Regions Financial Corporation (RF) Earnings Call Transcript & Summary

Okay. Good afternoon, everybody. For those of you joining us via webcast, I'm Susan Katzke. I cover the large-cap banks for Credit Suisse. This is the final session of day 1 of the conference for the bank presenters. And I would say you are all troopers for lasting this long and for agreeing to do the 4:20 slot when it's nice outside. So I am very pleased to be joined and to welcome back Regions Financial to be joined here in person by Deron Smithy, the Treasurer of the bank; by Scott Peters, the Head of Consumer Banking; by Dana Nolan, who heads up Investor Relations and knows everything about this bank. We're going to run this as a fireside chat. But by all means, I'm happy to take questions along the way, so don't hesitate to raise your hand, we'll take some questions and get started.

So I know this is a tough question where every time we turn around something is changing. And when we sat here 2 years ago, we had the same situation but very, very different in the midst of the pandemic. So let's talk a little bit about the macro environment and what you're seeing out there in your territory and really how anything's changed over the last 4 weeks in terms of rates, loan demand, customer and client activity, uncertainty? Go for it.

Sure. Well, I'll start. So obviously, it has been a challenging 2 years. Obviously, the last 6, 9 months or so, we've seen a progression toward, hopefully, better future regarding the virus and reopening -- starting reopening and then pause and then reopening again. But I think what's been consistent across most of our markets is we were one of the last to start to feel the pressures of the pandemic. We certainly aren't immune to it, but reopening started earlier. And so by and large, most of our markets have seen pretty steady improvement progression over the last couple of years. And as we talk to our clients today and they look towards '22 and beyond, I think they're pretty optimistic and looking to grow their businesses. Our business clients are looking for those opportunities. And so obviously, inflation is a big concern for everyone today and the path of rates. And I think the -- with respect to the bank, we're well positioned to manage through that. Obviously, rising rates can be problematic if it comes too fast and unexpectedly for the economy. And so there's still some uncertainty as to how that's going to play out. But our expectation is that the economy will continue to grow certainly across our markets, we're the beneficiary of a lot of in-migration into our markets. And so we're seeing good growth opportunities both on the commercial side as well as good consumer growth and Scott can speak to that. But I think we're optimistic for '22 to be a pretty good year.

Yes. I think Deron caught it pretty well. I think fortunately, in our footprint, we have actually had economies who bounced back quicker, probably came out of the most perilous times and concerns and fears that were in the marketplace and a lot of in-migration. We're in a great part of the country where we do see not only companies actively moving into our footprint but consumers, whether it's -- if you look at the pandemic, maybe speeding up for some people, retirement has been the case in the baby boomer generation. Well, we're in in-migration part of the country for a lot of those folks. And fortunately, some real attractive parts of the country, too, for people who can work from anywhere they want to work from as well as to some degree, tax rates and those types of things. So we started a little quicker. The economies look good. Consumers are pretty optimistic. And I would say we're seeing our spending levels through card transactions and things like that have really rebounded -- and as we look forward, pretty much good optimism and our consumers have behaved really well. So as a banker, we try to teach our consumers to have a cushion to manage that prudently. The paydown rates we've seen have decreased the debt burdens for most of our consumers. So it really is a very pristine credit quality and the economy looks good, too.

Okay. Great. So let's take that optimistic or relatively optimistic macro view into actual loan demand and what you're seeing. I mean we had a pretty healthy pickup in the fourth quarter of last year. The H.8 data maybe doesn't look quite as strong into the beginning of this year. But let's talk about what you're seeing on both the consumer side and on the broader commercial side to that as well.

Yes. Well, why don't I start on consumer and Deron, you can make some comments on the corporate and commercial side. One is we see very healthy. Our pipelines are as good as they've been in quite some time, just in our core business. Of course, we've been pretty excited, and we've seen great loan demand on the point-of-sale, home improvement, the EnerBank acquisition that we made. That was a business that had a lot of momentum from growth last year. We brought on about a $3 billion balance sheet in last year, call it about $2 billion worth of production. And the home improvement, home repair space continues to have really strong numbers from a standpoint of forward growth, and that business is growing quite well and been integrated extremely well.

Yes. And on the commercial side, certainly, we saw strong momentum in the fourth quarter coming from what had been more depressed periods earlier in the year, but we started to see pipelines firming and commitments growing, starting to see improvements in utilization rates. Obviously, utilization rates had gotten down to historic lows for us, and we saw improvements in the fourth quarter, and that momentum is carrying into the first quarter. Again, lots of optimism about businesses looking for growth plans, both organically as well as through potential strategic transactions, M&A -- so I think all of those are symptomatic of continued improvement in the economy and a good backdrop for growth in our business. We're seeing growth in tech and defense. We're seeing growth in transportation, health care, which is big in our markets, financial services. And so anything related to building and construction, multifamily construction, those are all places where we continue to see opportunities for growth.

So I'm curious, when we look at the recent senior loan officer survey, it indicated confidence in continuing demand across most loan categories but also spoke to easing of standards being fairly prevalent across loan categories. So I'm curious what are you seeing? And are you easing standards in any of your portfolios materially?

Yes, I'll start from the consumer side, definitely not easing standards in our portfolio. So...

I somehow expected that from you.

Yes. We're a prime shop. We make no mistakes about that. We've got a lot of disciplines around credit. We really announced with the EnerBank transaction that we wanted to become the premier lender to homeowners across the board, not just for mortgages or equity, but with the point of sale and home improvement, that's a prime kind of market from a credit quality standpoint. So by adding -- getting both the surprise or small repairs and the contractor base selling directly to consumers, we can serve a prime customer base without deteriorating our credit standards, but have very healthy growth.

Yes. And I would echo those comments with respect to commercial. Obviously, competition has been pretty intense, but it's always strong. And so there are always players in the market that are willing to do things to drive growth that we have to try to be as competitive with is what we make -- is what we think makes sense. But obviously, there are some things that we're not willing to give on structure. Pricing is something you have to compete on. Structure and the overall credit worthiness of those decisions is not something to compete on. And so there are perhaps some of the smaller players that are willing to be a little more forward leaning in certain spaces. But by and large, it's business as usual for us.

I'm going to channel my colleague, Ronnie Smith, who runs corporate and commercial. And I do think it's absolutely important when you talk about this, but client selectivity is extremely important. And as you think about it, you can have the right kinds of deals, the right kinds of structure that's still within our standards. And if you selected the right clients, they understand that they want to be with you through thick and thin and you're going to stand by each other, their credit quality is going to perform better. So that's really also very, very important to us on the corporate and commercial side.

Okay. Okay. So let's switch gears a little bit into the balance sheet. And I want to take -- consider your NII guidance and the path of interest rates from January when you spoke to modest NII growth in the first quarter after accounting for too fewer days and PPP and all that. And really, when I think about more broadly how you manage your balance sheet, how defensive you were in terms of managing interest rates into the tightening cycle, that we had seen starting 2 years ago. I want to understand your current thinking about how monetary policy plays out. And then I think it's probably helpful if you walk through some of the guidance changes, fine-tuning that you put in the 8-K that you filed on Tuesday, I think, of this week.

A couple of days ago, yes. So that was really to reflect the fact that since we gave guidance coming out of earnings, rates have -- the outlook for rate increases has continued to increase. And so that does translate to better growth in net interest income. And so that's the driver of increase in the revenue guidance. With respect to the first quarter, obviously, there are some seasonally with fewer days, there are some elements that generally make the first quarter a little weaker. But there are some PPP headwinds, but we believe we'll be able to overcome all of that and still have modest growth in top line net interest income. And I think what has happened since earlier -- to the start to this year is we've just seen rates continue to move higher. We've had better reinvestment rates in the securities portfolio. We're now starting to see LIBOR begin to anticipate the Fed's ultimate tightening. And so we'll start to see some of that manifest in growing commercial yields. And so all of that together is modestly more helpful for the first quarter. But again, most of that growth in NII is going to come after the first Fed tightening expecting in March.

Right, which the curves that you put out in the 8-K were the -- were multiyear CAGRs and raising that multiyear growth rate of NII. So I wasn't looking to kind of pin you down on first-quarter guidance changes, assuming that it all was rolling into the first quarter as opposed to that improved growth rate on the back of the shift up.

Yes. One of the things we tried to do with that guidance, obviously, there are a number of cross currents. We have had a fairly large hedging position that we've been actively managing, preparing for and ultimate begin to the Fed's tightening cycle. And so we've made some revisions to that in the fourth quarter. And so we wanted to combine those actions and really speak to how once you get into the second half of this year and into '23, when we think the Fed is going to be in full swing of the tightening cycle, how our sensitivity position really does drive the potential growth for NII and widening of the margin. But we've also got a stronger outlook for balance sheet growth than we've had in previous years. We've obviously got the acquisitions, EnerBank in particular, that will help fuel loan growth. All of those things together are giving us a better outlook for NII growth on a sustained basis assuming that rates move up on a fairly orderly fashion, and we don't have to go too far too fast and bring forward the potential for a recession. But the growth outlook...

You're not allowed to say that word.

Sorry. We are always thinking about the probability for that and so that's obviously what helped protect us in this most recent downturn as being thinking about that well in advance and so we're obviously on an upswing in rates today. And we think that assuming again that the Fed doesn't have to move too aggressively. We've still got a pretty good runway for growth in the economy, but we are turning our attention to when we might think about putting protection on out in the future as well.

So let's just talk about how the -- how your expectations have changed and a concern that the Fed has to move too quickly. What do you expect now in terms of the Fed moves?

So we model versus the forwards and so the forwards have somewhere between 6 and 7 tightenings baked in today. And then it's -- there's some concern about perhaps a 50 basis point tightening in March. We're not in that camp. We don't believe we're going to get 50, but the market is certainly pricing in some probability of that. But we think that every meeting is live and the potential to have pretty steady rate increases over the balance of the year is likely. And whether we end the year at -- in the 150 range or modestly higher, I think will drive the outlook for what happens in '22 and beyond. Our expectation, again, is not that I mean, we plan for what might look like a soft landing in our base guidance, but we're always preparing for what ifs, what might happen if they were to move more quickly. We're well positioned if the Fed is moving more aggressively over the next year or so. That translates to a widening margin for us and higher net interest income. But again, it increases the probability that at some point on the horizon, rates may have to go the other way.

Understood. That's the business cycle. So in terms of you mentioned the improved outlook based in part on improvements in liquidity deployment and the yields that you're getting on that. So where are you outside of the loan growth for deployment, where are you putting liquidity today?

So I would say our first -- our first objective or our most desired place is through loan growth and our outlook for loan growth over the next year or 2 will be very effective in putting the excess liquidity that's sitting on our balance sheet and cash to work. There's some cross currents with the EnerBank transaction, we've got a pool of CDs that will be -- brokered CDs that will be rolling off over the next couple of years. And so that will use some of that cash as well. We also anticipate that as the Fed begins to raise rates and normalize its balance sheet that some of what we've seen flow on to the balance sheet and surge deposits, namely deposits that are more commercial in nature from our commercial clients that's going to find a better -- more productive use off the balance sheet or perhaps may find better opportunities for higher rates off the balance sheet. So we see some opportunity for that to moderate, and that will utilize some of that cash as well. But as we look forward over the next couple of years, we really think the lion's share of the excess liquidity that we have today will be deployed through balance sheet growth, and we think that's the most productive use of those deposits.

Okay. So you mentioned the surge deposits in the core consumer banking book, let's talk about what the beta might look like in that book this time around?

Yes. So I'll talk a little bit about our book and how it's unique. It's clearly been a strength of our company for a long time. Underneath that, what makes it such a strength as our core strategy is to bank our customers and consumers' operating accounts. So they're core checking accounts where their payments are flowing through it. We've been very successful with that. The last couple of years, we've been growing core checking accounts at about 3x the industry average. So that feels good. We're bringing in deposits with that, of course, and getting NIR associated with it. We've got the strongest debit card portfolio in the industry. So I think it's 30 straight quarters. We've had the highest Visa Power score, which is a combination of activation, utilization. So we have a super strong granular base. That base largely, those operating account dollars are largely impervious to the rate increases. We have one of the highest percentages of NIB, noninterest-bearing, checking account balances in the industry. So that's our strength. And then, Deron, you might give the overall betas and then the consumer beta?

Sure. Yes. I think a byproduct of what Scott is describing this out of the $39 billion to $40 billion of surge deposits that we've seen, 35-ish percent has come from what we would consider good core deposit growth, no pun intended there. But dollars coming from growing customers, growing accounts that we think will perform more similar to our legacy portfolio. And in the first 100 basis points, our history tells us that, that consumer portfolio is fairly slow to move. And we will see betas somewhere in the 10% to 11%. For the first 50 basis points, you might not see much movement at all. But over the first 100, perhaps 10% to 11% in interest-bearing. Once you get past 100 basis points, history tells us that depositors become more aware and there are other alternatives that become more competitive. And so we start to see betas move a little more. But over the full tightening cycle, we think the betas are in that upper 20s, 29% to 30% range, which is more similar to what we saw in the last tightening cycle. Again, we do think though there is growth in categories and products that likely will be more rate sensitive this time around, mainly around corporate. And so we've positioned the balance sheet that way. And so we're carrying excess cash to manage through what we think will be normalization. But underlying all of that is a really solid outlook for growth on the consumer side that will give us quite a runway to fund growth in the balance sheet looking forward.

In terms of when you look at the beta in that core book and you look back at the historic experience and the stickiness of your deposit base, in particular, what if any impact have been new competitors, the neo banks had on that deposit base? And does that factor in at all to your beta assumptions?

To a smaller degree, probably for us versus some peers because our base is so granular and so focused in the operating account. That's not really where folks are going for, let's call it, the digital competitors. It's more the rate seekers, the more price-sensitive money, money that you put maybe put there, and it's not really your operating money. I will say if you look at the digital entities, that are trying to do operating business with folks what we find and we look at money going out and money coming back in. And customers, we found over time that a good percentage of what we see go out very often comes back in, especially as core accounts because the service proposition and the overall proposition is different and customers really still want that full banking as well.

Okay. Makes sense. So let's just touch on credit quality while we're kind of in fundamentals here. And you mentioned at the outset, if I'm correct, you mentioned that credit was pretty pristine, which is a fairly uniform view at this point. Although it feels like people are trying to caveat, and we all know that at some point, losses feel a little bit unsustainably low at this point. So what do you expect to see in terms of the loss rate on the consumer portfolio this year? What is -- I hate to use the word normal with respect to credit because it's either low or high, but we're kind of too low. So how do you see this playing out?

So for our book, from a consumer perspective, and again, going back to the fact that we're a prime shop what we've largely seen -- so I'll give you an example. Over 20% of our checking customers about 22% have credit cards with us. So when we look at our credit card balances, the behavior of that book has been extremely strong. Payment rates have been exceptionally high. So what you see is liquidity is being created by the consumers or they're concerned because there was uncertainty clearly with the pandemic for a period of time. So really good credit behavior from a standpoint of the amount of debt that they were holding. You add on top of that mortgage refinances and downward rates on other debt outside of, let's say, credit cards. So you look at the whole consumer picture and their debt situation is far better. We think and we believe with the prime portfolio will continue to be pretty low, you start to see a little bit on delinquencies coming back a little bit from almost nothing. But we're a good ways away from what I'd even call normalization on that. I do think, if you look at it broadly, say, outside of our company and across the industry, you're probably going to see cracks in that in the subprime category sooner, as you would expect in a credit cycle. But we've got a really healthy consumer. Their behavior has been really, really good. And at the same time, they've been paying down debt. They've been growing savings. So if you look at customers, who you would expect maybe to feel pressure from a credit perspective and have lower cash flows, the fact of the matter is they got a greater degree of savings. They have less debt outstanding, lower debt burden on them. And in addition, there's tons of jobs and wages have gone up for most of those folks. So maybe it sounds a little optimistic, but I do think it's going to be a slower burn towards increased normalization on the consumer side, especially in prime portfolios.

And so that being the case, when you think about loan loss reserves. Is there an argument for a lower reserve level under CECL?

I'll let you take that one, Deron.

I know you're fighting over who gets to answer that question.

Well, lower than where we are today? Or...

Lower than CECL Day 1.

Lower than CECL day 1. I'm not sure I have a crisp answer for that. I think that going into prior to the pandemic and going into the adoption of CECL, we had an outlook for credit, which was a more normal position for credit. And I'm not sure we think very differently about that today than we did going into day 1.

And I would say our teams coordinate on this extremely well. We've got great folks to do the analytics on it. And there is a sort of quantitative modeling approach to it, but there's also a qualitative aspect. And the adjustments that we've made historically over the last couple of years have played out where our qualitative plus quantitative has been pretty close to what we expect.

So let's shift gears to strategy a little bit and talk about things like the EnerBank acquisition last year, which was one of -- I think you closed 4 acquisitions, I'm looking at Dana, 4 acquisitions in the fourth quarter, correct?

Three in the fourth quarter.

Three.

Three? Three in the fourth quarter, yes. Okay. The -- and you talk about wanting to make additional bolt-on acquisitions or in consumer lending and capital markets and wealth. So let's talk about to the degree that we can play in your backyard with the consumer lending acquisitions, the integration of EnerBank and the appetite for additional portfolios?

Yes, that's great. So EnerBank was a great match for us. We've been interested in that for some time. As you know, we had some GreenSky paper over time. So we got to get closer to the space, look at the performance dynamics, look at the -- how that business operated. Look at the regulatory and compliance demands that made sense because our regulators wanted us to so to make sure that obviously GreenSky was complying as well. So we wanted to be in that space for some time. We flirted with a few different acquisitions in that space. Timing didn't work out. And the EnerBank timing made a lot of sense. And I think we were strategically smart. We were probably a little bit lucky that we got the right partner for us. EnerBank was a regulated entity because it had an industrial loan charter. So it had a bank charter. So they were regulated by the FDC. Their parent company was a utility. So they kind of were capped on their growth. They're very much a prime shop. Their compliance is very strong. So there's not a lot of fixing we have to do with regard to EnerBank. So the perfect for us anyway, bank partner plus, they have very, very strong teams, strong relationships, a strong growth profile. But quite honestly, their growth profile had been held down because the parent company did not want them to get too large impact their ratings, their credit ratings were more important to them than the raw growth. Culturally, like a glove, very principal group who really focus on not only getting good results, but doing it the right way. So they fit right into the Region's culture well. The teams are operating great. We have good growth going on, a great pipeline right now, really not anything to fix. So the opportunity really is to take off and grow. And in our integration, we've identified, call it, roughly 9 or 10 work streams, synergy work streams. We just actually launched one just the other day. And those are things outside of what you would see baked into our forward optimism that aren't even accounted in that with regard to crossover in the customer base, the opportunities to leverage that, to leverage EnerBank customers into being full Regions customers. Some of the product improvements we can make and the synergies we can offer to their customer base and theirs to our customer base as part of Regions. So it's really gone quite honestly, better than we could have even expected and have a lot of optimism for growth even outside of what probably we've thought about going forward.

And so how consuming is that acquisition to you right now or because it was a relatively clean for lack of a better word, clean acquisition, you've got capacity to go out and look for additional opportunities?

Well, I think in that space, as you think about it, EnerBank was a top 5 provider. And those 5 were only 10% of the whole market. So there's a lot of, call it, verticals within the home improvement space, There's also different providers in those verticals that sometimes facilitate it, whether it might be technological platforms and things like that. So we are very interested in growing that business. Doing it the right way, again, but there are opportunities for us to do potentially some acquisitions that are very quickly accretive because of the synergies that already exist. So we'll continue to be looking there. And looking for opportunities and really we're taking a look at a variety of those now. Right now, though, the platform, quite honestly, it's not like adding the same platform, a direct competitor type of opportunity. Some of the synergies are much more in that stream and within the verticals of enabling technologies or partnerships that you might be able to acquire in order to just pull that into EnerBank and not create a -- bringing on another, call it, EnerBank that operates very differently that doesn't have the same risk profile and those types of things.

Okay. So the appetite is still there for acquisitions.

Absolutely.

And I would say broadly on the bolt-on, speaking even outside of the consumer business, there's the potential to see more?

We -- John has been terrific and encouraging. Ronnie and Bill and myself to really be on our forward foot from a standpoint of strategically, can we get stronger? Can we deliver more products and services to a customer base and a footprint that we have, where we might have gaps and has really tasked us at being much better than maybe we were 3 or 4 years ago to be really making that an active part of our job to be looking for ways that we can grow the business as long as it's strategically sound and has good economics.

Yes. And I think I would just add that, that's our top priority for use of our capital is finding ways to grow our business. And Scott did a good job of laying out what the strategic thinking is there. But we're always looking for that first before other uses of capital like share repurchase. So yes, you should expect us to continue to look for opportunities to grow the business and use our capital that way.

Maybe not at 3 per quarter, but...

Yes, that was a -- that was -- seemed like a little bit of excess activity if you will. And just to kind of housekeep a little bit while we're on the consumer banking business for a minute, in terms of the nuisance fees and the decisions in the fourth quarter in January to change the product and reduce those fees. Can you talk about what the reception has been in the marketplace and kind of some of the decision-making that went on behind?

Yes, sure. First of all, quite honestly, we don't look at it from a sort of -- we know what it is. We don't look at it from a revenue and an income stream standpoint, right? We look at it from a standpoint of what's our strategy to bank our consumers. As I mentioned before, we're very, very focused on having core operating accounts, and we are a primary bank, one of the highest primacy rates in the industry. So when we look at this, what we're really thinking about -- and we've been decreasing our amount of overdraft income over the last 10 years pretty materially is how can we continue to serve the customers very well. Take care of their needs and do so in a smart way, and it's a very complicated ecosystem, and you see a lot of the changes are across different vectors, whether it's price or whether it's say, a de minimis or whether it's an advance. And so understanding that and making sure that you don't have bad unintentional consequences, especially when you have a prime customer base that's really important to us. So our focus has been on, we want to stay competitive, for sure. We want to make sure that we don't hurt our consumers in an unintended way, because sometimes, as an example, if you just decrease overdraft fees and get rid of them altogether, it's harder to provide that short-term liquidity because all of a sudden, it's upside down. And then does that result in pushing people out of the banking system who maybe need to be there. So we're trying to really manage those elements quite well. Clearly, there was a move entirely in the marketplace. I don't believe there's -- it's because of the complicated ecosystem, rule-making is challenging and has been stepped away from regulators in the past. But clearly, there's a sentiment amongst the newer breed of regulators as well as some of our legislators that wanted to have some pressure and some reduction of fees to consumer in this way. So we're just trying to navigate it to continue to stay competitive, but really do the right thing for consumers and customers. And quite honestly, and I talked to our folks in the field regularly when I go out and visit them, I was in 4 different markets actually last week. And I always ask them when they do roundtables with our bankers on the ground? I say, do customers ask you about our overdraft policies. And the answer is, no, they don't. And quite honestly, most customers don't go into a banking relationship with the idea that they're going to overdraw. And so from a competition on the ground thing, it hasn't come about yet. I will tell you from our associates, they like it because it's friendly for consumers. They feel that they're very vested in their consumers. And so they feel really good about it. And we've simplified our posting order last year, a lot more alerts and visibility. So we've, to some degree, demystified some things that maybe confused customers, which obviously our people on the ground have to spend time when a customer does get an overdraft handling a lot of that. So that's kind of what we've seen so far.

Presumably, it pays off in customer growth and a lower deposit beta overt time.

That's right.

Okay. So we have a couple of minutes left here. I do want to touch on capital management a little bit. You've spoken to targeting CET1 this year in the middle of the 9.25% to 9.75% range. And this range has come down a little bit, and I realize you want to have excess because you are conservative and because you are looking at bolt-on acquisitions, but what makes this the right level?

Well, it starts with our internal stress test assessment. And so that helps inform us the minimum level that we need. And so that range is a bit higher than what we think we need from -- that's informed by the stress test, and that's really to give us the flexibility to lean into growth when we see growth opportunities. And so there are other constituents that matter as well, it's not just what's required for regulatory purposes, rating agencies, for instance. And so we're -- we assess what is the appropriate range really to meet regulatory expectations, expectations from rating agencies to maintain our ratings, which are important to our business clients as well. And also to give us flexibility where when we see opportunities like the transactions that we completed in the third quarter to be able to lean into that and do it using capital in the way that we want to use it first, which is to grow our business. And so that range gives us flexibility to do that, to lean into growth. And growth can be organic as well when we see opportunities to see outside...

Sure. But just to push you on that for 1 minute because you've been running the stress test, you meaningfully derisked your balance sheet over the course of the last 5-plus years. Your performance -- though there were a lot of mitigating factors through this most recent cycle, your performance, I think, was far better than you probably expected or envisioned in your own stress test. And so I would assume that both your performance in the stress test that you run and you see and what you're showing the rating agencies would indicate that there should be some improvement or reduction in your requirements. You're holding yourself to a very high level is what I'm saying and your performance has been better.

Yes. We have seen some modest improvements in our own internal stress tests. We've also added some portfolios like EnerBank, which are more risky at the margin. And so we've seen modest improvements there. Obviously, we were managing to a higher level during the pandemic because of the uncertainty. I think that the range is the appropriate range for our business mix and to satisfy the full slate of constituents where we operate in that range really is about when do we want to lean into opportunities to grow or give ourselves flexibility to do so. I think there's an opportunity that capital levels could continue to modestly come down over time, but we think that's the appropriate range for us as we sit here today.

I think that makes all the sense in the world. So we'll end it on that positive note, and I thank you once again for making the trip. I'm not going to say down here making the trip kind of over here and joining us once again at the Credit Suisse Financial's Conference. Thank you.

Very good. Our pleasure.

Thank you, Susan.

Thank you.