Regions Financial (RF) Q3 2026 earnings call transcript

Thank you Chris. Welcome to Region's third quarter of 2026 earnings call. John and Anil will provide high-level commentary regarding our results. We ask that you review the cautionary statements included in our earnings documents, which are available in the investor relations section of our website. These materials contain information regarding the use of non-gap measures and reconciliations to the gap results as well as forward-looking statements about Region's performance. These statements speak only as of today and we undertake no obligation to update them. I will now turn the call over to John.

Thank you Chris and good morning everyone. We appreciate you joining our call today. Earlier this morning, we reported earnings of $611 million resulting in earnings per share of 71 cents. On an adjusted basis, earnings were $622 million or 73 cents per share. We delivered adjusted pre-tax, pre-provision income of $870 million and an adjusted return on tangible common equity of 22%. As we move through the second half of the year, what stands out most to me is the consistency of our performance.

While continuing to generate strong financial results, we've remained focused on strengthening the franchise through investments in talent, technology, products and key markets. Those investments contain and enhance our ability to serve customers and compete effectively. Across our businesses, we continue to see healthy customer engagement. On the consumer side, we continue to grow households and checking accounts while deepening primary relationships.

Commercial clients continue to invest in their businesses, technology and long-term growth initiatives. While the operating environment continues to evolve, activity levels across the franchise remain constructive.

Credit quality continues to be a source of strength during the quarter. Annualized net charge-offs were 29 basis points of average loans. While business services criticized and total non-performing loans continued to decline. Despite these positive trends, we remain focused on actively managing risk across the portfolio. While soundness remains the foundation of our strategy, we're also generating strong momentum across our fee-based businesses.

Capital markets and treasury management each delivered record revenue during the quarter, reflecting strong client engagement and continued execution across businesses.

Wealth management revenue moderated from record second quarter levels, but remained strong relative to the prior year. Collectively, capital markets, treasury management and wealth management, continue to perform at historically strong levels demonstrating the strength of our diversified fee-based business model and the value we provide to our clients.

We continue to make meaningful progress on our cloud-based deposit platform implementation and broader modernization efforts. As we've discussed previously, we're taking a deliberate phased approach that we believe approved balances execution discipline with the scale and complexity of the initiative.

This is one of the most significant technology investments in our company's history. We remain confident in both our approach and the long-term benefits this investment will deliver.

Our commitment to long-term investment extends beyond talent and technology to the communities we serve. This year marks 30 years as the official bank of the Southeastern Conference, a milestone we're proud to celebrate. We believe the longevity of that relationship reflects the strength of our brand, the depth of our community relationships, and our longstanding commitment to customers and businesses we serve.

As we look ahead, we remain confident in our position. We have a strong franchise, healthy customer relationships, and a leadership team focused on execution. We believe the investments we've made and the momentum we're seeing across the business, position regions well for a strong finish to 2026, and sustained success in the years ahead. Now, Anil will provide some highlights regarding the quarter.

Thank you, John. Let's start with average and ending loans increased modestly, but are affected and consistent with market trends, moderated from the stronger pace experience during the first half of the year. Growth was again driven by broad-based commercial landing activity, including continued strength across several CNI categories in government and public and wholesale and financials.

While net loan growth remained concentrated among investment-grade commercial clients, production trends continued to be healthy, also our emerging commercial and middle-market business, supported by recent talent investments, similar loan balances declined modestly during the quarter. Growth and credit card and home equity was all set by continued softness and residential mortgage and region's home improvement finance, reflecting the higher rate environment and muted housing market activity.

As we look ahead, current levels of client engagement, friction activity, and pipeline strength continue to support our confidence in the growth outlook. We continue to expect full-year average loan growth to be of low single digits versus 2025.

Turning to deposits, average and ending balances decreased modestly, early reflecting activity from a few of our largest commercial customers, utilizing our institutional investment serve a specific investment strategy combined with expected seasonal outflows and public funds deposits.

As a reminder, the company continues to manage substantial excess client balance for commercial clients, totaling approximately $16 billion, due to liquid, off-bouncy investments.

Underlying commercial trends remained healthy with continued growth in new accounts and increases in both average and ending commercial, non-interest-bearing balances during the quarter. Retail deposits performed as expected with growth in new accounts partially offset by late-summer seasonal spending. Consumer money market balances continued to grow while year-to-date small business account openings reached their highest level in the past decade, excluding the pandemic period, and are approximately 100 basis points higher than the prior year period.

We remain disciplined in managing deposit costs in an elevated rate environment while leveraging the strength of our deposit franchise to drive customer acquisition and retention. Our non-interest-bearing deposit mix remained in the low 30 percent range, consistent with our target, and reflective of the operational nature of our deposit base. We continue to expect 2026 average deposits to be at below single digits versus interest income. An interest income increased 2 percent link quarter, building on recent momentum and supported by structural re-pricing dynamics and balance sheet expansion.

That interest margin increased two basis points to 3.68 percent, reflecting our strong profitability and deposit funding advantage. During the third quarter, interest-bearing deposit calls were largely stable, increasing just one basis point to 1.70 percent. Disciplined deposit cost management and our operating account mix continues to provide a strong foundation for earnings in the current elevated interest rate environment.

We expect the interest-bearing deposit beta will remain in the mid-to-high 30 percent range through the rising rate cycle, supporting a mostly neutral interest rate risk position. In the fourth quarter, however, lags in the re-pricing of certain retail deposit products following the September rate hike will provide a modest lift to net interest income.

We are positioned well to benefit from higher middle and long-term interest rates through fixed rate asset turnover. The third quarter yields on newly originated fixed rate assets were approximately 100 basis points higher than the yields on maturity. We expect this re-pricing advantage to expand to between 100 and 125 basis points in the fourth quarter, providing a tailwind that persists for multiple years.

As previously mentioned, loan growth moderated during the quarter. However, we did see momentum pick up late, further supporting average balance and net interest income growth into the fourth quarter. The mix of loan growth continues to migrate towards high-quality credits, and while this creates a headwind for asset spreads, that interest income and margin, the economic trade-off is evident in improving credit results and deepening customer relationships.

While the funding mix in the third quarter was negatively impacted by the migration of certain deposits to all on-sheet products, the resulting shift supports fee-res.

Looking forward, we expect a more balanced one-in-deposit growth profile to sustain profitability. In fact, fourth quarter and interest income to increase between 1 and 2 percent, supported by persistent tailwinds from higher rates, structural re-pricing, disciplined deposit cost management, and the seasonal HR asset dividend.

The fourth quarter and net interest margin is expected to be approximately 3.70 percent. Now, let's turn to fee revenue performance for the quarter. Adjusted non-interest income increase 3 percent on a link quarter basis, driven primarily by record capital markets and treasury management revenue, as well as growth in commercial credit fees, bank owned life insurance income, and other non-interest income, partially offset by 28 million dollar decline in the market value on employee benefit assets.

Capital markets income increase 23 percent compared to the prior quarter, driven by stronger M&A advisory activity, securities underwriting and placement fees, plus swap income and syndications revenue.

Looking ahead, activity levels remain constructive, and we continue to expect fourth quarter revenue to be within our previously communicated range of 90 to $105 million. The timing of line activity and market conditions will influence where we land within that range. For year 2026, we continue to expect adjusted non-interest income to grow between 3 and 5 percent versus 2025, with results continuing to track toward the lower end of that range.

Let's move on to non-interest expense. Adjusted non-interest expense was relatively stable compared to the prior quarter. Lower salaries and benefits expense attribute will primarily to lower market value adjustments for supplemental employee benefit liabilities, along with a decline in other expense, helped offset higher equipment software expense, and increased professional legal and regulatory costs during the quarter.

Expected continued investments in technology and infrastructure set by discipline management are being consistent with our expectations. For four-year 2026, we continue to expect adjusted non-interest expense to be up between 1 and a half and 3 and a half percent to deliver four-year adjusted positive operating leverage.

Regarding asset quality, we were encouraged by strong credit performance during the quarter, reflecting the strength and resiliency of our customer base and our continued discipline approach to risk management.

As John highlighted, annualized net charge also has a percentage of average loans to client 13 basis points to 29 basis points. Business services criticized and non-performing loans both improved during the quarter. The business services criticized ratio to client 30 basis points to 4.71 percent, while the non-performing loan ratio declined 8 basis points to 59 basis points. Non-through credit losses ratio declined 2 basis points to 1.61 percent.

Continued progress within previously identified portfolios of interest serves maintained for macroeconomic uncertainty and other qualitative factors, resulting in a relatively stable reserve balance during the quarter. Four-year 2026 net charge off to be between 40 and 50 basis points, and based on performance today, no expected trend toward the lower end of that range.

Let's turn to capital and liquidity. We ended the quarter with an estimated common equity tier one ratio of 10.8 percent, while executing $95 million in share repurchases and $255 million in common dividends during the quarter.

Liquidity remains robust with total sources well above required levels. Plans during the quarter reflect the impact of higher rates on collateral valuations, as well as the changes in loans and deposits. Regions remains well positioned to support future long growth, while maintaining a disciplined approach to balance sheet management. In the impact of AOCI, in reflecting the proposed Basel III endgame, risk-weighted asset changes, our estimated CET1 ratio was approximately 10 percent.

This level remains well above our target range of 9.25 to 9.75 percent. That's continued flexibility to support strategic growth and return capital to shareholders. Regions maintains a strong earnings profile that consistently generates capital. It will continue to execute strategies to further reduce our sensitivity to interest rates.

The third quarter performance, which reflects the strength of our franchise, the customer base, and the disciplined execution of our long-term strategy, will remain well positioned to support our best in growth opportunities and deliver sustain.

Thank you.

Yeah, thank you. So the most important thing to protect the margin is to make sure we continue to grow non-interestary deposits. And so that has been a key focus of ours. That's why we're making the investments we are across our retail network, across a small business platform between great results so far this year. Small business operating accounts are up over 100 basis points this year, and so continuing to do that. It is day-to-day siting, but that is the key to success. The overall composition of our balance sheet is also what helps us. Having a relatively lower loan to deposit ratio is helpful. Having a lower debt footprint is helpful. It allows us to continue to invest in profitable loan growth, while being able to maintain the deposit cost flexibility and having the funding needed to fund that growth through time.

So continuing to do that, being mindful of putting on good profitable loan growth and continuing to execute growing non-interest-bearing deposits is the key to maintaining that flexibility and that deposit advantage, and the NIM advantage going forward.

Ron, I just add we're obviously not using rate as part of our deposit, the strategy to grow deposits, but we can if we need to. We have about $16 billion in off-balance sheet, investment-related deposits that customers are holding either in a sweet product, basically, or with our institutional trust department. So we know that money is, we can easily attract that back to the bank with higher rates. Separately on the consumer side, back in 2022, 2023, when rates were rising, and we saw because of a very active program that we initiated to grow deposits, we grew CDs by about $7 billion, money market deposits by four, and we're able to do that at a deposit rate of about 44%.

So when rates went up, almost 500 basis points over that period of time. So we know we can grow deposits if we need to by using rate, and we're actively following our customer activity, but it's not part of our strategy, obviously, currently.

Yeah, so importantly, under the current capital framework, our capital level is 10.8%. It's a very robust capital level. To your point, if we wanted to pro forma for Basel III endgame, which we expect to see this year, that would take us to 10%, which is well above our 9.75 to 9.75 range. Also, we generate 50 basis points of capital every quarter. This quarter is a great example. It just really shows the organic capital generation that we have quarter to quarter. We'll pay 20 basis points out in the dividend, grow the balance sheet. And so we organically create capital as well. Then also, when you think about the impact from AOCI, given the last quarter's rate moves, through time, we'll see that AOCI burn down assuming flat rates.

And so that's capital that accretes back to our balance sheet through time as well. And so we think we're well positioned given the organic capital we generate, given our overall capital position to continue to make all the investments we want to make and when appropriate buyback shares through time as well.

Yeah, this is John. We have seen nice activity toward the end of the quarter. As you pointed out, production was up year over year, about $4 billion. We saw a 60% increase in production. And in addition to that, obviously line utilization is up year over year. They're down a little for the quarter. But customers are actively managing the balance sheets, investing in their business, and still have a positive point of view or positive view of the economy. And so we expect that activity to continue. One place where we are seeing the impact of interest rates is in the investor real estate portfolio.

While we're seeing growth in multifamily as a result of previous commitments that are funding, the level of new activity is slowing because of rising cost and difficulty to make the economics of those transactions work. So that's something we'll look for in future quarters, have an impact on loan growth. But in general, a business sentiment is still good.

Yeah. And we removed that slide. Given that slide was really focused for the full year and given we gave you the fourth quarter guide, we just didn't feel that slide was as necessary. But I'll address your question. We'll go too far to give 27 guidance. But, you know, we indicated we expect to exit the fourth quarter around the 370 margin. So, we look forward to the 2027. Some of the structural tailwinds that we have will continue into 27. So, fixed asset reprising will continue. We quoted that to be 100 to 125 basis points in the fourth quarter. That will continue into the future at a lower rate as we go through time. It's still a benefit.

And then we expect the balance sheet to continue to grow into 27. And so, as long as we continue to generate good, non-interest bearing deposits, maintain or deposit beta in the mid to high 30s as rate increases, that will continue to support expansion of both net interest income and the margin in the 27.

Yes. Our conversations about capital with the rating agencies have been positive. We've been very clear with how we think about regulatory capital TCE. So our capital priorities are unchanged. We have strong capital generation. We're mindful of the interest rate environment. You know, it's just good to remind ourselves, over the past 10 years, we've seen 11 quarters when the 10-year treasury has increased or decreased more than 50 basis points.

And so we saw a big move this quarter, but we need to remind ourselves that large moves can happen. And so it's one of the reasons why we're so active in making sure that our hedging program factors that end. So you see on the slide in our appendix, the fair value hedges that we put on this quarter to protect capital and a potential rising rate environment. So we'll continue to execute strategies like that to protect capital.

But because of that and the capital generation that we have, we still think our capital priorities are unchanged. With respect to the TCE ratio, I've commented on this before, but, you know, the inclusion of cash flow hedges in that calculation, I think, is meaningful, you know, for us. That's the core of our franchise values, our deposit base. And so being able to maintain that duration and capitalize on that through time through revenue is important for us. And so we will make sure that we make good risk management decisions around that.

But the TCE ratio, really only reflecting, you know, one side of that trade, if you will, we think is a big disadvantage of that ratio. And so we think the changes to regulatory capital, those make sense and will monitor TCE, but the inclusion of cash flow hedges is one that I think I wouldn't want to impact how we risk manage our balance sheet.

Good morning, Ibrahim.

Yeah, I mean, it is our focus. And we're dedicated, our consumer banking teams to focus on acquiring the new customer checking households and new small business checking households. Our commercial bankers are focused on winning new logos, new middle market business. And that really is our objective. We're using field on the street to do that by and large.

And we think we're in really great markets. We continue to recruit a lot of wonderful bankers. We are enabling them with a lot of really good technology, provides insights about customers and prospects, and we're focused on execution. And as a result of that, we're growing consumer checking accounts, we're growing small business checking accounts, and that's really the core of the business, right? So as we deepen those relationships through providing customers with debit cards, with credit cards, with equity lines of credit and more mortgages, investment products.

On the other side, small businesses with treasury management payment capabilities, and sometimes credit. Those are relationship deepening activities. We think we've talked about growth in treasury management, penetration rates up over 7%. Again, it's a focus on helping customers manage the cash flow in their business, manage the cash in their business, and also take advantage of emerging new payments products that really help their businesses and help speed up cash flow as assets convert. So I think our teams are doing a really nice job when we're seeing that in household growth and feel good about what that will mean over time. As those customers activate their accounts, use their cards, and do other things that result in more deposit balances coming to the bank.

And Evie, I'll just add to that. We really understand the nature of our deposit base, not a deposit customers. We're very proud of the 30% of our deposit base that's not interest-bearing. But even that interest-bearing portion, we understand the rate-seeking behavior of that population. We're able to test into that population and grow deposits in a very targeted fashion. This is where being in some of the best growth markets in the country works to our advantage, because we can do very targeted opportunities and offers to grow deposits in that bucket that we have very well defined and add to our deposit base while still protecting the non-interest-bearing deposit base as John just alluded to. The other thing I just make a point, we've grown our massive fluent customer base by about 8% year over year.

And 85% of those customers come from our own customer base. So we're acquiring younger customers, we believe, based upon information provided by industry sources, about three times the rate that many of our peers are. And we're converting those customers over time to be more massive fluent in nature, and as a result, their balances and their relationships grow. So a really important part of our strategy, and I think producing really good results.

Yeah, absolutely. So investing in cyber defense has always been something very critical for us. It's even more heightened in today's environment. We are actively participating across many different industry consortiums to ensure that our cyber defense protocols are advancing as this technology involves. To your point, it does involve meaningful expense, both a new expense and redirection of existing associates, and that's embedded in our call space. We do expect that to continue through time. It's the new reality that we live in today. So we're definitely front and centre with that.

Our CSO is actively involved with with our counterparts across the industry. We have a great team working to make sure that our customers can continue to have the trust in us that we know is incredibly valuable to them. So that is an important investment that we will constantly make to make sure that trust is maintained. We're able to monitor in terms of how AI is being used across different platforms so we can track activity and help me impact our deposit base. We're seeing very low traffic through that channel. We'll continue to monitor that. We've talked before about while we don't believe that's a meaningful threat to our deposit base, but we can monitor that as well.

But to your point, it's an important investment, broadly speaking, that we need to make as a company and one that will absolutely continue today.

Yeah, one point of differentiation is the magnitude of the change before I think drove a higher beta. But in terms of what gives us confidence is really it's that granularity of understanding the nature of our deposit base. So not just thinking about it quote unquote an aggregate, but understanding that we have a portion of our customer base. That's 100% beta and we understand and can back test to see how that changes through time. And so by actively monitoring betas across different cohorts, if you will, of our deposit base and tracking that and seeing the consistency of performance.

That's what really gives us confidence in our guide looking forward.

I think too, Ken, just embedded in the numbers were some of the, maybe some of the data I shared about our growing deposits, intentionally growing deposits, interest-bearing deposits in 2022 and 2023. You might remember that was a period of time when banks were actively seeking deposit growth. There was a lot of pressure on deposits. And so at that time, as I mentioned, we grew CDs by $7 billion and money market deposits by $4 billion. And as a result, the deposit beta was higher at 44% as our call.

Yeah, and to your remixing point, we had, as you'd expect, as rates have moved higher, our kind of starting point today does have some of that remixing already baked into it.

Yes. I think if you look at loan growth over the quarter, consumer loan growth has been a little bit of a headwind. And since a good bit of our consumer loan growth, consumer loan balances are in the mortgage portfolio. You shouldn't expect to see a lot of growth in consumer loans. If any growth over the next quarter, two, three, depending upon where rates are on the other side, our wholesale business grew significantly. If we look at H8 data, we grew a little faster than the H8 data in the corporate banking business. So we feel good about the path of loan growth from here to your point. It should be business as usual.

Absent the impact on the consumer business from rates. At this point, in the quarter, we saw really nice growth in IRA as well, up about 2.4%. As you look towards where rates may go in the future, that will be a kind of a governor as to how much growth we see there in terms of what may go to the capital markets if rates level out a little bit. But John's point, we're really proud of the growth that we're seeing. And when you break it down, portfolio by portfolio, we think that comparison to H8 data is kind of reaffirming our belief that we're growing as our markets growth.

Yeah. So, so we're going to maintain the discipline that you've seen from us in terms of looking at the return profile of those transactions since about $850 million that we executed this quarter, that $15 million loss had about a 2 million, sorry, a 2 year payback on that. And so we've been, we've been consistent with thinking about that from a payback of less than 3 years. And we'll do that through time.

As rates move around, we're constantly evaluating any opportunities and as securities pull to pull closer maturity, the lack of liquidity benefit also provides opportunity there. We wouldn't expect to see too much given what we're saying right now. But given our history, you should expect us to continue to manage that.

Regarding the overall security portfolio, we feel good about the size and composition of where it sits right now. We'll continue to manage the risk from interest rates, as I mentioned before, through continuing to use fair value swaps on securities to make sure that we're monitoring capital risk. And then we feel good about our mix of HTM right now at about 16% will monitor that through time, but all in all feel like we're well positioned in this rate environment.

Yeah, no, we think stable from here, John, based on what we know, we think the net charge off range based on the composition of our portfolio is somewhere between 40 and 50 basis points. We're still working on a few large credits that we've identified as problems in those portfolios of interest, how and when they get resolved will impact results and could increase charge offs modestly in a given quarter. But for the year, we would expect charge offs within the 40 to 50 basis point range and at the likely at the low end of that range.

And we think we see stability from here forward. A little weakness in the multifamily business, primarily in Texas, as it just as a geography, some softness in absorption rates. But otherwise, and we continue to watch office and transportation, given the things that are still impacting those portfolios that they have improved. And obviously, as you see that in our results, and we would expect, as I said, stability from here.

Yeah, and I'll just point you maybe to three things as you think about the allowance from here. And then John mentioned there's a couple credits that we're still monitoring. They're fully reserved for. So if they charge off over time, you should expect us to reduce the allowance by like amount. Continue to look at the economic environment. You know, clearly that's something that could be variable. And so we'll keep an eye on that. And then also, just as importantly, is the the origination profile. We've talked a lot about investment grade credits. And so just mathematically, if that should continue into the future, we don't need to hold as much reserves again. So it's given the better credit risk.

So that could play out just in terms of the mass as the ratio makes from here.

Well, it has had an impact on the business over the last 12 to 18 months. So we did have a good quarter in the third quarter across all components of our capital markets business, including the real estate business. We have a couple of transactions that actually could go to the secondary market and on the verge, depending on what happens with rates over the next few weeks. And so we're guiding the 90 to 105 and we think that's a solid range.

If those transactions work, maybe it's on the upper end of that range. But today we would say somewhere between 90 and 105 is where we all end the quarter.

Sure. So on the deposit system platform, will we get a pilot of associates, friends and family, so to speak in the next week or two? And assuming that goes well, we'll start a larger pilot in the first quarter of 2027. And our attention is to convert customers over time in 2027 completing some time towards the end of the second quarter and the third quarter of 2027. And all that is on track at the moment.

In terms of M&A, our position is unchanged. We said we're not interested in depository M&A. We have a really good plan. We can see an executor plan. We can deliver top quartile, top decile results based on return on tangible costs. Common equity as a primary metric. And we think that that's still very achievable. We have this project going on. It is consuming everyone's attention internally, likely the largest technology project we've done. We're effectively converting ourselves. So we need to get through that project before we think about M&A. And I would say that when we get through it, we'll have a lot of the conversation about our interests. But today, because I think we'll have some capabilities that will position us well if we wanted to participate.

But today, we are not the candidate who participated in depository M&A.

Morning, Matt.

Yeah. So I break the drivers into two buckets. First to your point is just portfolio composition. And so looking at both the equities and bonds, I'd say drives around 40 to 50% of the overall performance of the business. But most importantly, production within our financial advisors is what drives the growth as well. And so this is the place where we've really been committed to investing. This business has done very well for us. You've seen us post record quarters and prior quarters this quarter. We take down just a little bit still saying good production and expect that to return. But as you think about the drivers of revenue, I break it into those buckets.

And see, I'd make the point just we will likely end the year with record year of wealth management. So while we had a little office in the quarter relatively speaking, it's going to be a really good year for wealth management. We would expect that trend to continue.

Yeah. So we are on schedule to deliver the platform in 2027. And as I mentioned earlier, we'll start a pilot the next week or two. And that pilot will gravitate to a much larger set of customers after the first of the year. And we will convert customers in waves over the course of the year, likely completing that toward the end of the second quarter or sometime early in the third quarter based on what we know today. The platform will be a contemporary platform. We think this gives us a lot of capabilities that we don't have today. It's a real-time system.

And we think that will be an advantage that we have and something we can bring to our customers. It will also allow us to bring products, pricing mechanisms to customers that we don't have today. We think we'll be able to do that much more quickly. And so we're excited about the capabilities with respect to artificial intelligence. Again, we think the system is one component of a transformation of our business as we think about how do we make it easier for our bankers and our customers to do business? How do we transform our client onboarding experience, sales enablement, problem resolution, the new system in combination with artificial intelligence and process improvement driven by bankers that know and understand our processes are things that we think will give us a real competitive advantage once the system's in place.

And we can begin to combine technology with process improvement and quality bankers.

Yeah. Now it's something we monitor very clearly. I just remind you have a couple metrics. So our average customer deposit account balance is right at $5,200. That's a similar number to what I've shared with you before. And the median is still right around $900. And so we have not seen a meaningful shift in that. We talked earlier this year about the benefit of taxes and how that's a buffer for higher costs across the board. But really aren't saying much movement. We track energy costs. And so year over year, the impact of higher gasoline prices on our customers about $24 a month.

And so our customers are very resilient. And we see that in their deposit balance.

That's just investment in cyber security. So think about frontier AI and investments that we're making to ensure we have a trustful platform for our customers. And some of that is just a redirectment of existing spend and then some marginal spend as well. But all that's in in the numbers for the quarter.

And then will there with it with once you get so towards the second half of next year, will there be any kind of relief on the expense side or a headcount with the when you're finally done with the deposit conversion?

One, we will move on to a new general ledger platform as well. And so there'll be continued investments in tech spend. I won't give you too much guidance in the 2027, but we think technology investment is something that we will continue to do. There are ample projects that we think can enable our business investment as we compete in markets that we're in today. And so we're very focused on a couple key projects today. But when we bring those online. There are plenty of other projects that we think technology can bring to bear to help our bankers support our customers day in and day out. And we have some great business cases that we'll be executing upon in years to come.

So won't go too far in terms of headcount going forward. But I think what you should see is us continuing to invest in capabilities that will enable our bankers to serve our customers.

Yeah. And if that will that continue beyond a second half and into 28. I think it'll continue for a couple of years. It'll start to come down as revenue starts to grow.

Generating positive operating leverage through time at the commitment of ours. When you have significant investments like we have right now, the timing of them, as you can imagine, when you start depreciating capital spend and bringing on SaaS related expenses is important just in terms of the math. And so, you know, the timing of all that will impact positive operating leverage. We're still committed to delivering it. But as we get closer to giving guidance for 2027, we'll clarify that. But the underlying core of our business, the revenue we generate, the expense discipline is unchanged.

Where we have significant projects like this that becomes a bit of a math exercise that we can go through. But the core of our business, our core strategy is unchanged. And as we get closer to 2027, we'll update you on our guidance.

Chris, we're committed to delivering positive operating leverage.

I'm sorry. I missed the first part of the question.

Okay. Got it. I'm sorry. So, you know, I think as we think about depository M&A, if we were interested, we probably would be both focused on creating more density and markets that we're in. We're in a lot of really great markets. And I think we had an opportunity to create, again, create more density, build a stronger business in some of the markets we're in where we're not as present. That would certainly be a consideration.

I mean, in the end, we have a very good, obviously low cost deposit base, very low customer base. I think any acquisition that we might consider, if we were interested in depository M&A, would have to be one that was complimentary, certainly not going to be the same as, but would be complimentary to the customer base that we currently have in the deposit base we have. That would be my problem.

Okay. Well, thank you very much. Again, we're awfully proud of our quarter and the consistent performance we continue to deliver. Appreciate your interest in our company participating today. I hope you have a great weekend.