RF - NYSE

Good morning, and welcome to the Regions Financial Corporation's quarterly earnings call. My name is Chris, and I will be your operator for today's call. [Operator Instructions] I will now turn the call over to Dana Nolan to begin.

Thank you. Welcome to Regions First Quarter Earnings Call. John and David will provide high-level commentary regarding our results. Earnings documents, which include our forward-looking statement disclaimer and non-GAAP reconciliations Are available in the investor relations section of our website. These disclosures cover our presentation materials, today's prepared remarks, and Q&A. I will now turn the call over to John.

Thank you, Dana. And good morning, everyone. Appreciate you joining our call today. Earlier this morning, we reported strong quarterly earnings of $465 million, resulting in earnings per share of $0.51 and adjusted earnings of $487 million and adjusted earnings per share of $0.54. We delivered pretax pre-provision income of $745 million, a 21% increase year over year, and we generated a return on tangible common equity of 18%. We are pleased with our performance and believe we are well prepared to face the current market uncertainty. At Regions Financial Corporation, we remain committed to our long-standing strategic priorities of soundness, profitability, and growth. These priorities support our ability to generate consistent, sustainable, long-term performance. They are also the foundation underpinning our decade-long plus journey to transform our bank. Over the last ten plus years, we have strengthened our soundness through enhancements to our interest rate risk, credit risk, and capital and liquidity management frameworks, while fortifying our operational and compliance practices to support growth. We meaningfully improved our profitability through diversifying our revenue streams, focusing on appropriate risk-adjusted returns, and disciplined expense management. And over the last five years, we have generated top quartile organic loan and deposit growth while continuing to make investments in talent, technology, products, and services to further grow our business. These efforts have contributed to significant improvement in our return on tangible common equity. In 2015, our return was in the bottom quartile. In each of the last four years, we delivered the highest return on tangible common equity among our peers. Additionally, we have generated top quartile earnings per share growth over both a five and ten-year period. Our derisking efforts and best-in-class hedging program have contributed to a strong capital position. This is evident in the most recent CCAR stress test results as our projected post-stress capital degradation was well below the peer median, and our pre-tax pre-provision income coverage of projected stress losses was the highest among our peers. We believe our robust capital balances and strong organic capital generation position us well to perform across an array of potential economic conditions. Our enviable footprint provides us with both a low-cost and granular core deposit base as well as favorable growth opportunities from our high-growth priority markets. This benefit, coupled with our proven strategic plan and experienced team with a record of successful execution, leads us to feel good about our positioning for 2025 and beyond. With respect to 2025, our outlook for unemployment has increased, and there is an expectation for a pronounced slowdown in GDP growth. But at present, our base case does not include a recession. Our clients remain optimistic that the economy will improve, and the current conditions have created uncertainty, which has caused many of our clients to delay investments. Importantly, we remain well-positioned to generate consistent results and support our clients regardless of the market backdrop and economic conditions. With that, I'll hand it over to David to provide some highlights regarding the quarter.

Thank you, John. Let's start with the balance sheet. Average loans remain relatively stable quarter over quarter, while ending loans declined 1%. Within the business portfolio, average loans remained stable as customers continue to carry excess liquidity and utilization rates remain below historic levels. Although pipelines and commitments continue to trend higher versus this time last year, it is too early to assess the full impact tariffs will ultimately have on loan demand. However, as John indicated, customers are delaying investment decisions pending further clarity. Average consumer loans decreased approximately 1% in the first quarter as lower seasonal production contributed to declines in home improvement finance and residential mortgage. Given the near-term economic uncertainty, we now expect full-year 2025 average loans to be relatively stable versus 2024. From a deposit standpoint, average deposit balances grew 1% linked quarter, and ending balances increased 3%. The growth is consistent with normal seasonal tax trends and is also reflective of customer preference for liquidity amid the uncertain environment. We have experienced favorable performance in both core and priority markets, with good participation in our money market offers, which boosted interest-bearing deposits. Despite this, we remain at our expected mix in the low thirties as a percent of non-interest-bearing to total deposits and believe this profile will remain relatively stable in the coming quarters. In the second quarter, we expect average deposit balances to be roughly flat, reflecting tax outflows in April offset by existing relationship deepening and new customer acquisition, particularly in our priority markets. Should cautiousness persist among clients, we could experience somewhat higher commercial balances in the near term. But under our current baseline for the full year 2025, we expect average deposits to be stable to modestly higher when compared to 2024. This reflects modest growth in consumer deposits partially offset by some incremental deployment of excess liquidity by corporate clients later in the year. Let's shift to net interest income. Net interest income declined 3% linked quarter but declined less than 1% excluding the impact of nonrecurring items and day count. Excluding these factors, the decline in net interest income is mostly driven by lower loan balances and less origination fee activity as customers wait for more clarity in the operating environment. Additionally, a tight lending spread environment created a modest headwind. The benefits from lower deposit cost and hedging have protected the margin during the falling rate cycle. Our ability to manage funding costs lower while also growing deposit balances in the quarter further highlights the strength of Regions Financial Corporation's deposit advantage. Linked quarter interest-bearing deposit costs fell by 11 basis points, representing a full falling rate interest-bearing deposit beta of 32%. Further, the March exit rate for the quarter shows our ability for ongoing deposit cost reduction from time deposit maturities and repricing, which imply a mid-30% deposit beta. Finally, we took advantage of yield curve and spread dynamics that provided for a less than three-year payback on an additional securities portfolio repositioning. Currently, we have limited remaining repositioning opportunities that meet our interest rate risk and capital management objectives. However, we will continue to evaluate as conditions warrant. After declining in the first quarter, net interest income is expected to grow approximately 3% in the second quarter, as the overhang from day count and other nonrecurring items abate. Additionally, we believe that fixed-rate loan and securities turnover in the prevailing rate environment and improving deposit cost trends will drive net interest income higher over the remainder of the year. Full-year 2025 net interest income is now projected to grow between 1% and 4%, with a reduction in the range driven by the evolving macroeconomic and interest rate environment. While only a small amount of loan growth from here is necessary to support the midpoint of our guidance, the potential for accelerating growth later in the year provides opportunity to achieve the higher end of the range. Now let's take a look at fee revenue performance during the quarter. Adjusted non-interest income remained stable in quarter as growth in most categories, including new records in both treasury and wealth management revenue, was offset by lower capital markets. The decline in capital markets was driven primarily by lower M&A, real estate capital markets, and loan syndication activity. We continue to believe that over time, and in a more favorable environment, our capital markets business can consistently generate quarterly revenue of approximately $100 million, benefiting from investments we have made in capabilities and talent. However, we expect it will continue to run around $80 to $90 million in the near term. Due to heightened uncertainty and market volatility, we currently expect full-year 2025 adjusted non-interest income to grow between 1% and 3% versus 2024. Move on to non-interest expense. Adjusted non-interest expense increased approximately 1% compared to the prior quarter, driven primarily by a 1% increase in salaries and benefits, which included one month of merit, as well as the reset of payroll taxes and 401(k) matching. The seasonal increase in salaries and benefits came in lower than originally anticipated, attributable to lower headcount and incentive-based compensation. The company's planned investments in talent, primarily in our priority markets, remain underway. We expect second quarter salaries and benefits expense to be up modestly compared to the first quarter. We have a well-established history of prudently managing expenses across various economic conditions. As our outlook for revenue in 2025 has come down, we now expect full-year 2025 adjusted non-interest expense to also come down to be flat to up approximately 2%. Despite these revisions, we remain committed to generating full-year positive operating leverage in the 50 to 150 basis point range. Regarding asset quality, provision expense was approximately equal to net charge-offs, $124 million. The resulting allowance for credit losses ratio increased two basis points to 1.81% based on conditions at quarter-end. Declines related to specific reserves and portfolio changes were offset by increases associated with economic deterioration and qualitative adjustments reflecting more uncertainty in the economic environment. Annualized net charge-offs as a percentage of average loans increased three basis points to 52 basis points, driven primarily by previously identified portfolios of interest. Nonperforming loans as a percent of total loans decreased eight basis points to 88 basis points, modestly below our historical range. While business services criticized loans increased by 4%, our through-the-cycle net charge-off expectations are unchanged and remain between 40 and 50 basis points. We continue to expect full-year net charge-offs to be towards the higher end of the range, attributable primarily to loans within our previously identified portfolios of interest. We do expect losses to be elevated in the first half of the year, but importantly, we have reserved for losses associated with these portfolios. Let's turn to capital liquidity. We ended the quarter with an estimated common equity tier one ratio of 10.8% while executing $242 million in share repurchases and paying $226 million in common dividends during the quarter. When adjusted to include AOCI, common equity tier one increased from 8.8% to an estimated 9.1% from the fourth to the first quarter, attributable to strong capital generation and a reduction in long-term interest rates. We continue to execute transactions to better manage this volatility. Towards the end of the first quarter, we transferred an additional $1 billion of available-for-sale securities to held-to-maturity. And in early April, we transferred another $1 billion, increasing our current mix of HTM to total securities to approximately 20%. In the near term, we expect to manage common equity tier one inclusive of AOCI closer to the lower end of our 9.25% to 9.75% operating range. This should provide meaningful capital flexibility to meet proposed and evolving regulatory changes while supporting strategic growth objectives and allowing us to continue to increase the dividend and repurchase shares commensurate with earnings. This covers our prepared remarks. We'll now move to the Q&A portion of the call.

Thank you. We will now be conducting a question and answer session.

You may press star two if you would like to remove your question from the queue. Thank you. Our first question comes from the line of Scott Siefers with Piper Sandler.

Morning, everybody. Thanks for taking the question. Oh, yeah. Let's see. John, I was hoping maybe you could sort of give us your sense for the degree to which things at least your perception regarding the degree to which things will need to settle down before customers are willing to reengage with things like investments or other strategic decisions. And if there's any difference in how you would look at it for, you know, traditional commercial lending versus your capital markets businesses, etcetera.

I do not know that I can put a degree of settling down on it, so to speak. But, clearly, the volatility and uncertainty have customers in sort of a wait-and-see mode. I do think as it becomes more clear what the nature of the tariffs will be, what products they will be applied to, what countries, and to what degree the customers can be more certain about the potential impacts. We are also following and talked a lot about this. We are also following the changes in immigration policy and changes in regulation and the impact on businesses. We have had the opportunity over the last six weeks to visit with more than 60% of our corporate banking group customers, non-real estate related, and have a pretty good sense of their frame of mind. I would say customers are still optimistic but very much in wait-and-see mode. It is kind of odd to kind of yes. The second part of that question on capital markets. We had a little bit of activity that picked up when the ten-year came to the lower 4% actually dipped I think we were at 3.88% for a short period of time. You know, those lower rates are really what you need to help drive a little bit more activity in that space.

Perfect. Okay. Thank you. And then maybe, David, when you think about the lower expense growth rate for the year, can you maybe put a little more context around how much of that is just sort of naturally lower cost due to less revenue-driven activity and versus how much might be, you know, actual cuts or delays to investments, things like that, just trying to get a sense for the balance in there.

Yeah. So, you know, we had the seasonal increase. We were able to offset that a bit because of lower headcount. We also had some retirements that happened in the end of the fourth quarter, the very beginning of the first quarter that we benefited from that will be ongoing. That is helping us offset the investment we have already made and will continue to make in terms of the additional hires that we had mentioned for our growth market. So we have a schedule in the back. I think it's on page nineteen in the deck. That shows the investments we want to make in all three of our segments to grow, in particular, in our priority markets. And so our whole point has been we are going to control costs, but we and we need to make investments to grow. We have to find those savings somewhere else. We have been able to do that by controlling headcount in other areas. We have leveraged technology incrementally better, still have a ways to go there. So it is really not holding off on investments. It is finding the cost elsewhere in the business.

Yeah. Okay. Perfect. Thank you both very much.

Our next question comes from the line of John Pancari with Evercore. Please proceed with your question.

Good morning, guys. Morning. To the loan side, I know you bumped your guidance lower, and you just gave a little bit of color just around the, you know, the customers are in kind of a wait-and-see mode. Can you give us a little bit more detail there? What are you seeing in terms of line utilization? You know, was there any pre-tariff drawdown that you saw that could be more of a pull forward? And then separately, are there any areas of growth that you are seeing that could be the main driver of loan growth here amid this uncertainty?

Yeah. So, John, we did see during the quarter, I guess, our pipelines are I'll call them a bit mixed. I think the activity in sort of the upgrade in the middle market and smaller corporate customer space is pretty soft. Customers were able to access the secondary market. During the first quarter, we had almost $800 million in paydowns from customers who went to the bond market, raised capital, and reduced their outstandings with the bank. So that sector has been and the opportunity there is fairly soft. Within the middle market customer space and in real estate, we are beginning to see pipelines expanding a bit. And so those customers are more interested in making investments, we think, and that likely will continue. The issue is primarily understanding of what the impact of tariffs will be on the cost of projects and other things, but we will follow that more closely. Line utilization is still flat. We are not seeing any borrowings to facilitate increasing inventories. And in fact, the customers are still carrying a tremendous amount of liquidity on their balance sheets. We have seen a significant growth in what I'll call wholesale deposits, both on balance sheet and off balance sheet. And I think until customers begin using that liquidity, it is not likely we see any real increase in borrowings under wise credit.

Great. Alright. Thanks, John. And then I guess just separately on the capital front. You know, your CET1 is solid at 10.8% and 9.1%, including ASC I. You bought back about $242 million this quarter. Can you just help us think about the pace of buyback as we look out through the rest of the year? Do you think that as growth remains muted that that actually facilitates a higher pace of buybacks? Or could the pressure to growth mean still weaker economic outlook and therefore you could be more cautious in terms of buybacks longer term? So just want to get that how you are thinking about that trade-off.

Yeah, John. I think it's along the lines of the first thing you mentioned. You know, we have our capital where we need to be right at it. We said, even after AOCI impact would be at the lower end of our range. We are generating 40 basis points of capital every quarter. You know, we want to continue to pay our dividend even be able to increase that appropriately. And then we really use our capital to support our business, support our customers, and make loans. And if there is not a lot of demand for loans, then the expectation is we use that capital and buy back. And so we leaned into that a little bit. We did $242 million in the quarter, and to the extent we continue to earn what we think we can earn, you should expect us to lean into buybacks until we start to see loan growth. You know, we are confident in the amount of capital that we have to support our business under any economic scenario. So there is no need to be ultra-conservative with regards to that. So I think buybacks would be in order for us.

Great. Alright, David. Thank you for that.

Our next question comes from the line of Ebrahim Poonawala with Bank of America. Please proceed with your question.

Good morning. Hey. Good morning. I guess maybe David just sticking with the capital. So we did some, I think, bond book restructuring this quarter. Payback 2.7 years. Just give us a sense, is there more juice to go there in terms of restructuring more bonds and, like, how are you thinking about that today versus buybacks?

Yeah. So we have mentioned NAV for two quarters that we thought we are kind of hit end of the line in terms of being able to do that. And we really have targeted financial arbitrage, but we have targeted a payback of three years or less. We really did not think we had much left to do going into the quarter. The rate environment changed pretty abruptly for us and gave us an opportunity to do another small fairly small slug of that. And so we are, again, going to reiterate, we think we are kind of at the end of the line. But if the market gives us the opportunity to do that, again, we go through the math of looking at what is better for you to do a securities repositioning, take the loss, or buy your shares back? And that is really the calculus. And if we continue to see opportunities to do repositioning that is better than buyback, we will do so. It is just I think that is going to be a harder calculation to come back. We have a little bit left, but just not much.

Understood. And maybe, John, just back to we saw we have seen a dramatic change in customer sentiment today versus January. As we think about customers that are on pause right now, we are trying to figure out whether the next move is higher or into a recession. How quickly do you think activity could pick up? I mean, what are you hearing from the customers around tariff clarity that they need? You could actually see like, is it realistic that 30, 60, 90 days from now growth could be much better than expected? Or is this going to take a lot longer given what we have been through over the last 30 or 60 days?

Well, I think some stability more likely 90 days than 30 is would be important for customers to act. Is it maybe 90 more days than that? So 90 days to six months is probably more likely. But I do think people are looking for a period of some stability and that probably is a minimum of 90 days.

And just following up on that, you have markets where you have pretty significant manufacturing plants tied to the auto sector. Any impact you have seen right now, either good or bad because of the auto tariffs?

Not yet. Not yet. We really have not seen any significant impact associated with the tariffs to date nor immigration policy changes, but we are monitoring all those things, obviously.

Good. Thank you.

Our next question comes from the line of Matt O'Connor with Deutsche Bank. Please proceed with your question.

Good morning, Matt. Good morning. The service charge line grew nicely year over year. And then also link quarter where normally there is some seasonal pressure. So just talk about that. I think there is both treasury management and consumer overdraft. It is one of the big drivers. So could touch on that. Thanks.

Yeah. I mean, we continue to grow customer accounts. Customer checking accounts, and you know, more accounts are going to have more service charges. We do have a little bit of seasonality that comes in the service charge line item on the corporate side. And that is always a bit helpful in the first quarter. But you know, all of our income lines and the non-interest revenue were all increasing with the exception of capital markets, which is where we had the biggest challenge. And we expect that non-interest revenue source to be fairly stable to growing throughout 2025, excluding the GAAP market's challenges. Yeah. I will just add, Matt, reiterate David's point. Growth in consumer checking accounts, growth in small business checking accounts are a driver of service charge income. We grew treasury management relationships by 9% last year, and you are seeing the benefits of that manifested in increased treasury management revenue, and we would expect to continue to have that sort of success growing treasury management relationships as we expand our commercial and corporate banking businesses across our growing footprint.

Okay. That is helpful. And then just on the consumer overdraft fees, there has obviously been, you know, some relief over what could have happened in terms of cash. And just thoughts on that going forward. Obviously, it has been a drag for kind of multiple years from you guys, but opportunities for that to grow maybe beyond account growth from here?

Well, you know, we have made a lot of changes in our overdraft practices and services that we offer customers, including early pay, a 24-hour grace period, established de minimis levels for overdrafts, and maximum number of transactions. All those things have had an impact on overdraft revenue, and that is a positive from our perspective. We want to provide that service to customers, but we prefer they not use it. To the extent they do, then we are generating some revenue associated with it. It grew modestly quarter over quarter. We are still seeing about the same percentage of customers access overdraft. So it is not a we are not seeing a growing number of customers, I guess, would be the point using overdraft. It really is more a reflection, I think, of the overall number of accounts that we are opening. And as a result, some additional revenue is being generated.

Okay. Thank you. That is helpful.

Our next question comes from the line of Erika Najarian with UBS.

Hi. My first question is as we think about what the reserve is capturing in terms of unemployment rate, David, could you give us a sense on what the current baseline is and what the weighted average may be?

Yeah. We did so we do our calculation a little differently. If you go look at and I get the pages off to page twenty-nine, it will show you what our unemployment expectations are for the next sorry. What that page. Is that right page? How about 4.2%, 4.3%? We also have a qualitative component and embedded in that qualitative component is trying to think what that a comp a piece of that is, what the unemployment rate could go to. When you weight all that down, we are in the high 4% range as far as the unemployment that is embedded in our current allowance we have at the end of the quarter.

Got it. Yeah. As we think about the allowance going forward, you know, given how you have told us your charge-offs will trend over this year, there are clearly some already identified issues that you are working through, which would imply a release of those associated reserves. But clearly, the macro outlook is murkier given the tariff policy. So how should we think about, you know, the potential of modest loan growth coming back, you know, the resolution of those previously identified problem credits, and then just, like, a who knows environment as we think about your ACL going forward.

Yeah. I think so if you look on page thirty-one where we show our allowance relative to our kind of day one CECL back to the fourth quarter of 2019 first opening quarter of 2020. We show you kind of what those reserves that is in a benign environment. We clearly have more reserves today because we have to take care of some of our problem assets in those portfolios of interest. And that is why we expect higher charge-offs in the first half year lower in the back half. And as you see that, you should have an expectation all of the things being equal, the economy does not drift further away. That the allowance coverage ought to be coming down. We have given you a pro forma as to what the loss rates would look like. With our current portfolio as if it were adopted on the first day of CECL, then it is a 1.62%. So what you ought to see is that 1.81% that we have today is drift down more towards that in a normal environment. The pace of which we cannot tell you because we do not know what the economic environment is going to be. But those higher charge-offs coming through this year just directionally, you should expect the 1.81% to be lower as time goes by unless the economy falls apart.

Got it. Very helpful. Thank you.

Our next question comes from the line of Gerard Cassidy with RBC. Please proceed with your question.

Hey, John. This is Gerard.

Hi.

David, can just want to clarify the answer in that last question on slide thirty, your economic outlook. With the unemployment rate. That is if I recall, those are the economic statistics for your region, your footprint, rather than the country. Am I correct in remembering that?

That is correct.

Okay. I just because your numbers are going to be different than what we are hearing from others, I want to make sure people knew that. Coming back to your CECL comment with the reserves, how challenging do you think it is going to be convincing the regulators and the rating agencies of what you pointed out the way the math works and the CECL, how those reserves should come down. Any thoughts there?

Well, I mean, we think we are pretty expert at knowing what allowance we need to have. Obviously, we get challenged by rating agencies, regulators, or independent auditors. But we have a pretty good process in place. It is consistently applied. And just directionally, what I said has to happen over time. I think what is embedded in your question, Gerard, is the pace of that improvement and coming down. And I do not think we are going to get to 1.62% until we see things really settle down and we have clarity and the economy is kind of moving along like it is capable of. So I do not want to assert that we are going to 1.62% next quarter. Or even this year. I am just saying that, you know, with a higher charge-offs, with a 1.81% allowance, if you are fully reserved for the charge-off, that number mathematically has to come down all other things being equal.

Certainly. Got it. And then one other follow-up just on credit. You guys, you know, coming out of the pandemic, identify some of the ongoing portfolio, surveillance portfolios like transportation, trucking. As we move forward in a slower growth environment, are you have you identified any other portfolios you are keeping extra attention to outside of what you have already identified from the pandemic area. Are there any portfolios in particular that you look at?

Yeah. I would say retail trade, manufacturing, particularly related to consumer durables, I think we will have to watch the consumer and where their spending or not. And those will be areas that we follow with some interest. Construction would be another area with potential impacts on rising cost. Above and beyond what we have already experienced.

Very good. Thank you, John.

Our next question comes from the line of Christopher Spahr with Wells Fargo. Please proceed with your question.

Good morning. Hi. Good morning. How are you all doing? So my question is just to follow-up on the fee drivers. And your lower guide, but yet you had like, record wealth management and treasury management. Going into the quarter. So just is it all you are going to be at the low end of the capital markets guide of $80 to $90 million or there are some other things that kind of that led to you to kind of lower your guidance for fees for the year? Thanks.

Yeah, Chris. The main driver is exactly what you said is capital markets. Yeah. All the other categories seem to be doing pretty well. We could have a bit of a challenge in the wealth area just because of the market. We will see, you know, they are continuing to grow assets in the wealth management area. Which will be nice. But there is also a market comp component of fee revenue there too. So with the market down, it makes that a bit more challenging. But the biggest single driver is what is capital markets going to be. And that is driven by more specifically, M&A activity, real estate capital markets, and loan syndications, and all three of those were down this quarter. And, hopefully, over time, we can get those rebound, which is why we have given you the that that business is set up to generate $100 million a quarter, but it is just not going to happen with uncertainty that is created the rate environment. Those are two big drivers of that revenue stream.

Okay. Okay. And then as a follow-up, just you know, you have talked in the past about kind of targeting some core markets in your footprint and just can you just expand on what you what actions you might be doing, especially if you are not really expanding new branches in those markets? Thank you.

Yeah. It is mostly around just additional focus on the opportunities in the market. So as an example, we think we talked about last quarter making an investment in bankers, specifically skilled to take advantage of the unique opportunities that might exist around the market. Small business, as an example. We operate 1,250 branches. The opportunity to bank small businesses is not equal across those 1,250 branches. In fact, there are some locations where there is real opportunity. And so placing bankers in those markets specifically to focus on the opportunities there is an important investment. Similarly, we are making investments in commercial bankers and wealth bankers. And our approach to business is a team-based approach. So we are focusing on using all the assets that we have and some of these markets to work together to grow our business. And we are excited about the opportunities that that presents.

Alright. Thank you.

Thank you. Your final question comes from the line of Betsy Graseck with Morgan Stanley. Please proceed with your question.

Oh, hi. Thank you. Hi. I did just want to understand the comment you made earlier around how net charge-offs are do I get it right front-end loaded and, like, how should I be thinking about the pace of what we are going to be seeing in the beginning of the year versus the end of the year, and how much differential is there there? And then separately, you have reserved all for this, so the provision is neutral. Is that a fair read or what did I miss? Thanks.

Yeah. I think the way to think about it, Betsy, is we identified a couple of credits in the portfolios of interest that we have previously talked about, office specifically, senior housing, transportation. We are in a workout mode. We do not know exactly the timing of those resolutions. But we believe that it would likely be in the first or second quarter. As a consequence, we have signaled charge-offs could be higher in the first and second quarter or the first half of the year than in the latter part of the year. Having said that, we are still committed to a range of 40 to 50 basis points. So you can draw your conclusions. We recorded 52 basis points of charge-offs in this quarter. If we are still going to be within that range of 40 to 50 basis points, you can sort of assume the trajectory from here. We still believe the second quarter will be higher than third and fourth. So, again, based on things that we think we are going to get we are going to resolve.

And from a provisioning standpoint, again, all things being equal, you should expect the provision to be right there with charge-off. Now if we get some loan growth or we get economic deterioration, both of those can drive an increase in the provision over charge-offs. But we just have to wait until we get to the end of the quarter to see.

Yeah. Just wondering since you reserved for these, you know, workouts you are doing, you know, you write it off and the reserve goes down. Right? You release the reserve against it. So that is why I was wondering would that be a neutral impact on provision.

Yeah. And you would have seen that in this quarter, but for the fact that we had some economic deterioration. So we did increase our reserves for general imprecision as a result of just observations about the market. And your comment about seeing the reserve come down, that was my whole point talking to got who it was now. Erika maybe and Gerard. Said the 1.81% that we have ought to come down as you see those higher charge-offs coming up.

Right. Understood. Thanks so much. Appreciate the call.

Thank you.

Alright. Okay. Well, that concludes, I think, all the questions we had today. So thank you for participating in our call. Thanks for an in our company. Have a great weekend.