franchise. You know, when you look at just the level of dealer engagement we're seeing, you know, there are a lot of pressures, a lot of headwinds that we saw at the end of the year, you know, between light vehicle sales, the end of the EV lease tax credit, you know, some of the dynamics around pull forward that probably reversed a little bit in the fourth quarter. But as you pointed out, our application volume was strong, and it supported our credit selectivity and our ability to get what I think is a really great vintage in the fourth quarter. And that really comes from just the strength of the overall franchises. You know, we are consistent supporters of our dealer partners over time and across all aspects of their business. We have, you know, a value proposition that's attractive and helps them in the many aspects of running a better dealership. And that, you know, the strength of those relationships and that engagement translates directly into the application volume that really is the lifeblood of that business. And so, you know, this is an attractive business. And if anything surprised us, it's that it took until this year before a number of our competitors realized how attractive it is. And so we expected that competition, and, you know, we're pleased with how the business has responded and continued to really excel in the face of it.

Russ, thanks for that, Russ and Moshe. You know, great question. And, yeah, this competitive marketplace, just a sign of how great the business that we have. If you take away, there's been a lot on this call, and I'm going to take your question and kind of frame it with respect to a lot of what's going on. The competition was more intense this year, but incredibly proud of this team. And this team showed up in a big way, this strength of relationships that we have, certainly in the auto business and the corporate finance business and the way we've delivered. This whole year has been about strategic pivots backed by discipline execution. We talk about the fact that we have, quote, you know, solid results. This was a very good year. And I use the word solid because, you know, as good as we've done, we know there's a path to better. And, you know, I think, Russ, you talked a lot about that. But we have momentum. You feel good about how this business is playing out. And just a real thanks and a shout-out to this team for delivering a really, really strong, solid year and for the momentum they've built going into 26.

Thank you, Michael. Seeing we're a little bit past time, we'll go ahead and wrap it there today. If you have any additional questions, please feel free to reach out to Investor Relations. Thank you for joining us this morning. That concludes today's call.

This concludes today's conference call. Thank you for your participation. You may now disconnect.