Good day and thank you for standing by. Welcome to the first quarter 2026 Ally Financial Earnings 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'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Sean Leary, Chief Financial Planning and Investor Relations Officer. Please go ahead.

Thank you, Liz. Good morning and welcome to Ally Financial's first quarter 2026 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 GAAP and non-GAAP measures pertaining to our operating performance and capital results are on page three. 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 our first Corridor Earnings Call. In the last update, I noted my optimism for the path ahead. One quarter into 2026, our results confirm we're on the right path and support my confidence in our outlook, even as the macro environment remains dynamic. That confidence is grounded in the position of strength we carried into the year, driven by the actions to focus our business, streamline our operations, and increase our capital levels. The Focus Forward strategy we rolled out last year is simple and powerful. Focused means we're doubling down on the businesses and segments where we have clear competitive advantages. These are areas where we have long-standing relationships, differentiated capabilities, relevant scale, and a right to win. Ford reflects our ambition to create something extraordinary and sustainable from a position of strength. Together, these principles have allowed us to streamline and sharpen our focus, building a business that is increasingly impactful and enduring. The results since our refresh last year provide unmistakable evidence it's working. Record application flow has enabled strong origination volume with accretive risk-adjusted returns. Record written premium volume as we continue to leverage our insurance offering to deepen dealer relationships and help them win across their entire ecosystem. Strong growth across the corporate finance portfolio while delivering an ROE of over 25% and maintain an unwavering focus on credit risk. And reinforce our position as the nation's leading all-digital direct bank as we continue to grow customers and increase engagement, providing stable, cost-efficient funding. The progress is real, and we remain committed to delivering even more. With that, let me cover some of the highlights from our first quarter. Adjusted EPS of $1.11 was up 90% year-over-year. Core ROTCE of 11.1% was up 440 basis points versus 2025, reflecting the structurally high returns we're capable of generating. Margin of 3.52% was impacted by the lease headwinds we discussed last quarter, but we remain confident in our ability to deliver a sustainable upper 3% margin, the final lever of our mid-teens thesis. Adjusted net revenue of $2.2 billion was up 6% year-over-year and 12% when adjusting for the sale of credit card. Finally, CET1 of 10.1% was up roughly 60 basis points year-over-year. We're encouraged by the thoughtful Basel III proposal released a few weeks ago and the clarity it provides. We appreciate the agency's efforts to modernize the capital rules and achieve a more streamlined framework that better aligns capital requirements with the risks inherent in our business. Specific to Ally, I view the proposal as being constructive and supporting our existing capital allocation priorities. We remain confident in our ability to identify creative opportunities for organic growth in our business, build CET1, and return capital shareholders. The strategy is amplified by our brand and our culture. Our brand is an asset, one known for authenticity and impact. Earlier this week, we announced that we met our 50-50 media pledge to spend equally in men's and women's sports. That's a year ahead of schedule and clear proof of the impact we can make. women's sports have been experiencing remarkable growth in recent years and we're incredibly proud to partner with and support those shaping the evolution the business outcomes of these investments have been encouraging with our brand health at an all-time high and customer retention continuing to lead the industry our culture is based on an unwavering commitment to do it right and establishes an ethos for everything we do In the first quarter, we were honored to be named to Fortune's 100 best companies to work for, the highest ranking we've received, and the fourth consecutive year being recognized. Additionally, Newsweek included Ally on their list of the most trusted companies. These recognitions reflect the kind of culture and customer centricity our team builds every day. What mattered even more was hearing directly from our teammates. Over 90% said that Ally is a great place to work and saw meaningful gains in trust in leadership and confidence in where we are headed. That tells me our strategy is resonating. We're aligned, focused, and executing in a way that employees can resonate with. That alignment is energizing. The momentum is real, and I am excited for what lies ahead. With that, let's turn to page five and discuss the core franchises. Operational momentum within each of our core franchises remains strong, builds on the progress we delivered in 2025, and positions us for further improvement in financial performance. Our dealer-centric, through-the-cycle approach remains a key differentiator, driving results across dealer financial services and reinforcing the strength of our relationships. 4.4 million applications reflect another record quarter. The scale and breadth of our product offerings and mutually beneficial dealer relationships remain key strategic advantages that drive strong application flow and enable us to be selective in what we originate. The strength at the top of the funnel translates into solid origination performance. with consumer originations of $11.5 billion, up 13% year-over-year, despite a decline in industry light vehicle sales and healthy competition. Importantly, with a focus on risk-adjusted returns, we are mindful of the economic environment and maintain a dynamic approach to underwriting. The benefit of the strong application flow extends beyond originations, as we saw record volume and revenue from our pass-through programs this quarter. Insurance is a critical lever contributing to the success of our dealer partners and our ability to win. That strength is translating to results with written premium of $389 million, marking a first quarter record for Ally. Growth continues to be fueled by leveraging synergies with the auto finance team as we highlight our all-in value proposition to support dealers across all aspects of their business. In corporate finance, we delivered a 26% ROE, while growing the portfolio to $13.7 billion, up roughly 6% quarter over quarter. While we continue to see a creative growth opportunities, credit remains central to how we operate. As we've cited previously, we serve as the lead agent for virtually all transactions, given us the ability to own the diligence process, underwrite, and structure transactions appropriately. Turning to Ally Bank, our customer-first approach sets us apart as we continue to benefit from the shift to digital channels. We ended the quarter with $146 billion in retail deposit balances, reinforcing our position as the largest all-digital direct bank in the U.S. Our focus remains on providing best-in-class products and services to drive customer growth and retention. We saw an improvement in customer acquisition the first quarter, and over the past year, we delivered 6% customer growth. We see meaningful opportunity continue deepening relationships with 3.5 million customers as we look to provide value extending beyond rate paid. The strength and stability of the portfolio remains critical to our success. Retail deposits continue to represent nearly 90% of total funding and 92% are FDIC-insured. The franchise provides stable, low-cost funding source that enables our business to focus on prudent growth. Let me finish where I opened up, and that's with optimism. Our path ahead is clear and compelling. Our core franchises are delivering and returns are moving higher. I'm encouraged by the progress of momentum. And while mindful of the dynamic operating environment, I'm optimistic for what remains ahead. And with that, I'll turn it over to Russ to walk through the financials in more detail.

Thank you, Michael. I'll begin by walking through first quarter performance on slide six. Net financing revenue, excluding OID of $1.6 billion, was up 8% year-over-year and up 15% when excluding credit card in the prior year. We continue to benefit from strong performance across our core franchises, ongoing optimization of the balance sheet toward higher-yielding assets, and our disciplined approach to deposit pricing. Adjusted other revenue of $572 million in the first quarter was flat year-over-year, despite an approximately $25 million headwind due to the sale of credit card. This momentum reflects the strength of our diversified revenue streams, which include insurance, smart auction, and our pass-through programs. Adjusted provision expense of $474 million was down $23 million year over year, largely driven by continued improvement in retail auto NCOs and the exit from credit card. Retail auto NCOs declined 15 basis points year-over-year to 1.97%. Adjusted non-interest expense of $1.2 billion was down $85 million year-over-year, demonstrating our continued commitment to cost discipline, as well as reflecting the sale of credit card and historically elevated weather losses in March of last year. Let's move to slide 7 to discuss margin in detail. Net interest margin, excluding OID, was 3.52% as repricing of floating rate exposures and lower lease yields were offset by lower deposit costs. Retail auto portfolio yield, excluding the impact from hedges, was flat sequentially, consistent with the expectations noted in January. Lease yield included a $10 million loss on lease terminations given the headwinds on select plug-in hybrids we noted in January. We assessed depreciation rates quarterly, and we accelerated depreciation on certain leases maturing in the near term, primarily due to these impacted models. As a reminder, we expect our lease termination mix will start to shift next year. Approximately half of the leases we originated over the past two years have OEM residual value guarantees, while the other half reflect a more diversified mix of OEMs. This will continue to reduce lease gain and loss volatility over time. On the liability side, cost of funds decreased nine basis points quarter over quarter, largely driven by a nine basis point decrease in deposit costs. Retail deposit balances increased $2.6 billion, and we added 74,000 net new customers. Clear proof our brand and products resonate in the market. We remain disciplined on pricing through a key growth period, but given the strength of the portfolio, we were able to reduce liquid saving rates by 10 basis points in February, bringing our cumulative beta to 57%. While not reflected in 1Q results, we just reduced liquid savings another 10 basis points, bringing our cumulative beta to 63%. Additionally, CD maturities remain a tailwind with approximately $18 billion in maturities in the first half of 2026, carrying a weighted average yield of nearly 4%. Looking ahead, we anticipate a decline in 2Q retail deposit balances given seasonal tax payments. Our focus remains on customer growth trends and optimizing overall cost of funds. Average earning assets were up 2% year over year. Importantly, growth continues to be concentrated in our highest returning assets, retail auto and corporate finance. Those portfolios, in aggregate, were up 6% year over year. Momentum across the balance sheet supports my conviction in our path to a sustainable upper threes margin over time across a variety of rate environments. Turning to page eight, CET1 of 10.1% was up approximately 60 basis points versus the prior year. Like Michael, I'm appreciative of our regulators' thoughtful approach to the revised Basel proposals and the clarity they provide. I look forward to continued engagement throughout the comment period. The proposal's improved alignment between capital requirements and fundamental risk in our business is encouraging. Relative to current headline CET1 of 10.1%, the revised standardized approach would produce a CET1 ratio just above 9% when fully phasing in AOCI. That is nearly 100 basis points higher than where we would have landed under the 2023 proposal. In addition to the standardized approach, we continue to evaluate the expanded risk-based framework. As Michael noted, the proposals indicate a favorable outcome for Ally, and our capital allocation priorities remain the same. We look forward to continuing to drive accretive growth in our core franchises, build capital, support our dividend, and repurchase shares. Earlier this week, we announced a quarterly dividend of $0.30 for the second quarter of 2026, which remains consistent with the prior quarter. And we repurchased shares worth $147 million. Our open-ended buyback authorization continues to provide flexibility, enabling us to remain dynamic in any given quarter, as buybacks complement the rest of our capital allocation framework. At the end of the quarter, adjusted tangible book value per share reached an all-time high of $41, up nearly 14% over the past year and reflecting our ability to concurrently increase book value and returns. On slide nine, we will review asset quality trends. Consolidated net charge-offs of 121 basis points were down 13 basis points versus the prior quarter and down 29 basis points year over year. Strength across our commercial portfolios continues to complement favorable trends in retail auto. Retail auto net charge-offs of 197 basis points were down 17 basis points quarter over quarter and down 15 basis points compared to a year ago. 1Q marked the fifth consecutive quarter of year-over-year improvement in NCOs as we benefited from particularly strong used vehicle prices and record low flow-to-loss rates. On the top right of the page, 30-plus all-in delinquencies of 4.6% were down 17 basis points from the prior year, marking the fourth consecutive quarter of year-over-year improvement on an all-in basis. Industry data has shown that tax refunds increased roughly 11% year-over-year versus some earlier expectations for increases above 20%. Notwithstanding the increase in tax refunds and a dynamic macro, delinquency followed what we would consider to be a typical seasonal pattern during the quarter. We've continued to see a resilient consumer, but given the evolving backdrop, we feel it's appropriate to remain measured. Turning to the bottom of the page on reserves, consolidated coverage decreased one basis point this quarter to 2.53% given mixed dynamics, while the retail auto coverage rate was flat at 3.75%. Retail auto coverage levels continue to balance favorable credit results within our portfolio against macroeconomic uncertainty. Across our commercial portfolios, credit performance remains strong with stable fundamentals. We continue to see accretive growth opportunities, but risk-adjusted returns remain our focus. We'll remain disciplined on both underwriting and pricing as growth is assessed through a credit-first lens. Moving to slide 10 to review auto segment highlights. pre-tax income of $336 million was lower year-over-year due mainly to CECL Reserve Build. On the bottom left, we've highlighted the trajectory of retail auto portfolio yields. Excluding the impact from hedges, yields were flat quarter-over-quarter and up 16 basis points year-over-year. First quarter-originated yield of 9.6% was relatively flat quarter-over-quarter despite ongoing competition, coming in slightly favorable versus our original expectations. S-tier concentration declined to 41% in the period. We will remain dynamic as we optimize risk-adjusted returns across the credit spectrum. On the bottom right of the page, $11.5 billion of consumer originations were enabled by an all-time record in consumer applications. Our strategic focus is on the top of the funnel and our all-in dealer-centric model. Originations were up 13% year-over-year despite a continuation of strong competition and a decline in new and used industry sales. We remain disciplined in our approach to underwriting as we assess the potential impact of higher oil prices and lower consumer sentiment. Our ability to actively calibrate our buy box with the evolving market will support accretive, risk-adjusted returns over time. Turning to insurance on slide 11, core pre-tax income was $87 million, up $70 million year-over-year. Total written premiums of $389 million were up $4 million year-over-year. Insurance losses of $121 million were down $40 million, primarily due to lower weather losses given historic weather events in the prior year. Insurance continues to drive capital-efficient, diversified revenue and remains a key component of our long-term growth strategy. We continue to leverage synergies with auto finance to drive momentum within the business and deepen our all-in value proposition as we help our dealer partners succeed in all aspects of their business. Turning to corporate finance on slide 12, the business delivered another strong quarter with core pre-tax income of $94 million and a 26% ROE. We have continued to prudently grow the portfolio, which stands at nearly $14 billion today. Credit discipline is embedded in everything we do. It guides our growth and is reflected in the credit characteristics of the portfolio. Our strategy is built on longstanding relationships and deep underwriting familiarity, which we believe are advantages in managing risk. Additionally, our differentiated funding profile enables us to structure transactions conservatively while generating accretive returns. Given headlines related to the private credit industry more broadly, we've added some metrics highlighting the strength of our portfolio. We've never recorded a loss since we entered the business in 2019, and no loan has ever been classified as criticized or placed on non-accrual. Our approach remains highly disciplined, anchored in conservative underwriting with loan-level detail, conservative advance rates, tight concentration limits, and eligibility requirements, along with the ability to revalue underlying collateral and reduce borrowing limits. The portfolio is well diversified, spanning nearly 1,200 obligors with an average advance rate of 60%, reinforcing our strong collateral position. Our exposure is intentionally concentrated with groups of high-quality, scaled asset managers with proven through the cycle performance. Our track record and ongoing prioritization of credit risk management give us confidence in our ability to drive accretive growth going forward. I will briefly discuss our outlook on slide 13. Guidance remains consistent with what we shared three months ago. We are pleased with our execution during the quarter as we continue to capitalize on the momentum across our core franchises. While we are closely monitoring the impacts of macroeconomic uncertainty, we remain confident in our ability to deliver against our full-year guidance. As noted on the page, our baseline assumptions reflect the March 31st forward curve, which doesn't include a Fed funds cut until June of 2027. Movement and benchmark rates may impact the timing and pace of future NIMA expansion, but we remain confident in delivering a sustainable, upper 3% margin over time across a range of rate environments. As Michael noted, we're encouraged by operational performance and improving financial results. Our focused forward strategy is working. Our team remains intensely focused on advancing our progress to disciplined execution. I remain confident in our ability to deliver compelling long-term value for our shareholders. And with

that, I'll turn it over to Sean for Q&A. Thank you, Russ. As we head into Q&A, we do ask that participants, limit yourself to one question and one follow-up. Liz, please begin the Q&A.

As a reminder, if you'd like to ask a question at this time, please press star one one on your touchtone phone. Our first question comes from Ryan Nash with Goldman Sachs.

Hey, good morning, guys. Michael, maybe to kick it off, you know, there's clearly a lot out there that the consumer is facing, you know, whether it's volatile oil prices, other pieces of inflation, Interest rates are not as low as people had hoped. So when you think about all the things that are out there, maybe just give us an update on what you're seeing on the consumer and, you know, what does that mean for your overall credit expectations going forward? Thank you.

And category.

And when you kind of look at it all together, you know, on the whole, it has yet to materially impact our business. And let me unpack that a bit more as I think about both today and looking ahead. today we see the continued behavior is resilient. And I've mentioned this before in a couple conversations is that there's a bit of a disconnect between consumer sentiment data and what we're seeing in our portfolio. I'd also offer that today we continue to see opportunities to generate loans with attractive risk-adjusted returns. We like the business that we're booking. And at the same time, I think you heard in the comments, we're choosing to be deliberately measured. If you look at the data from the quarter, auto originations or applications, I should say, are up 16% year over year. But origination volumes are at a slightly more moderate pace. And so we're prioritizing, I call it discipline over volume. And I think the word you heard is what we're being measured. I think appropriately so. And if I think about looking ahead, like my ability, I think our ability to predict exactly how conditions unfold is probably know better than anyone else's. And so we stay really focused on what we control. First of all, we remain anchored in our long-term strategy. And I think the pivots that we took a year or so ago have really, really set us up well for this environment. Second, we run Ally with a strong data discipline. And we have lots of data. It's internal data, new origination data on the auto side. Clearly, you look at portfolio data and vintage trends and loss severity and roll rates and skip rates and things like that. We also look at external data, macro data, savings rates and income rates and even credit card delinquency and credit card minimum pay data and things like that. And so when you put it all together on a go-for-it basis, look, we're, you know, I think we're being, you know, I think measured in this environment, but I think you saw from the quarter, we feel good about what we're delivering. And so you put all this stuff together, you got headwinds and tailwinds, but we feel good about what we're seeing in our portfolio. And so overall, I'm aware the environment is unusual, but I'm really pleased with our fundamentals and our recent performance.

Gotcha. Maybe as my follow-up, Russ, you reiterated the NIM of 360 to 370, despite the shift in rates, and you're assuming no cuts now. Can you maybe just talk about how the cadence of the margin has changed? where do you see the exit run rate now and maybe just talk about if you can continue to manage deposit costs lower similar to the cut that you made yesterday in this sort of stable rate environment thank you

great thanks Ryan thank you for the question there's there's a lot there let me try to try to break that down as best I can yeah and I guess maybe where I'd start is you know we've talked before about medium-term trends in our business in terms of the portfolio mix, in terms of our deposit pricing data, all those things continue to be very much intact and give us confidence around our medium-term trajectory in terms of net interest margin. As you know, the pace and magnitude of Fed funds changes can impact us, particularly in a given quarter, but all those trends remain intact. And so, as you pointed out, So, you know, we've seen a shift in terms of Fed Fund's expectations. Our guidance is now based on an assumption that Fed Funds will be flat through the rest of this year. And we've maintained our guide at 360 to 370. And I'd say that's just a reflection of the business performing as expected. With recent cuts to our OSA rates, we're operating at a 63% beta. that's very much in the range that we've talked about before and that we've targeted for the business. When you think about the next couple of quarters, you know, second quarter will have the benefit of, you know, the recent cut that we put through the system yesterday, as well as the full quarter impact of the cut that we made back in February, as well as CD maturities, which will continue throughout the year. And then in the background, that ongoing portfolio mix migration as we run off lower yielding mortgage securities and mortgage loans, and we continue to grow our higher yielding retail auto loan book and corporate finance books. And we continue to leverage the momentum that we have in both of those businesses. So once again, our overall outlook on NIM is unchanged. For the year, we expect 360 to 370. And as you do the mathematics on that, that very much implies that we exit the year at or above the high end of that range, and that continues to be our expectation. Again, as you know all too well, obviously, movements and rates can affect us in a given quarter, but the business has ways of offsetting

that awesome appreciate all the color our next question comes from rob wild hack with autonomous

research morning guys uh i guess i'll start on capital the buyback came in better than we were modeling and michael you called out you and russ called out some of the benefits to ally from the new proposal if you add those things up um i guess what kind of scope is there to maintain or even accelerate the current pace of buyback in the wake of the new rules yeah thanks maybe i'll start and

and michael you can you can jump in i guess first i'd reiterate the comments we made on the call where we're appreciative of the these very thoughtful proposals um you know they are proposals they're going to go through a comment period i am i'm confident they'll get a lot of comments as we go through that um you know and and there there may be some changes in terms of of what the final rules look like. And so with that as context, I'd say overall our expectation though is that they're constructive and they'll be favorable for allies, we pointed out on the call. Our capital priorities remain unchanged. And I do think the first quarter provides an interesting template, a good template for the way that we prioritize growth in the businesses that we're focused on growing. And so you saw that strong growth in retail, auto, and corporate finance. And, you know, that is a priority for us is to ensure that we have the capital to support that growth. We are also prioritizing continuing to build our capital and to put a buffer on top of the effective kind of 9% plus CEQ1 ratio that you'd print if you fully phased in under the RSA. And then I'd say, obviously, it's supporting our dividend and continuing to buy back stock. I would say in terms of capital, we think of this as a story of and, not or, and that we can do all of these things at the same time, support the growth of our core businesses, build our capital, support our dividend, and buy back shares.

Okay, thanks. And then on the competitive environment in a couple of different areas, can you just unpack what you're seeing on the retail auto side. Obviously, there have been some newer or potential re-entrants there. And then similar question on deposits. You know, you highlighted the 63% cumulative beta so far. So, have there been any changes to what you're

seeing competitively on the deposit side too? Yeah, I'll start on the auto side. I'd say there really haven't been recent changes in the competitive environment. I think we've had four straight quarters where I'd say the, you know, where we've seen this kind of higher level of competition than what we had seen coming out of the pandemic. And it's been, you know, four straight quarters where we've continued to demonstrate momentum in our businesses. Our dealers are responding to the fact that we are a through-the-cycle partner. We support their businesses in a number of different ways. And we have longstanding and meaningful relationships. And that, for us, has translated into strong application volume. You saw the record application volumes we had this quarter. That gives us an opportunity set, and we've been able to use that in order to originate, to originate at volumes that we like, credit, and at an originated yield that we like. And I think we saw all those things come through in the first quarter.

And Russ, on the deposit side, you know, it's actually quite – we're very pleased with what we're seeing and, you know, recognize there's competition for deposit balances. Like, we believe we are in a relatively rarefied air in that we're a digital bank with a national brand, and there are not many who really tick that box. And if you saw, we actually disclosed this quarter our customer growth on a quarter – on a year-over-year basis was 6%. And, in fact, in this environment, we're actually seeing our customer growth rates actually accelerating, not decelerating. So pricing aside, we like the margin we're getting in that business, and we like the new volume flows. And new volume flows are, albeit they're lower-balanced customers, we actually like that dynamic. And so we're really pleased with what we're seeing there. Absolutely. Thanks, Michael.

The customer is clearly responding to a national brand, a top-notch digital experience.

competitive rates. Okay. Thank you, guys. Our next question comes from Sanjay Sakrani

with KBW. Thank you. Good morning. I guess what I think you mentioned. Maybe I'll start on the

question around credit. Yeah, as you pointed out, we're pleased with what we're seeing in the book. You know, when you look at first quarter, you know, photo loss rates were solid. We got some support from used vehicle prices. It translated into another quarter where NCOs are down on a year-over-year basis and DQs are also down on a year-over-year basis. So, you know, once again, pleased with what we're seeing in our book. Michael pointed out earlier there's a lot going on in the macro. It's a very dynamic macro. And, you know, we would consider ourselves to have a measured posture. You know, you asked specifically about reserves. You know, we held reserves flat at 375. That's very much taking into account what we're seeing in the book, as well as the backdrop of a very dynamic macro. As you can imagine, we have a thorough process that we go through every quarter as we go about setting reserves, you know, taking into account what we're seeing in the book, you know, some of the uncertainties that are in the macro, you know, and the output of that process was holding reserves flat. You know, as we think about our return ambitions going forward, as we think about our mid-teens, we don't predicate that on the idea of reserve releases. It's not something that we model. You know, we kind of look at the business kind of very much on a steady

state basis. And, you know, and you did hear that we used the word measured. You know, you often hear us talk also of being dynamic. And so, like, in this environment with what we see today, you know, measured is the appropriate word. But, like, as I said, we're very data dependent. And, you know, as data ebbs and flows, we'll make some adjustments that we think is the best interest of the business to drive a creative business.

Maybe just on the penetration, or is it more diversification across brands? I'm just curious the NIMH progression on a go-forward basis.

Yeah. Let me kick this one off, and Russ, see if you have anything to add to this. In terms of the strength of our application flows, I could take you back. It was probably last year when we announced what I call our strategic pivot, where we were going to sell the credit card business and stop originating mortgages. really focus on our core businesses. And that's, we've been very intentional about that over the past year and really like what we're seeing. And I just have to tip my hat to the, to our teammates in the, in dealer financial services, and particularly those who are the dealer facing colleagues, because they're working, building their relationships every single day. And, you know, as we do that, our dealers appreciate we're all in on them. And they appreciate the way we actually manage the relationships and that we're there to help them win. And that's translating into more volumes. And so this is the premise of this strategy, we call it Focused Forward, is really leaning to things that we do very, very well. And what I see in terms of application flows is really just the fruits of discipline execution against that strategy. And so we feel very pleased with that. But anyway, and then in terms of kind of yield, look, you know, yield is going to ebb and flow with mix and there's seasonal factors that kind of come into play. We like the yield that we saw in the first quarter. I mean, Russ, it's probably a bit a little higher than we were expecting.

Yeah, I think it outperformed our expectations a little bit. And as you pointed out, you know, we expect to see the originated yield ebb and flow somewhat from quarter to quarter. And, you know, certainly as we look to kind of first quarter to second quarter, there's, you know, there's generally been some seasonality there, which would kind of drive that S-tier concentration a little higher in the second quarter and perhaps put a little pressure on yield. But, again, I wouldn't get hung up on yield in any particular quarter. I think the important point to look at is that strong application volume that we see gives us a lot of flexibility in terms of, you know, being able to really, you know, to really kind of manage and be flexible and be dynamic with what we pull through in a given quarter in terms of volume and credit and originated yield.

Our next question comes from Brian Farran with Truist.

Oh, hi.

Okay. Maybe on capital, you've got this note that you're still evaluating ERBA. Is there any thought that ERBA might be better than the 9.1% and it's worth opting in?

You know, I mean, as we said before, you know, both of the proposals are constructive. They are just proposals. There probably could be some movement between now and when they're finalized. You know, that being said, on the face of it, you know, ERBA obviously has the advantage of lower risk weights for certain categories, including retail auto loans, which is a big part of our balance sheet. So there are certainly some advantages there. There are also some additional RWA categories like operational risk that offset some of that. And so as you would imagine, we're very focused on evaluating both IRBA and RSA to understand the implications of both of those. As a Category 4 bank, we'll be kind of automatically put into the RSA bucket, and it's up to us to decide if we want to opt in. And I believe there's, based on the current regs, a one-year transition process in terms of transitioning from RSA to IRBA. So, it's certainly something that we're looking at now. I imagine as these proposals go through the process to finalization, we'll continue to look through it. And, of course, you know, we'll be judged in terms of kind of what positions us best for the long term as an organization and what kind of best matches the risk in our book with the appropriate capital

requirement. Thanks. And then on corporate finance, the growth, I mean, the metrics are what they are, 26% ROE, zero historical loss. So it's tough to argue with growing that business. But I'm sure as you appreciate, there's a lot of investor nervousness in the space. I wonder if you could just touch on, you know, qualitatively in terms of what's driving the growth. Is it team hires? Is it competitors pulling back? You know, and then also, if you could touch on, you mentioned some of the underwriting metrics. Is there anywhere where you're starting to tighten up? Are you raising pricing, lowering advance rates, marking collateral? Maybe if you could just touch on those two things conceptually, you know, what's driving the growth underneath the surface, and then from an underwriting standpoint, is it steady as it goes or any tightening you're doing? Yeah, maybe I'll start with just the team

that we have. You know, it's a team that's more or less been in place for decades, and it's a credit-first team. And I just want to make it clear, we don't chase growth in this business. We don't chase growth across our organization. And as you can see from the results, this is a team that prioritizes credit and returns above growth. And so we typically expect to see our corporate finance loan portfolio ebb and flow. You've seen that volatility over time. I think there were some quarters a little while back where we actually shrank the book over the course of the quarter. And part of that, again, is our credit-first approach and the fact that we don't chase growth. And part of it is just the nature of the business in terms of the lumpiness of paydowns and originations. We're really pleased with what the business was able to do in the first quarter in terms of growth. But I just want to assure you that there haven't been any compromises made in terms of how we think about credit. Now, there is a dynamic in this business with respect to the CLO model, where some of our facilities are taken out as our clients transition from basically our facilities to the CLO market, and there's certainly some ebb and flow in that, and obviously some degree of pricing competition between where our facilities are priced versus that market. But I can assure you we're not making compromises based on credit here for the sake of

growth. And Russ, maybe the other thing I might add to that is you talk about our team being in business, you know, for literally decades. Many of our clients that we work with have also been in business for decades. And when our commercial clients are doing very, very well, they are growing. And a lot of the growth you're seeing is just us growing with our clients. And so people who we've dealt with many, many times so far, we have longstanding trusted relationships, We age in our businesses. And as they're successful, we're doing more and more business with them. And that's just probably the best way you can grow.

Great. Thank you.

Our next question comes from Moshe Orenbuk with T.D. Cowan.

Great. Thanks. I was hoping to talk a little bit in more detail about the retail auto credit, both performance and outlook. I mean, clearly you've got, you know, the current performance of the consumer and I guess in the spirit of being dynamic, you know, today is probably a better day to look at that going forward. But as you think about the, you know, the key trends that you identify, the vintage roll forward, used car values, and the underlying performance of the consumer, just talk a little bit about how you expect, you know, that evolution, you know, in terms of, you know, should that performance be, you know, increasingly better as we go through 2026?

You know, we've left our Retail Auto NCO Guide for 26 unchanged at 1.8% to 2%. You know, back in January, we talked a little bit about the guide, and, you know, we compared our approach to the guide this year versus last year. And, you know, I think the way we described it is that kind of 1.8% to 2% is very much a down-the-middle guide. You know, if the portfolio continues to perform the way it has been in terms of, you know, photo loss and used car prices and the overall evolution of delinquency, we'd expect to be very much in the middle of that range. So it's, from our perspective, a balanced guide. You know, that being said, if I think about our book over a longer period of time, you know, we originate to a 1.6 to 1.8 annualized NCO rate, and so our expectation is, as you kind of look at this over, you know, with the benefit of years, we should, you know, we should have that migration towards that area. But based on just where we are, delinquency, low-to-loss, you know, a kind of down-the-middle view of used car prices, our expectation is still very much 1.8 to 2 percent is a very kind of balanced view of what we expect for 2026. Got it. Thanks. And, you know, on the

insurance business, profitability was quite strong. Growth was a little bit lower. You know, you mentioned, you know, lower weather losses and other things. Are there any other trends that we should be aware of and anything that would cause that growth and kind of the top line of premiums, written, or revenues to accelerate.

Yeah. And thanks for pointing that out. And when you kind of look at the earnings in this quarter, you know, it's a strong quarter, you know, from a weather perspective. And the year-on-year comp was interesting, given, you know, March of last year we had some record events. I think they were kind of one in 200-year weather events that impacted our profitability in the first quarter of last year. So we had a really easy year-over-year comp to meet. And so obviously we had some favorability on the weather side this quarter. On the investment portfolio side, realized gains were also strong over the quarter, and so that certainly helped the business as well. As you think about the business over a longer term, kind of one of the shifts that we've been making is as we're underwriting, you know, we're doing a lot of business that I would characterize as having kind of marginally lower risk than previously. And so with respect to weather in particular, you know, we've entered into lower risk floor plan insurance policies where, you know, we're doing, we're less concentrated in what we would consider to be the weather state, you know, where you have higher risk of the hailstorms that tend to impact us. And we're also doing more high deductible business where our customers are basically taking more of the risk through their deductible as opposed to passing that on to us. And so, you know, over time, you know, we certainly expect that to translate into a little bit less volatility. Hard to see that, obviously, on a quarter-to-quarter basis based on kind of everything going on in that business. But that's one of the trends. And obviously, with kind of lower risk policies comes lower premium for the same, you know, the same nominal dollar value of vehicles insured. Thanks very much. Our next question comes from Jeff Adelson

with Morgan Stanley. Hey, good morning, guys. Thanks for taking my questions. Just wanted to ask one on operating leverage. You've done a pretty good job executing on some expense management here this quarter. Obviously, you're getting the benefit of card rolling off from the expenses and and, you know, not having that one in a 200-year event on weather. But can you maybe just unpack how you're trending relative to your own expectations on expense management and, you know, where you think you can kind of go from here? And are there any other opportunities for you to really hone in and improve your efficiency from these levels?

Thanks for the question, Jeff. And I appreciate your mentioning that we, you know, we had some benefits in terms of the year-over-year comp this year, having given the card business was in play first quarter of last year, and then obviously we had that one- and 200-year weather event. And so while we saw that reduction in non-interest expenses year-over-year this quarter, as we think about the forward, we're going to have more appropriate year-over-year comps to deal with. All that being said, we've talked about our focus on expense discipline extensively over the last few quarters. It is very much in play. we are absolutely executing on that, and a large part of kind of what you've seen, not just this quarter, but if you look over the last several quarters, is you've seen an expression of that discipline in the way that we've really held the line on non-interest expenses. You know, all that being said, you know, we provide a guide for the year on non-interest expenses, but more importantly, as we think about the forward beyond 2026, you know, we do think this is something that comes in the, call it, low single digits, low to mid single digit range in terms of expense growth on a long-term basis. But, yeah, certainly over the course of the next year, you know, we continue to expect we're sticking to our guide of, you know, up about 1% over the course of this year.

Russ, you know, we talk a lot about discipline execution, which certainly plays a role in terms of the volumes we generate, but also plays a significant role in terms of just how we operate the business and ensuring the dollars we're spending are highly levered and constantly challenge ourselves to reprioritize our investment spend to ensure we're getting the maximum impact and just getting real pleased with how the teams have been showing up for this.

Okay, perfect. And maybe just a follow-up on tax refunds. I appreciate the comments earlier. You know, you don't think it's really changing the cadence of your delinquency seasonality. But I guess, you know, given that they are starting to trend up at these levels year to date, I mean, are there any areas you do expect it to flow through? And I guess maybe just thinking through the demand you've seen on applications, et cetera, do you maybe think that there's some, you know, potential pull forward dynamic happening here as we think about tax refunds, people using that for car purchases or just getting ahead of expected impacts of higher oil prices, et cetera?

Look, I think, look, you know, refunds, you know, up probably about 11 percent, not the 20 percent that people probably anticipated coming into the year, but up meaningfully. And, you know, that was probably a helpful factor. As Michael pointed out, there's also a lot of other things going on, you know, in terms of the macro, including, as you pointed out, what's going on with oil prices. some of the changes we've seen in consumer sentiment, personal savings rates. I think there's a mix of a lot of things going on right now. And I think as you pull all that together, I'd say the seasonality that we saw in the quarter was very much typical of what we would have expected. Okay, great. Thank you.

Our next question comes from John Pancari with Evercore.

Good morning. Okay. Just on the retail auto side, you noted the $10 million loss remarketing on the lease residuals. I just want to see if you can maybe give us an updated outlook there. How do you think that will trend? Is that largely factored into the guide? And then separately, I know you also acknowledged the decline, the 5% decline in new light vehicle sales. Does that, you know, what's your assumption internally, and does that temper or alter your 2% to 4% earning asset growth outlook at all?

Yeah, maybe I'll start on the, you know, on the lease side. And I'd say, you know, we showed $10 million of losses on lease terminations during the quarter. You know, I'd say that was probably a little favorable to what we expected when we spoke back in January. And, you know, I think, you know, the pressure we're seeing on PHEVs, I've said a handful of models of PHEVs, was very much consistent with what we were seeing coming into the quarter. But I would say, you know, we saw some favorability in used car prices, which affected the lease termination portfolio more broadly and probably provided some offsetting good guy there. Yeah, as we think about the remainder of the year, you know, one of the changes we made was we accelerated depreciation on some of the vintages coming through in the near term. That acceleration of depreciation is very much related to that handful of PHEV models that, you know, where we've been seeing pressure. And so, we think we've taken, you know, care of that, you know, through our processes around lease depreciation. And so, you know, I'd say our outlook for the year, you know, very much takes into account, you know, takes into account what we expect in terms of any pressure, any remaining pressure from those models. As far as light vehicle sales go, you know, we saw light vehicle sales down in the quarter. We saw pressure on light vehicle sales in the fourth quarter. We still had, you know, two very strong quarters in terms of applications that translated into two very strong quarters in terms of originations. And so we feel pretty good about our momentum on the retail auto loan side, and so we continue to feel really good about our guidance around earning assets.

Got it. All right. Thanks, Russ. And then on the return front, I know you cited your confidence in your net interest margin, despite the fluctuations in the rate backdrop. You cited the favorable Basel implications. How does this come into play in terms of your mid-teams, ROTCE expectation? Any changes there and maybe update us on what a reasonable timing may look like for that target?

No updates there, John. I mean, on timing, we continue to resist the temptation to try and call a quarter. As you know, we see things that impact our business in any given quarter, but those longer-term or medium-term trends persist, and we have a high degree of confidence of meeting our mid-teens targets.

Got it. All right. Thanks, Russ.

Our next question comes from Mark DeVries with Deutsche Bank.

Yeah, thanks. I appreciate all the comments so far on capital. But, Russ, I noticed you didn't refer to low and slow.

Was that kind of a deliberate omission that reflects just greater optimism about the pace at which you can return capital, or am I reading too much into that?

I think you're probably reading too much into it. You know, I'd say we're going to be dynamic. Our capital priorities are unchanged. And so, you know, we're going to be dynamic as we see the opportunity on the origination side in our core businesses, where we generate returns that are accretive to us. And obviously, we'll continue to build capital and support our dividend and buy back shares. But, yeah, I'd say I think you probably overread into it a little bit.

Russ, maybe I think this might be our last question. This might be to pivot off the capital question. If you reflect again upon the past few years, the fact that we're having conversations of the pace of share repurchases, I think is a real testament to the fact that we've got the right strategy for our organization and the discipline execution is playing through. So we feel really good about our strategic positioning and really how we're going to, not just how we delivered this quarter, which we feel very, very good about, but how we're teed up for the future. And I love the fact we're having conversations about the pace of capital and the chair reverse. Thank you, Michael.

Sean, right at the top of the hour, we'll go ahead and wrap it for there for today. If you have any additional questions, as always, 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 participating. You may now disconnect.