Fifth Third Bancorp ($FITB) Q1 2026 Earnings Call

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

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

Thanks, Tim, and good morning. Our first quarter results reflect the strength of what we have built and the discipline with which we are executing. Results exceeded our March expectations driven by stronger NII, disciplined expense management, and integration execution on plan. Adjusted ROA was 1.12% and adjusted ROCE excluding AOCI was 13.7%. The Comerica acquisition closed without tangible book value dilution and TBV per share grew 1% sequentially and 15% year-over-year. The earnings power of the combined company is intact and the integration is on track. Given the magnitude of the acquisition, standard year-over-year and sequential comparisons obscure more than they reveal this quarter. What matters is how we exit: a larger, more granular loan portfolio, a lower cost deposit base, and larger diversified fee income businesses. Each of those is a deliberate outcome, and each positions us to generate stronger and more durable returns as the integration delivers. Now, diving further into the income statement, starting with NII and the balance sheet, net interest income was $1.94 billion for the quarter, above our March expectations. Managed NIM expanded 17 basis points to 330 basis points driven by the impacts of the Comerica acquisition. That includes seven basis points from securities portfolio marks and repositioning, six basis points from cash flow hedge termination, and two basis points from purchase accounting accretion on the loan portfolio. A full quarter of these impacts will benefit NIM by a few additional basis points in the second quarter. End of period loans were $178 billion, up 2% sequentially from pro-forma combined year-end balances. Average total loans were $158 billion reflecting the February 1 close. The growth was broad-based: strong middle market production, a rebound in line utilization, and continued momentum in home equity, auto, and our Provide fintech platform. In commercial, line utilization ended the quarter at 40.7%, up approximately 120 basis points from the pro-forma combined year-end level and notably held steady throughout the volatility in March. Clients are cautious but active. On a legacy Fifth Third basis, commercial loans grew 6% year-over-year. Combined with the addition, shared national credits now represent only 26% of total loans, a deliberate and ongoing reduction in concentration risk. On the consumer side, first quarter auto originations were the highest in two years with average indirect secured balances up 10% year-over-year. Home equity balances grew substantially, supported by both the acquisition and strong underlying production. We achieved the number one HELOC origination market share in our legacy Fifth Third branch footprint with an average portfolio FICO of 773 and average loan-to-value of 64%. The production strength is real and the credit discipline behind it is equally real. Turning to deposits, average core deposits were $207 billion and end of period core deposits were $231 billion. Non-interest bearing balances comprise 28% of core deposits at quarter end, up from 25% at the same point last year. That improvement reflects the combined benefit of Comerica's commercial DDA franchise and our continued organic consumer DDA growth. The household growth Tim described is showing up directly in our funding costs. On a legacy Fifth Third basis, consumer household growth of 3% over last year supported 4% consumer DDA growth. Total deposit costs, including the benefit of non-interest bearing balances, were 158 basis points in the first quarter. A funding cost profile that compares favorably across the peer group. Interest-bearing deposit costs were 215 basis points, down 27 basis points year-over-year, reflecting both that organic deposit mix improvement and the benefit of the Comerica balance sheet. Despite the larger balance sheet, our approach to balance sheet management is unchanged. We prioritize granular insured deposit funding over large wholesale holds. We maintain strong liquidity buffers and we proactively manage the overall cost of funds. That discipline showed up again this quarter. Average wholesale funding declined 3% year-over-year even with Comerica balances included. That favorable mix shift lowered the cost of interest-bearing liabilities by 36 basis points. We also maintained full Category 1 LCR compliance at 109% and a loan-to-core deposit ratio of 76%. Now turning to fees, adjusted non-interest income, excluding securities losses and the other items listed on page four of our release, was $921 million, slightly above the midpoint of our March expectations. The most significant milestone here is that both wealth and commercial payments are now generating fee income at the run rate necessary to deliver $1 billion each in annualized non-interest income. That outcome reflects years of consistent disciplined investment in both businesses and the recurring nature of the revenue. Looking further at wealth, fees were $233 million and total AUM ended the quarter at $119 billion. Legacy Fifth Third AUM trends remain strong, up $10 billion or 15% over last year. Fifth Securities delivered strong retail brokerage results with revenue up 15% year-over-year. These are businesses that we have been consistently investing in and the returns are compounding. Commercial payment fees totaled $218 million for the quarter. Direct Express contributed $14 million in fees for the quarter and approximately $3.7 billion in average deposits for the month of March. New Line continues to drive strong fee growth of 30% year-over-year and related deposits reached $5.5 billion, up $2.7 billion from last year. Capital markets fees were $134 million, up 11% sequentially. Increased hedging activities in commodities and FX and strong bond underwriting fees combined with two months of Comerica activity were the primary drivers of this growth. Turning to expenses, page five of our release details certain items that had a larger impact on the non-interest expense this quarter, primarily $635 million in merger-related expenses. Adjusted non-interest expense was $1.77 billion, consistent with our guidance. The adjusted efficiency ratio was 61.9%, which reflects the addition of Comerica and normal first quarter seasonality associated with the timing of compensation awards and payroll taxes. On the synergy front, we remain confident in our ability to achieve the $850 million of annualized run rate cost savings in the fourth quarter of this year. Integration activities are progressing as planned against our established milestones and savings are being realized. The expense benefit will build steadily over the first three quarters of this year with a more significant increase in the fourth quarter once the system conversion and branch consolidations are completed in early September. Shifting to credit, the net charge-off ratio was 37 basis points for the quarter in line with our expectations and the lowest level in two years. The NPA ratio was 57 basis points compared to 65 basis points last quarter. Commercial net charge-offs were 26 basis points, also a two-year low with stable trends across industries and geographies. Consumer net charge-offs were 58 basis points, down five basis points from last year. The consumer portfolio remains healthy with non-accrual and over 90 delinquency rates relatively stable across all loan categories. We have been deliberate about where we choose to grow. Our exposure to non-depository financial institutions represents only 7% of our total loan portfolio, well below the industry average. Our three largest categories are subscription lines supporting capital call facilities, corporate credit facilities to traditional institutions such as payment processors, insurance companies, and brokerage firms, and secured lending to residential mortgage-related entities. These are long-standing portfolios. We have deep underwriting expertise in each of them. Strong collateral visibility and structural protections where needed, including borrowing base requirements and advance rates that provide significant loss absorption before we would recognize a dollar of loss. On private credit, we have chosen not to participate meaningfully in lending to private credit vehicles and business development companies, which combined represent less than 1% of total loans. That was a deliberate decision, not a missed opportunity. The structural complexity embedded in these exposures introduces risks that are harder to assess through a cycle. We would rather grow in categories where we have more transparency to the collateral and have direct relationships with the underlying borrowers. On software and data center lending, we have maintained that same discipline posture. We believe in the long-term demand for AI infrastructure, but we have also seen how quickly these build cycles can overshoot. We've remained selective and our exposure is intentionally limited. Software-related exposure is less than 1% of total loans with the portfolio performing in line with expectations with no material migration in the quarter. ACL as a percentage of portfolio loans and leases decreased to 1.79%, primarily reflecting the Comerica acquisition. The ACL as a percentage of non-performing assets increased to 316%. Provision expense included $83 million for merger-related day one ACL build. Our baseline and downside cases assume unemployment reaching 4.5% and 8.5% respectively in 2027. We made no changes to our macroeconomic scenario weightings during the quarter, though a qualitative adjustment was applied to reflect the direct impacts of the elevated energy and commodity costs as well as the broader implications for economic growth, inflation, and unemployment in the current geopolitical environment. Moving to capital, CET1 ended at 10%, reflecting the impact of the Comerica transaction and strong RWA growth. Under the proposed capital rule, our estimated fully phased-in pro-forma CET1 ratio is 9.6%. The RWA benefit to capital ratios associated with the new rule is nearly a 100 basis point improvement primarily due to credit risk RWA reduction. The proposed rule recognizes the granular, well-secured, and relationship-based nature of our loan portfolio. The same portfolio characteristics we have been deliberately building toward over the past several years. The proposed rule should expand the ability of the banking industry to support the economy through increased lending capacity. Additionally, our tangible common equity ratio, including the impact of AOCI and the Comerica acquisition, increased to 7.3%. Over the last 12 months, the impact of unrealized losses included in regulatory capital under the proposed rule has decreased by 16%, a 25 basis point improvement to the pro-forma capital ratios despite an 11 basis point increase in the 10-year Treasury rate. That is the direct result of our strategy to concentrate our AFS portfolio in securities that return principal on a known schedule, which represents approximately 55% of the fixed rate holdings within our AFS portfolio. We expect continued improvement in the unrealized losses as the securities pull apart. Moving to our current outlook, our outlook reflects the forward curve at the end of March, which assumes no rate cuts or hikes in 2026. Given the updated rate outlook and our more asset-sensitive balance sheet, we are updating our full-year NII outlook to a range between $8.7 and $8.8 billion. We will continue to take actions to move the balance sheet to a more neutral rate risk position over time, which could include investment portfolio and/or other hedging actions. Our outlook for full-year average total loans remains in the mid-$170 billion range. Full-year non-interest income is expected to be between $4.0 and $4.2 billion, reflecting continued revenue growth in commercial payments, capital markets, and wealth and asset management. Full-year non-interest expense is expected to be $7.2 to $7.3 billion, including the impact of $210 million of CDI amortization and $360 million of net expense synergies in 2026. This outlook excludes acquisition-related charges. In total, our guide implies full-year adjusted PPNR, including CDI amortization, up approximately 40% over 2025. We remain on track to exit 2026 at or near the profitability and efficiency levels consistent with our 2027 targets. For credit, we expect full-year net charge-offs between 30 and 40 basis points. Turning to capital, with the release of the proposed capital rule, we are updating our CET1 operating target to a range of 10 to 10.5%. We expect to resume regular quarterly share repurchases in the second half of 2026 with the amount and timing dependent on the balance sheet growth and the timing of the remaining merger-related charges. Our capital return priorities are unchanged: pay a strong dividend, support organic growth, and then share repurchases. For the second quarter, we expect average loans of $178 to $179 billion, driven by growth in CNI, home equity, and auto. NII is projected to be $2.2 to $2.25 billion with NIM expanding another 3 to 5 basis points. Non-interest income is expected to be $1.0 to $1.06 billion and non-interest expense is expected to be $1.87 to $1.89 billion. Finally, net charge-offs are expected to be 30 to 35 basis points. The first quarter established the foundation: NII above expectations, tangible book value per share growth intact, credit at a two-year low, integration on track, and early revenue synergies beginning to show. Those results matter not just for what they are but for what they signal. The core business is performing. The integration is delivering. And as we move through the year, the financial profile of Fifth Third will continue to improve in ways that are visible, measurable, and consistent with everything we have committed to when we announced this combination. We have the balance sheet, the business mix, and the team to get there. With that, let me turn it over to Matt to open up the call for Q&A.

Thanks, Brian. Before we start Q&A, given the time we have this morning, we ask that you limit yourself to one question and one follow-up and then return to the queue if you have additional questions. Operator, please open the call for Q&A.

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

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

All right. That's kind of like my weakness is I work too hard. Okay, I'll take that. So just, I guess there's no just interesting like I think I said it sounds very old last century all these mailings and stuff but six million mailings and sounds like if you're getting $1 billion of deposit that'll pay off but how does this is all Comerica accounts right now and so after Labor Day they're all going to become Fifth Third accounts and so seems like that transition has some risk too going from Comerica to actually branded Fifth Third. How do you manage that transition?

Great. Thank you.

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

Morning guys. Thank you for taking the question. Maybe Brian, hoping to start with you. I was hoping you could speak to some of the underlying drivers in the core margin. And I know you suggested the reported level should expand another few basis points in the second quarter due to the full quarter's impact of Comerica but maybe you could sort of speak to dynamics such as overall rate positioning which I think you touched on but maybe competitive dynamics on the loan and pricing sides just those kinds of things that you're seeing.

Yeah absolutely Scott thanks for the question. As I mentioned in my prepared remarks we are asset sensitive today. That is certainly a factor that we are focused on as we think about trying to move to a more neutral position over time. We feel very good about how we're positioned and that's obviously one of the things that's gone well for us with the current volatility in interest rates. It's given us some opportunity to do some things in the investment portfolio and put a few positions on in the quarter at pretty attractive levels. So we do feel good about that. From a driver perspective, we do expect some additional improvement from fixed rate asset repricing over the remainder of the year. From a magnitude perspective, it's a little bit less impactful than it has been because a third of our balance sheet was effectively repriced with the acquisition. So we are still seeing some good trends there on the legacy Fifth Third portfolio, but obviously that's just a smaller percentage of the balance sheet. Now that's probably a basis point, basis point and a half kind of pickup each quarter through the end of the year and feeling good about a trajectory that gets us approaching to exiting the year closer to 340 from an NIM perspective. So a lot of things going well from an NIM trajectory perspective. The environment obviously it's competitive. We're in an industry that is always competitive both on the lending side and on the deposit side. I would tell you that it is competitive but not irrational right now. Loan spreads have come in a little bit but aren't crushing at this point and we are just seeing normal deposit competition with the Midwest continues to be the most competitive deposit market that we're seeing from a consumer perspective. More competitive than the Southeast. And we're still trying to get a better sense of what Southwest looks like. But it does not look like it is going to be an outlier relative to other markets.

Okay, perfect. Thank you. And then maybe a higher level question here. You all have talked about the fourth quarter of this year representing sort of the time when we'll really see the full run rate accretion, returns, efficiency, basically all the benefits from the Comerica transaction. Basically all your numbers are going to be at or near best-in-class as we start to look to a post-Comerica time like in the next year when those benefits have really become realized. How will you sort of think about balancing additional improvement in profitability, returns, efficiency, or will those at that point represent sort of steady states as you do things like invest to just ensure that the levels you reach remain durable over time?

Yeah, that's a good one. And we've been getting a variant of that Scott over the last call it 90 days about hey are the synergies...

Gotcha. Okay, perfect. Thank you very much. Yep. Next we'll go to Gerard Cassidy at RBC Capital Markets.

Morning Tim. Good morning, Brian. Tim, did you have a Dave Wadd poster too with Steve's poster?

Got it. Good for you. When I look at your utilization trends that you gave us and you touched on in your prepared remarks, in the appendix, I think it was, it jumped up nicely from 34.9 in the fourth quarter to 40.7 and then you give it ex-America. Can you give us some color in two areas? One, Legacy Fifth Third, what you're seeing there and then also Legacy Comerica. What are they seeing?

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

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

Good to hear, Tim. Thank you.

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

Hey, morning. I had a question first just on deposits. As we go through all these updates, it does feel like funding is a much bigger constraint for banks as we move forward than capital. Just talk to us around this Southeast strategy in what seems like an intense environment. How are you converting clients acquired through promotions into core checking accounts? Is that happening? Just kind of remind us on where that stands and maybe tied to one of the previous questions, Tim, when you think about opening these branches in Texas 3 to 5 years from now, just degree of confidence that branches will still be as relevant 5 years from now as a client acquisition tool as they are today. Thank you.

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

We'll move next to Manan Gosalia at Morgan Stanley.

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

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

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

Got it. Thank you.

We'll go next to Chris McGrady at KBW.

Oh, great. Good morning. Hey, good morning. Tim, I want to come back to the comment about the Midwest being more competitive than the Southeast. Seems somewhat contrary to where all the capital's being allocated from a lot of the banks. Can you unpack that a bit?

Great. Yeah, definitely with Chicago being one of the more competitive markets and fragmented. I don't know that there's another state with three regional banks headquartered in it either the way that Ohio has, you know, Huntington, Fifth and Key.

And then Brian just on the full synergies, the cost saves, mapping out, can you help with exit run rate on efficiencies? Feels like low 50s in this year and you kind of go into next year from a pretty good position but just could you fine-tune that for me? Thanks.

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

Perfect. Thanks.

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

Good morning. I was just wondering when you first announced the Comerica acquisition, you were targeting a 27 EPS of 4.89, but now that you spent more time with the company, you're getting some early wins on the revenue synergy side. Do you see upside to that number because it did not include any revenue synergies?

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

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

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

Got it. Thanks Brian.

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

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

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

Thank you. Thank you.

And next we'll move to John Pankari at Evercore.

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

Yeah, I mean, there's always a little bit of conservatism we put in place relative to capital markets. You know, we've been talking about hoping for a kind of more stable, productive environment now and the hedging environment for a couple years. So we do think there's opportunity for that as a more stabilized environment to come out. Obviously, that will be helpful from an M&A perspective as well. The rest of the fee businesses have been doing fairly well without or even with the uncertainty that we've been facing. So we feel like the tailwind's there and the investments we've been making from a salesforce and a production perspective positions those businesses to continue to grow as well as the investments from a payments perspective and just the categories that we're attached to. So certainly we think that there is opportunity from a fee perspective to continue to see good outcomes.

Okay, great. Thank you.

We'll take our next question from Ken at Autonomous Research.

Hey, thanks. Good morning, guys. Just one question just given that it's a, you know, partial closed quarter. Just wanted to understand the moving parts a little bit. Can you help us understand the dollars of purchase accounting accretion that were in 1Q, what you're expecting for 2Q and just how that cascades in terms of the schedule?

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

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

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

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

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

Okay, great. Thanks, Brian. Appreciate it.

Next, we'll move to David Shiverini at Jefferies.

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

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

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

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

Very helpful. Thank you.

And we'll take our final question today from Christopher Marinac at Janney Capital Research.

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

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

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

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

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

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