Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the first quarter, 2026, Fifth Third Bancor Earnings Conference Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press the star key, followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. At this time, I would like to turn the conference over to Matt Kiro, Director of Investor Relations. Please go ahead.

Good morning, everyone. Welcome to Fifth Third's first quarter 2026 earnings call. This morning, our Chairman, CEO, and President Tim Spence and CFO Brian Preston will provide an overview of our first quarter results and outlook. Please review the cautionary statements in our materials, which can be found in our earnings release and presentation. These materials contain information regarding the use of non-GAAP measures and reconciliations to the GAAP results, as well as forward-looking statements about Fifth Third's performance. These statements speak only as of April 17, 2026, and Fifth Third undertakes no obligation to update them. Following prepared remarks by Tim and Brian, we'll open up the call for questions. With that, let me turn it over to Tim.

Good morning, everyone, and thanks for joining us today. At Fifth Third, we believe great banks distinguish themselves based on how they perform in uncertain environments, not in benign ones. We prioritize stability, profitability, and growth in that order, and we deliver them by finding ways to get 1% better every day while investing meaningfully in the future. Today, we reported earnings per share of $0.15, or $0.83, excluding certain items outlined on page two of the release. Results reflect the February 1st closing of the Comerica acquisition. Revenue was $2.9 billion, up 33% year-over-year, and adjusted net income was $734 million, up 38%. Credit performance was in line with expectations, with net charge-offs at 37 basis points. Both MPAs and criticized assets improved modestly. In a quarter, we closed the largest M&A transaction in Fifth Third's history. We delivered an adjusted return on assets of 1.12% and an adjusted return on tangible common equity of 13.7%. Our tangible common equity ratio rose to 7.3%, and tangible book value per share increased 1%. We are the only bank among our peers who have reported to date to increase both of these key metrics during the quarter. Fifth Third's legacy strategies are continuing to produce broad-based growth while we execute the Comerica integration on plan and on schedule. In commercial, legacy Fifth Third CNI loan balances grew 6% year over year. Production remained healthy with the strongest activity in manufacturing and construction supported by reshoring and infrastructure investment. New client acquisition more than doubled, led by our Southeast markets, and 35% of new clients were fee-led with no extension of credit. Importantly, our commercial loan growth continues to come from relationship-based lending and not from non-relationship sources. In commercial payments, Newline continued to scale with revenue up 30% and deposits up $2.7 billion year over year. During the quarter, Plaid launched a new payment product built on Newline, joining other marquee clients like Stripe and Circle, and we advanced preparations for the second quarter launch of the new Direct Express platform. In consumer, the legacy Fifth Third franchise delivered 3% household growth and 4% DDA balance growth. Southeast households grew 8% led by Georgia and the Carolinas, and we opened 10 additional branches in the region during the quarter. Consumer and small business loans grew 7% led by auto home equity and our Provide FinTech platform now turning to comerica thanks to timely regulatory approvals we closed earlier than originally expected on february 1st and have continued to make progress at an accelerated pace our top priority is our people and we're working hard to become one team since legal day one leaders have been on the ground in comerica's major markets nearly every week and we visited every branch in the Comerica network. We've also hosted product showcases to highlight the breadth of our combined capabilities. Organizational design and leadership decisions are complete, and I'm very excited about the caliber of our combined team. On technology, we remain on track to convert all systems over Labor Day weekend, with our first full mock conversion later this month. As a result, we remain confident that we will deliver $360 million of net cost savings this year and reach an $850 million annual run rate by the fourth quarter. We're also already building a strong pipeline of revenue synergies. In commercial, we're seeing early wins by bringing capital markets, payments, and specialty lending to existing relationships. In the first 60 days, our capital markets team completed fuels and metals, commodity hedges, and executed an accelerated share repurchase for Comerica clients. We also booked our first Comerica to Fifth Third loan win in asset-based lending, while Fifth Third referrals helped to build the largest-ever pipeline in Comerica's national dealer services business. Commercial Payments has presented our managed services solutions to over 100 Comerica clients, with 65 of them interested in moving forward. In consumer, we launched our first Comerica-branded deposit campaign in Texas in February. Response rates and average opening balances were broadly consistent with results that we generate in our legacy fifth-third markets, and nearly half of new savings customers also opened a checking account. We've hired more than half of the mortgage loan officers and auto dealer representatives that we plan to add this year in Comerica's footprint and pipelines in each of those businesses we're going to build. We'll open our first fifth-third branded branches in Dallas and Fresno this month, and we now have letters of intent in place or in progress for 81 of our targeted 150 de novo branches in Texas. As I wrote in our annual letter to shareholders, the global economy is a complex adaptive system, and such systems react to change in unexpected ways. We're closely evaluating the direct impacts of the war in Iran on energy and other commodities, as well as the implications for prices, interest rates, and customer activity. In an environment where we may not see the macro tailwinds that many expected at the start of the year, the Comerica merger expands Fifth Third's organic opportunity set, but we do not need a perfect backdrop to deliver on our commitments. Before I turn it over to Brian, I want to take a moment to say thank you to our colleagues. Earlier this month, we surpassed $300 billion in total assets for the first time, an important milestone that reflects the work we do together to serve customers support communities and show up for one another i know many of you are putting in extra effort to support the integration whether that's helping customers learning new products meeting new teammates or navigating change your commitment to getting one percent better every day and your dedication to our clients and to each other is what gives me confidence in what we're building and the opportunities ahead. With that, Brian will provide more detail on the quarter and the outlook.

Thanks, Tim, and good morning. Our first quarter results reflect the strength of what we have built and the discipline with which we are executing. Results exceeded our March expectations, driven by stronger NII, disciplined expense management, and integration execution on plan. Adjusted ROA was 1.12%, and adjusted ROTCE, excluding AOCI, was 13.7%. The Comerica acquisition closed without tangible book value dilution, and TBV per share grew 1% sequentially and 15% year-over-year. The earnings power of the combined company is intact, and the integration is on track. given the magnitude of the acquisition standard year-over-year and sequential comparisons obscure more than they reveal this quarter what matters is how we exit a larger more granular loan portfolio a lower cost deposit base and larger diversified fee income businesses each of those is a deliberate outcome and each position positions us to generate stronger and more durable returns as the integration delivers. Now, diving further into the income statement, starting with NII and the balance sheet, net interest income was $1.94 billion for the quarter, above our March expectations. Net interest margin expanded 17 basis points to 330 basis points, driven by the impacts of the Comerica acquisition. That includes seven basis points from securities portfolio marks and repositioning, six basis points from cash flow hedge termination, and two basis points from purchase accounting accretion on the loan portfolio. A full quarter of these impacts will benefit NIM by a few additional basis points in the second quarter. End-of-period loans were $178 billion, up 2% sequentially from pro forma combined year-end balances. Average total loans were $158 billion, reflecting the February 1st close. The growth was broad-based, strong middle market production, a rebound in line utilization, and continued momentum in home equity, auto, and a Provide fintech platform. In commercial, line utilization ended the quarter at 40.7%, up approximately 120 basis points from the pro forma combined year-end level, and notably held steady throughout the volatility in March. Clients are cautious, but active. On a legacy fifth-third basis, commercial loans grew 6% year-over-year. Combined with a Comerica edition, shared national credits now represent only 26% of total loans, a deliberate and ongoing reduction in concentration risk. On the consumer side, first quarter auto originations were the highest in two years, with average indirect secured balances up 10% year-over-year. Home equity balances grew substantially, supported by both the acquisition and strong underlying production. We achieved the number one HELOC origination market share in our legacy fifth-third branch footprint. With an average portfolio FICO of 773 and average loan-to-value of 64%, the production strength is real, and the credit discipline behind it is equally real. Turning to deposits, average core deposits were $207 billion, and end-of-period core deposits were $231 billion. Non-interest-bearing balances comprise 28% of core deposits at quarter end, up from 25% at the same point last year. That improvement reflects the combined benefit of Comerica's commercial DDA franchise and our continued organic consumer DDA growth. The household growth tenscribed is showing up directly in our funding costs. On a legacy to third basis, consumer household growth of 3% over last year supported 4% consumer DDA growth. Total deposit costs, including the benefit of non-interest-bearing balances, were 158 basis points in the first quarter, a funding cost profile that compares favorably across the peer group. Interest-bearing deposit costs were 215 basis points, down 27 basis points year over year, reflecting both that organic deposit mix improvement and the benefit of the Comerica balance sheet. Despite the larger balance sheet, our approach to balance sheet management is unchanged. We prioritize granular, insured deposit funding over large wholesale holds. We maintain strong liquidity buffers, and we proactively manage the overall cost of funds. That discipline showed up again this quarter. Average wholesale funding declined three percent year-over-year, even with Comerica balances included. That favorable mix shift lowered the cost of interest-bearing liabilities by 36 basis points. We also maintained full Category 1 LCR compliance at 109% and a loan-to-core deposit ratio of 76%. Now turning to fees. Adjusted non-interest income, excluding securities losses, and the other items listed on page 4 of our release was $921 million, slightly above the midpoint of our March expectations. The most significant milestone here is that both wealth and commercial payments are now generating fee income at the run rate necessary to deliver $1 billion each in annualized non-interest income. That outcome reflects years of consistent, disciplined investment in both businesses and the recurring nature of the revenue. Looking further at wealth, fees were $233 million, and total AUM ended the quarter at $119 billion. Legacy Fifth Third AUM trends remain strong, up $10 billion, or 15% over last year. Fifth Third Securities delivered strong retail brokerage results, with revenue up 15% year-over-year. These are businesses that we have been consistently investing in, and the returns are compounding. Commercial payment fees totaled $218 million for the quarter. Direct Express contributed $14 million in fees for the quarter and approximately $3.7 billion in average deposits for the month of March. New Line continues to drive strong fee growth of 30% year-over-year, and related deposits reached $5.5 billion, up $2.7 billion from last year. Capital markets fees were $134 million, up 11% sequentially. Increased hedging activities and commodities in FX, and strong bond underwriting fees, combined with two months of Comerica activity, were the primary drivers of this growth. Turning to expenses. Page 5 of our release details certain items that had a larger impact on the non-interest expense this quarter, primarily $635 million in merger-related expenses. adjusted non-interest expense was $1.77 billion consistent with our guidance. The adjusted efficiency ratio was 61.9%, which reflects the addition of Comerica and normal first quarter seasonality associated with the timing of compensation awards and payroll taxes. On the synergy front, we remain confident in our ability to achieve the $850 million of annualized run rate cost savings in the fourth quarter of this year. Integration activities are progressing as planned against our established milestones and savings are being realized. The expense benefit will build steadily over the first three quarters of this year with a more significant increase in the fourth quarter once the system conversion and branch consolidations are completed in early September. Shifting to credit, the net charge off ratio was 37 basis points for the quarter in line with our expectations and the lowest level in two years. The MPA ratio is 57 basis points compared to 65 basis points last quarter. Commercial net charge-offs were 26 basis points, also a two-year low, with stable trends across industries and geographies. Consumer net charge-offs were 58 basis points, down five basis points from last year. The consumer portfolio remains healthy, with non-accrual and over-90 delinquency rates relatively stable across all loan categories. We have been deliberate about where we choose to grow. Our exposure to non-depository financial institutions represents only 7% of our total loan portfolio, well below the industry average. Our three largest categories are subscription lines supporting capital call facilities, corporate credit facilities to traditional institutions such as payment processors, insurance companies, and brokerage firms, and secured lending to residential mortgage-related entities. These are longstanding portfolios. We have deep underwriting expertise in each of them, strong collateral visibility, and structural protections where needed, including borrowing base requirements and advance rates that provide significant loss absorption before we would recognize a dollar of loss. On private credit, we have chosen not to participate meaningfully in lending to private credit vehicles and business development companies, which combined represent less than 1% of total loans. That was a deliberate decision, not a missed opportunity. The structural complexity embedded in these exposures introduces risks that are harder to assess through a cycle. We would rather grow in categories where we have more transparency to the collateral and have direct relationships with the underlying borrowers. On software and data center lending, we have maintained that same discipline posture. We believe in the long-term demand for AI infrastructure, but we have also seen how quickly these build cycles can overshoot. We have remained selective, and our exposure is intentionally limited. Software-related exposures is less than 1% of total loans, with the portfolio performing in line with expectations, with no material migration in the quarter. ACL as a percentage of portfolio loans and leases decreased to 1.79%, primarily reflecting the Comerica acquisition. The ACL as a percentage of non-performing assets increased to 316%. Provision expense included $83 million for merger-related day one ACL build. Our baseline and downside cases assume unemployment reaching four and a half and eight and a half percent respectively in 2027. We made no changes to our macroeconomic scenario weightings during the quarter, though a qualitative adjustment was applied to reflect the direct impacts of the elevated energy and commodity costs, as well as the broader implications for economic growth, inflation, and unemployment in the current geopolitical environment. Moving to capital, CET1 ended at 10%, reflecting the impact of the Comerica transaction and strong RWA growth. Under the proposed capital rule, our estimated fully phased-in pro forma CET1 ratio is 9.6%. The RWA benefit to capital ratios associated with the new rule is nearly a 100 basis point improvement, primarily due to credit risk RWA reduction. The proposed rule recognizes the granular, well-secured, and relationship-based nature of our loan portfolio, the same portfolio characteristics we have been deliberately building toward over the past several years. The proposed rule should expand the ability of the banking industry to support the economy through increased lending capacity. Additionally, our tangible common equity ratio, including the impact of AOCI and the Comerica acquisition, increased to 7.3%. Over the last 12 months, the impact of unrealized losses included in regulatory capital under the proposed rule has decreased by 16%, a 25 basis point improvement to the pro forma capital ratios despite an 11 basis point increase in the 10-year treasury rate. That is the direct result of our strategy to concentrate our AFS portfolio in securities that return principal on a known schedule, which represents approximately 55% of the fixed-rate holdings within our AFS portfolio. We expect continued improvement in the unrealized losses as the securities pull to par. Moving to our current outlook, our outlook reflects the forward curve at the end of March, which assumes no rate cuts or hikes in 2026. Given the updated rate outlook and our more asset-sensitive balance sheet, we are updating our full-year NII outlook to a range between $8.7 and $8.8 billion. We will continue to take actions to move the balance sheet to a more neutral rate risk position over time, which could include investment portfolio and or other hedging actions. Our outlook for full-year average total loans remains in the mid-$170 billion range. Full-year non-interest income is expected to be between $4.0 and $4.2 billion, reflecting continued revenue growth in commercial payments, capital markets, and wealth and asset management. Full-year non-interest expense is expected to be $7.2 to $7.3 billion, including the impact of $210 million dollars of CDI amortization and 360 million dollars of net expense synergies in 2026. This outlook excludes acquisition-related charges. In total, our guide implies full-year adjusted PPNR, including CDI amortization, up approximately 40% over 2025. We remain on track to exit 2026 at or near the profitability and efficiency levels consistent with our 2027 targets. For credit, we expect full-year net charge-offs between 30 and 40 basis points. Turning to capital, with the release of the proposed capital rule, we are updating our CET1 operating target to a range of 10 to 10.5%. We expect to resume regular quarterly share repurchases in the second half of 2026, with the amount and timing dependent on the balance sheet growth and the timing of the remaining merger-related charges. Our capital return priorities are unchanged. Pay a strong dividend, support organic growth, and then share repurchases. For the second quarter, we expect average loans of $178 to $179 billion, driven by growth in C&I, home equity, and auto. NII is projected to be $2.2 to $2.25 billion, with NIM expanding another 3 to 5 basis points. Non-interest income is expected to be $1 to $1.06 billion, and non-interest expense is expected to be $1.87 to $1.89 billion. Finally, net charge-offs are expected to be 30 to 35 basis points. The first quarter established the foundation. NII above expectations, tangible book value per share growth in tax, credit at a two-year low, integration on track, and early revenue synergies beginning to show. Those results matter, not just for what they are, but for what they signal. The core business is performing. The integration is delivering. And as we move through the year, the financial profile of Fifth Third will continue to improve in ways that are visible, measurable, and consistent with everything we have committed to when we announce this combination. We have the balance sheet, the business mix, and the team to get there. With that, let me turn it over to Matt to open up the call for Q&A. Thanks, Brian. Before we start Q&A, given the time we have this morning, we ask that you limit yourself to one question and one follow-up, and then return to the queue if you have additional questions. Operator, please open the call for Q&A.

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. We'll go to our first question from Mike Mayo at Wells Fargo.

Hi. As you highlighted, this is the biggest acquisition in your firm's history. And it sounds like it's on track from your prior guidance with the Labor Day integration, $850 million run rate savings by the end of the fourth quarter. I think we kind of knew that already, but what's incremental in the last three months or since your last presentation that you think is maybe going better than expected? Is that any of that higher NII guide due to the expansion in Texas and the promotions? And also, where are you seeing some of the snags? There's always issues with these things. What do you need to make sure you work out and, you know, doesn't kind of let down the progress.

Hey, Mike. It's Tim. I'll take an initial crack at that one, and then I'll let Brian clean it up. So, yeah, I mean, you think you did a pretty good job of summarizing the path. As you know, when it comes to these large transactions, the absence of any surprises is a positive, right? So getting one quarter closer to the point where we're operating on a single common platform is an important milestone unto itself. In terms of just the core integration, I think things have gone really well. There really haven't been big surprises. We have all that we completed the lock the walls planning exercise that we run. All the customer day one deliverables have been locked. There are 46 new to fifth-third applications, which, as we mentioned, from a technology perspective previously, primarily support the tech and life sciences business and the dealer services business, plus a couple of things in payments. I think that the data strategy and the data conversion, you know, that work's completed. All the risk-based process reviews we needed to get done, you know, which are essentially the click-down from the work that got done in diligence have been completed, and we know where the product gaps are that, you know, that need to get filled. The org charts are done, as I mentioned in my remarks, and we've selected the key leaders. I'm pleased. It's very early days. So this is not by any stretch of the imagination declaration of success, but the sort of employee attrition is actually running a little bit below historical levels. So we're not seeing any sort of elevation in attrition. I think the positive surprise is actually what is happening in Texas and then even more broadly across the Southeast as it related to promotional activity. We got a lot of questions after we announced the deal about whether the playbook that's worked so well for Fifth Third and the Southeast would work in Texas and in the Southwest more broadly. So that initial mailing that I referenced in my prepared remarks was a test, right? It was the test and learn process so that we could reground our targeting and expected balance models. on empirical data in Texas. We mailed 700,000 households. Response rates were good. The fact that more than half of customers open checking, even in an environment where there are still, all the legacy tech limitations that Comerica had are still in place, I think is very good. But maybe the more exciting thing is then having regrounded the models, we dropped the subsequent mailing on the 10th or 11th of this month. to 6 million people. And the very early results there are super positive. Like with the sort of reground of the analytic models, like we're getting 3x the response rate that we see at this stage in a campaign in our legacy markets. And we actually expect that campaign alone to generate a billion dollars in deposits across Texas, Arizona, and California, which would be great. Now, that is all incorporated in the guide, to be clear. It's not above and beyond the guide. But it just speaks to, A, the fact that the tactics that we are using in the Southeast are going to work in the Southwest, and, B, the fact that Comerica had not run any sort of external consumer marketing in 13 years means it's a relatively unsaturated market for us, and therefore, you know, if anything, I think my optimism about our ability to gain share there has improved. Then in terms of what's not, you know, working, we got a little bit of an internal civil war here between people who like their chili with beans, no beans, or on spaghetti. So that we're going to have to solve before we can truly say we're one company.

All right. That's kind of like, you know, my weakness is I work too hard, but okay, I'll take that. So I guess it's just interesting, like I think I said, it sounds very old, last century, all these mailings and stuff, but 6 million mailings and sound like you're getting $1 billion of deposits, that'll pay off. But this is all America accounts right now, right? and say, you know, after Labor Day, they're all going to become fifth-third accounts. And so it seems like that transition has some risk, too, going from America to actually branded fifth-third. How do you manage that transition?

Yeah, I mean, the tech conversion, as you know, right, is the single largest point of risk in a transaction because I think we've got a very good employee value proposition here. We've got, on a combined basis, more capability than either company had to serve clients, and those things are good for people. The code red event that could occur would be if you made a mistake on the tech conversion and either people couldn't access their accounts or you had service issues or processing issues or otherwise. So we're definitely always mindful of that. So assuming that we execute the conversion well, the way that we did with MB, you know, as an example, then I actually think the tech conversion is a positive. There'll be a bake-in period where people will need to learn to navigate new interfaces, whether that's the consumer mobile app or the commercial portals and otherwise. but the capabilities that are exigent in fifth-thirds digital channels are much broader than exist inside Comerica's current channels. The point I made about the managed services, those are software solutions that we offer in commercial payments. The fact that we've shown those things to 100 Comerica clients, and we have two-thirds of them as qualified leads in the sales pipeline sort of speaks to the tech quality. What the conversion will allow us to unlock, though, is all the digital marketing channels. Like, the reason we're not doing digital marketing to support the Southwest markets today is because Comerica can't open consumer deposit accounts digitally, and therefore there's no sense in using them. Once we're under the fifth-third brand and on the fifth-third tech stack, you know, the 50% of our direct marketing that gets done via digital today all of a sudden then becomes viable, you know, in the Southwest, and all the household growth tactics that we use in addition to the deposit growth tactics in the Southeast become viable as well.

Great. Thank you.

Yep.

We'll move to our next question from Scott Seifers at Piper Sandler.

Morning, guys. Thank you for taking the question.

Maybe, Brian, hoping to start with you, something you could speak to some of the underlying drivers in the core margin. I know you suggested the reported level should expand another few basis points in the second quarter due to the full quarter's impact of Comerica, but maybe you could sort of speak to dynamics such as overall rate positioning, which I think you touched on, but maybe competitive dynamics on the loan and pricing side, just those kinds of things that you're seeing. Yeah, absolutely, Scott. Thanks for the question. As I mentioned in my prepared remarks, we are asset sensitive today. That is certainly a factor that we are focused on as we think about trying to move to a more neutral position over time. We feel very good about how we're positioned, and that's obviously one of the things that's gone well for us with the current volatility in interest rates. It's given us some opportunity to do some things in the investment portfolio and put a few positions on in the quarter at pretty attractive levels. So we do feel good about that. From a driver perspective, we do expect some additional improvement from fixed rate asset repricing over the remainder of the year. From a magnitude perspective, it's a little bit less impactful than it has been because a third of our balance sheet was effectively repriced with the Comerica acquisition. So we are still seeing some good trends there on the legacy third portfolio, but obviously that's just a smaller percentage of the balance sheet now. That's probably a, you know, a basis point, basis point and a half kind of pick up each quarter through the end of the year and feeling good about a trajectory that gets us approaching to, you know, exiting the year closer to 340 from a NIMP perspective. So, a lot of things going well from a NIMP trajectory perspective. The environment, obviously, it's competitive. We're in an industry that is always competitive, both on the lending side and on the deposit side. I would tell you that it is competitive, but not irrational right now. Loan spreads have come in a little bit, but aren't crushing at this point. And we are just seeing normal deposit competition with the Midwest continues to be the most competitive deposit market that we're seeing from a consumer perspective, more competitive than the Southeast. And we're still trying to get a better sense of what Southwest us looks like, but it does not look like it is going to be an outlier relative to other markets. Okay, perfect. Thank you. And then maybe a higher level question. You all have talked about the fourth quarter of this year representing sort of the time when we'll really see the full run rate accretion, returns, efficiency, basically all the benefits from the Comerica transaction. Basically all your numbers are going to be at or near best in class.

As we start to look to a sort of a post-Comerica time, like in the next year, when those benefits have really become realized, you know, how will you sort of think about balancing, you know, additional improvement in profitability, returns, efficiency, or will those at that point represent sort of steadier states as you do things like invest to just ensure that the levels you reach remain durable over time.

Yeah, that's a good one. And we've been getting a variant of that, Scott, over the last call it 90 days, you know, about, hey, are the synergies durable or do they need to be reinvested? I have been telling people, if you have to spend it in some other way, that's not an expense synergy. It's a capital application play. So we absolutely believe we can sustain the level of profitability that, you know, that we expect to achieve in the fourth quarter and continue to improve it. I grew up in the cradle of distance runners and Nike posters of Steve Prefontaine on my wall growing up. So the view here is like there's no finish line, right? We just have so much in front of us. So you want to generate a strong return on equity under any circumstances But then you want to make the decision at the margin. So if we're at 19% and we've got a 53% efficiency ratio, the decision on the margin should always be, do we utilize continued strength and operating performance to drive higher profitability and boost the TBV, the P to TBV multiple? Or do we focus on growing tangible book value per share or doing a little bit of both of those? I just think we're going to have the ability to continue to do, you know, both. Like when I got here 11 years ago, I think it's under a quarter of the U.S. population lived in our footprint. Today, more than half of the U.S. population does. As Brian mentioned in his remarks, 17 of the 20 fastest growing large metro areas in the U.S. are now in the footprint. And we have a credible path to top five market share in all of them. I think we have the freshest branch network if you just look at it. by age of any of the Cat 3 or 4 banks and maybe any of the LFI banks. We've got this payments business now that's benefiting when non-banks actually take share from banks, which is great. And we have this huge influx of bankers from Comerica who have the shackles off of them, right, in terms of not being capital or liquidity, you know, constrained. And I'm proud of the track record we have for tech innovation. So we will continue always to invest in the core business, you know, with the expectation that at 19, like 19% ROTCE is great. And if we run out of ideas, then we'll focus on getting 19 to be 20 or 21 or 22, you know, and otherwise it will be about growing book value for share.

Gotcha. Okay, perfect. Thank you very much.

Next, we'll go to Gerard Cassidy at RBC Capital Markets.

Good morning, Tim. Good morning, Brian.

Good morning, Ed.

Tim, did you have a Dave Waddle poster, too, with Steve's poster?

I had Steve and Dick Fosbury. At my height and my lack of foot speed, you had to go with the field athletes as well. So, high jumpers.

Got it. Good for you. um when i look at your utilization trends that you gave us and you touched on in your prepared remarks uh in the appendix i think it was it jumped up nicely from 34.9 in the fourth quarter to 40.7 and then you give it ex-co-america can you give us some color in two areas one legacy fifth third what you're seeing there and then also legacy co-america um what are they seeing?

Yeah, from a utilization perspective, Gerard, I would tell you it's fairly consistent what we're seeing across the Fifth Third platform and the Comerica platform, which is middle market customers who are starting to see use a little bit more activity there. We also saw a nice rebound from a corporate bank perspective. I do think part of it was some of the activity that we were seeing from a capital markets perspective because we did see less pay down this quarter from a capital markets payoff perspective. But it was really a, and we think it was the rebound that we were expecting associated with some of the tax bill benefits coming through where we just saw some more active spending happening as customers were working for the environment. And then obviously later in the quarter, obviously some impacts associated with the situation in the Middle East.

Yeah, maybe the one thing I'd add there that is at least based on the cursory read I did of the other banks that have reported thus far is one thing we didn't see that a lot of other people saw is we didn't get a lot of the loan growth from private equity or private capital. So if you look at the growth in loans, less than 10% of it in our case came from private equity or private capital. And my quick read through was It may be as high as 80% in a lot of other places. One of the things comforting about the Comerica portfolio is they're a lot like Fifth Third in the sense that we bank real economy businesses, primarily privately held real economy businesses, people that make things or move them or warehouse them or sell them, or core services like health care. And otherwise, between the two of us, we were both on the low end of the, you know, NDFI is a percentage of total commercial loans tables. And it just hasn't been a growth focus for us. I think the other thing I might flag there, since I know it's come up, is we have less than $100 million of funded exposure to data centers. We definitely have been on the more skeptical end of the spectrum on that front. You know, we talk internally about the fact that we wouldn't underwrite an energy loan without a petroleum engineer looking at the projections. And I don't think there are a lot of us employing AI researchers at the cost that they are to help underwrite data center facilities. It's just there's such a long history of, you know, overbuilding tech infrastructure any time there's a platform shift. And the obligores are a little less clear than, you know, than we personally would prefer. So that is where the growth wasn't coming from in our case.

Very good. And then just one follow-up on the credit quality, which, Brian, you pointed out, you know, the guide for tri-drafts is very good, and the numbers in the quarter are good. One question in the commercial side of the portfolio, and I know this number moves around because of the nature of it, but the 30 to 89 delinquency numbers, even though they're low, you know, when you look at the commercial industrial going to 38 basis points, or the CRE going up. Was it anything there that we should just keep an eye on, or is it just because of the combination of the two companies and people maybe didn't know where to send payments? I know that sounds kind of strange, but any color there?

Yeah, it's not quite as basic as they didn't know where to send payments, but the majority of the increase there, Gerard, was two credits, and the payments got made on April 1st. So, if we could have reported all of this as of April 2nd, you wouldn't have seen the jump that materialized there.

Good to hear, Tim.

Our next question comes from Abraham Hunawala at Bank of America.

Hey, Abraham.

Hey, morning. I had a question first, just on deposits. as we go through all these updates, it does feel like funding is a much bigger constraint for banks as we move forward than capital. Just talk to us around this Southeast strategy in what seems like an intense environment. How are you converting clients acquired through promotions into core checking accounts? Is that happening? Just kind of remind us on where that stands And maybe tied to one of the previous questions, Tim, when you think about opening these branches in Texas three to five years from now, just degree of confidence that branches will still be as relevant five years from now as a client acquisition tool as they are today. Thank you.

Yeah, good question. So, yeah, I think your point is an important one. Your ability to convert relationships into essentially new clients, right? Whether you attract them through rate or cash bonus or because of a new branch opening or otherwise in the primary long-tenured relationships, that's effectively the seed corn for everything that we do because we have an acquire once and then maximize wallet share strategy. That's the reason we keep disclosing the household growth rates in the Southeast. like those are primary households. If accounts go inactive, they get washed out of that number. And so you can trust that the 3% overall, and in this case, the 8% in household growth in the Southeast, the sort of 7, 8% range we've been running at as a real number. It's active accounts in one period divided by active accounts in the same period the year before minus one, right? Um, so I, the population growth in the Southeast is one and a half to 2% per year, uh, in any given market, our growth rates have been seven to 8%. So we're generating three to four X the growth, uh, you know, uh, on a net basis that the market is experiencing, uh, on a net basis, uh, which I think should be the, you know, the sort of best proof point you can rely on that we're making the conversion. Savings promotions don't count in that number. Anything we do with loan products, home equity, et cetera, that doesn't count in that number, that's primary checking customers. In the Southwest and in Texas, we have 81 or 82 of these properties locked up. We're going to have branches opening next year, not in three to five years, just to be clear. And I think the measure of their importance, like I actually like to think about branches. If you don't think about them as standalone mechanisms to generate new account growth, the other way to think about them is attributes which boost response rates to direct marketing, whether that's digital or mail. And there is a nonlinear decay function in response rates and expected value. The further you get away from a fifth-third branch by drive time in our models today. It's one of the more powerful variables in dictating who gets a digital offer, like the IP range or the zip code in the case of a mailer actually drive whether or not you see fifth-third promotions. And as long as that decay function exists, the branches are playing a role in driving our ability to grow the franchise. And I just don't expect human behavior to change that quickly. It certainly hasn't ever in the past.

Got it. And just one quick follow-up. You mentioned this a few times in terms of delineating between NDFI growth versus non-NDFI. One, like, do you see, like, why do you not, like, do you see there are embedded risks in that lending that you don't like? Just give us a sense of, like, when you evaluate, why is it attractive for so many of your peers and not so much when you assess that for Fifth Third?

Yeah, I mean, I'm not making a call on private credit and viability. I don't personally believe it's going to go away as a category. I think our view generally has been that the private credit industry is going to be much smaller in the future than people were worrying about. Like their two strategies for growth were retail money, which was always a bad idea and which has just been demonstrated again to be a bad idea, and by promising returns of 8% to 9%, which we just viewed as being unrealistic, right? Banks run at like 8 to 10 times leverage to get a 15% return, and we have loan revenue, deposit revenue, fee revenue in the mix. The idea that private credit could deliver 8 to 9% with call it 2 to 3 times leverage with loan-only revenue just always felt like it was unrealistic. So, you know, is there a place in the investment spectrum or on the efficient frontier for something that offers a return between corporate bonds and equities? Like, absolutely. It just doesn't feel like it's going to be anywhere near the size. Now, we're not a very big player in this market. Comerica and Fifth Third together had somewhere around a billion dollars of private credit or BDC activity. So I can't speak to the leverage points that a lot of others are. The reason we avoided it is because we couldn't figure out what total leverage was in these structures between the portfolio companies and the back leverage and the NAV lending and the lending to the companies that were doing the NAV lending and the capital call and all the rest. And we don't like things that we don't understand. I think for me at least, though, the bigger reason to avoid it is that is not an industry that, like, lending to BDCs is not a place where banks are going to build competitive barriers, which means the return profile just eventually will gravitate to cost of capital. and we want to generate returns in excessive cost of capital. So when you let your line of business get too addicted to getting growth from something that's going to be a cost of capital hurdle, it distracts them from focusing on the things that can generate excess returns, like primary relationship lending, like managing wallet share, like establishing lead left positions. And so that is where we want to get the growth from, and stuff that can generate a 19 plus percent return over time, not something that's going to generate an 11, 12, 13, 14 percent return over time.

Thank you.

Thanks.

We'll move next to Manin Gasalia at Morgan Stanley.

Hey, Manon. Hey, good morning. You know, I think in the prepared remarks, you mentioned that the proposed rules recognize granular, say, for well-collateralized loans. So I think you were pointing to opting into ERBA. So first, I just wanted to clarify that. And then my main question, Tim, when you think about ERBA, given that it would allow banks to hold less capital against higher quality loans, do you think it creates some sort of disincentive or negative credit selection for banks that don't opt in?

Hey, Manoz, Brian. At this point, we're still evaluating whether or not we would opt into ERBA. It's not necessarily the driver of what's creating the big benefit for us. ERBA is probably an incremental 10 or so basis points relative to the numbers that I quoted. And then obviously, there are some complexities associated with data and models and systems in place necessary to do some of the calculations. So that's something that we're still evaluating. You know, there is always some regulatory arbitrage out there, whether it's within the existing capital rules and use of securitization style structures from just general lines or how private credit participates in the regulatory landscape as well. So there is always that aspect of competition and ultimately how you think about capital allocation across. I don't think it will ultimately ERBA or non-ERBA would have a really big impact ultimately on competitiveness across the industry and between the banks that opt in and those that don't.

Yeah, and I guess the only thing I'd just add there is it sort of depends on how you underwrite. Like not every bank, at least 15 years ago when I was a consultant, not every bank underwrote to the same binding constraints. Not every bank thought the same way about how they calculated returns. The binding constraint here, obviously, we think about red cap and the return on red cap in terms of the performance of the company as a whole. But when we look at individual credits, we look at the amount of economic capital that those credits should attract, given the way that we risk rate the credits, both in terms of default probability and loss-given default. So if all you were looking at was the same capital charge for every loan you underwrite, like in a non-urban environment, I think you'd run into that risk. But certainly the way that we approach it, the decision to opt in or out is going to get made at the macro level. And the individual underwriting decisions and the return calculations get done at an individual company level.

Got it. That's really helpful. And then, you know, now that we have the proposals for capital, I mean, I think the focus has been turning to the liquidity rules. I guess the question for you is, what would you like to see there on the liquidity side? And is there something that you want to see that would cause you to manage your liquidity differently from what you're doing now?

Yeah, I think the most valuable thing for the industry is some credit in the liquidity rules associated with your secured lending capacity at places where you know the liquidity is going to be there. Think about your FHLP borrowing capacity against your securities, discount window, or repo facilities. Those would be areas where getting some credit associated with that off-balance sheet liquidity would be very valuable for the industry. That is probably one of the more significant. We would also like a little bit more rationality on deposit outflow assumptions. That is an area where there has been significant pressure on the industry across the old horizontal liquidity exams that were occurring. And I just think we've ended up in a spot where the assumptions that are embedded than most liquidity stress tests today are just absurdly high relative to some of the the core banking relationships in particular the operational deposits that are attached to treasury management services got it thank you thank you we'll go next to chris mcgratty at kbw hey chris oh great good morning hey morning um jim i want to come back to the comment about the midwest being more competitive in the southeast seems somewhat contrary to where all the capital is being allocated from a lot of the banks.

Can you unpack that a bit?

Yeah, I mean, Chris, this has been true. It's like one of the interesting factors that's just been true for a very long time. I think you had two dynamics in the Midwest that are a little bit unique relative to the rest of the country. One, historically, you've had a lot more regional banks headquartered in the Midwest, right, and less in the way of trillionaire market share, and less consolidated markets tend to be more competitive. That's not a blinding insight on my part. That's just economics 101. The second factor is credit unions play a much more prominent role in a lot of the Midwestern markets than they do other places elsewhere in the country. And credit unions tend to be optimizing for very different factors. They're not held to a profit mandate, and therefore they tend to be optimizing around just absolute levels of liquidity needed or otherwise. And so the sort of combination of more fragmented markets and an actor that's optimizing around a different set of goals just produces higher levels of deposit competition. That, I think, for us has been one of the interesting things as we've moved into the Southeast, is we have this double benefit of both having a small existing share and therefore a low cannibalization cost of any new marketing campaign that we run, right, which is a little bit like judo. You're using your opponent's weight against them. And the fact that at the margin, the marginal dollar in the Southeast is still a little bit cheaper to raise than the marginal dollar in the Midwest. It means we can be more aggressive and still have a very nice impact on the franchise overall.

Great. Yeah, definitely with Chicago being one of the more competitive markets and fragmented. Yeah.

I don't know that there's another state with three regional banks headquartered in it either, the way that Ohio has Huntington, Fifth, Third, and Key.

For sure. And then, Brian, just on the full synergies, the cost phase mapping out, Can you, I guess, help with exit run rate on efficiencies? It feels like low 50s in this year, and you kind of go into next year from a pretty good position. But just could you fine-tune that for me?

Yeah, I mean, the expectation that we've talked about is being in that 53% range in 2027. Our fourth quarter efficiency ratio is always our lowest efficiency ratio for the year. So I would expect us to be a good, you know, point and a half, two points below that 53% in the fourth quarter.

Perfect.

Thanks.

We'll go next to Peter Winter at DA Davidson.

Good morning. I was just wondering, when you first announced the Comerica acquisition, you were targeting a 27 EPS of 489. But now that you spent more time with the company, you're getting some early wins on the revenue synergy side. Do you see upside to that number because it did not include any revenue synergies?

I mean, obviously, that's something that's part of the deal that we would not contemplate any revenue synergies. So anything that we are seeing would be upside. So we do feel good about kind of the progress there. I think we will be striving to outperform what is there. Obviously, 2027 is a long time away. and the environment, the rate environment, and a lot of other things can change. But we certainly are more positive today about the opportunity in front of us, even though we were incredibly positive at the time of the acquisition. So a lot of things are going well, and we feel good about the trajectory of the company.

And then if I could just follow up, just if I think about Fifth Third, one of the strengths has been managing the balance sheet in different interest rate environments. But, Brian, where are you in the process of repositioning Clamerica's balance sheet? You know, you mentioned it. You're asset sensitive now. But how quickly do you want to get back to neutral? Or would you slow walk it just given a higher for longer rate environment?

The higher for longer rate environment in our outlook and, like, we are very cautious around what could happen out the curve. So we are trying to make sure that we're balancing capital risk as well with down rate risk. And all the things that's happened even over the last month or so, when you think about what it's going to do to inflation and what is honestly still fairly reasonably strong economic activity that we're seeing, we just see that there is more bias right now for the higher for longer outlook. So with that, we're probably moving a little bit slower. But as that outlook changes, we would have an ability to accelerate. There's probably in the neighborhood of $30 to $40 billion of kind of notional exposure that we could move out the curve as our rate environment outlook changes. That gives us a lot of flexibility as we navigate this environment. And we think even if you were to start to see some more significant cuts again, that what you're likely to see is some amount of steepening that gives you some opportunity for us to deploy and maintain and even grow in II even in a falling rate environment.

Thanks, Brian.

Thank you.

And next we'll go to Erica Najarian at UBS.

Hey, Erica.

Hey, just one question because I know we're pushing the limits of length of time. But, Brian, given that there's no cuts in the curve, could Fifth Third maintain deposit costs even if there are no cuts? I mean, Tim, your ears must be burning because even your money center peers are talking about your competitiveness in their markets. So just wondering what the deposit cost outlook is in an environment where the Fed's not cutting.

Yeah, we absolutely think we can maintain deposit costs even in an environment where the Fed's not cutting. The real wild card there is ultimately what the balance sheet needs from a growth perspective. Because if we see a more aggressive long growth environment, you know, that is an environment that would put a little bit more pressure on deposit costs, but in a fairly rational and kind of normalized growth environment, we think we could, we think we have a lot of optionality to be able to maintain deposit costs where they are.

Thank you.

Thank you.

And next, we'll move to John Pancari at Evercore.

Morning, John. Hey, good morning. This is Gerard Sweeney on for John. Just one on the fee side, solid result in the quarter, healthy guide despite volatility and headlines. If this subsides at all, do you see this driving much upside from the billion quarterly run Think about wealth and capital markets, like you mentioned, think about how much a conservative might be baked into guidance now, again, versus potential upside.

Yeah, I mean, there's always a little bit of conservatism we put in place relative to capital markets, which we've been talking about hoping for a more stable, productive environment now and the hedging environment for a couple years. So we do think there's opportunity for that as a more stabilized environment to come out. Obviously, that will be helpful from an M&A perspective as well. The rest of the few businesses have been doing fairly well without or even with the uncertainty that we've been facing. So we feel like the tailwinds there and the investments we've been making from a sales force and a production perspective positions those businesses to continue to grow as well as the investments from a payments perspective and just the categories that we're attached to so certainly we think that there is opportunity from a fee perspective to continue to see good outcomes great thank you we'll take our next question from ken oosten at autonomous research hey ken hey thanks good morning guys um just one question just given that it's a you know partial close quarter just wanted to understand the moving parts a little bit But can you help us understand the dollars of purchase accounting accretion that were

in 1Q, what you're expecting for 2Q, and just how that cascades in terms of the schedule?

Yeah. If you look at the – we tried to lay that out in our slide deck in our NEM walk. So, if you see, there was about $12 million of purchase accounting accretion associated with the loan portfolio in the first quarter. and I think the easiest way to think about that is it's really just two months of activity, and it'll burn down relatively gradually over the next few years. Most of that is associated with a combination of the commercial portfolio, so that has a little bit shorter tail on it than if it were residential mortgage exposures. That is kind of the main piece from a purchase accounting accretion perspective. The securities, you know, kind of what was embedded from a securities perspective is basically bringing those securities to current market rates. So the assumption there should just be based off of how you think about where market yields are going for the securities.

Okay, so basically that's one line that you mentioned in your prepared remarks that that becomes a little bit more in the second quarter. So it's really just that 12 kind of run rating. I just want to understand the magnitude of how much of help that is going forward. Thanks.

Yeah, 12. You're basically the 12 becoming probably closer to mid-teens when you think about adding another month in for next quarter.

Okay. And then just a real quick one. You mentioned also in your prepared remarks that you might get back into the buyback in the second half. You know, your CET1 with AOCI still on the lower end appears. Any way to think about like what that looks like when you get to that point?

Yeah, I think in a normalized environment, we would be talking about kind of $200 million to $300 million of buybacks is what our quarter was, what our historical run rates had been. Obviously, it's going to be very dependent upon how much we need to support organic growth because being able to lean into lending is an area that is obviously a priority for us always because we'd rather deploy the capital and earn a higher return. As Tim was talking about, our ability to attract customers and generate high teens returns is what we think is the best outcome for shareholders. For this year, it's going to be less than that as we get into the second half, but we still think there's going to be some opportunity to restart buybacks.

Okay, great. Thanks, Brian. Appreciate it.

Next, we'll move to David Chivarini at Jeffries.

Hey, David. Hi, thanks. Hi, how's it going? So a question on dividend finance. It looks like the deceleration you anticipated is starting to come through and the related uptick in NCOs there is beginning to occur as well. How high should we expect this NCO rate to trend so that we're not surprised given the slowdown is fully anticipated?

Yeah, I think it's a good question and it's one that we think the range we're in right now is probably a reasonable range to expect for a period of time. Obviously, this is an industry that is facing a significant amount of disruption as a result of the tax bill and basically creating a world where the leasing product is economically advantaged relative to the lending product. That was not an environment that when we did the original acquisition that we were expecting. We're working through it, and it's obviously not a growth asset for us anymore. But I think the range we're in right now from a charge-off ratio perspective is probably where we'll be for a little bit.

Very helpful. And then shifting over to HELOC, the HELOC growth is off to a very strong start in the first quarter and more than offsetting that headwind on dividend finance, what's driving the strong growth in HELOC? Is it fifth-thirds pricing or is it grassroots loan demand from customers? And what is the outlook for this business?

The first quarter benefits some from the Comerica acquisition as well. Of their consumer lending categories, HELOC was one of the categories that had some loan balance. So that is a driver of probably about half of the first quarter growth. But beyond that, what we're seeing is actually just good grassroots activities. We've made a lot of improvements to that business and the customer experience in that business over the last couple of years. It's put us in a spot where we have a really nice engine that's running right now. We're seeing good activity from a branch perspective. The improvements that we've made from a technology and underwriting experience perspective has made it a product that is easier for the bankers to sell which it has just been something that we're seeing a lot of good activity on and we've also been able to to actually lean in from to a little bit of marketing in the space as well and some customer acquisition tactics and honestly when you just take a step back and think about the dynamics of the amount of home equity that is out there in the market right now and the lack of housing turnover that's occurring it's just it's an area that we think you're going to continue to see significant growth in for some time i mean we're two years two plus years and And now it's seeing consistent growth from a home equity perspective.

Yeah, the one thing I'd just add there is I think, as Brian said in his remarks, number one in market share and our footprint in home equity originations and in the bottom half in terms of pricing. And there's very good pricing data available through aggregators. So we are not competing on price. It's great originations volume effectively at better spreads than others.

Very helpful.

Yes.

And we'll take our final question today from Christopher Marenak at Breen Capital Research.

Hey, Chris. Hey, good morning, Tim. I want to ask you and Brian about the NDFI reserve allocation. Would that number necessarily not go up much this year because you're avoiding some of the higher risk, lower return pieces of NDFI?

Yeah, we're not seeing anything in our NDFI portfolio that would cause us to have any need to build significant reserves related to what we're doing. It's very well-secured, very well-performing, just not an area where we're seeing any stress.

Sounds great. Thanks for all the detail this morning on that topic, and I appreciate the information in general.

Yeah, absolutely. Before we wrap it, I just quickly want to say congratulations to Keith Horowitz on his retirement and on his 30 years in the community. My sense is that he's going to prove out the adage that old cell fighters never die. They just stop updating their outlook. So we appreciate Keith for all the years of coverage here and wish him the best in the next phase.

And that concludes our question and answer session. I will turn the conference back over to Matt for closing remarks.

Thank you, Audra. And thanks, everyone, for your interest in Fifth Third. Please contact the Investor Relations Department if you have any follow-up questions. Audra, you may now disconnect the call.

Thank you. And this concludes today's conference call. We thank you for your participation. You may now disconnect.