David Turner: John, several things. And we have probably $75 million worth of expense we can point to on different front. So part of it is operational losses that we don’t think will repeat. We obviously have the first quarter issues with regards to payroll taxes and things of that nature. We had HR asset valuation that’s offset in NIR that’s a part of that, too. We have some things in occupancy and professional fees. If you add all that up, it’s about $75 million, and we have pretty good confidence that, that won’t repeat. We tried to signal that the first quarter was going to be the high watermark and that you couldn’t take the $4.1 billion and divide by 4, and we’re sticking to that, and we’re sticking to our guidance that we have.
And we have pretty good confidence. We did take some actions this quarter like we did in the fourth quarter from a severance standpoint. Now the first quarter has the normal expense of payroll for those folks in addition to the severance. So that won’t repeat. So all of that, like I said, adds up to right around $75 million.
John Turner: And that’s just — we have other opportunities to reduce expenses as well. That’s just an indicator of what we can pretty quickly identify it won’t repeat.
John Pancari: And if I could ask just one follow-up related to that. Is your — the status of your core systems conversion. Is that still trending as expected in terms of timing and cost?
John Turner: It is. Yes. We, in fact, just had a Board meeting this week and went through all that detail with our Board. We feel good about the project and the progress that we’re making and our ability to stay on budget on time.
Operator: Our next question comes from the line of Ken Usdin with Jefferies.
Kenneth Usdin: Wondering if we — David, you could talk a little bit about that bullet you put in on Slide 5 about stable deposit costs, February to March. And what our takeaway should be in terms of mix shift pricing movement, et cetera, and I know you talked about still mid-40s deposit betas, but just what’s changing underneath in terms of that stability that you’re starting to see?
David Turner: Yes. Part of — one of the big reasons we put that in there is because our deposit cost change was higher than what you’re seeing from peers, but that’s because of what we did in the fourth quarter, and you had a full quarter effect of that. Now that we’ve kind of got that baked into the base, and we start seeing offers and things of that nature on the deposit offerings coming down, the exit in February and March gives us a lot of confidence that those deposit costs are stabilizing and therefore, we have a lot of confidence in our cumulative beta band in the mid-40s. So a couple of more points from where we are today.
Kenneth Usdin: Okay. And I guess as a follow-up, are you starting to change pricing, change offers, bring in duration? What are you doing in terms of trying to take that point further?
David Turner: Yes, that’s a good point, Kenneth. So yes, we started that last quarter. Actually, we had some CD maturities coming that were longer dated 12-, 13-month CDs and we went shorter in the 5- to 7-month range that to be able to reprice those this year with the original expectation the rates would be coming down sooner than they probably are now. And so — yes. And we can see from a competitive standpoint, we want to be competitive, we don’t have to lead with price, but we do need to be fair and balanced. And so you’re starting to see the benefit of having the promotional rates coming down here.
Kenneth Usdin: Okay. And on that last point about the higher for longer, you’ve talked about the $12 billion to $14 billion of fixed rate production for a while now and you say that’s per year. Has the benefit from that also — does that get better and higher for longer? And how does that differ when you think about this year versus next year?
David Turner: Yes, I would say marginally higher for longer because you have a lot of securities that are repricing, that we’re picking up about 235 basis points today. We’re picking up, call it, 125 basis points on the loan side. So if you get — and we expect to get the deposit costs stabilized then you don’t — then the repricing can actually start overwhelming the costs that you had on the deposit side. That has not been the case thus far. It’s been just the opposite. So you’re going to see that turn, which is why we’re calling the bottom for us in the second quarter.
Operator: Our next question comes from the line of Dave Rochester with Compass Point.
David Rochester: Just on credit regarding the large restaurant credit and the commercial manufacturing credit, could you guys quantify the impacts on net charge-offs and provision this quarter? And if you could just give some additional background on where you are in the resolution process there, that’d be great.
David Turner: So if you were to look at those two added together, just those two made about 7 basis points of charge-offs. So if we didn’t have those two, our 50 would have been 43.
David Rochester: Great. And then where are you guys in the process of resolving those?
David Turner: Say that again?
David Rochester: Where are you in the process of resolving those credits?
John Turner: They’re both still being worked out.
David Rochester: Okay. And I guess just bigger picture with you reiterating the net charge-off guide here for the year of 40 to 50 bps, you’re at the high end of that right now. So you’re expecting that to either remain stable here or decline through the end of the year, and you have confidence around that?
John Turner: Yes, we do.
David Rochester: Great. And then just switching to deposits with the recent inflation data that’s been elevated and the shift to expectations to fewer rate cuts this year, are you noticing any impact from any of that on your corporate deposit customers’ behavior at all? Are you seeing any change in activity there? And does that impact your expected range of NIB remix at all for the year?
