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Operator: 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. I would like to remind everyone that all participant phone lines have been placed on mute. At the end of the call, there will be a question and answer session. If you wish to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. I will now turn the call over to Dana Nolan to begin. Dana Nolan: Thank you, Chris. Welcome to Regions Financial Corporation's fourth quarter and full year 2025 earnings call. John and David will provide high-level commentary regarding our results. Earnings documents, including our forward-looking statement 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. John Turner: Thank you, Dana, and good morning, everyone. Appreciate you joining our call today. Before we begin, I'd like to take a moment and personally thank David Turner for his service and leadership. After nearly a forty-year career in auditing and finance, including twenty years of service at Regions Financial Corporation, he has made a decision to retire. David has been one of, if not, the longest-serving CFOs across the financial space and is highly respected given his depth of experience and his practical approach. David joined the bank at a critical moment in our history. Through his steady leadership, strategic insight, and disciplined approach to financial management, Regions Financial Corporation not only navigated an exceptionally challenging period for our industry but emerged stronger, building the solid foundation we stand on today. While we certainly will miss David's leadership, not to mention his trademark sense of humor, I'm genuinely excited about working closely with Anil Chadda, our newly appointed CFO. Anil brings a deep understanding of Regions Financial Corporation's strategic vision and is fully aligned with our near-term goals and long-term priorities, having been a key member of David's leadership team for the past five years. At the same time, Anil offers a fresh perspective that will help us continue evolving and strengthening our business. With that, let me turn to our financial results. This morning, we reported strong full-year earnings of $2.1 billion, resulting in earnings per share of $2.33 on an adjusted basis. We also generated one of the highest returns on tangible common in the industry at just over 18%. We also reported solid fourth-quarter earnings of $514 million, resulting in earnings per share of $0.58 and $0.57 on an adjusted basis. We had a few items which negatively impacted fourth-quarter earnings by an additional $0.04. Dave will provide more detail on those in a moment. As you look at our results, it's clear we performed well against our strategic priorities and continue to build momentum heading into 2026 and beyond. We've made significant progress in hiring bankers to support our growth initiatives, and our investments in priority markets continue to pay off, accounting for over 40% of our new corporate client growth during 2025. We also made meaningful progress on our multiyear effort to modernize our core systems. When complete, we will be among a very small number of regional banks operating on a true modern core platform, something we believe will strengthen our competitive position. We launched a new native mobile app that's performing exceptionally well, earning a 4.9 out of 5-star rating in the App Store. And we continue to invest in capabilities that matter: authentication, data governance, data management, and real-time data. These investments strengthen security, enhance the customer experience, support growth, and expand the use of both traditional and generative AI across the company. Our transformation touches every layer of our technology stack, and every business, channel, and support function. We feel good about where we are and the opportunities ahead. At the same time, we've remained disciplined and focused on the fundamentals. Loan growth was challenged in 2025. Large corporate customers took advantage of very attractive financing opportunities in the capital markets and paid down debt. Our commitment to ongoing portfolio management and focus on risk-adjusted returns also drove reductions in loans outstanding as we exited certain portfolios and relationships. However, our net interest income continued to benefit from fixed asset turnover and prudent funding cost management, and we expect those tailwinds to persist. We grew adjusted noninterest income by 5% in 2025 as our wealth management and corporate bank businesses achieved another year of record fee income. Treasury Management products and services achieved a second consecutive record while capital markets posted its second-best year ever. We managed expenses prudently, producing 140 basis points of adjusted positive operating leverage. And we grew capital, increasing tangible book value per share by 20%, while returning $2 billion to shareholders through dividends and share buybacks. In summary, we delivered solid financial results through focused strategic execution, advancing our modernization agenda, strengthening our technology foundation, and driving performance across the franchise. We enter 2026 with momentum, a disciplined operating posture, and a clear commitment to generating consistent, sustainable, long-term performance. Before I turn it over to David, I want to thank our 20,000 Regions associates. Their dedication to serving customers, living our values, and executing with integrity is the reason we've been able to deliver the performance we're discussing today. Our progress is a result of commitment day in and day out to doing the right things the right way. Our associates continue to demonstrate what it means to serve with purpose, adapt with resilience, and work as one team. I'm incredibly proud of the way we show up for our customers, our communities, and for one another. I want to thank them for their leadership, their hard work, and their belief in what we're building together. With that, I'll hand it over to David to provide some highlights from the quarter and the full year. David Turner: Thank you, John. Before we move to the balance sheet, let me address the additional fourth-quarter items John mentioned that were not included in our non-GAAP adjusted items. We recorded $26 million of incremental tax expense associated with adjustments to certain state income tax reserves, resulting in a full-year effective tax rate of 21.4%. For the full year 2026, we expect the effective tax rate to return to the 20.5% to 21.5% range. We also incurred a total of $14 million of incremental expense related to severance, pension settlement, and visa class B litigation escrow funding. These items collectively reduced our fourth-quarter EPS by $0.04. Now let's move on to the balance sheet. Average and ending loans were relatively stable versus 2024 and the third quarter. While loan demand has been modestly improving throughout 2025, we experienced over $2 billion in strategic runoff, mainly from leveraged lending and continued resolutions within our portfolios of interest. We also saw consistently elevated refinancing of large corporate loan balances into the capital markets during 2025. The good news is that many of these headwinds are now largely behind us. Client sentiment is improving. Loan pipelines and commitments are strengthening. Excess corporate liquidity is beginning to normalize, and as John mentioned, we've made significant progress in our banker hiring initiative. Taken together, these trends give us confidence that loan growth will return to more normal levels in 2026. For the full year, we expect average loans to be up low single digits versus 2025. Deposits continued to perform well this quarter. Ending balances were up approximately $800 million, supported by strong customer acquisition and retention. Average deposits were roughly flat, modestly outperforming typical year-end seasonality, particularly in consumer banking where we normally see declines ahead of tax season. Importantly, we achieved this stability while continuing to reduce total deposit costs. Rate movements continue to drive a steady mix shift from CDs into money market accounts in both consumer and wealth. Higher third and fourth-quarter CD maturities help lower our average portfolio cost and, as expected, balanced attrition was modest. We saw limited impact on overall balances even as some funds migrated to money market. In the commercial bank, our five-quarter trend of growing total client-managed liquidity on and off balance sheet modestly reversed in the fourth quarter, driven primarily by a decline in off-balance sheet liquidity. Corporate customers are beginning to deploy excess liquidity into business investments, which we expect to support bank borrowings in 2026. Our noninterest-bearing mix remains in the low 30% range, consistent with our target and reflective of the operational nature of our deposit base. As a result, we again expect 2026 average deposits to be up low single digits versus the prior year. Let's shift to net interest income. Despite lower than anticipated loan growth, net interest income grew by 2% linked quarter, at the upper end of our expected range. Additionally, net interest margin rebounded to 3.7%, up 11 basis points inclusive of the nonrecurring benefits from higher than anticipated seasonal HR-related asset dividends and credit-related interest recoveries. The balance sheet remains well-positioned for the current and expected environment. Our neutral interest rate positioning performed as designed in the quarter, with very little impact on net interest income from the Fed's interest rate cuts. In the fourth quarter, interest-bearing deposit costs declined 16 basis points, equating to a 36% linked quarter beta. The falling cycle interest-bearing deposit beta is 33%, and we remain confident in a mid-thirties beta with the potential to outperform over time. Net interest income also benefited from fixed asset turnover in the fourth quarter as a steep yield curve continued to support term loan and securities pricing levels. While we expect these benefits to persist in 2026 and beyond, asset repricing is exposed to middle and long-term rate fluctuations. To mitigate a portion of this exposure, we added $3.5 billion of forward-starting receive-fixed swaps, scheduled to begin throughout 2026. These hedges, distinct from our short-term rate protection, are intended to lock in rate levels on future loan and securities production. Finally, the increase in margin was partly due to lower earning asset balances, including cash, which is now within the range we consider sufficient for liquidity management. Turning our attention to 2026, we expect net interest income to grow between 2.5% and 4%. The first quarter will be modestly lower, driven by fewer days and timing of HR-related asset dividends and the benefit from interest recoveries that benefited the fourth quarter. We anticipate sequential growth thereafter, supported by a well-protected interest rate risk position, continued fixed asset turnover, and balance sheet growth. After normalizing for nonrecurring items in the fourth quarter, a mid-360s net interest margin is a better starting point when looking to 2026. We expect the margin to be around 3.7% in the first quarter, elevated by day count. A continuation of positive trends throughout the year supports a low to mid-370s net interest margin in 2026. Now let's take a look at fee revenue performance during the quarter. Adjusted noninterest income increased 5% in 2025 but declined 6% versus the third quarter. The quarter-over-quarter decline in capital markets reflects postponed M&A transactions and normal seasonality in loan syndication and securities underwriting activity. Real estate capital markets and commercial swap activity were further impacted by the temporary government shutdown. For 2026, we expect Capital Markets quarterly revenue of $90 million to $105 million, trending near the lower end of the range early in the year and moving higher as the year progresses. Wealth Management delivered record full-year revenue and a fourth consecutive quarter of growth, supported by continued sales momentum and a favorable market backdrop. Mortgage income increased 8% in 2025; however, fourth-quarter results were negatively impacted by changes to MSR evaluations and net hedge performance. Service charges increased 4% in 2025, led by another record year in treasury management and strong growth in consumer checking and operating accounts across small business and commercial customers. For the full year 2026, we expect adjusted noninterest income to grow between 3% and 5% versus 2025. Let's move on to noninterest expense. Adjusted noninterest expense increased 2% in 2025 and was stable quarter over quarter. Salaries and benefits rose 3% in 2025, driven by higher health insurance costs, higher revenue-based incentives, and hiring tied to growth initiatives. Equipment software expenses increased 4% in 2025 as we continue our core modernization and migrate further to software-as-a-service solutions. Technology costs will run a bit higher. Historically, technology spend has been 9% to 11% of revenue. Going forward, expect it to be between 10% and 12%. Over time, these investments will drive efficiency and allow us to manage headcount lower through attrition. For the full year 2026, we expect adjusted noninterest expense to be up between 1.5% and 3.5%. And we expect to deliver full-year adjusted positive operating leverage. Regarding asset quality, annualized net charge-offs as a percentage of average loans increased four basis points to 59 basis points, reflecting material progress on resolutions within previously identified portfolios of interest, which were reserved for in prior periods. Business services criticized and total nonperforming loans decreased 9% and 8%, respectively, as risk rating upgrades continue to outpace downgrades. The resulting NPL ratio declined six basis points to 73 basis points. As a result of the improvement in business services criticized loans and NPLs, as well as continued resolutions in stress portfolios, the allowance for credit losses decreased $27 million. The allowance for credit loss ratio declined two basis points to 1.76%. While the allowance as a percentage of NPLs actually increased to 242%. We expect full-year 2026 net charge-offs to be between 40 and 50 basis points. Should macro conditions continue to improve, we have the opportunity to operate towards the lower end or the middle part of that range for the year. Let's turn to capital and liquidity. We ended the quarter with an estimated common equity Tier 1 ratio of 10.8%, while executing $430 million in share repurchases and paying $231 million in common dividends. When adjusted to include AOCI, common equity Tier 1 remained unchanged compared to the prior quarter, an estimated 9.6%. We expect to manage common equity Tier 1 inclusive of AOCI around this level, providing meaningful flexibility to meet proposed and evolving regulatory changes, support strategic growth, and continue increasing the dividend and repurchasing shares commensurate with earnings. Likewise, liquidity remains stable and robust with ample cash to support growth. As you've heard throughout the call, we feel good about the progress we made this year and, importantly, the momentum we're carrying into 2026. Many of the 2025 headwinds are behind us, and the underlying trends on pipelines, deposit strength, fee income growth, and continued improvement in credit are all moving in the right direction. We're executing well, investing where it matters, and doing it with the same discipline around capital, expense management, and returns that have served us well over the years. There's a lot of opportunity in front of us across our markets, across our businesses, supported by the ongoing modernization of our core systems. We believe we're well-positioned to take advantage of those opportunities and to continue delivering consistent, sustainable, long-term performance for our shareholders. This covers our prepared remarks. We'll now move to the Q&A portion of the call. Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. Our first question comes from the line of Ryan Nash with Goldman Sachs. Please proceed with your question. Ryan Nash: Hey, good morning, everyone. Good morning. David, just wanted to say congratulations on the retirement. David Turner: You will certainly be missed on these calls. Maybe not by me, but I'm assuming by others. Ryan Nash: Thank you, Ryan. You just mad because of outbound being no David Turner: was actually hoping to get a come on now out of you. So, I'll take the sports insult. But maybe, to start with loan growth. So, you know, at the conference last month, you guys talked about pipelines being up over 80% and you were growing commitments. Maybe just unpack for us the loan growth guidance, how do you anticipate coming from C&I, from consumer? And within the outlook, is there any further runoff baked in or movement into capital markets that's embedded in there? Thanks. John Turner: Yeah. So, Ryan, it's John. Thank you for the question. Say, first of all, customer sentiment is generally positive, and I think the environment's pretty good. That being commercial customers, I should say. We have seen a nice increase in pipeline activity, quarter over quarter, year over year, and we believe that's a catalyst for growth. We're beginning to see customers use some of their excess liquidity, which we think is also a precursor, obviously, to borrowing and increased line utilization. We've talked about the good markets that we're in. About 40% of our new logos, new customers came from the new markets that we're in. We're continuing to hire bankers. We've targeted hiring almost 120 bankers over a two-year period. We hired about 50 in 2025. So we're working toward adding those additional bankers. They'll all be or firstly, all be in our priority markets, those eight priority markets where we think we have real opportunity. We're adding the small business bankers and our branches to separate from those 120 commercial bankers that we want to add. So we believe those activities really set the foundation for growth. We're leaning into our expertise. We have some really strong specialized industry groups, particularly in energy and health care, power utilities, where we think we're going to continuously expansionary activities, and we really like our real estate banking team and all the capital markets products that we have to go with that. And we think position us to grow on the wholesale side of the business. So while we're guiding to lower single-digit loan growth, we feel good about how we're positioned today. We've seen nice commitment growth and, again, pipeline activity is positive. On the consumer side, I would say customers are still in really good shape from our perspective. Activity is still good. While we don't expect a lot of growth out of our consumer business, I expect that we'll see some. But the primary driver will be our commercial banking activities and leaning into the strength of our franchise, both our core markets and our growth markets, our priority markets where we have opportunities. The final question you had was related to runoff. We think we've worked through most of the portfolio shaping activities that have been underway over the last twelve to eighteen months. And so don't believe that would be a headwind as it has been particularly through 2025. Ryan Nash: Got you. Maybe as my follow-up. So John, the banks over the last ten years have been focused on improving returns and it's obviously resulted in you guys having peer-leading returns. And you know, the environment now feels like the markets are much more focused on growth and you know, you're obviously taking steps with a lot of the hiring that you guys are doing, but maybe just talk a little bit about how you're thinking about the trade-off between growth and returns at this point? And do you foresee that a lot of this hiring that you're doing is gonna result in an uptick in growth over time so that you guys are gonna be growing more in line with peers. How do you think about that trade-off over the medium term? Thank you. John Turner: Well, I'd say first and foremost, we're focused on capital allocation, on risk-adjusted returns. On ensuring that we're delivering top quartile returns on tangible common equity. That's our focus. That was our commitment back to ourselves and to the market in 2014, 2015. And I think that focus has allowed us to continue to shape our business in a way that we are performing at the top of our peer group from a return on tangible common equity perspective. And as a result, our shareholders are benefiting as a result of that. And I would say that as we think about growth, we've historically said we want to grow with the economy plus a little, and that reflects the good markets that we're in. I think that will always be true. Our desire is to deliver consistent, sustainable, long-term performance to eliminate some of the volatility that had characterized our franchise back in the February and early two thousands in particular and, I guess, all through the February, through that decade. And I think we've generally done that. And so, to me, there's no trade-off between growth and returns. We need to make sure that we're sound first, we're profitable second, that we're growing third. And we think we can do all those things given the markets that we're in. And, Ryan, I'll add this, David. You know, there's a lot of discussion about balance sheet growth. We also we're fixated on earnings per share growth, with the right return profile, and our earnings per share growth has been quite nice over an extended period of time relative to the peer group. So there are a lot of other ways to continue to make money. We acknowledge we want to grow the balance sheet, but you need to do it in a responsible way. When it's there. And if you try to force it, you're gonna get yourself in trouble. We've been very disciplined with that, and we're in great markets with the hires that John mentioned, and we think we can grow faster on the balance sheet than what you've seen. At least in 2025. Ryan Nash: I was trying to let you get off easy on your last call, David, but appreciate the color. Thank you. Operator: Our next question comes from the line of Scott Siefers with Piper Sandler. Please proceed with your question. Scott Siefers: Good morning, everyone. Thank you for taking the question. David, I was hoping you could maybe help to kind of unpack the fourth-quarter capital markets performance and outlook. The postponed M&A transaction is definitely understandable given the shutdown, but you'd also, in the release, noticed a lower syndication and security underwriting activity that kinda feels like the will start on the slower end but pick up from there. So just curious about any comments about pipeline, why it trajects or leaps back up after the first quarter, etcetera? David Turner: Yeah. We feel good about capital markets in total. Loan syndications have a little bit of seasonality there in the fourth quarter, came in a bit weaker than we had hoped, but we believe that can pick up in 2026. We'll have a little bit of a slow start in the first quarter, but it'll pick up, and we believe that the guidance that we've given you is pretty good. You know, M&A activity by its nature is a bit episodic. We do have a lot in the pipeline. It just didn't get closed in the fourth quarter. We expect that to get closed in the first half of the year. And so we think capital markets, it had its second-best year in its history. It just had a, you know, it just didn't have the fourth quarter where we wanted it to be. So think we're gonna rebound and feel very confident that we're gonna get that up on a run rate in the guidance we've given you. John Turner: I would just add in with respect to real estate corporate bank and capital markets related activities, adding a couple of bankers to that business, and we think that will be a catalyst for some additional revenue. Improving interest rate environment helps as well. So, the business is pretty well balanced, I think, between a variety of sources of revenue, and we expect that 2026 will be another good year for capital markets, and we should see nice growth over 2025 performance. Scott Siefers: Perfect. Thank you. And then, so the deposit beta performance, you know, it sounds like it's going very well and could still ultimately outpace your expectations? Just maybe some additional thoughts on pricing trends, what you're seeing competitively, and especially how they move from here if we had another couple of rate cuts throughout '26? David Turner: So that last part of your question is important, and it's we want to remain competitive, but we also have to acknowledge where the market's going. We had a pretty big CD maturity quarter as we told you at the last conference we were at in the fourth quarter that helped propel that 36 basis point improvement over beta. For the quarter, 33% on a cumulative. We think, and our guidance is really centered around the mid-30% change. And so we think if you look at the first quarter, we'll have another $3.5 billion of CD maturities. We got another $5 billion in the second quarter. It's a pretty big quarter there. So, being reactive, we've had nice reactivity from our corporate banking group and our consumer banking group and the wealth group. To react to what's going on in the marketplace. To watch what the Fed's doing, but also to stay competitive in the markets that are important. Scott Siefers: Perfect. Okay. Thank you. And, David, just congratulations on your retirement. We'll certainly miss you on these calls and elsewhere. David Turner: Thank you, Scott. Appreciate it. Operator: Our next question comes from the line of Gerard Cassidy with RBC. Please proceed with your question. Gerard Cassidy: John. Good morning, Gerard. John Turner: Good morning. Gerard Cassidy: David, congratulations. You're leaving big shoes to fill. Good luck in the future endeavors. David Turner: Thank you, Gerard. Appreciate it. Gerard Cassidy: John and David, can you share with us, you mentioned in the slide, I think it was slide three, on the loans about the downsizing of the portfolio. And you specifically pointed it out about $2.6 billion of loans in 'twenty five were refinanced through the capital markets. Can you share with us what's the attraction that the customers are seeing? Is it lower rates, easier terms? What's the real driver of that going into the capital markets? John Turner: Gerard, most of that activity is in investment-grade credits within our real estate corporate banking business, so REITs, within the energy portfolio and financial services, insurance companies, that we bank. And so the cost of capital was lower. They could borrow more cheaply. Terms were potentially better. An activity that does occur on an annual basis. We see particularly in those three industries, customers enter the capital markets and raise some capital. And that activity occurred this year as well. Probably a little earlier than it does sometimes. Oftentimes, within the REIT portfolio, particularly, it's the third quarter of the year, but we did see a fair amount of activity in 2025. Gerard Cassidy: Was it more pronounced John, in '25 than years past that you can recall? John Turner: Seems to be. Yeah. Seem to have been. Because the market was not open for a while, and then when it did open, we did see a lot of activity. Gerard Cassidy: Got it. And then just following up on credit quality. Credit's in good shape. You guys have identified the, you know, the higher risk portfolios of office, commercial real estate, and trucking. And transportation. Any color on the trends you mentioned that the backdrop is getting better economically for trucking? What are you guys seeing in those higher risk portfolios as we look into '26? John Turner: Yeah. Well, first of all, I'd say to your point in credit, quality or the deterioration in credit quality peaked a couple quarters ago. We've seen four quarters of improvement in nonperforming loans. Down from 96 basis points to 73. Criticized loans down 32% over a four-quarter period. Charge-offs, which is a trailing indicator, reached a high point this quarter at 59 basis points. We expect that obviously to come down. We're guiding to 40 to 50 basis points and feel very confident that we'll perform within that range. So we do expect to continue to see improvement in credit quality. I would say trucking and transportation is getting better. But still, challenged. From our perspective. Other industries like forest products, some construction-related activity or building materials industries still struggling a little bit. But in general, I would say we continue to see, as reflected in the metrics in our own portfolio, continued improvement and, so are optimistic about 2026 and beyond. David Turner: Gerard, I'll add that. So we're sitting with an allowance for loan loss credit loss of $1.76. Right now, we put a schedule in the back of our appendix. It shows you what kind of day one CECL was when she's when an environment pretty benign from a credit standpoint. That implies based on the current portfolio that we have today that our reserve could be $1.64. So over time, and we can debate what that means in terms of over time, you should expect us all things being equal, to get back to a normalized environment that $1.76 to trend down to $1.64. You saw a bit of that. We're down two basis points this quarter. And you should see that trend continue. Throughout '26. Gerard Cassidy: Very good. Thank you. Operator: Our next question comes from the line of John Pancari with Evercore. Please proceed with your question. John Pancari: Good morning, John. Good morning, David. John Turner: Morning. John Pancari: David, you're a legend. Best of luck. We will miss you. And, apparently, other banks are gonna miss you too. I've been hearing from a number of other executives just saying how much they're gonna miss you at different conferences and everything. So and, you know, Walt, we look forward to working with you. David Turner: Thank you, John. John Pancari: So just a question on the capital front. Just given the CET one at 10.8, you did the $430 million buyback in the fourth quarter. I mean, can you just kind of frame how you're thinking about the pace of buybacks as you look at the capital need for organic? You talked about loan growth, you know, generally improving and some of the runoff slowing. So how do you balance that in terms of the pace of buybacks? Do you think it's reasonable as you look at 2026? Anil Chadda: Sure, John. This is Anil. I'll take that. So we look at every quarter, we generate about forty basis points of capital. And we'll pay a dividend of 18 basis points of that. To your point, beyond that, our number one focus is to invest back into our business through good loan growth. When we see that, we're definitely gonna fund that with capital. When we don't see that, we're gonna step in and buy back shares like we saw us do this quarter. So the $430 million is really a testament to what we were seeing in terms of loans coming onto the balance sheet. We saw an opportunity early in the quarter in particular when the stock price was down a bit and stepped in and bought back shares then. Our goal is to always invest in loan growth, and when we see that good quality loan growth, we're gonna step in there and generate and invest capital into that. David Turner: And then, you know, and I'll add to it. So we're at 9.6% on an adjusted CET one adjusted for AOCI. Our range is 9.25% to 9.75%, so we're right on top of that. Have a little extra. And, we're gonna do exactly what Anil said, use it for loans and then buy it back if not there, if the loan growth is not there. John Pancari: Got it. Okay. Very helpful. Thanks for that. Then separately, I guess you could just give us your updated thoughts around M&A potential whole bank M&A. Just kind of, pick up. We know that there's a potential, you know, need for scale in certain businesses, certain markets, obviously, that you could argue is, you know, here. And then lastly, you know, you just, I guess, the check that we could see in a seven a window close. How do you view it? What's your updated thoughts on that front? John Turner: Yeah. Well, maybe I'll ask the last part first. The window clearly is open. But I don't think decision-making of any sort should be driven by whether the window's open or closed. I mean, ultimately, it ought to be about whether or not the transaction is in the best interest of the bank's shareholders and will create value for shareholders over time. We remain our position is unchanged. M&A is not depository M&A is not part of our strategy today. We're continuing to observe what's going on in the marketplace. We do not suffer from fear of missing out at this point. We're gonna continue to operate our business, execute our plan, focus on our transformation of our core deposit system and all that goes with that over the next fifteen to eighteen months. And, and just continue to do what we've been doing. Operator: Our next question comes from the line of Peter Winter with D.A. Davidson. Please proceed with your question. Peter Winter: Thanks. Good morning. John, I wanted to ask about just overall banking. Obviously, it's a very competitive business, but do you see risk of losing market shares as these bigger regional banks are coming into your markets? Or is it really an opportunity to take advantage of some dislocation? John Turner: Well, we think it's an opportunity. I mean, we again, are in really good markets, core markets, where we've been for a hundred and twenty-five, 150, and some it's a hundred and seventy-five years. Have a really strong brand. We have very good market share, bankers that are well known in their communities, and a really good job taking care of our customers. And we have an opportunity to grow in those markets, and we are doing that. Separately, we're in growth markets. We talk about our eight priority markets where we have a chance to grow and last year, about 40%, as I said earlier, of our new commercial banking relationships were won in those markets. And so, you know, I view it as an opportunity to continue to grow. We're gonna focus on our customers on providing unique ideas and solutions to help them grow their businesses, whether they be businesses or consumers. We're gonna take care of our customers, and I think we'll have an opportunity to continue to grow our business regardless of what the conditions are, the markets that we operate. Peter Winter: Got it. And then can you talk about where you are in the process of the modernization of the platform and maybe highlight some of the benefits from this initiative versus competitors? John Turner: Sure. So we have worked through all the very difficult integration work, and we've now entered the user testing phase, and that will go on for likely the next two plus quarters. We should, sometime in the third quarter, move to production and a pilot phase where we'll begin with a small cohort of customers piloting the system to ensure that it does everything that we believe it will do, and that'll lead us to beginning a conversion of our customer base in early 2027, assuming everything continues to go as planned. Been really happy with the progress we're making. The team's doing a great job. It is a super complex and challenging effort, but we have been, as I said, really pleased with the effort, activity, and the progress that we're making. To your question about the benefits to us, we think that will give us a speed to market, as we want to offer customers new products. It will support our ambition to be sound in that the system will be very contemporary in nature. We're not customizing any aspect of it, so we can continue to update the system as the vendor provides updates and that will be super helpful to us. It also, I think, will enhance our ambition to provide a really great experience, an omnichannel experience to our customers. And we think that that will be really, really important. Another benefit is in order to convert your 5 million customers from one system to another, you have to go through the process of cleansing all your data, organizing your data in a way that will facilitate a lot of things, including additional work we're doing around artificial intelligence and generative AI. So, we think there are a lot of benefits both direct and indirect, that will support the business. And, are excited about how that will position us going forward. Peter Winter: Got it. Thanks. And, David, I'll add my congratulations to retirement. It's truly been very enjoyable working with you over these years. David Turner: Thank you so much. Appreciate it. Operator: Our next question comes from the line of Christopher Spar with Wells Fargo. Please proceed with your question. Christopher Spar: Hi. Good morning. Thanks for taking the call. So my question is regarding the expense outlook. And just looking at the headcount increase, the competition increase, large regional banks basically kind of threw down the gauntlet earlier today. Talking about how they're kind of expanding to growth markets. And I understand that you're gonna kind of defend your market share or try to grow that, but I'm just wondering, like, if you know, how are you gonna be able to keep costs kind of with inflation where it is and with higher headcount? And then second, the follow-up will be on the tech initiative and the increase in tech spend. I get it where you are. You can see you can manage headcount lower through attrition. I'm just wondering about the ability to do that in the timeline for that as well. Thank you. Anil Chadda: Yeah. Thanks for the question. This is Anil. So, it's an important question and something that we've been focused on for going back ten years. There's always been important places where we need to invest in our business, whether it's in risk management, whether it's in security, of course, growing our bankers is something that we've been very focused on over the past couple of years. We always have to find ways to fund that growth. Over the past ten years, you can see in our slide deck, our compound annual growth rate for expenses is 2.8%. So it's incumbent upon us every day to make sure we're making the right investments to grow revenue. Making the right investments in technology, but also find ways to fund those investments. That's been a critical part of our history. It's something really important to us now. It's evident in our expense guide for the next year. And it's evident in our commitment to positive operating leverage. So it's something we've seen before, and it's something that we continue to execute day in and day out. Christopher Spar: Thank you. Operator: Our next question comes from the line of David Chiaverini with Jefferies. Please proceed with your question. David Chiaverini: Hi. Thanks. So I had a follow-up on loan growth. And the pace of hiring. So you mentioned about hiring 120 bankers. Over two years. You did 50 in 2025. I'm curious, how does this pace compare to the prior say, three to five-year trend? And do you expect incremental hiring above this pace as you take advantage of the M&A disruption? John Turner: Yeah. So it would be a bit of an uptick in hiring, I would say, over the previous I think your time frame was three years and reflects hours. Double the pace, I would say. Reflects our commitment to, again, growing primarily in these primary markets where or priority markets where we see opportunity. With respect to incremental hiring, one of our expectations of our leaders in our markets is that they're constantly recruiting and identifying who the best bankers are in the markets. That they operate in. So to the extent that we find an opportunity to hire a banker or a team of bankers who are recognized in their markets as being really good at what they do, and we think they'd be a great addition to the Regions team. I expect our teams will recruit them to come to work for us whether they're included in the 120 targeted bankers or not. So we're actively looking for bankers all the time. Who can provide great service to our customers and be additive to our teams. David Chiaverini: Thanks for that. And as we think about the guide of low single digit for 2026, as the headwind subside, it sounds like borrower sentiment is improving, pipelines are up significantly. You're mostly through the runoff. Is this low single this year kind of a step function to mid-single digit looking out to 2027? John Turner: I think that's reasonable to assume. We're not haven't committed to that yet. Dana won't let me provide any guidance beyond 2026, but I think you can expect momentum to continue. We expect momentum to continue to build in our business, particularly as we're recruiting more talent. And we're benefiting from the opportunities that are in our markets. David Chiaverini: Great. Thanks for that. And, David, congrats on your retirement. David Turner: Thank you. I appreciate it. Operator: Our next question comes from the line of Ebrahim Poonawala with Bank of America. Please proceed with your question. Ebrahim Poonawala: I guess just one a couple of follow-up questions. One, on the systems conversion, John and David, I'm not sure if you've mentioned when this will all be completed. And in the meantime, does it restrict your ability to do something? I heard your comments around M&A earlier, but if you wanted to it sort of restrict that flexibility in the meantime or not? John Turner: We expect to be completed toward the latter part of 2027. And I would say technically, it does not restrict our ability to do an M&A transaction practically it would be very challenging, we believe. So, that is a factor. In certainly in how we think about how we're positioned relative to M&A and outreach. Ebrahim Poonawala: Got it. And just one follow-up on the loan growth front. When we think about just the tariff uncertainty and maybe the Supreme Court's gonna rule on this next week, do you think that may materially change sort of sentiment among your customers when they think about borrowing and investing? Or do you think they have enough clarity today to kind of move forward with expected plans? John Turner: We think they have enough clarity. I hear and don't talk with many customers who are overly focused on that topic. Ebrahim Poonawala: Got it. Anil, congratulations. And David, all the best. Look forward to seeing you soon. David Turner: Thank you. Thank you so much. Appreciate it. Operator: Our next question comes from the line of Betsy Graseck with Morgan Stanley. Please proceed with your question. Betsy Graseck: Good morning. Hi, good morning. David, I'll throw in my comments too. Thank you so much for the time and insights over the years, and I hope that wherever retirement takes you, you have a fantastic and enjoyable time. David Turner: Thank you, Betsy. I really appreciate it. Betsy Graseck: And, Anil, look forward to working with you. I do just have two short follow-ups. One is just on the net interest margin as you discussed way earlier in the call. You know, coming in in 1Q similar to where we are today and then dipping down a bit and then you know, ending the year. Roughly where we are today, if I have that right. And I'm just wondering what is the dip down a function of, and how low does it go during that? Pressured point? David Turner: Yeah. I think so first off, we need to level set where we finish. So we had about four basis points of NIM in there through things that won't that we aren't counting on repeating. Interest recoveries, being one in the HR asset dividend, was unusually high. We always have a little bit of that. That mean we won't have an interest recovery. We just don't count on it. So that's four basis points. So we start with three sixty-six. We think we'll finish the quarter first quarter at three seventy, and it'll inch up from there throughout the year. And maybe we get a few more points on top of that. Somewhere between the low three seventies and the mid three seventies perhaps. And that's assuming you see our assumption is that we have that mid 30% beta expectation in our loan growth in low single digits. I think, would be important. And, you know, and we have we don't have any big changes in the ten year in particular. As we get repricing fixed asset repricing benefits. Betsy Graseck: Okay. Great. Thank you. And then on the you talked about the tech spend going from 9% to 11% of revs to 10% to 12 and that, that offset would be headcount. And I'm just wondering, is that expected to be managed in a way that the tech investment spend and the headcount offset each other in each quarter, or should we expect any kind of expense ratio changes as you're going through this? Which sounds like no, of course, but you tell me. John Turner: Yeah. Betsy, we don't have any big initiatives planned. I mean, again, we're as I think Anil pointed out, one of the, we believe, strengths of the company is how effective we've managed our expenses over the last ten plus years. And so we're always looking for opportunities to improve. There are areas that are probably obvious to you where there we believe there's opportunity for improvement. And use of technology, which will result in a reallocation headcount more than likely into places where we have a chance to support growth. So I think we'll manage it over time as again, as the opportunities develop, it won't be part of a broad onetime initiative. David Turner: Yep. Betsy, that comment was meant to be a very broad comment. It was not to be a backhanded way of saying we're gonna have volatility in our quarterly expense structure because of it. So don't read that into it. Betsy Graseck: Sounds good. Thank you. Appreciate it. Operator: Our next question comes from the line of Chris McGratty with KBW. Please proceed with your question. Chris McGratty: Good morning. John Turner: Good morning. Chris McGratty: Thank you. I'm interested in your trends in consumer account checking account growth. That's been a big focus. The larger banks this quarter and the number of accounts they're opening. With your exceptional retail deposit base, can you just talk about trends in new account growth? John Turner: Yep. We're seeing nice growth in consumer checking accounts. Again, our focus is on a core consumer checking customer. One that is going to have a direct deposit with us, is going to actively use their debit card and use their checking account. That is our history. That is the source of our very loyal, low-cost deposit base, and that's what we're continuing to focus on. Growing. We have seen a nice increase in digital originations. So as we have developed our digital capabilities, our mobile banking platform has continued to improve. And we're seeing additional enhancements to our growth initiatives as a result of that. Customer has to have a direct deposit with us for us to count on a, you know, a new oh, yeah. Well, should say also, we just introduced a new capability that allows a customer to pretty easily move their direct deposit from a competitor to Regions, which has resulted in, I think, a nice increase to some of the uptick in activity. Chris McGratty: Great. And just a finer point on the tech question. The 10 to 12, is that a kind of a one-year catch-up, or is that kind of a new level set? I know you've been at nine to 11 for a bit of Anil Chadda: Yeah. We'd say that's a new level set. We've been running at about 11 so the upper end of that nine to 11 range. So we've shifted our guidance to 10 to 12. Chris McGratty: Okay. Thank you very much. Operator: Our next question comes from the line of Erika Najarian with UBS. Please proceed with your question. Erika Najarian: Good morning. Thank you so much. Good morning. Actually, most of my questions have been asked and answered, but maybe just one for Anil since you're on the line. You know, could you give us a sense of when you take over and fill these very large shoes that David has left for you, what would you tell investors your sort of top three priorities are as you take on the role? Anil Chadda: Yeah. First, it's great to step into the role with the stability that we have. We have a great strategic plan that John has outlined and the board's approved, and it's critical for us to continue to execute that. It's nice to come in when you're performing very well. It's incumbent upon us to continue to do that. And David has built a phenomenal team in finance. Great partnerships with our businesses, and that is job number one, two, and three, is to continue on the great path we've been on, execute our plan, and to continue to deliver great financial performance. Erika Najarian: Got it. And, David, you'll be missed, but I'm sure investors won't miss you smoking them on the golf course. And it's scary to think that you're actually potentially going to get better and lower handicap. David Turner: I'm going to work on my putting. So congratulations, and welcome again, Anil. Erika Najarian: Thank you. David Turner: Thank you very much, Erika. Operator: Our final question comes from the line of Matt O'Connor with Deutsche Bank. Please proceed with your question. Matt O'Connor: Morning, Matt. Good morning. Hoping you guys could talk about your leverage to the recovery in commercial real estate. Obviously, there's the credit aspect of it. You've been pretty clear about being past the worst there and being well reserved for remaining office loans. But as we think about from a loan volume perspective, obviously, we're seeing industry loans inflect. It does seem like there's more and more momentum building. So how do you think about that leverage? You do have a good slide in there showing a lot of maturities coming in the next couple of years. Which is the case for the industry. So is that upside risk? As we think about growing loans overall? Or is there a risk that more of the CRE loans get refied away from you than expected? David Turner: Yeah. I mean, we've so we've been very successful, you know, when things mature to be being able to refinance those. The rate environment's helping a bit more on growth in that space, in particular, in multifamily because we've been able to, you know, as rates have come down, the math's starting to work. So before the rates came down, we were demanding more of a down payment. To make the math work for us. Well, that didn't happen with the developer. So now it's coming into equilibrium. We're seeing demand for the multifamily. We're seeing more opportunity there. And yes, we had derisked commercial real estate over the years, but that is not constraining our ability to grow. When we get paid, the risk that we take. And so hopefully, we'll have the opportunity to grow over time. John Turner: Yeah. I'd just add, Matt. We have really strong real estate banking teams, great customer base. We have developed, I think, a portfolio of products that allowed us to meet our customers' needs across a variety of financing capabilities and requirements and I feel like it's a business that we will continue to invest in. We'll continue to see it grow, and I am confident that it will be an important contributor to our longer-term success both on the balance sheet and the income statement as capital markets activity picks up. Matt O'Connor: Okay. Thank you very much. John Turner: Thank you. Okay. Is that that's all our call today. Thank you very much for your participation, and your support of Regions Financial Corporation. We appreciate it. And, everybody, congratulations. I'll add my congratulations to David Turner. Done a great job for us here. Been a really important member of our leadership team. We will miss him and his sense of humor, but are excited about Anil and his filling the role as CFO. So thank you again for your participation. All the best. Operator: This concludes today's teleconference. You may disconnect your lines at this time.
Operator: Good morning, and welcome to State Street Corporation's Fourth Quarter and Full Year 2025 Earnings Conference Call and Webcast. Today's call will be hosted by Elizabeth Lynn of Investor Relations at State Street. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question and answer session. Today's discussion is being broadcast live on State Street's website at investors.statestreet.com. This conference call is also being recorded for replay. State Street's conference call is copyrighted and all rights are reserved. This call may not be recorded for rebroadcast or distribution in whole or in part without the expressed written authorization from State Street Corporation. The only authorized broadcast of this call will be housed on State Street's website. Now I'd like to hand the call over to Elizabeth Lynn. Elizabeth Lynn: Good morning, and thank you all for joining us. On our call today, our CEO, Ron O'Hanley, will speak first. Then John Woods, our CFO, will take you through our fourth quarter and full year 2025 earnings presentation, which is available for download in the Investor Relations section of our website, investors.statestreet.com. Afterward, we'll be happy to take questions. Before we get started, I'd like to remind you that today's presentation will include results presented on a basis that excludes or adjusts one or more items from GAAP. Reconciliations to these non-GAAP measures to the most directly comparable GAAP or regulatory measure are available in the appendix to our presentation. In addition, today's call will contain forward-looking statements. Actual results may differ materially from those statements due to a variety of important factors, including those referenced in our discussion today as well as in our SEC filings, including the risk factor section in our Form 10-Ks. Our forward-looking statements speak only as of today, and we disclaim any obligation to update them even if our view should change. With that, let me hand it over to Ron. Ron O'Hanley: Thank you, Liz. Good morning, everyone, and thank you for joining us. Our fourth quarter results represent a strong finish to another successful year for State Street. We entered 2026 with momentum and a proven strategy that continues to deliver strong results and meaningful value for our clients, shareholders, and employees. Our progress reflects the strategic actions and investments we have made in recent years, deepening and broadening our capabilities while elevating our client value proposition, which have strengthened our position as our client's essential partner, enabling us to compete from a position of great strength. This solid foundation positioned us well to capitalize on a dynamic yet constructive market environment in 2025 and deliver another year of accelerating financial performance. Notably, 2025 marked our second consecutive year of positive operating leverage and pretax margin expansion, and our 4Q results represent the eighth straight quarter of positive operating leverage excluding notable items. Our strong financial performance underscores the effectiveness of our strategy, and in 2025, we built on that success with a number of key strategic milestones that I will detail shortly. These actions reflect our disciplined focus on reinvesting to drive near-term and long-term growth across our franchise, enhance client experience and capabilities, and further strengthen our platform while delivering strong shareholder returns. We are excited about the client opportunities ahead and the significant potential being unlocked by the next generation of our operating model transformation, particularly as we further leverage and embed AI-enabled capabilities throughout the franchise. With that strategic context, let me turn to our fourth quarter and full year highlights on Slide two of our investor presentation. Starting with financial performance, excluding notable items, which John will address shortly, we generated strong fourth quarter EPS growth of 14% year over year, supported by both record quarterly fee and total revenue. Healthy positive operating leverage in 4Q helped to drive pre-tax margin to 31% excluding notable items. Our full year results were similarly strong. Excluding notable items, earnings per share were $10.3, up 19% year over year, supported by strong revenue growth and growing margins. For 2025, we delivered strong positive operating leverage, expanded pretax margin by more than 150 basis points, and achieved return on tangible common equity of 20%, excluding notable items. As we look ahead, our attention is firmly focused on capturing the opportunities before us. Shifts in investor demand, advances in technology, and an evolving regulatory landscape are creating new opportunities for both us and our clients. In response, we meaningfully advanced a number of key strategic initiatives last year and are creating new distinctive capabilities that enhance client engagement, open doors to strategically attractive markets, and further streamline our operations and technology platform, all of which are designed to support continued strong financial performance. Within investment services, which surpassed $50 trillion in AUCA for the first time in 2025, we are encouraged by rising client satisfaction and the good momentum in alpha client onboarding, including meaningful progress with large development partners. We are drawing on our heritage of technology-driven innovation and investment services by delivering next-generation tools, digital platforms, and client solutions aimed at helping our clients succeed in a constantly evolving market, while strategically pivoting State Street to faster-growing segments of the market. Our strong industry position in private markets servicing is a clear example, with related servicing fees growing at a double-digit year-over-year pace in 2025. A further illustration is in the digital assets ecosystem. We finalized and recently launched our digital asset platform, which will enable tokenization of assets, funds, and cash for institutional investors, unlocking new efficiencies, improving liquidity, and creating opportunities for growth. As a result, we are strategically positioning State Street to be the bridge between traditional and digital finance and the connection point among digital asset platforms. Another example is in the wealth services market, which presents a highly attractive opportunity for expansion and long-term growth. In 2025, we strategically advanced our capabilities in the space through a partnership and minority investment in APEC's fintech solutions. This action enables us to capitalize on new opportunities and significantly strengthen our market position, and we are confident that this partnership will deliver positive results this year. This combination of distinctive capabilities and high service quality, coupled with targeted strategic expansions, enables us to meet our clients where they are going while maintaining price discipline. Within our investment management business, over the last several years, we have innovated at pace, with a focus on expanding product and distribution capabilities. These actions are now delivering strong results. State Street Investment Management ended 2025 with record quarterly and full-year management fee revenue. We were also delivering a consistent trend of solid asset growth, as 2025 marked its third consecutive year of net new asset growth above 3%. This consistent organic growth helped drive period-end AUM to an all-time high of $5.7 trillion, just two quarters after surpassing the $5 trillion mark for the first time. These results also reflect our ability to innovate in the strategic growth initiatives we executed in 2025. We launched a record 134 new products across our management business, expanding our capabilities and delivering greater value to clients. Within our ETF franchise, this included innovative alternatives offerings developed through partnerships with Apollo Global Management, Bridgewater Associates, and Blackstone. We also introduced 11 sector SPDR premium income ETFs and expanded our suite of actively managed target maturity ETFs, further strengthening our fixed income and retirement capabilities, both of which are core strategic priorities. Throughout 2025, our investment management business also cultivated a series of strategic partnerships that strengthen our investment distribution and technology capabilities and position us for future growth. Early in the year, we invested in Ethic, a technology leader that enables wealth advisers to build tailored client portfolios at scale. We also established a strategic relationship with Smallcase, India's largest model portfolios platform, and partnered with Van Lanschop, Kempen Investment Management to drive further growth in Europe. In addition, we made a strategic minority investment in Collard Capital, one of the world's largest dedicated private market secondaries managers. And after quarter-end, we also announced a strategic minority investment in Grow AMC, the asset management arm of one of India's most innovative and fast-growing digital investment platforms. Within our State Street markets franchise, we have focused on strategically expanding and deepening client relationships in recent years, which is delivering positive results. We generated double-digit full-year fee revenue growth across both FX trading services and securities finance in 2025, supported by higher client volumes. As a testament to the strength of our markets franchise and the value we deliver to clients, in 2025, we are proud to see State Street recognized with eight category wins in Euromoney's FX awards, doubling our achievements for 2024. Turning to our operational model, I am pleased to report that we achieved our full-year productivity savings target of $500 million in 2025, or 5.5% of our underlying cost base. Over the last five years, we have generated nearly $2 billion cumulatively in productivity and other savings, including significant recurring cost benefits. This achievement has enabled us to aggressively reinvest in our business, which in turn is driving revenue growth, positive operating leverage, and increasing returns to shareholders. We are intensely focused on capturing the additional opportunities ahead of us, with technology-led innovation and transformation among the most significant. Our next-gen transformation initiatives, underpinned by our growing AI-enabled capabilities and associated AgenTx, are building a stronger foundation and new platforms that aim to even further improve efficiency and empower smarter decisions. We are positioning State Street to set new industry standards and fundamentally transform the way we and our clients work. Turning to our solid financial position, our strong balance sheet enabled us to return over $2.1 billion in capital to shareholders in 2025 through common share repurchases and dividends. To conclude, 2025 marks several strategic and performance milestones for State Street, reinforcing the effectiveness of our strategy as we enter 2026 with clear momentum. Our continued improvement is supported by a range of tangible proof points, including stronger financial performance, expanded innovation and product capabilities across our franchise, and ongoing technology-led transformation of our operating model and client experience. We are focused on the growth opportunities ahead through effective execution of our strategic priorities and leading with client service excellence. I am optimistic about 2026 and confident in what we will achieve next as a firm. Advancing transformation to enhance how we operate and serve clients and further embedding digital and AI-enabled capabilities more deeply across the organization are the foundation of our one State Street approach to unlock the full value of our franchise by connecting capabilities for clients as demonstrated results and has even greater potential. Continuing to accelerate growth in private markets to strengthen our position as an industry-leading platform and operator, driving continued innovation in our investment management business, and executing against our growth opportunities in wealth services are enabling us to strengthen our core. Finally, we are advancing innovation in digital assets and digitizing capabilities in a space that is reshaping financial services. These are ambitious steps designed to position us and our shareholders for long-term success. With that, let me turn the call over to John, who will take you through our results in more detail. John Woods: Thank you, Ron, and good morning, everyone. Picking up on slide three, I will review our fourth quarter and full-year financial results, all on an ex-notable basis. Fourth quarter highlights include a year-over-year fee revenue growth of 8%, higher net interest income and net interest margin, continued capital return, and robust EPS growth of 14%. Our pretax margin in the quarter improved to approximately 31%. Return on tangible common equity increased to 22%, and we generated operating leverage of over 100 basis points. For the full year, we delivered record total revenue of approximately $14 billion, up more than 7% from the prior year. Record fee revenue of $11 billion increased 9% year over year, reflecting broad-based growth across investment services, investment management, and State Street markets. Expenses of $9.8 billion increased 5%, primarily driven by an increase in strategic initiatives to enhance client-facing capabilities, investments in the ongoing transformation of our technology platform, and higher operating costs net of productivity savings. We ended the year with record AUCA and AUM, driven by higher market levels and continued strength in flows across investment servicing and investment management. Our capital and liquidity positions remain strong, giving us flexibility to support clients and invest in future growth. Taken together, we generated operating leverage of nearly 220 basis points and a pretax margin of approximately 29%, up from 28% in 2024. These results supported EPS growth of 19% and an increase in return on tangible common equity from 19% in 2024 to 20% for the year, underscoring the strong momentum across our businesses and providing a solid foundation as we enter 2026. Finally, notable items totaled $206 million pretax in the fourth quarter, or $0.55 per share after tax, primarily reflecting repositioning charges associated with our ongoing productivity efforts, as well as an FDIC special assessment release included in other notable items. Turning now to results for the fourth quarter, starting on slide four, servicing fees increased 8% year over year, primarily reflecting higher average market levels, net new business, and the impact of currency translation. Record AUCA of $53.8 trillion increased 16% year over year, driven by higher period-end market levels and positive client flows. In 2025, we made meaningful strides in our investment services business with servicing fee revenue wins of approximately $330 million, surpassing $300 million for the third consecutive year while continuing to onboard new business at a healthy pace. As Ron mentioned, we are pleased with the strategic process we are driving across our investment services business and our focus on key growth areas, including private markets, wealth services, and digital assets, which is positioning us for continued momentum. I would emphasize the private markets business in particular, which continued to demonstrate strong growth of 12% in 2025 and now represents approximately 10% of servicing fees, up from 9% in 2024. Moving to slide five, the fourth quarter represented the culmination of a record year in investment management revenue, delivering a strong finish to 2025 and reinforcing the strength of our platform. Management fees increased 15% year over year to a new quarterly record of $662 million, driven by higher average market levels and quarterly net inflows of $85 billion, supported by strong performance across our ETFs, cash, and institutional segments. Assets under management increased 20% from the prior year to an all-time high of $5.7 trillion, reflecting higher period-end market levels and continued client inflows. As indicated, innovation remains a cornerstone of our investment management strategy and is driving business momentum. In the fourth quarter alone, we launched 37 new products, further expanding our suite of client solutions and positioning us for continued net new asset growth. Turning to slide six, State Street markets posted a strong fourth quarter, achieving solid year-over-year growth in both FX trading services and securities finance. FX trading revenue increased 13% year over year, supported by continued engagement with investment services clients. Despite a meaningful decline in currency volatility, our fourth quarter performance benefited from strong client franchise growth and healthy activity across all of our trading venues. Securities finance revenues increased 8% year over year, primarily driven by higher client lending balances. Moving to slide seven, software and processing fees declined 15% year over year in the fourth quarter, primarily driven by lower on-premises renewals. This is partially offset by a 7% increase in software-enabled revenues, reflecting strong client engagement with 11% year over year, about $420 million in the fourth quarter, and our front office revenue backlog increased approximately 16% year over year, reinforcing the differentiated value proposition offered to clients across both public and private markets. Turning now to slide eight, fourth quarter net interest income of $802 million was up 7% year over year, reflecting a three basis point expansion of net interest margin to 1.1% and an increase in average interest-earning assets. Year-over-year NIM expansion was driven by improvements in both our interest-earning asset and funding mix, partially offset by lower market rates. On the interest-earning asset side, continued securities portfolio repricing was complemented by the positive impact of runoff from terminated hedges on loan yields. Our funding mix benefited from a reduction in short-term wholesale funding associated with our balance sheet optimization efforts. Growth in interest-earning assets primarily reflected continued client-driven loan growth and higher investment securities balances, all supported by healthy deposit growth. On a sequential basis, NII increased 12%, driven by an improvement in NIM, partially offset by a decline in average interest-earning assets. Sequential NIM expansion reflected an improved interest-earning asset mix, driven by continued securities portfolio repricing and benefiting from the runoff from terminated hedges on loan yields. Our funding mix also improved quarter over quarter, reflecting lower short-term wholesale funding as well as an improved deposit mix, primarily due to seasonally higher noninterest-bearing deposits. Turning to slide nine, expenses increased approximately 6% year over year in the fourth quarter, excluding notable items. Expense growth was primarily driven by an increase in strategic initiatives and technology investments, along with higher operational costs net of productivity savings. Compensation-related costs increased 6% year over year, excluding notable items, reflecting higher salaries and incentive compensation as well as currency translation, partially offset by headcount reductions related to process improvements and the ongoing simplification of our operating model. We continue to deliver productivity improvements in the fourth quarter, achieving approximately $500 million in productivity and other savings for full-year 2025 and meeting the target established at the start of the year. These savings created capacity for incremental investments across key strategic growth priorities and for the investment in ongoing transformation activities. Moving now to slide 10, our capital position remains strong and well above regulatory minimums, providing flexibility to support client activity and advance our strategic priorities. At quarter-end, our standardized CET1 ratio was 11.7%, up approximately 40 basis points from the prior quarter, primarily reflecting a decline in risk-weighted assets, with the largest driver being market dynamics in our FX trading and agency lending businesses. We returned $635 million of capital to common shareholders during the fourth quarter, including $400 million in common share repurchases and $235 million in declared common stock dividends, resulting in a total payout ratio of over 90%. For the full year, we returned over $2.1 billion of capital to common shareholders for a total payout ratio of roughly 80%. Turning to slide 11, I'll cover our 2026 outlook, which is on an ex-notables basis. I'll start by outlining the key assumptions underlying our current full-year outlook, which assumes global equity markets to be flat point to point in 2026, equating to the daily average being up roughly 11% year over year. Our 2026 interest rate outlook assumes two cuts by the Fed, one cut by the Bank of England, and no cuts by the ECD, all of which broadly align with the forward curves. We currently expect fee revenue to be up 4% to 6%, driven by continued momentum in servicing and management fees, reflecting higher average market levels and organic growth, and supported by continued solid client engagement in our markets business. Regarding NII, based on our current assumptions, we expect NII to be up low single digits for the full year, off a record 2025 print, with an expected improvement in net interest margin relative to 2025. We currently expect expenses to be up approximately 3% to 4%, driven primarily by the investments in strategic growth initiatives and ongoing transformation activities, as productivity and other savings are expected to largely offset the growth in recurring operating costs in 2026. We are also targeting a level of productivity and other savings that is comparable to 2025. Importantly, we currently expect to deliver positive operating leverage in excess of 100 basis points in 2026, which suggests the continued improvement in full-year pretax margin to roughly 30% this year. We expect an effective tax rate of approximately 22% for the full year. Lastly, we expect our 2026 total payout will be roughly 80%, subject to board approval and other factors consistent with 2025. And with that, operator, we can now open the call for questions. Operator: At this time, we'll open the floor for questions. If you would like to ask a question, please press 5 on your telephone keypad. You may remove yourself at any time by pressing 5 again. Please note, you'll be allowed one question and one related follow-up question. Again, that's 5 to ask a question. I'll pause for just a moment. Our first question will come from Glenn Schorr with Evercore. Your line is open. Please go ahead. Glenn Schorr: Hello. Thanks very much. So I think I see, like, 220 basis points of core operating leverage in 2025, and you look at the 100 plus expected for '26. Just want to unpack a little bit. On the one hand, you see good markets and an improved NII, and you'd love it to be bigger operating leverage and bring more to the bottom line. On the other hand, we want you to invest for growth and future gain. So I wanted to just at the high level hear how you think about that, and you could even weave in, and I won't ask a follow-up because this is the second one. Weave in, why doesn't AI at some point supercharge that ability to deliver better operating leverage and even better in good times? Thanks so much. John Woods: Yeah. Sure. And thanks for the question, Glenn. Let me unpack that a little bit. And there's a fair bit of management discretion and judgment about how we want to invest that's really baked into that operating leverage outlook for '26 that you're seeing. But first, let me start off with the revenue picture. You know, I think when you look at the guide and the fee revenue, we indicated an assumption of a flat market outlook for '26. You know, I think the way we see that is the balance point there being a little above the midpoint if, in fact, you know, markets are flat. So first and foremost, I think you could see that if you isolate the impact of market levels, you could see our revenues coming in a little above the midpoint of the fee revenue range. I wanted to get that out first and foremost. Secondly, I think what we are doing is baking in significant productivity savings to both, you know, what we were able and recognizing in '25 as around $500 million, and that number is going to grow a bit as you get into 2026. What that's allowing us to do is, for the most part, largely offset our ongoing run-the-bank type costs to support our existing platforms. And much of the remaining growth that you see of that 3% to 4% in expenses is really being decked against those multiyear investments in strategic initiatives that we're very excited about. And so we think that's a good balance point to, on the one hand, continue to drive overall margins higher. So you saw our progression in '25 where we got to around 29% margin year over year for the year. Our guide in '26 implies continued progress where we're getting to full-year margins of around 30%. And we actually delivered that in '25. So we have a good jumping-off point as we go into '26. But then there's the judgment that we should be investing in the multiyear opportunities that we're seeing in the servicing businesses and in the management fee business. Whether that's in private markets, wealth, digital, and a number of the other investments that you're hearing about in investment management. And then separately, you know, we're going to be ramping our investments in our multiyear tech-led transformation. And to your point on AI, that has been contributing for us in the past. That's going to be a much bigger part of the story as you get into 2026 and years beyond. So, you know, it's really a judgment call on balancing, continuing to drive key metrics higher while investing in multiyear attractive initiatives across our businesses. Ron O'Hanley: Yeah. Glenn, it's Ron. I just wanted to underscore a couple of things that John said. First of all, the guide does imply markets flat to year-end 2025, and we did that deliberately. I mean, our own house view at State Street Investment Management is suggesting markets will grow for a variety of reasons. But we wanted to do this to make it easier for each of you. You've got your own market view in here. And I think you know how markets affect our business. We can remind you all of that if that helps. So that's number one. Number two, we are investing at a very high level. We invested at a high level in 2025, and we're investing at an even higher level in 2026. The $500 million in productivity, which largely addresses what I would broadly describe as BAU expenses, will help offset a lot of that. And the point of that is that this is the moment we believe we should be investing in capabilities of technology, etcetera. But as John noted, I mean, there's some discretion in that. And if the market and conditions were to turn out to be very different this year, we've got some ability to modulate that. And then on AI, we're well underway in this AI transformation. We do have some savings embedded in that. That will occur at an accelerating rate as we hit '26 and into '27. Glenn Schorr: Thanks for all that detail. Appreciate it. Operator: Our next question will come from Betsy Graseck with Morgan Stanley. Please go ahead. Your line is open. Betsy Graseck: Hi, good morning. Can you hear me okay? Ron O'Hanley: Morning. Betsy Graseck: Alright. I did have a question on the digital transformation here. But first off, what are clients actually looking to do with you in digital assets? Could you help us understand, is this just crypto, or is it beyond that? Ron O'Hanley: Actually, relatively little of it is in crypto if you mean by crypto kind of Bitcoin and other cryptocurrencies. Right? It really is about the digitalization of transactions. So a fair amount of it is around how do you digitize and transform things like cash, money market funds into tokens? Number one. Number two, working with a lot of the digital rail providers to help them. One, in some cases, they need a partner like us, whether it's for, you know, reserve cash or things like that. But more importantly, to be able to make the bridge between traditional finance and digital finance. And I may have used this analogy before here, so forgive me if I have. But where we are in this space is like mid-1800s railroads. There's a lot of rails being laid. Not all of them are the same gauge. Everybody wants to charge everybody else to crossover from one set of rails to the other. And it's the role of somebody like us to actually enable that movement between and amongst these different rails. But if you think about our business, in the asset management business, we've got a big money market business. So you'll be seeing from us tokenized money market funds, which have lots of benefits that we can talk about if you'd like. In the services business, we, as you know, are the largest servicer of asset managers, and they all want to do similar things plus. In terms of digitalizing collateral, tokenizing money market funds, etcetera. So it's being able to enable those institutions to make this transition from traditional finance into digital finance and to do it in a cost-effective way. Betsy Graseck: Sure. What's the benefit of tokenized money market funds? Ron O'Hanley: We collateralize them. I mean, that's the most important. I mean, there's lots of others. There's, you know, the speed of settlement, things like that. But, I mean, the most important would be that. Betsy Graseck: And clients are interested in this in part for, you know, the perceived increased efficiency of asset funds movement and new asset classes. Is that fair? Ron O'Hanley: Yeah. That's, yes, that's part of it. And the other part of it is, I think, you know, we all have a view as to how this is going to turn out, but nobody can predict it with accuracy. So, for example, to the extent to which stablecoins become some kind of regular way of settling securities transactions, you need these kinds of capabilities to enable those that kind of cash, if you will, that digital cash to be able to settle a traditional securities transaction. Betsy Graseck: And should we expect the financial impact of the digital asset work that you're doing and the services that you will be providing to appear on the P&L in the near term, medium term, long term? Is it replacing current activity or in addition to current activity? How should we think about the financial impact for you? Ron O'Hanley: Yeah. So that's hard to predict. I think in the short term, it's not necessarily replacing activity on the margin. I suppose it is. But we're in this space where we call traditional finance and digital finance are the ladders coming up, but the former dominates volumes and will continue to dominate volumes. So part of this is preparing for a future that I think it's reasonable to expect it will come. It's uncertain as to when and how quickly. Betsy Graseck: Yeah. Okay. Thank you. Just a follow-up to John? Put an emphasis on the last point. It's not really going to be visible in '26. It's more of a medium-term matter. But all of the investments we're making now will position us so that we are relevant and part of that growth story over the medium term. Betsy Graseck: Got it. Thank you very much. Operator: Our next question will come from Ken Usdin with Autonomous. Please go ahead. Ken Usdin: Thanks. Hi. Good morning. Hey, John. On the NII side, a really strong exit and, obviously, you know, kind of already run rating above what the kind of guide implies on a quarterly basis from here. So I'm just wondering, can you detail what things do you think might have kind of over-earned on the NII side in the fourth quarter? That might not continue going forward. Thanks. John Woods: Yeah. Sure. I mean, yeah, we're feeling good about some of the early progress here as we start to think about managing for a stable and consistent NII with growing net interest margin, which is what our objectives are. So I feel very good about the strong print in the fourth quarter. That said, there were some, I would call it, some seasonal factors with respect to deposit mix that tend to moderate a bit. And so I think the primary contributor to that was our net interest, our non-interest-bearing balances in on the deposit portfolio. We had a really nice growth in that portfolio in the fourth quarter. That probably comes off a little bit as you head into '26. And that's the reason for why you couldn't and run rate 4Q. That said, I mean, you know, nevertheless, we printed net interest of 110 basis points. We're printing 100 basis points for the year, and we're calling for net interest margin rising as you get into 26. And I'd say it's probably, you know, net interest margin probably comes in a little lower than the run rate from April, but it comes in higher than what you saw last year. So somewhere the balance point is somewhere in the middle of that, and I think that underpins an expectation of net interest margin growth, you know, on a multiyear basis, you go over the medium term. Ken Usdin: Okay. Got it. And just a follow-up on you mentioned and we saw in the third quarter Q that terminated swaps burden should lessen. Can you kind of give us the third to fourth delta on that? If you have it in dollars? And then how do you expect that to traject as you get into next year? John Woods: Yeah. In the fourth quarter, I'd say terminated hedges are going to be a continued tailwind. There's some lumpiness, though, quarter to quarter. But I'd say I'd put it in the range of a couple of basis points a quarter round numbers, you know, with some lumpiness. But overall, that's going to be something that contributes, you know, it contributed about two basis points in the fourth quarter, and it will continue to have a positive impact as you get into 2026. Ken Usdin: Okay. Got it. Thanks, John. Operator: Our next question will come from Jim Mitchell with Seaport Global Securities. Your line is now open. Please go ahead. Jim Mitchell: Okay. Great. Good morning. John, maybe just following up on Ken's question a little bit, maybe a broader question. It seems like if I think about your NI guide and your NIM in the NIM discussion, it seems like maybe the implied balance sheet is pretty flat. I know you're looking to do a lot of optimization with the balance sheet. Is that a fair assumption? And maybe just walk us through some of the opportunities to optimize and how you're thinking about the balance sheet growth in '26? John Woods: Yeah. I mean, I think that's fair. I mean, I think when you think about '26, you know, in that low single-digit guide, you know, growing that interest margin, I'd say, you know, without much growth, maybe even a touch below where we ended where we came out in '25. Is what is what's implied by '26. And I think the point of that is that, you know, we're looking to think about balance sheet optimization across all the components of the balance sheet. And some of the early things we saw were in the short-term wholesale funding book, where there's some higher-cost funding that weren't really driving a lot of value in the investment portfolio. And so you'll see early days, a running some of that off. And so that may show total interest-earning assets and total funding declining, but it's noncustomer facing. And it's dilutive to net interest margin and in some cases dilutive to NII. So you get a win-win there when you run off some of those more wholesale, you know, associated portfolios that aren't necessary for other risk management-related matters, and it wasn't. We have significant liquidity, and so we're feeling good about all of that. But that's an area that I think continues to contribute a bit into twenty-six. Other areas of optimization, we're looking at the loans portfolio, we're seeing some opportunity to pull back on some of the thinner relationship activities and really just there's we have so much opportunity in our client base to have a broad relationship from a custody perspective and supplement that with lending opportunities. And we're really reserving our capital and liquidity for very attractive deep relationship lending. So we're doing a little bit of rotation there. Same in the investment portfolio where there's an ongoing repricing that's happening from a securities portfolio standpoint that happens naturally. From time to time, we find opportunities to accelerate and see opportunities across currencies to add value in the investment portfolio. So all of those things are what we mean when we say balance sheet optimization. It's part of what you do over time, but we're doing a little bit of catch-up in terms of some opportunities we saw in late 2025. And then finally, just ensuring that capital is being allocated to its highest and best use and, you know, optimizing across risk-based and leverage metrics, you know, pulls it all together. In driving, you know, a nice and attractive increase in net interest margin in 2026. Jim Mitchell: Okay. That's all helpful. But how do you think about the mix and growth in deposits? What's your kind of base assumption embedded in there? John Woods: Yeah. I think it's I'd say deposits base assumption is around $150 billion. So basically stable overall for 2026. With around 10% of that in non-interest bearing. So maybe off a little bit from the fourth quarter, but that would imply around $25 billion for non-interest bearing for 2026. Jim Mitchell: Right. Okay. Thank you. Operator: Our next question will come from Alex Blostein with Goldman Sachs. Your line is now open. Alex Blostein: Hey. Hey, guys. Good morning, everybody. Just maybe building on some of the guidance dynamics. I kind of want to go back to the overall fee guide if you don't mind. I guess if you just look at the quarter, you're annualizing pretty close to what you're implying for P guided in 2026. I totally get the market dynamic right here assuming flat markets or no market tailwinds, so that'll make sense. But it just feels like there's no organic growth really baked in in your 2026 numbers unless there was something really, you know, additive, I guess, to the run rate in Q4, which doesn't feel like there was some just kind of hoping you could unpack what your expectations are for getting growth in the fee businesses. And if there are any offsets that we should be thinking about that kind of doesn't create a bigger uplift in the fee structure here, even excluding markets? John Woods: Yeah. I mean, I would say just right out of the gate, two things. One is that the, you know, sort of the balance point if markets are flat, are as I mentioned a little earlier on the call bring us a little above the midpoint of that four to six. That's the first thing to get out there. And then if and, you know, and Ron's mentioning sensitivities. You know, if markets are up 5%, that brings us to the upper end of that range. So just wanted to make sure that that was clear in terms of how the math works. Then the other point I would make is that for both the quarter and the full year, we generated organic growth in our businesses, in our two largest businesses, which drive a lot of this in servicing fees and in management fees. We had very attractive organic growth, something in the neighborhood of 2% for servicing fees at around three or 4%, I think, for management fees. And so that's very attractive. Lot of momentum heading into 2026. We do have organic growth built in to those businesses in 2026, and we expect to deliver that. I think other things you have to pull together and our other two revenue businesses that I haven't mentioned is in the markets business itself. We also have growth there, and that tends to ebb and flow a little bit with how currency and equity volatility plays out, but so you've got to think about that. And then lastly, our strategic transition in the software business from an on-prem approach to a SaaS approach, which can have some headwinds when you transition from that lumpier but all upfront model to one that's recurring and stable over time. But we think that that pays dividends by making that transition, and the underlying fundamentals are quite strong with high single-digit improvement in organic growth. The software business, notwithstanding that transition. So putting it all together, absolutely expect and plan to deliver on organic growth in 2026. Alex Blostein: Got it. That's helpful. And just one more on the balance sheet, just kind of building on the discussion around average earning assets and optimization there. So it sounds like the average earning assets could remain flattish to your point earlier. And I was hoping you could relate that to the buyback. So when I think about 2025, total payout, I think, was a little below your target. I think you guys were doing it something in the low seventies versus the 80. I know leverage, I think, has to be a little bit more binding for you guys for now. So with perhaps some more kind of range-bound balance sheet, should we expect a larger buyback or a larger payout for 2026? Or how do you guys think about John Woods: Couple points there. I mean, I think we were right around 80% for '25. Maybe just slightly below. That was due to a late, you know, in the quarter kind of windfall from the FDIC where we ended up with additional P&L in the denominator. But our actual buybacks from a dollar standpoint were pinpoint on what we expected to deliver for the year. So feeling good there, and that rolls over into '26. But we about this at the beginning of the year that around 80% is about right. You know, when you think about our capital priorities, we start off with protecting and growing dividend over time given our strong earnings growth. And I think we have a track record of growing earnings and having an attractive growth in the dividend over time. So that's first and foremost. The other areas are our organic opportunities in deploying RWA and we sort of reserve at the outset some capacity for growing the lending businesses with our custody clients, and we have opportunities to do that. It's our expectation that we would grow RWA and grow the loan book in '26 with deep customer relationships. We have end markets business that has supports investment services and investment management clients as well that actually has opportunities to deploy RWA, and there's an expectation of growth there that we're putting to work. And then supporting all of that, our investment opportunities and bolt-on M&A that helps us accelerate our strategy that we've demonstrated at the '25 whether with several very attractive acquisitions including Apex. And so we think that's the right balance to basically have a strong buyback at the end of the day because that's at the end of this. Once you've, you know, allocated the capital in that direction, still end up with a strong buyback, but investing for the long term with your clients. And then lastly, in terms of capital ratios themselves, although technically from a regulatory standpoint, we're leverage constrained. Just how we operate in terms of internal capital targets, etcetera. We tend to operate more on the CET1 as our lead metric that we optimize against. And so that 80% and all those capital priorities are I articulated are all expressed in the context of a CET1 ratio. Alex Blostein: Great. Thanks so much, John. Operator: Our next question will come from Brennan Hawken with BMO Capital Markets. Your line is now open. Brennan Hawken: Hi. Good morning. Thanks for taking my questions. I'd love to follow-up on the software and processing fees and the alpha. I know you flagged the on-prem and John that you just spoke to shifting from on-prem to SaaS. But, you know, it looked like even beyond on-prem, like, pretty much every line and stuff from processing were also down year over year aside from SaaS. So could you help us understand why the other lines were down and how long of a process is it going to be transitioning from on-prem to SaaS when you hit that tipping point or we can start to see the growth dynamics shift back into your favor and get the revenue more in line with some of the underlying metrics that continue to look like they're kind of constructive here on the slide. John Woods: Yeah, a couple of things. I mean, I think the biggest driver year over year is in fact, the SaaS line and that's up 7%. I think you'll have some minor variability in some of the other line items. One of them is professional services down slightly, down a little bit in terms of dollars, and we already referenced the on-prem. So the on-prem is I think the message really is on-prem is down. That's by far, the biggest driver of the decline year over year. And nevertheless, offset by SaaS. We also have on the page lending and other related fees, which will jump around a little bit, but these are single-digit million dollars, so not really anything strategically different going on there. And I think this transition will typically happen over the length of the contracts. So it'll take, you know, a year or two for those contracts to turn over and for us to migrate into an outlook that starts to see the not only the recurring revenue that's growing around 11% but the actual revenues that are booked in the P&L that are growing at high single-digit to converge. And that'll typically take a year or two for you to see that happening. Ron O'Hanley: Yep. Brennan, it's Ron. What I would add to that, you use the term, which is tipping point, and I would argue that we're at that tipping point. And part of how you know that is that there's fewer and fewer of these big on-prem renewals. You know, as attractive as they are, you know, you get all this revenue upfront. It's inconsistent with the business strategy. It's inconsistent with where the market's going. And we have encouraged our clients and incented our clients to actually move away from on-premise. It's better for them, right, because it saves these periodic gigantic kinds of software change-outs. It's better for us in that we make one change, and it gets spread across lots of clients. And it happens kind of in the cloud as opposed to us kind of going in with wrenches and screwdrivers and on-premises with them. So I would say we're at that point. And so you started to see it in 2025. You're seeing it in our guide in 2026 that we have few, if any, significant on-prem renewals in the guide. Brennan Hawken: Got it. Okay. Okay. Thanks for that. And then John, when we're talking about the NII guide, which, you know, I think surprised a few folks, particularly given the strength of the fourth quarter, but you spoke to the seasonal loan growth. It seems as though there might have been some puts and takes in maybe mix from your comments before. You maybe flesh that out a little bit and what should we be thinking about for loan growth? Because that's been a pretty solid part of the story here in recent years. You guys expecting that to slow overall, and then you're just going to see mix shifts within? Or is that going to continue to be pretty robust as we move forward? John Woods: Yeah. Good questions. I'd say all the above. I think we're going to end up with continued loan growth. That loan growth is slowing a bit, in the context of overall. But in terms of the opportunities across call it, subscription finance, fund finance, and CLOs, which are the big three that are the products that we tend to deliver into our client base. We're seeing very solid growth expectations across all three of those. And there's some thinner relationship stuff that's sitting in the commercial loan line that we're allowing to run off. And in some cases accelerating, you know, with some sales here and there. And that is, you know, being efficient with respect to capital and liquidity as we're servicing this underlying very strong growth. And just being rotating some of that capital for its highest and best use with deep customer relationships. So I'd say loan growth, you know, into '26 is still part of our story, maybe a little bit but below what you might have seen in '25. Brennan Hawken: Great. Thanks for taking my questions. Operator: Our next question comes from Gerard Cassidy with RBC. Your line is now open. Gerard Cassidy: Good morning, Ron. Good morning, John. Good morning. Can you guys share with us, when you go back to your guidance in January '25 with the fourth quarter 2024 numbers, you had fee revenue growth forecast for the 3% to 5% NII was flat plus or minus, you know, 1% maybe. And expenses up two to 3%. Clearly, your fee revenues this year were much better than guidance, and it's hard to forecast I'm not questioning the forecast. But what I'd be interested in when you look back at the forecast versus actual, was it due to just better markets or did you do better with your customers? You penetrated them more? Or you won more business than you thought? What led to that nice beat when you look back on the forecast? Ron O'Hanley: Let me start on that, Gerard, because if you remember, last year, there was, you know, a fair amount of economic concern, kind of concerns about the economy post the elections, some concerns about what was going to happen with tariffs, what would that mean for markets, etcetera. So in retrospect, it was a conservative guide. So, obviously, we had an unanticipated market tailwind. That helped us there, number one. Number two, we well, we had some significant execution built into our plan, we executed better than we even had planned. So you saw good onboardings. You saw we had some pretty important development partners in the alpha area. That we needed to get them onboarded. We got those onboarded. And then lastly, you had really significant growth in markets. And as we've talked about, we've invested heavily when there was no volatility in the market in the market areas to kind of expand our position with clients, and that really paid off. In 2025 because as more volatility came in, you saw what happened kind of post-April 1 in Liberation Day. We really benefited from all that, and that was nowhere near in our forecast. Which, you know, gets us really back to this year, and I'll turn it over to John in a second. But it's really why we wanted to focus, Gerard, on what's the kind of embedded organic growth capability in the firm instead of putting a market assumption in that may or may not be consistent with your own, we put no market assumption in. We're just saying markets at where they were at the 2025. To show here's what it is organically. And depending on what you believe on markets, there's some upside to that. Or if you believe that market gonna go down, there's some potential downside to it. Gerard Cassidy: Very good. And then as a follow-up, we're all anticipating the Basel III endgame proposal will hopefully be released in the first quarter or soon. Can you guys share with us, what are you looking forward to that would be a real benefit for State Street from that proposal? Ron O'Hanley: Yeah. Maybe the most important benefit will be that we stop talking about it. But yeah. I agree. But leaving that aside, you know, obviously, the GSIB proposal and what actually happens with capital as it relates to GSIB as a result of Basel III and everything else that the Fed is doing. We think that collectively will be favorable to the GSIB. We should benefit proportionally there. So will we benefit as much as some of the other balance sheet intensive business competitors? Probably not. But nonetheless, there's nothing but goodness that's going to come out of this. Secondly, and, you know, it's not a Basel III point, but the new regulatory new that's come upon with this administration and the changes that have been made across the Federal Reserve is the most important. And, again, I don't think it as being a huge rollback in regulation, but I think it's the application of regulation and supervision being much more risk-based and much more predictable, therefore. And that has just enormous benefits in terms of being able to, you know, one, it just takes some administrative burden off of all of us, but it gives some predictability in terms of how we operate. Gerard Cassidy: Thank you. Operator: Our next question will come from David Smith with Truist. Your line is now open. David Smith: Hey, good afternoon. Ron O'Hanley: Hi, David. David Smith: So you put up about 20% RoTCE. You know, it sounds like you're confident. That, you know, the ongoing business model transformation still has some legs there. You're pointing to some operating leverage for next year, albeit seemingly with some need for capital retention. I'm just wondering, you know, how much potential does State Street have to improve returns further, over the next couple of years based on, you know, where you see the company's organic growth potential and for continued efficiency improvements. Ron O'Hanley: So let me begin on that, David. It's Ron. And John can pick up. We see a lot of potential. Starting with the revenue lines, we have demonstrated that we can consistently grow these fee lines at an accelerating rate. There was a lot that needed to be done to make that happen. First and foremost, in the core servicing business, it was really getting at service quality. And all of our metrics indicate that that continues. We continue to be rated very highly there, and rated very highly relative to others in the marketplace. Secondly, we've invested in capabilities that are enabling us to do more with these clients and to offer them more services. And then third, and it's, you know, last but not least, we've invested heavily in the sales and relationship management force to deliver on this promise of being our clients' essential partners. So we're very confident in the revenue line across those three core businesses. On top of the core businesses, we've invested as you know, in some key areas. We've talked a lot about software, and that's in a nice spot. Secondly is in wealth services. That's still nascent. But we're already seeing some revenue pickup there. And between what we have at Charles River, in terms of Charles River wealth plus the investment that we've made in Apex, that gives us a highly modernized platform that's much more up to date than anybody else and really positions us for this ongoing shift away from kind of pure institutional asset management to the retail intermediary and direct to the client on a services basis. So we feel pretty strong about the revenue line. John's talked about we're primarily a fee-for-service provider. But the NII is important, and there's a, you know, the balance sheet optimization is underway there. John's talked about that. In terms of expenses, we continue to be very confident there. We delivered $500 million in productivity last year. We've got the same kind of number planned for this year. And we're reinvesting a lot of that back into what we call next-gen transformation. We've had transformation underway now for years. And I'm as optimistic about what's in front of us as I am proud of what we've accomplished. In terms of the promise of AI. Now everybody's talking about it. We have worked really hard on it. AgenTex are being deployed. And if you think about our business and how operationally intensive it is, it actually lends itself to this kind of stuff. Whether it's in areas like reconciliations, whether it's in areas of NAV production and what happens afterwards when the NAV is produced and has to be distributed out. So there's just immense opportunities here. The way we're going about it is let's get it right in two or three high-value areas and then repeat it in analogous areas. So we see this pattern we've established over the last couple of years as being able to continue. And we're looking forward to that. John Woods: Yeah. And just to add a couple of points there. And is really as Ron indicated, the fee businesses, I think where you put it all together, we have an opportunity to grow profitability over time and grow the platform over time. Where it comes from is solidifying the organic growth pivot that began a couple of years ago and we're demonstrating that in our largest revenue line items, solidifying and growing NII over time. Is an objective. And when you think about what Ron indicated with respect to how operationally intensive we are, basically converting all of that into a much more manual tech-led transformation is all has already is underway. And there's a huge opportunity in front of us to take those resources and from a flywheel standpoint, plowing that back into all the innovative opportunities we have on the strategic initiatives portfolio. To continue to be relevant with all of the megatrends that we're seeing, you know, that are impacting our business, whether it's digital, wealth, privates, and opportunities that we see in the United States, but also outside the United States. So those are the thoughts related to that. We have scaled positions. Pivoting to growth, and a really attractive risk-reward profile from that standpoint when you put it all together. David Smith: Putting it all together, does that mean that they should be able to do, like, a mid-twenties ROTC over the medium term, or do you think that's too ambitious? John Woods: Yeah. I mean, I think from a medium-term standpoint, I think, you know, we've made considerable progress, you know, migrating the business to where we are now, which is, you know, we're at pretax margin, you know, at 30%. In the 2025. And, you know, our guide implies that or even a little better for '26. I think the objective here is to solidify that. Create that consistency, you know, again, emphasize all that innovation and organic growth across our businesses that we've talked about. And I mean, I think a lot of the priorities you heard from us are multiyear in nature, but I'd say the natural evolution in our journey is that it would be valuable to illustrate what we think we can accomplish across a number of dimensions, both from a return standpoint, whether that's pretax margins or on tangible common equity as you indicated or growth. When it comes to EPS and revenues. So I think, you know, that's something that we're working on and putting these building blocks together and we should be able to share that over time maybe sometime later this year. David Smith: Alright. Well, certainly looking forward to that. Thank you. Operator: Our next question will come from Mike Mayo with Wells Fargo. Your line is now open. Mike Mayo: Hi. My short question is if you put State Street strategy on a cocktail napkin, what would it say that would impress investors? And my longer version of this question is my sense is that investors are very frustrated. Today, the stock is down 5% or 6%. This decade you've far underperformed the 500, despite having stock market benefits. And since the start of even last decade, you talked about investing in tech to progress. And as you know, when I attended the annual meeting way back then, you know, the board actually said it fell short. So I feel like under the short, medium, long term, it's not really playing out the way State Street had wanted to do. I think the implicit premise in what you're saying today is that you aren't exactly where you want to be. For the last two years, you've seen more momentum. You talked about growth. This security servicing. You talked about the pretax margin going from 28% to 29% maybe 30% this year. So let me accept the implicit premise that you have this new momentum in the last two years, then the issue, I think, comes down to confidence by investors in management and the strategy. I mean, here you have a fee-based capital markets company that's trading at one of its lowest valuations, especially versus peers. So that just takes me back to the cocktail napkin question. What can you say that will give investors greater confidence, not about this past quarter, the next quarter, or even this year, but that over the next five years, that this is a company that they should invest in and that they're missing something. Thank you. Ron O'Hanley: So, Mike, let me start on that. I think just listening to you carefully. I don't mean to rephrase your question, but I think you're asking why own State Street at this moment. And I give five reasons for it. First is there continues to be very attractive fundamentals in the space in which we operate. The shift from savings to investment continues worldwide. The shift from state-provided pensions to funded retirement systems continues everywhere, even in places that you'd least expect it. There's literally a pension revolution going on in the Middle East. That we are well-positioned to participate in. The democratization of investing is driving growth in vehicles like ETFs and it's increasing complexity for the players, these big private firms, that simply are not positioned to do this work themselves. As I mentioned earlier, the move to digital assets and digitalization is requiring new infrastructure. Plus connecting points between traditional and digital platforms. And we are well-positioned to participate in that. So that's number one. Number two, we've got distinctive capabilities in high-growth, high-PE areas. So we've got a leading position in the three core businesses. We're the leading provider in private. We have the alpha end-to-end platform, including an app scale commercial software player, the ETF space, we basically are the leading player in all aspects of it. Whether it's sponsoring ETFs or servicing ETFs. And ETFs now have truly become the vehicle of choice globally. We've got a very key position and a trusted position in this digital revolution. We're staking out this new distinctive position in wealth services, and it's distinctive because it's a modern platform and it's digital. And finally, we've got this proven and long-standing ability to partner, which is really important. Whether it's partnering with firms like a Blackstone or an Apollo. To bring them into a space that they want to be. Or to work with clients long-term and be their outsourcing partner. Number three, we've got what I believe and you more or less implied it there, we've got this clear pattern of effective execution and performance. Consistent fee growth over the last several years, services, asset management, and markets. We cut balance sheet optimization well underway. As John talked about in NII and NIM. We've got consistent productivity improvement. $500 million last year, $500 million this year. $2 billion over the last five years with more to come. And then as you note, two years of fee growth, positive operating leverage, expanding margin. And our guide reflects a commitment to more of that in 2026. Fourth, I would point to the team. It's a mix of State Street veterans plus truly superb talent from the outside that I would argue. Now makes up the best team in our space. More most importantly, it's backed up by a very deep bench. And it's a team that's determined to win and incented to do so. And then lastly, your negative is my positive. We're an attractive capital-light income statement. We're growing better than our peers. In the attractive PE revenue areas like servicing fees, like management fees, like software, and that should drive multiple expansion. So whether or not that fits on a cocktail napkin, that's how I would articulate it. Mike Mayo: Well, maybe that fits on five cocktail napkins. But just as a follow-up. So let me just accept everything you just said. Just to let and you know, the market's not convinced. Right? I think that market knows a lot of this, and you remind the market a lot about that. But, you know, under what scenario would you consider a combination with another bank? Under what scenario would you consider selling off asset management? Under what scenario would you consider buying another bank? Under what scenario would you consider a more significant strategic move, especially given this environment of deregulation? And I hear you don't need it. You have you're confident with the internal growth. But this seems like the time to think about those big types of questions. Where do you come at on that? Thank you. Ron O'Hanley: Mike, I mean, we always think about M&A as we think about capital deployment and even more importantly, strategically, we are and where do we want to go. I mean, I do we do remain confident in our abilities, and I think that showing this ability to deploy those capabilities and generate accelerating returns. Now there's always the question around scale. And how we think about that. I mean, that's really what motivated what we tried to do with BBH. You know, it was unfortunate that that was in a different environment. And so without implying that there's anything underway, explicitly or implicitly, I'm not saying that. And we are confident in our organic strategy. But to the extent to which something made sense and it was a good use of shareholder capital as opposed to returning it capital or reinvesting in our business, of course, we'd look at that. John Woods: And just as my short follow-up, when I go ahead. Wait. Go ahead, John. John Woods: Mike. It's just a one point on that. I mean, I think I think agree with all, of course, everything that Ron was just saying. I mean, I think when I think about the scale position, and the growth pivot and how well-positioned we are to win with the megatrends that Ron articulated, whether it's digital, privates, wealth. You put that together with the transformation and other opportunities that are all in front of us, that we'll put a frame around, you know, maybe sometime later this year. All that upside, you know, we think, you know, should accrue to the benefit of the existing shareholder base. And when there's, you know, a large transaction, you know, you have to think about whether you want to share what's right in front of us organically with any other shareholder base. And I think this shareholder base, you know, that's hung in with us deserves to basically see that upside, and I think we see that coming. So that's certainly something that I think about when you asked your question. And, you know, there's a lot of excitement here. Around what we can deliver organically, and let's basically convince the investor base that we can be consistent. In solidifying our gains and growing down the line. And I think the stock will take care of itself under that scenario. Mike Mayo: And just so I didn't mischaracterize it. Maybe I'm talking to the wrong investors. But investors I talked to seem to be frustrated. When you get that sense of frustration, you're trying to, you know, show them they're wrong? Or you sense that investors are pleased with the progress? John Woods: I think we have a lot of support. For the vision that we're painting, which is yes, you've made you've made a pivot to growth over the last two or three years. Let's see that solidified and let's see that accelerate. And I think we have a lot of support for that vision. And we've demonstrated and we've allowed that to we've shown an ability to drop that to the bottom line. With improving margin and returns. And I think you've got to basically have that track record continue to be the case over time, and that's our expectation. So I think we are hearing support from that standpoint. Mike Mayo: Alright. Well, take close attention. Thank you. Operator: This concludes the question and answer session. I'll now turn the call back over to Elizabeth Lynn for closing remarks. Elizabeth Lynn: Thank you all for joining us today, and please feel free to reach out to investor relations for any additional questions. Thank you, and have a good day.
Operator: Thank you for your continued patience. The meeting will begin shortly. If you need assistance at any time, please press 0, and a member of our team will be happy to help you. Rajeev Ranjan: Please stand by. Your meeting is about to begin. Morning, everyone. Welcome to today's M&T Bank Corporation Fourth Quarter and Full Year 2025 Earnings Conference Call. All lines have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question, you may remove yourself from the queue by pressing star 2. When posing your question, we ask that you please pick up your handset to allow for optimal sound quality. Lastly, if you should require operator assistance today, please press star 0. And please be advised that today's conference is being recorded. I would now like to hand the conference over to Rajeev Ranjan, Head of Investor Relations and Corporate Development. Please go ahead, sir. Rajeev Ranjan: Thank you, Bo, and good morning. I would like to thank everyone for participating in M&T Bank Corporation's fourth quarter 2025 earnings conference call. If you have not read the earnings release we issued this morning, you may access it along with the financial tables and schedules by going to our investor relations website at ir.ngb.com. Also, before we start, I would like to mention that today's presentation may contain forward-looking information. Cautionary statements about this information are included in today's earnings release materials, and in the investor presentation as well as our SEC filings and other investor materials. The presentation also includes non-GAAP financial measures, as identified in the earnings release and investor presentation. The appropriate reconciliations to GAAP are included in the appendix. Joining me on the call this morning is M&T Bank Corporation's Senior Executive Vice President and CFO, Daryl Bible. Now I would like to turn the call over to Daryl. Daryl Bible: Thank you, Rajeev, and good morning, everyone. I'm excited to share our full year 2025 results. M&T Bank Corporation has continued to deepen our presence in key markets, expand access in new communities, and build innovative offerings that empower our customers and businesses alike. In the last quarter alone, we delivered on our commitment to expand access to banking in Bridgeport, Connecticut's East End, opening our new full-service Honey Locust branch, the community's first new bank branch in decades. We partnered with the Baltimore Ravens and wide receiver Zay Flowers to launch our Financial Fitness Academy, giving young people dynamic real-world tools to build financial confidence. We also launched our new Banking Made for Business suite of business banking solutions tailored to support small and mid-sized businesses throughout the growth of their life cycle. These efforts reflect our long-term commitment to creating economic opportunities and our purpose to make a difference in people's lives. Turning to slide four, we continue to garner recognition for our businesses and our people, including those who lead the engagement with you, our investors and analysts. Now let's turn to slides six and seven. Before getting into the details of the fourth quarter, I want to pause and reflect on some of the highlights for 2025. The progress we made against our 2025 priorities and related enterprise initiatives will allow us to grow and scale in the coming years. I look forward to executing against our updated priorities in 2026. Our focus on the fundamentals drove our continued success in 2025. In 2025, M&T Bank Corporation realized consistent and continued growth while also remaining disciplined and return-focused. We earned record net income of $2.85 billion and record EPS of $17 while also maintaining our top quartile return on tangible assets of over 1.4%. We increased our quarterly dividend by 11%, repurchased 9% of our outstanding shares, and grew tangible book value per share by 7%. We made great progress on improving our asset quality with nonaccruals decreasing 26% and the nonaccrual percentage of total loans reaching 90 basis points, the lowest since 2007. We also reduced criticized commercial loans by 27% over the course of the year. We grew fee income by 13%, reaching a record of $2.7 billion, and increased our fee mix as a percentage of revenue from 26% to over 28%. Expenses remain well controlled. The efficiency ratio improved from 56.9% to 56% while making significant enterprise investments that will allow M&T Bank Corporation to thrive in the years to come. Turn to slide eight, which shows the results for the fourth quarter. Diluted GAAP earnings per share were $4.67, down from $4.80 in the prior quarter. Net income was $759 million compared to $792 million in the linked quarter. M&T Bank Corporation's fourth quarter results produced an ROA and ROCE of 1.41% and 10.87%, respectively. The fourth quarter included two notable expense items: a $29 million reduction in FDIC expense related to the lower estimated special assessment, adding $0.14 to EPS, and a $30 million charitable contribution which reduced EPS by $0.15. Slide nine includes supplemental reporting of M&T Bank Corporation's results on a net operating or tangible basis. M&T Bank Corporation's net operating income was $767 million compared to $798 million in the linked quarter. Diluted net operating earnings per share were $4.72, down from $4.87 in the prior quarter. Net operating income yielded an ROTA and an ROTCE of 1.49% and 16.24% for the recent quarter. Next, we'll look a little deeper into the underlying trends that generated our fourth quarter results. Please turn to slide 10. Taxable equivalent net interest income was $1.79 billion, an increase of $17 million or 1% from the linked quarter. Our net interest margin was 3.69%, an increase of one basis point from the prior quarter. This improvement was driven by a positive four basis points from higher asset liability spread driven by continued fixed asset repricing and favorable funding mix, positive three basis points from a reduction and negative impact of our interest rate swaps, partially offset by negative six basis points from the lower contribution of net free funds. Turning to slide 12, to talk about average loans. Average loans and leases increased $1.1 billion to $137.6 billion. Higher commercial residential mortgage and consumer loans were partially offset by a nominal decline in CRE balances. Commercial loans increased $500 million to $62.2 billion, aided by growth in dealer commercial services, and, to a lesser extent, reblending business banking, and fund banking. CRE loans declined 1% to $24.1 billion, reflecting a slowing pace of decline in the portfolio with continued payoffs and paydowns and higher originations. Residential mortgage loans increased 2% to $24.8 billion. Consumer loans grew 1% to $26.5 billion, reflecting growth in recreational finance and HELOC. Loan yields decreased 14 basis points to 6%, reflecting lower rates on variable rate loans, partially offset by continued fixed rate loan repricing including the reduction of the negative impact on our interest rate swaps. Turning to slide 13, our liquidity remains strong. At the end of the fourth quarter, investment securities and cash held at the Fed totaled $53.7 billion, representing 25% of total assets. Average investment securities increased slightly to $36.7 billion. In the fourth quarter, we purchased a total of $900 million in debt securities with an average yield of 4.9%. The yield on the investment securities increased four basis points to 4.17%, reflecting continued fixed rate securities repricing benefit. The duration of the investment portfolio at the end of the quarter was 3.4 years, and the unrealized pretax gain on available-for-sale portfolio was $208 million or a 10 basis point CET1 benefit if included in regulatory. While not subject to the LCR requirements, M&T Bank Corporation estimates that its LCR on December 31 was 109%, exceeding the regulatory minimum standards that would be applicable if we were a category three institution. Turning to slide 14. Average total loans rose $2.4 billion to $165.1 billion. Non-interest bearing deposits increased $100 million to $44.2 billion. Interest-bearing deposits increased $2.2 billion to $120.9 billion, driven by growth in commercial and business banking, partially offset by smaller declines in consumer corporate trust deposits. Interest-bearing deposit costs decreased 19 basis points to 2.17%, aided by lower time retail time deposit costs and lower interest checking and savings costs across our business lines. Continuing on slide 15, non-interest income was $696 million compared to $752 million in the linked quarter. Mortgage banking revenues were $155 million, up from $147 million in the third quarter. Residential mortgage banking revenues decreased $3 million to $105 million. Commercial mortgage banking increased $11 million to $50 million, driven by higher gains on the sale of commercial mortgage loans. Trust income increased $3 million to $184 million from higher institutional services fee income. Other revenues from operations decreased $67 million to $163 million, primarily from prior quarter items including the $28 million distribution of an earn-out payment, a $20 million day view distribution, and a $12 million gain on the sale of equipment leases. Turning to slide 16. Non-interest expenses for the quarter were $1.38 billion, an increase of $16 million from the prior quarter. Salary and benefits decreased $24 million to $809 million from lower severance and other benefit-related expenses. Professional services increased $24 million to $105 million, reflecting higher legal and review costs. FDIC expense decreased $21 million, mostly related to the reduction in the estimated special assessment expense. Other costs of operations increased $15 million to $151 million from the $30 million contribution to the M&T Charitable Foundation, partially offset by the settlement gain from the pension annuity purchase and the prior quarter impairment of renewable energy tax credit investment. The efficiency ratio was 55.1% compared to 53.6% in the linked quarter. Next, let's turn to slide 17 for credit. Net charge-offs for the quarter totaled $185 million or 54 basis points, increasing from 42 basis points in the linked quarter. Net charge-offs reflect resolution of three previously identified credits totaling over $100 million. Non-accrual loans decreased 17% to $1.3 billion. The non-accrual ratio decreased 20 basis points to 90 basis points, driven largely by payoffs and charge-offs of the commercial NCRE non-accrual loans. In the fourth quarter, we reported a provision for credit losses of $125 million compared to net charge-offs of $185 million. The allowance for loan losses as a percent of total loans decreased five basis points to 1.53%, from improved asset quality and macroeconomic factors. Slide 18 has a summary of our NDFI portfolio. The NDFI portfolio increased $1.3 billion from the third quarter to $12.6 billion. The increase was driven by both net new loan growth and a recategorization of certain C&I loans as NDFI. Please turn to slide 19. The level of criticized loans was $7.3 billion compared to $7.8 billion at the September. The improvement from the linked quarter was largely driven by a $429 million decline in CRE criticized balances. The CRE decline was broad-based with lower criticized levels across nearly all property types. Given the consistent improvement in criticized, we will likely exclude the detailed criticized information on slides 20 and 21 in future earnings presentations. But the detail will continue to be available in our 10-K and 10-Q reporting. Turning to slide 22 for capital. M&T Bank Corporation's CET1 ratio was an estimate of 10.84%, a decline of 15 basis points from the third quarter. The lower CET1 ratio reflects a $507 million in share repurchases and an increase in risk-weighted assets, largely from higher end-of-period commercial loans, partially offset by continued strong capital generation. The AOCI impact on the CET1 ratio from AFS securities and pension-related components combined would be approximately a positive 13 basis points included in regulatory capital. On slide 23, we have our employee directions for 2026, which is shaped by two priorities, drawn from the work across the company. The first is what we call operational excellence. We are building an enterprise that can operate at scale with greater consistency, efficiency, and transparency. Our focus is on creating intelligent, simplified operations that make it easier for customers to do business with us and easier for our teams to deliver. This includes strengthening our shared standards, streamlining processes, equipping colleagues with better tools, and maturing capabilities such as automation and enterprise-wide control processes. These steps help reduce risk, improve performance, and free our people to focus on the work that matters most. The second priority is teaming for growth. We are leaning into a more unified enterprise-wide approach to growth, bringing together markets, business lines, and capabilities so clients experience us as one bank. When we integrate the strengths across regions, and when we match local insight with the scale of M&T Bank Corporation and Wilmington Trust, we unlock opportunities we cannot reach in silos. This focus is about deepening relationships, more coordinated planning, and a shared approach to serving clients across the spectrum, from retail to commercial to wealth. Together, these priorities help deliver consistent value, position the bank for long-term performance, and strengthen how we serve the communities that rely on us. Now turning to slide 24 for the outlook. First, we begin with the economic backdrop. The economy continues to hold up well despite the ongoing concerns and uncertainty regarding tariffs and other policies. Private data sources reported decent spending growth in the holiday season, and roughly a 4% through price increases have driven some of that growth. The economy bounced back in the third quarter with the strongest expansion in two years, but we are cautious of possible revisions and a slowdown once the fourth quarter data is collected. Businesses continue engaging in CapEx and equipment while spending on new buildings remains in decline. Although overall economic activity was resilient, we remain attuned to the risk of a slowdown in coming quarters due to a weakening labor market. We remain well-positioned for a dynamic economic environment. Now turning to the outlook. Starting with net interest income. We expect taxable equivalent net interest income to be $7.2735 billion as net interest margin in the low 370s. Our outlook includes 50 basis points of rate cuts in 2026. Though our sensitivity to the short end of the curve remains relatively neutral. That said, shifts in the shape of the curve could drive variability in the NII outlook. We expect full-year average loans to be $140 billion to $142 billion, reflected in the priority discussed earlier. We have renewed focus on growing relationship customers in our community bank regions across all business lines. This outlook includes point-to-point growth in each of the four main loan portfolios, though we expect the full-year CRE balances to be lower than the 2025 full-year average. The full-year average deposits are expected to be $165 billion to $167 billion. We remain focused on growing customer deposits at a reasonable cost and expect broad-based growth across each of the business lines. Turning to fee income. We expect non-interest income to be $2.675 billion to $2.775 billion. We expect growth to be broad-based across our fee income categories and business lines. Continuing with expenses, we expect total non-interest expense including intangible amortization to be $5.5 billion to $5.6 billion. Our expense outlook includes continued investment in enterprise initiatives while also closely managing non-investment spend. This outlook includes our usual first-quarter seasonal salary and benefit increase, which is estimated to be $110 million. We also included in the outlook approximately $31 million in intangible amortization. As of January 1, we elected to carry our own residential MSRs at fair value rather than the prior treatment of lower of cost or market. We have also begun hedging the changes in fair value of those MSRs. Along with this election, MSR amortization is no longer to be recognized as an expense and instead the impact of the MSR time decay and related hedging will be net with mortgage banking revenues. These changes are included in the fee and expense guidance ranges but have minimal impact on net income or PPNR. The MSR fair value election also adds $197 million in regulatory capital or an eight basis point benefit to the CET1 ratio. Regarding credit, we expect charge-offs for the full year again to be near 40 basis points. We expect the taxable equivalent tax rate to be 24% to 25% in the 24.5% range. As it relates to capital, we expect to operate with a CET1 ratio of 10.25% to 10.5% in 2026. We always run a bank to generate the best returns for our shareholders, offer appropriate capital levels, and return excess capital to shareholders. Given the current capital levels and continued strong capital generation, we have significant flexibility to continue to support lending, pursue opportunistic inorganic growth, and return excess capital to shareholders. Or be opportunistic with share repurchases. We're also monitoring the economic backdrop and asset quality trends. To conclude, on slide 25, our results underscore our optimistic investment thesis. M&T Bank Corporation has always been a purpose-driven organization with a successful business model that benefits all stakeholders, including shareholders. We have a long track record of credit outperforming through all economic cycles while growing within the markets we serve. We remain focused on our shareholder returns and consistent dividend growth. And finally, we are a disciplined acquirer and prudent steward of shareholder capital. Last, I would like to thank Brian Clark for his leadership in M&T Bank Corporation's investor relations since he rejoined the bank in 2021. I look forward to his continued impact as he leads the bank strategy function. I'd also like to welcome Rajeev Ranjan, a twenty-year-plus M&T finance veteran, who will be leading M&T Bank Corporation's investor relations along with several other finance functions. As we close, I want to thank my M&T colleagues for serving our customers and communities. It was because of all of you that M&T Bank Corporation continues to be the top-performing community bank. Now with that, let's open up the call to questions before which Bo will briefly review the instructions. Operator: Certainly, Mr. Bible. Thank you very much. Ladies and gentlemen, at this time, if you do have any questions, again, please press 1. If you find your question has been addressed, you may remove yourself from the queue by pressing 2. Additionally, we do ask that you please limit yourself to one question and one follow-up. We'll go first to Gerard Cassidy of RBC Capital. Gerard Cassidy: Hi, Daryl. Daryl Bible: Hey, Gerard. Gerard Cassidy: Circling back to the capital ratios, obviously, we're going to get the Basel III endgame proposal, hopefully, sometime in the first quarter, as well as, you know, another stress test. Assuming those are favorable to you and your peers, and bring down your required regulatory capital CET1 ratio. How do you then approach where you are today with the CET1 around 10.25% to 10.5%? Is that something you guys would look to maybe bring down if your required number fell with what's coming with those two, the stress test and Basel III endgame? Daryl Bible: Yeah. Thanks for the question, Gerard. I would just tell you that, you know, we are always looking at, you know, what position we have on our balance sheet and what's going on in the economy. You know? And we feel good about bringing it down to 10.25% right now, and potentially, we could go lower. I don't view the regulatory capital limits of where they are now as a binding constraint right now. We can go a lot lower with where we are today, and we may actually improve that. But, you know, I think it really depends on what other things are going on in the marketplace. But could we go below 10% at some point? Possibly. And we will evaluate it and consider that with everything else we do as we move forward. Gerard Cassidy: And you mentioned binding constraint. What would you point to as your binding constraint if you don't look at it as the CET1 ratio? Daryl Bible: We have other constituencies out there that have other limitations, including rating agencies and, you know, working with the rating agencies and getting them comfortable with how we're performing. I mean, when I look at our asset quality now, it's probably been the best it's been in the last couple of decades. So we are in really strong condition. Our capital generation is probably the best we've been. So we're really strong there. So we have a lot of positives going forward. You know, I love the page when I started out with the statistics. We grew dividends 11%. You know, we retired 9% of shareholders. We grew tangible book 7%. We had record income, net income, EPS, our ROTA is over 1.4. And our efficiency ratio went down from 56.9 to 56. I mean, we are performing at a very high level. And the risk that we're taking on our balance sheet is the right risk for us, and we feel really good with it, and we're getting great returns on that. Gerard Cassidy: Great. And then just as a follow-up question, regarding the loan growth, you gave us some clarity on where you are today. And where you hope to be moving forward. On the commercial real estate side, I think you pointed out that you think it will start to inflect in '26. Are there regions of the franchise or property types you're anticipating will be the driver behind this inflection? Daryl Bible: Yeah. I would say when you look at our teams and the CRA team run by Tim Gallagher and all the credit folks in Rich Berry's area. They've been working all 2025 to get us back on track. And if you look at the fourth quarter, our production levels are the strongest they've been for a very long time. December, we closed over $900 million loans in CRE. So we are performing on all cylinders. If you look at our three sectors, we have a large regional CRE portfolio. That is hitting all cylinders. We have a strong M&T RCC business that is also hitting record returns and record outstandings. We have an institutional CRE that is also performing very well. So our CRE businesses are really strong and productive, and we will have growth, you know, as we said, starting in the second quarter on an average to average basis. So we're going to have four of our loan portfolios. All of our four loan portfolios should have point-to-point loan growth for us in 2026, which would be really, really strong and gives us a lot of confidence with our earnings power. Gerard Cassidy: Great. And Brian, good luck in the enhanced role. Thank you, Daryl. Daryl Bible: Thanks, Gerard. Operator: Thank you. We'll go next now to Scott Siefers with Piper Sandler. Scott Siefers: Good morning, guys. Thanks for taking the question. Daryl, actually, just hoping you can expand upon just what you said about some of those non-CRE drivers. As we look at CRE having come down the last couple of years, you've had pretty good momentum in some of those other main categories. Where do you see the best demand and sort of your willingness to lend in those kind of non-CRE categories as we look out into the course of the year? Daryl Bible: So, Scott, when you look at where we've had growth for the last couple of years, it's been in our C&I but mainly in our specialty businesses, fund banking, mortgage warehouse, and other portfolios like corporate institutional. And that will continue to grow and do really nicely. But when we talked about our new priorities that we have for 2026, one of them is called teaming for growth. Teaming for growth simply is basically bringing the whole bank together in the regions that we operate in. We operate in 27 regions where we have regional presidents. Regional presidents have the local knowledge to how we go to market in those markets. We're trying to combine the regional presence local knowledge with the scale and how we deliver our products and services of a larger company together. And we're really focused on growing our regional regions this year. And then do that. We are planning to grow in that area and think we'll be very successful there. Scott Siefers: Perfect. Okay. Thank you. And then, you know, you all have been just, you know, quite transparent about sort of M&A aspirations. Just curious to hear any updated thoughts you might have about how you're thinking about the landscape this year. Daryl Bible: You know, M&A will come our way when it happens, Scott. You know, we aren't aware of anybody and, you know, we want scale and dense in the markets we serve. We serve we're in 12 states plus the District of Columbia. That's where we want to continue to get more density. We are not aware if anybody wants to sell in those markets. We will continue to reach out and have good relationships with them. Renee knows all the appropriate people and all that. And we'll happen when it happens. We aren't gonna force anything from that perspective. And you know, it will happen at some point down the road. But right now, we have a lot of capital. We want to deploy that capital to our markets, to our customers, first and foremost, continue to pay a great strong dividend, and we're going to buy back a ton of stock. Scott Siefers: Perfect. Okay. Great. Thank you very much. And, yeah, Brian, good luck in the new role as well. Operator: Thank you. We'll go next now to Matt O'Connor with Deutsche Bank. Matt O'Connor: Good morning. I was hoping you could elaborate on the deposit environment. Obviously, you've been kind of running off in CDs and growing other deposits. But maybe some color in terms of net checking account growth, what you're seeing from a competitive landscape and, you know, any changes in the brand strategy as you think about driving organic growth? Thanks. Daryl Bible: Yeah. Definitions are really key. One of my famous sayings that I have, Matt, is that we want to have both oars in the water. So, you know, as we grow loans, we also want to grow our customer deposit base. We've done a good job the last couple of years growing that and retiring a lot of non-core funding in the wholesale book. I think we will continue to do that. As far as, you know, competitive-wise, you know, all of our businesses have their plans to grow customer deposits. And we're really focused on doing that so we complete and really manage both sides of the balance sheet very well. As far as competition goes, I would say the competition is the same as it's been for the last couple of years. Not any worse or any easier. What it is, it's competitive. We have different pricing strategies depending on the scale and density market share that we have in those markets, and it seems to be successful. Our teams are really good at going to market. But first and foremost, you know, we really focus on getting the operating account, the checking account, you know, whether you're in the consumer bank, business banking, commercial, wealth, that is really critical to us. And from that, other revenues and products and services come off of that. And we've always done that, and we will continue to do that. Really focused on growing net new checking accounts, which is really important. Matt O'Connor: Okay. That's helpful. And then just separately, I know it's not a big category for you, but the trading revenues have stepped up each of the last two quarters to $18 to $19 million. Remind me, like, has there been a change in kind of the efforts there or any small deal that would reset this level higher versus just kind of quarter-to-quarter volatility? Daryl Bible: Yeah. No. I appreciate you breaking that out. I mean, that specifically is our customer swap book. You know, but what you see there is really just a precursor of something that's greater overall. We have Hugh Giorgio who runs our 2026. We will actually once we get through our general ledger conversion, shortly, we're gonna break out actually show our capital markets and investment banking so you can see it together. It's growing really nicely. And our teams are executing really well. And I think it's been a really strong business, and we'll continue to grow well for our fee income categories. Matt O'Connor: Okay. Thank you very much. Operator: Thank you. We go next now to Manan Gosalia at Morgan Stanley. Manan Gosalia: Hey. Good morning, Daryl. Daryl Bible: Morning. Manan Gosalia: When I look at the guide for 2026 for both fees and expenses relative to what you did in 2025 and even the 4Q run rate, it feels like, you know, both growth rates are significantly slower. I know you called out the impact of the MSR. Oh, well, you called out the MSR fair value and hedge will impact those two lines. Is that a big driver for both lines? And what is the core growth rate that you expect for both fees and expenses next year? Daryl Bible: Yeah. I know. Thank you for the question. I would say that the accounting change is part of it. It's $75 million that would normally be in amortization expense is gonna be now netted against revenues. So that's basically just a shrink of both expenses and revenues by adopting this mark-to-market accounting on the residential MSR. When you look at kind of our projections for fee income and you kind of back out notable items, we should be about 4% in fee growth. That's kind of what we're looking at there. And it's pretty broad-based when you look at the fee growth. You know, we're growing our treasury management. That was up double-digit year over year. We expect to be close to that again in '26. We're growing trust revenues. We're growing in the mortgage area. Potentially, our commercial mortgages are off to a good start. So they're doing really well. Residential mortgages, if rates come down on the long run, we'll be able to do well there. Could have potential more subservicing growth there. Then what I just talked about in our capital markets investment banking. So we have momentum on the fee side and feel good about hitting the full. We have. If you look at put it all together, we are generating positive operating leverage in '26, you know, probably 150 basis points plus or minus. So we feel good about that like we did this past year. Manan Gosalia: Got it. And then in the deck, you spoke about operational excellence and teaming for growth and how the outcome of that should drive better revenues and profitability. You know, when you think about the environment, loan growth is improving. Fee income is growing, capital is normalizing. How do you think about the trajectory for ROTCE over the next twelve to eighteen months and, you know, what's a good end goal for Roxy as we look out, you know, in the medium term? Daryl Bible: Yeah. Thank you for the question. So we had a really strong finish in 2025 with our returns approaching 16%. We think that will kind of continue in 2026. Be in the 16% range. And our goal is to get it to 17% by 2027. So I think we're on a great trajectory, and I think we can get there. Manan Gosalia: Got it. Thanks so much. And, Brian, we will miss you all the very best. And, Rajeev, looking forward to working with you. Operator: Thank you. We go next now to John Pancari of Evercore. John Pancari: Thanks, Rajeev. Welcome. I look forward to working with you and Brian. Best of luck in your role. It's gonna feel kinda weird now seeing you bouncing around at the conferences and cracking some jokes. I guess, on the loan growth front, Daryl, I wanted to see I know Scott asked you a question just a little bit around the other areas. Could you elaborate a little bit more on what you're seeing in underlying commercial C&I growth more specifically? Are you seeing you mentioned CapEx in your prepared remarks. Are you seeing some drawdowns tied to CapEx? Are you seeing line utilization tied to that? You could just give us a little bit more color on what's actually beginning to take shape and influencing your growth expectations? Daryl Bible: In the fourth quarter, our middle market commercial actually had an increase in utilization. So that was a positive. So I think that was something really good to see that dormant for a while from that perspective. I think net net overall, we're seeing good growth. It's competitive, obviously, in the commercial space. But feel that we're gonna have good growth overall. Both in specialty and in our regions as we kinda launch with our new priorities. From that perspective. So I think we're confident we're gonna have good loan growth. I mean, if you look at loan growth, you know, for the whole company, it's, you know, in total, probably be in the 3% to 5% range. You know, and C&I will be kinda right in that same similar range. But we got CRE still shrinking year over year, but starting to grow point to point. We got commercial real estate. We ended up sort of just talked about. And then real estate, consumer real estate and consumer growth also growing nicely. Consumer actually in the indirect space and HELOCs, you know, will approach high single digit. So we have good overall broad-based growth in all portfolios. John Pancari: Got it. Alright. Thanks, Daryl. And then separately, on the credit side, I know you indicated you the charge-offs related to this resolution of the charge-offs of some of the previously identified credits. But your non-negate past dues jumped about 30% in the quarter. Can you give us a little bit of color what drove that? And if that could influence non-performers and losses in coming quarters at all? Daryl Bible: Yep. So on the consumer delinquencies, that's really just a result of more Ginnie Mae repurchases going on the balance sheet. Which is an attractive trade for us, and we actually make more fee income doing that. On the commercial side, it was more administrative delays. People basically missed payments in the first week or so. If you just if you move from year-end, go back, you know, forward seven days, you know, we had $250 million more come in in payments and all that that wouldn't have been delinquent. So I think there's nothing there to say in the delinquency per se. I think we feel good about our credit quality and performance there. It's just kind of one administrative on the commercial side and consumer is just on the Ginnie Mae growth side. John Pancari: Got it. Alright. Thanks, Daryl. Very helpful. Operator: Thank you. We'll go next now to David Gevirini of Jefferies. David Gevirini: Hi. Thanks for taking the question. I wanted to ask about your deposit beta on the next 50 basis points of cuts. What's your assumption there? Daryl Bible: We've been holding pretty good to the low 50s, David. So far. And, you know, we feel really good in the down 50 that you asked for. Still staying in the low fifties. I think that that's definitely doable. I think at some point, if you continue to go down more, you're going to start heading forwards on the consumer portfolios. But definitely feel confident we can stay in low 50s going down another 50 basis points. David Gevirini: And as you inflect higher on loan growth, do you expect increased competitiveness on the deposit cost front? Daryl Bible: You know, our mindset first is to grow operating accounts. We're also, I believe, in, like, always on strategy where we always will offer competitive rates for our customers. We won't be the highest. We won't be the lowest. But we'll get our market share. I think that's what you're seeing come through from the business lines. We grew $2.2 billion this past quarter. Was in business banking and commercial. So I feel that we're pretty much hitting stride there and doing really well. So I feel that our deposit growth will stay intact with our loan growth. Don't think you're gonna have any disconnect there. David Gevirini: Great. Thank you. And, Brian, thank you, and good luck in the new role. Operator: We'll go next now to Erika Najarian with UBS. Erika Najarian: Hi. Good morning. Just wanted to take a step back, Daryl, as we think about how longer-term shareholders should sort of frame the M&T Bank Corporation investment case. As we think about your capital position and as we think about, you know, some of these initiatives and, you know, sort of the, you know, the CRE optimization strategy. You know, as you think about 2026 and maybe the next three years, what is more important to this management team and board? Optimizing ROTCE or optimizing growth? Daryl Bible: That sounds like a familiar question. Erika Najarian: It was a good discussion. Daryl Bible: It was a good discussion. You know, Erika, you know, believe it's really a combination of both of that, to be honest with you. You know, we really have capital out there, and we want to use it for our customers and make sure we get good returns on that. So we're pretty disciplined in the returns we're getting when we're putting loans on the books and getting those returns. You know, we also will distribute capital to our shareholders and think you're seeing us do that. I think we're probably the only large bank that basically retired 9% of their shares this past year. They're probably due amount most of that this next year, maybe a little bit lower because of higher stock price, but we are, you know, giving back lots of capital to our investors and shareholders. So, I think we feel good. We're a balancing act. We generate a lot of capital, do a lot of good for this community, which is really important for us and our customers who make their meet their financial needs. So our company is, I think, doing well on all cylinders right now, and, you know, our new two new priorities are tweaking us to get even better in the things that we do and how we execute. Which is really exciting from the teaming for growth and operational excellence. We just try to keep notching it up and keep setting the standard as we kind of improving it better. Erika Najarian: Got it. And just a more localized question on the net interest income guide, Daryl. Daryl, you mentioned neutrality on the short end. How much of those three components that you mentioned that would be telling of where you are in the range. How much is the shape of the curve important versus the gross trends? And, additionally, thanks for giving us the average balances. I'm wondering, you know, if you could give us a sense of the size of your overall balance sheet in terms of earning asset growth embedded in that NII number? Daryl Bible: Yes. So I'll start with the shape of the curve. Obviously, the shape of the curve will have an impact because we still are getting benefit from kind of our fixed rate loans, our investment securities, and sometimes our swap book all that so that if the curve flattens out, we will definitely have less NII. If it stays steeper, we'll have a little bit of a benefit there. It's really hard to hedge the yield curve, and it keeps moving back and forth. So I don't recommend trying to do that on a regular basis, to be honest with you. But feel pretty good, though, that we're pretty neutral on the short end. Which is really good. Because, yeah, as you know, we're really asset sensitive without the hedges that we have right now. I mean, if we didn't hedge right now, if we stop hedging now and you go a year forward, we'd be much more asset sensitive just by what's rolling off. So we have to hedge to stay relatively neutral. Growth will be a good key component. It's gonna be a good value add for us. This year. Having more growth consistently across all of our portfolios. You know, being able to grow deposits and loans in sync is really good. As far as, yeah, earning assets, it's growing about 3% if you look at it on a point-to-point basis. Erika Najarian: Great. And welcome, Rajeev, and congratulations, Brian. On your new role. We'll always have Denver. Daryl Bible: Thanks, Erika. Operator: Thank you. We'll go next now to Chris McGratty at KBW. Chris McGratty: And, Mr. McGratty, your line is open, sir. You might be on mute. Chris McGratty: Yep. Sorry about that. Earlier in your remarks there, you talked about checking account growth. As a priority in terms of mix shift within the deposit. Can you put a little meat on, like, checking account traction, you know, whether maybe accounts opened in 2025, outlook for non-interest bearing, anything you could provide there would be great. Daryl Bible: You know, I'd probably start with my favorite business that I have is business banking. When you look at business banking, we have three times more deposits than loans. You know, their go-to-market strategy is always to get the checking account first and foremost. In the consumer bank, you know, we definitely, you know, we try to grow and we monitor those statistics every month to try to get to that account growth. From that perspective. And then commercial and wealth, you know, it's definitely important from that. You know, and we are investing heavily in our treasury management products and services. Are helping the growth in business banking as well as commercial. You know, as far as specific numbers of account growth, I'll probably be able to give you that maybe at the next conference and all that. I don't have that handy with me right now, Chris. But we'll share that information in our next investor deck for the first quarter. That's okay. Chris McGratty: That'd be great. Thank you. And as my follow-up, I'm looking at slide 24 in the ranges that you've provided. If you take a step back, is there a piece of the P&L where you're, I guess, most optimistic about? Within the ranges? You talked about loan growth by each category, point-to-point growing. Any kind of elaboration there would be great. Daryl Bible: You know, we've had a lot of strong momentum in the fee area in the last couple of years. So we still have momentum there. So that would be one that I'd probably be most bullish on. You know, NII, I think we're going to do well in that space. You know, expenses, you know, we have a very disciplined company. One of the favorite things I like being part of M&T Bank Corporation is once we set our plan and move forward, you know, people follow the plan and move get the job done. So I have all the confidence that we'll get our operating leverage that we have and move forward. So I feel good about it. I mean, I feel more positive entering '26 than I have the first couple of years I've been here. I think we're moving together, and working together much better as a team. Renee, I think, has probably the strongest management team he's had, you know, under his tenure running the company. And are starting to perform like that as well. I feel really good about that. Chris McGratty: Alright. Great. Thank you very much. Operator: Thank you. We'll go next now to Ken Usdin with Autonomous Research. Ken Usdin: Hey, Daryl. Just two quick ones. On the deposit side, growth allowed you to remix a little bit on the wholesale borrowings. Just wondering how much more room you might have there? And if do you believe we've seen the bottom here of the DDA balances? Daryl Bible: So on the first question, we can probably still shrink, you know, whether it's broker or some of our funds or other areas, maybe a couple billion more so we can, you know, if we, a, get cheaper core deposits and don't can't deploy it in the lending side, we'll be able to shrink and still optimize there. Definitely want to continue to run as efficient optimal balance sheet as possible. That's really important to us. Your second question, what was that again? Ken Usdin: Just about the DDA balances. And do you think we've hit an absolute bottom in do you expect any growth from here? Daryl Bible: We think when we hit around 3% DDA, should bottom out and start to actually grow. So we aren't that far away from that. If we hit those two more down 50 basis points, we think at that point, it should start to level off and start to grow again. From that perspective is our opinion. That and, you know, we're investing heavily in treasury management services. We have a great leader there that's doing a great job, and, you know, and our businesses are really good going to market with all that. So we're launching with good products and services, and will also benefit. But I think down about 50 more points, and I think you're gonna start to see it bottom out and grow. Ken Usdin: Okay. And one on the loan side, I haven't done the calc this morning, but, you know, I see a rebottom just can you just remind us where CRE is as a percentage of your equity today? And as you start to grow it again, where would you be comfortable taking that back to? If in fact you, you know, you kinda you know, the reduction ended up being any different than where you would comfort level would be. Daryl Bible: Yeah. So we're at 124%. Our limit is, I think, 160%. So we have a ton of room to grow. And, you know, we'll grow, you know, serving our clients, getting the right returns on the growth that we're getting. We really have a large amount of capacity to just be able to grow and add to that portfolio. As needed. And I think the teams are excited. Tim Gallagher, who runs that group, is, you know, really excited. He said, you know, he had all three businesses performing at top levels and at an unbelievably strong finish to the end of the year, and that's gonna carry us really well. One of the things that I always watch for, you know, going into a new year is start point issues and all that. And when we put our plan together in the third quarter, you know, we didn't know if we'd have any start point problems or issues. And lo and behold, as we the year of fourth quarter played out, all of our loan portfolios performed really well, we have no start point problems. So we're starting where we thought we would be and we aren't behind that gives us a lot of momentum to actually lift off and grow. From that perspective. Ken Usdin: Got it. Thanks, Daryl. Operator: We'll go next now to Steven Chubak of Wolfe Research. Steven Chubak: Hi. Good morning, and thanks for taking my questions. Sure. Hey, Daryl. So wanted to ask just on consumer deposit growth. Just within the guidance that you offered up for 2026, how you're thinking about the growth in consumer versus wholesale, I know we don't have the explicit disclosure within the supplement by the last quarter year on year retail deposit growth. It was beginning to recover back towards that flat year on year level. As you continue to build density in some of these markets like New England and Long Island, are you nearing a sustainable inflection in retail deposits as we look out to the coming year? Daryl Bible: Yes. We are really focused on growing our consumer deposits and believe that is kind of the real value that you have by having a strong consumer threshold. All the businesses that we plan for, whether it's consumer, business banking, commercial wealth, all plan for their deposits to grow, both their operating and total deposits. Which is really positive. If we did shrink some of our time deposits this past year. Was intentional because we didn't have a use for a higher cost. We can get that back very easily by just going out and doing that. That was a conscious decision. But net net, overall, we feel good about the growth and what we can achieve in the consumer side. As far as commercial goes, they're a machine. They're important when we go and serve our clients. You know, it's not just loans, deposits, treasury management, other fee income services. They deliver and bring the whole bank to them and all that. So we're really good about getting the right wallet share on the commercial side. Steven Chubak: And for my follow-up, just on mortgage banking, revenues continue to grow at a healthy clip. I know that's primarily been driven by the extension in the subservicing business. Do you believe the tailwinds from 2025 could persist into '26? What's a reasonable expectation for growth within that subservicing business at the current clip? Daryl Bible: So there's going to be a couple of changes in '26 in subservicing. Early on, I think we're going to lose a smaller portfolio. Then we're gonna get something back the next quarter and potentially even get more back in the second half of the year. So Mike Drury, who is in charge of that business and many other businesses out there, you know, feels really good about his mortgage business, his subservicing. You know, we are really good subservicers in the hard to service. So the FHA stuff is kind of our sweet spot. That we do. And, you know, people come to us to have us service those loans, and that's a niche that we have, and we feel really good about it. So, you know, net net, you know, might bounce around a little bit throughout the year, but I think we're gonna finish the year strong overall in that space. Steven Chubak: Very helpful color. Thanks for taking my questions. Operator: And we'll go next now to Ebrahim Poonawala of Bank of America. Ebrahim Poonawala: Hey, Ebrahim. Good morning, Daryl. Just one question. As we think about your growing core deposits organically, as we think about the incremental balance sheet growth that's coming on, would you say that's dilutive to the net interest margin where it is today around 3.70? And what is there a ton of upside? Like, is there an upside scenario where this margin could be closer to 3.80? If you could sort of give us a framework around those two, appreciate that. Daryl Bible: Yeah. So yeah. That's a good question. You know, when we, you know, put on customer relationships, we look at the returns for the overall relationship. We just don't look at one side of the fence, whether it's deposits or loans. It's the whole relationship. You know, there are scenarios that we're, you know, if we grow loans, grow deposits, maybe you put a little lower net interest margin on the books. But net net, it still returns a good return on capital. And which is something I think we can do. I mean, I think our net interest margin is either first or second in the peer group. So we have room for it to go down, you know, if we need it to go down to be competitive. But right now, you know, we're trying to continue to keep our mix there and grow the DDA. In conjunction with interest-bearing deposits as well as, you know, good attractive spread loans and getting good fee income overall. So it's really getting the whole balance there. So but, you know, the guide that we have is what we're giving you is what we think is gonna happen. You know, from what's we're going to earn, and we'll keep you updated as that plays out. But right now, we feel really good about operating in the low 3.70s in 2026. Ebrahim Poonawala: Got it. Thanks. Operator: Thank you. Gentlemen, it appears we have no further questions this morning. Mr. Ranjan, I'd like to turn things back to you, sir, for any closing comments. Rajeev Ranjan: Thank you. Again, thank you all for participating today. And as always, if any clarification is needed, please contact our investor relations department at (716) 842-5138. And I look forward to working with all of you. Operator: Thank you, Mr. Ranjan. Thank you, Mr. Bible. Ladies and gentlemen, that will conclude today's M&T Bank Corporation fourth quarter and full year 2025 earnings conference call. Again, thanks so much for joining us, everyone. We wish you all a great afternoon. Goodbye.
Bryan Gill: Greetings, and welcome to the PNC Financial Services Group Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. Now my pleasure to introduce your host Bryan Gill. You, Bryan. You may begin. Well, good morning, and welcome to today's conference call for the PNC Financial Services Group. I am Bryan Gill, the director of investor relations for PNC, and participating on this call are PNC's chairman and CEO, Bill Demchak, Bill Demchak: and Rob Reilly, executive vice president and CFO. Today's presentation contains forward-looking information. Cautionary statements about this information, as well as reconciliations of non-GAAP measures included in today's earnings release materials as well as our SEC filings and other investor materials. Are all available on our corporate website, pnc.com, under investor relations. These statements speak only as of 01/16/2026, and PNC undertakes no obligation to update them. Now I'd like to turn the call over to Bill. Thank you, Bryan, and good morning, everyone. As you've seen by virtually all measures, 2025 was a Rob Reilly: successful year for PNC. Earned $7 billion in net income or $16.59 per share. Strong performance across all our lines of business resulted in record revenue, 5% operating leverage and 21% EPS growth. For the year. As you've likely seen on January 5, we closed the acquisition of FirstBank and we're all excited about the opportunity in front of us. And I'd like to welcome FirstBank employees to PNC. You know, we ended 2025 with substantial momentum. Marked by meaningful client growth across all of our businesses. Businesses and our ongoing branch expansion. And we're poised to accelerate that growth in 2026. As Rob will highlight in a second, we're positioned to generate meaningful positive operating leverage again this year. Importantly, we expect to do so on a PNC standalone basis and also with the addition of FirstBank. Further, we will exit 2026 with FirstBank's fully integrated results. Which we expect will add approximately $1 per share to the 2027 results. Finally, we expect to achieve all this while also one of the largest investment agendas we've ever pursued, including all of our technology initiatives, payments capabilities, and consumer rewards platforms. And of course, our branch expansions. Now before I wrap up, I want to thank all of our employees for everything they do for our company and our customers. Including our new teammates from FirstBank. I'm incredibly about what we're gonna be able to accomplish together. With that, I'll turn it over to Rob to take you through the numbers. Rob? Rob Reilly: Thanks, Bill, and good morning, everyone. Our balance sheet is on Slide three and is presented on an average basis. For the linked quarter, loans of $328 billion grew by $2 billion or 1%. Investment securities of $142 billion decreased $2 billion or 2%. Deposit balances were up $8 billion or 2% and averaged $440 billion and borrowings decreased $6 billion to $60 billion AOCI as of December 31 was negative $3.4 billion an improvement of $669 million or 16% compared with the prior quarter. Our tangible book value of $112.51 per common share increased 4% linked quarter and 18% compared to the same period a year ago. We remain well capitalized at quarter end with an estimated CET1 ratio of 10.6%, or 9.8% when including AOCI. We continue to be well positioned with capital flexibility During the quarter, we returned $1.1 billion of capital to shareholders, dividends were $676 million share repurchases were approximately $400 million and were at the high end of our estimated range. Going forward, we expect to further increase our quarterly share repurchases to a range of $600 million to $700 million Slide four shows our loans in more detail. Loan balances averaged $328 billion in the fourth quarter, an increase of $2 billion or 1% linked quarter. The growth was driven by higher commercial balances. On a spot basis, loans grew $5 billion or 2% reflecting broad based new production across our C and I franchise. Total loan yield of 5.6% decreased 16 basis points linked quarter, driven by lower interest rates. Compared to the same period a year ago, average loans increased $9 billion or 3%. Commercial loans grew $10 billion or 5% as strong growth in C and I was partially offset by a decline in CRE loans. Notably, we believe that our CRE balances have largely stabilized and we anticipate moderate growth in 2026. Consumer loans declined a billion dollars or 1% as growth in auto balances was more than offset by a decline in residential real estate loan. Slide five covers our deposit balances in more detail. Deposits averaged $440 billion an increase of $8 billion or 2% and included seasonal growth in commercial deposits. Noninterest bearing balances of $95 billion increased $2 billion or 2% and represent 22% of total average deposits. Our total rate paid on interest bearing deposits decreased 18 basis points to 2.14% in the fourth quarter reflecting lower rates. Turning to slide six. We highlight our income statement trends. For the full year of 2025 compared to 2024, we've demonstrated strong momentum across our franchise. Total revenue increased $1.5 billion or 7% driven by both record net interest income and non interest income. Noninterest expense was well controlled and increased by 2%, which resulted in 5% positive operating leverage and 15% PPNR growth. Net income of $7 billion was up $1 billion and full year diluted EPS grew 21% to $16.59 per share. Comparing the fourth quarter to the third quarter, total revenue was a record $6.1 billion grew a $156 million or 3%. Non interest expense of $3.6 billion increased $142 million or 4% And as a result, we delivered record PPNR of 2 and a half billion dollars. Provision was $139 million Our effective tax rate was 12.7%, reflecting favorable resolution of several tax matters. And our fourth quarter net income was $2 billion or $4.88 per diluted share. Turning to Slide seven. We detail our revenue trends. Fourth quarter revenue increased $156 million or 3% compared to the prior quarter. Net interest income of $3.7 billion increased $83 million or 2%. The growth was driven by lower funding costs, loan growth, and the continued benefit of fixed rate asset repricing. And our net interest margin was 2.84%, an increase of five basis points. Non interest income of $2.3 billion increased $73 million or 3%. Inside of that, fee income increased $54 million or 3% linked quarter. Looking at the details, asset management and brokerage increased $7 million or 2% driven by both higher equity markets and positive client net flows. Capital markets and advisory revenue increased $57 million or 13% driven by M and A advisory revenue. Bardan Cash Management declined $4 million or 1% This higher treasury management revenue was more than offset by other seasonally lower activity. Lending and deposit services increased $7 million or 2%, and included higher loan commitment fees. Mortgage revenue decreased $13 million or 8% reflecting lower MSR hedging activity down from elevated third quarter levels. And other non interest income of $217 million increased $19 million primarily due to higher private equity revenue. The Visa derivative adjustment in the fourth quarter was negative $41 million primarily related to Visa's December announcement of a litigation escrow funding. Notably, we continue to see strong momentum across our lines of business and throughout our markets, for the full year 2025, noninterest income of $8.7 billion grew $633 million or 8% compared to 2024. Turning to slide eight. Our fourth quarter expenses were up $142 million or 4% linked quarter. The growth was driven by increased business activity and seasonality, partially offset by a reduction to the FDIC special assessment accrual. Full year noninterest expense increased $310 million or 2% reflecting business growth and continued investments in our franchise. As you know, we had a goal of $350 million in cost savings through our 2025 continuous improvement program, and we successfully completed actions to exceed that goal. Looking forward to 2026, our annual CIP target is once again $350 million which is independent of the FirstBank acquisition. And this program will continue to fund a significant portion of our ongoing business and technology investments. Our credit metrics are presented on Slide nine. Overall credit quality remains strong. Nonperforming loans increased $81 million or 4% linked quarter. At year end, NPLs represented 0.67% of total loans, down from 0.73% last year. Total delinquencies of $1.4 billion on December 31, represented 0.44% of total loans, up slightly quarter over quarter but importantly unchanged from the same period a year ago. Net loan charge offs were $162 million down $17 million and represent a net charge off ratio of 20 basis points. And provision was a $139 million reflecting a slight release of loan reserves. At the end of the fourth quarter, our allowance for credit losses totaled $5.2 billion or 1.58% of total loans. Turning to slide 10. As you know, we successfully completed the FirstBank acquisition earlier this month. Greatly expanding our presence in high growth communities across Colorado and Arizona. Importantly, PNC and First Bank employees have made great progress in preparing for successful conversion and integration. Which is scheduled for June 2026. I also wanna provide an update to some of the deal metrics all of which are the same or better than we had originally estimated. As you know, the purchase price was 30% cash and 70% stock. And was approximately $4.2 billion at closing. And we issued 13.9 million shares of common stock as part of the consideration. At closing, tangible book value is estimated to be a $109 per share, exceeding our expectations at deal announcement. The reduction to our CET1 ratio is estimated to be approximately 40 basis points which is in line with our original expectations. And we continue to project an internal rate of return of approximately 25%. Our expectation for nonrecurring merger and integration costs is approximately $325 million majority of which will be recognized in the 2026. Importantly, we anticipate achieving substantial operational efficiencies across the first Bank franchise, And as a result, we expect FirstBank to generate an annualized earnings run rate of approximately $1 per share by the end of the year. Bill Demchak: To summarize, Rob Reilly: PNC reported a strong fourth quarter which contributed to a very successful 2025. Well positioned to continue this momentum into 2026, with the addition of FirstBank, we're poised to enhance our growth trajectory. Regarding our view of the overall economy, we're expecting continued economic growth over the course of 2026. Resulting in approximately 2% real GDP growth. And unemployment to remain near 4.5% throughout the year. We expect the Fed to cut rates two times in 2026 with a 25 basis point decrease in July and another in September. Looking ahead, FirstBank's results will be reflected in our financial statements and accordingly, our guidance is based on the projected financial results of the combined company. Our outlook for the full year 2026 compared to 2025 results is as follows. We expect full year average loan growth to be approximately 8%. We expect total revenue to be up approximately 11%, Inside of that, our expectation is for net interest income to be approximately 14% and noninterest income to grow 6%. Noninterest expense to be up approximately 7% excluding an estimated $325 million of integration expense. And we expect our effective tax rate to be approximately 19.5%. Based on this guidance, we expect to generate approximately 400 basis points positive operating leverage. Nearly all of which is driven by PNC on a standalone basis. Looking ahead to the first quarter on slide 12, our guidance as I just mentioned includes the impact of the FirstBank acquisition. Our outlook for the 2026 compared to the 2025 is as follows. We expect average loans to be up approximately 5%. Net interest income to be up approximately 6%, fee income to be down one to 2%, other non interest income to be in the range of a 150 to $200 million, Taking the component pieces of revenue together, we expect total revenue to be up 2% to 3%. We expect noninterest expense, excluding integration expenses, to be up approximately 4%. We expect first quarter net charge offs to be approximately 200,000,000 and we expect diluted common shares to average approximately $4.00 6,000,000 the first quarter. Which includes the impact of shares issued as part of the FirstBank acquisition. With that, Bill and I are ready to take your questions. Operator: Thank you. We'll now be conducting a question and before pressing star one. Our first question is coming from John Pancari from Evercore ISI. Your line is now live. Good morning. Rob Reilly: Hey. Good morning. Morning, John. John Pancari: Just a question, actually, straight to capital. On buyback front, I know you bought back $400 million in fourth quarter. You guided to this $600 million to $700 million in the deck. And then Rob, in your comments there, it sounds like you were pointing to that 6 to $700 million quarterly pace as something that could continue? If you could just clarify on that. Is that a fair assumption as we look through 'twenty six? Rob Reilly: Yes. John, you're spot on there. 600 to 700 is a quarterly pace that we expect to continue through 'twenty six. John Pancari: Got it. Okay. All right. And then also related to capital I know your CET1 came in at ten point six and you guided to the 10.4 with the FirstBank deal. Could you just remind us of your of what how we should think about a targeted CET1 as you look through 2026? Considering the deal and considering growth and buybacks? Then how should we think maybe about a good medium term ROTCE target for you guys? I know you came in around 16.5% full year for 2025. ROTCE and the fourth quarter was around 18 How can we think about a good medium term target for PNC? Rob Reilly: Okay. Well, that's a lot there, John, but let's take it as as you asked it. In terms of our CET1 ratio, to be clear, we finished the year at 10.6%. With the acquisition of First Bank, we'll take that down 40 basis points to somewhere around 10.2%, 10.3 in terms of where we are now. With the share repurchases that we expect in the first quarter, we would expect to end the first quarter's somewhere around that range. We've said that we've got a target right now and that target is obviously short term because there's a lot of capital rules that are still in flux, but we said 10%. So in the first quarter, we'll be in that 10.2%, 10.3 working our way down from 10.6%. In terms of ROTCE, you're right. We actually exited 2025 elevated somewhat elevated because of the tax reserve release. But I'd say we're at 17% right now as our exit rate into '26 When we get through '26 with the First acquisition and we deliver on the guidance that we expect to deliver by this time next year. And again, is just math, we don't have targets. But this time next year, we'll be at 18% heading higher. John Pancari: Got it. Okay. Thanks, Robert. Appreciate it. Sure. Thank you. Next question is coming Scott Siefers from Piper Sandler. Your line is now live. Good morning, guys. Thanks for taking the question. Hey, Rob, was hoping you could maybe sort of delve into your thoughts on NII momentum for the year. It can be a little little noisy. Given that, you know, you had some stand alone thoughts previously. I think you all had been saying, you know, up like $1 billion or more of growth, if I recall, Scott Siefers: correctly. Now we've got First Thanks into the guidance. Maybe you can just sort of bridge the gap and go through any places where you're feeling incrementally know, better or or worse or or any change on how you see NII projecting through the year? Rob Reilly: Sure. So our guidance with First Bank for the year, as you've seen, is up 14% in NII. Inside of that to your question, PNC stand alone, we're somewhere between 7.58% which is comfortably above the $1 billion that we said in the earnings call in the third quarter. So we feel good about it. I mean, those are pretty good numbers and that's helping us generate the operating leverage that looks very comparable to last year. And that's very good. Perfect. Scott Siefers: Okay. Good. And then, you know, was was glad to see you guys were able to sort of clean up last quarter's noise, related to the deposits with lower costs this quarter as we had hoped. Maybe you could spend just a quick second on how you see deposit costs playing out for know, say, these next 50 basis points or so of, Fed funds rate cuts that we've got kind of baked into the guide? Rob Reilly: Yes. And just to clarify for those who weren't on the third quarter call, that was a mix shift in terms of the commercial deposits that we added that were outsized at the time. Just to level set that. As we go into 2026, we continue to see a rate paid coming down. We'll see that in the first quarter even if we don't get a rate cut, which we don't expect just simply because the December rate cut will play through. And we're calling for two rate cuts in July and one in September. And when those if and when those occur, rate paid will continue to go down. Bill Demchak: But I guess, I mean, it's worth mentioning independent of whether we're right or wrong on the timing of those two rate cuts. It doesn't impact our outcome NII materially one way or the other. That's right. Scott Siefers: Perfect. Good. Bill and Rob, thank you for taking the questions. Rob Reilly: Yeah. Sure, Scott. Operator: Thank you. The next question today is coming from Betsy Graseck from Morgan Stanley. Your line is now live. Hi, good morning. Betsy. Betsy Graseck: Bill, could I ask you to unpack a little bit In your prepared remarks, you commented very quickly on the investments that you've been making We all know in the branches and in technology, etcetera. Could you give us a sense as to how far along in this investment trajectory you are I mean, I know technology is ongoing, right? But like it was pretty quick, and I was hoping we could unpack a little bit where you are relative to where you want to be. And how first Bank integrates into all that. Thank you. Bill Demchak: Yeah. You know, I I I guess you know, in its simplest form, our new initiative CapEx expense, all embedded in our guidance. Rob Reilly: Is higher this year than it's ever been. I think if you depending on how you how you wanna how you wanna look at tech spend, maybe spend $3.5 billion and it's going to go up 10% plus or minus. For the year. And inside of that, AI is 20% of that increase. Beyond what we spend already. Most of it is just the number of things we have to drive momentum Right? So we're we're with the ongoing branch build and that will continue. So it's putting us in front of more clients. Rebuild of our our payments capabilities Think of it as along the same lines of the rebuild of our online banking where breaking it down to micro services, so it's more resilient and and faster to be able to change Modernization of our data centers, so we're always on All of our applications will be cloud native and will run-in a synchronous transmission between backup data centers. Continued investments in people in the new markets, including investments in people inside of the Colorado, Arizona markets. To take advantage of the First Bank footprint. All of that's inside of the guide we gave and all of that the ability to do that and still control expenses kind of comes on the back of this continuous improvement program. We're going to execute again in 2026 and a lot of the savings in 2026 coming out of our automation efforts. Some of which are related to AI. But some of which are just straight up automation. To allow us to continue the investment profile we've had for years. Betsy Graseck: And is that savings in the form of system savings, headcount savings? I mean, I'm assuming it's a mix, but how much is headcount driving that? Rob Reilly: Account savings is a piece of it. The most obvious example there is is simply using AgenTeq AI for coding. But a lot of it is is, you know, contract savings and tech as shut down old systems and roll in new systems. So, you know, we're you know, shut shutting down redundant things and running on a single one. I'm trying to think inside of what's in that completely. Well, would say, Betsy, just to in, I mean, continuous improvement program is something that we've had for a number of years that's in our DNA. And when we do our budgeting, every part of the company is expected to contribute some CIT savings. Is just efficiency off of our increasingly larger spend. So it is it is as broad based as it could be. Betsy Graseck: Yeah. No. I see IT is decades long. Right? Rob Reilly: That's right. But to give you an idea of the scope, maybe this will help. You know, between 2225, we were able to get 40 points of operating leverage through automation in our retail operations and care center operations. Sorry. We were able to get it's probably closer to 30. When we look at AI between 2530, we another 40 points of operating leverage. Have 171 different opportunities outlined and a billion four of total addressable spend. That we're able to go after through. I mean, we'll we'll use the term AI, but I just think of it as the same march that we've been along with automation that is given us all those efficiencies between 2225. Rob Reilly: And all of that is in our guidance. Yeah. Betsy Graseck: Okay. Super. Thanks so much. Operator: Thanks. Next question is coming from Gerard Cassidy from RBC Capital Markets. Your line is now live. You. Good morning, Bill. Good morning, Rob. Gerard Cassidy: Rob, to follow-up on your comment about the ROTCE coming out of the end of this year, many companies now give out these ROTC targets. Obviously, you don't. But I'd like to get your insights on just how you guys approach looking at ROTCE and how you manage it? Rob Reilly: Sure. No. Thanks, Gerard. And it relates to John's question there. We don't an explicit target because we've always viewed it as an outcome rather than something that we manage to. That said, when you take a look at our levels comparable to peers, they're pretty good. And we're pretty optimistic in terms of what we're going to be able to do in 2026 and beyond. So we see the level that we're at now, which is pretty good, 17% going to 18% this time next year and then higher from there. So we watch it. Everything that we do contributes to it. But we just don't start out with a target. Bill Demchak: Yeah. And part part of the issue with the target you know, it it it's so dependent on operating environment. In terms of shape of the yield curve. Credit costs. And it's also dependent on capital management. And I hate the idea of setting a target on return on capital and then managing the capital itself to hit that return. They ought to in some ways be disconnected. We can always just we could always just drive our capital. Well, that's where the variables that's where the variables are. So we saw that as an industry, we saw that in the couple of years when negative AOCI showed up. Nobody thought that was a good thing. But it helped our TCE. Yeah. Exactly. No. Very, very helpful. And then Bill and Rob, with the chance of being called a commudgeon again, as I was at one of your peers peer calls earlier in the week about this question. I'll try to rephrase it. The the setup for you folks and and your peers for 2026 look really, really good. And, you know, for guys like all of us on the call that have been around a while, you know, we just get nervous because we're bank guys. Can you look at, you know, any risks on the other than the obvious geopolitical risk? We get that. But are there what are you guys kinda looking at just to make sure that, you know, you you don't get blindsided? Because I don't mean just you guys, but just the industry gets kind of hit over the head with something that we don't expect. Bill Demchak: It has to be some exogenous variable because the base economy, I I just don't see big cracks that are gonna be realized in 2026. So you know, you you get up every morning and you read a headline on credit card rates or on this or on that. You know, I it could be anything. Right? By the way, it could be good things too. But the basic business or running the bank against the economy with customer demand and the health of the consumer. We have a lot of tailwinds this year, and it should be a great year for banks. Gerard Cassidy: I agree. I appreciate it, Bill. Thank you. Yes. Operator: Thank you. Next question today is coming from Erika Najarian from UBS. Your line is now live. Erika Najarian: Hi, good morning. Maybe one for you, Bill. As we take a step back into the year, I think a lot of you know, contemplating, you know, the push pull and investing in money centers versus regional banks. And maybe from your purview, as you think about the opportunities regional banks, particularly in direct lending, which is just C and I lending or commercial lending. How much do you think potential Fed cuts the leverage lending limits going away, and the certainty or better certainty in the macro is that going to spur more direct lending opportunities for regional banks? Or are you agnostic to it relative to the cap markets opportunity? And also just remind us your peers talked about significant advisory opportunities for 2026. And then just remind us how much of a SKU in advisory you may have in cap markets? Bill Demchak: Let me start by saying we're a national bank, not a regional bank. So I don't know what regional banks are going to do with the leverage lending guidance. What it does for us is allow us to make smart loans, not necessarily riskier loans, but basically, the guidance is written would actually capture a lot of things as leveraged and high risk when they weren't. And by clearing that up, you know, the ability to do some of our specialized that are secured or that are first out increases pretty dramatically and we're pretty excited by that. But it's not like an open in the you know, we're not treating it like an open invitation to run out and take more risk there. That's not what the that's not what the game is. On on the advisory side, capital markets broadly did really well this year. As we go into next year, we it's not as large a percentage of our total company perhaps as it is at the money centers, but the mixes are wildly different Inside of that mix, we are more heavily weighted to advisory probably than the giant banks And you know, in that sense, Harris Williams you know, backlog their activity level through the fourth quarter is as high as it's ever been. So pretty optimistic about the opportunity set there. Erika Najarian: And just a follow-up question. On the ROTCE. Obviously, I heard you loud and clear. 18% and going higher is better than your peers. You know, and as I just take a step back, you know, this is sort of a question, Bill. The way you answered the earlier question, it sounds like you don't want to necessarily just put targets out there because you want the flexibility you know, for the capital allocation when there are growth opportunities which makes sense. But also, as we think about you know, longer term returns, is 18 plus sort of above through the cycle or is that sort of closer to like a through the cycle you know, range for, you know, a PNC? All in. And, you know, just asking it this way because you are the JPMorgan of, you know, smaller national banks, and they have a through the cycle, you know, target. Bill Demchak: Why don't we just kinda reason that out for a second? It's not gonna become a target. If you assume for a second that we're running, I don't know where we are this quarter, two eighty eight in them or something into this work. We've and we run, where, two fifty to three? Yeah. That's right. Yeah. And so, you know, let's say that accepts out interest rate volatility, and then let's assume for a second that our credit costs are running you know, on the on the low side for through the cycle number. You know, we probably have even upside downside on the NIM from here. We have downside on the credit costs. So through the cycle, slightly lower. However, as we plan out with the scale efficiencies we get through some of our cost initiatives and just client growth, it kinda offsets that. So the outcome, the mechanical outcome that Rob talks about when you cross through 18%, keep going. I mean, I could show you on a piece of paper where it crosses 20 in the not too distant future. During that period of time, if credit normalizes and our charge offs go up, double, we're not going to hit that. Which is why we don't wanna put that target out there. We're operating in a great space. It's elevated from our history. We ought to be to keep it somewhere around here, but there's a lot of variables swinging around. And I don't want to make uneconomic choices to hit a target that was artificially created. Erika Najarian: That was very helpful, though. Thank you, guys. Operator: Thank you. Next question is coming from Steven Trubak from Wolfe Research. Your line is now live. Good morning, Bill and Robin. Thanks for taking my questions. Steven Trubak: So wanted to start with a discussion on the capital markets outlook. Bill, at a conference in December, you indicated you're starting to see increased capital markets activity. Particularly in the middle market space. I was hoping you could just contextualize what you're seeing in terms of pipelines how they compare to year ago levels? Just how you're thinking about growth in capital markets fees in the coming year given the strong exit rate we saw in '25? Well as some of the factors driving more robust activity that you cited? Bill Demchak: Maybe Rob can give you detail on numbers. But before we go there, what I was referring to at the at that conference and his in fact, come to fruition is that the logjam in middle market investments the willingness to do M and A, the willingness to take down credit to get a deal done has opened up where it was kind of on hold for a long period of time because of tariffs and people trying to figure out how they operate and they're afraid to buy something when there was so much volatility and potential outcomes. We saw that kind of pipeline crack in the fourth quarter. See it in the Harris Williams results. By the way, you would see it in our spot C and I loan numbers at the end of the year. As we've just seen more activity on on financings into acquisitions. Inside of our forecast, Rob, and as an aside, all that activity drives the rest of our capital markets activity. So when people are doing loans and deals, there's there's derivatives, there's bond issuance, there's loan syndication, and so on and so forth. Rob Reilly: Yeah. Just to finish that. So, in terms of our outlook for '26 capital markets, we're expecting it to be up high single digits. Steven Trubak: Okay, great. And then just a question on NIM. I know in the past, you've noted you could achieve north of 300 bps at some point in the coming year, acknowledge that that's an output. Do you feel like normalized NIM because you were alluding to this in your prior response, Bill, whether that could still settle in the low 300 range as you optimize wholesale funding restrike the securities book, prosecute on some of the initiatives to grow operational deposits, including some mix shift from First Bank, Feels like you can run sustainably above that for a bit, but just was hoping you could provide some context. Bill Demchak: Look. I think that's right. Assuming we stay in an upward slumping yield curve. In a similar environment. If we get into a world where we have 200 points of inversion, we're not gonna be running at 3%. Rob Reilly: But our plans in 2026 are to reach that 3% level in the 2026. Somewhere somewhere during the third quarter, maybe end of the third quarter. Steven Trubak: That's great. Thanks so much for taking my questions. Operator: Thank you. Next question today is coming from Ken Usdin from Autonomous Research. Your line is now live. Ken Usdin: Hey, good morning. Thanks guys. Just a follow-up on the last question. Thanks for giving the outlook on the capital market side. Rob, just with the moving parts of FirstBank ads, I'm just wondering if you can kind of help us through just where you expect to have lead the fee growth, which obviously ended the year in almost all categories on on a high note? Thanks. Rob Reilly: Yes, sure, Ken. So for the full year, we're saying a noninterest income up 6% in terms of the subcategories of that just in the order that we report them, we've got asset management up mid single digits. As I just said, capital markets up high single digits. Card and Cash Management up mid to high single digits. And then Lending Deposit Services and Mortgages each up low single digits. And then to add to that, for the full year is a $100 million of what are basically first banks fees. When we get past integration, we'll be able to put that 100 million into each of those categories. But at the moment, it's just simply an add on. So you put all that together, that's the that's the up 6%. Ken Usdin: Okay. And I I guess same question. I don't know if you're able to do it or or willing, but is there any way to help us kinda understand where the the FirstBank NII contribution is inside the the total NII? Rob Reilly: Yeah. Sure. So, I actually came up on the question earlier. So we're saying up 14% inside of that PNC is 7% to 8% of that. Seven Sure. Okay. Yeah. Right. Okay. And that would include, obviously, all the percent accounting benefits that Yeah. That's right. Right. Yeah. That's right. Now got it, Ken. Oh, okay. Got it. Thanks. You. Next question is coming from Mike Mayo from Wells Fargo. Your line is now live. Mike Mayo: I'm going to start with very simple question, and then I'll have a more complex question. But what's the difference between a national bank and a regional bank? Because when you answered the prior question, you said we're a national I know you're a national main street bank. And you've had that position for several years now. But it seems like there's an important distinction in your mind whether it's for growth or efficiency or returns. Or brands. So you could elaborate on that. Bill Demchak: I think maybe the distinction is as much aspiration as it is where we are from the starting point. We are national in terms of our presence, with C and I and retail. We're across the country But more importantly, perhaps, is the strategic direction and belief that ultimately to succeed, particularly with the retail platform, you have to have a national and ubiquitous presence and share an each market that allows you a fair fight I think the distinction between that and a regional bank, a regional bank that's trying to protect its moat in a shrinking market as the large banks at PNC come into their market. Is a tough place to be. And and and that's why I draw that distinction. Mike Mayo: Alright. And I guess you're saying you you still target, the 30 largest MSAs so you can shift resources and people and attention as you see opportunities. You don't have to just defend a few of them, I guess, is that what you're saying? Bill Demchak: Yeah. I don't I don't think anybody has an ability to defend home turf here. Right? We we you know, the branch builds that are going on with the giant banks and ourselves and at least one other of the smaller banks in the country we're coming into your market. If you're not coming into our market to come fight us, we're coming to your market to come fight you, and we're gonna get some percentage of your market as is JP and B of A. And ultimately, if you're not growing, you're shrinking. And, you know, so perhaps it's just a a a a nuance in strategy or the realization of long term survivability, at least in our view, is dependent on the ability to take the flight to all the markets in The US and win. Rob Reilly: A national platform. Yeah. Mike Mayo: And then as a follow-up to that then. So I heard you correctly. You have your ongoing continuous improvement program. And as part of that, you have record investment spend in 2026 record tech spend, record AI spend. And even with that, you have 400 basis points of positive ARPU leverage in your guide. So I guess even with you doing all that, are you spending enough given the higher level of competition from the the bigger banks? Bill Demchak: Yeah. I I I think we are. I mean, part of what you spend is what you can achieve. So you know, you push too hard, you start wasting money. For the places where we compete Mike, so you think about what we do in welfare retail or our C and I middle market, small or large corporate. Related product capabilities. I think our tech spend is at least on par and I think our product set is more than competitive. And I think our core infrastructure as it relates to running in a everything being cloud native and build off of micro services and the ability to do products is as good as anybody. Where we lose right, on tech spend is, you know, some of our larger friends who've reported so far they could choose to go build another Visa or Mastercard or Stripe. Or Shopify. Right? They they could choose to build a whole another business inside of their existing operating platform where what we're doing with our tech spend is optimizing the businesses we're in today. And I I I I think that's the big difference. All right. Thank you. Operator: Thank you. Our next question is coming from Saul Martinez from H. Your line is now live. Hey, good morning, guys. Thanks for taking my question. Wanted to ask about loan growth and you know, the 8% guidance for growth in average loans it seems to imply still pretty fairly modest growth on an organic basis. Saul Martinez: Know, stripping out FirstBank. I get to something in the neighborhood of about 3%. And, you know, correct me if that math is wrong, you obviously expressed some optimism about you know, C and I picking up, CRE stabilizing here. So that headwind is mitigated. I think you still probably have some headwinds in resi, but just walk me through some of the assumptions that are embedded in the loan growth and you know, whether there's an element of conservatism built into that? Rob Reilly: Yeah. No. It's that's a good question. So we're calling for our full year forecast 8% average loan growth, which does include First Bank, PNC on a stand alone, we're at approximately 4% loan growth. So so you have that number there. And and all the all the categories you mentioned, that's that's what we see too. So we still see some momentum coming here in terms of C and I Ideally, real estate will inflect at some point here in the '26. On the consumer side, we don't have a whole lot of growth built in. We do it in auto card, but as you mentioned, resi mortgage is part of our deliberate management is is going down a bit. Saul Martinez: Okay. Okay. That that's helpful. And then the the only other question I have is just more of a clarification. On the fee guidance. The numbers you gave, Rob, for asset management cap cap markets in the different categories, that's on a stand alone basis. And then you would overlay about a 100,000,000 from FirstBank and that will that $100,000,000 would get you know, with would fall in those categories in some some distribution. Is that is that correct? That that's Okay. That's exactly Okay. That's exactly right. And and FirstBank didn't have a whole lot of fees there. So that hundred million getting added to a 9,000,000,000 plus number. So Yeah. Yeah. Fair point. Okay. Awesome. Thanks so much. Operator: Thank you. And that question is coming from Chris McGratty from KBW. Your line is now live. Chris McGratty: Great. Good morning. Rob, on the dollar of contribution from FirstBank and 2027, I guess, where could you be positively surprised? I know it's early. Rob Reilly: Oh, I would say, you know, the synergies on the revenue side. I do I think there's a lot of excitement. There's a lot of enthusiasm. First Bank has excellent relationships across those communities. And some of those relationships are likely, I would think, to utilize PNC products and services that FirstBank didn't have. So we don't have a whole ton of that built into it. But, you know, obviously, we find it appealing. Chris McGratty: Okay. Great. And then related to the high single digit capital markets expectation, you talked in your prepared remarks about the log Jam just being opened. Is this is this high single digit the the full potential that you think the team on the field can achieve, or is there still an element of you're holding back for little bit of uncertainty? Bill Demchak: No. That's what we think we can achieve. As with all our guidance. Chris McGratty: Got it. Thank you. Sure. Operator: Thank you. Next question is coming from Matt O'Connor from Deutsche Bank. Your line is now live. Matt O'Connor: Good morning. I was hoping you could update us on your interest rate positioning. And I guess post the closing of First Bank, I don't think that would have impacted that much. But just kind of give us a full picture of how you're positioned from here for changes in absolute rates. Rob Reilly: Sure, Matt. That came up a little bit earlier. Yes, First Bank doesn't change a whole lot. We've been for some time, which is largely neutral So, I mean, our NII guide isn't reliant on rate cuts So if they happen or they don't happen, that's pretty much on the margin. Matt O'Connor: Okay. And then, guess there's, you know, a lot of moving pieces as we think about the rate curve. I mean, there's obviously focus to lower, I guess, both the low end and the short end and the longer term. And it's been a few years since we've had some volatility. So I'm just wondering how you're thinking protecting yourself from maybe unusual movements in rates and how that impact your thinking of securities book? Bill Demchak: So you should think about our book at least in the near term as we are kind of indifferent to the front end of the curve. So we're we're just balanced out on wherever Fed funds would set between gains and losses on loan yield and deposit gains, losses and so forth. We are exposed on the reinvestment rate of fixed rate assuming we don't change the the duration of the balance sheet, right? We have assumptions built in there on the forward curve on where we can reinvest rolling off money. We have for just as an ongoing program, and we did this in in '25, and we've done a lot of it in '26. We lock those forward maturities, at opportunistic times with forward starting swaps. Right? So we kind of say, look, we're pretty good independent of what rates does. Because we've taken advantage and locked a lot of that forward. And, Matt, you know that's we started that at the beginning of last year. So that's unchanged. Matt O'Connor: Okay. Alright. Thank you. Operator: Thank you. Next question is coming from Ebrahim Poonawala from Bank of America. Your line is now live. Ebrahim Poonawala: Good morning. I guess, Bill, just going back to the long term competitiveness of the franchise, as you think about where some of the financing activity, revenue pools are shifting, just talk to us when you think about investment spend, like should BNC be adding a lot more in terms of capital markets capabilities? And on the wealth management front. Just how do you think about those two businesses in particular either for '26 and over the medium term? Bill Demchak: Good question. So a couple of things. We're focused on, a couple of things we're not focused on. Focused on is the size of the wallet of private capital. Entities. Which we do a tremendous amount of business with today either through lending and asset based lending or the business with Harris Williams or Solbury. Or Capcom lines or on and on and on. Getting better organized in covering them as a client versus having product centric coverage, I think, opens up a big opportunity going forward. Inside the capital markets space, in particular, investments in places we have grown through the years are in we've had derivatives and syndicate loan syndications and FX forever, and it grows that grows with our client base. We have built from scratch a a fairly good and growing fixed income business, largely high grade, moving at the margin to higher yield. We have invested and don't intend to invest into the equities business. I I think that is a business that is going to be completely driven by giant scale players and automation. And not a place where there's gonna be big margins for for some of it. Somebody like us. And so I think you know, we'll continue to grow that business and invest in people, but I don't think we need to buy anything to do it. I think it's investing in research at the margin. Salespeople at the margin and making sure that our bankers covering our clients are aware of our capabilities on the on the debt syndication side. But, no, we with no giant shifts to do anything there other than continue the trajectory we've been on. Right. I should know this number. Don't know. Right? What what's the total annual number that we make out of our collective capital? What do we make in '25 in our total In total capital, couple of billion. Yeah. I mean, it's a big business for us. You know, people tend to say, oh, that's Harris Williams. You know, Harris Williams and piece of it. We do an awful lot of capital markets business for their clients. Ebrahim Poonawala: That was helpful, Bill. And just one other question. There's been obviously a lot of discussion around stablecoins, interest payments, including this week. And what we are seeing is just the the influence that the crypto industry has in DC. Dabbled a little bit in terms of partnerships with Coinbase. Just give us your sense around how you're following this legislation whether or not you think there is a risk to industry deposits and how shareholders of banks should think about it. Bill Demchak: That's a good question. So the fight right now in DC is over a some terminology in the Genius Act that they're trying to fix with the Clarity Act with respect to weather rewards count is interest paid on stable points, which was forbidden in the Genius Act. As a as a practical matter, you know, coin was created and is marketed and touted as a payment mechanism, that makes payments know, more efficient. That remains to be seen. But it isn't marketed nor is it regulated as an investment vehicle. And I think if they actually wanna pay interest on it, then they ought to go through the same process. Then it looks to me an awful lot like a government money market fund. I think banks are sitting here saying, if you want to be a money market fund, go ahead and be a money market fund. Wanna be a payment mechanism, be a payment mechanism. But money market funds shouldn't be payment mechanisms, and you shouldn't pay interest. And know, the crypto industry has a lot of lobbying power to say, no. We want it all. But we'll we'll see how this plays out. Ebrahim Poonawala: Helpful. Thank you. Operator: Thank you. We reached the end of question and answer session. I'd to turn the floor back over to Bryan for any further or closing comments. Bryan Gill: Well, thank you all for joining our call today and your interest in PNC. And please feel free to reach out to the IR team if you have any follow-up questions. Operator: Thanks. Everybody. Thank you. Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at time and have a wonderful day. We thank you for your participation today.
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